Major Management Challenges and Program Risks: Department of Commerce
(Letter Report, 01/01/2001, GAO/GAO-01-243).
This report, part of GAO's high risk series, discusses the major
management challenges and program risks facing the Department of
Commerce. These challenges include (1) increasing U.S. businesses'
access to international markets, (2) ensuring that the United States is
secure from proliferation of dual-use commodities and chemical weapons,
(3) ensuring that weather forecasts and severe weather warnings are
accurate and timely, (4) improving the economy in distressed areas, and
(5) addressing other challenges to building a high-performing
organization.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GAO-01-243
TITLE: Major Management Challenges and Program Risks: Department
of Commerce
DATE: 01/01/2001
SUBJECT: Risk management
Accountability
Economically depressed areas
Economic development
Dual-use technologies
Financial management
Weather forecasting
International trade
Exporting
IDENTIFIER: High Risk Series 2001
GAO High Risk Program
NWS Advanced Weather Interactive Processing System
NWS Next Generation Weather Radar
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GAO-01-243
Performance and Accountability Series
January 2001 Major Management Challenges and Program Risks
Department of Commerce
GAO- 01- 243
Letter 3 Overview 6 Major
14 Performance and Accountability Challenges
Related GAO 33
Products Performance
38 and Accountability Series
Lett er
January 2001 The President of the Senate The Speaker of the House of
Representatives
This report addresses the major performance and accountability challenges
facing the Department of Commerce as it seeks to promote job creation and
improve living standards for all Americans through economic growth,
technological competitiveness, and sustainable development. It includes a
summary of actions that Commerce has taken and that are under way to address
these challenges. It also outlines further actions that GAO believes are
needed. This analysis should help the new Congress and administration carry
out their responsibilities and improve government for
the benefit of the American people. This report is part of a special series,
first issued in January 1999, entitled the Performance and Accountability
Series: Major Management Challenges
and Program Risks. In that series, GAO advised the Congress that it planned
to reassess the methodologies and criteria used to determine which federal
government operations and functions should be highlighted and which should
be designated as “high risk.” GAO completed the assessment,
considered comments provided on a publicly available exposure draft, and
published its guidance document, Determining Performance and Accountability
Challenges and High Risks (GAO- 01- 159SP), in
November 2000. This 2001 Performance and Accountability Series contains
separate reports on 21 agencies- covering each cabinet department, most
major independent agencies, and the U. S. Postal Service. The series also
includes a governmentwide perspective on performance and management
challenges across the federal government. As a companion volume to this
series, GAO is issuing an update on those government operations
and programs that its work identified as “high risk” because of
either their greater vulnerabilities to waste, fraud, abuse, and
mismanagement or major challenges associated with their economy, efficiency,
or effectiveness.
David M. Walker Comptroller General of the United States
Overview The Department of Commerce's activities touch Americans' lives
every day by, among other things, providing weather forecasts and warnings,
protecting patents and trademarks, creating jobs and businesses in
distressed communities, reconciling export regulation with national security
concerns, supporting exports from U. S. businesses to international markets,
and conducting the decennial census. Although the Department's typical
budget outlays of about $5 billion
annually are relatively small compared to the outlays of many other major
departments, its wide- ranging programs have far- reaching national
implications. Commerce is facing a number of performance and accountability
challenges that affect its ability to meet its mission.
Increase the access of U. S. businesses to international markets
? Ensure that the United States is secure from the proliferation of dual-
use commodities and chemical weapons
? Ensure that weather forecasts and severe weather warnings are accurate and
timely
? Improve the economy in distressed areas ? Address other challenges to
building a highperforming organization
Businesses' Access to International trade has become increasingly important
International Markets to the U. S. economy. Since the early 1980s, the
United States has entered into over 400 trade- related agreements. While
these agreements were intended to increase the access of U. S. companies to
foreign markets, businesses' efforts to identify potential
markets may be hampered by problems related to identifying and monitoring
trade agreements. Specifically, in late 1999, we reported that officials at
Commerce and other key trade agencies were unable to provide a definite
count of trade agreements. Consequently, we recommended that the Secretary
of Commerce establish clear criteria for the types of agreements to be
included in the archive and clarify that the archive is intended to contain
all trade agreements. More recently, we reported that the ability of
Commerce and two other trade agencies to monitor and enforce trade
agreements was limited because the agencies lacked sufficient numbers of
experienced staff with the right expertise; 1 did not always get needed
analytical or other types of support from other agencies; and sometimes had
difficulty obtaining balanced,
comprehensive input from the private sector. We recommended that the
Secretary of Commerce work with other relevant agencies to develop a
strategy for how our federal government will manage its growing trade
agreement monitoring and enforcement workload. Commerce has partially
implemented our recommendations. However, until these problems are fully
resolved, U. S. businesses may not be able to take full advantage of the
benefits secured by trade agreements in accessing foreign markets and, thus,
increasing U. S. exports. While Commerce's International 1 Commerce's human
capital problems can be seen as part of a broader
pattern of human capital shortcomings that have eroded mission capabilities
across the federal government. See our High- Risk Series: An Update (GAO-
01- 263, Jan. 2001) for a descussion of human capital as a newly designated
governmentwide high- risk area.
