GAO Performance and Accountability Report Fiscal Year 2005	 
(15-NOV-05, GAO-06-1SP).					 
                                                                 
Presented is GAO's performance and accountability report for	 
fiscal year 2005. In the spirit of the Government Performance and
Results Act, this annual report informs the Congress and the	 
American people about what we have achieved on their behalf.	 
Importantly, GAO received a clean opinion from independent	 
auditors on our financial statements for the 19th consecutive	 
year. The financial information and the data measuring GAO's	 
performance contained in this report are complete and reliable.  
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-1SP 					        
    ACCNO:   A41518						        
  TITLE:     GAO Performance and Accountability Report Fiscal Year    
2005								 
     DATE:   11/15/2005 
  SUBJECT:   Accountability					 
	     Agency missions					 
	     Performance measures				 
	     Strategic planning 				 

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GAO-06-1SP

     

     * Performance & Accountability Report
     * Contents
          * Abbreviations
          * How to Use This Report
     * Introduction
          * Financial Reporting Assurance Statements
          * About GAO
               * Mission
               * Strategic Planning and Management Process
               * Organizational Structure
               * How We Measure Our Performance
     * Management's Discussion and Analysis
          * Providing Information That Improves Federal Programs Now and in
            the Future
               * Focusing on Results
               * Focusing on Our Clients
               * Focusing on Our People
               * Focusing on Our Internal Operations
               * 21st Century Challenges
               * GAO's High-Risk Program
               * Building Partnerships
               * Managing Our Resources
               * Strategies for Achieving Our Goals
               * Addressing Management Challenges That Could Affect Our
                 Performance
               * Mitigating External Factors That Could Affect Our
                 Performance
     * Performance Information
          * Performance Information by Strategic Goal
          * Goal 1 Overview
               * Financial Benefits
               * Other Benefits
               * Testimonies
               * Multiyear Performance Goals
          * Goal 2 Overview
               * Financial Benefits
               * Other Benefits
               * Testimonies
               * Multiyear Performance Goals
          * Goal 3 Overview
               * Financial Benefits
               * Other Benefits
               * Testimonies
               * Multiyear Performance Goals
          * Goal 4 Overview
               * Multiyear Performance Goals
          * Data Quality and Program Evaluation
               * Verifying and Validating Performance Data
               * Program Evaluation
     * Financial Information
          * Overview of Financial Statements
               * Financial Systems and Internal Controls
          * Audit Advisory Committee's Report
          * Independent Auditor's Report
          * Purpose of Each Financial Statement
          * Balance Sheets
          * Statements of Net Cost
          * Statements of Changes in Net Position
          * Statements of Budgetary Resources
          * Statements of Financing
          * Notes to Financial Statements
     * Appendixes
          * 1. Accomplishments and Other Contributions
          * 2. From the Inspector General
          * 3. GAO's Report on Personnel Flexibilities
          * 4. GAO's Federal Information Security Management Act Efforts
          * Image Sources
          * Providing Comments on This Report

                                 GAO'S MISSION

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.

                                 SCOPE OF WORK

GAO performs a range of oversight-, insight-, and foresight-related
engagements, a vast majority of which are conducted in response to
congressional mandates or requests. GAO's engagements include evaluations
of federal programs; performance, financial, and management audits; policy
analyses; legal opinions; bid protest adjudications; and investigations.

                                  CORE VALUES

                                 ACCOUNTABILITY

INTEGRITY

RELIABILITY

We help the Congress oversee federal programs and operations to ensure
accountability to the American people. GAO's analysts, auditors, lawyers,
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.

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.

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

Source: GAO.

