GAO: Transformation Challenges, and Opportunities (16-SEP-03,	 
GAO-03-1167T).							 
                                                                 
Congress sought GAO's views on GAO's accomplishments, challenges,
and opportunities for its oversight hearing. It also sought GAO's
views on its latest human capital proposal, which has been	 
introduced in the Senate as S. 1522.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1167T					        
    ACCNO:   A08498						        
  TITLE:     GAO: Transformation Challenges, and Opportunities	      
     DATE:   09/16/2003 
  SUBJECT:   Agency missions					 
	     Federal agency reorganization			 
	     Federal legislation				 
	     Human resources utilization			 
	     Proposed legislation				 
	     Accountability					 
	     Internal controls					 
	     Performance measures				 
	     Strategic planning 				 
	     Productivity in government 			 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-03-1167T

                                       A

Test i mony Before the Senate Committee on Governmental Affairs

For Release on Delivery Expected at 9: 30 a. m. EDT GAO Tuesday, September
16, 2003 Transformation,

Challenges, and Opportunities

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

GAO- 03- 1167T

Madam Chair and Members of the Committee: I am pleased to appear before
you today* almost 5 years after becoming the seventh Comptroller General
of the United States* to discuss what GAO has accomplished during my
tenure thus far, the challenges we face at GAO, including why passage of
S. 1522, the GAO Human Capital Reform Act, is an integral part of helping
GAO prepare for those challenges, and what we are contemplating for the
future. Before I begin, I would like to commend you for holding this
oversight hearing, the first oversight hearing this Committee has held on
GAO since 1995. In addition, Madam Chair, I would like to thank both you
and Sen. Voinovich for sponsoring S. 1522, the GAO Human Capital Reform
Act, and for introducing the bill before the August recess. When I became
Comptroller General in November 1998, I found an organization, with a
long- standing reputation for doing good work and a

talented workforce, that was doing many things right. However, the agency
was in need of revitalization because it had not had a confirmed agency
head for more than 2 years and had undergone many years of downsizing and
severe budgetary reductions. I also found an organization that, in my
opinion, was still too hierarchical, process- oriented, *siloed,*
internally focused, and somewhat risk adverse. My consultations with
congressional members and staff, external entities in both the public and
private sectors, and GAO staff led me to the belief that GAO must do
things differently as we move forward in order to continue to maximize our
value to the Congress and the country, especially in view of the strong
likelihood of constrained resources and client demands. Specifically, we
needed to take

steps to transform GAO to make it more results- oriented, more client
focused, more partnerial, more externally aware, more transparent, more
strategic, more employee oriented, and more constructive in dealing with
those who are the subject of our work. Over the past 5 years, we believe

that we have accomplished much. Nevertheless, we recognize that we still
have much to do and welcome and value the comments of every Member of this
Committee in helping us become and stay a model federal agency that

supports the Congress* important responsibilities under the U. S.
Constitution. GAO*s Evolving Role Established in 1921 by the Budget and
Accounting Act to follow the federal

dollar and ensure that it is spent in an economical, efficient, and
effective manner, GAO has evolved over its 82- year history to meet the
changing needs of the Congress and the nation. Today*s GAO is profoundly
different

in organization than the one established in 1921. For example, over the
years, GAO has changed from an entity that once

 operated as an independent entity (the law did not state that GAO was to
be part of the legislative branch) to one that is recognized as an
independent agency within the legislative branch whose primary client is
the institution of the Congress;

 audited the government*s vouchers to one that evaluates the efficiency
and effectiveness of a wide range of federal policies and programs; 
performed work mostly of a self- initiated basis to one where 89 percent

of its work in fiscal year 2002 was either mandated or requested by the
Congress;  conducted work primarily in the area of oversight to one that
now

performs work in the areas of oversight, insight, foresight, and legal/
adjudicatory activities.

 employed principally voucher examiners to an organization that employs a
highly educated, skilled, and diverse professional staff with degrees in a
variety of academic disciplines, such as accounting, law, engineering,
public administration, business administration, computer

science, economics, medicine, and social and physical sciences. Although
today*s GAO is different from that of 1921, it has remained faithful
throughout its history to its original mandate of assuring the
government*s accountability to the American people. In addition, GAO has
historically defended its ability to conduct and report its work in an
independent, objective, professional, and nonpartisan manner in order to
maintain the credibility that an *honest broker* must have in order to
have its information, analyses, and judgments trusted by lawmakers,
policymakers, and the American people.

GAO has benefited from the past leadership of several of my predecessors.
In particular, I would like to commend my most recent predecessors, Elmer
B. Staats, who served from 1966 to1981 and, Charles A. Bowsher, who served
from 1981 to 1996, both of whom accomplished a great deal during their 15
year tenures. Mr. Staats strengthened GAO*s emphasis on program evaluation
and policy analysis so that GAO would be better equipped to review the
expanded social programs of the Great Society. He also

promoted progress in federal financial and program accountability both

domestically and internationally. In addition, Mr. Staats was responsible
for the United States* joining the International Organization of Supreme
Audit Institutions (INTOSAI), an organization composed of national audit
offices of 184 nations who share knowledge and expertise on an ongoing
basis. Mr. Bowsher championed federal financial management reform, in
general, and the Chief Financial Officers (CFO) Act, in particular. He
also

initiated GAO*s high- risk series. In the human capital arena, it was Mr.
Staats who in 1980 successfully gained GAO*s legislative authority to
establish a broad- banding and pay for performance system that Mr.

Bowsher subsequently was able to implement in 1989. It is because of their
leadership efforts that GAO had certain initial human capital tools and
flexibilities for over two decades that many executive branch agencies are
either just requesting or recently received and was able to exercise them.

Today, GAO is an agency uniquely poised to serve the Congress with the
information it needs to address the full range of important issues and
challenges our nation faces in a complex, rapidly changing, and
increasingly interdependent world. 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 the Congress and our country. 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 on providing
professional, objective, fact- based, nonpartisan, nonideological, fair,
and balanced information to the Congress and the public at large. 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;

 insight related work that involves determining which programs work and
which do not;

 foresight related work that is future oriented and involves identifying
key trends and emerging challenges before they reach crisis proportions;

 reviews and analyses of agencies* budgets in support of the
appropriations process;

 investigations to assess whether illegal or improper activities are
occurring;

 analyses of the financing for government activities;  legal/
adjudicatory activities, including legal opinions to determine

whether agencies are in compliance with applicable laws and regulations
and resolution of bid protests by disappointed bidders seeking to obtain
federal contracts;  policy analyses to assess needed actions, develop
options, and note the

implications of possible actions;  *constructive engagements* whereby we
help agencies make progress

in key areas by *helping them to help themselves* through the issuance of
self- help guides, benchmarking and best practice studies, etc.; and 
additional assistance to the Congress in support of its oversight and

decision- making involving legislative branch entities, activities, and
functions.

See appendix I for graphics describing GAO past and present. GAO*S
Downsizing The 1990s was a difficult period for the GAO. Beginning in
1992, GAO began an over 5- year period of significant staff downsizing.
During the mid1990s, GAO underwent a 25 percent budgetary reduction that
had to be implemented over a 2- year period. In order to absorb such a
large budgetary reduction within such a short period of time, GAO
undertook a number of measures such as closing 5 field offices (including
our European and Far East field offices) and 4 sublocations in 1995. GAO
also reduced its workforce, using authority granted by the Congress, by
granting voluntary early retirements and buyouts and by conducting a
reduction in force or *layoffs* of staff in select field offices and in
Washington, D. C. While the measures taken allowed the agency to address
the immediate budgetary

challenge, they also increased the risk that GAO would not be positioned
well to serve the Congress in the future. For example, GAO*s hiring freeze
at the entry level produced an over 5- year gap in the workforce pipeline
that affected a smooth succession and resulted in a top heavy workforce.
GAO also significantly reduced its investments in technology by curtailing
upgrades of hardware and software, which adversely affected its ability to
apply technology to perform work better, faster, and more efficiently. GAO
also eliminated bonuses and reduced other investments in its people.
Today, we have a significantly smaller staff-- 40 percent smaller than in

1992* with slightly over 3,250 staff on board. About 75 percent of our
staff are located in our headquarters in Washington, D. C. and 25 percent
in 11 field offices around the country. While maintaining approximately
the same number of staff, we have been able to accomplish much in support
of the Congress. How was this made possible? First, we conducted a
comprehensive outreach and risk assessment shortly after I became the
Comptroller General. We identified risks that could undermine our ability
to support the Congress in future years, such as in the areas of human
capital and information technology and worked with our appropriations
committees to obtain targeted funding for those areas. We also determined

that the agency needed to undertake a transformation that even in the best
of organizations typically takes 7 or more years to accomplish. Critical
to that transformation was the development of a strategic plan that would
provide the agency a clear set of strategic goals and objectives.

Becoming More Fortunately, before my becoming Comptroller General, GAO had
Strategic, Partnerial,

recognized the need to prepare a strategic plan. We made this a top
priority after my appointment as Comptroller General. GAO*s strategic
plan, which and Externally Aware

is developed in consultation with the Congress, is forward looking and
built on several key themes or trends that relate to the United States and
our position in the world community. GAO*s strategic plan continues to be
a model for others, a framework for aligning our organization and
resources, and a basis to help inform client requests and identify work
initiated on the Comptroller General*s authority (also termed research and
development work). Our strategic planning process provides for updates
every 2 years, including an ongoing analysis of emerging conditions and
trends, extensive consultation with congressional clients and outside
experts, and assessments of internal capacities and needs. Our first
strategic plan, issued in the spring of 2000, set forth the issues

around which we needed to focus and develop our resources to effectively

serve the Congress in covering the period 2000- 2005. We updated the plan
in fiscal 2002, carrying forward the following four strategic goals, and
will retain these goals for our latest update scheduled to be issued in
early 2004 (see appendix I of this statement for our strategic plan
framework):

 Goal 1: Address current and emerging challenges to the well- being and
financial security of the American people.

 Goal 2: Respond to changing security threats and the challenges of
global interdependence.

 Goal 3: Help transform the government*s role and how it does business to
meet 21 st century challenges.

 Goal 4: Maximize the value of GAO by being a model federal agency and a
world- class professional services organization.

Because achieving our strategic goals and objectives also requires
strategies for coordinating with other organizations with similar or
complementary missions, we use (1) advisory panels and other bodies (e.
g., the Comptroller General Advisory Board, the Educators* Advisory Panel,
the Accountability Advisory Board) to inform GAO*s strategic and annual
work planning and (2) initiate and support collaborative national and
international audit, technical assistance, and other knowledge- sharing
efforts. In order to leverage our resources and tap certain expertise not
resident in GAO, we have entered into a partnership agreement with the
National Academy of Sciences. Also, we have worked to foster partnerships
with other *good government* organizations, such as the National Academy
for Public Administration, the Private Sector Council, the Council for
Excellence in Government, the Partnership for Public Service, and the
Association of Government Accountants. These types of strategic working
relationships allow us to extend our institutional knowledge and
experience and, in turn, to improve our service to the Congress, the
country, and the American people.

As previously mentioned, since 1970 GAO has been part of an international
network, INTOSAI, which is composed of 184 accountability organizations.
We have benefited from this network directly as an organization doing

work in support of the Congress in that the relationships fostered by
INTOSAI have facilitated our access to people, information, and knowledge
sharing needed to maximize the value and ensure the expeditious completion
of our international engagements. It is my opinion that our

country has also benefited from our participation in this network because
our efforts have served to promote democratic institutions and fight
corruption through strengthening accountability organizations around the
world. I serve on the Board of INTOSAI and head of the Accounting
Standards Committee and the Board*s Strategic Planning Task Force. In this
regard, during fiscal 2002, GAO was asked to lead a 10- nation task force
to develop a strategic planning framework for INTOSAI. INTOSAI*s draft
strategic planning framework, which was based on GAO*s approach to
strategic planning, was approved by INTOSAI*s Board in October 2002.
During fiscal 2003, the task force has been working to expand that

framework into a comprehensive strategic plan. GAO also is an active
member of the auditing standards, internal control standards, and public
debt committees. I am a founder of the Global Working Group (GWG), in
which the heads of GAO*s counterparts from 17 countries and I meet
annually to discuss mutual challenges and share best practices. These 18
members represent over 75 percent of global gross domestic product (GDP),
and the efforts of this group have helped all member countries as well as
INTOSAI as a whole.

Domestically, I chair the National Intergovernmental Audit Forum, and
through 10 regional intergovernmental audit forums, GAO consults regularly
with federal inspectors general as well as state and local auditors on
issues of mutual interest and concern. In addition, through the Domestic
Working Group (DWG), the Comptroller General and the heads of 18 federal,
state, and local audit organizations exchange information and seek
opportunities to collaborate in a manner similar to the GWG. As
Comptroller General, I also serve as one of the four principals of the
Joint Financial Management Improvement Program (JFMIP), who are actively
fostering financial management reform. The JFMIP principals have met five
times during the past 2 years with significant progress being made during
this period of time. GAO*S Transformation

In a testimony on executive reorganization authority that I delivered in
Efforts

April this year, I stated that creating high performing organizations
requires a cultural transformation within agencies. Hierarchical
management approaches will need to yield to participative approaches.
Processoriented ways of doing business will need to yield to results-
oriented ones. Siloed organizations* burdened with overlapping functions,
inefficiencies, and turf battles* will need to become more horizontal and
integrated organizations if they expect to make the most of the knowledge,
skills, and abilities of their people. Internally focused agencies will
need to focus

externally in order to meet the needs and expectations of their ultimate
clients* the American people.

Consistent with our strategic plan*s fourth goal, I believe that GAO
should *lead by example* and be a model federal agency and world- class
professional services organization. As the leading performance and
accountability organization in the United States and possibly the world,
GAO should be the federal government*s model for best practices in every
major operational area, from strategic planning and organizational
alignment to performance and accountability reporting, client service,
human capital practices, financial management, information technology,
change management, and knowledge management. To achieve this, we

have undertaken a comprehensive transformation effort over the past few
years. Leading this transformation team is an Executive Committee that I
established to provide strategic leadership. The members of the Committee
include myself as Chief Executive Officer; Gene Dodaro, Chief Operating

Officer; Sallyanne Harper, Chief Mission Support Officer and Chief
Financial Officer; and Anthony Gamboa as our General Counsel. Together, we
have focused GAO*s transformation efforts on three primary areas: results,
clients, and people. Our efforts to transform GAO into a high performing
organization have

included a range of internal and external initiatives that has helped us
become more strategic, results- oriented, partnerial, integrated,
responsive, flexible, employee oriented, externally focused and
constructive with those who we audit. Our strategic and annual planning
processes, as discussed earlier, have helped us look forward and allowed
us to proactively engage our clients in planning work that is focused on a
more balanced time horizon and results orientation. Our organizational
restructuring efforts have resulted in a significant streamlining and
consolidation. We have expanded and revised our products to better meet
client needs. In addition, we have redefined success in results- oriented
terms and have linked our goals both to institutional and individual
performance measures. We have strengthened our client relations and
employed a constructive engagement approach to those we review. The impact
of these and other efforts has been dramatic.

Over the past 4 years, we have worked on continuously improving GAO*s
performance measures, including most recently the development of a
balanced scorecard that would allow us to better monitor, track, and
report the achievement of results. Measuring the right things is vitally
important because you manage what you measure and measurements ultimately
drive

basic organizational and individual behaviors. The performance measures
that I found upon arriving at GAO were similar to other traditional
performance measures in that, among other things, some of them focused on
items that can be easily counted (e. g., numbers of reports); were

numerous and of undifferentiated significance; and were process- oriented
rather than results oriented. Our balanced scorecard is based on the three
key areas that I mentioned earlier: results, clients, and people. For
results, we measure such items as: financial benefits, other
(nonfinancial) benefits, progress towards meeting the strategic plan*s
goals and objectives, number of recommendations made, the percentage of
reports with recommendations; and the percentage of our recommendations
adopted. For clients, we measure such items as: direct client feedback on
individual products and testimonies, number of testimonies, and
timeliness. For people, we measure: attracting and retaining quality
talent; developing, supporting, and using staff; and leading, recognizing,
and listening to staff.

Realigning the Organization After our strategic plan was developed in
2000, we used it to restructure our organization in that same year to
align with the goals and objectives of

our strategic plan. Restructuring can be an important tool, but in order
to be effective, it must be focused on clear goals and specific desired
outcomes. GAO*s restructuring resulted in the elimination of a layer of

management and the consolidation of 35 issue areas into 13 teams. These
teams perform the bulk of our research, analysis, and audit work for the
Congress. Of the agencies in the legislative branch, GAO is the only one
with a field

office presence that has allowed it to be Congress* *eyes and ears* beyond
the nation*s capital. However, with changes in air transportation,
computer technology, demographics, and federal presence, our field office
structure needed to be reexamined. After extensive study, we continued a
process that began in 1986 and, as a result of the organizational
realignment effort referenced above, further reduced our field offices
from 16 to 11. Subsequently, we further restructured our field offices by
eliminating the position of regional manager* a Senior Executive Service
level position* in the individual field offices and consolidating the
remaining field offices into three regions* the eastern region, the
central region, and the western region, each headed by a single senior
executive.

