Fiscal Year 2003 Budget Request: U.S. General Accounting Office  
(24-APR-02, GAO-02-519T).					 
                                                                 
This testimony discusses GAO's fiscal year 2001 performance and  
results, current challenges and future plans, and GAO's budget	 
request for fiscal year 2003.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-519T					        
    ACCNO:   A03134						        
  TITLE:     Fiscal Year 2003 Budget Request: U.S. General Accounting 
Office								 
     DATE:   04/24/2002 
  SUBJECT:   Budget outlays					 
	     Future budget projections				 
	     Fiscal year					 
	     Performance measures				 
	     Strategic planning 				 


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GAO-02-519T
     
Testimony Before the Subcommittee on Legislative Committee on Appropriations
House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 3: 00 p. m. EDT on Wednesday April
24, 2002

FISCAL YEAR 2003 BUDGET REQUEST

U. S. General Accounting Office

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

GAO- 02- 519T

Mr. Chairman and Members of the Subcommittee: I am pleased to appear before
the Subcommittee today as the Comptroller General of the United States and
head of the U.S. General Accounting Office (GAO) to report on GAO?s fiscal
year 2001 performance and results, current challenges and future plans, and
budget request for fiscal year 2003 to support the Congress and serve the
American public.

Fiscal year 2001 was characterized by a series of unprecedented challenges
for the federal government. After a lengthy waiting period to decide the
results of the presidential election, the year began with a new
administration and a new policy agenda. Within a short time, the leadership
of the Senate changed as well. Although the year began with the nation at
peace and with modest economic growth, by year?s end, the nation was at war
and the economy was in recession. Fortunately, the war is going well and the
economy seems to be improving.

Against this backdrop, GAO served the Congress and the American people in a
variety of ways. Early in the year, we conducted an extensive analysis of
voter access and election reform. Our work was instrumental in enabling the
House and Senate to develop election reform proposals and also yielded a
series of reports and recommendations upon which the Departments of Defense
and State have pledged to act to improve their voting assistance programs
for Americans living abroad. In addition, our 2001 Performance and
Accountability Series and High-Risk Update identified close to 100 major
management challenges and program risks at 21 federal agencies and
highlighted actions needed to address these serious problems. The series
proved useful in carrying out our responsibility under the Presidential
Transition Act to serve as a key source of information for the incoming
administration and members of the 107 th Congress. Among the issues we
brought to the Congress?s attention was the importance of addressing the
future human capital needs of the federal government. This high-risk issue
is being triggered by the impending retirements of the baby boom generation,
the knowledge and skills gap engendered in part by our changing economy, and
the advent of new technologies. Another new issue added to the high-risk
list is the Postal Service?s transformational efforts and long-term outlook.

Citizens benefited directly from GAO?s work as federal agencies and the
Congress took a wide range of actions based on our analyses and
recommendations. The results ranged from improving services to low-income
children and disabled veterans, to protecting consumers from insurance
fraud, to identifying billions of dollars in savings and resources that
could be reallocated. In total, GAO?s efforts helped the Congress and
government leaders to save $26.4 billion-a $69 return on every dollar
invested in GAO. This is number one in the world for organizations like GAO.

Because of our past work and work in progress, we also were able to provide
timely, rapid assistance on the issues raised by the tragic events of
September 11. In numerous congressional hearings, GAO?s witnesses offered
suggestions for strengthening the security of the nation?s airports and air
traffic control system, for protecting critical information technology
infrastructure, and for enhancing government?s ability to analyze and manage
security risks, including bioterrorism. We also were able to highlight a
number of safeguards that could be used in structuring financial assistance
to the airlines, several of which were incorporated in the

2

emergency $15 billion financial aid package that was enacted. In addition,
soon after the release of our report recommending that the president appoint
a single focal point within the Executive Office of the President to oversee
the collective efforts of the many agencies involved in combating terrorism,
the president announced the creation of the Office of Homeland Security.
This office possesses many of the functions and responsibilities that we had
advocated for improving interagency coordination.

Closer to home, 2001 was a significant year for GAO because it marked the 80
th anniversary of our agency and 50 th anniversary of our headquarters
building. It also was a year marked by important changes designed to better
position our agency for the future.

AO?S MISSION IS TO SUPPORT THE CONGRESS in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the American
people.

GAO is an independent, professional, nonpartisan agency in the legislative
branch that is commonly referred to as the investigative arm of the
Congress. Created in 1921 as a result of the Budget and Accounting Act, we
have seen our role evolve over the decades as the Congress expanded our
statutory authority and called on us with greater frequency for oversight,
insight, and foresight in addressing the growing complexity of government
and our society.

Today, we examine a broad range of federal activities and programs, publish
thousands of reports and other documents annually, and provide a number of
other services to the Congress. We also look at national and international
trends and challenges to anticipate their implications for public policy. By
making recommendations to improve the practices and operations of government
agencies, we contribute not only to the increased effectiveness of federal
spending, but also to the enhancement of the taxpayers? trust and confidence
in their federal government.