Contents

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . iii
How to Use This Report . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . iv
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 1
From the Comptroller General . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 2
Financial Reporting Assurance Statements . . . . . . . . . . . . . . . . .
. . . . . . . 7
About GAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 9
Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 9
Strategic Planning and Management Process . . . . . . . . . . . . . . . .
. . . . . . 10
Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 14
How We Measure Our Performance . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 17
: Management's Discussion and Analysis . . . . . . . . . . . . . . . . . .
. 21
Providing Information That Improves Federal Programs Now and in the Future
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 22
Focusing on Results . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 25
Focusing on Our Clients . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 35
Focusing on Our People . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 37
Focusing on Our Internal Operations . . . . . . . . . . . . . . . . . . .
. . . . . . . . 41
21st Century Challenges . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 42
GAO's High-Risk Program . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 43
Building Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 46
Managing Our Resources . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 47
Strategies for Achieving Our Goals . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 51
Addressing Management Challenges That Could Affect Our Performance . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 55
Mitigating External Factors That Could Affect Our Performance . . . . . .
. . 58
: Performance Information . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 61
Performance Information by Strategic Goal . . . . . . . . . . . . . . . .
. . . . . . 62
Goal 1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 63
Financial Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 64
Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 65
Testimonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 65
Multiyear Performance Goals . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 65
Goal 2 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 68
Financial Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 69
Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 70
Testimonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 70
Multiyear Performance Goals . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 71
Goal 3 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 74
Financial Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 75
Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 76
Testimonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 76
Multiyear Performance Goals . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 77
Goal 4 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 79
Multiyear Performance Goals . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 80
Data Quality and Program Evaluation . . . . . . . . . . . . . . . . . . .
. . . . . . . . 82
Verifying and Validating Performance Data . . . . . . . . . . . . . . . .
. . . . . . . 82
Program Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 92
    : Financial Information . . . . . . . . . . . . . . . . . . . . . . . . .
                                                           . . . . . . . . 95
From the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . .
                                                       . . . . . . . . . . 96
Overview of Financial Statements . . . . . . . . . . . . . . . . . . . . .
                                                         . . . . . . . . . 99
    Financial Systems and Internal Controls . . . . . . . . . . . . . . . . .
                                                           . . . . . . . . 99
    Audit Advisory Committee's Report . . . . . . . . . . . . . . . . . . . .
                                                            . . . . . . . 101
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . .
                                                        . . . . . . . . . 102
    Purpose of Each Financial Statement . . . . . . . . . . . . . . . . . . .
                                                            . . . . . . . 106
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
                                              . . . . . . . . . . . . . . 107
Statements of Net Cost . . . . . . . . . . . . . . . . . . . . . . . . . .
                                                  . . . . . . . . . . . . 108
    Statements of Changes in Net Position . . . . . . . . . . . . . . . . . .
                                                            . . . . . . . 109
    Statements of Budgetary Resources . . . . . . . . . . . . . . . . . . . .
                                                          . . . . . . . . 110
    Statements of Financing . . . . . . . . . . . . . . . . . . . . . . . . .
                                                  . . . . . . . . . . . . 111
    Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . .
                                                      . . . . . . . . . . 112
: Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 123
Accomplishments and Other Contributions . . . . . . . . . . . . . . . . .
. 124
From the Inspector General . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 194
GAO's Report on Personnel Flexibilities . . . . . . . . . . . . . . . . .
. . . . 195
GAO's Federal Information Security Management Act Efforts . . . . 197
Image Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 200
Providing Comments on This Report . . . . . . . . . . . . . . . . . . . .
. . . . . . 201

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.

                                 Abbreviations

BPA                     Bonneville Power Administration                    
CAO                     Chief Administrative Office                        
CMS                     Centers for Medicare & Medicaid                    
                           Services                                           
CSRS                    Civil Service Retirement System                    
DHS                     Department of Homeland Security                    
DISA                                    Defense Information Systems Agency 
DOD                     Department of Defense                              
DOE                     Department of Energy                               
DOL                     Department of Labor                                
EPA                     Environmental Protection Agency                    
FAA                     Federal Aviation Administration                    
FECA                                   Federal Employees' Compensation Act 
FEGLIP                  Federal Employees' Group Life                      
                           Insurance Program                                  
FEHBP                   Federal Employees Health Benefits                  
                           Program                                            
FEMA                    Federal Emergency Management                       
                           Agency                                             
FERS                                   Federal Employees Retirement System 
FFMIA                   Federal Financial Management                       
                           Improvement Act                                    
FHA                     Federal Housing Administration                     
FICA                    Federal Insurance Contributions Act                
FISMA                   Federal Information Security                       
                           Management Act                                     
FTE                     full-time equivalent                               
GAO                     Government Accountability Office                   
GSA                     General Services Administration                    
HCTC                    Health Coverage Tax Credit                         
HHS                     Department of Health and Human                     
                           Services                                           
HIPAA                   Health Insurance Portability and                   
                           Accountability Act                                 

                    HUD           Department of Housing and Urban             
                                  Development                                 
                    IG            Office of Inspector General                 
                    INTOSAI       International Organization of Supreme       
                                  Audit Institutions                          
                    IRS           Internal Revenue Service                    
                    IT            information technology                      
                    MFO           multinational force observer                
                    NASA          National Aeronautics and Space              
                                  Administration                              
                    NFC           National Finance Center                     
                    NHTSA         National Highway Transportation Safety      
                                  Administration                              
                    NIH           National Institutes of Health               
                    OMB           Office of Management and Budget             
                    OOI           Office of Opportunity and Inclusiveness     
                    OPM           Office of Personnel Management              
                    PART          Program Assessment Rating Tool              
                    QCI           Quality and Continuous Improvement          
                    SBA           Small Business Administration               
                    SEC           Securities and Exchange Commission          
                    SSA           Social Security Administration              
                    TSA           Transportation Security Administration      
                    UNHCR         United Nations High Commissioner for        
                                  Refugees                                    
                    USACE         U.S. Army Corps of Engineers                
                    USAID         U.S. Agency for International               
                                  Development                                 
                    USCIS         U.S. Citizenship and Immigration            
                                  Services                                    
                    USDA          U.S. Department of Agriculture              
                    US-VISIT      United States Visitor and Immigrant         
                                  Status Indicator Technology                 
                    VA            Department of Veterans Affairs              

