Federal Budget: Opportunities for Oversight and Improved Use of
Taxpayer Funds (16-JUL-03, GAO-03-1029T).
No government should waste its taxpayers' money, whether we are
operating during a period of budget surpluses or deficits.
Further, it is important for everyone to recognize that fraud,
waste, abuse, and mismanagement are not victimless activities.
Resources are not unlimited, and when they are diverted for
inappropriate, illegal, inefficient, or ineffective purposes,
both taxpayers and legitimate program beneficiaries are cheated.
Both the Administration and the Congress have an obligation to
safeguard benefits for those that deserve them and avoid abuse of
taxpayer funds by preventing such diversions. Beyond preventing
obvious abuse, government also has an obligation to modernize its
priorities, practices, and processes so that it can meet the
demands and needs of today's changing world. More broadly, the
federal government must reexamine the entire range of policies
and programs--entitlements, discretionary, and tax incentives--in
the context of the 21st century.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-1029T
ACCNO: A07558
TITLE: Federal Budget: Opportunities for Oversight and Improved
Use of Taxpayer Funds
DATE: 07/16/2003
SUBJECT: Financial management
Funds management
Productivity in government
Program evaluation
Program management
Taxpayers
******************************************************************
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GAO-03-1029T
FEDERAL BUDGET Opportunities for Oversight and Improved Use of Taxpayer
Funds
Statement of Paul L. Posner Managing Director for Federal Budget and
Intergovernmental Relations Issues, Strategic Issues
United States General Accounting Office
GAO Testimony Before the Committee on Government
Reform U. S. House of Representatives
For Release on Delivery Expected at 10: 00 a. m. EDT Wednesday, July 16,
2003 GAO- 03- 1029T
This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
GAO- 03- 1029T 1 Mr. Chairman, Mr. Waxman, members of the Committee
It is a pleasure to be here today to assist you in what Comptroller
General Walker has described as one of your important obligations* to
exercise prudence and due care in connection with taxpayer funds. No
government should waste its taxpayers* money, whether we are operating
during a period of budget surpluses or deficits. Further, it is important
for everyone to recognize that fraud, waste, abuse, and mismanagement are
not victimless activities. Resources are not unlimited, and when they are
diverted for inappropriate, illegal, inefficient, or ineffective purposes,
both taxpayers and legitimate program beneficiaries are cheated. Both the
Administration and the Congress have an obligation to safeguard benefits
for those that deserve them and avoid abuse of taxpayer funds by
preventing such diversions. Beyond preventing obvious abuse, government
also has an obligation to modernize its priorities, practices, and
processes so that it can meet the demands and needs of today*s changing
world. More broadly, the federal government must reexamine the entire
range of policies and programs* entitlements, discretionary, and tax
incentives* in the context of the 21 st century.
Periodic reexamination and revaluation of government activities has never
been more important than it is today. Our nation faces long- term fiscal
challenges. Increased pressure also comes from world events: both from the
recognition that we cannot consider ourselves *safe* between two oceans--
which has increased demands for spending on homeland security-- and from
the U. S. role in an increasingly interdependent world. And government
faces increased demands from the American public for modern organizations
and workforces that are responsive, agile, accountable and responsible.
Efforts to assure prudent use of taxpayer funds, efforts to guard against
fraud, waste, abuse and mismanagement, and efforts to improve economy,
efficiency and effectiveness must be broad, encompassing those programs
subject to annual appropriations, mandatory programs, and tax preferences/
tax incentives.
GAO- 03- 1029T 2 Direct, or mandatory, spending programs are by definition
assumed in the baseline and
not automatically subject to annual congressional review as are
appropriated discretionary programs. Nonetheless, a periodic reassessment
of these programs, as well as tax incentives, is critical to achieving
fiscal discipline in the budget as a whole. Moreover, such a review can
help ascertain whether these programs are protected from the risk of
fraud, waste and abuse and are designed to be as cost effective and
efficient as
possible. As you know, the Budget Resolution directs GAO to prepare a
report identifying *instances in which the committees of jurisdiction may
make legislative changes to improve the economy, efficiency, and
effectiveness of programs within their jurisdiction.* This report will be
based on examples drawn from GAO*s recent work highlighting programs and
operations where improvements could be made to address performance issues
that may have budgetary consequences. My testimony draws in part on some
of the items that will be included in that report.
As Mr. Walker did before the House Budget Committee last month, today I
want to talk about program reviews, oversight, and stewardship of taxpayer
funds in three tiers:
First, it is important to deal with areas vulnerable to fraud, waste,
abuse and mismanagement. Payments to ineligibles drain resources that
could otherwise go to the intended beneficiaries of a program. Everyone
should be concerned about the diversion of resources and subsequent
undermining of program integrity.
Second, and more broadly, policymakers and managers need to look at ways
to improve the economy, efficiency and effectiveness of federal programs
and specific tax expenditures. Even where we agree on the goals of
programs, numerous opportunities exist to streamline, target and
consolidate to improve their delivery. This means looking at program
consolidation, at overlap and at fragmentation. For example, it means
tackling excess federal real property* whether at home or abroad. It means
improved targeting in both spending
GAO- 03- 1029T 3 programs and tax incentives-- in some cases, spreading
limited funds over a wide
population or beneficiary group may not be the best approach.
Finally, a fundamental reassessment of government programs, policies, and
activities can help weed out programs that are outdated, ineffective,
unsustainable, or simply a lower priority than they used to be. In most
federal mission areas* from low- income housing to food safety to higher
education assistance* national goals are achieved through the use of a
variety of tools and, increasingly, through the participation of many
organizations, such as state and local governments and international
organizations, that are beyond the direct control of the federal
government. Government cannot accept as *givens* all of its existing major
programs, policies, and operations. A fundamental review of what the
federal government does, how it does it, and in some cases, who does the
government*s business will be required, particularly given the demographic
tidal wave that is starting to show on our fiscal horizon.
Addressing Vulnerabilities to Fraud, Waste, Abuse and Mismanagement
Programs and functions central to national goals and objectives have been
hampered by daunting financial and program management problems, exposing
these activities to fraud, waste and abuse. These weaknesses have real
consequences with large stakes that are important and visible to many
Americans. Some of the problems involve the waste of scarce federal
resources. Other problems compromise the ability of the federal government
to deliver critically needed services, such as ensuring airline safety and
efficiently collecting taxes. Still others may undermine government*s
ability to safeguard critical assets from theft and misuse.
In recent years, GAO*s work across the many government programs and
operations has highlighted threats to the integrity of programs which
prompt potential for fraud, waste and abuse. As the next sections
illustrate, much of our work for the Congress in fact is
GAO- 03- 1029T 4 dedicated to helping redesign programs and improve
management to address these long
standing problems, in areas ranging from uncollected taxes, both corporate
and individual, to major entitlement programs.
In 1990, GAO began a program to report on government operations we
identified as *high- risk.* This label has helped draw attention to
chronic, systemic performance and management shortfalls threatening
taxpayer dollars and the integrity of government operations. Over the
years GAO has made many recommendations to improve these high- risk
operations. We discovered that the label often inspired corrective action*
indeed 13 areas have come off the list since its inception. For each of
these areas, we focus on (1) why the area is high- risk; (2) the actions
that have been taken and that are under way to address the problem since
our last update report and the issues that are yet to be resolved; and (3)
what remains to be done to address the risk.
In January of this year we provided an update for the 108 th Congress,
giving the status of high- risk areas included in our last report [January
2001] and identifying new high- risk areas warranting attention by the
Congress and the administration. 1 GAO*s 2003 highrisk list is shown in
Attachment I. Lasting solutions to high- risk problems offer the potential
to save billions of dollars, dramatically improve service to the American
public, strengthen public confidence and trust in the performance and
accountability of our national government, and ensure the ability of
government to deliver on its promises.
In addition to perseverance by the administration in implementing needed
solutions, we have noted that continued congressional interest and
oversight, such as that exemplified by this hearing today are of crucial
importance. The administration has looked to our recommendations in
shaping government- wide initiatives such as the President*s Management
Agenda, which has at its base many of the areas we have previously
designated as high- risk.
1 U. S. General Accounting Office, High- Risk Series: An Update, GAO- 03-
119 (Washington, D. C.: January 2003).
GAO- 03- 1029T 5 Clearly progress has been made in addressing most of the
areas on our current high- risk
list, both through executive actions and congressional initiatives.
However, many of these problems and risks are chronic and long standing in
nature and their ultimate solution will require persistent and dedicated
efforts on many fronts by many actors. Some will require changes in laws
to simplify or change rules for eligibility, provide improved incentives
or to give federal agencies additional tools to track and correct improper
payments. Continued progress in improving agencies* financial systems,
information technology resources and human capital will be vital in
attacking and mitigating risks to federal program integrity. Some areas
may indeed require additional investments in people and technology to
provide effective information, oversight and enforcement to protect
programs from abuse.