For us, achieving our goals and objectives rests, for the most part, on
providing professional, objective, fact-based, nonpartisan, nonideological,
fair, and balanced information. We develop and present this information in a
number of ways to support the Congress, including the following:

evaluations of federal policies and the performance of agencies;

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

investigations to assess whether illegal or improper activities are
occurring;

analyses of the financing for government activities;

constructive engagements in which we work proactively with agencies, when
appropriate, to help guide their efforts toward positive results;

legal opinions to determine whether agencies are in compliance with
applicable laws and regulations;

policy analyses to assess needed actions, develop options, and note the
implications of possible actions; and

G

3

additional assistance to the Congress in support of its oversight and
decisionmaking responsibilities.

AO?S STRATEGIC PLAN FOR SERVING THE CONGRESS: Our first strategic plan for
the 21 st century, covering fiscal years 2000-2005, was an important
milestone, providing a framework for how we would support the Congress and
the American people in the coming years. To develop this plan, we worked
closely with committee leadership and individual members and their staff, as
well as with agency inspectors general, our sister agencies, and numerous
other interested organizations and parties. With the plan as our blueprint,
we realigned GAO?s structure and resources to better address our long-term
goals and objectives for helping the Congress in its legislative, oversight,
and investigative roles.

We have committed to updating our strategic plan every 2 years, coinciding
with each new Congress, to make sure our efforts remain a vital and accurate
reflection of the important issues facing the Congress and the nation. The
world has changed considerably since our last plan. Two years ago, we were
at peace and the economy was growing, with large budget surpluses projected
into the future. Today, the country is at war, addressing threats both
within and outside our borders. The economic outlook, uncertain before
September 11, 2001, continues to be very difficult to predict but seems to
be improving. This changing environment has enormous ramifications for
national policymaking and, consequently, for GAO. Accordingly, we have
prepared a draft strategic plan for serving the Congress during fiscal years
2002-2007, that we will be using to help solidify how we will support
congressional needs. The draft is now being discussed with our congressional
clients and being made widely available for comment to ensure that we meet
the Congress?s needs and address the most critical issues.

While the overall framework of our first strategic plan is still valid, we
propose placing greater emphasis on the following areas in particular to
reflect the altered agenda of policymakers:

Recognizing that the Congress and the federal government will focus
considerable effort and resources on homeland security, we are proposing to
increase our emphasis on overseeing the efficiency and effectiveness of
efforts across the federal government to protect against and respond to
various forms of terrorism.

In light of changing public expectations and needs, as well as fiscal
pressures, we have redefined one of our strategic goals to focus on helping
to transform the federal government's role to meet the challenges of the 21
st century-what it does and how it does business.

Because of the emerging serious, long-term, and far-reaching fiscal,
demographic, technological, scientific, and other trends affecting our
society and the economy, we anticipate assisting the Congress in addressing
the effects of these trends on program priorities and budget decisions in
both the short and long terms.

Our draft strategic plan takes into account the forces that are likely to
shape American society, its place in the world, and the role of the federal
government over the next 6 years. As illustrated by the strategic plan
framework that follows, we have identified seven themes that have

G

4

implications for congressional decisionmaking and, therefore, underlie our
strategic goals and objectives:

Security and preparedness: the national and global response to terrorism and
other threats to personal and national security;

Globalization: the increasing interdependence of enterprises, economies,
civil society, and national governments;

The changing economy: the global shift to market-oriented, knowledge-based
economies;

Demographics of an aging and more diverse population;

Science and technology and the opportunities and challenges created by the
rapid changes in both of these areas;

Quality of life for the nation, communities, families, and individuals;

Governance: the diverse and evolving nature of governance structures and
tools. In light of recent trends and in keeping with our mission and
responsibilities, we have identified four strategic goals and related
objectives that will guide our work to serve the Congress in fiscal years
2002-2007. Our four strategic goals are as follows:

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

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

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

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

5

6

ENEFITS RESULTING FROM GAO?S WORK

During fiscal year 2001, GAO recorded hundreds of accomplishments providing
financial and other benefits that were achieved based on actions taken by
the Congress and federal agencies, and we made numerous other contributions
that provided information or recommendations aiding congressional
decisionmaking or informing the public debate to a significant extent. Our
contributions to legislative and executive actions included:

strengthening national security and combating terrorism;

advancing and protecting U.S. interests abroad;

better targeting defense spending;

helping the Congress reduce or better target budget authority;

ensuring public health, safety, and welfare;

protecting the environment;

addressing national election issues;

safeguarding government information systems;

highlighting management challenges and risks for the new Congress and
administration; and

fostering more efficient and effective government services and operations.
Our recently issued performance and accountability report and a compact
highlights version of it combine an assessment of our accomplishments in
fiscal year 2001 with our plans for continued progress through fiscal year
2003. The following is a sampling of GAO?s fiscal year 2001 accomplishments.