                             How to Use This Report

This report describes the U.S. Government Accountability Office's (GAO)
performance measures, results, and accountability processes for fiscal
year 2005. In assessing our performance, we compared actual results
against targets and goals that were set in our annual performance plan and
were developed to help carry out our strategic plan. Our complete set of
strategic planning and performance and accountability reports is available
on our Web site at http://www.gao.gov/sp.html .

This report has an introduction, four major parts, and supplementary
appendixes as follows:

fS Introduction

Look here for the letter from the Comptroller General and a statement
attesting to the completeness and accuracy of the data in this report.
Also, look here for a discussion of our mission, organizational structure,
strategic planning process, and process for assessing our performance.

fS Management's Discussion and Analysis

Look here for our agencywide performance results and use of resources in
fiscal year 2005. Look here also for information on the strategies we use
to achieve our goals and the management challenges and external factors
that affect our performance.

fS Performance Information

Look here for details on our performance results by strategic goal in
fiscal year 2005 and the targets we are aiming for in fiscal year 2006.
Look here also for an explanation of how we ensure the completeness and
reliability of the performance data used in this report.

fS Financial Information

Look here for details on our finances in fiscal year 2005, including a
letter from our Chief Financial Officer, audited financial statements and
notes, and the reports from our external auditor and audit advisory
committee. Look here also for information on our internal controls and for
an explanation of the kind of information each of our financial statements
conveys.

fS Appendixes

Look here for detailed write-ups about our most significant
accomplishments and contributions recorded in fiscal year 2005, for our
Inspector Gen-eral's assessment of our agency's management challenges, and
for information on certain human capital management flexibilities and on
information security reform efforts.

                                  Introduction

                                  Introduction

Source:See Image Sources.

November 15, 2005

By nearly every measure, GAO has once again produced excellent results in
serving the Congress and the American people and, through this performance
and accountability report, I am proud to share with you our assessment of
how well we performed during fiscal year 2005. Our business involves
helping to improve performance and ensure accountability in connection
with a broad range of federal programs, policies, and activities. Simply
put, we try to help improve the way the federal government works for the
benefit of all of our nation's citizens both now and in the future. To
determine our success, we set performance targets and follow financial
management and quality control practices that help ensure that we are
making the best use of the federal funds invested in us. In addition, I am
very pleased to report that we received clean opinions from external,
independent auditors on our financial statements and on our performance
audit and financial audit quality assurance systems. We also identified a
broad range of issues that could seriously affect the stability and
prosperity of the nation in the years to come. The following paragraphs
highlight our performance in each of these areas.

With respect to our performance measures, I am especially pleased to
report that we met or exceeded targets for 10 of our 14 performance
measures, while setting or matching all-time records for 3 measures. We
documented $39.6 billion in financial benefits-a return of $83 for every
dollar we spent-and over 1,400 nonfinancial ben-efits-a record for us. The
work we did to produce these benefits helped to shape important
legislation, such as the Intelligence Reform and Terrorism Prevention Act
of 2004 (Pub. L. No. 108-458), and increase the efficiency of various
federal programs, thus improving the lives of millions of Americans. In
addition, the rate at which our recommendations were implemented by the
Congress or federal agencies rose to 85 percent in fiscal year 2005, and
the percentage of our fiscal year 2005 products con-taining
recommendations increased to 63 percent-exceeding the targets we set for
both of these measures this year. Our performance in these two areas also
set an all-time record for recommendations implemented and matched the
record we set in fiscal year 2004 for the percentage of new products with
recommendations. We delivered 179 testimonies, slightly missing our target
of 185. We also just missed our target of providing 98 percent of our
products to the Congress when promised. In addition, in the first year
that we are reporting our progress on our 8 new measures related to our
people, we met or exceeded the targets for 6 of them related to retention
and employee satisfaction. We came close to, but did not achieve, the
targeted performance related to our new hire rate-the ratio of the number
of people hired to the number of people we planned to hire-and the
percentage of people that accepted our employment offers.