Achieving Results GAO*s contributions to the Congress and our country are
significant and varied. While our contributions to financial benefits are
quantifiable, what

is more difficult to quantify and yet very valuable, are contributions to
help inform the national debate on a broad spectrum of issues; providing
the Congress with assistance such as reviews of agency budgets that help
identify areas of potential savings; preventing major problems from
occurring through constructive engagement efforts, when appropriate,

with agencies to *help them help themselves* make progress in key areas;
leading by example to demonstrate to agencies what can be done to advance
management reform; and advancing the accountability community, both
domestically and internationally, through the sharing of

best practices and methodologies in areas where GAO is a recognized
leader, such as performance auditing, financial auditing and reporting,
standards setting, and governance. To move towards a results orientation,
we have reexamined our desired

outcomes and are working to simplify and improve our performance measures
to capture those contributions that are most significant. Beginning with
the issuance of our strategic plan, we monitor our progress. Fortunately,
by any reasonable benchmark, we are making excellent

progress towards achieving most of our performance goals. We also modified
our performance measures and eliminated specific goals, such as the number
of products issued, which, while easy to count, was not resultsoriented
and did not have a strong enough correlation to positive results. GAO
delivers by any benchmark, an excellent return on investment to the

Congress and the American people. I would like to briefly summarize some
of our achievements over the past 5 years. Our financial and nonfinancial
accomplishments have increased steadily over the past 5 years, and some
have almost doubled. See table 1 for a summary of GAO*s financial and
nonfinancial benefits.

Table 1: Annual Measures and Targets 2002

5- year 1998

1999 2000

2001 Avg. 2003

Performance measure Actual Actual Actual Actual Target Actual Actual
Target

Financial benefits (billions) $19. 7 $20. 1 $23. 2 $26. 4 $30.0 $37. 7 a
$25. 4 $32.5 b Other benefits 537 607 788 799 770 906 727 800 b Past
recommendations implemented 69% 70% 78% 79% 75% 79% N/ A 77% New
recommendations made 987 940 1,224 1,563 1,200 1,950 1,333 1,250 b New
products with recommendations 33% 33% 39% 44% 45% 53% 40% 50% Testimonies
256 229 263 151 200 216 223 180 b Timeliness 93% 96% 96% 95% 98% 96% 95%
98% Source: GAO.

a Changes GAO made to its methodology for tabulating financial benefits
caused the fiscal 2002 results to increase about 11 percent. b Four
targets published in GAO*s performance plan for fiscal 2003 were
subsequently revised based

on more current information. Two were raised; two were lowered. The
original targets were financial benefits, $35 billion; other benefits,
785; recommendations made, 1,200; and testimonies, 210.

As depicted in table 1, in fiscal year 1998, for every dollar invested in
GAO, we helped the Congress and the agencies produce about $58 in
financial benefits or $19.7 billion in total. In fiscal year 2002, for
every dollar invested in GAO, we helped the Congress and the agencies
produce about $88 in financial benefits or $37.7 billion in total. The 5-
year average for financial benefits was $25. 4 billion for fiscal years
1998 through 2002. These financial benefits were achieved through actions
taken by the

Congress and federal departments and agencies that led to budget
reductions, avoided costs, deferred appropriations, or resulting in
additional revenue collections. Several recent examples of where our work

resulted in significant financial benefits include our work in preventing
inappropriate Medicare payments (financial benefits of $8.1 billion) and
our work on the Department of Defense*s (DOD) consolidation initiatives at
its computer centers (financial benefits of $859 million). Based on our
results to date, we fully expect our fiscal year 2003 financial benefits
to significantly exceed the 5- year average.

GAO*s work has helped inform congressional deliberations and debate on a
broad spectrum of issues. During the 107 th Congress, we made substantive
contributions through our products, testimonies, briefings, and technical
assistance in areas vital to helping legislators address challenges to our
nation*s national security, homeland security, economic security, as well
as

the financial security of Americans. For example, during the 107 th
Congress, GAO*s work supported legislative deliberations and policy
decisions involving the Homeland Security Act of 2002, Public Law 107-
296; the Aviation Security and Transportation Act, Public Law 107- 71; the
Sarbanes- Oxley Act of 2002, Public Law 107- 204; Help America Vote Act of
2002, Public Law 107- 252; Best Pharmaceuticals for Children Act, Public
Law 107- 1092; Terrorism Insurance Act of 2002, Public Law 107- 297; and
the E- Government Act of 2002, Public Law 107- 347. Our work has also
helped facilitate the transformation of the federal government in general.
More

specifically, our efforts have helped identify the attributes of high
performing organization, challenges in the human capital arena,
competitive sourcing, and reforms needed for specific entities like the U.
S. Postal Service and the Pension Benefit Guaranty Corporation. In
addition to financial benefits, GAO*s work has led to improvements in a

wide range of government operations and activities. GAO*s work was
instrumental in bringing 906 needed improvements in the effectiveness and
efficiency of government operations and services in fiscal year 2002.
Since most of the results of our work take the form of action initiated in
response to our recommendations, we use the number of recommendations made
during the year as a performance measure. In fiscal year 2002, we made
1,950 recommendations for improvements in the economy, efficiency, and

effectiveness of federal operations. An example of recommendations that
led to such improvements is our work on improper payments, where we made
recommendations on actions agencies should take to reduce improper
payments. These recommendations not only led to the enactment of the
Improper Payments Information Act of 2002, Public Law 107- 300, but also
resulted in action by the Office of Management and Budget (OMB) through
the President*s Management Agenda which required

selected agencies to report improper payment rates and the causes of those
payments. Because our recommendations take time to implement, we track
recommendations made in past years. Specifically, in fiscal year 2002, we
noted that 79 percent of the recommendations we had made in fiscal 1998
had been implemented, a significant percentage when the work

we have done for the Congress becomes a catalyst for creating tangible
benefits for the American people. GAO continued its long- standing
tradition of providing the Congress a framework for oversight through the
issuance of our Performance and Accountability Series and High- Risk
Update. Our 2001Update identified close to 100 major management challenges
and program risks at 21 federal agencies and highlighted actions to
address these serious problems. In

preparing the 2001 update, we established a new framework with respect to
the High Risk list that provided greater consistency in determining which
areas should be designated high risk and which areas would be eligible for
getting off the high risk list. Our 2003Update added the new high risk
issues Implementing and Transforming the New Department of

Homeland Security, Modernizing Federal Disability Programs, Federal Real
Property, and the Medicaid Program; subsequently, we added the Pension
Benefit Guaranty Corporation*s Single- Employer Insurer Program. We are
currently examining ways of improving on our Performance and
Accountability Series and High- Risk Update with an eye towards making it
even more strategic and foresight oriented.

Serving the Client From the beginning of my tenure, I have sought to
strengthen relations and improve communications with our congressional
clients. Addressing client needs is critical to any organization*s
success, and while GAO is unique in

that it must provide the Congress its best professional opinion in a
political, and sometimes contentious, environment, it must be perceived by
its client as meeting its needs. Both prior to and subsequent to my
appointment as Comptroller General, I consulted broadly with key Members
and staff in both houses and on both sides of the aisle as well as with a
variety of other parties. Based on this outreach, some believed or
perceived that GAO may have strayed from important values related to its
mission, may have become closer to one political party, and, may not have
effectively managed its staff details to certain congressional committees.
Another

concern that I heard was that GAO*s basis for decision making on requests
was not very transparent, well known, or understood.

To address these issues, upon becoming the Comptroller General, I
immediately worked with GAO*s top management to establish and communicate
to all GAO staff our mission and core values, to guide what

we do and how we do our work. Our mission statement states: *GAO exists 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.* After a lot of
discussion and debate, we agreed on an express set of core values to guide
our work. GAO*s core values are accountability, integrity, and
reliability. The values are further defined as follows:

 Accountability: We help the Congress oversee federal programs and
operations to ensure accountability to the American people. GAO*s
analysts, lawyers, auditors, economists, information technology

specialists, investigators, and other multidisciplinary professionals seek
to enhance the economy, efficiency, effectiveness, and credibility of the
federal government both in fact and in the eyes of the American people.

 Integrity: We set high standards for ourselves in the conduct of GAO*s
work. Our agency takes a professional, objective, fact- based nonpartisan,
nonideological, fair and balanced approach to all activities. Integrity is
the foundation of reputation and the GAO approach to work ensures both.

 Reliability: We at GAO want our work to be viewed by the Congress and
the American public as reliable. We produce high- quality reports,
testimony, briefings, legal opinions, and other products and services that
are timely, accurate, useful, clear and candid.

These are values that represent our institutional beliefs and boundaries.
I use them every day in my internal and external decision making. Both our
mission and core values are communicated externally and internally through
many venues. In addition, we also developed and implemented a set of
Congressional

Protocols* policies and procedures* to guide our interactions with and
ensure our accountability to the Congress. These protocols, which
underwent a 9- month pilot test, set out clear, transparent, consistently
applied policies and practices for GAO*s relations with the Congress. They
are designed to help reduce miscommunications and ensure that our
congressional requesters are treated both consistently and equitably. The
final protocols were issued in November 2000 and have been well received.
We are in the process of updating our Congressional Protocols now and will
be vetting them with your Committee and others before finalizing the
revisions.

To respond more effectively to the Congress, we changed our process for
accepting congressional requests (if accepted, these requests are termed
engagements) and our approach to identifying related risk. We have

become increasingly sophisticated in meeting our clients* needs within
available resources. We believe that our engagement acceptance process has
provided more structure; a broader institutional perspective; greater
internal collaboration; and additional awareness of the external
environment, including potential partnerships in connection with GAO
engagements. Annually, in addition to mandates established in law, we
receive over a thousand requests from the Congress, with most coming

from congressional committees and lesser numbers from individual members
of Congress and the senior leaders. To address these requests in a timely
basis and allow for prompt communication back to the requesters, the
requests are reviewed and discussed in a weekly meeting chaired by Gene
Dodaro, our Chief Operating Officer. During that meeting, members

of the Executive Committee and GAO*s managing directors discuss
congressional requests received during the previous week. As part of that
discussion, we determine whether to accept the request based on
consideration of factors such as our ability to carry out the work in
terms

of both authority and resources available, work that may already be
ongoing, and the priority assigned to the requester based on those set
forth in our Congressional Protocols. Also, during that meeting, a risk
factor is assigned to the engagement that will, among other things,
determine the level of product review required before issuance. To
facilitate the timeliness of our response to our clients, I have delegated
to our team managing directors the authority to sign off on products with
lower risk designations.

In the interest of leading by example and promoting transparency and
accountability in government, we provide annual Performance and
Accountability reports to the Congress and the public. We have also
improved congressional access to GAO information on our active assignments
and our products. GAO*s first Accountability Report to the Congress, which
discusses our performance and accountability in serving the Congress and
the American people, was issued for fiscal year 1999. For fiscal year
2001, we issued a performance plan that contained the performance measures
and annual performance targets we planned to use

to gauge progress towards accomplishing our strategic goals and
objectives. For 2002, we combined an assessment of our accomplishments in
fiscal year 2001 with our plans for continued progress through fiscal year
2003 into one performance and accountability report and issued a new and
condensed *highlights report.* George Mason University*s Mercatus Center
evaluated our fiscal year 2002 Performance and Accountability report at
our request and ranked GAO*s report number one in the federal government.
The report earned a Certificate of Excellence in Accountability Reporting
from the Association of Government Accountants (AGA). It also earned
honors for graphics design in the annual American Graphics Design Award
competition of 2003. The annual competition attracts about 10,000 entries
from advertising agencies, graphic design firms, corporate creative
departments, and publishers in a wide range of categories, and fewer than
10 percent were selected for awards.

In the past, GAO has made several attempts to devise systems for measuring
how well it was meeting the needs of our congressional clients, yet none
of these attempts proved to be particularly successful. We now seek direct
client feedback through our continuous congressional outreach effort and a
Web- based client feedback survey on certain individual products and
testimonies. These initiatives are set forth as follows.

 Continuous congressional outreach. Since the mid- 1990s, we have
conducted a structured outreach to our key congressional clients* the
Senate and House senior leaders and the congressional committees* in order
to obtain feedback on our performance, discuss the legislative agenda for
the coming year and how GAO can best support the Congress, and obtain
information needed to update our strategic plan.

 Feedback on individual products. 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 piloted for 7 months with our oversight committees and
implemented in fiscal year 2002, used E- mail and a Web site to obtain
client feedback on (1) product timeliness and (2) communications and
professional conduct during the engagement for a sample of recently issued
products. For example, of those who responded, we received a 91 percent
favorable response rate for our testimonies and a 93 percent favorable
response rate for our written products for the period covering March
through November 2002. Indications are that the favorable response rate
for our products and testimonies is holding for this fiscal

year as well.  Congressional testimonies. Since the early 1980s, GAO*s
testimonies at

congressional hearings have increased. At one time, only the Comptroller
General and a few others could testify. My predecessor, Mr. Bowsher,
expanded the pool of potential GAO witnesses to our senior executive
corps. During fiscal 2002, members of our senior executive service or I
testified 216 times in fiscal year 2002 across a broad spectrum of
congressional committees, sometimes on as little as 24 hours notice.

 Timeliness. Given the time sensitive nature of the legislative process
and the fact that information delivered after decisions have been made is
not useful, we have worked hard to make sure that information is provided
in a timely manner. In fiscal year 2002, our on- time delivery

rate was 96 percent. Of our seven agencywide annual performance targets,
timeliness was the only measure that we did not fully meet. Recognizing
that members and key staff are inundated with information and pressed for
time, we sought better ways of communicating information

to them. We initiated efforts in fiscal year 2001 to revamp our
communications strategy. We piloted and have now implemented for most of
our products and testimonies a new reporting product line entitled
Highlights* a one- page summary that provides the key findings and

recommendations from a GAO engagement. This summary has been extremely
well- received by our congressional audience as well as the press and the
general public. In addition, we continue seeking better ways to
communicate, including presenting information in a visual manner to
quickly convey the message. We have applied technology and used our
Website to issue and publicize

our products not only to the Congress, but also to the general public. Our
external website now logs about 130,000 hits each day and more than 1
million GAO products are downloaded every month by our congressional
clients, the public, and the press. Further, to better inform the client
about the work we have in progress, we have implemented a Web- accessible
active assignment list for congressional clients and to facilitate key

contacts, enhanced the search capability for GAO products on our external
Web site. In yet another example of serving the Congress, GAO opened our
doors to

Members of the House of Representatives and their staffs on October 23,
2001, in response to the anthrax incident on Capitol Hill. As an outgrowth
of that experience, the House of Representatives has designated GAO one of
its contingency sites in the event of an emergency in order to maintain
legislative continuity of operations. Fostering Constructive

To better maximize our value to the Congress and work smarter, we have
Agency Relations

increased our constructive engagement efforts with other agencies. Rather
than deal with problems after the fact, piecemeal, or when they*ve reached
crisis proportions, we are working to prevent problems by pointing out

what is right, recognizing the progress made, and guiding agencies to
positive results by publishing self- assessment guides that provide tools
with which agencies can help themselves. One area in particular where this
has made a big difference is information technology. As we have reported
repeatedly, the federal government does not have the systems in

place that can provide accurate and real- time information for legislators
and policymakers to evaluate program effectiveness and efficiency.
However, our benchmarking and best practices studies are recognized
industrywide for their excellence. Other examples of our assisting

agencies include GAO*s work in strategic planning, human capital, and
financial management.

To this end, we have worked hard to cultivate good working relations with
the Office of Management and Budget (OMB) and Cabinet- level officials.
These relations have proven mutually beneficial. Because Congress* need
for information is time sensitive, having good working relations with the
executive branch agencies has helped us overcome bureaucratic inertia or
resistance in their providing information in a timely manner. As part of
our constructive engagement efforts, we have assisted in the congressional
and presidential transitions and provided 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, thus contributing to
good government. Our Performance and Accountability Series and High

Risk Update has proven useful in carrying out our responsibility under the
Presidential Transition Act in that it helped serve as a key source of
information for the incoming administration and Members of the 107 th
Congress. In addition, the President*s Management Agenda (PMA) 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.

To minimize misunderstanding and miscommunication between us and the
agencies relating to how we do our work and report the results, we piloted
a first- ever set of agency protocols for a 6- month period from December
2002 through June 2003, to guide our interactions with federal agencies
and provide clearly defined, consistently applied, well- documented, and
transparent policies for conducting our work with these federal agencies.
In developing the protocols, we sought comments from 28 federal
departments, agencies, and entities and are in the process of considering
their comments. After analyzing the comments from the pilot, we plan to
implement the agency protocols in fiscal year 2004.

Investing in People: Human Given GAO*s role as a key provider of
information and analyses to the Capital Initiatives

Congress, maintaining the right mix of technical knowledge and expertise
as well as general analytical skills is vital to achieving our mission. We
spend about 80 percent of our resources on our people. I think it is fair
to

say that while our people account for 80 percent of our costs, they
constitute 100 percent of our real assets. Without excellent human capital
management, we could still run the risk of being unable to deliver what
the Congress and the nation expects of us. For this and other reasons, we
seek the additional human capital flexibilities contained in S. 1522.

At the beginning of my term in fiscal year 1999, we completed a
selfassessment that profiled our human capital workforce and identified a
number of serious challenges facing our workforce, including significant
issues involving succession planning and imbalances in the structure,
shape, and skills of our workforce. As presented below, through a number
of strategically planned human capital initiatives over the past few
years, we have made significant progress in addressing these issues. The
flexibilities provided GAO in the GAO Personnel Flexibilities Act of 2001,

Public Law 106- 303, enacted on October 26, 2000, was a contributing
factor in helping us reshape the organization. In fiscal years 2002 and
2003, because of the authority granted us under the law, we granted
voluntary early retirement to 52 employees in fiscal year 2002 and 37
employees in fiscal year 2003. As a result of our various human capital
initiatives, as illustrated in figure 1, by the end of fiscal year 2002,
we had almost a 60 percent increase in the percentage of staff at the
entry- level (Band I) as compared with fiscal year 1998. Also, the
proportion of our workforce at the mid- level (Band II) decreased by 8
percent.

Figure 1: GAO*s Human Capital Profile FY 1998 FY 2002

Mission

SES/ SL 3.4

3.5 Band III 12.2

12.0 Band II

45.6 38.1

Band I 13.1

22.8 Other a

4.2 4.1 Mission Support b

21.5 19.5

Figures in percentages

Source: GAO.

a Attorneys and criminal investigators. b Mission support includes both
mission and mission support offices.