Financial Benefits Exceeding $26 Billion

For fiscal year 2001, GAO?s findings and recommendations to improve
government operations and reduce costs contributed to legislative and
executive actions that yielded over $26.4 billion in measurable financial
benefits. We achieve financial benefits when our findings and
recommendations are used to make government services more efficient, improve
the budgeting and spending of tax dollars, or strengthen the management of
federal resources. As illustrated in the following graphic, the financial
benefits achieved in fiscal year 2001 exceeded our $23 billion target for
the year, as well as last year?s results of $23.2 billion. These financial
benefits are equivalent to about $69 for every $1 that was appropriated to
GAO for fiscal year 2001.

B

7

Financial Benefits Resulting from GAO?s Work $19.7 $20.1

$23.2 $26.4

$23.0 0 4

8 12

16 20

24 28

Dollars in billions 1998 1999 2000 2001 2001

Fiscal years Actual Target

As described below, our work on military base realignments and closures,
restructuring the defense acquisition workforce, and recapturing unexpended
balances in a major federal housing program, for instance, together yielded
more than $12 billion of the year?s financial benefits.

Contributing to the Military Base Closure and Realignment Process: GAO has
issued a number of reports since 1979 documenting excess infrastructure
within the Department of Defense and supporting the need for a base closure
and realignment process. After the Congress?s authorization of such a
process, GAO was legislatively required to provide the Congress with a
series of reports and testimonies validating Defense?s implementation. GAO
monitored and assessed all phases of the decisionmaking process, including
executive-level sessions, for compliance with congressional requirements. In
addition, GAO provided staff to each commission established to recommend
base closures and realignments for rounds held in 1991, 1993, and 1995. The
staff helped shape the commissions? decisions through analysis of issues
associated with closing or realigning specific installations. GAO estimated
$6 billion in net savings in fiscal years 1999 and 2000 for the three base
closure rounds.

Cutting the Cost of Defense?s Acquisition Infrastructure: In a series of
reports and comments on legislation for the House National Security
Committee beginning in the mid-1990s, GAO examined numerous facets of the
Department of Defense?s acquisition infrastructure, of which its acquisition
workforce is a major component. GAO?s primary messages were that acquisition
infrastructure reductions had not kept pace with reductions in other areas
of Defense?s operations and that the acquisition workforce needed to be
consistently defined to effect appropriate reductions. Consequently, Defense
redefined the workforce and the Congress directed the department to develop

8

specific plans for reducing its acquisition workforce. These workforce
reductions totaled $3.32 billion and freed the funds for other high-priority
items.

Recapturing Unexpended Balances in a Federal Housing and Urban Development
Program: GAO reviewed the unexpended balances in the Department of Housing
and Urban Development?s Section 8 program, in which the department contracts
with property owners to provide housing for low-income families. GAO
recommended that the department revise the procedures used to review
unexpended balances and ensure that excess balances were recaptured from
this program. Subsequently, the department recaptured nearly $3 billion of
unexpended balances from prior years? budgets. According to the department?s
officials, the savings directly resulted from their implementation of GAO?s
recommendation.

Nearly 800 Actions Improving Government Agencies? Management or Performance

Not all actions on GAO?s findings and recommendations produce measurable
financial benefits. As illustrated below, in fiscal year 2001, we recorded
799 actions that the Congress or executive agencies had taken based on our
recommendations to improve the government?s accountability, operations, or
services. Our audit and evaluation products issued in fiscal year 2001
contained over 1,560 new recommendations targeting improvements in the
economy, efficiency, and effectiveness of federal operations and programs
that could yield significant financial and other benefits in the future. At
the end of the year, 79 percent of the recommendations we made 4 years ago
had been implemented. We use a 4-year interval because our historical data
show that agencies often need this time to complete action on our
recommendations.

GAO?s Work Improving Government Operations and Services

537 607

788 799 700

0 200

400 600

800 Number of actions

1998 1999 2000 2001 2001 Fiscal years Actual Target

9

The actions reported for fiscal year 2001 include actions to combat
terrorism, strengthen public safety and consumer protection, improve
computer security controls, and establish more effective and efficient
government operations. Following are a few examples of GAO?s work that led
to improvements in government management and performance:

Improving Department of Defense antiterrorism efforts: At the request of the
House Special Oversight Panel on Terrorism, GAO reviewed the Department of
Defense?s antiterrorism efforts at domestic installations. GAO identified
shortcomings that needed to be addressed to provide installation commanders
with the necessary information to effectively manage the risk of a terrorist
attack and develop an effective antiterrorism program. The department agreed
with GAO?s findings and has begun implementing all of the GAO-recommended
corrective actions. GAO also worked with the department to update and
improve antiterrorism standards and the secure communication capabilities
between some navy facilities. This work provided a foundation for developing
a risk management approach that can be applied to other government
operations. GAO presented information about this management approach to
various congressional committees and other organizations.