Ultimately, a transformation will be needed in the cultures and operations
of many agencies to permit them to manage risks and foster the kind of
sustained improvements in program operations called for. Continued
persistence and perseverance in addressing the high- risk areas will
ultimately yield significant benefits for the taxpayers over time. Finding
lasting solutions offers the potential to achieve savings, improved
service and strengthened public trust in government.
I will now address some specific areas and examples from both our high-
risk work and other program reviews that illustrate both the problems
facing us and the opportunities for congressional and executive actions to
better safeguard taxpayer funds. 2 Improper Payments Improper payments
include inadvertent errors, such as duplicate payments and
miscalculations; payments for unsupported or inadequate supported claims;
payments for services not rendered; payments to ineligible beneficiaries;
and payments resulting from outright fraud and abuse by program
participants and/ or federal employees. Recently, agencies' financial
statements also have begun to identify and measure the wide range of 2
Attached to this testimony is a list of selected GAO reports related to
the specific examples cited.
GAO- 03- 1029T 6 improper payments involved in many activities throughout
government. Agency
financial statements for both fiscal years 2002 and 2001 identified
improper payment estimates of approximately $20 billion. OMB recently
testified that the amount of improper payments was closer to $35 billion
annually for major benefit programs. This range may be indicative of the
fact that it is hard to get a handle on the precise total. Furthermore, as
significant as these amounts are, they do not represent a true picture of
the magnitude of the problem governmentwide because they do not consider
other significant but smaller programs and other types of agency
activities that could result in improper payments. In reviewing fiscal
year 2002, financial statements of the 24 CFO Act agencies, we found
references to improper payments in 17 agencies and 27 programs* and a
variety of program activities. Unfortunately, not all of the agencies
provided information on their estimate of the amount of such payments.
Many of these problems can most effectively be addressed by individual
programs and the agencies that manage them. However, crosscutting
approaches can also be essential to making progress. For example, enhanced
sharing of data across programs and purposes can help to verify program
eligibility and provide improved controls over payments. Access to IRS
taxpayer information is available to many programs but not all. Such
access could have helped the Department of Education prevent some of the
$100 million in excess payments under the Pell Grant awards in 2000
stemming from underreporting of income by recipients. Computer matching
enabled the SSI program and Food Stamp and TANF programs in certain states
to identify over 110,000 beneficiaries who are fugitive felons ineligible
for assistance, enabling estimated cost savings of over $96 million for
SSI alone. However, most states administering TANF and food stamps, as
well as HUD, were not conducting these kinds of matches.
GAO- 03- 1029T 7 Collection of Unpaid Taxes Ensuring that taxpayers meet
their tax obligations under an increasingly complex tax
code has long presented the Internal Revenue Service (IRS) with daunting
challenges. Although the majority of taxpayers voluntarily and timely pay
the taxes they owe, regrettably high levels of noncompliance by some
taxpayers persist. Some noncompliance is intentional and may be due to
outright fraud and the use of abusive tax shelters or schemes. Some
noncompliance stems from unintentional errors and taxpayers*
misunderstanding of their obligations. Regardless of the cause, we have
designated the collection of unpaid taxes* including detecting
noncompliance and collecting taxes due but not paid* as a high- risk area
because of the potential revenue losses and the threat to voluntary
compliance.
Collecting taxes due includes both compliance programs, like audits, that
identify those who owe more than they self- report and collection programs
that seek payment of taxes assessed but not timely paid. However, IRS
compliance and collections programs have seen larger workloads, less
staffing, and fewer cases closed per employee. For the last several years,
Congress and others have been concerned that the declines in IRS's
enforcement programs are eroding taxpayers' confidence in the fairness of
our tax system putting at risk their willingness to voluntarily comply
with the tax laws.
The number of tax returns increases every year. Between 1993 and 2002, the
number of individual returns filed went from 114.7 million to
approximately 130 million* a 13 percent increase over those 10 years. IRS
projects the number of total individual returns filed will be 132.3
million in 2003 and continue to increase at an annual rate of 1.5 percent
until 2009. Such a rate of increase would lead to 145.3 million total
individual returns filed in 2009. Returns from businesses and other
entities have also increased substantially.
While the number of tax returns has increased, key compliance program
rates have declined. In testimonies and reports, GAO has highlighted large
and pervasive declines
GAO- 03- 1029T 8 in IRS*s compliance programs. These programs, not all of
which have seen declines,
include computerized checks for nonfiling and underreported income as well
as audits of both individual taxpayers and business entities. Between 1996
and 2001, key programs generally experienced growing workloads, decreased
staffing, and decreases in the number of cases closed per employee. Figure
1 shows the decline in audit rates for different types of taxpayers.
Figure 1: Change in Percent of Returns Audited, 1996 - 2001 . IRS
collections programs are also increasingly stressed. As we reported in May
2002, between fiscal years 1996 and 2001 trends in the collection of
delinquent taxes showed almost universal declines in collection program
performance, in terms of coverage of workload, cases closed, direct staff
time used, productivity, and dollar of unpaid taxes
GAO- 03- 1029T 9 collected. 3 Although the number of delinquent cases
assigned to collectors went down
during this period, the number of collections cases closed declined more
rapidly, creating an increasing gap. During that 6- year period, the gap
between the new collection workload and collection cases closed grew at an
average annual rate of about 31 percent.
Uncollected Taxes By the end of fiscal year 2002, IRS had deferred
collection action on about one out of three collection cases and had an
inventory of $112 billion of known unpaid taxes with some collection
potential.
A key to reversing these trends and ensuring compliance with the tax laws
is continuing to modernize IRS*s management and systems. Such change is
required across IRS. IRS needs to acquire and analyze data on
noncompliance by continuing to implement the National Research Program as
planned. IRS needs to reengineer it compliance and collection programs.
Reengineering depends, in turn, on successfully modernizing business
information systems by implementing recommended management controls. IRS
needs to implement its planned centralized cost accounting system in order
to strengthen controls over unpaid tax assessments. Because of their
magnitude, these efforts are a major management challenge. IRS has tried
to increase enforcement staffing. However, the hiring of additional staff
has been delayed by factors such as unbudgeted cost increases.
Recoup Delinquent Taxes from Those Benefiting from Federal Programs Many
taxpayers, both individuals and businesses, who owe the federal government
billions of dollars in delinquent taxes, are receiving billions of dollars
in federal payments annually. In addition to SSA benefit payments, these
delinquent taxpayers may be paid 3 U. S. General Accounting Office, Tax
Administration: Impact of Compliance and Collection Program Declines on
Taxpayers, GAO- 02- 674 (Washington, D. C.: May 22, 2002).
GAO- 03- 1029T 10 federal civilian retirement payments and federal
civilian salaries, payments on federal
contracts, and Small Business Administration loans. IRS and federal
payment records indicate that nearly one million taxpayers who were
receiving some type of federal payments owed about $26 billion in
delinquent taxes as of February 2002. To help the IRS collect these
delinquent tax debts, provisions in the Taxpayer Relief Act of 1997 gave
IRS authority to continuously levy 4 up to 15 percent of certain federal
payments made to delinquent taxpayers. 5 Payments subject to IRS*
continuous levy program include Social Security, federal salary and
retirement payments, and federal vendor payments. According to IRS, the
program resulted in collecting over $60 million in fiscal year 2002 by
directly levying federal payments. However, not all agencies have been
included in the continuous levy program. 6 When we reviewed three of these
we found, that as of June 30, 2000, about 70,400 individuals and
businesses that received about $1.9 billion in federal payments
collectively from three agencies owed over $1 billion in federal taxes.
IRS has either tested or commenced with levies of vendors or employees for
the Department of Defense and the U. S. Postal Service. IRS has not begun
to levy payments made to Centers for Medicare and Medicaid Services*
vendors. In another report we found that IRS blocks many eligible
delinquent accounts from being included in the Federal Payment Levy
Program, missing an opportunity to gather information on which debtors are
receiving federal payments. 7 IRS officials imposed these blocks because
of concerns that the potential volume of levies* about 1.4 million
taxpayer accounts* would disrupt ongoing collection activities. However we
estimate that about 112,000 would actually qualify for levy. These
taxpayers were collectively receiving about $6.7 billion in federal
payments and owed about $1.5 billion in delinquent taxes. In January 2003,
IRS unblocked and began matching delinquent
4 Levy is the legal process by which IRS orders a third party to turn over
property in its possession that belongs to the delinquent taxpayer named
in a notice of levy. A continuous levy remains in effect from the date
such levy is first made until the tax debt is fully paid or IRS releases
the levy. 5 Specifically, the 1997 legislation allows continuous levy of
*specified payments,* including non- means
tested federal payments, as well as certain previously exempt payments. 6
U. S. General Accounting Office, Tax Administration: Millions of Dollars
Could be Collected if IRS Levied More Federal Payments, GAO- 01- 711
(Washington, D. C.: July 20, 2001). 7 U. S. General Accounting Office, Tax
Administration: Federal Payment Levy Program Measures, Performance, and
Equity Can Be Improved, GAO- 03- 356 (Washington, D. C.: March 6, 2003).