One of my top priorities when I became Comptroller General was to enhance
internal communications as a means of empowering staff and facilitating
our agency transformation and our change management efforts.

This has been accomplished through various means. For example, any GAO
staff member can e- mail me with comments and concerns, and believe me, I
do respond. Since becoming Comptroller General, I have provided employees
throughout GAO the opportunity to provide me their views through a
periodic, now annual, confidential employee survey. An independent
contractor collects the survey results and aggregates them. They then are
provided to GAO*s managing directors and me. Employees are also given the
opportunity to provide written narrative comments that I,

and I alone, receive for review. I recently received the results of the 3
rd employee survey in which 89 percent of GAO*s workforce responded and
2,101 provided me with written narrative comments, which I personally
read. Highlights of this most recent employee survey are as follows.

 The results of the 2003 Employee Survey were by and large very positive.
Of those questions with a basis for year- to- year comparisons, employee
satisfaction (as measured by the number of strongly

agree/ agree responses) was up in 72 of the 83 areas, with one area
remaining unchanged.  Critical *People Measures Scores,* which are used
in our balanced scorecard and reported externally, went up in all four
areas (i. e.,

organizational climate, staff utilization, leadership, and staff
development) in 2003 versus 2002. The increases in people measures were
attributable to both new and experienced staff responses to the

2002 survey.  In comparing our results to OPM*s 2002 survey of executive
branch

agencies for 11 benchmark questions, our 2003 survey results were higher
than the governmentwide benchmark numbers for 9 of 11 comparable
questions. GAO*s overall average positive score for these 11 benchmark
questions was about 10 percent higher than the OPM

benchmark questions* average. Similarly, for the four benchmark questions
also applicable to the private sector, GAO*s scores were higher than both
the private sector and government averages in all four areas,

significantly so in three of the four questions.  Some areas, such as
encouraging innovation and creativity and soliciting

and considering employee views, went up dramatically, which are big steps
in the right direction with respect to our overall transformation effort.

 There was only one area where the positives went down and the negatives
went up, and that was in the area of requiring our employees to prepare
Individual Development Plans (IDP). As a result, we are reassessing and
reconsidering our approach to IDPs.

I have also used periodic CG *Chats,* which are closed- circuit telecasts
to all agency staff. Through the years, I have used these telecasts on
numerous occasions to discuss critically important issues, such as GAO*s

strategic plan and congressional protocols, client service, employee
survey results, work processes, organizational alignment, information
technology- including our most recent human capital initiative, which your
committee is considering today. In addition, we established an employee
suggestion program in October 1999 as a means of tapping the ideas and
ingenuity of

GAO staff members to improve the agency*s processes, products, and
services. Since the start of the program, 2, 348 suggestions have been
submitted, of which 345 have been accepted, with most of the remaining
either rejected or closed because they didn*t meet the program*s criteria
or had duplicated earlier suggestions. One of the areas of which I am most
proud is the establishment of our now

fully democratically elected Employee Advisory Council (EAC). This
23member Council represents virtually every group of GAO employees. The

members of the Executive Committee and I use this Council to discuss
current and emerging issues of mutual interest and concern and to
continuously improve GAO. While the EAC opted not to testify today, I
understand that they have submitted a statement for the record on GAO*s
human capital proposal.

Other major human capital initiatives include the following:  Recruiting
talented staff. Because of the budget reductions of the mid1990s, GAO
froze hiring, which created an over 5- year gap in its

workforce pipeline. In fiscal year 1998, we resumed hiring, and in fiscal
year 2002, we hired nearly 430 permanent staff and 140 interns. We also
developed and implemented a strategy to place more emphasis on diversity
in campus recruiting. A recent article in the Washington Post

lauded GAO*s recruitment innovations and efforts as an example of a
federal agency that is approaching recruiting right.  Identifying and
assessing skills. A modern professional services

organization needs to know what skills its workforce possesses and be able
to readily assess those skills in support of its clients. GAO has
conducted an agencywide assessment and inventory of our workforce*s
knowledge and skills that is updated periodically.

 Retaining staff with critical skills. A challenge facing the federal
government is the retention of critical skills, particularly in the
technical areas. Using the authority granted us by Public Law 106- 303, we
established a corps of senior level executives who have the pay and

benefits of the Senior Executive Service but need not be generalist
managers. To retain staff with critical skills and staff with less than 3
years of GAO experience, we implemented legislation authorizing federal
agencies to offer student loan repayments in exchange for certain federal
service commitments. GAO ranks as one of the top agencies in providing
student loan repayments. GAO also periodically administers an employee
preference survey that is being used along with the results of the
knowledge and skills inventory to meet our institutional work needs while
accommodating staff preferences for types of work to the extent possible.
In addition, we have recently instituted a new knowledge transfer and
succession planning program that would allow select retirees to become
reemployed annuitants for up to 2 years following retirement in order to
facilitate the transfer of knowledge in critical areas and allow for a
smooth transfer of responsibilities.

 Modernizing the performance assessment system. In fiscal year 2002, GAO
completed an overhaul of its performance assessment system and implemented
a new, modern, effective, and credible performance appraisal system for
analysts and specialists; adapted the system for attorneys; and began
modifying the system for administrative professional and support staff.
Our performance standards were revised to incorporate our core values and
strategic goals. We also updated descriptions of performance to better
reflect the current nature of our work and implemented other key concepts,
such as leadershipby- example, client service, measurable results, matrix
management, open and constructive communications, and balancing people and

product considerations.  Investing in training. One of the down sides of
the budget reductions of the mid- 1990s was that GAO reduced its training
investment in

employees. World- class professional service organizations with staffs
similar to GAO*s multidisciplinary workforce invest nearly 6 percent of
their budgets in training staff. GAO*s investment in training its staff in
fiscal year 1998 was less than that. We have resumed our training
investment, but with an eye towards maximizing the efficiency and
effectiveness of our investment. To this end, we have hired a Chief

Learning Officer and established a new Learning Board to guide our Center
for Performance and Learning in formulating its training priorities. We
have also begun developing a new core training curriculum for managers and
staff to provide additional training on the key competencies required to
perform GAO*s work.

 Creating incentives and improving recognition. One of the areas that I
have championed since coming into office has been establishing the
allocation of pay on a more performance- oriented basis. We have been
fortunate to be the beneficiaries of excellent recruits, due in part to
the economic downturn, a renewed interest in public service following the
events of September 11, 2001, and our innovative human capital strategies.
Retaining these recruits, however, will require a range of

efforts including providing a continuous learning environment, adequate
technological support, and reasonably competitive compensation. Also, for
those who have made GAO their careers, there should be rewards for
outstanding performance. For example, during fiscal year 2003, we began
providing performance bonuses to top performers who are *pay

capped** those who, because they have reached the pay ceiling, are
ineligible for any permanent pay increases.

S. 1522 would help us continue to invest in our people and attract,
recruit, and retain staff with the critical skills we need. Building an
Integrated and

Information technology is critical to our productivity, success, and
viability. Reliable Information As such, we have been working on a number
of initiatives to enhance and

Technology Infrastructure protect our investments in information
technology. Specifically, we have

 completed a comprehensive review of our information technology; 
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.  developed, as required by the Clinger- Cohen Act, an
enterprise

architecture program* a blueprint for operational and technological
change;

 expanded information systems security efforts and disaster recovery
systems that allow for continuity of operations;

 made progress to implement a risk- based, agencywide security program,
provide security training and awareness, and develop and implement an
enterprise disaster recovery solution; and

 begun implementing an information security program consistent with the
requirements in the Government Information Security Reform provisions
(commonly referred to as *GISRA*) enacted in the Floyd D. Spence National
Defense Authority Act for fiscal year 2001.

During 2002 and 2003, we acquired new hardware and software and developed
user- friendly systems that enhanced our productivity and responsiveness
to the Congress. Specifically, we replaced aging desktop

workstations with notebook computers that provided greater computing
power, speed, and mobility; developed new, integrated, user- friendly
Webbased systems that eliminate duplicate data entry while ensuring the
reusability of existing data; expanded the availability of cellular phones
and personal digital assistants to GAO*s senior management; and added
video broadcast capability 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. Recently, the CIO Magazine*s August 15, 2003,
issue named GAO as a *CIO 100* organization, thereby recognizing GAO*s
excellence in managing information technology resources. Of the over 400
applicants from both

the public and private sectors, GAO was one of just three federal agencies
named a *CIO 100*. Specifically, GAO was recognized for asset management
(i. e., getting the most out of it existing systems), staffing and
sourcing (i. e., flexible and creative approaches to meeting personnel
needs), and partnerships (i. e., building internal and external
relationships to deliver new products and services). In addition, GAO was
specifically cited for a best practice* staffing new projects through
internal *help wanted* ads. Reengineering Business

As part of the organizational realignment implemented in calendar year
Processes 2000, we established an internal group whose mandate was to
focus on business process reengineering as a tool for increased
productivity and

knowledge management. One of the accomplishments of this group was the
launching of the Electronic Assistance Guide for Leading Engagements* the
EAGLE, which is the prototype of a comprehensive Web- based guide to
conducting GAO engagements. Recently, we have established a Continuous
Improvement Board to guide the activities of the group that has been
integrated into our Quality and Continuous Improvement office. Along with
our realignment, we also implemented two new management

strategies: risk management and matrix management. GAO*s risk management
approach allows management to identify key stakeholders throughout an
engagement, to transcend traditional organizational boundaries, to
maximize value, and manage risks in connection with GAO*s engagements and
other activities. GAO*s matrix management approach maximizes our value to
the Congress by leveraging the knowledge, skills,

and experience of all employees to ensure the highest quality products and
services and to help the Congress address the challenging, complex,
rapidly changing, and multidimensional problems facing the nation.

Being Good Stewards of Our As the leading performance and accountability
organization in the public

Financial Resources sector, it is vital that GAO set the example in the
area of financial

management as well. GAO*s financial statements for fiscal years 2002, like
those for fiscal years past, received an unqualified opinion from an
independent auditor. No material weaknesses in internal control were

identified, and the auditor reported substantial compliance with the
requirements in the Federal Financial Management Improvement Act of 1996
(the Improvement Act) for financial systems. In addition, the auditor did
not find any instances of noncompliance with the laws or regulations for
which they tested.

Challenges As with any organization, we face a range of internal and
external challenges that could affect our ability to effectively support
the Congress

in the future. Some of these challenges are those that require ongoing
management vigilance and attention (e. g., assuring product quality and
adherence to core values, human capital, physical security, and
information security) while others are special challenges that warrant
monitoring and/ or congressional attention.

While we have put in place a good risk management system for our
engagements, whereby all the engagements are reviewed weekly and
categorized by a variety of factors including risk, we nevertheless must
always be vigilant that GAO does not stray from its values and therefore,
lose its reputation for being an *honest broker* on important government
operations and policy issues. Given that about 25 percent of our staff
have been with GAO for 3 years or less, it is vitally important that we
inculcate these values in our staff and train them in the proper conduct
of our work. Also, we need to make sure the staff who have been here for
more than 3 years remain true to our values and our quality assurance
standards and practices. To ensure that we have an independent quality
check in place, GAO has had, beginning with its financial audits issued in
1995 and continuing for every 3 years thereafter, an external group* an
independent CPA firm* performs a peer review of our work. We are currently
in the process of extending this practice to our non- financial work and
expect our

products issued in 2004 to be peer reviewed by a team headed by the
Auditor General*s office of Canada who will conduct their work between
2004 and 2005. To prepare for this, we have invested much effort in
revamping our quality assurance framework.

We named in our fiscal year 2002 Performance and Accountability report
three risk areas* human capital, physical security, and information
security* as areas that could affect our ability to perform work for the
Congress. We have made progress in addressing each of these challenges,
but still have work to do. In the human capital area, we are faced with a
challenge because a significant percentage of our workforce is nearing
retirement age, while

marketplace, demographic, economic, and technological changes indicate
that competition for skilled workers will be greater in the future. We are
recruiting diverse, high- caliber staff with the skills and abilities we
need to achieve our strategic goals and objectives. Whether we will be
able to retain them when the economy improves remains to be seen, but I
can assure you that we are doing our best to do so. Given GAO*s role as a
key provider of information and analyses to the Congress, maintaining the
right mix of technical knowledge and expertise as well as general
analytical skills is vital to achieving our mission. Over the next several
years, we need to continue to address skill gaps, maximize staff
productivity and effectiveness, and reengineer our human capital policies,
programs, and processes to make them more user- friendly. We plan to
address skill gaps by further refining our recruitment and hiring
strategies to target gaps identified through our workforce planning
efforts, while taking into account the significant percentage of our
workforce eligible for retirement.

In the aftermath of the September 11 terrorist attacks and subsequent
anthrax incidents, the ability to provide a safe and secure workplace
emerged as a challenge for our agency. Protecting our people and our
assets is critical to our ability to carry out our mission to serve the
Congress and the American people. Also in light of these incidents, we
need to ensure information systems security and disaster recovery systems
that allow for the continuity of operations. We have made progress through
our efforts to, among other things, implement a risk- based, agencywide
security program; provide security training and awareness; and develop and
implement an enterprise disaster recovery solution. Special Challenges The
following are some special challenges that we are carefully monitoring

and may need to work with the Congress on to address:  Unfunded mandates.
Since becoming the Comptroller General, I have not asked for any increase
in our staffing levels and have requested

targeted investments in human capital, information technology and
security, and physical security initiatives based on specific business
cases. Last year, the Congress passed a 4.1 pay increase but did not
provide funding for all of the increase. While we were able to reallocate
our budget to cover these increases, we are concerned that if this becomes
a regular practice, we will be unable to effective discharge our
responsibilities in view of the fact that our employees* salaries and
related benefits comprise 80 percent of our budget. We have worked hard
with available resources to cover mandatory expenses, including

inflation and compensation costs. In addition, there has been recent
interest in having GAO expand the scope of its activities in such areas as
evaluating regulatory costs and benefits as well as conducting technology
assessments. While I obviously want to be sure that we meet the changing
needs of the Congress, I believe strongly that any

significant expansion of the scope of our work should be coupled with
appropriate funding. Doing otherwise would ultimately undermine our
ability to carry out our core activities. Looking longer- term, we are
concerned about the future fiscal outlook and its potential impact on our
organization. We hope that the Congress will resist the tendency, in
responding to budgetary constraints, to institute across the board budget
reductions or reward the *basket cases* with additional flexibilities and
appropriations, instead of rewarding organizations such as ours that
generate positive results, do many things right, and are trying to do the
right things.

 Supply and demand imbalances. While the overall number of congressional
requests has decreased, the quality of these requests has improved which
is reflected in the results we are achieving. Also, more requests are of a
bipartisan nature. However, we are monitoring closely the number of
engagements that we have accepted but not yet staffed, which has increased
during the past 4 years. These engagements, totaling over a hundred, are
spread among our 13 teams. The backlog is particularly acute in certain
teams and areas (e. g., health care) because of increasing congressional
demands. While we are working to achieve more flexibility in the way we
staff and are reexamining our inventory, there is a limit to our ability
to address these challenges by shifting resources from one area to another
because of the specialized skills and

knowledge required. We are concerned that we may not be able to respond to
engagements we accept in a timely manner if the backlog builds. Also, if
this supply and demand imbalance continues to grow, we will need to work
with this Committee, the House Government Reform Committee, our
appropriations committees, and senior leaders in

making some tough choices, such as possibly reconsidering and
reprioritizing any pending requests and not being able to accept requests
from individual Members. Further, we may have to limit the small
percentage of resources dedicated to research and development work (work
that by law the Comptroller General is able to initiate on his own
authority), which would hamper our ability to respond to urgent issues

as we were able to do in the areas like national preparedness, homeland
security, human capital, and Postal Service reform. I believe that it is
important for GAO to be able to dedicate roughly 10 - 15 percent of its
total resources to research and development work, which ultimately
improves our ability to respond to longer- range issues. In this regard,
the percentage of resources devoted to research and development work

was 13 percent in FY 01, 11 percent in FY 02, and 9 percent year to date
in FY 03.

 Access to records. Not surprisingly, GAO has faced access to record
problems periodically in its history. Most of the time, we have been able
to work with the executive branch. In my opinion, it was very unfortunate
that we could not work out our information request relating to the
National Energy Policy Development Group with the Vice President, who
chaired the Group. We felt that we had no choice but to seek redress
through the courts because the request was backed by four Senate committee
or subcommittee chairmen, and as you know, we are required by law to
perform work for committees. In addition, the administration did not
exercise its option to withhold the information based on executive
privilege or under the certification provision in GAO*s statute. The
federal district court ruled in its decision that GAO did not have the
standing to sue, but did not render an opinion on the merits of the case.
We decided not to proceed with an appeal for a variety of reasons. Since
then, we have monitored our access- to- record issues closely and have not
experienced thus far a proliferation of access to records problems. In
light of certain records access

challenges during the past few years, and with concerns about national and
homeland security unusually high at home and abroad, it may become more
difficult for us to obtain information from the executive branch and
report on certain issues. If this were to occur, it would hamper our
ability to complete congressional requests in a timely manner. We are
updating GAO*s engagement acceptance and review policies and practices to
address this issue. However, we do not require legislative changes in this
area at the present time.

