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GAO: 

United States Government Accountability Office: 

Serving the Congress and the Nation: 

Performance & Accountability Report: 

Fiscal Year 2005: 

Accountability: 

Reliability: 

Integrity: 

[See PDF for image] - graphic text: 

SERVING THE CONGRESS: 

GAO’S MISSION: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

SCOPE OF WORK: 

GAO performs a range of oversight-, insight-, and foresight-related 
engagements, a vast majority of which are conducted in response to 
congressional mandates or requests. GAO’s engagements include 
evaluations of federal programs; performance, financial and management 
audits; policy analyses; legal opinions; bid protest adjudications; and 
investigations. 

CORE VALUES: ACCOUNTABILITY: 

We help the Congress oversee federal programs and operations to ensure 
accountability to the American people. GAO’s analysts, auditors, 
lawyers, 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. 

CORE VALUES: 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 GAO’s approach to work 
ensures both. 

CORE VALUES: 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. 

Source: GAO. 

[End of figure] 

Contents: 

Abbreviations: 

How to Use This Report: 

Introduction: 

From the Comptroller General: 

Financial Reporting Assurance Statements: 

About GAO: 

Mission: 

Strategic Planning and Management Process: 

Organizational Structure: 

How We Measure Our Performance: 

Part I: Management's Discussion and Analysis: 

Providing Information That Improves Federal Programs Now and in the 
Future: 

Focusing on Results: 

Focusing on Our Clients: 

Focusing on Our People: 

Focusing on Our Internal Operations: 

21st Century Challenges: 

GAO's High-Risk Program: 

Building Partnerships: 

Managing Our Resources: 

Strategies for Achieving Our Goals: 

Addressing Management Challenges That Could Affect Our Performance: 

Mitigating External Factors That Could Affect Our Performance: 

Part II: Performance Information: 

Performance Information by Strategic Goal: 

Goal 1 Overview: 

Financial Benefits: 

Other Benefits: 

Testimonies: 

Multiyear Performance Goals: 

Goal 2 Overview: 

Financial Benefits: 

Other Benefits: 

Testimonies: 

Multiyear Performance Goals: 

Goal 3 Overview: 

Financial Benefits: 

Other Benefits: 

Testimonies: 

Multiyear Performance Goals: 

Goal 4 Overview: 

Multiyear Performance Goals: 

Data Quality and Program Evaluation: 

Verifying and Validating Performance Data: 

Program Evaluation: 

Part III: Financial Information: 

From the Chief Financial Officer: 

Overview of Financial Statements: 

Financial Systems and Internal Controls: 

Audit Advisory Committee's Report: 

Independent Auditor's Report: 

Purpose of Each Financial Statement: 

Balance Sheets: 

Statements of Net Cost: 

Statements of Changes in Net Position: 

Statements of Budgetary Resources: 

Statements of Financing: 

Notes to Financial Statements: 

Part IV: Appendixes: 

1. Accomplishments and Other Contributions: 

2. From the Inspector General: 

3. GAO's Report on Personnel Flexibilities: 

4. GAO's Federal Information Security Management Act Efforts: 

Image Sources: 

Providing Comments on This Report: 

Obtaining Copies of GAO Documents: 

[End of Contents] 

Abbreviations: 

BPA: Bonneville Power Administration: 

CAO: Chief Administrative Office: 

CMS: Centers for Medicare & Medicaid Services: 

CSRS: Civil Service Retirement System: 

DHS: Department of Homeland Security: 

DISA: Defense Information Systems Agency: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOL: Department of Labor: 

EPA: Environmental Protection Agency: 

FAA: Federal Aviation Administration: 

FECA: Federal Employees' Compensation Act: 

FEGLIP: Federal Employees' Group Life Insurance Program: 

FEHBP: Federal Employees Health Benefits Program: 

FEMA: Federal Emergency Management Agency: 

FERS: Federal Employees Retirement System: 

FFMIA: Federal Financial Management Improvement Act: 

FHA: Federal Housing Administration: 

FICA: Federal Insurance Contributions Act: 

FISMA: Federal Information Security Management Act: 

FTE: full-time equivalent: 

GAO: Government Accountability Office: 

GSA: General Services Administration: 

HCTC: Health Coverage Tax Credit: 

HHS: Department of Health and Human Services: 

HIPAA: Health Insurance Portability and Accountability Act: 

HUD: Department of Housing and Urban Development: 

IG: Office of Inspector General: 

INTOSAI: International Organization of Supreme Audit Institutions: 

IRS: Internal Revenue Service: 

IT: information technology: 

MFO: multinational force observer: 

NASA: National Aeronautics and Space Administration: 

NFC: National Finance Center: 

NHTSA: National Highway Transportation Safety Administration: 

NIH: National Institutes of Health: 

OMB: Office of Management and Budget: 

OOI: Office of Opportunity and Inclusiveness: 

OPM: Office of Personnel Management: 

PART: Program Assessment Rating Tool: 

QCI: Quality and Continuous Improvement: 

SBA: Small Business Administration: 

SEC: Securities and Exchange Commission: 

SSA: Social Security Administration: 

TSA: Transportation Security Administration: 

UNHCR: United Nations High Commissioner for Refugees: 

USACE: U.S. Army Corps of Engineers: 

USAID: U.S. Agency for International Development: 

USCIS: U.S. Citizenship and Immigration Services: 

USDA: U.S. Department of Agriculture: 

US-VISIT: United States Visitor and Immigrant Status Indicator 
Technology: 

VA: Department of Veterans Affairs: 

[End of Abbreviations] 

How to Use This Report: 

This report describes the U.S. Government Accountability Office's (GAO) 
performance measures, results, and accountability processes for fiscal 
year 2005. In assessing our performance, we compared actual results 
against targets and goals that were set in our annual performance plan 
and were developed to help carry out our strategic plan. Our complete 
set of strategic planning and performance and accountability reports is 
available on our Web site at [Hyperlink, http://www.gao.gov/sp.html]. 

This report has an introduction, four major parts, and supplementary 
appendixes as follows: 

* Introduction: 

Look here for the letter from the Comptroller General and a statement 
attesting to the completeness and accuracy of the data in this report. 
Also, look here for a discussion of our mission, organizational 
structure, strategic planning process, and process for assessing our 
performance. 

* Management's Discussion and Analysis: 

Look here for our agencywide performance results and use of resources 
in fiscal year 2005. Look here also for information on the strategies 
we use to achieve our goals and the management challenges and external 
factors that affect our performance. 

* Performance Information: 

Look here for details on our performance results by strategic goal in 
fiscal year 2005 and the targets we are aiming for in fiscal year 2006. 
Look here also for an explanation of how we ensure the completeness and 
reliability of the performance data used in this report. 

* Financial Information: 

Look here for details on our finances in fiscal year 2005, including a 
letter from our Chief Financial Officer, audited financial statements 
and notes, and the reports from our external auditor and audit advisory 
committee. Look here also for information on our internal controls and 
for an explanation of the kind of information each of our financial 
statements conveys. 

* Appendixes: 

Look here for detailed write-ups about our most significant 
accomplishments and contributions recorded in fiscal year 2005, for our 
Inspector General's assessment of our agency's management challenges, 
and for information on certain human capital management flexibilities 
and on information security reform efforts. 

[End of How to Use This Report] 

Introduction: 

"The government being the people's business, it necessarily follows 
that its operations should be at all times open to the public view." 

- William Jennings Bryan: 

From the Comptroller General: 

November 15, 2005: 

By nearly every measure, GAO has once again produced excellent results 
in serving the Congress and the American people and, through this 
performance and accountability report, I am proud to share with you our 
assessment of how well we performed during fiscal year 2005. Our 
business involves helping to improve performance and ensure 
accountability in connection with a broad range of federal programs, 
policies, and activities. Simply put, we try to help improve the way 
the federal government works for the benefit of all of our nation's 
citizens both now and in the future. To determine our success, we set 
performance targets and follow financial management and quality control 
practices that help ensure that we are making the best use of the 
federal funds invested in us. In addition, I am very pleased to report 
that we received clean opinions from external, independent auditors on 
our financial statements and on our performance audit and financial 
audit quality assurance systems. We also identified a broad range of 
issues that could seriously affect the stability and prosperity of the 
nation in the years to come. The following paragraphs highlight our 
performance in each of these areas. 

With respect to our performance measures, I am especially pleased to 
report that we met or exceeded targets for 10 of our 14 performance 
measures, while setting or matching all-time records for 3 measures. We 
documented $39.6 billion in financial benefits--a return of $83 for 
every dollar we spent--and over 1,400 nonfinancial benefits--a record 
for us. The work we did to produce these benefits helped to shape 
important legislation, such as the Intelligence Reform and Terrorism 
Prevention Act of 2004 (Pub. L. No. 108-458), and increase the 
efficiency of various federal programs, thus improving the lives of 
millions of Americans. In addition, the rate at which our 
recommendations were implemented by the Congress or federal agencies 
rose to 85 percent in fiscal year 2005, and the percentage of our 
fiscal year 2005 products containing recommendations increased to 63 
percent--exceeding the targets we set for both of these measures this 
year. Our performance in these two areas also set an all-time record 
for recommendations implemented and matched the record we set in fiscal 
year 2004 for the percentage of new products with recommendations. We 
delivered 179 testimonies, slightly missing our target of 185. We also 
just missed our target of providing 98 percent of our products to the 
Congress when promised. In addition, in the first year that we are 
reporting our progress on our 8 new measures related to our people, we 
met or exceeded the targets for 6 of them related to retention and 
employee satisfaction. We came close to, but did not achieve, the 
targeted performance related to our new hire rate--the ratio of the 
number of people hired to the number of people we planned to hire--and 
the percentage of people that accepted our employment offers. 

As in past years, during fiscal year 2005, our work covered a number of 
major topics of concern to the nation and, in some cases, the world. 
For example, we reported on the nation's long-term fiscal challenges, 
the financial condition of the airline industry, spending and 
reconstruction activities related to Iraq and Afghanistan, and 
strengthening the visa process as an antiterrorism tool. As the war in 
Iraq continued, we examined how the Department of Defense supplied 
vehicles, body armor, and other materiel to the troops in the field. We 
also examined the Department of Defense's transformation challenges, 
base realignment and closure issues, increasing the strategic focus of 
federal acquisitions, protecting against identity theft, the oversight 
of electricity markets, zero down payment mortgages, and immigration 
enforcement. We testified many times before the Congress, contributing 
to the public debate on a variety of topics that included Social 
Security reform, wildland fire management, gasoline prices, the flu 
vaccine, veterans' health care, benefits for members of the Reserves 
and National Guard, digital broadcast television, long-term health care 
financing, passport fraud detection, reducing the tax gap, information 
security, and a range of financial management and accountability 
issues. These and other topics on which we testified are listed on page 
36 of this report. 

The American people benefited this year as federal agencies took a wide 
range of actions based on our analyses and recommendations, while our 
efforts also heightened the visibility of issues needing attention. For 
example, adoption of our recommendations helped improve home health 
care performance standards, increase the collection of delinquent 
taxes, and improve the efficiency of federal acquisitions. It is 
important for our nation and citizens not only that these issues are 
made visible, but also that the nation's leaders address them. We feel 
fortunate and honored that in a significant majority of cases, our 
clients and federal agencies listen to what we have to say and act on 
our recommendations. Furthermore, virtually all of our reports are 
published and available on our Web site ([Hyperlink, 
http://www.gao.gov]), keeping us accountable to the American people. 

Once again we have received a clean audit opinion on our financial 
statements, and in part III of this report we have included the 
external auditor's report stating that we presented our financial 
statements fairly and maintained effective internal control processes. 
The auditors also reported no instances of noncompliance with 
applicable laws and regulations. Additionally, I am most pleased to 
report the results of the first ever review of our quality assurance 
system used to conduct our performance audits, which involves work 
performed in virtually all parts of GAO. This review--which was 
performed by an international team of auditors from seven countries led 
by the Office of the Auditor General of Canada--assessed whether our 
quality assurance policies and procedures were suitably designed and 
operating effectively; the review resulted in a clean opinion. Their 
April 2005 audit report also cited a number of exemplary practices at 
GAO, such as our strategic planning process, proactive working 
relationship with the Congress, quality assurance framework, and audit 
risk assessment process, and offered us some suggestions for 
improvement, including streamlining certain requirements for low-risk 
assignments, a suggestion that we are already working to implement. 
Similarly, we received a clean opinion resulting from a separate audit 
of our quality assurance system for our financial audits. This opinion 
was in line with previous such audits that have been conducted every 3 
years. The auditors concluded that our system of quality control for 
the accounting and auditing practice was designed to meet applicable 
quality control standards and was complied with for the period 
reviewed, providing us reasonable assurance of conforming to applicable 
professional standards. 

In fiscal year 2005, we issued two products that will assist the 
Congress as it addresses a broad range of future challenges. Our report 
entitled 21st Century Challenges: Reexamining the Base of the Federal 
Government provides a series of illustrative questions related to 12 
areas of federal activity as well as our perspective on various 
strategies and approaches that should be considered as a possible means 
to address the issues and questions raised in the report. Drawing on 
our institutional knowledge and extensive program evaluation and 
performance assessment work for the Congress, we presented over 200 
specific 21st century questions illustrating the types of hard choices 
our nation needs to face as it reexamines what the federal government 
should do, how it should do it, and how it should be financed. (see p. 
42 for more information about our 21st century challenges report.) We 
also issued our High-Risk Series: An Update, which identifies federal 
areas and programs at risk of fraud, waste, abuse, and mismanagement 
and those in need of broad-based transformations. The issues affecting 
many of these areas and programs may take years to address, and the 
report will serve as a useful guide for the Congress's future 
programmatic deliberations and oversight activities. The current 
administration has looked to our high-risk program in shaping 
governmentwide initiatives such as the President's Management Agenda, 
which has at its base many of the areas we had previously identified as 
high risk. The Office of Management and Budget, in consultation with 
us, is currently working to ensure that agencies develop detailed 
action plans to address high-risk areas, with the ultimate objective, 
over time, of seeing these items removed from our high-risk list. 

This year we also continued to take steps internally to be a model 
federal agency and a world-class professional services organization. 
These steps helped us to address our three major management challenges-
-human capital, physical security, and information security. Through 
the GAO Human Capital Reform Act of 2004, the Congress granted GAO 
several additional human capital flexibilities that will allow us, 
among other things, to move to an even more performance-oriented and 
market-based compensation system. Our most valuable asset continues to 
be our people, and the flexibilities granted in this act will help us 
to continue to modernize our people-related policies and strategies, 
which, in turn, will help to ensure that we are well equipped to serve 
the Congress and the American people in the years to come. As a result, 
we are continuing to take a range of actions designed to modernize our 
human capital policies and practices. In fiscal year 2005, we adopted a 
broad pay band approach and a more performance-oriented pay system for 
our administrative staff. We also made considerable progress in moving 
to a more market-based and skills-, knowledge-, and performance- 
oriented classification and pay system for all of our employees. 

In today's world, we should partner for progress with other key 
players. We believe strongly in doing so in order to maximize our value 
and mitigate risk within current and expected resource levels. Fiscal 
year 2005 included several major milestones in GAO's outreach efforts. 
Most notably, we led the adoption of the first-ever strategic plans for 
the International Organizational of Supreme Audit Institutions 
(INTOSAI) and the National Intergovernmental Audit Forum. 

In short, fiscal year 2005 was a very successful year for us. This 
report describes our many contributions toward improving the 
government, and I am confident that the performance data and financial 
information in this report are complete and reliable, as noted in the 
statement of assurance that appears just after this letter. I believe 
that GAO remained true to its core values of accountability, integrity, 
and reliability throughout the year and that those who read this report 
will agree that the taxpayers received an excellent return on their 
investment in us. 

Signed by: 

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

[End of From the Comptroller General of the United States] 

Financial Reporting Assurance Statements: 

November 15, 2005: 

We, as GAO's executive committee, are responsible for preparing and 
presenting the financial statements and other information included in 
this performance and accountability report. The financial statements 
included herein are presented in conformity with U.S. generally 
accepted accounting principles; incorporate management's reasonable 
estimates and judgments, where applicable; and contain appropriate and 
adequate disclosures. Based on our knowledge, the financial statements 
are presented fairly in all material respects, and other financial 
information included in this report is consistent with the financial 
statements. 

On the basis of GAO's comprehensive management control program, we are 
pleased to certify, with reasonable assurance, that: 

* Our financial reporting is reliable--transactions are properly 
recorded, processed, and summarized to permit the preparation of 
financial statements in accordance with U.S. generally accepted 
accounting principles, and assets are safeguarded against loss from 
unauthorized acquisition, use, or disposition. 

* GAO is in compliance with all applicable laws and regulations-- 
transactions are executed in accordance with (1) laws governing the use 
of budget authority and other laws and regulations that could have a 
direct and material effect on the financial statements and (2) any 
other laws, regulations, and governmentwide policies applicable to GAO. 

* Our performance reporting is reliable--transactions and other data 
that support reported performance measures are properly recorded, 
processed, and summarized to permit the preparation of performance 
information in accordance with the criteria stated by GAO's management. 

We also believe these same systems of accounting and internal controls 
provide reasonable assurance that GAO is in compliance with the spirit 
of 31 U.S.C. 3512 (commonly referred to as the Federal Managers' 
Financial Integrity Act). This is an objective that we set for 
ourselves even though, as part of the legislative branch of the federal 
government, we are not technically required to do so. 

Signed by: 

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

Signed by: 

Gene L. Dodaro: 
Chief Operating Officer: 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer: 

Signed by: 

Anthony H. Gamboa: 
General Counsel: 

[End of Financial Reporting Assurance Statements] 

About GAO: 

GAO is an independent, nonpartisan, professional services agency in the 
legislative branch of the federal government. Commonly known as the 
"audit and investigative arm of the Congress" or the "congressional 
watchdog," we examine how taxpayer dollars are spent and advise 
lawmakers and agency heads on ways to make government work better. As a 
legislative branch agency, we are exempt from many laws that apply to 
the executive branch agencies. However, we generally hold ourselves to 
the spirit of many of the laws, including 31 U.S.C. 3512 (commonly 
referred to as the Federal Managers' Financial Integrity Act), the 
Government Performance and Results Act of 1993, and the Federal 
Financial Management Improvement Act of 1996.[Footnote 1] Accordingly, 
this performance and accountability report for fiscal year 2005 
supplies what we consider to be information that is at least equivalent 
to that supplied by executive branch agencies in their annual 
performance and accountability reports. 

Mission: 

Our mission is 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. The strategies and means that we use to accomplish 
this mission are described in the following pages. In short, we 
accomplish our mission by providing reliable information and informed 
analysis to the Congress, to federal agencies, and to the public; and 
we recommend improvements, when appropriate, on a wide variety of 
issues. Three core values--accountability, integrity, and reliability-
-form the basis for all of our work, regardless of its origin. These 
are described on the inside front cover of this report. 

GAO's History: 

The Budget and Accounting Act of 121 required the President to issue an 
annual federal budget and established GAO as an independent agency to 
investigate how federal dollars are spent. In the early years, we 
mainly audited vouchers, but after World War II we started to perform 
more comprehensive financial audits that examined the economy and 
efficiency of government operations. By the 1960s, GAO, which is in the 
legislative branch of the federal government, had begun to perform the 
type of work we are noted for today-program evaluation--which examines 
whether government programs are meeting their objectives. Our name--the 
U.S. Government Accountability Office-reflects our people, our work, 
and our reputation. 

Strategic Planning and Management Process: 

To accomplish our mission, we use a strategic planning and management 
process that is based on a hierarchy of four elements (see fig. 1), 
beginning at the highest level with the following four strategic goals: 

* Strategic Goal 1: Provide Timely, Quality Service to the Congress and 
the Federal Government to Address Current and Emerging Challenges to 
the Well-Being and Financial Security of the American People: 

* Strategic Goal 2: Provide Timely, Quality Service to the Congress and 
the Federal Government to Respond to Changing Security Threats and the 
Challenges of Global Interdependence: 

* Strategic Goal 3: Help Transform the Federal Government's Role and 
How It Does Business to Meet 21st Century Challenges: 

* Strategic Goal 4: Maximize the Value of GAO by Being a Model Federal 
Agency and a World-Class Professional Services Organization: 

Figure 1: GAO's Strategic Planning Hierarchy: 

[See PDF for image] - graphic text: 

A four step pyramid illustrating GAO's strategic planning hierarchy. 

Step 1: Strategic Goals (4); 
Step 2: Strategic Objectives (21); 
Step 3: Performance Goals (99); 
Step 4: Key Efforts (400+); 

Source: GAO. 

[End of figure] 

Our work is primarily aligned under the first three strategic goals, 
which span issues that are both domestic and international, affect the 
lives of all Americans, and influence the extent to which the federal 
government serves the nation's current and future interests. The fourth 
goal is our only internal one and is aimed at maximizing our 
productivity through such efforts as investing steadily in information 
technology (IT) to support our work; ensuring the safety and security 
of our people, information, and assets; pursuing human capital 
transformation; and leveraging our knowledge and experience. Figure 2 
lists by goal some examples of our work during fiscal year 2005; this 
work relates to a variety of specific strategic objectives. We revisit 
the focus and appropriateness of these four strategic goals each time 
that we update our strategic plan. 

Figure 2: Examples of How GAO Assisted the Nation: 

GAO strategic goal 1; 
Description: Provide timely, quality service to the Congress and the 
federal government to address current and emerging challenges to the 
well-being and financial security of the American people; 
In fiscal year 2005, GAO provided information that helped to...
* Improve the transition from active duty to civilian status for 
veterans with serious war-related injuries; 
* Address long-term health care financing pressures on state and local 
government budgets; 
* Identify challenges with transferring the Medicare appeals process 
from the Social Security Administration (SSA) and the Department of 
Health and Human Services (HHS); 
* Improve patient safety at Department of Veterans Affairs hospitals; 
* Improve the security of Social Security numbers; 
* Address the challenges of pension reform; 
* Strengthen the security screening process for passengers and checked 
baggage at the nation's airports; 
* Improve the oversight of Federal Housing Administration single-family 
and multifamily lenders; 
* Improve the oversight of electricity markets by the Federal Energy 
Regulatory Commission; 
* Identify challenges associated with the Department of Energy's (DOE) 
nuclear facility designs; 
* Monitor the growth in the digital television market; 
* Analyze issues contributing to the declining financial condition of 
the airline industry. 

GAO strategic goal 2; 
Description: Provide timely, quality service to the Congress and the 
federal government to respond to changing security threats and the 
challenges of global interdependence; 
In fiscal year 2005, GAO provided information that helped to...
* Improve the management of funds for the Global War on Terrorism; 
* Increase the security of cargo containers to prevent terrorist 
activity; 
* Alert the Congress to issues affecting the Department of Defense's 
(DOD) major weapon systems; 
* Analyze funding options for a new federal foreign assistance program--
the Millennium Challenge Account; 
* Promote government efforts to address threats to the security of the 
nation's information systems; 
* Strengthen the visa process as an antiterrorism tool; 
* Improve management of the U.S. Coast Guard's Deepwater program; 
* Shape the debate on improving military pay and benefits; 
* Strengthen the U.S. strategic export control system; 
* Identify improvements needed to secure the telecommunications and 
information systems used by U.S. financial markets. 

GAO strategic goal 3; 
Description: Help transform the federal government's role and how it 
does business to meet 21st century challenges; 
In fiscal year 2005, GAO provided information that helped to...
* Increase the public's understanding of the federal government's long-
term fiscal challenges; 
* Implement governmentwide civil service reforms; 
* Oversee federal tax policy; 
* Increase debts collected from criminals; 
* Decrease improper payments made by the U.S. Department of 
Agriculture's (USDA) Food Stamp Program and other federal agencies; 
* Manage multibillion-dollar IT modernizations and investments at the 
Department of Homeland Security (DHS) and Office of Personnel 
Management; 
* Improve agencies' strategic purchasing practices; 
* Examine changes in key areas of federal activity that could affect 
the federal government's fiscal future; 
* Enhance the knowledge base on comprehensive national indicators. 

GAO strategic goal 4; 
Description: Maximize the value of GAO by being a model federal agency 
and a world-class professional services organization; 
In fiscal year 2005, GAO provided information that helped to...
* Foster among other federal agencies GAO's innovative human capital 
practices, such as broad pay bands; performance-based compensation; and 
workforce planning and staffing strategies, policies, and processes; 
* Share GAO's model business and management processes with counterpart 
organizations in the United States and abroad. 

Source: GAO. 

[End of table] 

The four strategic goals are supported by strategic objectives that are 
in turn supported by and achieved through numerous performance goals 
and key efforts. Our strategic planning framework for serving the 
Congress, which lists the strategic objectives under each goal, is 
depicted in the graphic described later in this section. This framework 
not only shows the relationship between our strategic goals and 
strategic objectives, but also shows major themes that could 
potentially affect our work. 

An Example of Our Strategic Planning Elements: 

Strategic Goal 1: Provide Timely, Quality Service to the Congress and 
the Federal Government to Address Current and Emerging Challenges to 
the Well-Being and Financial Security of the American People. 

Strategic Objective: A Secure Retirement for Older Americans. 

Performance Goal: Identify Opportunities to Improve the Ability of 
Government Agencies to Administer and Protect Workers' Retirement 
Benefits. 

Key Efforts: 

* Evaluate pension, pension insurance, and tax oversight programs to 
determine whether workers' private pension retirement benefits are 
effectively protected. 

* Evaluate SSA's service-delivery systems and program operations to 
determine whether they are being implemented fairly, effectively, 
efficiently, and securely. 

* Assess the adequacy and management of public service retirement 
systems, including the federal, state, and local government employee 
systems, in serving participants and in protecting and providing 
benefits. 

Complete descriptions of the steps in our strategic planning and 
management process are included in our strategic plan for fiscal years 
2004 through 2009, which is available on our Web site at [Hyperlink, 
http://www.gao.gov]. This site also provides access to our annual 
performance plans since fiscal year 1999 and our performance and 
accountability reports since fiscal year 2001. 

To ensure that we are well positioned to meet the Congress's current 
and future needs, we update our 6-year strategic plan every 3 years, 
consulting extensively during the update with our clients on Capitol 
Hill and with other experts (see our complete strategic plan on 
[Hyperlink, http://www.gao.gov/sp/d04534sp.pdf]). Using the plan as a 
blueprint, we lay out the areas in which we expect to conduct research, 
audits, analyses, and evaluations to meet our clients' needs, and we 
allocate the resources we receive from the Congress accordingly. Given 
the increasingly fast pace with which crucial issues emerge and evolve, 
we design a certain amount of flexibility into our plans and staffing 
structure so that we can respond readily to the Congress's changing 
priorities. When we revise our plans or our allocation of resources, we 
disclose those changes in annual performance plans, which are posted--
like our strategic plan--on the Web for public inspection ([Hyperlink, 
http://www.gao.gov/sp.html]). For example, we issued our performance 
plan for fiscal year 2006 in June 2005. 

Each year, we hold ourselves accountable to the Congress and to the 
American people for our performance, primarily through the annual 
performance and accountability report. However, we have included some 
information about future plans in this report to provide as cohesive a 
view as possible of what we have done, what we are doing, and what we 
expect to do to support the Congress and to serve the nation. Last 
year, the Association of Government Accountants awarded us for the 
fourth consecutive year its Certificate of Excellence in Accountability 
Reporting for our fiscal year 2004 performance and accountability 
report. According to the association, this certificate means that we 
produced an interesting and informative report that achieved the goal 
of complete and fair reporting. 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: GAO's Strategic Plan Framework: 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Themes: 

* Long-Term Fiscal Imbalance; 

* National Security; 

* Global Interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to... 

Address Current and Emerging Challenges to the Well-Being and Financial 
Security of the American People related to... 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

Provide Timely, Quality Service to the Congress and the Federal 
Government to... 

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving... 

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

Help Transform the Federal Government Government's Role and How It Does 
Business to Meet 21st Century Challenges by assessing... 

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government: 

Maximize the Value of GAO by Being a Model Federal Agency and a World- 
Class Professional Services Organization in the areas of... 

* Client and customer satisfaction; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice: 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Fiscal Years 2004-2009. 

Source: GAO. 

[End of GAO's Strategic Plan Framework] 

[See PDF for image] - graphic text: 

A picture showing the certificate of excellence and the cover of the 
Performance and Accountability Report for fiscal year 2004. 

[End of figure] 

Organizational Structure: 

As the Comptroller General of the United States, David M. Walker is the 
head of GAO and is serving a 15-year term that began in November 1998. 
Three other executives join Comptroller General Walker to form GAO's 
Executive Committee, which is the top policymaking body within GAO. 
These executives are Chief Operating Officer Gene L. Dodaro, Chief 
Administrative Officer/Chief Financial Officer Sallyanne Harper, and 
General Counsel Anthony H. Gamboa. 

To achieve our strategic goals, our staff is organized as shown in 
figure 3. For the most part, our 13 research, audit, and evaluation 
teams perform the work that supports strategic goals 1, 2, and 3--our 
three external strategic goals--with several of the teams working in 
support of more than one strategic goal. 

Senior executives in charge of the teams manage a mix of engagements to 
ensure that the Congress's need for information on quickly emerging 
issues is met as we also continue longer term work efforts that flow 
from our strategic plan. To effectively serve the Congress with a 
finite set of resources, senior managers consult with our congressional 
clients and determine the timing and priority of engagements for which 
they are responsible. In fiscal year 2005, we formed a new unit-- 
Forensic Audits and Special Investigations--within our Financial 
Management and Assurance team. This unit was designed to provide the 
Congress with high-quality forensic audits;[Footnote 2] investigations 
of fraud, waste, and abuse; and evaluations of security vulnerabilities 
and other appropriate investigative services as part of its own 
assignments or in support of other teams. This unit follows up on 
engagements and referrals from our other teams when its special 
services are required to help determine whether legislative or 
administrative actions are necessary. The unit is composed of 
investigators and staff from our former Office of Special 
Investigations; auditors from the Financial Management and Assurance 
team who have experience with forensic audits; and staff in General 
Counsel who worked with FraudNet--our online system designed to 
facilitate the reporting of allegations of fraud, waste, abuse, or 
mismanagement of federal funds. 

As described below, General Counsel supports the work of all of our 
teams. In addition, the Applied Research and Methods team assists the 
other teams on matters requiring expertise in areas such as economics, 
research design, and statistical analysis. And staff in many offices 
such as Strategic Planning and External Liaison, Congressional 
Relations, Opportunity and Inclusiveness (OOI), Quality and Continuous 
Improvement (QCI), Public Affairs, and the Chief Administrative Office 
(CAO) support the efforts of the teams. This collaborative process, 
which we refer to as matrixing, increases our effectiveness, 
flexibility, and efficiency in using our expertise and resources to 
meet congressional needs on complex issues. 

General Counsel is structured organizationally along subject matter 
lines to facilitate the delivery of legal services. This structure 
allows General Counsel to (1) provide legal support to GAO and its 
audit teams concerning all matters related to their work and (2) 
produce legal decisions and opinions for the Comptroller General. 
Specifically, the Goal 1, Goal 2, and Goal 3 groups in General Counsel 
are organized to provide each of the audit teams with a corresponding 
team of attorneys dedicated to supporting each team's needs for legal 
services. In addition, these groups prepare advisory opinions to 
committees and members of the Congress on agency adherence to laws 
applicable to their programs and activities. General Counsel's Legal 
Services group provides in-house support to GAO's management on a wide 
array of human capital matters and initiatives and on information 
management and acquisition matters and defends the agency in 
administrative and judicial forums. Finally, attorneys in the 
Procurement Law and the Budget and Appropriations Law groups prepare 
administrative decisions and opinions adjudicating protests to the 
award of government contracts or opining on the availability and use of 
appropriated funds. 

For strategic goal 4--our fourth and only internal strategic goal-- 
staff in CAO take the lead. They are assisted on specific key efforts 
by the Applied Research and Methods team and by staff offices such as 
Strategic Planning and External Liaison, Congressional Relations, OOI, 
QCI, and Public Affairs. In addition, attorneys in General Counsel, 
primarily in the Legal Services group, provide legal support for goal 4 
efforts. 

Figure 3: Organizational Structure: 

[See PDF for image] - graphic text: 

An organization chart showing GAO’s basic structure. The agency’s top 
level of organization was the Executive Committee, which includes the 
Comptroller General, the Chief Operating Officer, the Chief 
Administrative Officer/Chief Financial Officer, and the General 
Counsel. Nineteen units report directly to the Comptroller General and 
the Chief Operating Officer. The units included the following staff 
offices: Public Affairs, Strategic Planning and External Liaison, 
Congressional Relations, Opportunity and Inclusiveness, and Inspector 
General, which report to the Comptroller General; and Quality and 
Continuous Improvement, which reports to the Chief Operating Officer. 

Other units that report to the Chief Operating Officer include teams 
and field operations that conduct audits, evaluations, and research. 
These teams perform work primarily supporting one of our three external 
strategic goals but several teams perform work in support of multiple 
strategic goals. Generally the teams fall under the following goals: 

Goal 1: 

Provide timely, quality service to the Congress and the federal 
government to address current and emerging challenges to the well-being 
and financial security of the American people. 

* Education, Workforce, and Income Security; 
* Financial Markets and Community Investment; 
* Health Care; 
* Homeland Security and Justice; 
* Natural Resources and Environment; 
* Physical Infrastructure; 

Goal 2: 

Provide timely, quality service to the Congress and the federal 
government to respond to the changing security threats and the 
challenges of global interdependence. 

* Acquisition and Sourcing Management; 
* Defense Capabilities and Management; 
* International Affairs and Trade; 

Goal 3: 

Help transform the federal government’s role and how it does business 
to meet 21st century challenges. 

* Applied Research and Methods; 

* Financial Management and Assurance; 
- Forensic Audits and Special Investigations; 

* Information Technology; 

* Strategic Issues; 
- Federal Budget and Intergovernmental Relations; 

Goal 4: 

Five units that report to the Chief Administrative Officer support our 
fourth goal; which is to maximize the value of GAO by being a model 
federal agency and a world-class professional services organization. 
These are: 

* Controller; 

* Human Capital Office: 
- Chief Human Capital Officer; 

* Information Systems and Technology Services: 
- Chief Information Officer; 

* Knowledge Services: 
- Chief Knowledge Services Officer; 

* Professional Development Program. 

Note: General Counsel's structure largely mirrors the agency's goal 
structure, and attorneys who are assigned to goals work with the teams 
on specific engagements. Thus, the dotted lines in this figure indicate 
General Counsel's support of or advisory relationship with the goals 
and teams rather than a direct reporting relationship. 

Source: GAO. 

[End of figure] 

Throughout GAO, we maintain a workforce of highly trained professionals 
with degrees in many academic disciplines, including accounting, law, 
engineering, public and business administration, economics, and the 
social and physical sciences. About three-quarters of our approximately 
3,200 employees are based at our headquarters in Washington, D.C; the 
rest are deployed in 11 field offices across the country. Staff in 
these field offices are aligned with our research, audit, and 
evaluation teams and perform work in tandem with our headquarters staff 
in support of our external strategic goals. 

GAO Field Locations: 

* Atlanta; 
* Boston; 
* Chicago; 
* Dallas; 
* Dayton; 
* Denver; 
* Huntsville; 
* Los Angeles; 
* Norfolk; 
* San Francisco; 
* Seattle. 

How We Measure Our Performance: 

We measure our performance using annual quantitative measures and 
multiyear qualitative performance goals. Together, these indicators 
help us to determine how well we are meeting the needs of the Congress 
and maximizing our value as a world-class organization. 

Annual Performance Measures: 

For several years, we assessed our performance annually using 
quantitative performance measures that are related to our work results 
and the usefulness of those results to our primary client--the 
Congress. Recently, we expanded our focus to include a more balanced 
set of performance measures that focus on three key areas--results, 
clients, and people.[Footnote 3] Fiscal year 2005 is the first year 
that we report how well we performed against the targets we set for our 
people measures. These categories of measures are briefly described 
below. 

* Results. Focusing on results and the effectiveness of the processes 
needed to achieve them is fundamental to accomplishing our mission. To 
assess our results, we measure financial benefits, other (nonfinancial) 
benefits, recommendations implemented, and percentage of new products 
with recommendations. 

* Clients. Our strategy in this area draws upon a variety of data 
sources (e.g., our client feedback survey and in-person discussions 
with congressional staff) to obtain information on the services we are 
providing to our congressional clients. To judge how well we are 
serving our clients, we measure the number of times we are asked to 
present expert testimony at congressional hearings as well as our 
timeliness in delivering products to the Congress. 

* People. As our most important asset, our people define our character 
and capacity to perform. A variety of data sources, including an 
internal survey, provide information to help us measure how well we are 
attracting and retaining high-quality staff and how well we are 
developing, supporting, using, and leading staff. 

Beginning with fiscal year 2006, we will add internal operations 
measures to the list of measures on which we report. Our mission and 
people are supported by our internal administrative services, including 
information management, building management, knowledge services, human 
capital, and financial management services. Through an internal 
customer satisfaction survey, we gather information on how well our 
internal operations help employees get their jobs done or improve 
employees' quality of work life. Examples of surveyed services include 
providing secure Internet access and voice communication systems, 
performance management, and benefits information and assistance. (For 
more information about these measures, see the section entitled 
Focusing on Our Internal Operations). 

To establish targets for these measures, we examine what we have been 
able to achieve in the past (e.g., by looking at our 4-year rolling 
averages for our client measures and most of our results measures, see 
part I) and the external factors that influence our work (see the 
section entitled Mitigating External Factors That Could Affect Our 
Performance). The teams and offices that are directly engaged in the 
work discuss their views of what must be accomplished in the upcoming 
fiscal year with our top executives, who then establish targets for the 
performance measures. Once approved by the Comptroller General, the 
targets become final and are presented in our annual performance 
plan.[Footnote 4] We may adjust these targets after they are initially 
published when our expected future work or level of funding provided 
warrant doing so. If we make changes, we include the changed targets in 
later documents, such as this performance and accountability report, 
and annotate the changes. In part II, we include detailed information 
on data sources that we use to assess each of these measures, as well 
as the steps we take to verify and validate the data (see the section 
entitled Verifying and Validating Performance Data). 

Measuring the Results of Our Work: 

We use four of our annual measures--financial benefits, other benefits, 
the percentage of past recommendations implemented, and the percentage 
of new products with recommendations--to assess our efforts to provide 
the kind of information and recommendations that will lead to benefits 
for the American people. Financial benefits and other benefits provide 
quantitative and qualitative information, respectively, on the outcomes 
or results that have been achieved from our work. They often represent 
outcomes that occurred over a period of several years. The remaining 
measures are intermediate outcomes in that they often lead to achieving 
outcomes that are ultimately captured in our financial or other 
benefits. 

For financial benefits and other benefits we first set targets for the 
agency as a whole and then we set targets for each of the external 
goals--that is, goals 1, 2, and 3--so that the sum of the targets for 
the goals equals the agencywide targets. For past recommendations 
implemented and percentage of products with recommendations, we set 
targets and report performance for the agency as a whole because we 
want our performance on these measures to be consistent across goals. 
We track our performance by strategic goal in order to understand why 
we meet or do not meet the agencywide target. We also use this 
information to provide feedback to our teams on the extent to which 
they are contributing to the overall target and to help them identify 
areas in which they need to improve. 

Multiyear Performance Goals: 

We use two elements in our strategic planning hierarchy--performance 
goals and key efforts--as qualitative indicators of our performance. We 
ask senior managers to determine whether the performance goals 
established in our strategic plan have been met over a multiyear 
period. To do this, these managers examine the amount of work conducted 
and recommendations made for each key effort supporting each 
performance goal. Senior managers also consider any other assistance 
provided to the client or customer that is related to these efforts. 
These managers then judge whether the work completed collectively for 
all key efforts actually achieved the performance goal, and we include 
the results of those assessments in our performance and accountability 
reports. 

For all four strategic goals, the multiyear, qualitative performance 
goals included in our current strategic plan describe specific areas of 
work that we had planned to complete by the end of fiscal year 2005. We 
assess our progress toward these multiyear, qualitative performance 
goals in part II of this report. However, during fiscal year 2004, we 
decided to revise our strategic plan every 3 years, rather than on a 2- 
year cycle, which means that we will not set new multiyear performance 
goals until 2007. To accommodate this change, for fiscal year 2006, we 
plan to continue to use the current performance goals as a basis for 
aligning our work with our strategic goals, and will describe the work 
we did in support of these multiyear performance goals at the end of 
fiscal year 2006. In preparing our fiscal year 2006 budget submission, 
we made minor revisions that apply to fiscal year 2006 for some of 
these performance goals, mainly in the homeland security and justice 
areas. These revisions were discussed in our fiscal year 2006 
performance plan. In our next strategic plan update, which will cover 
fiscal years 2007 through 2012, we will establish revised performance 
goals and key efforts that cover fiscal years 2007 through 2009. 

Measuring Client Service: 

We use two performance measures--the number of testimonies and the 
timeliness of our products--as indicators of how well we are meeting 
our clients' needs. 

We consider requests to present testimony as an indicator that our 
clients believe our work can add value to the congressional decision- 
making process. We set a target at the agencywide level for the number 
of testimonies and then assign a portion of the testimonies as a target 
for each of the external goals--that is, goals 1, 2, and 3--based on 
their expected contribution to the agencywide total. As in measuring 
the results of our work, we track our progress on this measure at the 
goal level in order to understand why we met or did not meet the 
agencywide target. 

We also believe that our ability to provide products by the agreed-upon 
date means that we have met the clients' needs for providing 
information in time for it to be of value to them. We set agencywide 
targets for timeliness because we want our performance on these 
measures to be consistent across goals. However, we track our progress 
on this measure at the team level so that we can provide feedback to 
our teams on the extent to which they are contributing to the overall 
target and to help them identify areas in which they need to improve. 

Measuring the Management of Our People: 

Our most important asset is our people, and they determine our capacity 
to perform. Therefore, we hold our managers accountable for attracting 
and retaining our human resources and determine how well we are 
performing in these areas through our new hire rate, acceptance rate, 
and retention rate. We also hold our managers accountable for investing 
in and leading our human resources. To assess our success in these 
areas, we track our performance using the following measures: staff 
development, staff utilization, leadership, and organizational 
development. We set targets for all of these measures at the agencywide 
level. 

On the pages that follow, we assess our performance for fiscal year 
2005 against our previously established performance targets. We also 
present our financial statements, the independent auditor's report, and 
a statement from GAO's Inspector General. 

[End of About GAO] 

[End of Introduction] 

Part I: Management's Discussion and Analysis: 

"Government is a trust, and the officers of the government are 
trustees; and both the trust and the trustees are created for the 
benefit of the people." 

- Henry Clay: 

Providing Information That Improves Federal Programs Now and in the 
Future: 

In fiscal year 2005, the Congress focused its attention on a broad 
array of challenging issues affecting the safety, health, and well- 
being of Americans here and abroad, and we were able to provide the 
objective, fact-based information these decision makers needed to 
stimulate debate, change laws, and improve federal programs for the 
betterment of the nation. For example, as the war in Iraq continued, we 
examined how DOD supplied vehicles, body armor, and other materiel to 
the troops in the field; contributed to the debate on military 
compensation; and highlighted the need to improve health, vocational 
rehabilitation, and employment services for seriously injured soldiers 
transitioning from the battlefield to civilian life. We also kept pace 
with the Congress's information needs about ways to better protect 
America from terrorism by issuing products and delivering testimonies 
that addressed issues such as security gaps in the nation's passport 
operations that threaten public safety and federal efforts needed to 
improve the security of checked baggage at airports and cargo 
containers coming through U.S. ports. We explored the financial crisis 
that weakened the airline industry and the impact of this situation on 
the traveling public and airline employees' pensions. 

In addition, we helped to focus the attention of the Congress and the 
public on issues affecting the fiscal security and economic stability 
of the nation in the long term. In the second quarter of fiscal year 
2005, we issued two products that will assist the Congress as it 
addresses future challenges. Our report entitled 21st Century 
Challenges: Reexamining the Base of the Federal Government provides a 
series of illustrative questions related to 12 areas of federal 
activity as well as our perspective on various strategies and 
approaches that should be considered as a possible means to address the 
issues and questions raised in the report. Drawing on our institutional 
knowledge and extensive program evaluation and performance assessment 
work for the Congress, we presented over 200 specific 21st century 
questions illustrating the types of hard choices our nation needs to 
face as it reexamines what the federal government does and how it does 
it. We also issued our High-Risk Series: An Update, which identifies 
federal areas and programs at risk of fraud, waste, abuse, and 
mismanagement and those in need of broad-based transformations. The 
issues affecting many areas and programs discussed in these two 
products may take years to address, and these products will serve as a 
useful guide for the Congress's future programmatic deliberations and 
oversight activities. (see pp. 42 and 43 for more information about our 
21st century challenges and high-risk reports, respectively.) We 
performed all this work and more in accordance with our strategic plan, 
guided by our core values, and consistent with our professional 
standards. 

As we assisted the Congress in fiscal year 2005, we monitored our 
performance using 14 annual performance measures that capture the 
results of our work; the assistance we provided to our client--the 
Congress; and our ability to attract, retain, develop, and lead a 
highly professional workforce (see table 1). These measures indicate 
that we had an impressive year--we met or exceeded our performance 
targets for 10 of our 14 measures. Two of our results measures-- 
financial benefits and other benefits--illustrate the outcomes of our 
work and our value to the nation because they track federal dollars 
saved or better used and programmatic improvements implemented as a 
result of our work. Two additional results measures track 
recommendations implemented and new products with recommendations that 
help us to achieve financial and other benefits. Our client measures-- 
testimonies and timeliness--indicate how well we, as an information 
provider, serve the Congress, and our people measures reflect how well 
we manage our staff to achieve the results that we do. 

Table 1: Agencywide Summary of Annual Measures and Targets: 

Results: 

Performance measure: Financial benefits; 
2001 Actual: $26.4 billion; 
2002 actual: $37.7 billion; 
2003 actual: $35.4 billion; 
2004 actual: $44.0 billion; 
2005 target: $37.5 billion; 
2005 actual: $39.6 billion; 
Met/not met: Met; 
2006 target: $39.0 billion. 

Performance measure: Other benefits; 
2001 Actual: 799; 
2002 actual: 906; 
2003 actual: 1,043; 
2004 actual: 1,197; 
2005 target: 1,000; 
2005 actual: 1,409; 
Met/not met: Met; 
2006 target: 1,050. 

Performance measure: Past recommendations implemented; 
2001 Actual: 79%; 
2002 actual: 79%; 
2003 actual: 82%; 
2004 actual: 83%; 
2005 target: 80%; 
2005 actual: 85%; 
Met/not met: Met; 
2006 target: 80%. 

Performance measure: New products with recommendations; 
2001 Actual: 44%; 
2002 actual: 53%; 
2003 actual: 55%; 
2004 actual: 63%; 
2005 target: 55%; 
2005 actual: 63%; 
Met/not met: Met; 
2006 target: 60%. 

Client: 

Performance measure: Testimonies; 
2001 actual: 151; 
2002 actual: 216; 
2003 actual: 189; 
2004 actual: 217; 
2005 target: 185; 
2005 actual: 179; 
Met/not met: Not met; 
2006 target: 210 

Performance measure: Timeliness; 
2001 actual: 95%; 
2002 actual: 96%; 
2003 actual: 97%; 
2004 actual: 97%; 
2005 target: 98%; 
2005 actual: 97%; 
Met/not met: Not met; 
2006 target: 98%. 

People: 

Performance measure: New hire rate; 
2001 Actual: N/A; 
2002 actual: 96%; 
2003 actual: 98%; 
2004 actual: 98%; 
2005 target: 97%; 
2005 actual: 94%; 
Met/not met: Not met; 
2006 target: 97%. 

Performance measure: Acceptance rate; 
2001 Actual: N/A; 
2002 actual: 81%; 
2003 actual: 72%; 
2004 actual: 72%; 
2005 target: 75%; 
2005 actual: 71%; 
Met/not met: Not met; 
2006 target: 75%. 

Performance measure: Retention rate with retirements; 
2001 Actual: 91%; 
2002 actual: 91%; 
2003 actual: 92%; 
2004 actual: 90%; 
2005 target: 90%; 
2005 actual: 90%; 
Met/not met: Met; 
2006 target: 90%. 

Performance measure: Retention rate without retirements; 
2001 Actual: 
95%; 
2002 actual: 97%; 
2003 actual: 96%; 
2004 actual: 95%; 
2005 target: 94%; 
2005 actual: 94%; 
Met/not met: Met; 
2006 target: 94%. 

Performance measure: Staff development; 
2001 Actual: N/A; 
2002 actual: 71%; 
2003 actual: 67%; 
2004 actual: 70%; 
2005 target: 72%; 
2005 actual: 72%; 
Met/not met: Met; 
2006 target: 74%. 

Performance measure: Staff utilization; 
2001 Actual: N/A; 
2002 actual: 67%; 
2003 actual: 71%; 
2004 actual: 72%; 
2005 target: 74%; 
2005 actual: 75%; 
Met/not met: Met; 
2006 target: 75%. 

Performance measure: Leadership; 
2001 actual: N/A; 
2002 actual: 75%; 
2003 actual: 78%; 
2004 actual: 79%; 
2005 target: 80%; 
2005 actual: 80%; 
Met/not met: Met; 
2006 target: 80%. 

Performance measure: Organizational climate; 
2001 Actual: N/A; 
2002 actual: 67%; 
2003 actual: 71%; 
2004 actual: 74%; 
2005 target: 75%; 
2005 actual: 76%; 
Met/not met: Met; 
2006 target: 75%. 

Source: GAO. 

Notes: N/A indicates the information is not available or the target is 
not applicable. Our fiscal year 2006 target for the percentage of 
products with recommendations differs from the target we reported for 
this measure in our fiscal year 2006 performance plan posted on our Web 
page in June 2005. On the basis of our performance in fiscal year 2005, 
we increased this target by 5 percentage points. 

[End of table] 

In fiscal year 2005, we accomplished real results for the nation, 
surpassing our financial benefits target for the year and exceeding our 
annual target and all-time record for other (nonfinancial) benefits. 
Our financial benefits of $39.6 billion represents an $83 return on 
every dollar invested in us, and the more than 1,400 other benefits 
resulting from our work helped to improve the efficiency and 
effectiveness of government programs that serve the public. In 
addition, we exceeded our targets for past recommendations implemented 
and new products with recommendations by 5 percentage points and 8 
percentage points, respectively. 

We did not achieve the targets we set for testimonies and timeliness. 
Several testimonies we had scheduled were postponed or canceled so that 
the Congress could turn its attention to the Supreme Court nominations, 
and during the last months of the fiscal year, to Hurricane Katrina and 
its aftermath. However, we believe we served the Congress very well 
during fiscal year 2005. Based on feedback through an electronic survey 
completed by a sample of our congressional clients who requested our 
testimonies and significant products, 96 percent of the responses 
concerning their overall satisfaction with our products were favorable. 
These respondents were pleased with various aspects of our written 
products and testimony statements, such as the professional manner in 
which we conducted our work and responded orally to questions at 
congressional hearings, respectively. We discuss the client feedback 
survey in detail in the section called Focusing on Our Clients. 

Concerning our eight people measures, which we began to hold managers 
accountable for in fiscal year 2005, we are happy to report that we met 
or exceeded our annual targets for all but two of them--new hire rate 
and acceptance rate. Our performance in this area indicates that we did 
a very good job developing, productively using, and managing our staff, 
but need to improve our recruiting and hiring processes a little more, 
which we have taken steps to do. We discuss these actions in appendix 1 
of this report. 

To help us examine trends over time, we also look at 4-year averages 
for all of our results and client measures except the percentage of 
past recommendations implemented because it is a composite that is 
drawn from a number of years rather than an annual percentage. 
Calculating 4-year rolling averages for the other measures minimizes 
the effect of an atypical result in any given year. We consider this 
calculation, along with other factors, when we set our performance 
targets. Table 2 shows that from fiscal year 2001 through fiscal year 
2005 financial and other benefits increased steadily along with the 
percentage of new products with recommendations. The average number of 
testimonies, on the other hand, declined from fiscal years 2003 through 
fiscal year 2004, but has increased in fiscal year 2005. Our ability to 
provide timely products leveled off after fiscal year 2002 and fiscal 
year 2004 at 96 percent, but increased slightly by 1 percentage point 
in fiscal year 2005. 

Table 2: Four-Year Rolling Averages for Selected GAO Measures: 

Results: 

Performance measure: Financial benefits; 
2001: $22.4 billion; 
2002: $26.9 billion; 
2003: $30.7 billion; 
2004: $35.9 billion; 
2005: $39.2 billion. 

Performance measure: Other benefits; 
2001: 683; 
2002: 775; 
2003: 884; 
2004: 986; 
2005: 1,139. 

Performance measure: New products with recommendations; 
2001: 37%; 
2002: 42%; 
2003: 48%; 
2004: 54%; 
2005: 58%. 

Client: 

Performance measure: Testimonies; 
2001: 225; 
2002: 215; 
2003: 205; 
2004: 193; 
2005: 200. 

Performance measure: Timeliness; 
2001: 95%; 
2002: 96%; 
2003: 96%; 
2004: 96%; 
2005: 97%. 

Source: GAO. 

[End of table] 

Regarding our qualitative multiyear performance goals, at the close of 
fiscal year 2005 (the end of our multiyear performance cycle) we met 96 
of our 99 performance goals. In part II of this report, we present 
detailed information about the multiyear performance goals developed to 
measure our progress toward achieving each of our four strategic goals. 

Focusing on Results: 

Focusing on outcomes and the efficiency of the processes needed to 
achieve them is fundamental to accomplishing our mission. The following 
five annual measures indicate that we have fulfilled our mission and 
delivered results that benefit the nation. 

Financial and Other Benefits: 

We describe many of the benefits produced by our work as either 
financial or other (nonfinancial) benefits. Both types of benefits 
result from our efforts to provide information to the Congress that 
helped to (1) change laws and regulations, (2) improve services to the 
public, and (3) promote sound agency and governmentwide management. In 
many cases, the benefits we claimed in fiscal year 2005 are based on 
work we did in past years because it often takes the Congress and 
agencies time to implement our recommendations or to act on our 
findings. 

To claim either type of benefit, our staff must document the connection 
between the benefits reported and the work that we performed. 

Financial Benefits: 

Our findings and recommendations produce measurable financial benefits 
for the federal government when the Congress or agencies act on them 
and the funds are made available to reduce government expenditures or 
are reallocated to other areas. The monetary effect realized can be the 
result of changes in: 

* business operations and activities; 

* the structure of federal programs; or: 

* entitlements, taxes, or user fees. 

For example, financial benefits could result if the Congress were to 
reduce the annual cost of operating a federal program or lessen the 
cost of a multiyear program or entitlement. Financial benefits could 
also result from increases in federal revenues--due to changes in laws, 
user fees, or asset sales--that our work helped to produce. 

In fiscal year 2005, our work generated $39.6 billion in financial 
benefits (see fig. 4). Of this amount, $19 billion (or approximately 48 
percent) resulted from changes in laws or regulations (see fig. 5). 

Figure 4: Financial Benefits GAO Recorded in Fiscal Year 2005: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

2001 Actual: $26.4 billion; 
2002 Actual: $37.7 billion; 
2003 Actual: $35.4 billion; 
2004 Actual: $44.0 billion; 
2005 Target: $37.5 billion; 
2005 Actual: $39.6 billion. 

Source: GAO. 

[End of figure] 

Figure 5: Types of Financial Benefits Recorded in Fiscal Year 2005 from 
Our Work: 

[See PDF for image] - graphic text: 

Pie chart with three slices, representing a total of $39.6 billion in 
financial benefits. 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: $19.0 billion (48.0%); 

Agencies acted on GAO information to improve services to the public: 
$12.8 billion (32.4%); 

Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO's work: $7.7 billion (19.5%). 

Source: GAO. 

Note: Percentages and amounts do not add due to rounding. 

[End of figure] 

Financial benefits included in our performance measures are net 
benefits--that is, estimates of financial benefits that have been 
reduced by the costs associated with taking the action that we 
recommended. We convert all estimates involving past and future years 
to their net present value and use actual dollars to represent 
estimates involving only the current year. Financial benefit amounts 
vary depending on the nature of the benefit, and we can claim financial 
benefits over multiple years based on a single agency or congressional 
action. To ensure conservative estimates of net financial benefits, 
reductions in operating cost are typically limited to 2 years of 
accrued reductions. Multiyear reductions in long-term projects, changes 
in tax laws, program terminations, or sales of government assets are 
limited to 5 years. Estimates come from non-GAO sources and are reduced 
by any identifiable offsetting costs. These non-GAO sources are 
typically the agency that acted on our work, a congressional committee, 
or the Congressional Budget Office. 

To document financial benefits, our staff complete reports documenting 
accomplishments that are linked to specific products or actions. All 
accomplishment reports for financial benefits are documented and 
reviewed by (1) another GAO staff member not involved in the work and 
(2) a senior executive in charge of the work. Also, a separate unit, 
QCI, reviews all financial benefits and approves benefits of $100 
million or more, which amounted to 94 percent of the total dollar value 
of benefits recorded in fiscal year 2005. Additionally, our IG performs 
an independent review of all accomplishment reports claiming benefits 
of $500 million or more, which represented about 78 percent in fiscal 
year 2005. 

Figure 6 lists several of our major financial benefits reported in 
fiscal year 2005 and briefly describes some of our work contributing to 
financial benefits. 

Figure 6: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2005: 

Description: Reduced funding for a missile defense system. In an April 
2003 report, we stated that to successfully develop an effective and 
suitable missile defense system, the Missile Defense Agency must be 
willing to adopt knowledge-based acquisition practices that have made 
other developers successful. Our report acknowledged that the agency's 
development strategy for the Kinetic Energy Interceptor program 
included knowledge-based practices, but concluded that the agency had 
not implemented two important practices: (1) using well-developed 
technologies during system integration and (2) fully testing a system 
before fielding it. In response, the Missile Defense Agency is scaling 
back development of the Kinetic Energy Interceptor program until 
technologies are mature. Over a 5-year period--from fiscal year 2005 
through fiscal year 2009--program funding will be reduced by about $5.2 
billion, which has a net present value of about $4.7 billion. (Goal 2); 
Amount: $4.7 billion. 

Description: Avoided higher costs associated with a nuclear waste 
disposal process. In a June 2003 report, we recommended that DOE pursue 
legislative clarification from the Congress because of a legal 
challenge that threatened DOE's ability to proceed with its less costly 
strategy for treating and disposing of radioactive tank wastes with 
lower concentrations of radioactivity. DOE estimated that pursuing a 
more expensive treatment and disposal strategy suitable for wastes with 
higher concentrations of radioactivity would increase waste treatment 
disposal costs by $55 billion to $60 billion at its Savannah River 
Site. The Fiscal Year 2005 National Defense Authorization Act contained 
a provision that clarified DOE's authority to follow its planned 
treatment and disposal strategy thus avoiding a more costly process. We 
calculated that the net present value of the cost avoidance for fiscal 
years 2005 through 2009 was about $4.5 billion. (Goal 1); 
Amount: $4.5 
billion. 

Description: Improved the Army's force structure. In a report examining 
the Army's force structure, we recommended that the Army establish 
mission criteria to provide a firmer basis for its Strategic Reserve, 
Domestic Support, and Homeland Defense force requirements. Such 
criteria would help to ensure that the Army had the right number and 
types of soldiers available for these purposes. Rather than request 
additional end strength, the Army reconfigured its existing force's 
structure. In April 2003, DOD reported that the Army had included force 
structure changes in its fiscal year 2004 budget, which supported 
increased units for military police; military intelligence; special 
forces; and chemical, civil affairs, and psychological operations. 
Based on this action, the Army has been able to rebalance its force 
structure to create needed units with minimal increases in authorized 
end strength. The amount shown represents the net present value of the 
force structure changes over a 5-year period (fiscal years 2004 through 
2008). (Goal 2); 
Amount: $3.4 billion. 

Description: Reduced the cost of federally subsidized housing projects. 
We determined that the Department of Housing and Urban Development 
(HUD) had not developed the systems it needed to track the status of 
unexpended balances in its project-based Section 8 housing program and 
therefore could not use this information to help manage the program and 
formulate budget requests for it. As a result of our work, the Congress 
required HUD to better enforce the legislative provisions requiring the 
recapture of capital funds not being utilized by public housing 
authorities. In fiscal year 2005, we documented--using HUD data--that a 
financial benefit of about $2.7 billion in current dollars resulted 
from HUD's recapture of about $2.5 billion of fiscal year 2003 dollars. 
(Goal 1); 
Amount: $2.7 billion. 

Description: Avoided costs associated with higher payment rates at 
skilled nursing homes. In 2002, we assessed the impact of a 16.6 
percent increase in Medicare's daily rate for skilled nursing 
facilities on nurse staffing ratios. Our analysis showed that nurse 
staffing ratios changed little from April 1, 2001, through September 
30, 2002--the period during which the rate increase was in effect. In 
fiscal year 2003, the cost to the federal government of reinstating the 
payment rate increase was approximately $1 billion per year. Since we 
issued our report, the Congress has considered reinstating the rate 
increase, but it has chosen not to, largely on the basis of our 
analysis. The net present value of the annual cost avoidance for fiscal 
years 2004 and 2005 is $2 billion. (Goal 1); 
Amount: $2.0 billion. 

Description: Increased tax revenues. We reported that the Internal 
Revenue Service (IRS) did not have systems or procedures in place to 
allow it to identify and actively pursue unpaid tax cases that may have 
some collection potential. Based on our work, IRS has taken action to 
better assess the potential for collecting unpaid tax assessment cases 
and has used that information to better target its collection efforts. 
Specifically, in 2004 IRS began implementing a sophisticated modeling 
technology to identify productive and less productive cases to ensure 
that its resources are devoted to cases with a higher likelihood of 
collection and to help prevent premature suspension of collection 
efforts. IRS's analysis of the yield on collection cases after 
employing this modeling in fiscal year 2004 shows that this yield 
increased by about $1.8 billion (in current year dollars), or 8.4 
percent from the previous year (fiscal year 2003), without significant 
staffing level increases. (Goal 3); 
Amount: $1.8 billion. 

Description: Ensuring continued investment in the General Services 
Administration's (GSA) online purchasing system. As of 2003, GSA had 
spent $84 million to develop, implement, and maintain Advantage, a 
system for ordering products and services online. However, 5 years 
after the system was launched, only 35 percent of all government-
contracted vendors participated in the program, and agencies were 
largely using the system to compare pricing. To ensure GSA's level of 
investment matched customer needs, we recommended that the agency 
develop a business case for a system such as Advantage, and in January 
2005, GSA selected a new business strategy that would significantly 
enhance the system's capabilities to serve as a broker between buyers 
and suppliers and provide agencies with an automated tool for 
formulating acquisition requirements and developing requests for 
quotes. GSA projects over $1.5 billion in financial benefits to result 
from electronic transactions, spend analysis (analysis of expenditures 
that shows how money is spent on goods and services), a searchable 
procurement data repository, and competitive pricing. This financial 
benefit has a net present value of just over $1.3 billion. (Goal 3); 
Amount: $1.3 billion. 

Description: Reduced Navy and Air Force appropriations. DOD policy 
requires the Defense Working Capital Fund to maintain cash levels to 
cover 7 to 10 days of operational cash and 6 months of capital asset 
disbursements. Our analysis showed that the January 2004 reported 
actual cash balance for the Air Force Working Capital Fund exceeded the 
10-day cash requirement by about $1.5 billion, and the Navy's Working 
Capital Fund reported actual cash balance exceeded the budgeted cash 
balance by $659 million and $408 million at the end of fiscal years 
2002 and 2003, respectively. The Congress reduced the Navy and Air 
Force fiscal year 2005 Operation and Maintenance appropriations by just 
under $1.3 billion due to excessive cash amounts. (Goal 3); 
Amount: 
$1.3 billion. 

Description: Eliminated the National Aeronautics and Space 
Administration's (NASA) Prometheus 1 project. We issued a report 
questioning whether NASA had established the initial justification for 
its investment in the Prometheus 1 project and how the agency planned 
to ensure that critical nuclear power and propulsion system 
technologies were sufficiently developed to support deep space probes 
like the Jupiter Icy Moons Orbiter. We also reported that the approved 
Prometheus 1 funding profile was inadequate to support the planned 
mission--a launch to Jupiter's Icy Moons in 2015. NASA has subsequently 
deferred the Jupiter Icy Moons Orbiter mission indefinitely, reducing 
the agency's funding needs by about $1.22 billion through fiscal year 
2009; the net present value of this reduction is over $1.1 billion. 
(Goal 3); 
Amount: $1.1 billion. 

Description: Reduced the budget request for a new foreign assistance 
program. In March and June 2004, we provided the Congress with 
information to help it assess the President's $2.5 billion fiscal year 
2005 budget request for the Millennium Challenge Account--a new foreign 
assistance program intended to provide economic assistance to countries 
that demonstrate a commitment to ruling justly, investing in people, 
and encouraging economic freedom. Our work provided the Congress with a 
framework for identifying relationships and tradeoffs between funding 
levels, compact length, and number of compacts (i.e., agreements). Our 
analysis indicated that by reducing assistance target levels, the 
length of compacts or both with participating countries, the program 
could operate at a lower funding level. We also estimated the effect of 
funding compacts partly from future appropriations. Our work 
facilitated the Congress's decision to reduce the appropriation for the 
Millennium Challenge Account in fiscal year 2005 to $1.5 billion. (Goal 
2); 
Amount: $1.0 billion. 

Source: GAO. 

[End of table] 

Other Benefits: 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2005, we recorded a total of 1,409 
other benefits (see fig. 7). 

Figure 7: Other Benefits GAO Recorded in Fiscal Year 2005: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

2001 Actual: 799; 
2002 Actual: 906; 
2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Target: 1,000; 
2005 Actual: 1,409. 

Source: GAO. 

[End of figure] 

We documented 75 instances where the information we provided to the 
Congress resulted in statutory or regulatory changes, 595 instances 
where federal agencies used our information to improve services to the 
public, and 739 instances where agencies improved core business 
processes or governmentwide reforms as a result of our work. (See fig. 
8.) These actions spanned the full spectrum of issues, from identifying 
that some soldiers had not been reimbursed for military-related travel 
costs they personally incurred to highlighting weaknesses in SSA's 
policies for verifying birth certificates when issuing replacement 
Social Security cards. In figure 9 we provide examples of some of the 
other benefits we claimed as accomplishments in fiscal year 2005. The 
laws that we cite in the first section of this figure were passed in 
fiscal year 2005. 

Figure 8: Types of Other Benefits Recorded in Fiscal Year 2005 from Our 
Work: 

[See PDF for image] - graphic text: 

Pie chart with three slices, representing a total of 1,409 other 
benefits. 

Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO's work: 739 (52.4%); 

Agencies acted on GAO information to improve services to the public: 
595 (42.2%); 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: 75 (5.3%). 

Source: GAO. 

Note: Percentages do not add due to rounding. 

[End of figure] 

Figure 9: GAO's Selected Other (Nonfinancial) Benefits Reported in 
Fiscal Year 2005: 

Other benefits that helped to change laws: 

Intelligence Reform and Terrorism Prevention Act of 2004 (Pub. L. No. 
108-458): 

Our work is reflected in this law in different ways. In our May 2004 
testimony on the use of biometrics for aviation security, we reported 
on the need to identify how biometrics will be used to improve aviation 
security prior to making a decision to design, develop, and implement 
biometrics. Using information from our statement, the House introduced 
a bill on July 22, 2004, directing the Transportation Security 
Administration (TSA) to establish system requirements and performance 
standards for using biometrics, and to establish processes (1) to 
prevent individuals from using assumed identities to enroll in a 
biometric system and (2) to resolve errors. These provisions were later 
included in an overall aviation security bill and were eventually 
included in the Intelligence Reform and Terrorism Prevention Act of 
2004, enacted in December 2004. (Goal 2). We conducted a body of work 
assessing the physical screening of airport passengers and their 
checked baggage. We found that the installation of systems that are in 
line with airport baggage conveyor systems may result in financial 
benefits according to TSA estimates for nine airports. We also found 
that the effectiveness of the advance passenger screening under the 
process known as Secure Flight was not certain. TSA agreed to take 
corrective actions in these areas, and the Congress required TSA in the 
Intelligence Reform and Terrorism Protection Act to prepare a plan and 
guidelines for installing in-line baggage screening systems, and 
enacted measures to promote Secure Flight's development and 
implementation. (Goal 1). 

Real ID Act of 2005 (Pub. L. No. 109-13): 

We reported on the verification of identity documents for drivers' 
licenses, noting that visual inspection of key documents lent itself to 
possible identity fraud. To demonstrate this, our investigators were 
able to obtain licenses in two states using counterfeit documents and 
the Social Security numbers of deceased persons. The Congress 
established federal identification standards for state drivers' 
licenses and other such documents and mandated third- party 
verification of identity documents presented to apply for a driver's 
license. (Goal 1). 

Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005 (Pub. L. No. 108-375): 

We assisted the Congress in crafting major improvements to a program 
intended to compensate individuals who worked in DOE facilities and 
developed illnesses related to radiation and hazardous materials 
exposure. In a 2004 report, we identified features of the originally 
enacted program that would likely lead to inconsistent benefit outcomes 
for claimants, in part because the program depended on the varying 
state workers compensation systems to provide some benefits. We also 
presented several options for improving the consistency of benefit 
outcomes and a framework for assessing these options. When the Congress 
enacted the Ronald W. Reagan National Defense Authorization Act for 
Fiscal Year 2005, it revamped this energy employees benefit program. 
Among other changes, this law federalized the payment of worker 
compensation benefits for eligible energy contractor employees and 
provided a schedule of uniform benefit payments. (Goal 1). 