Trade Administration (ITA) reported some success in assisting U. S.
businesses in gaining access to international markets, it also noted that it
faced several difficulties in portraying its progress in this effort due, in
part, to the reluctance of businesses to share information on their exports
and unanticipated changes in the economies of developing countries.
Control of Exports of At the same time that it encourages trade, Commerce,
Dual- Use
through its Bureau of Export Administration (BXA) also Commodities and helps
administer the nation's export control system by Chemical Weapons
processing license applications for exported items that may pose a national
security risk or foreign policy concern, such as chemical, biological,
nuclear, and missile technology items. In Commerce's annual performance
plans, BXA has set performance goals related to (1) restructuring export
controls for the 21st century by, among other things, streamlining its
application process and (2) maintaining a fully effective law enforcement
program to protect U. S. national security and public safety, uphold U. S.
foreign policy, and ensure the nonproliferation of dual- use commodities and
chemical weapons. 2 BXA reported that
it met or exceeded various performance measures, such as deterring high-
risk transactions. However, it is unclear how some of the measures would
contribute to restructuring the export control system, and some of the terms
used in measuring the goal had not yet been defined. In addition, among the
performance targets not met were average processing time for licensing
applications in relation to BXA's export control system goal and the number
of investigations completed under
BXA's law enforcement goal. Consequently, it is not clear how much overall
progress BXA has made in meeting its goals.
2 Dual- use commodities are those with both commercial and military
applications.
In 1975, the President established the Committee on Foreign Investment in
the United States to monitor foreign investment by reviewing reports of
foreign acquisitions of U. S. companies that may affect national security.
In June 2000, we reported that Commerce and other agencies did not always
inform the Committee of known foreign acquisitions with national security
implications. Consequently, the unreported acquisitions
may not be reviewed from all appropriate perspectives. For example, an
acquisition may be reviewed from the perspective of protecting classified
material, but not from the perspective of other concerns such as technology
transfers, weapon technology proliferation, or foreign sources of supply. To
improve the Committee's process for identifying foreign acquisitions with
potential national security implications, we recommended that the Secretary
of Commerce, among others, establish procedures requiring agency officials
to submit all known foreign acquisitions of companies with potential
national security implications to the Committee. Commerce agrees with and
plans to take steps to implement our recommendation.
Accurate and Timely Almost two decades ago, Commerce's National Weather
Weather Forecasts Service (NWS) decided to improve its weather warnings
and Warnings and forecasts through a nationwide modernization
program. NWS recognized that improved warnings and forecasts were essential
to enhancing public safety and our nation's economic productivity. However,
the modernization effort, originally expected to be completed in 1994,
experienced difficulties that included schedule delays, cost overruns, and
technical problems
on key systems. Accordingly, in February 1995 and 1997 and January 1999, we
identified NWS' modernization effort as a high- risk initiative because of
several issues,
such as the agency's lack of an overall systems architecture to guide the
modernization and problems in developing the Advanced Weather Interactive
Processing System (AWIPS)- the centerpiece of the
modernization. Over the years, we have made numerous recommendations to
address the modernization's difficulties, and NWS has acted to implement
them. For example, in response to our recommendations, NWS established an
overall systems architecture, improved the availability of its Next
Generation Weather Radar
(NEXRAD), and enhanced its AWIPS software development processes. Due to NWS'
progress in addressing key concerns, and in deploying and using AWIPS, we no
longer consider NWS' modernization effort to be a high- risk initiative;
however, we will continue to monitor NWS' plans to deploy enhancements to
AWIPS in 2001 and 2002.
Through its modernization, NWS has achieved improvements in the accuracy and
timeliness of some weather warnings. For example, the agency reported that
in fiscal year 1999, the lead times for tornadoes increased by 20 percent
over the lead times in 1997. NWS also noted improvements in the accuracy of
flash flood warnings in specific areas of the country. Nevertheless, NWS met
only two of seven targets for
fiscal year 1999 under its performance goal of advancing short- term warning
and forecast services. For example, NWS met its target of increasing the
lead- time and accuracy of tornado warnings, but did not meet its target for
improving the lead- time and accuracy of severe
thunderstorm warnings. Commerce noted that planned enhancements to NWS'
systems- and specifically AWIPS- would enhance its forecasting capabilities.
As a result, the full effect of the modernization on NWS' goal of improved
forecasts and warnings may not be determined for several more years.
The Economy in The Economic Development Administration (EDA) Distressed
within Commerce has both an agency- level and a Communities governmentwide
responsibility for improving the economy in distressed areas. Specifically,
EDA provides grants to economically distressed communities to
generate and retain jobs and to stimulate industrial and commercial growth
in rural and urban areas that experience high unemployment, low income, or
severe economic distress. In addition, through legislation and
accompanying reports, the Congress has urged EDA to aggressively pursue
efforts to increase the efficiency of the federal response to distressed
communities by working with other agencies. In terms of its own programs,
EDA has made some progress in meeting the two fiscal year 1999 performance
goals related to improving the economy in distressed areas- creating jobs
and private enterprise in economically distressed communities and building
local capacity to achieve and sustain economic growth. For example, EDA
exceeded its targets for state and local dollars committed to EDAfunded
projects that are intended to create jobs and for the percentage of EDA
grants awarded to economically distressed areas. However, as we reported in
March 1999, measuring job creation that results from economic development
programs is problematic. On a broader scale, while EDA has taken steps to
coordinate its work with that of other agencies, an important next step will
be for EDA to collaborate with other agencies to develop common or
complementary goals for improving their performance in addressing
crosscutting issues.