Strengthening nuclear nonproliferation and safety efforts: Preventing the
spread of weapons of mass destruction and ensuring the safety of
Soviet-designed reactors are important national security concerns. GAO?s
work in this area continues to have major impacts, including the
implementation of GAO?s recommendations designed to strengthen the
Department of Energy?s program to secure nuclear materials in Russia and
sustain the improvements. In addition, Energy has implemented GAO?s
recommendations to fund only those safety projects that directly improve the
operation of Soviet-designed reactors and to focus its Nuclear Cities
Initiative funding on only those projects designed to employ Russian weapons
scientists. These changes will result in better targeting of limited
resources by eliminating projects that did not meet mission goals.

Improving food safety: Over the years, public awareness of foodborne illness
outbreaks has heightened concerns about the effectiveness of the federal
system for ensuring the safety of the nation?s food supply. GAO has served
as an honest broker of information on the shortcomings of the federal food
safety system. In particular, GAO?s work has been used extensively in
congressional deliberations and by federal program mangers to improve the
food safety system. For example, GAO?s work on seafood safety identified
several important weaknesses that compromised the overall effectiveness of
the Food and Drug Administration?s newly implemented science-based system
for seafood. In response, the agency made improvements in 2001 to the
science-based system. GAO?s work identifying shortcomings in shellfish
safety was instrumental in the 2001 adoption of the first national plan to
reduce pathogenic bacteria in oysters.

Creating a focal point for combating terrorism: GAO identified fragmentation
among federal efforts to combat terrorism, as several key interagency
functions were spread across various agencies and sometimes overlapped.
During the summer of 2001, GAO recommended that the president appoint a
single focal point within the Executive Office

10

of the President to oversee the collective efforts of the many agencies
involved. Soon after the release of GAO?s September 2001 report, the
president announced the creation of the Office of Homeland Security within
the Executive Office of the President. The executive order establishing the
office provided it with many of the functions and responsibilities that GAO
had advocated for improving interagency coordination.

Over 150 Testimonies Contributing to Public Debate on National Issues

GAO officials were called to testify 151 times before committees of the
House and Senate in fiscal year 2001, as illustrated in the following
graphic. In addition, we provided nine statements for the record. Our number
of appearances for fiscal year 2001 was lower than for previous years
because external factors such as the extended presidential transition, a new
Congress and administration both beginning work, and the unprecedented
mid-session shift in control of the Senate reduced the number of
congressional hearings and, therefore, occasions for GAO to testify.
Nonetheless, we testified on a broad range of subjects, including combating
terrorism, energy prices, the federal budget, and September 11 issues.

GAO Appearances at Congressional Hearings 256

229 263

151 150 0 90

180 270

Number of testimonies 1998 1999 2000 2001 2001

Fiscal year Actual Target AXIMIZING GAO?S EFFECTIVENESS, RESPONSIVENESS, AND
VALUE

In addition to the financial and other benefits resulting from our work over
the past year, we continued to make great progress toward achieving our
fourth strategic goal of maximizing the value of GAO by being a model
organization for the federal government. We strive to ensure that GAO?s
operations reflect the highest standards. As discussed in the following
sections, we expanded congressional outreach efforts to ensure our
responsiveness to

M

11

client needs. We also implemented numerous human capital initiatives
following best practices, to ensure that GAO has the appropriate mix of
staff and skills needed to address issues of interest to the Congress. In
other areas, such as information technology, financial management, and
security and safety, our operations also reflect prevailing best practices.
Following are some examples of the key efforts we have taken to strengthen
GAO and maximize our productivity.

Cultivating and Fostering Effective Congressional and Agency Relations

In fiscal year 2001, we continued our efforts to strengthen relationships
and improve communications with our congressional clients, federal agencies,
and other key stakeholders. For example, we implemented a set of
congressional protocols-policies and procedures-to guide our interactions
with and ensure our accountability to the Congress. In addition, we drafted
similar protocols to guide our interactions with federal agencies, foreign
ministries and governments, and international organizations, and we plan to
pilot the federal agencies and international protocols in fiscal year 2002.

We also began efforts to revamp our communications strategy to better meet
the needs of our clients. In fiscal year 2001, we developed a new reporting
product line entitled Highlights-a

one-page summary that provides the key findings and recommendations from a
GAO engagement. We plan to examine other means during fiscal year 2002 to
better communicate the results of our work.

During fiscal year 2001, we also expanded and improved access to GAO
information for our congressional clients and other stakeholders. We
implemented a Web-accessible active assignment list for congressional
clients, established a transition Web site to assist the new administration
in learning about GAO?s work and to facilitate key contacts, enhanced the
search capability for GAO products on our external Web site, and expanded
electronic access to GAO reports issued since 1985.

