- LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2006

[Senate Hearing 109-]
[From the U.S. Government Publishing Office]

LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2006

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TUESDAY, APRIL 19, 2005

U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:27 a.m., in room SD-116, Dirksen
Senate Office Building, Hon. Wayne Allard (chairman) presiding.
Present: Senators Allard and Johnson.

LIBRARY OF CONGRESS

STATEMENT OF JAMES H. BILLINGTON, Ph.D., THE LIBRARIAN
OF CONGRESS
ACCOMPANIED BY:
GENERAL DONALD L. SCOTT, DEPUTY LIBRARIAN OF CONGRESS
MARY BETH PETERS, REGISTER OF COPYRIGHTS
DANIEL P. MULHOLLAN, DIRECTOR, CONGRESSIONAL RESEARCH SERVICE

OPENING STATEMENT OF SENATOR WAYNE ALLARD

Senator Allard. The Legislative Subcommittee on
Appropriations will come to order. We meet today to take
testimony from the Librarian of Congress and the Comptroller
General on the fiscal year 2006 budget request for the Library
of Congress and the Government Accountability Office (GAO). We
will also receive testimony for the record on the Open World
Leadership Program.
I welcome our witnesses this morning. We will hear from Dr.
James Billington, the Librarian, who is accompanied by General
Donald Scott, the Deputy. We will hear from Dan Mulhollan,
Director of the Congressional Research Service, Mary Beth
Peters, Register of Copyrights, and many others.
The Library will be followed by Mr. David Walker,
Comptroller General, who is accompanied by Gene Dodaro, GAO's
Chief Operating Officer; Sallyann Harper, the Chief
Administrative Officer; and Stan Czerwinski, the Controller.
The Library is requesting a budget of $628 million, 7
percent above the fiscal year 2005 level. The amount requested
would support 4,365 employees and would accommodate all
anticipated pay and price level increases, as well as continue
some ongoing projects, such as the copyright reengineering
effort and the completion of the National Audiovisual
Conservation Center.
While the areas for which the Library has requested
additional resources are important, it will be very difficult
for this subcommittee to approve large increases since it is
very unlikely the overall level of discretionary spending will
even keep up with the rate of inflation.
Following the Library, we will hear from Mr. Walker on the
Government Accountability Office's budget request, which totals
$493.5 million over the current year, an increase of 4 percent.
GAO's request is one of the more conservative ones we have seen
in the legislative branch this year and we appreciate the fact
that you have attempted to restrain programmatic increases.
The budget would provide for 3,215 staff and would
accommodate normal pay and inflation-related increases. GAO has
been involved in a number of legislative branch assignments
over the past few years, helping to oversee the Capitol Visitor
Center construction project, making recommendations on
management improvements within the Architect of the Capitol,
and tracking Capitol Police administrative reforms to name a
few. We appreciate these efforts and believe they are resulting
in improvements to legislative branch operations.
One of my interests will be to continue and even accelerate
efforts to hold legislative branch agencies to the highest
standards of performance and accountability.
Finally, I would like to take this opportunity to recognize
Stan Czerwinski, GAO's Controller. I was fortunate enough to
work with Stan in his previous capacity as a managing director
overseeing housing matters and I also found his insight
helpful. I am looking forward to the opportunity of working
with him once again as the legislative branch chairman.
However, I understand that Stan will be going back to program
work. While this is unfortunate for our work on this
subcommittee, I look forward to regaining his expertise on
program matters.
Stan, thank you for your outstanding service as Controller.
I would ask the witnesses to stick with the 5-minute rule.
Go ahead and make your presentations so we will have plenty of
time to get into questions and ask you questions that I may
have or any member here of the subcommittee may have.
So we will start this morning with Dr. Billington with the
Library of Congress.

OPENING STATEMENT OF THE LIBRARIAN

Dr. Billington. Thank you, Mr. Chairman. It is a pleasure
and an honor to come before you today and first of all to thank
the Congress for being for more than two centuries the greatest
single patron of a library in the history in the world. The
Library that Congress has created is the world's largest
collection of human knowledge and the principal source of
research support for the Congress itself.
You know that the Library receives books and other works
submitted for copyright registration to the Copyright Office,
thus preserving the immense ongoing record of American
creativity. We also collect and preserve materials in 486
languages from abroad, thus adding to the wide scope of
knowledge available to our citizens. The ways in which we
perform these vital services are changing rapidly in response
to digital technologies, which are also generating new kinds of
resources. We collect films and recordings in addition to
books, journals, manuscripts, maps; we must now collect digital
audiovisual resources, digital documents, electronic databases,
and even web sites.
In 2004 our unique universal collection of 130 million
items added 2.6 million new books and other artifacts and our
richly stocked web site attracted more than 3.3 billion
electronic hits. We are also leading a national program to
archive materials that are unique, important, and dependable
from the flood of digital material on the Internet, and we are
moving our national service to the blind and physically
handicapped into digital formats. We are now in fact in the
advanced stages of converting almost all our processes from
manual to digital and into electronic formats. At no other time
has technology so directly affected how the Library performs
its work.
Beyond mandatory pay raises and unavoidable price
increases, our request includes additional funds for the
National Audiovisual Conservation Center, for copyright
reengineering, for storage modules at Fort Meade, and for
direct service to the Congress, a one-time adjustment to the
Congressional Research Service's budget to sustain its staff
capacity, and an adjustment to the CRS acquisition base, and
funds to make accessible law library materials that are
important for the Congress.

NAVCC--CULPEPER

An unprecedentedly generous private donation from the
Packard Humanities Institute is enabling us to create a
facility that will provide state-of-the-art preservation at
Culpeper, Virginia, for all of our massive and hitherto
scattered audiovisual materials. We need 23 FTEs that will
greatly increase production and meet the demands of this
complex technical system.

We are in the last year of the 7-year plan that Congress
approved for copyright reengineering. We need one-time funds to
keep our technical team united for the completion of this
project, support for the move to an offsite location, and
funding in the AOC budget for reconstructing space in the James
Madison Building.

FORT MEADE PROJECT

Congress has generously funded two modules at Fort Meade
for storage of books and journals to address the long-delayed
preservation needs of 26 million unique and often priceless
special format materials. We request funds to begin building
Modules 3 and 4.
These and other requests illustrate the ways in which the
Library must continue to change if we are to maintain in the
electronic age our vital historic role as the preeminent
steward of the world's knowledge and of America's creative
heritage.

PREPARED STATEMENT

We are deeply grateful for what Congress has already
created and admirably sustained in this time of transition. The
appropriations we request for fiscal year 2006 will enable us
to continue providing you with comprehensive nonpartisan
research and will provide future generations of your
constituents with the wonderful learning resources that digital
technology is making possible. You will be supporting more than
just a great cultural repository. Appropriations for today's
Library will be investments in tomorrow's minds.
[The statement follows:]

Prepared Statement of James H. Billington

I appreciate the opportunity to appear before you today to discuss
the past accomplishments and future goals of the Library of Congress in
the context of our fiscal year 2006 budget request. This Committee has
always supported the Library's programs and I ask for your help again
in securing the investments we need to keep the Library as useful to
the Congress in the new millennium as we have been in the nineteenth
and twentieth centuries.
For 205 years, the Congress of the United States has sustained the
Library of Congress in its efforts to acquire, preserve, and make
accessible the mint record of American creativity and the world's
largest collection of human knowledge. We share this knowledge with the
Congress, principally through the Congressional Research Service and
the Law Library, and we protect the artistic and literary legacies of
our citizens through our Copyright Office. We also serve your
constituencies through our National Library for the Blind and
Physically Handicapped, through our cataloging and other services to
your local libraries and by offering rich educational content to your
teachers and students through our acclaimed Internet site.

THE LIBRARY TODAY

The Library of Congress contains more than 130 million items in
more than 470 languages and in virtually every media. Every workday the
Library adds more than 10,000 new items to its collections and provides
numerous specialized services. In fiscal year 2004, the Congressional
Research Service performed exclusive public policy research and
analysis for Congressional Members and Committees, covering more than
200 active legislative issues, preparing and updating nearly 1,000
reports and delivering nearly 900,000 responses to inquiries. Of
particular note in fiscal year 2004, CRS experts responded with
immediate support on matters that suddenly were on the Congressional
agenda, including a comprehensive interdisciplinary response to the 9/
11 Commission Report that involved 70 written products; legal analysis
related to the Abu Ghraib prison controversy; and an assessment of
implementation issues of the new Medicare prescription drug benefits.
The Copyright Office administered the U.S. copyright laws and acquired
copyrighted works for the collections of the Library while registering
more than 661,000 copyright claims in the past year. The Books for the
Blind and Physically Handicapped program circulated more than 23
million books and magazines free of charge, to the blind and disabled.
The Library assisted the nation's local libraries by cataloging more
than 300,000 books and serials, and providing the bibliographic records
to libraries everywhere. Finally, the Library provided free internet
access to more than 75 million records and recorded more than 3.3
billion hits on its website in fiscal year 2004.

ACCOMPLISHMENTS

Throughout fiscal year 2004 and into fiscal year 2005, the Library
continued to reach important milestones. We moved forward with our
massive film preservation facility in Culpeper, Virginia, slated to
open in the Fall of 2006. Phase 1 of the project will be completed this
year, allowing the initial transfer of the Motion Picture,
Broadcasting, and Recorded Sound Division collections to Culpeper in
August. Years of planning for off-site storage of other collections at
Fort Meade, Maryland came to fruition when Module 1 opened in November
2002. This facility represented the start of the Library's program to
use custom-built offsite facilities to relieve overcrowding on Capitol
Hill, and to ensure an excellent preservation environment. During
fiscal year 2004, 567,000 items were transferred to the facility,
bringing the total number of items transferred to Module 1 to 1.2
million. This module is now completely full. Completion and commission
of Module 2 is scheduled for Spring 2005.
Under the mandate of the Congress's 2000 National Digital
Information Infrastructure and Preservation (NDIIPP) Act, we continue
to build a strong nationwide network of partners. We awarded nearly $14
million to eight partner institutions who agreed to provide matching
funds and to help collect and preserve a diverse range of important,
at-risk digital material that could prove useful to current and future
generations of researchers, scholars and lifelong learners. NDIIPP also
partnered with the National Science Foundation to establish the first
digital archiving grants program that will fund cutting-edge research
to support the long-term management of digital information.
In fiscal year 2004, the Library added approximately 2.6 million
new items to its collections through all sources of acquisitions,
including purchase, exchange, gift, federal transfer, and copyright
deposit. Through the Federal Library and Information Network (FEDLINK),
which makes available an array of print serials, books, electronic
publications and preservation services, the Library contracted with
more than 100 major vendors to provide services to approximately 1,200
Federal offices participating in the program saving the offices an
estimated $8.9 million in cost avoidance benefits and more than $11
million in vendor volume discounts.
The Copyright Office exceeded its 90-day target for processing of
claims. The Office now processes claims on an average of 80 days; this
is a 60 percent improvement since 2001. The Copyright Office also cut
average recordation processing time in half, reaching 33 days at the
end of 2004, an 85 percent improvement since 2001.
The Library organized and sponsored, with the funds raised from the
private sector, the third National Book Festival with 85,000
attendees--the most ambitious National Book Festival to date. Through
other fund raising activities this past year, the Library received a
total of $11 million, representing 828 gifts from 713 donors. The
Library awarded the first John W. Kluge Prize for Lifetime Achievement
in the Human Sciences in fiscal year 2004. The $1 million prize--made
possible by an endowment established by the Madison Council Chairman
John W. Kluge--is given for lifetime achievement in the humanities and
social sciences, areas of scholarship for which there are no Nobel
Prizes. Finally, for the ninth consecutive year, the Library received
an unqualified ``clean'' opinion on its fiscal year 2004 consolidated
financial statements.

BUILDING A 21ST CENTURY LIBRARY

Shifting media formats, the greatly increased flood of important
material available only in perishable digital form, and increasingly
complex data rights issues--have combined to create immense new
challenges for the Library. At no other time has the emergence of
technology so directly affected how the Library acquires, catalogs,
preserves, serves and secures its vast collections and holdings.
In order for the Library to continue fulfilling its historic
mission, we must embrace the rapidly unfolding technology revolution,
build and maintain an internal infrastructure and recruit, educate, and
train a new staff of knowledge navigators able to sort out, prioritize,
and help mediate to Congress and the Nation what is worth saving from
the increasingly unfiltered information online.

LIBRARY'S FISCAL YEAR 2006 PLAN

In preparing the fiscal year 2006 budget, the Library considered
the areas that will be most changed by the transition from a largely
print-on-paper collections to a hybrid collection that incorporates
great numbers of digital materials. As we shape the Library of the
future, we recognize the need to concentrate on three areas:
technology, acquisition, and preservation. Specifically:
Technology
Develop an infrastructure to support the digital library.
Build a stronger connection between the Library and the wider
library community to create a national digital library to make widely
useful material locally available through the Internet, even if not
always physically housed at the Library of Congress.
Redefine the Library's leadership role in describing and organizing
information--adjusting cataloging methods and setting standards for the
digital environment.
Preservation
Preserve at-risk ``born digital'' materials and work in partnership
with educational and corporate partners to keep such materials
available for subsequent generations.
Acquisition
Reconceptualize our special collections development policies to
include the creations of writers, artists, cartographers,
photographers, and musicians that are available only online (or born
digital).

FISCAL YEAR 2006 BUDGET REQUEST

Our fiscal year 2006 budget represents in many ways, a transition
to closure on several multi-year projects that are essential for
building a 21st century library.
The Library is requesting a total budget of $628 million for fiscal
year 2006. This includes $591 million in net appropriations and $37
million in authority to use receipts, a net increase of $43 million or
7 percent above the fiscal year 2005 level. This total includes $24.3
million for mandatory pay and price level increases needed to maintain
current services and to prevent a reduction in staff, which would
severely impact the Library's ability to manage its diverse and complex
programs.
The requested funding will support 4,365 full-time equivalent
(FTEs), a net increase of 74 FTEs above the fiscal year 2005 level of
4,291, but still 355 FTEs short of the fiscal year 1992 total--despite
the fact that we are doing far more work now than in fiscal year 1992.

UNFUNDED MANDATES

A total of $2.5 million and 3 FTEs is requested for two new and
unfunded mandates: $1.2 million for the Administration's Department of
State Capital Security Cost Sharing program, and $1.3 million and 3
FTEs for the new Copyright Royalty Judges Program.
Two years ago, the Department of State launched a 14-year program
to finance the construction of approximately 150 embassy compounds. The
Library was assessed $2.4 million for fiscal year 2006 based on the
number of staff we have in overseas acquisition field offices attached
to an embassy. The Library has argued for a reduction in the
assessment, based on the services provided to the Library by the
Department of State in diplomatic facilities, but the matter has not
been resolved. We hope the amount requested by the Department of State
will be less, but until a decision is reached, the Library must request
full funding. It is essential that we not risk losing our overseas
offices, which collect vast amounts of important and otherwise
unavailable material for many of the world's trouble spots.
The Copyright Royalty Distribution Reform Act of 2004 (Public Law
108-419), signed into law on November 30, 2004, created a new program
in the Library to replace most of the current statutory
responsibilities of the Copyright Arbitration Royalty Panels (CARP)
program. The new Copyright Royalty Judges (CRJ) program will determine
distributions of royalties that are disputed and will set or adjust
royalty rates, terms and conditions, except satellite carriers'
compulsory licenses. The Satellite Home Viewer Extension and
Reauthorization Act, signed into law on December 8, 2004, extends
satellite compulsory licenses and requires CARPs, rather than CRJs, to
set new rates for satellite retransmission. The CARPs will be funded by
participants in the proceedings and/or by royalties. Unlike CARP, the
new Copyright Royalty Judges program will be funded by new permanent
net appropriations and nominal filing fees. Funding supports the
salaries and related expenses of the three royalty judges and three
administrative staff required by law to support this program.

MAJOR PROJECTS

The Library is requesting $7.284 million and 45 FTEs for projects
that are either in the last year of development or on a time-sensitive
schedule that must be maintained if the entire project is to be
successful. The projects support preservation, electronic delivery of
services, acquisitions and access functions. The first of these
projects is the National Audio-Visual Conservation Center (NAVCC) in
Culpeper, Virginia.
A gift of $120 million from the Packard Humanities Institute (PHI)
three years ago launched the National AudioVisual Conservation Center,
an unparalleled conservation facility for the special formats that are
uniquely held by the Library of Congress. The construction project at
Culpeper, Virginia is proceeding well, and the collections from five
disparate storage collections will be moved to Culpeper during the
summer, 2005. The staff will be relocated to Culpeper in 2006.
During fiscal year 2006, the Library's ability to procure, deliver
and install NAVCC furnishings, equipment and infrastructure must again
be carefully managed in concert with PHI's schedule for finishing,
testing and commissioning Phase 2 of the facility, slated for
completion and move-in by April 2006. For this reason, no-year
authority is again required to accommodate unforeseen fluctuations in
the construction schedule. The Library is requesting a net decrease of
$3 million and an increase of 23 new FTEs in fiscal year 2006. This
request follows the original five-year plan submitted for Culpeper.
Funding supports several components for which timing and funding
flexibility will be especially desirable, including the bulk of the
staff relocations, the completion of collections relocations (including
nitrate film), and completing the design, procurement and integration
of the complex digital preservation systems with the NAVCC's audio-
visual laboratories. Of the total amount requested for fiscal year
2006, approximately $11 million reflects one-time costs. After the
staff and collections have been relocated, the Culpeper budget will
only require funding for ongoing operations.
Fiscal year 2006 is the final year of the Copyright Office's
reengineering initiative that requires new funding. The reengineering
program is an extensive multi-year effort to redesign the Office's
business processes, including the development of a new information
technology infrastructure, new work flows, new job roles, and new
facilities design. The new environment will support electronic delivery
of copyright services, including electronic submissions of copyright
registrations and receipt of digital deposits. During fiscal year 2006,
the Copyright Office will relocate staff to a temporary off-site leased
space, reconfigure its main facilities, and install new furniture and
equipment. Final implementation is scheduled the first half of fiscal
year 2007, after relocation of the staff to the reconfigured space in
the Madison Building. A total of $4 million in one-time funding is
requested in the Copyright Office's budget to fund the temporary
offsite relocation of the staff. Completion of the reengineering
initiative is contingent upon the Architect of the Capitol's budget
request of $5.5 million to pay for construction costs to reconfigure
existing Madison Building space. These requests will permit the
Copyright Office to move forward on the facilities work so critical to
the final implementation of the reengineering project.
The Library is requesting a total of $2 million for the GENPAC
program and $1 million for CRS to recover lost purchasing power of
critically needed research materials. This funding will support the
purchase of serial subscriptions and/or electronic resources--ensuring
that the CRS analysts and other Library staff have access to the highly
specialized research materials and data needed to support the work of
the Congress and other Library customers.
The boundaries of the world become ever smaller as information
production increases across the globe. There are great opportunities to
acquire new materials from parts of the world we had little knowledge
of up until now. The Library collects little known and hard-to-find
materials because it is in the national interest to have the resources
that document other cultures and nations. We are interested in
acquiring the emerging electronic publications from all parts of the
world, including the Web sites for advocacy as well as education. In
selecting the most important electronic resources, the Library places
special emphasis on those databases and scholarly journals containing
information to support the work of Congress in the development of
public policy.
Preservation is a unique responsibility of the Library of
Congress--a library that all other libraries expect to keep materials
in perpetuity. The Library requests $3.375 million and the retention of
22 NTE FTEs to continue the preservation efforts required to place 4.5
million items (most of them audio-visual materials or special
collections) in proper storage containers and through proper
transshipment to Fort Meade, Culpeper, or other off-site repositories.
Other projects are critical to the Library's acquisition and
preservation programs. Specifically, funding of $52 million is
requested by the Architect of the Capitol (AOC) to support essential
and long deferred projects specifically requested by the Library. This
total includes $41 million for construction of Book Modules 3 and 4 at
Fort Meade. These modules are already designed and will provide
critically needed collections processing and storage space and cold
vaults for unique and growing special format collections. This program
is critical to providing relief to collections storage and resulting
safety problems in the Library's Capitol Hill buildings. Of the
remaining $11 million requested, $5.5 million supports the Copyright
Re-engineering construction project and $5.5 million supports minor
construction, design, and/or the operation and maintenance of the
Library's Capitol Hill, Fort Meade, and Culpeper buildings.

MAJOR LIBRARY-WIDE PROJECTS

In addition to these major projects, the Library is requesting $5.5
million and 7 FTEs for several Library-wide infrastructure projects
that support all organizational entities within the Library and are key
to performing the Library's mission efficiently and effectively. The
first is in the all-important area of Information Technology (IT),
where the Library is requesting a total of $3.3 million and 5 FTEs,
needed to keep pace with rapid technological changes. Included in this
total is $571,000 and 5 FTEs for the ITS Systems Engineering Group
(SEG) to support a workload that has grown dramatically in recent
years. The current staff of SEG operates with single individuals
shouldering responsibilities without backup. This situation presents a
high-level risk and places the Library in a serious and highly
vulnerable position. The Library must mitigate this risk and protect
itself against the potential loss of knowledge and breakdown of
services in the event of illness or other unforeseen circumstances. The
total also includes $1 million to support the increased costs
associated with the IT service provider contract. Our IT staff is
struggling with the vast increase in the Library's digital services and
will have to either curtail services or decrease equipment purchases if
funding is not provided. Finally, the total includes $720,000 for
contract support for the certification and accreditation of the
Library's IT systems as required by the Federal Information Security
Management Act of 2002 and $1 million to implement the next phase of
the Library's new financial management information system.
The Library is requesting a total of $1.4 million and 2 FTEs to
support space management of all the Library's buildings--the Madison
Building alone is one of the largest in the Washington, DC area, with
over 2 million square feet of space. With more shifts outside Capitol
Hill to Fort Meade and Culpeper and resulting shifts on Capitol Hill as
space utilization is redefined, the Library must have the ability to
remap and maximize critical space needed for staff, collections and
business operations and in a timely manner to ensure continuity of
operations. The requested funding supports two additional in-house
staff and the use of contracted staff support to supplement in-house
resources with a full range of professional services, including project
management, interior design, safety, engineering, construction
administration and custodial support. Without the requested funding,
valuable space will go unused or be used inefficiently, impacting the
acquisition and preservation of the Library's collections, safety of
its employees, and the operation of its programs.
For those working on Capitol Hill, the value of emergency
preparedness cannot be overstated. The Library is requesting $746,000
to implement its Continuity of Operations and Shelter-in-Place plans,
and to purchase medical supplies in the event of a large scale
emergency that may affect Library personnel and visitors. We continue
to work with our Capitol Hill counterparts to coordinate emergency
planning efforts.

SUSTAINING STAFF CAPACITY

Closely related to the mandatory and price level increases, the
Library needs two critical payroll adjustments to maintain payroll
purchasing power to sustain staff capacity. CRS is requesting a one-
time permanent base adjustment of $2.9 million to align its funding
with the current staffing mix, level, and benefits costs to achieve a
total capacity of 729 FTEs. This request will enable CRS to continue to
fulfill effectively its mission by rebuilding and sustaining a level of
research capacity that meets the changing needs of the Congress--needs
which are increasingly more demanding and highly complex. CRS has
proven to be a solid, long-term investment for the Congress with a high
return on the investment through its shared pool of highly skilled
experts who serve ``around-the-clock'' as the research arm of the
Congress by assisting every Member and Committee of Congress in every
phase of the legislative process.
Because of the fiscal year 2005 rescission, the Library reduced pay
in all offices by a total of $3 million. The Library is requesting
restoration of the $3 million in fiscal year 2006 to maintain its
future payroll purchasing power needed to sustain staff capacity. Over
time, the Library will be forced to reduce staff in all offices, in
spite of growing workloads and new challenges and responsibilities if
the payroll budget is not restored.

OTHER PROJECTS

The Library is requesting $8 million and 52 FTEs for five other
initiatives. Included in this amount is $493,000 and 7 FTEs to support
the new Chinese acquisition strategy in which Chinese scholars identify
unique materials to add to the Library's collections. The total also
includes $445,000 to begin reclassifying one-third of the Law Library's
legal collections from the obsolete ``Law'' shelving arrangements to
the Library of Congress Class K international standard, to ensure
retrievability of invaluable and unique legal materials.
Of the $8 million total, $1.6 million in one-time funding is
requested to procure and implement a comprehensive, new, web-based
classification and staffing system that will track all human resources
functions. Replacement of the current system is needed to add new
functionalities and to allow the integration with the Library's
emerging Human Resources Information System. Also included in the total
is $1.5 million in no-year funding to continue the renovation and
refurbishment work in the Thomas Jefferson and John Adams buildings.
Maximizing available space on Capitol Hill is a priority for the
Library and the restoration projects will provide much needed space for
staff and programs. Finally, the total includes $4 million and 45 FTEs
to continue addressing the police staffing shortfall of approximately
77 FTEs.

PROPOSED CHANGES TO LEGISLATIVE LANGUAGE

The Library has proposed language under the National Digital
Information Infrastructure and Preservation Program (NDIIPP) Section,
to set aside $25 million of the $75 million provided under the fiscal
year 2001 appropriations act, and exempt the set-aside from the dollar-
to-dollar match requirement. The set-aside is to provide competitive
grant funding for state governmental entities, who meet NDIIPP
preservation partnership network building and digital content
preservation grant guidelines, to preserve significant, at-risk, and
born digital state and local government information.
The Library has also proposed new appropriation language to address
the new Copyright Royalty Judges program, authorized by the Copyright
Royalty and Distribution Reform Act of 2004.
The fiscal year 2005 administrative provision that limits the
Library's assessment for embassy construction (to an amount equal to or
less than the unreimbursed value of the services provided to the
Library on State Department diplomatic facilities) is also maintained
in fiscal year 2006.

CONCLUSION

The Library must continue to sustain and perform its traditional
core mission for the Congress, the Nation, and the world of acquiring,
preserving and making accessible its knowledge. At the same time, we
must develop new ways to perform this historic mission in light of the
plethora of digital information that must be harvested and cataloged.
The fiscal year 2006 budget request will enable the Library to complete
crucial projects of modernization, while laying the foundation for our
future.
I thank the Committee for its continued support of the Library's
programs, projects, and people. Together, we can accomplish much today
and more tomorrow.
______

Preapred Statement of James H. Billington

OPEN WORLD LEADERSHIP CENTER

Chairman Allard, Senator Durbin, and Members of the Subcommittee:
The United States Congress initiated the Open World Russian Leadership
Program as a pilot exchange program at the Library of Congress in 1999
(Public Law 106-31). Congress in December 2000 established an
independent Legislative Branch entity, the Open World Leadership
Center, to conduct the Open World Program. The Center is governed by a
Board of Trustees.
The Open World Program was crafted in 1999 to bring emerging
federal and local Russian political and civic leaders to the United
States to meet their American counterparts and gain firsthand knowledge
of American civil society. Program participants experience American
political and community life and see democracy in action, from the
workings of the U.S. Congress to debates in local city councils.
A Government Accountability Office (GAO) report \1\ on the Open
World Program concluded that ``Open World has exposed a large, broad,
and diverse group of Russians to U.S. economic and political systems''
and stated that many of the alumni interviewed for the report said they
have ``taken concrete actions to adapt what they learned from their
U.S. visits to the Russian environment.'' GAO analysis indicates that
Open World has achieved a remarkably high degree of proportional
geographic representation, and that U.S. ambassadors and embassy
officials consider Open World ``a valuable tool to complement U.S.
mission activities and outreach efforts'' in Russia in part because of
its unique place in the Legislative Branch.
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\1\ General Accounting Office, International Exchange Programs,
Open World Achieves Broad Participation; Enhanced Planning and
Accountability Could Strengthen Program, GAO-04-436, Washington, D.C.,
March 2004.
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Since July 1999, Open World has brought 8,900 current and future
decision makers from all 89 regions of the Russian Federation to more
than 1,300 communities in all 50 states. In 2003, as testament to the
success of the Open World model, Congress expanded Open World to
include cultural leaders in Russia and political leaders in the 11
remaining Freedom Support Act countries and the Baltic republics
(Public Law 108-7). The Open World Leadership Center Board of Trustees
in 2003 approved pilot programs in Ukraine, Uzbekistan, and Lithuania
and also approved a new cultural leaders program for Russia. From
countries other than Russia, 370 young leaders have experienced the
practice of American democracy and community life through Open World in
the past two years. The Board has expressed concern that program
expansion not jeopardize the strength of the Center's original and
continuing commitment to the Russian Federation.
In December 2004, Public Law 108-447 expanded Open World program
eligibility to any other country that is designated by the Board of
Trustees, provided that the Board notify the House and Senate
Appropriations Committees of such a designation at least 90 days before
it is to take effect. Over the life of the program, Congress has
signaled its intention for Open World to function flexibly and
strategically for U.S. interests around the globe. With key Members of
Congress on its board, Open World has supported parliamentary
relationships led by the Speaker of the House and Senate Majority
Leader and remains a flexible and important tool for public diplomacy
within the Legislative Branch.

BOARD OF TRUSTEES

As Chairman of the Board of Trustees, I am honored to serve on the
Board with several of your distinguished colleagues, as well as
regional experts and private citizens. The Congressionally appointed
members are Senate Majority Leader Bill Frist (TN), Senator Carl Levin
(MI), and Representative Robert E. (Bud) Cramer (AL). Senator Ted
Stevens (AK) is honorary chairman. Former Ambassador to Russia James F.
Collins and Walter J. Scott, Jr., Chairman of Level 3 Communications,
are the current citizen members. We are awaiting an appointment by the
Speaker of the House to replace the seat held by retired House member
Amo Houghton.
Since its inception in 1999 in the Legislative Branch, the Open
World Program has gained from the active interest and direction of this
Committee. In accordance with a recommendation made by our Board of
Trustees last year, Congress has added the Chair of this Committee and
the Chair of the Senate Subcommittee on Legislative Branch to the
Board. Your membership on the Board will greatly enhance our ability to
provide effective direction for the future of the Open World Leadership
Center.

FISCAL YEAR 2006 BUDGET REQUEST

The Center's fiscal year 2006 request of $14 million (Appendix A)
will allow Open World to continue to operate the core Russian programs,
including work with alumni and cultural leaders, and to continue
funding for expansion programs in selected countries. The requested 4.5
percent increase above fiscal year 2005 funding represents unavoidable
price increases and the weakened purchasing power of the dollar abroad.

PROGRAM OBJECTIVES

Open World was created by the Congress both to make a contribution
to democratic developments in Russia and to combat negative and
manipulated images of America fostered by long years of isolation from
the West under Soviet power. Through Open World, emerging leaders in
previously authoritarian countries experience short but intensive
immersion in the reality of civil society and the rule of law in the
United States. George F. Kennan summarized what an effective public-
diplomacy effort like Open World is about when he suggested that our
system is most persuasive not when we talk about it, but ``when we show
other people what can be done in a democracy, and nothing is more
useful than that.''
Open World was created to allow participation by non-English
speakers, and, as a result, the program has successfully engaged a very
broad sector of young political leadership in each participating
country. Programs are matched carefully to participants' professional
interests and responsibilities, and almost all include the following
elements:
--Meeting U.S. government, business, and community leaders at the
federal, regional and local levels;
--Understanding the separation of powers, checks and balances,
freedom of the press, and the transparency and accountability
of democratic government;
--Experiencing a free market economy;
--Learning how U.S. citizens organize voluntary and nongovernmental
initiatives to address social and civic needs;
--Building a continuing relationship with the U.S. hosts;
--Sharing approaches to common challenges;
--Participating in American family and community activities.