Federal Lands Recreation Enhancement Act (Pub. L. No. 108-447): 

Our work over the past several years has helped the Congress to 
establish and assess the impacts of the recreational fee demonstration 
program. Under this trial program, the Congress authorized the National 
Park Service, the Fish and Wildlife Service, the Bureau of Land 
Management, and the Forest Service to charge fees to visitors to, among 
other things, reduce the maintenance backlog at federal parks and 
historic places and protect these lands from visitor impacts. Since the 
program's inception in 1996, we have identified issues that needed to 
be addressed to improve the program's effectiveness that included 
providing (1) a more permanent source of funds to enhance stability, 
since the current program had to be reauthorized every 2 years; (2) the 
participating agencies with greater flexibility in how and where they 
apply fee revenues; and (3) improvements in interagency coordination in 
the collection and use of revenue fees to better serve visitors by 
making the payment of fees more convenient and equitable and reducing 
visitor confusion about similar or multiple fees being charged at 
nearby or adjacent federal recreational sites. As a result of this body 
of work, the Congress addressed these issues by passing the Federal 
Lands Recreation Enhancement Act in December 2004. This act permits 
federal land management agencies to continue charging fees at 
campgrounds, rental cabins, high-impact recreation areas, and day-use 
sites that have certain facilities. The act also provides for a 
nationally consistent interagency program, more on-the-ground 
improvements at recreation sites across the nation, enhanced visitor 
services, a new national pass for use across interagency federal 
recreation sites and services, and public involvement in the program. 
(Goal 1). 

Consolidated Appropriations Act, 2005 (Pub. L. No. 108-447): 

Our work is reflected in this law in different ways. At the time of our 
August 2003 report, the original 1999 expiration date for the franchise 
fund pilots operating at the Departments of Commerce, Veterans Affairs, 
Health and Human Services, the Interior, and the Treasury and at the 
Environmental Protection Agency had been extended three times. These 
franchise funds, authorized by the Government Management Reform Act of 
1994, are part of a group of 34 intragovernmental revolving funds that 
were created to provide common administrative support services required 
by many federal agencies. For example, the Commerce Franchise Fund's 
business line provides IT infrastructure support services to the 
agency. We concluded that increasing the period of authorization would 
help ease concerns of current and potential clients about franchise 
fund stability and might allow franchise funds to add new business 
lines, and we suggested that the authorizations be extended for longer 
periods. The Congress provided permanent authority to the Treasury 
franchise fund in the Consolidated Appropriations Act, 2005, passed on 
December 8, 2004. (Goal 3); In 2003, we reported that most agencies 
could not retain the proceeds from the sale of unneeded property and 
this acted as a disincentive to disposing of unneeded property. We 
stated in our high- risk report on federal real property that it may 
make sense to permit agencies to retain proceeds for reinvestment in 
real property where a need exists. Subsequently, in the Consolidated 
Appropriations Act, 2005, the Congress authorized the Administrator of 
GSA to retain the net proceeds from the conveyance of real and related 
personal property. These proceeds are to be deposited into the Federal 
Buildings Fund and are to be used as authorized for GSA's real property 
capital needs. (Goal 1). In December 2003, we reported that 184 out of 
213 Alaska Native villages are affected, to some extent, by flooding 
and erosion. However, these villages often have difficulty qualifying 
for federal assistance to combat their flooding and erosion problems. 
In our report, we recommended that the Denali Commission adopt a policy 
to guide investment decisions and project designs in villages affected 
by flooding and erosion. In this legislation, the Congress provided the 
Secretary of the Army authority to carry out "structural and non- 
structural projects for storm damage prevention and reduction, coastal 
erosion, and ice and glacial damage in Alaska, including relocation of 
affected communities and construction of replacement facilities." (Goal 
1). To improve the federal government's ability to collect billions of 
dollars of outstanding criminal debt, we recommended in a 2001 report, 
that the Department of Justice work with other agencies involved in 
criminal debt collection, including the Administrative Office of the 
U.S. Courts, the Department of the Treasury (Treasury), and the Office 
of Management and Budget (OMB), to develop a strategic plan that would 
improve interagency processes and coordination with regard to criminal 
debt collection activities. The conference report that accompanied the 
Consolidated Appropriations Act, 2005, directed the Attorney General to 
assemble an interagency task force for the purpose of better managing, 
accounting for, reporting, and collecting criminal debt. (Goal 3). 

Other benefits that helped to improve services to the public: 

Encouraged improvements in the process for ensuring states' compliance 
with education laws for the disabled: 

Our report found that the Department of Education's (Education) system 
for resolving noncompliance with the Individuals with Disabilities in 
Education Act is protracted. We found that resolution of noncompliance 
cases often takes several years, in part because Education took a year 
on average from the time it identified noncompliance to issue a report 
citing the noncompliance. We therefore recommended that Education 
improve its system of resolving noncompliance by shortening the amount 
of time it takes to issue a report of noncompliance and by tracking 
changes in response times under the new monitoring process. In response 
to our recommendation, Education has instituted an improved process for 
managing and tracking the various phases of the monitoring process, 
which includes the creation of a database to facilitate this tracking. 
This new tracking system will enable Education to better monitor the 
status of existing noncompliance, and thus enable the department to 
take appropriate action when states fail to come into compliance in a 
timely manner. (Goal 1). 

Identified a weakness in Medicare's telephone assistance service: 

In 2004, we found that the 24-hour 1-800-MEDICARE help line, operated 
by the Centers for Medicare & Medicaid Services (CMS), did not answer 
10 percent of the calls we placed to test its accuracy, often because 
it automatically transferred some calls to claims administration 
contractors that were not open for business at the time of the call. 
This call transfer process prohibited callers from accessing 
information during nonbusiness hours, even though 1-800-MEDICARE 
operates 24-hours a day. As a result, we recommended that CMS revise 
the routing procedures of 1-800-MEDICARE to ensure that calls are not 
transferred or referred to claims administration contractors' help 
lines during nonbusiness hours. In response, CMS finished converting 
its call routing procedures. As a result, calls placed after normal 
business hours will be routed to the main 1-800-MEDICARE help line for 
assistance. (Goal 1). 

Highlighted the need for increased security at a federal disease 
research facility: 

USDA scientists at the Plum Island Animal Disease Center research 
contagious animal diseases that have been found in other countries. The 
mission of the facility, now administered by DHS, is to develop 
strategies for protecting the nation's animal industries and exports 
from these foreign animal diseases. In our September 2003 report, 
Combating Bioterrorism: Actions Needed to Improve Security at Plum 
Island Animal Disease Center, we made several recommendations to 
improve security at the facility and reduce vulnerability to terrorist 
attacks. Among other things, we recommended that the Secretary of 
Homeland Security, in consultation with the Secretary of Agriculture, 
enhance incident response capability by increasing the size of the 
guard force. DHS has informed us that this has been completed. 
According to the Director of Plum Island, DHS has more than doubled the 
number of guards assigned on each shift on Plum Island. (Goal 1). 

Other benefits that helped to promote sound agency and governmentwide 
management: 

Recommended a process to increase the efficiency of DOD procurements: 

DOD spending on service contracts approaches $100 billion annually, but 
DOD's management of services procurement is inefficient and ineffective 
and the dollars are not always well spent. Many private companies have 
changed management practices based on analyzing spending patterns and 
coordinating procurement efforts in order to achieve major savings. We 
recommended that DOD adopt the effective spend analysis processes used 
by these leading companies and use technology to automate spend 
analysis to make it repeatable. In response, DOD is developing new 
technology to do that. According to DOD and contractor project 
managers, one phase of the project was completed in December 2004. In 
March 2005, DOD approved a business case analysis to seek follow-on 
funding for developing a DOD-wide spend analysis system. (Goal 2). 

Improved the Air Force's oversight of purchase card transactions: 

As part of our audit of Air Force purchase card controls, we identified 
transactions that Air Force officials acknowledged to be fraudulent as 
well as potentially fraudulent transactions that the Air Force had not 
identified. To improve Air Force oversight of purchase card activity 
and facilitate the identification of systemic weaknesses and 
deficiencies in existing internal control and the development of 
additional control activities, we recommended that the Air Force 
establish an agencywide database of known purchase card fraud cases. In 
lieu of establishing a separate agencywide database, during fiscal year 
2003, the Air Force Office of Special Investigations initiated 
quarterly reporting on its purchase card investigations to the DOD IG 
for macro-level analysis of systemic weaknesses in the program. Our 
ongoing collaboration with the DOD IG on DOD's purchase card program 
confirmed that the Air Force's Office of Special Investigations is 
working effectively with DOD's IG on data- mining techniques for 
detection of potentially improper and fraudulent purchase card 
transactions. As a result of our work, the Air Force has taken action 
to reduce the financial risk associated with undetected fraud and abuse 
in its purchase card program. (Goal 3). 

Encouraged the Census Bureau to produce training materials in other 
languages: 

For the 2000 Census, the United States Census Bureau (Bureau) printed 
material used to train census workers only in English, except in Puerto 
Rico where training materials were available in Spanish. However, to 
better prepare census workers--some of whom speak Spanish as their 
first language--to locate migrant farm workers and other hard-to-count 
groups, we recommended that the Bureau consider providing training 
materials in languages other than English to targeted areas. In 
response to our recommendation, the Bureau is researching foreign- 
language data collection methods as part of its preparations for the 
2006 Census test and, more generally, plans to identify areas and 
operations that will require in-language training materials for areas 
with very large, new migrant populations where it will not be possible 
to hire bilinguals. Moreover, the Bureau's June 2005 request for 
proposals for a Field Data Collection Automation System includes a 
requirement for the contractor to provide training applications and 
materials in English and Spanish for the handheld computers enumerators 
are to use to count nonrespondents. (Goal 3). 

Source: GAO. 

[End of table] 

In addition to the financial and other benefits claimed in fiscal year 
2005 from our work, we also achieved the following results. 

Past Recommendations Implemented: 

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2005, 85 percent of the 
recommendations we made in fiscal year 2001 had been implemented (see 
fig. 10), primarily by executive branch agencies. Putting these 
recommendations into practice will generate tangible benefits for the 
nation in the years ahead. 

Figure 10: Percentage of Past Recommendations Implemented: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

Four-year implementation rate: 

2001 Actual: 79%; 
2002 Actual: 79%; 
2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Target: 80%; 
2005 Actual: 85%. 

Source: GAO. 

[End of figure] 

The 85 percent implementation rate for fiscal year 2005 exceeded our 
target for the year by 5 percentage points as well as our actual 
performance for the last 4 years. As figure 11 indicates, agencies need 
time to act on recommendations. Therefore, we assess recommendations 
implemented after 4 years, the point at which experience has shown that 
if a recommendation has not been implemented, it is not likely to be. 

Figure 11: Cumulative Implementation Rate for Recommendations Made in 
Fiscal Year 2001: 

[See PDF for image] - graphic text: 

Bar graph with four items. 

After 1 year: 20%; 
After 2 years: 31%; 
After 3 years: 48%; 
After 4 years: 85%. 

Source: GAO. 

[End of figure] 

New Products Containing Recommendations: 

This year, about 63 percent of the 637 written products we issued 
(excluding testimonies) contained recommendations. (See fig. 12.) We 
track the percentage of new products with recommendations because we 
want to encourage staff to develop recommendations that when 
implemented by the Congress and agencies, produce financial and other 
benefits for the nation. However, by setting our target at 55 percent, 
we recognize that our products do not always include recommendations 
and that the Congress and agencies often find such informational 
reports just as useful as those that contain recommendations. Our 
informational reports have the same analytical rigor and meet the same 
quality standards as those with recommendations and, similarly, can 
help to bring about significant financial and other benefits. Hence, 
this measure allows us ample leeway to respond to requests that result 
in reports without recommendations. 

Figure 12: Percentage of New Products with Recommendations: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

2001 Actual: 44%; 
2002 Actual: 53%; 
2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Target: 55%; 
2005 Actual: 63%. 

Source: GAO. 

[End of figure] 

Multiyear Performance Goals: 

In addition to our annual measures, we track our progress on 99 
multiyear performance goals. At the end of fiscal year 2005, we met all 
but 3 of our performance goals. Our performance goals measure the 
extent to which we did the work we had planned to do to support the 
Congress during fiscal years 2004 and 2005. Our senior managers 
developed these performance goals at the beginning of the assessment 
cycle (fiscal year 2004) based on their knowledge of specific subject 
areas and in consultation with our clients and customers. However, 
because congressional or GAO priorities can change over the period 
covered by these performance goals, we may not be able to meet some of 
them because resources had to be shifted away from planned work to 
address new or more urgent priorities. In such circumstances, we do not 
necessarily view an unmet performance goal as a problem. Rather, we 
believe it shows that we are responsive in carrying out our mission of 
serving the Congress and the nation and devoting our resources to 
efforts of critical importance. We consider these performance goals 
qualitative rather than quantitative because our senior managers 
determine whether enough work (i.e., key efforts) has been performed to 
achieve a performance goal. In Part II of this report, we list by 
strategic goal the multiyear qualitative performance goals supporting 
each strategic objective and indicate whether the performance goal was 
met. 

Focusing on Our Clients: 

To fulfill the Congress's information needs, we strive to deliver the 
results of our work orally as well as in writing at a time agreed upon 
with our clients. Our performance this year indicates that we assisted 
our clients--the Congress--well, though we missed our target on both 
the number of hearings we participated in and our ability to deliver 
products on time. 

Testimonies: 

Our clients often invite us to testify on our current and past work 
when it addresses issues that congressional committees are examining 
through the hearing process. During fiscal year 2005, experts from our 
staff testified at 179 congressional hearings covering a wide range of 
complex issues (see fig. 13). For example, our senior executives 
testified on improving the security of nuclear material, federal 
oversight of mutual funds, and the management and control of DOD's 
excess property. (See the list of selected testimony issues below for a 
summary of issues we testified on by strategic goal in fiscal year 
2005.) Over 70 of our testimonies were related to high-risk areas and 
programs, which are discussed in the section called GAO's High-Risk 
Program. 

However, in spite of our willingness to testify for our clients, we did 
not meet our fiscal year 2005 target of 185 testimonies, primarily 
because congressional committees either canceled or postponed several 
hearings at which our senior executives were scheduled to testify to 
focus instead on the Supreme Court nominations and Hurricane Katrina. 

Figure 13: Testimonies: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

Hearings at which GAO testified: 

2001 Actual: 151; 
2002 Actual: 216; 
2003 Actual: 189; 
2004 Actual: 217; 
2005 Target: 185; 
2005 Actual: 179. 

Source: GAO. 

[End of figure] 

Selected Testimony Issues: Fiscal Year 2005: 

Goal 1: 

Address Challenges to the Well-Being and Financial Security of the 
American People: 

* Head Start grants management; 
* Preparing for an influenza pandemic; 
* Overseeing the U.S. food supply; 
* Retirement options for seniors; 
* Long-term health care costs and government budgets; 
* Energy demand in the 21st century; 
* Postal service reform legislation; 
* Veterans' disability claims; 
* Social Security reform; 
* Wildland fire management; 
* Medicaid financing issues; 
* Meeting the future demand for energy in the United States; 
* National air traffic system; 
* Amtrak's Acela train; 
* Protecting nuclear material handled at science and environmental 
sites; 
* Providing services to seriously injured veterans; 
* Rural housing service; 
* Federal real property; 
* Endangered Species Act; 
* Federal oversight of the E-rate program. 

Goal 2: 

Respond to Changing Security Threats and the Challenges of 
Globalization: 

* Army's modular forces; 
* U.S. passport fraud; 
* Cargo security strategies; 
* Acquisition challenges facing the Navy's DD(X) destroyer program; 
* Tactical aircraft modernization; 
* DOD security clearances; 
* Oil for Food program; 
* Unmanned aerial vehicles; 
* Condition of Coast Guard aircraft and ships used in deep waters; 
* Managing violations of restricted air space; 
* Federal oversight of mutual funds to ensure investor security; 
* Port security; 
* Protecting U.S. officials overseas from terrorist attacks; 
* DOD's business transformation; 
* Transportation security issues; 
* Implementing laws that protect the security of information; 
* DOD's national security personnel system; 
* Acquisition challenges facing the Army's future combat systems 

Goal 3: 

Help Transform the Federal Government's Role and How It Does Business: 

* Long-term fiscal issues affecting the federal government; 
* Gaps in military pay and benefits; 
* 21st century challenges for the federal government; 
* Air Force procurement protests; 
* Human capital transformation at DHS; 
* Preparing for emergencies at federal agencies; 
* Space shuttle workforce issues; 
* Reducing the tax gap; 
* U.S. government financial statements; 
* Management and control of DOD's excess property; 
* Pricing federal multiple award contracts; 
* Performance budgeting; 
* High-risk federal programs; 
* Army National Guard travel reimbursement issues; 
* Space acquisitions and investment planning; 
* Improper Payments Information Act; 
* Agencies' continuity of operations plans; 
* DHS's Student and Exchange Visitor Information System. 

Source: GAO. 

[End of figure] 

Timeliness: 

We track the percentage of our products that are delivered on or before 
the day we agreed to with our clients because it is critical that our 
work be done on time for it to be used by policymakers. As shown in 
figure 14, in fiscal year 2005 we missed our target of providing 98 
percent of them by the promised date. 

Figure 14: Timeliness: 

[See PDF for image] - graphic text: 

Bar graph with six items. 

Percentage of products on time. 

2001 Actual: 95%; 
2002 Actual: 96%; 
2003 Actual: 97%; 
2004 Actual: 97%; 
2005 Target: 98%; 
2005 Actual: 97%. 

Source: GAO. 

[End of figure] 

As part of its periodic review of our performance measures, the IG 
independently examined our process for calculating product timeliness 
and found evidence that some staff may be inconsistently applying the 
policy for changing a committed issue date, which ultimately affects 
the reliability of this measure. The IG also noted that the internal 
reporting approach may not adequately represent the most complete 
assessment of the requesters' satisfaction with our ability to deliver 
products when our clients need them. The IG recommended that GAO 
management strengthen the guidance for determining timeliness and 
consider developing an alternative, more independent measure to gauge 
performance in this area. 

Therefore, beginning in fiscal year 2006, we will use the results of 
our client feedback survey as a barometer for how well we are getting 
our products to the Congress when it needs them. We will use this 
survey as the primary data source for our external timeliness measure 
because the responses come directly from our clients and are free from 
significant input by our staff. However, we will continue to use as a 
supplemental check to the survey our current process for determining 
timeliness and have already taken steps to clarify the guidance related 
to our process for changing committed issue dates. Both indicators will 
help to ensure that teams supporting strategic goals 1 through 3 
continue to complete engagements on the date mutually agreed to with 
our clients. 

Since March 2002, we have been pilot testing an e-mail survey that we 
send to a portion of our clients for direct, independent feedback from 
them on their satisfaction with the quality and timeliness of our work 
and their interactions with our staff. We tally responses from the 
survey we send to key staff working for the requesters of our testimony 
statements and our more significant written products (e.g., engagements 
assigned a risk level of "high" by our senior management[Footnote 5] 
and those requiring an investment of 500 staff days or more). Each 
survey asks the client whether the product was delivered on time. 
Because our products often have multiple requesters, we survey more 
than one congressional staff person per product. In fiscal year 2005, 
we sought feedback on 42 percent of the products we issued that year 
and had a 30 percent response rate from the congressional staff 
surveyed. Overall, 93 percent of those responding to the survey either 
strongly or generally agreed that our products were delivered on time. 

Focusing on Our People: 

We could not have performed as well as we did in fiscal year 2005 
without the support and commitment of our highly professional, 
multidisciplinary staff. Our ability to hire, develop, retain, and lead 
staff is critical to fulfilling our mission of serving the Congress and 
the American people. 

Since 2002, we have refined our processes for measuring how well we 
manage our human capital and have benchmarked our performance in this 
area. Fiscal year 2005 was the first year we held our managers 
accountable for our eight people measures, and we met six of them-- 
slightly missing our targets for new hire rate and acceptance rate by 
only a few percentage points. These measures are directly linked to our 
goal 4 strategic objective of becoming a professional services employer 
of choice. For more information about our people measures, see 
Verifying and Validating Performance Data in part II of this report. 

New Hire Rate and Acceptance Rate: 

Our new hire rate is the ratio of the number of people hired to the 
number we planned to hire. Annually, we develop a workforce plan that 
takes into account projected workload changes, as well as other 
changes, such as retirements, other attrition, promotions, and skill 
gaps. The workforce plan for the upcoming year specifies the number of 
planned hires and, for each new hire, specifies the skill type and the 
level. The plan is conveyed to each of our units to guide hiring 
throughout the year. Progress toward achieving the workforce plan is 
monitored monthly by the Chief Operating Officer and the Chief 
Administrative Officer. Adjustments to the workforce plan are made 
throughout the year, if necessary, to reflect changing needs and 
conditions. In fiscal year 2005, our adjusted plan was to hire 281 
staff. However, we were only able to bring on board 263 staff by year- 
end. Our acceptance rate measure is a proxy for GAO's attractiveness as 
an employer and an indicator of our competitiveness in bringing in new 
talent. It is the ratio of the number of applicants accepting offers to 
the number of offers made. Table 3 shows that we missed the targets we 
set for new hire rate and acceptance rate by 3 percentage points and 4 
percentage points, respectively. Our calculations for each of these 
measures do not include offers extended to applicants for fiscal year 
2005 vacancies that were accepted but for which applicants will not 
report for duty until the first quarter of fiscal year 2006. In 
addition, we were unable to fill by year-end critical positions for 
accountants/auditors due to market competition. 

To more effectively anticipate and acquire the human resources we need 
now and in the future, we took steps to improve our recruitment 
strategy by expanding the focus of our student employment program. 
Rather than targeting our recruitment efforts solely at graduate 
students who are available to work with us during the summer, we 
expanded the program to include undergraduate students, and we will 
offer both groups employment opportunities in the fall and spring as 
well as during the summer. Our fiscal year 2006 recruitment strategy, 
developed in fiscal year 2005, includes (1) using targeted recruiting 
for special skill sets and hard-to-fill positions with an emphasis on 
diversity and (2) implementing year-round internships, cooperative 
education agreements with five local universities, and governmentwide 
flexibility for noncompetitive appointments into our Professional 
Development Program. We also launched a pilot program that offers 
employment to a limited number of undergraduate cooperative education 
program participants in September 2005. 

Table 3: Actual Performance and Targets Related to Our New Hire and 
Acceptance Rate Measures: 

Performance measure: New hire rate; 
2001 Actual: N/A; 
2002 Actual: 96%; 
2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Target: 97%; 
2005 Actual: 94%. 

Performance measure: Acceptance rate; 
2001 Actual: N/A; 
2002 Actual: 81%; 
2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Target: 75%; 
2005 Actual: 71%. 

Source: GAO. 

Note: N/A indicates the data are not available. 

[End of table] 

Retention Rate: 

We continuously strive to make GAO a place where people want to work. 
Once we have made an investment in hiring and training people, we would 
like them to stay with us. This measure is one indicator of whether we 
are attaining this objective. We calculate this measure by taking 100 
percent of the on-board strength minus the attrition rate, where 
attrition rate is defined as the number of separations divided by the 
average on-board strength. We calculate this measure with and without 
retirements. Table 4 shows that we met each of our retention rate 
targets in fiscal year 2005. With the exception of fiscal year 2002 and 
2003, our actual retention rate excluding and including retirements, 
respectively, has been relatively flat over the last 5 years. 

Table 4: Actual Performance and Targets Related to Our Retention Rate 
Measures: 

Performance measure: Retention rate with retirements; 
2001 Actual: 91%; 
2002 Actual: 91%; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Target: 90%; 
2005 Actual: 90%. 

Performance measure: Retention rate without retirements; 
2001 Actual: 95%; 
2002 Actual: 97%; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Target: 94%; 
2005 Actual: 94%. 

Source: GAO. 

[End of table] 

Staff Development, Staff Utilization, Leadership, and Organizational 
Climate: 

One way that we measure how well we are supporting our staff and 
providing an environment for professional growth and improvement is 
through our annual employee feedback survey. This Web-based survey, 
which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our managers-
-from the immediate supervisor to the Executive Committee--on key 
aspects of their leadership styles. The survey consists of over 100 
questions. 

In fiscal year 2005, 80 percent of our employees completed the survey, 
and we met or slightly exceeded our targets for all four measures (see 
table 5). We first conducted this survey in fiscal year 2002 and since 
then favorable responses to questions related to these measures have 
increased each year. Our scores this year averaged 8.5 percent higher 
than the latest Office of Personnel Management governmentwide survey 
and 5.25 percent higher than the latest private industry survey. In 
fiscal year 2005, we also added questions to assess employees' 
satisfaction with us. The results of the responses to these questions 
were used by the Partnership for Public Service (Partnership) to 
determine our standing in the annual Best Places to Work in the Federal 
Government rankings. In September 2005, we received an award from the 
Partnership for our fourth place ranking. 

Table 5: Actual Performance and Targets Related to Our Measures of 
Employee Satisfaction with Staff Development, Staff Utilization, 
Leadership, and Organizational Climate: 

Performance measure: Staff development; 
2001 Actual: N/A; 
2002 Actual: 71%; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Target: 72%; 
2005 Actual: 72%. 

Performance measure: Staff utilization; 
2001 Actual: N/A; 
2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Target: 74%; 
2005 Actual: 75%. 

Performance measure: Leadership; 
2001 Actual: N/A; 
2002 Actual: 75%; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Target: 80%; 
2005 Actual: 80%. 

Performance measure: Organizational climate; 
2001 Actual: N/A; 
2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Target: 75%; 
2005 Actual: 76%. 

Source: GAO. 

Note: N/A indicates the data are not available. 

[End of table] 

Focusing on Our Internal Operations: 

Our mission and people are supported by our internal administrative 
services, including information management, building management, 
knowledge services, human capital, financial management, and other 
services. Beginning in fiscal year 2006, we will begin using two new 
performance measures to assess our performance related to how well our 
internal administrative services help employees get their jobs done or 
improve employees' quality of work life. These measures are directly 
related to our goal 4 strategic objectives of continuously enhancing 
GAO's business and management processes and becoming a professional 
services employer of choice. We will use information from our annual 
customer satisfaction survey to set targets and assess our performance 
for both of these measures, which are shown in table 6 along with 
baseline data that we recorded for them in fiscal year 2003 and fiscal 
year 2004. The first measure encompasses 21 services that help 
employees get their jobs done, such as Internet access, desktop 
computer equipment, and voice and video communication systems. The 
second measure encompasses another 10 services that affect quality of 
work life, such as assistance related to pay and benefits, building 
security, and workplace safety and health. Using survey responses, we 
calculate a composite score for each service category that reflects 
employee ratings for (1) satisfaction with the service and (2) 
importance of the service. 

Table 6: Actual Performance and Targets Related to Our Internal 
Operations Measures: 

Performance measures: Internal Operations: Help get job done; 
2000 Actual: N/A; 
2001 Actual: N/A; 
2002 Actual: N/A; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: N/A; 
2006 Target: 4.0. 

Performance measures: Internal Operations: Quality of work life; 
2000 Actual: N/A; 
2001 Actual: N/A; 
2002 Actual: N/A; 
2003 Actual: 3.86; 
2004 Actual: 3.96; 
2005 Actual: N/A; 
2006 Target: 4.0. 

Source: GAO. 

Notes: We will report actual data for fiscal year 2005 once the data 
from our November 2005 internal operations survey have been analyzed. 
N/A indicates that the data are not available yet or not applicable 
because we did not collect the data during this period. 

[End of table] 

21st Century Challenges: 

We have long had a statutory responsibility for monitoring the 
condition of the nation's finances. Recently, in our role as the 
auditor of the U.S. government's consolidated financial statements, we 
included an emphasis paragraph in our audit report for the fiscal year 
ended September 30, 2004, expressing our concern that the fiscal 
policies in place today will--absent unprecedented changes in tax 
policies, spending policies, or both--result in large, escalating, and 
persistent deficits that are economically unsustainable over the long 
term. This conclusion is based on the results of our long-term budget 
model, which the agency has used since 1992. 

Over the long term, the nation's growing fiscal imbalance stems 
primarily from the aging of the population, rising health care costs, 
and lower federal revenues as a percentage of the economy. These trends 
are compounded by the presence of near-term deficits arising from new 
discretionary and mandatory spending as well as lower revenues as a 
share of the economy. Absent significant changes on the spending side, 
the revenue side, or both of the budget, these long-term deficits will 
encumber a growing share of federal resources and test the capacity of 
current and future generations to afford both today's and tomorrow's 
commitments. Continuing on this unsustainable path will gradually 
erode, if not suddenly damage, our economy, our standard of living, and 
ultimately our national security. 

Addressing the nation's long-term fiscal imbalances constitutes a major 
transformational challenge that may take a generation to resolve. Given 
the size of our projected deficit, we will not be able to grow our way 
out of this problem--tough choices will be required. In addition, 
traditional incremental approaches to budgeting will need to give way 
to more fundamental and periodic reexaminations of the base of 
government, ultimately covering discretionary and mandatory programs as 
well as the revenue side of the budget. The nature and magnitude of the 
fiscal, security, economic, and other adjustments that need to be 
considered are not amenable to "quick fixes"; rather they will likely 
require an iterative, thoughtful process of disciplined changes and 
reforms over many years. 

We produced the 21st century challenges report to help the Congress 
review and reconsider the base of federal spending and tax 
programs.[Footnote 6] It is intended as one input among many that the 
Congress will receive as it decides what its agenda will be for 
oversight and program review. We have framed the issues presented as 
illustrative questions for policymakers to consider as a supplement to 
their own efforts. The questions are drawn from our issued work, our 
strategic plan prepared in consultation with the Congress, input from 
several inspectors general, and the institutional knowledge of our 
staff. They cover discretionary spending; mandatory spending, including 
entitlements; as well as tax policies and programs. While answers to 
these questions may draw on our work and that of others, only elected 
officials can and should decide which questions to address as well as 
how and when to address them. 

Having identified the major fiscal challenge facing the nation, and 
given our role in supporting the Congress, we believe that we also have 
an obligation to provide policymakers with support in identifying 
issues and options that could help to address these fiscal pressures. 
In our 21st century challenges report, we built on our past and pending 
work--90 percent of which was requested by the Congress or required by 
law--to provide policymakers with a comprehensive compendium of those 
areas throughout government that could be ripe for reexamination and 
review. The report is consistent with our other products, such as our 
high-risk reports (discussed below), in that it pulls together our 
insights and previous work for the Congress to help with its budget and 
programmatic deliberations and oversight activities. 

In developing the 21st century questions, we reflected on the inventory 
of future forces working to reshape American society, our place in the 
world, and the various roles and responsibilities of the federal 
government that were presented in our Strategic Plan for Serving the 
Congress and the Nation (2004-2009). The specific questions raised for 
each area were informed by a set of generic evaluation criteria that 
are useful in evaluating any government program, policy, function, or 
activity. The criteria are framed as questions and are designed to 
address the legislative basis for the program, its purpose and 
continued relevance, its effectiveness in achieving goals and outcomes, 
its efficiency and targeting, its affordability, its sustainability, 
and its management. We used these criteria to generate specific 21st 
century questions about those programs and priorities already 
identified. The 21st century questions illustrate the kinds of issues 
that a reexamination and review initiative needs to address. 

Copies of this report are available upon request. In addition, this 
document is available at no charge on our Web site at [Hyperlink, 
http://www.gao.gov]. 

GAO's High-Risk Program: 

Since 1990, our high-risk program has highlighted long-standing 
challenges facing the federal government. Increasingly, the program has 
focused on those major programs and operations that are in urgent need 
of broad transformation, and congressional as well as executive branch 
action, to ensure that our national government functions in the most 
economical, efficient, and effective manner possible. Our latest 
report, released in January 2005, highlights 25 troubled areas across 
government.[Footnote 7] Many of these areas involve critical public 
service providers, such as the U.S. Postal Service and IRS, and 
services provided to Medicare and Medicaid recipients through CMS. 
Table 7 lists each high-risk area, the year it was placed on the high- 
risk list, and the strategic goal under which our work related to each 
high-risk area is generally performed. 

Table 7: GAO's 2005 High-Risk List: 

Addressing challenges in broad-based transformations: 

2005 high-risk area: Strategic Human Capital Management[A]; 
Year designated high risk: 2001; 
GAO's strategic goal: 3. 

2005 high-risk area: U.S. Postal Service Transformation Efforts and 
Long-Term Outlook[A]; 
Year designated high risk: 2001; 
GAO's strategic goal: 1. 

2005 high-risk area: Managing Federal Real Property[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Protecting the Federal Government's Information 
Systems and the Nation's Critical Infrastructures; 
Year designated high risk: 1997; 
GAO's strategic goal: 3. 

2005 high-risk area: Implementing and Transforming the Department of 
Homeland Security; 
Year designated high risk: 2003; 
GAO's strategic goal: 2. 

2005 high-risk area: Establishing Appropriate and Effective Information-
Sharing Mechanisms to Improve Homeland Security; 
Year designated high risk: 2005; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Approach to Business Transformation[A]; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Business Systems Modernization; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Personnel Security Clearance Program; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Support Infrastructure Management; 
Year designated high risk: 1997; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Financial Management; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Supply Chain Management (formerly Inventory 
Management); 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Weapon Systems Acquisition; 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

Managing federal contracting more effectively: 

2005 high-risk area: DOD Contract Management; 
Year designated high risk: 1992; 
GAO's strategic goal: 2. 

2005 high-risk area: DOE Contract Management; 
Year designated high risk: 1990; 
GAO's strategic goal: 1. 

2005 high-risk area: NASA Contract Management; 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

2005 high-risk area: Management of Interagency Contracting; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

Assessing the efficiency and effectiveness of tax law administration: 

2005 high-risk area: Enforcement of Tax Laws[A, B]; 
Year designated high risk: 1990; 
GAO's strategic goal: 3. 

2005 high-risk area: IRS Business Systems Modernization[C]; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

Modernizing and safeguarding insurance and benefit programs: 

2005 high-risk area: Modernizing Federal Disability Programs[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Pension Benefit Guaranty Corporation Single-
Employer Insurance Program[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Medicare Program[A]; 
Year designated high risk: 
1990; 
GAO's strategic goal: 1. 

2005 high-risk area: Medicaid Program[A]; 
Year designated high risk: 
2003; 
GAO's strategic goal: 1. 

2005 high-risk area: HUD Single-Family Mortgage Insurance and Rental 
Housing Assistance Programs; 
Year designated high risk: 1994; 
GAO's strategic goal: 1. 

Other: 

2005 high-risk area: Federal Aviation Administration (FAA) Air Traffic 
Control Modernization; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

Source: GAO. 

[A] Legislation is likely to be necessary, as a supplement to actions 
by the executive branch, in order to effectively address this high-risk 
area. 

[B] Two high-risk areas--collection of unpaid taxes and earned income 
credit noncompliance--have been consolidated to make this area. 

[C] The IRS financial management high-risk area has been incorporated 
into this high-risk area. 

[End of table] 

Issued to coincide with the start of each new Congress, our high-risk 
update has helped sustain attention from members of the Congress who 
are responsible for oversight and from executive branch officials who 
are accountable for performance. Our focus on high-risk problems 
contributed to the Congress enacting a series of government-wide 
reforms to address critical human capital challenges, strengthen 
financial management, improve IT practices, and instill a more results- 
oriented government. Overall, our high-risk program has served to 
identify and help resolve serious weaknesses in areas that involve 
substantial resources and provide critical services to the public. Of 
the 43 areas that have appeared on our high-risk list since 1990, 16 
have improved enough to be removed from the list and 2 have been 
consolidated with other areas. We also continue to identify other areas 
that require attention and should be added to the list. Further, the 
current administration has looked to our high-risk program in shaping 
governmentwide initiatives such as the President's Management Agenda, 
which has at its base many of the areas we had previously identified as 
high risk. OMB, in consultation with us, is currently working to ensure 
that agencies develop detailed action plans to address high-risk areas, 
with the ultimate objective, over time, of seeing these items removed 
from our high-risk list. 

Our high-risk program includes four high-risk areas added in 2005: 

* establishing appropriate and effective information-sharing mechanisms 
to improve homeland security, 

* DOD approach to business transformation, 

* DOD personnel security clearance program, and: 

* management of interagency contracting. 

One organization-related high-risk area that exemplifies the program's 
increasing focus on transformation is DOD's approach to business 
transformation. As an organization that spends billions of dollars 
supporting the warfighter here and abroad, DOD requires transformation 
to meet current and emerging mission and organizational challenges. DOD 
has initiated various efforts to transform business operations; 
however, current business processes continue to result in reduced 
effectiveness and efficiencies at a time when DOD is challenged to 
maintain a high level of operations while competing for resources in a 
fiscally constrained environment. The Secretary of Defense estimates 
that improving business operations could save 5 percent of DOD's annual 
budget, which would represent a savings of about $22 billion a 
year.[Footnote 8] Business transformation requires long-term cultural 
change and business process reengineering and a commitment from the 
executive and legislative branches of government. Sound strategic 
planning is the foundation on which to build, but DOD has not yet 
developed a clear strategic and integrated plan for business reform. 
For these reasons, we designated--for the first time--DOD's lack of a 
strategic and integrated planning approach to its business 
transformation as high risk. 

In addition, we consolidated four high-risk areas involving IRS into 
two. First, we combined the collection of unpaid taxes area and earned 
income credit noncompliance area into a single area called enforcement 
of tax laws. We determined that while IRS collection efforts and 
compliance with the provisions of the earned income credit remain 
important issues, other aspects of tax law compliance are also 
significant. We concluded that the challenge facing IRS in enforcing 
the nation's tax laws is better understood in this broader context. 
Second, we incorporated the IRS financial management high-risk area 
into the IRS business systems modernization area. We found that the 
main financial management-related challenge still facing IRS is the 
modernization of its outmoded financial management controls and 
processes and that IRS's efforts in this regard are closely intertwined 
with its business systems modernization project. 

In fiscal year 2005, we also removed the high-risk designation from 
three areas: Education's student financial aid programs, FAA's 
financial management, and USDA's Forest Service financial management. 

In fiscal year 2005, excluding our high-risk update report and its 
companion testimony, we issued 183 reports and delivered 75 testimonies 
related to our high-risk areas and documented financial benefits 
totaling about $26 billion. For example, we examined challenges in the 
implementation and transformation of DHS, such as strengthening 
internal controls and addressing weaknesses in financial systems, fully 
establishing and institutionalizing a departmentwide strategic 
framework for managing information, and addressing systematic problems 
in human capital and acquisition systems, resulting in 19 reports and 
11 testimonies. We also evaluated the Medicare program and found 
weaknesses in program management and oversight of patient safety and 
care, inefficient payment policies, and areas vulnerable to fraud and 
abuse. Our work in this area resulted in approximately $3.9 billion in 
financial benefits for fiscal year 2005. Our efforts continue to bring 
attention to areas in urgent need of improvement and to help the 
Congress and federal government institute reforms to address these 
high-risk areas. 

To learn more about our work on the high-risk areas or to download the 
high-risk update in full, go to [Hyperlink, 
http://www.gao.gov/docsearch/featured/highrisk.html]. 

Building Partnerships: 

In fiscal year 2005, we continued to explore indicators that could help 
us measure how well we develop mutually beneficial relationships with 
other accountability organizations. Such partnerships are important 
because they create opportunities for collaboration that help all 
organizations involved address common challenges and enhance their 
ability to improve government operations and service to the public. 
Moreover, these partnerships allow us and other organizations to make 
meaningful changes in our internal accountability processes and 
policies as well as leverage available resources. 

We performed an extensive literature review to identify indicators that 
other agencies and organizations in the United States and overseas are 
using to measure the success of their partnership efforts. We collected 
information on partnership activities at several federal agencies, such 
as DOE and HUD and at a social services agency in Australia and a 
public works cooperative in England. Though we found no U.S. agencies 
that have developed indicators for measuring the health or 
effectiveness of partnerships, the foreign organizations articulated 
the following qualitative indicators for assessing the performance of 
these relationships: 

* commitment (e.g., time and resources devoted to the partnership 
effort and sustained participation by the same individuals), 

* clear definition of roles and responsibilities, 

* contribution to outcomes, 

* success of the activity or project being supported by the 
partnership, and: 

* value for resources spent or effective use of resources. 

Teams and units supporting all four of our strategic goals have 
established key partnerships with a variety of organizations. For 
example, our partnership with the International Organization of Supreme 
Audit Institutions (INTOSAI) has been a long-standing relationship-- 
cultivated primarily through goal 4's external liaison activities--that 
has resulted in tangible benefits for both organizations. In fiscal 
year 2005, we actively worked on several INTOSAI committees, gleaning 
valuable insights from the experiences of our counterpart audit 
institutions. We also helped INTOSAI produce various publications that 
help to promote auditing standards for use around the world. Through 
forums and roundtable discussions, we also partnered with the Concord 
Coalition--a nonpartisan organization dedicated to informing the public 
about the need for responsible fiscal policy--to support its work in 
educating the public about financial literacy and the government's long-
term fiscal challenges. Our external liaison activities also helped to 
sustain partnerships with organizations such as the Intergovernmental 
Audit Forums, the Governmental Accounting Standards Advisory Committee, 
the Partnership for Public Service (which now includes the Private 
Sector Council), the Council for Excellence in Government, and the 
Woodrow Wilson International Center for Scholars; professional 
associations, such as the Association of Government Accountants; and 
various GAO advisory groups. (For more information about these 
partnerships, see Strategies for Achieving Our Goals later in this 
section of the report.) Finally, teams supporting goals 1 through 3 
established or maintained partnerships with organizations that helped 
them to exchange information about issues related to our performance 
goals and key efforts in these areas. For example, several teams 
continued their ongoing partnerships with the National Academies of 
Science, sharing, for example, information on issues such as drinking 
water security, environmental indicators, and wind power development. 
One team also supported the National Academies of Science and the 
Organisation for Economic Cooperation and Development--a group of 30 
member countries that helps to foster good governance in public service 
and corporate activity--in their efforts to advance the development of 
national performance indicators. In addition, another team worked 
collaboratively on a wide range of emerging transportation issues with 
the Eno Transportation Foundation, whose mission is to cultivate 
creative and visionary leadership for all modes of transportation. 

In the coming years, we will attempt to describe these and other 
partnerships that our teams and units participate in and describe the 
outcomes and benefits derived from them to help us assess our 
performance in this area. 

Managing Our Resources: 

Resources Used to Achieve Our Fiscal Year 2005 Performance Goals: 

Our financial statements for fiscal year 2005 received an unqualified 
opinion from an independent auditor. The auditor found our internal 
controls to be effective--which means that no material weaknesses were 
identified--and the auditor reported substantial compliance with the 
requirements for financial systems in the Federal Financial Management 
Improvement Act of 1996. The auditor also found no instances of 
noncompliance with the laws or regulations in the areas tested. The 
statements and their accompanying notes, along with the auditor's 
report, appear later in this report. Table 8 summarizes key data. 
Compared with the statements of large and complex agencies in the 
executive branch, our statements present a relatively simple picture of 
a small yet important agency in the legislative branch. We focus most 
of our financial activity on the execution of our congressionally 
approved budget with most of our resources devoted to the human capital 
needed for our mission of supporting the Congress with professional, 
objective, fact-based, nonpartisan, nonideological, fair, and balanced 
information and analysis. 

Table 8: GAO's Financial Highlights: Resource Information: 

Total budgetary resources[A]; 
Fiscal year 2005: $493.8 million; 
Fiscal year 2004: $487.5 million. 

Total outlays[A]; 
Fiscal year 2005: $478.7 million; 
Fiscal year 2004: $469.0 million. 

Net cost of operations: 

Goal 1: Well-being and financial security of the American people; 
Fiscal year 2005: $197.7 million; 
Fiscal year 2004: $194.7 million. 

Goal 2: Changing security threats and challenges of globalization; 
Fiscal year 2005: $144.2 million; 
Fiscal year 2004: $131.7 million. 

Goal 3: Transforming the federal government's role; 
Fiscal year 2005: $147.3 million; 
Fiscal year 2004: $145.8 million. 

Goal 4: Maximizing the value of GAO; 
Fiscal year 2005: $22.0 million; 
Fiscal year 2004: $23.4 million. 

Less reimbursable services not attributable to goals; 
Fiscal year 2005: ($5.4 million); 
Fiscal year 2004: ($5.5 million). 

Total net cost of operations[A]; 
Fiscal year 2005: $505.8 million; 
Fiscal year 2004: $490.1 million. 

Actual full-time equivalents; 
Fiscal year 2005: 3,189; 
Fiscal year 2004: 3,224. 

Source: GAO: 

[A] The net cost of operations figures include nonbudgetary items, such 
as imputed pension and depreciation costs, which are not included in 
the figures for total budgetary resources (which include current and 
prior year carryover authority) or total outlays. 

[End of table] 

Our budget consists of an annual appropriation covering salaries and 
expenses and revenue from reimbursable audit work and rental income. 
For fiscal year 2005, our total budgetary resources increased by $6.3 
million from fiscal year 2004. This increase consists of funds needed 
to cover mandatory and uncontrollable costs and a one time transfer of 
budgetary authority from DHS for a review of TSA's calendar year 2000 
costs for screening passengers and property. 

Our total assets were $114.4 million, consisting mostly of property and 
equipment (including the headquarters building, land and improvements, 
and computer equipment and software) and funds with the U.S. Treasury. 
The largest dollar change in our assets was in the net value of 
property and equipment, which decreased in fiscal year 2005 as a result 
of normal depreciation amounts being greater than asset purchases. 
Total liabilities of $94.9 million were composed largely of employees' 
accrued annual leave, amounts owed to other government agencies, 
accounts payable, and employees' salaries and benefits. The greatest 
changes in the liabilities were increases in intragovernmental accounts 
payable and capital lease liabilities. The increase in 
intragovernmental accounts payable relates to amounts due to GSA 
accrued at the end of the year. The increase in capital lease liability 
during fiscal year 2005 is primarily the result of entering into new 
leases for the replacement of substantially all the notebook computers 
and copiers at GAO headquarters. 

The net cost of operating GAO during fiscal year 2005 and fiscal year 
2004 was approximately $506 million and $490 million, respectively. 
Expenses for salaries and related benefits accounted for 78 and 79 
percent of our net cost of operations in fiscal years 2005 and 2004, 
respectively. Figure 15 shows how our fiscal year 2005 costs break down 
by category. 

We report net cost of operations according to our four strategic goals, 
consistent with our strategic plan. Goal 2 accounted for the greatest 
dollar increase in our net cost of operations from fiscal year 2004 
through fiscal year 2005. The increase is due to the continued efforts 
in homeland security. Costs in goal 4 decreased in fiscal year 2005 as 
a result of several goal 4 key efforts being completed during fiscal 
year 2004, the first year of the 2-year strategic plan period. Examples 
include the implementation of the Travel Manager System completed in 
fiscal year 2004 as well as the development phase efforts for both the 
performance-based compensation system and the competency-based 
appraisal system. 

Figure 15: Use of Fiscal Year 2005 Funds by Category: 

[See PDF for image] - graphic text: 

Pie chart with five items. 

Percentage of Total Net Costs: 

Salaries and benefits: 78.3%; 
Building and hardware maintenance services: 10.8%; 
Rent (space and hardware): 3.9%; 
Depreciation: 2.7%; 
Other: 4.3%. 

Source: GAO. 

[End of figure] 

Figures 16 and 17 show our net costs by goal for fiscal year 2002 
through fiscal year 2005. Figure 16 shows costs unadjusted for 
inflation, while figure 17 shows the same costs in 2005 dollars, that 
is, adjusted for inflation. 

Figure 16: Net Cost by Goal, Unadjusted for Inflation: 

[See PDF for image] - graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2002: $178.3 million; 
2003: $186.4 million; 
2004: $194.7 million; 
2005: $197.7 million. 

Goal 2; 
2002: $110.5 million; 
2003: $122.0 million; 
2004: $131.7 million; 
2005: $144.2 million. 

Goal 3; 
2002: $141.0 million; 
2003: $144.9 million; 
2004: $145.8 million; 
2005: $147.3 million. 

Goal 4; 
2002: $25.3 million;
2003: $20.0 million;
2004: $23.4 million;
2005: $22.0 million. 

Source: GAO. 

[End of figure] 

Figure 17: Net Cost by Goal, Adjusted for Inflation: 

[See PDF for image] - graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2002: $191.3 million; 
2003: $196.1 million; 
2004: $200.1 million; 
2005: $197.7 million. 

Goal 2; 
2002: $118.6 million; 
2003: $128.4 million; 
2004: $135.3 million; 
2005: $144.2 million. 

Goal 3; 
2002: $151.3 million; 
2003: $152.5 million; 
2004: $149.8 million; 
2005: $147.3 million. 

Goal 4; 
2002: $27.2 million;
2003: $21.0 million;
2004: $24.0 million;
2005: $22.0 million. 

Source: GAO. 

[End of figure] 

Audit Advisory Committee: 

Assisting the Comptroller General in overseeing the effectiveness of 
GAO's financial operations is a three-member external Audit Advisory 
Committee. The committee's report for fiscal year 2005 appears after 
our financial statements and accompanying notes. Current members of the 
committee are: 

* Sheldon S. Cohen (Chairman), CPA and practicing attorney in 
Washington, D.C., former Commissioner and Chief Counsel of the Internal 
Revenue Service, and Senior Fellow of the National Academy of Public 
Administration. 

* Edward J. Mazur, CPA, member of the Governmental Accounting Standards 
Board, former State Comptroller of Virginia, and former Controller of 
the Office of Federal Financial Management in OMB. 

* Charles O. Rossotti, Senior Advisor at The Carlyle Group; former 
Commissioner of Internal Revenue; and founder and former Chief 
Executive Officer and Chairman of American Management Systems, Inc., an 
international business and IT consulting firm. 

Limitation on Financial Statements: 

Responsibility for the integrity and objectivity of the financial 
information presented in the financial statements in this report rests 
with our managers. The statements were prepared to report our financial 
position and results of operations, consistent with the requirements of 
the Chief Financial Officers Act, as amended (31 U.S.C. 3515). The 
statements were prepared from our financial records in accordance with 
the formats prescribed in OMB Circular A-136, Financial Reporting 
Requirements. These financial statements differ from the financial 
reports used to monitor and control our budgetary resources. However, 
both were prepared from the same financial records. 

Our financial statements should be read with the understanding that as 
an agency of a sovereign entity, the U.S. government, we cannot 
liquidate our liabilities (i.e., pay our bills) without legislation 
that provides resources to do so. Although future appropriations to 
fund these liabilities are likely and anticipated, they are not 
certain. 

Planned Resources to Achieve Our Fiscal Year 2006 Performance Goals: 

GAO's resources include budget authority of $490 million for fiscal 
year 2006 to maintain current operations for serving the Congress as 
outlined in our strategic plan and allow us to continue to enhance our 
productivity, and maintain the progress we have made in technology and 
other transformation areas (see table 9). This funding level supports 
3,217 full-time equivalent (FTE) personnel. Our resources include $483 
million in direct appropriations and estimated revenue of $7 million 
from reimbursable audit work and rental income. Our fiscal year 2006 
resources represent a modest 3 percent increase over fiscal year 2005 
resources--primarily to fund mandatory pay and uncontrollable costs. 
Following the catastrophic events of Hurricanes Katrina and Rita, the 
Congress is considering governmentwide across-the-board funding 
reductions that might reduce fiscal year 2006 spending levels, and this 
could affect our resources. The nature and extent of any potential 
funding reduction is unknown. 

Table 9: Fiscal Year 2006 Budgetary Resources by Strategic Goal: 

Strategic goal: Goal 1; 
Provide timely, quality service to the Congress and the federal 
government to address current and emerging challenges to the well-being 
and financial security of the American people; FTEs: 1,286; 
Amount[A]: $194 million. 

Strategic goal: Goal 2; 
Provide timely, quality service to the Congress and the federal 
government to respond to changing threats and the challenges of global 
interdependence; 
FTEs: 941; 
Amount[A]: $141 million. 

Strategic goal: Goal 3; 
Help transform the federal government's role and how it does business 
to meet 21st century challenges; 
FTEs: 850; 
Amount[A]: $129 million. 

Strategic goal: Goal 4; 
Maximize the value of GAO by being a model federal agency and a world-
class professional services organization; 
FTEs: 140; 
Amount[A]: $26 million. 

Total; 
FTEs: 3,217; 
Amount[A]: $490 million. 

Source: GAO. 

[A] These amounts exclude prior year carryover authority. 

[End of table] 

Our resources support three broad program areas: human capital, mission 
operations, and critical infrastructure. We will also continue to 
address our major management challenges, which are human capital, 
information security, and physical security. For example, on the human 
capital front, to ensure our ability to attract and retain a highly 
qualified, high-performing, and diverse workforce, our fiscal year 2006 
recruitment strategy enhances or expands existing programs for 
internships and professional development, and provides targeted 
recruiting for special skill sets and hard-to-fill positions, and to 
enhance the agency's diversity recruiting. 

In fiscal year 2006, we plan to implement recommendations resulting 
from an assessment of our compensation system being conducted by a well-
regarded consulting firm, to ensure that our compensation is fair and 
equitable and aligned with competitive labor markets. 

On the information security front, to address the increasing threats 
due to compromised information or information systems, we will complete 
an audit of network servers and refine monitoring techniques. To extend 
our ability to securely access and transmit classified data and 
information, we completed installation of security features in seven of 
our field offices and plan to continue installation at the remaining 
field offices in fiscal year 2006. 

On the physical security front, we are working to enhance our 
communication with external agencies, improve our internal 
communications and operations, and strengthen the technical and 
physical aspects of our emergency preparedness efforts. 

Strategies for Achieving Our Goals: 

The Government Performance and Results Act directs agencies to 
articulate not just goals, but also strategies for achieving those 
goals. As detailed in the following sections, our strategies primarily 
emphasize providing information from our work to the Congress and the 
public in a variety of forms and continuing and strengthening our 
internal operations. For all four strategic goals, the multiyear, 
qualitative performance goals included in our current strategic plan 
describe specific areas of work that we planned to complete by the end 
of fiscal year 2005. 

Our strategies also emphasize the importance of two overarching 
approaches: (1) working with other organizations on crosscutting issues 
and (2) effectively addressing the challenges to achieving our agency's 
goals and recognizing the internal and external factors that could 
impair our performance. Through these strategies, which have proven 
successful for us for a number of years, we plan to achieve the level 
of performance that is needed to meet our annual performance measures 
and our multiyear performance goals and that in turn will allow us to 
achieve our strategic goals. 

Attaining our three external strategic goals (goals 1, 2, and 3) and 
their related objectives rests, for the most part, on providing 
professional, objective, fact-based, nonpartisan, nonideological, fair, 
and balanced information to support the Congress in carrying out its 
constitutional responsibilities. To implement the performance goals and 
key efforts related to these three goals, we develop and present 
information in a number of ways, including: 

* evaluating federal policies, programs, and the performance of 
agencies; 

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

* investigating whether illegal or improper activities are occurring; 

* analyzing the financing for government activities; 

* conducting various constructive engagements in which we work 
proactively with agencies, when appropriate, to provide advice that may 
assist their efforts toward positive results; 

* providing legal opinions that determine whether agencies are in 
compliance with applicable laws and regulations; 

* conducting policy analyses to assess needed actions and the 
implications of proposed actions; and: 

* providing additional assistance to the Congress in support of its 
oversight and decision-making responsibilities. 

We conduct specific engagements as a result of requests from 
congressional committees and mandates written into legislation, 
resolutions, and committee reports. In fiscal year 2005, we devoted 87 
percent of our engagement resources to work requested or mandated by 
the Congress. We initiated the remaining 13 percent of the engagement 
work under the Comptroller General's authority; much of this work was 
related to government programs and operations that we have identified 
as high risk for fraud, abuse, and mismanagement; reviews of agencies' 
budget requests; and various emerging challenges that are of broad- 
based interest to the Congress, such as the cost of the Global War on 
Terrorism and the status of the reconstruction efforts in 
Iraq.[Footnote 9] By making recommendations to improve the 
accountability, operations, and services of government agencies, we 
contribute to increasing the effectiveness of federal spending and 
enhancing the taxpayers' trust and confidence in their government. 

Our staff are responsible for gathering all the relevant data and 
following high standards for documenting and supporting the information 
we collect and analyze. This information is, more often than not, 
documented in a product that is made available to the public. In some 
cases, we develop products that contain classified or sensitive 
information that cannot be made available publicly. We generally issue 
around 1,200 to 1,300 products each year, either electronically or in 
printed format. Our products include the following: 

* letter reports and chapter reports that when printed, are issued with 
our traditional blue cover; 

* correspondence, which is a written letter that does not have a blue 
cover; 

* testimonies and statements for the record, where the former are 
delivered orally by one or more of our senior executives at a hearing 
and the latter are provided for inclusion in the congressional record; 
and: 

* oral briefings, which are usually given directly to congressional 
staff members. 

We also produce special publications on specific issues of general 
interest to all Americans, such as our primer on motor fuels that we 
prepared to help improve public understanding of the major factors that 
influence the U.S. price of gasoline and our guide on Social Security 
that answers concisely some basic questions about how the program works 
and why it needs to be reformed.[Footnote 10] Collectively, our 
products always contain information and often conclusions and 
recommendations that allow us to achieve our external strategic goals. 

Another means of ensuring that we are achieving our goals is to examine 
the impact of our past work and use that information to shape our 
future work. Consequently, we evaluate actions taken by federal 
agencies and the Congress in response to our past recommendations. The 
results of these evaluations are reported in terms of the financial 
benefits and other benefits that reflect the value of our work. We 
actively monitor the status of our open recommendations--those that 
remain valid but have not yet been implemented--and report our findings 
annually to the Congress and the public ([Hyperlink, 
http://www.gao.gov/openrecs.html]). 

Similarly, we will use our biennial high-risk report, most recently 
issued in January 2005, to provide a status report on major government 
operations that we consider high risk because they are vulnerable to 
waste, fraud, abuse, and mismanagement or are in need of broad-based 
transformation. And we will use our report on 21st century challenges, 
which was issued in February 2005, to alert the nation's leaders to 
current and emerging issues facing the nation, including the long-range 
budget challenge, the human capital crisis, postal reforms, and the 
federal government's financial management efforts. These reports are 
valuable planning tools because they help us to identify those areas 
where our continued efforts are needed to maintain the focus on 
important policy and management issues that the nation faces. 

To attain our fourth strategic goal--an internal goal--and the five 
related objectives, we conduct surveys of our congressional clients and 
internal customers to obtain feedback on our products, processes, and 
services, and perform studies and evaluations to identify ways in which 
to improve them. 

Because achieving our strategic goals and objectives also requires 
strategies for coordinating with other organizations with similar or 
complementary missions, we: 

* use advisory panels and other bodies to inform our strategic and 
annual work planning and: 

* initiate and support collaborative national and international audit, 
technical assistance, and other knowledge-sharing efforts. 

These two types of strategic working relationships allow us to extend 
our institutional knowledge and experience; to leverage our resources; 
and in turn, improve our service to the Congress and the American 
people. Our Strategic Planning and External Liaison office takes the 
lead and provides strategic focus for the work with external partner 
organizations, while our research, audit, and evaluation teams lead the 
work with most of the issue-specific organizations. 

Strategic and Annual Work Planning: 

Through a series of forums, advisory boards, and panels; periodic 
environmental scans; and our speakers' series, we gather information 
and perspectives for our strategic and annual planning efforts. In 
fiscal year 2005, the Comptroller General convened various experts from 
the public, private, and nonprofit sectors in a series of forums and 
panels intended to enhance our understanding of emerging issues and to 
identify opportunities for action. 

* In December 2004, we hosted a forum on long-term fiscal challenges 
and issued a report summarizing the discussion in February 2005. 

* In February 2005, we convened a forum on defined benefits pension 
plans, the results of which were reported in June 2005. 

* In March 2005, we convened a roundtable involving the accountability 
community on long-term fiscal challenges, the results of which were 
summarized and shared with the participants. 

* Throughout 2005, we held five sessions of our speakers' series 
Conversations on 21st Century Challenges, wherein prominent leaders 
discuss emerging themes and their implications for public policy. In 
2005, we also initiated the Auditors General Speakers' Series that 
provides unique international perspectives in support of our work; 
speakers included the auditors general of China, Ireland, South Korea, 
and Saudi Arabia. 

Advisory boards and panels also support our strategic and annual work 
planning for alerting us to issues, trends, and lessons learned across 
the national and international audit community that we should factor 
into our work. These groups include the Comptroller General's Advisory 
Board whose 40 members from the public and private sectors have broad 
expertise in areas related to our strategic objectives. Through the 
National Intergovernmental Audit Forum, chaired by the Comptroller 
General, and 10 regional intergovernmental audit forums, we consult 
regularly with federal inspectors general and state and local auditors. 
In addition, through the Domestic Working Group, the Comptroller 
General and the heads of 18 federal, state, and local audit 
organizations exchange information and seek opportunities to 
collaborate. 

We also work with a number of issue-specific and technical panels to 
improve our strategic and annual work planning, including the 
following: 

* The Advisory Council on Government Auditing Standards provides us 
guidance on promulgating auditing standards. These standards articulate 
auditors' responsibilities when examining government organizations; 
programs; activities; functions; and government assistance received by 
contractors, nonprofits, and other nongovernmental organizations. The 
council's work ensured that the revised standards would be generally 
accepted and feasible. 

* The Accountability Advisory Council, made up of experts in the 
financial management community, advises us on audits of the U.S. 
government's consolidated financial statements and emerging issues 
involving financial management and accountability reporting. 

* The Executive Council on Information Management and Technology, whose 
19 members are experts from the public and private sectors and 
representatives of related professional organizations, helps us to 
identify high-risk and emerging issues in the IT arena. 

* The Comptroller General's Educators' Advisory Panel, composed of 
deans, professors, and other academics from prominent universities 
across the United States, advises us on recruiting, retaining, and 
developing staff and on strategic planning matters. 

Internationally, we participate in INTOSAI--the professional 
organization of the national audit offices of 186 countries. During the 
fall of 2004, the INTOSAI Congress unanimously adopted a 5-year 
strategic plan--the first in INTOSAI's 50-year history--that was 
developed by a 10-nation task force chaired by the Comptroller General. 
This plan has provided the foundation for the Governing Board to engage 
member institutions in advancing professional audit standards and 
promoting knowledge sharing. 

Collaborating with Others: 

By collaborating with others, we have strengthened professional 
standards, provided technical assistance, leveraged resources, and 
developed best practices. In our work with INTOSAI, we chair the 
accounting and reporting committee and we are an active member of 
INTOSAI's auditing standards, internal control and accounting 
standards, and other technical committees. We publish INTOSAI's 
quarterly International Journal of Government Auditing in five 
languages to foster global understanding of standards, best practices, 
and technical issues. To help ensure that the public sector 
perspectives are reflected in the International Federation of 
Accountants Standards Development project, we are working as a member 
of INTOSAI's Professional Standards Committee as it collaborates 
closely with the International Auditing Assurance Standards Board and 
the World Bank to develop international auditing standards. 

To build capacity in the national audit offices around the world, we 
conduct an international audit fellows program for mid-to senior-level 
staff from other countries. In 2005, 20 audit fellows from Africa, 
Asia, Europe, Latin America, and the Middle East spent about 4 months 
at GAO learning how we are organized to do our work, how we plan our 
work, and what methodologies we use, particularly for performance 
audits. As part of our strategy to promote continuous learning and 
sustainability once the fellows return to their countries, we are 
working with major donors--such as the World Bank and the U.S. Agency 
for International Development--to identify or support relevant capacity-
building projects in fellows' institutions. Six current and seven 
former auditors general as well as several deputy auditors general, 
including the current chair of INTOSAI, are graduates of this program. 

Other collaborative activities undertaken by our staff during 2005 
included the following: 

* Conferring with the Partnership for Public Service (Partnership), a 
nonprofit, nonpartisan public service organization committed to making 
the government an employer of choice for talented, dedicated Americans 
through educational outreach, research, legislative advocacy, and hands-
on partnerships with agencies on workforce management issues. In late 
2004, the Partnership merged with the Private Sector Council, another 
external partner organization dedicated to helping the federal 
government improve its efficiency, management, and productivity through 
the cooperative sharing of knowledge. During 2005, the Partnership has 
collaborated with us on a human capital symposium focused on 
performance management best practices and assisted us on a number of 
engagements. 

* Actively participating in four other Domestic Working Group 
collaborative efforts of federal, state, and local audit officials to 
address issues regarding access to records, grants management, long- 
term fiscal challenges, and governance. Collaborative efforts with the 
Domestic Working Group and the National Association of State Auditors, 
Comptrollers, and Treasurers facilitated our work involving the states 
by fostering a cooperative working relationship with the state auditors 
on over a dozen engagements. 

* Implementing the National Intergovernmental Audit Forum (Forum) 
strategic plan that was adopted in December 2004. This plan was 
developed by a task force composed of federal, state, and local 
auditors and an independent public accountant. The newly established 
committees have begun organizing to implement the plan, which seeks to 
maximize the Forum's effectiveness in promoting good government and 
accountability at all levels of government. In addition, 21 regional 
Forum meetings were held, which brought together auditors at all 
government levels. 

Using Our Internal Experts: 

We coordinated extensively within our own organization on our strategic 
and annual performance planning efforts, as well as on the preparation 
of our performance and accountability reports. Our efforts are 
completed under the overall direction of the Comptroller General and 
the Chief Operating Officer. We relied on our Chief Administrative 
Officer/Chief Financial Officer and her staff to provide key 
information, such as the financial information that is included in part 
III of this report. Her staff also coordinated with others throughout 
the agency to provide the information on goal 4's results, which 
appears in part II of this report, and provided input on other efforts 
dealing with issues that include financial management, budgetary 
resources, training, and security. We obtained input on all aspects of 
our strategic and annual performance planning and reporting efforts 
from each of our engagement teams and organizational units through 
their respective managing directors, as well as other staff responsible 
for planning or engagement activities in the teams. Staff from QCI 
prepared the report, ensuring, among other things, that the report 
addressed comments and suggestions received from the Association of 
Government Accountants and other reviewers. In short, we involved 
virtually every part of GAO and used our internal expertise in our 
planning and reporting efforts. 

Addressing Management Challenges That Could Affect Our Performance: 

At GAO, management challenges are identified by the Comptroller 
General, the Executive Committee, and the agency's senior executives 
through the agency's strategic planning, management, and budgeting 
processes. Our progress in addressing the challenges is monitored 
through our annual performance and accountability process. Under 
strategic goal 4, we establish performance goals focused on each of our 
management challenges, track our progress in completing the key efforts 
for those performance goals quarterly, and report each year on our 
progress toward meeting the performance goals. Each year we ask our IG 
to examine management's assessment of the challenges and the agency's 
progress in addressing them. (See appendix 2 for the IG's assessment.) 

For fiscal year 2005, we continued to address three management 
challenges--human capital, information security, and physical security. 
We anticipate that we may need to continue to address these management 
challenges in future years because they are evolving and will require 
us to continuously identify ways to adapt and improve. We revisit the 
challenges each year and refine them when appropriate, and when we 
believe we have sufficiently addressed these challenges we will remove 
them from our list. We will report any changes as we monitor and report 
on our progress in addressing the challenges through our annual 
performance and accountability process. The following sections describe 
our recent and planned efforts to address these challenges. 

The Human Capital Challenge: 

Given our role as a key provider of professional and objective 
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, but without excellent human capital policies 
and management practices, we could run the risk of being unable to lead 
by example and meet the expectations of the Congress and the American 
people. Our ability to meet the needs of the nation could also be 
impaired if we do not receive the funding that we need to adequately 
staff the agency, invest in our people, and reward our top performers-
-a mitigating external factor that we discuss along with others in the 
next section of this report. 

To recruit, reward, and retain a highly qualified, high-performing, and 
diverse workforce remains one of our most important challenges. We 
employed a number of strategies to improve our recruitment efforts and 
support our workforce plan, including increasing the use of short-term 
and time-limited appointments and direct-hire authorities and 
implementing a pilot program for undergraduate cooperative education 
program participants. We also developed our fiscal year 2006 
recruitment strategy to more directly support the agency's workforce 
plan. The strategy includes enhancements or expansions of existing 
programs, such as the capability to offer internships in the fall and 
spring as well as the summer; fully implementing a cooperative 
education program; implementing governmentwide flexibility for 
noncompetitive appointments into the Professional Development Program-
-our system for exposing new, entry-level staff to a variety of 
engagements, teams, and developmental opportunities during their first 
2 years of employment; and using special teams to employ targeted 
recruiting for special skill sets, hard-to-fill positions, and 
diversity recruiting. 

We continued to enhance our performance management and compensation 
systems through new and enhanced policies and processes. To improve our 
Performance-Based Compensation System, with the help of a well-regarded 
consulting firm, we implemented a revised process for determining 
performance-based compensation that more directly links individuals' 
performance, as reflected by their appraisal, with his or her 
compensation. In June 2005, our administrative and professional support 
staff completed their first year under a broadband pay system and a 
competency-based performance system. To ensure that these staff 
understood the new process and to foster staff acceptance, we employed 
an aggressive communication strategy that included meetings with staff 
as well as Web-based guides and questions and answers. To design a 
competitive, fair, and equitable compensation program aligned with 
competitive labor markets in which we compete for talent, we worked 
with the same consulting firm to perform a market-based compensation 
study. Based on the results of the market-based compensation survey, we 
have invested significantly in restructuring our analyst and analyst- 
related specialist Band II pay band into two pay levels to better align 
individual staff with our institutional compensation policies. We 
expect all compensation system changes to be implemented in fiscal year 
2006. To ensure that our managers' needs for support and guidance 
concerning their responsibilities in the performance management process 
are met, we established an organizational and performance consulting 
service designed to help managers interpret and address feedback they 
receive from our annual employee feedback survey, developed an e- 
learning course on designated performance managers' roles and 
responsibilities, and developed and began issuing a report for managers 
and our Employee Advisory Council evaluating the performance management 
assessment cycle with recommendations for improvements. We also 
improved the accuracy and user-friendliness of our performance 
management Web site. 