 Selection process for the Deputy Comptroller General. GAO has only two
political appointee positions* the Comptroller General and the Deputy
Comptroller General. GAO has not had an official Deputy Comptroller
General since the appointment process was changed by law in 1980. Under
the law, the Deputy Comptroller General is nominated by the same 10 member
board that nominates the Comptroller General (i. e., Senate and House
leaders and the Chairmen and Ranking Minority Members of the Senate
Committee on Governmental Affairs and the House Committee on Government
Reform) working with the Comptroller General. Under the current scheme,
the Deputy Comptroller General is supposed to serve in the Comptroller
General*s absence or after his 15- year term is completed. I believe the
time has come to consider having the Comptroller General, in consultation
with the aforementioned board, be able to pick the Deputy, which is how it

works in most of our international counterpart organizations. 
Performance and accountability community coordination. Related to trying
to do more with the resources we have in the performance and
accountability area is determining how GAO and the Inspectors General
should best complement each other and coordinate. The Inspectors General
Act of 1978 as amended, Public Law 95- 452, which established the
Inspectors General, has been in existence for almost 25 years and merits a
review. Given the challenges facing the federal government, I

believe that the past should not be prologue in this arena. The law
currently requires that the Inspectors General coordinate with GAO to
ensure that they are not duplicating efforts. The traditional division of
responsibilities has been that GAO looks horizontally at programs and
functions across government, while the Inspectors General have been the
*local cop* on the beat focusing on combating fraud, waste, abuse

and mismanagement within their respective agencies. With OMB*s efforts to
make performance and financial reports more relevant to management
decision- making, our collaborative efforts in improving governmentwide
financial management will merit review. Over the next few years, GAO will
need to invest more resources, (through use of GAO*s own staff and/ or
through contractors) in assuring the work of the Inspectors General and
external auditors in the financial statements area. This resource
investment is necessary if we are to be able to render an opinion on the
consolidated financial statements of the U. S. government.

 Additional bid protest volume. Over the past year, GAO has seen the
number of bid protests filed increase by close to ten percent, and that

upward trend is continuing. In addition to its other roles, GAO also
serves as a quasi- judicial forum, hearing bid protests from disappointed
bidders seeking to obtain federal contracts. GAO provides an objective,
independent, and impartial forum for resolving protests, and GAO*s

decisions, which are published on our website, are relied on by the
courts, the contracting agencies, and the public. This means of resolving
disputes saves both time and money in that the parties need

not go through the federal court system. Two particularly significant
areas in which GAO has issued, and expects to continue issuing, decision
on bid protests are public/ private competitions under OMB Circular A- 76
and procurements involving purchases under GSA*s Federal Supply Schedules.
 Work involving other legislative branch entities. GAO is increasingly

being requested to provide assistance on work involving other legislative
branch entities such as the Architect of the Capitol, including its
Capitol Visitors Center project, the Capitol Police, the Government
Printing Office, and the Library of Congress. This assistance can take
different forms (e. g., direct assistance, contract procurement and

monitoring, or management and technical assistance) and can be of a
sensitive and high risk nature.

Need for S. 1522 I believe that it is vitally important to GAO*s future to
continue modernizing and updating its human capital policies and practices
in light of the

changing environment and anticipated challenges ahead. GAO*s proposal
represents a logical incremental advancement in modernizing our human
capital policies. Given GAO*s human capital infrastructure and unique role
in leading by example in major management areas, the rest of the federal
government can also benefit from GAO*s pay system experience. We
respectfully request the Committee*s support of our request. We also

respectfully request prompt passage of S. 1522 by the Congress, since some
of our existing authorities are set to expire at the end of this calendar
year.

GAO has used the narrowly tailored flexibilities granted by the Congress
previously in Public Law 106- 303, the GAO Personnel Flexibilities Act,
responsibly, prudently, and strategically. GAO*s latest proposal combines

diverse initiatives that, collectively, should further GAO*s ability to
enhance its performance; assure its accountability; and help ensure that
we can attract, retain, motivate, and reward a top- quality and high-
performing

workforce both now and in future years. Specifically, GAO is requesting
that the Congress (1) make permanent GAO*s 3- year authority to offer
early

outs and buyouts, (2) allow GAO to set its own annual pay adjustment
system separate from the executive branch, (3) permit GAO to set the pay
of an employee demoted as a result of workforce restructuring or
reclassification to keep his/ her basic pay but to set future increases

consistent with the new position*s pay parameters, (4) provide authority
to reimburse employees for some relocation expenses when that transfer has
some benefit to GAO but does not meet the legal requirements for
reimbursement, (5) provide authority to place upper- level hires with
fewer than 3 years of federal experience in the 6- hour leave category,
(6) authorize an executive exchange program with the private sector, and
(7) change GAO*s legal name from the *General Accounting Office* to the
*Government Accountability Office.*

We believe that our proposal is both well reasoned and reasonable.
Although GAO*s request for authority to adjust its annual pay system
separate from the executive branch may appear to be dramatic to some,
there are compelling reasons why GAO ought to be given this authority.
These include the fact that GAO already has a hybrid pay system
established by the authority the Congress granted it over two decades ago.
In addition, the proposal is modest if viewed in the light of authorities

already granted and requested by other agencies (e. g., DHS, DOD).
Further, GAO already has a number of key systems and safeguards in place
(e. g., a validated performance measurement system for its analysts and
attorneys; a grievance process which allows employees to appeal to an
independent Personnel Appeals Board; and opportunity periods for employee
improvement) and has plans to build in additional safeguards if the
additional authorities that we are seeking are granted. Since submitting
the proposal, I testified on July 16, 2003, before the House

Government Reform Subcommittee on Civil Service and Agency Organization,
along with Chris Keisling, the Employee Advisory Council*s representative,
Paul Light of Brookings Institution, and Pete Smith of the Private Sector
Council. See Appendix II for a copy of the statement that I presented
before the House. GAO*s proposal was introduced that same day as H. 2751,
the GAO Human Capital Reform Act of 2003, and was subsequently marked up
and reported out of the Subcommittee on July 23, 2003, with an amendment
that added a requirement that we periodically

report on the status of certain provisions; modified the target group for
the increased annual leave benefit from upper- level hires to key officers
and employees; and limited our exchange program to no more than 30 people
coming to GAO from the private sector and no more than 30 people leaving
GAO for a detail to the private sector. We concurred with these

amendments. The bill that Senator Voinovich introduced on July 31, 2003,
S. 1522, which you co sponsored, Madam Chair, mirrors the bill that was
marked up in the House. Based on employee feedback, there is little
concern relating to most of our

legislative proposal. Although some elements of GAO*s initial straw
proposal were very controversial (e. g., GAO*s pay adjustment provision),
I have made a number of changes, clarifications, and commitments to
address employee concerns. While I believe that some employees remain
concerned about the pay adjustment provision, I also believe that employee

concerns have been reduced considerably due to the clarifications,
changes, and commitments I have made. This view has been underscored by
the results of the recent employee staff survey. Of the 2,101 GAO
employees who provided narrative comments, only a small percentage
commented on our legislative proposal. Opportunities Over the balance of
my tenure, I will seek to continue the transformation of

GAO into a world class professional services firm able to provide the
Congress the best information and analyses possible delivered in a manner
timely for appropriations, oversight, authorization, and legislative
policy decision- making. While many think that this is a difficult goal to
achieve, I believe that we are well on the way there. We will continue
seeking to lead by example in all the aforementioned areas, including
strategic planning, human capital management, process reengineering,
information technology, and financial management. We will continue to
examine what we do and how we do it focusing on achieving results. Some
specific initiatives contemplated include the following:

 Helping the Congress in addressing challenges relating to the long- term
fiscal outlook. GAO*s mission of assuring accountability has been and will
remain closely linked to supporting congressional oversight and improving
government efficiency and effectiveness. However, we believe in the years
ahead, this support will prove even more critical because of the pressures
that will be created by our country*s fiscal outlook. These pressures will
require the Congress to make tough choices on what the government does,
including how the government does business and who does the government*s
business in the future. I believe that GAO can be of invaluable assistance
in helping the Congress review and reprioritize existing mandatory and
discretionary spending programs and tax policies.

 Transforming government and how government does business. While
supporting congressional oversight will remain a major part of our
mission, we believe that the work GAO performs in the areas of insight (e.
g., determining which programs and policies work and which don*t and
sharing best practices and benchmarking information, both horizontally
across government and vertically through different levels of

government) and foresight (e. g., identifying key trends and emerging
challenges before they reach crisis proportions and developing proposed
frameworks for moving forward, including various options with related pros
and cons) will be increasingly important and that our work in these areas
needs to be further increased. I believe that GAO can do much to promote
and facilitate government transformation, including how government does
business. GAO*s work in the government transformation area (e. g., DOD
business practices, information technology, human capital, Postal Service,
and Social Security) has helped the Congress reexamine what the federal
government does, what it should do, and how it does it best. An additional
focus on foresight activities will be crucial in developing information
for congressional decision makers facing the challenges and opportunities
of the 21 st century so that they can fully assess the long- term
consequences of today*s policy choices.  Making GAO the federal employer
of choice and the gold standard for a

world class professional services organization. Creating highperforming
organizations often requires a cultural transformation that can take years
to accomplish. GAO is no exception. GAO needs to continue its
transformation process. We have made great progress in the past 3 years,
but much remains to be done. For example, we have established task teams
to examine how we staff our assignments and how we can best facilitate
additional matrix management and knowledge sharing. As part of this
cultural transformation, we are also hard at work in transforming GAO into
a continuous learning

organization. Opinion surveys of employees, such as our entry- level
staff, indicate that one of the critical elements in their staying with an
organization is the ability to continuously learn. Therefore, we must
continue to strive to create such an environment through our training
programs and employee development efforts. We must also continue, while
addressing any skills imbalances and succession planning needs, to invest
in our staff.

Concluding Since its creation, GAO has demonstrated that it has been able
to adapt to

Observations the changing needs of the nation, the Congress, and the
American people.

Today, we live in a different world than even that of 2 years ago. The
increasing interconnectedness of today*s world is demonstrated in the
issues we care most about* our national security, our economic security,
our financial security, our personal security, and our personal health. As
evidenced by the testimony that I*ve delivered today, I have done my best,
working closely with our congressional clients and all of GAO*s employees,
to provide the best professional products and services to the Congress

today and to position ourselves to continue to be able to do so in the
future. We*ve also demonstrated that being *world class* doesn*t mean a
substantial appropriation increase, but rather that an effective,
efficient, and creative use of resources, aided by selected additional
legislative authorities and flexibilities, can translate into significant
pay- offs in the form of real and measurable positive results. However, we
believe that

GAO, similar to most public and private sector organizations, is only as
good as our people. S. 1522 will help us address many of the challenges we
face, particularly in the human capital arena, and we urge that this
Committee mark up the legislation and, working with the House, enact it
before the Congress adjourns for the year.

Madam Chair Collins and Members of the Committee, this concludes my
prepared statement. I would be happy to respond to any questions that you
may have.

Contacts For further information regarding the testimony, please contact
David M. Walker, the Comptroller General of the United States, on (202)
512- 5500 or

at walkerd@ gao. gov, Gene L. Dodaro, Chief Operating Officer (202) 512-
5600 or at dodarog@ gao. gov, or Helen H. Hsing, Director of Special
Strategic Projects (202) 512- 5500 or at hsingh@ gao. gov

Appendi x I

GAO*s Strategic Plan 2002- 2007 GAO*s Strategic Plan

Source: GAO.

Annual Performance Measures

(1998 and 2002) Actual Performance measure

FY 1998 FY 2002 Financial benefits (billions) $19.7 $37.7 Other benefits

537 906 Past recommendations implemented 69% 79% Return on investment
(ROI)

58: 1 88: 1 Financial benefits per employee (millions) $6.1 $11.7
Timeliness 93% 96% Source: GAO.

GAO*s 2002 Reports

Selected Topics

Food Safety Private Pensions

Performance- Based Budgeting Social Security

Military Transformation Prescription Drugs

School Vouchers Aviation Safety

Restructured Energy Markets Welfare Reform

Army Readiness Securities Regulation

Water Quality Election Reform

Nuclear Waste Information Security

Export Controls FBI Reorganization

Tax Administration Nursing Homes

Drug Control Space Station

Postal Transformation Homeland Security

Corporate Governance & Auditing Failures

Source: GAO.

The Nature of GAO*s Work

FY 1966 FY 1981 FY 1998 FY 2002 2 22 15 33

4 11 90

10 65 74 74

R& D Mandates Requests

Source: GAO.

GAO*s

High Risk Areas Designated High Risk Addressing Challenges in Broad- based
Transformations

Protecting Information Systems Supporting the Federal Government and 1997
The Nation s Critical Infrastructures

High

Strategic Human Capital Management *

2001 U. S. Postal Service Transformation Efforts and Long- Term Outlook *

2001 Risk

Implementing and Transforming the New Department of Homeland Security 2003
List

Modernizing Federal Disability Programs *

2003 Federal Real Property *

2003 July 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 IRS Financial Management 1995 Forest Service
Financial Management 1999 FAA Financial Management 1999 Reducing
Inordinate Program Risks

Medicare Program *

1990 Collection of Unpaid Taxes 1990 DOD Inventory Management 1990 Student
Financial Aid Programs

1990 HUD Single- Family Mortgage Insurance and Rental Assistance Programs
1994 Earned Income Credit Noncompliance

1995 DOD Support Infrastructure Management 1997 Medicaid Program *

2003 Pension Benefit Guaranty Corporation Single- Employer Insurance
Program *

2003 Managing Large Procurement Operations More Efficiently

DOD Weapon Systems Acquisition 1990 Department of Energy Contract
Management 1990 NASA Contract Management 1990 DOD Contract Management 1992
Source: GAO.

* Additional authorizing legislation is likely to be required as one
element of addressing this high risk area.

Sources of Requested Work

During Congressional Sessions

Percent 100

Both 80

60 Majority 40

20 Minority 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

103 rd 104 th 105 th 106 th 107 th Note: As of 11- 18- 02 Source: GAO.

Engagements For Congressional Committees

107 th Congress

House Committees Senate Committees 35%

24% 54%

68% 7%

9% 1%

2%

House Committee on Government Reform Senate Committee on Governmental
Affairs

Appropriations Appropriations

Budget Budget

Authorizing and other Authorizing and other

Source: GAO.

Engagements For Senate Committees

107 th Congress

200

161

150

132

100

87 80

50

47 45 39 38 34

0 Finance

& Health,

Labor &

& Other* Affairs

Services Banking,

Affairs Pensions

Commerce, Science

Works & Governmental

Armed Housing

Urban Appropriations

Education, Transportation

Environment Public

*Other includes 12 committees: Small Business and Entrepreneurship (27),
Judiciary (23), Aging (18), Agriculture, Nutrition and Forestry (14),
Veterans Affairs (12), International Narcotics Control (8), Foreign
Relations (8), Intelligence (5), Indian Affairs (5), Energy and Natural
Resources (5), Budget (4), and Rules and Administration (3). Source: GAO.

Engagements For House Committees

107 th Congress

400

341

300 200

148

100

89 84 77 70 62 58 51

0 &

& Armed

Government Reform

Appropriations Judiciary

Energy Commerce

Ways Means

Services Transportation

Financial Services

Other*

*Other includes 12 committees: Veterans Affairs (33), International
Relations (26), Budget (18), Resources (17), Education and Workforce (17),
Small Business (13), Science (9), Agriculture (5), Intelligence (4),
Administration (4), Homeland Security (1), and Rules (1). Source: GAO.

Testimonies (91% Favorable Responses)

Strongly Agree 70% Generally Agree 21%

21%

Neither Agree Nor Disagree 4%

70%

Generally Disagree 4% Strongly Disagree 1% March through November 2002
Surveyed Senate Governmental Affairs and House Government Reform 57 out of
113 Responses (50%) Source: GAO.

Written Products (93% Favorable)

Strongly Agree 80%

13%

Generally Agree 13% Neither Agree Nor Disagree 4%

80%

Generally Disagree 1% Strongly Disagree 2% March through November 2002
Surveyed Senate Governmental Affairs and House Government Reform 38 out of
80 Responses (48%)

Source: GAO.

GAO*s Budget Authority and FTE Levels Fiscal Years 1992- 2003

6000 FTE level Dollars in millions

600 5000 500 4000

400 3000

300 2000

200 1000

100 0

0 1992

1993 1994

1995 1996

1997 1998

1999 2000

2001 2002

2003 Fiscal years

FTE*s Budget authority* *Budget authority is shown in inflation- adjusted
1992 dollars Source: GAO.

financial statements High Risk List Source: GAO.