STRATEGIC GOALS

As the Open World Program has matured from its six-month Russian
pilot in 1999 to its current scale in four countries, the Board and
staff have been guided by strategic goals that shape the annual budget
submission and our year-round operations.
Goal I: Improving U.S.-Open World program-country relations and
mutual understanding.
The Open World Program is located in the Legislative Branch, housed
in and administratively supported by the Library of Congress, but its
work abroad is shaped and implemented in cooperation with the embassies
in each Open World country. All elements of the program--its focus,
candidate nomination and selection, parliamentary delegations--are
closely coordinated with the U.S. Embassy and such organizations as the
Helsinki Commission.
Goal II: Provide the highest caliber program within the United
States so that Open World participants return with a good understanding
of America's democracy, market economy, and civil society.
Open World has improved the quality of its programs by continuous
monitoring of programs, site visits, post-visit evaluations, and annual
participant surveys. There is an annual review and evaluations of all
program elements. The program has increasingly focused on a few key
themes central to building democracy and the rule of law.
Goal III: To extend the catalytic effect of a 10-day U.S. stay by
fostering continued, post-visit communication among Open World
participants, with alumni of other USG-sponsored exchange programs, and
with their American hosts and counterparts.
Open World's multilingual website maintains communication among
participants, American hosts, and other interested parties. The visit
to the United States is just the beginning of a Russian delegate's
association with the Open World Program. Open World encourages
continued contact with U.S. hosts and among participants themselves. In
2004, Russian alumni participated in more than 250 workshops,
interregional conferences, meetings, and professional seminars. An
alumni bulletin and web forums are available to all 8,900 Russian
participants.
Many of Russia's larger cities now also boast Open World alumni
associations and clubs organized by the alumni themselves--supporting
special projects, such as support for orphanages or environmental
efforts and career development seminars. Alumni-led activities in 2004
included a youth health fair in Tver and a seminar for Novgorod
educators on how to encourage volunteerism among high school students.

STRATEGIC DECISIONS

Russian Federation
The Chairman of the Senate Foreign Relations Committee, Senator
Richard G. Lugar, at a recent hearing on ``Democracy in Retreat in
Russia'' said, ``The states of the former Soviet Union present a
special challenge to the advancement of democracy . . . The biggest
concern in the region for democracy advocates is . . . Russia. Despite
elections and the experience of post-Soviet personal freedoms . . . the
fate of democracy in Russia is perhaps more ambiguous now than at any
time since the collapse of the Communist system.'' Noting the decline
in State Department funding for democracy programs, Senator Lugar
commented: ``With so much at stake in Russia, this is not the time to
diminish our funding in this area.''
Despite the authoritarian direction of much recent Russian policy,
Russia remains a key ally for the United States in antiterrorism and
nonproliferation efforts. Open World's 8,900 alumni in all 89 regions
are a strategic asset in the continuing struggle to secure a
constitutional democracy in Russia. Assessments of Russia's current
political state by the International Republican Institute (IRI) point
to the dichotomy of suppression of democratic voices at the national
level, but ``re-invigoration at the regional level.'' [Testimony of
Stephen B. Nix, Director, Eurasia Programs, IRI; appearance before the
Senate Foreign Relations Committee; February 17, 2005.] Open World's
base of participation in Russia spans the entire country and is not
concentrated in Moscow at the federal level.

Expansion Beyond Russia
Meanwhile, Open World offers a unique and effective tool for
Congress to respond to new realities and opportunities around the
globe. The Open World Board's decision in 2003 to invest in a Ukraine
pilot has yielded a broad-based program in operation before the Orange
Revolution that brought the first delegations to the United States in
the wake of the 2004 presidential elections. A pilot program in
Lithuania focused on building regional government expertise and pointed
the way toward important regional activity that Open World might
undertake in Kaliningrad and Belarus. Similarly, Open World's prior
experience in the largely Islamic regions of Russia helped shape a
successful investment in Uzbekistan. Despite continuing and legitimate
concerns about the repressive central government, Uzbekistan remains
strategically important to the United States, and Open World delegates
have returned to strengthen independent media and economic development
and lead efforts to combat trafficking in the region.
With a Congressional authorization to operate in any country in the
world, Open World represents an asset that deserves continued
investment to allow its continued development as an important tool of
American public diplomacy, particularly in regions of the world that
are not the principal focus of State Department efforts.

WHAT THE INVESTMENT HAS YIELDED

Russia
Russia Civic and Cultural Program
The Open World Russia Program completed its fifth year in 2004.
Open World's core exchange program--with the Russian Federation--
brought 1,567 young leaders in calendar year 2004, with wide regional
representation (87 of the 89 Russian regions), diverse hosting
experiences throughout the United States (44 states), a high percentage
of women delegates (58 percent), and multiethnic representation. The
selected themes for 2004--economic and social development, environment,
health, rule of law, women as leaders, and youth issues--focus on key
areas essential to democracy-building. The focus on rule of law,
especially in the context of current evaluations of Russia's commitment
to an independent judiciary and a constitutional democracy, deserves
special mention.
In 2004, Open World emphasized programs on the elections process
and media coverage of the presidential and local elections process.
Participants in all themes who traveled during the months leading up to
the election came away with unique election-year experiences of
watching the debates with their host families, seeing signs for
presidential and local government candidates posted in front lawns, and
observing volunteers of all ages as they supported their candidates at
campaign headquarters.
Eight delegations received an insider's view into Election Day in
the United States. Three Russian delegations consisting of government
officials and aides visited Baltimore, Maryland; Moorhead, Minnesota;
and Saratoga Springs, New York. The delegations observed the activities
of polling stations in their host communities, visited voter advocacy
organizations, and witnessed firsthand the reactions of individual
citizens as they watched television coverage of the voting results.
Five delegations of print and television media professionals visited
Atlanta, Georgia; Louisville, Kentucky; Portland, Oregon; Reno, Nevada;
and Rochester, New York. These groups visited local news outlets to
discuss and watch election coverage, interviewed election workers and
voters, and even wrote on-the-spot news articles to be published in
Russia.
Additional examples of Open World's impact in Russia and elsewhere
in our participants' own words are found in Appendix B.

Open World in Colorado
As I speak to you today, four women leaders from Russia--a
businesswoman, a president of a regional NGO, an education
administrator, and a legislative staff assistant--are visiting
Longmont, Colorado to examine women's leadership roles. Highlights of
the delegation's agenda include a meeting with an NGO director; a
discussion with senior women bankers on banking relationships with
women-owned businesses; talks with Colorado senators and
representatives about elections, government and the role of women in
politics; and a panel discussion with a district attorney and chief
district judge. Their visit is being conducted by the Longmont Rotary
Club, a five-time Open World host organization that has helped make it
possible for Colorado to welcome 200 other Open World participants.

Rule of Law Program
Open World's specialized rule of law program is the largest U.S.-
Russia judicial exchange. Working in close cooperation with federal
judges associated with the International Judicial Relations Committee
of the Administrative Office of the U.S. Courts, and with a network of
state judges, Open World sponsors intensive, 10-day U.S. professional
visits for Russian judges, judicial branch officials, prosecutors,
defense attorneys, legal educators, and court staff. Since its
inception in 2001, the program has enabled prominent jurists from all
over Russia to observe and participate in the U.S. judicial system and
to form lasting working relationships with their American judicial
hosts and counterparts.
Just last month, Justice Anthony M. Kennedy hosted a high-level
Open World delegation at the U.S. Supreme Court for two days of
intensive working sessions on U.S.-Russian judicial cooperation and the
status of judicial reform in Russia. Our distinguished delegates were
Russian Supreme Court Chief Justice Vyacheslav M. Lebedev, Justice
Yuriy I. Sidorenko, who chairs Russia's Council of Judges, and a top
regional judge. Chief Justice William H. Rehnquist and Justices John
Paul Stevens, Sandra Day O'Connor, Antonin Scalia, Ruth Bader Ginsburg,
David Hackett Souter, and Stephen G. Breyer all participated in the
Russians' Supreme Court visit, as did U.S. District Judge Michael M.
Mihm of Peoria, Illinois, and other prominent U.S. judges. Not only did
the Russians discuss jury trials, judicial independence, and the rule
of law with the highest judges in the land, they also saw the U.S.
judicial system in action by observing oral argument at the Supreme
Court and attending proceedings at the federal courthouse in
Alexandria, Virginia.
As the Lebedev delegation visit illustrates, the Open World
specialized rule of law program contributes to Russia's progress toward
judicial reform by demonstrating the concepts and practices that
underpin the United States' strong, independent judiciary. By observing
and discussing the workings of the U.S. legal system with their
American counterparts, participants have developed a better
understanding of some of the new procedures that they are being
required to adopt by Russia's judicial reform legislation, and they
have demonstrated great enthusiasm for implementing many U.S. practices
that are relevant to their own situations. Another important program
outcome is the establishment and strengthening of a number of sister
relationships between the courts of our U.S. host judges and those of
their Open World participants. And American host judges have made
return trips to Russia to participate in follow-up alumni work on the
all-important issue of ethics.
In 2004, 258 participants (43 delegations) visited 30 communities
in 25 states and the District of Columbia on the specialized rule of
law program. A total of 31 federal and state judges hosted for Open
World in 2004. An illustrative example of Open World's work in this
important area:

Cultural Leaders Program
The late Academician Dmitri Sergeevich Likhachev was co-chairman of
the original Russia-focused Open World Program in 1999. Likhachev was a
lifelong advocate of the need for Russia to learn about and have
contact with Western culture. The expansion of Open World to Russian
cultural leaders is based on this principle.
In 2004, 44 young folklorists, writers, and jazz musicians
participated in Open World exchanges designed to foster an
understanding of American culture and how it is sustained. The goal is
to forge better understanding between the United States and Russia by
enabling Russian cultural leaders to experience American cultural and
community life, and to share their talents with American artists and
audiences. Performances and readings are an essential component of the
visit.
The jazz musicians, creative writers, managers of folk arts
institutions, and arts administrators who took part in the 2004 program
were hosted by prominent arts organizations and educational
institutions in five states. Each host community selected by Open World
boasts rich cultural institutions and is the center of a flourishing
arts scene.
The cultural leaders program has continued in 2005. Currently, the
University of Mississippi is hosting four young Russian authors who
specialize in poetry, fiction writing, literary criticism, and
translation. The delegation participated in the twelfth annual Oxford
Conference for the Book, and is taking part in translation workshops
with students and faculty in the Ole Miss creative writing program and
panel discussions on Russian and American culture. The National
Endowment for the Arts provided financial support for this hosting.

Pilot Programs
Ukraine
Ukraine was selected for an Open World pilot program in 2003
because of its strategic position in Eurasia, its large and educated
population, its mounting difficulties in democracy-building, and its
important potential contribution to regional stability.
Elections formed a central focus for the Open World Program's 2004
Ukrainian exchange, which took place in August, when both the American
and Ukrainian presidential campaigns were in full swing. The 50
Ukrainian participants came from 19 of the country's 27 regions and
represented a wide range of political views. Two delegations of
Ukrainian party activists, NGO election monitors, and campaign experts
participated in the ``electoral processes'' theme, and three
delegations of print and broadcast journalists took part in the
``independent media'' theme, which included a concentration on
political and election coverage. The five Ukrainian delegations that
visited under the NGO development theme also had opportunities to learn
about campaign practices and citizen engagement in politics in the
United States.
In March, Open World held the first major post-Orange Revolution
exchange in the United States, hosting 45 Ukrainian judges,
journalists, elections experts, NGO leaders, and researchers. Their
U.S. community visits, which had been rescheduled from December 2004
(when the presidential election was still unresolved by the courts),
focused on the rule of law, elections, and the role of an independent
media.
This exchange was very much a two-way learning process, as everyone
the Ukrainians met with was interested to hear about the Orange
Revolution and the current political climate. The Ukrainian delegates
were here to strengthen ties to the United States and their own
professional understanding of their role in a democracy. On arriving in
Washington, delegates had frank and future-oriented discussions with
Representative Marcy Kaptur of the Congressional Ukrainian Caucus,
Supreme Court Justice David Souter, and two former U.S. ambassadors to
Ukraine.

Ukraine Program in Ohio
The March exchange marked the debut of Open World's rule of law
theme for the Ukraine program, and our highest-ranking judicial
delegation was hosted in Columbus, Ohio, by state Supreme Court Chief
Justice Thomas J. Moyer and Judge Robert Cupp of the Ohio Third
District Court of Appeals. The visit began with a Ukrainian bread-and-
salt welcoming ceremony at the Ohio Judicial Center and concluded with
a live television broadcast of a symposium on Ukrainian democracy with
the Ukrainians and Chief Justice Moyer. In between, the delegation--
which included a Ukrainian Supreme Court justice--observed court
proceedings, including a jury trial; took part in roundtables with Ohio
judges; and met with Governor Bob Taft. Rule of law delegations
simultaneously visiting Georgia, Minnesota, New York, and Pennsylvania
had similar experiences.

Lithuania
Lithuania was selected for an Open World pilot because of its
prospects for building a successful market economy and democracy and
because of Congressional interest in including a Baltic country.
Lithuania's independent parliament (Seimas) and historical ties with
the United States made a legislative-based program very welcome.
Open World launched its Lithuania pilot program in 2004, bringing
mayors, journalists, business and NGO leaders, environmental experts,
and youth activists from nine of the country's 10 administrative
districts to the United States in February and September. Lithuanian
Ambassador Vygaudas Usackas held receptions for both travel groups at
his embassy during their Washington, D.C., orientations.
Open World's newest program received high marks from the 100
Lithuanians who participated. Higher education, lobbying, business
associations, health care, Social Security, and citizen participation
in local government were rated among the most useful topics studied. In
a representative comment, a delegate on a Fort Collins, Colorado,
program on youth issues stated, ``My best moments were when I realized
that people in the United States work very hard in order to accomplish
their goals, especially helping the youth. This motivates me to work
harder in Lithuania.''
Chicago, Illinois, hosted several of our inaugural Lithuanian
delegations in 2004, with significant participation by the large
Lithuanian-American community there. Among the highlights of the
Chicago visits were a Q-and-A session for Lithuanian journalists at the
Chicago Tribune, a fundraising workshop for NGO leaders at the Donors
Forum, and, for a Lithuanian business-development delegation, a nuts-
and-bolts overview of how U.S. business incubators work at the
Industrial Council of Nearwest Chicago.

Uzbekistan
Uzbekistan was chosen for an Open World pilot on the basis of its
large population, its cultural and intellectual prominence among the
new independent states of the former Soviet Union that are principally
Islamic, and its strategic position in Central Asia. The Open World
Board believed that furthering democracy and a market economy in
Uzbekistan would promote stability in the entire region.
Open World hosted its second Uzbek exchange in October 2004. The
50-person group included senior representatives from Uzbekistan's
ministries of economics, finance, and public health; Central Bank
officials; judges; prominent journalists; agricultural experts; women
entrepreneurs; and health advocates. Delegates came from 10 of
Uzbekistan's 14 political subdivisions.
Open World has received numerous reports on how participants have
used the knowledge they gained while in the United States. A business
consultant running for the Nukus City Council campaigned on themes
inspired by her U.S. visit: creating favorable conditions for private
business through legislation and defending the rights of female
entrepreneurs. The head of the Agro-Industrial Stock Exchange in
Tashkent reports that, as a result of his visit to the Kansas City
Board of Trade, his exchange has now introduced electronic trading.
A doctor who practices in the populous Fergana Valley conducted a
workshop on premature infant care for 45 of her colleagues to share the
neonatal techniques she had seen at Tampa General Hospital. And a
Tashkent newspaper reporter is publishing two long articles, ``Two-
Story America'' and ``The White Stele [Monument] of Washington,'' that
describe in detail how his impressions of America and Americans changed
for the better as a result of his Open World visit to Chattanooga,
Tennessee, and Washington, D.C. He writes, ``The one thing that really
impressed me in the United States is the people. To tell the truth,
having watched Hollywood films, I expected to see an undisciplined
public where people did whatever they felt like. But already in
Washington, I was sincerely surprised by the proper and polite
Americans that I met. On the street, people were smiling . . . and no
one looked at us with unfriendliness. At the end of my stay in the U.S.
capital, I felt as though I were at home in Tashkent.''

Future Directions
In 2004 the Senate requested that Open World study the feasibility
of expansion to Pakistan and Afghanistan. The Open World model, with
appropriate U.S. in-country support, has demonstrated its suitability
in a variety of environments. The key question for the Open World
Board, which includes the Chairman of this Subcommittee, as well as the
Chairman of the House Appropriations Committee, is to decide the
allocation of available resources among the countries in which Open
World is authorized. Recent concerns have been raised by Members of
Congress about Belarus, Moldova, and Georgia. Congressional interest in
Russia, Ukraine, Uzbekistan and Lithuania have remained strong. Yet
Open World's annual budget has been modest since its inception. In the
current budget environment, significant expansion is unlikely;
therefore, decisions will be influenced by available resources.
A regional approach, centered in Russia, the western NIS, and
Central Asia, would allow Open World to respond flexibly to U.S.
strategic interests but avoid the upfront investment devoted to setting
up a new country-focused program. Open World might offer a cost-
effective means of delivering current exchange programs in a number of
countries. If Congress so approves, the Board could request that a new
regionally aimed model be developed for fiscal year 2007. The fiscal
year 2006 budget request is based on the current country-specific
model. The staff evaluation of the feasibility of pilot programs in
Afghanistan and Pakistan is included as Appendix C.

FISCAL YEAR 2006 BUDGET REQUEST

The Center's budget request for fiscal year 2006 reflects an
increase of $.612 million over fiscal year 2005, in order to continue
the Center's proven mission of hosting young political and civic
leaders from Russia and other countries of the region. The Board of
Trustees believes that maintaining a robust Open World presence in
Russia is necessary and important for future U.S.-Russia relations.
Program capacity in fiscal year 2006 at the requested level remains far
below the limitation of 3,000 set in the Center's authorizing
legislation.
The budget request maintains hosting and other programmatic
activities at a level of approximately 1,400 participants total
(continuing a decrease in hosting levels begun in fiscal year 2003),
based on airfare and other travel increases above the overall inflation
rate, and projected higher foreign exchange rates. The Department of
State Capital Security Cost Sharing charge for the Center's two Foreign
National Staff is also included. Actual participant allocations for
individual countries will be based on Board of Trustees recommendations
and on consultations with the Committee.
Major categories of requested funding are:
--Personnel Compensation and Benefits ($.883 mil/11 FTEs)
--Contracts ($8.435 mil)
--Management of delegate nomination and vetting process
--Visa and other document processing
--Travel arrangements, including international and domestic air
travel
--Management and coordination with grantees on delegate host
placement
--Database maintenance and development
--Information services
--Grants ($4.354 mil) (U.S. host organizations)
--Professional program development
--Food and (limited) lodging
--Cultural activities
--Local transportation
--Interpretation
The requested funding support is also needed for anticipated fiscal
year 2006 pay increases. Overall administrative costs remain at a low 6
percent of the Center's annual expenditures.

OTHER PROGRAM CONTRIBUTIONS

Major financial support to the Open World Program is contributed by
American citizens who host program participants in their homes and
communities. Private American citizens freely provide cultural
activities, community-wide activities, and housing for one week, which
often reduces the program's per diem expenses--by a substantial amount
when estimated over the life of the program. During 2004, Open World
also received financial support from The Russell Family Foundation for
support of environmentally focused programming and from TNK-BP for
general support of Open World programming and alumni activity in Russia
and Ukraine.

CONCLUSION

The fiscal year 2006 budget request will enable the Open World
Leadership Center to continue to make major contributions to an
understanding of democracy, civil society, and free enterprise in a
region of vital importance to the Congress and the Nation.
I thank the Subcommittee for its continued support of the Open
World Program.

APPENDIX A

OPEN WORLD LEADERSHIP CENTER BUDGET, FISCAL YEAR 2006
------------------------------------------------------------------------
Fiscal year
Description 2006 estimated
obligations
------------------------------------------------------------------------
11.1 Personnel Compensation............................. $702,000
12.1 Personnel Benefits................................. 181,000
21.0 Travel............................................. 80,000
22.0 Transportation..................................... 3,000
23.0 Rent, Comm., Utilities............................. 204,000
24.0 Printing........................................... 21,000
25.1 Other Services/Contracts........................... 8,435,000
26.0 Supplies........................................... 4,000
31.0 Equipment.......................................... 16,000
41.0 Grants............................................. 4,354,000
---------------
Total, fiscal year 2006 budget request............ 14,000,000
------------------------------------------------------------------------

APPENDIX B
OPEN WORLD DELEGATE QUOTATIONS

Russia
``During my Open World visit to America I was struck by the well-
functioning educational system, social programs, and the people
themselves, full of life and purpose, wanting to help others. Our mayor
Aleksandr Yermoshin and vice-mayor for legislative relations Yuriy
Sukhoruchenkov have also had the opportunity to travel to the U.S. on
Open World. I consider that all that we saw and experienced has
definitely influenced our work in municipal development. Key to our
social policy are current programs for children, improving their health
(infant mortality has decreased between 2002 and 2004), finding
placement for orphans, providing therapy to children in dysfunctional
families and those with disabilities, creating employment and
activities for youth, and working with gifted children.''

Yuriy Kostev
First Vice-Mayor of Aleksin, Tula
Region
San Diego, CA

``While visiting the United States on the Open World Program I
became aware of the genuinely constructive interaction that can exist
between government bodies and the community. Upon my return home, I
decided to take action. I told the people of Voronezh how they can
protect their right to adequate accommodations, and prevent unsuitable
living conditions resulting from the inaction of local government. The
`Citizen Inspection' project was born, providing information (letters)
from local authorities on budgetary information and deadlines for the
refurbishment of houses and buildings in the community. I received many
letters and telephone calls informing me about what really goes on in
housing and communal services. This information led to the creation of
the Citizen Inspection television program. A second project called `My
Rights' was also successful. This project provides information about
property registration rights and opportunities. Our brochures describe
the registration procedure, rates, and free services that the community
can and must demand from the authorities.''

Aleksandr Vladimirovich Sysoyev
Deputy, Voronezh City Duma
Milwaukee, WI

``A close working relationship exists between school and family in
both Russia and the U.S. Parents and older classmates are actively
recruited to work with children. Promoting a healthy lifestyle should
begin with pre-schoolers.''

Svetlana Safonova
Psychologist/Nakhodka City
Department of General
Professional Education
Information and Curriculum
Development Center
Denver, CO

``I became enamored with American crisis centers in Chicago where
all resources--counselors, medical help, lawyers, etc.--are available
in one place, unlike in Russia (where a child has to relive the horror
of domestic abuse several times at several different agencies).''

Sergey Vitalyevich Belashev
Head/Children's Department Rostov-
on-Don Psycho-Neurological
Center
Chicago, IL

``It is clear that Americans rigorously defend their rights that
are guaranteed by the Constitution. This also raised a sense of
patriotism in us for our country and our Constitution. Order can be
established through a set of laws in which all people are truly equal.
This is one of the fundamental principles of civil society that we need
to strive for. That is good enough reason to study the American
example.''

Alyuset Mezhmedinovich Azizkhanov
Freelance radio journalist and
member of the Russian
Journalists Association
Durham, NC

``These organizations [U.S. NGOs] have just a few paid workers. The
vast majority spends it own time and effort and work without pay. We
asked: `For what?' And they answered: `I need this, my children need
this, my country needs this.' For us, volunteer efforts are surprising,
for them it is the norm. What also surprised us is the belief of
ordinary Americans that much depends on them in their personal lives as
in the life of the city, state, and nation.''

Mariya Abramova
Public and International Relations
Specialist and Assistant to the
Deputy Governor of the Tomsk
Region Administration
Baltimore, MD

``America showed me our different attitudes in our relations
between man and government and man and society. I learned from my host
that she believes that her participation in the life of her country,
community, and government matters and that the future of America
depends on the actions of every American. This lesson allowed me to
take a fresh look at my work for the past ten years. I first met the
parents of Down's Syndrome children in the early 1990s. The government
considered these children unteachable. Parents united to deal with the
situation themselves. This resulted in a decorative arts workshop where
some of the adults and teens with Downs Syndrome now work, in a group
that prepares athletes for Special Olympics, and another group that
works with severely mentally retarded children. So we discovered that
those with Down Syndrome are teachable and employable and that they
should be taught and employed. I wanted to work with them, first as a
volunteer and later as a professional art therapist. I now teach
specialists how to teach the learning disabled. Never before was there
such a demand for all my talents. Thank you, Fran Satina (OW host), I
now know that I can change my country for the better.''

Marina Rodkevich
Moscow City Psychologist and Art
Director, ``Same as You''
organization
Akron, OH

``I was very impressed with the plans of Vicksburg, Tupelo, and
Oxford, Mississippi. Although the population of Nizhniy Novgorod is
more than one million people, much of the planning of these small towns
could be applicable to Nizhniy Novgorod's own development. Strategic
community planning at the city level is a new trend in economic
development in the Russian Federation. As a new trend, it seems likely
that we can adapt American experiences with such planning and
effectively apply these principles in the development of Russian
cities.''

Galina Yuryevna Topnikova
Head/Social-Economic Development
Projection Section, Nizhniy
Novgorod City Administration,
Economic Development and
Planning Department
Oxford, MS
Ukraine
``I think it [his Open World visit] will expand all of my horizons,
as well as everyone else's. I also have ambitions at some time in the
future to help draft legislation for my country. I think these
experiences will help that as well.''

Judge Valentyn Paliy
Judge/Kyiv Commercial Court
Corvallis, OR

``We saw that Americans live in this democracy every day, but every
day they create it. We realize more and more how difficult is the path
ahead of us.''

Maryna Bohdanova
Deputy chief editor and columnist/
Ria weekly newspaper
Pittsburgh, PA

``The important thing about this program is that it will bring
about change--change in the participants personally--and that it will
serve as a stimulus for greater effort in Ukraine.''

Olena Morhun
Crises Prevention Program
Coordinator/Woman for Woman
Center
Washington, DC

``I was impressed with the members of the group with which I worked
over the past ten days because I realized their immense potential in
Ukraine, thanks to the high level of their competence and experience.
It is very important that we met in this group from Ukraine, and I
expect that we will continue our work there together.''

Valentyna Kyrylova
Director/Osnovy Publishing House
Washington, DC

``Especially useful for me was to see democracy in action,
exercising its influence on the government, and the role of society in
the decision-making process of government.''

Lyudmyla Merlyan
Head/Gender Committee of the Civil
Parliament of Ukrainian Women
Washington, DC
Uzbekistan
``The one thing that really impressed me in the United States is
the people. To tell the truth, having watched Hollywood films, I
expected to see an undisciplined public where people did whatever they
felt like. But already in Washington, I was sincerely surprised by the
proper and polite Americans whom I met. On the street, people were
smiling . . . and no one looked at us with unfriendliness. At the end
of my stay in the U.S. capital, I felt as though I were at home in
Tashkent.''

Viktor Krymzalov
Special Correspondent/Private
Property newspaper
Chattanooga, TN

``It wasn't just a trip to America; it was a trip to the future,
the future that I thought would never see in my lifetime or in my
country. Owing to this opportunity, I now know what it is, and I will
try to bring something from the future that I saw back home to
Uzbekistan.''

Zhumanazar Melikulov
Deputy Editor-in-Chief/Fidokor
newspaper
Chattanooga, TN

``I have unforgettable impressions of the Open World Program. My
understanding of America as a country and Americans has completely
changed. Before my trip, I had a very vague insight of what it is. My
comprehension now: it is a great country, which is as it is owing to
its free, honest and direct people. I was impressed by a high
motivation and energy of American entrepreneurs and especially by the
fact the legislation and the system as a whole support them. The
significant result of my trip was elaboration of a new system for
exchange trade--Internet--trading. I'm proud to say that we've
implemented it successfully and today there is no analogy of it in CIS
countries. I'd like to take this opportunity to express my gratitude to
the organizers of the Open World Program.''

Temur Valitov
Chair/Agro-Industrial Exchange
Kansas City, KS
Lithuania
``My best moments were when I realized that people in the United
States work very hard in order to accomplish their goals, especially
helping the youth. This motivates me to work harder in Lithuania.''

Youth Issues program participant
Fort Collins, CO

``Local grass-roots initiatives really left a big impression on me.
I have both learned how to better communicate with city and village
communities and realized the need to consult with them more regularly
on policy issues.''

Virgilijus Skulskis
Head, Information and Analysis
Department/Institute of Agrarian
Economics
Middlebury, VT

``In Vermont, much of your success depends on the trust you've
built through working relationships. This is something that we need to
improve among ourselves.''

Linas Vainus
Project Manager/Atgaja Green
Movement
Middlebury, VT

``While we did not even know each other as recently as last week,
it now feels like we have known each other for a long time--like
classmates, and I know that we will be friends for a long time to
come.''

Algirdas Ronkus
District Administrator/Klaipeda
District Municipality
Omaha, NB

``I was surprised to find out that many NGOs in the United States
work without any government support . . . Our NGOs should follow this
example rather than expecting support from the government.''

Women's Issues and NGOs program
participant
Portland, OR

``At the Shelburne town meeting we understood that this was a
useful way for a small community to influence local government's
decision-making process . . . We were able to make new contacts and an
idea for a project in Lithuania emerged.''