Additional Finally, Commerce needs to manage improvements in Challenges
three other areas in order to build a high- performing organization.
? In the financial management area, Commerce has made substantial progress
in recent years, but continues to face challenges in both its financial
statement reporting and financial management systems. Although Commerce
received an unqualified opinion on all of its financial statements for
fiscal year 1999, Commerce's Chief Financial Officer has agreed that a
diligent effort is needed to continue to receive unqualified audit opinions
on
future Commerce financial statements. Commerce officials strengthened
Commerce's internal control structure; however, one of the remaining
material
weaknesses is the lack of a single, integrated financial system. As stated
in Commerce's fiscal year 1999 accountability report, many of its financial
systems are seriously outdated and fragmented; unable to provide timely,
complete, and reliable financial information; inadequately controlled; and
costly and difficult to maintain. Consequently, the systems do not comply
with federal laws and regulations. In order to comply with applicable laws
and safeguard its assets against waste, loss, unauthorized use, or
misappropriation, Commerce must continue to emphasize financial management
improvements and correct its material weaknesses and reportable conditions.
Commerce reports that it has made progress in addressing this material
weakness and will continue its efforts to improve in this area. ? With
respect to the 2000 Census, Commerce's Bureau of the Census generally
completed its peak data collection activities consistent with its
operational plans, and remaining activities appear to be on- track. As a
result, we no longer consider the 2000 Census to be a high- risk program. We
had designated the
census a high- risk area as early as 1997 due to formidable challenges that
included building a complete and accurate master address file, motivating
the public to participate in the census by returning their census
questionnaires, meeting field staffing goals in a tight labor market, and
collecting timely and accurate data from nonrespondents. Fortunately, the
Bureau's actual peak data collection activities proceeded on or ahead of
schedule, and generally were performed as planned. Particularly noteworthy
was an initial mail response rate of 65 percent, which was four percentage
points higher than the Bureau had anticipated, and matched the response rate
to the 1990 Census. Nonetheless,
surmounting the various challenges to a successful census that the Bureau
faced in 2000 came at considerable cost. Moreover, the single most important
determinate of a successful census- the completeness and accuracy of the
census count, and in particular, the size and nature of the undercount- will
not be known until the Bureau completes various accuracy and coverage
assessments. Consequently, as the Bureau looks toward the next census,
continued societal and demographic changes
such as more complex living arrangements and a large non- English- speaking
population, will make the national headcount in 2010 at least as challenging
as it was in 2000. As a result, it will be important for Commerce to ensure
that the Bureau completes its
evaluations of key census operations as planned, and explores innovative
options for a cost- effective census in 2010. ? The National Oceanic and
Atmospheric
Administration (NOAA) within Commerce owns and operates a fleet of ships
that supports its programs in fisheries research, oceanographic research,
and hydrographic charting and mapping. However, these
ships can be costly and inefficient to operate and maintain, and they may
lack state- of- the- art technology. For more than a decade, congressional
committees, public and private sector advisory groups, the National
Performance Review, the
Commerce Office of Inspector General, and we have urged NOAA to aggressively
pursue cost- effective alternatives to its in- house fleet of ships.
According to NOAA, it has taken steps to improve the cost efficiency of its
fleet such as removing some ships from service, bringing new and converted
Navy ships into service, and negotiating contracts outside NOAA to meet some
of its needs. However, continued
oversight of NOAA's plans to replace or upgrade ships will be needed to
ensure that NOAA is pursuing the most cost- effective alternatives for
acquiring marine data.
Major Performance and Accountability Challenges
As stated in its fiscal year 2001 annual performance plan, the Department of
Commerce's basic mission is to promote job creation and improve living
standards for
all Americans through economic growth, technological competitiveness, and
sustainable development. Commerce employs about 40, 000 people in numerous
offices in the U. S. and overseas; however, it has a relatively small annual
budget, with typical outlays of about $5 billion annually. Commerce is
composed of nine agencies, whose programs and activities include ?
supporting export policies that affect millions of domestic jobs and
monitoring hundreds of international trade agreements;
? helping stop the proliferation of weapons of mass destruction and
providing technical assistance to Russia and newly emerging countries
concerning export controls; ? forecasting and warning the public about
severe weather, such as hurricanes, tornadoes, and floods; ? providing
assistance to distressed communities; ? advancing the establishment and
expansion of minority- owned businesses;
? supporting the domestic and international management of living marine
resources, including overseeing 2,000, 000 square miles of ocean and 300
marine species; ? fostering telecommunications policies that promote
economic and technical advancement; ? protecting patents, trademarks, and
intellectual property rights; and
? conducting the decennial census, demographic and economic censuses, and
over 200 annual surveys. Commerce shares responsibilities for these
functions with a number of other federal departments and agencies, and has a
lead role in one area- promoting economic development in distressed areas.