As in past years, during fiscal year 2005, our work covered a number of
major topics of concern to the nation and, in some cases, the world. For
example, we reported on the nation's long-term fiscal challenges, the
financial condition of the airline industry, spending and reconstruction
activities related to Iraq and Afghanistan, and strengthening the visa
process as an antiterrorism tool. As the war in Iraq continued, we
examined how the Department of Defense supplied vehicles, body armor, and
other materiel to the troops in the field. We also examined the Department
of Defense's transformation challenges, base realignment and closure
issues, increasing the strategic focus of federal acquisitions, protecting
against identity theft, the oversight of electricity markets, zero down
payment mortgages, and immigration enforcement. We testified many times
before the Congress, contributing to the public debate on a variety of
topics that included Social Security reform, wildland fire management,
gasoline prices, the flu vaccine, veterans' health care, benefits for
members of the Reserves and National Guard, digital broadcast television,
long-term health care financing, passport fraud detection, reducing the
tax gap, information security, and a range of financial management and
accountability issues. These and other topics on which we testified are
listed on page 36 of this report.

The American people benefited this year as federal agencies took a wide
range of actions based on our analyses and recommendations, while our
efforts also heightened the visibility of issues needing attention. For
example, adoption of our recommendations helped improve home health care
performance standards, increase the collection of delinquent taxes, and
improve the efficiency of federal acquisitions. It is important for our
nation and citizens not only that these issues are made visible, but also
that the nation's leaders address them. We feel fortunate and honored that
in a significant majority of cases, our clients and federal agencies
listen to what we have to say and act on our recommendations. Furthermore,
virtually all of our reports are published and available on our Web site (
http://www.gao.gov ), keeping us accountable to the American people.

Once again we have received a clean audit opinion on our financial
statements, and in part III of this report we have included the external
auditor's report stating that we presented our financial statements fairly
and maintained effective internal control processes. The auditors also
reported no instances of noncompliance with applicable laws and
regulations. Additionally, I am most pleased to report the results of the
first ever review of our quality assurance system used to conduct our
performance audits, which involves work performed in virtually all parts
of GAO. This review-which was performed by an international team of
auditors from seven countries led by the Office of the Auditor General of
Canada-assessed whether our quality assurance policies and procedures were
suitably designed and operating effectively; the review resulted in a
clean opinion. Their April 2005 audit report also cited a number of
exemplary practices at GAO, such as our strategic planning process,
proactive working relationship with the Congress, quality assurance
framework, and audit risk assessment process, and offered us some
suggestions for improvement, including streamlining certain requirements
for low-risk assignments, a suggestion that we are already working to
implement. Similarly, we received a clean opinion resulting from a
separate audit of our quality assurance system for our financial audits.
This opinion was in line with previous such audits that have been
conducted every 3 years. The auditors concluded that our system of quality
control for the accounting and auditing practice was designed to meet
applicable quality control standards and was complied with for the period
reviewed, providing us reasonable assurance of conforming to applicable
professional standards.

In fiscal year 2005, we issued two products that will assist the Congress
as it addresses a broad range of future challenges. Our report entitled
21st Century Challenges: Reexamining the Base of the Federal Government
provides a series of illustrative questions related to 12 areas of federal
activity as well as our perspective on various strategies and approaches
that should be considered as a possible means to address the issues and
questions raised in the report. Drawing on our institutional knowledge and
extensive program evaluation and performance assessment work for the
Congress, we presented over 200 specific 21st century questions
illustrating the types of hard choices our nation needs to face as it
reexamines what the federal government should do, how it should do it, and
how it should be financed. ( see p. 42 for more information about our 21st
century challenges report.) We also issued our High-Risk Series: An
Update, which identifies federal areas and programs at risk of fraud,
waste, abuse, and mismanagement and those in need of broad-based
transformations. The issues affecting many of these areas and programs may
take years to address, and the report will serve as a useful guide for the
Congress's future programmatic deliberations and oversight activities. The
current administration has looked to our high-risk program in shaping
governmentwide initiatives such as the President's Management Agenda,
which has at its base many of the areas we had previously identified as
high risk. The Office of Management and Budget, in consultation with us,
is currently working to ensure that agencies develop detailed action plans
to address high-risk areas, with the ultimate objective, over time, of
seeing these items removed from our high-risk list.

This year we also continued to take steps internally to be a model federal
agency and a world-class professional services organization. These steps
helped us to address our three major management challenges-human capital,
physical security, and information security. Through the GAO Human Capital
Reform Act of 2004, the Congress granted GAO several additional human
capital flexibilities that will allow us, among other things, to move to
an even more performance-oriented and market-based compensation system.
Our most valuable asset continues to be our people, and the flexibilities
granted in this act will help us to continue to modernize our
people-related policies and strategies, which, in turn, will help to
ensure that we are well equipped to serve the Congress and the American
people in the years to come. As a result, we are continuing to take a
range of actions designed to modernize our human capital policies and
practices. In fiscal year 2005, we adopted a broad pay band approach and a
more performance-oriented pay system for our administrative staff. We also
made considerable progress in moving to a more market-based and skills-,
knowledge-, and performance-oriented classification and pay system for all
of our employees.