NGO development program participant
Burlington, VT

APPENDIX C

ASSESSMENT OF PROPOSED OPEN WORLD EXPANSION INTO AFGHANISTAN AND
PAKISTAN

Background.--In December 2004, Public Law 108-447 expanded Open
World program eligibility to any other country that is designated by
the Open World Leadership Center Board of Trustees, provided that the
Board notify the House and Senate Appropriations Committees of such a
designation at least 90 days before it is to take effect. During Senate
floor consideration of the Open World legislation, Open World Board
Chairman James Billington and Open World staff were requested explore
the possibility of expanding the program to Afghanistan and Pakistan,
two countries crucial to U.S. interests. (Congressional Record, Sept.
21, 2004, S9425.)
Summary of Assessment Efforts to Date.--Open World staff met with
Congressional Research Service experts on the region, the Library of
Congress Field Director at the U.S. Embassy in Islamabad and his staff,
and Open World grantees with hosting experience in both target
countries. Open World contractors conducted logistical assessments and
contacted key State Department, embassy and AID personnel.
Overall Comment.--Each country has different, overarching obstacles
to applying the Open World model successfully. Afghanistan's societal
structure and civil society have very little in common with what is
found in the United States. Pakistan's population is so large and
diverse that it is questionable how much impact a program involving
only a few hundred delegates would have (details below).
Afghanistan
Political Situation.--Afghanistan is stabilizing after more than 22
years of warfare, and the successful presidential election appears to
be accelerating political and economic reconstruction. The United
States is committed to a secure and stable Afghanistan. Many observers
are looking forward to the September 2005 parliamentary elections and
the next major step toward stable governance.
Viability of Open World Candidates/Themes.--Afghanistan currently
has very few identifiable civic leaders because there are few
identifiable elements of civil society, but small U.S. exchange
programs have been implemented. (For example, in 2004, Meridian
International, an Open World grantee, hosted 30 Afghans in themes such
as civil society, local government, democracy building, cultural
heritage, and civic education.) These exchanges do not have homestays,
but do include visits to American homes. Women travel in all-female
groups. Delegates do not have English-language capability.
Embassy Support.--It would be very difficult for the U.S. Embassy
to lend logistical support to an Open World program, both for security
and workload reasons, but the embassy would need to handle the actual
selection process and is willing to do so under the scenario given in
the recommendation below.
Visas.--All candidates must be flown to Islamabad for their visa
interview. A minimum of six weeks is required from the time of the
interview until a final decision is made on issuance or nonissuance of
the visa. In 2004 there was a high incidence of nonissuance to Afghan
exchange candidates.
Costs.--The estimated cost is $18,000-$19,000 per person, almost
150 percent above the cost for a Russia civic program delegate.
Recommendation.--State Department officials have expressed support
for an Open World pilot program for new Afghan parliamentarians that
would bring them into direct contact with their American federal and
state legislative counterparts. If Congress directs Open World to
implement a pilot program, Open World staff would recommend hosting one
pilot delegation of 8-10 parliamentarians and/or parliamentary staff
following the September 2005 parliamentary elections.
Pakistan
Political Situation.--Hopes that the October 2002 national
elections would reverse Pakistan's history of unstable governance and
military interference in democratic institutions were eroded by the
actions of the Musharraf government. The United States has continued to
express concern over lack of progress on political rights and civil
liberties, but Pakistan's stability and cooperation in the war against
terrorism are of vital importance to the United States.
Viability of Open World Candidates/Themes.--Exchange programs in
Pakistan are well established and growing. Several Open World grantees
have extensive experience hosting Pakistani participants. Certain
segments of urban Pakistani society are very well educated, know
English, and are enthusiastic about interacting with Americans. We
continue to assess whether this segment of society would benefit from
Open World programs, which usually reach into the far regions of
participating countries. Because of the current security situation in
Pakistan, travel by State Department employees from the embassy and
consulates is restricted. This limits their ability to identify
qualified candidates for exchange programs outside Islamabad.
Visas.--The visa application process takes a minimum of six weeks
and there is a high rate of rejection, especially for males. The
Library of Congress Field Office will report to us in late March on
their discussions with the consular section to identify more
specifically the level of support for Open World available under
current staffing and security conditions.
Costs.--$12,000 per person (nearly twice the cost for most Open
World Russia delegates)
Recommendation.--If Congress directs Open World to implement a
pilot program, Open World staff would recommend hosting one or two
delegations of 8-10 delegates each on Open World's Federalism or Women
as Leaders themes.
______

Prepared Statement of Marybeth Peters

Mr. Chairman and Members of the Committee:Thank you for the
opportunity to present the Copyright Office's fiscal year 2006 budget
request.
For fiscal year 2006, the Copyright Office is seeking the
Committee's approval of one major request for the Office and support
for two of the Architect of the Capitol's (AOC) requests on behalf of
the Copyright Office. First, in the BASIC appropriation we are
requesting a $4.161 million increase in new net appropriation authority
and a $500,000 decrease in offsetting collections authority. Four
million dollars of the requested funds will be used for offsite lease
costs to temporarily relocate the Office while its existing space in
the Madison Building is under construction. I am pleased to report that
we have made great progress on our Reengineering Program and expect
full implementation in the first half of fiscal year 2007. The
remaining $161,000 is a request for restoration of the fiscal year 2005
rescission. Additionally, in recognition of new legislation that
terminated funding, we are requesting a $1.872 million decrease in the
CARP offsetting collections authority.
As part of AOC's budget, we request your support to provide $5.5
million for reconstruction of existing Copyright Office space in the
Madison Building to accommodate the reengineered processes and new
organizational structure. Also, as part of the AOC's budget, we request
$800,000 to do a design study for construction of a Copyright Deposit
Facility at Fort Meade. This facility will provide environmental
conditions for copyright deposits that allow us to meet our legal
requirements to retain, and be able to produce copies of, these works.
I will review these requests in more detail, but first will provide
an overview of the Office's work.

REVIEW OF COPYRIGHT OFFICE WORK AND ACCOMPLISHMENTS

The Copyright Office's mission is to promote creativity by
sustaining an effective national copyright system. We do this by
administering the copyright law; providing policy and legal assistance
to the Congress, the administration, and the judiciary; and by
informing and educating the public about our nation's copyright system.
The demands in these areas are growing and becoming more complex with
the evolution and increased use of digital technology.
I will briefly highlight some of the Office's current and past work
and our plans for fiscal year 2006.
Policy and Legal Work
We have continued to work closely with the Senate Committee on the
Judiciary and its House counterpart. In July I testified on S. 2560,
the Inducing Infringement of Copyrights Act of 2004, which would have
created a new cause of action for intentionally inducing copyright
infringement. After the hearing the bill's sponsors, Senators Hatch,
Leahy, Frist, Daschle, Graham of S.C. and Boxer asked me to meet with
the interested parties to discuss alternatives, evaluate whether these
parties could reach consensus on an approach to this legislation, and
to provide them with the Office's recommendations. The parties failed
to reach consensus, and late in September I submitted our recommended
approach which accommodated the legitimate concerns of all parties,
provided a basis of moving forward, while at the same time meeting the
goals of the bill's cosponsors. Unfortunately, there was not sufficient
time to move this bill forward in the remaining days of the 108th
Congress.
The Office's general counsel testified on my behalf on the
Satellite Home Viewer Extension Act of 2004, which was enacted as part
of Public Law 108-447, and we assisted in reform of the Copyright
Arbitration Royalty Panel System (the Copyright Royalty and
Distribution Reform Act of 2004, enacted as Public Law 108-419).
I testified in the House, and we worked closely and extensively
with staff, on the proposed Family Movie Act, which is now part of S.
167, the Family Entertainment and Copyright Act, passed by the Senate
on February 1, 2005. H.R. 357, the House's companion bill, cleared the
House Judiciary Committee on March 9, 2005. We have also worked
extensively on issues concerning the existing compulsory license for
the making and distribution of phonorecords of musical compositions,
including digital phonorecord deliveries of music. Other issues
included proposals to create criminal and civil penalties for
camcording by individuals in theaters, providing statutory damages for
``pre-release works,'' and creating a system of pre-registration for
certain classes of ``pre-release works,'' which are included in S.167
and H.R. 357, mentioned above.
On January 5, 2005 Senators Hatch and Leahy asked me to study the
issue of ``orphan works,'' copyrighted works whose owners are difficult
or impossible to locate, and to report our findings and recommendations
to them by the end of the year. We are in the process of seeking
initial comments on the scope of the problem and possible solutions.
The Office also intends to hold hearings during the year.
During fiscal year 2006, the Office will initiate and conduct most
of the required work on its triennial rulemaking on exceptions from the
section 1201 prohibition on circumvention of technological measures
that control access to copyrighted works. The purpose is to determine
whether there are any particular classes of works as to which users
are, or are likely to be, adversely affected in their ability to make
noninfringing uses due to the prohibition. (In 2003, the Librarian of
Congress, upon the recommendation of the Register, exempted four narrow
classes until October 27, 2006.) Comments proposing exemptions will be
solicited, comments on the proposals will be sought, and hearings will
held.
The Office has been extremely active in a number of important
copyright cases, many of which challenged the constitutionality of
various provisions of the Copyright Act. In these cases the Office
assisted the Department of Justice in defending the law. The Office
also assisted the Department of Justice in the government's Supreme
Court amicus brief of the United States in MGM Studios v. Grokster,
Ltd., on whether providers of ``file sharing'' network software can be
held secondarily liable for copyright infringement when the vast
majority of uses of the providers' network constitute copyright
infringement. (Oral argument was heard on March 29, 2005.)
As always, the Office continued to provide ongoing advice to
executive branch agencies on international matters, particularly, the
United States Trade Representative, the Department of Commerce and the
Department of State, and participated in numerous multilateral,
regional and bilateral negotiations.

Registration including Renewals and Recordation
Registration of authors' and other copyright owners' claims to
copyright, including claims in renewals, and recordation of documents,
such as assignments, security interests, and mergers are important
parts of the U.S. copyright system. The Office has significantly
improved its delivery times for registration and recordation services
since 2001.
During fiscal year 2004, the Copyright Office received 614,235
claims to copyright covering more than a million works and registered
661,469 claims received during fiscal year 2003 and 2004. Registration
is now two and a half times speedier than in 2001, when the average
time between receipt of a claim and the issuance of a registration
certificate was 200 days. At the end of fiscal year 2004, the Office
has shortened the average time to process a claim to 80 days.
The Copyright Office records documents relating to copyrighted
works, mask works, and vessel hull designs and creates records of those
documents. These documents frequently concern popular and economically
significant works. The Office recorded 14,979 documents covering more
than 470,000 titles of works in fiscal year 2004. At the end of the
fiscal year, the average time to record a document was 33 days, more
than six times faster than the average of 210 days in fiscal year 2001.
These achievements took place during a period of increased security
concerns. In early February 2004, ricin-contaminated mail was delivered
to a Senate Office. This incident stopped the Office's postal mail
delivery for an entire month while enhanced screening processes were
put in place. The disruption affected mail processing until early June,
when the last of the delayed mail was delivered. The Office worked to
restore normal processing levels, and the improvement in timeliness
reflects efforts to overcome the disruption.
However, processing time for the creation and making available of
online cataloging records increased in fiscal year 2004 because of the
Office's focus on improving the efficiency of registration processing.
The result was an increase in the Cataloging Division's work on hand.
For the remainder of fiscal year 2005, the Office will concentrate on
improving processing time for these records.
With respect to renewal registrations, the Office is facing the
fact that the number of renewal registrations will decrease
significantly in fiscal year 2007. Renewal registrations only apply to
works that were copyrighted before January 1, 1978, the effective date
of the current copyright law. Before 1978, if a work was published with
the required notice of copyright or an unpublished work was registered
with the Copyright Office, it received an initial term of copyright
protection of 28 years, and a renewal term that initially was 28 years
and today is 67 years. To receive the renewal term, a renewal
registration had to be made in the last year of the initial term, i.e.,
the 28th year. The last year for 28th year renewals is the end of this
year, December 31, 2005.
Additionally, the law was changed in 1992 to make renewal
registration voluntary. There are certain benefits that are gained by
renewing in the 28th year. However, if no renewal claim is registered
in the 28th year of the term, renewal is automatically secured on the
last day of that year. The 1992 law applies to works copyrighted
between January 1, 1964 and December 31, 1977. However, even if renewal
is automatically secured, i.e., no renewal application was submitted in
the 28th year of the initial term of copyright, a renewal claim may be
submitted after the 28th year and some benefits flow from such a
registration. A number of such registrations are made each year.
When renewal registration was required, the Office registered
approximately 52,000 claims. Since the enactment of the automatic
renewal provision in 1992, the number of renewal claims decreased each
year. Last year the Office received approximately 17,000 renewal
claims. We believe that between 1,500 and 2,000 renewal claims were
post 28th year renewals. Our records show that approximately 5,500
renewal claims were received in October, November and December, 2004.
The renewals unit consists of a staff of five.
The Office currently receives approximately $1 million a year for
renewal services. We project that the Office will take in significantly
less money in fiscal year 2006 for the 28th year renewals received in
October, November, and December 2005 and for renewals submitted after
the 28th year. During fiscal year 2006 we will assess the impact of
this loss of revenue and the decreased workload. However, it is likely
that in the fiscal year 2007 budget submission, the Office will request
a permanent decrease in its offsetting collections authority and a
reduction in FTEs.

Public Information and Education
The Copyright Office responded to 381,845 requests for direct
reference services and electronically published thirty issues of its
electronic newsletter NewsNet a source that alerts subscribers to
Congressional hearings, new and proposed regulations, deadlines for
comments, new publications, other copyright-related subjects, and news
about the Copyright Office to 5,297 subscribers.
The Office website continued to play a key role in disseminating
information to the copyright community and the general public. The
Office logged 20 million hits by the public in fiscal year 2004,
representing a 25 percent increase over the previous year. The Spanish
language pages on its website received approximately 130,000 hits
during the fiscal year.
The website received an updated look to coincide with the January
1, 2004, introduction of the new office seal, logo, and wordmark. The
website displayed the new symbols along with new colors derived from
those used in the Office's printed materials. The pages' appearance was
also standardized, streamlined, and designed for faster loading. The
Department of Health and Human Services selected the Copyright Office
website as an example of a government site that meets user expectations
with regard to navigation, content, and organization.
The Copyright Office, with the Library's Office of Strategic
Initiatives, initiated the Copyright Records Project to determine the
feasibility of digitizing millions of Copyright Office paper records
covering 1790-1977. In 2004, the project team researched and documented
the various types of paper records, developed a strategy, and issued a
Request for Information seeking expressions of interest. In early
fiscal year 2005 three potential vendors conducted a test of their
capabilities to digitize and index sample records and we expect a
report on the results by the end of April 2005.

Licensing Activities
The Copyright Office administers the copyright law's statutory
licenses and obligations. The Licensing Division collects and
distributes royalty fees from cable operators for retransmitting
television and radio broadcasts, from satellite carriers for
retransmitting ``superstation'' and network signals, and from importers
and manufacturers of digital audio recording products for later
distribution to copyright owners. In fiscal year 2004, the Office
collected $212.9 million in royalty funds and distributed $154.1
million to copyright owners.
With the passage of the Copyright Royalty and Distribution Reform
Act of 2004 (Public Law 108-419), a new program was established in the
Library of Congress, the Copyright Royalty (CRJ) program, which assumed
most of the functions of the Copyright Arbitration Royalty Panels
(CARPs). The interim Chief Copyright Royalty Judge is submitting a
separate statement to request funding for the new CRJ Program.

FISCAL YEAR 2006 BUDGET REQUEST

Reengineering Program
The Copyright Office's seven-year Reengineering Program initiative
is to redesign delivery of its public services. This program is
customer driven to prepare our Office for the future growth in
electronic submissions. The Office had planned for the reengineering
implementation to be fully funded and completed in fiscal year 2006, to
include moving staff offsite so that its space in the Madison Building
can be renovated in one phase. However, due to infrastructure and
offsite lease requirements, the program cannot be completed until the
first half of fiscal year 2007.
The relocation of the Copyright Office staff and the Madison
Building construction need to be done concurrently. Because of the
complexity and integrated nature of the various steps in the
registration and recordation processes, they must be located in one
place. The Library of Congress does not have sufficient swing space to
accommodate such a large group of staff and operations; therefore,
there is no choice but to relocate most staff to leased offsite space.
The $4 million request for new one time funding is to cover most of
the fiscal year 2006 expenses associated with moving staff offsite,
specifically lease and utilities, furniture rental, security guards,
and voice and data line leases. With the committee's support for the
new fiscal year 2006 funding, the Office will relocate staff to leased
offsite space, reconfigure its main facilities, install new equipment
and staff workstations, and bring the new IT systems infrastructure
online. In late 2006, staff will move back from the leased offsite
location to a new organizational structure to begin reengineered
operations. This represents the fourth and last net appropriations
increase to the Copyright Office BASIC appropriation base to complete
the Reengineering Program. The project will be fully implemented in
fiscal year 2007 with no new funding requested for fiscal year 2007.
Rather, the Office plans to reduce its net appropriation base in fiscal
year 2007 and return non-recurring Reengineering Program funds.
The reengineering initiative is contingent upon the AOC receiving
its fiscal year 2006 request for $5.5 million to undertake the
construction of the current Copyright Office space in the Madison
Building.

Sustaining Staff Capacity
Because of the fiscal year 2005 rescission, the Copyright Basic
fund reduced pay by $161,000. The Library is requesting the restoration
of the $161,000 in fiscal year 2006 to maintain payroll purchasing
power needed to sustain staff capacity.

Copyright Deposit Facility at Fort Meade
The Copyright Office is required by law (title 17) to retain
unpublished copyright deposits for the full-term of copyright, which is
life of the author plus 70 years, and published deposits for the
longest period considered practicable and desirable by the Register of
Copyright. A retention period of 120 years has been established for the
unpublished deposits and 20 years for the published deposits. A
certified copy of a copyright deposit may be used in legal proceedings
as evidence of the scope of copyright in a work.
Currently, the Copyright Office archives more than 800,000
copyright deposits annually in a variety of media as part of the
registration process which results in an annual storage increase of
approximately 3,500 cubic feet of published deposits and records and
3,500 cubic feet of unpublished deposits. From fiscal year 2007 through
2020, the storage requirement is projected to expand to a total of
approximately 245,000 cubic feet.
Copyright deposits are currently stored at two locations: leased
space in Landover, Maryland, a GSA facility, and at a commercial
records management facility in Sterling, Virginia, managed by Iron
Mountain. Both facilities are subject to wide temperature variances and
high humidity levels, and therefore fail to provide the appropriate
environmental conditions necessary to ensure the longevity of the
deposit materials. According to the Library of Congress Conservation
Division, continued storage under present substandard environmental
conditions will accelerate the aging of the deposit material and reduce
the useful life span by 75 percent, placing these deposits at risk,
especially after 25 years.
In 1994, the U.S. Army transferred a 100-acre site at Fort Meade,
Maryland, to the Architect of the Capitol (AOC) for use by the
legislative branch for the construction of storage modules. The master
plan envisioned 13 buildings for the Library of Congress of which one
was dedicated to the storage of copyright deposits. Both the design and
construction documents were completed in August 2003. In recognition of
the tight budgetary environment, the Copyright Office is recommending
that the Fort Meade facility be redesigned for modular construction so
that the facility can be built in phases in order to spread out the
costs over multiple funding cycles. The AOC is requesting $800,000 in
fiscal year 2006 funds for this redesign effort with construction of
the initial phase being deferred until fiscal year 2008. We ask your
support for this request.

CARP offsetting collections authority
The Copyright Arbitration Royalty Panels (CARP) system funded by
royalty fees and by participants is being replaced by the Copyright
Royalty Judges (CRJ) Program, created by the Copyright Royalty and
Distribution Reform Act of 2004, signed into law on November 30, 2004.
However, there are still some proceedings that will or may operate
under the old CARP system during fiscal year 2006. In accordance with
the Satellite Home Viewer Extension and Reauthorization Act of 2004,
signed into law on December 7, 2004, the satellite carrier statutory
license rate setting procedures will be conducted by CARPs. Therefore,
the cost of the arbitrators for the CARP proceedings will be paid for
by the participants, and staff and other expenses will be funded from
the royalty pools. The Office is requesting a $1.872 million decrease
in the CARP offsetting collections authority, leaving $300,000 to fund
the fiscal year 2006 program.

CONCLUSION

Mr. Chairman, I ask that you support the fiscal year 2006 Copyright
Basic budget request for a one time $4 million increase in net
appropriations and a $500,000 decrease in offsetting collections for
the BASIC appropriation to implement the Reengineering Program, and a
$1.872 million decrease in offsetting collections authority in the CARP
appropriation. Your support is also requested to approve the $5.5
million in the AOC budget for reengineering costs to construct the
redesigned facilities.
Our fiscal year 2006 request permits us to move forward on the
facilities work critical to the final implementation of our
Reengineering Program. We appreciate the past support you have given us
for this project. We are now at the point that we cannot turn back,
and, with your continued support, we look forward to bringing the
Office into the electronic environment that is so prevalent today.
I thank the Committee for its past support of the Copyright Office
requests and for your consideration of this request in this challenging
time of transition and progress.
______

Prepared Statement of Bruce Forrest, Interim Chief Copyright Royalty
Judge

Mr. Chairman and Members of the Committee: Thank you for the
opportunity to present the Copyright Royalty Judge program fiscal year
2006 budget request.
The Copyright Royalty Judge (CRJ) system was created by the
Copyright Royalty and Distribution Reform Act of 2004, Public Law 108-
419, signed into law on November 30, 2004 (``Reform Act''). The
Copyright Royalty Judges will assume the duties formerly carried out by
the Copyright Arbitration Royalty Panels and the Librarian of Congress
with respect to setting rates for the statutory copyright licenses
(with the exception of certain rate-setting proceedings being conducted
this year for the satellite television license under 17 U.S.C.
Sec. 119, which remain under the CARP system) and distributing
royalties from the royalty pools maintained by the Copyright Office.
The CRJ program will provide an important improvement over the CARP
system because it lowers the cost to the participants, requires
decision makers to have certain subject matter expertise, and makes use
of institutional knowledge to render consistent decisions.
The Reform Act specifies that the new CRJ system, which will be
part of the Library of Congress, will have three Copyright Royalty
Judges (CRJs) and three staff employees. The three judges will be
responsible for setting the rates and terms for the statutory licenses
that allow for: (1) the retransmission of copyrighted broadcast
programming by cable systems and satellite carriers; (2) the making and
distribution of phonorecords; (3) the reproduction and performance of
sound recordings by means of digital audio transmissions; and (4) the
use of certain copyrighted works in connection with noncommercial
broadcasting. In addition, the judges will conduct distribution
proceedings for the cable and satellite royalty fees deposited with the
Copyright Office and the fees collected for the making and distribution
of digital audio recording devices and media. The CRJs will have
authority, unlike the CARPs, to determine the status of a digital audio
recording device or digital audio interface device under chapter 10 of
the Copyright Act. The CRJ program also vests the judges with the
continuing authority to correct any technical or clerical errors, or to
modify any terms in response to unforeseen circumstances, and grants
them authority to promulgate notice and recordkeeping requirements for
use of certain licenses.
Congress took care to insure that the Copyright Royalty Judges
would have adequate qualifications to perform these highly technical
and difficult tasks. Under the Reform Act, each Copyright Royalty Judge
must be an attorney with at least 7 years of legal experience, and the
Chief CRJ must have at least 5 years of experience in adjudications,
arbitrations, or court trials. Of the other two Judges, one must have a
significant knowledge of copyright law and the other must have a
significant knowledge of economics.

REVIEW OF COPYRIGHT OFFICE WORK AND ACCOMPLISHMENTS

In fiscal year 2005, you approved the Library's request to
reprogram $540,000 and three FTEs from the Copyright Arbitration
Royalty Panels (CARP) to the Copyright Royalty Judge program, since the
Library's fiscal year 2005 budget did not include funds to cover the
costs of the new program. This allowed the Library to use existing
offsetting collections authority funded by royalties to cover the
personal and nonpersonal costs of the new CRJ program during the
transition phase of the program, as provided for under the Act. As
required by the Act, one interim CRJ has been sworn in to draft new
regulations to govern the rate setting and distribution proceedings
under the new statutory guidelines and to initiate immediately a rate
setting proceeding to establish rates for the statutory licenses that
allow for the public performance of sound recordings by means of
digital transmissions, e.g., webcasting.

FISCAL YEAR 2006 BUDGET REQUEST

This fiscal year 2006 budget, which is the first budget request for
Copyright Royalty Judge (CRJ) operations and proceedings under the
Reform Act, requests new permanent funding ($1.3 million) in
appropriations with no-year authority. The level of funding is
essentially ordained by the requirements of the Reform Act. The funding
will support three full-time Copyright Royalty Judges and three staff
positions, whose salary levels are specified in the Reform Act, and
other non-personal expenses. The CRJs' primary task will be to set
rates and terms for the various statutory licenses and to determine the
distribution of royalty fees collected by the Copyright Office.
In summary, I ask that you support the fiscal year 2006 Copyright
Royalty Judge Program budget request for new permanent $1.3 million
increase in total appropriations.

CONCLUSION

I thank the Committee for its consideration of this request.

Senator Allard. Thank you very much, Dr. Billington.
General Scott, do you have any additional comments for the
committee?
General Scott. No, sir, I do not.
Senator Allard. Okay, thank you.
Now I will recognize Senator Johnson for his opening
comments.

STATEMENT OF SENATOR TIM JOHNSON

Senator Johnson. Well, thank you, Mr. Chairman. I will
forego opening statements. I have a statement I can submit. I
simply want to welcome Dr. Billington and Mr. Walker to the
hearing today and thank them for their leadership. I look
forward to working with you as well as ranking member Durbin as
we wind our way through the appropriations process in a year
that is going to be a difficult one for all of us.
Thank you, Mr. Chairman, and thank you again to our panel
today.
[The statement follows:]

Prepared Statement of Senator Tim Johnson

Thank you, Mr. Chairman, for calling today's hearing to
examine the budget requests for the Library of Congress and the
Government Accountability Office. I want to first welcome you,
Mr. Chairman, to the Appropriations Committee and as the
chairman of the Legislative Branch Subcommittee. I look forward
to working with you and Ranking Member Durbin as we work on the
Legislative Branch appropriations bill this year.
I also want to welcome Dr. Billington and Mr. Walker to the
hearing today. So much of what we do here in Congress is made
easier and better because of the work done by the Library of
Congress and Government Accountability Office. The Library,
with such a unique array of collections, is truly a national
treasure. I enjoyed visiting the Library to see the Lewis and
Clark exhibit that was on display in the Jefferson Building. I
had a particular interest since the Lewis and Clark expedition
came through South Dakota and reportedly first saw the vast
buffalo herds of the Great Plains from Spirit Mound near my
hometown of Vermillion, South Dakota.
The Library's Congressional Research Service continues to
be one of the best sources of information and analysis provided
to members and our staffs on even the most obscure subjects. I
want to publicly thank the dedicated staff at CRS for their
timely and thorough responses to inquiries from our offices.
Mr. Walker, I also want to thank you and everyone at GAO
for the professional work done under what can sometimes be
extraordinary circumstances. Without GAO's investigative
abilities, Congress would be hard pressed to fulfill its
oversight role. My staff and I have relied upon GAO to look
into matters ranging from country of origin meat labeling to No
Child Left Behind Act implementation in rural states. Thank you
for the work GAO does to assist us in Congress, especially
GAO's ongoing assistance to this Subcommittee on the Capitol
Visitor Center.
I look forward to your testimony and to working with both
of you in the coming months as we move through the
appropriations process. Obviously, we find ourselves in a very
difficult budget situation, so funding will be tight across the
board. However, the roles the Library of Congress and GAO play
are vital to helping Congress meet its constitutional
responsibilities.
Thank you again, Mr. Chairman.

FUNDING PRIORITIES AND CHALLENGES

Senator Allard. Thank you, Senator Johnson. Just for your
information, we are going to use the 5-minute rule and we will
rotate around a little. If we have to have several rounds of
questioning, we will do that. My hope is that we will get out
this morning about 11:45 or so, when we have scheduled votes on
the floor.
Let me start with you, Dr. Billington. You talked a little
bit about the budget priorities. The Library's budget request
is an increase of $45 million or 7 percent over the current
year budget. In the event we are unable to provide the full
amount requested, please explain what your highest budget
priorities will be?
Dr. Billington. Well, our budget request basically supports
every aspect of our basic historic mission and enables us to
continue, hopefully, our transition to the new digital world.
That mission is, as I have indicated, acquiring, preserving,
making accessible this enormous collection.
The business of acquisition and preservation cannot be
deferred. Maintenance cannot be deferred for very long, and
basic services I do not think should be curtailed, although
that is ultimately for the Congress to determine. But to
maintain our historic role in knowledge management, the
traditional key to the investments we seek are to maintain our
construction schedule, long delayed, for storage and
preservation at Fort Meade and Culpeper, to regain some of our
purchasing power for acquisitions, which has been seriously
eroded over the last 10 years for acquisitions and for CRS
research materials. Of course reengineering our business
processes for outdated manual systems, particularly this last
year of the copyright program, is important. And of course the
whole question of revitalizing our human capital resources and
infrastructure, particularly information technology, is of
central importance.

NAVCC--CULPEPER

Senator Allard. Thank you, Dr. Billington.
I also want to just take a moment here and thank the
Packard Foundation for their generous support of the National
Audiovisual Conservation Center. Hopefully, later on in the
year I would like to have an opportunity to go out there and
take a look at that facility.
The Library's budget requests $16 million and 47 FTEs, an
increase of 23 new positions, for the National Audiovisual
Conservation Center, which is scheduled to open next year. Why
are these additional staff needed now and what will be the
total annual operating cost for the NAVCC once it is fully
operational?
Dr. Billington. Well, the increase is 23 FTEs. First of
all, the Packard donation is a capital donation that is almost
unprecedented.
Senator Allard. It is.
Dr. Billington. It is somewhere between $120 and $130
million. So the building is basically being built with private
funds. The increase of FTEs, first of all, is consistent with
the 5-year plan we submitted and was approved by the Congress 3
years ago. But the point is that we are not simply relocating
people and materials to a new facility. We are creating a
national conservation center, which we have never really had,
with a new digital preservation system for audiovisual
materials that will allow the Library to preserve the
collection for at least 100 years, the same standard that we
have for paper.
So this is a totally new achievement that will be made
possible. The new technical system and the enhanced capacities
of the conservation center require additional and more
technically qualified staff. Even with the increase in
staffing, total funding requested in the Federal budget for
this year for the Culpeper center is $3 million less than the
funding was last year.
Our new restoration lab that we are setting up there will
operate 24 hours a day and the new system will allow us to
increase preservation productivity 10 times the current rate.
So this is a fundamental revolutionary escalation of our
capacity to exercise and realize the congressional mandate of
1976 to create a real national archive for the preservation of
radio and television, as well as recorded sound, film, and
other audiovisual materials.
So it is a major undertaking. I cannot give you today the
exact projection figures for what the operating costs will be.
I do not want to just guess at that. But a good deal of what we
have been asking the last couple of years for the appropriation
are one-time things to get us in there, to get us established.
So I think we have to get over that bump. But that is a small
bump compared to the mountain that the Packard Foundation is
contributing.
Senator Allard. Well, we would appreciate that response. We
will be looking forward to getting those figures and showing
some more detail on that.
[The information follows:]

The Library's five-year request to Congress to acquire the
new equipment and staff resources necessary to operate the
NAVCC concludes in fiscal year 2008. Full initial operations,
using existing base funds and new resources will start in
fiscal year 2009, with ongoing annual operating costs beginning
that year of $22.5 million. This figure includes $6 million for
preservation digitization, $3.5 million for storage, $1.5
million for facilities management, and $11.5 million for staff.
It includes existing base funds and staff from the Motion
Picture, Broadcasting and Recorded Sound Division. The
operating capacities reflected in these costs were established
based on our urgent need to preserve at-risk national heritage
collections dating back nearly 120 years, as well as the need
to begin ingesting significant new born-digital works.
Fortunately, the proven technologies to achieve this have
recently become available, and the Packard Humanities Institute
gift of the state-of-the-art NAVCC facility will allow us to
take advantage of these technologies for the first time.

Senator Allard. Senator Johnson.
Senator Johnson. I do not have any questions.

