    [Senate Hearing 114-177]
    [From the U.S. Government Publishing Office]

             LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2016

                                  ----------

                            TUESDAY, MARCH 10, 2015

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 3:04 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Shelley Moore Capito (chairman)
    presiding.
        Present: Senators Capito, Schatz, and Murphy.

                          CONGRESSIONAL BUDGET OFFICE

    STATEMENT OF DR. DOUGLAS W. ELMENDORF, PH.D., DIRECTOR

               opening statement of senator shelley moore capito

        Senator Capito. Good afternoon, everybody. The subcommittee
    will come to order. I would like to welcome everyone to the
    first of our fiscal year 2016 budget hearings for the variety
    of agencies under the jurisdiction of the Legislative Branch
    Appropriations Subcommittee.
        I would like to welcome my ranking member. This is our
    first run at this show, and I think I speak for myself and for
    the Senator, that we are excited about having this
    responsibility.
        We are going to begin today with the Director of the
    Congressional Budget Office (CBO), Dr. Douglas Elmendorf, and
    the head of the Government Accountability Office (GAO), Mr.
    Gene Dodaro. I appreciate the willingness of the witnesses to
    appear before the subcommittee today.
        I would like to start by thanking Dr. Elmendorf for his 6
    years of service as the Director of the Congressional Budget
    Office. As we talked just briefly, I know you are going to be
    welcoming a breath of fresh air in your life, a time to reflect
    and figure what you want to do for the rest of your life, but
    you have been a stellar public servant.
        Your tenure has assured that the CBO provided this
    committee with objective, non-partisan information that is
    necessary for us to do our job, and I speak for the rest of
    Congress as well.
        We appreciate the manner in which you have approached this
    with the very, very difficult task that you have had. We wish
    you well.
        As many of you already know, on February 27, the Speaker of
    the House, John Boehner, and the President Pro Tempore, Orrin
    Hatch, jointly appointed Dr. Keith Hall to be the next Director
    of the Congressional Budget Office, after consideration of the
    recommendation made to leadership by the chairmen of the House
    and Senate Budget Committees.
        Dr. Hall's term will begin on April 1. Maybe he should
    start on April 2. It will expire on January 3, 2019, in
    accordance with the guidelines set forth in the Congressional
    Budget and Impoundment Control Act of 1974.
        The total Congressional Budget Office request is $47.27
    million, a $1.57 million or 3.4 percent increase over the 2015
    enacted level. This funding request supports the current full-
    time equivalent (FTE) level of 235 plus an additional three
    FTEs necessary for health related work and developing a
    specific structure within the existing Macroeconomic Division,
    in order to comply with the new House rule requirement.
        The total GAO request for fiscal year 2016 is $553.1
    million, a $31.1 million or 6 percent increase above the fiscal
    year 2015 enacted level. This funding request supports an
    increase in FTEs from 3,015 to 3,055, which would continue
    progress on GAO's multi-year plan to achieve an optimal level
    of 3,250 FTEs.
        I look forward to exploring these needs with you and the
    other members of the subcommittee today and over the next
    several months as we move forward through this fiscal year 2016
    process.
        Again, I would like to thank you, and I would like to turn
    it over to the ranking member, Senator Schatz, for any opening
    remarks he might have.

                       statement of senator brian schatz

        Senator Schatz. Thank you, Chair Capito. It is an honor to
    serve on the Senate Appropriations Committee and especially to
    be serving as your ranking member. I look forward to working
    with you on this subcommittee, and we are fortunate to have you
    and your 14 years of experience in the Federal legislative
    context.
        I am anxious today to get started on our work together
    examining the budgets of agencies funded in this bill and
    making sure that the taxpayers' money is being spent wisely.
        I would like to welcome Director Elmendorf and Comptroller
    General Dodaro to this hearing. CBO and GAO play a vital role
    in supporting the Congress' legislative and oversight
    responsibilities by providing objective and authoritative
    information to the Congress. CBO and GAO ensure that policy and
    funding debates are based on sound factual and independent
    information.
        Recent policy and funding decisions are being considered
    within a challenging fiscal climate, making CBO's cost
    estimates, budget projections, and economic forecasts
    especially important.
        Within GAO, one key component of their work is the agency's
    high risk list published at the start of each new Congress to
    identify areas at high risk for waste, fraud, abuse, or
    mismanagement. The high risk list provides Congress and the
    committee a clear and informed set of oversight priorities.
        I look forward to working with our two agencies today and
    throughout the year to ensure that both have the resources
    needed to fulfill your responsibilities.
        I am also interested in learning how your agencies may have
    to adjust their operations if current Budget Control Act (BCA)
    spending caps remain in place.
        Dr. Elmendorf, after 6 years, you will soon finish your
    service as CBO Director. I understand CBO has produced more
    than 3,000 written cost estimates under your leadership, and
    that this is your 50th and perhaps last congressional hearing.
        I want to thank you for your service to Congress and wish
    you the best in your future endeavors.
        Thank you, Chair Capito.
        Senator Capito. Thank you. Now, I would like to ask the
    witnesses, beginning with Dr. Elmendorf, to give a brief
    opening statement of approximately five minutes. The written
    testimony of each witness will be printed in full in the
    hearing record. Dr. Elmendorf.

                 summary statement of dr. douglas w. elmendorf

        Dr. Elmendorf. Thank you, Madam Chairman, and Ranking
    Member Schatz, for your kind words. I appreciate the
    opportunity to present CBO's budget request for fiscal year
    2016.
        We are asking for appropriations of $47.3 million, which
    will be an increase of $1.6 million or 3.4 percent from the
    $45.7 million provided to CBO for 2015.
        About one-quarter of our requested increase, roughly
    $440,000, would fund three additional full-time equivalent
    positions. We aim to boost our staffing from the 235 FTEs
    contemplated for this year to 238 next year.
        The additional FTEs would be devoted, as the chair said, to
    analyze the economic effects of Federal tax and spending
    policies, including conducting so-called ``dynamic analysis''
    of certain legislation under the new House rule, and probably
    on occasion for the Senate as well, and to analyze healthcare
    issues.
        The remaining $1.1 million of the increase, about 2.4
    percent, will be devoted to our ongoing operations. That figure
    is the net increase of an increase of $1.7 million in pay and
    benefits, and a decrease of about $550,000 in non-pay
    expenditures.
        The proposed increase in pay and benefits reflects small
    increases in average pay and rising costs of benefits,
    including a marked increase in contribution rates for the
    Federal Employees Retirement System that took effect this year
    but was not anticipated in our budget request for this year. We
    are meeting this year's costs within our appropriations because
    the pay of some new employees has turned out to be less than we
    anticipated.
        We continue to face considerable competitive pressure in
    attracting and retaining the highly educated and skilled
    employees that we and the Congress need. Talented economists
    and budget analysts are highly sought by other Government
    agencies, private analytic organizations, and private
    companies.
        Indeed, the gap between the compensation that CBO can
    provide and the compensation that people with such backgrounds
    can receive elsewhere is increasing.
        The decrease in non-pay expenditures in our request is
    mostly related to information technology, and it is possible
    because funding provided last year and this year allowed us to
    catch up on IT purchases that had been deferred from previous
    years.
        In various other areas, we expect to contain non-pay costs
    so it will be less than or equal to this year's expenditures,
    despite rising prices.
        Our goal with this funding request is to continue to
    provide the Congress with a timely, carefully thought out, non-
    partisan budgetary and economic analysis that you and your
    colleagues expect from us.
        As you know, our work encompasses a wide array of subjects
    and appears in many different forms. We write reports on the
    outlook for the budget and the economy, long term budget
    outlook, and options for reducing budget deficits.
        We issue more than 500 formal cost estimates in a year and
    provide thousands of preliminary informal estimates as
    committees seek to have a clear picture of the budgetary impact
    of proposals before they formally consider legislation.
        We release more than 100 scorekeeping tabulations each
    year, including account level detail for individual
    appropriation acts at all stages of the legislative process.
        We publish roughly 85 analytical reports and other
    publications each year, generally as required by law, or in
    response to requests from the chairman and ranking members of
    key committees.
        A common thread running through all of that work is that
    the demand from you and your colleagues exceeds the quantity
    that the 235 of us at CBO can supply. The enactment of major
    healthcare legislation in 2010 has been followed as you know by
    a high level of congressional interest in analysis of that
    legislation and numerous proposals for further changes in
    Federal healthcare programs.
        In addition, the slow recovery of an economic down turn has
    spurred interest in our economic forecasts, and in policies
    that might boost economic growth and opportunity in both the
    near term and the longer term.
        Moreover, the surge in Federal debt and the high level of
    projected deficits over the long term have led to ongoing
    consideration of fundamental changes in spending and tax
    policies, from changes in benefit programs to defense policy,
    infrastructure, energy policy, and much more.
        Despite the very hard work of CBO's highly dedicated staff,
    we simply cannot keep up with the volume of requested estimates
    and other analyses. Of course, we regularly consult with the
    leadership of the key committees of the House and the Senate as
    a whole to ensure that our limited resources are focused on the
    work that is of highest priority to the Congress.
        Even so, if we have to reduce our staffing below the
    current level, the mismatch between the demand for and the
    supply of our work would become even more acute.
        I want to close by thanking this committee for the support
    it has supported CBO over many years. I have had the
    extraordinary privilege to lead a terrific organization and
    work with its very talented people for the past 6 years. I know
    CBO will continue to provide the Congress with careful
    objective analysis as you and your colleagues grapple with the
    many challenges the Nation faces.
        Thank you.
        [The statement follows:]
                 Prepared Statement of Dr. Douglas W. Elmendorf
        Madam Chairman, Ranking Member Schatz, and members of the
    subcommittee, thank you for the opportunity to present the
    Congressional Budget Office's budget request. CBO requests
    appropriations of $47.3 million for fiscal year 2016. That amount
    represents an increase of $1.6 million, or 3.4 percent, from the $45.7
    million provided to CBO for 2015.
        About one-quarter of the requested increase, roughly $440,000,
    would fund three new full-time-equivalent positions (FTEs): The agency
    aims to boost its staffing from the 235 FTEs contemplated in the 2015
    appropriation to 238 for 2016. The additional FTEs would be devoted to
    analyzing the economic effects of Federal tax and spending policies
    (including conducting ``dynamic analysis'' of certain legislation
    pursuant to a new House rule) and healthcare issues.
        The remaining $1.1 million increase (about 2.4 percent) would be
    devoted to ongoing operations--the result of an increase of nearly $1.7
    million in pay and benefits, which would be partly offset by a decrease
    of about $550,000 in nonpay expenditures. The proposed increase in pay
    and benefits reflects small increases in average pay and rising costs
    of benefits, including a marked increase in contribution rates for the
    Federal Employees Retirement System (FERS) that took effect in 2015 but
    was not anticipated in CBO's 2015 budget request. The decrease in
    nonpay expenditures, mostly related to information technology (IT), is
    possible because funding provided in 2014 and 2015 allowed CBO to catch
    up on IT purchases deferred from previous years. In various other
    areas, CBO expects to contain nonpay costs so they will be less than or
    equal to this year's expenditures, despite rising prices.
        Of the requested funding for 2016, 91 percent would support pay and
    benefits, 6 percent would be for IT, and 3 percent would go toward
    purchases of data, training, office supplies, and other items.
          cbo's funding history and its effects on staffing and output
        Because such a large share of CBO's budget represents compensation,
    the contours of the agency's budget and staffing levels have been and
    will continue to be closely linked.
        Between fiscal years 2002 and 2008, the number of authorized FTEs
    at CBO held between 232 and 235 (see Figure 1). During that period,
    CBO's budget generally rose slowly, as Federal employees received
    salary increases and the cost of Federal benefits increased. For fiscal
    years 2009 and 2010, the Congress approved larger increases in CBO's
    budget to support a step-up in staffing. That step-up was intended
    primarily to increase the agency's ability to analyze potential changes
    in Federal healthcare policy while maintaining its capacity to provide
    cost estimates and reports on other topics. CBO had sufficient funding
    for 254 FTEs in 2010.
        The increase in staffing enabled CBO to engage in analyses of
    particularly complex issues and to provide substantially more estimates
    and other analyses to the Congress. Among the accomplishments that were
    facilitated by the larger staff were a significant expansion of
    healthcare analysis, substantial enhancement of financial analysis,
    considerable improvement in modeling the economic effects of Federal
    tax and spending policies, issuance of several reports with options for
    changing Federal benefit programs, significant gains in the
    transparency of CBO's analysis, and continued high quality of the
    agency's cost estimates and analyses of numerous other topics.
        However, constraints on CBO's funding (following from constraints
    on discretionary appropriations as a whole) caused the agency's
    staffing to shrink in fiscal years 2011 through 2013. The agency's
    appropriation for 2013 was well below the amounts provided to the
    agency during the preceding years (see Figure 2). Those cuts, combined
    with small increases in average pay and rising costs of benefits and
    other items during those years, required a drop in the number of FTEs
    to only 225 in 2013, the lowest level in more than a dozen years. In
    addition, the agency had to defer critical purchases of IT equipment
    and services and other items.