Finally, we continued providing our staff with courses and 
opportunities to develop their knowledge and expertise, build their 
competency, and strengthen their leadership skills. We designed and 
delivered 13 new competency-building courses and implemented an adjunct 
faculty program to increase the number of our subject matter experts 
available to develop content for new courses, expand the range of 
courses available, and provide training throughout the year. We also 
established a group of analysts-in-charge representing various teams 
supporting goals 1 through 3 to discuss best practices related to 
managing engagements; challenges for new analysts-in-charge; and 
techniques for motivating, directing, and coaching staff. In addition, 
we upgraded our learning content management system to make it available 
on demand any time, anywhere, and provide improved tracking and 
reporting capabilities, and developed resource guides for our 
administrative professional and support staff that describe learning 
opportunities by competency and aid in creating individual development 
plans for professional growth. To deliver required core courses to Band 
I analyst staff in field offices, we redistributed and realigned course 
delivery among three learning hubs rather than centralizing course 
delivery in headquarters. We estimate that this decision will result in 
a cost avoidance of $500,000 in travel and per diem, as well as other 
benefits, such as networking among and across teams, a sustained focus 
on learning, larger classes that make more effective use of adjunct 
faculty time, and the opportunity to strengthen matrixed work 
relationships through shared learning experiences. 

We continued to strengthen our strategic human capital management by 
realigning our Human Capital Office during fiscal year 2005 to better 
meet the needs of our internal customers. By consolidating our services 
under four centers of excellence, we will improve our customer focus, 
clarify lines of delegated authorities, standardize guidance across the 
Human Capital Office, and dedicate more of our resources to direct 
customer support. 

While we have made progress in addressing the human capital challenge, 
more work remains to be done. Some of the largest efforts planned in 
this area for fiscal year 2006 include: 

* implementing the market-based compensation ranges for our analyst and 
analyst-related staff, 

* determining the market-based compensation ranges for our 
administrative professional and support staff, 

* implementing changes necessary to restructure our analyst Band II 
staff, 

* continuing to strengthen our recruiting processes to better meet the 
needs of the agency and support our strategic goals, 

* obtaining a better understanding of the retention factors affecting 
GAO, and: 

* identifying an appropriate methodology to successfully implement the 
Comptroller General's authority to determine the amount of annual pay 
adjustments. 

The Information Security Challenge: 

Information system security is a critical activity in ensuring our 
information system assets are safe and free from compromise. To address 
the increasing threats due to compromised information or information 
systems, we implemented a wide range of initiatives to strengthen and 
protect the security of our information systems and data. 

We enhanced the security of our users' workstations by installing 
personal firewall software to prevent download of viruses, anti-spyware 
to identify and eliminate malicious programs, and automatic activation 
of the screensaver. We also locked the GAO intranet home page as the 
default home page to prevent spyware from hijacking the default home 
page and downloading more spyware. 

In support of the requirements in the Federal Information Security 
Management Act, we completed remediation of several key weaknesses and 
vulnerabilities during fiscal year 2005. These included, ensuring that 
risk assessments, system security plans, reviews performed under 
National Institute of Standards and Technology special publication 800- 
26, and letters for authorization to operate were in place and that 
system test and evaluation reviews and certifications and 
accreditations were developed and completed as necessary. 

To extend our ability to securely access and transmit classified data 
and information, we completed installation of the Secret Internet 
Protocol Router Network in seven of our field offices. This network 
allows our staff to obtain specific classified data directly from 
agency officials via secure e-mail, improves efficiency of our research 
through direct access to classified information, posts our classified 
reports for review and dissemination, electronically transmits our 
classified reports to agencies for comments, and reduces the necessity 
of using certified mail for classified data. 

Finally, we continued to implement initiatives and improvements to our 
Disaster Recovery Program. Our most significant accomplishment was the 
completion of our vision of the Disaster Recovery Program/Continuity of 
Operations, which was approved and signed by the Comptroller General 
and the Chief Administrative Officer on May 31, 2005. In support of the 
program we also developed Emergency Preparedness training video 
material for headquarters staff and installed an emergency voice and 
text notification system on the network. 

We anticipate that information security will continue to be one of our 
management challenges in the future. In fiscal year 2006, we will 
further address that challenge by completing implementation of 
centralized auditing of network servers and devices to better secure 
our computing assets within GAO, refining our network monitoring 
procedures to include the use of correlation products to automate the 
detection of potentially harmful threats to our network, implementing 
improvements to our disaster recovery operations, and improving our 
ability to respond and recover in the event of a disruption by 
implementing additional technologies to lessen our risks. 

The Physical Security Challenge: 

The challenge to provide a safe and secure work environment for 
employees remains a constant in light of domestic and international 
events that can have a profound impact on the way we conduct business 
in the United States and around the world. Protecting our people and 
our assets is paramount to agency operations. In fiscal year 2005, we 
initiated actions to enhance our communication with external agencies, 
improve our internal communications and operations, and strengthen the 
technical and physical aspects of our emergency preparedness efforts. 

Externally, we established or enhanced contacts and procedures with 
local agencies to enable us to receive detailed intelligence that would 
not necessarily be provided through normal communication channels and 
to ensure coordination with the legislative branch in case of 
emergency. For example, we established emergency notification 
procedures with the Federal Bureau of Investigation Joint Terrorism 
Task Force; enhanced relocation procedures and improved relations with 
the U.S. Capitol Police, the House Sergeant of Arms, and the Emergency 
Preparedness Office; and made arrangements with the District of 
Columbia government to receive up-to-date emergency notifications. We 
are also an active member of the Legislative Branch Continuity of 
Operations Plan Working Group, and we coordinated and participated in a 
legislative branch tabletop exercise involving a simulation of a crisis 
requiring the House of Representatives to vacate and relocate 
elsewhere. 

Internally, we took several steps to support our goal of providing a 
safe and secure work environment. To ensure that our staff know what to 
do in case of an emergency, we conducted our first shelter in place 
drill for headquarters, and distributed shelter in place plans for the 
majority of our field offices and an emergency preparedness brochure 
for all staff. To reduce the agency's security risk, we installed an 
electronic fingerprint system that improves the speed with which we can 
obtain screening through the Federal Bureau of Investigation, including 
immediate reports if prints are not acceptable. In addition, we are now 
requiring National Crime Information Center checks for contractors, 
including fingerprints, which bring our security requirements and 
procedures for contractors more in line with those for our own 
employees. 

To help ensure continued operations, we have completed initiatives in 
the areas of technical and physical security. We increased our network 
access potential through installing and reactivating additional local 
area network ports. This will provide for efficient and effective use 
of space in the event that congressional staff need to relocate to our 
headquarters building in an emergency. Our physical security was 
improved this year with the completion of the perimeter security phase 
of our security plans. Projects completed include installation of high- 
speed rollup doors in the garage, placement of guard booths at our 
vehicle entrances, installation of undervehicle cameras and pop-up 
barriers, and construction of a perimeter plinth wall. 

We plan to continue to assess our security operations to ensure our 
ability to meet ever-changing challenges to our security posture. In 
fiscal year 2006 we will be completing work on the Integrated 
Electronic Security System, which includes installation of turnstiles 
at headquarters, implementation of smart card technology, and upgrading 
access control and intrusion detection systems for headquarters and the 
field offices. Other efforts to meet this continuing challenge include 
procurement of an emergency notification system, and designing and 
disseminating a more robust security education and awareness program 
for headquarters and the field offices. 

Mitigating External Factors That Could Affect Our Performance: 

Several external factors could affect the achievement of our 
performance goals, including the amount of resources we receive, shifts 
in the content and volume of our work, and various national and 
international developments. Limitations imposed on our work by other 
organizations or limitations on the ability of other federal agencies 
to make the improvements we recommend are additional factors that could 
affect the achievement of our goals. 

The external factors that could have the most significant adverse 
affect on us are the constrained budget environment in which we 
currently work and the uncertain budget future we face. We are 
experiencing heavy demand from the Congress for work in a number of 
subject areas, especially in disaster recovery and preparedness in the 
aftermath of Hurricanes Katrina and Rita and in health care. Given the 
across-the-board funding reductions that the Congress is considering 
for fiscal year 2006, large current federal budget deficits, and the 
nation's long-range fiscal imbalance, the Congress is likely to place 
an increasing emphasis on fiscal constraint. While it is unclear how we 
will ultimately be affected, it is reasonable to assume that any 
attempt to exercise additional budgetary discipline in the legislative 
branch will include our agency. As a result, while we believe that we 
submit reasonable and responsible budget requests and we know that the 
return on investment that we generate is unparalleled, we must plan and 
prepare for the possibility of significant and recurring constraints on 
the resources made available to us. In addition, because almost 80 
percent of our budget is composed of people-related costs, any serious 
budget situation will have an adverse impact on our human capital 
policies and practices. This, in turn, will have an adverse impact on 
our ability to serve the Congress and meet our performance targets. 
While, as we noted above, the nature and extent of any such budget 
constraints cannot be determined at the present time, our executive 
team is prudently engaged in a range of related planning activities 
that will help us to manage small reductions in our funding levels and 
still perform the high-quality work for the Congress that we are known 
for. We sincerely strive to lead by example, and are hopeful that our 
modest budget requests supported by our sound business case and proven 
performance results will encourage the Congress to provide additional 
resources to us and other high-performing entities like ours. If the 
Congress employs such an approach, we should be in a good position to 
continue to provide a high rate of return on the resources invested in 
the agency. However, employing an across-the-board cut or other 
nontargeted approaches would greatly impede our ability to do our work 
and may create perverse incentives for those agencies who are trying to 
model our priorities and practices. 

A growing area for us also involves our work on bid protests. As 
required by law, General Counsel prepares Comptroller General 
procurement law decisions that resolve protests filed by disappointed 
bidders. These bidders challenge the way individual federal 
procurements are being conducted or how the contracts were awarded. In 
recent years, we have experienced an increase in the number of bid 
protests that have been filed. There is a possibility of a further 
increase if the executive branch undertakes a significant number of 
public or private competitions under OMB Circular A-76, particularly if 
statutory changes allow representatives of employees to protest when 
the private sector wins these competitions. We will continue to monitor 
our workload in this area to ensure that we meet our statutory 
responsibilities with minimal negative impact on our other work. 

In addition to current and future budget constraints, another external 
factor is the extent to which we can obtain access to certain types of 
information. With concerns about operational security being unusually 
high at home and abroad, we may have more difficulty obtaining 
information in a timely manner and reporting on sensitive issues. 
Historically, our auditing and information gathering have been limited 
whenever the intelligence community is involved. In addition, we have 
not had the authority to access or inspect records or other materials 
held by other countries or, generally, by the multinational 
institutions that the United States works with to protect its 
interests. Consequently, our ability to fully assess the progress being 
made in addressing national and homeland security issues may be 
hampered. Also, we anticipate that more of our reports may be subject 
to classification reviews than in the past, which means that the public 
dissemination of these products may be limited. We plan to work with 
the Congress to identify both legislative and nonlegislative 
opportunities for strengthening our access authority as necessary and 
appropriate. 

As the Congress focuses on unpredictable events--such as natural 
disasters, possible public health pandemics, and the global threat 
posed by sophisticated terrorist networks--the mix of work we are asked 
to undertake may change, diverting our resources from some strategic 
objectives and performance goals. We can and do mitigate the impact of 
these events on the achievement of our goals in various ways. For 
example in fiscal year 2005, we: 

* stayed abreast of current events (such as the airline industry's 
financial crisis and gasoline prices) and communicated frequently with 
our congressional clients in order to be alert to possibilities that 
could shift the Congress's priorities or trigger new priorities; 

* quickly redirected our resources when appropriate (i.e., on the cost 
and recovery efforts related to Hurricane Katrina) so that we could 
deal with major changes as they occur; 

* maintained broad-based staff expertise (i.e., in our social security, 
health care financing, and homeland security areas) so that we could 
readily address emerging needs; and: 

* initiated research under the Comptroller General's authority on a 
limited number of selected topics, such as U.S. tsunami detection and 
preparedness efforts, the status of Iraq's reconstruction, and our 21st 
century challenges and high-risk work. 

Our ability to effectively manage the demands on our resources could 
have an impact on our ability to meet our performance targets. However, 
we will continue to manage the congressional requests we receive and 
the work we do under the Comptroller General's authority in order to 
minimize any negative impact it may have on our ability to meet the 
needs of the Congress and the American people. 

[End of Part I: Management's Discussion and Analysis] 

Part II: Performance Information: 

"The effect of a good government is to make life more valuable; of a 
bad one, to make it less valuable." 

-- Henry David Thoreau: 

Performance Information by Strategic Goal: 

In the following sections, we discuss how each of our four strategic 
goals contributed to our fiscal year 2005 performance results. 
Specifically, for goals 1, 2, and 3--our external goals--we present 
performance results for the three annual measures that we assess at the 
goal level. Most teams and units also contributed toward meeting the 
targets for the agencywide measures that were discussed in the previous 
part of this report. In addition, for all four strategic goals, we 
assess our progress on our qualitative, multiyear performance goals. 

Goal 1: Overview: 

Provide timely, quality service to the Congress and the federal 
government to address current and emerging challenges to the well-being 
and financial security of the American people: 

Our first strategic goal upholds our mission to support the Congress in 
carrying out its constitutional responsibilities by focusing on work 
that helps address the current and emerging challenges affecting the 
well-being and financial security of the American people and American 
communities. Our multiyear (fiscal years 2004-2009) strategic 
objectives under this goal are to provide information that will help 
address: 

* the health needs of an aging and diverse population; 

* the education and protection of the nation's children; 

* the promotion of work opportunities and the protection of workers; 

* a secure retirement for older Americans; 

* an effective system of justice; 

* the promotion of viable communities; 

* responsible stewardship of natural resources and the environment; 
and: 

* a safe, secure, and effective national physical infrastructure. 

These objectives, along with the performance goals and key efforts that 
support them, are discussed fully in our strategic plan, which is 
available on our Web site at [Hyperlink, http://www.gao.gov]. The work 
supporting these objectives was performed primarily by headquarters and 
field staff in the following teams: Education, Workforce, and Income 
Security; Financial Markets and Community Investment; Health Care; 
Homeland Security and Justice; Natural Resources and Environment; and 
Physical Infrastructure. 

Selected Work under Goal 1: 

Improving the oversight and monitoring of Head Start grantees: We 
assisted the Congress and the Department of Health and Human Services 
(HHS) in identifying major risk areas in the Head Start program and 
crafting solutions to address those risks. For example, we noted the 
lack of reliable data on enrollment in Head Start centers nationwide 
and highlighted gaps in Head Start's oversight framework that put 
federal funds at risk and can reduce the quality or amount of services 
provided. HHS is now taking steps to address these and other gaps we 
identified. (See appendix 1, item 1.36.C.) 

Addressing the challenges of pension reform: We urged the Congress to 
enact comprehensive pension reform that would reduce the financial 
risks to the Pension Benefit Guaranty Corporation and the taxpayer, as 
well as to put the defined benefit system on a more stable financial 
footing. The Congress subsequently included in draft legislation the 
key elements that we suggested. (See appendix 1, item 1.47.C.) 

Redefining rural: in assessing how a change in the definition of rural 
would impact USDA's Rural Housing Service in meeting rural housing 
needs, we suggested that the Congress consider changing to a density-
based system as a basis for making more equitable rural housing program 
eligibility determinations. (See appendix 1, item 1.55.C.) 

Improving security at drinking water and wastewater plants: We 
identified key activities that can help the Environmental Protection 
Agency improve security for the water sector. Because of this work, the 
agency established common protocols for monitoring threats; provided 
simulation exercises to improve local, state, and regional 
collaboration; and significantly expanded training opportunities 
related to security by sponsoring several security workshops and 
seminars on topics such as wastewater system security, drinking water 
system preparedness, and emergency response. (See appendix 1, item 
1.67.C.) 

To accomplish our work under these strategic objectives, we conducted 
engagements, audits, analyses, and evaluations of programs at major 
federal agencies and developed reports and testimonies on the efficacy 
and soundness of those programs. 

As shown in table 10, we did not meet our fiscal year 2005 performance 
target for financial benefits for goal 1, but we exceeded our targets 
for other benefits and testimonies. 

Table 10: Strategic Goal 1's Annual Performance Results and Targets: 

Performance measure: Financial benefits; 
2001 Actual: $8.9 billion; 
2002 actual: $24.1 billion; 
2003 actual: $23.6 billion; 
2004 actual: $26.6 billion; 
2005 target: $19.6 billion; 
2005 actual: $15.6 billion; 
Met/not met: Not met; 
2006 target: $18.7 billion[A]. 

Performance measure: Other benefits; 
2001 Actual: 210; 
2002 actual: 226; 
2003 actual: 217; 
2004 actual: 252; 
2005 target: 240; 
2005 actual: 277; 
Met/not met: Met; 
2006 target: 242[A]. 

Performance measure: Testimonies; 
2001 actual: 73; 
2002 actual: 111; 
2003 actual: 80; 
2004 actual: 85; 
2005 target: 78; 
2005 actual: 88; 
Met/not met: Met; 
2006 target: 89. 

Source: GAO. 

[A] Our fiscal year 2006 targets for financial benefits and other 
benefits differ from the targets we reported for these measures in our 
fiscal year 2006 performance plan. On the basis of our performance in 
fiscal year 2005, we lowered these targets from $19.5 billion in 
financial benefits and 255 in other benefits, because we anticipate 
that these benefits during fiscal year 2006 are more likely to stem 
from work performed under goal 2. We did not change the agencywide 
targets for these measures, but we made corresponding changes to 
targets for goals 2 and 3. 

[End of table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages, which minimize the effect of an unusual level of 
performance in any single year and are shown in table 11. This table 
indicates that financial and other benefits have generally risen over 
time, while the number of testimonies has generally declined for goal 1 
since fiscal year 2001. 

Table 11: Four-Year Rolling Averages for Strategic Goal 1: 

Performance measure: Financial benefits; 
2001: $11.9 billion; 
2002: $15.2 billion; 
2003: $17.7 billion; 
2004: $20.8 billion; 
2005: $22.5 billion. 

Performance measure: Other benefits; 
2001: 177; 
2002: 190; 
2003: 209; 
2004: 226; 
2005: 243. 

Performance measure: Testimonies; 
2001: 114; 
2002: 110; 
2003: 99; 
2004: 87; 
2005: 91. 

Source: GAO. 

[End of table] 

The following sections describe our performance in goal 1 for each of 
these three quantitative performance measures and describe the targets 
for fiscal year 2006. This analysis is followed by a discussion of our 
multiyear qualitative performance measures. 

Financial Benefits: 

The financial benefits reported for this goal in fiscal year 2005 
totaled $15.6 billion, falling short of the target of $19.6 billion. 
This shortfall resulted, in part, because our work focused on 
nonfinancial rather than financial benefits. The largest of the 
financial benefits for this goal arose from our recommendation that DOE 
take actions to avoid costs associated with a nuclear waste disposal 
process. Other financial benefits resulting from our work under goal 1 
stemmed from HUD recapturing funds not being used by public housing 
authorities, HHS avoiding costs in the Medicare program, and the 
National Park Service increasing revenues. We describe these and other 
accomplishments in the goal 1 section of appendix 1. 

Because financial benefits often result from work completed in prior 
years, we set our fiscal year 2006 target on the basis of our 
assessment of the progress agencies are making in implementing our past 
recommendations. Our analysis indicates that financial benefits in the 
future for goal 1 are likely to decline. We, therefore, have set the 
target for fiscal year 2006 at $18.7 billion, which is higher than what 
we achieved this year. 

Other Benefits: 

Other tangible, nonfinancial benefits reported for goal 1 in fiscal 
year 2005 included 254 actions taken by federal agencies to improve 
their services and operations in response to our work and another 23 in 
which information we provided to the Congress resulted in statutory or 
regulatory changes. This total of 277 other benefits exceeded our 
target of 240. We report some of our major accomplishments in detail in 
the goal 1 section of appendix 1. For fiscal year 2006, we have set a 
target of 242. While this target is lower than what we achieved this 
year, it is about the same as the 4-year average for the goal and is 
consistent with our recognition that we are more likely to achieve 
these benefits under goals 2 and 3 in the next few years. 

Examples of Goal 1's Other Benefits: 

Paying properly for power wheelchairs for Medicare beneficiaries: On 
the basis of our finding that the information provided to Medicare 
contractors that process wheelchair claims-one of the program's most 
expensive items-provided insufficient detail, new requirements were 
established to make more information available. (See appendix 1, item 
1.9.A.) 

Monitoring states' inventories of childhood vaccines: The Centers for 
Disease Control and Prevention implemented our recommendation to 
develop a strategic plan that includes steps to monitor childhood 
vaccine supplies in state depots, which should help ensure that 
adequate inventories are available. (See appendix 1, item 1.17.A.) 

Estimating tobacco retailer violation rates: Our work led HHS to 
increase oversight of states' monitoring of tobacco retailers; for 
example, HHS now visits states to help assess the accuracy and 
completeness of tobacco outlet lists and works with states to improve 
standardization of inspection protocols. (See appendix 1, item 1.19.A.) 

Testimonies: 

Our witnesses testified at 88 congressional hearings related to this 
strategic goal, which exceeded the fiscal year 2005 target of 78 
testimonies. Among the testimonies given were those on student loan 
programs, Social Security reform, Medicare spending, defense health 
care, farm program payments, and transportation security (see the 
section on Focusing on Our Clients for a list of testimony topics by 
goal). On the basis of our assessment of the potential need to testify 
on issues under this goal, we have set a target of presenting testimony 
at 89 hearings during fiscal year 2006. 

Multiyear Performance Goals: 

As shown in table 12, at the close of fiscal year 2005, we met 39 of 
the 40 performance goals for this strategic goal. We did not meet the 
goal of assessing the administrative efficiency and effectiveness of 
the federal court and prison systems because we did not receive 
requests to perform work in this area and could not undertake self- 
initiated work because we needed resources for work requested by the 
Congress in other areas. For fiscal year 2006, we are replacing this 
performance goal with one for improving the administration of the 
nation's election system, a goal that better reflects the interests of 
our congressional clients. 

Table 12: Strategic Goal 1's Qualitative Performance Goals, Fiscal 
Years 2004 and 2005: 

Strategic objective: 1.1. The health needs of an aging and diverse 
population. 

Performance Goal: 1.1.1. Evaluate Medicare reform, financing, and 
operations; Met. 

Performance Goal: 1.1.2. Assess trends and issues in private health 
insurance coverage; Met. 

Performance Goal: 1.1.3. Assess actions and options for improving the 
Department of Veterans Affairs and the Department of Defense's health 
care services; Met. 

Performance Goal: 1.1.4. Evaluate the effectiveness of federal programs 
to promote and protect the public health; Met. 

Performance Goal: 1.1.5. Evaluate the effectiveness of federal programs 
to improve the nation's preparedness for the public health and medical 
consequences of bioterrorism; Met. 

Performance Goal: 1.1.6. Evaluate federal and state program strategies 
for financing and overseeing long-term health care; Met. 

Performance Goal: 1.1.7. Assess state experiences in providing health 
insurance coverage for low-income populations; Met. 

Strategic objective: 1.2. The education and protection of the nation's 
children. 

Performance Goal: 1.2.1. Analyze the effectiveness and efficiency of 
early childhood education, care, and nutrition programs in serving 
their target populations; Met. 

Performance Goal: 1.2.2. Assess options for federal programs to 
effectively address the educational and nutritional needs of elementary 
and secondary students; Met. 

Performance Goal: 1.2.3. Determine the effectiveness and efficiency of 
child support enforcement and child welfare programs in serving their 
target populations; Met. 

Performance Goal: 1.2.4. Identify opportunities to better manage 
postsecondary, vocational, and adult education programs and deliver 
more effective services; Met. 

Strategic objective: 1.3. The promotion of work opportunities and the 
protection of workers. 

Performance Goal: 1.3.1. Assess the effectiveness of federal efforts to 
help adults leave welfare for work and to assist other low-income 
individuals; Met. 

Performance Goal: 1.3.2. Analyze the impact of programs designed to 
maintain a skilled workforce and ensure employers have the workers they 
need; Met. 

Performance Goal: 1.3.3. Assess the success of various enforcement 
strategies to protect workers while minimizing employers' burden in the 
changing work environment; Met. 

Performance Goal: 1.3.4. Identify ways to improve federal support for 
people with disabilities; Met. 

Strategic objective: 1.4. A secure retirement for older Americans. 

Performance Goal: 1.4.1. Assess the policy challenges facing the future 
of the Social Security system and the need for reform; Met. 

Performance Goal: 1.4.2. Bolster retirement security by identifying 
opportunities to foster greater pension coverage, raise personal 
saving, and increase the employment earnings of seasoned workers; Met. 

Performance Goal: 1.4.3. Identify opportunities to improve the ability 
of government agencies to administer and protect workers' retirement 
benefits; Met. 

Performance Goal: 1.4.4. Assess the role of the Social Security number 
in improving government operations, minimizing fraud and abuse, and 
protecting citizens from identity theft and other illegal activity; 
Met. 

Strategic objective: 1.5. An effective system of justice. 

Performance Goal: 1.5.1. Identify ways to improve federal agencies' 
ability to prevent and respond to terrorism and other major crimes; 
Met. 

Performance Goal: 1.5.2. Assess the effectiveness of federal programs 
to control illegal drug use; Met. 

Performance Goal: 1.5.3. Assess federal efforts to enforce immigration 
and customs laws; Met. 

Performance Goal: 1.5.4. Assess the administrative efficiency and 
effectiveness of the federal court and prison systems; Not met. 

Strategic objective: 1.6. The promotion of viable communities. 

Performance Goal: 1.6.1. Assess federal community and economic 
development assistance and its impact on communities; Met. 

Performance Goal: 1.6.2. Assess the effectiveness of federal 
initiatives to assist small and minority-owned businesses; Met. 

Performance Goal: 1.6.3. Assess how the federal government can balance 
the promotion of home ownership with financial risk; Met. 

Performance Goal: 1.6.4. Assess federal efforts to enhance national 
preparedness and capacity to respond to and recover from natural and 
man-made disasters; Met. 

Performance Goal: 1.6.5. Assess how well federal programs that support 
affordable housing meet objectives, manage financial risk, and improve 
recipient's well-being; Met. 

Strategic objective: 1.7. Responsible stewardship of natural resources 
and the environment. 

Performance Goal: 1.7.1. Assess the nation's ability to ensure reliable 
and environmentally sound energy for current and future generations; 
Met. 

Performance Goal: 1.7.2. Assess federal strategies for managing land 
and water resources in a sustainable fashion for multiple uses; Met. 

Performance Goal: 1.7.3. Assess environmental protection strategies and 
programs; Met. 

Performance Goal: 1.7.4. Assess efforts to reduce the threats posed by 
hazardous and nuclear wastes; Met. 

Performance Goal: 1.7.5. Assess federal programs' ability to ensure a 
plentiful and safe food supply, provide economic security for farmers, 
and minimize agricultural environmental damage; Met. 

Strategic objective: 1.8. A safe, secure, and effective national 
physical infrastructure. 

Performance Goal: 1.8.1. Assess strategies for identifying, evaluating, 
prioritizing, financing, and implementing integrated solutions to the 
nation's transportation infrastructure challenges; Met. 

Performance Goal: 1.8.2. Assess the impact of transportation and 
telecommunications policies and practices on competition and consumers; 
Met. 

Performance Goal: 1.8.3. Assess federal government's role in fostering 
and overseeing telecommunications in the public interest; Met. 

Performance Goal: 1.8.4. Assess efforts to improve safety in moving 
people and goods across the nation's transportation system; Met. 

Performance Goal: 1.8.5. Assess efforts to improve security in all 
transportation modes; Met. 

Performance Goal: 1.8.6. Assess the U.S. Postal Service's 
transformation efforts to ensure its viability and accomplish its 
mission; Met. 

Performance Goal: 1.8.7. Assess federal efforts to plan for, acquire, 
manage, maintain, secure, and dispose of the government's real property 
assets; Met. 

Source: GAO. 

Notes: In indicating whether we have met a performance goal, the 
responsible senior executive considers, for example, the amount of work 
conducted and recommendations made for each key effort under that 
performance goal, as well as other assistance provided to the client or 
customer that is related to these efforts. The senior executive then 
judges whether the work completed collectively for all key efforts has 
achieved the performance goal. To view the 153 key efforts for the 40 
performance goals above, go to [Hyperlink, http://www.gao.gov/sp.html]. 

[End of table] 

[End of Goal 1 Overview] 

Goal 2 Overview: 

Provide timely, quality service to the Congress and the federal 
government to respond to changing security threats and the challenges 
of global interdependence: 

The federal government is working to promote foreign policy goals, 
sound trade polices, and other strategies to advance the interests of 
the United States and its allies while also seeking to anticipate and 
address emerging threats to the nation's security and economy. Given 
the importance of these efforts, our second strategic goal focuses on 
helping the Congress and the federal government respond to changing 
security threats and the challenges of global interdependence. Our 
multiyear (fiscal years 2004-2009) strategic objectives under this goal 
are to support the congressional and federal efforts to: 

* respond to emerging threats to security, 

* ensure military capabilities and readiness, 

* advance and protect U.S. international interests, and: 

* respond to the impact of global market forces on U.S. economic and 
security interests. 

These objectives, along with the performance goals and key efforts that 
support them, are discussed fully in our strategic plan, which is 
available on our Web site at [Hyperlink, http://www.gao.gov]. The work 
supporting these objectives is performed primarily by headquarters and 
field staff in the following teams: Acquisition and Sourcing 
Management, Defense Capabilities and Management, and International 
Affairs and Trade. In addition, the work supporting some performance 
goals and key efforts is performed by headquarters and field staff from 
the Information Technology, Homeland Security and Justice, Financial 
Markets and Community Investment, and Natural Resources and Environment 
teams. 

Selected Work under Goal 2: 

Strengthening federal agency information security: In response to our 
identification of specific information security improvements needed at 
numerous agencies, some agencies strengthened their information 
security practices by, among other things, changing access controls to 
limit the ability to read, modify, or delete information to authorized 
individuals; implementing software change controls to allow only 
authorized software programs to operate; and using service continuity 
controls to protect computer-dependent operations from significant 
disruptions. (See appendix 1, item 2.6.A.) 

Increasing security of cargo containers to prevent smuggling of weapons 
of mass destruction: In response to our recommendations, DHS agreed to 
improve its ability to assess security procedures of certain companies, 
identify high-risk containers, inspect containers with scanning 
equipment, and manage the programs overall to increase the security of 
cargo containers in order to prevent terrorists from using such 
containers to smuggle weapons of mass destruction into the United 
States. (See appendix 1, item 2.11.C.) 

Identifying challenges to efforts to stabilize and rebuild Iraq: We 
identified the challenges to U.S. efforts to stabilize Iraq, 
reconstruct Iraq's essential infrastructure, and support its elections. 
Our work was widely reported in the national media, helped inform 
American taxpayers about U.S. efforts in Iraq, and provided the 
Congress with crucial oversight information as it considered 
legislative action. (See appendix 1, item 2.49.C.) 

Bolstering efforts to prevent terrorists and criminals from obtaining 
U.S. passports: The Congress expressed grave concerns about the 
security gaps that we identified in U.S. passport operations and asked 
the Departments of State (State) and justice to implement our 
recommendations correcting these and other systemic weaknesses in 
State's passport fraud detection efforts. The agencies have begun 
implementing actions to close these critical security gaps. (See 
appendix 1, item 2.50.C.) 

To accomplish our work under these strategic objectives, we conducted 
engagements and audits that involved fieldwork related to federal 
programs that took us across multiple continents, including Australia, 
Europe, Africa, Asia, South America, and North America. As in the past, 
we developed reports, testimonies, and briefings on our work. 

As shown in table 13, we exceeded our fiscal year 2005 performance 
targets for financial and other benefits, but did not meet the target 
for testimonies for this goal. 

Table 13: Strategic Goal 2's Annual Performance Results and Targets: 

Performance measure: Financial benefits; 
2001 Actual: $10.5 billion; 
2002 actual: $8.4 billion; 
2003 actual: $7.1 billion; 
2004 actual: $9.7 billion; 
2005 target: $9.4 billion; 
2005 actual: $13.0 billion; 
Met/not met: Met; 
2006 target: $10.5 billion[A]. 

Performance measure: Other benefits; 
2001 Actual: 188; 
2002 actual: 218; 
2003 actual: 273; 
2004 actual: 369; 
2005 target: 300; 
2005 actual: 365; 
Met/not met: Met; 
2006 target: 282[A]. 

Performance measure: Testimonies; 
2001 actual: 34; 
2002 actual: 38; 
2003 actual: 48; 
2004 actual: 70; 
2005 target: 52; 
2005 actual: 42; 
Met/not met: Not met; 
2006 target: 58. 

Source: GAO. 

[A] Our fiscal year 2006 targets for financial benefits and other 
benefits differ from the targets we reported for these measures in our 
fiscal year 2006 performance plan. On the basis of our performance in 
fiscal year 2005, we raised these targets from $9.1 billion in 
financial benefits and 275 in other benefits. We did not change the 
agencywide targets for these measures, but we made corresponding 
changes to targets for goals 1 and 3. 

[End of table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages, which minimize the effect of an unusual level of 
performance in any single year and are shown in table 14. This table 
indicates that financial and other benefits derived from our work have 
risen. At the same time, the number of testimonies for goal 2 has 
remained stable. 

Table 14: Four-Year Rolling Averages for Strategic Goal 2: 

Performance measure: Financial benefits; 
2001: $6.2 billion; 
2002: $6.9 billion; 
2003: $7.9 billion; 
2004: $8.9 billion; 
2005: $9.5 billion. 

Performance measure: Other benefits; 
2001: 118; 
2002: 154; 
2003: 202; 
2004: 262; 
2005: 306. 

Performance measure: Testimonies; 
2001: 43; 
2002: 41; 
2003: 44; 
2004: 48; 
2005: 50. 

Source: GAO. 

[End of table] 

The following sections describe our performance in goal 2 for each of 
our quantitative performance measures and describe the targets for 
fiscal year 2006. This analysis is followed by a discussion of our 
multiyear qualitative performance measures. 

Financial Benefits: 

The financial benefits reported for this goal in fiscal year 2005 
totaled $13 billion, exceeding the target of $9.4 billion. These 
accomplishments stemmed from engagements that recommended scaling back 
a defense program until the required technology is mature, increasing 
efficiencies in the Army's force structure, reducing funding for the 
Millennium Challenge Account--an account established to support 
development in countries around the world--and for DOD's operations and 
maintenance, and avoiding costs associated with the return of excess 
Army materiel from Iraq. We describe these and other accomplishments in 
the goal 2 section of appendix 1. 

Given the large portion of the U.S. budget that defense spending 
consumes, we expect our work under this goal to continue to produce 
economies and efficiencies that yield billions of dollars in financial 
benefits for the American people each year. We set goal 2's fiscal year 
2006 target at $10.5 billion based on its fiscal year 2005 4-year 
rolling average of $9.5 billion and our assessment of the progress 
agencies are making in implementing our past recommendations that might 
yield financial benefits. 

Other Benefits: 

The other tangible benefits reported for goal 2 in fiscal year 2005 
included 341 actions taken by federal agencies to improve their 
services and operations in response to our work and another 24 in which 
information we provided to the Congress resulted in statutory or 
regulatory changes. This total of 365 other benefits exceeded our 
target of 300. Our success in this area arose from our increased 
emphasis on follow-up efforts and increased monitoring of our progress 
toward the targets throughout the year. Some of our major 
accomplishments are reported in detail in the goal 2 section of 
appendix 1. 

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
set our fiscal year 2006 target at 282. This target is lower than our 
fiscal year 2005 actual performance and 4-year average for this measure 
because we want to encourage staff to identify significant and 
meaningful other benefits rather than numerous, narrowly focused ones 
that would easily ensure that we meet a higher target. 

Examples of Goal 2's Other Benefits: 

Improving controls covering technology exports: We found that a gap in 
control regulations covering exports with both military and civilian 
applications could enable individuals in most countries to legally 
obtain these items without any U.S. government review and that these 
items could be used to help make a cruise missile or unmanned aerial 
vehicle. The Department of Commerce subsequently proposed modifications 
to its regulations to help close the regulatory gap. (See appendix 1, 
item 2.1.A.) 

Strengthening the visa process as an antiterrorism tool: Using our work 
as a primary guide, State strengthened the visa process as an 
antiterrorism tool by, among other things, issuing guidance emphasizing 
national security as the department's first priority in the visa 
process; developing over 80 standard operating procedures to ensure 
that consular officers properly review visa applications and 
effectively fulfill their national security responsibilities; and 
developing and enhancing training on analytic interviewing techniques, 
fraud prevention, counterterrorism, and use of a name check system for 
passports and visa applications. (See appendix 1, item 2.32.A.) 

Ensuring decisions to transfer U.S. weapons and technologies to foreign 
governments are adequately informed: We found that the National 
Disclosure Policy Committee-which approves or denies requests for 
exceptions to the criteria used to determine if classified weapons or 
technologies can be released to the requesting country-was operating 
with outdated Central Intelligence Agency risk assessments. Acting on 
our recommendations, the committee's Executive Secretariat requested 
that the Central Intelligence Agency provide updated risk assessments 
for 23 countries, and those assessments are under way. (See appendix 1, 
item 2.55.A.) 

Testimonies: 

Our witnesses testified at 42 congressional hearings related to this 
strategic goal, missing our target of presenting testimony at 52 
hearings. Among other things, we testified on U.S. passport fraud, DOD 
security clearances, the Oil for Food program, mutual funds, unmanned 
aerial vehicles, protecting U.S. officials oversees from terrorist 
attacks, and transportation security issues (see the section on 
Focusing on Our Clients for a list of testimony topics by goal). We 
have set our target for presenting testimony at hearings to 58 for 
fiscal year 2006. This should be a challenge for us as it is above both 
our fiscal year 2005 performance and 4-year average for this goal. 

Multiyear Performance Goals: 

As shown in table 15, at the close of fiscal year 2004, we met 22 of 
our 23 performance goals for this strategic goal. We did not meet the 
performance goal of identifying opportunities to embed homeland 
security concepts in ongoing national initiatives because our homeland 
security resources were needed for other work requested by the Congress 
and we did not have resources in the homeland security area to 
undertake self-initiated work related to this performance goal. For 
fiscal year 2006, we plan to drop this performance goal and concentrate 
our resources on the remaining homeland security efforts. 

Table 15: Strategic Goal 2's Qualitative Performance Goals, Fiscal 
Years 2004 and 2005: 

Strategic objective: 2.1. Respond to emerging threats to security. 

Performance Goal: 2.1.1. Assess federal homeland security management, 
responsibility, effectiveness, and achievement of mission goals; Met. 

Performance Goal: 2.1.2. Identify ways to strengthen strategies related 
to homeland security and their implementation; Met. 

Performance Goal: 2.1.3. Evaluate homeland security resource 
priorities, costs, and approaches to stimulate desired investments; 
Met. 

Performance Goal: 2.1.4. Identify opportunities to embed homeland 
security concepts in ongoing national initiatives; Not met. 

Performance Goal: 2.1.5. Evaluate ways to strengthen government 
information security and protect computer and telecommunications 
systems that support the nation's critical infrastructures; Met. 

Performance Goal: 2.1.6. Assess the effectiveness of U.S. and 
international efforts to prevent the proliferation of nuclear, 
biological, chemical, and conventional weapons and sensitive 
technologies; Met. 

Strategic objective: 2.2. Ensure military capabilities and readiness. 

Performance Goal: 2.2.1. Assess DOD's ability to maintain adequate 
readiness levels while addressing the force structure changes needed in 
the 21st century; Met. 

Performance Goal: 2.2.2. Assess overall human capital management 
practices to ensure a high-quality total force; Met. 

Performance Goal: 2.2.3. Assess the ability of weapon system 
acquisition programs and processes to achieve desired outcomes; Met. 

Performance Goal: 2.2.4. Identify ways to improve the economy, 
efficiency, and effectiveness of DOD's support infrastructure and 
business systems and processes; Met. 

Performance Goal: 2.2.5. Assess the National Nuclear Security 
Administration's efforts to maintain a safe and reliable nuclear 
weapons stockpile; Met. 

Performance Goal: 2.2.6. Assess whether DOD and the services have 
developed integrated systems, procedures, and doctrines to support 
joint and coalition forces on the battlefield safely and effectively; 
Met. 

Performance Goal: 2.2.7. Analyze and support DOD's efforts to improve 
planning, programming, budgeting, execution, and program performance; 
Met. 

Strategic objective: 2.3. Advance and protect U.S. international 
interests. 

Performance Goal: 2.3.1. Analyze the plans, strategies, costs, and 
results of the United States and its allies in conflict interventions; 
Met. 

Performance Goal: 2.3.2. Analyze the effectiveness and management of 
U.S. foreign aid and developmental and humanitarian programs and the 
tools used to implement them; Met. 

Performance Goal: 2.3.3. Analyze the plans, costs, and outcomes of 
responding to challenges to U.S. strategic interests; Met. 

Performance Goal: 2.3.4. Evaluate the extent to which U.S. interests 
are effectively served by U.S. participation in multilateral 
organizations; Met. 

Performance Goal: 2.3.5. Assess the strategies and management practices 
for U.S. foreign affairs functions and activities; Met. 

Strategic objective: 2.4. Respond to the impact of global market forces 
on U.S. economic and security interests. 

Performance Goal: 2.4.1. Analyze how U.S. interests are served through 
trade agreements and U.S. programs; Met. 

Performance Goal: 2.4.2. Improve understanding of the effects of a 
global industrial base on U.S. national security interests; Met. 

Performance Goal: 2.4.3. Assess how the United States can influence 
improvements in the world financial system; Met. 

Performance Goal: 2.4.4. Assess the ability of the financial services 
industry and its regulators to maintain a stable and efficient 
financial system in the face of market change and innovation; Met. 

Performance Goal: 2.4.5. Assess the effectiveness of regulatory 
programs and policies in ensuring access to financial services and 
deterring fraud and abuse in financial markets; Met. 

Source: GAO. 

Notes: In indicating whether we have met a performance goal, the 
responsible senior executive considers, for example, the amount of work 
conducted and recommendations made for each key effort under that 
performance goal, as well as other assistance provided to the client or 
customer that is related to these efforts. The senior executive then 
judges whether the work completed collectively for all key efforts has 
achieved the performance goal. To view the 88 key efforts for the 23 
performance goals above, go to [Hyperlink, http://www.gao.gov/sp.html]. 

[End of table] 

[End of Goal 2 Overview] 

Goal 3 Overview: 

Help transform the federal government's role and how it does business 
to meet 21st century challenges: 

Our third strategic goal focuses on the collaborative and integrated 
elements needed for the federal government to achieve results. The work 
under this goal highlights the intergovernmental relationships that are 
necessary to achieve national goals. Our multiyear (fiscal years 2004- 
2009) strategic objectives under this goal are to: 

* reexamine the federal government's role in achieving evolving 
national objectives; 

* support the transformation to results-oriented, high-performing 
government; 

* support congressional oversight of key management challenges and 
program risks to improve federal operations and ensure accountability; 
and: 

* analyze the government's fiscal position and strengthen approaches 
for addressing the current and projected fiscal gap. 

These objectives, along with the performance goals and key efforts that 
support them, are discussed fully in our strategic plan, which is 
available on our Web site at [Hyperlink, http://www.gao.gov]. The work 
supporting these objectives is performed primarily by headquarters and 
field staff from the Applied Research and Methods, Financial Management 
and Assurance, Information Technology, and Strategic Issues teams. In 
addition, the work supporting some performance goals and key efforts is 
performed by headquarters and field staff from the Acquisition and 
Sourcing Management and Natural Resources and Environment teams. This 
goal also includes our bid protest and appropriations law work, which 
is performed by staff in General Counsel, and our fraud investigations, 
which are conducted by staff from the Forensic Audits and Special 
Investigations unit within the Financial Management and Assurance team. 

Selected Work under Goal 3: 

Cost effectively managing a multibillion dollar IT investment: DHS 
program managers who track cargo entering and leaving the United States 
implemented our recommendations related to developing and using 
enterprise architecture, following an incremental system acquisition 
approach, establishing system acquisition process controls, and 
ensuring the independence of DHS's function to oversee the program. 
(See appendix 1, item 3.19.C.) 

Improving criminal debt collection: Our efforts resulted in the 
Congress directing the department of justice to develop a strategic 
plan with the other involved federal agencies to improve the federal 
government's ability to collect billions of dollars of outstanding 
criminal debt. The department has begun to act on this directive. (See 
appendix 1, item 3.20.C.) 

Improving governmentwide telecommunications acquisition: Because of 
concerns that we raised regarding a governmentwide telecommunications 
contract known as Networx, GSA drafted measures to address each of the 
program's goals and is working to revise the draft measures based on 
our feedback. In addition, the Congress directed the agency to delay 
the release of its final request for proposals until information was 
available on the level of service contractors would be required to 
provide at each location. (See appendix 1, item 3.21.C.) 

Raising awareness of selected technology used to block pornography: We 
found that the filters offered by selected peer-to-peer file-sharing 
applications-which allow Internet users to find and exchange 
information, including images and videos-varied in their ability to 
block pornographic images. (See appendix 1, item 3.29.C.) 

Conducting the first financial audit of the Securities and Exchange 
Commission (SEC): Our audit of SEC for the fiscal year ended 2004 - the 
first conducted at SEC resulted in a clean opinion on its financial 
statements. Nevertheless, we identified material internal control 
weaknesses over financial statements and disclosures, recording and 
reporting disgorgements and civil penalties, and information security, 
which SEC is taking steps to address. (See appendix 1, item 3.60.C.) 

To accomplish our work under these four objectives, we conducted 
audits, evaluations, and analyses in response to congressional requests 
and carried out work initiatives under the Comptroller General's 
authority. As in the past, we developed reports, testimonies, and 
briefings on our work. 

As shown in table 16, we exceeded our fiscal year 2005 performance 
targets for financial and other benefits for this goal, but did not 
meet the target for testimonies at the goal level. 

Table 16: Strategic Goal 3's Annual Performance Results and Targets: 

Performance measure: Financial benefits; 
2001 Actual: $7.0 billion; 
2002 actual: $5.2 billion; 
2003 actual: $4.7 billion; 
2004 actual: $7.6 billion; 
2005 target: $8.5 billion; 
2005 actual: $11.0 billion; 
Met/not met: Met; 
2006 target: $9.8 billion[A]. 

Performance measure: Other benefits; 
2001 Actual: 401; 
2002 actual: 462; 
2003 actual: 553; 
2004 actual: 576; 
2005 target: 460; 
2005 actual: 767; 
Met/not met: Met; 
2006 target: 526[A]. 

Performance measure: Testimonies; 
2001 actual: 42; 
2002 actual: 65; 
2003 actual: 56; 
2004 actual: 60; 
2005 target: 55; 
2005 actual: 47; 
Met/not met: Not met; 
2006 target: 63. 

Source: GAO. 

[A] Our fiscal year 2006 targets for financial benefits and other 
benefits differ from the targets we reported for these measures in our 
fiscal year 2006 performance plan. On the basis of our performance in 
fiscal year 2005, we lowered the financial benefit target from $10.4 
billion. We also raised the target for other benefits from 520. We did 
not change the agencywide targets for these measures, but we made 
corresponding changes to targets for goals 1 and 2. 

[End of table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages, which minimize the effect of an unusual level of 
performance in any single year and are shown in table 17. This table 
indicates that documentation of financial and other benefits derived 
from our work under this goal have risen, while the number of 
testimonies for goal 3 has declined overall. 

Table 17: Four-Year Rolling Averages for Strategic Goal 3: 

Performance measure: Financial benefits; 
2001: $5.3 billion; 
2002: $5.5 billion; 
2003: $5.5 billion; 
2004: $6.1 billion; 
2005: $7.1 billion. 

Performance measure: Other benefits; 
2001: 407; 
2002: 445; 
2003: 480; 
2004: 498; 
2005: 590. 

Performance measure: Testimonies; 
2001: 86; 
2002: 78; 
2003: 67; 
2004: 56; 
2005: 57. 

Source: GAO. 

[End of table] 

The following sections describe our performance in goal 3 for each of 
our quantitative performance measures and describe the targets for 
fiscal year 2006. This analysis is followed by a discussion of our 
qualitative performance measures. 

Financial Benefits: 

The financial benefits reported for this goal in fiscal year 2005 
totaled $11 billion, exceeding our target of $8.5 billion. These 
efforts included increasing revenues from IRS collections, avoiding 
costs by using streamlined federal acquisition strategies, reduced 
funding due to improved cash management processes in the Air Force's 
working capital fund and to postponement of NASA's Prometheus 1 
project, and reducing costs associated with the 2010 Census. We 
describe these and other accomplishments in the goal 3 section of 
appendix 1. 

Under goal 3, we typically work on core government business processes 
and governmentwide management reforms. Our assessments of the executive 
branch's current efforts to implement the recommendations we made in 
our work under this goal indicate that financial benefits related to 
this goal are likely to be in line with our 4-year average; 
consequently, we set the target for financial benefits at $9.8 billion 
for fiscal year 2006. 

Other Benefits: 

The other tangible benefits reported for goal 3 in fiscal year 2005 
included 739 instances in which agencies' core business processes were 
improved or governmentwide management reforms were advanced because of 
our work. In addition, there were 28 instances in which information we 
provided to the Congress resulted in statutory or regulatory changes. 
This total of 767 other benefits exceeded our target of 460. The larger 
number of other benefits occurred mainly in our financial management 
and information technology areas where we tend to make multiple, 
specific recommendations for change to more than one entity. We 
describe some of our major accomplishments in the goal 3 section of 
appendix 1. 

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
set a fiscal year 2006 target of 526 other benefits for goal 3. We 
recognize that this target is lower than our fiscal year 2005 actual 
performance, but we set it at this level because we want to encourage 
staff to identify significant and meaningful other benefits rather than 
numerous, narrowly focused ones that would easily ensure that we meet a 
higher target. 

Examples of Goal 3's Other Benefits: 

Adding rigor to the Coast Guard's oversight of Deepwater program 
contractors: We found that (1) the Coast Guard's evaluation of a 
contractor responsible for developing and delivering assets for the 
Deepwater Program-established to modernize the Coast Guards' aging 
fleet of ships and aircraft lacked the necessary rigor to be effective 
and (2) two subcontractors were solely responsible for deciding whether 
to compete assets or make the assets themselves. Based on our 
recommendations, the Coast Guard improved the criteria for assessing 
the system integrator's performance and required the subcontractors to 
provide notification of decisions to make assets valued at $10 million 
or more. (See appendix 1, item 3.6.A.) 

Preventing improper sales of sensitive clothing and textile items: On 
the basis of our findings that it improperly sold over the Internet 
excess clothing with reflectant properties that prevent detection with 
infrared technologies, DOD issued a more stringent policy, which 
determined that these items are of a sufficiently critical and 
sensitive nature to require total destruction- an action that should 
help prevent this sensitive technology from falling into the wrong 
hands. (See appendix 1, item 3.31.A.) 

Improving accountability at the Department of Labor (DOL): We 
recommended that OMB revise its audit guidance to require sufficient 
testing for auditors to be able to positively state whether agency 
financial management systems comply with requirements (positive 
assurance). DOL's IG advised us that it had followed our advice and 
became the first federal agency to provide positive assurance. (See 
appendix 1, item 3.34.A.) 

Improving NASA's cost-estimating processes: Acting on our 
recommendations, NASA has removed barriers to cost estimation-such as 
the lack of reliable financial and performance data and the lack of 
incentives to measure and monitor cost trends-and improved its cost-
estimating practices. (See appendix 1, item 3.37.A.) 

Testimonies: 

Our witnesses testified at 47 congressional hearings related to this 
strategic goal, falling short of the target of 55. Among the 
testimonies presented were those on Army Reserve and Army National 
Guard pay, tax system abuse by DOD contractors, diploma mills, federal 
purchase and travel cards, NASA's shuttle program, and DOD contract 
management (see the section on Focusing on Our Clients for a list of 
testimony topics by goal). For fiscal year 2006, we have set a target 
of presenting testimony at 63 hearings because we expect the level of 
hearings to be higher than it was in fiscal year 2005; the anticipated 
increase stems from our work on bid protests and on contracting 
activities resulting from federal Hurricane Katrina cleanup and 
recovery efforts. 

Multiyear Performance Goals: 

As shown in table 18, at the close of fiscal year 2005, we met all of 
the 19 performance goals for this strategic goal. 

Table 18: Strategic Goal 3's Qualitative Performance Goals, Fiscal 
Years 2004 and 2005: 

Strategic objective: 3.1. Reexamine the federal government's role in 
achieving evolving national objectives. 

Performance Goal: 3.1.1. Examine emerging challenges and opportunities 
to position the federal government for the 21st century; Met. 

Performance Goal: 3.1.2. Develop new resources and approaches that can 
be used to assess the nation's position and progress; Met. 

Performance Goal: 3.1.3. Explore ways to evaluate the effectiveness of 
the entire set of policy tools that the federal government uses to 
achieve national objectives; Met. 

Performance Goal: 3.1.4. Assess how involvement of state and local 
governments and nongovernmental organizations affects federal program 
implementation and achievement of national goals; Met. 

Strategic objective: 3.2. Support the transformation to results-
oriented, high-performing government. 

Performance Goal: 3.2.1. Analyze and support efforts to improve the 
human capital infrastructure key to the successful transformation of 
the government; Met. 

Performance Goal: 3.2.2. Assess and support efforts to improve results-
oriented management across the government; Met. 

Performance Goal: 3.2.3. Analyze efforts to build high-performing 
organizations; Met. 

Performance Goal: 3.2.4. Identify ways to improve the collection, 
dissemination, and quality of federal information; Met. 

Performance Goal: 3.2.5. Identify ways to improve financial management 
infrastructure capacity to provide useful information for managing 
results and costs day to day; Met. 

Performance Goal: 3.2.6. Assess the government's planning, 
implementation, and use of information technology to improve 
performance and modernize federal programs and operations; Met. 

Performance Goal: 3.2.7. Identify ways to improve how federal agencies 
acquire goods and services; Met. 

Strategic objective: 3.3. Support congressional oversight of key 
management challenges and program risks to improve federal operations 
and ensure accountability. 

Performance Goal: 3.3.1. Highlight the federal programs and operations 
at highest risk and the major performance and management challenges 
confronting agencies; Met. 

Performance Goal: 3.3.2. Assess the management and results of the 
federal investment in science and technology and the effectiveness of 
efforts to protect intellectual property; Met. 

Performance Goal: 3.3.3. Identify ways to strengthen accountability for 
the federal government's assets and operations; Met. 

Strategic objective: 3.4. Analyze the government's fiscal position and 
strengthen approaches for addressing the current and projected fiscal 
gap. 

Performance Goal: 3.4.1. Analyze the long-term fiscal position of the 
federal government; Met. 

Performance Goal: 3.4.2. Analyze the structure and information for 
budgetary choices and explore alternatives for improvement; Met. 

Performance Goal: 3.4.3. Contribute to congressional deliberations on 
tax policy; Met. 

Performance Goal: 3.4.4. Support congressional oversight of federal tax 
administration; Met. 

Performance Goal: 3.4.5. Assess the reliability of financial 
information on the government's fiscal position and financing sources; 
Met. 

Source: GAO. 

Notes: In indicating whether we have met a performance goal, the 
responsible senior executive considers, for example, the amount of work 
conducted and recommendations made for each key effort under that 
performance goal, as well as other assistance provided to the client or 
customer that is related to these efforts. The senior executive then 
judges whether the work completed collectively for all key efforts has 
achieved the performance goal. To view the 90 key efforts for the 19 
performance goals above, go to [Hyperlink, http://www.gao.gov/sp.html]. 

[End of table] 

[End of Goal 3 Overview] 

Goal 4 Overview: 

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

The focus of our fourth strategic goal is to make GAO a model 
organization. For us, this means that our work is driven by our 
external clients and internal customers, our managers exhibit the 
characteristics of leadership and management excellence, our employees 
are devoted to ensuring quality in our work process and products 
through continuous improvement, and our agency is regarded by current 
and potential employees as an excellent place to work. Our multiyear 
(fiscal years 2004-2009) strategic objectives under this goal are to: 

* continuously improve client and customer satisfaction and stakeholder 
relationships; 

* lead strategically to achieve enhanced results; 

* leverage GAO's institutional knowledge and experience; 

* continuously enhance GAO's business and management processes; and: 

* become a professional services employer of choice. 

These objectives, along with the performance goals and key efforts that 
support them, are discussed fully in our strategic plan, which is 
available on our Web site at [Hyperlink, http://www.gao.gov]. The work 
supporting these objectives is performed under the direction of CAO 
with assistance on specific key efforts being provided by staff from 
the Applied Research and Methods team and from offices such as 
Strategic Planning and External Liaison, Congressional Relations, OOI, 
QCI, and Public Affairs. 

To accomplish our work under these five objectives, we plan to perform 
internal studies and complete projects that further the strategic goal. 

Selected Work under Goal 4: 

Improving dissemination of GAO products: We continued our pilot to 
produce and disseminate GAO reports in an electronic format, and, based 
on the positive client feedback we received on the products we provided 
in electronic format, we plan to make the use of electronic products 
routine. We also improved the process for creating and posting to our 
Web site the electronic supplements to our reports, enabling our staff 
to view all features of a supplement before it is posted on the 
Internet, easing navigation within the electronic supplement, and more 
readily identifying the product as a GAO product. (See appendix 1, item 
4.3.C.) 

Enhancing our classification and compensation systems: We more directly 
linked the process for determining compensation to an individual's 
performance, as reflected on the appraisal, and used a market-based 
compensation study to design a competitive, fair, and equitable 
compensation program that is aligned with competitive labor markets in 
which we compete for talent. In addition, our administrative and 
professional support staff completed their first year under a broadband 
pay system and a competency-based performance system. (See appendix 1, 
item 4.13.C.) 

Improving customer service through use of Web-based technology: We 
upgraded our Web-based time and attendance system and our automated 
competency-based performance system, developed and implemented a Web-
based request system for scheduling GAO vans that transport our staff 
to official meetings, redesigned the Web-based phone book, and deployed 
a major enhancement to our Web-based employee locator system. (See 
appendix 1, item 4.27.C.) 

Ensuring our IT security: To ensure our IT security we installed 
personal firewall software, implemented changes to ensure desktop 
security and foil spyware, and implemented an integrated security 
approach for our Web-based systems. (See appendix 1, item 4.32.C.) 

Ensuring our physical security: We enhanced our physical security by 
completing the perimeter security efforts, including installation of 
high speed rollup doors, guard booths, undervehicle cameras, pop-up 
barriers, and a perimeter plinth wall. (See appendix 1, item 4.33.C.) 

Multiyear Performance Goals: 

The annual measures used to assess our performance under our external 
strategic goals are not applicable to this internal strategic goal, but 
the multiyear qualitative performance goals do apply. As shown in table 
19, at the close of fiscal year 2005, we met 16 of the 17 performance 
goals for this strategic goal. We did not meet our performance goal of 
maximizing the collection, use, and retention of essential 
organizational knowledge. While we completed substantial work for this 
performance goal, we will not complete this work until after fiscal 
year 2005. Specifically, our work has been slower than we anticipated 
because funding was rescinded in fiscal year 2004 and some essential 
steps--such as developing prototypes and conducting pilot tests--have 
taken longer than we initially anticipated. We now plan to complete 
efforts under this performance goal during fiscal year 2006. 

Table 19: Strategic Goal 4's Qualitative Performance Goals, Fiscal 
Years 2004 and 2005: 

Strategic objective: 4.1. Continuously improve client and customer 
satisfaction and stakeholder relationships. 

Performance Goal: 4.1.1. Strengthen communication with congressional 
clients and more broadly measure their satisfaction with GAO's work; 
Met. 

Performance Goal: 4.1.2. Assess internal customer satisfaction with 
GAO's services and processes and implement and measure improvement 
efforts; Met. 

Performance Goal: 4.1.3. Strengthen relationships with GAO's 
stakeholders and increase the accessibility of GAO's products; Met. 

Strategic objective: 4.2. Lead strategically to achieve enhanced 
results. 

Performance Goal: 4.2.1. Integrate planning, budgeting, and performance 
measurement to achieve enhanced results; Met. 

Performance Goal: 4.2.2. Strengthen GAO's strategic human capital 
management to achieve enhanced results; Met. 

Performance Goal: 4.2.3. Ensure exemplary practices and systems in 
GAO's fiscal operations; Met. 

Performance Goal: 4.2.4. Strengthen IT governance practices and 
processes to achieve strategic results; Met. 

Strategic objective: 4.3. Leverage GAO's institutional knowledge and 
experience. 

Performance Goal: 4.3.1. Maximize the collection, use, and retention of 
essential organizational knowledge; Not met. 

Performance Goal: 4.3.2. Increase GAO's knowledge-sharing capability; 
Met. 

Performance Goal: 4.3.3. Enhance knowledge sharing with other national 
and international accountability and professional organizations; Met. 

Strategic objective: 4.4. Continuously enhance GAO's business and 
management processes. 

Performance Goal: 4.4.1. Improve engagement support services; Met. 

Performance Goal: 4.4.2. Use enabling technology to improve GAO's 
crosscutting business processes; Met. 

Strategic objective: 4.5. Become a professional services employer of 
choice. 

Performance Goal: 4.5.1. Promote an environment that is fair and 
unbiased and that values opportunity and inclusiveness; Met. 

Performance Goal: 4.5.2. Provide GAO staff with tools, technology, and 
a world-class working environment; Met. 

Performance Goal: 4.5.3. Provide a safe and secure workplace; Met. 

Performance Goal: 4.5.4. Enhance employee views about GAO; Met. 

Performance Goal: 4.5.5. Improve the development and experiences of 
newly hired staff; Met. 

Source: GAO. 

Notes: In indicating whether we have met a performance goal, the 
responsible senior executive considers, for example, the amount of work 
conducted for each key effort under that performance goal, as well as 
other assistance provided to the client or customer that is related to 
these efforts. The senior executive then judges whether the work 
completed collectively for all key efforts has achieved the performance 
goal. To view the 80 key efforts for the 17 performance goals above, go 
to [Hyperlink, http://www.gao.gov/sp.html]. 

[End of table] 

[End of Goal 4 Overview] 

Data Quality and Program Evaluation: 

Verifying and Validating Performance Data: 

Each year, we measure our performance by (1) evaluating our annual 
performance on measures that cover the outcomes and outputs related to 
our work results, client service, and management of our people and (2) 
assessing our progress in performing work related to the multiyear 
qualitative performance goals. To assess our performance in fiscal year 
2005, we used performance data that were complete and actual (rather 
than projected) for all of our performance measures. We believe the 
data to be reliable because we followed the criteria and verification 
and validation procedures described here to ensure the data's quality. 

The specific sources of the data for our annual performance measures 
and multiyear qualitative performance goals, procedures for 
independently verifying and validating these data, and the limitations 
of these data are described in table 20. 

Table 20: How We Ensure Data Quality for Our Annual Performance 
Measures and Multiyear Performance Goals: 

Results measures: 

Financial benefits: 

Definition and background: 
Our work--including our findings and recommendations--may produce 
benefits to the federal government that can be estimated in dollar 
terms. These benefits can result in better services to the public, 
changes to statutes or regulations, or improved government business 
operations. A financial benefit is an estimate of the federal monetary 
effect of agency or congressional actions. These financial benefits 
generally result from work that we completed over the past several 
years but can also result from information about questionable 
activities referred to us by agencies' IGs. The funds made available as 
a result of the actions taken in response to our work may be used to 
reduce government expenditures, increase revenues, or reallocate funds 
to other areas. Financial benefits included in our performance measures 
are net benefits--that is, estimates of financial benefits that have 
been reduced by the costs associated with taking the action that we 
recommended. We convert all estimates involving past and future years 
to their net present value and use actual dollars to represent 
estimates involving only the current year. Financial benefit amounts 
vary depending on the nature of the benefit, and we can claim financial 
benefits over multiple years based on a single agency or congressional 
action. Financial benefits are linked to specific recommendations or 
other work. To claim that financial benefits have been achieved, our 
staff must file an accomplishment report documenting that (1) the 
actions taken as a result of our work have been completed or 
substantially completed, (2) the actions generally were taken within 2 
fiscal years prior to the filing of the accomplishment report, (3) a 
cause-and-effect relationship exists between the benefits reported and 
our recommendation or work performed, and (4) estimates of financial 
benefits were based on information obtained from third parties. Prior 
to fiscal year 2002, we limited the period over which the benefits from 
an accomplishment could be accrued to no more than 2 years. Beginning 
in fiscal year 2002, we extended the period to 5 years for certain 
types of accomplishments known to have multiyear effects, such as those 
associated with multiyear reductions in longer term projects, changes 
embodied in law, program terminations, or sales of government assets 
yielding multiyear financial benefits. For financial benefits involving 
events that occur on a regular but infrequent basis--such as the 
decennial census--we may extend the measurement period until the event 
occurs in order to compute the associated financial benefits using 
GAO's present value calculator. Managing directors decide when their 
staff can claim financial benefits. A managing director may choose to 
claim a financial benefit all in 1 year or decide to claim it over 
several years, especially if the benefit spans future years and the 
managing director wants greater precision as to the amount of the 
benefit. 

Financial benefits: Data sources: 
Our Accomplishment Reporting System provides the data for this measure. 
Teams use this Web-based data system to prepare, review, and approve 
accomplishments and forward them to QCI for its review. Once 
accomplishment reports are approved, they are compiled by QCI, which 
annually tabulates total financial benefits agencywide and by goal. 

Financial benefits: Verification and validation: 
Our policies and procedures require us to use the Accomplishment 
Reporting System to record the financial benefits that result from our 
work. They also provide guidance on estimating those financial 
benefits. The teams identify when a financial benefit has occurred as a 
result of our work. Teams develop estimates based on third-party 
sources, such as the agency that acted on our work, a congressional 
committee, or the Congressional Budget Office, and file accomplishment 
reports based on those estimates. The estimates are reduced by any 
identifiable offsetting costs. Teams develop workpapers to support 
accomplishments with evidence that meets our evidence standard, 
supervisors review the workpapers, and an independent person within GAO 
reviews the accomplishment report. The team's managing director or 
director is authorized to approve financial accomplishment reports with 
benefits of less than $100 million. The team forwards the report to 
QCI, which reviews all accomplishment reports and approves 
accomplishment reports claiming benefits of $100 million or more. QCI 
provides summary data on approved financial benefits to unit managers, 
who check the data on a regular basis to make sure that approved 
accomplishments submitted by their staff have been accurately recorded. 
Our Engagement Reporting System also contains fiscal year 2005 
accomplishment data. In fiscal year 2005, QCI approved accomplishment 
reports covering 94 percent of the dollar value of financial benefits 
we reported. Every year, our IG reviews accomplishment reports that 
claim benefits of $500 million or more. In addition, on a periodic 
basis, the IG independently tests compliance with our process for 
claiming financial benefits of less than $500 million. The IG is 
currently completing a review of fiscal year 2005 financial benefits of 
less than $500 million. 

Financial benefits: Data limitations: 
Not every financial benefit from our work can be readily estimated or 
documented as attributable to our work. As a result, the amount of 
financial benefits is a conservative estimate. Estimates are based on 
information from third parties and are based on both objective and 
subjective data, and as a result, professional judgment is required in 
reviewing accomplishment reports. The IG is currently completing a 
review of financial benefits, including ensuring that our existing 
verification and validation steps are reasonable and adequately 
minimize any adverse impact from this limitation. 

Results measures: Other benefits (nonfinancial): 

Definition and background: 
Our work--including our findings and recommendations--may produce other 
benefits to the federal government that cannot be estimated in dollar 
terms. These benefits can result in better services to the public, 
changes to statutes or regulations, or improved government business 
operations. Other (nonfinancial) benefits generally result from work 
that we completed over the past several years. Other benefits are 
linked to specific recommendations or other work that we completed over 
several years. To claim that other benefits have been achieved, staff 
must file an accomplishment report that documents that (1) the actions 
taken as a result of our work have been completed or substantially 
completed, (2) the actions generally were taken within the past 2 
fiscal years of filing the accomplishment report, and (3) a cause-and- 
effect relationship exists between the benefits reported and our 
recommendation or work performed. 

Other benefits: Data sources: 
Our Accomplishment Reporting System provides the data for this measure. 
Teams use this automated system to prepare, review, and approve 
accomplishments and forward them to QCI for its review. Once 
accomplishment reports are approved, they are compiled by QCI, which 
annually tabulates total other (nonfinancial) benefits agencywide and 
by goal. 

Other benefits: Verification and validation: 
Our policies and procedures require us to use the Accomplishment 
Reporting System to record the other benefits that result from our 
findings and recommendations. Staff in the teams file accomplishment 
reports to claim that benefits have resulted from their work. Teams 
develop workpapers to support accomplishments with evidence that meets 
our evidence standard. Supervisors review the workpapers; an 
independent person within GAO reviews the accomplishment report; and 
the team's managing director or director approves the accomplishment 
report to ensure the appropriateness of the claimed accomplishment, 
including attribution to our work. The team forwards the report to QCI, 
where it is reviewed for appropriateness. QCI provides summary data on 
other benefits to unit managers, who check the data on a regular basis 
to make sure that approved accomplishments from their staff have been 
accurately recorded. Additionally, on a periodic basis, the IG 
independently tests compliance with our process for claiming other 
benefits. For example, the IG tested this process in fiscal year 2005 
and found it to be reasonable. The IG also suggested actions to 
strengthen documentation of our other benefits and to encourage the 
timely processing of the supporting accomplishment reports. We are 
currently examining this performance measure and considering possible 
alternative methods for determining our impact in this area. 

Other benefits: Data limitations: 
The data may be underreported because we cannot always document a 
direct cause-and- effect relationship between our work and benefits it 
produced. However, we feel that this is not a significant limitation on 
the data because the data represent a conservative measure of our 
overall contribution toward improving government. 