FORT MEADE STORAGE

Senator Allard. Senator Johnson indicates he does not have
any more questions, so I will move on to Fort Meade storage
modules. The Architect's budget includes $40 million for
additional storage modules at Fort Meade. I would like to have
you explain the importance of these storage modules and what
the future requirements the Library expects to have at the Fort
Meade location. My understanding is that there will be a
considerable number of modules that are being projected out
over the years to bring into that Fort Meade location.
Dr. Billington. Well, let me just say briefly, and I can
let General Scott speak mainly to this, but the purpose of the
two modules, Modules 3 and 4, is to house 26 million special
format collections, including maps, prints, photographs,
microfilm, manuscripts, things of a special nature, almost all
of which are one of a kind.
Senator Allard. Excuse me for interrupting you, Dr.
Billington. Are they refrigerated or special humidity
controlled?
Dr. Billington. Modules 1 and 2 are for book storage. The
beauty of these new modules is that they are really not simply
storage, they are--for instance, from Module 1, we have had a
100 percent retrieval rate on all things; it happens within 24
hours. So they are very efficient for storing and retrieving.
But most important of all the collections to be stored in
Modules 3 and 4 are practically all one of a kind items of
which there are no other copies. They will be in state-of-the-
art preservation conditions, which is important, as with the
Culpeper audiovisual collections. So the creation of these
Modules is an investment simply prolonging the lifespan of
priceless things, of which we are the custodian of so many, in
this case 26 million items in the special format collections,
which cannot be just stacked the way books are, but have to be
handled in a special manner.
So that is it. But I will let General Scott speak further
to the whole project, except to say that we submitted a
detailed plan for the various modules quite some time ago with
the Congress. So we are on schedule, even though we were 5
years behind getting construction started according to the
original plans and are already 1 more year delayed beyond the 5
years for these important modules for these special
collections.
Senator Allard. And you do not see any change on those
plans that were submitted, any modifications or anything? The
time line is the same; it is just the total time line has been
moved back?
Dr. Billington. That is right, that is right.
Senator Allard. Okay. General?
General Scott. Yes, sir. You had asked about future storage
needs for the Library. We do have a complete plan that
envisions having 13 buildings out at Fort Meade that would
carry us up through the year 2027. Module 1, which was
completed in 2002, is completely filled. It was at capacity in
about 2\1/2\ years with some 1.5 million items.
Module No. 2, which is slated to open very soon, has a
capacity of 2 million items and similarly it too will house
books. Our projection is that Module 2 will also be filled
within 2 years once it opens.
The 13 modules that are either in design or construction
will hold books and special format collections as well as other
treasures from the Library. To date, funding has been provided
for Modules 1 and 2. We are requesting funding for Modules 3
and 4.
We would be happy to submit for the record a table that
highlights our future storage and capital requirements.
Senator Allard. I wonder if you would do that, General
Scott. I think that would be helpful for the committee.
[The information follows:]

LIBRARY OF CONGRESS FUTURE FORT MEADE CAMPUS STORAGE (CAPITAL) REQUIREMENTS
[Dollars in millions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Plans
Storage Requirement ---------------------------------------------------------------------------------------- Projected Materials To Be Stored
Design Construction Occupancy Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fort Meade Module 2................ Completed.................... Fiscal year 2005............... Fiscal year 2005...... NA General collections (2M items)
Fort Meade Modules 3 & 4........... Completed.................... Requested fiscal year 2006..... ...................... $40.7 Special format collections: maps, prints, photographs,
manuscripts, microfilm (26M items)
Fort Meade Copyright Deposits \1\.. Requested fiscal year 2006 Requested fiscal year 2008..... ...................... $45 $800,000 re-design funding requested fiscal year 2006
($800,000). will permit modular, phased construction. Will house
Published and Un-Published Copyright Materials.
Fort Meade Logistics Warehouse..... Completed.................... Requested fiscal year 2007..... ...................... $56 Preservation materials, Exhibit Cabinets, Office
supplies, equipment, computers, business records,
Library publications, and material staging
Fort Meade Modules 5............... Completed.................... Requested fiscal year 2007..... ...................... $11 General collections (2M items)
Fort Meade Modules 6-13............ Module....................... ............................... Through 2026.......... \2\ $88 General collections. Eight additional modules planned
through 2027.
-----------
Total........................ ............................. ............................... ...................... $240.4 Through Year 2027
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: As a result of the fiscal year 2005 construction request of $59 million for the Copyright Deposit, the committee requested that the Library research other options. The options
included an analysis of the second building at the Alternate Computer Facility in Massases, VA. The re-designed facility will introduce a modular approach with a goal of reducing the cost to
$45 million.
\2\ $11 million each.

Dr. Billington. Excuse me, Mr. Chairman. I must just say
that as far as Culpeper is concerned, the beauty of that
facility is that it is very capacious and we will not need any
supplementing of that for a very long period.

POLICE MERGER

Senator Allard. I want to talk a little bit about merging
the Library police force with the Capitol Police Force. As I
understand it, this effort was to try and streamline and unify
the security for the Capitol complex. The Congress authorized
in fiscal year 2004 any new Library police positions to be
filled by the Capitol Police officers. Late last year the
Library and Capitol Police entered into an memorandum of
understanding (MOU) to enable 23 Capitol Police officers to be
assigned to the Library.
How would you assess the effectiveness of this merger to
this point, Dr. Billington?
Dr. Billington. I will let General Scott speak to that.
Senator Allard. That would be fine. General.
General Scott. As you indicated, the Congress did approve
23 police FTEs for the Library back in the 2004 budget. To set
that in context, the Library had indicated in the 2004 budget
that we would need at least 100 FTEs spread over a 3-year
period. In 2004, we received an appropriation for 23 of those
FTEs with the directive that the Capitol Police hire those
officers for the Library.
To facilitate the hiring, the Library and Capitol Police
entered into a memorandum of understanding. The MOU laid out
the procedures through which we would receive the 23 officers
who came on board in December 2004. The augmentation was
seamless and it is working well.
However, the Library still needs to continue building
toward the 100 FTEs and is therefore asking for 45 new police
officers in fiscal year 2006. The MOU does not provide the
Capitol Police the authority to hire those 45. Additionally, we
think that the MOU does not resolve our long-range police
staffing requirements as we will still need to have 32 more to
round out the 100 that we requested in 2004.
Finally, the MOU does not address or protect the
fundamental authority of the Librarian to protect the
buildings, the staff, and the collections of the Library.
Dr. Billington. Could I just add that if the hiring of the
45 additional police officers, which we are requesting in this
budget, continues to go through the U.S. Capitol Police, that
what we are in fact seeing is a de facto police merger taking
place without authorization from the appropriate congressional
committees and without their knowledge of the full fundamental
change that will be made in the Librarian's historic and
statutory responsibilities.
Senator Allard. Now, you have requested 45 police officers.
Did you consult with the Capitol Police on this request?
General Scott. Yes, sir, we did.
Senator Allard. You did?
General Scott. Right.
Senator Allard. And this is a number that they felt they
needed to have? Here is the issue and the reason I structure it
this way. My understanding is that right now there is no
authorization for more police officers as far as the Library is
concerned, that has been passed over then. So I am a little
perplexed why you make that request under this budget here and
why we did not get the request through the Capitol Police
budget. I wonder if you can respond to that.
General Scott. Yes, sir. We have been consulting with the
Chief of the Capitol Police over the staffing issues, as well
as other police issues. The 45 that we are asking for is based
on the staffing model and the guide that the Capitol Police
have. We are asking for officers that would augment our current
force, and make us consistent in our entrance and exit posts
with the staffing of the Capitol Police.
Senator Allard. I hope that we can have some uniformity.
During my tour of the Capitol Visitor Center we had a good look
at the tunnel and everything, which I am excited about, the
direct access over to the Library. But not only do we increase
access to the Library, but we also increase access back into
the Capitol. I think if we have not given any thought to that,
I think we have to think about that in the process, because we
have a security issue coming back into the Capitol from the
other side.
So it is something that I just made note of here and I want
to check out a little further. I appreciate your response on
this. I understand that Roll Call had an article on this.
Apparently they talked to Library employees and I think it was
an anecdotal type of story. But anyhow, they viewed the Library
as a possible weak link on the Hill, as far as security.
Do you agree with that article? Do you think that is
something to be concerned about?
General Scott. I cannot comment about the article, Senator.
I had not read the article. But I can say this, that we are in
complete agreement that security on Capitol Hill is our highest
priority and we are determined to meet all the security
requirements. We want to mirror the Capitol Police augmentation
on our posts.
I would also add that the inspector, who is in charge of
the Library's police and an employee of the Capitol Police, has
made significant improvements in the liaison role that we now
have with the Capitol Police.
Senator Allard. I tell you what. I do have a copy of that
article that staff has just handed me. What I thought I would
do is I will give you a copy of it, I will make it a part of
the record, and then you can maybe respond to any issues that
are raised in this article if you will.
General Scott. Yes, sir.
Senator Allard. I think it would be helpful.
General Scott. Okay.
[The information follows:]

The Library is not a weak link in the security of the
Capitol complex, as depicted in the recent Roll Call article
(April 5, 2005). We do agree that it is critical for the
Library to maintain a level of security commensurate with the
rest of Capitol Hill. The Library has been effectively
addressing the protection of its employees, visitors, and
assets for years, as well as contributing toward strengthening
the security of the Capitol complex as a whole, with the goal
of creating seamless security throughout the complex.
Since the mid-1990s, the Library has aggressively
implemented major security improvements consistent with the
many security improvements that have been put in place
throughout the Capitol complex. Examples of the Library's
improvements include major perimeter security enhancements,
implementation of full building entry screening, expanded
emergency communications capabilities, and establishment of a
robust emergency preparedness program.
The Library Police are an integral component of the
Library's steady progress toward strengthening Library security
programs. Over the past several years, the Library Police have
achieved major improvements in operations and personnel
readiness. Although the Library Police force is comparatively
small and does not have all the resources available to the
Capitol Police, the Library Police work closely with the
Capitol Police to maximize the level of support for daily
operations and for emergency situations. There has been
significant enhancement in the coordination efforts between the
Library Police and the Capitol Police in those areas where the
capabilities of the Library Police are limited because of
resource considerations or to avoid costly duplication of
effort. With the continued commitment and assistance of the
Capitol Police, we see no discernable differences in response
capabilities of either police force.
The Library Police recently underwent an audit by the
Library's Inspector General. The audit did not identify any
significant systemic weaknesses or program vulnerabilities that
would place any employee, visitor, facility, or any part of the
collections at risk. The goal of the Library Police is to
achieve cooperative parity with the Capitol Police. The Library
Police have been working diligently for some time to ensure
that the Library receives the same level of protection as the
remainder of the Capitol complex.
The unique security and enforcement requirements of the
Library have developed a police culture having somewhat
different responsibilities than most federal police agencies.
The successful record of the Library Police in both detecting
and deterring crimes against the facilities, personnel, or
property of the Library demonstrates that the Library Police
are fully capable of meeting their statutory requirements and,
as demonstrated through the ongoing detail of Capitol Police
officers, can work effectively with other agencies. There is no
evidence that the Library Police constitute a weakness in
meeting their law enforcement and security requirements, and
the Library Police's aggressive implementation of the
recommendations from the Inspector General's audit indicates
their willingness to improve processes and procedures to
enhance their capabilities and professionalism.
In summary, Library management has confidence in the
Library Police that they will continue to provide the required
level of security and law enforcement to meet their statutory
responsibilities in the ever-improving security climate on
Capitol Hill.

Senator Allard. The Library of Congress budget included $4
million to complete the Copyright Office's reengineering
initiative. It includes funds for the lease of temporary office
space. Please explain how the copyright process will be
improved through the reengineering effort, which I am pleased
to see you doing, because if there is one criticism that I get
it is the copyright procedure and how long it takes to get
approval. My hope is that this will speed things up and it
sounds like you are on that, and I want to compliment you on
that.
General Scott. Thank you, sir. Marybeth Peters, who is the
Director, the Register of Copyrights, has had a visionary
insight in recognizing that commerce and the digital network
environment now demands that we meet customer expectations by
electronically making it possible to receive copies of digital
works, web sites, databases, and various filings, such as
applications for registrations, and to process them
electronically.
Five years ago the Register of Copyrights announced a very
well thought-out plan that would change the copyright processes
to support our electronic environment. Fiscal year 2006 is the
last year that new appropriated funds will be needed to
complete this project.
Deferring the project beyond 2006 will not only result in
the loss of $19.7 million in past investments, but the Library
will also lose the contract staff who built the new systems and
the related expertise which is needed to complete this project.
These resources, if we lost them, would not be available beyond
2006 due to other commitments.
The new system cannot be implemented without, of course, a
reconfiguration of the Copyrights Office space since the
current floor plans are not aligned with the flow of the new
business processes. Without the 2006 funding, this project may
never be implemented, that is why we are making this request.
Dr. Billington. Don's basic point is that the registration
will be much quicker, which has been a constant concern and
complaint, and in the long run it will be much more economical
because it can be done electronically.
Senator Allard. Both of those are very worthy goals. I am
just trying to think through the process. If you are an author,
do you submit the book in written and electronic form? Your
book then would go into storage and then you add the book to
your electronic database?
I would like you to clarify that for the subcommittee.
General Scott. At this point I would really like to call
upon Mary Beth because she is the expert in this, sir.
Senator Allard. If you feel uncomfortable talking about
that, we will be glad to put something in the record.
Ms. Peters. No, I am not in the least bit uncomfortable
talking about it.
Dr. Billington. She has been dealing with this for 40
years.
Ms. Peters. That is right.
Senator Allard. I notice I brought a smile to your face.
You must enjoy it.
Ms. Peters. The truth is I love it.

If you have authors today and they choose to register as
soon as they write their books, before they send the manuscript
to a publisher----
Senator Allard. Then it gets a Library of Congress number,
is that correct?
Ms. Peters. Not if it is the submission of the author's
manuscript and it is unpublished. If I write a book and I have
not sent it to a publisher, I may want to get a registration
before I send it out to publishers, I would send the copyright
office a paper copy because today we are not equipped to take
it in electronically.
Starting this fall, we will be experimenting with taking in
all types of material electronically and processing them
electronically.
Senator Allard. Would that not help your process if you
expected the author to provide an electronic one when it goes
to the publisher.
Ms. Peters. Absolutely. When the publisher gets the
author's manuscript, it is in electronic form. Then the
publisher converts it to print form. The print copy is used to
register the publisher's claim to copyright. The print copies
usually go into the collections of the Library of Congress, and
could end up at storage Module 1 or 2 at Fort Meade.
Senator Allard. Depending on its perceived importance, is
that right?
Ms. Peters. Depending on the Library's acquisition
policies.
Senator Allard. I see, okay.
Ms. Peters. So, we hope that we are able to provide all of
our services within 2 weeks. Reengineering will totally
revolutionize the way that we do business.
Senator Allard. I was trying to visualize it. That is what
I was visualizing, we are making it more efficient. We can also
keep a hard copy in case something happens to the electronic
one.
Ms. Peters. Yes, a digital file will come in to the
copyright office for registration. If the Library wants print
copies of a literary work, the publisher will send two print
copies for the use of the Library, but the copyright office
will have a digital file of the work.
Senator Allard. Very good, thank you.
Ms. Peters. Thank you.

OPEN WORLD LEADERSHIP

Senator Allard. I have just one question on the Open World
program and then we will hear from the CRS.
Your statement indicates that Russia alone has nearly 9,000
Open World alumni, Dr. Billington, each of whom has visited a
U.S. community for a 10-day stay under the program. I am
curious as to what continuing communication is needed and
desirable beyond the original introduction to America, which is
a 10-day stay here with a host family as I understand the
program.
Dr. Billington. Well, this has been an extraordinary
program in a lot of ways. One of the ways is that it has
created a lot of sister relationships. For instance, we have
been emphasizing the rule of law. We have had 800 judges and
prosecutors. Many of them have established sister court
relationships. That is a very common thing. Or there are
oftentimes return visits that are at the invitation of the
Russian visitor.
The alumni of this program have set up an internal web site
to communicate, giving a sense of identity and community among
these people exchanging their own perceptions and ideas once
they are there. They have had alumni meetings all over Russia.
As you know, they have come from all 89 political districts of
Russia, all 50 States of the Union. So there is a very
substantial continuity. Recently, we had the first major
Ukrainian visit for the Ukrainian program since the so-called
Orange Revolution there and they established a lot of contacts
that I am sure are going to be useful. One of the participants
was then subsequently elected to higher office. This is a
frequent phenomenon.
There are all kinds of linkages. There is an upcoming
alumni event in the Russian Far East, but I would like to give
you a full itemization of the program. I am just speaking off
the cuff here. Overall, 44 percent of the participants have
been women with an average age of about 37, which is something
totally new in Russia. Not a single one of the Russian
participants has stayed in this country. That is almost unheard
of in relations between Russia and America. As you know, people
often want to stay when they come to America. The open world
participants are tremendously impressed by the time they have
because it is a total immersion. It is not a series of lectures
or dialogues where people just give speeches to each other.
We just had a delegation of their version of the Supreme
Court and the top jurists, and our Supreme Court met with them
here for a couple of days and it was really quite exciting. I
believe some of the U.S. Justices will be returning the visit.
So this is really the opening up of contacts with a new
generation of Russian leaders, which is very much the hope of
that country if it is going to make it as a functioning
democracy.
The one thing they all take back, the most important thing
is the excitement over nongovernmental organizations, the
extent to which many social services, many problems are dealt
with at the community level.
This is the biggest exchange program of its kind since the
Marshal Plan. It is something that has been done entirely
within the legislative branch of Government and it is having an
extraordinary effect, even though it is a short period of time.
The participants stay in homes. They see the real America. They
shadow people, and the cooperation is extraordinary--we have
many more volunteers across the country to take these people in
than we are able to accommodate. So it is a good sign that the
American people everywhere in all communities are really
interested in getting better informed about what is going on in
Russia.
Senator Allard. There is follow-up, then, so that at some
point in time we would like to be able to measure results. I
hope that we have follow-up on the program. The only way I see
us being able to measure results is to see what happens to
these folks 5 years or 10 years down the road.
Dr. Billington. Absolutely. It is a long-term investment
because these people have to work their way up through the
system. We can give you a lot of information on this.
Senator Allard. Good.
Dr. Billington. But we do follow up and they do have a
continuing existence both as alumni, on their web site, and in
answering to the host organizations in America.

CONGRESSIONAL RESEARCH SERVICE

Senator Allard. Very good. Thank you.
Now on the Congressional Research Service (CRS) increase,
there is an increase of $9 million or 9 percent that is
requested for CRS, for a total budget of $105 million. The
budget request would provide for 729 staff compared to the 700
staff you are now operating with. Now, why is that level not
sufficient? I think Mr. Mulhollan is here to answer that
question. Could you tell us why you think such an increase for
CRS should be given preference over other legislative branch
priorities? So you have got two questions there.

STATEMENT OF DANIEL P. MULHOLLAN

Mr. Mulhollan. This is a question of why is CRS a priority
for the Congress. I would argue that it is the fact that we are
a cost-effective extension of congressional staff. In other
words, we are a shared pool of experts that helps each Member
and every committee. The Congress draws upon CRS to get
thorough analysis, that are context-based, and provide a
framework for considering and comprehending the issues and
potential consequences of legislative options. CRS supports
equally the majority, the minority, and each chamber. CRS is a
shared resource, so each committee and office does not have to
acquire such expertise because you have it available. CRS
expertise and products are targeted to your needs. CRS
guarantees the confidentiality of all our work for you.
Given the need to sustain this shared pool of expertise,
and recognizing the budget difficulty you face, half the
request is for the mandatories and price level increases. The
next $3.6 million is to keep us whole at the level of 729 FTEs.
CRS is at a tipping point. Three major factors contribute to
this request.
One is that the level of expertise CRS must hire is greater
than it has been in the past and costs more. Back in 1995 our
average new hire was a GS-7 step 9. Today it is GS-13 step 9.
You face more compelling, complex, and interrelated problems,
such as terrorism and homeland security layered onto the
massive domestic issues that the Nation faces. The nature of
your work dictates that CRS hire individuals with high levels
of formal education and specialized experience.
Second is staff participation in the newer retirement
system. The committee has been very supportive of CRS in our
succession planning. To that end, we have been very thoughtful
in identifying what kind of expertise the Congress needs and
who we need to hire. As we lose our older employees, who for
many years have participated in the older Federal retirement
system where the employer-paid portion of the benefit is 13.5
percent per employee. Virtually all those coming into CRS are
under the newer Federal employee retirement system, FERS. Under
FERS, the employer-paid benefit is 27 percent per employee,
twice as much.
The third element is that in the past 10 years, with one
exception, 1998, we faced a gap between what we have
anticipated and asked for with regard to the mandatory pay
adjustments and what was enacted. For example, in fiscal year
2004 the adjustment we anticipated was 3.7 percent. What the
President signed into law was 4.42 percent. That caused a
$400,000 shortfall in our budget and that is four FTEs.
We are seeking a one-time catch-up to keep us whole on that
staffing level.
[The statement follows:]

Prepared Statement of Daniel P. Mulhollan

Mr. Chairman and Members of the Committee: I appreciate the
opportunity to appear before you today to present the fiscal year 2006
budget request for the Congressional Research Service (CRS). I also
wish to express my gratitude to the Committee for its support of the
Service's budget requests in years past, as I am well aware of the
fiscal environment and the difficult funding decisions you face.
The Service's request for fiscal year 2006 represents not a
workload increase but instead reflects our need to replenish the levels
of staffing and resources required to enable us to meet our statutory
mission of serving all Members of Congress with comprehensive,
accurate, and timely research and analysis. As such, CRS' fiscal year
2006 budget request is composed of two parts: funding for our mandatory
pay- and inflation-related costs and two increases necessary to sustain
our staff and resource capacities.
These are challenging times for lawmakers. The environment within
which the Congress works is fluid and dynamic, with multiple pressures
vying every day for your attention and for the resources each Member is
charged to manage. The major policy issues facing Congress, such as the
ongoing war efforts, Social Security reform, tax reform, immigration
and border control, homeland security, and issues relating to
terrorism, are more complex, are politically charged, and have global
consequences. These and many other issues are complicated and multi-
faceted. Congress is functioning under ever-increasing pressures and
expectations to be conversant on all the issues and serve as an expert
on virtually every topic as it deliberates these highly consequential
issues.
CRS assists every Member and committee. Our assistance responds to
your full range of legislative needs, from identifying and evaluating
authoritative, reliable sources of research and information to offering
and analyzing legislative and policy options that might best address
complex, high-stakes public policy problems. All of our work is
confidential and focuses solely, directly, and specifically on the
needs of the congressional community.
Everyone at CRS takes seriously the trust that the Congress has in
our work. I believe this trust is earned daily through the interactions
CRS staff have with you and your staff. Each of us at CRS, no matter
what role we play, strives to improve and excel in every aspect of the
service that we provide.

FISCAL YEAR 2006 BUDGET REQUEST

Mr. Chairman, my fiscal year 2006 budget request presents to you
only what CRS needs to achieve its statutory obligations. I am keenly
aware of the budgetary pressures facing this Committee and the
Congress. My responsibility as Director of CRS is to weigh these
pressures against the basic needs of the Service and to offer you a
fiscally responsible assessment of the condition of the Service.
The 2006 request would fully fund our mandatory and price-level
increases, our first and highest priority, along with two baseline
adjustments that would enable us to recuperate from shortfalls that are
straining our ability to acquire staff and research tools.
Specifically, CRS is requesting a total of $105.289 million for fiscal
year 2006, an increase of $9.171 million over fiscal year 2005. The
increase is comprised of $5.097 million for mandatory and price-level
increases and $4.619 million for increases to recover lost purchasing
power. The request also includes a $544,000 reduction for the one-year
funding provided last year to implement XML capacity.

STAFF CAPACITY

CRS' strength is its people: 88 percent of our budget is devoted to
staffing. The remaining 12 percent of the CRS budget covers the non-
personals expenses, the day-to-day business operations of the Service,
including the monthly phone bills, hardware and software maintenance
agreements, technology refreshment, and permanently contracted
operations. These non-personals costs offer little financial
flexibility for adding to staff capacity. Because our work is dependent
on the skills and abilities of the people, I am continually reviewing
the composition of CRS' staff so that we have the right mix of
individuals with the right expertise to assist the Congress as it
frames and considers major policy problems. CRS staff are ready to meet
today's needs and, at the same time, are anticipating and preparing for
the major policy issues on the horizon.
CRS is proposing a one-time budgetary adjustment of $3.6 million to
sustain its staffing level of 729 full-time equivalents (FTEs). Without
this additional funding the Service would have to reduce permanently
down to about 700 FTEs. There are three factors contributing to the
need for $3.6 million: CRS' need to sustain a higher level of staff
expertise, the gap between the funding provided in the budget process
and the federal pay raises enacted, and the impact of a workforce
shifting from the old to the new federal retirement system.
The first factor evolves from the change in CRS' workforce
composition. The variety and range of expertise of CRS staff must match
the expertise needed by the Congress as it develops and undertakes its
legislative agendas, both current and anticipated. We routinely conduct
two Service-wide examinations: to identify the major policy areas
Congress is likely to address and to assess and forecast the
availability of CRS experts to assist the Congress in those issue
areas. The results of these assessments guide my decision-making in our
annual staffing plan and subsequent staffing selections. The nature of
your legislative work requires a higher level of CRS expertise. As we
recruit and interview prospective employees, we are finding that the
work competencies we need are best met by those seeking positions in
the higher general schedule pay ranges. This is confirmed by CRS
statistics on new hires: in the period from fiscal year 1995 to the
present, the grade level of the average CRS hire has increased from a
GS-7, Step 9 to a GS-13, Step 9. The complex and often technical nature
of the policy problems you face requires us to ensure that we have the
right expertise to correspond to the myriad sources having stakes in
the policy outcomes of your work.
The second factor contributing to the need for this baseline
increase is the cumulative shortfall in funding that has resulted from
pay raises enacted at a higher rate than provided for in the
Legislative Branch annual appropriations, albeit you have provided what
we asked for. Since 1995, with the exception of 1998, the Service's
budget has been increased for staff salary and benefits costs in an
amount less than what was ultimately required by law to be paid to the
employees. For example, in fiscal year 2004, the budget process
anticipated an annual rate increase of 3.7 percent; however, the actual
enacted pay raise was 4.2 percent, costing CRS about $400,000 (or four
FTEs) more to sustain the current staff. The cumulative impact over the
past ten years contributes to the need for our current budget request
for sustaining staff capacity.
It is costing the Service more to subsidize retirement benefits. As
of right now, about 42 percent of the CRS workforce participates in the
Civil Service Retirement System (CSRS). Based on fiscal year 2004 data,
a CSRS participant is costing the agency about 13.5 percent in
employer-paid fringe benefits. This compares to the 27 percent in
employer-paid benefits for a Federal Employee Retirement System (FERS)
employee. For the past few years, virtually all of the CRS retirements
are staff participating in CSRS, while the majority of new hires are
eligible to participate only in the more expensive FERS. As the
proportion of the FERS workforce continues to grow, the fiscal impact
has been, and will continue to be a dramatic rate of increase in agency
costs.
The budget I am requesting will allow CRS to rebuild and replenish
to its authorized ceiling of 729 FTEs, the staffing level needed to
sustain current services. A single example will allow me to illustrate
the level of service that I am committed to providing to the Congress
and that the Congress has come to expect from this agency. When the
congressional leadership last July identified the newly released 9/11
Commission report as its top priority, CRS acted. Within one week over
70 CRS analysts and information professionals came together to provide
Members with thorough analyses of the report. Those analyses were
context-based, providing a framework for considering and comprehending
the report's contents in view of other relevant factors and their
potential impact. Most importantly, we provided real-time, round-the-
clock analysis. We were ready when your deliberations began and
remained at your side as you considered the Commission's
recommendations and as you took steps to enact the policy changes
deemed most appropriate.
We were able to provide this kind of specialized and close support
because our staff work collaboratively across disciplines, are experts
in their fields, and are available on-demand to consult individually
with Members and committees. Because of our proximity to the Congress,
because of the close working relationship we enjoy with you and your
staff, and because our experts prepare analyses that benefit the entire
congressional audience, we were able to deliver the services Congress
has mandated and come to expect. This is the kind of work the Congress
has outlined for CRS in our organic statute. However, our ability to
sustain this level of assistance, as you deliberate the wide range of
policy problems facing the Nation, will be in jeopardy if our staffing
capacity is reduced further.
CRS is a cost-effective extension of congressional staff. As a
shared pool of experts, CRS has the ability both to address high-
priority issues from a multi-disciplinary perspective and to provide a
wide range of high-level, specialized expertise. Individual committees
and Members could not retain such a valuable resource for their own
offices, but CRS, as a centralized, shared pool, proves to be very
cost-effective when meeting total congressional demand.

CRS RESEARCH MATERIALS

The third component of my request is a one-time, $1 million
baseline adjustment for research materials. There are a number of
critical electronic materials continually requested by our subject-
matter experts that CRS is currently unable to procure.
Annually, the Service carefully considers each subscription and
database renewal to ensure that the available funding is used to
acquire only the highest priority materials. Even with this close
scrutiny and the elimination of lesser used items, CRS has barely been
able to maintain a stable inventory of the resources most pertinent to
our work, let alone add any newly requested resources. However, sound
analysis depends on authoritative sources covering the full range of
subject areas that the Congress may consider.
CRS' work requires materials that are timely and authoritative,
particularly in emerging public policy issue areas, such as homeland
security and global terrorism. Your approval of our fiscal year 2006
request would enable us to buy resources such as Oxford Analytica,
Inside Washington publications, prescription-drug proprietary
databases, and the PIERS database. These represent highly specialized
and technical research resources and are not acquired by the Library of
Congress for CRS use. These materials are, however, available to others
who provide you information and who lobby for particular positions and
policy outcomes. Without access to those resources, CRS experts'
capacity to capture the range of knowledge available on an issue, to
prepare you for challenges you may face in defending your position, and
to provide you with the consequences of policy options is diminished.

MANAGEMENT INITIATIVES

Congress holds me accountable for managing responsibly, and in the
last 11 years I have gratefully undertaken that charge. I take
seriously my responsibility to assure you that the budgetary support
you give the Service results in a cost-effective organization that is
dedicated to its statutory mission and that offers you the highest
quality of service. I would like to take this opportunity to summarize
briefly some actions I have and continue to take that reflect this
commitment.
We continually examine and adjust our organizational structure to
maximize direct service to the Congress. We consolidated some CRS
facilities in the House congressional buildings with the assistance of
the Committee on House Administration. We made use of flexible hiring
programs, such as the Presidential Management Fellows and Hispanic
Association of Colleges and Universities (HACU) programs. We have taken
advantage of the cost savings that can be achieved through outsourcing
by implementing contracting services for our messenger service, copy
operations, and technology help-desk, and continually seek out new
opportunities.
Another initiative affecting personnel and improving efficiency is
the reorganization of our information professionals into a single
organizational unit. The thrust behind this major re-engineering effort
is to increase collaboration between information professionals and
analysts, which in turn will maximize efficiencies. Through
collaboration each functional unit can ensure that the work is handled
by the individual with the appropriate expertise to accomplish that
work.
Earlier I noted that 88 percent of CRS' budget is salaries and
benefits. The remaining 12 percent also merits close attention in my
efforts to streamline. Although this 12 percent of the CRS budget
represents our relatively fixed costs, we look carefully at those costs
to see if any component of that expenditure can be reduced or
eliminated. To achieve this we conduct an annual ``zero scrub'' of the
entire CRS budget. We look at every single cost category from the
ground up; we do not simply roll over the budget for these categories
from one year to the next. Also, we have initiated audits of every on-
going activity within CRS. These comprehensive audits will help us to
continue to secure a well-executed and cost-effective program, with the
assurance that every dollar spent contributes to the Service's singular
mission. I hope that you would contact me directly if you have any
concerns about our management activities, processes, or direction.

CONCLUSION

In closing, Mr. Chairman, I appreciate the opportunity to inform
the Committee about the state of CRS and the near-term challenges we
face in our continuing ability to serve the Congress. As the first
branch of government, the Congress must ensure that it maintains its
independent capacity to analyze the complex challenges that the Nation
confronts, especially during a time of war. I hope that you agree that
CRS contributes significantly to this independent capacity and that we
are fulfilling our mission in a way that warrants your ongoing support.
I am, of course, always available to answer any questions that the
Committee may have.

CONGRESSIONAL RESEARCH SERVICE RESPONSE TIME

Senator Allard. Thank you for your explanation.
Are you measuring the length of time it takes you, or do
you have some idea about the length of time it takes you to
respond to the average Congressional request?
Mr. Mulhollan. The majority of information requests are
answered in 24 hours. But a significant amount of time can be
spent on more complex questions--for instance, a study for a
committee dealing with, let us say, prescription drug pricing
and what changes are being considered in medicare benefits. The
use and manipulation of the drug pricing database can take
several months--and that could be considered one request.
Meanwhile, let us say an LA calls and says, ``I have a
Member who is looking at this language; can you explain this
language to me? We have just gotten it and the subcommittee
meeting is in a half hour.'' So it is also this kind of rapid-
response expertise that is drawn upon daily by the Congress.