GAO- 03- 1029T 11 taxpayer accounts identified as receiving a federal
salary or annuity payment. IRS
officials will not unblock the remaining delinquent accounts until
sometime in 2005. In addition, OMB circular A- 129, revised, directs
agencies to determine whether applicants for federal credit programs are
delinquent on any federal debt* including tax debt* and to suspend
processing of credit applications until the applicant pays the debt or
enters into a payment plan. Unfortunately, these polices have not been
effective in preventing the disbursement of federal dollars to individuals
and businesses with
delinquent taxes. In order to fully realize this benefit, the Congress
could enact legislation codifying the provisions of OMB Circular A- 129,
as revised, that relate to this matter. A key aspect of this legislation
would be to ensure that IRS's efforts to modernize its business systems
are successful in enabling it to generate timely and accurate information
on the taxpayer's status to assist other agencies in making determinations
about eligibility for federal benefits and payments. The Medicare Program
The sheer size and complexity of the Medicare program makes it highly
vulnerable to
fraud, waste and abuse. In fiscal year 2002, Medicare paid about $257
billion for a wide variety of inpatient and outpatient health care
services for over 40 million elderly and disabled Americans. To help
administer claims the Centers for Medicare & Medicaid Services (CMS)
contracts with 38 health insurance companies to process about 900 million
claims submitted each year by over 1 million hospitals, physicians, and
other health care providers. Although CMS has made strides, much remains
to be done. Today I will note a few specific areas in which we have
recommended actions:
Reducing improper payments: Since 1996, annual audits by the Department of
Health and Human Services* Office of the Inspector General have found that
Medicare contractors have improperly paid claims worth billions of
dollars* $13.3 billion in fiscal year 2002 alone. CMS has been working to
better hold
GAO- 03- 1029T 12 individual contractors accountable for claims payment
performance and help them target remedial actions to address problematic
billing practices.
Monitoring managed care plans: In 2001 auditors found that 59 of 80 health
plans had misreported key financial data or had accounting records too
unreliable to support their data, but CMS did not have a plan in place to
resolve these issues.
Improving financial management processes: Despite a *clean* opinion on its
financial statements, CMS financial systems and processes do not routinely
generate information that is timely or reliable and do not ensure
confidentiality of sensitive information.
Collecting debt: At the end of fiscal year 1999, over $7 billion of debt
had accumulated on contractors* books as accounts receivable that were
neither collected nor written off. While Medicare contractors have
referred eligible delinquent debt to the Treasury for collection, CMS
continues to face challenges in ensuring that contractors consistently
make these referrals and is working to address this. Enhancing program
oversight: Program safeguard activities, such as the
Medicare Integrity Program, have historically produced savings* in the
past CMS has estimated a return of over $10 for every dollar spent in this
area. While funding for the Medicare Integrity Program has increased, in
2002 it remained below comparable levels in the previous decade, adjusted
for inflation. Moreover, freeing the Medicare program to directly choose
contractors used to administer program payments on a competitive basis
would enable the program to benefit from the advantages conferred by
competition.
Reducing excessive payments for services and products: These hurt not only
the taxpayers but also the program*s beneficiaries who are generally
liable for co-
GAO- 03- 1029T 13 payments equal to 20 percent of Medicare*s approved fee.
Excessive payments
have been found for both medical products and outpatient drugs.
o Medical products* Medicare*s payment approaches lack the flexibility to
keep pace with market changes. Payments for medical equipment and supplies
are through fee schedules that remain tied to suppliers* historical
charges to the program. Evidence from two competitive bidding projects
suggests that competition might provide a tool that facilitates setting
more appropriate payment rates that result in program savings.
o Outpatient drugs* Medicare pays list prices set by drug manufacturers,
not prices providers actually pay. In September 2001, we reported that in
2000 Medicare paid over $1 billion more than other purchasers for
outpatient drugs that the program covers. CMS has not acted upon our
recommendations in this area. 8 Medicare Excessive Payments: Outpatient
Drugs
In some cases, Medicare*s payments were so high that the beneficiaries*
co- payments alone exceeded the purchase price available to the provider.
In 2001,
o Medicare paid $3.34 per unit for Ipratropium bromide although it is
widely available for $0.77 per unit;
o Medicare paid $588 for leuprolide acetate although it was widely
available at a cost of $510.
The Medicaid Program Medicaid, which pays for both acute health care and
long- term care services for over 44 million low- income Americans, has
been subject to waste and exploitation. In fiscal year
GAO- 03- 1029T 14 2001, federal and state Medicaid expenditures totaled
$228 billion. The federal share
was about 57 percent, representing 7 percent of all federal outlays.
Medicaid is the third largest social program in the federal budget (after
Social Security and Medicare) and the second largest budget item for most
states (after education).
CMS, in the Department of Health and Human Services (HHS) is responsible
for administering the program at the federal level, while the states
administer their respective program*s day- to- day operations. The
challenges inherent in overseeing a program of Medicaid*s size, growth,
and diversity, combined with the open- ended nature of the program*s
federal funding, puts the program at high risk. Inadequate fiscal
oversight has led to increased and unnecessary federal spending. GAO has
made recommendations in a number of areas, such as:
Curb state financing schemes: Such schemes inappropriately increase the
federal share of Medicaid expenditures. For example, some states have
created the illusion that they made large Medicaid payments to providers
while in reality they only made temporary electronic funds transfers that
the providers were required to return to them. In some cases, states have
used federal payments for purposes other than Medicaid. Although Congress
and CMS have repeatedly acted to curtail abusive financing schemes, states
have developed new variations. Each has the same result: some of the
state*s share of program expenditures is shifted to the federal
government. Curbing abusive state practices is of increasing importance
today since states are under budgetary pressures. Experience shows that
some states are likely to look for other creative means to supplant state
financing, making a compelling case for the Congress and CMS to sustain
vigilance over federal Medicaid payments.
Curbing states* exploitative practices can yield substantial savings. CMS*
2001 regulation to close one significant loophole that was being
increasingly used by
8 Medicare: Payments for Covered Outpatient Drugs Exceed Providers* Cost,
GAO- 01- 1118 (Washington, D. C.: Sept. 21, 2001).
GAO- 03- 1029T 15 states to generate excessive federal Medicaid payments,
referred to as the upper
payment limit, is estimated to save the federal government $55 billion
over 10 years, and a related 2002 CMS regulation is estimated to yield an
additional $9 billion over 5 years. To reduce these and other exploitative
schemes and to better ensure that federal funds were used to reimburse
providers only for Medicaidcovered services actually provided to eligible
beneficiaries, we recommended in 1994 that the Congress enact legislation
to prohibit making Medicaid payments to a government- owned facility in
excess of the facility*s costs. To date, no action has been taken.
The figure below shows one state*s arrangement to increase federal
Medicaid payments inappropriately.
Improve federal and state agency controls over payments: CMS does not have
a sound method for states to identify areas at high risk for improper
Medicaid payments. Also, in our June 2001 review, we noted that no state
requested the full amount of federal funds available for antifraud efforts
due to a reluctance to put up state matching funds.
GAO- 03- 1029T 16 HUD Single- Family Mortgage Insurance and Rental
Assistance Programs HUD manages about $550 billion in insurance and $19
billion per year in rental
assistance. The department relies on a complex network of thousands of
third parties to manage their risk. We have made recommendations in a
number of areas:
Reducing rental subsidy overpayments: HUD estimates that rental subsidy
overpayments in fiscal year 2000 were $2 billion* over 10 percent of total
program expenditures. A significant portion of this overpayment is
attributable to tenants* underreporting of income. We have recommended
steps to improve data sharing between HUD and the Department of Health and
Human Services to help identify unreported income before rental subsidies
are provided. 9 HUD needs to ensure that its rental housing assistance
programs operate effectively and efficiently, specifically that assistance
payments are accurate, recipients are eligible, assisted housing meets
quality standards, and contractors perform as expected.
Reduce risk of losses in the single- family housing program: HUD also
needs to reduce the risk of losses in its single- family housing program
due to fraud, loan defaults, and poor management of foreclosed properties.
Ineligible buyers sometimes fraudulently obtain loans, or loans are made
on properties actually worth less than the loan amount, increasing the
risk of default and losses. In addition, foreclosed properties are not
always secured and maintained in a timely fashion and their condition can
deteriorate, resulting in lower sales prices and limiting FHA*s ability to
recover its costs. HUD*s IG has reported that fraud in the origination of
mortgages of single- family properties continues to be the most pervasive
problem uncovered by its investigations. We have reported on weaknesses in
HUD*s oversight of mortgage lenders and have made recommendations aimed at
strengthening HUD*s processes for approving and
9 U. S. General Accounting Office, Benefit and Loan Programs: Improved
Data Sharing Could Enhance Program Integrity, GAO/ HEHS- 00- 19
(Washington, D. C., Sept. 13, 2000).