In today's world, we should partner for progress with other key players.
We believe strongly in doing so in order to maximize our value and
mitigate risk within current and expected resource levels. Fiscal year
2005 included several major milestones in GAO's outreach efforts. Most
notably, we led the adoption of the first-ever strategic plans for the
International Organizational of Supreme Audit Institutions (INTOSAI) and
the National Intergovernmental Audit Forum.

In short, fiscal year 2005 was a very successful year for us. This report
describes our many contributions toward improving the government, and I am
confident that the performance data and financial information in this
report are complete and reliable, as noted in the statement of assurance
that appears just after this letter. I believe that GAO remained true to
its core values of accountability, integrity, and reliability throughout
the year and that those who read this report will agree that the taxpayers
received an excellent return on their investment in us.

David M. Walker Comptroller General of the United States

                    Financial Reporting Assurance Statements

November 15, 2005

We, as GAO's executive committee, are responsible for preparing and
presenting the financial statements and other information included in this
performance and accountability report. The financial statements included
herein are presented in conformity with U.S. generally accepted accounting
principles; incorporate management's reasonable estimates and judgments,
where applicable; and contain appropriate and adequate disclosures. Based
on our knowledge, the financial statements are presented fairly in all
material respects, and other financial information included in this report
is consistent with the financial statements.

On the basis of GAO's comprehensive management control program, we are
pleased to certify, with reasonable assurance, that

     + Our financial reporting is reliable-transactions are properly
       recorded, processed, and summarized to permit the preparation of
       financial statements in accordance with U.S. generally accepted
       accounting principles, and assets are safeguarded against loss from
       unauthorized acquisition, use, or disposition.
     + GAO is in compliance with all applicable laws and
       regulations-transactions are executed in accordance with (1) laws
       governing the use of budget authority and other laws and regulations
       that could have a direct and material effect on the financial
       statements and (2) any other laws, regulations, and governmentwide
       policies applicable to GAO.
     + Our performance reporting is reliable-transactions and other data that
       support reported performance measures are properly recorded,
       processed, and summarized to permit the preparation of performance
       information in accordance with the criteria stated by GAO's
       management.

We also believe these same systems of accounting Managers' Financial
Integrity Act). This is an objecand internal controls provide reasonable
assurance tive that we set for ourselves even though, as part of that GAO
is in compliance with the spirit of 31 the legislative branch of the
federal government, we

U.S.C. 3512 (commonly referred to as the Federal are not technically
required to do so.

David M. Walker                                 Gene L. Dodaro             
Comptroller General                                Chief Operating Officer 
of the United States                

Sallyanne Harper Anthony H. Gamboa Chief Financial Officer General Counsel

About GAO

We exist 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

Source:See Image Sources.

GAO is an independent, nonpartisan, professional services agency in the
legislative branch of the federal government. Commonly known as the "audit
and investigative arm of the Congress" or the "congressional watchdog," we
examine how taxpayer dollars are spent and advise lawmakers and agency
heads on ways to make government work better. As a legislative branch
agency, we are exempt from many laws that apply to the executive branch
agencies. However, we generally hold ourselves to the spirit of many of
the laws, including 31 U.S.C. 3512 (commonly referred to as the Federal
Managers' Financial Integrity Act), the Government Performance and Results
Act of 1993, and the Federal Financial Management Improvement Act of
1996.1 Accordingly, this performance and accountability report for fiscal
year 2005 supplies what we consider to be information that is at least
equivalent to that supplied by executive branch agencies in their annual
performance and accountability reports.

  Mission

Our mission is to support the Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the American
people. The strategies and means that we use to accomplish this mission
are described in the following pages. In short, we accomplish our mission
by providing reliable information and informed analysis to the Congress,
to federal agencies, and to the public; and we recommend improvements,
when appropriate, on a wide variety of issues. Three core
values-accountability, integrity, and reliability-form the basis for all
of our work, regardless of its origin. These are described on the inside
front cover of this report.

                                 GAO's History

The Budget and Accounting Act of 1921 required the

President to issue an annual federal budget and estab

lished GAO as an independent agency to investigate

how federal dollars are spent. In the early years, we

mainly audited vouchers, but after World War II we

started to perform more comprehensive financial

audits that examined the economy and efficiency of

government operations. By the 1960s, GAO, which is

in the legislative branch of the federal government,

had begun to perform the type of work we are noted

for today-program evaluation-which examines

whether government programs are meeting their

objectives. Our name-the U.S. Government Account

ability Office-reflects our people, our work, and our

reputation.