PERFORMANCE MANAGEMENT

Senator Allard. As you can tell, for those of you here at
the table and in future testimony, I have a lot of interest in
performance and measurement. We require that on executive
branch agencies. We do not require it on the legislative
branch. But I do think that we ought to set an example here in
the legislative branch for the rest of the agencies. So I am
going to request more and more definitive assessment through
what we call GPRA, Government Performance and Results Act.
I think it has been a good business tool. When I did my
business, I set goals that were measurable, measured them, and
then it helped me evaluate as a manager in my own business
exactly whether we were meeting those goals or not.
So some of my questions are being laid out to prepare you a
little bit for when we get into the next year and then I will
be asking questions about how you are doing setting down
performance standards and then measuring the results. I think
as administrators it helps us all understand what is going on
and then we can focus on results and do not have to focus about
the nitty-gritty of management, we will leave that to you, but
we just look at results and then we have something that is
measurable, hopefully.

CRS PERFORMANCE MEASUREMENT

Mr. Mulhollan. Mr. Chairman, may I add for the
Congressional Research Service, we welcome that. We have been
spending a significant amount of time on considering meaningful
performance measurements. You can look at the workload measures
that we have identified. I think there are significant success
stories. For example, in fiscal year 2002 we responded to a
total of 811,000 requests, and in fiscal year 2004 we responded
to almost 900,000 requests.
We break that down further, for example to track hits on
the CRS web site, which is solely for use by the Congress. No
one else has the depth of expertise covering roughly 170 major
public policy areas, where you can have it targeted to meet the
needs of each chamber, whether in committee or on the floor,
and where the analysis anticipates the consequence of your
decisions there. We have now, almost 5,000 reports, continually
updated on more than 300 issues and available for the Congress.
Two years ago we had 4,000. So it is an additional 1,000
reports that we are keeping updated along this line.
Another measure is e-mail exchanges. Following up with a
Congressional request we now have an encrypted e-mail exchange
between the Senate and the House and ourselves. As a
consequence of that effort, last year we counted 77,000
exchanges. As of the first quarter of the current fiscal year,
we have seen a 13 percent increase from last year.
So our measures I think on our focused assistance are good
and solid, and we are working to improve them.
Senator Allard. Very good. Thank you.

LIBRARY OF CONGRESS PERFORMANCE MEASUREMENT

Dr. Billington. Mr. Chairman, let me just add----
Senator Allard. Dr. Billington.
Dr. Billington [continuing]. A point, that we are not
actually required to use the Government Performance and Results
Act, but we do use it as a guide.
Senator Allard. I am glad to hear that.
Dr. Billington. I would only say also that, as we were just
saying with the Open World program, which actually is a
separate line item but I happen to chair the board, so I am
happy to answer for it and it is in the legislative branch as
well, in that as in the Library as a whole performance has to
be seen over a long period of time. One would have said that
there was very little justification for keeping old German
archaeological records. Every other library in the world
discarded them. But when it came to verifying whether the tanks
that did the flanking motion in southern Iraq would sink in the
sand or be able to sustain them, it was that kind of material
that enabled them to verify, because the Germans pedantically
reported how much they dug and how long it took, with what kind
of shovel, in Mesopotamia, which is where a lot of the
archaeology was.
So what I am saying is that having this extra margin, which
is what we are talking about when we talk about the need for
acquisitions and the use of our overseas offices--Islamabad,
Cairo, all these places--where valuable information is gathered
that really does not exist anywhere else, it is a long-term
investment. You do not know when you are going to cash in the
investment, but it is of incalculable value to have so much
knowledge because you cannot possibly anticipate what kinds of
questions are going to be essential for this country.
Senator Allard. I recognize the complexities of getting
measurable goals out there. It is not always easy. And I
recognize the fact that you cannot look at it just on a short-
term basis, but you do need to collect this data on an annual
basis and see over a trend line over several years, and then
that gives you some idea of how your programs are operating.
Dr. Billington. Oh, absolutely, and we welcome it. And as I
say, we try to follow these guidelines.
Senator Allard. That is one of the issues I am going to
take a little time exploring with all the legislative agencies.
Thank you, Dr. Billington. Thank you, General Scott. Dan,
thank you, and Mr. Mulhollan. I appreciate your testimony.
Thank you.
General Scott. Thank you, sir.

ADDITIONAL COMMITTEE QUESTIONS

Senator Allard. Also, we will be making your full statement
a part of the record.
If there are any additional questions, they will be
submitted to you for your response.
[The following questions were not asked at the hearing, but
were submitted to the Library for response subsequent to the
hearing:]

Questions Submitted by Senator Wayne Allard

IMPACT OF TECHNOLOGY

Question. According to LOC's budget justification, ``To help
researchers quickly find information that is relevant, authoritative
and verifiable, the Library must adapt its traditional strengths of
acquiring, describing, serving and preserving information to an
environment that is not bound by time or physical space.'' How do you
balance the Library's traditional mission with this new requirement?
How does technology help streamline and make more cost-effective the
Library's ability to meet its mission, and even reduce costs?
Answer. The Library's traditional mission is being pushed by the
expectations of users, who increasingly demand and rely on electronic
resources in addition to the traditional reference, descriptive, and
access services for physical collections that the Library provides.
While the Library continues to make accessible and preserve its print
and multimedia collections, it requires additional resources and new
skill sets among staff to purchase and serve electronic resources such
as subscription databases, which are the cornerstones of research in
many academic disciplines today.
Technology enables the Library to increase its services to the
Congress and to its other constituencies in many ways:
--Entire Library collections of primary source materials are
available online via American Memory and Global Gateway to be
shared in libraries and classrooms around the country and
around the world.
--Reference questions are asked and responded to via the Web.
--Guides to Library manuscript and other special format collections
are available online for researchers to peruse before they come
to the reading rooms, making their time in the Library more
productive.
--Catalogers are pioneering Electronic Data Interchange (EDI)
applications to share bibliographic and authority control
records with other national libraries and library services
vendors.
--Publishers share pre-publication galleys of books electronically
with the Cataloging in Publication (CIP) program to streamline
cataloging processes and shorten publication time.
The Library offers direct services to Congress electronically as
well. ``LCnet'' premiered this spring as an online portal devoted
solely to Members of Congress and their staff to interact with the
Library on a number of fronts--to reserve rooms and plan special
events, to arrange tours for constituents, to receive customized
calendars of Library events, and to fulfill other special services or
information needs that arise.

CVC TUNNEL

Question. The Capitol Visitor Center will include a tunnel to the
Library of Congress' Jefferson Building. Do you have any estimate of
how much visitation will increase? Will you need additional staff for
tours or security? Do you plan any new activities that will necessitate
additional resources?
Answer. The number of visitors to the Library could triple to more
than three million annually with the opening of the Capitol Visitor
Center tunnel. Should the number of visitors exceed building safety
requirements, the entrance through the tunnel to the Thomas Jefferson
Building will be limited on an hourly basis or through a ticketing
system. At present, we are assuming that security screening will take
place on the Capitol Visitor Center side and that visitors entering the
Library through the tunnel will not be re-screened.
The Library is studying the impact the Capitol Visitor Center
tunnel will have on the level of visits to the Thomas Jefferson
Building in particular and to the Library and its services for visitors
as a whole. Planning is underway to enhance the visitor experience, and
it is not yet clear whether the experience will be largely self-guided
and enhanced by interactive kiosks and audio tours, or whether it will
be more traditionally led by staff and volunteer docents. Internal and
external planning expertise is being deployed on this front, and the
results of these consultations will determine whether additional
resources will be necessary.

BOOKS FOR THE BLIND AND PHYSICALLY HANDICAPPED

Question. The Library has been working for several years to develop
a design for a ``digital talking book'' to replace the current cassette
tape system to make books available to the blind. When do you expect to
need the funds necessary to begin the full conversion to the digital
format? How much will be required in total?
Answer. The National Library Service for the Blind and Physically
Handicapped projects that a total of approximately $76.5 million will
be required to fund the transition from analog cassette to a digital
format over a period of four years. An initial request of approximately
$19 million will be submitted in fiscal year 2007.

NATIONAL DIGITAL INFORMATION INFRASTRUCTURE AND PRESERVATION PROGRAM

Question. Library has been spearheading a $100 million effort aimed
at preserving ``born-digital'' materials. There are now 8 NDIIP
grantees/partners, who were awarded $14.5 million. What has been
accomplished to date and what do you expect to accomplish in the year
ahead? Why is the Library requesting a waiver for state government
entities of the dollar-for-dollar match requirement? Do you anticipate
additional funds will be needed in the future for this effort? Are
other federal agencies, such as the National Archives, providing
resources for this effort?
Answer. NDIIPP Accomplishments to date and expected accomplishments
include the following:
--The goal of the NDIIPP is to build a national preservation program
for reliable digital content. The Library is following the plan
approved by Congress in 2002, executing three areas of
investment: building a network of partners to share in this
responsibility; developing the technical architecture to
support that network (standards and protocols); and creating
the tools for digital preservation. Continuing investment in
these three areas is expected in the coming years.
--An 18-month test of 6 existing technical architectures was
completed with 4 other large research libraries. This work
advances the development of the architecture necessary support
a network of partners.
--NDIIPP launched its first partners in January 2004--8 consortiums
with a total of 36 organizations to collect at risk digital
content in excess of 60 terabytes. The content is diverse and
consists of web sites, social science data sets, geo-spatial
materials, business history, and digital television
programming. These partners provided $15 million in pledged
matching funds over the next 3 years.
--A Copyright Working Group, made up of representatives of the
content creator/distributor communities, libraries, and
archives, was just launched to examine Section 108 of the
copyright law dealing with libraries and archives. This work is
sponsored by NDIIPP working with the U.S. Copyright Office. The
working group will make recommendations to Congress about
revisions to the law.
--Working with NSF, the Library is funding 7 advanced research grants
for developing tools and techniques for digital preservations.
--The Library is working with E-Archives, the San Diego Super
Computer Center and the Los Alamos National Laboratories to
develop repository software for archiving different types of
digital content.
In 2005, we are developing a program to bring state and local
organizations into the preservation network. The request for a waiver
results from the Library's experience in building collaborative NDIIPP
relationships in the last few years. The Library recognizes that there
are limited discretionary funds available, especially from state
governmental entities, to meet common digital preservation challenges
faced by all preserving institutions. Building sustainable preservation
network partnerships is a long-term process. By requesting the state
waiver, the Library plans to encourage the active building of broad
collaborative relationships within and among state entities. By not
subjecting these entities immediately to the match provision, the
Library hopes to catalyze states to seek out building sustainable long-
term collaborative relationships during and after the grant period, and
not before.
The Library does not anticipate additional funds, beyond that which
already has been authorized for NDIIPP, will be needed to execute the
NDIIPP program by 2010.
The Library works collaborative with other federal agencies through
their participation in the National Digital Strategy Advisory Board
(NDSAB), joint participation in developing technical digital
preservation guidelines and best practices, and their work with the
Library's collaborating partners in the NDIIPP program. Other federal
agencies do not provide direct resources to the Library and its NDIIPP
program.

OUTSOURCING

Question. Is the Library seeking opportunities to outsource any
activities, as a way to reduce costs? Please explain.
Answer. The Library outsourced a significant number of activities
and continually seeks to identify additional activities that are
appropriate for outsourcing in order to improve service, reduce cost,
increase responsiveness, and promote efficiency in the agency. Some
examples of activities that are currently outsourced include:
--Infrastructure support services (custodial services, food services,
furniture and furnishings installations and maintenance, trash
removal and recycling pick-up, vehicle leases, secure mail
operations, messenger service, graphics and design services,
etc.)
--Human Resource Services (employee assistance program, retirement
services, management of personnel records, job analysis,
selected training, etc.);
--Information technology (help desk and user support);
--Security (security within reading rooms, exhibit areas, and
outlying annexes, and ID card and finger printing functions);
--Financial (payroll processing, travel services, implementation of
new financial systems, etc.); and
--Program support (translation services, receptionist support).
In addition, several of the Library's major programs are either
outsourcing some of their work or investing in outsourcing pilots. For
example:
--Library Services has issued a contract to an Italian bookseller for
a pilot project in which Italian books bought for the
collection will also be cataloged by the bookseller. If this
pilot is successful, outsourcing the cataloging of some of the
foreign language collections is a possibility--both to reduce
costs and to gain language expertise that is not always
available on staff.
--The Copyright Office outsourced its registration certificate
production (i.e., printing and quality checking for over half a
million copyright registration certificates per year). In
addition, data entry of titles from recorded copyright
documents, totaling anywhere from 300,000 to 500,000 titles per
year, and contracting for selected divisional IT technical
support are partially outsourced.
--The Law Library outsourced work related to its Global Legal
Information Network (GLIN), including scanning of documents,
data input, and quality control of laws, regulations and other
legal sources that comprise the GLIN. The Law Library has also
outsourced a number of core services related to collection
management, such as processing new receipts, binding
preparation, loose leaf filing and shelving.
--In addition to actions taken and planned within the Library, the
Congressional Research Service (CRS) has done a significant
amount of outsourcing and continues its efforts to seek out
additional opportunities. In response to the recent Legislative
Branch Agency Self-Certification Survey, CRS described a number
of activities that have been outsourced and for which the
tangible benefits have already been factored into the Service's
annual Operating Plan. Over the past eight to ten years, CRS
has permanently outsourced a number of on-going business
activities, including its messenger service; mail operations;
copy centers; technology help-desk and user support; foreign
language translations; receptionist positions; job analysis;
graphics design work; and general laborers/movers. CRS utilizes
contractors to produce specific deliverables within a limited
timeframe where securing in-house capability is not warranted
given the temporal nature of the need. Examples of this type of
outsourcing include library support functions; professional
librarians; on-site group training and staff development
services; assistance with developing a performance management
system; professional survey instruments; professional services
to help develop new authoring policies and procedures as well
as meeting federal archiving obligations under the Federal
Records Act; and cataloguing services.
Savings gained through these outsourcing measures has provided CRS
with some interim financial flexibility to absorb cost increases in
other aspects of the Service's budget, e.g., software maintenance,
research materials, employer-paid benefits costs for staff, and staff
performance awards. While the Service believes that it has reached a
level of critical mass with paring down its expenses and defraying
unavoidable cost increases, CRS continually evaluates its programs,
activities, and projects to determine the feasibility of undertaking
them through outsourcing mechanisms.
Further, CRS conducts in-depth program/financial audits of each of
its on-going business activities every two years to ensure that the
level of service is both appropriate for and contributes directly to
meeting the mission and strategic objectives and performance targets
set forth by the Director. In addition to the on-going activity
reviews/audits, CRS conducts other internal studies to assess
organizational structure or performance in comparison to the Service's
total program needs. The results of these studies inform business
decisions about the proper skills levels and mix needed throughout the
Service, the right distribution of those skills and capacities, and the
most cost effective way to deliver the skills and capacities--
specifically, via in-house staffing or by outsourcing. Using
information gleaned from its quarterly/annual performance reviews and
annual management control reviews, CRS is continually probing its own
operation to ensure that every aspect of the day-to-day business is
carried out in the most efficient and cost-effective way possible and
contributes to the singular goal of meeting the analytic research and
information needs of the Congress.

GOVERNMENT ACCOUNTABILITY OFFICE

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL OF
THE UNITED STATES
ACCOMPANIED BY:
GENE DODARO, CHIEF OPERATING OFFICER
SALLYANNE HARPER, CHIEF ADMINISTRATIVE OFFICER
STAN CZERWINSKI, CONTROLLER

Senator Allard. Now we will call the Government
Accountability Office (GAO), please. We are having Mr. David
Walker, Comptroller General; Gene Dodaro, Chief Operating
Officer; and Sallyanne Harper, Chief Administrative Officer;
and then Stan Czerwinski, who is our Controller.
Mr. Walker, when you are ready you may proceed. We will ask
that you limit your testimony to 5 minutes or so, and we will
go into question and answer. We will make your full statement
part of the record.

OPENING REMARKS

Mr. Walker. Thank you, Mr. Chairman. It is a pleasure to be
back before this subcommittee to talk about our fiscal 2006
budget request. As you mentioned, accompanying me on my
immediate right, Sallyanne Harper, our Chief Administrative
Officer and Chief Financial Officer; on her right, Stan
Czerwinski, about whom you had very kind comments, our
Controller; on my left, Gene Dodaro, our Chief Operating
Officer. We appreciate your having us before you, because all
of these individuals and others have played an important part
in putting together this budget submission.
I respectfully request, Mr. Chairman, that my entire
statement be included in the record. Therefore, I will
summarize the highlights.
Senator Allard. So ordered, without objection.
Mr. Walker. Thank you very much.
As you know, Mr. Chairman, GAO is the third largest agency
in the legislative branch based upon budget authority. Our job
is to help the Congress discharge its constitutional
responsibilities, basically geared toward helping to improve
the performance of Government and assure the accountability of
Government for the benefit of the American people. I was
encouraged and had a very favorable reaction to your
conversation before about performance and results.
I would note that we voluntarily comply with the Government
Performance and Results Act. Our objective is not just to
comply with the Act; it is to lead by example and to be the
best in Government in anything that we do. I would respectfully
suggest that when you have a chance you may want to take a look
at GAO's Fiscal Year 2004 Performance and Accountability
Highlights Report, because I think you will be proud of what it
has to say.
We have an important philosophy of leading by example,
because we are the agency that audits, investigates, and
evaluates others. Therefore, I believe we have a responsibility
to be as good or better than the agencies we audit, investigate
or evaluate. This adds to our effectiveness as well as our
credibility. In fact, one of our four goals under our strategic
plan for serving the Congress is to be a model Federal agency
and a world class professional services organization.

MEASURING SUCCESS

We have four key success measures: results that are outcome
based, not activity based; the feedback we get from clients;
what our most valuable asset, our employees, say about us; and
what our partners within and outside of Government, say about
us, namely whether we are a good partner.
For fiscal year 2004 we had record results, all-time record
results for GAO. For example, we achieved $44 billion in
financial benefits, a $95 return for every dollar spent by
GAO--an all-time record. Number one in the world, nobody is
even close. Second, with regard to clients, a 97 percent client
satisfaction rate. Also, an all-time record. With regard to
employees' views on our overall operations and work
environment, GAO will probably receive one of the highest
ratings in the federal government based upon past reported
activity. With regard to our partners, we get very positive
feedback.
With regard to our budget, we are very well aware that the
federal government faces a large deficit and a long-range
fiscal imbalance. Therefore, for several years we have tried to
lead by example in this regard as well. We have had very modest
budget requests, as is the case this year.
There is some risk, Mr. Chairman, in trying to lead by
example in this regard, because it means that we count on you,
your capable staff, and others to make sure that there is a
level playing field in scrubbing these budget requests before
you make final decisions. For example, if this subcommittee
were to approve the request of every legislative branch
agency--and I know you are unable to do that because of the
fiscal pressures--and if you were to see how much of a budget
increase would have been achieved in the last 3 years, from
fiscal years 2004 to 2006, versus the average for the
legislative branch, GAO's increase if we got everything that we
asked for, which is based on need versus want, would be a total
of 7.4 percent. That is basically inflation. The average for
the legislative branch would be 18.4 percent.
So I would respectfully suggest, Mr. Chairman, that it is
important not just to look at 1-year budget requests, but also
to look, as you pointed out before, at the trendline of what
has happened over the last several years, where do things stand
on a relative basis as well as hopefully be able to look at
return on investment. By having a modest budget request and a
strong return on investment, we hope that puts us in a strong
position to get our fair share.

PREPARED STATEMENT

The last thing I would say, Mr. Chairman, is I appreciate
this subcommittee's past support of GAO. I look forward to
working with you. I congratulate you on your appointment to the
chairmanship, and I know that it is going to be a tough year
and series of years. But I think by focusing on minimizing
budget requests, maximizing return on investment, and focusing
on positive, outcome-based results, I hope that it will make
your job a little bit easier.
Thank you.
[The statement follows:]

Prepared Statement of David M. Walker

Mr. Chairman and Members of the Subcommittee: I am pleased to
appear before you today in support of the fiscal year 2006 budget
request for the U.S. Government Accountability Office (GAO). This
request is necessary to help us continue 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.
We are grateful to the Congress for providing us with the support
and resources that have helped us in our quest to be a world-class
professional services organization. I am proud of the work we
accomplish as we continue to provide our congressional clients with
professional, objective, fact-based, non-partisan, non-ideological,
fair, balanced, and reliable information in a timely manner regarding
how well government programs and policies are working and, when needed,
recommendations to make government work better. We believe that
investing in GAO produces a sound return and results in substantial
benefits to the Congress and the American people. In the years ahead,
our support to the Congress will likely prove even more critical
because of the pressures created by our nation's current and projected
budget deficit and long-term fiscal imbalance. These fiscal pressures
will require the Congress to make tough choices regarding what the
government should do, how it will do its work, who will help carry out
its work in the future, and how government will be financed in the
future.
We summarized the larger challenges facing the federal government
in our recently issued 21st Century Challenges report.\1\ In this
report, we emphasize the critical need to bring the federal
government's programs and policies into line with 21st century
realities. Continuing on our current unsustainable fiscal path will
gradually erode, if not suddenly damage, our economy, our standard of
living, and ultimately our national security. We, therefore, must
fundamentally reexamine major spending and tax policies and priorities
in an effort to recapture our fiscal flexibility and ensure that our
programs and priorities respond to emerging security, social, economic,
and environmental changes and challenges in the years ahead. I believe
that GAO can be of invaluable assistance in helping the Congress
address these challenges.
---------------------------------------------------------------------------
\1\ GAO, 21st Century Challenges: Reexamining the Base of the
Federal Government, GAO-05-325SP (Washington, D.C.: February 2005).
---------------------------------------------------------------------------
My testimony today will focus on our (1) performance and results
with the funding you provided us in fiscal year 2004, (2) streamlining
and management improvement efforts under way, and (3) budget request
for fiscal year 2006 to support the Congress and serve the American
people.

SUMMARY

In summary:
--The funding we received in fiscal year 2004 allowed us to audit and
evaluate a number of major topics of concern to the nation and,
in some cases, the world. For example, we reported on the
reconstruction efforts in Afghanistan and Iraq; important
concerns about pay and other support for the National Guard and
Reserve forces; numerous topics related to homeland and
national security, including improving operations of the
Departments of Homeland Security and Defense; curbing the use
of counterfeit identity documents; and making the nation's
transportation system safer from potential acts of terrorism.
We also continued to raise concerns about the nation's long-
term fiscal imbalance, summarized key health care statistics
and published a proposed framework for related reforms, and
provided staff support for the 9/11 Commission. In fiscal year
2004, we exceeded or equaled our all-time record for six of our
seven key performance indicators while continuing to improve
our client and employee feedback results. I am especially
pleased to report that we documented $44 billion in financial
benefits--a return of $95 for every dollar spent, or $13.7
million per employee. In fiscal year 2004, we also recorded
1,197 other benefits that could not be measured in dollar terms
including benefits that helped to change laws, to improve
services to the public and to promote sound agency and
governmentwide management. Also, experts from our staff
testified at 217 congressional hearings covering a wide range
of important public policy issues during fiscal year 2004.
--Shortly after I was appointed Comptroller General, I determined
that our agency would undertake a transformation effort. This
effort is consistent with the elements of House Report (H.
Rpt.) 108-577 that focus on improving the efficiency and
effectiveness of operations at legislative branch agencies. Our
transformation effort has enabled us to eliminate a management
layer, streamline our organization, reduce our overall
footprint, and centralize many of our support functions.
Currently, over 50 percent of our support staff are
contractors, allowing us to devote more of our staff resources
to our mission work. We recently surveyed managers of agency
support operations and identified additional activities that
potentially could be filled through alternative sourcing
strategies. In fiscal years 2005 and 2006, we will further
assess the feasibility of using alternative sourcing for these
activities. I would be pleased to brief you at a later date on
our preliminary analyses.
--In developing our fiscal year 2006 budget, we have taken into
consideration the overall federal budget constraints and the
committee's desire to lead by example. Accordingly, we are
requesting $493.5 million which represents a modest increase of
4 percent over fiscal year 2005. This increase is primarily for
mandatory pay costs and price level changes. This budget
request will allow us to continue to maximize productivity,
operate more effectively and efficiently, and maintain the
progress we have made in technology and other areas, but it
does not allow us sufficient funding to support a staffing
level of 3,269--the staffing level that we requested in
previous years. Even as we are tempering our budget request, it
needs to be acknowledged that there are increasing demands on
GAO's resources. For example, the number of congressional
mandates for GAO studies, such as GAO reviews of executive
branch and legislative branch operations, has increased more
than 15 percent since fiscal year 2000. While we have reduced
our planned staffing level for fiscal years 2005 and 2006 in
order to keep our request modest, we believe that the staffing
level we requested in previous years is a more optimal staffing
level for GAO and would allow us to better meet the needs of
the Congress and provide the return on investment that both the
Congress and the American people expect. We will be seeking
your commitment and support to provide the funding needed to
rebuild our staffing levels over the next few fiscal years,
especially as we approach a point where we may be able to
express an opinion on the federal government's consolidated
financial statements.

FISCAL YEAR 2004 PERFORMANCE AND RESULTS

In fiscal year 2004, much of our work examined the effectiveness of
the federal government's day-to-day operations, such as administering
benefits to the elderly and other needy populations, providing grants
and loans to college students, and collecting taxes from businesses and
individuals. Yet, we remained alert to emerging problems that demanded
the attention of lawmakers and the public. For example, we continued to
closely monitor developments affecting the Iraq war, defense
transformation, homeland security, social security, health care, the
U.S. Postal Service, civil service reform, and the nation's private
pension system. We also informed policymakers about long-term
challenges facing the nation, such as the federal government's
financial condition and fiscal outlook, new security threats in the
post-cold war world, the aging of America and its impact on our health
care and retirement systems, changing economic conditions, and the
increasing demands on our infrastructure--from highways to water
systems. We provided congressional committees, members, and staff with
up-to-date information in the form of reports, recommendations,
testimonies, briefings, and expert comments on bills, laws, and other
legal matters affecting the federal government. We performed this work
in accordance with the GAO Strategic Plan for serving the Congress,
consistent with our professional standards, and guided by our core
values. See appendix I for our Strategic Plan Framework for serving the
Congress and the nation.

Outcomes of Our Work
In fiscal year 2004, our work generated $44 billion in financial
benefits, primarily from recommendations we made to agencies and the
Congress (see fig. 1). Of this amount, about $27 billion resulted from
changes to laws or regulations, $11 billion resulted from agency
actions based on our recommendations to improve services to the public,
and $6 billion resulted from improvements to core business processes,
both governmentwide and at specific agencies, resulting from our work
(see fig. 2). Our findings and recommendations produce measurable
financial benefits for the federal government when the Congress or
agencies act on them. The funds that are saved can then be made
available to reduce government expenditures or be 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
able to reduce its 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 sales--that our work helped to produce. 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. Figure 3 lists
several of our major financial benefits for fiscal year 2004 and
briefly describes some of our work contributing to financial benefits.

FIGURE 3.--GAO'S SELECTED MAJOR FINANCIAL BENEFITS REPORTED IN FISCAL
YEAR 2004
------------------------------------------------------------------------
Description Amount
------------------------------------------------------------------------
Eliminated Medicaid's upper payment limit loophole. We $10,073
identified a weakness in Medicaid's upper payment limit
methodology that allowed states to make excessive payments
to local, government-owned nursing facilities and then
have the facilities return the payments to the states,
creating the illusion that they had made large Medicaid
payments in order to generate federal matching payments.
Closing the loophole prevented the federal government from
making significant federal matching payments to states
above those intended by Medicaid. The amount shown
represents the net present value of estimated financial
benefits for fiscal years 2005 and 2006--the final years
for which benefits can be claimed.........................
Updated the Consumer Price Index (CPI). We recommended that $5,074
the Bureau of Labor Statistics periodically update the
expenditure weights of its market basket of goods and
services used to calculate the CPI to make it more timely
and representative of consumer expenditures. The bureau
agreed to do this every 2 years, and the CPI for January
2002 reflected the new weights. For federal programs that
use the CPI as an index for determining benefits, the
adjustments have resulted in decreased federal
expenditures (e.g., reduced Social Security cost-of-living
adjustments) and increased federal revenues, such as
reductions in the growth of personal exemptions for
federal income taxes. The amount shown represents
projected financial benefits for fiscal year 2007, the
fifth and final year for which we will allow benefits to
be claimed for this action................................
Reduced costs associated with Medicare spending on home $4,661
health care. We reported in 2002 that Medicare's payments
for home health care episodes were, on average, about 35
percent higher than the estimated costs of home health
care provided in the first 6 months of 2001. Our report
helped to ensure that the Congress did not delay or
eliminate a scheduled reduction in Medicare home health
payments that had risen rapidly from the late 1980s
through the mid-1990s.....................................
Reduced the cost of federal housing programs. We determined $3,638
that the Department of Housing and Urban Development (HUD)
did not have the information it needed to routinely
calculate and track unexpended balances in its housing and
community development programs. As a result of our work,
the Congress required HUD to prepare quarterly reports on
unexpended balances for each program, and HUD management
committed to closely monitor these balances and identify
amounts available for recapture...........................
Improved the use of the Iraqi Freedom Fund. We reported $3,490
that the military services may not obligate all of the
funds appropriated for the global war on terrorism in
fiscal year 2003 as required. Thus, the Congress rescinded
$3.49 billion from the September 2003 balance remaining in
the Iraqi Freedom Fund as part of the fiscal year 2004
Department of Defense Appropriations Act. These funds were
made available for other purposes.........................
Reduced costs associated with preparing the Department of $2,057
Defense's (DOD) financial statements. We determined that
DOD's initial plans to obtain a favorable fiscal year 2004
audit opinion were not feasible or cost-effective.
Therefore, instead of moving $2.2 billion to fund the DOD
components' efforts focused on a fiscal year 2004 audit
opinion, the DOD Comptroller shifted $184 million to begin
auditability assessments and audits, as applicable, as
part of a long-term strategy to improve DOD's fiscal
accountability. The Comptroller's decision not to
reprogram the funds allowed DOD to use over $2 billion for
other purposes during the fiscal year.....................
Modified the focus of funding for DOD's V-22 Osprey $1,618
aircraft program. We highlighted for DOD officials--before
full production of the aircraft was scheduled to begin--
numerous risks and unknowns that existed in the V-22
Osprey program because of inadequate testing and
evaluation. We reported these concerns to a blue-ribbon
investigative panel established after a second fatal crash
of the V-22. As a result of our work, the blue-ribbon
panel recommended that DOD temporarily reduce the
production of the V-22 to a minimum level to free up funds
to better address the research and development issues we
raised. The Congress reduced the procurement funding for
purchasing V-22 aircraft from the planned 37 to 11 for
each of fiscal years 2003 and 2004. This action allowed
some funds to be used for development testing of the V-22
aircraft, but the remaining funds were made available for
other purposes............................................
Eliminated unnecessary military funding from the budget. We $1,353
recommended that requested fiscal year 2004 funds be
eliminated for three terminated military operations
involving Iraq's compliance with various United Nations
resolutions, Operations Northern and Southern Watch and
Operation Desert Spring. These funds were made available
for other purposes........................................
Improved DOD's contracting and acquisition practices. We $868
developed a strategic framework--based on the best
practices of leading private-sector companies--to guide
DOD's services contracting reforms and recommended changes
in DOD's organizational structure and approach to
acquiring goods and services, such as using cross-
functional teams and spend analyses to coordinate key
purchases and leverage buying power for the agency. As a
result of work done by us and others, the Congress cut
DOD's budget in its fiscal year 2003 appropriation in
anticipation of expected savings. This accomplishment
amends a financial benefit we claimed in fiscal year 2002
and represents an additional benefit in fiscal year 2004--
the final year for which a benefit can be claimed.........
------------------------------------------------------------------------
Source: GAO.