With the increased focus on results and accountability accompanying the
Government Performance and
Results Act, Commerce has come to symbolize dispersed responsibility for
federal programs. On the basis of our work and reports from Commerce's
Office of Inspector General, we have identified major performance and
accountability challenges facing the Department. These challenges include
(1) increasing the access of U. S. businesses to international markets, (2)
ensuring that the United States is secure from the proliferation of dual-
use commodities and chemical weapons, (3) ensuring that weather forecasts
and severe weather warnings are accurate and timely, and
(4) improving the economy in distressed areas. To build a high- performing
organization, Commerce also must continue to successfully produce financial
statement reports, as well as implement a departmentwide financial
management system; complete the 2000 Census and develop innovative options
for conducting a
cost- effective census in 2010; and better manage NOAA's research fleet.
Increasing the International trade has become increasingly important Access
of to the U. S. economy. As shown in figure 1, U. S. exports
Businesses to have increased about 70 percent since 1990, to almost
International $700 billion a year. In recent decades, the United States
Markets
has led the world in the effort to create a system of open trade under
accepted rules, in which the reduction of trade barriers, such as tariffs
and import quotas, would help provide greater market access for U. S. goods
and services. The United States has entered into over 400 trade- related
agreements since the early 1980s, including the far- reaching 1994 World
Trade Organization agreements, which cover about $1. 4 trillion in annual U.
S. trade with 135 countries. 1 Most of these agreements were negotiated by
the Office of the U. S. Trade Representative, which is statutorily
responsible for developing and coordinating U. S. international trade
policy. However, other federal agencies, including the Department of
Commerce, negotiated some of the
agreements. Although these agreements were intended to increase U. S.
companies' access to foreign markets, businesses' efforts to identify
potential markets may be hampered by problems related to identifying and
monitoring the trade agreements.
1 Trade agreements are negotiated understandings between two or more
countries that generally address the terms of trade. There is no universal
definition of a trade agreement, because agreements can take many forms and
serve different purposes.
Figure 1: United States Export Growth, 1970- 98 800
Dollars in billions 700 600 500 400 300 200 100
0 1970
1971 1972
1973 1974
1975 1976
1977 1978
1979 1980
1981 1982
19831984 1985
1986 19871988
1989 1990
1991 1992
1993 1994
1995 1996
1997 1998
Years
Exports Source: GAO calculations based on International Financial
Statistics. (Washington, D. C.: International Monetary Fund, Jan. 1999).
Specifically, to fully use the benefits of trade liberalization, both
private businesses and the public need quick and easy access to the terms
and conditions
of the numerous trade agreements to which the United States is a party.
However, in December 1999, we reported that the number of those trade
agreements was uncertain. Officials at key trade agencies, including the
Commerce Department, were unable to provide a definite count of trade
agreements that were currently in force. Although Commerce maintains the
largest
government archive of trade agreements that was designed to include all
agreements, we found that the archive was incomplete and was missing over
one- third
of the trade agreements that we identified. Consequently, we recommended
that the Secretary of
Commerce establish clear criteria for the types of agreements to be included
in the archive and clarify that the archive is intended to contain all trade
agreements. Commerce has since taken actions to clarify the criteria for
including trade agreements in its archive, but Commerce decided that its
database would not include some agreements, such as those involving
agriculture. Therefore, U. S. businesses may still have difficulty taking
full advantage of the benefits that trade
agreements provide in accessing foreign markets because they may not be
aware of all of the agreements and the terms of those agreements. In March
2000, we reported that the ability of Commerce and two other trade agencies
to monitor and enforce trade agreements is limited. We attributed the
problems to the agencies' lack of sufficient numbers of experienced staff
with the right expertise; not always getting the needed analytical or other
types of support
from other agencies; and difficulty obtaining balanced, comprehensive input
from the private sector. In addition, we found that Commerce and the two
other agencies- the Department of Agriculture and the Office of the U. S.
Trade Representative- had not developed a strategy for how the U. S.
government would manage its growing trade monitoring and enforcement
workload. Specifically, they have not identified the full scope of this
workload, the number and types of resources
needed to perform it, the availability of these resources, and the roles of
individual agencies. As a result, the U. S. government is not realizing the
full benefits of its trade agreements to increase U. S. market access abroad
and
thereby increase U. S. exports. We recommended that the Secretary of
Commerce work with other relevant agencies to develop a strategy for how our
federal government will manage its growing trade agreement monitoring and
enforcement workload. While this strategy has not yet been developed,
Commerce, in conjunction with the Office of the U. S. Trade
Representative, has begun to address our recommendation.