Strategic Perspectives of GAO and OIGs

We both maximize government performance and ensure accountability OIGs GAO

Comptroller General*s Testimony of July 16,

Appendi x II

2003 United States General Accounting Office

GAO Test i mony Before the Subcommittee on Civil Service and Agency

Organization, Committee on Government Reform, House of Representatives

For Release on Delivery Expected at 2: 00 p. m. EDT GAO Wednesday, July
16, 2003 Additional Human Capital

Flexibilities Are Needed Statement of David M. Walker Comptroller General
of the United States

A

GAO- 03- 1024T

July 16, 2003

GAO

Additional Human Capital Flexibilities Are

Highlights of GAO- 03- 1024T, a testimony

Needed

before the Subcommittee on Civil Service and Agency Organization,
Committee on Government Reform, House of Representatives

The Subcommittee seeks GAO*s As an arm of the legislative branch, GAO
exists to support the Congress in views on its latest human capital

meeting its constitutional responsibilities and to help improve the
proposal that is slated to be

performance and ensure the accountability of the federal government for
the introduced as a bill entitled the

American people. Unlike many executive branch agencies, which have GAO
Human Capital Reform Act of

either recently received or are just requesting new broad- based human
2003. capital tools and flexibilities, GAO has had certain human capital
tools and

flexibilities for over two decades. GAO*s latest proposal combines diverse
initiatives that, collectively, should further GAO*s ability to enhance
its GAO believes that its proposal is

performance, assure its accountability, and help ensure that it can
attract, well reasoned and reasonable.

retain, motivate, and reward a top- quality and high- performing workforce
Although GAO*s request for

currently and in future years. authority to adjust its annual pay

system separate from the executive Specifically, GAO is requesting that
the Congress (1) make permanent GAO*s branch appears broad based, there

3- year authority to offer early outs and buyouts, (2) allow GAO to set
its own are compelling reasons why GAO

annual pay adjustment system separate from the executive branch, ought to
be given this authority. (3) permit GAO to set the pay of an employee
demoted as a result of

These include the fact that GAO already has a hybrid pay system workforce
restructuring or reclassification to keep his/ her basic pay but to
established by the authority the

set future increases consistent with the new position*s pay parameters,
Congress granted it over two

(4) provide authority to reimburse employees for some relocation expenses
decades ago, the proposed when that transfer has some benefit to GAO but
does not meet the legal authority is not radical if viewed in requirements
for reimbursement, (5) provide authority to place upper- level the light
of authorities already

hires with fewer than 3 years of federal experience in the 6- hour leave
granted and requested by other

category, (6) authorize an executive exchange program with the private
agencies, and GAO already has a

sector, and (7) change GAO*s legal name from the *General Accounting
number of key systems and

Office* to the *Government Accountability Office.* safeguards in place and
has plans to build in additional safeguards if

GAO has used the narrowly tailored flexibilities granted by the Congress
granted the authority. previously in Public Law 106- 303, the GAO
Personnel Flexibilities Act,

GAO has conducted extensive responsibly, prudently, and strategically. GAO
believes that it is vitally

external and internal outreach important to its future to continue
modernizing and updating its human

efforts on its latest human capital capital policies and system in light
of the changing environment and

proposal. GAO respectfully anticipated challenges ahead. GAO*s proposal
represents a logical

requests the Subcommittee*s incremental advancement in modernizing GAO*s
human capital policies. support and prompt passage by the

Based on employee feedback, there is little or no concern relating to most
of Congress.

the proposal*s provisions. Although some elements of GAO*s initial straw
proposal were controversial (e. g., GAO*s pay adjustment provision), the
Comptroller General has made a number of changes, clarifications, and
commitments to address employee concerns. While GAO believes that some
employees remain concerned about the pay adjustment provision, GAO also
believes that employee concerns have been reduced considerably due to the

clarifications, changes, and commitments the Comptroller General has made.
Given GAO*s human capital infrastructure and unique role in leading

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 1024T.

by example in major management areas, the rest of the federal government

To view the full product, including the scope

can benefit from GAO*s pay system experience.

and methodology, click on the link above. For more information, contact
Sallyanne Harper at (202) 512- 5800 or harpers@ gao. gov.

Madam Chairwoman and Members of the Subcommittee: I am pleased to be here
today to discuss GAO*s latest human capital proposal. Chairwoman Davis, we
at GAO appreciate your support of our proposal and your leadership in
seeking additional sponsors for the bill you plan to introduce, the GAO
Human Capital Reform Act of 2003.

As I have testified on many occasions, strategic human capital management
must be the centerpiece of any serious government transformation effort. A
key component of this is modern, effective, and credible human capital
policies, which are critical to the successful functioning of any
enterprise,

both public and private. As the Chief Executive Officer and primary
steward of GAO, I am not just responsible for GAO*s current economy,
efficiency, and effectiveness, I am also responsible for ensuring that we
are well positioned to serve our congressional clients, maximize our
performance, and assure our accountability in the future. With this
important responsibility in mind, I asked this committee and

others over 3 years ago to grant GAO certain additional narrowly tailored
human capital authorities. In enacting Public Law 106- 303, known as the
GAO Personnel Flexibilities Act, the Congress granted GAO certain
flexibilities, which we have used responsibly to help strategically
reshape the organization in order to better support the Congress and the
American people. After reviewing the range and limits of our existing
administrative and legal authorities, I have concluded that we now need to
seek from the Congress additional human capital flexibilities in order for
GAO to: ensure quality service to the Congress; continue leading by
example in the government transformation, in general, and human capital
reform areas in particular; and continue to attract, retain, motivate, and
reward a quality and high- performing workforce, both currently and in
future years. We believe that our proposal is well reasoned and
reasonable, especially if

viewed in the light of authorities already granted and requested by other
agencies and the extensive external and internal outreach efforts we have
conducted. We also respectfully request your support and prompt passage by
the Congress. GAO: A Unique Agency

As an arm of the legislative branch, GAO exists to support the Congress in
with a Hybrid System 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. Today, GAO is a
multidisciplinary professional services organization, comprised of about
3,250 employees,

Page 1 GAO- 03- 1024T

that conducts a wide range of financial and performance audits, program
evaluations, management reviews, investigations, and legal services
spanning a broad range of government programs and functions. GAO*s work
covers everything from the challenges of securing our homeland, to the
demands of an information age, to emerging national security threats, and
the complexities of globalization. We are committed to transforming how
the federal government does business and to helping government agencies
become organizations that are more results oriented and accountable to the
public. We are also committed to leading by example in all major
management areas.

Given GAO*s role as a key provider of information and analyses to the
Congress, maintaining the right mix of technical knowledge and subject
matter expertise as well as general analytical skills is vital to
achieving the agency*s mission. Carrying out GAO*s mission today is a
multidisciplinary staff reflecting the diversity of knowledge and
competencies needed to deliver a wide array of products and services to
support the Congress. Our mission staff* at least 67 percent of whom have
graduate degrees* hold degrees in a variety of academic disciplines, such
as accounting, law, engineering, public administration, economics, and
social and physical sciences. I am extremely proud of our GAO employees
and the difference

that they make for the Congress and the nation. They make GAO the world-
class organization that it is, and I think it is fair to say that while
they account for about 80 percent of our costs, they constitute 100
percent of our real assets.

Because of our unique role as an independent overseer of federal
expenditures, fact finder, and honest broker, GAO has evolved into an
agency with hybrid systems. This is particularly evident in GAO*s
personnel and performance management systems. Unlike many executive branch
agencies, which have either recently received or are just requesting new
broad- based human capital tools and flexibilities, GAO has had certain
human capital tools and flexibilities for over two decades. As a result,
we have been able to some extent to operate our personnel system with a
degree of independence that most agencies in the executive branch do not
have. For example, we are excepted from certain provisions of Title 5,
which governs the competitive service, and we are not subject to Office of
Personnel Management (OPM) oversight.

Until 1980, our personnel system was indistinguishable from those of
executive branch agencies* that is, GAO was subject to the same laws,
regulations, and policies as they were. However, with the expansion of

Page 2 GAO- 03- 1024T

GAO*s role in congressional oversight of federal agencies and programs,
concerns grew about the potential for conflicts of interest. Could GAO
conduct independent and objective reviews of executive branch agencies,
such as OPM, when these agencies had the authority to review GAO*s
internal personnel activities? As a result, GAO worked with the Congress
to pass the GAO Personnel Act of 1980, the principal goal of which was to
avoid potential conflicts by making GAO*s personnel system more
independent of the executive branch.

Along with this independence, the act gave GAO greater flexibility in
hiring and managing its workforce. Among other things, it granted the
Comptroller General authority to

 appoint, promote, and assign employees without regard to Title 5
requirements in these areas;

 set employees* pay without regard to the federal government*s General
Schedule (GS) pay system*s classification standards and requirements; and

 establish a merit pay system for appropriate officers and employees. By
excepting our agency from the above requirements, the GAO Personnel Act of
1980 allowed us to pursue some significant innovations in managing our
people. One key innovation was the establishment of a *broad banding,* or
*pay banding,* approach for classifying and paying our Analyst

and Attorney workforce in 1989. This was coupled with the adoption of a
pay for performance system for this portion of our workforce. Therefore,
while other agencies are only now requesting the authority to establish
broad banding and pay for performance systems, GAO has had almost 15 years
of experience with such systems. Although GAO*s personnel and pay systems
are not similar to those of

many executive branch agencies, I must emphasize that in important ways,
our human capital policies and programs are very much and will continue to
remain similar to those of the larger federal community. GAO*s current
human capital proposal will not change our continued support for certain
national goals (e. g., commitment to federal merit principles, protection
from prohibited personnel practices, employee due process through a
specially created entity* the Personnel Appeals Board (PAB), and
application of veterans* preference consistent with its application in the
executive branch for appointments and all appropriate reductions- in-

Page 3 GAO- 03- 1024T

force). Furthermore, our pay system is and will continue to be consistent
with the statutory principle of equal pay for equal work while making pay
distinctions on the basis of an individual*s responsibilities and
performance. In addition, we are covered and will remain covered by Title
VII of the Civil Rights Act, which forbids employment discrimination. At
GAO, we also emphasize opportunity and inclusiveness for a diverse
workforce and have zero tolerance for discrimination of any kind. We have
taken and will continue to take disciplinary action when it *will promote
the efficiency of the service** which for us includes such things as GAO*s
ability to do its work and accomplish its mission.

Although we are not subject to OPM oversight, we are nevertheless subject
to the oversight of the Congress including our appropriations committees*
the Senate Committee on Appropriations* Subcommittee on the Legislative
Branch and the House Committee on Appropriations* Subcommittee on
Legislative* and our oversight committees* the Senate Committee on
Governmental Affairs and the House Committee on Government Reform. In
addition, GAO*s management actions are subject to the review of an
independent five member board, the Personnel Appeals Board, which performs
functions similar to those provided by the Merit Systems Protection Board
for federal executive branch employees* personnel grievances. The Congress
authorized the establishment of the PAB specifically for GAO in order to
protect GAO*s independence as an agency. As with other federal executive
branch employees, our employees have the right to appeal certain kinds of
management actions including removal, suspension for more than 14 days,
reductions in pay or grade, furloughs of not more than 30 days, a
prohibited personnel practice, an action involving prohibited
discrimination, a prohibited political activity, a within- grade denial,
unfair labor practices or other labor relations issue. However, they do so
to the PAB rather than the MSPB.

While we currently do not have any bargaining units at GAO, our employees
are free to join employee organizations, including unions. In addition, we
engage in a range of ongoing communication and coordination efforts to
empower our employees while tapping their ideas. For example, we regularly
discuss a range of issues of mutual interest and concern with our
democratically elected Employee Advisory Council (EAC). Chris Keisling,
who is a Band III field office representative of the EAC, is testifying
with me today. In addition, I consult regularly with our managing
directors on issues of mutual interest and concern. In that spirit, I will
consult with the managing directors and the EAC before implementing the
provisions related to our human capital proposal. As we did with the

Page 4 GAO- 03- 1024T

flexibilities granted it under Public Law 106- 303, the GAO Personnel
Flexibilities Act, we will implement the authorities granted under this
provision of our proposal only after issuing draft regulations and
providing all employees notice and an opportunity for comment.
Specifically, for the authorities granted to us under Public Law 106- 303,
we posted the draft regulations on our internal Web site and sent a notice
to all GAO staff advising them of the draft regulations and seeking their
comments.

Key Elements of GAO*s GAO*s proposal combines diverse initiatives that,
collectively, should

Proposal further GAO*s ability to enhance our performance, assure our

accountability, and help ensure that we can attract, retain, motivate, and
reward a top quality and high- performing workforce currently and in
future years. These initiatives should also have the benefit of helping
guide other agencies in their human capital transformation efforts.
Specifically, we are requesting that the Congress provide us the following
additional human capital tools and flexibilities:

 make permanent GAO*s 3- year authority to offer voluntary early
retirement and voluntary separation payments;

 allow the Comptroller General to adjust the rates of basic pay of GAO on
a separate basis than the annual adjustments authorized for employees of
the executive branch;

 permit GAO to set the pay of an employee demoted as a result of
workforce restructuring or reclassification at his or her current rate
with no automatic annual increase to basic pay until his or her salary is
less than the maximum rate of their new position;

 provide authority in appropriate circumstances to reimburse employees
for some relocation expenses when that transfer does not meet current
legal requirements for entitlement to reimbursement but still benefits
GAO;

 provide authority to put upper- level hires with less than 3 years of
federal experience in the 6- hour leave category;

 authorize an executive exchange program with private sector
organizations working in areas of mutual concern and involving areas in
which GAO has a supply- demand imbalance; and

Page 5 GAO- 03- 1024T

 change GAO*s legal name from the *General Accounting Office* to the
*Government Accountability Office.*

I will go into more detail later in my testimony on the details and
rationale for each of these proposals.

Process for Developing In developing our proposal, we used a phased
approach that involved the Proposal

(1) developing a straw proposal, (2) vetting the straw proposal broadly
both externally and internally, and (3) making appropriate adjustments
based on comments and concerns raised during the vetting process. As we
have previously testified, many of the management tools and flexibilities
we needed to pursue modern human capital management approaches are already
available to us and we have used them. We have chosen to come to the
Congress for legislation only where the tools and flexibilities we have
were inadequate for addressing the challenges we faced. For example, the
Congress enacted Public Law 106- 303 to provide us with certain narrowly
tailored flexibilities we needed to reshape our workforce and establish
senior- level technical positions in critical areas. These flexibilities
were needed to help GAO address the past decade*s dramatic downsizing
(approximately 40 percent from 1992 through 1997) combined with a
significant increase in the retirement- eligible workforce that
jeopardized our ability to perform our mission in the years ahead.

In developing our preliminary proposal, we gathered suggestions for
addressing GAO*s human capital challenges as well as challenges faced by
the rest of the federal government, discussed and debated them internally,
and compiled a preliminary list of proposals. We received a number of
viable proposals that we separated into two groups: (1) proposals that
would be more applicable government- wide and (2) proposals GAO should
undertake. I had our Office of General Counsel review the proposals GAO
should undertake to determine whether we needed to seek legislative
authority to implement them or whether I could implement them under the
Comptroller General*s existing authority. Mindful of the need to keep the
Congress appropriately informed, my staff

and I began our outreach to GAO*s appropriations and oversight committees
on the need for additional human capital flexibilities beginning late last
year. In early spring of this year, we shared with these committees a
confidential draft of a preliminary draft proposal. We also advised them
that we planned to conduct a broad range of outreach and consultation on
the proposal with our employees and other interested parties and that we

Page 6 GAO- 03- 1024T

would send them our revised legislative proposal at a later date. We
conducted an extensive outreach and consultation effort with members of
the Congress, including chairmen and ranking minority members of our
appropriations and oversight committees and a number of local delegation
members; congressional staff; the Director of OPM; the Deputy Director for
Management of the Office of Management and Budget; public sector employee
associations and unions; and various *good government* organizations.

Within GAO, members of the Executive Committee (EC), which includes our
Chief Operating Officer, our General Counsel, our Chief Mission Support
Officer and me, engaged in an extensive and unprecedented range of
outreach and consultation with GAO employees. This outreach included
numerous discussions with our managing directors, who manage most of GAO*s
workforce, and members of the EAC.

The EAC is an important source of input and a key communications link
between executive management and the constituent groups its members
represent. Comprising employees who represent a cross- section of the
agency, the EAC meets at least quarterly with me and members of our senior
executive team. The EAC*s participation is an important source of front-
end input and feedback on our human capital and other major

management initiatives. Specifically, EAC members convey the views and
concerns of the groups they represent, while remaining sensitive to the
collective best interest of all GAO employees; propose solutions to
concerns raised by employees; provide input to and comment on GAO
policies, procedures, plans, and practices; and help to communicate
management*s issues and concerns to employees.

I have also used my periodic *CG chats,* closed circuit televised
broadcasts to all GAO employees, as a means of explaining our proposal and
responding to staff concerns and questions. Specifically, I have held two
televised chats to inform GAO staff about the proposal. One of these chats
was conducted in the form of a general listening session, open to all
headquarters and field office staff, featuring questions from members of
the EAC and field office employees. I have also discussed the proposal
with the Band IIs (GS- 13- 14 equivalents) in sessions held in April 2003,
and with our Senior Executive Service (SES) and Senior Level members at
our May off- site meeting. In addition to my CG chats, I have personally
held a number of listening sessions, including a session with members of
our Office of General Counsel, two sessions with our administrative
support staff, and sessions with staff in several field offices.
Furthermore, the Chief

Page 7 GAO- 03- 1024T

Operating Officer represented me in a listening session with Band I field
office personnel. Finally, I have also personally received and considered
a number of E- mails, notes, and verbal comments on the human capital
proposal. I would like to point out to others seeking human capital
flexibilities that

the outreach process, while necessary, is indeed time- consuming and
requires real and persistent commitment on the part of an agency*s top
management team. In order for the process to work effectively, it also
requires an ongoing education and dialogue process that will, at times,
involve candid, yet constructive, discussion between management and
employees. This is, however, both necessary and appropriate as part of the
overall change management process. To facilitate the education process on
the proposal, we posted materials on GAO*s internal website, including
Questions and Answers developed in response to employees* questions and
concerns, for all employees to review. Unfortunately, others who have
sought and are seeking additional human capital flexibilities have not
employed such an extensive outreach process.

Nature of GAO Based on feedback from GAO employees, there is little or no
concern

Employee Concerns relating to most of the provisions in our proposal.
There has been

significant concern expressed over GAO*s proposal to decouple GAO*s pay
system from that of the executive branch. Some concerns have also been
expressed regarding the pay retention provision and the proposed name
change. As addressed below, we do believe, however, that these employee
concerns, have been reduced considerably due to the clarifications,
changes, and commitments resulting from our extensive outreach and
consultation effort.

On the basis of various forms of GAO employee feedback, it is not
surprising, since pay is important to all employees, that the provision
that has caused the most stir within GAO has been the pay adjustment
provision. Fundamentally, some of our employees would prefer to remain
with the executive branch*s GS system for various types of pay increases .

There are others close to retirement who are concerned with their *high
three* and how the modified pay system, when fully implemented, might
affect permanent base pay, which is the key component of their retirement
annuity computation. Overall, there is a great desire on the part of GAO
employees to know specifically how this authority would be implemented.
Page 8 GAO- 03- 1024T

It is important to note that, even in the best of circumstances, it is
difficult to garner a broad- based consensus of employee support for any
major pay system changes. While it is my impression, based on employee
feedback, that we have made significant strides in allaying the
significant initial concerns expressed by employees regarding the pay
adjustment provision, I believe that some of these concerns will remain
throughout implementation. In addition, some can never be resolved because
they involve philosophical differences or personal interest considerations
on behalf of individual GAO employees.