Many of the benefits that result from our work cannot be measured
in dollar terms. During fiscal year 2004, we recorded a total of 1,197
other benefits (see fig. 4). We documented 74 instances where
information we provided to the Congress resulted in statutory or
regulatory changes, 570 instances where federal agencies improved
services to the public, and 553 instances where agencies improved core
business processes or governmentwide reforms were advanced (see fig.
5). These actions spanned the full spectrum of national issues, from
ensuring the safety of commercial airline passengers to identifying
abusive tax shelters. See figure 6 for examples of other benefits we
claimed as accomplishments in fiscal year 2004.

FIGURE 6.--GAO'S SELECTED OTHER (NONFINANCIAL) BENEFITS REPORTED IN FISCAL YEAR 2004
----------------------------------------------------------------------------------------------------------------
Explanation
----------------------------------------------------------------------------------------------------------------
OTHER BENEFITS THAT HELPED TO CHANGE
LAWS

Vision 100-Century of Aviation We worked closely with the Congress to draft language that was included in
Reauthorization Act, Public Law 108- this law related to curriculum and certification requirements for
176. aviation mechanics. The language, which was based on recommendations we
had made, included a requirement that the Federal Aviation Administration
update and revise curriculum standards for aviation mechanics.
Medicare Prescription Drug, Congress included six provisions in the law based on analyses and
Improvement, and Modernization Act recommendations we made. For example, our work found that Medicare's
of 2003, Public Law 108-173. method for establishing payment rates for drugs obtained under Medicare
Part B--which covers doctors' services, outpatient hospital care, and
some other nonhospital services--was flawed because it based payments on
nonmarket-driven price estimates. The law addressed these issues by
lowering payment rates in 2004 for drugs covered by Part B to more
closely reflect acquisition costs and by changing the method for
calculating these payment rates in 2005, basing these rates on a market-
driven estimate. Also, partly on the basis of our work, the Congress
modified the eligibility criteria for small rural hospitals to qualify as
critical access hospitals under the Medicare program. This change
provides flexibility for some additional hospitals to consider
conversion. Because of Medicare's payment methodology, converting to a
critical access hospital may help bolster a hospital's financial
condition, allowing it to continue to provide services to patients.
Consolidated Appropriations Act, We found that HUD could make more accurate eligibility decisions for
2004, Public Law 108-199. individuals seeking housing assistance if it had access to more timely
income information available from the Department of Health and Human
Service's Office of Child Support Enforcement's National Directory of New
Hires. We recommended that HUD match applicants and current recipients of
its rental housing assistance programs with the new hires database. This
law gives HUD access to information from the database that will better
ensure that only eligible individuals receive housing assistance.
National Defense Authorization Act We testified that most existing federal performance appraisal systems,
for Fiscal Year 2004, Public Law including a vast majority of DOD's systems, are not designed to support a
108-136. meaningful performance-based personnel system, and agencies should have
to demonstrate that these systems are modern, effective, and valid in
order to receive any additional performance-based flexibilities. We
suggested that the Congress establish a governmentwide fund whereby
agencies could apply for funds to modernize their performance management
systems and ensure that those systems have adequate safeguards to prevent
abuse. This law established the Human Capital Performance Fund to support
all executive agencies as they plan for and carry out performance-based
rewards for their civilian employees.

OTHER BENEFITS THAT HELPED TO
IMPROVE SERVICES TO THE PUBLIC

Helped to Ensure the Safety of In July 2001, we reported that the Food and Drug Administration's (FDA)
Shellfish. oversight of states' shellfish safety programs was not risk-based and
thus FDA was not using its limited resources wisely. To better ensure
shellfish safety, we recommended that FDA identify risk factors for each
of its program elements (growing area classification, processing and
shipping, and control of harvest). FDA developed a scoring system for
these factors. FDA shellfish specialists compute a total risk score of
high, medium, or low that determines the frequency of the evaluation of
that program element. High-risk elements were to be evaluated every year
beginning in fiscal year 2003, medium-risk elements every second year
beginning in fiscal year 2004, and low-risk elements every third year
beginning in fiscal year 2005.
Identified the Need for Better Our report found that states did not have the information needed to
Criteria to Determine Highly determine whether teachers had met criteria to be considered highly
Qualified Teachers. qualified, as required by the No Child Left Behind Act. Specifically,
states did not have the information they needed to develop methods to
evaluate the subject area knowledge of teachers. To help states determine
the number of highly qualified teachers they have and the actions they
need to take to meet the requirements for highly qualified teachers by
the end of the 2005-2006 school year, we recommended that the Secretary
of Education provide more information to states about methods to evaluate
subject area knowledge of current teachers. In January 2004, Education
issued a revised version of the guidance ``Improving Teacher Quality,''
which contains more information on how to evaluate subject area knowledge
to meet the federal definition of a highly qualified teacher.
Specifically, the guidance includes a new section that, among other
things, defines evaluation standards and factors to consider when
developing them.
Encouraged VA to Clarify the Array We recommended that the Department of Veterans Affairs (VA) specify in
of Home Health Care Services policy whether three home health services--home-based primary care,
Available to Veterans. homemaker/home health aide, and skilled home health care--are to be
available to all enrolled veterans. In response, VA published an
information letter on October 1, 2003, clarifying that, according to VA
policy, the three home health services are to be available for all
enrolled, eligible veterans in need of such services. The information
letter was distributed to all facilities through e-mail and is available
on the VA Web site.

OTHER BENEFITS THAT HELPED TO
PROMOTE SOUND AGENCY AND
GOVERNMENTWIDE MANAGEMENT

Identified the Need for More We found that the Internal Revenue Service (IRS) is investing more in
Specific Criteria to Select for audits of large corporations and getting less in return. To improve the
Audit Tax Returns from Large audits of tax returns filed by large corporations, we recommended that
Corporations. IRS provide more specific objective criteria and procedures to guide the
selection of large corporate tax returns and classification of tax issues
with high audit potential across the districts. In March 2002, IRS
implemented a process for scoring returns in order to fully implement a
plan to place these returns in the field for audit. IRS has begun to
identify high-risk returns from corporate and partnership tax returns
using the Discriminant Analysis System.
Helped to Centralize the Oversight We examined various DOD initiatives underway that are intended to better
of Major DOD Contracts. manage acquisition of services, including drafting policy to provide
better oversight on purchases of high-dollar value services. In response
to our work, the Under Secretary of Defense for Acquisition, Technology,
and Logistics and each of the military departments now have a management
structure in place and a process for reviewing major (i.e., large-dollar
or program-critical) service acquisitions for adherence to performance
and other contracting requirements. The new policy establishes a
threshold of $500 million or more for selecting service purchases for
review and approval by the military department and possibly DOD
headquarters, allowing DOD to adequately plan major purchases before
committing the government to major expenditures.
Helped to Reduce Fraud, Waste, and In a series of reports and testimonies beginning in 2001, we highlighted
Abuse of Agencies' Purchase Cards. pervasive weaknesses in the government's $16 billion purchase card
program. Our work identified numerous cases of fraud, waste, and abuse at
DOD, HUD, and the Federal Aviation Administration. These agencies have
taken significant steps to implement the hundreds of recommendations we
made to upgrade their controls. Major improvement areas include enhanced
controls over card issuance and cancellation, reduced span of control for
approving officials, increased human capital resources and training, new
performance measures and goals, required advance approval of purchases,
and independent receiving and acceptance of goods and services. These
efforts will substantially reduce the government's vulnerability to
fraud, waste, and abuse in agencies' purchase card programs.
----------------------------------------------------------------------------------------------------------------
Source: GAO.

Recommendation Acceptance Rate
At the end of fiscal year 2004, 83 percent of the recommendations
we made in fiscal year 2000 had been implemented (see fig. 7),
primarily by executive branch agencies. Putting these recommendations
into practice is generating tangible benefits for the American people.
As figure 8 indicates, agencies need time to act on our
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.

Testimonies That Serve the Congress
During fiscal year 2004, experts from our staff testified at 217
congressional hearings (see fig. 9) covering a wide range of complex
issues. For example, our senior executives testified on the financial
condition of the Pension Benefit Guaranty Corporation's single-employer
program, the effects of various proposals to reform Social Security's
benefit distributions, and enhancing federal accountability through
inspectors general. Nearly half of our testimonies were related to
high-risk areas and programs. See figure 10 for a summary of issues we
testified on, by strategic goal, in fiscal year 2004.

Figure 10.--Topics on Which GAO Testified During Fiscal Year 2004
Goal 1: Well-being and financial security of the American people
Student loan programs
Child welfare
Pension plan insurance programs
Energy Employees' Occupational Illness Compensation Program
Social Security reform's effect on benefits and taxes
Medicare spending
Intergovernmental Medicaid transfers
Private health insurance
Defense and veterans' health care
U.S. gasoline markets
Farm program payments
Security challenges at chemical facilities
Oil and gas activities on federal lands
Postal Service transformation
Rail security
Federal real property
Federal aviation management and modernization
Pipeline safety
Telecommunications
Goal 2: Changing security threats and challenges of globalization
Gulf War illnesses
International broadcasting
Border security
Terrorist financing
United Nations Oil-for-Food program
Oversight of government-sponsored enterprises
Securities and Exchange Commission operations
Mutual funds
Use of Reserve forces
Destruction of chemical weapons
Mail delivery to deployed troops
Defense personnel clearances
Unmanned aerial vehicles
Military base closures
Operations in Iraq
Challenges in inspecting oceangoing cargo containers
Homeland security advisory system
Security at nuclear facilities
Counterfeit identities
Information security
Critical infrastructure protection
International defense sales
U.S. Army combat systems
Military aircraft
Defense's space systems
National strategy for homeland security
Goal 3: Transforming the Federal Government's role
Army Reserve and Army National Guard pay
Defense contractor tax system abuses
Fraudulent diplomas
Illicit Internet pharmacies
Information technology management
Information technology continuity of operations
Electronic government
Border and transportation security
Electronic voting
Abusive tax shelters
Diversity among senior federal executives
Transformation of the federal government
Long-term federal budget issues
Office of Management and Budget's Program Assessment Rating Tool
The impact of the Government Performance and Results Act
District of Columbia government
Federal financial management and fiscal challenges
Federal purchase and travel cards
Excess Defense property
Space shuttle program
Defense contract management
GAO's High-Risk Program
Issued to coincide with the start of each new Congress, our high-
risk update lists government programs and functions in need of special
attention or transformation to ensure that the federal government
functions in the most economical, efficient, and effective manner
possible. Our latest report, released in January 2005, presents the
status of high-risk areas identified in 2003 and lists new high-risk
areas warranting attention by the Congress and the administration.\2\
---------------------------------------------------------------------------
\2\ GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
---------------------------------------------------------------------------
In January 2003, we identified 25 high-risk areas; in July 2003, a
twenty-sixth high-risk area was added to the list (see table 1). Since
then, progress has been made in all areas, although the nature and
significance of progress varies by area. Federal departments and
agencies, as well as the Congress, have shown a continuing commitment
to addressing these high-risk challenges and have taken various steps
to help correct several of their root causes. GAO has determined that
sufficient progress has been made to remove the high-risk designation
from the following three areas: student financial aid programs, FAA
financial management, and Forest Service financial management.
Also, four areas related to IRS have been consolidated into two
areas.
This year, we designated four new high-risk areas. The first new
area is establishing appropriate and effective information-sharing
mechanisms to improve homeland security. Federal policy creates
specific requirements for information-sharing efforts, including the
development of processes and procedures for collaboration between
federal, state, and local governments and the private sector. This area
has received increased attention, but the federal government still
faces formidable challenges sharing information among stakeholders in
an appropriate and timely manner to minimize risk.
The second and third new high-risk areas are, respectively, DOD's
approach to business transformation and its personnel security
clearance program. GAO has reported on inefficiencies and inadequate
transparency and accountability across DOD's major business areas,
resulting in billions of dollars of wasted resources. Senior leaders
have shown commitment to business transformation through individual
initiatives in acquisition reform, business modernization, and
financial management, among others, but little tangible evidence of
actual improvement has been seen to date in DOD's business operations.
DOD needs to take stronger steps to achieve and sustain business reform
on a departmentwide basis. Further, delays by DOD in completing
background investigations and adjudications can affect the entire
government because DOD performs this function for hundreds of thousands
of industry personnel from 22 federal agencies, as well as its own
service members, federal civilian employees, and industry personnel.
The Office of Personnel Management (OPM) is to assume DOD's personnel
security investigative function, but this change alone will not reduce
the shortages of investigative personnel.
The fourth high-risk area is management of interagency contracting.
Interagency contracts can leverage the government's buying power and
provide a simplified and expedited method of procurement. But several
factors can pose risks, including the rapid growth of dollars involved
combined with the limited expertise of some agencies in using these
contracts as well as recent problems related to their management.
Various improvement efforts have been initiated to address interagency
contracting, but improved policies and processes, and their effective
implementation, are needed to ensure that interagency contracting
achieves its full potential in the most effective and efficient manner.
Lasting solutions to high-risk problems offer the potential to save
billions of dollars, dramatically improve service to the American
public, strengthen public confidence and trust in the performance and
accountability of our national government, and ensure the ability of
government to deliver on its promises.

TABLE 1.--THE YEAR THAT AREAS ON GAO'S 2005 HIGH-RISK LIST WERE
DESIGNATED AS HIGH RISK
------------------------------------------------------------------------
Year
Area designated
high risk
------------------------------------------------------------------------
Medicare Program........................................ 1990
DOD Supply Chain Management............................. \1\ 1990
DOD Weapon Systems Acquisition.......................... 1990
DOE Contract Management................................. 1990
NASA Contract Management................................ 1990
Enforcement of Tax Laws................................. \2\ 1990
DOD Contract Management................................. 1992
HUD Single-Family Mortgage Insurance and Rental Housing 1994
Assistance Programs....................................
DOD Financial Management................................ 1995
DOD Business Systems Modernization...................... 1995
IRS Business Systems Modernization...................... \3\ 1995
FAA Air Traffic Control Modernization................... 1995
Protecting the Federal Government's Information Systems 1997
and the Nation's Critical Infrastructures..............
DOD Support Infrastructure Management................... 1997
Strategic Human Capital Management...................... 2001
U.S. Postal Service Transformation Efforts and Long-Term 2001
Outlook................................................
Medicaid Program........................................ 2003
Managing Federal Real Property.......................... 2003
Modernizing Federal Disability Programs................. 2003
Implementing and Transforming the Department of Homeland 2003
Security...............................................
Pension Benefit Guaranty Corporation Single-Employer 2003
Insurance Program......................................
Establishing Appropriate and Effective Information- 2005
Sharing Mechanisms to Improve Homeland Security........
DOD Approach to Business Transformation................. 2005
DOD Personnel Security Clearance Program................ 2005
Management of Interagency Contracting................... 2005
------------------------------------------------------------------------
\1\ This area was formerly entitled DOD Inventory Management.
\2\ One of the two high-risk areas that were consolidated to make this
area--Collection of Unpaid Taxes--was designated high risk in 1990.
The other area--Earned Income Credit Noncompliance--was designated
high risk in 1995.
\3\ IRS Financial Management has been incorporated into the IRS Business
Systems Modernization high-risk area. Both areas were initially
designated as high risk in 1995.

Source: GAO.

In fiscal year 2004, we issued 218 reports and delivered 96
testimonies related to our high-risk areas and programs, and our work
involving these areas resulted in financial benefits totaling over $20
billion. This work, for example, included 13 reports and 10 testimonies
examining problems with DOD's financial management practices, such as
weak internal controls over travel cards, inadequate management of
payments to the Navy's telecommunications vendors, and abuses of the
federal tax system by DOD contractors, resulting in $2.7 billion in
financial benefits. In addition, we documented $700 million in
financial benefits based on previous work and produced 7 reports and 4
testimonies focusing on, for example, improving Social Security
Administration and Department of Energy processes that result in
inconsistent disability decisions and inconsistent benefit outcomes.
streamlining and management improvement efforts
Shortly after I was appointed in November 1998, I determined that
GAO should undertake a major transformation effort to better enable it
to ``lead by example'' and better support the Congress in the 21st
century. This effort is consistent with the House Report 108-577 on the
fiscal year 2005 legislative branch appropriation that focuses on
improving the efficiency and effectiveness of operations at legislative
branch agencies.

----------------------------------------------------------------

The Mandate:
H. Rpt. 108-577 directed GAO to work closely with the head of each
legislative branch agency to identify opportunities for streamlining,
cross-servicing and outsourcing, leveraging existing technology, and
applying management principles identified as ``best practices'' in
comparable public and private sector enterprises. H. Rpt. 108-577 also
directed the legislative branch agencies to be prepared to discuss
recommended changes during the fiscal year 2006 appropriations hearing
cycle.

----------------------------------------------------------------

Our agency transformation effort has enabled GAO to become more
results-oriented, partnerial, client-focused, and externally aware, and
less hierarchical, process-oriented, ``siloed,'' and internally
focused. The transformation resulted in reduced organizational layers,
fewer field offices, the elimination of duplication in several areas,
and improved our overall resource allocation. We began our
transformation effort by using the GAO Strategic Plan as a framework to
align our organization and its resources. On the basis of the strategic
plan, we streamlined and realigned the agency to eliminate a management
layer, consolidated 35 issue areas into 13 teams, and reduced our field
offices from 16 to 11. We also eliminated the position of Regional
Manager--a Senior Executive Service level position--in the individual
field offices and consolidated the remaining field offices into three
regions--the eastern region, the central region, and the western
region, each headed by a single senior executive. Following the
realignment of our mission organization and field offices, GAO's
support organizations were restructured and centralized to eliminate
duplication and to provide human capital, report production and
processing, information systems desk-side support, budget and financial
management, and other services more efficiently to agency staff. This
has resulted in a 14 percent reduction in our support staff since 1998.
As shown in figure 11, these and subsequent measures improved the
``shape'' of the agency by decreasing the number of mid-level managers
and by increasing the number of entry level and other staff with the
skills and abilities to accomplish our work.

During my tenure, GAO has outsourced and cross-serviced many
administrative support activities, which has allowed GAO to devote more
of its resources to mission work. In fiscal year 2004, about two-thirds
of our nonhuman capital costs were spent to obtain critical mission
support services for about 165 activities from the private and public
sectors through outsourcing. Outsourcing contracts include a wide range
of mission support activities, including information technology systems
development, maintenance, and support; printing and dissemination of
GAO products; operation and maintenance of the GAO Headquarters
building; information, personnel, and industrial security activities;
records management; operational support; and audit service support. GAO
also meets many of its requirements through cross-servicing
arrangements with other federal agencies. For example, GAO uses the
Department of Agriculture's National Finance Center to process its
personnel/payroll transactions. Also, GAO uses the legislative branch's
long-distance telephone contract, which has resulted in continual
reductions in long-distance rates. GAO also uses a wide range of
contracting arrangements available in the executive branch for
procuring major information technology (IT) services. GAO also uses the
Library of Congress' Federal Library and Information Network to procure
all of its commercial online databases.
Currently, as shown in figure 12, over 50 percent of our staff
resources in the support area are contractors, allowing us to devote
more of our staff resources to our mission work. We recently surveyed
managers of agency mission support operations and identified additional
activities that potentially could be filled through alternative
sourcing strategies. In fiscal years 2005 and 2006, we will assess the
feasibility of alternative sourcing for these activities using an
acquisition sourcing maturity model and cost-benefit analyses.

Utilizing IT effectively is critical to our productivity, success,
and viability. We have applied IT best management practices to take
advantage of a wide range of available technologies such as Web-based
applications and Web-enabled information access, as well as modern,
mobile computing devices such as notebook computers to facilitate our
ability to carry out our work for the Congress more effectively. We
make wide use of third-party reviews of our practices and have scored
well in measurement efforts such as total cost of ownership, customer
service, and application development. In fiscal year 2002, an
independent study of GAO's IT processes and related costs revealed
that, ``GAO is delivering superb IT application support and development
services to the business units at 29 percent less than the cost it
would take the Government peer group to deliver.'' In confirmation of
these findings, in fiscal year 2003, GAO was one of only three federal
agencies to receive the CIO Magazine 100 Award for excellence in
effectively managing IT resources to obtain the most value for every IT
dollar. We were named to the CIO Magazine's ``CIO 100'' for our
excellence in managing IT resources in both 2003 and 2004.
Because one of our strategic goals is to maximize our value by
serving as a model agency for the federal government, we adopt best
practices that we have suggested for other agencies, and we hold
ourselves to the spirit of many laws that are applicable only to the
executive branch. For example, we adhere to the best practices for
results-oriented management outlined in the Government Performance and
Results Act (GPRA). We have strengthened our financial management by
centralizing authority in a Chief Financial Officer with functional
responsibilities for financial management, long-range planning,
accountability reporting, and the preparation of audited financial
statements, as directed in the Chief Financial Officers Act (CFO Act).
Also, for the eighteenth consecutive year, independent auditors gave
GAO's financial statements an unqualified opinion with no material
weaknesses and no major compliance problems.
In the human capital area, we are clearly leading by example in
modernizing our policies and procedures. For example, we have adopted a
range of strategic workforce policies and practices as a result of a
comprehensive workforce planning effort. Among other things, this
effort has resulted in greatly upgrading our workforce capacity in both
IT and health care policy. We also have updated our performance
management and compensation systems and our training to maximize staff
effectiveness and to fully develop the potential of our staff within
both current and expected resource levels.

GAO'S FISCAL YEAR 2006 REQUEST TO SUPPORT THE CONGRESS

We are requesting budget authority of $493.5 million for fiscal
year 2006. This budget request will allow us to continue to maximize
productivity, operate more effectively and efficiently, and maintain
the progress we have made in technology and other areas. However, it
does not allow us sufficient funding to support a staffing level of
3,269--the staffing level that we requested in previous years. In
preparing this request, we conducted a baseline review of our operating
requirements and reduced them as much as we felt would be prudent.
However, with about 80 percent of our budget composed of human capital
costs, we needed to constrain hiring to keep our fiscal year 2006
budget request modest. We plan to use recently enacted human capital
flexibility from the GAO Human Capital Reform Act of 2004 as a
framework to consider such cost savings options as conducting one or
more voluntary early retirement programs and we also plan to review our
total compensation policies and approaches.
There are increasingly greater demands on GAO's resources. Since
fiscal year 2000, we have experienced a 30 percent increase in the
number of bid protest filings. We expect this workload to increase over
the coming months because of a recent change in the law that expands
the number of parties who are eligible to file protests. In addition,
the number of congressional mandates for GAO studies, such as our
reviews of executive branch and legislative branch operations, has
increased more than 15 percent since fiscal year 2000. While we have
reduced our planned staffing level for fiscal years 2005 and 2006, we
believe that the staffing level we requested in previous years is a
more optimal staffing level for GAO and would allow us to successfully
meet the future needs of the Congress and provide the return on
investment that the Congress and the American people expect. We will be
seeking your commitment and support to provide the funding needed to
rebuild our staffing levels over the next few fiscal years, especially
as we approach a point where we may be able to express an opinion on
the federal government's consolidated financial statements. Given
current and projected deficits and the demands associated with managing
a growing national debt, as well as challenges facing the Congress to
restructure federal programs, reevaluate the role of government, and
ensure accountability of federal agencies, a strong GAO will result in
substantially greater benefits to the Congress and the American people.
Table 2 summarizes the changes we are requesting in our fiscal year
2006 budget.

TABLE 2.--FISCAL YEAR 2006 BUDGET REQUEST, SUMMARY OF REQUESTED CHANGES
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Cumulative
Budget category FTEs Amount percentage
change
----------------------------------------------------------------------------------------------------------------
Fiscal year 2005 budget authority to support GAO operations... 3,215 $474,565 ...............
Fiscal year 2006 requested changes:
Nonrecurring fiscal year 2005 costs....................... .............. (4,122) (0.9)
Mandatory pay costs....................................... .............. 20,778 3.5
Price level changes....................................... .............. 1,428 3.8
Relatively controllable costs............................. .............. 899 ...............
-------------------------------------------------
Subtotal--requested changes............................. .............. $18,983 4.0
=================================================
Total fiscal year 2006 budget authority required to 3,215 $493,548 4.0
support GAO operations.................................
----------------------------------------------------------------------------------------------------------------
Source: GAO.

Our budget request supports three broad program areas: Human
Capital, Mission Operations, and Mission Support.
In our Human Capital program, to ensure our ability to attract,
retain, and reward high-quality staff and compete with other employers,
we provide competitive salaries and benefits, student loan repayments,
and transit subsidy benefits. We have undertaken reviews of our
classification and compensation systems to consider ways to make them
more market-based and performance-oriented and to take into
consideration market data for comparable positions in organizations
with which we compete for talent. Our rewards and recognition program
recognizes significant contributions by GAO staff to the agency's
accomplishments. As a knowledge-based, world-class, professional
services organization in an environment of increasingly complex work
and accelerating change, we maintain a strong commitment to staff
training and development. We promote a workforce that continually
improves its skills and knowledge.
We plan to allocate funds to our Mission Operations program to
conduct travel and contract for expert advice and assistance.
Travel is critical to accomplishing our mission. Our work covers a
wide range of subjects of congressional interest, plays a key role in
congressional decision making, and can have profound implications and
ramifications for national policy decisions. Our analyses and
recommendations are based on original research, rather than reliance on
third-party source materials. In addition, GAO is subject to
professional standards and core values that uniquely position the
agency to support the Congress in discharging its oversight and other
responsibilities under the Constitution.
We use contracts to obtain expert advice and or assistance not
readily available within GAO, or when expertise is needed within
compressed time frames for a particular project, audit, or engagement.
Examples of contract services include obtaining consultant services,
conducting broad-based studies in support of audit efforts, gathering
key data on specific areas of audit interest, and obtaining technical
assistance and expertise in highly specialized areas.
Mission Support programs provide the critical infrastructure we
need to conduct our work. Mission support activities include the
following programs:
--Information Technology.--Our IT plan provides a road map for
ensuring that IT activities are fully aligned with and enable
achievement of our strategic and business goals. The plan
focuses on improved client service, IT reliability, and
security; it promotes effectiveness, efficiency and cost
benefit concepts. In fiscal years 2005 and 2006, we plan to
continue to modernize outdated management information systems
to eliminate redundant tasks, automate repetitive tasks, and
increase staff productivity. We also will continue to modernize
or develop systems focusing on how analysts do their work. For
example, we enhanced the Weapons Systems Database that we
created to provide the Congress information to support budget
deliberations.
--Building Management.--The Building Management program provides
operating funds for the GAO Headquarters building and field
office locations, safety and security programs, and asset
management. We periodically assess building management
components to ensure program economy, efficiency and
effectiveness. We are currently 8 percent below the General
Services Administration's (GSA) median costs for facilities
management. We continue to look for cost-reducing efficiencies
in our utility usage. Our electrical costs are currently 25
percent below GSA's median cost. With the pending completion of
our perimeter security enhancements and an automated agency
wide access control system, all major security enhancements
will have been completed.
--Knowledge Services.--As a knowledge-based organization, it is
essential for GAO to gather, analyze, disseminate, and archive
information. Our Knowledge Services program provides the
information assets and services needed to support these
efforts. In recent years, we have expanded our use of
electronic media for publications and dissemination; enhanced
our external Web site, resulting in increased public access to
GAO products; and closed our internal print plant and increased
the use of external contractors to print GAO products,
increasing the efficiency and cost-effectiveness of our
printing operation. Due to recent budget constraints, we have
curtailed some efforts related to archiving paper records. We
currently are implementing an electronic records management
system that will facilitate knowledge transfer, as well as
document retrieval and archival requirements.
--Human Capital Operations.--In addition, funds will be allocated to
Human Capital Operations and support services to cover
outplacement assistance, employee health and counseling,
position management and classification, administrative support,
and transcription and translation services.

CONCLUDING REMARKS

We appreciate your consideration of our budget request for fiscal
year 2006 to support the Congress. GAO is uniquely positioned to help
provide the Congress the timely, objective information it needs to
discharge its constitutional responsibilities, especially in connection
with oversight matters. GAO's work covers virtually every area in which
the federal government is or may become involved anywhere in the world.
In the years ahead, GAO's support will prove even more critical because
of the pressures created by our nation's large and growing long-term
fiscal imbalance.
This concludes my statement. I would be pleased to answer any
questions the Members of the Subcommittee may have.
appendix i: serving the congress--gao's strategic plan framework

SOURCES OF GAO WORK

Senator Allard. Well, thank you for your testimony.
You talked quite a bit about your staffing levels. You have
requested fewer staff for 2006, FTEs is 3,215 employees, than
you had in 2005, which is also down from 2004. At the same
time, you report that the number of congressional mandates for
GAO studies has increased by more than 15 percent. How do you
plan to meet the Congress' increased expectations with fewer
staff?
Mr. Walker. Mr. Chairman, first, if you look at the trend
line over the last 3 years you will see that the number of
mandates we received and the percentage of staff time spent on
them has gone up. What this means is that we will have to
respond more and more to requests from committee and
subcommittee chairs, such as yourself, and committee and
subcommittee ranking members. We will have less ability to
respond to requests from Members who may be on a relevant
committee of jurisdiction but not in a leadership capacity.
Basically what happens is that when we have more mandates,
when we have constrained resources, it limits our ability to be
able to deal with non-leadership requests. It also can have an
effect on how long it might take us to get to a particular
issue. That is the fallout.
I did say for the record, Mr. Chairman, that we also are
trying to lead by example on what we are requesting. Since 80
to 81 percent of our total costs are people costs, to the
extent that we have funding constraints it very quickly affects
our people, and our head count, because we do not have a whole
lot of flexibility in other areas.

BACKLOG OF REQUESTS

Senator Allard. Do you have a backlog in some areas on work
that is requested from the Congress? Are there some areas where
you do not have enough flexibility to permit you to initiate
work on your own? Could you comment on that?
Mr. Walker. Thank you, Mr. Chairman. As you know, 90
percent of the work that GAO did in fiscal 2004 was either a
mandate from the Congress or a written request from the
Congress, typically a chair or ranking member of a committee or
subcommittee of jurisdiction. The other 10 percent includes
about 5 percent that represents events of broad interest to the
Congress that I do under my own authority as Comptroller
General because many committees are interested and it is not
appropriate for one committee to capture it. For example, the
work that we are doing on Iraq contracting, and the work that
we are doing with regard to a variety of other issues of broad
interest to the Congress.
About 5 percent has to do with items where we may not get a
request, but relate to significant issues in our strategic plan
that we know are of interest to the Congress, but they may not
be an immediate concern. For example, we did work on Social
Security reform starting several years ago, when Congress was
not focused on it, so we are well ahead of the curve. We have
done work on health care reform before Congress was focused on
it, to be well ahead of the curve. We did work on
counterterrorism before 9/11 to be ahead of the curve.
We do have varying backlogs. Our biggest backlog is in
health care, as you can imagine, Mr. Chairman.
Senator Allard. Not a surprise.