According to the measures used by ITA, it has achieved some success in
assisting U. S. businesses to gain access to international markets. For
instance, ITA reported that it exceeded its target for the number of firms
that were new to the export market in fiscal year 1999. However, ITA noted
that it faced several difficulties in portraying its progress in attaining
greater U. S. business access to
international markets. For instance, ITA noted that, due to proprietary
concerns, businesses often have been reluctant to share information on their
exports. In addition, ITA's programs are subject to unanticipated changes to
the economies of developing countries. It was also sometimes difficult to
gauge ITA's progress
because ITA's measures have not always been directly linked to its goals.
For example, under its performance goal of enforcing U. S. trade agreements,
ITA listed the value of market openings as a measure of progress. Trade
agreements are intended to guarantee the opportunity for U. S. firms to
engage in free and fair trade but do not necessarily lead to export sales
for U. S.
firms. Key Contact Susan Westin, Managing Director International Affairs and
Trade
(202) 512- 4128 westins@ gao. gov
Ensuring That the The Commerce Department, through BXA, is one of two
United States Is agencies that administer the nation's export control Secure
From the
system. 2 Under U. S. law, the President has the authority Proliferation of
to control and require licenses for exporting items that Dual- Use may pose
a national security risk or foreign policy Commodities and concern. The risk
level can vary depending on the item Chemical Weapons
being exported and the country of destination; therefore, exports of some
items involve less risk than other items and exports to some countries
involve less
risk than to other countries. In addition, Commerce and other agencies are
involved in notifying the Committee on Foreign Investment in the United
States about certain foreign acquisitions of U. S. companies, namely, those
with national security implications. 3 In Commerce's annual performance
plans, BXA set performance goals related to (1) restructuring export
controls for the 21st century and (2) maintaining a fully effective law
enforcement program to protect U. S. national security and public safety,
uphold U. S. foreign policy, and ensure the nonproliferation of dual- use
commodities and chemical weapons. However, it is not clear how much progress
BXA has made in meeting
these performance goals, in part, because the terminology used in stating
the goals is not clearly defined or understood. For example, the goal to
“restructure export controls for the 21st century” does not
articulate what BXA is attempting to achieve through restructuring. In
addition, BXA's performance 2 The State Department licenses munitions items
through its Office of
Defense Trade Controls. 3 In May 1975, the President established the
Committee on Foreign Investment in the United States to monitor foreign
investment in U. S. companies that could have national security
implications. Voluntary reporting of a foreign acquisition calls for the
company to submit detailed information to the Committee concerning its
organization,
background, assets, and products, including their relationship to national
security.
measures related to this goal tend to reflect workload and outputs and do
not show a clear link to how they would contribute to a restructuring of the
export control system; e. g., a change in the number of transactions
deterred could occur simply as a result of a change in the number of
licensing decisions. Although this type of information might indicate
improvements in the
implementation of export controls, it would not indicate changes to the
structure of the export control system. In discussing these issues, BXA
officials told us that they did not have comprehensive or specific guidance
for developing performance goals and measures. Similarly, it is difficult to
determine whether BXA's measures indicate progress toward achieving the goal
related to maintaining a fully effective law enforcement program because BXA
has not defined the term “fully effective law enforcement
program.” Thus, there is no sense as to how many outreach visits,
investigations completed, etc., would equal a “fully effective”
program. In addition, although the performance report says that,
according to Commerce's scoring method, BXA substantially met, met, or
exceeded all of its targets, BXA's data showed that it actually met or
exceeded the target for five out of nine measures. Targets that were not met
included the average processing time for
licensing applications in relation to its export control system goal and the
number of investigations completed under BXA's law enforcement goal.
Although BXA explained why those targets classified as “substantially
met” fell short of fully meeting the intended level of performance, it
did not discuss how it planned to address its unmet targets in the future.
In June 2000, we reported that Commerce and other agencies did not always
inform the Committee of known foreign acquisitions of U. S. companies with
national security implications. Consequently, the unreported acquisitions
may be reviewed from only one perspective, for example, from the viewpoint
of protection of
classified material, while other important national security concerns, such
as technology transfers, weapon technology proliferation, or foreign sources
of supply, may not be considered. To improve the Committee's process for
identifying foreign acquisitions with potential national security
implications, we recommended that the Secretary of Commerce, among others,
establish procedures requiring agency officials to submit all known foreign
acquisitions of companies with potential national security implications to
the Committee. Commerce agrees with and plans to take steps to implement our
recommendation.
Key Contacts Susan Westin, Managing Director International Affairs and Trade
(202) 512- 4128 westins@ gao. gov Katherine V. Schinasi, Director
Acquisition and Sourcing Management (202) 512- 4841 schinasik@ gao. gov
Ensuring That
In the 1980s, NWS decided to leverage the power of Weather Forecasts
information technology to achieve more uniform and Severe Weather weather
services across the nation, improve forecasting,
Warnings Are provide more reliable detection and prediction of severe
Accurate and
weather and flooding, permit more cost- effective Timely
operations through staff and office reductions, and achieve higher
productivity. At that time, NWS began a nationwide modernization program to
upgrade weatherobserving systems (such as satellites and radars), to design
and develop advanced computer workstations for forecasters, and to
reorganize its field office structure.