We also worked with the Office of Management and Budget (OMB) and
Cabinet-level officials to assist in the congressional and presidential
transitions and to provide new legislators and officials with information
about the challenges facing them. These and other constructive engagement
efforts are helping focus increased attention on major management challenges
and high-risk issues, leading to good government. For example, the
president?s recently issued management agenda for reforming the federal
government mirrors many of the management challenges and program risks that
GAO reported on in its 2001 Performance and Accountability Series and
High-Risk Update, including a governmentwide initiative to focus on
strategic management of human capital. We also continue our efforts to work
across boundaries and encourage knowledge sharing by networking through
various boards and panels, including the Comptroller General?s Advisory
Board, the Educators? Advisory Board, the Accountability Advisory Board, and
other global and domestic accountability organizations.

We continued to look for more efficient ways to obtain systematic feedback
from congressional members and key staff. In fiscal year 2001, we developed
a Web-based process to more effectively collect feedback from congressional
clients on our reports and products. This new system, which we plan to pilot
in fiscal year 2002 and implement in fiscal year 2003, uses E-mail

12

and a Web site to obtain client feedback on (1) product timeliness and (2)
communications and professional conduct during an engagement for a sample of
recently issued products.

In addition to working with accountability agencies and organizations in the
United States, we continued to work with our counterparts in other countries
and with international organizations to strengthen accountability around the
world. We are working with the International Organization of Supreme Audit
Institutions to help combat government-related corruption around the world.
For example, we plan to support a multilateral training effort with Russia,
other former Eastern bloc countries, and selected South and Latin American
countries on audit standards, policies, and methodologies. In addition, we
are working to provide bilateral technical assistance with the Russian
Chamber of Accounts to collaboratively undertake a joint audit of the
program to dispose of Russia?s chemical weapons.

Implementing a Model Strategic and Annual Planning and Reporting Process

GAO?s strategic plan continues to be a model for aligning our organization
and resources, and for ensuring that we remain responsive to the needs of
the Congress. Our strategic planning process provides for updates every 2
years with each new Congress, ongoing analysis of emerging conditions and
trends, extensive consultation with congressional clients and outside
experts, and assessments of internal capacities and needs. In addition, the
plan has become the basis for allocating resources and managing
organizational performance.

Our strategic plan also has helped serve as a model in providing clearer
accountability to the Congress and the American people. In fiscal year 2001,
we published our first Performance and Accountability Report, combining
information on performance in achieving the plan?s goals and objectives with
financial information on the costs of achieving results. The report also
included GAO?s performance plan for fiscal year 2002, linking planned
activities and performance with the resources requested in our annual
appropriation.

Aligning Human Capital Policies and Practices to Support GAO?s Mission

Over the past 3 years, we have made great progress toward addressing a
number of human capital issues that GAO was facing when I arrived at the
beginning of fiscal year 1999. At the time, our workforce was sparse at the
entry level. We faced major succession-planning issues with a significant
percentage of our senior managers and evaluator- and related workforce
becoming eligible to retire by the end of fiscal year 2004. The development
and training of our senior executives in key competencies, such as
leadership, communications, project supervision and conflict resolution, had
been at drastically reduced levels since 1993. In addition, new technical
skills were unavailable in needed quantities within the agency, especially
actuarial and information technology skills, to effectively assist the
Congress in meeting its oversight responsibilities.

We have confronted these issues through a number of strategically planned
human capital initiatives that have begun to yield results. For example, we
have

13

intensified our recruiting efforts targeted at the entry level and areas
requiring specialized skills and expertise,

enhanced our recruitment and college relations programs,

implemented our early-out authority, recently acquired through GAO?s human
capital legislation,

enhanced our training programs,

revamped and modernized the performance appraisal system for analysts,

enhanced performance rewards and employment incentives to attract and retain
high quality staff with specialized skills,

implemented a succession-planning program,

conducted an agencywide assessment and inventory of our workforce?s
knowledge and skills,

established an office of opportunity and inclusiveness, whose head reports
directly to the Comptroller General, to oversee GAO's efforts to foster a
work environment that ensures that all members of its diverse workforce are
treated fairly and their differences are respected, and

completed an organizational realignment and resource reallocation. As
illustrated in the following graphic, by the end of fiscal year 2002, we
will almost double the proportion of our workforce at the entry-level (Band
I) as compared with fiscal year 1999. Also, the proportion of our workforce
at the mid-level (Band II) will have decreased by about 9 percent. In
addition, we are steadily increasing the proportion of our staff performing
direct mission work.