HEALTH CARE BACKLOG

Mr. Walker. Probably our single biggest domestic policy
challenge is health care. That has been and continues to be our
biggest backlog. We are continuing to do the best that we can
to recruit as many people as possible in the health care area
to staff up. There is a tremendous amount of demand from other
organizations. It is a highly competitive marketplace. As a
result, we continue to work with the relevant committees of
jurisdiction to try to rebalance the portfolio and reset
priorities.
There are some areas where we do not have as large a
backlog, but that can be explained in part because many times
committees want us to do work, but they do not necessarily want
to put their name on it. For example, we do a lot of work in
the defense area. I can assure you that the work that we do in
the defense area is highly valued and sought after. At the same
point in time, from time to time Members do not necessarily
want to put their name on a request to look at a particular
weapons system because of the potential implications that that
might have for employment levels or other issues.
So we would be happy to provide for the record if you like
a detail of exactly where our backlogs are and how they are
trending. But I think we are very actively managing these
backlogs. As I said, we would not have 96 percent client
satisfaction unless we were doing a decent job. But it is a
constant challenge.

PERFORMANCE RECOGNITION

Senator Allard. Well, I do agree that there is a lot of
good work coming out of the Government Accountability Office.
You have changed your name a little bit. I have to think about
it, the Government Accountability Office. And I like your
approach. I like your pay for performance effort that you are
implementing.
Do you think that it has improved the overall performance
of employees throughout GAO, your results-driven management
style?
Mr. Walker. I think the numbers speak loudly, Mr. Chairman.
If you look at GAO today, we actually have slightly fewer
people today than we had 5 years ago. But our outcome-based
results--financial benefits, nonfinancial benefits, client
feedback, employee feedback, client satisfaction, et cetera--
have gone up dramatically. In fact, with regard to our
financial results, they have more than doubled during that 5-
year period of time.
Now, that is for a lot of reasons. Strategic planning. We
did our first strategic plan in Spring 2000. GAO never had one
before that. We realigned our organization based on that plan.
We eliminated a layer of management, reduced the number of
field offices, reduced the number of units from 35 to 13,
redeployed resources horizontally and externally. We redefined
success for GAO as outcomes and developed results-based
measures. We linked institutional, unit, and individual
performance measurement and reward systems.
We did a number of things and the combination of all these
initiatives, which were done in partnership with my colleagues
here with me today as well as others, has had a dramatic and
profound effect, not only on the results but I think, quite
frankly, on the culture and the reputation of our agency.
Senator Allard. Well, I think you bring a good news story
here to the subcommittee and I am delighted to hear what you
have to say.

MAKING A DIFFERENCE IN GOVERNMENT

Mr. Walker. Gene Dodaro has been with GAO, we like to say,
since the beginning, since he graduated from college. He might
be able to give you a little perspective.
Senator Allard. Okay.
Mr. Dodaro. Yes, Mr. Chairman. We track why people come to
GAO to work and then why they stay with us. The basic reason is
they want to make a difference. They want to make Government
better, they want to improve the situation. To the extent to
which we say, we are going to reward you for bringing about
positive change in Government, either saving money or improving
programs, public safety, et cetera, they are energized by that.
They are not here just to produce reports, although at times,
as you know, for policy issues we give information without
recommendations to the Congress to help you make decisions.
We are making more recommendations in our reports, and our
recommendation implementation rate is at an all-time high--83
percent of the recommendations we made in fiscal year 2000 got
implemented within a 4-year timeframe. So it is very important
to the employees.

PERFORMANCE AWARDS

Senator Allard. Well, thank you. I would suspect an
important part of your employee motivation is your rewards and
bonuses. I see where your budget request increases rewards and
recognition by 8 percent, for a total of $2.6 million. Maybe
you can explain that.
Mr. Walker. Mr. Chairman, part of our philosophy is we want
to be able to have as many people as our budget will allow. But
it is very, very important that, however many employees we
have, they be reasonably compensated and rewarded based upon
results. Consequently, our whole philosophy is that we want a
market-based and performance-oriented compensation system. We
want to recognize both team and individual outcome-based
performance geared toward our strategic plan for serving the
Congress and the country.
That means by definition that we need to make sure we have
adequate funding to be able to recognize and reward people when
they generate positive results. That is what that budget
request is.
Sallyanne, I do not know if you have anything else you want
to add to that.
Ms. Harper. We are also implementing this year, Mr.
Chairman, for the first time pay-for-performance for the
administrative staff of the agency. They previously were under
the General Schedule (GS) system and only got the within-grade
increases based on length of service and, perhaps, a special
recognition award.
Mr. Walker. In fact, Mr. Chairman, now virtually all of
GAO's employees are not only in broadbanding, but also pay-for-
performance systems. So we are a window to the future, I think,
with regard to the Federal Government.
Senator Allard. Well, I think you are doing a great job and
I think you set a good example for the legislative branch. As
you heard in my previous comments, I think that is important
when we are setting policy throughout the Government. I think
it is incumbent on this subcommittee to hold each of the
agencies accountable so that Members of the Senate and House do
not get embarrassed because somehow we have a different
standard here than you have for the rest of the government.
I know in my own personal office I make an effort to set an
example so that when you are asking other agencies to be frugal
that you can show in your own office you are frugal. I think
the same thing applies here.

ADDITIONAL COMMITTEE QUESTIONS

I compliment you on the way you are running your agency and
your office. I think that you reflect in a positive way what is
happening here in the legislative branch and I think that is
something that all the Members need to appreciate in the
Senate. So I am going to carry a very positive message as to
what you are doing to my colleagues, and I thank you for your
testimony and I thank you for your good work.
[The following questions were not asked at the hearing, but
were submitted to the Office for response subsequent to the
hearing:]

Questions Submitted by Senator Wayne Allard

Question. Your report on 21st Century Challenges emphasizes a need
for dramatic change to federal government programs and policies if we
are to avoid serious damage to our economy, our standard of living and
our national security. You say that we need to fundamentally reexamine
major spending and tax policies and priorities if we are to meet the
challenges that lie ahead. What role do you believe GAO, and you as the
Comptroller General of the United States, should play in addressing
these challenges?
Answer. In our report and testimony on 21st Century Challenges, we
stated that nothing less than a fundamental review, reexamination, and
reprioritization of all major spending and tax policies and programs is
needed. Given our role in supporting the Congress, we believe that GAO
has an obligation to provide policymakers in Congress with the support
they need in identifying issues and options that could help to address
these fiscal pressures. Of course, while answers to these questions may
draw on the work of GAO and others, only elected officials can and
should decide which questions to address and how and when to address
them.
GAO and I stand ready to assist the Congress as it develops its
agenda and to help collect facts, develop options, conduct analyses and
perform other work in connection with the questions the Congress wishes
to pursue. The challenges identified in the report are based upon our
past and pending work, a vast majority of which was performed at the
direction or request of the Congress. In addition, the reexamination
questions are based heavily on GAO's issued work, our strategic plan,
and the institutional knowledge of our staff. However, the size of the
problem is so large and the programs and issues covered span such a
wide range that the process of rethinking government programs and
activities will in all likelihood rely on multiple approaches and
sources of analysis (e.g., GAO, your staff, other Congressional support
agencies and OMB) over a period of years.
GAO and I may also be useful to the Congress by helping to raise
public awareness of issues and problems thereby preparing the way for
the Congress to take related actions. Our past and pending work has
addressed and will continue to address such items, including federal
spending and tax programs, existing budget processes and financial,
fiscal, and performance management activities. Inevitably, given the
breadth of our work, some of our past and current engagements touch on
many of the reexamination issues and questions, but it is up to the
Congress to determine the issues and questions that merit GAO's
resources.
Question. Is GAO currently structured properly with adequate
resources in the right places to address the complexities of the issues
you raise?
Answer. Yes. We believe we are well positioned to help the Congress
address these issues. We are currently organized to align our work in
support of our strategic plan for serving the Congress. This plan
reflects the same emerging themes discussed in our 21st Century
Challenges report. Importantly, we can both cover broad cross-cutting
government-wide issues while providing support to Congressional
Committees on their specific areas of interest.
We have worked very hard over the past several years to build and
modernize the structure that will best address our client's needs and
make GAO a model for other federal agencies. We believe it is working
very well. In particular, we are greatly encouraging a risk-based and
matrix management oriented approach to our work that facilitates and
motivates staff in different areas to work together to produce analyses
of very complicated issues. Accordingly, we are not planning to change
our basic structure at this time. Of course, we will continue to
monitor our services to the Congress for the benefit of the American
people and make changes as needed.
Question. Will the role you envision for GAO require additional
resources in future years?
Answer. Yes, but not to any significant extent. We will work with
our congressional clients to prioritize our work so that we are most
beneficial to them while assisting them in this reexamination. Also, as
mentioned above, we envision this to take place over several years and
involve numerous organizations in addition to the GAO. The most
challenging issue we may face in accomplishing this is to harness the
great potential of our new staff, a very sizable portion of our agency,
and give them the experience they will need. We are working very hard
to help develop them so that they can make meaningful contributions to
the Congress for years to come. We do, however, expect that additional
staff and resources will be necessary when the federal government comes
closer to being able to receive a qualified opinion on the consolidated
financial statements.
Question. Your budget submission shows very little change in the
distribution of FTE resources among your teams between fiscal year 2005
and fiscal year 2006. Do you expect that to continue or do you think
you will need to redistribute to better help the Congress meet the
challenges you say we are facing?
Answer. Although small, our fiscal year 2006 request does reflect
some adjustment to our team FTEs to better meet the Congress' needs.
Each year we adjust our FTE distribution based on a systematic
assessment of the workforce that we will need to carry out our work in
support of the Congress, the American public, and our strategic
priorities. Our total FTE request, as well as our internal allocation
of FTEs, is based on a number of factors including: Congressional
requests and interests, strategic priorities, emerging issues, current
staffing data, identified skill shortages, succession and knowledge
retention issues, results achieved with staff resources, and budgetary
considerations. Based on our analysis of this data, GAO's leadership
team makes fact-based decisions about our FTE needs and the optimal
deployment of our staff resources to most efficiently accomplish our
work. Since 2002, we have used this process to make refinements to our
unit-specific staffing allocations to reflect shifting strategic
priorities. For example, as tax policy issues rise to the forefront of
federal budget and deficit issues, we combined our tax group with other
areas that address cross-cutting, broad-based fiscal issues. We also
reallocated existing resources to create the Homeland Security and
Justice team to focus on these areas after a major realignment of
executive branch departments and agencies. While we have not finalized
our fiscal year 2006 workforce plan, we do expect some changes to the
team allocations, but not of a significant nature.
In addition to our workforce planning process, we also foster a
spirit of cooperation throughout GAO whereby staff on several teams
will work together under a matrix management approach to produce the
most efficient product. Much of our workforce is now working in this
manner. This provides flexibility and helps minimize the need for major
realignments of resources. Of course, we will continue to monitor the
need for organization structure changes and will notify the Congress of
any major realignment.
Question. You mention in your budget materials that over 50 percent
of your mission support staff resources are contractors and that during
your tenure you have outsourced many administrative tasks allowing you
to devote more resources to mission work. Have you found that
contractors actually cost less than performing the same functions with
GAO employees or are you adding contract money and moving FTE's and
salary money to mission units? If you have an analysis of cost
comparison between in-house and contractor operations could you share
that analysis with the Subcommittee? What factors other than cost
savings led you to decide to turn so much of your administrative
operations over to contractors?
Answer. In an environment of increasing fiscal restraint, we have
in recent years reduced our overall FTE staff usage from 3,275 in
fiscal year 1999 to 3,215 FTEs planned for fiscal years 2005 and 2006.
Through a number of targeted initiatives, including reengineering,
technology applications, and contracting out, we have also reduced the
number of administrative, professional and support (APSS) staff from 21
percent at the beginning of fiscal year 1999 to less than 18.9 percent.
Some of this reduction in APSS staff has allowed GAO to devote more
FTEs and salary funds to core mission operations. Since fiscal year
1999, we have also leveraged more contractor resources, increasing the
level of contract funds from $45.7 million to $69.7 million.
GAO contracts out for many reasons, such as improving service
delivery, obtaining specialized expertise not readily available within
GAO or when needed within compressed timeframes, providing technology,
and minimizing demands on the agency's resources. Contracts provide an
efficient, flexible vehicle to obtain technical assistance and
expertise in highly specialized areas, and allow us to better respond
to fluctuating demands. When GAO contracts-out for cost-effectiveness
reasons, it is to take advantage of firms with lower cost structures
than GAO. While direct salary and benefit costs for GAO staff and
contractor staff in many instances are comparable, contractors do not
always have lower costs. Contractor costs include management time and
other fees that make up corporate overhead, equivalent to indirect
costs an agency would pay to provide supervision, staff development,
equipment, and other overhead costs. In addition, contractor costs also
include profit not found in the federal environment. In other
instances, the federal sector cannot compete with salaries paid by the
private sector to staff in highly specialized disciplines, such as
information technology (IT).
Independent of cost, technical factors specific to the service area
are identified and assessed to ensure quality services or products are
obtained. A technical evaluation of contract proposals would assess
such items as, qualifications and skill levels of the proposed staff,
contractor's approach to providing services, ability to integrate
services in GAO's environment, and customer impact. Use of contract
staff provides the agency the flexibility to maintain operational
capabilities and obtain specific expertise for a limited duration--
expanding or shrinking the workforce as demands change for specific
skills--without the constraints of the federal recruitment and
retention processes. It also allows an agency to focus its own staff on
core functions, inherently governmental functions, and critical or
sensitive issues, while managing and overseeing contractor functions to
ensure accountability. For example, we found that we are able to reduce
the number of staff working in our financial management area. Vendor
invoice processing could be performed more cost effectively through a
cross-servicing arrangement with the Department of Interior's National
Business Center. In addition, as a result of travel management system
improvements made in fiscal year 2004, we are able to further reduce
our staffing requirements in this area. Our new travel management
system streamlines and expedites transaction processing, reduces
administrative processing requirements, and reduces the number of
manual external processes needed by GAO to manage this function.
A cost benefit analysis is conducted for each situation where GAO
considers utilizing contract resources. For example, in fiscal year
2003, GAO conducted a study of its mail operations center. GAO decided
to retain its in-house operation managed by GAO staff, and supplemented
by contract services for selected functions, after comparing GAO's
operation with other federal mail operations and assessing the cost to
outsource the operations. This decision resulted in a cost-avoidance of
about $250,000. Nine years ago, the mail center had 19 staff. Through a
series of changes, the mail operation has been reduced to a small, but
efficient operation with six staff.
In the area of library services and records management support,
however GAO has been able to obtain contract staff at less cost than
GAO staff. For example, the contract costs of a contract supervisory
library technician is about $61,000 compared to a salaried employee
whose fully-loaded cost is about $76,000. As current staff retire or
separate, we plan to increase our reliance on contract resources,
especially in the area of interlibrary loan services.
In the IT area, the costs for contract labor is higher than that of
salaried GAO staff and reflect the marketplace. Current fully-loaded
contract costs for an entry-level IT employee are about $30,000 above
that of an entry level IT salaried GAO employee. Most of our IT
contracts are GSA schedule contracts. In addition, we further negotiate
with vendors to obtain best value services and rates. Given the rapidly
changing IT environment, our contracts are structured to provide GAO
maximum flexibility to quickly obtain staff with the appropriate skill
mix to meet both short and long-term needs.
Question. The Subcommittee applauds GAO's efforts to transform the
agency to become more results-oriented and to devote more of its
resources to the agency's core mission. However, we also note that GAO
is asking for an increase in resources for mission support in fiscal
year 2006. Why?
Answer. In developing our fiscal year 2006 budget, we have taken
into consideration the overall federal budget constraints and the
committee's desire to lead by example. We have continued to streamline
our agency, modernize our policies and practices, and leverage
technology in manners that help us achieve our mission more effectively
and efficiently. These efficiencies have allowed us to maintain our
support of the Congress and enhance our overall performance without the
need for large budgetary increases. In addition, we conducted a
baseline review of our operating requirements and allocated our
resources to achieve the greatest return on investment. These actions
led us to request a modest increase of 4 percent over fiscal year 2005.
However, in order to keep our request modest, we needed to constrain
our staffing levels. We will be seeking your commitment and support to
provide the funding needed to rebuild our staffing levels over the next
few years. This will be essential when we get closer to the time when
GAO may be able to render our opinion on the consolidated financial
statements of the U.S. Government.
GAO is requesting a 3 percent increase in mission support
operations costs to support our infrastructure and cover the cost of
mandatory price-level increases and targeted investments, such as
information security and building management improvements. This
increase is less than the total requested increase in our budget
authority of 4 percent. We have been able to minimize the requested
increase by conducting base reviews of our support costs and through
offsets of non-recurring requirements. For example, our facilities
management program cost estimates assume that a GAO staff person will
retire and can be replaced by a more junior contract staff person.
Question. What is the percentage of staff allocated to mission
support activities?
Answer. The administrative and professional staff responsible for
GAO's mission support activities currently comprise less than 18.9
percent of total staff, down from 21 percent at the beginning of fiscal
year 1999. We expect this percent to decline to 18.5 percent by the end
of fiscal year 2006. The staff provides essential services for IT,
building management, knowledge services, human capital operations and
other support services. These services are vital to ensuring
consistency in the delivery of quality products to our clients and
customers.
Question. What is the percentage of costs allocated to mission
support activities? Where do you see these percentages going in the
next few years? What do you believe is the appropriate level of
investment in mission support?
Answer. Administrative and professional support staff and mission
support operational costs represent about 26 percent of GAO's total
budget authority. We believe that we have achieved a core level of
administrative and professional support staff and operating costs
necessary to provide the appropriate infrastructure for staff to
conduct their work. While we continue to seek opportunities to
streamline operations and leverage outsourcing mechanisms for
efficiency and economy purposes, we believe our investment is the
appropriate level without sacrificing quality in our administrative and
professional support services.
Question. GAO has established a strategic goal of being a model
agency. Your fiscal year 2004 Performance and Accountability Report
indicates three major management challenges, human capital, physical
security, and information security. Why were these areas identified as
management challenges? What actions have been taken to address these
challenges? What additional actions and funding are required to address
current weaknesses in these areas? Are there other areas that you
consider to be challenged?
Answer. At GAO, the Comptroller General and the agency's senior
executives through the agency's strategic planning, management, and
budgeting processes identify key management challenges. The three
challenges identified are all areas in which we have, and will continue
to experience substantial and continual change and challenges. They are
also areas that significantly impact our ability to support our
mission. We must focus our efforts and resources on maintaining our
flexibility to adapt to changing technology and world events, while
ensuring the security of our information assets and systems, and
ensuring that our human capital resources are best suited to meet the
needs of our congressional client. These are all internal challenges.
Our key external challenge is to assure that Congress adequately funds
GAO for the benefit of itself and the country.

Human Capital Management
In the area of human capital management, during the last few years,
we developed our first formal and comprehensive strategic plan for
human capital which communicates GAO's strategy for becoming a model
professional services organization, including how we plan to attract,
retain, motivate, and reward a high-performing and top-quality
workforce. We also fully implemented our workforce planning processes,
addressing the size, deployment, and profile of our staff to ensure we
have the appropriate resources strategically placed to pursue our goals
and objectives now and in the future. We continue to build on our
accomplishments in attracting and retaining a diverse workforce with
the knowledge, skills, and abilities to meet the new century's
challenges through succession planning activities and training and
development. For example, we implemented revised policies to expand the
use of flexi-place to provide employees additional options. Such
initiatives are particularly important given our employee profile where
about 50 percent of our staff are recent hires.
During fiscal year 2004 we completed establishment of market-based
and performance-oriented compensation systems and competency-based
appraisal systems for all our staff, and we began monitoring,
reviewing, and assessing these systems to identify enhancements that
may be needed. In fiscal year 2005, a consulting firm assisted us in
establishing pay rates that are competitive with comparable
organizations and these rates were used for certain purposes in our
annual pay for performance process for analysts, specialists, and
attorneys. We also began implementing policies and processes to
implement the human capital flexibilities authorized by Congress under
GAO's Human Capital Flexibilities Act of 2004. Other actions we have
taken include initiating strategy formulation for the annual adjustment
of GAO employees' salaries; revising and issuing our regulations on pay
administration to implement the satisfactory performance requirement
for GAO analysts and related specialists and attorneys; drafting and
issuing for review a regulation applicable to employees placed in lower
grades or bands as a result of workforce restructuring or
reclassification; revising and issuing for comment our leave policies
and procedures regulation, which includes the provision permitting
designated key employees with less than 3 years of federal service to
earn 6 hours of annual leave; and drafting and issuing for comment our
regulation implementing the Executive Exchange Program.
We anticipate that we will implement a number of the human capital
flexibilities authorized by Congress and for which we are drafting,
revising, and issuing for comment a number of regulations in fiscal
year 2005. In addition, we will implement a streamlined, user-friendly
guide to government and non-government professional development
opportunities; develop and implement an expedited and coordinated new
hire process; determine the feasibility of implementing a development
program for new hires with previous experience; and enhance our
competency-based performance systems. No additional funding will be
needed for these actions.

Physical Security
The challenge to provide a safe and secure work environment for
employees remains a government-wide issue in light of changing security
threats, which can have a profound impact on the way GAO conducts
business in the United States and around the world. Protecting our
people and our assets is paramount to agency operations. We continue to
devote time and resources to the assessment of security operations as
we further enhance GAO's security posture. Within the next few months,
our perimeter security enhancements will be complete. These
enhancements include protective barriers, such as installation of walls
and bollards around the building, vehicle restraints at the garage
ramps, ballistic-rated security guard booths, and vehicle surveillance
equipment at the garage entrances. We also plan to install a state-of-
the-art electronic security system during fiscal year 2005.
During fiscal year 2004, we developed a continuity of operations
plan and held communications drills to test our plan this fiscal year.
As part of our plan to ensure our continuity of operations should we
have to vacate our headquarters because of an emergency, we identified
an alternative facility to house our continuity-of-operations team. We
have also updated our Shelter in Place plan and Emergency Response
Handbook for headquarters and prepared similar plans for the field
offices. We continue to hold annual security fair seminars to
disseminate information on security and emergency preparedness at the
workplace and at home. We have no additional funding requirements at
this time.

Information Security
Following the events of September 11, 2001, expanded internet
access, and global technology, information security remains a
government wide issue. In the area of information security we
implemented a centralized reporting system to track audit findings
through a Plans of Action and Milestones tool; established monthly
remediation meetings for regular remediation effort tracking; completed
updates to our security awareness training presentation; began
performing weekly vulnerability assessments of our information systems
to ensure our scheduled patching process and configuration management
practices are working; and installed a firewall and spyware on our
workstations.
New initiatives for fiscal year 2006 include establishing annual
specialized training for various levels of management and IT staff with
elevated system privileges; and combining the IT Disaster Recovery and
the Continuity of Operations Plan into an integrated security plan, and
completing training for these plans. In addition, activities that will
be completed during fiscal year 2006 include completion of the
integration of a Web caching proxy and a firewall for Web-based traffic
into the GAO network architecture to provide additional information
security protection at the network level; continuing efforts to harden
our network and desktops with upgraded authentication devices,
exploring intrusion protection devices and external monitoring services
for after hours network security monitoring of our intrusion detection
devices; and completing the information sensitivity program to provide
system data sensitivity in accordance with FIPS Pub 199 and NIST SP
800-60. We anticipate additional funding of $487,000 will be needed to
complete these actions.
Question. Have you assessed the costs and benefits associated with
being a ``model'' agency?
Answer. No. While we have not conducted a formal cost/benefit
analysis, there is little question that our actions result in enhanced
value and better cost management. They also serve to enhance GAO's
image externally and our credibility within the government and the
accountability profession, both domestically and internationally.
Question. Your fiscal year 2006 budget request indicates that the
two main focal points for increased funding and new initiatives in IT
for fiscal years 2005 and 2006 will be in the areas of IT security and
business systems development. Please provide the Subcommittee an update
on your efforts to date in these areas. Please elaborate on the
opportunities that you have identified to affect economies and
efficiencies?
Answer. GAO has redesigned and automated numerous business and work
processes, as well as taken advantage of numerous electronic tools, to
foster productivity, improve cost savings and enhance timeliness. As
reliance on technology has grown, our technology efforts have and will
continue to directly affect the quality of our mission work and the
service GAO staff provide to the Congress through audits and analyses.
Our GAO fiscal year 2004 Performance and Accountability Report
highlights a number of efforts that have directly affected economies
and efficiencies while improving the quality, responsiveness, and
timeliness of GAO services. Several of these initiatives best
illustrate our efforts.
Acquisition Systems Management (ASM) Weapons Systems Database
This system has enabled GAO to become Congress' primary source of
annual evaluations of DOD acquisitions. The system expanded staff's
ability to query and view information across weapons systems programs,
perform micro and macro trend analysis, and shortened turnaround times.
Major benefits of this system include more comprehensive and
sophisticated analyses and improved multi-year reporting on weapons
acquisitions practices. The tool has significantly increased staff
productivity while contributing to recommendations that resulted in
$1.6 billion in programmatic savings in fiscal year 2004.

Financial Management and Assurance (FMA) Consolidated Financial
Statement Audit Database
This system, whose development is currently underway, documents the
planning, internal control and testing, and reporting phases of GAO's
annual audit of the U.S. Government's Consolidated Financial Statements
(CFS). Major efficiency benefits will include (1) shortened audit cycle
and ability to perform increased audit work; (2) increased
functionality and accessibility of audit tool to project users; (3)
improved reliability of the financial data collected and analyzed; (4)
improved security and backup capability; (5) increased potential for
data analysis as needed to improve the reliability of information of
the U.S. Government; (6) ability to conduct in-depth analyses to
support rendering opinions on CFS; and (7) ability to document audit
work performed to support auditor's reports on the CFS. In addition, by
reducing the staff days required for database maintenance, staff would
be able to devote more time to analyses and improved service to
clients. Plans are to also make this system available to the Inspector
General community for their individual department and/or agency audits.

Staffing Information System
This subsystem of the Engagement Management System will support
team decision-making and facilitate matrixing, multitasking, and
sharing of staff. It will support team decision making by balancing
staff preferences/development needs and provide real time access to
staffing data. By integrating data from all related systems, it will
eliminate staffing cuff systems and reduce the administrative burden on
teams.

Electronic Records Management System
This system automates management of GAO's records to leverage
institutional knowledge within and across agency functions. It
establishes a foundation for knowledge management in GAO, while
providing the ability to manage and dispose of records electronically.
It will also afford a seamless records system for GAO's move to
electronic business processes. Several significant benefits include:
Reduced in time spent by mission and administrative staff managing and
locating records; ready access to and retrieval of GAO records; reduced
costs for offsite storage, secure destruction, and courier services to
records centers; and more efficient and effective records management
processes.
Question. What savings will you be able to achieve by fiscal year
2006?
Answer. IT initiatives enable GAO to increase productivity and
ensure economy, efficiency, and effectiveness in performing GAO's work.
Many of the initiatives cited in the previous response are good
examples of these efforts. In many of our IT projects a residual
benefit is enabling staff to redirect time once spent on redundant,
time-consuming, and unproductive activities to more productive,
mission-related work. For example, the ASM Weapons Systems Database
enabled staff to shift time once spent on data collection and entry to
more analyses of greater breath and depth. Prior to this database, ASM
reviewed about 10 weapon systems programs per year with estimated costs
of $78.9 billion. In fiscal year 2004, ASM was able to review 60
programs and report on 51, covering estimated costs of $672 billion. As
a result, GAO was able to identify for the Congress a total potential
reduction in funding of $1.5 billion in these programs.
There are also IT efforts that provide opportunities for cost
savings in IT and non-IT areas. Remote access improvements are an
effort that resulted in a reduction in IT operational costs. The
movement to AT&T remote access services provided local access points
and eliminated reliance on costly ``800#'' dial-up services. It also
increased efficiencies by giving staff the ability to access the GAO
network using a wider range of devices such as DSL and cable modems.
The videoconferencing expansion project was an IT effort that
reduced non-IT costs. We provided a second videoconferencing system in
most field offices and expanded the number of units in headquarters.
This has resulted in increased communications and matrixing across
geographic locations and increased staff productivity. It also created
the potential for reductions in travel time and costs.
Question. What is the status of your efforts to upgrade your
financial management system?
Answer. This year we initiated efforts to replace our financial
management system by obtaining these services through cross-servicing
with another government agency. To date we have:
--Assembled a project team consisting of staff from our Financial
Management and Information Systems and Technology Services
organizations which has developed a steering committee charter
and identified steering committee members and a management team
that will oversee requirements definition, system selection,
procurement activities and system deployment.
--Conducted initial rounds of interviews to identify user-specific
requirements and major pain points with the current financial
management.
--Developed a Government-off-the-shelf (GOTS) evaluation process
methodology.
--Identified potential cross-service agencies.
We plan to select a system early in fiscal year 2006 and implement
the system for operational use in fiscal year 2007.
Question. Your focus in recent years has been on implementing
technology improvements and tools that enhance business practices, as
well as improve staff productivity. Which of these improvements has the
ability to create efficiencies throughout the legislative branch?
Answer. Two improvements that could create efficiencies throughout
the legislative branch for those agencies that utilize the Department
of Agriculture's National Finance Center (NFC) computer services are
WebTA and I*CAMS. Both GAO and the Library of Congress are using these
systems.
In 2004, GAO deployed WebTA, a user-friendly Web-based time and
attendance (T&A) system that replaced a costly and inefficient T&A
process. Benefits of this system include: Elimination of duplicate
entry of T&A data; an automated interface with NFC; on-line supervisory
approval; reduced time to process T&As; and decrease of T&A errors.
The second initiative that could benefit other legislative branch
agencies is the utilization of a Web-based human capital front-end to
the NFC personnel/payroll system, I*CAMS (Agriculture's Internet-based
Combined Administrative Management System). To date GAO has implemented
the transaction processing system that supports and integrates
transaction processing, position management, and awards processing.
There are a variety of benefits agencies may realize: Improved data
accuracy and timeliness; customized and real-time reports; elimination
of paper driven and standalone, automated ad hoc systems for tracking
and supporting transactions; reduced duplicate data entry; and human
capital portal capability for role-based and personalized access to
human capital information.

HEALTHCARE BACKLOG

Question. Are there some areas in GAO where there is a backlog of
work requested by Congress and other areas where there is enough
flexibility to permit you to initiate work on your own? Explain to the
Subcommittee the process you use to prioritize and address
congressionally requested work.
Answer. Yes. GAO has a backlog of congressionally-requested work,
but it is not uniformly spread across all of our teams. The backlog in
a few areas like health care and natural resources and the environment
is particularly large. At any point in time, the backlog may not
reflect all of the work that our clients would like us to do, as some
of them prefer not to send requests when they know that we do not have
the resources to begin the work.
To ensure adherence to GAO's core values, effective management
practices, and efficient use of available resources, GAO generally
initiates work according to the following priorities: Congressional
mandates; Senior congressional leader and committee leader requests for
issues within a committee's jurisdiction; and Individual Member
requests, with additional consideration given to requests from Members
who are on a committee of jurisdiction.
After receiving a mandate or a request, GAO will initiate a meeting
with the committees of jurisdiction staff to gain a better
understanding of the need for information, the nature of the research
questions and related timing issues.
Question. Do you routinely move resources from areas where backlogs
are small or non-existent to areas where they are significant?
Answer. Yes, we do move resources, but only to the extent that we
believe it can be done efficiently and without harming our long-term
responsibility to serve the entire Congress. We have also reassigned
work from overbooked areas to others that may be able to address the
work more quickly. For example, six requesters asked us to do a review
of the Klamath River Basin Conservation Area Restoration Program. One
of our teams--Natural Resources and Environment--was unable to do it
because of their backlog, so we assigned the work to our Financial
Management and Assurance team. In another case, our Homeland Security
and Justice team had difficulty staffing a review of reprogramming of
air marshal program funds, so it was assigned to our Strategic Issues
team.
We also work hard to foster matrix management in our work, wherein
we have staff from one team work with other teams without making a
permanent reassignment. This allows us to work more efficiently.
Nonetheless, in some cases, a specific expertise is needed that cannot
be met through matrixing or by using staff from another area. In those
cases, we may need to wait for the staff with the proper expertise to
be available before we can start the work. We also work periodically
with some committees to have them help prioritize the backlog of work
attributable to their committees.
Question. The organization chart in your budget submission shows 13
teams that perform the substance of GAO's work. Would you please
provide the Subcommittee with a breakout by team of the number of
congressionally mandated jobs in fiscal year 2004 and fiscal year 2005,
the average amount of time that elapsed from receipt of a Congressional
mandate to when data gathering actually began on the job, and the
number and age of requests currently on hand for each team?
Answer.