1The Federal Managers' Financial Integrity Act requires ongoing
evaluations and annual reports on the adequacy of the systems of internal
accounting and administrative control of each agency. The Government
Performance and Results Act seeks to improve public confidence in federal
agency performance by requiring that federally funded agencies develop and
implement an accountability system based on performance measurement,
including setting goals and objectives and measuring progress toward
achieving them. The Federal Financial Management Improvement Act
emphasizes the need to improve federal financial management by requiring
that federal agencies implement and maintain financial management systems
that comply with federal financial management systems requirements,
applicable federal accounting standards, and the U.S. Government Standard
General Ledger at the transaction level.

  Strategic Planning and Management Process

To accomplish our mission, we use a strategic planning and management
process that is based on a hierarchy of four elements ( see fig. 1 ),
beginning at the highest level with the following four strategic goals:

     + Strategic Goal 1: Provide Timely, Quality Service to the Congress and
       the Federal Government to Address Current and Emerging Challenges to
       the Well-Being and Financial Security of the American People
     + Strategic Goal 2: Provide Timely, Quality Service to the Congress and
       the Federal Government to Respond to Changing Security Threats and the
       Challenges of Global Interdependence
     + Strategic Goal 3: Help Transform the Federal Government's Role and How
       It Does Business to Meet 21st Century Challenges
     + Strategic Goal 4: Maximize the Value of GAO by Being a Model Federal
       Agency and a World-Class Professional Services Organization

                  Figure 1: GAO's Strategic Planning Hierarchy

Source: GAO.

Our work is primarily aligned under the first three strategic goals, which
span issues that are both domestic and international, affect the lives of
all Americans, and influence the extent to which the federal government
serves the nation's current and future interests. The fourth goal is our
only internal one and is aimed at maximizing our productivity through such
efforts as investing steadily in information technology (IT) to support
our work; ensuring the safety and security of our people, information, and
assets; pursuing human capital transformation; and leveraging our
knowledge and experience. Figure 2 lists by goal some examples of our work
during fiscal year 2005; this work relates to a variety of specific
strategic objectives. We revisit the focus and appropriateness of these
four strategic goals each time that we update our strategic plan.

Figure 2: Examples of How GAO Assisted the Nation

GAO strategic goal Description In fiscal year 2005, GAO provided
information that helped to...

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

     + Improve the transition from active duty to civilian status for
       veterans with serious war-related injuries
     + Address long-term health care financing pressures on state and local
       government budgets
     + Identify challenges with transferring the Medicare appeals process
       from the Social Security Administration (SSA) and the Department of
       Health and Human Services (HHS)
     + Improve patient safety at Department of Veterans Affairs hospitals
     + Improve the security of Social Security numbers
     + Address the challenges of pension reform
     + Strengthen the security screening process for passengers and checked
       baggage at the nation's airports
     + Improve the oversight of Federal Housing Administration single-family
       and multifamily lenders
     + Improve the oversight of electricity markets by the Federal Energy
       Regulatory Commission
     + Identify challenges associated with the Department of Energy's (DOE)
       nuclear facility designs
     + Monitor the growth in the digital television market
     + Analyze issues contributing to the declining financial condition of
       the airline industry

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

     + Improve the management of funds for the Global War on Terrorism
     + Increase the security of cargo containers to prevent terrorist
       activity
     + Alert the Congress to issues affecting the Department of Defense's
       (DOD) major weapon systems
     + Analyze funding options for a new federal foreign assistance
       program-the Millennium Challenge Account
     + Promote government efforts to address threats to the security of the
       nation's information systems
     + Strengthen the visa process as an antiterrorism tool
     + Improve management of the U.S. Coast Guard's Deepwater program
     + Shape the debate on improving military pay and benefits
     + Strengthen the U.S. strategic export control system
     + Identify improvements needed to secure the telecommunications and
       information systems used by U.S. financial markets

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

     + Increase the public's understanding of the federal government's
       long-term fiscal challenges
     + Implement governmentwide civil service reforms
     + Oversee federal tax policy
     + Increase debts collected from criminals
     + Decrease improper payments made by the U.S. Department of
       Agriculture's (USDA) Food Stamp Program and other federal agencies
     + Manage multibillion-dollar IT modernizations and investments at the
       Department of Homeland Security (DHS) and Office of Personnel
       Management
     + Improve agencies' strategic purchasing practices
     + Examine changes in key areas of federal activity that could affect the
       federal government's fiscal future
     + Enhance the knowledge base on comprehensive national indicators

4 Maximize the value fS Foster among other federal agencies GAO's
innovative human capital practices, such as of GAO by being a broad pay
bands; performance-based compensation; and workforce planning and staffing
model federal strategies, policies, and processes

agency and a world-fS Share GAO's model business and management processes
with counterpart organizations class professional

in the United States and abroad services organization.

Source: GAO.

The four strategic goals are supported by strategic objectives that are in
turn supported by and achieved through numerous performance goals and key
efforts. Our strategic planning framework for serving the Congress, which
lists the strategic objectives under each goal, is depicted on the next
page . This framework not only shows the relationship between our
strategic goals and strategic objectives, but also shows major themes that
could potentially affect our work.