        CBO's appropriation for 2014 was significantly larger than its
    appropriation for 2013, and the appropriation for 2015 equaled the
    amount provided in 2014. Accordingly, the agency sharply increased its
    recruiting efforts in order to return its staffing to the traditional
    level of 235 FTEs as quickly as possible and to catch up on deferred IT
    purchases. As a result, staffing now stands at 234 FTEs, and the number
    is expected to be slightly higher by the end of this fiscal year.
       cbo's funding request and its consequences for staffing and output
        In fiscal year 2016, CBO will continue its mission of providing
    objective, insightful, timely, and clearly presented budgetary and
    economic information to the Congress. To fulfill that mission, CBO
    requests $47.3 million in funding--an increase of $1,570,000 from the
    $45.7 million provided for 2015. The requested amount of funding would
    allow CBO to provide the following estimates and other analyses to the
    Congress:
      --Reports presenting the outlook for the budget and the economy,
            analyses of the President's budget, long-term budget
            projections, and options for reducing budget deficits;
      --More than 500 formal cost estimates, most of which will include not
            only estimates of Federal costs but also assessments of the
            cost of mandates imposed on State, local, and tribal
            governments or the private sector;
      --Thousands of preliminary, informal cost estimates, the demand for
            which is very high as committees seek to have a clear picture
            of the budgetary impact of proposals and variants of proposals
            before they formally consider legislation;
      --About 120 scorekeeping tabulations, including account-level detail
            for individual appropriation acts at all stages of the
            legislative process and summary tables showing the status of
            discretionary appropriations (by appropriations subcommittee)
            and running totals on a year-to-date basis; and
      --Roughly 85 analytical reports and other publications--generally
            required by law or prepared in response to requests from the
            Chairmen and Ranking Members of key committees--on a broad
            range of topics, including healthcare, policies for increasing
            economic growth and opportunity, changes in benefit programs,
            defense policy, infrastructure, energy policy, and the
            Government's role in the financial system.
        Those products would be the result of very hard work by CBO's
    highly dedicated staff. Nevertheless, the agency expects that the
    anticipated volume of estimates and other analyses will fall
    considerably short of the number of Congressional requests. The demands
    on CBO remain intense: The enactment of major healthcare legislation in
    2010 has been followed by a high level of congressional interest in
    analysis of that legislation and numerous proposals for further changes
    in Federal healthcare programs. In addition, the slow recovery from the
    economic downturn has spurred interest in the agency's economic
    forecasts and in policies that might boost economic growth and
    opportunity in both the near term and the longer term. Moreover, the
    surge in Federal debt and the high level of projected deficits have led
    to ongoing congressional efforts to enact fundamental changes in
    spending and tax policies. Analyzing the possibilities and proposals
    has strained the agency's resources in many areas. CBO regularly
    consults with committees and congressional leadership to ensure that
    its limited resources are focused on the work that is of highest
    priority to the Congress.
        The requested funds would be used as follows:
      --$32.1 million for pay of personnel--an increase of $1.6 million (5
            percent) over the amount that will be spent in fiscal year
            2015. The increase would cover $0.3 million in pay for the
            additional FTEs, as well as performance-based salary increases
            for current staff and an across-the-board increase of 2.2
            percent for employees making less than $100,000 (if such an
            increase is authorized for executive branch agencies).
      --$11.1 million for benefits of personnel--an increase of $0.5
            million (5 percent) relative to the amount projected to be
            spent in 2015, to fund an increase in the cost of Federal
            benefits as well as the benefits for the added staff members.
            The increase in the FERS contribution rate (about 1.7
            percentage points for most of the affected employees) took
            effect in 2015 but was not anticipated in the 2015 budget;
            those costs are being met within the 2015 appropriation because
            the pay of some new employees turned out to be lower than
            anticipated. The higher FERS contribution rate accounts for
            about $0.5 million of the proposed 2016 funding.
      --$4.1 million for other purposes--a decrease of $0.5 million (12
            percent) from the amount appropriated in 2015. The funds would
            go toward purchases of IT, data, training, and other items. The
            decrease for 2016 is made possible primarily by the fact that
            the 2014 funding allowed CBO to catch up on deferred IT
            purchases and to make some purchases that reduced future needs.
        In closing, I would like to thank the Committee for the support it
    has provided CBO over many years, enabling the agency to provide
    timely, carefully thought-out nonpartisan budgetary and economic
    analysis to the Congress as it addresses the critical issues facing the
    Nation.

        Senator Capito. Comptroller General.
                        GOVERNMENT ACCOUNTABILITY OFFICE

    STATEMENT OF HON. GENE L. DODARO, COMPTROLLER GENERAL
        Mr. Dodaro. Good afternoon, Madam Chairman, Senator Schatz.
    I am very pleased to be here this afternoon to discuss GAO's
    budget request.
        First, I would like to add to the compliments that both of
    you have provided to Doug Elmendorf. He has been a tremendous
    colleague to work with over the years. I want to wish him well
    in his future endeavors.

                                   GAO BUDGET

        With regard to GAO's budget request, I just want to make
    three basic points. First, GAO provides an excellent return on
    investment in supporting the Congress and improving the
    performance and accountability of the Government.
        Second, our ability to make an impact and help the Congress
    is dependent on having a highly skilled and experienced
    workforce to carry out our responsibilities.
        Finally, we have advanced a prudent request that will
    enable us to meet the highest priority needs of the Congress
    and provide the greatest impact on achieving financial
    benefits.

                            GAO RETURN ON INVESTMENT

        First, on GAO's return on investment. Last year as a result
    of implementing our recommendations, there were over $54
    billion in financial benefits identified to the Congress and
    the country. This is about a $100 return for every dollar
    invested in GAO. There were also about 1,200 documented
    improvements in agency operations that addressed public health
    and safety issues or helped improve the performance and
    efficiency of Government programs.
        The Bipartisan Budget Act recently incorporated
    recommendations from GAO to save over $23 billion which helped
    in avoiding the sequestration process for fiscal years 2014 and
    2015. The Consolidated Appropriations Act for 2015 was replete
    with references to GAO's work. We made contributions to
    numerous authorizations and reauthorizations on everything from
    defense to agriculture programs.
        We also helped advance major management reforms that the
    Digital Accountability and Transparency Act will now improve,
    if properly implemented, such as the accuracy and searchability
    of all information on Federal spending.
        Our work also led to the Federal Information Technology
    Reform Act, which will improve IT acquisitions across
    Government. We have made a number of recommendations to five
    different pieces of legislation that were passed last year,
    addressing the Federal Government's response to cybersecurity
    issues going forward.
        I think the record of investing in GAO is very clear and
    demonstrates that you get good results.

                                 GAO WORKFORCE

        With regard to our workforce, 82 percent of our request is
    for people. We need highly skilled and experienced people.
    Right now, we face succession planning challenges. Like many
    other public sector and private sector organizations, our
    workforce is aging.
        Right now, 40 percent of our Senior Executives are eligible
    to retire and 20 percent of our Senior Managers are eligible to
    retire. As I look ahead to 2018, those numbers go to well over
    50 percent of our Senior Executives and over 30 percent of our
    Senior Managers.
        We need to keep replenishing our pipeline. For people to
    make improvements across the breadth of the Federal
    Government's operations, they need to be experienced. We need
    to bring them in and train them not only on how GAO does its
    work, but also train them to become specialists in subject
    areas, since we serve about 94 percent of the full committees
    of the Congress, standing committees of the Congress, and 70
    percent of the subcommittees. We need experts in many different
    areas across the Federal Government.
        Finally, I would mention our request this year is for a 5.9
    percent increase. That would increase our number of FTE
    positions by 40. We believe this is a prudent increase. As you
    mentioned, Madam Chairman, in your opening comments, the
    optimal level, I believe, for GAO is 3,250 full-time equivalent
    positions. I am not asking to get to that level as a part of
    this request.
        As the auditor of the Federal Government's financial
    statements, I understand our fiscal position right now in terms
    of the deficit and debt. The 40 additional positions will
    enable us to tackle very important issues ranging from $124
    billion in improper payments that went out last year, as well
    as the $385 billion tax gap. We are losing money that we are
    paying that we should not be paying, and not collecting as much
    as we should be collecting.
        We can make a big difference in those areas and other high
    risk areas across the Government.
        Thank you very much for the opportunity to be here today. I
    look forward to responding to your questions.
        [The statement follows:]
                   Prepared Statement of Hon. Gene L. Dodaro
        Chairman Capito, Ranking Member Schatz, and members of the
    subcommittee:

        On behalf of the U.S. Government Accountability Office (GAO), I
    appreciate the opportunity to discuss our fiscal year 2016 budget
    request. I also appreciate the confidence this subcommittee has shown
    in GAO by supporting our efforts to serve Congress and improve
    Government performance, accountability, and transparency.
        The fiscal year 2015 funding of $522 million will allow GAO to have
    a staff capacity of 3,015 full-time equivalent (FTE) positions. This is
    a positive step forward in rebuilding our staff capacity, which in
    recent years had dropped to its lowest level since 1935 due to funding
    constraints. GAO remains committed to quality, focusing on meeting the
    highest priorities of Congress, and assisting in improving Government
    efficiency and effectiveness.
        GAO's fiscal year 2016 budget request of $553.1 million will
    support 3,055 FTEs, continuing progress towards achieving an optimal
    level of 3,250 FTEs. The requested funding also provides the resources
    to maintain current operations and make limited investments in
    information technology (IT) and building infrastructure. Costs will be
    offset with $33.4 million in reimbursements, primarily from financial
    audits and rental income.
                                 gao highlights
        Highlights of GAO-15-417T, a testimony before the Subcommittee on
    Legislative Branch, Committee on Appropriations, Senate.
                                   background
        GAO's mission is to support Congress in meeting its constitutional
    responsibilities and to help improve the performance and accountability
    of the Federal Government for the benefit of the American people. GAO
    provides nonpartisan, objective, and reliable information to Congress,
    Federal agencies, and to the public and recommends improvements, when
    appropriate, across the full breadth and scope of the Federal
    Government's responsibilities.
        GAO's work supports a broad range of interests throughout Congress.
    In fiscal year 2014, GAO received requests for our work from 94 percent
    of the standing committees of Congress and almost 70 percent of their
    subcommittees. Additionally, senior GAO officials testified 129 times
    on a wide range of issues that touched virtually all major Federal
    agencies.
        GAO remains one of the best investments in the Federal Government,
    and GAO's dedicated staff continues to deliver high quality results. In
    fiscal year 2014 alone, GAO's work yielded $54.4 billion in financial
    benefits--a return of about $100 for every dollar invested in GAO.
    Since fiscal year 2003, GAO's work has resulted in:
      --over \1/2\ trillion dollars in financial benefits; and
      --about 15,800 program and operational benefits that helped to change
            laws, improve public services, and promote sound management
            throughout Government.
        These results are a reflection of the dedication and hard work of
    GAO's staff. GAO has again been recognized as an employer of choice,
    and continues to be ranked near the top on ``best places to work''
    lists. In December 2014 the Partnership for Public Service ranked GAO
    second among mid-size agencies as one of the best places to work in the
    Federal Government.
                      fiscal year 2016 performance budget
        GAO's fiscal year 2016 budget request of $553.1 million supports
    3,055 full-time equivalent (FTE) staff and continues progress towards
    achieving an optimal level of 3,250 FTE. The request also provides the
    resources to maintain current operations and make limited investments
    in GAO's information technology (IT) and building infrastructure. Costs
    will be offset with $33.4 million in reimbursements, primarily from
    financial audits and rental income.
        The Congress used GAO's work extensively in 2014 to identify
    legislative solutions to emerging problems, achieve cost savings, and
    find efficiencies in Federal agencies and programs. GAO's work helped
    Congress achieve some of the billions in savings and revenue
    enhancements needed to avoid sequestration in fiscal years 2014 and
    2015. In addition, GAO's work was cited repeatedly in the Consolidated
    and Further Continuing Appropriations Act, 2015, and contributed to
    over a dozen key authorizations and reauthorizations, including, among
    others, the Department of Defense, the Coast Guard, workforce programs,
    and agriculture programs. GAO's work also contributed to bills intended
    to improve veteran's healthcare, Federal acquisitions of information
    technology and weapons systems, and transparency of Federal programs.
        In addition to the $54.4 billion in financial benefits from GAO's
    work, during fiscal year 2014, we recorded over 1,200 program and
    operational improvements in numerous areas affecting public safety and
    security and the efficient and effective functioning of Government
    programs, including:
      --cybersecurity governance;
      --oversight of international food aid;
      --security of diplomatic facilities and personnel overseas;
      --sharing of terrorism-related information with Federal and non-
            Federal partners; and
      --the future of nanomanufacturing, including research and
            development, U.S. competitiveness, and environmental, health,
            and safety concerns.
        Workforce and succession planning also remain a priority for GAO.
    In fiscal year 2015, GAO plans to achieve a staffing level of 3,015
    FTEs through a targeted recruiting strategy to address critical skills
    gaps. This is a positive step forward in rebuilding staff capacity
    which in recent years had fallen to the lowest level since 1935. The
    additional staff will help ensure GAO has the resources to assist
    Congress in improving Government performance, effectiveness, and
    accountability, as well as support GAO's commitment to service and
    quality. GAO's limited investments in IT and building infrastructure
    will allow GAO to further streamline business operations, increase
    staff productivity, as well as improve access to information.
    Implementation will be done through a phased approach to reduce risk
    and ensure effective implementation.
                       assisting congress and the nation
        GAO provides an exceptional investment, a return of about $100 for
    every dollar invested in GAO. In fiscal year 2014, our work resulted in
    $54.4 billion in financial benefits and 1,288 program and operational
    improvements across the Federal Government.
        The program areas where these benefits have been realized include
    public safety and security, program efficiency and effectiveness,
    public insurance and benefits, acquisition and contract management, tax
    law administration, and business process and management.
        GAO is recognized for its non-partisan, first-hand, objective,
    fact-based, and reliable analyses across the full breadth and scope of
    the Federal Government's responsibilities and the extensive interests
    of Congress.
        In fiscal year 2014, we responded to requests from 94 percent of
    the standing full committees of the Congress, and almost 70 percent of
    the standing subcommittees. Our analyses and testimony inform debate
    and decisions by providing facts and supporting documentation. We
    provide program and technical expertise to support Congress in
    overseeing the executive branch, evaluating spending priorities, and
    assessing information from outside parties.
        GAO remains steadfast in our financial stewardship responsibilities
    by providing high quality work identifying cost-savings and revenue
    enhancements as Congress and the administration deliberate on both the
    Federal Government's immediate priorities and the Nation's long-term
    fiscal path. Through sound analysis and advice, GAO recommends
    solutions across a vast array of areas to foster Government efficiency,
    effectiveness, and responsiveness on high priority challenges facing
    Congress and the Nation. In fiscal year 2014, we issued 693 reports and
    made 1,619 new recommendations. On average about 80 percent of GAO's
    recommendations have been implemented over a 4 year period.
    GAO's Work Helps Congress Avoid Sequestration
        Our findings are often cited in House and Senate deliberations and
    committee reports supporting congressional action, including improving
    Federal programs on our High Risk list and addressing fragmentation,
    overlap, and duplication in Government. Congress used our work on a
    broad range of issues to inform its decisions on important legislation,
    which also resulted in financial and other benefits for the Government.
        For example, some of the key decisions adopted by Congress on the
    fiscal year 2014 and 2015 budget (the Bipartisan Budget Act of 2013)
    were linked to our work.
        Specifically, our efforts helped Congress achieve some of the
    billions in savings and revenue enhancements needed to avoid
    sequestration in fiscal years 2014 and 2015, including:
      --improving the cost-effectiveness of filling the Strategic Petroleum
            Reserve resulting in estimated savings of $3.2 billion over 10
            years;
      --reducing overpayments for unemployment insurance by $159 million
            over 10 years by identifying fraud or failure to report
            earnings;
      --expanding the risk-based element of the Pension Benefit Guaranty
            Corporation's premium rate structure to increase revenues and
            offset direct spending by $7.9 billion over 10 years;
      --reducing improper payments to inmates for disaster relief and other
            assistance resulting in savings of $80 million over 10 years;
            and
      --increasing aviation security fees to cover 43 percent of aviation
            security costs in 2014, saving $12.6 billion over 10 years.
        Other contributions to mitigating the sequester related to our work
    included capping compensation costs for Federal contractors.
    GAO Contributes to a Wide Range of Key Appropriations and Authorization
            Legislation
        The Congress used GAO's work in 2014 to identify legislative
    solutions to emerging problems, achieve cost savings, and find
    efficiencies in Federal agencies and programs. For example, GAO's work
    was cited repeatedly in the Consolidated and Further Continuing
    Appropriations Act, 2015 (2015 Appropriations Act), and contributed to
    over a dozen key authorizations and reauthorizations, including for the
    Department of Defense, the Coast Guard, workforce programs, and
    agriculture programs.
        GAO's work also contributed to bills intended to improve veteran's
    healthcare, Federal acquisitions of information technology (IT) and
    weapons systems, and transparency of Federal programs, among others.
    Examples include:
      Cost savings and efficiencies
      --In the 2015 Appropriations Act, Congress rescinded funds or reduced
            administration proposals for weapon systems, including the
            Amphibious Combat Vehicle, Joint Tactical Radio System, and the
            Kiowa Warrior helicopter program for an estimated total of over
            $500 million.
      --To improve accountability, the Act also withheld funds from
            agencies, including the Departments of Defense and Energy,
            until problems identified by GAO were addressed.
      --The Agricultural Act of 2014 reflected billions of dollars in
            savings through the end of the direct payment program and
            clarification of eligibility for farm program payments.
      --The Workforce Innovation and Opportunity Act reauthorization
            realigned and streamlined employment and training programs, and
            the Water Resources Reform and Development Act directed the
            Army Corps of Engineers to realign projects according to
            priority.
      --The Carl Levin and Howard P. ``Buck'' McKeon National Defense
            Authorization Act for fiscal year 2015 (2015 NDAA) required the
            Department of Defense to periodically reassess their
            headquarters requirements to address growth in headquarters
            bureaucracy.
      Increasing Government transparency
      --The Digital Accountability and Transparency Act required the
            Federal Government to set government-wide data standards for
            financial data intended to result in consistent, reliable, and
            searchable government-wide spending data available to the
            Congress, agency managers, and the public.
      --The 2015 Appropriations Act and numerous authorization acts
            required Federal agencies to report on how they would respond
            to GAO's findings and recommendations.
      Services for veterans
      --The Veterans Access, Choice, and Accountability Act reflected GAO's
            recommendations regarding changes in the procedures for which
            VA will pay for healthcare for veterans outside of the VA
            system. It also addresses concerns about coordination between
            VA and the Indian Health Service on veteran's healthcare.
      --The Act takes measures to improve IT and staff training related to
            appointment scheduling.
      --The fiscal year 2015 Appropriations Act instructs DOD to improve
            cemetery and burial operations, including implementing GAO's
            recommendations regarding better serving rural veterans.
      Responding to emerging security issues
      --Five new laws addressing emerging cybersecurity challenges
            reflected GAO's recommendations, including provisions related
            to security standards, improving the Federal cybersecurity
            workforce, promoting public and private collaboration regarding
            cybersecurity, and to clarify and strengthen cybersecurity
            roles among Federal agencies.
      --With regard to chemical facility security, GAO's work was reflected
            in the Protecting and Securing Chemical Facilities Act of 2014,
            which should result in improved risk assessment procedures.
      Improvements to Federal acquisitions
      --In addition to the savings from weapon systems mentioned above,
            GAO's work was reflected in the Federal Information Technology
            Acquisition Reform Act, which addresses cost and performance
            issues in Federal IT acquisitions by improving the transparency
            of major IT investments, expanding the Chief Information
            Officer's authorities, eliminating duplication, and identifying
            cost savings opportunities.
      --Similarly, the Transportation Security Acquisition Reform Act of
            2014 requires the Transportation Security Agency (TSA) and the
            Department of Homeland Security (DHS) to reform their approach
            to identifying technology investments and monitoring cost,
            schedule and performance of these acquisitions.
      Protecting workers and consumers
      --In the 2015 Appropriations Act the Congress addressed the severe
            financial difficulties of multiemployer pension plans and the
            Pension Benefit Guaranty Corporation's Multiemployer Insurance
            Program.
      --The Cooperative and Small Employer Charity Pension Flexibility Act
            also reflected GAO's recommendations regarding these pensions.
      --The 2015 Appropriations Act also limits the ability of the National
            Technical Information Service, within the Department of
            Commerce, to charge consumers for reports from the Legislative
            Branch offices that can be obtained from those offices for
            free.
      --It also required the Department of Education to report on how it
            would implement GAO's recommendations to improve management of
            the District of Columbia's Opportunity Scholarship Program and
            ensure that administrative funds can be used to implement them.
      --The Coast Guard reauthorization required that information about
            crime on cruise ships be made easily available on the
            Department of Transportation's Web site.
    Program and Operational Benefits due to GAO's Work
        Many of the benefits resulting from our work cannot be measured in
    dollars, but led to program and operational improvements across the
    Government. During fiscal year 2014, we recorded 1,288 of these other
    benefits.\1\
    ---------------------------------------------------------------------------
        \1\ GAO's performance results can be found at: http://www.gao.gov/
    about/perfaccountreport.html. Our Web site includes a summary of GAO's
    fiscal year 2014 Performance and Accountability Report as well as the
    complete report. The annual report informs Congress and the American
    people about what we have achieved on their behalf with the funds
    entrusted to us.
    ---------------------------------------------------------------------------
        GAO's work led to improvements in numerous areas affecting public
    safety and security and the efficient and effective functioning of
    Government programs. Examples of actions taken by Government agencies
    in response to our work include:
      --better guidance and oversight to ensure complete documentation of
            investigations into abuse allegations at immigration detention
            facilities;
      --an improved cyber security governance structure to ensure that
            Federal agencies' efforts to educate the Nation's cyber
            security workforce are effective;
      --strengthened oversight of international food aid to ensure that
            targeted assistance reaches vulnerable groups, such as children
            and pregnant women, in other countries;
      --enhanced security of diplomatic facilities and personnel overseas,
            including improvements to security standards and efforts to
            mitigate vulnerabilities;
      --better sharing of terrorism-related information with Federal and
            non-Federal partners and enhanced efforts to identify and
            narrow gaps in information sharing;
      --informed decisionmaking on the future of nanomanufacturing,
            including research and development, U.S. competitiveness, and
            environmental, health, and safety concerns; and
      --improved transparency regarding how sequestration decisions were
            implemented so that agencies can better plan for such events if
            they occur in the future.
        This past fiscal year, GAO also issued revised internal control
    standards for the Federal Government and made significant contributions
    to international auditing standards. These standards can help agencies
    achieve effective internal control systems to safeguard public
    resources, report reliable information about their operations, and
    comply with applicable laws and regulations.
        Through the products we issued in fiscal year 2014, we continued to
    build on bodies of work under our three broad strategic goals:
        (1)  address current and emerging challenges to the well-being and
    financial security of the American people;
        (2) respond to changing security threats and global
    interdependence; and
        (3) help transform the Federal Government to address national
    challenges.

        Work completed in these areas included:
      --Protection of children--we reported on the need for improvements to
            school lunches, guidance for states on the use of psychotropic
            drugs for children in foster care, and preventing sexual abuse
            of students by school personnel;
      --Veterans--we reported on out-patient medical care, purchasing and
            tracking of surgical implants, cost increases and schedule
            delays in constructing and leasing VA medical facilities, and
            the accuracy and quality of processing disability claims for
            veterans;
      --Healthcare--we continued to report on the implementation of the
            Patient Protection and Affordable Care Act (e.g.,
            HealthCare.gov), drug shortages, Internet pharmacies selling
            counterfeit drugs, Medicare fraud, Medicaid financing, and
            nursing home care; and
      --Financial literacy--we reported on retirement security, managed
            retirement accounts, student loans, college debit cards, and
            lump sum payment pension scams.
    Testimonies
        Senior GAO officials testified 129 times before 70 separate
    committees or subcommittees on issues that touched virtually all major
    Federal agencies. Figure 1 shows examples of topics GAO testified on in
    fiscal year 2014 organized by strategic goal.
        Additional information on selected testimonies can be found in Part
    II of the 2014 Performance and Accountability Report at: http://
    www.gao.gov/products/GAO-15-1SP.