3/12/2002

GAO?s Human Capital Profile SES/SL Band III Band II Band I Other 1 Mission
(FY 1999 - 78.8)

(FY 2001 - 79.5 (FY 2002 est. - 80.4)

Mission support Estimated

FY 2002 FY 2001 FY 1999 11.6

13.2 3.2

21.2 4.2 46.6

3.3 4.4 13.0

17.4 20.5

3.2 4.4 12.2

23.1 37.5

19.6 41.4

Figures represent a percentage of the total workforce. 1 Attorneys and
criminal investigators

14

We also have taken steps to better link compensation, performance, and
results in achieving our strategic plan and goals for serving the Congress.
In fiscal year 2001, we developed a new performance appraisal system for our
analyst and specialist staff that links performance to established
competencies and results; this system is being implemented in fiscal year
2002. We also have begun creating similar performance systems for our
attorneys and mission support staff. Also during fiscal year 2002, we plan
to assess our pay systems and structures to identify ways to increase the
percentage of our staff?s compensation that is tied more directly to
performance and results. Currently, levels of annual compensation increases
are automatic, as is required by law.

Developing Efficient and Responsive Business Processes

We completed a number of major initiatives in fiscal year 2001 directed at
enhancing our business operations and processes. For example, we implemented
a major organizational realignment to increase our ability to achieve the
goals and objectives of our strategic plan. The realignment provides for a
clearer and more transparent delineation of responsibilities for achieving
our strategic goals and meeting the needs of the Congress. We also
centralized certain administrative support services to more efficiently
provide human capital, budget and financial management, information systems
desk-side support, and other services to agency staff. The centralization
will allow us to devote more resources to GAO?s mission work and to obtain
economies of scale by providing central and shared services.

To facilitate our staff?s efforts in conducting engagements, we developed a
comprehensive desktop tool-an Electronic Assistance Guide for Leading
Engagements (EAGLE) that provides immediate access to GAO?s most current
policies and procedures and eliminates the need to print and distribute
documents. We also developed a new engagement database to track
congressional requests, monitor their status, and provide information on
engagement reviews and results. In addition, we are reviewing our job
management processes to identify opportunities for improvement based on best
practices of other organizations.

Building an Integrated and Reliable Information Technology Infrastructure

Information technology is critical to our productivity, success, and
viability. As such, we have been working on a number of initiatives to guide
and protect our investments in information technology. In fiscal year 2001,
we

completed a comprehensive review of our information technology;

made substantial progress in implementing an enterprise architecture
program-a blueprint for operational and technological change;

expanded information systems security efforts to protect our information
assets;

developed an information technology investment process guide to ensure that
our investments are clearly linked to and support our strategic objectives
and business plans;

prepared an information technology plan for fiscal years 2001-2004 that
identifies major initiatives and investments that directly support our
strategic plan; and

15

rechartered and reestablished our Information Technology Investment
Committee to provide high-level vision, review, and approval of program
initiatives to transition from the current technological environment to the
target one.

We also undertook a wide range of other efforts during fiscal year 2001 to
improve efficiency by providing new enabling technology to staff and
improving access to GAO resources from any place at any time. These efforts
have included piloting notebook computers; expanding the availability of
cellular phones to GAO?s senior management; and testing new, emerging
technologies such as personal digital assistants and video broadcasts to the
desktop. In addition, we upgraded remote access capability, improving the
speed and reliability of dial-up connections to GAO?s information technology
facilities; completed communications upgrades to the field to provide
high-speed, reliable connectivity to the GAO network; replaced aging
videoconferencing equipment with current technology; and began planning
communications upgrades to support evolving video technologies.

ISCAL YEAR 2002 PLANS AND FUTURE CHALLENGES

During fiscal year 2002, we will continue focusing our work on issues of
national importance facing the Congress, including homeland and national
security, Social Security solvency, education, economic development,
Medicare reform, international affairs, government management reforms, and
government computer security. Other issues about which we will contribute to
the national debate include the concerns emanating from the sudden collapse
of Enron and other corporate failures: the determination of what systemic
reforms are needed regarding accounting and auditing issues, regulatory and
oversight matters, pensions, executive pay issues, and corporate governance.

We also will be working with congressional budget committees and others on
reviewing, reassessing, and reprioritizing what the federal government is
doing in light of the nation?s long- range fiscal challenges. This effort
will involve raising key questions about government programs, tax
incentives, regulations, and policies from the perspective of what works and
what does not, as well as examining selected budget and performance
reporting issues. Under a recent mandate, we have begun pilot testing
several approaches for providing technology assessment assistance to the
Congress. In addition, as noted earlier, we plan to issue two new sets of
protocols governing our relations with executive branch departments and
agencies, and with international organizations.

Internally, we must continue our efforts and initiatives to address human
capital and information technology challenges at GAO. While we have made
good progress in addressing many of these issues, we continue to view them
as significant challenges. We also are reassessing our security and safety
issues, in light of the far-reaching effects of the September 11 terrorist
attacks.