GAO- 03- 1029T 17 monitoring lenders and holding them accountable for poor
performance. 10 We
have also recommended that HUD adopt a foreclosure process more like that
used by other entities to better ensure that properties do not deteriorate
and that it recoups more of its losses when the houses are sold. 11 HUD
needs to improve the management and oversight of its single- family
housing programs to reduce its risk of financial losses.
Fraud in FHA Program A joint investigation between HUD*s Inspector General
and the Federal Bureau of Investigation uncovered a 20- person property-
flipping scheme in Chicago, Illinois, that resulted in 21 indictments and
convictions and 12 jail sentences.
The use of fraudulent documentation to qualify borrowers for FHA- insured
mortgages had led to criminal indictments and convictions in several other
communities.
Improve acquisition management and monitoring of contractor performance:
Contractors are responsible for managing and disposing of HUD*s inventory
of single- family and multifamily properties* properties that had a
combined value of about $3 billion as of September 30, 2001. Our review of
HUD*s files and disbursements indicates that its oversight processes have
not identified instances in which contractors were not performing as
expected. Weaknesses in HUD*s acquisition management limit its ability to
readily prevent, identify, and address contractor performance problems.
Without a systematic approach to oversight and adequate on- site
monitoring, the department*s ability to identify and correct contractor
performance problems and hold contractors accountable is reduced.
10 U. S. General Accounting Office, Single- Family Housing: Stronger
Oversight of FHA Lenders Could Reduce HUD*s Insurance Risk, GAO/ RCED- 00-
112 (Washington, D. C.: April 28, 2000). 11 U. S. General Accounting
Office, Single- Family Housing: Opportunities to Improve Federal
Foreclosure
and Property Sales Processes, GAO- 02- 305 (Washington, D. C.: April 17,
2002).
GAO- 03- 1029T 18 The resulting vulnerability limits HUD*s ability to
assure that it is receiving the
services for which it pays.
Improving Economy, Efficiency, Effectiveness Important as safeguarding
funds from fraud, waste, abuse and mismanagement is, I believe that for
long- lasting improvements in government performance the federal
government needs to move to the next step: to widespread opportunities to
improve the economy, efficiency and effectiveness of existing federal
goals and program commitments. The basic goals of many federal programs*
both mandatory and discretionary* enjoy widespread support. That support
only makes it more important for us to pay attention to the substantial
opportunities to improve their cost effectiveness and the delivery of
services and activities. No activity should be exempt from some key
questions about its design and management.
Key Questions for Program Oversight
Is the program targeted appropriately? Does the program duplicate or even
work at cross purposes with related programs and tools?
Is the program financially sustainable and are there opportunities for
instituting appropriate cost sharing and recovery from nonfederal parties
including private entities that benefit from federal activities?
Can the program be made more efficient through reengineering or
streamlining processes or restructuring organizational roles and
responsibilities? Are there clear goals, measures and data with which to
track progress, benefits
and costs? GAO*s work illustrates numerous examples where programs can and
should be changed to improve their impact and efficiency. Today I want to
touch on some of these areas and
GAO- 03- 1029T 19 highlight some significant opportunities for program
changes that promise to improve
their cost effectiveness. I recognize that many of these will prompt
debate* but that debate is both necessary and healthy. Targeting Our work
has shown that scarce federal funds could have a greater impact on program
goals by improving their targeting to places or people most in need of
assistance. Poorly targeted funding can result in providing assistance to
recipients who have the resources and interest to undertake the subsidized
activity on their own without federal financing. Moreover, lax eligibility
rules and controls can permit scarce funds to be diverted to clients with
marginal needs for program funds.
Grant programs: Many federal grant programs with formula distributions to
state and local governments are not well targeted to places with high
needs but low fiscal capacity. As a result, recipients in wealthier areas
may enjoy higher levels of federal funds than harder pressed areas. Better
targeting of grants offers a strategy to reduce federal outlays by
concentrating reductions in wealthier communities with comparatively fewer
needs and greater capacity to finance services from their own resources.
For such mandatory programs as Medicaid, Foster Care and Adoption
Assistance, reimbursement formulas can be changed to better reflect
relative need, geographic differences in the cost of services and state
bases.
Flood insurance losses: Repetitive flood losses are one of the major
factors contributing to the financial difficulties facing the National
Flood Insurance Program. Approximately 45,000 buildings currently insured
under the National Flood Insurance Program have been flooded on more than
one occasion and have received flood insurance claims payments of $1,000
or more for each loss. These repetitive losses account for about 38
percent of all program claims historically (currently about $200 million
annually) even though repetitive- loss structures make up a very small
portion of the total number of insured properties* at any
GAO- 03- 1029T 20 one time, from 1 to 2 percent. The cost of these
multiple- loss properties over the
years to the program has been $3.8 billion. One option that would increase
savings would be for FEMA to consider eliminating flood insurance for
certain repeatedly flooded properties.
Medicare Incentive Payment Program: The Medicare Incentive Payment program
was established in 1987 to provide a bonus payment for physicians to
provide primary care in underserved areas. However, specialists receive
most of the program dollars, even though primary care physicians have been
identified as being in short supply. Shortages of specialists, if any,
have not been determined. Moreover, since 1987 the Congress generally
increased reimbursement rates for primary care services and reduced the
geographic variation in physician reimbursement rates. HHS has
acknowledged that structural changes to this program are necessary to
better target incentive payments to rural areas with the highest degree of
shortage. For example, if the program*s intent is to improve access to
primary care services in underserved rural areas, the bonus payments
should be targeted and limited to physicians providing primary care
services to underserved populations in rural areas with the greatest need.
Federal Employees* Compensation Act: The formula for determining workers*
compensation benefits for disabled federal employees replaced more than
100 percent of their estimated take- home pay for 30 percent of those
included in our analyses, and over 90 percent for another 40 percent of
beneficiaries. The high replacement rates for this tax- free benefit stem
from the use of gross pay in the formula rather than the use of a base
that subtracts federal and state taxes, as some state programs do. Such
benefit levels may potentially discourage employees
from returning to work. Savings could be achieved if the formula were
revised to subtract taxes from gross pay.
GAO- 03- 1029T 21 Consolidation GAO*s work over the years has shown that
numerous program areas are characterized by
significant program overlap and duplication. In program area after program
area, we have found that unfocused and uncoordinated programs cutting
across federal agency boundaries waste scarce resources, confuse and
frustrate taxpayers and beneficiaries and limit program effectiveness.
Food safety: The federal system to ensure the safety and quality of the
nation*s food is inefficient and outdated. The Food Safety and Inspection
Service within USDA is responsible for the safety of meat, poultry and
eggs and some egg products, while the Food and Drug Administration (FDA)
under HHS is responsible for the safety of most other foods. USDA, FDA and
ten other federal agencies administer over 35 different laws for food
safety. The current system suffers from overlapping and duplicative
inspections, poor coordination and
inefficient allocation of resources. The Congress may wish to consider
consolidating federal food safety agencies under a single risk- based food
safety inspection agency with a uniform set of food safety laws.
Grants for homeland security: GAO identified at least 16 different grant
programs that can be used by the nation*s first responders to address
homeland security needs. These grants are currently provided through two
different directorates within the Department of Homeland Security, the
Department of Justice, and the Department of Health and Human Services and
serve state governments, cities and localities, counties, and others.
Multiple fragmented grant programs create a confusing and administratively
burdensome process for state and local officials and complicate their
efforts to better coordinate preparedness and response to potential
terrorist attacks across the wide range of specialized agencies and
programs. In addressing the fragmentation prompted by the current homeland
security grant system, Congress should consider consolidating separate
categorical grants into a broader purpose grant with
GAO- 03- 1029T 22 national performance goals defining results and perhaps
standards expected for
the state and local partnership.
Rural housing assistance: USDA and HUD both provide assistance for rural
housing, targeting some of the same kinds of households in the same
markets. The programs of both agencies could be merged, using the same
network of lenders. A consolidation of these programs building off the
best practices of both programs would improve the efficiency with which
the federal government delivers rural housing programs.
Department of Veterans Affairs (VA) food & laundry services: VA provides
inpatient food services and laundry processing for thousands of inpatients
a day in hospitals, nursing homes, and domiciliaries. As of November 2000,
VA had consolidated 28 of its food production locations into 10, begun
using less expensive Veterans Canteen Service workers in 9 locations and
contracted out in 2 locations. For laundry services, VA had consolidated
116 of its laundries into 67 locations and used competitive sourcing to
contract with the private sector in other locations. VA has the potential
to further reduce its inpatient food service and laundry costs. For
example, VA could consolidate food production locations within a 90-
minute driving distance of each other and laundry locations within a 4-
hour driving distance of each other.