In February 1995 and 1997 and January 1999, we identified NWS' modernization
as a high- risk initiative because of several issues, including NWS' lack of
a systems architecture to guide the modernization effort, and problems in
developing AWIPS. Over the years, we made a series of recommendations
intended to address NWS' problems. For example, in March 1994, we
recommended NWS develop an overall systems architecture to be used as a
guide in developing current and future subsystems; in May 1995, we
recommended that the agency correct shortfalls in its radar performance; and
in 1996, we recommended NWS
improve its processes for testing AWIPS software, and obtain an independent
AWIPS cost estimate since NWS did not have reliable project cost
information. NWS has acted to implement our recommendations. The agency
issued an initial systems architecture, improved its radar availability,
strengthened its software development and testing processes, and completed
an independent cost estimate of AWIPS. NWS also overcame major obstacles in
developing AWIPS. The system is now operating in field offices across the
country. However, it is operating with less than the full functionality that
AWIPS was planned to provide. For example, it does not provide weather
forecasters a full range of interactive forecast preparation techniques,
such as allowing forecasters to enter human observations of the weather into
radar- based warning tools. To allow more efficient and improved forecasts,
NWS plans to deploy radar and infrastructure enhancements to AWIPS in three
phased releases beginning in 2001 and 2002. Because of NWS' progress in
establishing an initial systems architecture and in
deploying and using AWIPS, we no longer consider the modernization effort to
be a high- risk initiative. However, we will continue to monitor NWS'
efforts to develop and deploy AWIPS enhancements.
NWS' modernization has resulted in improvements in the accuracy and the
timeliness of some weather warnings. For example, in October 1998, we
reported that the accuracy and timeliness of flash flood warnings improved
in Ventura and Los Angeles counties in
California after the Next Generation Weather Radar program was commissioned
in 1996. Furthermore, Commerce noted in its performance report for fiscal
year 1999 that the lead time for tornadoes increased by 20 percent over the
lead times for 1997. Nevertheless, NWS met only two of seven targets for
fiscal year 1999 under its performance goal of advancing short- term warning
and forecast services. For example, NWS met
its target of increasing the lead- time and accuracy of tornado warnings,
but did not meet its target for improving the lead- time and accuracy of
severe thunderstorm warnings. Similarly, NWS did not meet its target for
increasing the accuracy of heavy snowfall forecasts. Commerce noted that
planned enhancements to NWS' systems- and specifically AWIPS- would enhance
its forecasting capabilities. As a result, the full effect of the
modernization on NWS' goal of improved
forecasts and warnings may not be determined for several more years. Key
Contact Joel C. Willemssen, Managing Director Information Technology
(202) 512- 6408 willemssenj@ gao. gov Improving the
EDA has both an agency- level and a governmentwide Economy in responsibility
for improving the economy in distressed
Distressed Areas areas. Specifically, EDA was created to generate jobs, help
retain existing jobs, and stimulate industrial and commercial growth in
rural and urban areas of the nation experiencing high unemployment, low
income, or severe economic distress. EDA provides grants to economically
distressed communities for specific
projects. In addition, through legislation and accompanying reports, the
Congress has urged EDA to aggressively pursue efforts to increase the
efficiency of the federal response to distressed communities by working with
other agencies.
In terms of its own programs, EDA has made some progress in meeting the two
fiscal year 1999 performance goals related to improving the economy in
distressed areas- creating jobs and private enterprise in economically
distressed communities and building local capacity to achieve and sustain
economic growth. For example, EDA reported that it exceeded its target on
state and local dollars committed to EDA- funded projects that are intended
to create jobs. The percentage of EDA grants awarded to economically
distressed areas
also exceeded its target. Progress toward job creation and business success
through the other six measures could not be determined. As we reported in
March 1999, measuring the creation of new jobs resulting from
economic development programs is difficult and complex. EDA did not report
results for these measures because, among other reasons, they focused on
interim
or long- term objectives for which EDA stated it would provide results in
future performance reports. In addition, EDA has not yet included goals that
are complementary with or shared by the other agencies working to improve
distressed areas.
The Economic Development Administration and Appalachian Regional Development
Reform Act of 1998 (P. L. 105- 393) requires that other federal agencies
cooperate with Commerce in its efforts to assist distressed communities.
Furthermore, the accompanying Senate report states that EDA should
aggressively pursue efforts to increase the efficiency of the federal
response to distressed communities by working with other agencies. As we
reported in September 2000, at least nine agencies other than the
Department of Commerce provide funds for economic development activities.
These include the departments of Agriculture, Housing and Urban Development,
Defense, Health and Human Services, Interior, and Transportation, as well as
the Environmental Protection Agency, the Small Business Administration, and
the Appalachian Regional Commission. These agencies,
along with EDA, operate over 70 programs that can be used to support
economic development by funding activities that include constructing roads,
streets, water and sewer systems, nonresidential buildings, and industrial
parks. EDA has taken steps to coordinate its work with that of other
agencies. In particular, Commerce's fiscal year 2001 performance plan
identifies other agencies- both inside and outside of Commerce- that share
crosscutting issues with EDA. However, an important next step will be for
EDA to collaborate with other agencies to develop common or complementary
goals for improving their performance in addressing crosscutting issues. 4
Key Contact Thomas J. McCool, Managing Director Financial Markets and
Community Investment
4 In 1999 and 2000, the Office of Management and Budget (OMB) included the
development of common goals as guidance to the agencies in OMB Circular No.