                 An Example of Our Strategic Planning Elements

              Strategic Goal 1: Provide Timely, Quality Service to

               the Congress and the Federal Government to Address

Current and Emerging Challenges to the Well-Being

and Financial Security of the American People

Strategic Objective: A Secure Retirement for Older

Americans

Performance Goal: Identify Opportunities to

Improve the Ability of Government Agencies to

Administer and Protect Workers' Retirement Benefits

Key Efforts:

     + Evaluate pension, pension insurance, and tax oversight programs to
       determine whether workers' private pension retirement benefits are
       effectively protected
     + Evaluate SSA's service-delivery systems and program operations to
       determine whether they are being implemented fairly, effectively,
       efficiently, and securely
     + Assess the adequacy and management of public service retirement
       systems, including the federal, state, and local government employee
       systems, in serving participants and in protecting and providing
       benefits

Complete descriptions of the steps in our strategic planning and
management process are included in our strategic plan for fiscal years
2004 through 2009, which is available on our Web site at
http://www.gao.gov . This site also provides access to our annual
performance plans since fiscal year 1999 and our performance and
accountability reports since fiscal year 2001.

To ensure that we are well positioned to meet the Congress's current and
future needs, we update our 6-year strategic plan every 3 years,
consulting extensively during the update with our clients on Capitol Hill
and with other experts (see our complete strategic plan on
http://www.gao.gov/sp/d04534sp.pdf ). Using the plan as a blueprint, we
lay out the areas in which we expect to conduct research, audits,
analyses, and evaluations to meet our clients' needs, and we allocate the
resources we receive from the Congress accordingly. Given the increasingly
fast pace with which crucial issues emerge and evolve, we design a certain
amount of flexibility into our plans and staffing structure so that we can
respond readily to the Congress's changing priorities. When we revise our
plans or our allocation of resources, we disclose those changes in annual
performance plans, which are posted-like our strategic plan- on the Web
for public inspection (http://www.gao.gov/sp.html ). For example, we
issued our performance plan for fiscal year 2006 in June 2005.

Each year, we hold ourselves accountable to the Congress and to the
American people for our performance, primarily through the annual
performance and accountability report. However, we have included some
information about future plans in this report to provide as cohesive a
view as possible of what we have done, what we are doing, and what we
expect to do to support the Congress and to serve the nation. Last year,
the Association of Government Accountants awarded us for the fourth
consecutive year its Certificate of Excellence in Accountability Reporting
for our fiscal year 2004 performance and accountability report. According
to the association, this certificate means that we produced an interesting
and informative report that achieved the goal of complete and fair
reporting. (See p. 14 .)

Source: See Image Sources.

  Organizational Structure

As the Comptroller General of the United States, David M. Walker is the
head of GAO and is serving a 15-year term that began in November 1998.
Three other executives join Comptroller General Walker to form GAO's
Executive Committee, which is the top policymaking body within GAO. These
executives are Chief Operating Officer Gene L. Dodaro, Chief
Administrative Officer/Chief Financial Officer Sally-anne Harper, and
General Counsel Anthony H. Gamboa.

To achieve our strategic goals, our staff is organized as shown in figure
3 . For the most part, our 13 research, audit, and evaluation teams
perform the work that supports strategic goals 1, 2, and 3-our three
external strategic goals-with several of the teams working in support of
more than one strategic goal.

Figure 3: Organizational Structure

    Public Strategic Planning Congressional

Opportunity and Inspector General

    Affairs and External Liaison Relations

Inclusiveness

     o Provide audit and other legal support services for all goals and staff
       offices
     o Manage GAO's bid protest and appropriations law work

Source: GAO.

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

     o Education,Workforce, and Income Security
     o Financial Markets and Community Investment
     o Health Care
     o Homeland Security and Justice
     o Natural Resources and Environment
     o Physical Infrastructure

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

     o Acquisition and Sourcing Management
     o Defense Capabilities and Management
     o International Affairs and Trade

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

     o Applied Research and Methods
     o Financial Management and Assurance

- Forensic Audits and Special Investigations

     o Information Technology
     o Strategic Issues

- Federal Budget and Intergovernmental Relations

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

     o Controller
     o Human Capital Office

- Chief Human Capital Officer

o  Information Systems and Technology Services

- Chief Information Officer

     o Knowledge Services - Chief Knowledge Services Officer
     o Professional Development Program

Note: General Counsel's structure largely mirrors the agency's goal
structure, and attorneys who are assigned to goals work with the teams on
specific engagements. Thus, the dotted lines in this figure indicate
General Counsel's support of or advisory relationship with the goals and
teams rather than a direct reporting relationship.