USDA: Common Administrative Functions, County Offices: o Common
administrative functions-- In the mid 1990s, USDA began a reorganization
and modernization effort targeted at achieving greater economy and
efficiency and better customer service by the Farm Service Agency, the
Natural Resources & Conservation Service, and the agencies in the Rural
Development mission. However, despite the agencies* collocation of county
offices, little has changed in how the three agencies serve their
customers. USDA has made substantial progress in deploying
GAO- 03- 1029T 23 personal computers and a telecommunications network to
link its service
centers. USDA could do more to combine agencies* support functions, such
as legal and legislative affairs and public information into a single
office. o County office consolidation-- USDA*s field office structure
dates back to
the 1930s. In 1933 the U. S. had more than 6 million farmers; today the
number of farms in the U. S. is less than 2 million, and a small fraction
of these produce more than 70 percent of the nation*s agricultural output.
As the client base for USDA programs changes and technology offers
opportunities for program delivery efficiencies, USDA needs to consider
alternative program delivery approaches. Although the USDA has closed over
1000 county offices, an agency report in September 2001 said, *Further
actions are necessary to ensure that the USDA farm service structure is
appropriately sized, configured and located** Cost Recovery The allocation
of costs that once made sense when programs were created needs to be
periodically reexamined to keep up with the evolution of markets. In some
cases, private markets and program beneficiaries can play greater roles in
financing and delivery of program services.
User charges and fees: Greater opportunities exist to charge users of
federal programs across a number of areas to better reflect the full costs
of services provided to particular users or beneficiaries. For example,
the fees paid by utilities to pay for the costs of storage for high- level
radioactive wastes have not changed since 1983, making the fund
insufficient to cover increased costs due to inflation. Registration fees
charged to aircraft owners by the Federal Aviation
GAO- 03- 1029T 24 Administration have not changed since 1968, resulting in
over $6 million in lost
revenue for the agency. Federal food inspection agencies do not recover
the costs of inspections for meat, poultry, domestic foods and processing
facilities; Agriculture Department inspection agencies recovered only $403
million of the $1.3 billion they spent in 2002 for these purposes.
Child support enforcement: The Child Support Enforcement Program is to
strengthen state and local efforts to obtain child support for both
families eligible for Temporary Assistance for Needy Families (TANF) and
non- TANF families. From fiscal year 1984 through 1998, non- TANF
caseloads and costs rose about 500 percent and 1200 percent, respectively.
While states have the authority to fully recover the costs of their
services, states have charged only minimal application and service fees
for non- TANF clients, doing little to recover the federal government*s 66
percent share of program costs. In fiscal year 1998, for example, state
fee practices returned about $49 million of the estimated $2.1 billion
spent to provide non- TANF services. To defray some of the costs of child
support programs, Congress could require that mandatory application fees
should be dropped and replaced with a minimum percentage service fee on
successful collections for non- TANF families.
Fannie Mae and Freddie Mac: These enterprises are privately- owned
corporations chartered to enhance the availability of mortgage credit
across the nation. HUD is charged with mission oversight responsibilities
for the enterprises. Other federal organizations responsible for
regulating governmentsponsored enterprises are financed by assessments on
the regulated entities. However, HUD*s mission oversight expenditures are
funded with taxpayer dollars through HUD*s appropriations. Requiring
Fannie Mae and Freddie Mac to reimburse HUD for mission oversight
expenditures would not only result in budgetary savings but could also
enable HUD to strengthen its oversight activities by for example
dedicating new resources to verify housing goal data.
GAO- 03- 1029T 25
Water subsidies: Federal water programs to promote efficient use of finite
water resources for the nation*s agricultural and rural water systems have
been used to provide higher subsidies than Congress may have intended.
Some farmers have reorganized large farming operations into multiple,
smaller landholdings to be eligible to receive additional federally
subsidized irrigation water. However, due to the vague definition of the
term *farm,* the flow of federally subsidized water to land holdings above
the law*s 960- acre limit has not been stopped, and the federal government
is not collecting revenues to which it is entitled under the law. In
addition, Interior Department studies have shown that some farmers
received the water subsidy for using irrigated water and USDA subsidies
for crop production. Congress could consider collecting the full costs of
subsidized federal water for large farms and/ or restructuring the
subsidies for crops produced with federally subsidized water.
Governmentwide economy and efficiency: the case of federal real property
Beyond program management, there are governmentwide areas where major
savings could come from improving economy, efficiency and effectiveness.
Today I would like to highlight one GAO thinks is so important that we
added it to the high- risk list* the management of federal real property.
Excess and underused property and deteriorating facilities present a real
challenge* but
also an opportunity to reap great rewards in terms of improved structure
and savings for the federal government*s operations. The U. S.
government*s fiscal year 2002 financial statements show an acquisition
cost of more than $335 billion for the federal government*s real property.
This includes military bases, office buildings, embassies, prisons,
courthouses, border stations, labs, and park facilities. Available
governmentwide data suggest that the federal government owns roughly one-
fourth of the total acreage of the nation* about 636 million acres.
GAO- 03- 1029T 26 Underutilized or excess property is costly to maintain.
DoD alone estimates that it
spends about $3 to $4 billion per year maintaining unneeded facilities.
Excess DoE facilities cost more than $70 million per year, primarily for
security and maintenance. There are opportunity costs *these buildings and
land could be put to more costbeneficial uses, exchanged for needed
property, or sold to generate revenue for the government. Table 1 below
highlights excess and underutilized property challenges faced by some of
the major real property- holding agencies.
GAO- 03- 1029T 27 Table 1: Excess Property Challenges at Some of the Major
Real Property- Holding
Agencies Agency Excess and underutilized property challenge DOD Even with
four rounds of base realignment and closures that reduced its holdings by
21 percent, DOD recognized that it still had some excess and obsolete
facilities. Accordingly, Congress gave DOD the authority for another round
of base realignment and closure in the fiscal year 2002 defense
authorization act, scheduled for fiscal year 2005.
VA VA recognizes that it has excess capacity and has an effort underway
known as the Capital Asset Realignment for Enhanced Services (CARES) that
is intended to address this issue. VA recently completed its initial CARES
study involving consolidation of services among medical facilities in its
Great Lakes Network
(including Chicago) as well as expansion of services in other locations.
VA identified 31 buildings that are no longer needed to meet veterans'
health care needs in this network, including 30 that are currently vacant.
GSA GSA recognizes that it has many buildings that are not financially
self- sustaining
and/ or for which there is not a substantial, long- term federal purpose.
GSA is developing a strategy to address this problem. The L. Mendel Rivers
Federal Building in Charleston, S. C. is a prime example of a highly
visible, vacant federal building held by GSA.
DOE After shifting away from weapons production, DOE had 1,200 excess
facilities totaling 16 million square feet, and the performance of its
disposal program had not been fully satisfactory, according to DOE*s
Inspector General. Facility disposal activities have not been prioritized
to balance mission requirements, reduce risks, and minimize life- cycle
costs. In some cases, disposal plans were in conflict with new facility
requirements.
USPS The issue of excess and underutilized property will need to be part
of USPS*s efforts to operate more efficiently. Facility consolidations and
closures are likely to be needed to align USPS*s portfolio more closely
with its changing business model.
State Although State has taken steps to improve its disposal efforts and
substantially reduce its inventory of unneeded properties, it reported
that 92 properties were potentially available for sale as of September 30,
2001, with an estimated value of more than $180 million. State has begun
the disposal process for some of these properties. State will also need to
dispose of additional facilities over the next several years as it
replaces more than 180 vulnerable embassies and consulates for security
reasons. Security also has become a primary factor in considering the
retention and sale of excess property.
GAO- 03- 1029T 28 If the federal government is to more effectively respond
to the challenges associated with
strategically managing its multi- billion dollar real property portfolio,
a major departure from the traditional way of doing business is needed.
Better managing these assets in the current environment calls for a
significant paradigm shift to find solutions. Solutions should not only
correct the long- standing problems we have identified but also be
responsive to and supportive of agencies* changing missions, security
concerns, and technological needs in the 21 st century. Solving the
problems in this area will undeniably require a reconsideration of funding
priorities at a time when budget constraints will be pervasive.
Because of the breadth and complexity of the issues involved, the long-
standing nature of the problems, and the intense debate about potential
solutions that will likely ensue, current structures and processes may not
be adequate to address the problems. Thus, as discussed in our high- risk
report, there is a need for a comprehensive and integrated transformation
strategy for federal real property. This strategy could address challenges
associated with having adequate capacity (people and resources) to resolve
the problems. The development of a transformation strategy would
demonstrate a strong commitment and top leadership support to address the
risk. An independent commission or governmentwide task force may be needed
to develop the strategy. We believe that OMB is uniquely positioned to be
the catalyst for identifying and bringing together the stakeholders that
would develop the transformation strategy, drawing on resources and
expertise from the General Services Administration, the Federal Real
Property Council, and other real property- holding agencies. For example,
OMB could assess agency real property activities as part of the executive
branch management scorecard effort. Congress will need to play a key role
in implementing the transformation strategy*s roadmap for realigning and
rationalizing the government*s real property assets so that the portfolio
is more directly tied to agencies* missions. Without measurable progress
and a comprehensive strategy to guide improvements, real property will
most likely remain on the high- risk list.