----------------------------------------------------------------------------------------------------------------
Fiscal Year Median Age in
Fiscal Year 2005 Ongoing Months from Number of
2004 Completed and Completed Request Requests Median Age in
Team Mandates/ Mandates/ Receipt to Pending as of Months
Requests Requests as of Engagement 3/31/2005 \1\
3/31/2005 Initiation \1\
----------------------------------------------------------------------------------------------------------------
GAO............................. 1,061 894 1.1 278 3.7

Goal 1--Address Current and
Emerging Challenges to the Well-
Being and Financial Security of
the American People

Education, Workforce, and Income 79 79 1.3 16 1.5
Security.......................
Financial Markets and Community 50 46 1.0 11 3.7
Investment.....................
Health Care..................... 75 79 2.1 \2\ 48 13.2
Homeland Security and Justice... 83 70 2.3 29 1.9
Natural Resources and 105 106 3.1 \3\ 55 7.2
Environment....................
Physical Infrastructure......... 79 64 .5 15 5.4

Goal 2--Respond to Changing
Security Threats and the
Challenges of Global
Interdependence

Acquisition and Sourcing 54 46 1.8 28 1.1
Management.....................
Defense Capabilities and 92 57 .1 10 2.9
Management.....................
International Affairs and Trade. 75 46 .5 19 1.6

Goal 3--Help Transform the
Federal Government's Role and
How it Does Business to Meet
21st Century Challenges

Applied Research and Methods.... 8 12 .2 .............. ..............
Financial Management and 181 168 .2 5 3.6
Assurance......................
Information Technology.......... 95 58 .4 25 1.0
Strategic Issues................ 85 63 .6 17 1.4
----------------------------------------------------------------------------------------------------------------
\1\ These figures exclude legislative mandates and those requests that are dependent on (1) a triggering event
(e.g. an agency action), (2) a distant future due date that does not require GAO to start too early, and (3)
sequencing situations where other GAO work must be performed before work can logically be started.
\2\ Ten of these jobs have been started, but the engagement initiation paperwork is pending.
\3\ The team has made steady progress in reducing its backlog. Some requests await staff with appropriate
clearances; others have been sequenced by requesters. Ten requests are from individual members and are,
therefore lower in priority and have been in the backlog for some time.

Question. How much work do you initiate each year that is not
requested by Congress? How many FTE's and how much money do you spend
on that work?
Answer. In fiscal year 2004, about ninety percent of our audit
resources were spent on congressional requests and legislative
mandates, and about 10 percent on work performed under the CG's legal
authority. Importantly, a significant majority of the CG initiated
requests relate to areas of broad interest to the Congress. Under our
Congressional protocols, such items, especially when they are
precipitated by a significant event, can be done under the CG's
authority in order to facilitate broad sharing of related information
with the applicable congressional committees, e.g., election reform,
Iraq contracting. Many requests under the CG's authority represent
items of interest to Committees and/or Members, but they would prefer
not to be identified as the requester, e.g., defense related work.
We have further categorized the ten percent of our audit resources
initiated under the Comptroller General's authority (CGA). They include
--Engagements initiated by GAO that provide an opportunity for us to
do work on a wide range of issues we believe have particular
value but have not been requested (5.5 percent).
--GAO's High-Risk program, which focuses on selected federal programs
that are more vulnerable to waste, fraud, abuse, and
mismanagement than other programs or have major challenges with
their economy, efficiency, or effectiveness (1.6 percent).
--Our budget justification reviews that are of considerable help to
the Congress in authorizing and appropriating funds for federal
programs every year (1.6 percent).
--Work that addresses the broad interests of the Congress on longer-
range, crosscutting, and transformational issues; the topics
may be heavily requested by numerous Congressional clients, as
was the case on some of our most recent work on elections and
Iraq (0.6 percent).
--Presentations and guidance given on GAO's key responsibilities such
as the recently revised Government Auditing Standards or
accounting issues (0.5 percent).
The amount of work done under the CGA also varies from team to team
in GAO as shown in the following table for fiscal year 2004:

------------------------------------------------------------------------
Percent of Fiscal Year 2004
Audit Resources Spent
Team -------------------------------
Requests and Engagements
Mandates Under the CGA
------------------------------------------------------------------------
Goal 1--Address Current and Emerging
Challenges to the Well-Being and
Financial Security of the American
People

Education, Workforce, and Income 85 15
Security...............................
Financial Markets and Community 93 7
Investment.............................
Health Care............................. 99 1
Homeland Security and Justice........... 99 1
Natural Resources and Environment....... 97 3
Physical Infrastructure................. 97 3

Goal 2--Respond to Changing Security
Threats and the Challenges of Global
Interdependence

Acquisition and Sourcing Management..... 75 25
Defense Capabilities and Management..... 68 32
International Affairs and Trade......... 97 3

Goal 3--Help Transform the Federal
Government's Role and How it Does
Business to Meet 21st Century Challenges

Applied Research and Methods............ 74 26
Financial Management and Assurance...... 98 2
Information Technology.................. 99 1
Strategic Issues........................ 90 10
------------------------------------------------------------------------

Question. Do you believe that there is a need to maintain a certain
level of work that is not requested by Congress?
Answer. Absolutely. This allows the GAO to address significant
current or emerging issues having broad-based Congressional interest
that may have a significant effect on the nation's future. Indeed, a
very significant portion of our financial \1\ and other non-
quantifiable benefits are attributable to work initiated by us and
eventually used by the Congress. In fact, every engagement initiated by
us under our CGA relates to our strategic plan and is expected to be of
significant value to the Congress and the American people.
---------------------------------------------------------------------------
\1\ In fiscal year 2004, $16.4 billion of the $44 billion in GAO's
financial benefits (37 percent) flowed directly from our work performed
under GAO's CGA.
---------------------------------------------------------------------------
Examples of this work include work assessing: major DOD weapon
programs, funding for the global war on terrorism, offshoring of
American jobs, reporting of uncollectible debt to IRS, SBA's
disposition of disaster assistance applications, the Centers for
Disease Control and Prevention, factors influencing gasoline prices,
and issues associated with the future of intercity passenger rail
transportation.
Question. How do you decide what that work should cover?
Answer. The GAO has a comprehensive strategic planning effort that
lays the foundation for all of the work we do. This effort, which draws
heavily upon our staff's knowledge of federal programs and issues, is
also heavily dependent on the views of Congress and others in the
government and elsewhere who are interested in the work of the GAO. We
would be pleased to provide additional copies of this plan if needed.
Our Web site (www.gao.gov) also features this plan.
Our most senior executives, including the Comptroller General and
Chief Operating Officer, must approve engagements initiated by the GAO.
Our senior executives meet every week to discuss new engagements,
routinely consider each job and the likelihood that it will be of
significant use to our Congressional clients and produce results such
as financial benefits to the American people and improvements in the
management of the nation's government.
Question. You have been using a pay for performance system for some
years now. Have you done any analysis to determine whether your system
costs more than what the rest of the Government is doing? Also, please
describe your efforts to establish a market-based compensation system.
Do you have benchmark data available on GAO salaries?
Answer. No, GAO has not analyzed the cost of the agency's pay for
performance system in relation to other federal government agencies.
There are a variety of pay for performance systems operating throughout
the federal government, so there is no single model which can be used
for cost comparison. Importantly, in our view, given the operational
flexibility provided to GAO in 2004, it would be more appropriate to
consider conducting any such analyses after our pending changes have
been in effect for several years.
In July 2004, Watson Wyatt Worldwide, a leading compensation
consulting firm, assisted us in establishing pay ranges that are
competitive with comparable organizations including selected
government, not-for-profit, and professional services entities in the
labor markets where GAO staff are located. Watson Wyatt worked closely
with GAO executives and representatives of our Employees' Advisory
Council to assure that the GAO positions were appropriately matched to
positions in the numerous published compensation surveys from which
compensation data were extracted. Watson Wyatt presented their
recommendations for compensation ranges to GAO's Executive Committee in
November 2004. After consideration of the unique aspects of the roles
and responsibilities of some GAO positions in relation to the
applicable markets, as well as the need to assure internal equity among
positions doing similar work, the Executive Committee made some minor
adjustments to the compensation ranges recommended by Watson Wyatt. The
proposed compensation ranges were presented to all GAO employees in a
Comptroller General Chat in December 2004. These proposed ranges were
used for certain purposes in making individualized performance-based
compensation decisions for fiscal year 2004 performance, but our new
overall compensation ranges will not be formally adopted and fully
implemented until January 2006. Initially, we focused on establishing
competitive pay rates for the analysts, specialists, and attorneys, who
make up about 77 percent of our workforce, but we will also establish
competitive pay rates for our administrative and professional support
staff by the end of 2005.
The establishment of competitive pay ranges, along with the
development of a new methodology for making individualized performance-
based compensation decisions, was undertaken as part of a comprehensive
classification and compensation review that is guided by seven
principles:
--Enable GAO to attract, retain, motivate, and reward top talent.
--Result in equal pay for work of equal value over time.
--Be reflective of the roles and responsibilities that we expect GAO
staff to perform.
--Be reasonable, competitive, performance-oriented, and based on
skills, knowledge, and role.
--Be affordable and sustainable based on current and expected
resource levels.
--Be in conformity with applicable statutory limits.
--Try to assure a reasonable consistency in ratings and related
compensation results within and between teams.
Watson Wyatt was able to benchmark 34 of the 36 positions for which
GAO requested assistance in developing competitive pay rates. We were
very pleased with this result, which greatly exceeded the 40-60 percent
of positions that Watson Wyatt indicated would normally be benchmarked
to the market and gave us increased confidence in the reliability of
the market matches. GAO's proposed compensation ranges set the
``competitive rate'' at the 50th percentile relative to our comparable
organizations. The most robust data was found for positions in the
Washington, DC market. GAO's 12 field locations are grouped into five
zones. The salaries for each zone are adjusted using a geographic
differential that contemplates the cost of labor for that geographic
location against the market data collected for positions in Washington,
DC.
One of the significant findings of the compensation study was that
the cap for our Band I analysts and specialists should be lowered from
$81,986 to $74,000. When GAO validated its new competency-based
performance management system, we found that there were two different
roles for analysts and specialists at the Band II or ``Senior'' level--
that of an ``individual contributor'' and that of an ``engagement
leadership.'' In doing the compensation study, we asked Watson Wyatt to
see if the market made a distinction in how the two roles are
compensated. They found the market did distinguish between the two
roles. In fact, the distinction led them to recommend that we increase
our current pay range for Band IIs from $114,987 to $125,000, but only
for individuals who are in a leadership role. For individual
contributors, the market data indicated that the current pay range
should be lowered from $114,987 to $99,000. Over the next few months,
as we prepare for the full implementation of these market-based
compensation ranges, we will be developing the final pay ranges, as
well as the criteria and a process we will use to make pay range
placement decisions for our current Band II staff. We recognize the
importance of assuring that both the criteria and the process are
objective, transparent and non-discriminatory. We will also assure that
staff have an opportunity to appeal their placement.
At the Band III level, the current statutory cap of $135,136 limits
our ability to fully implement the compensation ranges the market
indicates would be competitive, especially for attorneys and PhD
economists, and to a lesser extent, for analysts and specialists with
management or senior leadership responsibilities. For example, the true
competitive rate for attorneys is $143,000, which would put the pay
range maximum at $178,750. That is 32 percent higher than the current
cap. Even attorneys at the current cap will be below the market rate by
about 5.4 percent.
Question. Will changes in your compensation system improve your
ability to retain staff?
Answer. Yes, we expect that it will and believe that it will not
have an adverse effect. As I mentioned earlier, one of the principle
objectives in undertaking the development of our market-based
compensation system was to enhance GAO's ability to attract, retain,
motivate, and reward top talent within current and expected resource
levels. Individuals generally cite the nature of the work, the
opportunity to make a difference, and the reputation of the agency as
primary reasons they choose to work for GAO. While it is true that for
individuals who choose public service, salary is not the primary
motivator, it is nonetheless an important factor. Except as I discussed
above with respect to the limitations the current statutory cap places
on our ability to adopt market-based pay ranges reflective of the true
competitive rate for Band IIIs, I am confident that we will be
competitive with entities that we regularly compete with for talent. I
believe that our competitive position will over time be enhanced by our
approach to individualized performance-based compensation that assures
that top performing staff are identified and well rewarded. I also
believe that it is important in adopting a market-based compensation
philosophy that we have reasonable flexibility to implement the
competitive pay ranges that are applicable to our workforce. As a
result, I am planning to request legislative authority to exceed the
GS-15/10 statutory cap when the market-based data indicates a higher
cap is reasonable and appropriate given the relevant facts and
circumstances. This will help us to more effectively compete with the
SEC, banks, regulatory agencies, and other federal entities.
Question. How will planned changes impact your average annual
salary?
Answer. I have made a commitment to our staff that no GAO
employee's current salary, including accumulated locality pay, will be
reduced irrespective of their current position, pay, performance, or
location. I also have made a commitment that they will receive annual
adjustments that will at least maintain their purchasing power, if they
are performing at the ``Meets Expectation'' level or above on all of
the competencies relevant to their band level and if their current
salary is not in excess of their applicable pay range limit. While
annually we will review and adjust, as appropriate, our pay ranges to
reflect changes in labor market rates, the salaries for individuals
being paid in excess of their pay range limit will be frozen. That
means that they will not receive an annual salary adjustment until
their salary falls within the expected pay range. However, they will
still have an opportunity to earn an annual performance bonus if their
rating places them in the top 20 percent of their band level within
their team. This ``floor guarantee'' will be paid as a cash bonus. In
addition, they will still be eligible for various other incentive
awards, e.g. spot awards.
Over time, an employee's average annual salary will be based more
on the competitive rate for their position and band level, with only
top performing staff receiving salaries that are above a certain point
in the pay range (e.g., the 75th percentile) that is referred to as a
``speed bump''. This is a key aspect of a performance-oriented and
market-based compensation philosophy and is markedly different from the
pay philosophy under which GAO and most federal agencies have been
operating. When GAO went to pay banding in 1989, we adopted pay ranges
that followed the GS schedule, and we assumed that staff were correctly
classified. In retrospect, that may not have been the case. However,
the underlying pay philosophy was that everyone had the right to
advance to the pay cap in the absence of performance issues--it was not
a matter of ``if'', but only ``when''. As we transition to a
performance-oriented and market-based compensation philosophy where pay
ranges are set to be competitive with entities that compete with GAO
for talent, everyone has the opportunity to advance to the pay cap--but
individuals must have performance in excess of a certain level to
advance beyond ``speed bumps''. That will limit the number of staff who
will advance to the pay cap. It will also help to assure that the only
individuals who are paid in excess of the minimum pay rate for the next
higher level of responsibility are strong performers.
Within a few years after implementing the market-based compensation
ranges, I expect that the combined effect of managing salaries around
the competitive rate and implementing a performance ``speed bump'' will
result in a lower average annual salary (in today's dollars) as
compared to what would otherwise occur under our current system.
However, that won't necessarily translate to a lower average total cash
compensation because of the impact of our new individualized
performance-based compensation system, which allocates pay earned on
the basis of performance between a salary increase and a one-time cash
bonus payment. Individuals whose current salaries are below the
competitive rate receive more of their performance pay as a salary
increase, while individuals whose current salaries are above the
competitive rate receive more of their performance pay as a one-time
cash bonus. For 2005 pay adjustments, all Washington, DC-based
employees received across-the-board and locality increases of 3.71
percent. In addition, analysts, specialists, attorneys, and economists
received an average performance-based compensation increase of 1.65
percent, allocated between salary increase and cash bonus.
With the flexibilities provided by the GAO Human Capital Reform Act
of 2004, more of individuals' annual pay adjustments in future years
will be determined by their performance. The allocation process is a
key element in managing salaries around the competitive rate, but it is
also justifiably a source of concern for GAO staff because the portion
received as cash is not a component of the calculation of an
individual's ``high-3'' for retirement or of the salary base upon which
Thrift Savings Plan (TSP) contributions are computed. Therefore, in
order to address these concerns, I am planning to request legislation
that would permit calculation of ``high-3'' and TSP contributions on an
individual's total cash compensation, rather than on base salary plus
accumulated locality pay as required by current law. I believe such
authority could significantly facilitate more widespread use of more
market-based and performance-oriented compensation systems that
allocate annual performance pay between salary increases and bonus
payments.
Question. Please elaborate on the cost savings options that you are
considering as part of your revised human capital framework.
Answer. By implementing a more market-based and performance-
oriented compensation system, GAO is continuing to work towards our
strategic goal of maximizing the agency's value under current and
expected resource levels. Our compensation initiatives have involved
the assessment of positions to ensure appropriate classification of
various career streams and levels of responsibility along with a
market-based determination of the appropriate salary range for
positions. Each year as part of the annual performance-based
compensation process, GAO provides employees with pay adjustments that
reward performance, are reflective of the market value of positions,
consider changes in purchasing power, and are financially sustainable.
For increases effective October 1, 2005, GAO will develop and apply its
own methodology for annual cost-of-living and locality pay adjustments.
For example, pay ranges in Washington, DC, and in other cities in which
GAO employees reside, will be based on the results of an independent,
market-based compensation study conducted for GAO.
While cost savings are not the impetus for our market-based,
performance-oriented compensation system and other human capital
initiatives, the Congress will likely place increasing emphasis on
fiscal restraint given large budget deficits and the nation's long-
range fiscal imbalance. GAO is planning for the possibility of
significant and recurring constraints on the available agency
resources. Since 80 percent of our budget is composed of people-related
costs, any serious budget situation will have an impact on our human
capital policies and practices. Using our recent human capital
flexibility as a framework, GAO would consider such options as
conducting early out offers, reviewing our policies and approaches to
total compensation, delaying or reducing investments in discretionary
programs that support the workforce, rethinking our current approach to
hiring, and considering workforce restructuring actions on the basis of
organizational need and budgetary considerations.
Question. Can you tell us what the average cost per FTE is for your
Band II and Band III employees and how that compares to the average
cost per FTE for GS-13 through GS-15 employees in agencies like OMB and
OPM? How does the percentage of Band II and Band III employees in GAO
compare to the percentage of GS-13 through GS-15 in OMB and OPM?
Answer. The average salary for GAO Band II and Band III employees
at September 30, 2003, the most recent year when comparable data is
available, was $98,426. The average salary for GS-13 to GS-15 staff was
$98,333 for OMB and $112,174 for the SEC. We do not consider OPM
comparable to GAO since over 72 percent of OPM staff perform clerical,
administrative and compliance related work which is typically
compensated at lower salary levels than staff performing work of an
analytical nature. We believe that work performed by the SEC is more
comparable to that performed by GAO. The average salary for GS-13
through GS-15 employees at OPM at September 30, 2003, was $89,099.
As of September 30, 2003, Band II and III employees accounted for
51 percent of GAO's staff. OMB and SEC GS-13 through GS-15 employees
accounted for 54 percent and 55 percent, respectively. At the OPM, the
percentage of GS-13 through GS-15 employees was 25 percent.
Question. Does your pay for performance and broad banding system
cover all GAO employees?
Answer. No. We have 5 Wage System employees who will not be
converted to a broad banded pay for performance system and 20 criminal
investigators who we are in the process of converting to a broad-banded
system. All GAO employees who are covered by a pay-banding system will
be eligible for pay for performance.
Question. Do you believe there is a need to further refine your
system to make it more effective? If so, what changes do you plan to
make and how much will they cost? Do you expect these refinements, once
implemented, to reduce overall compensation costs? If compensation
costs are reduced, can the savings help you to restore your FTE levels?
Answer. Yes. After the completion of each performance appraisal
cycle and performance based compensation process, GAO conducts an
evaluation by reviewing data and by soliciting feedback from managers
and employees. As part of our continuous improvement process, we have
made modifications to the performance appraisal and pay process every
year based on this evaluation. We are currently analyzing the results
of our evaluation of the fiscal year 2004 process to determine what, if
any, modifications will be recommended for next year. Continuous
improvement costs are minimal, as the majority of changes require minor
adjustments to the existing system. We do anticipate a review of the
analyst band structure and the competencies associated with the band
levels in connection with the implementation of market-based
compensation ranges. We anticipate the cost of this effort to be
minimal because the compensation work has already been completed and
the majority of the work on the competencies was completed when GAO
initially undertook revising its performance appraisal system.
While cost savings are not the impetus for our competency-based
performance management and compensation systems, by implementing a more
market-based and performance-oriented compensation system, GAO is
continuing to work towards our strategic goal of maximizing the
agency's value while managing its costs. Our compensation initiatives
have involved the assessment of positions to ensure appropriate
classification of various career streams and levels of responsibility,
along with a market-based determination of the appropriate salary range
for positions. Each year as part of the annual performance-based
compensation process, GAO will provide employees with pay adjustments
that reward performance, are reflective of the market value of
positions, consider changes in purchasing power, and are financially
sustainable. For increases effective on or after October 1, 2005, GAO
will develop and apply its own methodology for annual cost-of-living
and locality pay adjustments. For example, pay ranges in Washington,
DC, and in other cities in which GAO employees reside, will be based on
the results of an independent market-based compensation study conducted
for GAO.
Within a few years after implementing the market-based compensation
ranges, I expect that the combined effect of managing salaries around
the competitive rate and implementing a performance ``speed bump'' will
result in a lower average annual salary (in today's dollars) as
compared to what otherwise would occur under the current system.
However, that won't necessarily translate to lower average total cash
compensation because of the impact of our new individualized
performance-based compensation system, which allocates pay earned on
the basis of performance between a salary increase and a one-time cash
bonus payment. Individuals whose current salaries are below the
competitive rate, set at the 50th percentile of the compensation ranges
compared to comparable organizations, will receive more of their
performance pay as a salary increase, while individuals whose current
salaries are above the competitive rate will receive more of their
performance pay as a one-time cash bonus. For 2005 pay adjustments, all
Washington, DC-based employees received an across-the-board and
locality increase of 3.71 percent. In addition, analysts, specialists,
attorneys, and economists received an average performance-based
compensation increase of 1.65 percent, allocated between salary
increase and cash bonus. Finally, benefits costs also need to be
considered when determining total compensation and average compensation
amounts.
Question. Could you also explain the process you use to determine
who gets monetary awards, how many GAO employees received them last
year and what the amount of the award was for each?
Answer. GAO employees receiving performance-based compensation are
eligible for an increase to base pay, a bonus or a combination of the
two. A summary of the performance-based compensation is as follows:
Each year, the Comptroller General determines the budgetary
parameters for performance-based compensation, the methodology by which
amounts will be calculated and awarded to employees and the effective
date on which it will be paid. The methodology used to award
performance based compensation for fiscal year 2004 considered an
employee's appraisal, current salary and the applicable competitive
compensation range. Employees' appraisal averages were converted to
statistically standardized rating scores in order to minimize the
impact of any variability in raters' applications of the standards.
Performance based compensation amounts were calculated as a percentage
of the midpoint of the employee's band. The distribution of the
compensation amount between a permanent salary increase and a lump sum
was based on the employee's salary with employees at the lower portion
of the salary range receiving their awards primarily as base increases
and those employees at or near the top of the pay range receiving their
awards as lump sum payments. Performance based compensation is prorated
for those employees who have less than a full year of service during
the performance cycle.
In addition to performance-based compensation, GAO employees are
eligible for incentive awards. Agency regulations describe the
categories of incentive awards, the forms the award may take, e.g.,
plaque, money, time off, etc., and the recommendation and approval
process associated with each category of award.
GAO-wide honor awards, GAO's highest awards, recognize individuals
and teams for their noteworthy achievements and extra effort through
the performance-based compensation system and provide incentives for
employees to strive for greater achievements. These awards consist of
plaques and may include monetary recognition for individual recipients
(not teams) based on annual guidance. Each year, a request for
nominations is issued agency-wide and a screening committee reviews the
resulting nominations. The screening committee, which is selected by
the Executive Committee, comprised of the agency's top management team,
makes recommendations to the Executive Committee. Two SES level
employees lead the committee which is comprised of nine other members
representing mission teams, mission support and field operations. GAO
provides the following agency-wide honor awards: Comptroller General's
Award, Distinguished Service Award, Meritorious Service Award, Equal
Employment Opportunity Award, Customer Service Award, Client Service
Award, Community Service Award, Integrity Award, Grand Finale Award,
Big Picture Award and Human Capital Management Award.
GAO also provides Results through Teamwork Awards, which recognize
the accomplishment of teams working collaboratively across
organizational lines beyond what is normally expected and recognized
through the performance based compensation system. Awards may be
provided in the form of a monetary, time off, or a certificate award.
Managing Directors submit team nominations for the Executive
Committee's review and approval.
Employees are also eligible for unit awards, which are designed to
reward deserving individuals or teams for extra effort above and beyond
what is normally expected and recognized through the performance-based
compensation system. Rewards may include cash, paid time off, and
written expressions of appreciation, or combinations thereof. Unit
awards must be approved by the SES-level unit head and each unit is
responsible for developing a process to make award decisions that
ensures that all staff are fairly considered, and that awards are based
on performance, contributions, and extra effort above and beyond what
is normally expected and recognized through the performance-based
compensation system.
In fiscal year 2004, cash incentive awards were provided as
follows:
--Number of Awards: 2,293
--Average Amount: $471
--Median Amount: $300
--Total Cost: $1,080,000.
Question. The GAO Human Capital Reform Act of 2004 provided you
with a number of flexibilities in the human capital arena, including
the ability for the GAO to decouple itself from annual executive branch
pay adjustments. Please provide the Subcommittee an update on each of
the provisions of the Act, including expected implementation timeframes
and outstanding issues.
Answer. Public Law 108-271 contained various human capital
flexibilities. As required by section 10 of the act and consistent with
GAO's long standing practice, the human capital flexibilities
authorized by sections 2, 3, 4, 6, 7 and 9 are being implemented in
continuing consultation with GAO's employees and executives. The status
of each of these flexibilities is as follows:
--Section 2 amended Public Law 106-303, the GAO Personnel
Flexibilities Act of 2000, to permit the Comptroller General to
offer voluntary early retirement and voluntary separation
incentive payments on a permanent basis. GAO's regulations for
offering voluntary early retirement were issued on November 15,
2004. Since fiscal year 2002, GAO has held several early
retirement opportunities. To give the fullest consideration to
all interested employees, any employee may apply for
consideration when an early retirement opportunity is
announced, even if he or she does not meet the stated criteria.
The Comptroller General may also authorize early retirements
for applicants on the basis of the institutional needs of GAO
subject to certain statutory limits. The following table
summarizes data on the voluntary early retirement program.

SUMMARY DATA ON VOLUNTARY EARLY RETIREMENTS
----------------------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal Fiscal
Applications/Status of applications year year year year Total
2002 2003 2004 2005
----------------------------------------------------------------------------------------------------------------
Applicants separated by voluntary early retirement................. 54 28 21 9 112
----------------------------------------------------------------------------------------------------------------

The amendment in section 2 also removed the December 31, 2003
sunset date on the CGA to offer voluntary separation incentive
payments. The voluntary separation incentive provision, which
is now permanent, has not yet been implemented by regulation.
The costs associated with voluntary separation incentives can
be considerable. GAO anticipates little, if any, use of this
authority because of the associated costs. For this reason, as
well as to avoid creating unrealistic employee expectations,
GAO has not developed and issued agency regulations to
implement this section of the act.
--Section 3 of the act amended 31 U.S.C. 732(c), which required GAO
employees' pay to be adjusted at the same time and to the same
extent as the General Schedule and instead authorizes the
Comptroller General to determine the amount of annual pay
adjustments subject to the factors enumerated in section 3.
Additionally, section 3 establishes a requirement that an
employee must be performing at a satisfactory level in order to
receive an annual pay adjustment.
The CGA under section 3 is effective for increases on or after
October 1, 2005. We are formulating strategies for determining
the appropriate methodology for establishing alternatives to
the annual adjustment and anticipate the issuance of
regulations prior to January 2006--the first opportunity for
the Comptroller General to exercise this authority. GAO Order
2500.1, Pay Administration in the GAO Regulations, was issued
January 4, 2005 and implemented the satisfactory performance
requirement for GAO's analysts and related specialist and
attorneys. These groups of employees have been 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 as below expectations. Our regulations
will be revised to make this requirement applicable to the
analysts and related specialists and attorneys prior to the
January 2006 annual adjustment. The administrative,
professional and support (APSS) staff were recently converted
to a pay for performance system. We are continuing to implement
components of the APSS system and have not yet determined the
methodology for establishing annual adjustments.
--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. It is our intention to
complete the review and consultation process and implement this
section prior to January 2006.
--Section 6 authorizes GAO to provide increased annual leave to key
employees. After consultation, GAO Order 2630.1, Leave Policies
and Procedures, was issued for employee comment on December 29,
2004. These regulations contain a provision permitting
designated key employees with less than 3 years of federal
service to earn 6 hours of annual leave. The 45-day comment
period closed on February 14, 2005 and employees' comments are
being analyzed and will be considered by GAO's Executive
Committee before finalizing the regulations. We anticipate
finalization of the regulations and implementation of this
provision on or before June 1, 2005. In addition, in January
2005, we updated GAO Order 2317.1, GAO's Senior Executive
Service and Senior Level Positions, to allow senior executives
and senior level staff to accrue annual leave at the rate of 1
day for each full biweekly pay period without regard to the
length of their service with the federal government.
--Section 7 authorized GAO to establish an Executive Exchange
Program. Draft regulations implementing the Executive Exchange
Program were provided to employees for comment on January 31,
2005. The comment period closed on March 4, 2005 and review and
analysis of the comments is in process. We anticipate issuing
final regulations on or before June 1, 2005, and are
concurrently working on the operational implementation of the
program.
--Section 9 amended 31 U.S.C. 732(d) and incorporated additional
requirements for GAO's competency-based performance management
system. GAO's competency-based performance management system,
including its competency-based appraisal systems, addresses all
of these factors. However, we conduct an annual review and
assessment of our performance appraisal policies and processes
as part of ongoing continuous improvement of the system.

SUBCOMMITTEE RECESS

Senator Allard. The subcommittee stands in recess until
Wednesday, April 27, when we will take testimony from the
Senate Sergeant at Arms and the Capitol Police Board. Thank you
very much.
[Whereupon, at 11:33 a.m., Tuesday, April 19, the
subcommittee was recessed, to reconvene at 11 a.m., Wednesday,
April 27.]