           FIGURE 1: EXAMPLES OF FISCAL YEAR 2014 TESTIMONIES BY GOAL

    Goal 1: Address Current and Emerging Challenges to the Well-being and
            Financial Security of the American People
    Processing Veterans' Disability Benefits
    Early Learning and Child Care
    Social Security Disability Programs
    Timely Outpatient Medical Care for Veterans
    Federal Fiscal Exposure from Climate Risks
    Export-Import Bank Management
    Airport Development and Financing
    Oil and Gas Management
    U.S. Postal Service's Unfunded Benefit Liabilities
    Oversight of Student Loans
    Public Transit Challenges
    Expectations of Government Support for Large Bank Holding Companies
    Federal Efforts Supporting Financial Literacy
    VA Construction of Major Medical Facilities Face Cost Increases and
    Schedule Delays
    Medicare Fraud
    Goal 2: Respond to Changing Security Threats and the Challenges of
            Global Interdependence
    Arizona Boarder Surveillance Technology Plan
    Personnel Security Clearances
    DOD's POW/MIA Mission and Challenges
    Enhancing Federal Response to Information Security Breaches
    Space Launch Acquisitions
    Nuclear Nonproliferation
    Defense Acquisition Management Reforms
    DHS Chemical Security Program
    DHS's Progress Addressing High Risk Issues
    DOD Acquisition Risks
    F-35 Joint Strike Fighter
    NASA Export Controls
    DHS Research and Development Oversight
    Defense Health Reform
    USAID Support for Haiti's Reconstruction
    HealthCare.gov Security and Privacy Controls
    TSA's Screening Partnership Program
    Goal 3: Help Transform the Federal Government to Address National
            Challenges
    Biosafety Lapses in High Containment Labs
    Use of Psychotropic Medications for Foster Children
    IT Reform
    Patient Protection and Affordable Care Act Enrollment Control
    Leveraging Best Practices for IT Acquisitions
    Monitoring Improper Payments
    Government-wide Challenges to Efficiency and Effectiveness
    Reducing Fragmentation, Overlap, and Duplication in Federal Programs
    DOD Financial Management
    ----------
        Source: GAO.

        In addition, to better serve our clients and the public, we
    expanded our presence in digital and social media, releasing GAO iPhone
    and Android applications, and launching streaming video web chats with
    the public. More than 31,300 people now get our testimonies, reports,
    and legal decisions daily on Twitter, and our blog was just named one
    of the five best across the Federal Government.
        Building on our efforts in fiscal year 2013 to improve the GAO
    Watchdog website, available exclusively for members and their staff, in
    fiscal year 2014 we added drop-down menus, videos, and other features
    to enhance the user-friendliness of the site; improved functionality by
    allowing users to more easily find information on completed and ongoing
    GAO engagements; and feature new content such as descriptions of the
    full range of products and services GAO provides, including briefings
    by subject matter experts, comments on legislation, and assistance in
    drafting requests for work.
    High Risk Program
        GAO maintains a list for Congress of High Risk areas, which focuses
    on Government operations that are at high risk of fraud, waste, abuse,
    and mismanagement, or need transformation to address economy,
    efficiency, or effectiveness challenges, organized by six broad areas
    that touch on every aspect of Government operations:
      --Strengthening the Foundation for Efficiency and Effectiveness,
            including management of Federal oil and gas resources,
            modernizing the U.S. financial regulatory system and the
            Federal role in housing finance;
      --Transforming DOD Program Management;
      --Ensuring Public Safety and Security, including mitigating gaps in
            weather satellite data and protecting public health through
            enhanced oversight of medical products;
      --Managing Federal Contracting More Effectively, including at DOD,
            NASA and DOE;
      --Assessing the Efficiency and Effectiveness of Tax Law
            Administration; and
      --Modernizing and Safeguarding Insurance and Benefit Programs.
        In February 2015, GAO released its latest update of the list. The
    report noted that solid, steady progress has been made in the vast
    majority of the high-risk areas. Eighteen of the 30 areas on the 2013
    list at least partially met all of the criteria for removal from the
    High Risk List. Of those, 11 met at least one of the criteria for
    removal and partially met all others. Sufficient progress was made to
    narrow the scope of two high-risk issues--Protecting Public Health
    through Enhanced Oversight of Medical Products and DOD Contract
    Management. Overall, progress has been possible through the concerted
    actions of Congress, leadership and staff in agencies, and the Office
    of Management and Budget.

        This year GAO added 2 areas, bringing the total to 32:
      --Managing Risks and Improving Veterans Affairs (VA) Health Care.--
            GAO has reported since 2000 about VA facilities' failure to
            provide timely healthcare. In some cases, these delays or (VA's
            failure to provide care at all) have reportedly harmed
            veterans. Although VA has taken actions to address some GAO
            recommendations, more than 100 of GAO's recommendations have
            not been fully addressed. The recently enacted Veterans Access,
            Choice, and Accountability Act included provisions to help VA
            address systemic weaknesses. VA must effectively implement the
            Act.
      --Improving the Management of Information Technology (IT)
            Acquisitions and Operations.--Congress has passed legislation
            and the administration has undertaken numerous initiatives to
            better manage IT investments. Federal IT investments too
            frequently fail to be completed or incur cost overruns and
            schedule slippages while contributing little to mission-related
            outcomes. GAO has found that the Federal Government spent
            billions of dollars on failed and poorly performing IT
            investments which often suffered from ineffective management,
            such as project planning, requirements definition, and program
            oversight and governance. Over the past 5 years, GAO made more
            than 730 recommendations; about 23 percent had been fully
            implemented as of January 2015.

        GAO is also expanding two areas due to evolving high-risk issues:
      --Enforcement of Tax Laws.--This area is expanded to include IRS's
            efforts to address tax refund fraud due to identify theft. IRS
            estimates it paid out $5.8 billion (the exact number is
            uncertain) in fraudulent refunds in tax year 2013 due to
            identity theft. This occurs when a thief files a fraudulent
            return using a legitimate taxpayer's identifying information
            and claims a refund.
      --Ensuring the Security of Federal Information Systems and Cyber
            Critical Infrastructure and Protecting the Privacy of
            Personally Identifiable Information (PII).--This risk area is
            expanded because of the challenges to ensuring the privacy of
            personally identifiable information posed by advances in
            technology. These advances have allowed both Government and
            private sector entities to collect and process extensive
            amounts of PII more effectively. The number of reported
            security incidents involving PII at Federal agencies has
            increased dramatically in recent years.

           Solving these high risk problems has the potential to save
    billions of dollars, improve service to the public, and strengthen the
    performance and accountability of the U.S. Government. For example,
    since our last update in 2013, we issued 317 reports, delivered 78
    testimonies to Congress, and prepared numerous other products such as
    briefings related to our high risk work. We documented more than $40
    billion in financial benefits and 866 other improvements related to
    high-risk areas. The complete list of high-risk areas is included as
    Appendix I. Details on each high-risk area can be found at http://
    www.gao.gov/highrisk/overview.
    Fragmentation, Overlap, and Duplication
        GAO issued the fourth annual report in 2014 identifying 26 new
    areas and 64 actions that could reduce fragmentation, overlap, and
    duplication, as well as other cost savings and revenue enhancement
    opportunities across the Federal Government. To date, we have
    identified 188 areas where opportunities exist for executive branch
    agencies or Congress to reduce, eliminate, or better manage
    fragmentation, overlap, or duplication; achieve cost savings; or
    enhance revenue. These areas span a broad range of Government missions
    and functions.
        Within these 188 areas, we've identified approximately 440 actions
    that executive branch agencies and Congress could take to address these
    opportunities for greater efficiency and effectiveness. Although
    Congress and executive branch agencies have made notable progress
    toward addressing the actions we have identified, further steps are
    needed to fully address the remaining actions.
        As of November 2014, of the recommended actions identified in 2011,
    2012, 2013, and 2014, 29 percent have been addressed; 44 percent have
    been partially addressed; and 23 percent have not been addressed.\2\
    More specifically, of the actions directed to executive branch
    agencies, 30 percent have been addressed, 49 percent partially
    addressed, and 18 percent not addressed.\3\ Of the actions directed to
    Congress, 26 percent have been addressed, 16 percent partially
    addressed, and 51 percent not addressed.\4\
    ---------------------------------------------------------------------------
        \2\ Eighteen actions (or 4 percent) have been assessed as
    ``consolidated or other'' due to additional work or other information
    that we considered.
        \3\ Of the 18 actions assessed as ``consolidated or other,'' 13
    relate to executive branch actions (or 3 percent of the actions
    directed to the executive branch).
        \4\ Of the 18 actions assessed as ``consolidated or other,'' five
    relate to congressional actions (or 7 percent of the actions directed
    to Congress).
    ---------------------------------------------------------------------------
        We estimate that executive branch and congressional efforts to
    address actions identified by GAO have resulted in over $10 billion in
    realized savings with an additional $60 billion in financial benefits
    to be accrued over the next 10 years. Implementing other suggested
    actions could result in tens of billions of dollars more in cost
    savings and enhanced revenues. For example, in 2012, GAO reported that
    the military's approach to acquiring combat uniforms was fragmented,
    which could increase battlefield risk and increase costs. As a result
    of a provision to the National Defense Authorization Act for fiscal
    year 2014, the Army did not field new camouflage uniforms, avoiding
    $4.2 billion in costs over 5 years.
        To assist congressional oversight of these issues, we maintain
    GAO's Action Tracker, a publicly accessible Web site containing the
    status of actions suggested in this series of reports. The Web site
    allows Congress, executive branch agencies, and the public to track the
    progress the Government is making in addressing the issues we have
    identified.
    Legal Work
        In fiscal year 2014, GAO published 22 appropriations decisions,
    opinions, and letters on wide-ranging issues such as DOD's transfer of
    individuals from Guantanamo Bay, and the District of Columbia's budget
    autonomy. GAO attorneys also provided ongoing appropriations law
    assistance to various congressional committees and Federal agencies
    navigating the Government shutdown.
        GAO also assisted Congress on a number of other matters, including
    continuing advice on the implementation of sequestration. Finally,
    GAO's Office of General Counsel handled more than 2,500 bid protest
    cases during fiscal year 2014, issuing more than 500 decisions on the
    merits.
        The Consolidated Appropriations Act, 2014, directed GAO to develop
    an electronic bid protest filing system. The statute also authorized
    the collection and use of fees to offset the costs of that system. We
    conducted outreach with Congress and small business and veterans groups
    identified by congressional stakeholders regarding the implementation
    of a filing fee. Periodic updates are provided on our progress to the
    House and Senate Committees on Appropriations.
        We are making progress in developing the system. After considering
    the functional requirements for an electronic filing system, with an
    emphasis on IT security issues, we conducted market research through a
    Request for Information. We invited several vendors to provide
    demonstrations of their capabilities, and we developed a prototype bid
    protest electronic filing system as a proof of concept. We currently
    expect to complete development and launch the system by the end of
    calendar 2015.
                      strategic plan for serving congress
        In February 2014, GAO released its updated Strategic Plan: Serving
    the Congress and the Nation 2014-2019 (GAO-14-1SP). The plan describes
    our proposed goals and strategies for supporting Congress and the
    Nation as the country continues through this period of challenge and
    opportunity. Our strategic plan framework (Appendix II) summarizes the
    global trends, as well as the strategic goals and objectives that guide
    our work.
        While summarizing trends shaping the United States and its place in
    the world, the strategic plan reflects the areas of work we plan to
    undertake, including science and technology, weapons systems,
    healthcare, homeland security, the environment, and energy.
        GAO will also increase collaboration with other national audit
    offices to ensure sound collaboration and coordination on global issues
    that directly affect the United States, including international
    financial markets.
      managing workload by focusing resources on congressional priorities
        To manage our congressional workload, we continue to take steps to
    ensure our work supports the highest congressional legislative and
    oversight priorities while focusing on areas where there is the
    greatest potential for results, such as cost savings and improved
    Government performance.
        We actively coordinate with congressional committees in advance of
    new statutory mandates \5\ by identifying mandates real time as bills
    are introduced; participating in ongoing discussions with congressional
    staff; and collaborating to ensure that the work is properly scoped and
    is consistent with the committee's highest priorities.
    ---------------------------------------------------------------------------
        \5\ Congressional mandates include requirements directed by
    statutes, congressional resolutions, conference reports, and committee
    reports.
    ---------------------------------------------------------------------------
        In fiscal year 2014, 33 percent of our audit resources were devoted
    to mandates and 63 percent to congressional requests. I regularly meet
    with Chairs and Ranking Members of committees and subcommittees to hear
    firsthand feedback on our performance. Their priorities help ensure we
    maximize the return on your investment in us.
        As a matter of routine, GAO also reviews its list of recurring
    mandates (i.e., those that have repeating requirements over time) on an
    annual basis, and works with the appropriate committees to revise or
    repeal, as appropriate, those mandates on topics or programs which have
    already been fully analyzed, thereby freeing up resources for higher
    congressional priorities.
        During the second session of the 113th Congress, we collaborated
    with the Congress to revise or repeal GAO's mandated reporting
    requirements which had, over time, lost relevance or usefulness.
    Specifically, GAO worked with responsible committees to have six
    mandates repealed or revised as part of the 2014 National Defense
    Authorization Act. In addition, HR 4194, Government Reports Elimination
    Act repeals or revises an additional 11 mandates, and the National
    Defense Authorization Act for fiscal year 2015 included provisions to
    modify or repeal 4 reporting requirements for GAO. Both of these were
    passed by the Congress and signed by the President in November 2014.
                         fiscal year 2016 requirements
        GAO's fiscal year 2016 budget request seeks an appropriation
    increase of $31.1 million, or 5.9 percent, to support a modest increase
    in our staffing level to 3,055 FTE and continue critical improvements
    in our IT, building, and security infrastructures. Costs will be offset
    with $33.4 million in reimbursements, primarily from financial audits
    and rental income.
        The requested resources provide the funds necessary to ensure that
    GAO can meet the highest priority needs of Congress and produce results
    to help the Federal Government deal effectively with its serious fiscal
    and other challenges. A summary of GAO's resources for our fiscal year
    2010 baseline and fiscal years 2014 to 2016 is shown in Figure 2.