A- 11, Preparing and Submitting Budget Estimates, which is used to prepare
performance plans, among other
things.
(202) 512- 8678 mccoolt@ gao. gov Addressing Other Commerce also needs to
address other challenges in Challenges to
order to build a high- performing organization. These Building a
HighPerforming include (1) continuing to successfully produce financial
statement reports and implement a departmentwide Organization
financial management system, (2) ensuring that the Bureau of the Census
completes its evaluations of the 2000 Census as planned and uses the results
to develop innovative options for taking a more cost- effective census in
2010, and (3) better managing NOAA's research fleet and associated
personnel.
In the financial management area, Commerce has made substantial progress in
recent years, but continues to face challenges in both its financial
statement reporting and financial management systems. Specifically, in 1996,
Commerce's Inspector General issued a disclaimer of opinion on Commerce's
financial statements due to management's inability to support certain
account balances and deficiencies noted in Commerce's internal controls. 5
In addition, the auditors identified 39 reportable conditions that
represented significant deficiencies in the design or operation of the
internal control structure, of which 37 were considered to be material
internal control weaknesses. In contrast, Commerce received an unqualified
opinion on all of its financial statements for fiscal year 1999. In
addition, Commerce officials strengthened Commerce's internal control
structure so that the number of reportable conditions identified dropped to
12, of which 7 were material weaknesses. In order to comply with applicable
5 Of the 15 financial statements submitted that year, 7 received
unqualified opinions, 3 received qualified opinions on one or more of their
financial statements, 4 received disclaimers of opinion on all financial
statements, and 1 was not audited.
laws and safeguard its assets against waste, loss, unauthorized use, or
misappropriation, Commerce must continue to emphasize financial management
improvements and correct the remaining material weaknesses and reportable
conditions. Commerce's Chief Financial Officer has agreed that a diligent
effort is needed to continue to receive unqualified audit opinions on future
Commerce financial statements. In the financial systems area, Commerce's
lack of a single, integrated financial system continues to be reported by
its auditors as a material weakness. Further, as stated in Commerce's fiscal
year 1999 accountability report, many of its financial systems are seriously
outdated and fragmented. In addition, these systems are
unable to provide timely, complete, and reliable financial information;
inadequately controlled; and costly and difficult to maintain. Consequently,
the systems do not comply with federal laws and regulations. Commerce
reports that it has made progress in addressing this
material weakness and will continue its efforts to improve in this area.
Specifically, Commerce plans to continue its phased implementation of the
Commerce Administrative Management System, which it expects to complete by
2004. Also, Commerce is developing a corporate database that it says will
integrate financial data from each of its reporting units and will
facilitate preparing consolidated statements and reports.
With respect to the 2000 Census, the Bureau of the Census generally
completed its peak data collection activities consistent with its
operational plans, and
remaining activities appear to be on- track. As a result, we no longer
consider the operation of the 2000 Census to be high risk.
Beginning in February 1997, when we first designated the census a high- risk
area, we noted that formidable challenges surrounded critical census- taking
operations.
Key among these challenges were building a complete and accurate master
address file, motivating the public to participate in the census by
returning their census questionnaires, meeting field staffing goals in a
tight labor market, and collecting timely and accurate data from
nonrespondents. Moreover, in anticipation of comparatively low public
participation in the census, the Bureau planned on using statistical
sampling and estimation procedures that the Bureau believed would be more
accurate and cost- effective than visiting every nonresponding household.
However, Congress, citing legal and methodological concerns, did not agree
with the Bureau's planned use of sampling, which raised questions about the
Bureau's readiness for taking a “traditional,” nonsampling
census. As we have noted in several reports and testimonies, the Bureau has
taken a number of steps aimed at addressing the challenges it faced. For
example, in 1997, the Bureau redesigned its existing procedures for building
its
master address file. Under the new approach, temporary Bureau employees went
door- to- door verifying the majority of housing unit addresses across the
country. To increase public participation in the census, the Bureau
streamlined census questionnaires, and implemented an aggressive outreach
and promotion campaign, hiring a private sector advertising firm to promote
the census nationally, and partnering with religious, community, and other
local organizations to market the census on a grassroots basis. Moreover, in
January 1999, the U. S. Supreme Court ruled that statistical sampling could
not be used to determine the population count that would be used to
apportion the House of Representatives, thus, eliminating uncertainties
about which census design the Bureau was to use. The Bureau's peak data
collection activities proceeded on or ahead of schedule, and generally were
performed as planned. Particularly noteworthy was an initial mail
response rate of 65 percent, which was four percentage points higher than
the Bureau had anticipated, and matched the response rate to the 1990
Census. As we have often noted, although the response rate does not
guarantee a successful census, it reduced the cost and
scheduling pressures in nonresponse follow- up and subsequent census
operations while enhancing data quality. Indeed, this lower than anticipated
nonresponse follow- up workload, combined with the Bureau having met its
national staffing goals, helped the Bureau to generally complete nonresponse
follow- up in nine and a half weeks, several days ahead of schedule.