After a decade of downsizing and curtailed investments in human capital, it
became increasingly clear that GAO needed new human capital strategies if we
were to meet the current and emerging needs of the Congress and the nation?s
citizens. The initiatives we have in progress or plan to begin in the coming
months should build on the progress we have made during the past 2 years,

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yielding further improvements in how we recruit, develop, evaluate,
compensate, and retain our staff. We will continue to develop a human
capital strategic plan that both supports our strategic goals and ensures
that diversity, skills, leadership, and retention issues are addressed.

As with human capital, information technology investments at GAO declined
significantly during the mid- to late 1990s as a result of mandated spending
reductions. Consequently, information technology became a management
challenge as we entered the 21 st century. We have made progress in building
an integrated and reliable information technology infrastructure that
supports the achievement of our goals and objectives, but we must sustain
these efforts and begin others to ensure that we can continue to provide
quality, timely, efficient, and effective services to the Congress and the
public. Our information technology plan for fiscal years 2001 through 2004
is providing a foundation for initiatives and investments, and we are
expanding and accelerating our efforts to protect our agency?s information
assets.

The safety and security of GAO?s people, information, and assets are
necessarily a top priority. In the aftermath of the September 11 terrorist
attacks and the subsequent anthrax incidents, we designated safety and
security a management challenge for our agency. We are conducting threat
assessments and a comprehensive evaluation of security that we plan to
complete this year. Guided by these assessments, we will develop an
implementation plan to strengthen security and safety within GAO. We also
plan to review and update our emergency preparedness and response plan and
to develop a continuity of operations plan so that we are prepared for, can
respond to, and will recover from any major threat or crisis.

AO?S FY 2003 BUDGET REQUEST TO SUPPORT THE CONGRESS

To support the Congress as outlined in our strategic plan and continue our
efforts to strengthen and maximize the productivity of GAO, we have
requested a budget of $458 million for fiscal year 2003. This funding level
will allow us to maintain current operations; continue initiatives to
enhance our human capital and supporting business processes; ensure the
safety and security of our staff, information, and other resources; and
support our authorized level of 3,269 full-time equivalent (FTE) personnel.

Almost 80 percent of our request is for employee compensation and benefits.
The next largest proportion of the budget-about $50 million-is for contract
services supporting both GAO?s mission work and administrative operations,
including information technology, training, and building maintenance and
operations services. About $12 million is for travel and transportation,
critical components to accomplishing GAO?s mission to follow the federal
dollar and ensuring the quality of our work. The remaining funds are for
office equipment and space rentals; telephone, videoconferencing, and data
communications services; and other operating expenses, including supplies
and materials, printing and reproduction, and furniture and equipment.

During fiscal year 2003, we plan to increase our investments in maximizing
the productivity of our workforce by continuing to address two key
management challenges: human capital and information technology. On the
human capital front, we will target increased resources to continue
initiatives begun in fiscal year 2000 to address skill gaps, maximize staff
productivity, and increase staff effectiveness; update our training
curriculum to address organizational and

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technical needs; and train new staff. We also will continue to focus our
hiring efforts in fiscal year 2003 on recruiting talented entry-level staff.
In addition, to ensure our ability to attract, retain, and reward
high-quality staff, we plan to devote additional resources to our employee
benefits and training programs. For example, we will continue investments in
our student loan repayment program, which we are planning to begin offering
in fiscal year 2002, and mass transit subsidy benefits to enhance our
recruitment and retention incentives. In addition, major efforts are
underway to implement our new performance appraisal system for our analyst
staff and to develop new performance systems for our legal and mission
support staff.

On the information technology front, we plan to continue initiatives
designed to increase employees' productivity, facilitate knowledge-sharing,
maximize the use of technology, and enhance employee tools available at the
desktop. We also will devote resources to reengineering the information
technology systems that support job management processes, such as our
engagement tracking system, and to implementing tools that will ensure a
secure network operating environment.

Finally, we will make the investments necessary to enhance the safety and
security of our people, information, facilities, and other assets.

Following are additional details supporting the funding increase we have
requested for fiscal year 2003 to cover mandatory and uncontrollable costs
and a few modest, but important, program changes.

Mandatory and Uncontrollable Costs

We are requesting $19,935,000 to cover mandatory pay and benefits costs
resulting primarily from federal cost-of-living and locality pay
adjustments, annualization of prior year salary increases, increased
participation in the Federal Employees Retirement System, and an increase in
the estimated number of retirees. Also included are funds needed to cover
performance-based promotions and merit pay increases. Most of these
increases are automatic, as required by current law. We plan to review our
pay systems and structures during fiscal year 2002 to identify ways to
increase the percentage of our employees? compensation that is tied directly
to performance contributions and results.

We also are requesting $2,090,000 for uncontrollable inflationary increases
in travel and per diem, lodging, postage, printing, supplies, contracts, and
other essential mission support services, based on OMB?s 2-percent inflation
index and other factors.