GAO- 03- 1029T 29
Reassessing What Government Does I have talked about the need to protect
taxpayer dollars from fraud, waste, abuse and mismanagement and about the
need to take actions improving the economy, efficiency and effectiveness
of government programs, policies, and activities. However, to meet the
challenges of today and the future, we must move beyond this to a more
fundamental reassessment of what government does and how it does it.
In part this requires looking at current federal programs* both spending
and tax incentives* in terms of their goals and results. Why does the
program/ activity exist? Is the activity achieving its intended objective?
If not, can it be fixed? If so, how? If not, what other approaches might
succeed in achieving the goal/ objective? More fundamentally, even if a
program/ activity is achieving its stated mission* or can be *fixed* so
that it does so* where does it fit in competition for federal resources?
Is its priority today higher or lower than before given the nation*s
evolving challenges and fiscal constraints?
It also requires asking whether an existing program, policy, or activity
*fits* the world we face today and in the future. It is important not to
fall into the trap of accepting all existing activities as *givens* and
subjecting new proposals to greater scrutiny than existing ones undergo.
Think about how much the world has changed in the past few decades and how
much it will change in future years.
One example of a disconnect between program design and today*s world is
the area of federal disability programs* a disconnect great enough to
warrant designation as a *highrisk* area this year. Already growing,
disability programs are poised to surge as babyboomers age, yet the
programs remain mired in outdated economic, workforce, and medical
concepts and are not well positioned to provide meaningful and timely
support to disabled Americans. Disability criteria have not been updated
to reflect the current state of science, medicine, technology and labor
market conditions. Using outdated information, agencies* primarily SSA and
VA-- risk overcompensating some individuals
GAO- 03- 1029T 30 while under- compensating or denying compensation
entirely to others. Although federal
disability programs present serious management challenges and can be
vulnerable to fraud or abuse, the overarching and longer- term challenge
is to design a disability system for the modern world.
We should be striving to maintain a government that is effective and
relevant to a changing society* a government that is as free as possible
of outmoded commitments and operations that can inappropriately encumber
the future. The difference between *wants,* *needs,* and overall
*affordability* and long- term *sustainability* is an important
consideration when setting overall priorities and allocating limited
resources.
Finally, any reassessment of federal missions and strategies should
include the entire set of tools the federal government can use to address
national objectives. These tools include discretionary and mandatory
spending, loans and loan guarantees, tax provisions, and regulations.
Spending is most visible and it is all too easy when we look to define
federal support for an activity to look at the spending side of the
budget. Federal support, however, may come in the form of direct loans or
loan guarantees. It may come in the design of regulations. It may come in
the form of exclusions or credits in the tax code. We contrast
discretionary spending* which is controlled annually through the
appropriations process* with mandatory or direct spending. Entitlements
and mandatories are not uncontrollable, but because they continue unless
changed, they may seem less controllable and may be subject to less
frequent attention. While mandatory spending programs may too often be
taken as *givens,* think about the lack of public attention given tax
preferences. These may be even less visible. Yet none of these tools
should be ignored if we are to get a true picture of federal activity in
an area. So, for example, if we are evaluating federal support for health
care we need to look not only at spending, but also at tax preferences. If
we are evaluating federal support for higher education, we need to look
not only at spending but also at tax preferences such as the Lifetime
Learning and HOPE tax credits. The same thing is true for health care. The
figure below shows federal activity in health care and Medicare budget
functions in FY
GAO- 03- 1029T 31 2003: $48 billion in discretionary budget authority,
$419 billion in mandatory outlays,
$177 million in loan guarantees, and $129 billion in tax expenditures.
Approaches and Mechanisms to Facilitate Reexamination of Programs and
Operations
As the examples in this statement illustrate, a broad array of
opportunities exist for improving the programs and operations of the
federal government. Oversight and reassessment of programs and priorities
is called for to address many of the long standing performance challenges
in government programs and reposition the federal government for the 21 st
Century. The oversight challenge takes place on many levels:
The management and effectiveness of individual programs;
Progress on cross- cutting governmentwide management challenges;
Looking across agency and program boundaries at the full range of federal
activities and tools used to advance any given goal* and perhaps choosing
among them. This oversight agenda will be helped by the reforms instituted
over the past decade. The Congress and several administrations have put in
place a structure which is increasing the
Relative Reliance on Policy Tools in the Health Care Budget Functions
(FY2003)
22% 8% 70%
Tax Expenditures Discretionary budget authority Mandatory outlays
Note: Loan guarantees account for about $177 million or 0. 03% of the
approximately $597 billion in total federal health care resources. Source:
GAO analysis of data from the Office of Management and Budget.
GAO- 03- 1029T 32 focus on and accountability for government performance.
Federal agencies have been
working to carry out the Government Performance and Results Act (GPRA),
which requires the development of periodic strategic and annual
performance plans and reports. GPRA requires linkages of performance plans
to budgets, recognizing that one of the ways in which the full acceptance
and potential of performance management can be promoted is if this
information becomes relevant for the allocation of resources. The current
administration has made linking resources to results one of the top five
priorities in the President*s Management Agenda. In this regard, OMB*s
Program Assessment Rating Tool (PART) represents an effort to use
performance information more explicitly in the federal budget formulation
process by summarizing performance and evaluation information. As you
know, we are looking at the first year*s experience with PART for one of
your subcommittees and its counterpart in the Senate. Credible outcome-
based performance information is absolutely critical to foster the kind of
national debate that is needed about government in the 21 st Century.
While PART focuses on the performance of individual programs, many of the
key performance issues affecting the public cut across individual programs
and governmental tools, as illustrated by the examples discussed in my
statement. The importance of seeing the overall picture cannot be
overestimated. A single outcome, such as improving access to higher
education or health care, are in fact provided through numerous spending,
loan, loan guarantee and now tax incentive programs. Moreover, as the
examples above illustrate, the failure to develop a consistent and
coordinated program profile can frustrate and limit the outcomes we can
achieve.
Congress and the administration need a vehicle to compare the performance
results across similar programs addressing common outcomes. We have
previously reported that the Government Performance and Results Act
(Results Act) could provide a tool to reexamine roles and structure at the
governmentwide level. The Results Act requires the President to include in
his annual budget submission a federal government performance plan. The
Congress intended that this plan provide a ** single cohesive picture of
the annual performance goals for the fiscal year. ** The governmentwide
performance plan could be a unique tool to help the Congress and the
executive branch address critical
GAO- 03- 1029T 33
federal performance and management issues. It also could provide a
framework for any restructuring efforts. Unfortunately, this provision has
not been fully implemented. Beyond an annual performance plan, a strategic
plan for the federal government might be
an even more useful tool to provide broad goals and facilitate integration
of programs, functions, and activities, by providing a longer planning
horizon. In the strategic planning process, it is critical to achieve
mission clarity in the context of the environment in which we operate.
With the profound changes in the world, a reexamination of the roles and
missions of the federal government is certainly needed. From a clearly
defined mission, goals can be defined and organizations aligned to
carrying out the mission and goals. Integration and synergy can be
achieved between components of the government and with external partners
to provide more focused efforts on goal achievement. If fully developed, a
governmentwide strategic plan can potentially provide a cohesive
perspective on the long- term goals for a wide array of federal
activities. In addition, a strategic plan can provide a much needed
framework for considering any
organizational changes and restructuring of federal agencies and programs.
Essentially, organizations and resources (e. g., human, financial, and
technological) are the ways and means of achieving the goals articulated
by the strategic plan. Organizational structures should ideally be aligned
to be consistent with the goals and objectives of the strategic plan.
Clear linkages should exist between the missions and functions of an
organization and the goals and objectives it is trying to achieve. The
development of a strategic plan can also facilitate the building of
consensus by key stakeholders, including most notably
the Congress, for any restructuring proposals.
As the Comptroller General testified last fall, fifty years of past
efforts to link resources with results has shown that any successful
effort must involve the Congress as a partner. In fact, the administration
acknowledged that performance and accountability are shared
responsibilities that must involve the Congress. It will only be through
the continued attention of the Congress, the administration and federal
agencies that progress can be sustained and more importantly, accelerated.
The Congress has, in effect, served as the institutional champion for many
previous performance management initiatives, such as
GAO- 03- 1029T 34 GPRA and the CFO Act, by providing a consistent focus
for oversight and reinforcement
of important policies. More generally, effective congressional oversight
can help improve federal performance by examining the program structures
agencies use to deliver products and services to ensure the best, most
cost- effective mix of strategies is in place to meet agency and national
goals. This means looking beyond the current structure of PART to the
policy, management, and policy implications of crosscutting programs.