            FIGURE 2: FISCAL YEAR 2010 BASELINE AND FISCAL YEAR 2014 TO FISCAL YEAR 2016 SUMMARY OF RESOURCES
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                           Fiscal Year 2010   Fiscal Year 2014   Fiscal Year 2015   Fiscal Year 2016
                                                Actual             Actual           Estimated           Request
               Funding Source            ---------------------------------------------------------------------------
                                            FTE     Amount     FTE     Amount     FTE     Amount     FTE     Amount
    ----------------------------------------------------------------------------------------------------------------
    Salaries and Expenses Appropriation.  ......   $556,325  ......   $505,293  ......   $522,000  ......   $553,058
    Non-legislative-branch appropriation  ......     21,804  ......         70  ......  .........  ......  .........
    Reimbursements......................  ......     10,214  ......      2,330  ......      8,405  ......      7,955
    Offsetting receipts.................  ......     10,892  ......     20,898  ......     25,000  ......     25,000
    Bid protest user fees...............  ......  .........  ......  .........  ......  .........  ......        450
                                         ---------------------------------------------------------------------------
          Total budget authority........   3,347   $599,235   2,891   $528,591   3,015   $555,405   3,055  $586,463
    ----------------------------------------------------------------------------------------------------------------
    Source: GAO.

                                 staff capacity
        Our talented, diverse, and high-performing workforce is essential
    in fulfilling our mission of supporting Congress. While progress has
    been made, we still face challenges in addressing critical human
    capital management issues, including preparing for retirements of key
    subject matter experts, senior executives, and other key leaders;
    maintaining a performance-based and inclusive culture that helps
    motivate and retain a talented and diverse staff; and maintaining
    workplace and work-life practices that meet the needs of an evolving
    workforce in an equitable manner.
        A significant proportion of our employees are currently retirement
    eligible. Presently, about 40 percent of our senior executive staff and
    21 percent of our supervisory analysts are retirement eligible. In
    fiscal year 2015, through a targeted recruiting strategy to address
    critical skills gaps, we plan to hire entry-level staff and student
    interns to achieve a staff capacity of 3,015 FTEs. This will allow us
    to continue to reverse the downward trend in our FTEs and achieve some
    progress in reaching our optimal staffing level of 3,250 FTEs. Our
    fiscal year 2016 budget seeks funding for a 3,055 FTE level to help us
    continue to replenish the much needed pipeline of entry-level and
    experienced analysts to meet future workload challenges.
    Priority Areas for Increased Staffing
        GAO has identified areas that merit increased review and attention
    as additional staffing is made available including:
      --Continued Identification and Reduction in Improper Payments.--In
            fiscal year 2014 improper payments made in Federal programs
            were estimated to be over $124 billion, nearly $19 billion
            higher than reported for fiscal year 2013. Moreover, much of
            this increase is in two of the fastest growing programs in
            terms of Federal expenditures--Medicare and Medicaid. GAO will
            continue to be vigilant in identifying improper payments and
            providing recommendations to prevent this wasteful situation.
      --Science and Technology.--Congress increasingly asks GAO to review
            multi-billion dollar Federal investments in science and
            technology areas, such as cybersecurity, satellite and space
            programs, sophisticated weapons systems, as well as the
            environmental and energy sectors. GAO has also developed the
            capability to do science and technology assessments, and will
            continue to replenish our staff capacity to maintain a strong
            position in this area.
      --The tax gap.--The net gap between taxes owed and taxes paid is an
            estimated $385 billion each year. There is about an 84 percent
            compliance rate on taxes owed to the Federal Government. GAO
            has identified a number of opportunities for the Internal
            Revenue Service to get better data to do the necessary
            comparisons and increase collections. GAO will continue to
            devote resources to this area. The additional resources will
            enable us to expand our work in finding ways to further close
            the tax gap.
                            operational efficiencies
        In addition to addressing critical staffing needs, the fiscal year
    2016 budget request also focuses funding on two other areas,
    information technology and building and security.

      --Information Technology

              GAO's IT systems are an essential component in ongoing
            efforts to maintain efficient and effective business operations
            and to provide timely data needed to inform management
            decisions.
              Improvements to our aging IT software will streamline
            business operations, reduce redundant efforts, increase staff
            effectiveness and productivity, improve access to information,
            facilitate a more agile and mobile workforce, and improve
            operational efficiency.
              We continue to implement many of these actions in a phased
            approach to promote efficiencies and monitor effectiveness. In
            fiscal year 2016, we plan to:
        --complete implementation of the first phase of a new content
                creation system, which will automate the creation,
                indexing, referencing, review, approval, and publishing of
                GAO products via a standard workflow;
        --increase the availability of our core network wireless
                infrastructure at both headquarters and the field offices;
                and
        --strengthen our cellular signal with a new antenna capability,
                which will allow GAO to change providers without needing to
                upgrade internal antennas.
              These efforts will strengthen GAO's technology infrastructure
            and support an array of engagement management, human capital,
            and financial management systems.

      --Building and Security

              GAO plans to upgrade critical aging building systems to
            ensure more efficient operations and security. To support these
            requirements our fiscal year 2016 budget request includes
            resources to:
        --make general structural and architectural repairs, including the
                elevator shafts, interior walls, auditorium walls,
                projection booth, and the handicapped lift;
        --continue addressing priority items identified in the asset
                management plan for critical repairs, end-of-life
                replacements, and energy saving investments in the
                headquarters building, including replacement of the first
                floor heating and air conditioning system and the overhaul
                and retrofit of two chillers;
        --complete the headquarters lockdown project, which would provide
                building guards with the capability to lock all street exit
                doors more quickly in the event of an emergency or threat;
                and
        --install Joint Worldwide Intelligence Communication System
                capabilities to facilitate access to DOD's Top Secret/SCI
                Internet.
    Telework/Workspace-Sharing Pilots Reduce Costs and Improve Operational
            Efficiency
        GAO remains committed to sound operational efficiency and
    effectiveness. Our telework/workspace-sharing pilot has provided an
    opportunity for staff to work remotely while maintaining quality and
    productivity. This strategy has allowed GAO to reduce our physical
    footprint in the field and achieve cost savings of over $2 million.
        GAO is presently assessing the prospect of telework/workspace-
    sharing pilots in our Washington, DC headquarters. Implementation in
    headquarters may provide opportunities to streamline space usage and
    release space for lease to a future tenant, resulting in additional
    revenue. Results of the pilot will be critical to determining the
    potential for space reductions.
              gao recognized as one of the ``best places to work''
        On December 9, 2014, the Partnership for Public Service announced
    that GAO placed second among mid-size agencies in the best places to
    work in the Federal Government, and ranked number one in its support of
    diversity in that same category. GAO has consistently placed among the
    top five on the Partnership's list since 2005.
        We continuously strive to be the employer of choice in the public
    sector. Our ranking results from the dedicated efforts of the entire
    GAO team and leadership for their commitment in continuing to make GAO
    one of the Best Places to Work. GAO management remains committed to
    work with our union (IFPTE, Local 1921), the Employee Advisory Council,
    and the Diversity Advisory Council to continue to make GAO a preferred
    place to work.
                          center for audit excellence
        The Consolidated and Further Continuing Appropriations Act, 2015,
    enacted in December 2014, authorized GAO to establish a Center for
    Audit Excellence to build institutional auditing capacity and promote
    good governance by providing training and assistance to qualified
    personnel and entities, and permitted GAO to charge fees for the
    Center's products and services.
        The Center's mission is to enhance good governance and build the
    institutional auditing capacity of domestic and international audit
    organizations by providing high quality training, technical assistance,
    and related services that leverage GAO's position as a global leader in
    auditing. A business plan will be provided to the Appropriations
    Committees that will outline several key principles to help ensure
    effective operation of the Center.
                               concluding remarks
        In conclusion, GAO values the opportunity to provide Congress and
    the Nation with timely, insightful analysis on the challenges facing
    the country. GAO's fiscal year 2016 budget request is a fiscally
    responsible approach that will better position GAO to continue to
    support Congress and foster Government accountability, address long-
    standing challenges, and keep a watchful eye on the Nation's future.
        Our budget request includes funds to increase our staffing level
    and provide employees with the appropriate resources and support needed
    to effectively serve Congress. The requested funding will also allow us
    to continue efforts to promote operational efficiency, and begin
    addressing long-deferred investments and maintenance.
        This concludes my prepared statement. I appreciate, as always, your
    continued support and careful consideration of our budget. I look
    forward to discussing our fiscal year 2016 request with you.

                     APPENDIX I: GAO'S 2015 HIGH RISK LIST

    Strengthening the Foundation for Efficiency and Effectiveness
      --Limiting the Federal Government's Fiscal Exposure by Better
            Managing Climate Change Risks
      --Management of Federal Oil and Gas Resources
      --Modernizing the U.S. Financial Regulatory System and the Federal
            Role in Housing Finance \a\
      --Restructuring the U.S. Postal Service to Achieve Sustainable
            Financial Viability \a\
      --Funding the Nation's Surface Transportation System \a\
      --Strategic Human Capital Management
      --Managing Federal Real Property
      --Improving the Management of IT Acquisitions and Operations (new)
    Transforming DOD Program Management
      --DOD Approach to Business Transformation
      --DOD Business Systems Modernization
      --DOD Support Infrastructure Management \a\
      --DOD Financial Management
      --DOD Supply Chain Management
      --DOD Weapon Systems Acquisition
    Ensuring Public Safety and Security
      --Mitigating Gaps in Weather Satellite Data
      --Strengthening Department of Homeland Security Management Functions
      --Establishing Effective Mechanisms for Sharing and Managing
            Terrorism-Related Information to Protect the Homeland
      --Ensuring the Security of Federal Information Systems and Cyber
            Critical Infrastructure and Protecting the Privacy of
            Personally Identifiable Information \a\
      --Ensuring the Effective Protection of Technologies Critical to U.S.
            National Security Interests \a\
      --Improving Federal Oversight of Food Safety \a\
      --Protecting Public Health through Enhanced Oversight of Medical
            Products
      --Transforming EPA's Processes for Assessing and Controlling Toxic
            Chemicals \a\
    Managing Federal Contracting More Effectively
      --DOD Contract Management
      --DOE's Contract Management for the National Nuclear Security
            Administration and Office of Environmental Management
      --NASA Acquisition Management
    Assessing the Efficiency and Effectiveness of Tax Law Administration
      --Enforcement of Tax Laws \a\
    Modernizing and Safeguarding Insurance and Benefit Programs
      --Managing Risks and Improving VA Health Care (new)
      --Improving and Modernizing Federal Disability Programs
      --Pension Benefit Guaranty Corporation Insurance Programs \a\
      --Medicare Program \a\
      --Medicaid Program \a\
      --National Flood Insurance Program \a\
    ----------
        Source: GAO.
        \a\ Legislation is likely to be necessary to effectively address
    this high-risk area.

                  APPENDIX II: GAO'S STRATEGIC PLAN FRAMEWORK

            EXPLANATION FOR THREE NEW FULL-TIME EQUIVALENT POSITIONS

        Senator Capito. Thank you. I want to thank both of you. I
    will begin the questions. Dr. Elmendorf, you mentioned and you
    highlighted in your statement the fact that the demand exceeds
    the supply in terms of your workforce. You have asked for three
    more FTEs.
        I am wondering, is this part of a gradual build up that you
    believe is necessary for the CBO in order to meet the demand
    you talked about? Or do you think this is because of the
    healthcare issue, and maybe some of the macroeconomic issues
    that need to be addressed?
        Dr. Elmendorf. Madam Chairman, I think the Congress would
    benefit from higher staffing levels at CBO. A few years ago, we
    had more than 250 FTEs. That was an increase relative to the
    235 that we had in the first part of the last decade, and that
    increase was designed by the Appropriations Committee, the
    Budget Committee, and CBO, so that CBO could serve the Congress
    better, and in particular, by being able to do more analysis of
    healthcare issues without cutting back on the analysis we do
    across the whole range of other topics.
        We put those extra resources to good use. We hired people
    and we produced more estimates of pending legislative
    proposals. We produced more reports, studying areas of the
    Federal budget. We did more building of models to give you and
    your colleagues more accurate estimates of the effects of
    proposals.
        If it were up to me and money was freely available, I would
    certainly have requested a larger increase for CBO, but we
    understand the constraints you operate under, and we view this
    as a small step in a direction that would be useful to you.