GAO*s history with pay banding certainly is illustrative of how difficult
it is for an organization to allay employee fears even in the face of
obvious benefits. While history has proven that an overwhelming majority
of GAO employees have benefited from GAO*s decision to migrate our
Analysts and Attorneys into pay banding and pay for performance systems,
there was significant opposition by GAO employees regarding the decision
to move into these systems. The experience of the executive branch*s pay
demonstration projects involving federal science and technology
laboratories shows that employee support at the beginning of the pay
demonstration projects ranged from 34 percent to 63 percent. In fact, OPM
reports that it takes about 5 years to get support from two- thirds of
employees with managers generally supporting demonstrations at a higher

rate than employees. Following the pay adjustment provision but a distant
second in terms of employee concern, has been the pay reclassification
provision, which would allow GAO employees demoted as a result of
workforce restructuring or reclassification to keep their basic pay rates;
however, future pay increases would be set consistent with the new
positions* pay parameters. Currently, employees subject to a reduction-
in- force or reclassification can be paid at a rate that exceeds the value
of their duties for an extended period.

A distant third in terms of employee concern is the proposed name change
from the *General Accounting Office* to the *Government Accountability
Office,* which would allow the agency*s title to more accurately reflect
its mission, core values, and work. My sense is that some GAO employees
who have been with GAO for many years have grown comfortable with the name
and may prefer to keep it. At the same time, I believe that a significant
majority of our employees support the proposed name change. Importantly,
all of our external advisory groups, including the Comptroller General*s
Advisory Council, consisting of distinguished individuals from

Page 9 GAO- 03- 1024T

the public and private sectors, and the Comptroller General*s Educators
Advisory Council, consisting of distinguished individuals from the
academic community, and a variety of *good government* groups strongly
support the proposed name change. Changes Made in

The members of the EC and I took our employees* feedback seriously and
Response to Employee

have seriously considered their concerns. Key considerations in our
decision making were our institutional responsibility as leaders and
Feedback

stewards of GAO and the overwhelming support expressed through anonymous
balloting by our senior executives, who also serve as leaders and stewards
for GAO, for proceeding with all of the provisions of our human capital
proposal, including the pay adjustment provision. Specifically, in a
recent confidential electronic balloting of our senior

executives, support for each element of our proposal ranged from over 2 to
1 to unanimous, depending on the provision. Support for the proposed pay
adjustment provision was over 3 to 1, and support for the proposed pay
protection provision was over 4 to 1. Given this and other considerations,
ultimately, we decided to proceed with the proposal but adopted a number
of the suggestions made by employees in these sessions, including several
relating to the proposal to decouple GAO annual pay adjustments from those
applicable to many executive branch agencies. A key suggestion adopted
include a minimum 2- year transition period for

ensuring the smooth implementation of the pay provisions which would also
allow time for developing appropriate methodologies and issuing
regulations for notice and comment by all employees. Another key
suggestion adopted was the commitment to guarantee annual across the board
purchase power protection and to address locality pay considerations to
all employees rated as performing at a satisfactory level or above (i. e.,
meeting expectations or above) absent extraordinary

economic circumstances or severe budgetary constraints. We have chosen to
implement this guarantee through a future GAO Order rather than through
legislative language because prior *pay protection* guarantees relating to
pay banding made by my predecessor, Comptroller General Charles A.
Bowsher, used this means effectively to document and

operationalize that guarantee. I have committed to our employees that I
would include this guarantee in my statement here today so that it could
be included as part of the legislative record. Additional safeguards
relating to our pay proposal are set forth below.

Page 10 GAO- 03- 1024T

The following represents additional information regarding our specific
proposal.

Voluntary Early Section 2 of our proposal would make permanent the
authority of GAO

Retirement and under section 1 and 2 of Public Law 106- 303, the GAO
Personnel

Flexibilities Act of 2000, to offer voluntary early retirements (commonly
Separation Incentive

termed *early outs*) and voluntary separation payments (commonly Payment
Authorities

termed *buyouts*) to certain GAO employees when necessary to realign GAO*s
workforce in order to meet budgetary or mission needs, correct skill
imbalances, or reduce high- grade positions. We believe that we have
behaved responsibly in exercising the flexibilities that the Congress
granted us and deserve a permanent continuation of these authorities. In
addition, the two flexibilities which we would like to be made permanent

are narrowly drawn and voluntary in nature, since the employees have the
right to decide if they are interested in being considered for the
benefits. Further, the provisions also have built in limits: no more than
10 percent of the workforce in any one year can be given early outs and no
more than 5 percent can be given buyouts.

GAO*s transformation effort is a work in progress, and for that reason,
the agency is seeking legislation to make the voluntary early retirement
provision in section 1 of the law permanent. While the overall number of
employees electing early retirement has been relatively small, GAO
believes that careful use of voluntary early retirement has been an
important tool in incrementally improving the agency*s overall human
capital profile. Each separation has freed resources for other uses,
enabling GAO to fill an entry- level position or to fill a position that
will reduce a skill gap or address other succession concerns. Similarly,
we are seeking legislation to make section 2* authorizing the payment of
voluntary separation incentives* permanent. Although GAO has not yet used
its buyout authority and has no plans to do so in the foreseeable future,
we are seeking to retain this flexibility. The continuation of this
provision maximizes the options available to the agency to deal with
future circumstances, which cannot be reasonably anticipated at this time.
Importantly, this provision seems fully appropriate since the Homeland
Security Act of 2002 provides most federal agencies with permanent early
out and buyout authority.

Public Law 106- 303 required that GAO perform an assessment of the
exercise of the authorities provided under that law, which included the
authority for the Comptroller General to provide voluntary early
retirement

Page 11 GAO- 03- 1024T

and voluntary separation incentive payments. With your permission, I would
like to submit the assessment entitled Assessment of Public Law 106- 303:
The Role of Personnel Flexibilities in Strengthening GAO*s Human Capital,
issued on June 27, 2003, for the record. I will now highlight for you our
observations from that assessment on voluntary early retirement and
buyouts.

Voluntary Early Retirement Public Law 106- 303 also allows the Comptroller
General to offer voluntary early retirement to up to 10 percent of the
workforce when necessary or appropriate to realign the workforce to
address budgetary or mission constraints; correct skill imbalances; or
reduce high- grade, supervisory, or managerial positions. This flexibility
represents a proactive use of early retirement to shape the workforce to
prevent or ameliorate future problems. GAO Order 2931.1, Voluntary Early
Retirement, containing the agency*s final regulations, was issued in April
2001. Under the regulations, each time the Comptroller General approves a
voluntary early retirement opportunity, he establishes the categories of
employees who are eligible to apply. These categories are based on the
need to ensure that those employees who are eligible to request voluntary
early retirement are those whose separations are consistent with one or
more of the three reasons for which the Comptroller General may authorize
early retirements. Pursuant to GAO*s regulations, these categories are
defined in terms of one or more of the following criteria:

 organizational unit or subunits,  occupational series,  grade or band
level,  skill or knowledge requirements,  performance appraisal average,
 geographic location, or  other similar factors that the Comptroller
General deems necessary and

appropriate. Since it is essential that GAO retain employees with critical
skills as well as its highest performers, certain categories of employees
have been ineligible

Page 12 GAO- 03- 1024T

under the criteria. Some examples of ineligible categories are employees
receiving retention allowances because of their unusually high or unique
qualifications; economists, because of the difficulty that the agency has
experienced in recruiting them; and staff in the information technology
area. In addition, employees with performance appraisal averages above a
specified level have not been eligible under the criteria.

To give the fullest consideration to all interested employees, however,
any employee may apply for consideration when an early retirement
opportunity is announced, even if he or she does not meet the stated
criteria. Furthermore, under our order, the Comptroller General may
authorize early retirements for these applicants on the basis of the facts
and circumstances of each case. The Comptroller General or his EC designee
considers each applicant and makes final decisions based on GAO*s
institutional needs. Only employees whose release is consistent with the
law and GAO*s objective in allowing early retirement are authorized to
retire early. In some cases, this has meant that an employee*s request
must be denied.

GAO held its first voluntary early retirement opportunity in July 2001.
Employees who were approved for early retirement were required to separate
in the first quarter of fiscal 2002. As required by the act, information
on the fiscal 2002 early retirements was reported in an appendix to our
2002 Performance and Accountability Report. Another voluntary early
retirement opportunity was authorized in fiscal 2003, and employees were
required to separate by March 14, 2003. In anticipation of the 3- year
sunset on our authority to provide voluntary early retirements, I have
recently announced a final voluntary early retirement opportunity under
our current authority. Table 1 provides the data on the number of
employees separated by voluntary early retirement as of May 30, 2003. Page
13 GAO- 03- 1024T

Table 1: Summary Data on Voluntary Early Retirements Fiscal 2002 Fiscal
2003 Totals Applications/ Status

Percentage Percentage

Percentage of applications

Number of total Number of total Number of total

Total applications submitted 78 100. 0 39 100. 0 117 100.0 Approved
applications 72 92. 3 37 94. 8 109 93.1 Disapproved applications 6 7. 7 2
5. 1 8 6.8 Approved applications withdrawn by employees 18 23. 0 12 30. 7
30 25.6

Applicants separated by voluntary early retirement 54 69. 3 25 64. 1 79
67.5 Source: GAO.

As you can see from the table, of the 79 employees who separated from GAO
through voluntary early retirement, 66, or 83.5 percent, were highgrade,
supervisory, or managerial employees. High- grade, supervisory, or
managerial employees are those who are GS- 13s or above, if covered by
GAO*s GS system; Band IIs or above, if covered by GAO*s banded systems for
Analysts and Attorneys; or in any position in GAO*s SES or Senior- Level
system.

In recommending that GAO*s voluntary early out authority be made
permanent, I would like to point to our progress in changing the overall
shape of the organization. The 1990s were a difficult period for ensuring

that GAO*s workforce would remain appropriately sized, shaped, and skilled
to meet client demands and agency needs. Severe downsizing of the
workforce, including a suspension of most hiring from 1992 through 1997,
and constrained investments in such areas as training, performance
incentives, rewards, and enabling technology left GAO with a range of
human capital and operational challenges to address. Over 3 years ago,
when GAO sought additional human capital flexibilities, our workforce was
sparse at the entry level and plentiful at the midlevel. We were concerned
about our ability to support the Congress with experienced and
knowledgeable staff over time, given the significant percentage of the
agency*s senior managers and analysts reaching retirement eligibility and
the small number of entry- level employees who were training to replace
more senior staff.

As illustrated in figure 1, by the end of fiscal year 2002, GAO had almost
a 74 percent increase in the proportion of staff at the entry level (Band
I)

Page 14 GAO- 03- 1024T

compared with fiscal year 1998. Also, the proportion of the agency*s
workforce at the midlevel (Band II) decreased by 16 percent.

Figure 1: GAO*s Human Capital Profile FY 1998 FY 2002

Mission

SES/ SL 3.4

3.5 Band III 12.2

12.0 Band II

45.6 38.1

Band I 13.1

22.8 Other a

4.2 4.1 Mission Support b

21.5 19.5

Figures in percentages

Source: GAO.

Voluntary Separation In addition to authorizing voluntary early retirement
for GAO employees,

Payments Public Law 106- 303 permits the Comptroller General to offer
voluntary

separation incentive payments* buyouts* when necessary or appropriate to
realign the workforce to meet budgetary constraints or mission needs;
correct skill imbalances; or reduce high- grade, supervisory, or
managerial positions. Under the act, up to 5 percent of employees could be
offered such an incentive, subject to criteria established by the
Comptroller General.

The act requires GAO to deposit into the U. S. Treasury an amount
equivalent to 45 percent of the final annual basic salary of each employee
to whom a buyout is paid. The deposit is in addition to the actual buyout
amount, which can be up to $25,000 for an approved individual. Given the
many demands on agency resources, these costs present a strong financial
disincentive to use the provision if at all. GAO anticipates little, if
any, use of this authority because of the associated costs. For this
reason, as well as to avoid creating unrealistic employee expectations,
GAO has not developed and issued agency regulations to implement this
section of the act. Nevertheless, as stated earlier, it is prudent for us
to seek the continuation of this provision because it maximizes the
options available to the agency to deal with future circumstances. Since
GAO is also eligible to request buyouts under the provisions of the
Homeland Security Act, the

Page 15 GAO- 03- 1024T

agency will consider its options under this provision as well. However,
under the Homeland Security Act, GAO would have to seek OPM approval of
any buyouts, which raises serious independence concerns.

Annual Pay Setting Section 3 and 4 of our proposal would provide GAO
greater discretion in

Policy and determining the annual across the board and locality pay
increases for our

employees. Under our proposal, GAO would have the discretion to set
Adjustments

annual pay increases by taking into account alternative methodologies from
those used by the executive branch and various other factors, such as
extraordinary economic conditions or serious budgetary constraints. While
the authority requested may initially appear to be broad based, there

are compelling reasons why GAO ought to be given such authority. First, as
I discussed at the beginning of my testimony, GAO is an agency within the
legislative branch and already has a hybrid pay system established under
the authority the Congress granted over two decades ago. Therefore, our
proposal represents a natural evolution in GAO*s pay for performance
system. Second, GAO*s proposal is not radical if viewed from the vantage
point of the broad- based authority that has been granted the Department
of Homeland Security (DHS) under the Homeland Security Act of 2002;
agencies that the Congress has already granted the authority to develop
their own pay systems; the authorities granted to various demonstration
projects over the past two decades; and the authority Congress is
currently contemplating providing the Department of Defense (DOD). Third,
GAO already has a number of key safeguards and has plans to build
additional safeguards into our modified pay system if granted this
authority. Our proposal seeks to take a constructive step in addressing
what has been

widely recognized as fundamental flaws in the federal government*s
approach to white- collar pay. These flaws and the need for reform have
been addressed in more detail in OPM*s April 2002 White Paper, A Fresh
Start For Federal Pay: A Case for Modernization, and more recently the
National Commission on the Public Service*s January 2003 report on
revitalizing the public service. The current federal pay and
classification system was established over 60 years ago for a federal
workforce that was made up largely of clerks performing routine tasks
which were relatively simple to assess and measure. Today*s federal
workforce is composed of much higher graded and knowledge- based workers.

Although there have been attempts over the years to refine the system by
enacting such legislation as the Federal Employees Pay Comparability Act
(FEPCA) which sought to address, among other things, the issue of pay

Page 16 GAO- 03- 1024T

comparability with the nonfederal sector, the system still contains
certain fundamental flaws. The current system emphasizes placing employees
in a relative hierarchy of positions based on grade; is a *one size fits
all approach* since it does not recognize changes in local market rates
for different occupations; and is performance insensitive in that all
employees are eligible for the automatic across the board pay increases
regardless of their performance. Specifically, the annual across the board
base pay increase, also commonly referred to as the cost of living
adjustment (COLA) or the January Pay Increase which the President
recommends and

the Congress approves, provides a time driven annual raise keyed to the
Employment Cost Index (ECI) to all employees regardless of performance. In
certain geographic areas, employees receive a locality adjustment tied to
the local labor markets. However, in calculating the locality adjustment,
for example, it is my understanding that FEPCA requires the calculation of
a single average, based on the dominant federal employer in an area, which
does not sufficiently recognize the differences in pay rates for different
occupations and skills. In view of the fact that today we are in a
knowledgebased economy competing for the best knowledge workers in the job
market, I believe that new approaches and methodologies are warranted.
This is especially appropriate for GAO*s highly educated and skilled
workforce.

Our proposed pay adjustment provision along with the other provisions of
GAO*s human capital proposal are collectively designed to help GAO
maintain a competitive advantage in attracting, motivating, retaining, and
rewarding a high performing and top- quality workforce both currently and
in future years. First, under our proposal, GAO would no longer be
required to provide automatic pay increases to employees who are rated as
performing at a below satisfactory level. Second, when the proposal is
fully implemented, GAO would be able to allocate more of the funding*
currently allocated for automatic across- the- board pay adjustments to
all employees* to permanent base pay adjustments that would vary based on
performance. In addition, our proposal would affect all GAO, non- wage
grade employees, including the SES and Senior Level staff.

Ultimately, if GAO is granted this authority, all GAO employees who
perform at a satisfactory level will receive an annual base pay adjustment
composed of purchase power protection and locality based pay increases
absent extraordinary economic circumstances or severe budgetary
constraints. GAO will be able to develop and apply its own methodology for
annual cost- of- living and locality pay adjustments. The locality pay
increase would be based on compensation surveys conducted by GAO and

Page 17 GAO- 03- 1024T

which would be tailored to the nature, skills, and composition of GAO*s
workforce. The performance part of an employee*s annual raise would depend
on the level of the employee*s performance and that employee*s pay band.
We estimate that at least 95 percent of the workforce will qualify for an
additional performance- based increase. However, under this provision,
employees who perform below a satisfactory level will not receive an
annual increase of either type.

How GAO Plans to Use This GAO*s major non- SES pay groups include (1)
Analysts and Attorneys which

Authority comprises the majority of our workforce and is our mission
group, (2) the

Professional Development Program staff (PDP) which is our entry level
mission group, (3) the Administrative Professional Support Staff (APSS),
which is our mission support group for the most part, and (4) Wage Grade
employees who primarily operate our print plant. Each of these groups
currently operate in a different pay system. Generally, our mission staff
are all in pay bands whereby they currently receive the annual across-
theboard base pay increase and locality pay increase similar to the GS pay
system, along with performance- based annual increases that are based on
merit. Generally, our mission support staff, with some exceptions, remain
in a system similar to the GS pay system with its annual across- the-
board pay increases, locality pay, quality step increases, and within
grade increases. We are currently in the process of migrating the mission
support staff into pay bands and a pay for performance system. Our Wage
Grade staff will continue to be covered by the federal compensation system
for trade, craft, and laboring employees. Because of the small number of
employees and the nature of their work, we have no plans to apply the pay
adjustment provision authority to this group. I would like to point out
the tables in appendices I through IV, which

succinctly describe how GAO plans to operationalize our authority under
our proposed annual pay adjustment provision over time.