Results measures: 

Percentage of products with recommendations: 

Definition and background: 
We measure the percentage of our written products (chapter and letter 
reports and numbered correspondence) issued in the fiscal year that 
included at least one recommendation. We make recommendations that 
specify actions that can be taken to improve federal operations or 
programs. We strive for recommendations that are directed at resolving 
the cause of identified problems; that are addressed to parties who 
have the authority to act; and that are specific, feasible, and cost- 
effective. Some products we issue contain no recommendations and are 
strictly informational in nature. We track the percentage of our 
written products that are issued during the fiscal year and contain 
recommendations. This indicator recognizes that our products do not 
always include recommendations and that the Congress and agencies often 
find such informational reports just as useful as those that contain 
recommendations. For example, informational reports, which do not 
contain recommendations, can help to bring about significant financial 
and other benefits. 

Percentage of products with recommendations: Data sources: 
Our Documents Database records recommendations as they are issued. The 
database is updated daily. As our staff monitor implementation of 
recommendations, they submit updated information to the database. 

Percentage of products with recommendations: Verification and 
validation: Through a formal process, each team identifies the number 
of recommendations included in each product and an external contractor 
enters them into a database. We provide our managers with reports on 
the recommendations being tracked to help ensure that all 
recommendations have been captured and that each recommendation has 
been completely and accurately stated. Additionally, on a periodic 
basis, the IG independently tests the teams' compliance with our 
policies and procedures related to this performance measure. For 
example, during fiscal year 2003, the IG tested and determined that our 
process for determining the percentage of written products with 
recommendations was reasonable. In fiscal year 2005, we used the same 
procedures to compute and report this measure. 

Percentage of products with recommendations: Data limitations: 
This measure is a conservative estimate of the extent to which we 
assist the Congress and federal agencies because not all products and 
services we provide lead to recommendations. For example, the Congress 
may request information on federal programs that is purely descriptive 
or analytical and does not lend itself to recommendations. 

Results measures: 

Past recommendations implemented: 

Definition and background: 
We make recommendations designed to improve the operations of the 
federal government. For our work to produce financial or other 
benefits, the Congress or other federal agencies must implement these 
recommendations. As part of our audit responsibilities under generally 
accepted government auditing standards, we follow up on recommendations 
we have made and report to the Congress on their status. Experience has 
shown that it takes time for some recommendations to be implemented. 
For this reason, this measure is the percentage rate of implementation 
of recommendations made 4 years prior to a given fiscal year (e.g., the 
fiscal year 2005 implementation rate is the percentage of 
recommendations made in fiscal year 2001 products that were implemented 
by the end of fiscal year 2005). Experience has shown that if a 
recommendation has not been implemented within 4 years, it is not 
likely to be implemented. This measure assesses action on 
recommendations made 4 years previously, rather than the results of our 
activities during the fiscal year in which the data are reported. For 
example, the cumulative percentage of recommendations made in fiscal 
year 2001 that were implemented in the ensuing years is as follows: 20 
percent by the end of the first year (fiscal year 2002), 31 percent by 
the end of the second year (fiscal year 2003), 48 percent by the end of 
the third year (fiscal year 2004), and 85 percent by the end of the 
fourth year (fiscal year 2005). 

Past recommendations implemented: Data sources: 
Our Documents Database records recommendations as they are issued. The 
database is updated daily. As our staff monitor implementation of 
recommendations, they submit updated information to the database. 

Past recommendations implemented: Verification and validation: 
Through a formal process, each team identifies the number of 
recommendations included in each product, and an external contractor 
enters them into a database. Policies and procedures specify that our 
staff must verify, with sufficient supporting documentation, that an 
agency's reported actions are adequately being implemented. Staff 
update the status of the recommendations on a periodic basis. To 
accomplish this, our staff may interview agency officials, obtain 
agency documents, access agency databases, or obtain information from 
an agency's IG. Recommendations that are reported as implemented are 
reviewed by a senior executive in the unit and by QCI. Summary data are 
provided to the units that issued the recommendations. The units check 
the data regularly to make sure the recommendations they have reported 
as implemented have been accurately recorded. We also provide to the 
Congress a database with the status of recommendations that have not 
been implemented, and we maintain a publicly available database of open 
recommendations that is updated daily. Additionally, on a periodic 
basis, the IG independently tests our process for calculating the 
percentage of recommendations implemented for a given fiscal year. For 
example, the IG determined that our process was reasonable for 
calculating the percentage of recommendations that had been made in our 
fiscal year 1999 products and implemented by the end of fiscal year 
2003. In fiscal year 2005, we followed the same process for calculating 
the percentage of recommendations that had been made in fiscal year 
2001 products and implemented by the end of fiscal year 2005. 

Past recommendations implemented: Data limitations: 
The data may be underreported because sometimes a recommendation may 
require more than 4 years to implement. We also may not count cases in 
which a recommendation is partially implemented. However, we feel that 
this is not a significant limitation to the data because the data 
represent a conservative measure of our overall contribution toward 
improving government. 

Client measures: 

Testimonies: 

Definition and background: 
The Congress may ask us to testify at hearings on various issues. 
Participation in hearings is one of our most important forms of 
communication with the Congress, and the number of hearings at which we 
testify reflects the importance and value of our institutional 
knowledge in assisting congressional decision making. When multiple GAO 
witnesses with separate testimonies appear at a single hearing, we 
count this as a single testimony. We do not count statements submitted 
for the record when a GAO witness does not appear. 

Testimonies: Data sources: 
The data on hearings at which we testify are compiled in our 
congressional hearing system managed by staff in our Congressional 
Relations office. 

Testimonies: Verification and validation: 
The units responding to requests for testimony are responsible for 
entering data in the congressional hearing system. After a GAO witness 
has testified at a hearing, our Congressional Relations office verifies 
that the data in the system are correct and records the hearing as one 
at which we testified. Congressional Relations provides weekly status 
reports to unit managers, who check to make sure the data are complete 
and accurate. Additionally, on a periodic basis, the IG independently 
examines the process for recording the number of hearings at which we 
testified. For example, the IG determined that our process for 
recording hearings during fiscal year 2003 was reasonable. In fiscal 
year 2005, we followed the same process for recording hearings. 

Testimonies: Data limitations: 
This measure does not include statements for the record that we prepare 
for congressional hearings. Also, this measure may be influenced by 
factors other than the quality of our performance in any specific year. 
The number of hearings held each year depends on the Congress's agenda, 
and the number of times we are asked to testify may reflect 
congressional interest in work in progress, as well as work completed 
that year or the previous year. To mitigate this limitation, we try to 
adjust our workload to reflect cyclical changes in the congressional 
schedule. We also outreach to our clients on a continuing basis to 
increase their awareness of our readiness to participate in hearings. 

Client measures: 

Timeliness: 

Definition and background: 
The likelihood that our products will be used is enhanced if they are 
delivered when needed to support congressional and agency decision 
making. To determine whether our products are timely, we compute the 
proportion of our products that are issued by the dates agreed to with 
our clients or, for our work performed under the Comptroller General's 
authority, by the dates agreed to internally. The "committed" issue 
date for a product can be changed for requester-related reasons and for 
other significant reasons beyond GAO's control. Managing directors 
approve extensions to committed issue dates for their teams' 
engagements, and the teams document in their workpapers the reasons for 
extensions and the managing directors' approval. In fiscal year 2005, 
we extended the issue date on about one-third of our products. 

Timeliness: Data sources: 
The data supporting this measure are from our Mission and Assignment 
Tracking System, which is used to monitor our progress on our 
engagements. 

Timeliness: Verification and validation: 
Our staff enter the data supporting this measure into our Mission and 
Assignment Tracking System. The data are then uploaded into our 
Engagement Reporting System, allowing the teams to monitor their 
performance on this measure on a daily basis, if necessary, and resolve 
any issues. When an assignment is completed, data on its target and 
completion dates are reported to the project manager, who reviews and 
signs the report to confirm its accuracy. Additionally, on a periodic 
basis, the IG independently examines our process for calculating 
product timeliness. 

Timeliness: Data limitations: 
We do not measure the timeliness of all of our external products. 
Products such as staff studies, certain correspondence, and guidance 
are not part of our main product line and are excluded. To ensure that 
the data for this measure are sound, staff must follow the policy 
guidance as described above. However, based on the IG's 2005 review, 
there is evidence that some staff may be inconsistently applying the 
policy for changing a committed issue date, which ultimately affects 
the reliability of our measure. Also, our staff perform the process of 
changing a committed issue date, and thus the resulting data may not 
adequately represent an independent assessment of the requesters' 
satisfaction with our ability to deliver products when our clients need 
them. To mitigate these limitations, in fiscal year 2006 we will use 
our more direct client feedback survey as the primary indicator for our 
ability to deliver products on time to our clients. 

Multiyear qualitative performance goals: 

Definition and background: 
In addition to our other measures, we consult with our congressional 
clients and other outside experts in setting our multiyear qualitative 
performance goals. Thus, assessing the extent to which we achieve our 
performance goals helps focus our efforts on issues of critical 
importance and provides a tool for holding ourselves accountable for 
the resources the Congress provides. These goals measure the extent to 
which we did the work we had planned to do to support the Congress over 
a period of time. In this case, they cover fiscal years 2004 and 2005. 
For each performance goal, we identify the key efforts needed to 
achieve it. To determine whether a performance goal has been met, we 
assess the work completed under the goal's key efforts. In making this 
assessment, the responsible senior executives for strategic goals 1 
through 3--our external goals--consider, for example, the number of 
products issued (such as reports and testimonies) and the 
recommendations made for each key effort as well as any other 
assistance provided to the Congress related to these efforts. Senior 
executives then judge whether the work completed collectively for all 
key efforts actually achieved the performance goal. For strategic goal 
4--our internal goal--senior executives also judge whether the 
performance goals have been met based on the work done on the goals' 
key efforts. 

Multiyear qualitative performance goals: Data sources: 
The data supporting senior executives' assessments come from our 
Engagement Reporting System for strategic goals 1 through 3 and from 
reports produced by the managers responsible for each key effort for 
strategic goal 4. Teams and units maintain the supporting data used. 

Multiyear qualitative performance goals: Verification and validation: 
The assessment of each performance goal under strategic goals 1 through 
3 is supported by documentation showing, for example, by key effort the 
number of reports issued and recommendations made during the assessment 
period. The assessment of the performance goals under strategic goal 4 
is also supported by documentation showing the work completed under 
each key effort. Managing directors in all four goals sign this 
documentation. At the end of a multiyear assessment cycle, QCI reviews 
the assessments from each of the goals and checks supporting 
documentation for a sample of performance goals to ensure that criteria 
are consistently applied and that requirements are met. On a periodic 
basis, our IG independently tests our process for determining whether 
performance goals are met. The IG is currently completing its test of 
our multiyear performance goal process for fiscal year 2005. 

Multiyear qualitative performance goals: Data limitations: 
The assessment data represent opinions in the form of qualitative, 
professional judgments that senior managers make about their own work 
performed under each performance goal. However, we feel that the 
verification and validation steps that we take minimize any adverse 
impact from this limitation. 

People measures: 

New hire rate: 

Definition and background: 
This performance measure is the ratio of the number of people hired to 
the number we planned to hire. Annually, we develop a workforce plan 
that takes into account projected workload changes, as well as other 
changes, such as retirements, other attrition, promotions, and skill 
gaps. The workforce plan for the upcoming year specifies the number of 
planned hires and, for each new hire, specifies the skill type and the 
level. The plan is conveyed to each of our units to guide hiring 
throughout the year. Progress toward achieving the workforce plan is 
monitored monthly by the Chief Operating Officer and Chief 
Administrative Officer. Adjustments to the workforce plan are made 
throughout the year, if necessary, to reflect changing needs and 
conditions. 

New hire rate: Data sources: 
The Executive Committee approves the workforce plan. The workforce plan 
is coordinated and maintained by CAO. Data on accessions--that is, new 
hires coming on board--is taken from a database that contains employee 
data from USDA's National Finance Center (NFC) database, which handles 
payroll and personnel data for GAO and other agencies. 

New hire rate: Verification and validation: 
CAO maintains a database that monitors and tracks all our hiring 
offers, declinations, and accessions. In coordination with our Human 
Capital Office, our CAO staff input workforce information supporting 
this measure into the CAO database. While the database is updated on a 
daily basis, monthly reports are provided to the Chief Operating 
Officer and the Chief Administrative Officer to monitor progress by GAO 
units in achieving workforce plan hiring targets. CAO continuously 
monitors and reviews accessions maintained in the NFC data against its 
database to ensure consistency and to resolve discrepancies. The office 
follows up on any discrepancies. In addition, on a periodic basis, the 
IG examines our process for calculating the new hire rate. During 
fiscal year 2004, the IG independently reviewed this process and found 
it to be reasonable. The IG also suggested actions to improve the 
documentation of the process used to calculate this measure. We have 
implemented the IG's suggestions. 

New hire rate: Data limitations: 
There is a lag of one to two pay periods (up to 4 weeks) before the NFC 
database reflects actual data. We generally allow sufficient time 
before requesting data for this measure to ensure that we get accurate 
results. 

People measures: 

Acceptance rate: 

Definition and background: 
This measure is the ratio of the number of applicants accepting offers 
to the number of offers made. Acceptance rate is a proxy for GAO's 
attractiveness as an employer and an indicator of our competitiveness 
in bringing in new talent. 

Acceptance rate: Data sources: 
The information required is the number of job offers made (excluding 
interns, experts/consultants, and reemployed annuitants), the number of 
offers declined, and the number of individuals who come on board. Our 
CAO staff maintain a database that contains the job offers made and 
accepted or declined. Data on accessions--that is, new hires coming on 
board--are taken from a database that contains employee data from 
USDA's NFC database, which handles payroll and personnel data for GAO 
and other agencies. 

Acceptance rate: Verification and validation: 
Human capital managers in the Human Capital Office work with the CAO to 
ensure that each job offer made and its outcome (declination or 
acceptance) is noted in the database that is maintained by CAO's staff; 
periodic checking is performed to review the accuracy of the database. 
In addition, on a periodic basis, the IG examines our process for 
calculating the acceptance rate. During fiscal year 2004, the IG 
independently reviewed this process and found it to be reasonable. The 
IG also suggested actions to improve the documentation of the process 
used to calculate this measure and the reporting of this measure. We 
have implemented the IG's suggestions. 

Acceptance rate: Data limitations: 
See New hire rate, Data limitations. 

People measures: 

Retention rate: 

Definition and background: 
We continuously strive to make GAO a place where people want to work. 
Once we have made an investment in hiring and training people, we would 
like to retain them. This measure is one indicator that we are 
attaining that objective and is the inverse of attrition. We calculate 
this measure by taking 100 percent of the onboard strength minus the 
attrition rate, where attrition rate is defined as the number of 
separations divided by the average on-board strength. We calculate this 
measure with and without retirements. 

Retention rate: Data sources: 
Data on retention--that is, people who are on board at the beginning of 
the fiscal year and are still here at the end of the fiscal year as 
well as the average number of people on board during the year--are 
taken from a CAO database that contains some data from the NFC 
database, which handles payroll and personnel data for GAO and other 
agencies. 

Retention rate: Verification and validation: 
CAO staff continuously monitor and review accessions and attritions 
against the contents of their database that has NFC data and they 
follow up on any discrepancies. In addition, on a periodic basis, the 
IG examines our process for calculating the retention rate. During 
fiscal year 2004, the IG reviewed this process and found it to be 
reasonable. The IG also suggested actions to improve the documentation 
of the process used to calculate this measure. We have implemented the 
IG's suggestions. 

Retention rate: Data limitations: 
See New hire rate, Data limitations. 

People measures: 

Staff development: 

Definition and background: 
One way that we measure how well we are doing and identify areas for 
improvement is through our annual employee feedback survey. This Web- 
based survey, which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our managers--
from the immediate supervisor to the Executive Committee--on key 
aspects of their leadership styles. The survey consists of over 100 
questions. This measure is based on staff's favorable responses to four 
of the six questions related to staff development on our annual 
employee survey. This subset of questions was selected on the basis of 
senior management's judgment about the questions' relevance to the 
measure and specialists' knowledge about the development of indexes. 
Staff were asked to respond to these four questions on a five-point 
scale or choose "no basis to judge/not applicable" or "no answer". 

Staff development: Data sources: 
These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff how 
much positive or negative impact (1) internal training, (2) computer-
based training, (3) external training and conferences, and (4) on-the 
job-training have on their ability to do your job during the last 12 
months. From the staff who expressed an opinion, we calculated the 
percentage of staff selecting the two categories that indicate 
satisfaction with or a favorable response to the question. For this 
measure, the favorable responses were either "very positive impact" or 
"generally positive impact." 

Staff development: Verification and validation: 
The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
We have historically achieved a high response rate (over 80 percent) to 
the survey, which indicates that its results are largely representative 
of the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey. In addition, on a periodic basis, the IG independently 
examines our process for calculating the percentage of favorable 
responses for staff development. The IG examined this process during 
fiscal year 2004 and found it to be reasonable. The IG also suggested 
actions to improve the documentation of the process used to calculate 
this measure. We have implemented the IG's suggestions. 

Staff development: Data limitations: 
The information contained in the survey is the self-reported opinions 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion. The 
practical difficulties of conducting any survey may introduce errors, 
commonly referred to as nonsampling errors. These errors could result 
from, for example, respondents misinterpreting a question or data entry 
staff incorrectly entering data into a database used to analyze the 
survey responses. Such errors can introduce unwanted variability into 
the survey results. We took steps in the development of the survey to 
minimize nonsampling errors. Specifically, when we developed the survey 
instrument we held extensive focus groups and pretests to refine the 
questions and define terms used to decrease the chances that 
respondents would misunderstand the questions. We also limited the 
chances of introducing nonsampling errors by creating a Web-based 
survey for which respondents entered their answers directly into an 
electronic questionnaire. This approach eliminated the need to have the 
data keyed into a database by someone other than the respondent, thus 
removing an additional source of error. 

People measures: 

Staff utilization: 

Definition and background: 
This measure is based on staff's favorable responses to three of the 
six questions related to staff utilization on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Staff were 
asked to respond to these three questions on a five-point scale or 
choose no basis to judge/not applicable" or "no answer." (For 
background information about our entire employee feedback survey, see 
Staff development.) 

Staff utilization: Data sources: 
These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff how 
often the following occurred in the last 12 months: (1) my job made 
good use of my skills; (2) GAO provided me with opportunities to do 
challenging work; and (3) in general, I was utilized effectively. From 
the staff who expressed an opinion, we calculated the percentage of 
staff selecting the two categories that indicate satisfaction with or a 
favorable response to the question. For this measure, the favorable 
responses were either "very positive impact or "generally positive 
impact." 

Staff utilization: Verification and validation: 
See Staff development, Verification and validation. 

Staff utilization: Data limitations: 
See Staff development, Data limitations. 

People measures: 

Leadership: 

Definition and background: 
This measure is based on staff's favorable responses to 10 of 20 
questions related to six areas of leadership on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Specifically, 
our calculation included responses to 1 of 4 questions related to 
empowerment, 2 of 4 questions related to trust, all 3 questions related 
to recognition, 1 of 3 questions related to decisiveness, 2 of 3 
questions related to leading by example, and 1 of 3 questions related 
to work life. Staff were asked to respond to these 10 questions on a 
five-point scale or choose "no basis to judge/not applicable" or "no 
answer." (For background information about our entire employee feedback 
survey, see Staff development, Definition and background.) 

Leadership: Data sources: 
These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff about 
empowerment, trust, recognition, decisiveness, leading by example, and 
work life as they pertain to the respondent's immediate supervisor. For 
example, we looked at the responses related to specific qualities of 
our managers, such as "My immediate supervisor gave me the opportunity 
to do what I do best" and "My immediate supervisor provided meaningful 
incentives for high performance." From the staff who expressed an 
opinion, we calculated the percentage of staff selecting the two 
categories that indicate satisfaction with or a favorable response to 
the question. For this measure, the favorable responses were either 
"always or almost always" or "most of the time." 

Leadership: Verification and validation: 
See Staff development, Verification and validation. 

Leadership: Data limitations: 
See Staff development, Data limitations. 

People measures: 

Organizational climate: 

Definition and background: 
This measure is based on staff's favorable responses to 5 of the 13 
questions related to organizational climate on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Staff were 
asked to respond to these 5 questions on a five-point scale or choose 
"no basis to judge" or "no answer." (For background information about 
our entire employee feedback survey, see Staff development.) 

Organizational climate: Data sources: 
These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff to 
think back over the last 12 months and indicate how strongly they agree 
or disagree with each of the following statements: (1) a spirit of 
cooperation and teamwork exists in my work unit; (2) I am treated 
fairly and with respect in my work unit; (3) my morale is good; 
(4) sufficient effort is made in my work unit to get the opinions and 
thinking of people who work here; and (5) overall, I am satisfied with 
my job at GAO. From the staff who expressed an opinion, we calculated 
the percentage of staff selecting the two categories that indicate 
satisfaction with or a favorable response to the question. For this 
measure, the favorable responses were either "strongly agree" or 
"generally agree." 

Organizational climate: Verification and validation: 
See Staff development, Verification and validation. 

Organizational climate: Data limitations: 
See Staff development, Data limitations. 

Internal operations measures: 

Help get job done and Quality of work life: 

Definition and background: 
To measure satisfaction with GAO internal operations and solicit ideas 
on ways to improve them, we administer an annual web-based survey, 
known as our customer satisfaction survey, that asks employees to rate 
31 administrative services, on a scale of 1 (low) to 5 (high), for 
those services that are important to them and that they have had 
experience with or used recently. For each selected service, employees 
are asked to indicate their level of satisfaction from 1 to 5, and 
provide a written reason for their rating and recommendations for 
improvement if desired. Based on the survey results, we calculate 
composite scores for two measures: one measure reflects the 
satisfaction with the 21 services that help employees get their job 
done and the second measure reflects satisfaction with another 10 
services that affect quality of work life. Since 2003, we have 
collected baseline data from our internal customer satisfaction survey, 
but we will set targets and hold managers accountable for these two 
performance measures for the first time in 2006. 

Help get job done and Quality of work life: Data sources: 
To determine how satisfied GAO employees are with internal operations, 
we calculate composite scores for two measures. One measure reflects 
the satisfaction with the 21 services that help employees get their job 
done. These services include Internet and intranet services, IT 
customer support, mail services, and voice communication services. The 
second measure reflects satisfaction with another 10 services that 
affect quality of work life. These services include assistance related 
to pay and benefits, building maintenance and security, and workplace 
safety and health. The composite score represents how employees rated 
their satisfaction with services in each of these areas relative to how 
they rated the importance of those services to them. The importance 
scores and satisfaction levels are both rated on a scale of 1 (low) to 
5 (high). 

Help get job done and Quality of work life: Verification and validation: 
To ensure the security of the survey data, the survey is housed on a 
Web site maintained by an outside contractor and only the contractor 
has access to the password-protected results. We analyze the results by 
demographic representation (unit, tenure, location, band level, and job 
type) to ensure that its results are largely representative of the GAO 
population. In addition, each GAO unit responsible for internal 
operations conducts follow-on work, including analyzing the written 
comments to gain a better understanding of the information from the 
survey. 

Help get job done and Quality of work life: Data limitations: 
The information contained in the survey is self-contained. Therefore, 
there is no information to validate the views expressed by staff. We do 
not plan any actions to remedy this limitation because we feel it would 
violate the pledge of confidentiality that we make to our staff 
regarding the survey responses. 

Source: GAO. 

[End of table] 

Program Evaluation: 

To assess our progress toward our first three strategic goals and their 
objectives and to update them for our strategic plan, we evaluate 
actions taken by federal agencies and the Congress in response to our 
recommendations. The results of these evaluations are conveyed in this 
performance and accountability report as financial benefits and other 
benefits that reflect the value of our work. 

In addition, we actively monitor the status of our open 
recommendations--those that remain valid but have not yet been 
implemented--and report our findings annually to the Congress and the 
public ([Hyperlink, http://www.gao.gov/openrecs.html]). We use the 
results of that analysis to determine the need for further work in 
particular areas. For example, if an agency has not implemented a 
recommended action that we consider to be worthwhile, we may decide to 
pursue further action with agency officials or congressional 
committees, or we may decide to undertake additional work on the 
matter. 

We also use our biennial high-risk series to provide a status report on 
those major government operations considered high risk because of their 
vulnerabilities to waste, fraud, abuse, and mismanagement or the need 
for broad-based transformation. The series is a valuable evaluation and 
planning tool because it helps us to identify those areas where our 
continued efforts are needed to maintain the focus on important policy 
and management issues that the nation faces. 

To help ensure the quality of our work supporting strategic goals 1, 2, 
and 3, an external peer review was completed of the processes and 
practices we use to perform many of our engagements, specifically, 
performance audits. The review--conducted by an international team of 
auditors that was led by the Office of the Auditor General of Canada-- 
assessed whether our quality assurance policies and procedures were 
suitably designed and operating effectively. The peer review team 
examined the design of our engagement quality control system and the 
audit documentation for a sample of our products. The reviewers found 
that we have designed and implemented an effective system of quality 
controls for our performance audits to ensure reasonable compliance 
with generally accepted government auditing standards. The review team 
issued its final report in April 2005. In addition, a team of external 
auditors reviewed our process and procedures for performing our 
financial audits of other agencies. In the comment letter accompanying 
the clean opinion report that resulted from the financial audit peer 
review, the auditor included a suggestion for clarifying our quality 
control policies and procedures. We have begun to implement this 
suggestion. 

In addition, a team of independent auditors completed a review of our 
financial management and assurance procedures, which we contract for 
every 3 years. The auditors concluded that our system of quality 
control for the accounting and auditing practice was designed to meet 
applicable quality control standards and that we complied with this 
system for the period reviewed. Thus, the auditors were reasonably 
assured that our financial audits conformed with professional standards 
and gave us a clean opinion. 

To help ensure the quality of our internal processes and systems 
supporting strategic goal 4, we conducted an evaluation that supported 
our strategic objectives under goal 4, in response to a mandate in the 
House report on the fiscal year 2005 legislative branch appropriation 
(H.R. Rep. No. 108-577). This mandate asked that we identify 
opportunities to reduce costs, outsource, and streamline our internal 
operations. As a result of our review this year, we streamlined the 
travel document audit process of our travel function and have selected 
a service provider to provide accounts payable transaction processing 
services. Both of these actions will result in measurable cost savings 
in the future. 

In addition, an organizational and performance consulting firm examined 
our three-tier pay band system for our analysts and other professional 
staff and compared the compensation we provide these two groups with 
the compensation received by employees performing comparable work in 
the U.S. marketplace. Based on the results of this study, we reassessed 
the roles and responsibilities of our midlevel (Band II) analysts and 
adjusted compensation levels for other professional staff. As a result 
of this study, we are restructuring our analyst and analyst-related 
specialist pay bands to better align compensation and responsibilities 
and adjust compensation levels for other professional staff. 

We also completed a number of other studies and evaluations related to 
goal 4's strategic objectives. These studies resulted in internal 
products or briefings in fiscal year 2005 that are not available 
publicly. 

* Financial management. We conducted internal reviews of our compliance 
with requirements set forth in 31 U.S.C. 3512 (commonly referred to as 
the Federal Managers' Financial Integrity Act) and OMB Circular A-127, 
Financial Management Systems. The A-127 review covered consistency with 
the Standard General Ledger, adequacy of integration, reporting 
requirements, general ledger maintenance, and travel manager. The 
Financial Integrity Act review covered payroll testing; Financial 
Management System functions, including reporting; capitalized assets; 
budget administration controls; GAO mission and assignment tracking 
system; and internal controls for purchases, payments, and employee 
reimbursements. These reviews uncovered no problems and showed that we 
have the proper controls in place and that they are being followed. 

* Observations on the performance assessment cycle. The Executive 
Committee reviewed our 2004 annual performance management assessment 
data and requested that OOI make recommendations for improvements in 
the areas of staff feedback, communication, and training. OOI provided 
draft recommendations to the managing directors, the Employee Advisory 
Council, Blacks in Government, the Hispanic Liaison Group, the Gay and 
Lesbian Employee Association, the Asian-American Liaison Group, and an 
agency representative for veterans, and forwarded their comments to the 
Executive Committee. 

* Training for field office staff. We studied how best to deliver core 
training courses to our Band I staff in our field offices and 
determined that the most cost-effective way was to use a "hub" 
approach. Specifically, we identified San Francisco, Denver, and 
Atlanta as our three learning hubs where staff from these and nearby 
offices will complete groups of courses in five sets of 1-week 
sessions. The study concluded that among other things, this approach 
would be significantly less costly than bringing all Band I staff to 
GAO headquarters and result in a cost avoidance of $500,000 in travel 
and per diem expenditures. 

* Electronic records management. In fiscal year 2005 we began pilot 
testing an electronic records management system that will store all of 
our workpapers, reports, and testimonies and make them available to all 
of our staff. We plan to conclude this pilot in fiscal year 2006. 

* Customer satisfaction with internal operations and services. We 
conducted our second customer satisfaction survey to measure customer 
satisfaction with internal operational services, determine the impact 
of our improvement efforts launched as a result of our first survey, 
refine our targets, and make necessary adjustments to improve services 
and reduce the gaps between what our customers expect and the services 
available to them. We also used the information from this survey to 
refine our internal operations measures. 

* IT Security Program assessment. We contracted for an audit of our 
security practices and controls based upon the Federal Information 
Security Management Act and National Institute of Standards and 
Technology guidance. This assessment was designed to analyze the 
effectiveness of our IT Security Program and assist management in 
determining how to best utilize resources to protect our information 
and information systems. It is a critical on-site examination and 
analysis of the program to ascertain the present program status, to 
identify deficiencies or excesses, to determine the protection needed, 
and to make recommendations for improvement. 

[End of Data Quality and Program Evaluation] 

[End of Part II: Performance Information] 

Part III: Financial Information: 

"Money is of no value; it cannot spend itself. All depends on the skill 
of the spender." 

- Ralph Waldo Emerson. 

From the Chief Financial Officer: 

November 15, 2005: 

I am pleased to report that in fiscal year 2005 the U.S. Government 
Accountability Office continued to set the standard for excellence in 
government financial management. For the 19th consecutive year, 
independent auditors gave our financial statements an unqualified 
opinion with no material weaknesses and no major compliance problems. 
The financial statements that follow were prepared, audited, and made 
publicly available as an integral part of this performance and 
accountability report 45 days after the end of the fiscal year. In 
addition, for the fourth year in a row, the Association of Government 
Accountants awarded us a certificate of excellence in accountability 
reporting for our fiscal year 2004 annual performance and 
accountability report. 

During fiscal year 2005 we continued to make strides toward our 
strategic goal of becoming a model federal agency and a world-class 
professional services organization. We are leading the way in 
performance management through new and enhanced policies and processes. 
With the help of a consultant, we analyzed and designed a competitive, 
fair, and equitable compensation program aligned with the labor markets 
in which GAO competes for talent. Further, we invested significantly in 
restructuring our analysts' and specialists' pay bands to better align 
compensation with responsibilities. In June, our administrative staff 
completed their first cycle under a similar competency-based system 
designed to establish a clear link between employee performance and 
GAO's mission, core values, and strategic goals and objectives. This 
system will enable fair, honest, and properly applied measures of 
performance based on standards that are reasonable, appropriate, and 
clear to employees. Having a consistent competency-based performance 
management system throughout the agency will help to ensure that the 
work of all our staff is aligned with our core values and strategic 
direction. 

This year, we performed an extensive review of agency operations for 
potential cost savings, outsourcing, streamlining, and other 
opportunities to increase operational efficiency and effectiveness, as 
the result of a mandate in House Report 108-577. We had previously 
decided to cease operations of our internal print plant as a result of 
a reduced demand for printed products. The closing of the print plant 
was completed in October 2004, and all our printing needs are now met 
through contracts. Another area affected by our streamlining efforts 
this fiscal year was our accounting branch within the Office of 
Financial Management. Aiming to focus our financial management staff on 
greater value-added input to GAO activities, we have begun to shift the 
efforts of our staff away from routine transaction processing and 
toward a greater role in strategic business decision analysis and 
support. This shift will occur through a combination of automation, 
reallocation of resources within GAO, and outsourcing some data entry 
functions. Last year's implementation of the Travel Manager system has 
enabled us to streamline the auditing of our travel vouchers and 
transfer the remaining efforts from financial management to field 
office staff, more efficiently using administrative resources available 
throughout the agency. We cross-serviced the accounts payable function 
to the Department of the Interior's National Business Center. This 
center performs invoice receipt, processing, and payment activities for 
a number of other agencies; by utilizing the center's services, we will 
realize savings through eliminating data entry positions and focusing 
the efforts of the remaining staff on higher end financial analysis and 
decision support. 

To improve our operations through the use of new technology, we have 
embarked on an extensive effort to replace our current financial 
management system. Although our current system has served us well over 
the years, upgrades are no longer offered and technical support has 
become increasingly difficult to find. We have adopted, and are 
following, best practice processes to select and implement our next 
generation financial management system. This is part of a larger 
enterprise architecture effort that will improve integration of all our 
systems that interact with our financial data. We also improved our 
internal communications by implementing a new system for electronic 
dissemination and storage of agencywide communications, a new 
administrative services Web site, and a searchable administrative 
services directory. 

Looking forward to fiscal year 2006, we realize that there are many 
challenges ahead. In addition to our work on the new financial system, 
we continue to voluntarily implement the additional requirements of 
OMB's revised Circular A-123, which requires management to specifically 
document, assess, and attest to the effectiveness of internal controls 
over financial reporting beginning in fiscal year 2006. In addition to 
these efforts, we will continue to investigate and implement new 
approaches to improve the efficiency and effectiveness of our 
preparation of quality products for our clients in the Congress and the 
American people. 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer: 

[End of From the Chief Financial Officer] 

Overview of Financial Statements: 

Our financial statements and accompanying notes begin below.[Footnote 
11] Our financial statements for the fiscal years ended September 30, 
2005 and 2004, were audited by an independent auditor, Cotton & Co., 
LLP. 

Cotton & Co., LLP, rendered an unqualified opinion on our financial 
statements and an unqualified opinion on the effectiveness of our 
internal controls over financial reporting and compliance with laws and 
regulations. The auditor also reported that we have substantially 
complied with the applicable requirements of the Federal Financial 
Management Improvement Act (Improvement Act) of 1996 and found no 
reportable instances of noncompliance with selected provisions of laws 
and regulations. (For further information about this law, see footnote 
1.) In the opinion of the independent auditor, the financial statements 
are presented fairly in all material respects and are in conformity 
with generally accepted accounting principles. 

Financial Systems and Internal Controls: 

We recognize the importance of strong financial systems and internal 
controls to ensure our accountability, integrity, and reliability. To 
achieve a high level of quality, management maintains a quality control 
program and seeks advice and evaluation from both internal and external 
sources. 

We are committed to fulfilling the internal control objectives of 31 
U.S.C. 3512, commonly referred to as the Federal Managers' Financial 
Integrity Act (Integrity Act). (For further information about this law, 
see footnote 1.) Although we are not subject to the act, we 
comply voluntarily with its requirements. Our internal controls are 
designed to provide reasonable assurance that obligations and costs are 
in compliance with applicable laws and regulations; 
Funds, property, 
and other assets are safeguarded against loss from unauthorized 
acquisition, use, or disposition; and revenues and expenditures 
applicable to our operations are properly recorded and accounted for to 
enable our agency to prepare reliable financial reports and maintain 
accountability over our assets. 

Our management assesses compliance with these controls through a series 
of comprehensive internal reviews, applying the evaluation criteria in 
OMB's guidance for implementing the Integrity Act. The results of these 
reviews are discussed with our Audit Advisory Committee, and action is 
taken to correct deficiencies as they are identified. 

We assessed our internal controls as of September 30, 2005, based on 
the criteria mentioned above for effective internal controls in the 
federal government. On the basis of this assessment, we believe that as 
of September 30, 2005, we have effective internal controls in place. 
Additionally, our independent auditor found that we maintained 
effective internal controls over financial reporting and compliance 
with laws and regulations. Consistent with our evaluation, the auditor 
found no material internal control weaknesses. 

In addition, we are committed to fulfilling the objectives of the 
Improvement Act, which is also covered within 31 U.S.C. 3512. Although 
we are not subject to the act, we voluntarily comply with its 
requirements. We believe that we have implemented and maintained 
financial systems that comply substantially with federal financial 
management systems requirements, applicable federal accounting 
standards, and the United States Government Standard General Ledger at 
the transaction level as of September 30, 2005. We made this assessment 
based on criteria established under the Improvement Act and guidance 
issued by OMB. Also, our auditor reported that we had substantially 
complied with the applicable requirements of the Improvement Act as of 
September 30, 2005. 

GAO's IG also conducts audits and investigations that are internally 
focused, functions as an independent fact-gathering adviser to the 
Comptroller General, and reviews all accomplishment reports totaling 
$500 million or more. During fiscal year 2005, the IG examined 
compliance with our policy and procedures for conflict-of-interest 
determinations, recruiting and hiring, performance evaluations, career 
advancement, professional development, continuing professional 
education, GAO's information security program and practices, 
performance-based compensation process for analysts and attorneys, and 
benefits for transit and parking. In addition, the IG independently 
tests our compliance with procedures related to our performance data on 
a rotating basis over a 3-year period; these actions are specifically 
identified in the table that begins on page 83. No material weaknesses 
were reported by the IG. During fiscal year 2005, we completed actions 
related to 12 IG recommendations, none of which affected the financial 
statements. There are no unresolved issues. 

Our Audit Advisory Committee assists the Comptroller General in 
overseeing the effectiveness of our financial reporting and audit 
processes, internal controls over financial operations, and processes 
to ensure compliance with laws and regulations relevant to our 
financial operations. 

As of September 30, 2005, the committee consisted of Sheldon S. Cohen 
(Chairman), Edward J. Mazur, and Charles O. Rossotti, whose relevant 
experience was described on in Part I of this report, in the section on 
Managing Our Resources. The committee's report and the report from our 
independent auditors are included below. 

[End of Overview of Financial Statements] 

Audit Advisory Committee's Report: 

The Audit Advisory Committee (the Committee) assists the Comptroller 
General in overseeing the U.S. Government Accountability Office's (GAO) 
financial operations. As part of that responsibility, the Committee 
meets with agency management and its internal and external auditors to 
review and discuss GAO's external financial audit coverage, the 
effectiveness of GAO's internal controls over its financial operations, 
and its compliance with certain laws and regulations that could 
materially impact GAO's financial statements. GAO's external auditors 
are responsible for expressing an opinion on the conformity of GAO's 
audited financial statements with the U.S. generally accepted 
accounting principles. The Committee reviews the findings of the 
internal and external auditors, and GAO's responses to those findings, 
to ensure that GAO's plan for corrective action includes appropriate 
and timely follow-up measures. In addition, the Committee reviews the 
draft Performance and Accountability Report, including its financial 
statements, and provides comments to management who has primary 
responsibility for the Performance and Accountability report. The 
Committee met two times with respect to its responsibilities as 
described above. During these sessions, the Committee met with the 
internal and external auditors without GAO management being present and 
discussed with the external auditors the matters that are required to 
be discussed by generally accepted auditing standards. Based on 
procedures performed as outlined above, we recommend that GAO's audited 
statements and footnotes be included in the 2005 Performance and 
Accountability Report. 

Signed by: 

Sheldon S. Cohen: 
Chairman: 
Audit Advisory Committee: 

[End of Audit Advisory Committee's Report] 

Independent Auditor's Report: 

Cotton & Company: 

Cotton & Company, LLP: 
635 Slaters Lane: 
4th Floor: 
Alexandria, VA 22314: 

P: 703.836.6701: 
F: 703.836.0941: 

www.cottoncpa.com: 

INDEPENDENT AUDITOR'S REPORT: 

Comptroller General of the United States: 

Cotton & Company LLP audited the Government Accountability Office's 
(GAO) Balance Sheets as of September 30, 2005 and 2004, and the related 
Statements of Net Cost, Changes in Net Position, Budgetary Resources, 
and Financing for the years then ended. We found: 

* The financial statements referred to above are fairly presented, in 
all material respects, in conformity with U.S. generally accepted 
accounting principles, 

* GAO maintained effective internal control over financial reporting 
(including safeguarding of assets) and compliance with laws and 
regulations, 

* GAO's financial management systems substantially complied with the 
applicable requirements of the Federal Financial Management Improvement 
Act of 1996 (FFMIA), and: 

* No reportable noncompliance with laws and regulations we tested. 

The following four sections discuss the above conclusions in more 
detail. Our conclusions on Management's Discussion and Analysis (MD&A) 
and other accompanying information appear below, under the caption 
Consistency of Other Information. 

Opinion on Financial Statements: 

In our opinion, the accompanying financial statements present fairly, 
in all material respects, the financial position of GAO as of September 
30, 2005 and 2004, and its net costs, changes in net position, 
budgetary resources, and financing for the years then ended in 
conformity with U.S. generally accepted accounting principles. 

Opinion on Internal Control: 

In our opinion, GAO maintained, in all material respects, effective 
internal control over financial reporting (including safeguarding of 
assets) and compliance with laws and regulations as of September 30, 
2005, based on criteria established under the Federal Managers' 
Financial Integrity Act (FMFIA). 

Opinion on FFMIA Compliance: 

In our opinion, GAO's financial management systems substantially 
complied with the three FFMIA requirements: (1) Federal financial 
management system requirements, (2) Federal accounting standards, and 
(3) the U.S. Government Standard General Ledger (SGL) at the 
transaction level, as of September 30, 2005. 

Compliance with Laws and Regulations: 

The objective of our audits was not to provide an opinion on overall 
compliance with laws and regulations. Accordingly, we do not express 
such an opinion. However, our tests for compliance with certain 
provisions of laws and regulations disclosed no instances of 
noncompliance that would be reportable under Government Auditing 
Standards or Office of Management and Budget (OMB) Bulletin No. 01-02, 
Audit Requirements for Federal Financial Statements. 

This conclusion is intended solely for the information and use of the 
management of GAO, OMB, and Congress and is not intended to be, and 
should not be, used by anyone other than these specified parties. 
However, this report is a matter of public record and its distribution 
is not limited. 

Consistency of Other Information: 

We conducted our audits for the purpose of forming an opinion on the 
fiscal year 2005 and 2004 financial statements taken as a whole. 
Certain portions of the Performance and Accountability Report are not a 
required part of the basic financial statements, but are required by 
OMB Circular No. 136, Financial Reporting Requirements, and the Federal 
Accounting Standards Advisory Board's Statement of Federal Financial 
Accounting Standards No. 15, Management's Discussion and Analysis. 

There are two types of material within GAO's Performance and 
Accountability Report that are not a part of GAO's basic financial 
statements: MD&A and other accompanying information. MD&A describes GAO 
and its missions, activities, program and financial results, and 
financial condition. MD&A is required supplementary information. With 
respect to GAO's MD&A, we made certain inquiries of management and 
compared the information for consistency with GAO's audited financial 
statements and against other knowledge we obtained during our audits. 
Other accompanying information consists of the full Performance and 
Accountability Report except for the MD&A, the basic financial 
statements and notes to the financial statements, and this auditor's 
report. With respect to other accompanying information, we compared the 
information for consistency with the audited financial statements. 
Based on these limited procedures, we found no material inconsistencies 
between either the MD&A or the other accompanying information and the 
financial statements or notes. However, we did not audit the MD&A or 
the other accompanying information, and express no opinion on them. 

Management's Responsibility: 

Management is responsible for: 

* Preparing the financial statements in conformity with U.S. generally 
accepted accounting principles, 

* Establishing, maintaining, and assessing internal control to provide 
reasonable assurance that the broad control objectives of FMFIA are 
met, 

* Implementing, maintaining, and assessing financial management systems 
to provide reasonable assurance of substantial compliance with the 
requirements of FFMIA, and: 

* Complying with applicable laws and regulations. 

Auditor's Responsibility and Methodology: 

Cotton & Company LLP performed its audits and examinations in 
accordance with Government Auditing Standards, U.S. generally accepted 
auditing standards, the American Institute of Certified Public 
Accountants' (AICPA) attestation standards, and OMB Bulletin No. 01-02. 
We believe our audits and examinations provide a reasonable basis for 
our opinions. 

We are responsible for planning and performing our audits to obtain 
reasonable assurance about whether the financial statements are free of 
material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements. An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as 
evaluating overall financial statement presentation. 

We have examined management's assertion that GAO maintained effective 
control over financial reporting (including safeguarding of assets) and 
compliance with applicable laws and regulations as of September 30, 
2005, based on internal GAO evaluations using criteria established in 
FMFIA. Our responsibility is to express an opinion on the effectiveness 
of internal control based on our examination. We conducted our 
examination in accordance with attestation standards established by the 
AICPA and Government Auditing Standards and, accordingly, obtained an 
understanding of internal control over financial reporting (including 
safeguarding of assets) and compliance with laws and regulations; 
tested and evaluated the design and operating effectiveness of internal 
control; and performed other procedures considered necessary in the 
circumstances. We believe that our examination provides a reasonable 
basis for our opinion. 

With respect to internal control related to significant performance 
measures included in the MD&A, we obtained an understanding of the 
design of internal control relating to the existence and completeness 
assertions and determined whether they had been placed in operation, as 
required by OMB Bulletin No. 01-02. Our procedures were not designed to 
provide assurance on internal control over reported performance 
measures and, accordingly, we do not express an opinion on such 
control. 

Because of inherent limitations in internal control, misstatements, 
losses, or noncompliance may nevertheless occur and not be detected. 
Also, projections of any evaluation of internal control to future 
periods are subject to the risk that internal control may become 
inadequate as the result of changes in conditions, or that the degree 
of compliance with the policies or procedures may deteriorate. 

We have examined management's assertion that, as of September 30, 2005, 
GAO's financial management systems substantially complied with the 
three FFMIA requirements: (1) Federal financial management system 
requirements, (2) Federal accounting standards, and (3) the SGL at the 
transaction level. Management's assertion was based on internal GAO 
evaluations using compliance indicators set forth in OMB guidance, 
dated January 4, 2001, Revised Implementation Guidance for FFMIA, and 
criteria in OMB Circulars A-127, Financial Management Systems, and A- 
130, Management of Federal Information Resources. Our responsibility is 
to express an opinion on whether GAO's financial management systems 
substantially complied with the above-mentioned requirements, based on 
our examination. We conducted our examination in accordance with 
attestation standards established by the AICPA and Government Auditing 
Standards and, accordingly, we examined, on a test basis, evidence 
about GAO's substantial compliance with those requirements, and 
performed such other procedures as we considered necessary in the 
circumstances. We believe our examination provides a reasonable basis 
for our opinion. Our examination does not provide a legal determination 
of GAO's financial management systems' compliance with specified 
requirements. 

We are responsible for testing compliance with selected provisions of 
laws and regulations that have a direct and material effect on the 
financial statements. We did not test compliance with all laws and 
regulations applicable to GAO. We limited our tests of compliance to 
those laws and regulations required by OMB audit guidance that we 
deemed applicable to the financial statements for the fiscal year ended 
September 30, 2005. We caution that noncompliance may occur and may not 
be detected by these tests, and that such testing may not be sufficient 
for other purposes. 

We noted other nonreportable matters involving internal control and its 
operation that we will communicate in a separate management letter. 

COTTON & COMPANY LLP: 

Signed by: 

Charles Hayward, CPA: 

Alexandria, Virginia: 
November 1, 2005: 

[End of Independent Auditor's Report] 

Purpose of Each Financial Statement: 

* A balance sheet presents the combined amounts we had available to use 
(assets) versus the amounts we owed (liabilities) and the residual 
amounts after liabilities were subtracted from assets (net position). 

* A statement of net cost presents the annual cost of our operations. 
The gross cost less any offsetting revenue earned from our activities 
is used to arrive at the net cost of work performed under our four 
strategic goals. 

* A statement of changes to net position presents the accounting items 
that caused the net position section of the balance sheet to change 
from the beginning to the end of the fiscal year. 

* A statement of budgetary resources presents how budgetary resources 
were made available to us during the fiscal year and the status of 
those resources at the end of the fiscal year. 

* A statement of financing reconciles the resources available to us 
with the net cost of operating the agency. 

[End of Purpose of Each Financial Statement] 

Financial Statements: 

U.S. Government Accountability Office: 

Balance Sheets: 

As of September 30, 2005 and 2004. 

(Dollars in thousands). 

Assets: 

Intragovernmental: Funds with the U.S. Treasury and cash (Note 2 and 
3); 
2005: $65,878; 
2004: $67,169. 

Intragovernmental: Accounts receivable (Note 2); 
2005: $877; 
2004: $1,501. 

Total Intragovernmental; 
2005: $66,755; 
2004: $68,670. 

Property and equipment, net (Note 4); 
2005: $47,291; 
2004: $49,180. 

Other; 
2005: $310; 
2004: $382. 

Total Assets; 
2005: $114,356; 
2004: $118,232. 

Liabilities: 

Intragovernmental (Note 2): Accounts payable; 
2005: $11,805; 
2004: $7,359. 

Intragovernmental (Note 2): Employee benefits (Note 6); 
2005: $2,262; 
2004: $1,928. 

Intragovernmental (Note 2): Workers' compensation (Note 7); 
2005: 
$2,121; 
2004: $1,961. 

Total Intragovernmental; 
2005: $16,188; 
2004: $11,248. 

Accounts payable; 
2005: $12,121; 
2004: $12,749. 

Salaries and benefits (Note 6); 
2005: $16,493; 
2004: $15,035. 

Accrued annual leave and other (Note 5); 
2005: $30,093; 
2004: $29,958. 

Workers' compensation (Note 7); 
2005: $10,357; 
2004: $9,819. 

Capital leases (Note 9); 
2005: $9,657; 
2004: $5,934. 

Total Liabilities; 
2005: $94,909; 
2004: $84,743. 

Net Position: Unexpended appropriations; 
2005: $27,003; 
2004: $34,621. 

Net Position: Cumulative results of operations; 
2005: ($7,556); 
2004: ($1,132). 

Total Net Position (Note 13); 
2005: $19,447; 
2004: $33,489. 

Total Liabilities and Net Position; 
2005: $114,356; 
2004: $118,232. 

The accompanying notes are an integral part of these statements: 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office: 

Statements of Net Cost For Fiscal Years Ended September 30, 2005 and 
2004. 

(Dollars in thousands). 

Net Costs by Goal. 

Goal 1: Well-Being/Financial Security of American People; 
2005: 
$197,761; 
2004: $194,733. 

Less: reimbursable services; 
2005: ($31); 
2004: ($2). 

Net goal costs; 
2005: $197,730; 
2004: $194,731. 

Goal 2: Changing Security Threats/Challenges of Global Interdependence; 
2005: $144,281; 
2004: $131,745. 

Less: reimbursable services; 
2005: ($81); 
2004: ($85). 

Net goal costs; 
2005: $144,200; 
2004: $131,660. 

Goal 3: Transforming the Federal Government's Role; 
2005: $150,196; 
2004: $148,196. 

Less: reimbursable services; 
2005: ($2,878); 
2004: ($2,435). 

Net goal costs; 
2005: $147,318; 
2004: $145,761. 

Goal 4: Maximize the Value of GAO; 
2005: $22,034; 
2004: $23,410. 

Less: reimbursable services; 
2005: -; 
2004: -. 

Net goal costs; 
2005: $22,034; 
2004: $23,410. 

Less: reimbursable services not attributable to goals; 
2005: ($5,432); 
2004: ($5,493). 

Net Cost of Operations (Note 10); 
2005: $505,850; 
2004: $490,069. 

The accompanying notes are an integral part of these statements. 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office: 

Statements of Changes in Net Position For Fiscal Years Ended September 
30, 2005 and 2004. 

(Dollars in thousands); 

Balances, Beginning of Fiscal Year; 
2005 Cumulative Results of Operations: ($1,132); 
2005 Unexpended Appropriations: $34,621; 
2004 Cumulative Results of Operations: $2,338; 
2004 Unexpended Appropriations: $40,327. 

Budgetary Financing Sources: Current year appropriations; 
2005 Cumulative Results of Operations: $-; 
2005 Unexpended Appropriations: $467,205; 
2004 Cumulative Results of Operations: $-; 
2004 Unexpended Appropriations: $457,606. 

Budgetary Financing Sources: Appropriations transferred in; 
2005 Cumulative Results of Operations: $-; 
2005 Unexpended Appropriations: $1,644; 
2004 Cumulative Results of Operations: $-; 
2004 Unexpended Appropriations: $-. 

Budgetary Financing Sources: Lapsed budget authority; 
2005 Cumulative Results of Operations: $-; 
2005 Unexpended Appropriations: ($2,349); 

2004 Cumulative Results of Operations: $-; 
2004 Unexpended Appropriations: ($1,809). 

Budgetary Financing Sources: Appropriations used; 
2005 Cumulative Results of Operations: $474,118; 
2005 Unexpended Appropriations: ($474,118); 
2004 Cumulative Results of Operations: $461,503; 
2004 Unexpended Appropriations: ($461,503). 

Other Financing Sources: Intragovernmental transfer of property and 
equipment; 
2005 Cumulative Results of Operations: ($1); 
2005 Unexpended Appropriations: $-; 
2004 Cumulative Results of Operations: ($788); 
2004 Unexpended Appropriations: $-. 

Other Financing Sources: Federal employee retirement benefit costs paid 
by OPM and imputed to GAO (Note 6); 
2005 Cumulative Results of Operations: $25,309; 
2005 Unexpended Appropriations: $-; 
2004 Cumulative Results of Operations: $25,884; 
2004 Unexpended Appropriations: $-. 

Total Financing Sources; 

2005 Cumulative Results of Operations: $499,426; 
2005 Unexpended Appropriations: ($7,618); 
2004 Cumulative Results of Operations: $486,599; 
2004 Unexpended Appropriations: ($5,706). 

Net Cost of Operations; 

2005 Cumulative Results of Operations: ($505,850); 
2005 Unexpended Appropriations: $-; 
2004 Cumulative Results of Operations: ($490,069); 
2004 Unexpended Appropriations: $-. 

Net Change; 

2005 Cumulative Results of Operations: ($6,424); 
2005 Unexpended Appropriations: ($7,618); 
2004 Cumulative Results of Operations: ($3,470); 
2004 Unexpended Appropriations: ($5,706). 

Balances, End of Fiscal Year; 

2005 Cumulative Results of Operations: ($7,556); 
2005 Unexpended Appropriations: $27,003; 
2004 Cumulative Results of Operations: ($1,132); 
2004 Unexpended Appropriations: $34,621. 

The accompanying notes are an integral part of these statements; 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office: 

Statements of Budgetary Resources For Fiscal Years Ended September 30, 
2005 and 2004: 

(Dollars in thousands); 

Budgetary Resources (Note 11): Current year appropriations; 
2005: $467,205; 
2004: $457,606. 

Budgetary Resources (Note 11): Transfers of budget authority; 
2005: $1,644; 
2004: $-. 

Budgetary Resources (Note 11): Unobligated appropriations, beginning of 
fiscal year; 
2005: $14,066; 
2004: $18,895. 

Budgetary Resources (Note 11): Reimbursable services (Note 10); 
2005: $8,422; 
2004: $8,015. 

Budgetary Resources (Note 11): Cost-sharing and pass-through CPA 
contract reimbursements; 
2005: $2,470; 
2004: $3,006. 

Total Budgetary Resources; 
2005: $493,807; 
2004: $487,522. 

Status of Budgetary Resources: Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Status of Budgetary Resources: Unobligated appropriations, end of 
fiscal year; 
2005: $11,080; 
2004: $14,066. 

Status of Budgetary Resources: Lapsed budget authority; 
2005: $2,349; 
2004: $1,809. 

Total Status of Budgetary Resources; 
2005: $493,807; 
2004: $487,522. 

Relationship of Obligations to Outlays: Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Relationship of Obligations to Outlays: Obligated balance, net - 
beginning of fiscal year; 
2005: $53,103; 
2004: $50,487. 

Relationship of Obligations to Outlays: Less: Obligated balance, net - 
end of fiscal year; 
2005: ($54,798); 
2004: ($53,103). 

Total Outlays; 
2005: $478,683; 
2004: $469,031. 

Less: Reimbursable services; 
2005: ($8,422); 
2004: ($8,015). 

Less: Cost-sharing and pass-through CPA contract reimbursements; 
2005: ($2,470); 
2004: ($3,006). 

Net Outlays; 
2005: $467,791; 
2004: $458,010. 

Outlays: Disbursements; 
2005: $478,683; 
2004: $469,031. 

Outlays: Collections; 
2005: ($10,892); 
2004: ($11,021). 

Net Outlays; 
2005: $467,791; 
2004: $458,010. 

The accompanying notes are an integral part of these statements: 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office: 

Statements of Financing For Fiscal Years Ended September 30, 2005 and 
2004: 

(Dollars in thousands); 

Resources Used to Finance Activities: 

Budgetary Resources Obligated: Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Budgetary Resources Obligated: Less: Reimbursable services (Note 10); 
2005: ($8,422); 
2004: ($8,015). 

Budgetary Resources Obligated: Less: Cost-sharing and pass-through CPA 
contract reimbursements; 
2005: ($2,470); 
2004: ($3,006). 

Budgetary Resources Obligated: Net obligations; 
2005: $469,486; 
2004: $460,626. 

Other Resources: Intragovernmental transfer of property and equipment; 
2005: ($1); 
2004: ($788). 

Other Resources: Federal employee retirement benefit costs paid by OPM 
and imputed to GAO (Note 6); 
2005: $25,309; 
2004: $25,884. 

Other Resources: Net other resources used to finance activities; 
2005: 
$25,308; 
2004: $25,096. 

Total resources used to finance activities; 
2005: $494,794; 
2004: $485,722. 

Resources Used to Finance Items Not Part of the Net Cost of Operations: 
Net decrease in unliquidated obligations; 
2005: $4,632; 
2004: $876. 

Resources Used to Finance Items Not Part of the Net Cost of Operations: 
Costs capitalized on the balance sheet; 
2005: ($9,069); 
2004: ($11,703). 

Total resources used to finance items not part of the net cost of 
operations; 
2005: ($4,437); 
2004: ($10,827). 

Total resources used to finance the net cost of operations; 
2005: 
$490,357; 
2004: $474,895. 

Components That Require/Generate Resources in Future Periods: 
Increase/(decrease) in Workers' Compensation, Accrued Annual Leave, and 
Other Liabilities (Note 12); 
2005: $732; 
2004: ($1,630). 

Costs That Do Not Require Resources: Depreciation; 
2005: $14,761; 
2004: $16,804. 

Net Cost of Operations; 
2005: $505,850; 
2004: $490,069. 

The accompanying notes are an integral part of these statements: 

[End of table] 

[End of Financial Statements] 

Notes to Financial Statements: 

Note 1. Summary of Significant Accounting Policies: 

Reporting Entity: 

The accompanying financial statements present the financial position, 
net cost of operations, changes in net position, budgetary resources, 
and financing of the U.S. Government Accountability Office (GAO). GAO, 
an agency in the legislative branch of the federal government, supports 
the Congress in carrying out its constitutional responsibilities. GAO 
carries out its mission primarily by conducting audits, evaluations, 
analyses, research, and investigations and providing the information 
from that work to the Congress and the public in a variety of forms. 
The financial activity presented relates primarily to the execution of 
GAO's congressionally approved budget. GAO's budget consists of an 
annual appropriation covering salaries and expenses and revenue from 
reimbursable audit work and rental income. The revenue from audit 
services and rental income is included on the Statement of Budgetary 
Resources as "reimbursable services." The financial statements, except 
for federal employee benefit costs paid by the Office of Personnel 
Management (OPM) and imputed to GAO, do not include the effects of 
centrally administered assets and liabilities related to the federal 
government as a whole, such as interest on the federal debt, which may 
in part be attributable to GAO; they also do not include activity 
related to GAO's trust function described in Note 14. 

Basis of Accounting: 

GAO's financial statements have been prepared on the accrual basis of 
accounting in conformity with Generally Accepted Accounting Principles 
for the federal government. Accordingly, revenues are recognized when 
earned and expenses are recognized when incurred, without regard to the 
receipt or payment of cash. These principles differ from budgetary 
reporting principles. The differences relate primarily to the 
capitalization and depreciation of property and equipment, as well as 
the recognition of other long-term assets and liabilities. The 
statements were also prepared in conformity with Office of Management 
and Budget (OMB) Circular A-136, Financial Reporting Requirements. 

Assets: 

Intragovernmental assets are those assets that arise from transactions 
with other federal entities. Funds with the U.S. Treasury composed the 
majority of intragovernmental assets on GAO's balance sheet. 

Funds with the U.S. Treasury: 

The U.S. Treasury processes GAO's receipts and disbursements. Funds 
with the U.S. Treasury represent appropriated funds Treasury will 
provide to pay liabilities and to finance authorized purchase 
commitments. 

Accounts Receivable: 

GAO's accounts receivable are due principally from federal agencies for 
reimbursable services; therefore, GAO has not established an allowance 
for doubtful accounts. 

Property and Equipment: 

The GAO building qualifies as a multi-use heritage asset, is GAO's only 
heritage asset, and is reported with property and equipment on the 
balance sheet. The designation of multi-use heritage asset is a result 
of both being listed in the National Register of Historic Places and 
being used in general government operations. Statement of Federal 
Financial Accounting Standards No. 16 requires accounting for multiuse 
heritage assets as general property, plant, and equipment to be 
included in the balance sheet and depreciated. Maintenance of the 
building has been kept on a current basis. The building is depreciated 
on a straight-line basis over 25 years. 

Generally, property and equipment individually costing more than 
$15,000 are capitalized at cost. Building improvements and leasehold 
improvements are capitalized when the cost is $25,000 or greater. Bulk 
purchases of lesser value items that aggregate more than $150,000 are 
also capitalized at cost. Assets are depreciated on a straight-line 
basis over the estimated useful life of the property as follows: 
building improvements, 10 years; computer equipment, software, and 
capital lease assets, ranging from 3 to 6 years; leasehold 
improvements, 5 years; and other equipment, ranging from 5 to 20 years. 
GAO's property and equipment have no restrictions as to use or 
convertibility except for the restrictions related to the GAO 
building's classification as a multi-use heritage asset. 

Liabilities: 

Liabilities represent amounts that are likely to be paid by GAO as a 
result of transactions that have already occurred. 

Accounts Payable: 

Accounts payable consists of amounts owed to federal agencies and 
commercial vendors for goods, services, and other expenses received but 
not yet paid. 

Federal Employee Benefits: 

GAO recognizes its share of the cost of providing future pension 
benefits to eligible employees over the period of time that they render 
services to GAO. The pension expense recognized in the financial 
statements equals the current service cost for GAO's employees for the 
accounting period less the amount contributed by the employees. OPM, 
the administrator of the plan, supplies GAO with factors to apply in 
the calculation of the service cost. These factors are derived through 
actuarial cost methods and assumptions. The excess of the recognized 
pension expense over the amount contributed by GAO and employees 
represents the amount being financed directly through the Civil Service 
Retirement and Disability Fund administered by OPM. This amount is 
considered imputed financing to GAO (see Note 6). 

GAO recognizes a current-period expense for the future cost of 
postretirement health benefits and life insurance for its employees 
while they are still working. GAO accounts for and reports this expense 
in its financial statements in a manner similar to that used for 
pensions, with the exception that employees and GAO do not make current 
contributions to fund these future benefits. 

Federal employee benefit costs paid by OPM and imputed to GAO are 
reported as resources on the Statements of Changes in Net Position and 
Financing and are also included as a component of net cost by goal on 
the Statements of Net Cost. 

Annual, Sick, and Other Leave: 

Annual leave is recognized as an expense and a liability as it is 
earned; the liability is reduced as leave is taken. The accrued leave 
liability is principally long-term in nature. Sick leave and other 
types of leave are expensed as leave is taken. 

Contingencies: 

GAO has certain claims and lawsuits pending against it. Provision is 
included in GAO's financial statements for losses considered probable 
and estimable. Management believes that losses from certain other 
claims and lawsuits are reasonably possible but are not material to the 
fair presentation of GAO's financial statements and provision for these 
losses is not included in the financial statements. 

Note 2. Intragovernmental Assets, Liabilities, and Revenues: 

Intragovernmental assets, liabilities, and revenues arise from 
transactions with other federal entities. Details of GAO's 
intragovernmental assets, liabilities, and revenues, by agency, as of 
September 30, 2005 and 2004, are as follows: 

Intragovernmental assets as of September 30, 2005 and 2004: 

Dollars in thousands: 

Fiscal Year 2005 intragovernmental assets: Department of the Treasury; 
Fund balance with Treasury: $65,875; 
Accounts receivable: -; 
Total: $65,875. 

Fiscal Year 2005 intragovernmental assets: Cash; 
Fund balance with Treasury: $3; 
Accounts receivable: -; 
Total: $3. 

Fiscal Year 2005 intragovernmental assets: Federal Deposit Insurance 
Corporation; 
Fund balance with Treasury: -; 
Accounts receivable: $613; 
Total: $613. 

Fiscal Year 2005 intragovernmental assets: Securities and Exchange 
Commission; 
Fund balance with Treasury: -; 
Accounts receivable: $233; 
Total: $233. 

Fiscal Year 2005 intragovernmental assets: Other; 
Fund balance with Treasury: -; 
Accounts receivable: $31; 
Total: $31. 

Total intragovernmental assets; 
Fund balance with Treasury: $65,878; 
Accounts receivable: $877; 
Total: $66,755. 

Fiscal Year 2004 intragovernmental assets: Department of the Treasury; 
Fund balance with Treasury: $67,163; 
Accounts receivable: -; 
Total: $67,163. 

Fiscal Year 2004 intragovernmental assets: Cash; 
Fund balance with Treasury: $6; 
Accounts receivable: -; 
Total: $6. 

Fiscal Year 2004 intragovernmental assets: Federal Deposit Insurance 
Corporation; 
Fund balance with Treasury: -; 
Accounts receivable: $546; 
Total: $546. 

Fiscal Year 2004 intragovernmental assets: Securities and Exchange 
Commission; 
Fund balance with Treasury: -; 
Accounts receivable: $850; 
Total: $850. 

Fiscal Year 2004 intragovernmental assets: Other; 
Fund balance with Treasury: -; 
Accounts receivable: $105; 
Total: $105. 

Total intragovernmental assets; 
Fund balance with Treasury: $67,169; 
Accounts receivable: $1,501; 
Total: $68,670. 

[End of table] 

Intragovernmental liabilities as of September 30, 2005 and 2004: 

Dollars in thousands: 

Fiscal Year 2005 intragovernmental liabilities: General Services 
Administration; 
Accounts payable: $10,363; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $10,363. 

Fiscal Year 2005 intragovernmental liabilities: Department of Labor; 
Accounts payable: $284; 
Employee benefits: -; 
Workers' compensation: $2,121; 
Total: $2,405. 

Fiscal Year 2005 intragovernmental liabilities: Office of Personnel 
Management; 
Accounts payable: $549; 
Employee benefits: $1,701; 
Workers' compensation: -; 
Total: $2,250. 

Fiscal Year 2005 intragovernmental liabilities: Department of the 
Treasury; 
Accounts payable: -; 
Employee benefits: $561; 
Workers' compensation: -; 
Total: $561. 

Fiscal Year 2005 intragovernmental liabilities: Government Printing 
Office; 
Accounts payable: $227; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $227. 

Fiscal Year 2005 intragovernmental liabilities: Department of Veterans 
Affairs; 
Accounts payable: $139; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $139. 

Fiscal Year 2005 intragovernmental liabilities: Other; 
Accounts 
payable: $243; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $243. 

Total intragovernmental liabilities; 
Accounts payable: $11,805; 
Employee benefits: $2,262; 
Workers' compensation: $2,121; 
Total: $16,188. 

Fiscal Year 2004 intragovernmental liabilities: General Services 
Administration; 
Accounts payable: $5,559; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $5,559. 

Fiscal Year 2004 intragovernmental liabilities: Office of Personnel 
Management; 
Accounts payable: -; 
Employee benefits: $1,884; 
Workers' compensation: -; 
Total: $1,884. 

Fiscal Year 2004 intragovernmental liabilities: Department of the 
Treasury; 
Accounts payable: $661; 
Employee benefits: $44; 
Workers' compensation: -; 
Total: $705. 

Fiscal Year 2004 intragovernmental liabilities: Government Printing 
Office; 
Accounts payable: $361; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $361. 

Fiscal Year 2004 intragovernmental liabilities: Department of 
Agriculture; 
Accounts payable: $271; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $271. 

Fiscal Year 2004 intragovernmental liabilities: Department of Labor; 
Accounts payable: $215; 
Employee benefits: -; 
Workers' compensation: $1,961; 
Total: $2,176. 

Fiscal Year 2004 intragovernmental liabilities: Other; 
Accounts 
payable: $292; 
Employee benefits: -; 
Workers' compensation: -; 
Total: $292. 

Total intragovernmental liabilities; 
Accounts payable: $7,359; 
Employee benefits: $1,928; 
Workers' compensation: $1,961; 
Total: $11,248. 

[End of table] 

Intragovernmental revenues for fiscal years 2005 and 2004: 

Dollars in thousands: 

Intragovernmental revenue: U.S. Army Corps of Engineers; 
2005: $4,856; 
2004: $4,799. 

Intragovernmental revenue: Federal Deposit Insurance Corporation; 
2005: $1,774; 
2004: $1,540. 

Intragovernmental revenue: Securities and Exchange Commission; 
2005: $1,057; 
2004: $849. 

Intragovernmental revenue: State Department; 
2005: $248; 
2004: $361. 

Intragovernmental revenue: Other; 
2005: $420; 
2004: $390. 

Total intragovernmental revenue; 
2005: $8,355; 
2004: $7,939. 

Intergovernmental revenue; 
2005: $8,355; 
2004: $7,939. 

Nongovernmental revenue; 
2005: $67; 
2004: $76. 

Total revenue; 
2005: $8,422; 
2004: $8,015. 

[End of table] 

GAO's pricing policy for reimbursable services is to seek reimbursement 
for actual costs incurred, including overhead costs where allowed by 
law. Therefore, revenues, as listed above, and costs that generated 
those revenues are equivalent. 