Program Changes

A net increase of $3,832,000 is being requested to fund essential agency
programs. This increase includes an overall reduction of $168,000 in ongoing
or recurring programs and a one-time, nonrecurring request for $4 million to
fund critical security and safety enhancements, as illustrated in the
following table and accompanying narrative.

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Requested Program Changes (dollars in thousands)

Budget category FY 2003 change Recurring:

Recruitment, retention, and recognition benefits:

Education loan reimbursement $810

Transit subsidy 335

Performance-based rewards and recognition 114

Subtotal $1,259 Training 434 Printing and publishing services (360) Contract
services (2,000) Offsetting collections 499

Subtotal $ (168)

Non-recurring:

Security and safety enhancements $4,000

Net program changes $3,832

Recruitment, retention, and performance recognition benefits: $1,259,000 is
requested to maintain and expand current recruitment, retention, and
performance-based recognition programs to levels comparable to those of the
executive branch and to help ensure our ability to attract, retain, and
recognize high-caliber staff. This requested increase includes:

$810,000 to fund the second year of benefits under our education loan
repayment program, which increases total funding for the program to $1.2
million. This funding level will allow GAO to meet current program
commitments, offer benefits to new recruits, and provide more retention
benefits to current staff in critical skills areas.

$335,000 to fund the annualized cost of benefits under the transit subsidy
program, which was increased from $65 to $100 a month during fiscal year
2002, and to extend the program to new hires. This increase will raise the
program's funding level to $1.5 million.

$114,000 for performance-based reward and recognition programs to ensure
comparability with public- and private-sector entities. This represent a
4-percent increase in these programs, commensurate with the average
mandatory compensation increases, and will raise the program funding level
to $2.7 million, which is less than 1 percent of our total compensation
costs.

Training: We are requesting $434,000 to implement a new core training
curriculum and expand essential training opportunities to staff at all
levels to ensure staff competency in skill areas critical to achieving our
strategic plan.

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Printing and publishing services: During fiscal year 2002, we will be
implementing changes in the distribution and retention of GAO reports and
products. We estimate savings in fiscal year 2003 of $360,000 in printing,
publishing, and related costs and plan to use these savings to offset other
program needs.

Contract services: During fiscal year 2002, we will be contracting for
expertise not readily available within the agency to respond to
congressional requests related to security and terrorism issues, assess our
internal security and information technology requirements, and conduct a
congressionally mandated technology assessment pilot. As these contract
requirements are nonrecurring, we plan to reduce contract services in fiscal
year 2003 by $2 million and to use these savings to offset other program
needs.

Security and safety enhancements: We are seeking nonrecurring funds of $4
million in fiscal year 2003 to implement critical security and safety
enhancements identified through assessments conducted of our security and
potential threats following the September 11 attacks and subsequent anthrax
incidents. This funding will enable us to implement some of the
recommendations made in these assessments, such as enhancing our building
access and perimeter security, expanding protection against chemical and
biological intrusions, and increasing the number of background checks and
security clearances for GAO and contractor staff. Implementing these
measures will help ensure that we are prepared for, can respond to, and will
reduce our vulnerability to major threats or crises in the future.

Offsetting collections: We are requesting authority to increase the use of
revenue we receive from rental income and audit work from $2,501,000 to
$3,000,000, to continue renovation of the GAO building.

Finally, if a legislative proposal from the administration to transfer
accountability for retirement costs is enacted, we are also requesting
budget authority of $21,283,000 to cover our related costs for fiscal year
2003. The president has proposed a governmentwide initiative to transfer
accountability for accruing retirement and post-retirement health benefits
costs from the Office of Personnel Management to individual agencies. This
initiative represents a shift in the accounting treatment of these costs,
which are presently a component of mandatory costs and in the future will be
included in discretionary budget authority. Implementation of this proposal
is contingent upon enactment by the Congress of authorizing language
submitted by the administration.

ONCLUDING REMARKS

As a result of the support and resources that we have received from this
Subcommittee and the Congress over the past several years, we have been able
to make a difference in government, not only in terms of the financial
benefits and improvements in federal programs and operations that have
resulted from our work, but also in strengthening and increasing the
productivity of GAO, and making a real difference for our country and its
citizens. Our budget request for fiscal year 2003 is modest, but it is
essential to sustaining our current operations, continuing key human capital
and information technology initiatives, and ensuring the safety and

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security of our most valuable resource-our people. We seek your continued
support so that we will be able to effectively and efficiently conduct our
work on behalf of the Congress and the American people.

As the Comptroller General of the United States on GAO?s 80 th anniversary,
I take great pride in the many years of service GAO has provided the
Congress and the nation. Building on this legacy, we at GAO look forward to
continuing to help the Congress and the nation meet the current and emerging
challenges of the 21st century.
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