                           USE OF CONTRACTORS AT CBO

        Senator Capito. I appreciate that. Do you use contractors
    at all?
        Dr. Elmendorf. Very little. We have a few contractors. We
    look for expertise outside of CBO when we do not have it, but
    the vast majority of our expertise is in-house, and we have
    just a few contractors in particular areas, some in support
    areas, in IT, and some in substantive areas of economic and
    budgetary analysis, but it is very limited.

                   HIRING EMPLOYEES WITH NON-IMMIGRANT VISAS

        Senator Capito. You mentioned the skills gap, trying to
    find the highly skilled economists in terms of competition with
    both the private and public sector agencies. In the 2016
    budget, you include language that you have asked for for the
    last several years authorizing the hiring of employees with
    non-immigrant visas.
        I understand this is not the first time, but why do you
    believe that hiring of employees with non-immigrant visas is
    critical to the workforce, to your workforce? Is it because we
    do not have the talent here at all or you cannot compete for
    that talent?
        Dr. Elmendorf. I think we are always trying to attract and
    retain the best people we can, and I am very proud of the
    people we have at CBO, but we find the recruiting and retention
    processes to be difficult.
        On the recruiting side, about 35 percent of CBO staff have
    Ph.D.'s in economics, and two-thirds of the people who are
    obtaining Ph.D.'s in economics in this country are foreign
    nationals.
        If we can only look at the other third, we have just taken
    off the table two-thirds of the people who might have the
    skills that we need, and we cannot settle for people who do not
    have the right skills, but we end up looking harder and longer.
    We have larger gaps between when somebody leaves and before we
    can fill that slot. We sometimes hire people who then need more
    training from us, which is fine, but it slows our work for
    Congress.
        If we could broaden the field of people whom we could hire,
    at least in cases where we have a particular shortage of those
    skills in U.S. citizens, we think that would help us.
        We had some of that authority until 2010, and we hired a
    small number of foreign nationals. At that point, our authority
    was limited to countries that were allies of the United States,
    and there was a well defined list of such countries. We found
    at the time that helped us fill some crucial niches, and that
    is the authority that we are requesting to have restored.

                           GAO EDUCATION DEMOGRAPHIC

        Senator Capito. Just curious, Mr. Dodaro, what percentage
    of your workforce are Ph.D. economists, approximately?
        Mr. Dodaro. About 75 percent of our people have advanced
    degrees, Master's and Ph.D.'s.

                          CENTER FOR ADULT EXCELLENCE

        Senator Capito. There are probably not too many Ph.D.
    economists, not as many as maybe we need. Let me ask you, at
    GAO, you created the Center for Audit Excellence, authorized in
    the 2015 bill. Can you give us an update on that and what your
    plans for the Center are?
        Mr. Dodaro. The purposes of the Center are really to help
    advance U.S. interests abroad. The United States spent money
    along with others in the donor community. USAID and
    multinational lending organizations are moving to rely more on
    country systems.
        We would build the auditing capacity in other countries so
    there is better accountability over U.S. funds and other funds.
        Also, this would improve the global marketplace. Right now,
    for example, in the global financial markets it is important to
    have international regulations implemented properly. We get
    most of our drugs now, 80 percent ingredients for prescription
    drugs, from other countries, and 40 percent of finished drugs.
    More of our food is now being imported.
        If we can build the audit capacities in other countries,
    there will be better protections for U.S. consumers and U.S.
    interests.
        We have developed a business plan for the Center. Just in
    the last couple of months alone, the State Department
    approached us about providing training to an African country to
    help fight corruption. The Millennium Challenge Corporation has
    asked for help in providing training in South America and other
    areas.
        We get requests all the time. We are considered one of the
    global leaders in auditing in the world.
        Senator Capito. Quick question on that, and then I will go
    to my colleagues. When you are aiding another country, are you
    charging a consulting fee or anything like that?
        Mr. Dodaro. Right now, we have to have the committees
    approve our business plan before we can actually start
    operations. The idea is to charge a fee. The Center would be
    self financing. We need money for start up, like any other
    small business. Our plan is to use retired GAO people. That way
    it will not affect our service to the Congress.
        Senator Capito. Thank you. Senator Schatz.

    ENERGY SAVINGS PERFORMANCE (ESPCS) AND UTILITY ENERGY SERVICE CONTRACT
                                    (UESCS)

        Senator Schatz. Thank you. Dr. Elmendorf, CBO recently
    released a report that had great things to say about the
    taxpayer benefits of using energy savings performance contracts
    and utility energy service contracts to make long term
    investments to reduce energy costs.
        You report that by law under Energy Savings Performance
    Contracts (ESPCs) and Utility Energy Service Contracts (UESCs),
    energy efficiency upgrades are paid back exclusively from
    realized energy savings. These contracts never result in a
    penny of new spending, and agencies do not need to make a
    meaningful upfront investment.
        CBO also reports that beyond having a guarantee of no cost
    to the taxpayer, ESPCs and UESCs save taxpayer spending on
    energy. CBO estimates that after a contract is repaid using
    energy savings, the taxpayer typically retains at least 25
    percent of the savings produced by the energy efficient
    equipment over its useful life.
        I think the report confirms ESPCs and UESCs are a sound
    strategy. Again, they do not require one penny of spending,
    typically produce savings well beyond their costs, and isolate
    the taxpayer from risk that the equipment will under perform or
    fail.
        As you know, the CBO's budgetary treatment of ESPCs and
    UESCs prevent Congress from enacting policies that will allow
    for more deployment across the Federal Government. This is
    because the score of the legislation to expand the use of ESPCs
    and UESCs only reflects the cost of the investments but not the
    savings that flow back over time.
        We need a clear picture of which programs are saving money
    and CBO's scoring hides the true financial benefits of these
    types of instruments. CBO has reported several times that the
    budget rules constrain the agency from reflecting the
    cumulative net costs and savings from expanding the use of
    ESPCs and UESCs.
        Dr. Elmendorf, why does CBO show any cost for entering into
    a contract when the contracts themselves guarantee no cost?
        Dr. Elmendorf. Senator, I appreciate your careful read of
    our report. Let me try to make a few points. The first is that
    in our analysis of the effects of ESPCs on the Federal
    Government's energy costs, we rely on analyses of other
    agencies, including the Government Accountability Office.
        Our summary does report that on balance, the energy savings
    performance contracts that have been entered into recently have
    reduced Federal energy costs. That is not true necessarily with
    every single contract. As we explained, there can be a wide
    variation in the return across contracts, but on average, that
    is what other agencies have determined has happened.
        In our cost estimates for legislation involving ESPCs, we
    provide the Congress with the same sort of information that we
    do for other legislation. We provide an assessment of effects
    of the legislation on the discretionary spending, the
    appropriations that are determined by this committee and the
    rest of the Congress every year, and we provide estimates of
    effects on mandatory spending.
        We do show as a cost in mandatory spending the commitment
    that the Federal Government is making when it enters into a
    contract of that sort. That is not a matter of scoring rules.
    That is just a matter of basic budget principles, which is to
    show the up front costs.
        We also show the savings that can accrue in subsequent
    years. I think one challenge is that the budget window goes 10
    years, and many of the savings, the largest savings in energy
    costs come well outside that window.
        Senator Schatz. Sure. There are a couple of issues here.
    One is the scoring window, and I kind of understand how
    constrained you may be because frankly it is a difficult
    challenge, and my view is if most of the savings occur outside
    of the scoring window, it becomes a policy and an
    appropriations question more so than a question of how it gets
    scored.
        To be precise about UESCs and ESPCs, the way these
    contracts are written, at least some of the time, is that the
    contract is written so that the Government pays no money.
        In other words, it is a deal that a State government or a
    county government has often made private sector companies do
    this all the time, the company says we will retrofit your
    building, and whatever savings there is, some will be remitted
    to the performance contractor and some will be remitted back to
    the client.
        I guess I am having a difficult time understanding how
    there is any costs at all that goes on the books. I understand
    there are technical details here.
        Try to explain to me in plain English why this would cost
    the Government anything, forgetting the window. Why would this
    be an obligation on the books, if this were a private sector
    company and this was under GAAP procedures or wherever you
    were, why in the world does this look like an expenditure in
    anyone's world?
        Dr. Elmendorf. I think part of the answer, Senator, as you
    say, is the 10 year budget window. This is a transaction where
    much of the savings occurs outside a 10 year window. If you
    truncate what is reported--our study goes out 25 years to try
    to show the full lifetime effects of a contract of this sort,
    but for the 10 year budget window, if the savings are outside
    the window and you truncate the numbers at that point, then you
    will not see the full savings that you are discussing.
        The other point is----
        Senator Schatz. That is the saving side. What about the
    expenditure side? Am I misunderstanding what an energy savings
    performance contract is? My understanding over the last 12 odd
    years in State government and 2 years in the Federal Government
    is at least some of these are written such that the Government
    has no obligation at all to expend a penny.
        What are you marking down? What are you recognizing as an
    expenditure there?
        Dr. Elmendorf. What we are recognizing as an expenditure is
    the commitment the Government makes, it is acquiring equipment,
    lighting or insulation or what have you, and it is making a
    commitment to pay for that over a period of a number of years,
    but the commitment occurs up front.
        It is true that on the year by year basis going forward,
    the Government will get some savings that will offset those
    payments so that----
        Senator Schatz. Just to be clear, even from the first year,
    it is not like you are paying a little more in the beginning
    and then you get your savings back. You are starting at----
        Dr. Elmendorf. Yes, in a standard contract, there is a
    little bit of savings for many years and then larger savings
    beyond that once the equipment has been essentially paid off.
        Senator Schatz. You are saying acquiring the commitment is
    what has to be recognized essentially on the spending side?
        Dr. Elmendorf. Yes, that is right. I think that is really a
    very important principle, that if the Government takes an
    action that commits it to spending money, then that cost should
    be recorded, we think, and very long-standing budget principles
    say it should be recorded at the time that commitment is made.
        The savings will be realized later in many cases, and we
    try to show those as well. The distinction, again, I think is
    partly the 10 year cutoff and partly the distinction between
    discretionary spending and mandatory spending.
        There is a very deep distinction in how the Congress thinks
    about money. The discretionary spending is now controlled by
    the Congress through caps and is controlled through annual
    appropriations. The mandatory spending is limited by PAYGO
    rules.
        It is really not our place to combine those two different
    sorts of flows that the Congress treats very differently. We
    try to provide information in a contract. You mentioned in your
    statement that we prevent the Congress from doing something. I
    want to emphasize we do not prevent the Congress from doing
    anything.
        Senator Schatz. Fair enough.
        Dr. Elmendorf. If the information we provide in these costs
    estimates does not explain the full picture that we see, then
    we should do a better job in the cost estimate, but I do not
    think it is by adding up budget categories that the Congress
    has really set very much apart for decades now.
        I am happy to talk to you about ways we can make the
    estimates express more clearly the point that you want to make.
        Senator Schatz. Thank you very much.
        Senator Capito. Senator Murphy.

                                KING V. BURWELL

        Senator Murphy. Thank you very much, Madam Chair. It is a
    pleasure to sit on this committee with both of you, and let me
    add my appreciation to you, Dr. Elmendorf, for your service.
        I think this is the first time you have been before any of
    the committees I have served on while I have been in the
    Senate, but while I was a member of the Energy and Commerce
    Committee during the healthcare debate and the energy debate,
    we got a lot of chances to speak to each other.
        One of the great frustrations to members of Congress is
    CBO's independence, and you really truly are an independent
    body. That means you do your own interpretation, your own read
    of the statutes that we pass. We do not tell you what they
    mean. You do your own derivation and analysis and then attach
    numbers to it.
        I wanted in that context to ask you a question about
    probably the most important pending case before the Supreme
    Court right now, which is King v. Burwell.
        This is a pretty simple question as to whether the
    Affordable Care Act posits and allows for subsidies to go to
    states with Federal exchanges and State exchanges, or whether
    subsidies are allowable only to states that have set up their
    own State exchanges.
        I guess my question is pretty simple. How did CBO read the
    law as to this question of whether subsidies would go to
    Federal and State exchange participants or as the petitioners
    in this case believe, only to State exchange participants?
        What was CBO's read? What did you base your numbers off of
    when you did your analysis of the law?
        Dr. Elmendorf. Senator, our estimates for the Affordable
    Care Act have always included subsidies flowing to people
    buying insurance through those exchanges whether the exchanges
    were being run by the Federal Government or State governments.
        We wrote in a letter to Chairman Issa a few years ago, and
    I quote ``To the best of our recollection, the possibility that
    those subsidies would only be available in States that created
    their own exchanges did not arise during the discussions CBO
    staff had with a wide range of congressional staff when the
    legislation was being considered.''
        Senator Murphy. When CBO comes to a place in which they may
    have questions about the interpretation of a statute, how do
    you deal with those questions? Do you just ask congressional
    staff or do you do your own interpretation of the totality of
    the statute and the totality of the record?
        Dr. Elmendorf. Senator, we read legislation and apply our
    judgment about its effects, but we did not conduct a full legal
    analysis of the Affordable Care Act of the sort some people may
    have then and certainly have since then.
        CBO has three attorneys on our staff. They read legislation
    with our analysts. They also handle all of the legislative
    needs of the agency as an operating organization.
        We do try to read the legislation that we see carefully,
    but we are not pouring over it with sort of a full legal
    analysis that you may be suggesting.
        Senator Murphy. Your analysis was that the Affordable Care
    Act allowed for subsidies to go to State and Federal exchanges,
    thus, you priced it based on those----
        Dr. Elmendorf. Our estimates included the subsidies being
    provided to people in exchanges, whether they were operated by
    the State governments or by the Federal Government.