Note 3. Funds with the U.S. Treasury and Cash: 

GAO's funds with the U.S. Treasury consist of only appropriated funds. 
GAO also maintains cash imprest funds for use in daily operations. The 
status of these funds as of September 30, 2005 and 2004 is as follows: 

Dollars in thousands: 

Unobligated balance: Available; 
2005: $1,296; 
2004: $3,609. 

Unobligated balance: Unavailable; 
2005: $9,781; 
2004: $10,451. 

Obligated balances not yet disbursed; 
2005: $54,798; 
2004: $53,103. 

Total funds with U.S. Treasury; 
2005: $65,875; 
2004: $67,163. 

Cash; 
2005: $3; 
2004: $6. 

Total funds with U.S. Treasury and cash; 
2005: $65,878; 
2004: $67,169. 

[End of table] 

Note 4. Property and Equipment, Net: 

The composition of property and equipment as of September 30, 2005, is 
as follows: 

Dollars in thousands: 

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $10,652; 
Book value: $5,012. 

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191. 

Classes of property and equipment: Building improvements; 
Acquisition 
value: $112,855; 
Accumulated depreciation: $93,638; 
Book value: $19,217. 

Classes of property and equipment: Computer and other equipment and 
software; 
Acquisition value: $33,663; 
Accumulated depreciation: $22,290; 
Book value: $11,373. 

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $5,956; 
Accumulated depreciation: $5,152; 
Book value: $804. 

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $20,223; 
Accumulated depreciation: $10,529; 
Book value: $9,694. 

Classes of property and equipment: Total property and equipment; 
Acquisition value: $189,552; 
Accumulated depreciation: $142,261; 
Book value: $47,291. 

[End of table] 

The composition of property and equipment as of September 30, 2004, is 
as follows: 

Dollars in thousands: 

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $10,025; 
Book value: $5,639. 

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191. 

Classes of property and equipment: Building improvements; 
Acquisition value: $109,389; 
Accumulated depreciation: $87,413; 
Book value: $21,976. 

Classes of property and equipment: Computer and other equipment and 
software; 
Acquisition value: $34,525; 
Accumulated depreciation: $20,533; 
Book value: $13,992. 

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $5,091; 
Accumulated depreciation: $4,895; 
Book value: $196. 

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $30,321; 
Accumulated depreciation: $24,135; 
Book value: $6,186. 

Classes of property and equipment: Total property and equipment; 
Acquisition value: $196,181; 
Accumulated depreciation: $147,001; 
Book value: $49,180. 

[End of table] 

The decrease in the acquisition value of assets under capital lease in 
fiscal year 2005 relates to the retirement of fully depreciated assets 
during fiscal year 2005 in conjunction with implementing a new asset 
management system. 

Note 5. Liabilities Not Covered by Budgetary Resources: 

The liabilities on GAO's Balance Sheets as of September 30, 2005 and 
2004, include liabilities not covered by budgetary resources, which are 
liabilities for which congressional action is needed before budgetary 
resources can be provided. Although future appropriations to fund these 
liabilities are likely and anticipated, it is not certain that 
appropriations will be enacted to fund these liabilities. The 
composition of liabilities not covered by budgetary resources as of 
September 30, 2005 and 2004, is as follows: 

Dollars in thousands: 

Intragovernmental liabilities--Workers' compensation; 
2005: $2,121; 
2004: $1,961. 

Salaries and benefits--Comptrollers General retirement plan; 
2005: $2,836; 
2004: $2,937. 

Accrued annual leave and other; 
2005: $30,093; 
2004: $29,958. 

Workers' compensation; 
2005: $10,357; 
2004: $9,819. 

Capital leases; 
2005: $9,657; 
2004: $5,934. 

Total liabilities not covered by budgetary resources; 
2005: $55,064; 
2004: $50,609. 

[End of table] 

Note 6. Federal Employee Benefits: 

All permanent employees participate in the contributory Civil Service 
Retirement System (CSRS) or the Federal Employees Retirement System 
(FERS). Temporary employees and employees participating in FERS are 
covered under the Federal Insurance Contributions Act (FICA). To the 
extent that employees are covered by FICA, the taxes they pay to the 
program and the benefits they will eventually receive are not 
recognized in GAO's financial statements. GAO makes contributions to 
CSRS, FERS, and FICA and matches certain employee contributions to the 
thrift savings component of FERS. All of these payments are recognized 
as operating expenses. 

In addition, all permanent employees are eligible to participate in the 
contributory Federal Employees Health Benefits Program (FEHBP) and 
Federal Employees' Group Life Insurance Program (FEGLIP) and may 
continue to participate after retirement. GAO makes contributions 
through OPM to FEHBP and FEGLIP for active employees to pay for their 
current benefits. GAO's contributions for active employees are 
recognized as operating expenses. Using the cost factors supplied by 
OPM, GAO has also recognized an expense in its financial statements for 
the estimated future cost of postretirement health benefits and life 
insurance for its employees. These costs are financed by OPM and 
imputed to GAO. 

Amounts owed to OPM and Treasury as of September 30, 2005 and 2004, are 
$2,262,000 and $1,928,000, respectively, for FEHBP, FEGLIP, FICA, FERS, 
and CSRS contributions and are shown on the Balance Sheet as an 
employee benefits liability. 

Details of the major components of GAO's federal employee benefit costs 
for the years ended September 30, 2005 and 2004, are as follows: 

Dollars in thousands: 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Estimated future pension costs 
(CSRS/FERS); 
2005: $11,476; 
2004: $13,341. 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Estimated future postretirement 
health and life insurance (FEHBP/FEGLIP); 
2005: $13,833; 
2004: $12,543. 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Total; 
2005: $25,309; 
2004: $25,884. 

Federal Employee Benefits Costs: Pension expenses (CSRS/FERS); 
2005: 
$28,583; 
2004: $26,896. 

Federal Employee Benefits Costs: Health and life insurance expenses 
(FEHBP/FEGLIP); 
2005: $15,130; 
2004: $14,257. 

Federal Employee Benefits Costs: FICA payment made by GAO; 
2005: $15,261; 
2004: $14,545. 

Federal Employee Benefits Costs: Thrift Saving Plan - matching 
contribution by GAO; 
2005: $8,439; 
2004: $7,889. 

[End of table] 

Comptrollers General and their surviving beneficiaries who qualify and 
so elect to participate are paid retirement benefits by GAO under a 
separate retirement plan. These benefits are paid from current year 
appropriations. Because GAO is responsible for future payments under 
this plan, the estimated present value of accumulated plan benefits of 
$2,836,000 as of September 30, 2005, and $2,937,000 as of September 30, 
2004, is included as a component of salary and benefit liabilities on 
GAO's Balance Sheet. 

Note 7. Workers' Compensation: 

The Federal Employees' Compensation Act (FECA) provides income and 
medical cost protection to covered federal civilian employees injured 
on the job, employees who have incurred a work-related occupational 
disease, and beneficiaries of employees whose death is attributable to 
a job-related injury or occupational disease. Claims incurred for 
benefits for GAO employees under FECA are administered by the 
Department of Labor (DOL) and are paid, ultimately, by GAO. 

For fiscal year 2004, and again in fiscal year 2005, GAO used estimates 
provided by DOL to report the FECA liability. This practice is 
consistent with the practices of other federal agencies. 

GAO recorded an estimated liability for claims incurred but not 
reported as of September 30, 2005 and 2004, which is expected to be 
paid in future periods. This estimated liability of $10,357,000 and 
$9,819,000 as of September 30, 2005 and 2004, respectively, is reported 
on GAO's Balance Sheets. GAO also recorded a liability for amounts paid 
to claimants by DOL as of September 30, 2005 and 2004, of $2,121,000 
and $1,961,000, respectively, but not yet reimbursed to DOL by GAO. The 
amount owed to DOL is reported on GAO's Balance Sheets as an 
intragovernmental liability. 

Note 8. Building Lease Revenue: 

The U.S. Army Corps of Engineers (USACE) entered into an agreement with 
GAO to lease the entire third floor of the GAO building. USACE provided 
all funding for the third floor renovation. Occupancy began August 3, 
2000, for an initial period of 3 years, with options to renew on an 
annual basis for 7 additional years. Total rental revenue to GAO 
includes a base rent, which remains constant for the entire 10-year 
period, plus operating expense reimbursements at a fixed amount for the 
first 3 years, with escalation clauses from year 4 through year 10 if 
the option years are exercised. Beginning in fiscal year 2002, USACE 
leased additional space on the sixth floor with occupancy lasting 
through the original lease term. 

Rent received by GAO for fiscal year 2005 and 2004 was $4,856,000 and 
$4,799,000, respectively. These amounts are included in reimbursable 
services on the Statements of Budgetary Resources and Financing (see 
Note 2). Total rental revenue for the remaining period of the 10-year 
lease is as follows: 

Dollars in thousands: 

Fiscal year ending September 30, 2006; 
Total rental revenue*: $4,916. 

Fiscal year ending September 30, 2007; 
Total rental revenue*: $4,978. 

Fiscal year ending September 30, 2008; 
Total rental revenue*: $5,045. 

Fiscal year ending September 30, 2009; 
Total rental revenue*: $5,111. 

Fiscal year ending September 30, 2010; 
Total rental revenue*: $5,179. 

Total; 
Total rental revenue*: $25,229. 

*If option years are exercised. 

[End of table] 

Note 9. Leases: 

Capital Leases: 

GAO has entered into capital leases for office equipment and computer 
equipment under which the ownership of the equipment covered under the 
leases transfers to GAO when the leases expire. When GAO enters into 
these leases, the present value of the future lease payments is 
capitalized, net of imputed interest, and recorded as a liability. The 
acquisition value and accumulated depreciation of GAO's capital leases 
are shown in Note 4, Property and Equipment, Net. As of September 30, 
2005 and 2004, the capital lease liability was $9,657,000 and 
$5,934,000, respectively. This increase in capital lease liability is a 
result of replacing substantially all the copiers and notebook 
computers at GAO during 2005 and recording new capital lease 
liabilities. 

These lease agreements are written as contracts with a base year and 
option years. The option years are subject to the availability of 
funds. Early termination of the leases for reasons other than default 
is subject to a negotiation between the parties. These leases are lease-
to-ownership agreements. GAO's leases are short term in nature and no 
liability exists beyond the years shown in the following table. GAO's 
estimated future minimum lease payments under the terms of the leases 
are as follows: 

Dollars in thousands: 

Fiscal year ending September 30, 2006; 
Total: $5,019. 

Fiscal year ending September 30, 2007; 
Total: $4,015. 

Fiscal year ending September 30, 2008; 
Total: $1,343. 

Fiscal year ending September 30, 2009; 
Total: $241. 

Fiscal year ending September 30, 2010; 
Total: $54. 

Total estimated future lease payments; 
Total: $10,672. 

Less: imputed interest; 
Total: ($1,015). 

Net capital lease liability; 
Total: $9,657. 

[End of table] 

Operating Leases: 

GAO leases office space, predominately for field offices, from GSA and 
has entered into various other operating leases for office 
communication and computer equipment. Lease costs for office space and 
equipment for fiscal year 2005 and fiscal year 2004 amounted to 
approximately $10,752,000 and $7,991,000, respectively. Leases for 
equipment under operating leases are generally less than 1 year, 
therefore there are no associated future minimum lease payments. 
Estimated future minimum lease payments for field office space under 
the terms of the leases are as follows: 

Dollars in thousands: 

Fiscal year ending September 30, 2006; 
Total: $7,559. 

Fiscal year ending September 30, 2007; 
Total: $4,293. 

Fiscal year ending September 30, 2008; 
Total: $3,435. 

Fiscal year ending September 30, 2009; 
Total: $2,859. 

Fiscal year ending September 30, 2010; 
Total: $2,376. 

Fiscal year ending September 30, 2011 and thereafter; 
Total: $3,845. 

Total estimated future lease payments; 
Total: $24,367. 

[End of table] 

Leased property and equipment must be capitalized if certain criteria 
are met (see Capital Leases description). Because property and 
equipment covered under GAO's operating leases do not satisfy these 
criteria, GAO's operating leases are not reflected on the Balance 
Sheets. However, annual lease costs under the operating leases are 
included as components of net cost by goal in the Statements of Net 
Cost. 

Note 10. Net Cost of Operations: 

Expenses for salaries and related benefits for fiscal year 2005 and 
fiscal year 2004 amounted to $395,783,000 and $389,104,000, 
respectively, which were about 78 percent of GAO's annual net cost of 
operations in fiscal year 2005 and 79 percent in fiscal year 2004. 
Included in the net cost of operations are federal employee benefit 
costs paid by OPM and imputed to GAO of $25,309,000 in fiscal year 2005 
and $25,884,000 in fiscal year 2004. 

Revenues from reimbursable services are shown as an offset against the 
full cost of the goal to arrive at its net cost. Earned revenues that 
are insignificant or cannot be associated with a major goal are shown 
in total, the largest component of which is rental revenue from the 
lease of space in the GAO building. Revenues from reimbursable services 
for fiscal year 2005 and fiscal year 2004 amounted to $8,422,000 and 
$8,015,000, respectively. Further details of the intragovernmental 
components are provided in Note 2. 

The net cost of operations represents GAO's operating costs that must 
be funded by financing sources other than revenues earned from 
reimbursable services. These financing sources are presented in the 
Statements of Changes in Net Position. 

Note 11. Budgetary Resources: 

Budgetary resources made available to GAO include current 
appropriations, spending authority from budget transfers, unobligated 
appropriations, and reimbursements arising from both revenues earned by 
GAO from providing goods and services to other federal entities for a 
price (reimbursable services) and cost-sharing and pass-through 
contract arrangements with other federal entities. 

For fiscal year 2004 differences exist between the total budgetary 
resources on the Statements of Budgetary Resources and the budget 
authority amount in the fiscal year 2006 President's Budget. These 
differences are due to (1) unobligated funds available in expired 
accounts not included in the President's Budget submission and (2) 
reimbursements from cost-sharing and pass-through contract arrangements 
that could not have been anticipated at the time the President's Budget 
was developed. In addition, as the fiscal year 2007 President's Budget 
is not yet available, comparison between the Statements of Budget 
Resources and the actual fiscal year 2005 data in the President's 
Budget cannot be performed. 

For fiscal year 2005, budget transfers consisted of budget authority 
transferred from the Department of Homeland Security for a review of 
the Transportation Security Administration's calendar year 2000 cost 
for screening passengers and property. Reimbursements from cost-sharing 
and pass-through contract arrangements consisted primarily of 
collections from other federal entities (1) for the support of the 
Federal Accounting Standards Advisory Board and (2) to utilize GAO 
contracts to obtain services. The costs and reimbursements for these 
activities are not included in the Statements of Net Cost. 

Note 12. Components That Require/Generate Resources in Future Periods: 

Increases/decreases in workers' compensation, accrued annual leave, and 
other liabilities are reported in the Statements of Financing. These 
changes represent the increases/decreases in liabilities not covered by 
budgetary resources, as reported in Note 5. 

Dollars in thousands: 

Liabilities not covered by budgetary resources; 
Fiscal year ending September 30, 2005: $55,064; 
Fiscal year ending September 30, 2004: $50,609. 

Liabilities that are not components of net cost: Capital leases; 
Fiscal year ending September 30, 2005: ($9,657); 
Fiscal year ending September 30, 2004: ($5,934). 

Liabilities that are not components of net cost: Current year 
liabilities not covered by budgetary resources that are components of 
net cost; 
Fiscal year ending September 30, 2005: $45,407; 
Fiscal year ending September 30, 2004: $44,675. 

Liabilities that are not components of net cost: Prior year liabilities 
that are not components of current year net costs; 
Fiscal year ending September 30, 2005: ($44,675); 
Fiscal year ending September 30, 2004: ($46,305). 

Liabilities that are not components of net cost: Increase/(decrease) in 
workers' compensation, accrued annual leave, and other liabilities, as 
reported on the Statements of Financing; 
Fiscal year ending September 30, 2005: $732; 
Fiscal year ending September 30, 2004: ($1,630). 

[End of table] 

Note 13. Net Position: 

Net position on the balance sheets consist of unexpended appropriations 
and cumulative results of operations. Unexpended appropriations are the 
sum of the total unobligated appropriations and undelivered goods and 
services. Cumulative results of operations represent the excess of 
financing sources over expenses since inception. Details of the 
components of GAO's cumulative results of operations for the fiscal 
years ended September 30, 2005 and 2004, are as follows: 

Dollars in thousands: 

Investment in property and equipment, net; 
2005: $47,291; 
2004: $49,180. 

Other - supplies inventory; 
2005: $217; 
2004: $297. 

Liabilities not covered by budgetary resources; 
2005: ($55,064); 
2004: ($50,609). 

Cumulative results of operations; 
2005: ($7,556); 
2004: ($1,132). 

[End of table] 

Liabilities not covered by budgetary resources are liabilities for 
which congressional action is needed before budgetary resources can be 
provided. See Note 5 for breakdown. 

Note 14. Davis-Bacon Act Trust Function: 

GAO is responsible for administering for the federal government the 
trust function of the Davis-Bacon Act receipts and payments and 
publishes separate, audited financial statements for this fund. GAO 
maintains this fund to pay claims relating to violations of the Davis- 
Bacon Act and Contract Work Hours and Safety Standards Act. Under these 
acts, DOL investigates violation allegations to determine if federal 
contractors owe additional wages to covered employees. If DOL concludes 
that a violation has occurred, GAO collects the amount owed from the 
contracting federal agency, deposits the funds into an account with the 
U.S. Treasury, and remits payment to the employee. GAO is accountable 
to the Congress and to the public for the proper administration of the 
assets held in the trust. Trust assets under GAO's administration 
totaled approximately $4,666,000 as of September 30, 2005. These assets 
are not the assets of GAO nor the federal government and are held for 
distribution to appropriate claimants. During fiscal year 2005, 
receipts and disbursements in the trust amounted to $526,000 and 
$612,000, respectively. Because the trust assets and related 
liabilities are not assets and liabilities of GAO, they are not 
included in the accompanying financial statements. 

[End of Part III: Financial Statements] 

Part IV: Appendixes: 

"Integrity without knowledge is weak and useless, and knowledge without 
integrity is dangerous and dreadful." 

-- Samuel Johnson: 

1. Accomplishments and Other Contributions: 

In pursuing our strategic goals during fiscal year 2005, we recorded 
hundreds of accomplishments and made numerous other contributions. This 
appendix provides details on the most significant of these. In 
reporting accomplishments (designated by an A in the item number below) 
and other contributions (designated by a C in the item number below), 
we are holding ourselves accountable for the resources we received to 
implement our strategic plan. The accomplishments document financial 
benefits or other benefits achieved through action on our findings or 
recommendations. 

Typically, the accomplishments describe work that we completed in prior 
fiscal years because it takes time to implement recommendations, 
realize benefits, and record them. The other contributions, which often 
refer to work completed in fiscal year 2005, describe instances in 
which we provided information or recommendations that aided 
congressional decision making or informed the public debate to a 
significant degree. At the end of each accomplishment and contribution 
summary, we list the reference number for products associated with the 
work discussed. In the online version of this document, readers can 
link directly to these products if they want additional information. 

Strategic Goal 1: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People: 

The health needs of an aging and diverse population: 

1.1.A. Improving the Call Transfer Process Used by 1-800-MEDICARE: 

In 2004, we found that the 24-hour 1-800-MEDICARE help line, operated 
by the Department of Health and Human Services's (HHS) Centers for 
Medicare & Medicaid Services (CMS), did not answer 10 percent of the 
calls we placed to test its accuracy, often because it automatically 
transferred some calls to claims administration contractors that were 
not open for business at the time of the calls. This call transfer 
process prohibited callers from accessing information during 
nonbusiness hours, even though 1-800-MEDICARE operates 24-hours a day. 
As a result, we recommended that CMS revise the routing procedures of 1-
800-MEDICARE to ensure that calls are not transferred or referred to 
claims administration contractors' help lines during nonbusiness hours. 
In response, CMS finished converting its call routing procedures. As a 
result, calls placed after normal business hours will be routed to the 
main 1-800-MEDICARE line, which operates 24-hours a day. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-130] 

1.2.A. Reforming Medicare Payments for Inhalation Therapy Drugs: 

We provided information on the costs to suppliers of dispensing 
inhalation therapy drugs to Medicare beneficiaries. The Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 revised 
the payment formula for most outpatient drugs, including inhalation 
therapy drugs, covered under Medicare part B. Under the revised 
formula, effective 2005, Medicare's payment was intended to be closer 
to acquisition costs. We found that under the previous system, the 
higher dispensing costs incurred by some suppliers were covered by the 
excess payments for these drugs, but that under the revised payment 
system, the necessary costs of dispensing inhalation therapy drugs may 
not be covered. As we recommended, CMS--the agency that administers 
Medicare--evaluated the costs of dispensing inhalation therapy drugs 
and used our analysis to help set an appropriate dispensing fee. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-72] 

1.3.A. Requiring Out-of-Cycle Inspections for Medicare Suppliers: 

Although durable medical equipment suppliers are inspected when 
applying for Medicare billing privileges and reinspected every 3 years, 
this predictable timing has allowed suppliers intent on committing 
fraud to create the illusion of legitimacy long enough to enter the 
program. The Medicare contractor responsible for screening suppliers 
conducts out-of-cycle inspections but is not required to do so by its 
contract and can curtail this activity at any time. Because conducting 
out-of-cycle inspections has been valuable, we recommended routinely 
conducting them to better identify potentially fraudulent suppliers. 
During the course of our review of the supplier screening process, we 
held discussions on this topic with CMS staff who were writing the 
statement of work for a new contract that is scheduled to be awarded in 
December 2005. As a result, CMS included language in the new contract 
that will require the contractor to conduct random, out-of-cycle site 
visits as resources permit. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-656] 

1.4.A. Identifying Chain Suppliers for Medicare Site Inspections: 

Site inspections of durable medical equipment suppliers help verify 
their compliance with Medicare's standards and help safeguard the 
program against fraud. CMS allows its enrollment contractor to exempt 
suppliers in chains with 25 or more locations from the inspections. 
However, the contract did not clearly state that all 25 locations in 
the chain have to have active billing numbers. As a result, we found 
that the contractor had been exempting some suppliers in chains that 
currently had fewer than 25 locations with active billing numbers, 
including some with locations that had billing privileges revoked due 
to noncompliance with Medicare's standards. After we informed CMS, the 
agency revised its contract to clarify that a chain consisted of 25 or 
more active supplier locations. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-656] 

1.5.A. Classifying Inpatient Rehabilitation Facilities: 

In an April 2005 report, we recommended that CMS refine the rule used 
by Medicare to classify inpatient rehabilitation facilities. Medicare 
classifies these facilities using the "75 percent rule." If a facility 
can show that during 1 year, at least 75 percent of its patients 
required intensive rehabilitation for 1 of 13 specified conditions, it 
may be classified as an inpatient rehabilitation facility and paid at a 
higher rate than is paid for less intensive rehabilitation in other 
settings, such as an acute care hospital or a skilled nursing facility. 
Enforcement of the rule was suspended in 2002, resumed in July 2004, 
and suspended again in January 2005 pending issuance of our report on 
the rule. We found that there are patients in these facilities who may 
not need the intense level of services provided in them and that CMS 
has not been routinely reviewing admissions to these facilities to 
determine if they were medically justified. We recommended that CMS 
conduct reviews for medical necessity and produce more information 
about the effectiveness of inpatient rehabilitation to support future 
efforts to refine the rule over time to increase its clarity about 
which types of patients are most appropriate for inpatient 
rehabilitation facilities. CMS generally agreed with our 
recommendations and issued a regulation on June 24, 2005, to resume 
enforcement of the procedures for classifying these facilities, stating 
that facilities that do not comply with the requirements of the rule 
would have their classification terminated. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-366], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-825T] 

1.6.A. Improving Medicare Communications with Providers: 

To improve communications with physicians, we recommended that the 
administrator of CMS adopt a standard approach that would promote the 
quality, consistency, and timeliness of communications by publishing a 
national bulletin for physicians. We found that bulletins issued by 
Medicare contractors were poorly organized and contained dense legal 
language. We also noted that some failed to include information or 
provided little advance notice about upcoming program changes. CMS 
implemented our recommendation by developing a series of educational 
articles, "Medlearn Matters," which are available at CMS's Web site and 
replace the individual articles previously developed by each Medicare 
contractor. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-249] 

1.7.A. Improving Medicare Call Center Responses to Policy-Oriented 
Inquiries from Providers: 

To improve the accuracy and completeness of responses to policy-
oriented inquiries from providers, we recommended that the 
Administrator of CMS create a process to routinely screen and triage 
calls by routing complex policy-oriented questions to staff with the 
expertise to adequately address them. We found that the responses of 
call center customer service representatives to our policy-oriented 
questions were largely incorrect. Among other things, we noted that 
these call centers did not have the capability of identifying the 
subject of providers' questions so their calls could be routed to the 
most appropriate customer service representatives. We recommended that 
the Administrator of CMS take steps to ensure that all customer service 
representatives have the necessary tools to respond to such calls by 
developing clear and easily accessible policy-oriented materials that 
are electronically searchable. CMS instructed most of its contractors 
to develop an inquiry triage process for telephone inquiries by January 
2005. Call centers must have at least two levels of customer service 
representatives dedicated to responding to provider inquiries. 
Questions requiring in-depth research must be referred to a new group 
of staff, known as Provider Relations Research Specialists, who are 
trained to do the necessary research to provide complete and accurate 
responses to the inquiries. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-669] 

1.8.A. Improving Home Health Performance Standards and Oversight: 

In 2002, we reported that CMS's oversight of state home health agency 
survey activities was limited and needed to be improved. CMS responded 
by developing annual performance standards as a way to routinely 
monitor important state home health survey activities. For example, 
states are now evaluated to ensure that all home health agencies are 
surveyed at least once every 3 years, as required by statute. States 
are now evaluated on whether deficiencies found during home health 
surveys are appropriately and sufficiently supported and documented. 
Finally, states are now evaluated on whether home health complaints and 
incidents are appropriately prioritized based on the seriousness of the 
allegations received and whether those alleging immediate jeopardy to a 
patient are investigated within 2 working days of receipt by the state 
agency. These new standards allow CMS to monitor state performance over 
time and to work with state agencies to improve the quality of home 
health survey activities and ultimately the care provided to Medicare 
home health beneficiaries. In the same report, we stated that CMS had 
not applied the oversight tools that it uses to monitor state nursing 
home surveys to the survey activities of home health agencies. As a 
result, CMS officials generally were unaware of the variability in the 
extent to which states cited home health deficiencies and were unable 
to offer insights as to the underlying causes. Since our report, CMS 
has created a Web-based data reporting system that accumulates and 
stores data related to a variety of home health agency survey 
activities, including overdue surveys and home health agencies with 
identified serious deficiencies. Thus, CMS and states are now able to 
readily access important data related to home health survey activities 
to ensure that problems are addressed in a timely manner and Medicare 
beneficiaries receive the best quality care available. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-382] 

1.9.A. Paying Properly for Power Wheelchairs for Medicare 
Beneficiaries: 

In 2004, we examined the steps taken by CMS to respond to improper 
payments by the Medicare program for power wheelchairs. Medicare 
spending for power wheelchairs--one of the Medicare program's most 
expensive items of equipment--had increased more than fourfold from 
1999 through 2003. We reported that the information provided to 
Medicare contractors that process wheelchair claims did not provide 
sufficient detail for determining if power wheelchair claims should be 
paid, and we recommended that documentation supplied to these 
contractors be revised. In August 2005, CMS established a new 
requirement that the relevant clinical documentation from a patient's 
medical record be maintained by the supplier along with a written 
prescription for the power wheelchair and be submitted to the 
contractor upon request. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-716T], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-43] 

1.10.A. Leveraging Experts' Knowledge in Implementing Medicare 
Competitive Bidding: 

Each year, Medicare pays billions of dollars for beneficiaries' medical 
equipment and supplies. We have repeatedly reported that Medicare 
payments for some of these items are out of line with actual market 
prices. In 2007, CMS is slated to begin a large-scale effort to conduct 
Medicare competitive bidding for medical equipment and supplies. In 
September 2004, we recommended that as it implements the competitive 
bidding program, the agency seek input from individuals with technical 
knowledge about the items and services suppliers provide to 
beneficiaries. Subsequently, CMS appointed an advisory and oversight 
committee to advise the agency about the implementation of competitive 
bidding and about standards for suppliers that want to participate in 
the Medicare program. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
04-765] 

1.11.A. Revising the Health Insurance Portability and Accountability 
Act's (HIPAA) Model Certificate of Creditable Group Health Plan 
Coverage: 

HIPAA sets minimum federal standards for certain aspects of private 
health insurance to improve access to health insurance for people 
obtaining coverage through employment as well as for those purchasing 
it as individuals. For example, HIPAA limits the time that preexisting 
conditions may be excluded from coverage for many people changing jobs 
and guarantees access to coverage for certain individuals losing group 
coverage. HIPAA also requires that each person losing health coverage 
receive a certificate that documents the length of prior coverage. We 
determined, however, that the model certificate the federal agencies 
had developed as part of the 1997 interim rules had limitations as an 
educational tool. For example, it neither explicitly informed consumers 
that they had a group-to-individual portability right nor highlighted 
any of the restrictions on this right. To more explicitly inform 
consumers of their HIPAA rights, we recommended that HHS's Health Care 
Financing Administration--now known as CMS--and the Department of Labor 
(DOL) revise the model certificate to highlight key provisions and 
restrictions of the law and to inform consumers about appropriate 
contacts for additional information. As a result of our work, in 2004 
HHS, DOL, and the Department of the Treasury (Treasury) issued final 
regulations for health coverage portability for group health plans and 
group health insurance issuers. The final regulations cite our 
recommendation and include a modified certificate of creditable 
coverage, which includes an explicit description of HIPAA's portability 
rights and lists telephone numbers that can be called for additional 
information. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-99-
100] 

1.12.A. Making Medicare's Coverage Process More Understandable: 

Each year, CMS makes important decisions on whether new technology will 
be covered for Medicare's beneficiaries. However, the rationale for 
CMS's decisions has sometimes been uncertain because of the lack of 
clear coverage criteria. In 2003, we recommended that CMS develop 
written criteria for assessing whether a medical service or item is 
reasonable and necessary and could be covered by Medicare. In 2004, CMS 
published information on how it intends to develop public guidance 
discussing factors to be considered in making coverage decisions. In 
addition, CMS issued draft guidance in 2005 on how it would make 
coverage decisions for certain items or services for which sufficient 
data are not available. CMS also stated that it will seek public input 
on possible topics for new guidance documents. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-175] 

1.13.A. Determining Higher Payments' Effects on Nurse Staffing: 

The Congress enacted a temporary increase in the nursing component of 
the Medicare payment rate for skilled nursing facilities, effective 
April 1, 2001, and directed us to assess the impact of the increased 
payments on nursing staff in skilled nursing facilities. We found that 
after the nursing-related payment rate increase took effect, nurse 
staffing per patient day changed little. The payment increase expired 
September 30, 2002, and the Congress did not reinstate it during fiscal 
year 2005, resulting in a cost avoidance of about $2 billion. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-176] 

1.14.A. Assessing Medicare's Skilled Nursing Facility Payment Rate: 

A 1999 law authorized CMS to raise all Medicare payment rates for 
skilled nursing facilities by 4 percent for 2 years. Prior to the 
September 30, 2002, expiration of this 4 percent add-on, provider 
representatives argued that the add-on should be restored, citing 
payment shortfalls from other payers. In a 2002 report, however, we 
found that under the prospective payment system, most freestanding 
skilled nursing facilities' Medicare payments substantially exceeded 
the costs of caring for Medicare patients, contributing to facilities' 
overall positive financial condition. Specifically, the median Medicare 
margin was about 8 percent in 1999 and almost 19 percent in 2000. 
Consequently, the Congress declined to restore the 4 percent add-on 
from 2002 through 2005. The Medicare Payment Advisory Commission also 
contributed to this congressional decision by reporting similar results 
about the facilities' Medicare payments. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-183] 

1.15.A. Strengthening Guidelines for Nursing Home Fire Investigations: 

In 2004, we reported on two recent nursing home fires in which 31 
residents died. Our review revealed weaknesses in federal fire safety 
standards for nursing homes and in federal and state oversight. To 
improve federal oversight of state fire safety activities and better 
ensure the adequacy of federal fire safety standards, we recommended 
that the Administrator of CMS ensure thorough investigations are 
conducted following multiple-death nursing home fires so that fire 
safety standards can be reevaluated and modified where appropriate. In 
response to our study, CMS developed and issued a standardized 
procedure to ensure that both state survey agencies and its own staff 
take appropriate action to investigate health facility fires that 
result in serious injury or death. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-660] 

1.16.A. Developing a Strategy to Ensure an Appropriate Workforce: 

In June 2004, we recommended that the Substance Abuse and Mental Health 
Services Administration develop a detailed succession strategy to 
ensure that it has the appropriate workforce to carry out its mission. 
We reported that it had not developed a detailed succession strategy to 
prepare for the loss of essential expertise and to ensure that the 
agency continues to have the ability to fill key positions. In February 
2005, the Substance Abuse and Mental Health Services Administration 
developed a succession planning document that includes strategies 
related to recruitment, the selection process, training, and leadership 
development. The document also includes strategies for anticipating the 
loss of or additional coverage needed for critical positions and job 
functions. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-683] 

1.17.A. Monitoring States' Inventories of Childhood Vaccines: 

The Centers for Disease Control and Prevention has implemented our 
recommendation to develop a strategic plan that includes steps to 
monitor childhood vaccine supplies in state depots. The agency's 
strategic plan for the expansion of the pediatric vaccine stockpiles 
indicates that the agency will "Monitor state inventory levels on a 
routine basis." Specifically, its National Immunization Program 
requires states and other grantees to report, via automated software or 
monthly reports, the total number of doses of 18 childhood vaccines 
that are in stock at the state's central and secondary depots. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-987] 

1.18.A. Counting Clinical Research Expenditures at the National 
Institutes of Health (NIH): 

In a 2002 report describing NIH's implementation of the Clinical 
Research Enhancement Act of 2000, we stated that NIH's reports of 
clinical research expenditures did not include precise figures because 
the process of counting clinical research dollars varied widely across 
NIH's institutes and centers. We recommended that NIH strengthen its 
tracking and reporting of intramural and extramural expenditures for 
clinical research by developing and implementing a consistent, 
accurate, and practical way for all institutes and centers to count 
intramural and extramural clinical research expenditures. NIH 
implemented this methodology in order to respond to our recommendation, 
to make the reporting of clinical research transparent and rational, 
and to provide accurate and consistent data. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-965] 

1.19.A. Estimating Tobacco Retailer Violation Rates: 

To help ensure the quality of states' estimates of tobacco retailer 
violation rates, we recommended that the Secretary of HHS direct the 
Administrator of the Substance Abuse and Mental Health Services 
Administration to help states improve the validity of their samples by 
working more closely with them; revising the inspection protocol 
guidance to better reflect research results, particularly regarding the 
ages of minor inspectors, and working with states to develop a more 
standardized inspection protocol; and ensuring that all states' 
retailer violation rates exclude invalid inspections, particularly 
those in which the ages of minors and outcomes of inspections are 
unknown. The agency reported that in addition to other activities, it 
(1) is requiring states that selected their samples from a list of 
outlets to annually report and justify the accuracy and completeness of 
their tobacco outlet lists, making site visits to help states assess 
the accuracy and completeness of tobacco outlet lists, offering 
technical assistance to states on improving the quality and validity of 
samples drawn from outlet lists, and conducting reviews of states' 
sampling frames; (2) will work with states to discontinue the use of 14-
year-olds as inspectors by 2007 and will continue to work with states 
to improve standardization of inspection protocols and carefully 
monitor changes in inspector characteristics over time; and (3) has 
instituted review protocols that require states to exclude inspections 
that do not include the age or sex of minor inspectors and the outcome 
of inspections. The agency also developed a computer system to assist 
states in estimating violation rates by using software that only 
operates if complete data sets that include the age and gender of each 
inspector and the outcome of the inspection are entered in the system, 
and it reported that in fiscal year 2005, the majority of states used 
the system to report their survey data and inspection results. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-74] 

1.20.A. Improving Processing of Premium Changes from Health Plans: 

The Trade Adjustment Assistance Reform Act of 2002 established the 
health coverage tax credit (HCTC), which pays 65 percent of the premium 
cost for qualified individuals. For the advance credit, the HCTC 
program remits its share of the premium payment directly to the health 
plan. We found that enrollees sometimes face delays in having the 
correct amount of their advance HCTC payment adjusted and paid promptly 
to their health plans if they fail to notify the HCTC program office 
when their health plans change their premiums. This problem was 
attributed largely to the time it takes for HCTC enrollees to notify 
the HCTC program of their new premiums and for the HCTC program to 
adjust the allowable premium amount. In September 2004, we recommended 
that the Commissioner of Internal Revenue encourage participating 
health plans to provide notification of changes in premiums directly to 
the HCTC program office in order to simplify payment processing and 
avoid disruptions resulting from premium changes. In its comments to 
our draft report, the Internal Revenue Service (IRS) stated that it 
agreed that accepting notification of premium changes from 
participating health plans would be an administrative improvement, and 
it would develop an action plan to address the recommendation. In 
December 2004, IRS's proposal to standardize the HCTC program's ability 
to process bulk premium changes made upon a health plan's request was 
approved by the HCTC executive change control board. The change was 
implemented in the spring of 2005. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-1029] 

1.21.A. Improving Monitoring and Tracking of Physical Exam Programs: 

Servicemembers who leave the military and file disability claims with 
the Department of Veterans Affairs (VA) may be subject to potentially 
duplicative physical exams in order to meet requirements of both the 
Department of Defense (DOD) and VA. To streamline the process for these 
servicemembers, DOD and VA have attempted to coordinate their physical 
exam requirements by developing a single separation exam program. We 
recommended that DOD and VA develop systems to monitor and track the 
progress of implementing the single separation exam program. VA hired 
an official in November 2004 to monitor the single separation exam 
program at certain sites where VA and DOD have memorandums of 
understanding in place. This official monitors and tracks the progress 
of the single separation exam program in several ways. First, each VA 
regional office must provide a monthly report on the sites' activities. 
Included in these reports is information on the number of single 
separation exams that have been conducted. In addition, this official 
has conducted on-site evaluations at five locations and is planning to 
make seven additional site visits in the near future. The official will 
use information obtained during these site visits to develop best 
practices for other single separation exam programs and plans to 
continue to conduct site visits in the future. DOD uses VA's tools and 
its database to monitor the progress of single separation examination 
sites. Each month, DOD reviews VA's database to determine where a 
program is in place. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
05-64] 

1.22.A. Supporting DOD's Implementation of a Uniform Pharmacy and 
Tiered Co-payment System: 

In a 2001 report, we recommended that the Secretary of Defense complete 
the development and implementation of a formulary of brand-name drugs 
applicable to defense pharmacy programs, including the use of tiered 
retail and mail order pharmacy co-payments. A formulary is a list of 
drugs that health care organizations encourage or require their 
providers to use when they write prescriptions for patients, thus 
allowing the organizations to secure better prices for those drugs. DOD 
concurred with the recommendation and published a notice in the Federal 
Register that it was amending regulations to implement a uniform 
formulary drug list for DOD's Military Health Care System. The 
amendment states that the pharmacy benefits program, which includes the 
uniform formulary and an associated tiered co-payment structure, is 
applicable to all of the uniformed services. Under a tiered system, the 
co-payment borne by beneficiaries is generally lower for drugs on the 
uniform list of formulary drugs and higher for drugs not on the list. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-588] 

1.23A. Improving VA and DOD Capabilities to Electronically Order 
Medications and Perform Drug Interaction Checks: 

In 2002, we recommended that VA and DOD require providers to use 
computerized order entry of medications for shared patients where it is 
available. DOD agreed with this recommendation, and a pilot project is 
ongoing between DOD and VA in Hawaii in which electronic medication 
orders will be placed in the DOD system and electronically pushed to 
the VA system. The first phase is operational and allows DOD's 
Composite Health Care System providers to order prescriptions for 
dispensing at the VA Medical Center Honolulu pharmacy. Development of 
the second phase began in September 2004 and will allow VA Medical 
Center Honolulu providers to order prescriptions for dispensing at 
DOD's Tripler Army Medical Center. The interface system was developed 
on the legacy Composite Health Care System. The pilot system will be 
modified to work on Composite Health Care System II, which began 
worldwide deployment in January 2004. In the same report, we 
recommended that the agencies develop the capability to perform a 
comprehensive drug interaction check that uses medication information 
from all VA and DOD facilities and mail order operations and DOD's 
network pharmacies. According to DOD, the departments are exploring 
alternatives to best meet the legislative requirements for achieving a 
"real-time interface, data exchange, and checking of prescription drug 
data of outpatients and using national standards for the exchange of 
outpatient medication information." In June 2005, DOD reported that DOD 
and VA have developed a pharmacy interface as part of a multiphase 
project to support the agencies' goal of complete health care data 
systems interoperability. The agencies' bidirectional pharmacy, which 
enables the electronic exchange of prescription information between two 
pharmacies--Tripler Army Medical Center and the Veteran Affairs Pacific 
Island Health Care System--represents a significant achievement in 
advancing interoperability between VA and DOD health care information 
systems. A phased-in deployment of the new system is scheduled from 
October through December 2005. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-1017] 

1.24.A. Purchasing Surgical Supplies More Economically: 

In June 2002 testimony, we reported that joint contracting for surgical 
and medical supplies could yield meaningful savings for VA and DOD. 
Specifically, we pointed out that our analysis of about 100 identical 
medical and surgical items that VA and DOD contract for separately 
indicated that joint purchasing would yield savings. We also noted that 
the future of joint procurement initiatives depends on each 
department's commitment to joint procurement. In July 2005, VA and DOD 
demonstrated a commitment to joint procurement by announcing their 
decision to standardize the purchase of nearly 200 general surgical 
instruments throughout the military and VA health care systems--an 
action that should save about $180,000 annually. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-872T] 

1.25.A. Improving VA's Oversight Policy for Community Nursing Homes: 

In July 2001, we reported on weaknesses in VA's oversight of community 
nursing homes under contract to VA. Among other issues, we reported 
that VA lacked a comprehensive policy for overseeing community nursing 
homes. We recommended that VA establish a policy for overseeing all 
community nursing homes that may rely on annual state inspections and 
comparative reviews to assess the sufficiency of state survey data. In 
response to our recommendation, VA has established such a policy, as 
outlined in its community nursing home oversight procedures handbook, 
dated June 4, 2004. This handbook provides a protocol for conducting 
community nursing home oversight, relying on initial and annual state 
reviews, monthly site visits, and a comparative review by VA to assess 
the sufficiency of state surveys. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-01-768] 

1.26.A. Providing Guidance for VA and DOD Health Resource Sharing: 

In 2000, we suggested that the Congress provide guidance and direction 
to VA and DOD to further encourage the sharing of health care 
resources. Through the National Defense Authorization Act of Fiscal 
Year 2003, the Congress directed VA and DOD to (1) develop and publish 
a joint strategic vision statement and a joint strategic plan to shape, 
focus, and prioritize the coordination and sharing efforts among 
appropriate elements of the two departments; (2) establish a DOD-VA 
Health Executive Committee to recommend to the secretaries the 
strategic direction for the joint coordination and sharing efforts 
between and within the two departments; (3) establish a joint 
incentives fund program to provide incentives to implement, fund, and 
evaluate creative coordination and sharing initiatives; and (4) 
establish a health care resources sharing project to serve as a test 
for evaluating the feasibility, the advantages, and the disadvantages 
of measures and programs designed to improve the sharing and 
coordination of health care resource sharing. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-52] 

1.27.C. Highlighting Increasing Financial Burden of Long-term Care 
Spending: 

In an April 2005 testimony, we reported that projected spending for 
long-term care services for the elderly could nearly quadruple from 
2000 through 2050. Public payers primarily finance the cost of long-
term care services, especially the Medicaid program, which is one of 
the largest funding sources. Projected increases in long-term care 
spending have significant implications for federal and state budgets, 
as future spending is expected to also rely heavily on public payers. 
We highlighted these growing concerns, which will be fueled in part by 
the aging baby boom generation, and identified several areas that the 
Congress needs to consider as it shapes any reform proposals. Our 
information helped focus congressional and public attention to the 
increasing federal and state budgetary issues due to long-term care and 
will continue to inform future congressional debate as the Congress, 
states, and the American public search for solutions to this growing 
problem. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-564T] 

1.28.C. Ensuring Seamless Transition from DOD to VA Health Care: 

In our work to ensure that servicemembers who leave active duty 
(veterans) are able to make a smooth transition from DOD health care 
services to VA health care services, we found that DOD does not have 
specific procedures for routinely transmitting to VA health information 
on servicemembers who are likely to be discharged from the military 
because of their medical conditions and may seek VA health care 
services in the future. Additionally, DOD does not share information on 
the responses to the postdeployment health assessment questionnaire for 
Reserve and National Guard members who have left active duty. This 
questionnaire is completed following deployment to a location outside 
of the United States, including locations involved in Operation 
Enduring Freedom and Operation Iraqi Freedom. VA officials state that 
aggregate information from the postdeployment health assessment 
questionnaires would help VA plan for the future health care needs of 
these new veterans. The Congress used our findings to hold hearings and 
to stress the need to improve the exchange of medical information from 
DOD to VA. In response to our findings, VA and DOD continue to work 
together to identify the medical information that is needed to ensure a 
smooth transition from DOD to VA health care services. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-722T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-1052T] 

1.29.C. Improving VA's Patient Safety Program: 

The Institute of Medicine's estimate that 98,000 patients die each year 
from accidents at U.S. hospitals makes patient safety a critical issue. 
We measured clinicians' familiarity with, participation in, and 
cultural support of VA's Patient Safety Program at four VA facilities. 
We found that three-fourths of the clinicians were familiar with the 
concepts of teams investigating causes of unintentional adverse events. 
In addition, at one facility, the culture blocked participation for 
many clinicians. Clinicians articulated that a culture change could be 
stimulated by VA leadership actions and open communication. VA will 
implement an action plan to improve patient safety at its facilities by 
setting goals to increase staff familiarity with the major concepts of 
the program, participating in teams that investigate causes of 
unintentional adverse events, and promoting cultural support of the 
program--to the extent that each facility has established mutual trust 
and fostered comfort in reporting close calls and adverse events. In 
addition, VA plans to develop tools for measuring these goals by 
specific facility and to develop interventions when goals have not been 
met. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-83] 

1.30.C. Identifying Needed Changes in Managing Medicare Appeals: 

We identified weaknesses in a plan prepared by the Social Security 
Administration (SSA) and HHS regarding the transfer of the Medicare 
appeals workload from SSA to HHS. Our work found that important details 
concerning the transfer--mandated by the Congress to be completed by 
October 1, 2005--were omitted from the plan. We recommended that the 
Secretary of HHS and the Commissioner of SSA take steps to complete a 
substantive and detailed transfer plan that includes contingency 
provisions. At the request of the Senate Committee on Finance, we 
continued to monitor both agencies' efforts and subsequently identified 
three areas of concern--maintaining appellant access, meeting critical 
human resource needs, and resolving operational issues. The Senate 
Committee on Finance relied on our work in urging the agencies to take 
action to ensure that Medicare beneficiaries have access to a fair and 
accessible appeals process. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-45], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-703R] 

The education and protection of the nation's children: 

1.31.A. Using Student Data for Commercial Activities: 

As required under the No Child Left Behind Act, the Department of 
Education (Education) addressed pupil privacy by notifying states and 
school districts of the requirements to develop policies that cover the 
collection, disclosure, and use of personal data about students for 
commercial purposes and that include requirements for parental 
notification and permission. In 2004, we reported that many school 
districts had not developed effective policies that corresponded to 
state and federal law and others did not understand or were unaware of 
the guidance. After we recommended that Education take additional 
action to help districts implement effective policies, the agency 
worked with state education associations to provide training on the new 
requirements and discussed them at a National School Boards Association 
conference. Education also plans to disseminate the policy requirements 
to all states affiliated with the National School Boards Association 
and through the association's free e-mail service that provides 
participants with weekly updates on legal issues. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-810] 

1.32.A. Improving Compliance with the Individuals with Disabilities in 
Education Act: 

The Individuals with Disabilities Act requires states to provide 
educational and related services that facilitate learning to students 
with disabilities based on their individual needs. We reported that 
Education's system for resolving noncompliance with the act often takes 
several years and that some of the data used to monitor state 
compliance are weak. We recommended that Education improve its system 
of resolving noncompliance by shortening the amount of time it takes to 
issue a report of noncompliance, by tracking changes in response times 
under the new monitoring process, and by developing and providing 
states with more guidance for collecting data. As a result, Education 
instituted an improved monitoring process and created a database to 
facilitate tracking. The agency also provided guidance to states and 
developed a state survey for better data collection, offering states 
assistance with analyzing and reporting the data. Education also 
created the Center on Secondary, Transition, and Postsecondary School 
Outcomes for Students with Disabilities to help states implement and 
improve data systems to measure outcomes for students with disabilities 
and met with states to help them develop outcome measurement systems to 
improve special education data reporting. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-879] 

1.33.A. Strengthening Mediation to Resolve Disputes over Special 
Education Services: 

School districts and families may disagree about what kinds of special 
services, if any, are needed for children and how they should be 
provided. Some disagreements that cannot be resolved quickly become 
formal disputes that can be costly, both financially and in terms of 
the harm done to relationships. We found that officials in several 
states emphasized the importance of using mediation, a voluntary 
process, to resolve these disputes. Mediation was successful in 
achieving agreements, strengthening relationships and fostering 
communication between families and educators, resolving disputes more 
quickly, and reducing costs. However, the degree to which mediation was 
offered and used varied among the states we visited, and mediation 
agreements were not always implemented or enforced. The Congress noted 
that our report showed that the incidence of formal dispute resolution 
mechanisms, including mediation, has been generally low relative to the 
number of children with disabilities and included an amendment to the 
Individuals with Disabilities Education Improvement Act requiring 
mediation agreements to be executed through a legally binding 
agreement, enforceable in any state court of competent jurisdiction or 
in a district court of the United States. The act was reauthorized in 
December 2004. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-897] 

1.34.A. Clarifying Guidance on Using the Wage Withholding Process to 
Collect Child Support Payments: 

Changes to the wage withholding process can reduce the number of 
noncustodial parents who have their wages improperly withheld. In a 
2002 report, we reviewed the wage withholding form used by private 
firms and state child support enforcement agencies. HHS's Office of 
Child Support Enforcement, which establishes enforcement policies and 
guidance, issued a wage withholding form, along with guidance, for 
employers to use for automatically deducting amounts from an employee's 
wages or income to pay a debt or child support obligation. The office 
considers wage withholding the most effective tool for collecting child 
support, reporting that it is responsible for over 60 percent of 
successful collections. However, we found that the form and guidance 
made it difficult for employers to determine whether a private firm 
sent the form or if an appropriate authority had approved wage 
withholding. As a result, wages were inappropriately withheld from 
noncustodial parents. Consequently, we recommended specific changes to 
the form and guidance. The Office of Child Support Enforcement 
established a task group of stakeholders in the child support 
enforcement community to address these recommendations, and the group 
made several changes and clarifications to the form and guidance that 
resolved our concerns. The office subsequently informed state and 
tribal agencies administering child support enforcement plans of the 
revised form and guidance and stated that all public and private firms 
should use the revised form immediately. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-349] 

1.35.C. Influencing Temporary Changes in Subsidy Payments for 9.5 
Percent Loans: 

To encourage lenders to make student loans under the Federal Family 
Education Loan Program, the federal government guarantees lenders a 
statutorily specified rate of return--called lender yield. Some lenders 
may issue tax-exempt bonds to raise capital to make or purchase loans; 
loans financed with such bonds issued prior to October 1, 1993, are 
guaranteed a minimum lender yield of 9.5% (hereafter called 9.5% 
loans). When the interest rate paid by borrowers is less than the 
lender yield, the government pays lenders the difference--a subsidy 
called special allowance payments. In September 2004, we reported that 
subsidy payments for 9.5% loans had increased significantly in recent 
years, rising from $209 million in fiscal year 2001 to over $600 
million in fiscal year 2004. We identified loopholes in legislation and 
regulatory guidance that enabled lenders to maintain or increase the 
amount of 9.5% loans they held in three ways--recycling, refunding 
bonds, and transferring. We suggested that the Congress change the 
yield for loans made or purchased in the future with the proceeds of 
tax-exempt bonds issued prior to October 1, 1993, and any associated 
refunding bonds, to better reflect market interest rates. As a result 
of our work, the Congress enacted the Taxpayer-Teacher Protection Act 
in October 2004, which temporarily changed the lender yield on certain 
loans to one that reflects market interest rates. This legislative 
change will save the government $285 million in fiscal years 2005 and 
2006. In addition, as part of the Higher Education Act reauthorization, 
the Congress passed legislation in July 2005 that would permanently end 
the minimum 9.5 percent yield and could avert millions in future 
subsidy payments. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-
1070] 

1.36.C. Improving the Oversight and Monitoring of Head Start Grantees: 

Through a series of testimonies and reports, we assisted the Congress 
and HHS's Administration for Children and Families in identifying major 
risk areas in the Head Start program and crafting solutions to address 
those risks. For example, we reported on the lack of reliable data on 
enrollment in Head Start centers throughout the country. We also 
highlighted gaps in Head Start's oversight framework that put federal 
funds at risk and can reduce the quality or amount of services that the 
program can provide to poor children and their families. The agency 
does not have a comprehensive risk assessment strategy that would allow 
it to identify weaknesses in grantees that could limit the program's 
ability to achieve its objectives. Further, the agency does not have a 
process in place to ensure that oversight reviews are conducted in 
accordance with the framework it designed to assess grantee compliance 
with program and financial management requirements. Also, the agency 
does not effectively use grantees' financial reports and audits in its 
day-to-day monitoring activities to identify high-risk grantees and 
resolve their problems. HHS is now taking steps to address these and 
other gaps we identified. Once these gaps have been addressed, we 
recommended that the Administration for Children and Families make 
greater use of its authority to seek competition in communities that 
are currently served by poorly performing Head Start grantees. The 
agency plans to work with the Congress to seek changes in the law that 
would give the Secretary more flexibility in replacing poorly 
performing grantees. Head Start reauthorization bills incorporated 
measures to define underenrollment and prescribed methods to ensure 
that underenrollment is promptly addressed. The bills also provide the 
Secretary with more flexibility to seek competition in those cases 
where a community has been served by a high-risk grantee. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-17], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-176], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-465T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-473T] 

The promotion of work opportunities and the protection of workers: 

1.37.A. Improving SSA's Disability Claims Process: 

In response to several of our recommendations, SSA took action to 
improve its disability claims decision-making process. SSA developed 
and implemented the Case Processing and Management System, a nationwide 
system to support case processing operations, which is intended to 
speed up hearings and appeal decisions. To further increase efficiency, 
SSA has established electronic folders for use at all levels. SSA also 
designated a lead component agency to compile racial bias and 
misconduct complaint information filed against administrative law 
judges, who make disability determination decisions at the hearings 
level. SSA created a form to capture key information on racial bias and 
misconduct, and now stores the data in an electronic database, as we 
recommended. As a result, SSA can more readily identify patterns of 
racial bias and misconduct in complaints against administrative law 
judges and improve its assessment of the judges' decision-making 
accuracy. In addition, we reported that applicants had difficulty 
understanding the five-step disability determination process and the 
importance of providing SSA with information about how their disability 
prevented them from substantial gainful activity. In compliance with 
our recommendations, the agency's Web site now includes clarifying 
information on all steps in the process and makes its interactive adult 
disability report more readily available to all claimants. These 
efforts can expedite the claims process and help SSA make the right 
decisions on the disability process as early as possible. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-322], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-831], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-495] 

1.38.A. Helping to Expand Apprenticeship Programs: 

In a 2001 report, we found that DOL lacked a systematic process to 
expand apprenticeship--an employee training program administered by 
DOL--and did not systematically locate resources for apprenticeships 
needing funds. Employers' negative perceptions of the program also 
impeded its use. We recommended that DOL work with state apprenticeship 
councils and others to identify occupations that need skilled labor and 
could support apprenticeships and to develop plans to encourage 
apprenticeship in these occupations; share information about 
apprenticeships, especially among employers in occupations that 
traditionally have not used apprenticeship; and help identify funding 
to develop apprenticeships. In addressing these concerns, DOL 
implemented the Advancing Apprenticeship Initiative, which trained 
staff to work in high-growth industries new to apprenticeship, and 
developed marketing materials tailored to specific industries. DOL 
approved several apprenticeships in these industries. The agency also 
established the federal Advisory Committee on Apprenticeship to foster 
communication among business, labor, and the public sector and to 
advise DOL. Additionally, DOL used the Internet to share information 
about occupations that were new to apprenticeships. Finally, DOL 
leveraged $18.5 million in federal funds for marketing and pilot 
projects in growing industries and secured almost $5.5 million in 
private funds to stimulate apprenticeship development. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-940] 

1.39.A. Improving Oversight at the Mine Safety and Health 
Administration: 

DOL's Mine Safety and Health Administration improved oversight of its 
programs through changes to its operations, guidance, and data 
collection efforts, addressing many of the concerns raised in our 2003 
report. We found weaknesses (1) in the agency's oversight of 6-month 
district inspections, timely correction of hazards identified during 
inspections, guidance to inspectors, and data collection to evaluate 
performance and prevent future accidents and (2) in the agency's 
preparation for a likely shortage of inspectors in the future. 
Subsequently, the agency implemented a process for quarterly review of 
key inspection data to monitor the status of timely abatement of 
violations; increased the focus of its accountability program on core 
inspection activities, including the correction of hazards; adopted 
measures and standard operating procedures to improve the monitoring of 
6-month reviews; stepped up its reviews and evaluation of inspection 
data and, when deficiencies were identified, took corrective action; 
and developed national procedures to ensure accident investigation data 
are entered into its Accident Investigation database. The agency also 
expedited the hiring process for inspectors and expanded recruitment 
possibilities by using a new competency-based recruitment approach that 
provides more flexibility and fills vacancies much faster. In addition, 
in 2005, the agency identified ways to improve data collection from 
contractors to better track fatalities, injury rates, and trends and 
revised its General Inspections Procedures Handbook, which is now 
available on each inspector's computer for ready access to all the 
guidance needed to conduct an inspection. Such efforts can strengthen 
oversight to better protect the safety and health of coal miners. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-945] 

1.40.A. Improving Coordination to Enhance Charitable Contributions in 
Disasters: 

Many large charities reported raising billions of dollars to aid 
survivors of the September 11, 2001, terrorist attacks. We found that 
questions about how best to use the funds as well as service delivery 
difficulties complicated charities' responses to this disaster. We 
recommended that the Federal Emergency Management Agency (FEMA) convene 
a working group to implement strategies for future disasters. With 
FEMA's encouragement, national voluntary agencies developed the 
Collaborative Assistance Network (Network) to promote a coordinated 
approach to providing disaster relief services. The Network seeks to 
identify ways to coordinate more effectively and efficiently with 
voluntary and government agencies in catastrophic and major disaster 
events. Work groups consisting of representatives from national 
voluntary agencies are seeking to (1) ensure access to available 
services by sharing service delivery information and client data and 
(2) streamline the intake process and minimize the administrative 
burden by identifying common application form requirements and accepted 
standards for document verification. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-259] 

1.41.C. Improving Enforcement of Fugitive Felon Provisions: 

To better implement the fugitive felon provisions of the Personal 
Responsibility and Work Opportunity Reconciliation Act, we recommended 
that the Secretary of HUD test the feasibility and effectiveness of 
routinely matching its nationwide tenant file with the National Crime 
Information Center arrest warrant database to help identify tenants in 
housing assistance programs nationwide who are fugitive felons and 
subject to eviction. According to a HUD Office of Inspector General 
(IG) semiannual report to the Congress, the IG established the Fugitive 
Felon Initiative to assist HUD in responding to this recommendation. 
Under this initiative, the IG began computer matching its nationwide 
tenant file with the U.S. Marshals Service's arrest warrant database, 
the Federal Bureau of Investigation's National Crime Information Center 
arrest warrant database, and the wanted person data maintained by state 
and local law enforcement agencies. In August 2005, HUD's IG reported 
that the initiative had resulted in the apprehension of over 5,900 
wanted felons. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-716] 

1.42.C. Addressing the Health Problems of Nuclear Weapons Workers: 

We assisted the Congress in crafting major improvements to a program 
intended to compensate individuals who worked in nuclear weapons 
facilities and developed illnesses due to exposure to hazardous 
materials. We identified program features that would likely lead to 
inconsistent benefit outcomes for claimants, in part because the 
program depended on varying state workers compensation systems to 
provide benefits. We also presented several options for improving the 
consistency of benefit outcomes and a framework for assessing these 
options. As a result, the Congress overhauled the program as part of 
the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005. This legislation replaced the program with a new one that 
federalizes the payment of benefits and provides a schedule of uniform 
benefit payments for eligible individuals. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-249T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-298T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-515], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-516], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-571T] 

1.43.C. Improving Transitional Assistance to Seriously Injured 
Servicemembers: 

In our work on transitional assistance to seriously injured 
servicemembers and Reserve and National Guard members, including 
vocational rehabilitation and employment services, we found that more 
collaboration between VA and DOD is needed to expedite services for 
seriously injured servicemembers. We also found that enhanced services 
could improve transition assistance for Reserve and National Guard 
members. The Congress used our findings to hold hearings and highlight 
the need to improve these services. In response to our recommendation, 
VA and DOD have taken initial steps, including signing a memorandum of 
understanding, to lay the groundwork for sharing data and improving 
their assistance to seriously injured servicemembers and Reserve and 
National Guard members as they transition to civilian life. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-167], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-544] 

A secure retirement for older Americans: 

1.44.A. Improving Management at the Employee Benefits Security 
Administration: 

Our report on the DOL's Employee Benefits Security Administration's 
management resulted in improvements to strengthen safeguards for 
participants in employee benefit plans protected by the Employee 
Retirement Income Security Act. In studying concerns about the agency's 
enforcement program, we identified weaknesses in the agency's 
enforcement strategy, investigative process, and human capital 
management. We made recommendations to address the lack of information 
needed to assess benefit plans' noncompliance with the act, lack of 
coordination to share best practices information on investigations, 
lack of a centrally coordinated quality review process to ensure the 
proper conduct of investigations, and failure of the agency to consider 
succession planning and workforce retention as part of its human 
capital strategy. The agency subsequently issued a report on a 
noncompliance study and initiated additional studies that provided the 
information needed to identify compliance improvements. The agency 
established a Best Practices Sharing Team that developed a Web site on 
which investigators can share investigative plans and practices, and 
the agency developed a process to review case quality that ensures the 
independence of the case reviewer. In addition, the agency assessed its 
workforce retention and training needs and included this analysis in 
its Human Capital Strategic Management Plan, which addresses areas such 
as skill shortages, future staffing needs, and competency requirements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-232] 

1.45.A. Avoiding Disproportionately Adverse Effects on Pension Plan 
Participants from Securities and Exchange Commission (SEC) Regulations: 

Market timing by mutual fund investors has negatively affected pension 
plan participants and other long-term investors. In an effort to stop 
this abusive practice, SEC issued proposed regulations that would 
impose mandatory redemption fees on certain mutual fund transactions. 
We analyzed the potential effects of these proposed regulations on 
pension plan participants and, in a 2004 report, concluded that it 
could result in plan participants paying fees intended to deter market 
timing, even where there is clearly no intent to engage in abusive 
trading. Many such transactions are automated and, therefore, the plan 
participant would have no control over whether he or she is assessed a 
redemption fee. Thus, the proposed rule could affect plan participants 
more adversely than other investors. We recommended that SEC's 
Commissioners change the proposed regulations to prevent pension plan 
participants from being more adversely affected than other investors. 
SEC addressed this concern in a final rule issued in March 2005 that 
made the fees no longer mandatory. In this way, mutual fund companies 
may exempt any pension plan transaction where there is clearly no 
intent to engage in market timing. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-799] 

1.46.A. Strengthening the Integrity of the Social Security Card and 
Other Identification Documents: 

We recently reported on weaknesses in SSA's enumeration processes and 
found that SSA's policies for verifying birth certificates for children 
under age 1 and issuing replacement Social Security cards were weak and 
could expose SSA to fraud. Because Social Security numbers are central 
to many aspects of American life, they are vulnerable to fraud and 
financial crimes and, thus, sought by identity thieves. We also 
reported on the verification of identity documents for drivers' 
licenses, noting that visual inspection of key documents lent itself to 
possible identity fraud. To demonstrate this, our investigators were 
able to obtain licenses in two states using counterfeit documents and 
the Social Security numbers of deceased persons. Subsequently, the 
Congress included provisions in the Intelligence Reform and Terrorism 
Prevention Act mandating that SSA implement regulations for 
independently verifying birth documents for all field office Social 
Security number applicants, limit the number of replacement cards 
issued to individuals, and add death and fraud indicators to Social 
Security number verification systems for state agencies issuing 
drivers' licenses and identity cards. In addition, the Congress passed 
the Real ID Act of 2005, which established federal identification 
standards for state drivers' licenses and other such documents, and 
mandated third-party verification of identity documents. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-11], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-768T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-1099T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-59]. 