We have suggested in the past that the Congress might consider the need
for mechanisms that allow it to more systematically focus its oversight on
problems with the most serious and systemic weaknesses and risks. At
present, the Congress has no direct mechanism to provide a congressional
perspective on governmentwide performance issues. The Congress has no
established mechanism to articulate performance goals for the broad
missions of government, to assess alternative strategies that offer the
most promise for achieving these goals, or to define an oversight agenda
targeted on the most pressing
cross- cutting performance and management issues. Congress might consider
whether a more structured oversight mechanism is needed to permit a
coordinated congressional perspective on governmentwide performance
matters.
One possible approach would involve developing a congressional performance
resolution identifying the key oversight and performance goals that the
Congress wishes to set for its own committees and for the government as a
whole. Such a resolution could be linked to the current congressional
budget resolution. Initially, this might involve collecting the *views and
estimates* of authorization and appropriations committees on priority
performance issues for programs under their jurisdiction and working with
such crosscutting committees as such as this one. There are, of course,
other possible approaches to the objective of enhancing congressional
oversight. The issue I am raising is that Congress should assess whether
its current structures and processes are adequate to take full advantage
of the benefits arising from the reform agenda under way in the executive
branch. Ultimately, what is important is not the specific approach or
process, but rather
GAO- 03- 1029T 35 achieving the result of helping the Congress better
promote improvements in government
operations through broad and comprehensive oversight and deliberation.
Reexamination of the role and activities of government for the 21 st
Century requires more than performance information on individual programs
or governmentwide management issues. As the Comptroller General has said
on many occasions, any discussion about the role of the federal
government, about the design and performance of federal activities, and
about the near- term federal fiscal outlook takes place in the context of
two dominating facts: a demographic tidal wave is on the horizon, and it
combined with rising health care costs threatens to overwhelm the nation*s
fiscal future. The numbers do not add up. The fiscal gap is too great for
any realistic expectation that the country
can grow its way out of the problem. Metrics and mechanisms need to be
developed to facilitate consideration of the long- term implications of
existing and proposed policies or programs. These range from explicit
liabilities such as environmental cleanup requirements and federal
pensions to the more implicit obligations presented by life- cycle costs
of capital acquisition or disaster assistance. We have suggested that more
systematic reporting on the nature and extent of these exposures would be
beneficial. 12 Concluding Remarks Tackling areas at risk for fraud, waste,
abuse and mismanagement will require
determination, persistence and sustained attention by both agency managers
and Congressional committees. Large and complex federal agencies must
effectively use a mixture of critical resources and improved processes to
improve their economy, efficiency, and effectiveness; Congressional
oversight will be key.
12 U. S. General Accounting Office, Fiscal Exposures: Improving the
Budgetary Focus on Long- Term Costs and Uncertainties, GAO- 03- 213
(Washington, D. C.: January 24, 2003).
GAO- 03- 1029T 36 In view of the broad trends and long- term fiscal
challenges facing the nation, there is a
need to fundamentally review, reassess, and reprioritize the proper role
of the federal government, how the government should do business in the
future, and* in some instances* who should do the government*s business in
the 21 st century. It is also
increasingly important that federal programs use properly designed and
aligned tools to manage effectively across boundaries, work with
individual citizens, other levels of government, and other sectors.
Evaluating the role of government and the programs it delivers is key in
considering how best to address the nation*s most pressing priorities.
Periodic reviews of programs in the budget, on the mandatory and
discretionary sides of the budget as well as tax preferences, can prompt a
healthy reassessment of our priorities and of the changes in program
design, resources and management needed to get the results we collectively
decide we want from government.
Needless to say, we at GAO are pleased to help Congress in this very
important work.
GAO- 03- 1029T 37 Attachment I:
GAO*s 2003 High- Risk List 2003 High- Risk Areas Year
Designated High Risk Addressing Challenges In Broad- based Transformations
Strategic Human Capital Management* 2001
U. S. Postal Service Transformation Efforts and Long- Term Outlook* 2001
Protecting Information Systems Supporting the Federal Government and the
Nation*s Critical Infrastructures 1997
Implementing and Transforming the New Department of Homeland Security 2003
Modernizing Federal Disability Programs* 2003
Federal Real Property* 2003 Ensuring Major Technology Investments Improve
Services FAA Air Traffic Control Modernization 1995
IRS Business Systems Modernization 1995
DOD Systems Modernization 1995 Providing Basic Financial Accountability
DOD Financial Management 1995
Forest Service Financial Management 1999
FAA Financial Management 1999
IRS Financial Management 1995 Reducing Inordinate Program Management Risks
Medicare Program* 1990
Medicaid Program* 2003
Earned Income Credit Noncompliance 1995
Collection of Unpaid Taxes 1990
DOD Support Infrastructure Management 1997
DOD Inventory Management 1990
HUD Single- Family Mortgage Insurance and Rental Assistance Programs 1994
Student Financial Aid Programs 1990 Managing Large Procurement Operations
More Efficiently DOD Weapon Systems Acquisition 1990
DOD Contract Management 1992
Department of Energy Contract Management 1990
NASA Contract Management 1990 *Additional authorizing legislation is
likely to be required as one element of addressing this high- risk area.
Source: GAO
GAO- 03- 1029T 38 Attachment II:
Selected Reports Regarding Specific Examples Cited in Testimony
Erroneous payments, Misuse of benefits, Child and Adult Care Food Program
(CACFP), National School Lunch Program:
Food Assistance: WIC Faces Challenges in Providing Nutrition Services.
GAO- 02- 142. Washington, D. C.: December 7, 2001.
Food Stamp Program: Better Use of Electronic Data Could Result in
Disqualifying More Recipients Who Traffic Benefits. GAO/ RCED- 00- 61.
Washington, D. C.: March 7, 2000.
Food Assistance: Efforts to Control Fraud and Abuse in the Child and Adult
Care Food Program Should Be Strengthened. GAO/ RCED- 00- 12. Washington,
D. C.: November 29, 1999.
Food Stamp Program: Storeowners Seldom Pay Financial Penalties Owed for
Program Violations. GAO/ RCED- 99- 91. Washington, D. C.: May 11, 1999.
HUD Single- Family Mortgage Insurance and Rental Assistance Programs:
U. S. General Accounting Office, Financial Management: Strategies to
Address Improper Payments at HUD, Education and Other Federal Agencies,
GAO- 03- 167T (Washington, D. C.: Oct 3, 2002).
U. S. General Accounting Office, Strategies to Manage Improper Payments:
Learning from Public and Private Sector Organizations, GAO- 02- 69G
(Washington, D. C.: October 2001). U. S. General Accounting Office, Major
Management Challenges and Program Risks,
Department of Housing and Urban Development, GAO- 01- 248 (Washington, D.
C.: January 2001).
U. S. General Accounting Office, HUD Management: HUD*s High- Risk Program
Areas and Management Challenges, GAO- 02- 869T (Washington, D. C.: July
24, 2002).
U. S. General Accounting Office, Financial Management: Coordinated
Approach Needed to Address the Government*s Improper Payments Problems,
GAO- 02- 749 (Washington, D. C.: Aug 9, 2002).
GAO- 03- 1029T 39
Grant Programs:
Formula Grants: Effects of Adjusted Population Counts on Federal Funding
to States.
GAO/ HEHS- 99- 69. Washington, D. C.: February 26, 1999.
Medicaid Formula: Effects of Proposed Formula on Federal Shares of State
Spending.
GAO/ HEHS- 99- 29R. Washington, D. C.: February 19, 1999.
Welfare Reform: Early Fiscal Effect of the TANF Block Grant. GAO/ AIMD-
98- 137. Washington, D. C.: August 22, 1998.
Public Housing Subsidies: Revisions to HUD*s Performance Funding System
Could Improve Adequacy of Funding. GAO/ RCED- 98- 174. Washington, D. C.:
June 19, 1998.
School Finance: State Efforts to Equalize Funding Between Wealthy and Poor
School Districts. GAO/ HEHS- 98- 92. Washington, D. C.: June 16, 1998.
School Finance: State and Federal Efforts to Target Poor Students. GAO/
HEHS- 98- 36. Washington, D. C.: January 28, 1998.
School Finance: State Efforts to Reduce Funding Gaps Between Poor and
Wealthy Districts. GAO/ HEHS- 97- 31. Washington, D. C.: February 5, 1997.
Federal Grants: Design Improvements Could Help Federal Resources Go
Further.
GAO/ AIMD- 97- 7. Washington, D. C.: December 18, 1996.
Public Health: A Health Status Indicator for Targeting Federal Aid to
States.
GAO/ HEHS- 97- 13. Washington, D. C.: November 13, 1996.