           TWENTY PERCENT REDUCTION IN AFFORDABLE CARE ACT SUBSIDIES

        Senator Murphy. One other question on generally the same
    topic. You just released an updated cost analysis on the
    Affordable Care Act where you estimate that the overall cost
    will be about 10 percent less but the cost of the subsidies
    will be 20 percent less.
        Can you just speak for a moment as to the driver for
    specifically that 20 percent reduction? That is a pretty large
    decrease in terms of the estimate over the course of 10 years
    as to how much the subsidy is going to cost. It was very
    welcome news.
        There are a couple of factors, right, that figured into
    your change in an analysis of the rest of the window of the
    law.
        Dr. Elmendorf. Senator, we released an analysis of the
    costs of the coverage provisions of the Affordable Care Act.
    That sort of analysis comes as a natural course of us doing
    updated baseline projections, because that coverage expansion
    is so recent, and it is not so much in the existing flow of
    data. We look at it separately still.
        For the other parts of the Affordable Care Act, the big
    change is Medicare and the big revenue increases. We do not
    update those separately as private baseline projections because
    they are woven into current law.
        For these coverage provisions, our new estimate of the
    costs of those provisions is 11 percent less over the next
    decade than our previous estimate, and as part of that, there
    was a down revision in the costs of the subsidies provided
    through insurance exchanges of about 20 percent.
        The larger factor there was continued slow growth in
    private health insurers' spending. We have been expecting some
    bounce back, and that has not occurred. In fact, the latest
    data show slower growth than the years preceding that. We now
    have a number of years of quite slow growth, so we marked down
    our projection of growth in that spending going forward.
        A second factor was we now think there will be slightly
    fewer people who will take up coverage in the exchanges. That
    is from a combination of data about the sources of insurance
    coverage actually before the Affordable Care Act's big
    insurance expansion. We now have more recent data than we had
    when we did these estimates some time ago.
        There were slightly fewer uninsured people, so less take up
    of those people into exchanges, and more of the people with
    employer sponsored health insurance or at large firms that are
    less likely to drop their coverage because of the Affordable
    Care Act, and therefore, less flow from employers into the
    exchanges as well.
        Those factors together caused us to mark down our
    projection of coverage in the exchanges by about one million
    people in most years going forward.
        Senator Murphy. Just one last quick question. Is part of
    that reason for increased numbers of people being on employer
    based coverage because your estimate of cancellations, policy
    cancellations, has decreased, or the trend line in the number
    of cancelled policies has decreased?
        Dr. Elmendorf. We think there will be fewer cancellations
    because of the creation of the exchanges and other features of
    the Affordable Care Act.
        Senator Murphy. Thank you, Madam Chair.
        Senator Capito. I am going to go for a second round. Just a
    clarification. When you said fewer people are projected to be
    on the exchanges than were originally, which was the cause of
    your projections going down by a certain percent, did you say
    you were predicting one million less people? Is that in 1 year
    or over 10 years?
        Dr. Elmendorf. Yes, it is about one million fewer people in
    each of the next 10 years roughly.
        Senator Capito. Ten million less?
        Dr. Elmendorf. Yes, well, we put it carefully as being
    number of people in a given year, because people can turn up
    the following year and are or are not covered in various years.
        Senator Capito. In a given year, I get that.
        Dr. Elmendorf. We had been projecting on the order of 27
    million people in the exchanges in 2025, and now we think it
    will be 25 million. That difference may look like two, but
    there is some rounding, so the difference actually rounds to
    one million fewer people in 2025. Also, one million fewer in
    most of the years, each of the years of the coming decade.
        Senator Capito. Just curiosity wise, the last year that we
    have full data for would be 2013, that we have actual data of
    how many people are on the exchanges?
        Dr. Elmendorf. The exchanges were not in place in 2013. We
    know how many people were in the exchanges last year.
        Senator Capito. Okay, 2014.
        Dr. Elmendorf. That number we have. Some data we get pretty
    much right away, and for some data, we have a lag.
        Senator Capito. What was that number? Do you have it?
        Dr. Elmendorf. That was, I think, six or seven million
    people.
        Senator Capito. Right. What were you projecting? I am just
    curious.
        Dr. Elmendorf. We had been projecting, I think, somewhat
    more people a year or two or three ago. I think it came in a
    little below what we had been expecting a few years before
    that, but I am not 100 percent sure. We have been expecting a
    gradual ramp up in enrollment.
        We have actually knocked down our projection of enrollment
    for this year by a million people now, and I think a million
    people in January. We have come down a little bit for this
    year. We still think there will be much more enrollment in the
    future, but not quite as much more than we had thought.
        Senator Capito. As you had originally thought.
        Dr. Elmendorf. In our last projections.

                                DYNAMIC SCORING

        Senator Capito. Thank you. Since I have you here and the
    House has changed their rule 13, clause 8, the dynamic scoring
    rule. You hear a lot of controversy about this. I just came out
    of the House 14 years. Subject of great discussion.
        If you would not mind and my colleagues do not mind, would
    you just take a short period of time and tell in layman's terms
    what the difference between the way you score and a dynamic
    score would be?
        Dr. Elmendorf. Yes, of course, I am happy to do that. In
    CBO's cost estimates, we take on a whole variety of behavioral
    responses by individuals, by firms, by State governments. What
    we do not do in our estimates is to incorporate changes in
    people's behavior that would affect the size of the overall
    economy. We hold overall employment, overall GDP fixed in our
    estimates.
        We do a substantial amount of work in providing
    information/analysis of the macroeconomic effects of policy
    proposals. We do this every year in the analysis of the
    President's budget. We do this for proposals that Chairman Ryan
    put forward the last few years as chairman of the Budget
    Committee.
        We do those analyses for major pieces of legislation, major
    proposals, and we do them separately from our basic cost
    estimates.
        What the House rule does, as you know, is to require CBO to
    include that sort of macroeconomic feedback in our regular cost
    estimates for certain pieces of legislation, and in particular
    for major pieces of legislation, legislation that would have
    effects on spending or revenues that exceed a quarter percent
    of GDP in any era of the 10 year budget window at the threshold
    of $40 to $45 billion now.
        We will follow that rule in our estimates for the House. We
    will include those sorts of feedback effects in our estimates
    for large pieces of legislation.
        The closest thing we have done, I think, that has been
    prominently seen in the Senate was our analysis of immigration
    legislation the Senate took up a few years ago. A number of
    years before I arrived at CBO and considering comprehensive
    immigration legislation, people at CBO decided to assume there
    would be no change in the labor force or employment when the
    legislation was designed to increase the number of people in
    the country in some ways would have forced the estimate to be
    too distorted, so for the immigration legislation, we actually
    allowed for some macroeconomic consequences a number of years
    ago and then again a few years ago when this came up.
        We also did a separate analysis a few years ago as part of
    our analysis of immigration. We had a cost estimate and we had
    this extra analysis to look at even broader macroeconomic
    effects on productivity and saving behavior and so on.
        Under the current House rule, if that legislation were to
    come up in the House, we would include all those effects in the
    cost estimate for the legislation.
        Senator Capito. For the Senate, you were just asked to do
    that in sort of an advisory capacity? Is that correct? Or there
    is no requirement at all in the Senate?
        Dr. Elmendorf. There is no specific requirement. Of course,
    the chair or the ranking member of the Budget Committee or
    other key committees can ask us to do that sort of analysis,
    and we are happy to do that.
        We spent a good deal of effort in the past several years
    improving our modeling of the macroeconomic effects of changes
    in fiscal policy. We understand Congress' interest in this. The
    fact that we had not included it in cost estimates has not
    relieved us in our minds of the responsibility to be able to do
    that sort of analysis and to do it for major pieces of
    legislation of the sort I described.
        We have done a lot of modeling work, and we have tried to
    be very transparent about that. There is a collection of
    working papers essentially, maybe eight or nine separate
    reports, that as a collection explain how we do that sort of
    analysis, so that you and your staff can understand it and so
    we can receive the scrutiny of outside experts, many of whom we
    have consulted in the course of building these models, but to
    continue to receive scrutiny in the way that we do that sort of
    modeling so you can understand where it is coming from.

                     DYNAMIC SCORING IMPACT ON CBO'S STAFF

        Senator Capito. Assuming this is going to be a larger part
    of what the CBO is going to be asked to do, how do you think
    that is going to affect your workforce? Do you see that as you
    are going to need more people or different types of staff?
        Dr. Elmendorf. The increase in FTEs, the small increase
    that we have asked for, is partly to build up our staffing in
    that area. We have an excellent staff now. We have done this
    modeling work. It is not that it comes entirely out of the
    blue.
        We do expect there will be more demand for this sort of
    work and additional resources would help us to meet that demand
    in a quick and efficient way. Part of the challenge here is
    this sort of analysis takes a good deal of time, and if we had
    even a few more people who could do it, then we could respond
    more quickly to Congress' needs.
        Senator Capito. We always want everything yesterday, too.
        Dr. Elmendorf. Yes, ma'am.

                        GAO REPORTS AND RECOMMENDATIONS

        Senator Capito. I understand. Mr. Dodaro, one last question
    for you. I really appreciate the high quality reports the GAO
    generates and the money savings that have resulted from this. I
    think there is a gap between what we have actually enacted or
    been able to move forward with and what you all have uncovered,
    so to speak, where there could be greater savings.
        Would you have any suggestions for us, either House or the
    Senate, to be able to look at your recommendations and really
    achieve more cost savings and more efficiencies that your
    agency has brought forward? How would you recommend that we go
    about being better at responding?
        Mr. Dodaro. First, I would suggest more oversight hearings.
    Senator Schatz mentioned our high risk list, which has 32 areas
    on it right now. There is a very significant potential for
    saving billions of dollars by addressing those issues. More
    oversight hearings should be guided by the high risk list.
        We also produce a report every year on overlap,
    duplication, and fragmentation in the Federal Government. We
    add cost savings suggestions and revenue enhancements to that
    list.
        I just testified last week before the Senate Budget
    Committee. I think there could be more attention by the budget
    committees. I mentioned the Bipartisan Budget Act for 2014 and
    2015 to avoid sequestration. A number of GAO's recommendations
    were adopted to help avoid sequestration. There were over $23
    billion in contributions there.
        I also reach out to the Executive Branch Cabinet officials
    and encourage them to implement all the recommendations, they
    can voluntarily. We are going to send letters to all the agency
    heads in the coming months on the top recommendations that are
    outstanding. I anticipate providing that information to the
    Congress as well so they can use it in appropriation and
    authorization decisions.
        Right now we have about 6,000 outstanding GAO
    recommendations. On the whole, over a 4 year period, 80 percent
    of our recommendations are adopted. There are certain areas,
    like IT acquisitions, we put on the high risk list.
        In that area in the last 5 years we made 737
    recommendations, and only 23 percent have been implemented. On
    the Veterans Affairs (VA) healthcare issue, we have over 100
    outstanding recommendations. Those are two, VA and IT
    acquisitions, that we added to the high risk list.
        I also thank the subcommittee for looking carefully at our
    request for 40 FTEs. Many would be used to do more work and
    provide additional recommendations on how to close the tax gap
    and how to get on top of the improper payment issue.

                               IMPROPER PAYMENTS

        I am very concerned. Last year's estimate for 2014 was $125
    billion in improper payments. These are payments that should
    not have been made or were made in the wrong amounts. That is
    an increase of $19 billion from the prior year. Most of the
    increase is in Medicaid and Medicare. These are the two fastest
    growing challenges in the Federal Government's budget. This
    problem will get worse before it will get better.
        I have been saying that for a while, and the additional
    resources would help.