1.47.C. Addressing the Challenges of Pension Reform: 

Numerous reports and testimonies in 2005 urged the Congress to take 
timely action to enact comprehensive pension reform. The goal of such 
reform is to reduce the financial risks to the Pension Benefit Guaranty 
Corporation and the taxpayer, as well as to put the defined benefit 
system on a more stable financial footing. We urged that the Congress 
consider, for example, revisions to the existing rules governing the 
funding of defined benefit plans so that plans would be better funded 
and thus more able to meet benefit promises to plan participants. We 
also urged that there be changes to the Pension Benefit Guaranty 
Corporation insurance premium structure in how shutdown benefits are 
funded by plan sponsors, and that the Congress address the legal 
uncertainty concerning hybrid pension plans like cash balance plans. 
All of these key elements have been included in legislation in both the 
House and the Senate. In addition, we organized a Comptroller General 
forum involving experts and policymakers to discuss the many aspects of 
pension reform. The discussion and ensuing report have contributed to 
the Congress's and the public's understanding of the issues in this 
high-risk area and helped shape the proposed legislation. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-360T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-578SP], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-794T] 

An effective system of justice: 

1.48.A. Limiting Terrorists' Access to Guns: 

In a January 2005 report, we identified a number of potential problems 
in the procedures that the Federal Bureau of Investigation and 
applicable state agencies follow when a potential gun purchaser is 
identified as a valid match with a terrorist watch list record. While 
being on the watch list does not, in itself, disqualify an applicant 
from purchasing a gun, it is extremely important that steps are taken 
to ensure that the applicant does not have other disqualifying factors. 
These other factors could include a felony conviction or illegal alien 
status. The Federal Bureau of Investigation and states are allowed to 
share information with other law enforcement officials in order to 
validate the match and to ensure that other factors that would prohibit 
the sale are fully investigated. We made a number of recommendations 
intended to ensure that all allowable information is shared in cases of 
potential matches with the terrorist watch list and that states handle 
these cases consistently. Our recommendations have been adopted. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-127] 

1.49.C. Improving Immigration Enforcement: 

In several reports, we stressed that the Department of Homeland 
Security (DHS) should use performance information and employee feedback 
to manage its programs and operations. We reported that the federal 
response to alien smuggling could be improved if DHS tracked the 
results of alien smuggling referrals by U.S. Customs and Border 
Protection to U.S. Immigration and Customs Enforcement, that decisions 
about how to allocate scarce DHS resources could be improved if DHS 
developed additional measures on the performance of its Border Patrol-
operated interior traffic checkpoints, and that future DHS 
transformations and communications strategies could be improved if DHS 
sought feedback from employees about their ideas and concerns. DHS 
concurred with our recommendations in these areas, and we believe that 
their implementation will contribute to DHS's effectiveness in 
enforcing the nation's immigration laws and addressing long-standing 
management challenges. We also contributed to congressional debate by 
describing immigration-related management challenges confronting DHS, 
quantifying the costs of incarcerating criminal aliens, questioning the 
usefulness of an annual address reporting requirement for aliens, and 
describing how DHS has addressed immigration enforcement objectives. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-66], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-81], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-204], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-305], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-337R], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-435] 

1.50.C. Improving Evaluation of Contractor Performance: 

In a June 2005 report, we recommended that DHS's U.S. Citizenship and 
Immigration Services (USCIS) take steps to ensure that specific 
performance measurement requirements are finalized before awarding new 
performance-based contracts for operating USCIS call centers and that 
performance evaluation records are properly maintained. While 
discussing these issues during the course of our work, USCIS officials 
told us they planned to take the corrective actions. Further, in its 
formal comments on our draft report, DHS generally agreed with our 
recommendations, noting that a draft solicitation for new contracts 
specifically identified nonnegotiable performance requirements and that 
written records of performance assessments and performance evaluation 
meetings will be maintained and readily available for review by 
interested parties. These actions will improve USCIS's efforts in 
evaluating the performance of contractor-operated call centers and 
encourage quality services at the call centers. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-526] 

1.51.C. Providing Evidence regarding Effectiveness of Adult Drug 
Courts: 

With 1,200 operating drug courts in 2004, and an additional 500 being 
planned, it is extremely important that their effectiveness be 
assessed. Drug court programs generally allow some defendants with 
substance abuse problems to enter these programs as an alternative to 
prison or probation. The combination of court supervision and substance 
abuse treatment is intended to reduce recidivism and drug abuse relapse 
compared to more traditional sentencing. Our review of 27 
methodologically strong evaluations of drug courts provided evidence 
supporting drug courts as a means to reduce recidivism. Data concerning 
relapse was less clear for several reasons. While our review did not 
allow us to pinpoint specific aspects of drug courts that lead to their 
success, it was clear that program actions that help participants stay 
in and complete the program were linked to recidivism reductions. This 
is an important piece of information, given that the 2005 National Drug 
Control Strategy calls for an increase in federal drug court spending 
from about $40 million to about $70 million in 2006. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-219] 

The promotion of viable communities: 

1.52.A. Improving Oversight of Federal Housing Administration (FHA) 
Lenders: 

In a November 2004 report, we recommended ways that the Department of 
Housing and Urban Development (HUD) could improve its oversight of 
lenders participating in FHA's single-family mortgage insurance 
programs. Due in part to poor lender oversight, we have designated 
HUD's single-family mortgage insurance programs as high risk. In 
response to our report, HUD (1) issued updated standards for granting 
FHA lenders the authority to underwrite loans and determine their 
eligibility for FHA mortgage insurance without HUD's prior review, (2) 
revised the system used to evaluate the underwriting quality of loans 
insured by FHA so that it better reflects the risks different errors 
pose to the insurance fund, and (3) issued guidance specifying when 
action must be taken against lenders that fail to comply with FHA's 
program requirements. These changes will help HUD identify the lenders 
that pose the greatest insurance risk to the department and hold 
lenders accountable for poor performance. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-13] 

1.53.A. Reducing the Cost of Federal Subsidized Housing Projects: 

We determined that HUD had not developed the systems it needed to track 
the status of unexpended balances in its project-based Section 8 
housing program and therefore could not use this information to help 
manage the program and formulate budget requests for it. Because of our 
work, the Congress required HUD to better enforce the legislative 
provisions requiring the recapture of capital funds not being utilized 
by public housing authorities. HUD recaptured about $2.531 billion in 
fiscal year 2003, or about $2.7 billion in current dollars. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-663T] 

1.54.C. Improving First Responder Interoperable Communications: 

We noted that interoperable communications equipment was being bought 
without the fundamental first step of developing a clear, comprehensive 
plan for what needed to be communicated, to whom, and when. Without 
such a plan it was not possible to know whether the equipment purchased 
would meet defined needs. We recommended that DHS, through its grant 
guidance, encourage each state to establish a single statewide body to 
develop a single comprehensive statewide interoperability plan and that 
grant funding depend on conformance with such a plan. In its report 
accompanying the fiscal year 2006 appropriations bill, the Senate 
Committee on Appropriations directed that before grant dollars could be 
obligated for interoperable equipment, jurisdictions must certify that 
they have implementation plans that include governance structures, 
policies, procedures, training, and planned exercises. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-231T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-740], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-1057T] 

1.55.C. Redefining Rural: 

We assessed how a change in the definition of rural would affect the 
U.S. Department of Agriculture's (USDA) Rural Housing Service in 
meeting rural housing needs. By (1) presenting a time line of how the 
Congress had increased population limits over the past 50 years, (2) 
building on our prior work on Rural Housing Service management issues 
and how changes in technology and demographics have linked rural to 
urban areas, and (3) using geographically coded national data to show 
that such questionable eligibility determinations also exist 
nationwide, we were able to suggest that the Congress consider changing 
to a density-based system as a basis for making more equitable rural 
housing program eligibility determinations. The Rural Housing Service's 
Administrator agreed (1) that it does not make sense to use outdated 
boundaries, (2) to take our suggestion to work with USDA's Economic 
Research Service to develop a density-based system, (3) to propose 
legislative changes, and (4) to fix the data reliability problems we 
identified. The changes that the Administrator has agreed to make will 
help the Rural Housing Service use its scarce resources more 
efficiently and allocate its funding more fairly and equitably in 
accord with the intent and purposes of rural housing programs. The new 
rural definition could also have major implications for other federal 
agencies that allocate resources by population or location. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-110] 

Responsible stewardship of natural resources and the environment: 

1.56.A. Preparing for Asian Soybean Rust: 

Beginning in February 2005, we raised concerns regarding USDA's 
preparations for Asian soybean rust, which is a harmful, quick-
spreading fungal disease that first appeared in the United States in 
2004 and threatens America's $16 billion annual soybean production. As 
a result of our recommendations, USDA (1) developed a coordinated 
federal-state plan to manage the disease; (2) provided soybean 
producers with additional guidance on farming practices and 
documentation required to file an Asian soybean rust insurance claim; 
(3) authorized the use of about $1.2 million in contingency funding to 
help monitor, report, and manage the disease during the 2005 growing 
season; and (4) agreed to revise its insurance data system so that it 
can collect information on the number and dollar amounts of claims 
submitted and paid as a result of Asian soybean rust. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-668R] 

1.57.A. Improving Transparency of Water Bank Operations: 

In March 2005, we reported that the Bureau of Reclamation's Klamath 
Project water bank management and accounting practices lacked 
transparency, creating confusion and doubt among stakeholders such as 
farmers, environmentalists, and tribes. A credible water bank is 
essential to easing conflicts over water use among these groups by 
increasing river flows for salmon while ensuring irrigation water for 
farmers under ongoing drought conditions. Acting on our recommendation, 
the bureau improved the information provided to stakeholders by 
creating a water bank Web page, updated biweekly, with information on 
how much water has been delivered by the water bank, the current water 
delivery schedule, links to real-time water flow gauges and other 
information, and documents relevant to water bank management. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-283] 

1.58.A. Improving the Bonneville Power Administration's (BPA) Financial 
Condition: 

BPA, which markets 45 percent of the electric power consumed in the 
Pacific Northwest, experienced significant financial problems in 2001 
and 2002 while substantially increasing its electric power rates. BPA's 
open-ended obligation to provide power to the region was the primary 
cause of these rate increases. In response to our recommendations, BPA 
agreed to limit the power it sells at its lowest rate to the amount 
generated by the Federal Power System and to sell any additional power 
at rates that reflect the cost of generating or acquiring that power. 
These rate policies will help ensure that BPA remains competitive in 
the changing electricity industry and reduce the risk of BPA defaulting 
on its Treasury debt. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
04-694] 

1.59.A. Realizing Financial Benefits in the Environmental Protection 
Agency's (EPA) Superfund Program: 

During the past few years, we have noted that opportunities exist for 
EPA to recover unspent funds from inactive contracts under its 
Superfund program--established in 1980 to locate, investigate, and 
clean up the worst hazardous waste sites nationwide. In 2001, we 
developed a method for targeting potential deobligations and shared 
this approach with EPA. During our fiscal year 2005 budget 
justification review process, EPA acknowledged that our method for 
identifying deobligations was very useful in identifying unspent funds 
and that this method is still in use today. The deobligated funds have 
enabled the agency to address its backlog of hazardous waste sites that 
need remediation without receiving additional appropriations to conduct 
these cleanups. The financial benefits resulting from these 
deobligations in fiscal year 2005 total about $370 million. (Based on 
briefings). 

1.60.A. Reducing Nuclear Waste Cleanup Costs: 

Our work over the last 2 years helped to avoid a substantial increase 
in the cost of treating and disposing of high-level nuclear waste at 
the Department of Energy's (DOE) Savannah River Site. DOE's long-
standing plan for treating the waste was in jeopardy because of a legal 
challenge that could have resulted in the agency pursuing a 
substantially more costly treatment and disposal alternative that had 
little added environmental benefit. We recommended that DOE seek 
legislative clarification from the Congress to minimize delays and cost 
increases. In October 2004, the Congress clarified DOE's authority to 
follow its planned treatment and disposal strategy, thus avoiding a 
cost increase at the Savannah River Site of $55 billion to $60 billion. 
The cost avoidance for fiscal years 2005 through 2009 will be about 
$4.5 billion. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-593], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-930T], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-611] 

1.61.A. Improving the Security of the Plum Island Animal Disease 
Center: 

In September 2003, we found that security at the federal Plum Island 
Animal Disease Center, which contains highly contagious foreign animal 
disease pathogens, was insufficient and needed substantial improvement. 
We found that the center's physical security was incomplete, that the 
security force's response capability was limited, and that the security 
plan did not consider the possibility of a terrorist attack. In 
addition, center officials were not adequately controlling access to 
areas where pathogens are located, in part by allowing access by 
foreign scientists without security clearances. DHS, which assumed 
overall responsibility for Plum Island from USDA in June 2003, agreed 
with our assessment and recommendations. Subsequently, these 
departments have taken many actions to improve physical security and 
security planning for Plum Island, such as the addition of guards, 
security lighting, surveillance cameras, locks, alarms, and visitor 
inspections. Access to the pathogens has been restricted. Also, a 
Federal Protective Service officer has been assigned to Plum Island, 
and this step is expected to facilitate a further strengthening of the 
security response force. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-847] 

1.62.A. Protecting Our Food Supply from Deliberate Contamination: 

In 2003, we reported that USDA and the Food and Drug Administration--
the principal federal agencies responsible for ensuring food safety--
issued security guidelines to help food processors identify measures to 
prevent or mitigate the risk of deliberate contamination during food 
production. However, we reported that the majority of federal food 
safety inspectors were not receiving training on food security issues 
addressed by the guidelines. To increase the inspectors' knowledge and 
understanding of food security issues and facilitate their discussions 
about the guidelines with food processors, we recommended that such 
training be provided. This year, USDA directed its food inspectors to 
implement food security verification procedures during their routine 
food safety inspections. As part of implementing these new security 
procedures, the agency has provided training on the security guidelines 
for industry and on practical antiterrorist strategies. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-342] 

1.63.A. Reducing Overlaps and Duplication in Federal Food Safety 
Activities: 

During 2005, we continued to report and testify on the organization of 
federal food safety functions--a highly complex and fragmented system 
that stems from 30 principal laws and is administered by 15 federal 
agencies. This system results in inefficient use of resources, 
inconsistent oversight and enforcement, and ineffective coordination. 
In the past, we have recommended that the federal statutes be 
streamlined and that food safety functions be consolidated into a 
single agency. This year, our work identified overlapping and 
duplicative inspection activities conducted by USDA and the Food and 
Drug Administration at food-processing facilities that fall under the 
regulatory jurisdiction of both agencies. Although the agencies have 
entered into an agreement to make more efficient use of their resources 
and to reduce overlap and duplication, we found that they are not 
routinely communicating findings of mutual concern, such as sanitation 
problems affecting foods produced at these facilities--whether the 
foods fall under USDA or Food and Drug Administration jurisdiction. We 
recommended that the agencies ensure implementation of the agreement. 
USDA took prompt action and in June 2005 issued a directive, entitled 
Responsibilities in Dual Jurisdiction Establishments. The directive 
states that each agency's resources and experience will be used 
efficiently and that duplication of inspection effort is to be avoided. 
It also states that USDA and the Food and Drug Administration agree to 
communicate at the district office level about (1) findings of 
hazardous, contaminated, or mislabeled foods; (2) processes that may 
result in contamination or recalls; or (3) food tampering. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-213] 

1.64.A. Improving Recreation Fee Programs on Federal Lands: 

Our work over the past several years has helped the Congress to 
establish and assess the impacts of the recreational fee demonstration 
program. Under this trial program, the Congress authorized the 
Department of the Interior's National Park Service, Bureau of Land 
Management, and Fish and Wildlife Service and USDA's Forest Service to 
charge fees to visitors to, among other things, reduce the maintenance 
backlog at federal parks and historic places and protect these lands 
from the wear and tear caused by visitors. Since the program's 
inception in 1996, we have identified issues that needed to be 
addressed to improve the program's effectiveness. These issues included 
providing (1) a more permanent source of funds to enhance stability, 
since the current program had to be reauthorized every 2 years; (2) the 
participating agencies with greater flexibility in how and where they 
apply fee revenues; and (3) improvements in interagency coordination in 
the collection and use of revenue fees to better serve visitors by 
making the payment of fees more convenient and equitable and reducing 
visitor confusion about similar or multiple fees being charged at 
nearby or adjacent federal recreational sites. As a result of this body 
of work, the Congress designed and enacted the Federal Lands Recreation 
Enhancement Act, which addresses all of our reported issues, including 
providing a more permanent source of funding for the agencies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-99-7], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-RCED-99-77], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-RCED-99-101], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-00-37R], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-10], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-470], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-745T] 

1.65.A. Providing Federal Assistance to Alaska Native Villages Affected 
by Flooding and Erosion: 

We reported that while 184 out of 213 Alaska Native villages are 
affected to some extent by flooding and erosion, these villages often 
have difficulty qualifying for federal assistance to combat these 
problems. We recommended that the Denali Commission (established by the 
Congress to provide economic development services and to meet 
infrastructure needs in rural Alaska) adopt a policy to guide 
investment decisions and project designs in villages affected by 
flooding and erosion. We also identified four alternatives that could 
increase federal service delivery to the affected villages. In response 
to our findings, the Denali Commission adopted an investment policy, 
which will ensure that federal funds are expended in the most effective 
and efficient manner possible, and the Congress provided the Secretary 
of the Army authority to carry out "structural and nonstructural 
projects for storm damage prevention and reduction, coastal erosion, 
and ice and glacial damage in Alaska, including relocation of affected 
communities and construction of replacement facilities." [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-142], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-895T] 

1.66.C. Clarifying Policies on Wetlands: 

The U.S. Army Corps of Engineers (USACE) is responsible for 
implementing Section 404 of the Clean Water Act, our nation's primary 
wetlands protection program. Under this program, a property owner must 
obtain a permit from USACE before undertaking any activities that may 
degrade or destroy waters or wetlands that fall under federal 
jurisdiction. In 2004, we reported that USACE's district offices and 
staff were interpreting and applying federal regulations differently 
when determining whether a water or wetland falls under federal 
jurisdiction and that these differences might result in different 
jurisdictional decisions in similar situations. As we recommended, 
USACE is evaluating its districts' differing practices and determining 
what revisions to its guidance will be needed to ensure more 
consistency in decisions about which waters and wetlands fall under 
federal jurisdiction. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
04-297] 

1.67.C. Improving Security at Drinking Water and Wastewater Plants: 

We identified key activities that can help EPA improve security for the 
water sector. As a result of this work, EPA has begun to implement a 
number of these actions. First, the agency established common protocols 
for monitoring threats. In particular, it developed a list of 
Standardized Analytical Methods, providing a common standard for 
environmental laboratories' use in measuring contamination events and 
their associated threats. In addition, EPA provided simulation 
exercises to improve local, state, and regional collaboration. 
Specifically, it provided drinking water and wastewater systems with a 
series of tabletop exercises to help them prepare and carry out 
emergency response plans and strengthen relationships between utilities 
and local, state, and federal officials in the event of a terrorist 
attack. Finally, EPA significantly expanded training opportunities 
related to security by sponsoring several security workshops and 
seminars on topics such as wastewater system security, drinking water 
system preparedness, and emergency response. As a result, water sector 
personnel have additional tools and training opportunities to support 
them in their efforts to protect against terrorist attacks. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-29], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-1098T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-165] 

1.68.C. Improving Oversight of EPA Grant Programs: 

EPA has long faced problems in managing its grants, which constitute 
over one-half of the agency's annual budget, or $4 billion annually. 
Our work over the past 3 years has identified the major challenges 
facing EPA in managing its grants, including awarding, overseeing, and 
obtaining results from grants. EPA issued a 5-year grants management 
plan and policies, which for the first time offers a comprehensive road 
map with goals and milestones for addressing the challenges we 
identified. However, we found that the policies and plan will require 
strengthening, enhanced accountability, and sustained commitment to 
succeed. For example, EPA's new oversight policy mandates more in-depth 
monitoring of grantees, but it does not build in a process for 
analyzing the results of in-depth monitoring to address systemic 
grantee problems. In addition, its 5-year plan does not completely 
address how EPA will hold all managers and staff accountable for 
successfully fulfilling their responsibilities. Our recommendations, 
which EPA has begun to implement, will help to ensure that EPA is 
providing effective oversight of grants and holding managers and staff 
accountable for their grants management responsibilities. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-846], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-383R], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-459], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-149R] 

1.69.C. Improving EPA's Knowledge of Environmental Conditions: 

In a November 2004 report, we recommended that EPA establish clear 
lines of responsibility and accountability among its various 
organizational components and identify specific requirements for 
developing and using environmental indicators. Environmental indicator 
sets assemble quantitative measures of conditions and trends to assess 
the state of the environment and natural resources and to gauge 
progress toward specific goals. We reported that EPA needs to develop a 
more systematic approach to developing these indicators to ensure that 
information on environmental conditions and trends is incorporated into 
EPA's efforts to plan strategically, allocate resources, and assess 
progress toward meeting environmental goals and objectives. EPA is 
currently working to link its indicators to the agency's strategic 
planning activities and investigating opportunities to link 
environmental information to management reporting and accountability 
systems. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-52] 

1.70.C. Identifying Challenges to Ensuring Competition in Natural Gas 
Markets: 

Recent reports on the impact of soaring natural gas prices have 
outlined the volatile nature of natural gas prices that are driven by 
supply and demand imbalances. However, these reports also have 
highlighted the important role the federal government plays in ensuring 
that prices are determined in a competitive and informed marketplace. 
We found that federal agencies face major challenges in ensuring that 
natural gas prices are determined in a competitive and informed 
marketplace. For example, we found that the Federal Energy Regulatory 
Commission lacks an adequate regulatory and oversight approach and is 
reviewing its statutory authority and market monitoring tools. The 
Commodity Futures Trading Commission does not have regulatory authority 
for over-the-counter derivatives markets. It does have antimanipulation 
authority and is currently investigating what role, if any, these 
markets played in the natural gas price spike of 2000 through 2001. 
Finally, the Energy Information Administration has an outdated natural 
gas data collection program, but has made efforts to reassess its data 
needs to provide more useful information. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-46] 

1.71.C. Enhancing Oversight of Electricity Markets: 

Our recent reports on electricity market restructuring have encouraged 
the Federal Energy Regulatory Commission to, among other things, 
enhance its oversight of these markets to reduce the potential that 
firms could inappropriately exercise the use of market power, reduce 
the uncertainty private companies face when upgrading transmission 
lines to their power plants, and support consumer pricing and other 
programs that encourage consumers to adjust their electricity usage in 
response to changes in market conditions. Action in this last area 
alone--encouraging consumers to respond to changing electricity market 
conditions--could save billions of dollars as well as enhance 
reliability in the U.S. electricity sector more generally. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-204], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-844] 

1.72.C. Identifying the Effects of Oil Mergers on Consumers: 

Our work on the effects of mergers and market concentration in the U.S. 
petroleum industry, which found that the wave of mergers and market 
concentration that occurred in the 1990s led to higher gasoline prices, 
prompted a reevaluation by the Federal Trade Commission of how it 
reviews petroleum industry mergers in an effort to protect U.S. 
consumers from potential anticompetitive effects of such mergers in the 
future. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-96] 

1.73.C. Improving the Nuclear Regulatory Commission's Oversight of 
Nuclear Power Plants: 

In a series of reports and testimonies, we have identified a number of 
challenges to the Nuclear Regulatory Commission's ability to 
effectively regulate the safety and security of the nation's commercial 
nuclear power plants. We have made a number of recommendations to 
improve force-on-force exercises (mock terrorist attacks) that test 
nuclear power plants' defenses, and we are currently assessing the 
process the commission used to revise the design basis threat, which 
describes the terrorist threat plants are required to defend against. 
As part of this review, we have observed force-on-force exercises at 
two nuclear power plants and confirmed that the commission is 
implementing improvements we recommended that will better enable the 
commission to evaluate plants' ability to defend against terrorist 
attacks. In 2005, we reported that plants' control and accounting of 
radioactive spent nuclear fuel have been uneven and that the commission 
should establish specific requirements and inspection procedures for 
control and accounting of loose fuel rods and segments. In response to 
our recommendation, the commission is clarifying its guidance to plants 
on control and accounting of spent fuel and revising its inspection 
procedures--actions that if properly implemented, will reduce the risk 
that plants will report additional cases of missing spent nuclear fuel. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-752], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-1064T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-339], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-754T] 

A safe, secure, and effective national physical infrastructure: 

1.74.A. Improving Oversight of State Highway Safety Programs: 

In 2003 we reported that National Highway Traffic Safety Administration 
(NHTSA) regional offices were inconsistent in their oversight of state 
highway safety programs. Consequently, states with relatively poor 
safety performance sometimes received less oversight than states with 
better safety performance. We recommended that NHTSA provide clear 
guidance to its regional offices on the appropriate use of program 
management reviews and program improvement plans. In response to our 
recommendations, NHTSA developed new policies for its regional offices 
on when it is appropriate to use management reviews and improvement 
plans to assist state highway safety programs. Among other things, the 
new procedures direct NHTSA regional offices to conduct management 
reviews in each state at least every 3 years. In addition, the new 
procedures direct NHTSA regional offices to work with a state in 
collaboratively developing a performance enhancement plan (formerly 
known as an improvement plan) when a state fails to meet performance 
goals, shows substandard performance, or fails to show improvement 
toward priority safety program goals over a 3-year period. The Congress 
is considering specifying these improvements and mandating that we 
perform a follow-up review. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-474] 

1.75.A. Updating Assessments of Highway Traffic Safety Data Systems: 

In a November 2004 report, we recommended that the Congress consider 
requiring states to have assessments of their traffic records safety 
data systems that are no more than 5 years old in order to participate 
in NHTSA's traffic safety data improvement program. According to NHTSA 
officials, these assessments were valuable starting points in helping 
states take stock of the strengths and weaknesses of their entire 
systems. During our review, we found some assessments submitted by 
states that were nearly 10 years old. We also found assessments based 
on recent information reflected the dynamic and often changing reality 
of state safety data systems. In August 2005, the Congress passed the 
Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 
2005. The act included our recommendation that states have up-to-date 
assessments or audits of their highway safety data and traffic records 
systems in order to participate in NHTSA's state traffic safety 
information system improvements grant program. By implementing this 
eligibility requirement, NHTSA will have improved monitoring of state 
progress and have made a more detailed accounting of traffic data 
system improvements made as a result of the grant program. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-24] 

1.76.A. Improving NHTSA's Oversight Efforts: 

We found that NHTSA was inconsistent in its use of management reviews 
and improvement plans in providing oversight of state highway safety 
programs. We recommended that NHTSA develop guidance on the use of 
management and improvement plans. In response, NHTSA, in April 2004, 
reported to the Congress that it was establishing new procedures to 
address problems we identified. These new procedures included 
conducting triennial management reviews and establishing performance 
enhancement plans for states that fail to meet program goals over 3-
year period. In February 2005, we discussed incorporating our 
recommendations and alternative language for the surface transportation 
reauthorization bill with congressional staff. In July 2005, the 
Congress passed the Safe, Accountable, Flexible and Efficient 
Transportation Equity Act: a Legacy for Users, which enacted the NHTSA 
policies established directly in response to our recommendations. The 
law directs NHTSA to conduct triennial management reviews of state 
highway safety programs and program reviews of states that fail to make 
substantial progress in meeting priority program goals over a 3-year 
period. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-474] 

1.77.A. Authorizing the Retention of Proceeds from Real Property: 

In 2003, we reported that most agencies could not retain the proceeds 
from the sale of unneeded property and this acted as a disincentive to 
disposing of unneeded property. We concluded that agencies should be 
permitted to retain proceeds for reinvestment from real property where 
a need exists. Subsequently, in the 2005 Consolidated Appropriations 
Act, for fiscal year 2005 the Congress authorized the Administrator of 
the General Services Administration (GSA) to retain the net proceeds 
from the conveyance of real and related personal property. These 
proceeds are to be deposited into the Federal Buildings Fund and are to 
be used for GSA's real property capital needs. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-122] 

1.78.A. Identifying Improvements Needed to Strengthen Security and 
Achieve Efficiencies in Airport Passenger and Checked Baggage 
Screening: 

We conducted a body of work assessing the physical screening of airport 
passengers and their checked baggage, as well as the prescreening of 
passenger names against terrorist watch lists, designed to identify and 
prevent terrorist threats. We found that insufficient screener staffing 
and a lack of high-speed Internet and intranet connectivity at the 
nation's airports resulted in the majority of screeners not meeting 
legislatively mandated screener training requirements, and that 
weakness and vulnerabilities continued to exist in passenger and 
checked baggage screening systems. We also found that DHS's 
Transportation Security Administration's (TSA) internal solutions for 
deploying explosive detection systems to screen checked baggage 
resulted in operational inefficiencies and diminished security, and 
that its efforts to install in-line baggage screening systems have been 
limited. Related to passenger prescreening against terrorist watch 
lists, we found the effectiveness of TSA's Secure Flight program in 
identifying passengers who should undergo additional security scrutiny 
had not been determined, and that TSA had not resolved how passenger 
data would be transmitted from air carriers to TSA to support Secure 
Flight operations. We also reported that TSA did not comply with 
Privacy Act requirements by not fully disclosing to the public its use 
of personal information from commercial data sources during testing as 
required. Specifically, a TSA contractor collected more than 100 
million commercial data records containing personal information, such 
as name, date of birth, and telephone number, without informing the 
public. Based on this work, we made numerous recommendations to 
strengthen screener training, systematically evaluate baggage screening 
needs at airports, and manage the risks associated with Secure Flight's 
development and implementation. TSA agreed to take corrective actions 
in these areas. Several pieces of legislation were passed requiring a 
plan and guidelines for installing in-line baggage screening systems 
and measures to strengthen Secure Flight's development and 
implementation, based in part on our work. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-324], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-356], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-365], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-457], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-864R] 

1.79.C. Implementing Postal Reforms to Address Structural and Systemic 
Deficiencies: 

Our testimony identified the need for comprehensive postal reform 
legislation to address challenges that threaten the U.S. Postal 
Service's long-term outlook and identified some of the key principles 
for postal reform, including the need for additional managerial 
flexibility to improve the efficiency of postal operations and 
increased transparency and accountability for results, which have been 
incorporated into pending postal reform legislation. We also reported 
that the Postal Service faces challenges in eliminating excess capacity 
in its mail processing infrastructure, but its infrastructure 
realignment strategy was not sufficiently clear or accountable. The 
Congress referred to our work related to postal infrastructure 
realignment and said that it would work to ensure that the Postal 
Service implemented our recommendations. Language in postal reform 
legislation would require the Postal Service to report to the Congress 
on how it plans to modernize its infrastructure and provide greater 
transparency through annual reports on its progress in this area. We 
also testified that one of the key elements of postal reform is to 
clarify the Postal Service's mission and role so that it remains 
focused on universal postal service. Two of our reports on the Postal 
Service's electronic commerce activities contributed to language in 
pending postal reform legislation to limit the Postal Service's mission 
to delivering physical mail pieces to avoid the financial costs the 
Postal Service has incurred when it ventured away from its core 
business. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-00-
188], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-79], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-261], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-453T] 

1.80.C. Improving Congressional Oversight of the Airline Industry's 
Financial Condition: 

We reported on the deteriorating financial condition of the U.S. 
commercial airline industry, providing the Congress with some key 
insights into the underlying structural problems hampering the 
industry's recovery. Since 2001, the major U.S. airlines have lost more 
than $30 billion, with four major U.S. legacy airlines--Delta, 
Northwest, United, and US Airways--operating under bankruptcy 
protection. United and US Airways terminated their pension programs, 
transferring their plans to the Pension Benefit Guaranty Corporation at 
a net cost to the corporation of $9.7 billion; plan participants lost 
$5.3 billion in benefits (in constant 2005 dollars). We also reported 
that the airlines faced a considerable liquidity crisis over and above 
pension funding requirements. Legislative pension reform allowing 
airlines to amortize pension contributions over more years would 
relieve some of the liquidity pressures, but does not ensure that they 
will avoid bankruptcy because it does not fully address other 
fundamental structural problems, such as other high fixed costs. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-83], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-945], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-835T] 

1.81.C. Identifying Federal Action Needed to Secure Cargo Transported 
by Air: 

We found that TSA took initial steps in applying a risk-based managed 
approach to address air cargo security. However, TSA had not yet 
established a methodology or schedule for completing assessments of 
vulnerabilities and critical assets. We also found that TSA had not 
developed measures to assess the adequacy of air carrier compliance and 
systematically analyze audit results to target future inspections, or 
assessed the effectiveness of its enforcement actions to ensure 
compliance with security requirements. We also found that TSA's future 
plans for enhancing air cargo security pose financial, operational, and 
technological challenges to the agency and air cargo industry 
stakeholders, and that TSA may have underestimated the cost of proposed 
security measures. We recommended that among other actions, TSA 
complete assessments of air cargo vulnerabilities and critical assets; 
develop measures to gauge air carrier compliance; and ensure that data 
used in identifying elevated risk cargo are complete, accurate, and 
current. TSA generally concurred with the findings and recommendations 
in the restricted version of the report. (Based on a report that 
contains sensitive material and is not available to the public). 

1.82.C. Improving Federal and Private Sector Efforts to Secure General 
Aviation: 

We found that a systematic assessment of threats to general aviation--
all aviation other than commercial and military--had not been 
conducted, and that TSA and the Federal Aviation Administration (FAA) 
had taken limited steps to secure related airports, aircraft, and 
infrastructure. We also found that TSA has not established policies and 
procedures for reviewing and revalidating the need for flight 
restrictions that limit access to airspace for indefinite periods that 
could negatively affect the general aviation industry. We further found 
limitations in TSA's process for requiring background checks of foreign 
candidates for U.S. flight training schools. We recommended, among 
other things, that TSA develop a plan for implementing a risk-managed 
approach to strengthen general aviation security, and that FAA 
establish a documented process for reviewing and revalidating flight 
restrictions. TSA and FAA agreed to take corrective actions, and 
legislation, based on input from our work, was passed requiring DHS to 
improve pilot licenses to prevent tampering and alterations. TSA issued 
an interim final rule in July 2005 to restore limited general aviation 
aircraft operations at Reagan National airport. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-144] 

1.83.C. Identifying Federal Action Needed to Strengthen Airport 
Perimeter Security and Access Controls: 

We conducted a comprehensive review of airport perimeter security and 
access controls that addressed and made associated recommendations 
related to employee access to secure airport areas, including airport 
employee screening requirements. We briefed numerous congressional 
committees on this work and conferred with congressional staff as 
language was drafted for the Intelligence Reform and Terrorism 
Prevention Act of 2004. We also briefed the 9/11 Commission--whose 
recommendations formed the basis for this act--on our results in this 
area. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-728] 

1.84.C. Enhancing Federal Leadership Needed to Address Rail Security: 

We found that TSA had not completed risk assessments of the passenger 
rail industry, or completed a methodology for determining how to 
analyze and characterize risks that have been identified through other 
risk assessment initiatives. The lack of a risk management framework 
will make it difficult for TSA to compare risks across sectors, 
prioritize them, and allocate resources accordingly. We also found that 
federal and rail industry officials raised questions about the 
feasibility of implementing and complying with TSA rail security 
directives. We also observed security practices among certain foreign 
passenger rail systems or their governments that are currently not used 
by the domestic rail operators or the U.S. government, which could be 
considered for use in the United States. We recommended, among other 
things, that TSA develop a plan for completing its methodology for 
conducting risk assessments and develop rail security standards that 
can be measured and enforced. We also recommended that TSA consider the 
feasibility of implementing certain security practices in the United 
States that are currently used by foreign rail operators. DHS, the 
Department of Transportation, and Amtrak reviewed a draft of this 
report and generally agreed with the report's recommendations. Further, 
DHS stated that it appreciated the thorough analysis and discussion of 
rail security initiatives within our report and that it will continue 
to be cognizant of the areas of passenger rail security where further 
improvements can be made. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-851] 

1.85.C. Coordinating Agencies' Facility Protection Efforts and 
Promoting Key Practices: 

The Interagency Security Committee is chaired by DHS and is composed of 
representatives from most agencies. In November 2004, we recommended 
that DHS direct the committee to develop an action plan that identifies 
resource needs, goals, and time frames for meeting its 
responsibilities, and propose strategies for addressing the challenges 
it faces. Such an action plan would provide a road map for DHS to use 
in developing resource priorities and for the committee to use in 
communicating its planned actions to agencies and other stakeholders, 
including the Congress. DHS agreed to implement this recommendation. In 
addition, the committee has begun to implement our recommendation to 
establish a set of key practices that could guide agencies' efforts in 
the facility protection area. This initiative could be used to evaluate 
agency actions, identify lessons learned, and develop strategies for 
overcoming challenges. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-49] 

1.86.C. Providing Critical Information for the Congress Regarding 
Issues Related to the Digital Television Transition: 

Since 2002, we have reported why the transition from analog to digital 
television will not be likely to end by 2006--the target date 
originally set by the Congress. We have provided critical 
recommendations and information for policymakers to consider in their 
attempts to further the transition. Completing this transition is 
critical because the return of radio frequency spectrum used for analog 
broadcast television at the end of the digital television transition 
will provide many benefits to society, such as easing the spectrum 
scarcity facing public safety first responders; engendering economic 
growth and consumer value from spectrum redeployed to wireless 
services; and affording the federal government auction revenues, which 
could range from about $10 billion to $30 billion according to some 
studies. We reported on the digital television transition in Germany, 
and the Congress is now considering providing subsidies to low-income 
households, which was a feature of the German transition plan. This 
year, we also provided information on the likely costs of a subsidy to 
certain households for the purchase of digital television equipment and 
we also testified about the administrative issues that may arise in 
implementing a subsidy program. Legislation has been introduced in both 
the Senate and House aimed at speeding the transition using a subsidy 
program. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-258T] 

1.87.C. Enhancing the New Car Assessment Program: 

In 2005, we reported that NHTSA's New Car Assessment Program, which 
subjects new vehicles to crash and rollover tests, is at a crossroads 
and needs to be changed to remain relevant. For example, we found that 
the usefulness of current testing has been eroded by changes in the 
vehicle fleet that have occurred since the program began in 1978. The 
growing number of large pickups, minivans, and sport utility vehicles 
in the nation's vehicle fleet is creating different safety risks, 
particularly with regard to the incompatibility of large and small 
vehicles and vehicle rollover, which we found that the New Car 
Assessment Program does not fully address. In addition, the very 
success of the program has brought it to a point where it is not clear 
that the program's goals can continue to be met. Because almost all 
vehicles today receive top ratings in frontal and side crash tests, the 
program provides little incentive for manufacturers to further improve 
vehicle safety and does not provide consumers with information that 
differentiates the safety of one vehicle compared to another--two key 
goals of the program. Our recommendations will have continuing value in 
improving the safety of new vehicles. The agency generally agreed with 
the report, and it plans to address the key issues we raised to improve 
the program--namely, examining the growing size of vehicles in the 
nation's fleet, the risks associated with vehicle rollover, new 
technologies that can help prevent crashes from occurring, and ways to 
provide the public with improved safety information in a more timely 
manner. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-370] 

1.88.C. Reevaluating the Funding of Highway and Transit Grant Programs: 

In light of the nation's long-term fiscal outlook and the need to 
fundamentally reexamine the base of federal spending, we have 
highlighted the need to reevaluate highway and transit grant programs 
financed through the Highway Trust Fund. The trust fund was created to 
construct the interstate highway system--although the system is now 
complete, the program's basic financing and delivery mechanisms have 
not changed. Most highway grant funds are apportioned by formula, 
without regard to the needs or capacity of recipients. Evidence also 
suggests that increased federal highway grants do not result in 
commensurate increases in overall investment because states and 
localities in part substitute federal funds for funds they otherwise 
would have spent on highways. The Department of Transportation has 
established performance measures and outcomes to enhance mobility and 
security, but the program has no mechanism to link funding with the 
accomplishment of these measures and outcomes. In addition, while a 
wide range of factors must be considered when selecting highway or 
transit projects, decision makers often do not use formal analytical 
tools when evaluating projects, and even when they do, these analyses 
generally do not drive investment decisions. The Federal Highway 
Administration oversees the expenditure of tens of billions of federal 
dollars a year but lacks goals and measures that guide its activities, 
workforce plans that support these goals and measures, and data 
collection and analysis efforts to identify problems and transfer 
lessons learned. To improve federally funded highway and transit 
programs, we suggested that the Congress consider expanding the mandate 
of a proposed national commission to assess possible changes to the 
federal-aid highway program, including changes to the program's design, 
structure, and funding formulas; the roles of the various levels of 
government; and the inclusion of greater performance and outcome-
oriented features. In addition, we recommended that the Federal Highway 
Administration link its activities and staff expectations to oversight 
goals and measures; develop workforce plans that support its goals and 
measures; and develop the capability to track costs, identify problems, 
and transfer lessons learned. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-802], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-172], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-173], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-325SP] 

Strategic Goal 2: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence: 

Respond to emerging threats to security: 

2.1.A. Improving Controls Covering Technology Exports: 

In response to our recommendation, the Department of Commerce 
(Commerce) reviewed whether the existing catchall provision to address 
missile proliferation by certain entities--such as terrorist 
organizations or individuals--sufficiently protects U.S. national 
security interests, reported the results of the review, and proposed 
modifications to the rule to help close the regulatory gap. We reported 
that a gap in control regulations covering exports with both military 
and civilian applications (dual-use exports) could enable individuals 
in most countries to legally obtain, without any U.S. government 
review, U.S. dual-use items not on the Commerce Control List that could 
be used in making a cruise missile or unmanned aerial vehicle. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-175] 

2.2.A. Improving Controls over Computer Exports: 

In response to our recommendation to address the shortcomings of 
computer export controls, a Commerce council convened a panel of 
government and industry representatives to develop a replacement for 
the current method of measuring the composite theoretical performance 
of high-performance computers. The council advises Commerce on the 
technical parameters for export controls applicable to dual-use 
commodities and the administration of these controls. Composite 
theoretical performance is currently measured in millions of 
theoretical operations per second. The council's experts met and 
reached a consensus on using a new, simpler method for measuring 
performance. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-10] 

2.3.A. Improving Processes to Share Information on Maritime Threats: 

In April 2005, we identified U.S. Coast Guard procedures for providing 
security clearances that needed to be improved to get classified threat 
information to key state, local, and private sector stakeholders 
involved in port security. These stakeholders needed access to 
classified information, but did not have federal security clearances 
allowing them to receive the threat information. Lack of adequate 
guidance from Coast Guard Headquarters had stalled the process to 
provide clearances to more than 350 state, local, and private sector 
officials. Based on our findings, the Coast Guard provided the guidance 
and took other steps to expedite the process. This improvement will 
make it easier for key stakeholders in maritime activities to get 
sensitive threat information and thus take appropriate protective 
actions to ensure port security. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-394] 

2.4.A. Improving Management of U.S. Coast Guard Deepwater Program: 

Based on a body of work assessing the U.S. Coast Guard's Deepwater 
program, we identified areas for improved program oversight and 
management. We found that while the Coast Guard generated some limited 
information on the condition of its legacy assets, the majority of the 
Coast Guard's measures were not sufficiently robust to link an asset's 
declining condition to degradation in mission capabilities or 
performance. We noted that without such measures, the extent and 
severity of the decline in the existing deepwater legacy assets and 
their true condition could not be fully determined. Based on our 
findings, the Coast Guard has begun developing improved measures to 
more accurately capture data on the extent to which its deepwater 
legacy assets are degraded in their mission capabilities. This 
improvement will provide more accurate and meaningful information to 
the Coast Guard as well as to DHS as it decides where to spend limited 
budget dollars to obtain the greatest capabilities in the Deepwater 
program. In addition, we recommended the Coast Guard update the 
original 2002 Deepwater acquisition schedule in time to support the 
fiscal year 2006 Deepwater budget submission to DHS and the Congress 
and at least once a year thereafter to support each budget submission. 
We also recommended that the updated schedule include the current 
status of asset acquisition phases, interim phase milestones, and the 
critical paths linking assets. Based on our recommendations, the Coast 
Guard has taken steps to update the outdated schedule and has indicated 
that it plans to continue to update the schedule each month for 
internal efforts. The Coast Guard Deepwater Deputy Program Executive 
Officer agrees that these efforts to update the Deepwater acquisition 
schedule and integrate the individual schedules of the assets have 
improved the Coast Guard's overall management of the program. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-307T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-651T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-757] 

2.5.A. Ensuring Proper Implementation of Biometrics for Aviation 
Security: 

In our May 2004 testimony on the use of biometrics (a wide range of 
technologies that can be used to verify identity by measuring and 
analyzing human characteristics) for aviation security, we reported on 
the need to identify how biometrics will be used to improve aviation 
security prior to making a decision to design, develop, and implement 
biometrics. Using information from our statement, the House introduced 
a bill on July 22, 2004, directing TSA to establish system requirements 
and performance standards for using biometrics, and to establish 
processes (1) to prevent individuals from using assumed identities to 
enroll in a biometric system and (2) to resolve exceptions. These 
provisions were later included in an overall aviation security bill and 
were eventually included in the Intelligence Reform and Terrorism 
Prevention Act of 2004. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-785T] 

2.6.A. Strengthening Federal Agency Information Security: 

In 2005, we identified specific information security improvements 
needed at the following agencies: DHS, IRS, SEC, FAA, the Defense 
Logistics Agency, and the Federal Deposit Insurance Corporation. Also, 
on the basis of our prior recommendations, agencies--including VA, IRS, 
the Bureau of the Public Debt, the Federal Deposit Insurance 
Corporation, the Federal Reserve, and Commerce--took numerous actions 
to strengthen their information security practices. Actions included 
improvements to agencies' information security programs to aid in 
understanding risks and selecting and properly implementing effective 
controls; access controls to limit the ability to read, modify, or 
delete information to authorized individuals; software change controls 
to allow only authorized software programs to operate; and service 
continuity controls to protect computer-dependent operations from 
significant disruptions. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-262], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-482], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-486], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-567T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-700], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-712] 

2.7.C. Improving the Government's Ability to Respond to Terrorist 
Attacks and Other Emergencies: 

We helped the Congress move toward ensuring that the federal government 
is prepared for emergencies, including terrorist attacks. For example, 
we reported, based on detailed assessments of continuity of operations 
plans at major federal agencies, that agencies had not yet identified 
their essential functions that must be accomplished in an emergency and 
that none of the plans met the requirements of federal guidance. This 
work has focused congressional, agency, and public interest on these 
issues. Further, consistent with our recommendations, the Homeland 
Security Council initiated a major effort to identify essential 
functions governmentwide, including the identification of eight 
national essential functions and a process for identifying related 
agency-level functions. In addition, FEMA, which is the executive agent 
for continuity of operations planning, issued improved guidance 
addressing the prioritization of essential functions and the 
identification of associated resources. Finally, two agencies that did 
not have continuity plans in place have now developed them. As a result 
of these actions, the federal government is better positioned to 
respond to emergencies and continue essential services during and after 
emergencies of all types. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-577], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-619T] 

2.8.C. Assessing and Improving Chemical Facility Security: 

In March 2005, we reported that DHS has estimated that there are about 
4,000 chemical manufacturing facilities in the United States, but the 
exact number is uncertain. About 1,100 of these facilities belong to 
two major chemical associations that require their member companies and 
facilities to take actions to assess and improve their security. Only 
those facilities that are subject to the Maritime Transportation 
Security Act are required by federal law or regulation to take any 
actions to assess and improve their security, and the Coast Guard has 
not yet assessed the effectiveness of those actions. The Congress 
directed DHS to begin vulnerability assessments of those chemical 
facilities at highest risk and develop a protection strategy for the 
chemical sector that includes clear, measurable benchmarks for 
improving security and sharing lessons learned throughout the sector. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-327] 

2.9.C. Promoting Government Efforts to Address Emerging Security 
Threats: 

In fiscal year 2005, we reported on three emerging information security 
issues facing the federal government: security of wireless networks in 
the federal government; information security of third-party services; 
and emerging cybersecurity threats, such as spam, phishing, spyware, 
and malware. We found that agencies generally were not effectively 
applying the requirements in the Federal Information Security 
Management Act of 2002 (FISMA) to protect and maintain the 
confidentiality, integrity, and availability of their information and 
information systems. Also, we noted that by relying on a contractor's 
assessment of an agency's information systems, an agency official may 
not obtain a clear understanding of the effectiveness of security 
controls or be assured of the validity of the responses without 
independent testing. The Office of Management and Budget (OMB) 
recognized the significance of our findings and took immediate action, 
implementing several recommendations. Specifically, OMB made key 
changes to improve its fiscal year 2005 FISMA reporting instructions to 
the federal agencies, including (1) specifying that self-reporting by 
contractors does not meet agencies' FISMA requirements to ensure the 
security of their information systems and (2) requiring agencies to 
report on their policies and special procedures pertaining to new 
technologies and emerging threats, including wireless, spyware, and 
malware. OMB's actions could help to focus federal agencies' efforts to 
address and mitigate these emerging information security issues. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-231], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-362], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-383] 

2.10.C. Improving Policies and Oversight Needed for TSA's Designation 
of Sensitive Security Information: 

In June 2005, we reported that TSA lacked guidance and procedures, 
aside from the regulations themselves, for determining what constitutes 
sensitive security information. TSA also lacked a system of internal 
controls to ensure that the sensitive security information designation 
is being appropriately applied. It is clearly very important that some 
information related to threats to or protection of our transportation 
systems be held out of the public domain. However, it is also the case 
that the public has a legitimate interest and need for information 
related to threats and vulnerabilities. While TSA has indicated that it 
was already in the process of taking some steps to develop guidance and 
to institute internal control procedures, our work reinforced the need 
to take steps to ensure proper application of the sensitive security 
information designation. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-677] 

2.11.C. Increasing Security of Cargo Containers to Prevent Smuggling of 
Weapons of Mass Destruction: 

We identified a number of limitations in two DHS programs designed to 
increase the security of cargo containers and prevent terrorists from 
using such containers to smuggle weapons of mass destruction into the 
United States. The department was reducing its scrutiny of shipments 
from certain companies before it had assurances that the companies had 
adequate security procedures in place. We also found that not enough 
staff had been assigned to identify high-risk containers at several key 
ports. In addition, the department did not have technical requirements 
in place to assess the ability of foreign countries to inspect the 
containers with scanning equipment. Finally, the department had not 
developed performance measures to evaluate the performance of these 
cargo container programs. In response to our recommendations, the 
department agreed to improve its ability to assess company security 
procedures, identify high-risk containers, inspect containers with 
scanning equipment, and manage the programs overall. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-404], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-466T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-557] 

2.12.C. Enhancing Government and Private Sector Critical Infrastructure 
Protection Efforts: 

Critical infrastructure protection activities are intended to enhance 
the security of the public and private infrastructures that are 
essential to our national security, economic security, and public 
health and safety. Critical infrastructures include energy, information 
technology (IT) and telecommunications, water supply, and the defense 
industrial base. Over the last several years, we helped promote the 
progress made by federal agencies and nonfederal infrastructure sectors 
in implementing the activities required and suggested by federal 
critical infrastructure protection policy. For example, we highlighted 
where the government needed to improve public health IT infrastructure, 
which affects the nation's ability to respond to public health 
emergencies, including bioterrorism. In May 2005, we reported on DHS's 
progress in fulfilling 13 key cybersecurity-related critical 
infrastructure protection responsibilities identified in law and 
federal policies. We noted that while DHS has initiated multiple 
efforts, it has not fully addressed any of the 13 key cybersecurity-
related responsibilities, and it has much work ahead in order to be 
able to fully address them. We also reported that DHS faces a number of 
challenges that have impeded its ability to fulfill its cyber critical 
infrastructure protection responsibilities. Key challenges include 
achieving organizational stability, gaining organizational authority, 
overcoming hiring and contracting issues, increasing awareness about 
cybersecurity roles and capabilities, establishing effective 
partnerships with stakeholders (other federal agencies, state and local 
governments, and the private sector), achieving two-way information 
sharing with these stakeholders, and demonstrating the value DHS can 
provide. This work resulted in recommendations that DHS strengthen its 
ability to implement key cybersecurity responsibilities by prioritizing 
and completing critical activities and resolving underlying challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-308], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-434] 

Ensure military capabilities and readiness: 

2.13.A. Rebalancing Army Force Structure to Create Needed Units and 
Avoid $3.4 Billion of Costs: 

In May 2001, we recommended that the Department of the Army establish 
mission criteria to provide a firmer basis for its strategic reserve, 
domestic support, and homeland defense requirements. At the time of our 
review, the Army reported it was experiencing a 45,000-position 
shortfall in its warfighting force, and we were concerned that the Army 
might not be making the best allocation of its available end strength 
among all of its mission requirements. In response, the Army programmed 
force structure changes affecting 34,018 spaces over the period 
covering fiscal years 2004 through 2009, increasing available units for 
military police, military intelligence, special forces, chemical, civil 
affairs, and psychological operations. Army officials agreed that these 
actions have created a substantial cost avoidance of at least $3.4 
billion because the Army was able to rebalance the force to create 
needed units, with minimal increases in authorized end strength. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-485] 

2.14.A. Improving DOD's Weapon Acquisition Process: 

Since 1990, we have designated DOD's weapon acquisitions as a high-risk 
area due largely to persistent cost increases, schedule delays, and 
performance shortfalls. In our March 2005 report on 54 weapon 
acquisition programs, which represent a total investment of over $800 
billion, we noted significant cost growth and schedule delays--largely 
the result of programs not complying with DOD's policy on demonstrating 
high levels of technology, design, and production knowledge before key 
program commitments were made. Just 4 years ago, the largest 5 programs 
cost about $281 billion; today, in the same base year dollars, the 
largest 5 programs cost about $521 billion. In light of these facts, 
the Congress called for more oversight and better outcomes from weapon 
system programs. In response, DOD established the Defense Acquisition 
Performance Assessment Project to assess every aspect of the current 
acquisition system and provide a road map for restructuring DOD's 
weapon acquisition system. Additionally, the Air Force has been 
directed to take actions to improve its software development practices, 
as our work demonstrated that additional controls would help increase 
successful outcomes of complex software-intensive weapon systems. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-393], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-301] 

2.15.A. Contributing to Properly Funding the Military's Needs: 

We reviewed the reasonableness of DOD's fiscal year 2005 budget 
request, its use of budgeted funds in prior years, and its future 
resource needs. By the end of September 2004, we identified billions of 
dollars in potential costs avoided and opportunities for DOD to improve 
its internal oversight of the use and tracking of funds. Overall, our 
work contributed to multiple actions that resulted in total financial 
benefits of about $2.4 billion. Specifically, our work analyzing 
various aspects of DOD's operation and maintenance budget request for 
fiscal year 2005 resulted in the Congress reducing DOD's budget by 
almost $2 billion because of high unobligated balance levels and an 
overstatement of need in the civilian pay budget request. For example, 
our papers assisted the Congress in identifying funds not used by 
providing analyses of average unobligated balances for fiscal years 
1999 through 2003 and the unexpended balances canceled and reverted to 
the U.S. Treasury for fiscal years 1994 through 1998. The congressional 
conferees subsequently reduced DOD's fiscal year 2005 operation and 
maintenance budget by $833.1 million for the active and reserve 
military components and defense agencies. We also reported that the 
Defense Emergency Response Fund for the war on terrorism continued to 
maintain a high level of unobligated funds for several years. Based on 
our continued monitoring of these funds, the Congress directed DOD to 
transfer about $130 million in unobligated funds to the Iraqi Freedom 
Fund. Our past work also prompted DOD to become more engaged in 
managing its contracts looking for opportunities for greater economy 
and efficiency. The Army estimated that by adopting our recommendations 
for increased monitoring, it was able to save over $300 million in its 
Balkan support contracts. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-328] 

2.16.A. Improving the Outcomes of DOD's Aircraft System Acquisitions: 

DOD's F/A-22 Raptor, Joint Strike Fighter, Global Hawk Unmanned Aerial 
Vehicle, and E-10A Command and Control Aircraft programs--which 
together represent about a $322 billion investment--have not captured 
key knowledge early enough to efficiently and effectively manage 
program risks. Since the F/A-22's inception in 1986, the Air Force has 
planned for large investments in new capabilities without developing a 
new business case to justify these investments or aircraft quantities. 
The Joint Strike Fighter program has encountered serious design 
problems that required major changes to reduce the weight of the 
aircraft, and further design changes are likely. Delayed delivery, as 
well as reduced quantities, of both the F/A-22 and the Joint Strike 
Fighter could require existing aging aircraft to remain in the 
inventory longer. The Global Hawk program has been restructured twice 
to develop and produce a new and larger aerial vehicle in half the time 
originally planned. The accelerated schedule depends on a risky 
acquisition strategy that has already resulted in cost increases, 
schedule slippages, and performance trade-offs. Consistent with our 
recommendations, the Congress is considering (1) funding reductions 
that would slow Joint Strike Fighter development to allow the program 
to mature and (2) decreased procurement of the Global Hawk until a new 
acquisition strategy that reduces risk and justifies further 
investments is completed. Our review of the E-10A program raised 
questions about the overall business case for the program as well as 
DOD's strategy to make important decisions before critical knowledge 
about the aircraft's design, manufacturing, and reliability was known. 
DOD subsequently reduced the program's budget by a total of $600 
million and delayed the program by 5 years until it could demonstrate 
more knowledge about the aircraft. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-6], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
05-271], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-273], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-304], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-390T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-519T] 

2.17.A. Improving DOD's Missile Defense System Acquisitions: 

DOD plans to spend nearly $67 billion over the next 6 years to develop 
and field ballistic missile defenses. The diverse set of technologies 
that must be developed, integrated, and deployed across an array of 
land-, air-, sea-, and space-based platforms makes this system a 
challenging and risky endeavor, as evidenced by recent test failures 
and the delayed activation of an initial capability. Although DOD aims 
to place capabilities in the hands of the warfighter more quickly and 
with the flexibility to respond to an evolving threat, DOD has been 
unable to deliver the quantities promised within the original cost 
estimates--due in part to a lack of knowledge about the emerging 
technologies. Additionally, the year-to-year variability of the 
program's goals has made congressional oversight of the execution of 
this program difficult. Based on our reporting of these issues since 
2003, DOD has taken a more knowledge-based approach to developing an 
element of the system. Over a 5-year period--from fiscal year 2005 
through fiscal year 2009--program funding will be reduced by about $5.2 
billion, which has a present value of about $4.7 billion. DOD has also 
taken specific actions to ensure that the fielded system is adequately 
tested and that the Congress has adequate information to conduct 
oversight of this large and complex program. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-441], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-409], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-243] 

2.18.A. Improving DOD's Acquisition Business Processes: 

For fiscal year 2003, the Congress appropriated $47 billion to the 
military departments and the Missile Defense Agency for defense 
research and development--$3.8 billion dollars of which DOD 
subsequently shifted, or reprogrammed, from one research and 
development account to another or temporarily withheld. Although the 
Congress permits such reprogramming, we found that programs had 
reprogrammed funds multiple times and some had inflated their budget 
requests in anticipation of funding adjustments. At the same time, 
reporting on reprogrammed funds has been of limited use in terms of 
content and timing. As a result of our work, the Congress has taken 
action to end inappropriate reprogramming practices and to provide 
detailed and timely data on reprogramming and withholding activity. The 
Congress is considering restricting DOD's ability to rebaseline 
programs--a practice we found reduced cost increases below the 
threshold that would trigger required reporting to the Congress--as 
well as directing DOD to analyze alternatives to weapon system programs 
that exceeded their original cost baselines by more than 15 percent. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-944], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-182] 

2.19.C. Improving the Outcomes of Land System Acquisitions: 

The Army's Future Combat Systems--a networked suite of light and agile 
weapons and other systems--is, in the Army's words, the "greatest 
technology and integration challenge the Army has ever undertaken." An 
investment of well over $100 billion, we found that this program is at 
significant risk for not delivering required capability within cost and 
schedule estimates. Nearly 2 years after program launch and with $4.6 
billion invested, requirements are still changing and only 1 of the 
system's more than 50 technologies has sufficiently matured. Based on 
our findings, the Congress has begun to take action to restrict funding 
for key program elements until certain requirements have been met and 
demonstrated, and to require independent analyses of the rationale and 
cost of additional requirements for the systems. Significantly enhanced 
communications and networking capabilities are also critical to the 
Future Combat Systems' success. However, we have reported that each of 
the key communications programs is struggling to meet ambitious sets of 
user requirements and steep technical challenges within highly 
compressed schedules. In particular, the Joint Tactical Radio System 
program has been unable to mature and integrate technologies and come 
up with an effective design to meet key requirements--delaying the 
delivery of capabilities to the warfighter. As a result, the program is 
significantly over cost and behind schedule, and DOD is considering 
options for restructuring it. In light of our findings, the Congress 
has proposed reducing the funding for the program in fiscal year 2006 
and introduced legislation requiring DOD to strengthen the management 
and oversight of the Joint Tactical Radio System development efforts 
and to report on its plans for restructuring the program. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-442T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-669] 

2.20.C. Improving the Outcomes of DOD's Sea System Acquisitions: 

The Navy's DD(X) Destroyer is designed to be an advanced, multimission 
ship that will support forces ashore. The first ship is expected to 
cost over $3 billion. However, as the program approached two key 
milestones, it was clear that the destroyer's demanding requirements 
and time frames presented substantial challenges that greatly increased 
the risk of cost overruns, schedule delays, and degraded performance. 
As a result of our work, the Congress is considering rescinding fiscal 
year 2005 funds for the program and delaying approval of advance 
procurement funds for fiscal year 2006. The Navy is also developing a 
new class of surface warship-the Littoral Combat Ship-that is being 
designed to use helicopters, unmanned vehicles, and other systems that 
operate at a distance from the ship and that can be rapidly 
reconfigured to accomplish specific mine, antisubmarine, and surface 
warfare missions. However, like the destroyer, this program's 
requirements, operations, and technology created a number of challenges 
so that within the program's tight schedule between the delivery of the 
initial version of the ship and subsequent--and more sophisticated--
versions, there would be little time to draw on lessons learned. As a 
result of our work, the Congress has begun to take action to limit the 
Navy's ability to procure subsequent versions until the results of an 
operational evaluation of the initial version is completed and the Navy 
has reported on its acquisition strategy for the subsequent versions. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-973], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-255], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-752R], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-924T] 

2.21.C. Highlighting Issues Confronting DOD in Managing Its Facilities 
Infrastructure: 

For several years, our reports on DOD infrastructure have frequently 
cited the underfunding of maintenance and repairs, resulting in the 
deterioration of facilities, and the negative effects on the quality of 
life for those living and working at military installations and on 
their ability to accomplish their mission activities. Our July 2005 
report on DOD's selection process and recommendations for its 2005 
round of base realignments and closures indicated the process followed 
was generally logical, was reasoned and well documented, and has the 
potential for financial benefits and some reductions in excess 
infrastructure capacity; however, mechanisms will be needed to monitor 
implementation of finalized recommendations to validate and 
periodically update projected financial benefit estimates. In June 
2005, we recommended that DOD resolve long-standing inconsistencies 
among the services' definitions of base operations and support 
functions and expedite development and consistent application of a 
model for determining requirements. Also in June 2005, we reported that 
military training ranges are in varying degrees of degradation or 
lacked the necessary upgrades to meet training needs. DOD concurred 
with our recommendations that focused on the need for a more 
comprehensive approach for addressing deficiencies to ensure that its 
military ranges are sustainable and modernized, provide for more 
realistic training, and achieve DOD's transformation goals. Finally, 
our May 2005 report on DOD's efforts to privatize its utility systems 
found that the department's economic analyses supporting individual 
utility privatization decisions gave an unrealistic sense of financial 
benefit to a program that generally increases government costs in order 
to pay contractors for enhanced services and capital improvements. We 
made several recommendations to help ensure the reliability of future 
analyses and to improve the implementation and oversight the program. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-433], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-534], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-556], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-785] 

2.22.C. Contributing to Congressional Oversight of Transformation of 
the Armed Forces: 

Transformation is one of three top priorities of the National Military 
Strategy. DOD's transformation includes a number of efforts to adopt 
new operational concepts, restructure forces, and rebalance its active 
and reserve components in order to prepare the force to meet future 
global challenges. We contributed to congressional oversight of DOD's 
transformation plans by reporting on three key areas: DOD's New Triad, 
which defines the strategic capabilities that play a critical role in 
defending the United States; the Army's modular force initiative; and 
DOD's initiatives to rebalance active and reserve forces. First, we 
reported on the need for greater visibility of projected spending and 
future investments for DOD's New Triad. The New Triad is an effort by 
DOD to significantly change its definition and conceptual framework for 
its strategic capabilities to include not only the nuclear 
capabilities, but also offensive conventional strike forces, active and 
passive defenses, and a revitalized defense infrastructure. Second, we 
testified on the Army's efforts to convert its division-based force to 
a modular brigade-based force--considered to be the most significant 
restructuring of the Army since World War II. We noted that the Army 
will be challenged to provide its new modular units with some required 
skilled personnel and equipment needed to achieve planned capabilities. 
We also reported on the services' plans to move servicemembers to high-
demand specialties and noted that the plans are not fully developed and 
funding has not been identified to implement the planned changes. 
Finally, we reported that the Army's current policy of maintaining its 
reserve forces at low levels of readiness has resulted in unplanned and 
ad hoc transfers of personnel and equipment to deploying units, which 
have degraded the ability of nondeployed units to prepare for future 
overseas or homeland missions. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-21], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-200], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-443T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-540], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-660], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-962R] 

2.23.C. Contributing to Improved Warfighter Support and Readiness: 

We identified five systemic deficiencies in the way DOD's supply chain 
provided support to U.S. troops in Iraq that led to shortages of tires, 
batteries, body armor, up-armored high-mobility multipurpose wheeled 
vehicles and armor kits, and other items. DOD's ability to achieve its 
goal of providing sufficient numbers of the right items at the right 
time to meet the warfighter's needs was impeded by inaccurate Army war 
reserve spare parts requirements, inaccurate supply forecasts, 
insufficient and delayed funding, delayed acquisition, and ineffective 
distribution. We recommended that DOD take numerous actions to enhance 
logistics support to deployed forces, such as update war reserve models 
and run them annually to determine war reserve requirements, develop 
models for computing supply requirements for operations and provide the 
item managers with timely information for making supply decisions, 
assess the industrial-base capacity to meet updated demands for 
critical items, clearly state who has responsibility and authority for 
synchronizing supply distribution from the United States to deployed 
units during operations, and establish common supply information 
systems that can requisition and match incoming supplies to facilitate 
expeditious and accurate distribution. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-275] 

2.24C. Contributing to Congressional Oversight of the Development and 
Design of DOD's National Security Personnel System: 

DOD's new personnel management system--the National Security Personnel 
System--will have far-reaching implications for civil service reform 
across the federal government. If designed and implemented properly, 
this system could serve as a model for governmentwide transformation in 
human capital management. The 2004 National Defense Authorization Act 
gave DOD significant flexibilities for managing more than 700,000 
defense civilian employees. In February 2004, DOD and the Office of 
Personnel Management (OPM) released for public comment the proposed 
regulations for the new system. We contributed to the debate by 
providing the Congress with timely information and testimony on the far-
reaching implications that DOD's new personnel management system will 
have, not just for the management of the department, but for civil 
service reform across the federal government. For example, the 
Comptroller General testified on our preliminary observations on DOD's 
proposed National Security Personnel System regulations in such areas 
as pay and performance management, adverse actions and appeals, and 
labor-management relations; the multiple challenges DOD faces in 
implementing the new system; and a governmentwide framework to advance 
human capital reform. In addition, our written products on DOD's 
efforts to design its new personnel management system helped the 
Congress monitor and assess the progress of DOD's implementation 
effort. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-432T], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-517T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-559T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-641R], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-770R], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-771R], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-730] 

2.25.C. Helping Shape the Debate on Improving Military Compensation: 

The cost to provide military compensation--which includes a myriad of 
pays, benefits, and deferred compensation--has grown steeply in recent 
years. This upward cost trend is especially dramatic for certain 
military-related entitlements, like providing lifetime health care for 
retired members and their families. The growth has been somewhat 
obscured, however, because the total cost of military compensation is 
scattered around the federal budget, leaving the Congress with an 
incomplete picture of the true costs. We reported in July 2005 that the 
cost to the government for providing active duty compensation had grown 
by fiscal year 2004 to about $158 billion, or approximately $112,000 
for each active duty member. More than half these costs were for 
benefits and deferred compensation, such as retirement and health care. 
DOD's approach is inefficient and may not be appropriate for meeting 
the human capital demands facing the military in the 21st century. 
Moreover, it has left many military members unsatisfied with their pay 
and benefits, despite their large and growing costs. Our work has 
served to stimulate and shape the debate within the executive branch. 
For example, the Comptroller General in July 2005 briefed the Defense 
Advisory Committee on Military Compensation. Our findings also alerted 
the President, the Congress, and the American people that DOD's 
approach may not be affordable in the longer term, especially when 
considered against the inevitable fiscal constraint facing the military 
and the nation. People are an organization's most important asset, but 
DOD must balance its investments across a wide range of programs, 
including infrastructure and hardware. Like many other federal programs 
described in our report entitled 21st Century Challenges: Reexamining 
the Base of the Federal Government, we believe military compensation is 
an area for reexamination. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-325SP], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-798] 

2.26.C. Influencing DOD's Plan to Improve Supply Chain Management: 

In April 2005, the Director of OMB testified his agency agreed that 
fixing the management deficiencies highlighted by our high-risk report 
has the potential to save billions of dollars, dramatically improve 
service, and strengthen public confidence and trust in the performance 
and accountability of government. He then announced a DOD, OMB, and GAO 
collaborative effort to reduce DOD's supply chain management risk 
level. To more efficiently and effectively supply support to the 
warfighter, DOD would prepare a plan for improving the visibility over 
supplies, the accuracy of supply forecasting, and the seamless 
distribution of supplies in support of deployed forces. Since then, DOD 
has been developing its plan for improving management practices and 
soliciting comments from OMB and GAO on its format and content. The 
draft plan cites goals, specific focus areas for improvement, the 
responsible organizations, baseline metrics and data for measuring 
progress, performance targets for fiscal years 2005 through 2007, and 
details on 10 specific initiatives it expects will contribute to 
achieving these targets. We are waiting for DOD to finalize and fully 
implement the plan. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
05-207] 

2.27.C. Improving the Use of Private Security Providers in Iraq: 

The United States is spending billions of dollars to reconstruct Iraq 
while combating an insurgency that has targeted military and contractor 
personnel and the Iraqi people. This environment, coupled with the fact 
that providing security for agencies and contractors is not part of the 
U.S. military's stated mission, created a need for U.S. government 
agencies and reconstruction contractors to obtain substantially more 
security services than are typically needed when operating in other 
countries. Our work found that neither the agencies nor the 
reconstruction contractors were fully prepared to address this need. As 
a result, contractors had difficulty obtaining suitable security 
providers, and coordination between the military and private security 
providers continued to be problematic. In addition, agencies had 
limited data on the role, cost, and implications of using private 
security providers in Iraq. Our work provided the Congress information 
to increase its understanding of the issues associated with using 
private security providers to support reconstruction efforts and 
prompted DOD and other reconstruction agencies to initiate efforts to 
address the issues we identified. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-737] 

2.28.C. Improving the Outcomes of DOD's Space System Acquisitions: 

In fiscal year 2006 alone, DOD expects to spend almost $20 billion to 
develop and procure satellites and other space systems. These systems 
collect information on the capabilities and intentions of potential 
adversaries and enable U.S. military forces to be warned of missile 
attacks and to communicate and navigate while avoiding hostile actions, 
making them increasingly critical to every facet of military operations 
as well as the U.S. economy and homeland security. DOD's introduction 
of these important capabilities over time has not come without 
difficulties. Space system acquisitions have experienced problems over 
the past decade that have driven up costs by billions of dollars and 
delayed the delivery of needed capabilities to the warfighter. Since 
2003, we have pointed out that DOD's acquisition policies and processes 
have not fostered a disciplined, knowledge-based approach to 
acquisitions. In response to our reports, DOD revised its policies and 
processes to increase the knowledge about space programs before 
investment decisions are made, and the Congress has held hearings on 
how to get better outcomes from space system acquisitions. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-570R], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-891T] 

2.29.C. Improving Management of Funding for the Global War on 
Terrorism: 

We recently reviewed the reasonableness of DOD's fiscal year 2005 
supplemental budget request to support the Global War on Terrorism, its 
use of budgeted funds in prior years, its future resource needs, and 
the status of its war expenditures. We identified significant problems 
with DOD's processes for recording and reporting costs related to the 
war, raising concerns about the reliability of cost data used by DOD 
and the Congress in determining future funding needs. We also reported 
separately on the adequacy of supplemental appropriations for the war, 
identifying gaps between funding and war-related expenses, and the 
various actions DOD took to cover the difference, including deferring 
programs, to free up funds to help cover the gaps. We found that DOD 
had not considered using all available funds that were intended to 
support the war. If DOD had done so, it could have reduced or 
eliminated the gaps. We made several recommendations to help improve 
the reliability of DOD's cost reporting. In response, DOD has taken a 
range of corrective actions, including revising pertinent guidance, 
correcting recording errors, and establishing new methods for 
determining and reporting costs. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-767], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-882] 

2.30.C. Improving Management of DOD's Business Transformation Efforts: 

DOD spends billions of dollars to sustain key business operations 
intended to support the warfighter, including systems and processes 
related to the management of contracts, finances, the supply chain, 
support infrastructure, and weapons systems acquisition. DOD has 
embarked on a series of efforts to reform its business operations, 
including modernizing underlying IT business systems. However, serious 
inefficiencies remain. The areas of DOD's overall management approach 
that remain high risk include business transformation; business systems 
modernization; contract, financial, supply chain, and support 
infrastructure management; and weapon systems acquisition. Furthermore, 
limitations in DOD's approach to strategic planning and budgeting 
hinder its efforts to transform military capabilities and supporting 
business operations. During this fiscal year, we reported and testified 
on inefficiencies in DOD's business operations, such as the lack of 
sustained leadership, the lack of a strategic and integrated business 
transformation plan, and inadequate incentives. In particular, we 
pointed out the need for DOD to establish a chief management official 
to lead the department's overall business transformation efforts. In 
response to our work, DOD has acknowledged the need for better 
leadership accountability and has designated a senior official to be 
the focal point for business transformation. It has also stated that it 
is developing a plan to guide key business reform efforts. We will 
continue to monitor DOD's efforts in these areas. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-140T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-207], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-520T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-629T] 