Nonetheless, surmounting the various challenges to a successful census that
the Bureau faced in 2000 came at considerable cost. As we noted in our
December 1999 report, the Bureau estimated that the 2000 Census will cost at
least $6. 8 billion, an increase of 113 percent in real terms over the $3. 2
billion cost of the 1990 census in 1999 dollars. Moreover, the single most
important determinate of a successful census- the completeness
and accuracy of the census count, and in particular, the size and nature of
the undercount- will not be known until later in the census cycle when the
Bureau completes various accuracy and coverage assessments. Past experience
suggests that increased investment in the census does not necessarily
generate more accurate results. Indeed, the 1990 Census was, at that time,
the most expensive in the nation's history, but left millions of Americans-
particularly members of minority groups and renters- uncounted.
As the Bureau looks toward the next census, continued societal and
demographic changes such as more complex living arrangements and a large
non- Englishspeaking
population, will make the national headcount in 2010 at least as challenging
as it was in 2000. As a result, it will be important for the Department of
Commerce to ensure that the Bureau completes its evaluations of key census
operations as planned, and, in
a timely manner, explores innovative options that could help better ensure a
cost- effective census in 2010. Through NOAA, Commerce owns and operates a
fleet of ships that supports its programs in fisheries research,
oceanographic research, and hydrographic charting and mapping. However,
these ships can be costly and inefficient to operate and maintain, and they
may lack state- of- the- art technology. For more than a decade,
congressional committees, public and private sector
advisory groups, the National Performance Review, the Commerce Office of
Inspector General, and we have urged NOAA to aggressively pursue cost-
effective alternatives to its in- house fleet of ships. Over the same
timeframe, NOAA developed several fleet replacement and modernization plans
that required investments of hundreds of millions of dollars to upgrade or
replace these ships, each of which was criticized by the
Commerce Office of Inspector General for not pursuing alternative approaches
strongly enough. More recently- as part of our performance and
accountability series of reports issued in 1999- we identified the NOAA
fleet as one of the major performance and management issues confronting the
Department of Commerce. According to NOAA, it has taken steps to improve the
cost efficiency of its fleet such as removing some ships from service,
bringing new and converted Navy ships into service, and negotiating
contracts outside NOAA to meet some of its needs. However, NOAA continues to
rely heavily on its in- house fleet and still plans to replace or upgrade
some of these ships.
Consequently, continued oversight of NOAA's plans to replace or upgrade
ships will be needed to ensure that NOAA is pursuing the most cost-
effective alternatives for acquiring marine data. Key Contacts Jeffrey C.
Steinhoff, Managing Director
Financial Management and Assurance
(202) 512- 2600 steinhoffj@ gao. gov J. Christopher Mihm, Director
Strategic Issues (202) 512- 6806 mihmj@ gao. gov Thomas J. McCool, Managing
Director Financial Markets and Community Investment
(202) 512- 8678 mccoolt@ gao. gov
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Lett er
Performance and Accountability Series
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01- 246)
Major Management Challenges and Program Risks: Department of Health and
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Major Management Challenges and Program Risks: Department of the Interior
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01- 250)
Major Management Challenges and Program Risks: Department of Labor (GAO- 01-
251)
Major Management Challenges and Program Risks: Department of State (GAO- 01-
252)
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Major Management Challenges and Program Risks: Department of the Treasury
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Major Management Challenges and Program Risks: Department of Veterans
Affairs (GAO- 01- 255)
Major Management Challenges and Program Risks: Agency for International
Development (GAO- 01- 256)
Major Management Challenges and Program Risks: Environmental Protection
Agency (GAO- 01- 257)
Major Management Challenges and Program Risks: National Aeronautics and
Space Administration (GAO- 01- 258)
Major Management Challenges and Program Risks: Nuclear Regulatory Commission
(GAO- 01- 259)
Major Management Challenges and Program Risks: Small Business Administration
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Major Management Challenges and Program Risks: Social Security
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Major Management Challenges and Program Risks: U. S. Postal Service (GAO-
01- 262)
High- Risk Series: An Update (GAO- 01- 263)
(250002) Lett er
GAO United States General Accounting Office
Page 1 GAO- 01- 243 Commerce Challenges
Contents
Page 2 GAO- 01- 243 Commerce Challenges
Comptroller General of the United States
Page 3 GAO- 01- 243 Commerce Challenges United States General Accounting
Office
Washington, D. C. 20548
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Overview Page 7 GAO- 01- 243 Commerce Challenges
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Commerce Challenges
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Related GAO Products Page 34 GAO- 01- 243 Commerce Challenges
Related GAO Products Page 35 GAO- 01- 243 Commerce Challenges
Related GAO Products Page 36 GAO- 01- 243 Commerce Challenges
Related GAO Products Page 37 GAO- 01- 243 Commerce Challenges
Page 38 GAO- 01- 243 Commerce Challenges
Performance and Accountability Series
Page 39 GAO- 01- 243 Commerce Challenges
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