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



 
         LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2006

                              ----------                              


                        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.

                        COPYRIGHT REENGINEERING

    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.

                        COPYRIGHT REENGINEERING

    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.

                     COPYRIGHT REGISTRATION PROCESS

    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.]
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