Advance and protect U.S. international interests: 

2.31.A. Designating American Samoa as a High-Risk Grantee: 

After the Congress cited our December 2004 report and its 
recommendations, the Deputy Assistant Secretary of the Interior 
announced in June 2005 that the department was designating the American 
Samoa government as a high-risk grantee as a tool to encourage other 
federal agencies to support the fiscal reform process in American 
Samoa. We had assisted the Congress in drafting language for a 
congressional report that would implement our recommendation. According 
to the report, the committee had reviewed our recent report concerning 
accountability for federal grants to American Samoa and urged the 
Secretary to use his authority to encourage other agencies to consider 
designating American Samoa a high-risk grantee. In order to be removed 
from high-risk category, the American Samoa government will have to 
satisfy three conditions: (1) complete single audits by the statutory 
deadline, resulting in materially clean opinions, for 2 consecutive 
years; (2) have a balanced budget for 2 consecutive years, without 
regard for nonrecurring windfalls such as insurance settlements; and 
(3) remain in compliance with the memorandum of agreement executed with 
the Department of the Interior in 2002, as well as the related fiscal 
reform plan. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-41] 

2.32.A. Strengthening the Visa Process as an Antiterrorism Tool: 

Using our work as a primary guide, the Department of State (State) has 
strengthened the visa process as an antiterrorism tool. State issued 
guidance emphasizing national security as the department's first 
priority in the visa process; developed more than 80 standard operating 
procedures to ensure that consular officers properly review visa 
applications, effectively fulfill their national security 
responsibilities, and have a step-by-step, unambiguous guide for all 
procedures; established special teams to visit posts and reinforce 
standard operating procedures and management practices; and developed 
and enhanced training on analytic interviewing techniques, fraud 
prevention, counterterrorism, and the use of the Consular Lookout and 
Support System to check names on visa and passport applications. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-132NI] 

2.33.A. Improving Programs to Protect Internally Displaced Persons: 

In response to our work, the United Nations established a specific 
division to coordinate overall efforts to assist internally displaced 
persons--those forced to flee their homes because of armed conflict and 
persecution but who remain within their own country. The United Nations 
High Commissioner for Refugees (UNHCR) conducted a detailed review of 
its efforts to assist and protect displaced persons and, according to 
State officials, has implemented a more robust response for internally 
displaced persons. Ending a bureaucratic stalemate that lasted several 
years, the United States Agency for International Development (USAID) 
was designated the lead U.S. agency for internally displaced persons 
and instituted triweekly coordination meetings with State. In response 
to our recommendation that the Secretary of State strengthen 
international organizations' protection efforts by implementing 
training programs and forming country-level protection working groups, 
United Nations' organizations, U.S. government agencies, and 
nongovernmental organizations implemented internally displaced persons 
training programs for their staff. Also, according to State and USAID 
officials, country-level protection working groups are standard 
practice in countries with refugees and internally displaced persons. 
For example, in Sudan there are three protection working groups in 
Darfur. Finally, in response to our recommendations that the Secretary 
of State include a focus on internally displaced persons in annual 
reporting, State increased the breadth and scope of internally 
displaced persons reporting in its annual human rights report. State 
also improved the reporting format on internally displaced persons' 
issues by concentrating the bulk of its findings into one section of 
the individual country reports and harmonizing report language. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-803] 

2.34.A. Improving Efforts to Employ U.S. Citizens at United Nations' 
Organizations: 

In response to our recommendations for increasing efforts to achieve 
equitable representation of Americans employed in United Nations' 
organizations, State has undertaken several actions. Beginning in 2002, 
State incorporated U.S. employment targets for the United Nations and a 
strategy for implementing those targets in its performance and 
accountability report. State's recruitment strategy includes 
establishing and coordinating governmentwide efforts, promoting the 
detail and transfer of federal employees, and working with United 
Nations' agencies to encourage their hiring of more Americans. Also, 
State directed its missions to United Nations' organizations to 
redouble their efforts to promote increased U.S. representation on the 
staffs of United Nations' agencies by meeting with each of the heads of 
the major United Nations' agencies for which they were responsible. 
Each mission received specific guidance on what either the prescribed 
geographic distribution targets or negotiated targets were for each 
organization. As part of this effort, State provided each mission the 
department's annual reports to the Congress on efforts by the United 
Nations to employ Americans with specific instructions to share the 
report with United Nations' officials and encourage better recruitment 
of U.S. citizens. Consequently, some United Nations' agencies are more 
aware of U.S. employment issues and have taken strides to ensure that 
the United States does not fall below its geographical target. For 
example, because many of their U.S. employees will be eligible for 
retirement soon, the Secretariat has invited the United States to offer 
the National Competitive Recruitment exam. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-839] 

2.35.A. Improving Information on International Development Results: 

As a result of our work, USAID reported that it aggregated performance 
data for agencywide reporting in sectors where data are sufficiently 
comparable to use as common indicators. We recommended that USAID's 
Administrator provide clearer evidence of progress toward achieving 
agency outcomes, including, where possible, aggregate performance 
results across agency objectives and the activities under them. 
Although USAID reported that it made progress toward achieving the 
selected outcomes, the extent of the progress was unclear because the 
agency based its support on disaggregated and, in some cases, out-of-
date and selective data. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-01-721] 

2.36.A. Improving Reporting of Microenterprise Results: 

USAID uses information from its Microenterprise Results Reporting 
system to prepare annual reports. This system was created to track 
USAID's funding and program data related to small, informally organized 
businesses, called microenterprises. In response to our recommendations 
to improve the accuracy and completeness of its annual reports, USAID 
has undertaken several corrective actions that included adding language 
citing the limitations of its data on outreach to the poor and 
improving the collection, analysis, and reporting of data on meeting 
its spending targets. For example, it issued new guidance on what 
information should be collected, added requirements to perform spot 
checks on the data to improve accuracy, provided better instructions to 
clearly stipulate what portion of USAID assistance to institutions can 
be reported as microenterprise funding, and added clarifications in its 
annual report to better inform the reader of USAID's contribution to 
the institutions. Additionally, USAID took several actions to improve 
the completeness and accuracy of its reporting on microfinance 
institution sustainability. These actions include a requirement that 
each institution explain its sustainability calculations, that USAID 
review and follow up on problematic calculations, and that annual 
reports highlight the variance in sustainability reporting. Finally, 
USAID's report will now indicate that USAID funding alone is not 
responsible for the accomplishments highlighted. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-171] 

2.37.A. Improving Workforce Planning at USAID: 

In response to our recommendation that the USAID Administrator develop 
and institutionalize a strategic workforce planning and management 
system to help the agency plan for changes in its workforce and 
continue operations in an uncertain environment, USAID initiated a 
comprehensive workforce analysis and planning effort to predict 
workload and staffing demands for the future, identify current 
workforce gaps, and develop necessary solutions to close those gaps. 
The workforce plan institutes a process that will allow the agency to 
project its staffing requirements and to develop targeted initiatives 
to meet those requirements. Plans have been made to integrate the 
workforce planning model and its results into other agency planning 
processes. We reported that USAID's ability to deliver foreign 
assistance in an uncertain environment was becoming increasingly 
difficult as a result of several human capital vulnerabilities, such as 
its ad hoc approach to workforce planning. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-946] 

2.38.A. Significantly Reducing the Wait for Student Visas: 

As a result of our work, science students and scholars should be able 
to obtain visas significantly faster now than in 2004. In response to 
our recommendation, the Secretary of State, in coordination with the 
Director of the Federal Bureau of Investigation, the Secretary of 
Homeland Security, and others, reduced the length of time it takes for 
science students and scholars to obtain visas by taking several actions 
to improve the program and shorten the time allotted for security 
checks from 56 days to 15 days. For example, State and an intelligence 
agency agreed that the agency would reduce its response time from 15 to 
10 days. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-371], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-198] 

2.39.A. Expanding Refugee Protection: 

State worked with UNHCR to respond to our recommendations to reform 
elements of UNHCR's human capital management, including its staffing 
system, in order to better protect refugee women and girls from sexual 
abuse and violence. Specifically, UNHCR implemented a new personnel 
rotation policy to fill positions at hardship posts, began a pilot 
program to provide training on protection for nongovernmental 
organizations working with UNCHR in the field, institutionalized a 
project to fill staffing gaps, and included discussions on the 
prevention of sexual exploitation of refugee women and girls at 
meetings and in an annual report. State urged UNHCR to undertake these 
changes and contributed funding for projects to provide training on 
protection and provide UNHCR with personnel to fill staffing gaps. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-663] 

2.40.A. Developing More Comprehensive Interagency Strategic Plans for 
Democracy Assistance: 

In response to our work, USAID and State included in their first 
jointly prepared strategic plan a strategic goal of advancing the 
growth of democracy and good governance. The plan refers to working 
with key partners and crosscutting programs and highlights key areas of 
focus, including promoting the rule of law and developing governance 
and human rights infrastructures. The two agencies also (1) established 
a joint policy council to ensure that interagency coordination is 
implemented at the working level and (2) are developing a common tool 
at the country level to reflect strategic planning. USAID also held 
training sessions for democracy officers aimed at enhancing the quality 
of democracy programs by providing exposure to the latest academic 
thinking, programming from other regions, and comparison among similar 
approaches now being undertaken in Latin America. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-358] 

2.41.A. Improving the Accountability and Effectiveness of 
Microenterprise Programs: 

In response to our recommendations intended to improve program 
accountability and effectiveness, the House International Relations 
Committee crafted legislation to improve the accountability and impact 
of microeconomic development funds. Specifically, the Congress noted 
that USAID is not currently organized to adequately coordinate, 
implement, and monitor such programs. The Congress passed the 
Microenterprise Results and Accountability Act of 2004 in December 
2004. The law required USAID to establish an Office of Microenterprise 
Development and implement a program of central funding in order to 
improve program effectiveness, accountability, and efficiency. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-171] 

2.42.A. Reducing the Amount Requested for the Millennium Challenge 
Account: 

Our work contributed to the Congress's decision to appropriate $1.5 
billion for the Millennium Challenge Account in fiscal year 2005--a 
reduction of $1 billion from the President's request. In March and June 
2004, we provided budget papers and follow-up briefings to the Congress 
to help it assess the President's $2.5 billion fiscal year 2005 budget 
request for the account, which is a new foreign assistance program 
intended to provide economic assistance to countries that demonstrate a 
commitment to ruling justly, investing in people, and encouraging 
economic freedom. Our work made a unique contribution by providing a 
framework for identifying the relationships and trade-offs between 
funding levels, compact length, and numbers of compacts under several 
illustrative scenarios. We showed the impact of reducing the 
President's budget request by about $1 billion; suggested that the 
Millennium Challenge Account could compensate for lower levels of 
funding by reducing compact length, assistance target levels, or both; 
and estimated the effect of funding compacts partly from future 
appropriations. The fiscal year 2005 appropriations conference report 
recommended that the account negotiate shorter duration compacts 
because of budget constraints and directed it to fund compacts from 
existing appropriations, rather than partially using future 
appropriations. (Based on briefings). 

2.43.A. Improving Consultation on United Nations' Peacekeeping: 

In September 2001, we recommended that the Secretary of State provide 
the Congress with timely, detailed, and complete information about 
shortfalls for new or substantially revised peacekeeping operations and 
plans to mitigate the shortfalls. In response, State has provided 
detailed briefings to the Congress each month about new or 
substantially revised operations and the issues that confront the 
department. Also, in its notifications to the Congress, State now 
includes discussions about the shortfalls in operations and the steps 
to mitigate them. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-
917] 

2.44.A. Improving Oversight of the Multinational Force and Observers 
(MFO): 

We recommended that State ensure that staff with accounting expertise 
carry out financial oversight responsibilities for MFO--the body that 
monitors the peace treaty between Egypt and Israel--and that State's 
MFO Advisory Board should monitor and document State compliance with 
its oversight guidelines. In response, the board included 
representatives from State's IG to review MFO audits and adopted a 
mission statement to ensure adequate and documented review and analysis 
of MFO's activities and budget in accordance with established 
guidelines. State's IG reviewed MFO's latest annual external audit and 
financial statements in August 2004 and found no problems. A State 
official said that the IG will routinely participate on the board and 
will check on the quality of MFO's audits through an annual review of 
MFO-audited financial statements and relate them to prior years' 
statements. Moreover, any irregularities will be brought to the 
attention of State bureaus. We noted that State had not provided 
employees who possess the expertise to carry out many of its financial 
oversight responsibilities for MFO. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-883] 

2.45.A. Improving USAID's Caribbean Housing Reconstruction Program: 

Based on our observations, USAID and its primary contractor for housing 
refined their selection criteria and implemented mechanisms to make 
sure only those most in need obtained assistance. We are concurrently 
monitoring the progress of USAID's efforts to repair damage in Grenada, 
Jamaica, and Haiti caused by several hurricanes. We had previously 
identified weaknesses in the selection process, observing that the 
contractor did not have mechanisms for staff conducting site 
inspections to verify that people applying for housing assistance were 
only those in most need. (Based on a briefing). 

2.46.A. Improving Counternarcotics Assistance to Colombia: 

In response to our recommendations, State and DOD provided a report to 
the Congress detailing support for U.S. counternarcotics assistance to 
Colombia, including funding, training, maintenance, and logistics for 
the U.S.-provided helicopters. A subsequent DOD white paper also 
outlined timeliness, planning, and coordination to eventually turn 
operations and maintenance responsibilities over to the Colombians. We 
recommended that the Secretaries of State and Defense (1) determine 
training and logistical support requirements and identify future 
funding sources to support the U.S.-provided helicopters and other 
major equipment items already delivered to Colombia and (2) complete 
U.S. implementation plans and coordinate with Plan Colombia--Colombia's 
integrated strategy to meet its most pressing challenges, including 
combating the narcotics industry--so that any future U.S. assistance is 
adequately supported and plans for its use are clearly identified and 
agreed to. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-26] 

2.47.C. Strengthening Accountability at the Global Fund: 

Based partly on our work, legislation was introduced that would make 25 
percent of the U.S. contribution to The Global Fund to Fight AIDS, 
Tuberculosis, and Malaria conditional on the Secretary of State's 
certification that the fund has undertaken certain actions, including 
actions to (1) establish clear progress indicators upon which to 
determine the release of incremental disbursements, (2) release such 
disbursements only if positive results have been attained based on 
these indicators, and (3) provide support and oversight to country-
level entities to enable them to fulfill their mandates. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-639] 

2.48.C. Overseeing the United Nations' Reform and the Oil for Food 
Program: 

Earlier this year, we testified before the Congress that the United 
Nations had not assessed the status and impact of its reforms or 
developed a system to monitor and evaluate program results. We also 
identified 702 findings and 667 recommendations in the 58 internal 
audit reports of the Oil for Food program in Iraq but noted several 
limitations on scope and authority. Partly on the basis of our work, 
the Congress introduced a bill requiring reforms in the United Nations' 
accountability and directing us to review the implementation of United 
Nations reforms. The Congress also cited our report on United Nations 
reform efforts in a draft United Nations reform bill. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-346T], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-392T] 

2.49.C. Identifying Challenges to Efforts to Stabilize and Rebuild 
Iraq: 

We identified the challenges to U.S. efforts to stabilize Iraq, 
reconstruct Iraq's essential infrastructure, and support its elections. 
We reported that the United States has provided about $24 billion for 
these purposes from fiscal years 2003 through 2005. Our analysis of 
Iraq's security showed that the insurgency in Iraq has grown in 
intensity and sophistication. Moreover, the difficulty in training and 
equipping Iraqi forces and developing capable and loyal Iraqi 
leadership challenge efforts to stabilize Iraq and withdraw U.S. 
troops. We found that U.S. reconstruction efforts have made some 
progress in increasing Iraq's electrical generation capacity, 
refurbishing oil facilities, restoring some water treatment plants, and 
rehabilitating some health facilities. However, as of May 2005, Iraq's 
crude oil production and power generation were lower than before the 
2003 conflict, and some completed water projects were not functioning 
as intended. Moreover, reconstruction faces significant challenges, 
such as rebuilding in an insecure environment, ensuring that 
rehabilitated infrastructure is maintained after projects are turned 
over to the Iraqis, and measuring program results. In the water and 
sanitation sector, we recommended actions to improve U.S. efforts to 
measure progress and impact and to help the Iraqis operate and maintain 
new and repaired facilities. We also reported that the United States 
provided about $130 million to support Iraq's elections. All these 
findings were widely reported in the national media, helped inform 
American taxpayers about U.S. efforts in Iraq, and provided the 
Congress with crucial oversight information as it considers legislative 
action. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-431T], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-872], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-876], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-932R] 

2.50.C. Bolstering Efforts to Prevent Terrorists and Criminals from 
Obtaining U.S. Passports: 

Our work uncovered alarming security gaps in U.S. passport operations 
that made it more difficult to protect U.S. citizens from terrorists, 
criminals, and others who would do harm to the United States. We found 
that State was not receiving information from the Terrorist Screening 
Center--established to, among other things, provide continual 
operational support for thousands of federal screeners worldwide--on 
certain persons listed in the federal government's consolidated 
terrorist watch list and, therefore, could not integrate that 
information into its name-check system. We also found that State was 
not routinely obtaining the names of other individuals wanted by both 
federal and state law enforcement authorities for various crimes--some 
very serious. We made a number of recommendations for correcting these 
and other systemic weaknesses that we identified in State's passport 
fraud detection efforts. The Congress expressed grave concerns about 
the security vulnerabilities we identified and, citing maintaining the 
integrity of the U.S. passport as a critical component of our global 
effort to fight terrorism, called upon State and the Department of 
Justice (Justice) to implement our recommendations. The agencies have 
begun implementing actions to close these critical security gaps. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-477], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-853T] 

Respond to the impact of global market forces on U.S. economic and 
security interests: 

2.51.A. Using Better Measures for Trade Adjustment Assistance Outcomes: 

In response to our recommendations to establish more effective measures 
of desired outcomes of Trade Adjustment Assistance Centers, which were 
established to assist firms that have been adversely affected by import 
competition, Commerce established new measures to determine the 
percentage of clients taking action as a result of the assistance 
facilitated by the centers and the percentage of those actions taken by 
centers' clients that achieved the expected results. Commerce 
subsequently reported that the performance measures were established to 
determine the value added to the centers, to further define the 
relevance of the assistance by the centers, and to determine if the 
assistance facilitated by the centers is market based. This responds to 
our second recommendation that Commerce apply these measures as 
criteria to evaluate the effectiveness of the centers in helping 
injured firms adjust to import competition. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-12] 

2.52.A. Strengthening DOD's Anti-Tamper Program: 

U.S. weapons and technologies that are exported, stolen, or lost or 
damaged during combat and routine missions are vulnerable to reverse 
engineering and other exploitations, which can weaken U.S. military 
advantage, shorten the expected life of a system, and erode the U.S. 
industrial base's technological competitiveness. In an effort to 
protect U.S. weapons and technologies from exploitation, in 1999 DOD 
established a policy directing each military service to implement anti-
tamper techniques--a policy that has proven difficult to implement on 
individual weapon systems. Consistent with recommendations we made in 
March 2004, DOD issued a report that provides guidance to program 
managers about the relative cost and effectiveness of generic anti-
tamper techniques. According to DOD, the guidance will help program 
managers consider anti-tamper technologies in the design, development, 
and fielding of their systems. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-302] 

2.53.A. Improving Oversight of Trade Adjustment Assistance: 

We identified expenditures of almost $1.7 million for training, trade 
readjustment allowances, relocation, and job search allowances that 
were reported for trade adjustment petitions that according to DOL's 
database, were not certified and had been denied. Based on our analysis 
and recommendation, DOL identified reports from 31 states that included 
petitions that had been denied and asked the states to review their 
reports to determine whether these were data entry errors or if 
benefits were wrongly paid. As of March 2003, none of the states had 
identified any wrongly paid benefits, according to DOL. Further, DOL 
stated that it has corrected all errors that it has identified. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-59], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-988T] 

2.54.A. Improving Monitoring of Community Adjustment and Investment 
Program: 

In response to our recommendation, Treasury set up a system to monitor 
the number of jobs created or preserved by the borrowers of its loans 
and loan guarantees, as well as by grant recipients, in distressed 
communities under the Community Adjustment and Investment Program. The 
program conducted its first survey of job creation and preservation 
outcomes in September 2002 and plans to do its first survey of another 
program soon. Grant recipients report quarterly and in a final report 
on progress in meeting the annual goals. The Congress created the 
program in December 1993 to assist communities suffering job losses due 
to changing trade patterns with Mexico and Canada. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-229] 

2.55.A. Ensuring Decisions to Transfer U.S. Weapons and Technologies to 
Foreign Governments Are Adequately Informed: 

In 2001, transfers of U.S. weapons and technologies to foreign 
governments totaled over $12 billion, representing 46 percent of the 
world market share--a 15 percent increase from 1997. Before transfers 
are approved, the U.S. government must first determine if classified 
weapons or technologies can be released to the requesting country 
according to criteria set out in the National Disclosure Policy. To 
make this determination, a number of federal agencies and committees 
assess a number of factors including the risks that would be involved 
if a classified weapon or technology were to be compromised or end up 
in unfriendly hands. These assessments are based, in part, on 
intelligence information. However, in July 2003, we found that the 
National Disclosure Policy Committee--which reviews and approves or 
denies requests for exceptions to the National Disclosure Policy--was 
operating with outdated Central Intelligence Agency risk assessments. 
Acting on our recommendations, the committee's Executive Secretariat 
requested that the Central Intelligence Agency provide updated risk 
assessments for 23 countries. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-694] 

2.56.A. Improving Training under Trade Adjustment Assistance: 

The Congress acted on our matters for congressional consideration when 
it passed the Trade Act of 2002, inserting language to amend the Trade 
Act of 1974. Specifically, the language (1) permits workers to receive 
payments during breaks in training lasting up to 30 days, which allows 
workers to continue to receive income benefits during unavoidable, 
extended interruptions in training; (2) standardizes the training 
enrollment deadline for trade-affected workers; (3) refines training 
waiver policies for certified workers; and (4) expedites review of 
petitions by the Secretary of Labor, reducing the time from 60 to 40 
days, thereby permitting displaced workers to more quickly access 
retraining and financial support services. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-59], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-988T] 

2.57.A. Improving Information Security Practices: 

In response to the September 11, 2001, terrorist attacks, we have 
examined and reported on the adequacy of the steps that financial 
market participants have taken to reduce their vulnerability to 
attacks, including those by hackers attempting to gain unauthorized 
access to a specific organization's networks or systems or those 
arising from malicious computer viruses or worms that seek to damage 
data or deny access to legitimate users. From October 2003 through 
April 2005, we reviewed the measures taken by selected critical 
financial market organizations, including exchanges, clearing 
organizations, and payment system processors, to protect themselves 
from electronic attacks. As part of these reviews, we found that the 
selected financial market organizations were taking steps to prevent 
their operations from being disrupted by electronic attacks. Each of 
the organizations had implemented the major elements of a sound 
information security program. However, at each of these organizations, 
we identified 11 to 38 suggested improvements that could be taken to 
further improve their protections against attacks. Many of the 
improvements we identified related to how these organizations could 
implement additional controls to prevent unauthorized access to 
networks and information systems and to better detect intrusion 
attempts when they occur. We briefed staff from SEC and the Federal 
Reserve Board of Governors on the detailed results of our reviews, and 
they both indicated that they will use our work to monitor the progress 
of the organizations they oversee in implementing the information 
security improvements. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-679R] 

2.58.A. Strengthening the Government's Ability to Monitor Foreign 
Investors' Compliance with National Security Agreements: 

In 1988, the Congress passed the Exon-Florio amendment to the Defense 
Production Act, authorizing the President to suspend or prohibit a 
foreign acquisition of U.S. companies if the acquisition poses a threat 
to national security. In some cases, the Committee on Foreign 
Investment in the United States--an interagency committee that is 
chaired by the Secretary of the Treasury and is responsible for 
reviewing foreign acquisitions--may negotiate an agreement with the 
foreign investor on measures to mitigate national security concerns. 
However, in 2002, we reported that weaknesses in some agreements made 
it difficult to ensure compliance. Specifically, we found that 
agreements did not indicate the agency responsible for monitoring 
compliance and lacked monitoring provisions, such as time frames for 
implementing mitigation measures and consequences for noncompliance. 
Consistent with our suggestions, the committee has begun including 
specific time frames for compliance and the specific member agency 
office responsible for reviewing compliance with recently negotiated 
agreements. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-736] 

2.59.C. Contributing to Federal Financial Literacy Efforts: 

Research has shown that many Americans lack the knowledge of basic 
personal economics they need to make informed financial judgments and 
manage their money effectively. Yet financial literacy is increasingly 
important in a world where consumers must choose from an array of 
complicated financial products and services and employees must take on 
more responsibility for their retirement savings. Our financial 
literacy forum contributed to federal and nationwide discussion on 
possible topics, target populations, and methods of delivery for 
federal financial education efforts and the role of program evaluation. 
Our study on consumer knowledge and behavior regarding credit reporting 
outlined ways to improve consumers' understanding of the information 
contained in credit reports and how their actions can influence the 
contents of their reports. The study will help the Financial Literacy 
and Education Commission--which was established to improve financial 
literacy and education of people in the United States--and other groups 
following its lead to identify and penetrate particular demographic 
groups that would benefit the most from financial education efforts. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-95], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-223] 

2.60.C. Developing an Approach to Analyze Offshoring of Services: 

Offshoring of services generally refers to an organization's purchase 
from other countries of services that it previously produced or 
purchased domestically, such as software programming or services 
provided by telephone call centers. Our offshoring work has provided 
the Congress with an analytical approach for understanding a 
controversial and politically sensitive topic. The work took advantage 
of our ability to assemble a crosscutting team to analyze complex data 
to craft a unique report, which has served as the basis for numerous 
public presentations in the United States and Europe. Our analysis led 
the international Organisation for Economic Cooperation and Development 
to adopt our approach. The government of Sweden sought out the team for 
further coordination of the Organisation for Economic Cooperation and 
Development's efforts to understand the impact of offshoring in Europe. 
We are now routinely included in offshoring panel discussions, due to 
our objective and clear analysis of the practice and concept of 
offshoring and the multiple U.S. databases that relate to offshoring. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-932] 

2.61.C. Improving Transparency of U.S. Reporting on Currency 
Manipulation Issues: 

In a 2005 review of currency manipulation issues, we provided 
comprehensive analysis on a key international policy issue and 
increased the transparency of Treasury reporting on its manipulation 
assessments. Our report provided objective information on the legal 
determinants of currency manipulation, differences between currency 
undervaluation and manipulation, and the basis for recent Treasury 
findings. Partly in response to our ongoing work, Treasury added 
information to its semiannual currency report about its criteria for 
manipulation assessments. In addition, Treasury introduced a link to 
Web-based information about U.S. consultations with the International 
Monetary Fund to meet a legislative requirement. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-351] 

2.62.C. Prompting Action to Reform the U.S. Export Control System: 

Over the years, we have reported on the need to address weaknesses and 
inefficiencies in export controls to ensure that U.S. interests--
economic as well as military--are safeguarded and that defense-related 
items do not fall into the wrong hands. We have made numerous 
recommendations aimed at correcting these weaknesses and 
inefficiencies, such as clarifying jurisdiction over the export of 
missile technologies and establishing formal guidelines for reviewing 
and monitoring the flow of export license applications. Despite our 
findings and recommendations, we reported early this year that the 
export control system remained fundamentally unchanged. As a result of 
our work, the Congress has begun to take action to reexamine and reform 
the U.S. export control system. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-63], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-120], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-234], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-468R] 

Strategic Goal 3: 

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges: 

Reexamine the federal government's role in achieving evolving national 
objectives: 

3.1.A. Enhancing the Knowledge Base on Indicators: 

We have been working as a catalyst regarding approaches and options for 
measuring national performance using comprehensive key indicator 
systems. The U.S. government has invested billions of dollars in a rich 
variety of topical information (on the economy, the environment, and 
society and culture) that could underpin a national system. However, 
although several states, counties, and cities have developed key 
indicator systems, the United States lacks such a system at the 
national level. A comprehensive key indicator system for the United 
States could serve as a trusted source for reliable, fact-based 
information that could inform a much-needed reexamination of the base 
of existing programs, policies, functions, and activities. In fiscal 
year 2005, we issued the results of a wide-ranging study of 
comprehensive key indicator systems in the United States and elsewhere. 
We also contributed to the planning and implementation of the 
Organisation for Economic Development's first World Forum on Key 
Indicators. The participation of over 500 officials representing 43 
nations provided a key opportunity to share experiences and an impetus 
for further action and improvement. One such action was publication of 
the 2005 Factbook and an interactive Web site that present a range of 
statistics on member countries. At the Forum, representatives of the 
Key National Indicators Initiative discussed efforts to develop a 
comprehensive key national indicator system for the United States. We 
helped build the foundation for the Key National Indicators Initiative 
effort, which is housed under the National Academies. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-672SP], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-1] 

3.2.C. Reexamining the Base of the Federal Government: 

In February 2005, we issued a report calling for, defining, and 
illustrating how to carry out a fundamental reexamination of what the 
federal government does, how it does it, who does it, and how it gets 
paid for. Prompted by unsustainable fiscal commitments and the need to 
ready the federal government for the emerging challenges of the 21st 
century, the federal government and the Congress need to reexamine 
entitlements, tax policy, and discretionary spending governmentwide. 
The Congress held two hearings to learn more about such reexamination, 
and it has been a focal point of sustained outreach efforts agencywide. 
The report has been instrumental in beginning to shape both the 
interest of some in the Congress in how to deal with the 21st century 
challenges, as well as the lens through which we structure and 
prioritize our own work. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-325SP], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-317T], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-352T] 

Support the transformation to results-oriented, high-performing 
government: 

3.3.A. Improving the Defense Information Systems Agency's (DISA) IT 
Investment Planning and Management Controls: 

In March 2002, we identified numerous opportunities for DISA to improve 
planning and management controls over its $3.5 billion annual IT 
spending. Implementation of our recommendations helped DISA realize 
improvements in its strategic planning (including development of a 
strategic plan and implementation of a plan), organizational structure 
management, enterprise architecture management (including soon using 
the architecture to support IT investment decisions), IT investment 
management (including soon implementing portfolio management), customer 
relations management, and knowledge management. While responding to 
these recommendations required major change in its management systems 
and required years to complete, the changes realized to date helped 
DISA focus on improving warfighter support and better focus its IT 
spending. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-50] 

3.4.A. Achieving Significant Financial Benefits by Leveraging DOD's 
Buying Power: 

In fiscal year 2004, DOD spent over $127 billion on service contracts-
-more than two-thirds of the $189 billion spent by the entire federal 
government in that year. Despite this significant share of spending, 
DOD's management of service procurement is inefficient and ineffective 
and the dollars are not always well spent. Many private companies have 
managed their procurements by using spend analysis, which involves 
analyzing spending patterns and coordinating procurement in order to 
achieve substantial financial benefits. In response to our report, DOD 
and contractor project managers pilot-tested Web-based technology that 
links and pulls data from disparate sources; maps and organizes the 
data into a common taxonomy of products, services, and suppliers; and 
produces spend analysis reports. The proposed virtual spend data 
warehouse will enable DOD to identify high-volume, high-dollar services 
and product spending--opportunities for strategic sourcing that will 
result in financial benefits and quality improvements. In March 2005, 
DOD approved a business case analysis to seek follow-on funding for 
developing a departmentwide spend analysis system. DOD projects $4 
billion to $10 billion in annual financial benefits once the system is 
in place and used to support strategic sourcing across DOD. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-661] 

3.5.A. Encouraging Efficiency in DHS Acquisitions: 

In March 2003, 22 federal agencies and organizations essentially merged 
to form DHS--a transformation GAO has designated high risk since 2003. 
With a budget of almost $40 billion, DHS was challenged to leverage its 
substantial buying power and boost administrative efficiency. Based on 
our work, DHS has developed acquisition strategies for purchasing goods 
and services that include basic office supplies, ammunition, weapons, 
and IT. As a result of these strategies, DHS reported approximately $14 
million in cost reductions and cost avoidances for fiscal year 2004, 
with cost reductions expected to continue to grow, according to agency 
officials. At the same time, DHS was challenged to maintain an 
effective acquisition workforce. The contracting workforce of one of 
DHS's largest entities--with annual obligations for goods and services 
totaling $1.7 billion--had not grown sufficiently to manage an 
increased workload. In addition, Immigration and Naturalization Service 
field offices relied heavily on contracting officers who performed 
contracting duties along with their mission-related responsibilities 
and who are not career contracting officers. Consistent with our 
recommendations, DHS developed a plan, based on best practices, that 
defines the acquisition workforce, focuses on the need for continual 
training, and implements a certification program. DHS also phased out 
all collateral duty contracting officers, allowing only those 
individuals with specific contracting officer authority to execute 
contracts and related agreements on DHS's behalf. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-230], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-799], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-870], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-179] 

3.6.A. Providing Needed Rigor to the Coast Guard's Oversight of 
Deepwater Program Contractors: 

The Coast Guard established the Deepwater program to modernize and 
replace its fleet of ships and aircraft used for search and rescue, 
drug interdiction, offshore inspection, and other missions that 
generally occur beyond 50 miles from shore. Deepwater is the largest 
and most complex procurement project in the Coast Guard's history. In 
June 2002, the Coast Guard awarded a contract to a system integrator to 
develop and deliver the Deepwater assets, and from fiscal years 2002 
through 2004, the Congress appropriated almost $1.5 billion for the 
program. However, in March 2004 we reported that the Coast Guard's 
evaluation of the system integrator's performance lacked the rigor to 
effectively assess the contractor's performance. We also found that the 
two subcontractors--Lockheed Martin and Northrop Grumman--were solely 
responsible for deciding whether to compete Deepwater assets or make 
the assets themselves, and the Coast Guard had no insight into these 
decisions. Based on our recommendations, the Coast Guard has improved 
the criteria for assessing the system integrator's performance and has 
asked the system integrator to provide notification of a subcontractor 
decision to make instead of compete assets valued at $10 million or 
more. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-380] 

3.7.A. Ensuring Continued Investment in GSA's Online Purchasing System: 

In 1995, GSA launched Advantage, an Internet-based system for ordering 
products and services online. As of 2002, GSA had spent $84 million to 
develop, implement, and maintain the system. However, 5 years after the 
system was launched, only 35 percent of all government-contracted 
vendors participated in the program, and agencies were largely using 
the system to compare pricing. To ensure GSA's level of investment 
matched customer needs, we recommended that the agency develop a 
business case for an online ordering and market research system such as 
Advantage. In January 2005, GSA selected a new business strategy that 
would significantly enhance the system's capabilities to serve as a 
broker between buyers and suppliers and provide agencies with an 
automated tool for formulating acquisition requirements and developing 
requests for quotes. Although GSA expects to invest $124 million to 
implement the enhanced system, the agency projects over $1.5 billion in 
financial benefits from electronic transactions, spend analyses 
(reviews of expenditures that shows how money is spent on goods and 
services), a searchable procurement data repository, and competitive 
pricing. This financial benefit has a present value of just over $1.3 
billion. Consistent with our recommendation, GSA's new business 
strategy also calls for reviewing and adding as appropriate new 
performance measures to track results and outcomes of the enhanced 
system. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-328] 

3.8.A. Delivering Results through Performance-Based Service 
Contracting: 

In fiscal year 2004, federal agencies spent roughly $189 billion 
acquiring services from contractors--an area we have designated high 
risk for over a decade for DOE, DOD, and the National Aeronautics and 
Space Administration (NASA), which together account for most of the 
federal spending on services. To achieve greater financial benefits and 
better outcomes, the Congress and OMB have encouraged agencies to use 
performance-based service contracting, where the contracting agency 
specifies the desired outcome and the contractor decides how best to 
achieve this outcome. Although performance-based contracts can 
encourage contractors to find innovative ways to deliver services and 
offer other significant benefits, agencies historically have not widely 
used this strategy. Consistent with our recommendations--particularly 
when acquiring unique and complex services that require strong 
government oversight, OMB's Office of Federal Procurement Policy 
improved its guidance for using performance-based contracting and 
established a fiscal year 2005 target for using performance-based 
service acquisition methods. The office also partnered with the Defense 
Acquisition University, the Federal Acquisition Institute, federal 
government agencies, and industry associations to establish an online 
acquisition center of excellence. The Services Acquisition Reform Act 
of 2003 provides an additional incentive for the use of performance-
based contracting by giving executive agencies authority to treat 
qualifying contracts or task orders as contracts for commercial items. 
The act also requires agencies to collect data on these contracts and 
OMB to report to the Congress on the use of this incentive. Finally, 
OMB has taken steps to better track civilian agencies' use of 
performance-based service contracting. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-1049], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-716T] 

3.9.A. Promoting a Well-Trained Federal Acquisition Workforce: 

Procurement reforms, technological changes, and downsizing have placed 
unprecedented demands on the federal acquisition workforce. Acquisition 
workers are now expected to have greater knowledge of market 
conditions, industry trends, and the technical details of the 
commodities and services they procure. Despite congressional reforms 
enacted in the 1990s to ensure the federal acquisition workforce has 
the right skills to meet such challenges, we reported in July 2002 that 
agencies needed to better define and track their acquisition workforce 
training to inform the agencies' human capital strategic planning and 
ensure an adequately trained acquisition workforce. A number of actions 
have been taken in response to recommendations we made. As required by 
the Services Acquisition Reform Act of 2003, GSA established an 
acquisition workforce training fund, and certain civilian executive 
agencies have designated noncareer chief acquisition officers to 
establish clear lines of authority, accountability, and responsibility 
for acquisition decisions. OMB's Office of Federal Procurement Policy 
required each chief acquisition officer to implement a budget strategy 
that reflects his or her agency's workforce development needs and 
organizational structure and to appoint an individual with acquisition 
experience to lead the agency's acquisition career management program. 
The interagency Chief Acquisition Officer Council has established a 
Human Capital Working Group that is assessing skills required in the 
federal acquisition workforce, identifying skill gaps, and targeting 
training funds to those gaps. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-737], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-281] 

3.10.A. Improving OMB's Competitive Sourcing Processes: 

Under competitive sourcing, federal agencies open their commercial 
activities to competition among public and private sector sources, and 
this process begins each year with agencies developing inventories of 
their commercial positions. A large body of our work from 2000 through 
2004 recommended sustained improvement in the use of annual inventories 
and greater consistency in classifying commercial positions to support 
competitive sourcing as well as revisions to processes for the 
performance of commercial activities that are described in OMB Circular 
A-76, Performance of Commercial Activities. In addition, we recommended 
various improvements to OMB's proposed revisions to Circular A-76 
processes to bring them more in line with the Commercial Activities 
Panel's principles for improving the competitive sourcing decisions of 
the government. The congressionally mandated panel, chaired by the 
Comptroller General and composed of federal and private sector experts, 
stressed the importance of linking sourcing policy with agency 
missions, promoting sourcing decisions that provide value to the 
taxpayer regardless of the service provider selected, and ensuring 
greater accountability for performance. In response to our work and the 
inclusion of competitive sourcing as one of the President's management 
initiatives, OMB has undertaken a sustained effort since 2003 to 
improve and maintain a governmentwide commitment to developing useful 
annual inventories, improving guidance for classifying commercial 
positions, and incorporating most of the A-76 sourcing principles 
adopted by the panel. In fiscal years 2003 and 2004, OMB reported that 
agencies' competitive sourcing efforts will yield billions of dollars 
in financial benefits. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/GGD/NSIAD-00-244], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-498T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-1022R], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-391R], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-1022T], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-367] 

3.11.A. Improving Collection of Delinquent Nontax Debt: 

In a series of reports and testimonies over the past several years, we 
promoted federal agencies' use of key provisions of the Debt Collection 
Improvement Act of 1996 to collect nontax delinquent debt, which 
exceeds $70 billion annually. Acting on our recommendations, Treasury 
and other federal agencies have continued to take steps to implement 
the act's key provisions to improve collections. For example, Treasury 
included additional federal salary payments in its payment offset 
program and continued to offset Social Security payments to recover 
delinquent debts. Also, certain agencies--including Education and HHS-
-have published final rules allowing the implementation of 
administrative wage garnishment under the Debt Collection Improvement 
Act. These actions, along with additional steps taken by Treasury and 
other agencies to improve debt collection processes in response to our 
recommendations, have added about $374 million to a steady stream of 
recoveries. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD-98-
195], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AFMD-90-12], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-308], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-313], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-02-463] 

3.12.A. Assessing Programs Related to a Common Outcome: 

To review the relative contributions of similar programs to common or 
crosscutting goals and outcomes and to facilitate comparisons and trade-
offs between such programs, we recommended that OMB conduct Program 
Assessment Rating Tool (PART) assessments of similar programs and 
activities in the same year. Consistent with these recommendations, for 
the fiscal year 2006 budget, OMB used PART in conducting two 
crosscutting analyses to inform the President's Budget request--
Community and Economic Development programs and Rural Water programs. 
The Community and Economic Development analysis formed the basis for 
the administration's proposal to consolidate various of these programs 
into a $3.7 billion program at Commerce. The budget also indicated the 
administration's intention to develop recommendations to consolidate 
and reform Rural Water programs. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-174] 

3.13.A. Monitoring the Effectiveness of OMB's PART: 

To improve OMB's ability to judge the efficacy of PART, we recommended 
that the Director of OMB centrally monitor agency implementation and 
progress on PART recommendations and report such progress in OMB's 
budget submission to the Congress. Consistent with this recommendation, 
in the PART Summary Worksheets submitted with the fiscal year 2006 
President's Budget Request, OMB reported on the status of each 
program's recommendations. In April 2005, OMB also implemented PARTWeb, 
a Web-based data collection tool to, among other things, centrally 
track the implementation and status of PART recommendations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-174] 

3.14.A. Assisting Agencies in Implementing Leading Diversity Management 
Practices: 

In January 2005, we identified nine leading practices that experts 
agreed should be considered when an organization is developing and 
implementing diversity management. We also provided examples of how 10 
selected federal agencies implemented these practices. As the federal 
government strives to better manage its diverse workforce, our report 
is being used by agencies to begin the dialogue necessary to create an 
environment that is inclusive of individual differences, responsive to 
the diverse needs of employees, and ultimately provides for 
accountability and fairness for all employees. For example, in July 
2005, the Census Bureau held a diversity fair that focused on five of 
the diversity management practices discussed in our report (top 
leadership commitment, diversity as part of an organization's strategic 
plan, diversity linked to performance, employee involvement, and 
diversity training). A panel of officials from the selected agencies 
featured in our report discussed their agencies' implementation of the 
practices with Census Bureau employees in the morning, and executives 
from those agencies engaged in a frank discussion with Census Bureau 
executives in the afternoon about implementation strategies and 
barriers. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-90] 

3.15.A. Controlling the Cost of the 2010 Census: 

A body of congressionally requested products we issued in 2004 on plans 
for the 2010 Census contributed to congressional decision making that 
will reduce the life cycle cost of the next decennial headcount by 
around $807 million, and could produce better quality data. 
Specifically, members of the Congress cited findings contained in our 
report on census cost and design issues to secure legislative support 
for operational reforms that could help control the cost of the 2010 
Census, the price tag of which is currently estimated at more than $11 
billion. These same reforms, which include a short-form-only census and 
various technological improvements, could produce more accurate and 
timely information for data users as well. Additional taxpayer savings 
stemmed from our review of the feasibility of counting U.S. citizens 
living abroad. We concluded that enumerating this population group 
would not be cost-effective because of the difficulties in obtaining an 
adequate response rate and other challenges. Partly as a result of our 
findings and recommendation to the Congress, legislators eliminated 
funding for any future planning and testing activities. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-37], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-898] 

3.16.A. Strengthening Senior Executive Performance Management: 

High-performing organizations understand that their top leadership 
needs to lead the way to transform their agencies' cultures to be more 
results-oriented, customer focused, and collaborative in nature. 
Recognizing this important leadership role, the Congress authorized a 
new performance-based pay system for members of the federal 
government's Senior Executive Service in 2003. Yet we found that 
Education, HHS, and NASA had opportunities to use their performance 
management systems more strategically. Based on a report we issued in 
May 2004, these agencies are now implementing a series of 
recommendations that can help them provide a clear and direct linkage 
between their senior executives' performance and organizational 
results. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-69SP], 
and [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-832SP] 

3.17.C. Helping Enhance Legislative Branch Agencies' Efforts to Improve 
Performance and Accountability: 

Our work has assisted legislative branch agencies in guiding their 
respective management improvement and transformation efforts. The 
Government Printing Office used our work to guide the realignment of 
its human capital office, which will assist its leadership in managing 
its workforce and will support its overall transformation. To help 
ensure that the Office of Compliance maintains institutional continuity 
into the future, the Congress acted on our recommendations to amend the 
Congressional Accountability Act to permit the reappointment of its 
Board of Directors to an additional term. We encouraged the Architect 
of the Capitol and the U.S. Capital Police to make needed improvements 
to basic management functions, such as IT, financial management, 
strategic planning, and human capital management. We also provided 
recommendations to the Architect of the Capitol on ways to improve cost 
and schedule management of the Capitol Visitors Center project. As a 
result of our work, the Architect strengthened project management 
resources and obtained new cost and schedule estimates; and the 
Congress provided additional funds for the project. Additionally, we 
surveyed all of the legislative branch agencies to identify their 
efforts to cross-service and outsource administrative services, 
implement management and operational improvements, and streamline 
organizational structures and operations. Our survey also provided the 
legislative branch agencies the opportunity to document their efforts 
to incorporate best practices and to make management improvements in 
the areas of IT, financial management, strategic planning, human 
capital management, and acquisition. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-85], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-299], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-400], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-830], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-966], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-714T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-811T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-910T], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-1037T] 

3.18.C. Strengthening the Nation's Border Security: 

DHS's United States Visitor and Immigrant Status Indicator Technology 
(US-VISIT) program is a legislatively required, multibillion-dollar 
effort to track the entry and exit of foreign visitors traveling to the 
United States. In reviewing the fiscal year 2005 expenditure plan for 
the US-VISIT program, we identified a number of areas where US-VISIT 
could improve its program management activities, including developing 
reliable cost estimates and managing system capacity to support mission 
needs, and provided the Congress with information upon which to make 
funding decisions. We noted that the program office was not employing 
the kind of rigorous and disciplined management controls typically 
associated with successful programs and that as the program grows in 
scope and complexity, these controls would become even more critical. 
The US-VISIT program management office concurred with our 
recommendations and has begun implementing some of our recommendations, 
including establishing an effective program office structure, 
developing effective risk management processes and plans, and 
developing a human capital strategy. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-202] 

3.19.C. Helping the Government Cost Effectively Manage Multibillion-
Dollar IT Modernizations and Investments: 

DHS's Automated Commercial Environment is a multibillion-dollar program 
that tracks cargo entering and leaving the United States. Managers of 
the program have implemented our past recommendations related to 
developing and using enterprise architecture, following an incremental 
system acquisition approach, establishing system acquisition process 
controls, and ensuring the independence of its function to oversee the 
program. Further, DHS has improved management of the program by 
reducing the degree of concurrent system development activities and 
reconciling program cost estimates with independent estimates. Our 
recent recommendations have focused on the need for DHS to strengthen 
accountability for the Automated Commercial Environment program and 
better ensure the delivery of promised system capabilities and benefits 
within budget and on time. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-406], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-719], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-267] 

3.20.C. Improving Criminal Debt Collection: 

To improve the federal government's ability to collect billions of 
dollars of outstanding criminal debt, we recommended that Justice work 
with other agencies involved in criminal debt collection, including the 
Administrative Office of the U.S. Courts, Treasury, and OMB, to develop 
a strategic plan that would improve interagency processes and 
coordination with regard to criminal debt collection activities. In 
subsequent reports, we continued to identify criminal debt collection 
problems and followed up with Justice on the status of this and other 
related recommendations. We kept interested congressional parties 
informed of the status of outstanding criminal debt and Justice's lack 
of progress in implementing this recommendation, which resulted in the 
Congress directing the Attorney General to develop a strategic plan 
with the other involved federal agencies to improve criminal debt 
collection. Specifically, the conference report that accompanied the 
Consolidated Appropriations Act of 2005 included language to further 
the implementation of our 2001 recommendation on establishing an 
interagency task force for more effectively managing, accounting for, 
reporting, and collecting criminal debt. As a result, Justice has begun 
to meet with the Administrative Office of the U.S. Courts, Treasury, 
and OMB as a joint task force to develop the strategic plan as 
recommended. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-664], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-338], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-80] 

3.21.C. Improving Agency Preparation for Governmentwide 
Telecommunications Acquisition: 

During fiscal year 2005, we reviewed GSA's planning for a 
governmentwide telecommunications acquisition program, known as 
Networx. In March 2005, we testified on GSA's progress in addressing 
management challenges identified during our earlier reviews, including 
a lack of performance measures and inadequate transition planning for 
the Networx contracts. During our review, we identified several areas 
of concern to GSA officials, which they subsequently addressed. For 
example, we determined that GSA had not established performance 
measures to aid in program management. GSA subsequently drafted 
measures to address each of the program's goals and is working to 
revise the draft measures based on our feedback. Also, we pointed out 
that GSA had not provided potential offerors with enough information on 
the level of service they would be required to provide at each 
location. Without this information, offerors would have had difficulty 
preparing realistic proposals. In response, GSA delayed the release of 
its final request for proposals until information on the required 
levels of service was available. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-1085T], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-361T] 

3.22.C. Improving OMB Oversight of At-Risk IT Investments: 

In April 2005, we recommended that OMB strengthen its oversight of 
major IT investments by better utilizing the business cases it collects 
and analyzes as part of the annual formulation of the President's 
Budget. In the President's Budget for Fiscal Year 2005, OMB reported 
that based on its evaluation of the projects' business cases, about 
half of the 1,200 major IT investments submitted by agencies for 
funding were at risk. The total value of these investments was about 
$22 billion out of a total IT budget of about $60 billion. We reported 
that OMB never aggregated these at-risk projects into a single list and 
that its oversight of these projects was inconsistent, which limited 
the potential value of the management watch list. We recommended that 
OMB create a centralized capability for creating and monitoring these 
at-risk projects and that it use the additional insights provided in 
its statutorily mandated reporting to the Congress. The governmentwide 
analysis and consolidated tracking of projects' risk level made 
possible by an aggregated management watch list will enhance OMB's and 
the Congress's ability to ensure that funds are being wisely spent and 
to take effective and timely action on the billions in IT investments 
judged to be at risk. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
05-276] 

3.23.C. Improving OPM's Ability to Manage Retirement System 
Modernization: 

We reported that OPM did not have key system acquisition, change 
management, and investment management processes in place to help manage 
its Retirement Systems Modernization program and recommended that OPM 
establish the management processes needed for effective oversight of 
that program. Subsequently, OPM initiated efforts to develop a 
comprehensive acquisition strategy, identify interdependencies between 
project components, develop project tracking processes, establish risk 
management processes, and implement investment management processes. 
The agency also identified milestones for completing these activities 
over the next few months. As a result of our review, OPM is working to 
improve its ability to manage its modernization program. In addition, 
the Congress is better informed about the status of OPM's acquisition 
and is now in a better position to oversee OPM's project management of 
its retirement systems modernization program. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-237] 

3.24.C. Getting the Best Value for Goods and Services through 
Interagency Contracts: 

Federal agencies are increasingly relying on interagency contracts, 
leveraging the government's aggregate buying power to procure commonly 
used goods and services more efficiently. From 1994 through 2004, GSA's 
interagency contract sales alone jumped almost 750 percent to $32.5 
billion. Given the rapid growth of taxpayer dollars involved--along 
with the limited expertise of users and administrators and unclear 
accountability for ensuring proper use--we designated interagency 
contract management as a high-risk area in January 2005. Our work since 
then has continued to draw attention to the risks associated with 
interagency contracting arrangements, such as noncompetitive prices for 
goods and services, orders placed outside the scope of contracts, and 
inadequate management controls. To ensure the government is getting the 
best value from these types of contracting arrangements, we recommended 
that agencies clarify roles and responsibilities and establish clear, 
consistent, and enforceable policies and processes. DOD and other 
agencies are beginning to take action to respond to our 
recommendations. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-
201], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-207], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-229], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-456] 

3.25.C. Leveraging the Government's Significant Buying Power: 

In fiscal year 2004, federal agencies procured more than $327 billion 
in goods and services. Despite this significant cost, it is not clear 
that the federal government is fully leveraging its enormous buying 
power because agency procurement processes are decentralized. 
Recognizing the potential to use federal purchasing dollars more 
wisely, several of our reports examined best commercial procurement 
practices to reduce costs, stay competitive, and improve service 
levels. From 2002 through 2004, we reported how leading companies were 
implementing strategic sourcing approaches to leverage their buying 
power and foster new ways of doing business, and recommended several 
actions that agencies could take to adopt similar best practices to 
achieve the type of financial benefits and procurement performance 
improvements experienced by these companies. In May 2005, OMB adopted a 
new policy directing federal agencies to implement the types of 
strategic sourcing approaches we recommended, and beginning next year, 
agencies must report annually on their strategic sourcing outcomes, 
including price reductions for goods and services and total procurement 
cost reductions. According to OMB's federal procurement policy 
officials, OMB aligned much of its May 2005 strategic sourcing policy 
with the commercial best practices identified in our reports. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-230], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-661], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-870] 

3.26.C. Helping Customs Improve its Modernization Program: 

Our work has resulted in DHS's Customs and Border Protection improving 
its ability to manage its multibillion-dollar IT modernization program 
and provided the Congress with information on which to base funding 
decisions. Our recommendations have focused on the need for Customs and 
Border Protection to strengthen accountability for its modernization 
program and better ensure the delivery of promised system capabilities 
and benefits within budget and on time. The agency's progress toward 
addressing our earlier recommendations that it reduce the degree of 
concurrent system development activities, reconcile program cost 
estimates with independent estimates, and address human capital 
weaknesses has improved management of its modernization program. 
Adoption of our earlier recommendations related to developing and using 
an enterprise architecture, following an incremental system acquisition 
approach, establishing system acquisition process controls, and 
ensuring the independence of its function to oversee the modernization 
program has resulted in reduced exposure to risk. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-406], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-719], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-267] 

3.27.C. Improving the Federal Government's Collection, Use, and 
Dissemination of Federal Information: 

We have provided assistance to the Congress in ensuring that federal 
information is effectively managed and leveraged to improve agency 
performance and protect citizens' rights. For example, since key 
amendments to the Freedom of Information Act were passed in 1996, we 
have produced a body of work reporting on agency actions to implement 
the act, and congressional decision makers as well as the press have 
come to rely on our reports to gauge agencies' progress. In early 2005, 
bills were introduced to make further amendments to the act, we were 
asked to provide key status information at a May 2005 hearing on such 
measures as the numbers of Freedom of Information Act requests agencies 
have been processing annually and the size of the backlog of open 
requests that is carried over from one year to the next. Our analysis 
has provided a basis of discussion and debate for the Congress, the 
news media, and the public. We also made contributions to the 
Congress's upcoming reauthorization of the Paperwork Reduction Act, 
which provides the framework for managing federal information. In 
February, we sponsored a forum to explore reauthorization issues, which 
was attended by experts and key stakeholders in the executive and 
legislative branches. In addition, we reported on agencies' efforts to 
review proposed information collections--a critical process added to 
the act in the last reauthorization--and made suggestions to the 
Congress to strengthen the act's paperwork reduction requirements. On 
the issue of privacy, we commented on emerging issues in reporting on 
five case studies involving federal efforts to mine data, including 
personal information, and identified ways to improve privacy and 
security protections. In addition, we reported on shortcomings in TSA's 
initial public privacy notices on Secure Flight, its new passenger 
screening system, and as a result, the agency took prompt action to 
more fully disclose its use of personal information. Regarding records 
management, we made contributions toward ensuring that valuable 
electronic records created today will be accessible in the future by 
reporting on the progress that the National Archives and Records 
Administration has made in developing an advanced electronic records 
archive. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-12], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-405], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-420], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-424], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-648T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-864R], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-866], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-927] 

3.28.C. Using IT to Transform Health Care: 

Our work has helped to highlight the importance of IT in health care 
delivery and public health by identifying benefits of selected IT 
applications, which, among other things, have reduced costs, improved 
quality of care, and improved communications within health care 
delivery organizations and insurers. We have also highlighted the 
limited progress being made by federal agencies to improve the public 
health IT infrastructure, which affects the nation's ability to respond 
to public health emergencies, including bioterrorism. In addition, 
several significant bipartisan bills focused on health IT have been 
introduced in the House and the Senate that address interoperability 
standards, improvements to patient safety, and grants for health IT 
projects that demonstrate costs and benefits--areas of importance 
emphasized by our work. Our reports and resulting recommendations are 
also helping to drive HHS improvements such as the appointment of a 
National Coordinator for Health IT whose objective is to help transform 
the health care industry's use of IT. In July 2004, the National 
Coordinator issued the framework for strategic action, which outlined 
an approach to the nationwide implementation of electronic health 
records and interoperable health IT. This framework addresses the 
adoption of data standards and actively involves the private sector 
(such as the American Health Information Community task force) as 
integral components needed to transform the use of IT for health care 
delivery. In addition, HHS has issued requests for proposals for 
developing a prototype of a National Health Information Network 
architecture. Later this year, the National Coordinator is expected to 
release a comprehensive strategic plan, which we anticipate will 
implement our recommendations. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-139], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-224], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-947T], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-991R], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-308], [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-309R], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-628] 

3.29.C. Improving the Understanding of Selected File-Sharing Programs: 

Peer-to-peer file-sharing programs represent a major change in the way 
Internet users find and exchange information by allowing direct 
communication between computer users who can access and share digital 
music, images, and video files. These programs also can be a conduit 
for sharing pornographic images and videos. During fiscal year 2005, we 
reviewed selected electronic file sharing applications to (1) determine 
the extent to which they provide easy access to pornographic images and 
(2) assess the ability of the applications' filters to block 
pornographic images. We found that pornographic images are easily 
shared and accessed by the selected file-sharing applications, and that 
the pornography filters offered by the selected programs varied in 
their ability to block pornographic images. Our review contributed 
substantially to the Congress's and the public's understanding of the 
uses of peer-to-peer file-sharing applications to access and share 
pornography. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-634] 

3.30.C. Ensuring Executive Branch Agency Compliance with Continuity of 
Operations Guidance: 

We identified weaknesses in the processes agencies had used to identify 
the essential functions that should be quickly restored after being 
disrupted by an emergency and the plans to support restoring them 
(known as continuity of operations plans). These weaknesses included 
inconsistencies in the number of functions identified by agencies and 
the inclusion of functions that appeared to be of secondary importance. 
In response to these concerns, the President's Homeland Security 
Advisor began an interagency effort in January 2005 to define 
governmentwide essential functions and to review and validate agency-
identified essential functions. Also, DHS published revised guidance 
for agency continuity planning. Our most recent evaluation found that 
agencies had already begun addressing weaknesses identified in our 
original assessment. For example, two major agencies that did not have 
continuity plans in place in October 2002 have since implemented plans. 
In addition, the recent steps taken by DHS and the White House could 
result in an increased emphasis on the most critical government 
functions and better planning to ensure that those functions are 
quickly restored regardless of the type of event that caused the 
disruption. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-160], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-638T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-577], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-619T] 

Support congressional oversight of key management challenges and 
program risks to improving federal operations and ensuring 
accountability: 

3.31.A. Preventing Improper Sales of Sensitive Clothing and Textile 
Items: 

Our audit of controls over excess DOD property found that DOD 
improperly sold excess clothing with infrared reflectant properties 
over the Internet to the public. Infrared reflectant technology 
prevents detection and State has established criteria for designating 
certain of these items as defense articles. In response to our work, 
DOD issued a more stringent policy than State's guidelines. DOD 
determined these items to be of a sufficiently critical and sensitive 
nature to require the same demilitarization control as significant 
military equipment--total destruction--an action that should help 
prevent this sensitive technology from falling into the wrong hands. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-15NI], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-81TNI] 

3.32.A. Bolstering Governmentwide Actions to Identify and Report 
Improper Payments: 

Since fiscal year 2000, our recommendations aimed at raising the level 
of attention given to improper payments by the agencies that are 
subject to the Chief Financial Officers Act of 1990 contributed to the 
Congress passing the Improper Payments Information Act of 2002. This 
act required all agencies to identify programs and activities 
susceptible to significant improper payments, estimate the annual 
amount of improper payments, and report on the amount of and their 
actions to reduce their improper payments. Fiscal year 2004 marked the 
first year that federal agencies governmentwide were required by the 
act to report improper payment information. From our review of fiscal 
year 2004 performance and accountability reports, the 11 programs or 
activities that provided this information for the first time reported 
improper payments totaling over $700 million. For example, HHS 
disclosed an improper payment amount of $255 million for its Head Start 
program. Similarly, USDA disclosed an improper payment amount of $125 
million for its Federal Crop Insurance Corporation program. USDA, which 
has a long history of analyzing payment error rates for the Food Stamp 
Program, also reported that the improper payment rate for the Food 
Stamp Program had been reduced significantly, primarily due to the rate 
reduction in improper overpayments. Specifically, Food Stamp Program 
improper overpayments declined from 6.16 percent in base year 2002 to 
5.05 percent in fiscal year 2003, resulting in a $249.7 million 
reduction in improper overpayments for fiscal year 2003. On the basis 
of our analysis of USDA statistically projected error rates and OMB's 
reduction estimates of the Food Stamp Program, we expect to continue to 
see financial benefits stemming from these changes over the next 4 
fiscal years. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-
749], [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-750T], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-991T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-99], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-631T] 

3.33.A. Ensuring That USCIS Becomes Self-supporting: 

We determined that fees USCIS collected were not sufficient to fully 
fund the cost of processing applications for U.S. citizenship and 
naturalization as contemplated by existing law. USCIS charged fees to 
process applications for U.S. citizenship and naturalization, but was 
also receiving appropriated funds to pay for administrative and 
overhead costs. Our work highlighted the need for USCIS, among other 
things, to increase its fees in order to alleviate the need for 
appropriated funds. In April 2004, USCIS increased its fees, thereby 
enabling it to discontinue its partial reliance on taxpayer financing. 
The additional federal revenues for fiscal years 2004 and 2005 were 
$551 million. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-
309R] 

3.34.A. Improving Accountability at DOL: 

OMB's audit guidance for reporting compliance with the Federal 
Financial Management Improvement Act of 1996 (FFMIA) calls for either 
reporting identified problems or stating that none came to auditors' 
attention during testing. In our annual report on FFMIA, we recommended 
that OMB revise its audit guidance to require auditors to perform 
sufficient testing to be able to positively state whether an agency's 
systems substantially complied with the act's requirements (positive 
assurance). Although OMB has not done so, in fiscal year 2004, DOL's IG 
contracted with an independent public accounting firm to perform 
sufficient testing to allow positive assurance of FFMIA compliance, if 
warranted. DOL's IG advised us that DOL had decided to be the first 
federal agency to provide positive assurance because of our continual 
emphasis on this topic. Positive assurance provides users with 
substantially greater confidence that agency systems provide the 
reliable, useful, and timely management information envisioned by the 
act. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-29], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1062], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-881] 

3.35.A. Helping NASA Recognize Significant Challenges with the 
Prometheus 1 Project: 

In 2003, NASA initiated the Prometheus 1 project to explore the outer 
reaches of the solar system. However, in February 2005, we reported 
that the Prometheus 1 project, which the Congressional Budget Office 
estimated would cost about $10 billion, faced challenges in setting 
realistic requirements, preparing reliable cost estimates, and 
advancing complex critical technologies--challenges NASA has had 
difficulty overcoming in a number of other costly space initiatives. 
Additionally, the approved funding for Prometheus 1 was inadequate to 
support a planned 2015 launch to Jupiter's icy moons. Based on concerns 
about cost and technical complexity and consistent with our 
recommendations, NASA has deferred the Jupiter Icy Moons Orbiter 
mission indefinitely and is shifting the focus of its Prometheus 1 
project. Eliminating the Jupiter Icy Moons Orbiter mission from its 
fiscal year 2006 budget request reduces NASA's funding needs by more 
than $1.1 billion through fiscal year 2009. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-242] 

3.36.A. Strengthening NASA's Integrated Financial Management Program: 

For more than a decade, we have identified NASA's contract management 
as a high-risk area--in part, because the agency lacked an integrated 
financial management system, hampering its ability to oversee 
contracts, control program costs, and ensure an effective human capital 
management strategy. In April 2000, NASA initiated the Integrated 
Financial Program--its third effort at modernizing its financial 
management system. More than 3 years later, we reported that 
insufficient processes for ensuring adequate funding reserves for 
contingencies--along with uncertain reliability of cost estimates and 
optimistic schedules--put the program at risk of schedule delays and 
cost growth. In our fiscal year 2005 review, we found that NASA has 
implemented a methodology that enables programs to identify high-
severity risks and determine their direct relationship to reserves, 
which is in line with our recommendation. This methodology should help 
the agency ensure that the program's reserve funding is sufficient to 
cover the potential cost impact of risks and unknowns. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-118] 

3.37.A. Improving NASA's Cost-Estimating Processes: 

NASA's inability to collect, maintain, and report the full cost of its 
programs--along with persistent cost growth--has put NASA's contract 
management on our high-risk list for more than a decade. Through a 
review of selected programs, we found that NASA lacks the basic cost-
estimating processes needed to establish priorities, quantify risks, 
and make informed investment decisions. As a result, programs may be 
restructured to fit available resources, increasing the risk of cost 
and schedule overruns and failure to meet program objectives. We also 
identified a number of barriers to implementing effective cost-
estimating practices, including the lack of reliable financial and 
performance data and the lack of incentives to measure and monitor cost 
trends. Acting on recommendations we made in May 2004, NASA has taken 
actions to remove these barriers and improve its cost-estimating 
practices, including establishing requirements to facilitate the 
efficient and effective use of NASA's cost-estimating staff, 
requirements for independent assessments at program and project 
milestones, and enforcement mechanisms for ensuring that project cost-
estimating requirements are met before the project proceeds to the next 
milestone. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-642] 

3.38.A. Avoiding Additional Losses from Loan Sales: 

We found that the Small Business Administration (SBA) improperly 
calculated the results of billions of dollars of loan sales and could 
not determine the value of its remaining disaster loan portfolio. We 
recommended that SBA correct the calculation of the results of its loan 
sales and determine the value of its remaining disaster loan portfolio 
before conducting additional sales. In response, SBA conducted a 
detailed review of its financial records relating to the disaster loan 
program, including the completed loan sales, and shortly thereafter 
discontinued the loan sale program. SBA's analysis identified a 
fundamental flaw in the method used to determine whether a sale was 
beneficial to the government and allowed SBA to develop a more reliable 
process to calculate the results of a sale and to value the remaining 
loan portfolio. SBA's analysis showed that its prior sales of disaster 
loans resulted in losses of over $900 million as opposed to gains as 
previously reported. Prior to our review, SBA had intended to sell its 
remaining disaster portfolio of about $3 billion as well as loans 
disbursed in the future. Had SBA proceeded with these sales using the 
same flawed pricing model, it would have continued to incur significant 
losses, estimated to be approximately $441.4 million over 5 years. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-87] 

3.39.A. Increasing the Collection of Delinquent Federal Taxes: 

We have long advocated increased use of Treasury's offset program to 
intercept federal payments to those who have delinquent nontax and tax 
debt. Under this program, federal payments can be levied to pay 
taxpayers' outstanding tax debt. We identified missed collection 
opportunities because few payment streams were subject to the offset 
program, including those of disbursing offices outside of Treasury. We 
noted that millions of dollars of tax debt could be collected if 
Treasury levied such federal payments using its existing capacity. 
Fiscal year 2004 marked the first significant success due to (1) 
increasing numbers of programs subject to the levy program and (2) IRS 
releasing substantially more tax debt to be included in the levy 
program. We determined that tax levy collections using Treasury's levy 
authority for fiscal years 2004 and 2005 totaled $308 million dollars. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD-98-195], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-00-65], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-711] 

3.40.A. Revising DOD Working Capital Fund Appropriations: 

Over the years, we have reviewed various aspects of defense working 
capital funds, including cash management requirements. Our work on cash 
management this year showed that (1) the Air Force working capital fund 
would exceed the cash requirement at the end of fiscal year 2005 and 
(2) the Navy's working capital fund budget did not project excess cash 
at the end of fiscal year 2005, but these projections have not been 
reliable in recent years. Based on our review, the Congress reduced the 
Air Force and Navy fiscal year 2005 appropriations for operation and 
maintenance by a total of just under $1.3 billion due to excessive cash 
amounts. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-498] 

3.41.A. Improving Accountability at DHS: 

At the time that it was created in 2003, DHS was not subject to two key 
financial management improvement laws--the Chief Financial Officers Act 
of 1990 and FFMIA--whose key goals are, among other things, providing 
the Congress and agency management with reliable financial information 
for daily management and decision making and improving financial 
management systems and controls to properly safeguard the government's 
assets. Because of the size of DHS, the internal control weaknesses it 
inherited, and the importance of these laws in improving financial 
management, we urged the Congress to require DHS to be subject to these 
laws. We also supported the concept of DHS obtaining internal control 
opinions over financial reporting, similar to what Sarbanes-Oxley 
requires for publicly traded companies. On October 16, 2004, the 
Department of Homeland Security Financial Accountability Act was signed 
in to law by the President, requiring DHS to comply with the provisions 
of these laws. The act also requires DHS to obtain an opinion on its 
internal controls over financial reporting, making it the first agency 
covered by the Chief Financial Officers Act that is required to do so. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1134T], 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-774], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-945T] 

3.42.C. Increasing Reuse of Excess DOD Property: 

Our assessment of DOD's excess property program showed that DOD does 
not have management controls in place to maximize reuse of excess 
items. Of $33 billion in excess commodity disposals in fiscal years 
2002 through 2004, $4 billion were reported to be in new, unused, and 
excellent condition. DOD found in-house use for $495 million (12 
percent) of these items. However, the remaining $3.5 billion (88 
percent) represented significant waste and inefficiency because new, 
unused, and excellent condition items were transferred and donated 
outside of DOD, sold for pennies on the dollar, or destroyed even 
though other DOD units concurrently bought many of these same items. We 
identified at least $400 million of fiscal year 2002 and 2003 commodity 
purchases for which new, unused, and excellent condition items were 
available for reutilization. In response, the Defense Logistics Agency 
pledged to have systems improvements in place by January 2006 to 
prevent purchases of new items when identical items are available for 
reutilization. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-
277], and [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-729T] 

3.43.C. Focusing Attention on Financial Hardships Experienced by Army 
Guard and Reserve Soldiers: 

We reported that injured and ill Army Reserve soldiers--who are 
entitled to extend their active duty status to receive treatment--had 
been inappropriately removed from active duty status in the automated 
systems that control pay and access to medical care. Many of our case 
study soldiers incurred severe, permanent injuries fighting for their 
country, including loss of a limb, hearing loss, and back injuries. 
Nonetheless, these soldiers had to navigate the Army's convoluted and 
poorly defined process for extending active duty service. In responding 
to our report, DOD described its completed, ongoing, and planned 
actions to address each of our 22 recommendations. If effectively 
implemented, these actions should be important steps in developing 
comprehensive, effective solutions for dealing with Reserve component 
soldiers with service-connected injuries or illnesses. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-125], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-322T] 

3.44.C. Improving Travel Reimbursement Process for Mobilized Army Guard 
Soldiers: 

We reported and testified that mobilized Army Guard soldiers have 
experienced significant problems getting accurate, timely, and 
consistent reimbursements for out-of-pocket travel expenses. Army Guard 
soldiers in our case study units reported a number of problems that 
they and their families endured due to delayed or unpaid travel 
reimbursements, including debts on their personal credit cards, 
difficulty paying their monthly bills, and inability to make child 
support payments. As a result of our recommendations, DOD is taking 
action to correct the deficiencies noted in the areas of processes, 
human capital, and automated systems. However, with regard to DOD's 
longer term automated systems initiatives, we identified problems that 
raise concerns about whether and when complete and lasting solutions to 
these issues will be implemented. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-79], and [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-400T] 

3.45.C. Identifying Airline Passenger and Property Screening Costs: 

Funding for aviation security programs remains a central issue because 
passenger and air carrier security fees are not sufficient to fully 
cover TSA's costs. In the post-September 11 environment, passenger 
screening and who pays for it are highly visible and extremely 
sensitive topics to the traveling public, air carriers, airports, 
security companies, trade organizations, and the federal government. 
One of the fees that TSA is authorized to collect is currently based on 
airlines' self-reported costs of providing passenger and property 
screening during calendar year 2000. These self-reported amounts 
totaled $319 million. Because this amount was much lower than 
anticipated, the Congress asked us to provide an independent assessment 
of the airlines' passenger and property screening costs in 2000, the 
last full year prior to September 11, 2001. We estimated that passenger 
and property screening costs in 2000 for the major cost components were 
about $448 million or $129 million more than the air carriers reported. 
Accordingly, we recommended--and TSA agreed to consider--using the 
analysis and estimates in our study in determining the future basis for 
this fee. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-558] 

3.46.C. Supporting the Congress in Its Efforts to Focus on the 
Importance of Internal Control: 

The 1982 Federal Managers' Financial Integrity Act required the 
Comptroller General to issue internal control standards and OMB to 
issue guidelines for agencies to follow in assessing their internal 
controls. In 2004, OMB revised its internal control guidance contained 
in Circular A-123, in an effort to strengthen the requirements for 
conducting management's assessment of internal control over financial 
reporting and bring a principles-based approach to establishing and 
reporting on internal control. In February of 2005, we provided our 
views on OMB's revised circular, highlighting issues critical to 
successful implementation of the revised circular. We also outlined the 
importance of internal control, summarized the Congress's long-standing 
interest in internal control and the related statutory framework, and 
discussed our experiences and lessons learned from agency internal 
control assessments since the early 1980s. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-321T] 

3.47.C. Helping NASA to Address Its Human Capital Challenges: 

At the end of this decade, NASA plans to retire its Space Shuttle. 
Retiring the space shuttle--and in the larger context, implementing the 
President's new vision for space exploration--will require NASA to rely 
on its most important asset: its workforce. The space shuttle workforce 
currently consists of about 2,000 civil service and 15,600 contractor 
personnel, including a large number of scientists and engineers. After 
we began our work on NASA's human capital challenges related to 
retiring the Space Shuttle, NASA directed panel teams to examine human 
capital as an element of the shuttle program's mission execution and 
transition needs. Consistent with our findings, the teams made various 
recommendations on steps that should be taken to address human capital 
concerns, including developing and implementing a critical skills 
retention plan, developing a communication plan to ensure the workforce 
is informed, establishing an agencywide team to integrate human capital 
planning efforts, and developing a detailed budget that includes 
funding for human capital retention and reduction strategies. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-230], and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-718T] 

3.48.C. Modernizing the Accountability Profession for the 21st Century: 

We were actively engaged with other accountability organizations in 
building a solid foundation for an effective and ethical accountability 
profession prepared for the challenges of the 21st century. We provided 
leadership on key issues involving fair presentation of financial 
reporting overall and key aspects of auditing standards. We also 
provided the essential public interest perspective in the development 
of U.S. and international auditing standards that will fundamentally 
strengthen audit performance and improve the effectiveness of audits in 
the private and public sectors. We also continued to provide leadership 
in accountability for all levels of government auditors and financial 
management professionals in the United States--state, local, and 
federal--through training, technical advice, and leadership in auditing 
and internal control standards. Our experts responded to thousands of 
auditors' inquiries on the Government Auditing Standards, and provided 
training sessions at more than 50 professional conferences and 
workshops across the country for state, local, and federal government 
auditors and financial management professionals. In addition, we 
contributed insight and recommendations to ongoing Sarbanes-Oxley Act 
reforms, which posed significant challenges for corporations and 
auditors. In venues such as an SEC roundtable and the Public Company 
Accounting Oversight Board's Standing Advisory Group, we contributed to 
efforts to improve and streamline the audit process. On the 
international front, we provided leadership in developing strong, 
globally accepted auditing standards for the International Organization 
of Supreme Audit Institutions (INTOSAI), which is an association of 
national government audit organizations, and the International Auditing 
and Assurance Standards Board, which is working to establish auditing 
standards to be used around the world. (Based on briefings). 