School Finance: Options for Improving Measures of Effort and Equity in
Title I.
GAO/ HEHS- 96- 142. Washington, D. C.: August 30, 1996.
Highway Funding: Alternatives for Distributing Federal Funds. GAO/ RCED-
96- 6. Washington, D. C.: November 28, 1995.
Ryan White Care Act of 1990: Opportunities to Enhance Funding Equity. GAO/
HEHS96- 26. Washington, D. C.: November 13, 1995.
GAO- 03- 1029T 40
Department of Labor: Senior Community Service Employment Program Delivery
Could Be Improved Through Legislative and Administrative Action. GAO/
HEHS- 96- 4. Washington, D. C.: November 2, 1995.
Flood Insurance Losses:
Flood Insurance: Information on Financial Aspects of the National Flood
Insurance Program. GAO/ T- RCED- 00- 23. Washington, D. C.: October 27,
1999.
Flood Insurance: Information on Financial Aspects of the National Flood
Insurance Program. GAO/ T- RCED- 99- 280. Washington, D. C.: August 25,
1999.
Flood Insurance: Financial Resources May Not Be Sufficient to Meet Future
Expected Losses. GAO/ RCED- 94- 80. Washington, D. C.: March 21, 1994.
Medicare Incentive Payment Programs:
Physician Shortage Areas: Medicare Incentive Payments Not an Effective
Approach to Improve Access. GAO/ HEHS- 99- 36. Washington, D. C.: February
26, 1999.
Health Care Shortage Areas: Designations Not a Useful Tool for Directing
Resources to the Underserved. GAO/ HEHS- 95- 200. Washington, D. C.:
September 8, 1995.
Social Security Pension Offset Provision:
Social Security Administration: Revision to the Government Pension Offset
Exemption Should Be Considered. GAO- 02- 950. Washington, D. C.: August
15, 2002.
Social Security: Congress Should Consider Revising the Government Pension
Offset *Loophole*. GAO- 03- 498T. Washington, D. C.: February 27, 2002.
GAO- 03- 1029T 41
Food Safety:
Food Safety: CDC Is Working to Address Limitations in Several of Its
Foodborne Surveillance Systems. GAO- 01- 973. Washington, D. C.: September
7, 2001.
Food Safety: Federal Oversight of Shellfish Safety Needs Improvement. GAO-
01- 702. Washington, D. C.: July 9, 2001.
Food Safety: Overview of Federal and State Expenditures. GAO- 01- 177.
Washington, D. C.: February 20, 2001.
Food Safety: Federal Oversight of Seafood Does Not Sufficiently Protect
Consumers.
GAO- 01- 204. Washington, D. C.: January 31, 2001.
Food Safety: Actions Needed by USDA and FDA to Ensure That Companies
Promptly Carry Out Recalls. GAO/ RCED- 00- 195. Washington, D. C.: August
17, 2000.
Food Safety: Improvements Needed in Overseeing the Safety of Dietary
Supplements and *Functional Foods*. GAO/ RCED- 00- 156. Washington, D. C.:
July 11, 2000.
Meat and Poultry: Improved Oversight and Training Will Strengthen New Food
Safety System. GAO/ RCED- 00- 16. Washington, D. C.: December 8, 1999.
Food Safety: Agencies Should Further Test Plans for Responding to
Deliberate Contamination. GAO/ RCED- 00- 3. Washington, D. C.: October 27,
1999.
Food Safety: U. S. Needs a Single Agency to Administer a Unified, Risk-
Based Inspection System. GAO/ T- RCED- 99- 256. Washington, D. C.: August
4, 1999.
Food Safety: Opportunities to Redirect Federal Resources and Funds Can
Enhance Effectiveness. GAO/ RCED- 98- 224. Washington, D. C.: August 6,
1998.
Food Safety: Federal Efforts to Ensure the Safety of Imported Foods Are
Inconsistent and Unreliable. GAO/ RCED- 98- 103. Washington, D. C.: April
30, 1998.
Food Safety: Changes Needed to Minimize Unsafe Chemicals in Food. GAO/
RCED- 94- 192. Washington, D. C.: September 26, 1994.
Food Safety and Quality: Uniform Risk- based Inspection System Needed to
Ensure Safe Food Supply. GAO/ RCED- 92- 152. Washington, D. C.: June 26,
1992.
GAO- 03- 1029T 42
Grants for Homeland Security:
Federal Assistance: Grant System Continues to Be Highly Fragmented. GAO-
03- 718T. Washington, D. C.: April 29, 2003.
Multiple Employment and Training Programs: Funding and Performance
Measures for Major Programs. GAO- 03- 589. Washington, D. C.: April 18,
2003.
Managing for Results: Continuing Challenges to Effective GPRA
Implementation.
GAO/ T- GGD- 00- 178. Washington, D. C.: July 20, 2000.
Workforce Investment Act: States and Localities Increasingly Coordinate
Services for TANF Clients, but Better Information Needed on Effective
Approaches. GAO- 02- 696. Washington, D. C.: July 3, 2002.
Fundamental Changes are Needed in Federal Assistance to State and Local
Governments. GAO/ GGD- 75- 75. Washington, D. C.: August 19, 1975.
Rural Housing Assistance: Rural Housing Programs: Opportunities Exist for
Cost Savings and Management Improvement. GAO/ RCED- 96- 11. Washington, D.
C.: November 16, 1995.
Public Power:
Congressional Oversight: Opportunities to Address Risks, Reduce Costs, and
Improve Performance. GAO/ T- AIMD- 00- 96. Washington, D. C.: February 17,
2000.
Federal Power: The Role of the Power Marketing Administrations in a
Restructured Electricity Industry. GAO/ T- RCED/ AIMD- 99- 229.
Washington, D. C.: June 24, 1999.
Federal Power: PMA Rate Impacts, by Service Area. GAO/ RCED- 99- 55.
Washington, D. C.: January 28, 1999.
Federal Power: Regional Effects of Changes in PMAs* Rates. GAO/ RCED- 99-
15. Washington, D. C.: November 16, 1998.
Power Marketing Administrations: Repayment of Power Costs Needs Closer
Monitoring.
GAO/ AIMD- 98- 164. Washington, D. C.: June 30, 1998.
GAO- 03- 1029T 43
Federal Power: Options for Selected Power Marketing Administrations* Role
in a Changing Electricity Industry. GAO/ RCED- 98- 43. Washington, D. C.:
March 6, 1998.
Federal Electricity Activities: The Federal Government*s Net Cost and
Potential for Future Losses. GAO/ AIMD- 97- 110 and 110A. Washington, D.
C.: September 19, 1997.
Federal Power: Issues Related to the Divestiture of Federal Hydropower
Resources.
GAO/ RCED- 97- 48. Washington, D. C.: March 31, 1997.
Power Marketing Administrations: Cost Recovery, Financing, and Comparison
to Nonfederal Utilities. GAO/ AIMD- 96- 145. Washington, D. C.: September
19, 1996.
Federal Power: Outages Reduce the Reliability of Hydroelectric Power
Plants in the Southeast. GAO/ T- RCED- 96- 180. Washington, D. C.: July
25, 1996.
Federal Power: Recovery of Federal Investment in Hydropower Facilities in
the PickSloan Program. GAO/ T- RCED- 96- 142. Washington, D. C.: May 2,
1996.
Federal Electric Power: Operating and Financial Status of DOE*s Power
Marketing Administrations. GAO/ RCED/ AIMD- 96- 9FS. Washington, D. C.:
October 13, 1995.
Child Support Enforcement:
Child Support Enforcement: Clear Guidance Would Help Ensure Proper Access
to Information and Use of Wage Withholding by Private Firms. GAO- 02- 349,
March 26, 2002.
Child Support Enforcement: Effects of Declining Welfare Caseloads Are
Beginning to Emerge. GAO/ HEHS- 99- 105. Washington, D. C.: June 30, 1999.
Welfare Reform: Child Support an Uncertain Income Supplement for Families
Leaving Welfare. GAO/ HEHS- 98- 168. Washington, D. C.: August 3, 1998.
Child Support Enforcement: Early Results on Comparability of Privatized
and Public Offices. GAO/ HEHS- 97- 4. Washington, D. C.: December 16,
1996.
Child Support Enforcement: Reorienting Management Toward Achieving Better
Program Results. GAO/ HEHS/ GGD- 97- 14. Washington, D. C.: October 25,
1996.
GAO- 03- 1029T 44
Child Support Enforcement: States* Experience with Private Agencies*
Collection of Support Payments. GAO/ HEHS- 97- 11. Washington, D. C.:
October 23, 1996.
Child Support Enforcement: States and Localities Move to Privatized
Services.
GAO/ HEHS- 96- 43FS. Washington, D. C.: November 20, 1995.
Child Support Enforcement: Opportunity to Reduce Federal and State Costs.
GAO/ THEHS- 95- 181. Washington, D. C.: June 13, 1995.
(450243)
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