                                    TAX GAP

        The tax gap is $385 billion. We have many outstanding
    recommendations that Congress could implement that would result
    in increased revenue collection. These are revenues that are
    due under the current structure. We are not talking about tax
    increases. We are just collecting what should be collected.
        Senator Capito. Right.
        Mr. Dodaro. Those are a few of my suggestions.
        Senator Capito. I appreciate that. I think there is nothing
    more grinding on a taxpayer than to realize improper payments
    are going in the wrong way, either through fraud, waste, abuse
    or whatever. It really is an insult to the hard working people
    in this country who are paying their taxes and doing the right
    thing. I appreciate that.
        Senator Schatz.
        Senator Schatz. Thank you for your leadership in this
    space. Chairman Capito, I would be happy to work with you in
    any way to try to help the Senate and Congress overall to try
    to implement all of the recommendations from your high risk
    list.
        I think this is an opportunity for us to find savings, find
    revenue, and find bipartisan cooperation.

                DYNAMIC SCORING (UNCERTAINTY OF CBO'S ESTIMATES)

        Dr. Elmendorf, on the question of dynamic scoring, I am not
    one of those Democrats as allergic to the dynamic scoring
    approach as others. I just have a technical question with
    respect to how it may or may not increase the kind of
    variability in your cost estimates.
        I have to believe that for your analysts and for you and
    your successor, it may give you a little bit of heartburn to
    try to imagine macroeconomic impacts of policy and to try to
    quantify that in a way that is not just hazarding a guess.
        I am just wondering how you see this increasing the
    likelihood that you are going to get something badly wrong in
    the future.
        Dr. Elmendorf. Senator, we are acutely aware of the
    uncertainty that surrounds many of our estimates. This is a
    hard business that we are engaged in. The estimates of the
    macroeconomic effects of legislation certainly have substantial
    uncertainty around them, and in recognition of that, when we
    report those sorts of macroeconomic estimates, we generally do
    so with explicit ranges.
        We provide a central estimate and a higher level and a
    lower level. I would not say higher and lower bounds because
    the outcomes could be even outside that range. We try to show
    you and your colleagues the range.
        I would emphasize our estimates that do not include
    macroeconomic feedback also often have a great deal of
    uncertainty. I think it is important for you and your
    colleagues to understand that.
        We put down numbers because the budget process really
    requires numbers that add up, but we always think of them as
    being in a range of some sort, and I would urge you and your
    colleagues to remember that.
        I would urge you and your colleagues to continue to press
    us to try to be clear with you and to quantify where we can
    that uncertainty as we try to do in these macro estimates.
        Again, I want to say it is not entirely new to us. This
    analysis of the President's budget each year and our long term
    budget outlook each year, they look at alternative scenario's
    with this sort of macroeconomic feedback.
        We draw on the best thinking in the economics profession to
    do that, both in our reading of the papers and in our direct
    consultation with members of our panels, advisors, and other
    people.
        We have some confidence that we are giving you the best
    information that can be provided, but you and we need to
    remember that there is a lot of uncertainty and the uncertainty
    gets greater the further out in time we are asked to look, and
    it gets greater the more stark are the changes in Federal
    policies.
        Senator Schatz. Thank you, both. I really want to say that
    you both represent the best in public service, and I know your
    agencies work very hard and are sometimes criticized. I just
    want to say how much I appreciate both of your public service.
        Thank you, Madam Chair.
        Senator Capito. Thank you. I, too, would like to thank both
    of you. I think I have learned a lot and I appreciate you
    taking the time to be here with us today.
        This concludes the Legislative Branch Appropriations
    Subcommittee hearing regarding fiscal year 2016 funding for the
    CBO and GAO. I want to again thank both of you.

                         ADDITIONAL COMMITTEE QUESTIONS

        Our hearing record will remain open for seven days allowing
    members to submit statements and/or questions for the record,
    which will be sent to the subcommittee by close of business on
    Tuesday, March 17.
        [The following questions were not asked at the hearing, but
    were submitted to the agency for response subsequent to the
    hearing:]
                Questions Submitted to Dr. Douglas W. Elmendorf
              Questions Submitted by Senator Shelley Moore Capito
        Question. I understand that the fiscal year 2016 budget request
    includes funding for three additional full-time equivalents (FTE's).
    Knowing that the salaries and benefits associated with FTE's continue
    to increase over time, would upgraded, or additional, information
    technology systems be a more cost-efficient means of increasing CBO's
    output, rather than hiring new people?
        Answer. In CBO's view, hiring the additional people would provide
    the greatest value to the Congress. The additional employees would be
    devoted to analyzing the economic effects of Federal tax and spending
    policies (including ``dynamic'' effects, as required by a new House
    rule) and healthcare issues.
        Certain needs for information technology were addressed by CBO's
    2014 appropriation: The agency acquired greater storage capacity and
    advanced servers designed for sophisticated statistical analysis and
    modeling undertaken by an increasingly wide swath of the agency. At
    this time, to analyze the ever-changing proposals considered by the
    Congress, CBO's most pressing need is for talented analysts who can
    determine the modeling approaches that are appropriate for a particular
    proposal, can develop new models or understand and manipulate existing
    models, can translate legislative language into a set of parameters for
    use in modeling, and can make other adjustments for features of the
    legislative language that are not amenable to standard modeling.
        Question. What would be the impact to the agency if the committee
    was not able to provide funding for these three additional FTE's in
    fiscal year 2016?
        Answer. With its current staffing, CBO cannot meet all of the
    Congress's requests for estimates and analyses, particularly in the
    area of healthcare, and there is an increasing desire for the agency to
    analyze the economic effects of Federal tax and spending policies, as
    evidenced by the new House rule and a similar provision in the Senate-
    passed budget resolution. Without funding for three additional
    positions in fiscal year 2016, fewer of those requests would be
    fulfilled, and some such analyses would be less timely than desired.
    For instance, CBO would anticipate preparing fewer reports with policy
    options than hoped and being able to complete fewer informal estimates
    of the effects of bills before markup by committee. Even with the
    additional staffing, the volume of analyses and estimates that CBO
    could provide would fall far short of the total number of congressional
    requests.
        Question. I understand that CBO's budget request for fiscal year
    2016 includes an additional full-time equivalent (FTE) for the purpose
    of conducting dynamic scoring analysis of certain legislation pursuant
    to the new House rule XIII, clause 8. Why is an additional FTE
    necessary to help fulfill this requirement when CBO already has a
    Macroeconomic Analysis Division? Are any other changes required within
    the Macroeconomic Analysis Division in order to comply with the new
    House rule? If so, what are the costs associated with those changes?
        Answer. The agency has excellent analysts in its Macroeconomic
    Analysis Division, who have built--and continue to build and refine--
    sophisticated models used as part of such dynamic analyses. Those
    analyses also involve contributions from analysts in other divisions.
    Although CBO has done a good deal of work to develop the tools
    necessary to estimate the macroeconomic effects of legislation, such
    estimates can be quite complicated and time-consuming because bills can
    affect a number of key economic variables and each piece of legislation
    can affect those variables in different ways. Under the House rule, CBO
    will have to do more such analyses. Because all of the analysts in the
    Macroeconomic Analysis Division were fully engaged in work for the
    Congress before the House imposed this new requirement, CBO expects
    that one additional analyst in its Macroeconomic Analysis Division
    would be very valuable in helping the agency to meet its additional
    responsibilities under the House rule in a timely way.
        CBO will continue to evaluate whether it has sufficient resources
    to implement the House rule and any further requirements that may be
    imposed by the budget resolution. At this point, the agency is
    uncertain whether additional resources, beyond those already requested,
    will be needed.
        Question. If enacted into law, would any of the provisions in the
    Senate bill S. 200 require CBO to make further adjustments to its
    Macroeconomic Analysis Division? Would additional FTE's be necessary,
    would upgraded software systems be required, or would it be necessary
    to purchase additional data? If so, what are the costs associated with
    those changes?
        Answer. The analyses required under S. 200--to prepare, to the
    extent practicable, macroeconomic analysis of major revenue
    legislation--would generally be prepared by the staff of the Joint
    Committee on Taxation (JCT). However, analyses of major legislation
    affecting the revenue provisions of the Affordable Care Act and certain
    other tax legislation affecting healthcare would probably be undertaken
    jointly by JCT and CBO because the two agencies usually work together
    on such analyses. Such work would affect multiple divisions within CBO,
    not just the Macroeconomic Analysis Division. The additional full-time-
    equivalent positions that CBO has already requested would be helpful in
    meeting the requirements of S. 200, although, as mentioned, the agency
    is uncertain whether resources beyond those would be needed.
        Question. The House rule requires these estimates to cover the
    current 10-year budget window and the following 20-year period; while
    the Senate bill requires the estimates to cover the current 10-year
    window and the following three 10-year periods. Will it be more
    difficult to provide this analysis for 30 years beyond the first 10-
    year window as opposed to just 20 years beyond the first 10-year
    window?
        Answer. The House rule requires a qualitative assessment of
    budgetary effects in the 20-year period beyond the usual 10-year
    window; S. 200 would require quantitative estimates of changes in
    economic output, employment, interest rates, the capital stock, and tax
    revenues over the 30-year period beyond the current 10-year budget
    window. (S. 200 would also require estimates of changes in employment
    during the 10-year budget window, which would involve additional
    analysis beyond that needed to fulfill the requirements of the House
    rule.) Providing qualitative estimates is not as difficult as preparing
    quantitative ones. The ability to do the latter will vary depending
    upon various factors, such as the time horizon involved, the amount of
    time available to conduct the analysis, the complexity of the
    legislation being considered, the capability of the tools that the CBO
    has to assess the legislation's effects, and the agency's judgment
    about the uncertainty of the analysis.
        Providing estimates that look farther into the future would be more
    difficult and time-consuming. To undertake analyses of effects between
    30 and 40 years in the future, CBO would need to assess various
    additional factors, such as how different trends affecting estimates
    for components of legislation that were projected for the previous
    decade might change and how aspects of the legislation that were not
    binding in previous periods might begin to have effects. Estimates that
    extend beyond 10 years are generally quite uncertain, and the farther
    out they go, the more uncertain they become and the more difficult that
    uncertainty is to evaluate. Hence, when quantifying budgetary effects
    beyond the first decade, CBO often presents them as a percentage of the
    size of the economy (in part because economic growth itself is a source
    of uncertainty).
        Question. The House rule requires that this analysis be made part
    of the standard CBO cost estimate, but the Senate bill only requires
    these estimates to be part of a supplemental analysis. Practically
    speaking, is there a difference in the work performed by CBO to provide
    this analysis as part of the standard cost estimate vs. providing it as
    a supplemental analysis?
        Answer. In either case, CBO will provide all of the typical
    information provided today plus additional information about
    macroeconomic effects. The way CBO presents the budgetary impact of the
    macroeconomic effects of a proposal--either as part of a cost estimate
    or as a supplemental analysis--would not fundamentally change the work
    performed by the agency. However, when dealing with similar
    legislation, meeting two different requirements for presentation would
    have the practical effect of adding some effort and time.
        Question. I understand that CBO is again requesting authorizing
    language that would allow no more than 50 percent of its unobligated
    balances to remain available for a second fiscal year beyond the year
    in which it was appropriated. Why is this necessary? What is CBO unable
    to do with its funds in the year in which they are appropriated that
    requires carrying them forward?
        Answer. To ensure that the agency does not obligate more funds than
    have been appropriated, CBO sets aside funds to cover unexpected
    expenses late in the year. When such expenses do not arise, some funds
    remain unobligated at the end of the year. The authorizing language
    would provide the agency the flexibility of using a portion of those
    unobligated balances in the following year to pay for data or other
    goods or services--such as additional information technology services--
    that are critical but unforeseen and therefore not included in the
    budget.
        In addition, some obligations made at the end of the year do not
    result in outlays--when costs turn out to be lower than the maximum
    obligated amounts. The authorizing language would allow CBO to obligate
    a portion of those funds again so that they could be used, as
    originally intended, to sustain CBO's operations. The flexibility that
    CBO is seeking is based on general provisions that appear in the
    Financial Services, Homeland Security, and Transportation, Housing and
    Urban Development appropriation bills.
        Question. What would be the consequences to CBO of not providing
    this authorizing language in fiscal year 2016?
        Answer. If the requested flexibility regarding unobligated balances
    is not provided, CBO will have to use fiscal year 2016 funding to pay
    for any critical but unforeseen needs--perhaps additional data about
    healthcare--and then defer other activities included in the budget,
    such as the maintenance or replacement of information technology
    equipment. Moreover, obligated funds in excess of costs would continue
    to be unavailable to the agency.

                              SUBCOMMITTEE RECESS

        Senator Capito. The next hearing of this subcommittee will
    be on Thursday, March 12, at 9:45 in Dirksen 124, where we will
    hear testimony from the Secretary of the Senate, the Senate
    Sergeant At Arms, the Chief of the Capitol Police, regarding
    the fiscal year 2016 budget request for those agencies.
        Until then, the committee stands adjourned. Thank you.
        [Whereupon, at 3:56 p.m., Tuesday, March 10, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]