Analyze the government's fiscal position and strengthen approaches for 
addressing the current and projected fiscal gap: 

3.49.A. Improving GSA's Capital Financing Decisions: 

In our December 2004 report, we recommended that GSA's Administrator, 
among others, perform business case analyses and ensure that the full 
range of funding alternatives, including the technical feasibility of 
useful segments, are analyzed when making capital financing decisions. 
In a May 12, 2005, letter to the Comptroller General, GSA's 
Administrator wrote that in response to our recommendation, GSA will 
develop a pro forma business case analysis that is similar to the 
analysis used for projects using appropriated funds and can be used for 
Energy Savings Performance Contracts, which provide capital 
improvements, such as lighting retrofits and ventilation systems, for 
federal facilities without the government recording the full cost up-
front. In addition, GSA has promulgated supplemental internal 
procedures to be followed when entering into these contracts. The 
procedures require the performance of a life cycle cost analysis as 
part of the contract evaluation process. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-55] 

3.50.A. Permanently Reauthorizing Selected Franchise Fund Pilots: 

In August 2003, the Congress was considering the reauthorization of the 
six franchise fund pilots operating at the Department of the Interior, 
Commerce, Treasury, VA, HHS, and EPA. These franchise funds, authorized 
by the Government Management Reform Act of 1994, are part of a group of 
34 intragovernmental revolving funds that were created to provide 
common administrative support services required by many federal 
agencies. For example, the Commerce Franchise Fund's business line 
provides IT infrastructure support services to the agency. The Congress 
established these self-supporting, businesslike entities to provide 
such services on a fully reimbursable basis. We concluded in our report 
that increasing the period of authorization would help to ease the 
concerns of current and potential clients about franchise fund 
stability and might allow franchise funds to add new business lines. 
The Congress provided permanent authority to the Commerce and Treasury 
franchise funds in the Consolidated Appropriations Acts of 2004 and 
2005, respectively. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
03-1069] 

3.51.A. Improving IRS's Methodology for Pursuing Delinquent Taxes: 

Our report on IRS's fiscal year 1999 financial statements stated that 
IRS did not have systems or procedures in place to allow it to identify 
and actively pursue cases that may have some collection potential. We 
recommended that IRS improve its capacity to assess the collectibility 
of delinquent taxes as a way of deciding on which debts to focus 
collection efforts. In 2004, IRS began implementing sophisticated 
modeling technology to differentiate between more and less productive 
cases in order to make better resource allocation decisions. IRS's 
analysis showed that its collections of delinquent taxes with 
approximately the same resources increased by about $1.8 billion, or 
8.4 percent from the previous year. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-01-42] 

3.52.A. Improving Agency Capital Planning: 

In 2004, we evaluated VA, National Park Service, and Bureau of Prisons 
capital planning practices against the practices used by leading 
private companies and state and local governments that we identified in 
a 1998 report. We found that capital plans were not being done or 
needed to be centralized or expanded to reflect all the capital 
investment decisions made by the agencies. We also noted that the 
Congress and OMB should receive the plans to make agencies' longer term 
priorities transparent and to promote a longer term perspective in 
capital decision making. Since our 2004 report, all three agencies 
developed and improved capital plans, making them available to key 
decision makers. Also, as agencies developed such plans, capital asset 
management systems and asset inventories were improved as part of their 
efforts to better determine actual capital asset needs. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-138] 

3.53.A. Revising Tax Rules on Expatriation of Individuals: 

Certain high income or high net worth individuals are subject to an 
alternative method of income taxation for the 10 years after they 
relinquish their U.S. citizenship or noncitizens terminate their 
residency. In our May 2000 report to the Joint Committee on Taxation, 
we provided information on IRS, Immigration and Naturalization Service, 
and State Department procedures for preventing individuals who do not 
comply with these tax rules from reentering the United States, analyses 
of their tax returns, and information related to their country of 
citizenship and residence after leaving the United States. In February 
2003, the committee issued a report on the tax law and immigration 
treatment of relinquishment of citizenship and termination of long-term 
residency. The report extensively cited our assistance to the committee 
and provided the basis for the American Jobs Creation Act of 2004 to 
revise the tax rules related to citizenship relinquishment or residency 
termination. To accompany the conference agreement, the committee 
estimated that budget effect of the revised tax rules for the 2005 to 
2014 period will be to increase revenues about $377 million. We are 
recognizing $121 million of this increased revenue over the 2005 to 
2009 period as an accomplishment. [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/GGD-00-110R] 

3.54.C. Contributing to the Tax Reform Debate: 

We issued several products in fiscal year 2005 that looked at the cost, 
complexity, and fairness of our tax system. For example, two products 
focused on a major contributor to these costs, tax expenditures. One 
looked at tax expenditures as a whole, noting their growth and lack of 
oversight compared to federal spending. The other found that the rules 
governing the tax expenditures for higher education are complex and 
taxpayers often make decisions counter to their own financial interest. 
We also reviewed the literature on the costs of the current tax system-
-economic efficiency and compliance costs beyond the taxes actually 
paid--and reported that estimates of compliance burden range from 1.0 
to 1.5 percent of Gross Domestic Product, while estimates of the 
economic efficiency losses are on the order of 2 to 5 percentage points 
of Gross Domestic Product. Complexity also breeds noncompliance. As we 
reported, IRS estimates that the tax gap is over a quarter of a 
trillion dollars. Lack of confidence in the current tax system is 
driving proposals for reform. We also issued a special publication 
providing background on revenue needs, the criteria for a good tax 
system, and key questions to help policymakers and the public make up 
their own minds on tax reform proposals. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-527T], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-684], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-690], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-753], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-878], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-1009SP] 

3.55.C. Analyzing the Federal Government's Long-term Fiscal Imbalance: 

We continue to provide updated analyses of our nation's large and 
growing long-term fiscal challenge and the risks it poses to our 
future. Simply put, our nation's fiscal policy is on an unsustainable 
course. Absent substantive policy change, a growing imbalance between 
expected federal spending and tax revenue will lead to escalating and 
ultimately unsustainable federal deficits and debt. We hosted a forum 
in December 2004 to identify ways to broaden public understanding and 
dialogue so that action could be more likely, more informed, and more 
immediate. Taken together, our efforts have helped foster 
collaborations between groups and individuals across the political and 
policy spectrum aiming at increased public understanding of the nature, 
magnitude, and potential consequences of the long-term fiscal 
challenge. [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-282SP] 

3.56.C. Conducting the First GAO Appropriations Law Forum: 

We held our first Appropriations Law Forum on March 10, 2005, to 
highlight the more relevant federal appropriations law topics from the 
year as well as provide members of the community an opportunity to 
discuss appropriations law issues and to meet other appropriations 
counsel. Over 100 attorneys from government agencies participated in 
the forum, which focused on the Congress's power of the purse, with 
sessions that included an overview of significant decisions issued in 
2004, a discussion of interagency transactions, and an overview of the 
availability of appropriated funds to purchase food. Material from the 
forum was subsequently posted on our Web site and is routinely used by 
federal appropriations law practitioners. (Based on a forum). 

3.57.C. Achieving the First Annual Update of the Red Book: 

In March 2005, we published the first annual update of the third 
edition of volume I of Principles of Federal Appropriations Law (known 
as the Red Book) to improve its value as a timely, exemplary resource 
for understanding federal appropriations law matters. The update 
presented a cumulative supplement to the published third edition text 
that includes all relevant decisions from January 1 to December 31, 
2004. It was posted electronically on our Web site and contains links 
to all cited our decisions. The update has served as an invaluable new 
reference tool for the entire federal government and has been welcomed 
by the federal procurement community, composed of hundreds of attorneys 
and even more practitioners, as an extremely helpful publication. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-354SP] 

3.58.C. Amending the Antideficiency Act to Include GAO: 

We drafted legislative language amending the Antideficiency Act to 
require the heads of executive agencies and the Mayor of the District 
of Columbia to transmit to the Comptroller General copies of reports of 
violations at the same time violations are reported to the Congress and 
the President. Our provision was inserted into the Consolidated 
Appropriations Act 2005. We also drafted report language for the Senate 
report, which instructs us to establish a central repository of 
Antideficiency Act reports and states that the Comptroller General will 
track all Antideficiency Act reports, including responses to 
Comptroller General legal decisions and opinions and findings in audit 
reports and financial statement reviews. (Based on legal assistance). 

3.59.C. Increasing the Oversight of the Vehicle Donations Program: 

The American Jobs Creation Act of 2004 included a provision limiting 
the amount that a taxpayer can claim for a donated motor vehicle, boat, 
or plane to the gross proceeds received from the sale when the value 
exceeds $500 and the item is sold by the charitable organization. Prior 
to this law, IRS's guidance instructed taxpayers donating vehicles to 
charities to establish the value of a donation based on its fair market 
value. Our November 2003 report on charitable vehicle donations stated 
that the proceeds received by charities from vehicle donations were 5 
percent or less of the value donors claimed as a deduction on their tax 
returns. We consulted with congressional staff on a legislative 
proposal to address the problem by allowing taxpayers to only take a 
tax deduction for the selling price of the donated vehicle instead of 
the fair market value. As a direct result of our report, a bill was 
introduced in the Congress that included a revenue raiser to address 
the vehicle donations problem, and this revenue raiser was ultimately 
included in the American Jobs Creation Act. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-73] 

3.60.C. Advancing Accountability with the First Financial Audit of SEC: 

We conducted the first-ever audit of SEC for the fiscal year ended 
2004. SEC plays a prominent and critically important role in overseeing 
the U.S. securities markets and in enforcing accountability for 
corporations whose securities are traded in those markets. Completion 
of the first financial statement audit of SEC represented a significant 
advance in the commission's accountability to the public. SEC earned an 
unqualified, or clean, opinion on its financial statements, meaning 
that we found that its financial statements and accompanying notes are 
presented fairly in all material respects and in conformity with 
generally accepted accounting principles. We also found that in 
preparing its first complete set of financial statements, SEC had made 
significant progress in building a financial reporting structure. 
Nevertheless, we found that SEC had material weaknesses in internal 
control over financial statements and disclosures, recording and 
reporting disgorgements and civil penalties, and information security, 
and therefore we issued an adverse opinion on internal control. In 
congressional testimony, the Comptroller General said that SEC must 
lead by example in internal control. He said that a higher standard of 
accountability is important to SEC as a government regulator and to the 
success of its programs, activities, and leadership in the business 
community. SEC agreed with the majority of our recommendations and has 
taken steps to address the weaknesses we found. [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-244], [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-693R], and [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-880T] 

Strategic Goal 4: 

Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization: 

Continuously improve client and customer satisfaction and stakeholder 
relationships: 

4.1.C. Strengthening Communication with our Congressional Clients: 

To provide new members of the Congress and their staff with information 
about GAO and our working relationship with the Congress and to obtain 
information on client needs, the Comptroller General and the 
Congressional Relations staff met with new members and their staffs and 
have continued to meet and seek feedback from other committee members 
and staff who have been long-standing clients of GAO. We also sought to 
further improve our products, processes, and services by routinely 
providing feedback from our Web-based client survey to our managing 
directors who direct engagements supporting goals 1, 2, and 3. (Based 
on internal activities). 

4.2.C. Measuring Congressional Satisfaction with Our Work: 

We collect feedback on our products (all testimonies and high interest 
and higher cost written products) from every congressional committee, 
expanding our coverage from our two oversight committees. We received 
96 percent favorable responses to our client feedback survey for fiscal 
year 2005. Feedback on the nature of the comments has been provided to 
our managing directors, and our training now incorporates some of the 
most frequently received feedback. (Based on internal activities). 

4.3.C. Developing Options for Electronic Dissemination: 

As part of our ongoing pilot project to test the feasibility of 
producing and disseminating GAO reports in an electronic format, we 
provided over 70 products to various congressional requesters in an 
electronic format rather than generating hard copy reports. Electronic 
reports allow our clients to search and excerpt text more easily and to 
follow Web links for further information. Client feedback on our 
electronic dissemination process has been positive, and we plan to make 
the use of electronic products routine. As part of another effort, we 
modified processes for our electronic supplements, which are electronic 
copies of the complete results of Web-based surveys that were conducted 
in conjunction with our work and are posted on our Web site. 
Specifically, we modified the software program that generates these 
supplements and simplified the process for creating and posting them. 
As a result, paperwork requirements involved in requesting a product 
number are reduced for our staff, staff can view all features of the 
supplement before it is posted on the Internet, clients and other 
readers can more easily navigate within the electronic supplement, and 
the product is more readily identified as a GAO product. (Based on 
internal activities). 

4.4.C. Assessing Internal Customer Satisfaction with Our Services and 
Processes: 

In fiscal year 2004, we launched the Chief Administrative Office (CAO) 
customer satisfaction survey and established baselines for key 
performance indicators. Based on an analysis of the gap between 
customer expectations and satisfaction with services provided, we 
established targets for improvement for the most important CAO areas, 
and CAO units developed and implemented a number of improvement 
efforts. We conducted the second customer satisfaction survey in 
November 2004 to measure the impact of our improvement efforts, refine 
our targets, and make necessary adjustments to reduce the gap between 
customer expectations and the satisfaction with services provided. The 
following are examples of the improvements we made. To improve 
communications, we implemented a new system for disseminating and 
storing agencywide communications and notices; a new administrative 
services Web site (the GAO Administrative Gateway) to provide 
information about our administrative services in a more customer-
focused and user-friendly format, including direct links to CAO unit 
Web sites; and a searchable administrative services directory. We also 
addressed two major IT pain points identified in the survey: (1) we 
replaced the software that allowed secure network access in conference 
rooms but resulted in considerable network slowness and response times 
for users with one that enhances security while providing simple, 
direct, and stable access to the network, reducing customer frustration 
and the number of help desk calls, and (2) we procured new network 
printers with greater paper capacity, finishing capabilities, and print 
speed to replace an aging fleet of printers that were prone to 
breakdowns and were inconveniently located for staff. (Based on 
internal activities). 

4.5.C. Assessing GAO Staff Views on Overall Operations and the Work 
Environment: 

We launched our fifth employee feedback survey in May 2005, a 
confidential survey conducted online that provides an opportunity for 
our employees to provide their views on GAO's work environment. The 
results are used to assess employees' satisfaction with GAO and are 
analyzed to compile the people measures that are discussed in parts I 
and II of this report. Eighty percent of our employees completed the 
survey, and the overall results were very positive with improvement 
recorded in every people measure. Our scores averaged 8.5 percent 
higher than the latest OPM governmentwide survey and 5.25 percent 
higher than the latest private industry survey. This year we also added 
questions to assess employees' satisfaction with GAO. The results of 
the responses to these questions were used by the Partnership for 
Public Service to determine our standing in the annual Best Places to 
Work in the Federal Government rankings. In September, we received an 
award from the Partnership for Public Service for our fourth place 
ranking. (Based on internal activities). 

4.6.C. Strengthening Relationships with Our Stakeholders and Increasing 
the Accessibility of Our Products: 

We developed and issued international protocols to strengthen our 
relationships with our stakeholders in the international community. We 
released the draft protocols for a 1-year pilot in October 2005 and 
plan to issue the final version in early fiscal year 2006. We also 
continued work on our agency protocols, which provide clearly defined 
and transparent policies and practices on how we interact with the 
executive branch agencies in performing our work. Since we began pilot-
testing the protocols in December 2002, we have been monitoring their 
application. During that time we have received comments indicating that 
the protocols (1) help to ensure a consistent and unified GAO approach 
throughout the federal government and (2) could benefit, in some areas, 
from additional clarification. In response to these comments, we 
revised the protocols in October 2004 to clarify our relationship with 
the agencies where we perform work and our methods of communicating and 
exchanging information with them. Where applicable, we also revised the 
protocols to reflect the updated congressional protocols that were 
issued July 16, 2004. The international peer review team that 
independently assessed the effectiveness of our quality assurance 
system for conducting performance audits cited GAO's agency protocols 
in its April 2005 report as a good practice that will be of interest to 
other national audit offices. (Based on internal activities). 

4.7.C. Achieving External Recognition: 

We won an American Graphic Design Award for excellence in communication 
and design for our publication About GAO, a brochure that provides an 
overview of GAO and its history, mission, and key performance 
statistics. Fewer than 10 percent of the approximately 10,000 entries 
from advertising agencies, graphic design firms, corporate creative 
departments, and publishers were selected for an award by a panel of 
judges from the design and publishing fields. In addition, one of our 
systems--the Electronic Assistance Guide for Leading Engagements, which 
brings together in one place on the intranet everything our staff 
members need to carry out an engagement--was selected by the E-Gov 
Institute from among 120 entries as one of 14 government IT 
applications to receive its Pioneer Award. This award recognizes 
government organizations that have illustrated results-oriented 
government during the past year. Finally, our Chief Information Officer 
was recognized as one of the 10 recipients of Government Computer News' 
government IT leadership awards for "demonstrating the essential 
qualities of leadership." (Based on internal activities). 

Lead strategically to achieve enhanced results: 

4.8.C. Integrating Planning, Budgeting, and Performance Measurement: 

We continued our efforts to integrate our planning, budgeting, and 
measurement process to ensure a logical, timely, and accurate 
progression of information from one activity to the next during the 
fiscal year process while avoiding duplication of effort in information 
gathering and report preparation. For example, we aligned the contents 
of and time frames for the performance plan, performance and 
accountability report, and budget with our new 3-year strategic 
planning process. We also established a matrixed team to document the 
entities and activities associated with the workforce plan, budget, and 
human capital to help ensure integration of the time frames and content 
of planning and performance measurement. To improve performance 
measurement, we continued to refine our measures by dropping the 
measure that counted the number of recommendations we made in our 
reports annually and introducing two new measures related to our 
internal operations. Beginning in fiscal year 2006, these internal 
operations measures will help us track our ability to provide useful 
administrative services that help staff perform their jobs and 
contribute to the quality of their work lives. We also continued to 
explore ways to assess our performance in creating and sustaining 
partnerships with external organizations and entities. (Based on 
internal activities). 

4.9.C. Improving Our Strategic and Budget Planning Processes: 

As part of our planning activities for the fiscal year 2005 performance 
and accountability report, we incorporated lessons learned from the 
successful issuance of our fiscal year 2004 performance and 
accountability report on November 15. We accelerated issuance of this 
report from January 31 to November 15 to comply with OMB guidelines and 
the spirit of the Government Performance and Results Act. We also 
modified the format and revised some text in the fiscal year 2004 and 
2005 performance and accountability reports to address suggestions and 
recommendations from external reviewers, such as the Association for 
Government Accountants, and the Mercatus Center. For the fourth year in 
a row, the Association of Government Accountants awarded our 
performance and accountability report the Certificate of Excellence in 
Accountability Reporting. We also implemented changes to our budget and 
resource planning process designed to improve the efficiency of the 
process and ensure increased integration among IT investments, budget, 
procurement, and workforce planning. The revised process will help ease 
customers' administrative burden, provide greater consistency among the 
resource planning components, and provide a more comprehensive 
assessment of our resource needs. (Based on internal activities). 

4.10.C. Strengthening Our Strategic Human Capital Management: 

Based on feedback from our customer satisfaction survey, our Human 
Capital Office was realigned in June 2005 to consolidate services under 
four centers of excellence: the Talent Acquisition and Human Capital 
Consulting Center, the Learning Center, the Performance and Pay 
Management Center, and the Human Capital Strategic and Operations 
Center. This consolidation enables us to improve our customer focus and 
our understanding of our customer needs. In addition, the realignment 
has helped to clarify lines of delegated authorities, standardized 
guidance across the Human Capital Office, and allowed us to dedicate 
more of our resources to direct customer support. (Based on internal 
activities). 

4.11.C. Retaining and Attracting Staff: 

To more effectively anticipate and secure an adequate supply of talent 
for current and future needs, we have improved our recruitment strategy 
by redefining the student employment program to include both graduate 
and undergraduate career experiences during the fall and spring as well 
as the summer and increasing the use of short-term and time-limited 
appointments and direct-hire authorities. Our fiscal year 2006 
recruitment strategy, developed this year and recently approved by our 
Executive Committee, includes year-round internships; implementing 
cooperative education agreements with five local universities; 
implementing governmentwide flexibility for noncompetitive appointments 
into the Professional Development Program; and using targeted 
recruiting for special skill sets, hard-to-fill positions, and 
diversity recruiting. We also launched a pilot program that offers 
employment to a limited number of undergraduate cooperative education 
program participants in September 2005. (Based on internal activities). 

4.12.C. Refining Performance Management: 

We enhanced and improved our communications with managers and staff in 
fiscal year 2005 through implementation of a number of initiatives such 
as providing an organizational and performance consulting service to 
address organizational needs of our managers; issuing a report to our 
managing directors and the Employee Advisory Council that evaluates the 
performance management assessment cycle with recommendations for 
improvement; redesigning the performance management Web site to improve 
its user-friendliness; providing direct links to performance Web site 
information in GAO notices, e-mails, policy documents, and other forms 
of communication to staff; and developing an e-learning course--Roles 
and Responsibilities of the Designated Performance Manager--that 
provides our managers and supervisors with timely access to the 
information on our performance management process and their 
responsibilities. We also made specific improvements to the analysts, 
specialists, and investigators performance management system, including 
shortening the processing time for appraisals, pay, and promotion 
decisions; distinguishing feedback on performance from feedback on pay 
and promotion potential; and reducing the amount of paperwork required. 
(Based on internal activities). 

4.13.C. Enhancing Our Classification and Compensation Systems: 

We continued to enhance our performance management and compensation 
systems through new and enhanced policies and processes. We revised the 
process for determining performance-based compensation so that the 
compensation is more directly linked to an individual's performance, as 
reflected on the appraisal. In addition, our administrative and 
professional support staff completed their first year under a broadband 
pay system and a competency-based performance system in June 2005. To 
ensure that these staff understood the new process, as well as to 
foster staff acceptance, we employed an aggressive communication 
strategy that included meetings with staff, as well as Web-based guides 
and questions and answers. We also sought to strengthen our 
compensation system. To design a competitive, fair, and equitable 
compensation program aligned with competitive labor markets in which we 
compete for talent, we worked with a consulting firm to perform a 
market-based compensation study. Based on the results of the study, we 
have invested significantly in restructuring our analyst and analyst-
related specialist Band II pay band into two pay levels to better align 
compensation and responsibilities. Other improvements we have 
implemented to ensure our managers' needs for support and guidance 
concerning their responsibilities in the performance management process 
are met include establishing an organizational and performance 
consulting service, developing an e-learning course on designated 
performance managers' roles and responsibilities, developing and 
issuing a report for managers and our Employee Advisory Council 
evaluating the performance management assessment cycle with 
recommendations for improvements, and improving the accuracy and user-
friendliness of our performance management Web site. (Based on internal 
activities). 

4.14.C. Enhancing Opportunities for Training: 

We designed 13 new competency-building courses that focused on 
expanding the professional skills of auditors, assisting supervisors in 
providing oversight to the engagement process, and equipping designated 
performance managers to develop assigned staff. As a result, our staff 
have an opportunity to improve the quality of our writing, our 
methodological analysis, and our ability to identify appropriate 
developmental activities for continued professional growth. To further 
strengthen our definition of effective leadership and provide new 
leaders with an opportunity for peer-to-peer mentoring and problem 
solving, we have established a community of practice consisting of 
analysts-in-charge who graduated from a course on supervision. This 
community of practice meets regularly to discuss best practices; 
challenges facing new analysts in charge; techniques for motivating, 
directing, and coaching staff; how to effectively use and contribute to 
our performance management system; and tools to improve performance. We 
also implemented an adjunct faculty program, certifying line auditors 
as adjunct faculty. This program enlarges the number of subject matter 
experts available to develop content for new courses, expands the range 
of courses available for more experienced staff, and meets the needs of 
both headquarters and field staff. To deliver required core curricula 
to Band I analyst staff in the field offices in the most cost-effective 
manner, we developed and implemented a hub approach whereby we deliver 
courses that have been grouped into five sets of week-long sessions at 
three learning hubs (San Francisco, Denver, and Atlanta). This decision 
was based on our analysis that showed it would cost twice as much to 
centralize Band I program delivery in headquarters as it would to 
distribute and realign programs among the three learning hubs. This 
represents a cost avoidance of $500,000 in travel and per diem and 
offers a number of intangible benefits, such as networking among and 
across teams, a sustained focus on learning, larger classes that make 
more effective use of adjunct faculty time, and the opportunity to 
strengthen matrixed work relationships through shared learning 
experiences. (Based on internal activities). 

4.15.C. Providing Online Job Aids and Support Tools: 

To increase our ability to provide courses, job aids, or performance 
support tools to our staff online, in December 2004 we implemented an 
upgraded learning content management system. The upgraded system makes 
this learning content available on demand, anytime, anywhere, for our 
staff. It also provides the ability to identify core, required 
curricula for designated staff; track completion of the courses; 
capture information on completion of commercially licensed professional 
development courseware and simulations into our training information 
system; generate management, utilization, and course completion 
reports; and effectively launch e-learning developed in GAO directly to 
the learner's desktop. To bring equity to learning opportunities for 
both analyst and mission support staff, we organized information about 
the over 1,900 professional development courses deployed to our 
desktops last fiscal year as well as other centrally taught, instructor-
led classes into online learning resource guides for administrative 
professional and support staff. The resource guides, which parallel the 
design for analyst staff, organize learning opportunities by 
competency, suggest job developmental activities, and lay out practical 
learning tracks for staff and their supervisors to use in creating 
individual development plans for professional growth. (Based on 
internal activities). 

4.16.C. Ensuring Exemplary Practices and Systems in Our Fiscal 
Operations: 

Our fiscal year 2005 financial statements were prepared, and the audit 
was completed with a clean opinion within 45 days after the end of the 
fiscal year. This quick turnaround allowed the statements and auditor's 
report to be included in the performance and accountability report in 
the time frame mandated by OMB. Based on a fiscal year 2004 financial 
statement audit recommendation by our independent external auditors, we 
have developed an Anti-Fraud Program within GAO. Key elements of the 
program will include creation of an Anti-Fraud Web site and employee 
awareness training. Employees will be able to report significant 
instances of fraud, waste, and abuse in our operations anonymously and 
without fear of retaliation to the Anti-Fraud Web site, which will be 
overseen by our IG. Fraud awareness training modules will be included 
in our internal ethics training and the Web-based computer security 
awareness training that staff must take annually. Finally, in 
anticipation of a focused effort in fiscal year 2006 to replace our 
current financial management system, we established a steering 
committee, a management team, and a project team to analyze agency 
requirements and select the replacement system. (Based on internal 
activities). 

4.17.C. Strengthening IT Governance Practices and Processes: 

In fiscal year 2005, we took actions related to two surveys of our IT 
organization. The first survey reviewed how we compared with peer 
organizations of similar technical complexity, size, and workload in 
terms of costs. While the overall results were positive and showed that 
we are very competitive with our peers, there were two areas identified 
for potential cost reductions--desktop hardware and voice 
communications. In replacing our installed base of notebook computers 
by the close of fiscal year 2005, we have achieved some of these cost 
reductions. And we have an effort under way to contract for a voice 
communications system, which will yield additional financial benefits 
and reduce the number of support staff required for voice 
communications, bringing us within the competitive range for like 
organizations. The second survey assessed the skills of our IT staff in 
business and IT technical areas and evaluated how well we are 
positioned in workforce planning compared to peer organizations. Based 
on the survey results, we identified our skill strengths and 
weaknesses, training needs, and current and future workforce gaps and 
initiated an action plan to address the identified skill gaps and 
ensure workforce continuity and talent management. (Based on internal 
activities). 

Leverage GAO's institutional knowledge and experience: 

4.18.C. Maximizing the Collection, Use, and Retention of Essential 
Organizational Knowledge: 

As a knowledge-based professional services organization, it is 
important that we identify and implement strategies to increase 
organizational knowledge retention and transfer. We began a pilot of an 
electronic records management system, which we plan to implement in 
fiscal year 2006, that will capture our records--such as our 
workpapers, reports, and testimonies--and make them accessible 
electronically to all GAO staff. We plan to implement the final version 
of this system in fiscal year 2006. We have also made more types of 
organizational information accessible by beginning to digitize certain 
document collections--such as the legislative histories and the General 
Counsel's files that document legal research--and identifying GAO data 
sets, databases, and data models to make them available as well. We are 
currently assessing the policy and cultural implications of making all 
GAO records available to all GAO staff. In addition, we established a 
working group of employees from different parts of the agency to 
explore ways we could improve our reporting. These efforts may include 
creating new product types, revising our existing reporting format, or 
using other communication modes. Key members of this group also began 
to develop short-and long-term communications standards for various 
media to guide the presentation of all of our publications. (Based on 
internal activities). 

4.19.C. Increasing Our Knowledge-Sharing Capability: 

The Human Capital Reform Act of 2004 granted authority for an executive 
exchange program with private sector organizations. This year, we 
finalized our policy for an executive exchange program and received 
Executive Committee approval for the forms, templates, and brochures we 
developed to be used in the program. This program will further the 
institutional interests of GAO and the Congress by providing training 
and skill development opportunities for our employees as well as 
obtaining the expertise of selected private sector employees. In fiscal 
year 2005, we also implemented several changes to improve customer 
satisfaction with our external Web site, including integration of our 
products database with a search engine that provides more relevant and 
targeted results for customers using our search utility and links to 
both primary and related GAO products, an enhanced presentation of 
search results, enhanced capabilities for narrowing a full-text search, 
updated content on several pages, and making more site visitors 
eligible for the satisfaction survey through expansion of the survey 
throughout the site and using a version of the survey that works with 
pop-up blockers and additional browser types. Overall, customer 
satisfaction with the site, as measured by the American Customer 
Satisfaction Index, increased six points from June 2004 to September 
2005. We also initiated development of Web-based just-in-time training 
for many of our Web-based library databases. These databases will have 
instantly available step-by-step instructions that are only a click 
away on all GAO desktops. Finally, as part of continuing efforts to 
support operations, we have developed standards to aid analysts in 
conducting their research. These standards are available on the 
Knowledge Services and Information Services Web sites as well as in the 
Electronic Assistance Guide for Leading Engagements. To accompany the 
standards, we included a formatted checklist that analysts can use as a 
tool in performing literature searches. (Based on internal activities). 

4.20.C. Enhancing Knowledge Sharing with Other National Accountability 
and Professional Organizations: 

We convened a number of forums, symposia, and other meetings to provide 
opportunities for an exchange of knowledge between accountability and 
professional organizations, experts, and stakeholders within the United 
States. For example, we held Comptroller General forums that covered 
topics such as long-term fiscal challenges and defined benefit pension 
plans. In addition, our speakers' series, called Conversations on 21st 
Century Challenges, brought five distinguished leaders to speak to our 
staff on issues affecting the United States and its place in the world. 
Nationally, our continued participation in the Domestic Working Group-
-a group of federal, state, and local auditors that meets to discuss 
mutual challenges--on efforts such as access to records, governance, 
long-term fiscal challenges, and grants management facilitated 
collaboration between GAO teams and state auditors on 14 issues. The 
Partnership for Public Service and the National Association of State 
Auditors, Controllers, and Treasurers assisted us on a number of 
engagements and helped to facilitate our access to state and local 
auditors on engagements relating to improper payments. Through the 
National Intergovernmental Audit Forum, we convened 21 regional forum 
meetings to update federal, state, and local auditors on changes to 
professional audit standards, the implications of Sarbanes-Oxley for 
the audit profession, and other key issues affecting the audit 
community. In addition, we helped organize and develop briefings on 
program evaluation for OMB examiners in response to concerns about how 
they were assessing agency program evaluations with PART. As a result, 
these examiners should be able to more realistically judge the quality 
of the evaluation evidence presented to them and communicate more 
clearly to agency staff what evaluation information they need. (Based 
on internal activities). 

4.21.C. Enhancing Knowledge Sharing with International Accountability 
and Professional Organizations: 

Internationally, we continued to provide leadership in the 
implementation of INTOSAI's first strategic plan by having the 
Comptroller General serve as the Vice-Chair of the Governing Board's 
newly created Finance and Administration Committee and as board liaison 
for the strategic plan's capacity building goal. He also chairs 
INTOSAI's Accounting and Reporting Committee and several GAO employees 
are active members of the Auditing Standards, Internal Control 
Standards, Information Technology, Public Debt, and other technical 
committees. This year, we played a major role in developing 
international internal control standards that were adopted at the 
INTOSAI Congress. To help ensure that U.S. public sector perspectives 
are reflected in the International Federation of Accountants' standards 
development project, we are collaborating closely with the 
International Auditing and Assurance Standards Board and the World 
Bank. We also expanded our global network and reputation by promoting 
education and knowledge sharing through the International Auditor 
Fellowship Program and the Visitor Program in which 20 fellows from 
Africa, Asia, Latin America, the Caribbean, and Eastern Europe 
participated. We received about 600 visitors from 63 countries, 
including officials from our counterpart organizations, parliaments, 
and central government ministries. We also initiated the Auditors 
General Speaker Series that provides unique international perspectives 
and insights in support of our work. Speakers in this series included 
the auditors general of South Korea, China, Saudi Arabia, and Ireland. 
(Based on internal activities). 

Continuously enhance GAO's business and management processes: 

4.22.C. Improving Engagement Support Services: 

In fiscal year 2005, we improved engagement support services through 
various efforts. For example, we streamlined and simplified the Audit 
Documentation Set as part of the final phase of the document's pilot 
test, which was launched in January 2004. The Audit Documentation Set 
helps to ensure that our engagements are consistent with the generally 
accepted government auditing standards and our Quality Assurance 
Framework and that our work and engagement-related decisions have been 
systematically documented. After revising the January 2004 document 
based on extensive comments from analyst staff, we solicited comments 
from staff again in May 2005 and issued the final version of the Audit 
Documentation Set in July 2005. The new version should require less 
time to complete because it eliminated duplicate requirements and no 
longer requires documentation of steps where not applicable responses 
are self-evident. In a separate effort, we implemented two changes to 
improve the efficiency of the report production process and enhance 
customer service in response to comments we received through internal 
surveys. Specifically, we reduced the number of Product Assistance 
Groups--which provide services such as graphics design, editing and 
writing assistance, and report production--from four to three and 
realigned the teams and offices that they serve. In addition, we placed 
a full-time manager in charge of outside printing and graphics 
procurement, which has become more important since the elimination of 
our in-house printing capacity in fiscal year 2004. These changes will 
allow us to continue to support product development more efficiently 
and economically. (Based on internal activities). 

4.23.C. Obtaining a Clean Opinion on Our Performance Audit Practice: 

We obtained a clean opinion on our performance audit practice from an 
international team of experienced auditors--the first time that we have 
sought such an opinion. The independent reviewers concluded that we 
have designed and implemented an effective system of quality controls 
to provide reasonable assurance of complying with generally accepted 
government auditing standards, which are designed to ensure that audits 
of government activities are objective, independent, and reliable. This 
opinion validated that the Congress and the American people can rely on 
our work and products. (Based on internal activities). 

4.24.C. Improving Staff Assignments: 

Throughout the fiscal year, we rolled out first a prototype and then a 
pilot of our staffing information system, which is intended to 
integrate staffing data from related but disparate systems, reduce 
staff time spent researching staffing and engagement data, and enable 
better staffing decisions by identifying staff skills and availability 
early in the job process. The system should provide more visibility to 
current and future engagement staffing needs and a uniform means for 
staff to express future assignment preferences and short-term 
availability. Having a common system will also support the engagement 
staffing process across all GAO teams and maximize the use of staff by 
facilitating their assignment to multiple activities (multitasking) and 
sharing of staff expertise across teams (matrixes). (Based on internal 
activities). 

4.25.C. Initiating Process Improvement: 

We identified two areas--travel and accounts payable--for alternative 
sourcing in order to aid our financial management office in achieving 
its vision of shifting the efforts of our staff away from routine 
transaction processing and toward a greater role in policy, guidance 
development, reporting, and oversight. We selected a service provider 
to perform routine data entry functions, and we have transferred post-
travel audits of travel documents to field office staff, resulting in 
increased efficiency and productivity of our workforce. To improve our 
IT operations, we used a competency diagnostic tool provided through 
the Chief Information Officer Executive Board--an organization that 
provides strategic, case-study-based research to senior IT executives-
-to examine the organization of our IT operations from the perspective 
of our Information Systems and Technology Services staff. The tool 
focuses on eight core areas of IT management--governance, performance 
measurement, security, infrastructure, applications, vendor management, 
talent management, and business enablement. Analysis of the results by 
the Executive Board included benchmarking our organization against 
other public and private IT organizations and making recommendations 
for improvement, which included expanding the use of the diagnostic 
tool to examine the organization of our IT operations from the 
perspective of all GAO customers. In addition, following the closing of 
our in-house print plant, the increase of electronic-only report 
issuances has resulted in both financial benefits and efficiency gains. 
Reports no longer need to be printed on a 24-hour schedule to meet 
issue dates, resulting in significant financial benefits and allowing 
the teams and the Product Assistance Groups additional time to produce 
higher quality reports. We set a ceiling of 200 for printed copies of 
products, resulting in printing cost reductions that will total an 
estimated $189,000 over 2 years. (Based on internal activities). 

4.26.C. Using Enabling Technology to Improve Our Crosscutting Business 
Processes: 

We completed several efforts in fiscal year 2005 to provide better 
efficiency in our business processes. We automated two processes--the 
awards nomination process and the posting of individualized pay--saving 
staff time. The automated awards nomination process also provides award 
nomination tracking and approval and payment status and automatically 
sends out status reports on the nomination via e-mail. We installed 
ceiling-mounted projectors in five meeting rooms in headquarters to 
allow staff to use the equipment without needing to reserve equipment 
or schedule support staff ahead of time. We also acquired and deployed 
a Web-based, user-friendly, cost-effective project management software 
package that allows our staff to view files received from other 
agencies that use that software. (Based on internal activities). 

4.27.C. Using Web-Based Technology to Improve or Replace Existing 
Systems: 

We improved our customer service in several areas using Web-based 
technology. In response to customer requests for a more user-friendly 
interface, we upgraded our Web-based time and attendance system, which 
streamlined data entry so that time charges can be entered all on one 
screen, provided staff the ability to charge compensatory time while on 
travel, and enhanced the administrative functions to support the needs 
of our human capital staff. We also upgraded our automated competency-
based performance system to include our administrative professional and 
support services staff during their first year under the new competency-
based system and incorporate revised attorney competencies, new 
security requirements, new report features, enlarged font for improved 
readability, and online help and system feedback links. We improved our 
customer service for employees requesting GAO transportation to 
business meetings by providing a Web-based request system to take the 
place of the manual system used to collect information to schedule GAO 
vans and drivers. This new system allows users a more dependable way to 
submit requests and allows property management staff to make better-
informed decisions when scheduling vans and drivers. In addition, we 
redesigned the Web-based phone book, making it more user-friendly, 
including additional information and mail and location links, and 
improving its search capabilities. Finally, we deployed a major 
enhancement to our Web-based employee locator system to enable easy 
location of our employees when they are on official business travel 
overseas. (Based on internal activities). 

Become a professional services employer of choice: 

4.28.C. Promoting an Environment That Is Fair and Unbiased and Values 
Opportunity and Inclusiveness: 

The Office of Opportunity and Inclusiveness (OOI) made recommendations 
concerning proposed agency policy on reasonable accommodations and 
corresponding guidance. As a result, we developed a defined program for 
reasonable accommodation to (1) ensure a systematic approach to 
providing a safe and efficient workplace for staff members who have 
disabilities as defined by the Americans with Disabilities Act and (2) 
enhance the role of the reasonable accommodations coordinator as a 
central contact person who follows the accommodation process from the 
point of request through implementation. At the request of the 
Comptroller General, OOI drafted several recommendations addressing 
recent trends noted in our 2004 annual assessment data and concerns in 
the areas of staff feedback, communication, and training. These 
recommendations were discussed with a cross section of employee groups 
and forwarded with comments to the Executive Committee, which approved 
the recommendations. As a result, OOI set up a task force to determine 
how best to implement the recommendations. OOI also addressed the issue 
of sexual harassment in the workplace, conducting a number of workshops 
at the request of team managers. These workshops served to emphasize 
the agency's zero tolerance posture concerning sexual harassment. 
(Based on internal activities). 

4.29.C. Promoting Diversity: 

To help ensure that we attract a diverse pool of applicants for our 
vacant positions, we expanded our equal employment opportunity hiring 
statement in our vacancy announcements to specify the basis for our 
hiring selections, and we began providing a contact person and number 
for applicants who need a reasonable accommodation for the application 
process. To help retain talent we acquired through the summer 
internship program, the OOI Managing Director met with our 2005 summer 
interns to discuss his office's role and to provide guidance on 
important steps that interns can take to enhance their chances for 
successful conversion to permanent GAO employment. To increase 
retention of our Professional Development Program employees, the OOI 
Managing Director met with the their advisors to discuss the importance 
of ensuring that all program participants are provided appropriate 
training opportunities as well as the opportunity to demonstrate their 
abilities in all performance competencies. In addition, OOI provided 
several presentations during the fiscal year aimed at providing staff 
with information and reinforcing the agency's position on diversity and 
promoting a fair and unbiased work environment, including a panel 
discussion on diversity in the workforce; a presentation to new Band II 
analysts on the importance of promoting an environment that is fair and 
unbiased and that values opportunity and inclusiveness for all staff; 
and a presentation to Senior Executive Service employees on leading 
practices for maintaining diversity, focusing on top leadership 
commitment and ways in which officials can communicate that commitment. 
Our Asian American Liaison Group also continued to actively promote 
diversity and provide opportunities for GAO staff professional 
development. This group actively coordinates with the Human Capital 
Office to define and meet transparent recruiting goals and is 
spearheading creation of a committee to aid the Human Capital Office in 
increasing and targeting diversity recruitment in the most fair and 
efficient manner and improving overall diversity yield. To provide 
professional development opportunities, the group hosted external 
speakers such as the U.S. Postal Service's Vice President of Diversity 
Development, an expert from the American Association of Retired 
Persons, and a panel featuring four Asian American congressional staff. 
In addition, the group and the Human Capital Office cosponsored a self-
assessment workshop to provide practical tools for GAO employees to use 
to highlight their accomplishments, addressing cultural and other 
sensitivities that may affect one's ability to do so effectively. 
(Based on internal activities). 

4.30.C. Upgrading Tools and Technology: 

We completed a number of major upgrades to our tools and technology in 
fiscal year 2005, such as replacing outdated phone systems and 
equipment in the Chicago, Denver, Los Angeles, Seattle, and Dallas 
Field Offices to increase reliability and stability of the systems; 
replacement of older servers with up-to-date, bigger, and faster 
equipment; upgrading our server software, making it easier to patch and 
update and providing easier server administration and improved 
security; replacing existing copiers and multifunction machines with 
modern, more reliable units to reduce downtime for customers and 
standardize our printing hardware platform; installing updated desktop 
and office productivity software on our notebook computers, resulting 
in a single notebook platform that reduces maintenance costs; providing 
remote access software that is more reliable, is more secure, and 
provides worldwide access for dial-in users, supplementing available 
digital subscriber line and cable access; and installing a major 
software upgrade on the new notebooks that provides better access to 
the most up-to-date hardware drivers, tools, security updates, patches, 
and customer-requested product changes, as well as better organization 
of e-mail. (Based on internal activities). 

4.31.C. Providing a World-Class Working Environment: 

We completed all physical relocations of staff related to our 
organizational realignment, enabling more efficient function of 
organizations through proximity of staff requiring close interaction. 
We also awarded a new 5-year contract for cafeteria services, providing 
reasonably priced, quality meals for our employees. In the area of IT, 
we significantly enhanced the reliability and availability of access to 
the Internet by obtaining a redundant Internet connection that provides 
two paths to the Internet and ensures that users will have access to a 
fast Internet connection in the event that one connection fails or 
experiences slowness. In response to user comments on the customer 
feedback survey, we provided enhanced audio for videoconferences by 
making technical improvements. We upgraded our broadcast communications 
system that delivers live and prerecorded programs to our staff's 
desktops by replacing equipment, which increased capacity to meet 
growing demand by increasing storage capacity and improving the video 
file distribution process. We are now able to deliver live programs to 
all GAO desktops nationwide, replacing the use of video 
teleconferencing in the field offices. Finally, we upgraded our cable 
television service by moving to satellite television, which, among 
other things, will improve reception for televisions in managing 
directors' offices and the cafeteria and provide closed-circuit 
television programming capabilities. (Based on internal activities). 

4.32.C. Ensuring the Security of Our IT Systems: 

We strengthened security through personal firewall software that 
prevents the download of viruses while staff are on travel or working 
from home and other software that helps identify and eliminate 
malicious programs. In addition, we improved network security by 
automatically activating the screensaver after a period of inactivity, 
removing several games that were preinstalled on our new notebook 
computers, and locking the GAO intranet page as the default home page 
to prevent spyware from hijacking the default home page and downloading 
more spyware. Based on the results of a third-party independent annual 
assessment conducted to ensure that our systems and network meet 
industry security standards, we created a plan of action and milestones 
to remediate vulnerabilities, bringing us into compliance with FISMA 
requirements. This ensures that risk assessments, the system security 
plan, information security program assessments, and operator 
authorizations are in place for all major systems and other systems as 
required and that we have developed and completed system test and 
evaluation reviews and certifications and accreditations as necessary. 
In conjunction with the upgrade to our time and attendance system, we 
implemented an integrated security approach that protects and validates 
transactions in our Web-based systems, ensuring that no changes have 
been made once a transaction is approved. While the function is 
transparent to the user, internal controls capability is significantly 
enhanced and it also addresses the need for digital signatures in a Web-
based environment. We also continued installation of the Secret 
Internet Protocol Router Network in our field offices and completed the 
process in Seattle, Norfolk, Los Angeles, Huntsville, Denver, Dallas, 
and Atlanta. This network access allows our staff to obtain specific 
classified data directly from agency officials via secure e-mail, 
improves the efficiency of our research through direct access to 
classified information, posts our classified reports for review and 
dissemination, electronically transmits our classified reports to 
agencies for comments, and reduces the need to use certified mail for 
classified data. (Based on internal activities). 

4.33.C. Providing a Safe and Secure Workplace: 

To meet our goal of providing a safe and secure workplace for our 
employees, we implemented internal procedures and policies to enhance 
our security posture. For example, we conducted our first shelter in 
place drill for our headquarters staff, and developed and distributed 
shelter in place plans for the majority of our field offices; we 
further enhanced our communications with staff by developing and 
distributing an Emergency Preparedness Plan brochure; and we began 
requiring that contractors undergo a check conducted by our Security 
and Safety unit (through the Federal Bureau of Investigation's National 
Crime Information Center) and be fingerprinted, reducing the agency's 
security risk. We also improved the speed with which we can obtain the 
results of the Federal Bureau of Investigation's screening of 
fingerprints taken for security checks by procuring and installing an 
electronic fingerprint system. The system allows for instant transfer 
of information to the bureau and reports immediately if prints are not 
acceptable. Our employees are also happier with this system as it is an 
inkless, paperless process. In the event that emergency relocation of 
staff in the headquarters building is required, we have provided 
additional network access for displaced teams by installing and 
activating additional local area network ports in some conference and 
training rooms, and have reactivated existing disconnected local area 
network ports in all remaining conference rooms in headquarters. We 
completed the perimeter security build out phase of our security plans, 
including installation of high-speed rollup doors, guard booths, 
undervehicle cameras, pop-up barriers, and a perimeter plinth wall. 
Finally, we completed a number of significant items in support of our 
Disaster Recovery Program. We completed the vision of the Disaster 
Recovery Program/Continuity of Operations, which was approved and 
signed by the Comptroller General and Chief Administrative Officer on 
May 31, 2005; developed video materials for Emergency Preparedness 
training for headquarters staff; and installed an emergency voice and 
text notification system on the network. (Based on internal 
activities). 

4.34.C. Enhancing Emergency Coordination: 

Externally, to increase our ability to obtain detailed intelligence and 
ensure coordination with the legislative branch in case of an 
emergency, we established contacts and procedures with local agencies, 
including establishment of emergency notification procedures with the 
Federal Bureau of Investigation's Joint Terrorism Task Force; 
enhancement of relocation procedures and relations with the U.S. 
Capitol Police, House Sergeant of Arms, and emergency preparedness 
offices; participation as a member of the Legislative Branch CAO 
Council on Continuity of Operations Plans; coordination of and 
participation in the Legislative Branch CAO Table Top Exercise; and 
completion of arrangements with the District of Columbia government to 
receive up-to-date emergency notifications. (Based on internal 
activities). 

[End of Appendix 1] 

2. From the Inspector General: 

[See PDF for image] 

[End of figure] 

[End of Appendix 2] 

3. GAO's Report on Personnel Flexibilities: 

The GAO Personnel Flexibilities Act of 2000 (Pub. L. No. 106-303) and 
the GAO Human Capital Reform Act of 2004 (Pub. L. No. 108-271) require 
us to provide a review of the actions we have taken in fiscal year 2005 
under specific sections of these acts. This appendix details the 
activities we have undertaken separately for each act. 

GAO Personnel Flexibilities Act of 2000: 

Several sections of this act were made permanent by the 2004 act; the 
actions taken related to these provisions are reported under the new 
act. Section 3 of the 2000 act amended our prior reduction-in-force 
procedures, added a new provision, and required us to report the effect 
of using this authority on preference eligibles such as disabled 
veterans. During fiscal year 2005, one GAO employee was separated using 
reduction-in-force procedures and that individual was not a preference 
eligible. 

GAO Human Capital Reform Act of 2004: 

The first two sections of this act made permanent our authority to 
offer voluntary early retirement and voluntary separation incentive 
payments. We revised our regulations for offering voluntary early 
retirement on November 15, 2004. These regulations allow us to announce 
agencywide voluntary retirement opportunities with specific time frames 
and, under an exception provision, allow us to authorize early 
retirement for up to 5 employees in any organizational unit in any 
fiscal year without an agencywide announcement. During fiscal year 
2005, a voluntary early retirement opportunity was offered from 
November 2 through December 16, 2004. Applicants were required to 
retire between December 31, 2004, and January 3, 2005. Of the 9 
applications that were received, 7 were approved (all 7 applicants 
separated in the required time period) and 2 were denied. Under the 
exception provision, there have been 12 applications for early 
retirement, of which 8 were approved (6 of these applicants separated 
in fiscal year 2005 and 2 will separate in fiscal year 2006), 2 were 
denied, and 2 are pending decision. This authority has been very 
helpful in reshaping our workforce by reducing the number of high-
graded managers and replacing many of them with entry-level and 
midlevel hires who possess the skills and knowledge that will allow us 
to accomplish our mission and serve the needs of the Congress and the 
American people for many years to come. 

The voluntary separation incentive provision requires us to make the 
payment out of current appropriations and to pay an additional amount 
into the retirement fund. In certain circumstance, these costs can be 
considerable and, given the many demands on our resources, present a 
strong financial incentive to use the provision sparingly, if at all. 
Thus, we anticipate little or no use of this authority. For this 
reason, as well as to avoid creating unrealistic employee expectations, 
we have not developed and issued regulations to implement this 
authority. 

Section 3 of the act established a requirement that an employee must be 
performing at a satisfactory level in order to receive an annual pay 
adjustment and amended 31 U.S.C. 732(c), which required our employees' 
pay to be adjusted at the same time and to the same extent as the 
General Schedule, to authorize the Comptroller General to determine the 
amount of annual pay adjustments and described the factors to be 
considered in making those determinations. The Comptroller General's 
authority under section 3 is effective for increases on or after 
October 1, 2005. On January 4, 2005, we issued regulations addressing 
the satisfactory performance requirement for GAO's analysts and 
attorneys (employees covered by validated competency-based appraisal 
systems for at least one full appraisal cycle). The regulations 
provided for withholding annual increases from any employee whose 
performance on any competency was rated below expectations. These 
regulations will be revised to make this requirement applicable to all 
remaining employees prior to the January 2006 annual adjustment, at 
which time those employees will have completed one full appraisal cycle 
under the new competency-based appraisal system. We plan to issue 
regulations covering the determination of pay adjustments prior to 
January 2006--the first opportunity for the Comptroller General to 
exercise this authority. 

Section 4 authorizes the Comptroller General to establish pay retention 
regulations applicable to employees who are placed in lower grades or 
bands as a result of workforce restructuring, reclassification, or 
other appropriate circumstances. Draft regulations are currently under 
review. We intend to complete the review and consultation process and 
implement the regulation prior to January 2006. 

Section 6 authorizes GAO to provide increased annual leave to key 
employees. We posted draft regulations for employee comment on December 
29, 2004. These regulations would permit designated key employees with 
less than 3 years of federal service to earn 6 hours of annual leave 
per pay period. GAO's Executive Committee is considering employee 
comments before finalizing the regulations and, due to the complicated 
nature of the many issues raised, we anticipate finalization of the 
regulations and implementation of this provision in early fiscal year 
2006. 

Section 7 authorized GAO to establish an Executive Exchange Program. 
After soliciting and analyzing employees' comments on draft 
regulations, we issued the final regulations on May 20, 2005. We also 
developed draft forms, templates, and brochures to be used in 
implementing this program in fiscal year 2006. 

Section 9 incorporated additional requirements for GAO's performance 
management system, all of which are addressed by our competency-based 
appraisal systems. Additionally, we conduct an annual review and 
assessment of our performance management policies and processes as part 
of ongoing continuous improvement. 

Finally, section 10 requires us to consult with any interested groups 
or associations representing officers and employees of GAO when 
implementing changes brought about by this act. As evidenced in the 
narrative above, this is a practice that we have implemented for 
several years. Typically, in implementing changes such as those in this 
act, we consult with interested groups and associations within GAO, 
provide them with draft policies and regulations, and obtain input from 
them on suggested clarifications or changes to the policies and 
regulations. We carefully consider this input and incorporate it, when 
appropriate, before distributing policies and regulations for comment 
to all employees. We will continue this practice in implementing the 
changes relating to the act and have already taken steps to ensure that 
all GAO groups, associations, and employees are aware of the impending 
changes in the performance management system related to this act. 

[End of Appendix 3] 

4. GAO's Federal Information Security Management Act Efforts: 

Federal IT security management, policy, and procedures continue to 
evolve, and we have focused efforts on integrating these evolving 
policies and practices into our IT processes. During the past year, we 
stepped up efforts to improve our information security program, 
processes, and procedures, implementing key requirements set forth in 
FISMA provisions enacted under the E-Government Act of 2002, in 
National Institute of Standards and Technology 800 series guidance, and 
in Federal Information Processing Standards Publication 199. While we 
are not obligated by law to comply with FISMA, we have adopted FISMA 
requirements to help ensure that we establish an effective information 
security program and to fulfill our goal of being a model federal 
agency. 

We have instituted a wide range of programs and processes to assess, on 
a recurring basis, the status of our information security program, 
including the results of internal reviews by program offices and 
security staff. Consistent with FISMA requirements, our IG 
independently evaluated our information security program during fiscal 
year 2005. The IG commented on our progress in correcting identified 
weaknesses and implementing FISMA requirements and offered additional 
recommendations to further strengthen our IT security program. We also 
follow the standard practice of using a public accounting firm, as well 
as other external sources, to provide independent external evaluations 
and testings of IT controls on our major applications. Results of these 
reviews and evaluations, to date, have identified no material 
weaknesses in our major applications. In addition, we have 
substantially elevated information systems security consciousness at 
GAO by putting into practice requirements consistent with FISMA through 
our efforts to: 

* implement an enterprisewide risk-based security program; 

* develop essential policies, procedures, and reporting mechanisms to 
ensure that our security program is integrated into every aspect of IT 
system life cycle planning and maintenance; 

* provide recurring security training and awareness to all of our 
staff; 

* integrate security into our capital investment control process; and: 

* implement an enterprise disaster recovery solution. 

We have defined security initiatives that have pointed to the need for 
changes in our existing technology infrastructure, as well as new 
security tools and appliances. During fiscal year 2005, we undertook a 
number of projects that have significantly improved our information 
security program. Among these projects are the following: 

* Certification and accreditation methodology. We have revised the IT 
policy and procedures on certification and accreditation of our 
information systems. This policy establishes the foundation for our 
requirement to certify and accredit information systems that we 
supported. In addition, the methodology identifies activities, 
documentation, and the timeliness necessary to provide a complete risk 
assessment. 

* Certification and accreditation of the General Support System and 
major applications. We have completed revision of documentation for the 
certification and accreditation of our information systems, which 
includes the General Support System (our network) and four major 
applications. An update to existing risk assessments, system security 
plans, National Institute of Standards and Technology Special 
Publication 800-26 reviews, system tests and evaluations were 
accomplished to ensure the appropriate security controls had been 
implemented, risk to GAO was validated, and system documentation 
included current approval by the designated approval authority. 

* Vulnerability assessment. We have instituted a process consistent 
with the requirements cited in FISMA to scan the General Support System 
for vulnerabilities and potential areas that could be exploited. We 
integrated this process with our network operations to maintain up-to-
date patched systems to ensure a stable network. Using a scanning 
software tool, each network device is scanned on a routine schedule to 
identify vulnerabilities that are remediable via patches and 
configuration changes in order to ensure secure services and system 
standardization and meet our network hardening guidelines. 

* Wireless network protocol implementation. We have implemented the use 
of the Institute of Electrical and Electronics Engineers 802.1x 
protocol--which covers network access control and is used to provide 
authenticated network access--in our team and conference rooms, 
nationwide. This validation process ensures computer equipment that 
connects to our network is in fact GAO equipment, removing the 
potential risk for non-GAO equipment to have uncontrolled access to our 
network. The initial deployment of this technology was implemented in 
fiscal year 2005. This technology is also being examined for use beyond 
conference rooms in fiscal year 2006. 

* Centralized plan of actions and milestones. Tracking the results of 
various audits of our information systems was previously accomplished 
separately, using the methodologies specific to each audit. By 
integrating these tracking methods into a single program, we were able 
to gain synergy in monitoring the risks and remediation efforts and 
improve security within our information systems. 

* Enterprise FISMA tool. The procurement of an automated tool to 
enhance the security tracking and documentation of our information 
systems was completed in late 2005. This program will become our source 
for managing audit findings and remediation efforts, documenting annual 
assessments, and tracking certification and accreditation. 

* Enterprise event correlation application. We procured an event 
correlation engine, in late fiscal year 2005, to assist with the 
monitoring of diverse network traffic that identifies potential threats 
to our network environment. The use of this tool will allow the 
effective use of limited resources to minimize risk to GAO while 
vigilantly monitoring network activities. 

* Classified processing upgrade. In the past, our investigative mission 
work requiring electronic access to classified defense information had 
been limited to select sites with limited access. During fiscal year 
2005, we expanded our Secret Internet Protocol Router Network 
connections to seven GAO field office sites, providing each site with a 
secure computing facility and new equipment. Rooms were outfitted with 
dedicated switches, routers, firewalls, intrusion detection devices, 
servers, and workstations. Installation at the remaining field 
locations is scheduled to occur in fiscal year 2006. 

* Enterprise anti-spyware. We deployed an enterprise anti-spyware 
application as part of the standard desktop image. This application 
automatically monitors and remediates various types of intrusion and 
monitoring programs, such as adware and Trojan viruses, to prevent 
desktops from becoming infected with spyware. The implementation of 
this program has significantly reduced the amount of work required to 
reimage desktops due to spyware. 

* Enterprise Internet screening. We piloted the implementation of an 
Internet screening tool that provides antivirus and anti-spyware 
protection to our Web-based activities. This package will provide added 
security for the Web and improve the overall security posture for GAO's 
information systems. 

* Security Program Plan. We implemented a formalized Security Program 
Plan that provides the road map of activities for our Information 
Systems Security Group over the next few years to improve both the 
program and technical components of our network security. We also 
established a number of working groups to effectively support our 
security program. The IT Security Users Group meets monthly to share 
information about security-related activities, including policy, 
procedures, and guidance, on the network, while the Remediation Group 
meets monthly to provide input on activities related to the remediation 
of findings documented from audits and maintained in the centralized 
plan of actions and milestones. 

* FISMA Month. We instituted a novel program that takes place each 
August and is called FISMA Month. Because FISMA reporting is key to our 
annual security assessment, implementing FISMA Month focuses staff on 
the time frames and review requirements and helps to ensure that the 
documentation of our program activities is complete and up-to-date. 
This activity provides a snapshot of our program that has been in 
effect the entire year. 

* Security awareness training. We implemented a robust security 
awareness training program, which included awareness training for all 
of our staff and contractors and specialized security training for 
staff with enhanced access to the GAO network (primarily our IT 
operations staff). All training used Web-based courses. 

[End of Appendix 4] 

[End of Part IV: Appendixes] 

Providing Comments on This Report: 

To provide comments for improving this report, please contact our Chief 
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U.S. Government Accountability Office: 441 G Street NW, Room 6K17Q: 
Washington, D.C. 20548: 

[End of Providing Comments on This Report] 

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FOOTNOTES 

[1] The Federal Managers' Financial Integrity Act requires ongoing 
evaluations and annual reports on the adequacy of the systems of 
internal accounting and administrative control of each agency. The 
Government Performance and Results Act seeks to improve public 
confidence in federal agency performance by requiring that federally 
funded agencies develop and implement an accountability system based on 
performance measurement, including setting goals and objectives and 
measuring progress toward achieving them. The Federal Financial 
Management Improvement Act emphasizes the need to improve federal 
financial management by requiring that federal agencies implement and 
maintain financial management systems that comply with federal 
financial management systems requirements, applicable federal 
accounting standards, and the U.S. Government Standard General Ledger 
at the transaction level. 

[2] Forensic audits are reviews that are designed to highlight system 
vulnerabilities and identify potential instances of fraud, waste, and 
abuse. Such audits often involve data mining of agencies' information 
systems and developing examples or case studies to illustrate systemic 
problems. As with our performance and financial audits, we coordinate 
this work, when appropriate, with the agencies' Offices of Inspectors 
General (IG). 

[3] In addition, we are continuing to explore measures that could help 
us assess how well we develop mutually beneficial relationships with 
other accountability organizations. Such partnerships are important 
because they (1) create opportunities for collaboration and cooperation 
that help all organizations involved address common challenges and 
enhance their ability to improve government operations and serve the 
public better, (2) allow us and other organizations to make meaningful 
changes in our internal accountability processes and policies, and (3) 
allow us to better leverage available resources. The Building 
Partnerships and Strategies for Achieving Our Goals sections in this 
report provide additional information on the partnerships we have 
established. 

[4] Our most recent performance plan is available on our Web site at 
http://www.gao.gov/cgi-bin/getrpt?gao-05-776sp. 

[5] As part of our risk-based, engagement management process, we 
identify a new engagement as high risk if the work we need to perform 
will likely require a large investment of our resources, involve a 
complex methodology, or examine controversial or sensitive issues. 

[6] GAO, 21st Century Challenges: Reexamining the Base of the Federal 
Government, GAO-05-325SP (Washington, D.C.: February 2005). 

[7] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: 
January 2005). 

[8] This figure is based on DOD's reported fiscal year 2004 budget. 

[9] In fiscal years 2003 and 2004, the work performed under the 
Comptroller General's authority represented 8 percent and 10 percent, 
respectively, of our engagement efforts. 

[10] GAO, Motor Fuels: Understanding the Factors That Influence the 
Retail Price of Gasoline, GAO-05-525SP (Washington, D.C.: May 2005), 
and Social Security Reform: Answers to Key Questions, GAO-05-193SP 
(Washington, D.C.: May 2005). 

[11] Note 14 to the financial statements describes our Davis Bacon Act 
trust function. For more detailed Davis Bacon Act financial 
information, contact our General Counsel. 

[End of Footnotes] 

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[End of Performance & Accountability Report, Fiscal Year 2005]