GAO*s Proposed Pay GAO*s proposal for additional pay flexibility is
reasonable in view of the

Authority Is Reasonable authority the Congress has already granted DHS
through the Homeland

Security Act of 2002; the other agencies for whom the Congress has granted
the authority to develop their own pay systems; the demonstration projects
that OPM has authorized; and the authorities that other agencies in the
executive branch are currently seeking (e. g., DOD).

Page 18 GAO- 03- 1024T

While we are aware that the passage of the Homeland Security Act of 2002
was not without its difficult moments, particularly with respect to the
broad- based authorities granted the department, we are also aware that
the process employed by DOD and certain of its human capital proposals are
highly controversial. It is important to point out that GAO*s proposal and
proposed pay flexibilities pale in respect to those granted to the DHS and
to

those requested by the DOD in the Defense Transformation for the 21 st
Century Act of 2003. Collectively, these two agencies represent almost 45
percent of the non- postal federal civilian workforce. Specifically, in
November 2002, the Congress passed the Homeland Security Act of 2002,
which created DHS and provided the department with significant
flexibilities to design a modern human capital management system, which
could have the potential, if properly developed, for application
governmentwide. DOD*s proposed National Security Personnel System (NSPS)
would provide wide- ranging changes to its civilian personnel pay and
performance management systems, collective bargaining, rightsizing, and a
variety of other human capital areas. NSPS would enable DOD to develop and
implement a consistent, DOD- wide civilian personnel system. In addition
to DHS, there are a number of federal agencies with authority

for their own pay systems. Some of these agencies are, for example, the
Congressional Budget Office, which is one of our sister agencies in the
legislative branch; the Federal Aviation Administration (FAA); the
Securities and Exchange Commission (SEC) ; and the Office of the
Comptroller of the Currency (OCC) within the Department of the Treasury.
When the Congress created the CBO in 1974, it granted that legislative

branch agency significant flexibilities in the human capital area. For
example, CBO has *at will* employment. In addition, CBO is not subject to
the annual executive branch pay adjustments. Further, CBO has extensive
flexibility regarding its pay system subject only to certain statutory
annual compensation limits.

Furthermore, there are twelve executive branch demonstration projects
involving pay for performance. These projects have taken different
approaches to the sources of funding for salary increases that are tied to
performance and not provided as entitlements. Many of the demonstration
projects reduce or deny the annual across the board base pay increase for
employees with unacceptable ratings (e. g., the Department of Navy*s China
Lake demonstration, DOD*s Civil Acquisition Workforce demonstration, the
Department of Air Force*s Research Laboratory demonstration, and the
Department of Navy*s Research Laboratory demonstration, among others.)
Others, including the National Institute of Standards and Technology and

Page 19 GAO- 03- 1024T

the Department of Commerce demonstration projects, deny both the annual
across the board base pay increase and the locality pay adjustment for
employees with unacceptable ratings.

Currently, this Congress is considering a NASA human capital proposal.
This proposal would provide NASA with further flexibilities and
authorities for attracting, retaining, developing, and reshaping a skilled
workforce. These include a scholarship- for- service program; a
streamlined hiring authority for certain scientific positions; larger and
more flexible recruitment, relocation, and retention bonuses;
noncompetitive conversions of term employees to permanent status; a more
flexible critical pay authority; a more flexible limited- term appointment
authority for the SES; and greater flexibility in determining annual leave
accrual rate for new hires.

Safeguards Provided As we have testified, agencies should have modern,
effective, credible, and as appropriate, validated performance management
systems in place with

adequate safeguards, including reasonable transparency and appropriate
accountability mechanisms, to ensure fairness and prevent politicization
and abuse. While GAO*s transformation is a work in progress, we believe
that we are in the lead compared to executive branch agencies in having
the human capital infrastructure in place to provide such safeguards and
implement a modified pay system that is more performance oriented.
Specifically, for our Analyst pay group, we have gone through the first
cycle

of a validated performance management system that has adequate safeguards,
including reasonable transparency and appropriate accountability
mechanisms. We have learned from what has worked and what improvements can
and should be made with respect to the first cycle. In fact, we have
adopted many of the recommendations and suggestions of

our managing directors and EAC and are now in the process of implementing
these suggestions.

The following is an initial list of possible safeguards, developed at the
request of Congressman Danny Davis, for Congress to consider to help
ensure that any pay for performance systems in the government are fair,
effective, and credible. GAO*s current human capital infrastructure has
most of these safeguards built in, and the others are in the process of
being incorporated.

 Assure that the agency*s performance management systems (1) link to the
agency*s strategic plan, related goals, and desired outcomes and Page 20
GAO- 03- 1024T

(2) result in meaningful distinctions in individual employee performance.
This should include consideration of critical competencies and achievement
of concrete results.

 Involve employees, their representatives, and other stakeholders in the
design of the system, including having employees directly involved in
validating any related competencies, as appropriate.

 Ensure that certain predecisional internal safeguards exist to help
achieve the consistency, equity, nondiscrimination, and nonpoliticization
of the performance management process (e. g., independent reasonableness
reviews by the human capital offices and/ or the offices of opportunity
and inclusiveness or its equivalent in establishing and implementing a
performance appraisal system, as well as reviews of performance rating
decisions, pay determinations, and promotion actions before they are
finalized to ensure that they are merit- based; internal grievance
processes to address employee complaints; and pay panels predominately
made up of career officials who would consider the results of the
performance appraisal process and other information in making final pay
decisions).

 Assure reasonable transparency and appropriate accountability mechanisms
in connection with the results of the performance management process (e.
g., publish overall results of performance management and pay decisions
while protecting individual confidentiality, and report periodically on
internal assessments and employee survey results).

Transition Period We have provided a statutory period minimum to allow for
a smooth implementation of the law as it applies to both our mission and
mission

support staff. Specifically, for our Analyst and Attorney communities, we
plan to allow for at least a two- year period, during which they will
continue to receive their annual across the board pay raise and their
locality pay, if applicable, based on the amount set by the GS system.
Once the proposal is fully implemented, the new across- the- board
increase, which provides for inflation protection and locality pay where
applicable, would be computed based on GAO compensation studies, and the
performancebased merit pay would be provided based on an employee*s
performance.

For our APSS employees, the transition period of at least 2 years would
allow for a smooth migration to the pay bands and the implementation of at

Page 21 GAO- 03- 1024T

least one performance cycle of a newly validated competency based
performance appraisal system for that component of GAO*s workforce. Our
APSS employees are currently still in the GS system, but we are in the
process of moving them into pay bands. We will allow time for the group to
migrate to broad bands and to have at least one performance cycle under
pay bands before moving it into the new pay system. Therefore, as with the
analysts and attorneys, the administrative support staff will move into a
hybrid pay system once they migrate to pay bands. Also, as with the
analysts and attorneys, I have committed to providing them *pay
protection.* This guarantee would continue even after GAO*s authority to
adjust pay is fully implemented.

We have a small Wage Grade community of under 20 employees. As mentioned
earlier, we do not contemplate having the pay adjustment provision apply
to them.

*Pay Protection* Guarantee My predecessor, Comptroller General Charles A.
Bowsher, provided the analysts and attorneys a *pay protection* guarantee
at the time of their

conversion to broad bands. This guarantee, later spelled out in a GAO
order, provided that the analyst and attorneys rated as meeting
expectations in all categories would fare at least as well under pay bands
as under the GS system. This guarantee would not apply to employees who
are promoted after conversion or demoted, and to new employees hired after
the conversion. It is my understanding that this guarantee provided by my
predecessor is unique to GAO and has generally not been applied by other
agencies that have migrated their employees to pay bands.

Currently, 535 GAO employees are still covered by this *pay protection*
guarantee, while less than 10 employees annually have their pay readjusted
after the merit pay process. I have committed to GAO employees that even
if we receive the new pay adjustment authority, I would still honor my
predecessor*s pay protection guarantee. In addition, our mission support
staff will also receive this guarantee upon conversion to pay bands. This
guarantee will continue through the implementation period for our new
human capital authority.

Pay Retention Section 5 of our proposal would allow GAO not to provide any
automatic increase in basic pay to an employee demoted as a result of
workforce

restructuring or reclassification at his or her current rate until his or
her

Page 22 GAO- 03- 1024T

salary is less than the maximum rate of the new position. Under current
law, the grade and pay retention provisions allow employees to continue to
be paid at a rate that exceeds the value of the duties they are performing
for an extended period. Specifically, employees who are demoted (e. g.,
incur a loss of grade or band) due to, among other things, reduction- in-
force procedures or reclassification receive full statutory pay increases
for 2 years and then receive 50 percent of the statutory pay increases
until the pay of their new positions falls within the range of pay for
those positions. We believe that this antiquated system is inconsistent
with the merit principle that there should be equal pay for work of equal
value.

In granting GAO this authority, we would be able to immediately place
employees in the band or grade commensurate with their roles and
responsibilities. It is important to note that we have a key safeguard*
employees whose basic pay exceeds the maximum rate of the grade or band in
which the employee is placed will not have their basic pay reduced. These
employees, who would still be eligible to increase their overall pay

through certain types of performance- based awards (e. g., incentive
awards), would retain this rate until their basic pay is less than the
maximum for their grade or band. As with all the provisions in our
proposal, we will not implement this pay retention provision until we have
consulted with the EAC and managing directors and have provided all GAO
employees an opportunity for notice and comment on any regulations.
Relocation Expenses Section 6 would provide GAO the authority, in
appropriate circumstances,

to reimburse employees for some relocation expenses when transfers do not
meet current legal requirements for entitlement to reimbursement but still
benefit GAO. Under current law, employees who qualify for relocation
benefits are entitled to full benefits; however, employees whose transfer
may be of some benefit or value to the agency would not be eligible to
receive any reimbursement. This provision would provide these employees
some relief from the high cost of relocating while at the same time
allowing GAO the flexibility to promulgate regulations in order to provide
such relief. This authority has been previously granted to other agencies,
including the FAA.

Leave for Upper Level Section 7 of the proposal provides GAO the authority
to provide 160 hours

Hires (20 days) of annual leave to appropriate employees in high- grade,

managerial or supervisory positions who have less than 3 years of federal

Page 23 GAO- 03- 1024T

service. This is narrowly tailored authority that would apply only to GAO
and not to executive branch agencies. While it is been a long- standing
tenet that all federal employees earn annual leave based on years of
federal service, we believe that there is substantial merit in revisiting
this in view of today*s human capital environment and challenges. We have
found that, in recruiting experienced mid- and upper- level hires, the
loss of leave they would incur upon moving from the private to the federal
sector is a major disincentive. For example, an individual, regardless of
the level at which he enters first enters the federal workforce, is
eligible to earn 4 hours of annual leave for each pay period and,
therefore, could accrue a total of 104 hours (13 days) annually so long as
they do not use any of that leave during the year. This amount increases
to 6 hours of annual leave after 3 years of federal service. By increasing
the annual leave that certain newly hired officers and employees may earn,
this provision is designed to help attract and retain highly skilled
employees needed to best serve the Congress and the country.

Executive Exchange Section 8 would authorize GAO to establish an executive
exchange

Program program between GAO and private sector entities. Currently, GAO
has the

authority to conduct such an exchange with public entities and non profit
organizations under the Intergovernmental Personnel Act; there is no such
authority for private sector exchanges. Under this program, high- grade,
managerial or supervisory employees from GAO may work in the private
sector, and private sector employees may work at GAO. While GAO will
establish the details of this program in duly promulgated regulations, we
have generally fashioned, with exceptions where appropriate, the legal
framework for this program on the Information Technology Exchange Program
authorized by Public Law 107- 347, the E- Government Act of 2002, which
the Congress enacted to address human capital challenges within the
executive branch in the information technology area.

While the Information Technology Exchange Program only involves technology
exchanges, GAO*s exchange program will cover not only those who work in
information technology fields, but also accountants, economists, lawyers,
actuaries, and other highly skilled professionals. This program will help
us address certain skills imbalances in such areas as well as a range of
succession planning challenges. Specifically, by fiscal year 2007, 52
percent of our senior executives, 37 percent of our managementlevel
analysts, and 29 percent of our analysts and related staff will be
eligible for retirement. Moreover, at a time when a significant percentage
of our workforce is nearing retirement age, marketplace, demographic, Page
24 GAO- 03- 1024T

economic, and technological changes indicate that competition for skilled
employees will be greater in the future, making the challenge of
attracting and retaining talent even more complex.

One of the key concerns raised in the past regarding private sector
exchange programs has been the issue of conflict of interest. We believe
that in this regard GAO differs from executive branch agencies in that, as
reviewers, we are not as subject to potential conflicts of interest.
Nevertheless, it is important to note in requesting this authority that we
have made clear that the private sector participants would be subject to
the same laws and regulations regarding conflict of interest, financial
disclosure, and standards of conduct applicable to all employees of GAO.
Under the program, private sector participants would receive their
salaries

and benefits from their employers and GAO need not contribute to these
costs. We also believe that this will also encourage private sector
individuals to devote a portion of their careers to the public sector
without incurring substantial financial sacrifice.

Changing GAO*s Name Section 9 would change the name of our agency from the
*General

to the *Government Accounting Office* to the *Government Accountability
Office.* At the

same time, the well- known acronym *GAO,* which has over 80 years of
Accountability Office*

history behind it, will be maintained. We believe that the new name will
better reflect the current mission of GAO as incorporated into its
strategic plan, which was developed in consultation with the Congress. As
stated in GAO*s strategic plan, our activities are designed to ensure the
executive branch*s accountability to the American people. Indeed, the word
accountability is one of GAO*s core values along with integrity and
reliability. These core values are also incorporated in GAO*s strategic
plan for serving the Congress.

The GAO of today is a far cry from the GAO of 1921, the year that the
Congress established it through the enactment of the Budget and Accounting
Act. In 1921, GAO pre- audited agency vouchers for the legality,
propriety, and accuracy of expenditures. In the 1950s, GAO*s statutory
work shifted to the comprehensive auditing of government agencies. Later,
beginning during the tenure of Comptroller General Elmer B. Staats, GAO*s
work expanded to include program evaluation and policy analysis. Whereas
GAO*s workforce consisted primarily of accounting clerks during the first
three decades of its existence, today it is a multidisciplinary
professional services organization with staff reflecting the diversity of

Page 25 GAO- 03- 1024T

knowledge and skills needed to deliver a wide range of services to the
Congress.

Although currently less than 15 percent of agency resources are devoted to
traditional auditing and accounting activities, members of the public, the
press, as well as the Congress often incorrectly assume that GAO is still
solely a financial auditing organization. In addition, our name clearly
confuses many potential applicants, who assume that GAO is only interested
in hiring accountants. We believe that the new name will help attract
applicants and address certain *expectation gaps* that exist outside of
GAO. Concluding

In conclusion, I believe that GAO*s human capital proposal merits prompt
Observations

passage by this committee and, ultimately, the Congress. We have used the
narrowly tailored flexibilities the Congress provided us previously in
Public Law 106- 303 responsibly, prudently, and strategically to help
posture GAO to ensure the accountability of the federal government for the
benefit of the Congress and the American people. Although some elements of
our initial straw proposal were controversial, we have made a number of
changes, clarifications, and commitments to address various comments and
concerns raised by GAO employees. We recognize that the pay adjustment
provision of this proposal remains of concern to some of our staff.
However, we believe that it is vitally important to GAO*s future that we
continue modernizing and updating our human capital policies and system in
light of the changing environment and anticipated challenges ahead. We
believe that the proposal as presented and envisioned is well reasoned and

reasonable with adequate safeguards for GAO employees. Given our human
capital infrastructure and our unique role in leading by example in major
management areas, including human capital management, the federal
government could benefit from GAO*s experience with pay for performance
systems. Overall, we believe that this proposal represents a logical
incremental advancement in modernizing GAO*s human capital policies, and
with your support, we believe that it will make a big difference for the
GAO of the future.

Chairwoman Jo Ann Davis, Mr. Davis, and Members of the Committee, this
concludes my prepared statement. I would be pleased to respond to any
questions you may have.

Page 26 GAO- 03- 1024T

Contacts For further information regarding this testimony, please contact
Sallyanne Harper, Chief Mission Support Officer, on (202) 512- 5800 or at

harpers@ gao. gov or Jesse Hoskins, Chief Human Capital Officer, on (202)
512- 5553 or at hoskinsj@ gao. gov.

Page 27 GAO- 03- 1024T

Appendix I Analysts and Attorneys: Pay Increases under GAO*s Current
System and Human Capital

Appendi xI

Proposal Types of Pay Current Pay System b

Transition Period c Implementation Period d

Increases a (Broad band)

(Guaranteed Minimum; (Pay Protection from Band Pay Protection from Band
Conversion)

Conversion) Included Permanent

Included Permanent Included

Permanent base pay

base pay base pay Annual across- the- board base pay

(Same percentage as (Percentage

executive branch GS; decoupled from for all satisfactory

executive branch GS; performers)

for all satisfactory performers)

Locality pay (Same percentage as

(Percentage executive branch GS; decoupled from

for all satisfactory executive branch GS;

performers) for all satisfactory

performers) Performance- based pay

(Merit increases) (Percentages determined

(Percentages (Percentages

by EC annually; initial determined by EC

determined by additional performancebased annually; actual EC annually)

funds limited due incremental amount

to transition period will vary over time)

guarantee) Performance bonuses b- d

(for individuals who are One- time

One- time One- time

pay capped) Dividends b- d

One- time One- time

One- time Incentive awards

One- time One- time

One- time This element is applicable N/ A This element is not applicable
Source: GAO.

a The percentage allocated to each type of pay increase varies annually. b
Under our current pay system, GAO is linked to the executive branch for
annual base and locality pay adjustments; however, since the
implementation of broad banding, has not been linked to the executive
branch for performance- based merit pay increases, performance bonuses/
dividends, and other incentive award pay increases. The Executive
Committee determines on an annual basis which pay categories, if any, are
eligible for bonuses and dividends. For example, individuals in pay
categories one and two received dividends for their FY 02 performance. c
During the transition period, GAO staff rated as performing at a
satisfactory level (i. e., meeting

expectations or higher) will be guaranteed, at a minimum, barring
extraordinary economic

Page 28 GAO- 03- 1024T

Appendix I Analysts and Attorneys: Pay Increases under GAO*s Current
System and Human Capital Proposal

circumstances or serious budgetary constraints, base pay and locality pay
according to the same adjustment provided to executive branch employees.
All such GAO staff will also be eligible for additional performance- based
merit pay increases, performance bonuses (if pay capped)/ dividends, and
incentive awards. During the transition period, GAO will continue to raise
the pay cap for its pay bands commensurate with executive branch pay cap
increases absent extraordinary economic circumstances or serious budgetary
constraints. The Executive Committee will determine on an annual basis
which categories, if any, are eligible for bonuses and dividends. d Under
its human capital proposal, GAO proposes to decouple itself from the
executive branch for base

and locality pay adjustments after a 2 plus year transition period. After
the transition period, GAO will fully implement a modified pay system in
which absent extraordinary economic conditions or serious budgetary
constraints, all GAO staff rated as performing at a satisfactory level (i.
e., meeting expectations or higher) can expect to receive at a minimum an
annual adjustment designed to protect purchasing power (e. g., the
Consumer Price Index) and address differences in compensation ranges by
localities. In addition, all such staff will continue to be eligible for
performance- based merit pay increases, performance bonuses (if pay
capped)/ dividends, and incentive awards. Before finalizing and
implementing a modified pay system, GAO will seek the advice of the
managing directors and

GAO*s Employee Advisory Council. We will also draft revised pay
regulations and publish them for review and comment by all employees.

Page 29 GAO- 03- 1024T

Appendix II

Appendi xes Professional Development Program (PDP) Staff: Pay Increases
under GAO*s Current

Appendi xII

System and Human Capital Proposal Current Pay System b Transition Period c

Implementation Types of Pay

(Broad band/ PDP) Guaranteed Minimum Period d Increases a Included
Permanent

Included Permanent Included Permanent

base pay base pay base pay

Annual across- the- board (Percentage

base pay (Same percentage

decoupled as executive

from executive branch GS; branch GS; for all satisfactory

for all satisfactory performers)

performers) Locality pay

(Same percentage (Percentage

as executive decoupled

branch GS; from executive for all satisfactory

branch GS; performers) for all satisfactory

performers) Performance- based pay (Percentages

(Percentages (Percentages

determined by determined by

determined by EC annually)

EC annually) EC annually)

Performance bonuses b- e (for individuals who are

One- time One- time One- time pay capped)

Dividends c- e N/ A N/ A N/ A N/ A N/ A N/ A Incentive awards

One- time One- time One- time This element is applicable N/ A This element
is not applicable Source: GAO.

Note: PDP Staff who are Band IF (full performance) are covered by the
merit pay system. See chart for Analysts & Attorneys. a The percentage
allocated to each type of pay increase varies annually.

b Under our current pay system, GAO is linked to the executive branch for
base and locality pay. Band I staff in the PDP are eligible for periodic
performance based PDP pay increases that are not available in the
executive branch. PDP staff are not eligible for performance based merit
increases and dividends. c During the transition period, PDP staff rated
as performing at a satisfactory level (i. e., meeting

expectations or higher) will be guaranteed, at a minimum, barring
extraordinary economic circumstances or serious budgetary constraints,
base pay and locality pay according to the same adjustment provided to the
executive branch employees. PDP staff rated as performing at the
satisfactory level (i. e., meeting expectations or higher) will be
eligible for performance- based PDP pay increases. During and after the
transition period, PDP staff will not be eligible for dividends because
PDP staff are evaluated every 6 months for performance based PDP
increases. During the transition period, GAO will raise the pay cap for
its Band I pay band commensurate with executive branch pay cap increases
absent extraordinary economic circumstances or serious budgetary
constraints. The

Page 30 GAO- 03- 1024T

Appendix II Professional Development Program (PDP) Staff: Pay Increases
under GAO*s Current System and Human Capital Proposal

Executive Committee will determine on an annual basis which pay
categories, if any, are eligible for PDP bonuses. d Under its human
capital proposal, GAO proposes to decouple itself from the executive
branch for base

and locality pay after a 2 plus year transition period. After the
transition period, GAO will fully implement a modified pay system in which
absent extraordinary economic conditions or serious budgetary constraints,
all PDP staff rated as performing at a satisfactory level (i. e., meeting
expectations or higher) can expect to receive at a minimum, an annual
adjustment designed to protect purchasing power (e. g., the Consumer Price
Index) and address differences in compensation ranges by localities. In
addition, PDP staff rated as performing at a satisfactory level (i. e.,
meeting expectations or higher) will continue to be eligible for
additional performance- based compensation, including performance- based
PDP pay increases and incentive awards. Before finalizing and implementing
a modified pay system, GAO will seek the advice of the managing directors
and GAO*s Employee Advisory Council. We will also draft revised pay
regulations and publish them for review and comment by all employees.

Page 31 GAO- 03- 1024T

Appendix III Administrative Professional Support Staff (APSS): Pay
Increases under GAO*s Current

Appendi xIII

System and Human Capital Proposal Types of Pay Transition Period c

Implementation Period d Increases a

Current Pay System b (Broad band)

Pay Protection from Band Conversion (GS)

Pay Protection from Band Conversion Included Permanent

Included Permanent Included

Permanent base pay base pay

base pay Annual across- the- board base pay

(Same percentage Percentage decoupled from

as executive executive branch GS; branch GS)

for all satisfactory performers) Locality pay

(Same percentage Percentage decoupled from

as executive executive branch GS; branch GS)

for all satisfactory performers) Quality step increase

(QSI) N/ A N/ A N/ A N/ A

Within grade increase N/ A N/ A N/ A N/ A (WIG)

Performance- based pay N/ A N/ A

(merit increases) (Percentages

(Percentages determined by determined by EC annually; actual incremental
EC annually)

amount will vary over time) Performance bonuses b- d (for individuals who
are

N/ A N/ A

One- time One- time pay capped)

Dividends b- d N/ A

N/ A N/ A Incentive awards

One- time One- time One- time This element is applicable N/ A This element
is not applicable Source: GAO.

a The percentage allocated to each type of pay increase varies annually.
This chart applies only to APSS employees who are under the General
Schedule (GS) system. APSS employees who are already in broad bands should
see the chart for Analysts and Attorneys. b Under our current pay system,
GAO is linked to the executive branch for annual base, locality, QSI,

and WIG pay adjustments. APSS staff are eligible for performance incentive
award pay increases; however, they are not eligible for performance
bonuses (if pay capped) or dividends. c During the transition period, GAO
will implement broad banding for the APSS community between

April * June 2004 and allow at least one full cycle of a new competency-
based performance appraisal system before implementing any additional
performance- based pay adjustments envisioned under HC II. Upon conversion
to broad bands, GAO, as it did with its Analyst and Attorney communities,
will

replace QSIs and WIGs with performance pay increases that are not linked
to the executive branch. Also, as it did with its Analyst and Attorney
communities when they were converted to bands, GAO will provide a pay
protection guarantee. Specifically, APSS staff who perform at the meets
expectations level on any performance rating will earn a salary at least
as high as they would have received had they remained under the General
Schedule at their grade at the time of conversion. However, this

Page 32 GAO- 03- 1024T

Appendix III Administrative Professional Support Staff (APSS): Pay
Increases under GAO*s Current System and Human Capital Proposal

guarantee will not apply to staff who are promoted after conversion or
demoted and to new employees hired after the conversion. APSS staff will
be eligible for performance- based merit increases, performance bonuses
(if pay capped) /dividends, and incentive awards. During the transition
period, GAO will continue to raise the pay cap for its pay bands
commensurate with executive branch pay cap increases. The Executive
Committee will determine on an annual basis which pay categories, if any,
are eligible for bonuses and dividends.

d Under its human capital proposal, GAO proposes to decouple itself from
the executive branch for base and locality pay after a two plus year
transition for the broad band conversion. After the transition period, GAO
will fully implement a modified pay system in which absent extraordinary
economic conditions or serious budgetary constraints, all GAO staff rated
as performing at a satisfactory level (i. e., meeting expectations or
higher) can expect to receive at a minimum, an annual adjustment designed
to protect purchasing power (e. g., the Consumer Price Index) and address
differences in compensation ranges by localities. In addition, all APSS
staff will continue to be eligible for performance- based merit pay
increases, performance bonuses (if pay capped)/ dividends, and incentive
awards. Before finalizing and implementing a modified pay system, GAO will
seek the advice of the managing directors and GAO*s Employee Advisory
Council. We will also draft revised pay regulations and publish them for
review and comment by all employees. In addition, APSS staff receiving the
pay protection guarantee from their conversion into pay bands will
continue to be eligible for pay protection during the implementation
period.

Page 33 GAO- 03- 1024T

Appendix IV Wage Grade (WG) Staff: Pay Increases under GAO*s Current
System and Human Capital

Appendi xIV

Proposal Current Pay System b Types of Pay Increases a (Wage Grade)

System Same Under HC II

Included Permanent Annual across- the- board base pay

Locality pay N/ A N/ A Quality step increase (QSI) N/ A N/ A

Within grade increase (WIG) Incentive awards c One- time

. This element is applicable N/ A This element is not applicable Source:
GAO.

Note: HC II refers to GAO*s human capital proposal. a The percentage
allocated to each type of pay increase varies annually.

b Under its current wage grade pay system, GAO is linked to the executive
branch for base, locality, and WIG pay increases. Wage grade employees are
not eligible for QSIs and locality pay increases in GAO or anywhere in the
federal government. Because its wage grade community is so small, GAO does
not plan to include the wage grade community in the modified pay system
under its human capital proposal.

c Wage grade staff are not eligible for bonuses and dividends.

(997900) Page 34 GAO- 03- 1024T

(996000)

GAO*s Mission The General Accounting Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the

federal government for the American people. GAO examines the use of public
funds; evaluates federal programs and policies; and provides analyses,
recommendations, and other assistance to help Congress make informed
oversight, policy, and funding decisions. GAO*s commitment to good
government is reflected in its core values of accountability, integrity,
and reliability.

Obtaining Copies of The fastest and easiest way to obtain copies of GAO
documents at no cost is

through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext GAO Reports and

files of current reports and testimony and an expanding archive of older
Testimony

products. The Web site features a search engine to help you locate
documents using key words and phrases. You can print these documents in
their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail

this list to you every afternoon, go to www. gao. gov and select
*Subscribe to e- mail alerts* under the *Order GAO Products* heading.
Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A

check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U. S. General Accounting Office 441 G Street NW, Room LM Washington, D. C.
20548 To order by Phone: Voice: (202) 512- 6000 TDD: (202) 512- 2537 Fax:
(202) 512- 6061

To Report Fraud, Contact:

Waste, and Abuse in Web site: www. gao. gov/ fraudnet/ fraudnet. htm E-
mail: fraudnet@ gao. gov Federal Programs

Automated answering system: (800) 424- 5454 or (202) 512- 7470 Public
Affairs Jeff Nelligan, Managing Director, NelliganJ@ gao. gov (202) 512-
4800 U. S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D. C. 20548

GAO United States General Accounting Office

A

As an arm of the legislative branch, GAO exists to support the Congress in
meeting its constitutional responsibilities to improve the performance and
ensure the accountability of the federal government for the American
people. Established in 1921 by the Budget and Accounting Act to follow the
federal dollar and ensure that it is spent in an economical, efficient,
and effective manner, GAO has evolved over its 82- year history to meet
the changing needs of the Congress and the nation. Faced with a budgetary

reduction in the mid- 1990s that had to be implemented over a 2- year
period, GAO undertook measures that, while necessary, also increased the
risk that the agency would not be positioned well to serve the Congress in
the future.

To effectively position itself for the future, GAO has been undergoing a
major transformation effort over the past 4 years that even in the best of
organizations takes 7 or more years to implement. Based on its strategic
plan developed in consultation with the Congress, GAO*s effort is focused
on three specific areas: achieving results, serving the client, and
investing in

people. GAO has realigned the agency to eliminate a management layer,
consolidate 35 issue areas into 13 teams, and reduce its field offices
from 16 to 11. Today, GAO is a significantly smaller organization* 40
percent smaller than in 1992* with slightly over 3,250 staff on board. GAO
has worked with its appropriations committees to obtain targeted funding
for such particularly acute risk areas as human capital and information
technology. GAO also launched a range of internal and external initiatives
that have helped it become more strategic, results- oriented, partnerial,
integrated, flexible, responsive, employee- oriented, and externally
focused. Since 1998, GAO*s work has produced a steady increase in
financial benefits and nonfinancial benefits including many improvements
in government

operations. For example, in fiscal year 2002, GAO*s work helped achieve
$37.7 billion in financial benefits* a $88 return for every dollar
invested in GAO. In addition, GAO*s work informed the debate and the
resulting legislation relating to such areas as our nation*s national
security, homeland security, economic security, and the financial security
of Americans.

GAO faces a number of challenges. Issues that GAO is either watching
closely and/ or believes require congressional attention include supply
and demand imbalances, unfunded mandates, access to records, the Deputy
Comptroller General selection process, performance and accountability
community coordination, and additional bid protest volume. S. 1522, the
GAO Human Capital Reform Act of 2003, which mirrors H. R. 2751, which has
been marked- up and reported to the full House Government Reform
Committee, is urgently needed to help address GAO*s challenges. Some
specific initiatives that the Comptroller General plans to focus on for
the future include helping the Congress address challenges relating to the
longterm fiscal outlook, transforming government and how government does
business, and making GAO the federal employer of choice and the gold
standard for a world class professional services organization. The
Committee sought GAO*s views on GAO*s accomplishments, challenges, and
opportunities for

its oversight hearing. The Committee also sought GAO*s views on its latest
human capital proposal, which has been introduced in the Senate as S.
1522.

GAO recommends that the Committee act on S. 1522 promptly and that the
Congress enact the GAO Human Capital Reform Act of

2003 before it adjourns this year. GAO believes that its latest human
capital proposal is both well reasoned and reasonable. There are
compelling reasons why GAO ought to be given this additional human capital
authority. These include the fact that GAO already has a hybrid pay system

established by the authority that the Congress granted it over two decades
ago, the proposal is modest if viewed in light of authorities granted and
requested

by other agencies, and GAO already has a number of key systems and
safeguards in place and has plans to build in additional safeguards.

GAO has conducted extensive external and internal outreach efforts on this
proposal. GAO

respectfully requests the Committee*s support and prompt passage by the
Congress. www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 1167T. To view the
full product, including the scope and methodology, click on the link
above. For more information, contact Gene Dodaro at (202) 512- 5600 or
dodarog@ gao. gov. Highlights of GAO- 03- 1167T, a testimony

before the Senate Committee on Governmental Affairs

September 16, 2003

GAO

Transformation, Challenges, and Opportunities

Page 1 GAO- 03- 1167T

Page 2 GAO- 03- 1167T

Page 3 GAO- 03- 1167T

Page 4 GAO- 03- 1167T

Page 5 GAO- 03- 1167T

Page 6 GAO- 03- 1167T

Page 7 GAO- 03- 1167T

Page 8 GAO- 03- 1167T

Page 9 GAO- 03- 1167T

Page 10 GAO- 03- 1167T

Page 11 GAO- 03- 1167T

Page 12 GAO- 03- 1167T

Page 13 GAO- 03- 1167T

Page 14 GAO- 03- 1167T

Page 15 GAO- 03- 1167T

Page 16 GAO- 03- 1167T

Page 17 GAO- 03- 1167T

Page 18 GAO- 03- 1167T

Page 19 GAO- 03- 1167T

Page 20 GAO- 03- 1167T

Page 21 GAO- 03- 1167T

Page 22 GAO- 03- 1167T

Page 23 GAO- 03- 1167T

Page 24 GAO- 03- 1167T

Page 25 GAO- 03- 1167T

Page 26 GAO- 03- 1167T

Page 27 GAO- 03- 1167T

Page 28 GAO- 03- 1167T

Page 29 GAO- 03- 1167T

Page 30 GAO- 03- 1167T

Page 31 GAO- 03- 1167T

Page 32 GAO- 03- 1167T

Page 33 GAO- 03- 1167T

Page 34 GAO- 03- 1167T

Page 35 GAO- 03- 1167T

Page 36 GAO- 03- 1167T

Appendix I

Appendix I GAO*s Strategic Plan 2002- 2007

Page 37 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 38 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 39 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 40 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 41 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 42 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 43 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 44 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 45 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 46 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 47 GAO- 03- 1167T

Appendix I GAO*s Strategic Plan 2002- 2007

Page 48 GAO- 03- 1167T

Page 49 GAO- 03- 1167T

Appendix II

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 50 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 51 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 52 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 53 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 54 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 55 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 56 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 57 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 58 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 59 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 60 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 61 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 62 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 63 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 64 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 65 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 66 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 67 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 68 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 69 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 70 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 71 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 72 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 73 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 74 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 75 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 76 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 77 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 78 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 79 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 80 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 81 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 82 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 83 GAO- 03- 1167T

Appendix II Comptroller General*s Testimony of July 16, 2003

Page 84 GAO- 03- 1167T

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.
*** End of document. ***