Senior executives in charge of the teams manage a mix of engagements to
ensure that the Congress's need for information on quickly emerging issues
is met as we also continue longer term work efforts that flow from our
strategic plan. To effectively serve the Congress with a finite set of
resources, senior managers consult with our congressional clients and
determine the timing and priority of engagements for which they are
responsible. In fiscal year 2005, we formed a new unit-Forensic Audits and
Special Investigations-within our Financial Management and Assurance team.
This unit was designed to provide the Congress with high-quality forensic
audits;2 investigations of fraud, waste, and abuse; and evaluations of
security vulnerabilities and other appropriate investigative services as
part of its own assignments or in support of other teams. This unit
follows up on engagements and referrals from our other teams when its
special services are required to help determine whether legislative or
administrative actions are necessary. The unit is composed of
investigators and staff from our former Office of Special Investigations;
auditors from the Financial Management and Assurance team who have
experience with forensic audits; and staff in General Counsel who worked
with Fraud-Net-our online system designed to facilitate the reporting of
allegations of fraud, waste, abuse, or mismanagement of federal funds.

As described below, General Counsel supports the work of all of our teams.
In addition, the Applied Research and Methods team assists the other teams
on matters requiring expertise in areas such as economics, research
design, and statistical analysis. And staff in many offices such as
Strategic Planning and External Liaison, Congressional Relations,
Opportunity and Inclusiveness (OOI), Quality and Continuous Improvement
(QCI), Public Affairs, and the Chief Administrative Office (CAO) support
the efforts of the teams. This collaborative process, which we refer to as
matrixing, increases our effectiveness, flexibility, and efficiency in
using our expertise and resources to meet congressional needs on complex
issues.

General Counsel is structured organizationally along subject matter lines
to facilitate the delivery of legal services. This structure allows
General Counsel to

(1) provide legal support to GAO and its audit teams concerning all
matters related to their work and (2) produce legal decisions and opinions
for the Comptroller General. Specifically, the Goal 1, Goal 2, and Goal 3
groups in General Counsel are organized to provide each of the audit teams
with a corresponding team of attorneys dedicated to supporting each team's
needs for legal services. In addition, these groups prepare advisory
opinions to committees and members of the Congress on agency adherence to
laws applicable to their programs and activities. General Counsel's Legal
Services group provides in-house support to GAO's management on a wide
array of human capital matters and initiatives and on information
management and acquisition matters and defends the agency in
administrative and judicial forums. Finally, attorneys in the Procurement
Law and the Budget and Appropriations Law groups prepare administrative
decisions and opinions adjudicating protests to the award of government
contracts or opining on the availability and use of appropriated funds.

For strategic goal 4-our fourth and only internal strategic goal-staff in
CAO take the lead. They are assisted on specific key efforts by the
Applied Research and Methods team and by staff offices such as Strategic
Planning and External Liaison, Congressional Relations, OOI, QCI, and
Public Affairs. In addition, attorneys in General Counsel, primarily in
the Legal Services group, provide legal support for goal 4 efforts.

2Forensic audits are reviews that are designed to highlight system
vulnerabilities and identify potential instances of fraud, waste, and
abuse. Such audits often involve data mining of agencies' information
systems and developing examples or case studies to illustrate systemic
problems. As with our performance and financial audits, we coordinate this
work, when appropriate, with the agencies' Offices of Inspectors General
(IG).

Throughout GAO, we maintain a workforce of highly trained professionals
with degrees in many academic disciplines, including accounting, law,
engineering, public and business administration, economics, and the social
and physical sciences. About three-quarters of our approximately 3,200
employees are based at our headquarters in Washington, D.C.; the rest are

GAO Field Locations

Atlanta Boston Chicago Dallas Dayton Denver Huntsville Los Angeles Norfolk
San Francisco Seattle

deployed in 11 field offices across the country. Staff in these field
offices are aligned with our research, audit, and evaluation teams and
perform work in tandem with our headquarters staff in support of our
external strategic goals.

  How We Measure Our Performance

We measure our performance using annual quantitative measures and
multiyear qualitative performance goals. Together, these indicators help
us to determine how well we are meeting the needs of the Congress and
maximizing our value as a world-class organization.

    Annual Performance Measures

For several years, we assessed our performance annually using quantitative
performance measures that are related to our work results and the
usefulness of those results to our primary client-the Congress. Recently,
we expanded our focus to include a more balanced set of performance
measures that focus on three key areas-results, clients, and peo-ple.3
Fiscal year 2005 is the first year that we report how well we performed
against the targets we set for our people measures. These categories of
measures are briefly described below.

     + Results. Focusing on results and the effectiveness of the processes
       needed to achieve them is fundamental to accomplishing our mission. To
       assess our results, we measure financial benefits, other
       (nonfinancial) benefits, recommendations implemented, and percentage
       of new products with recommendations.
     + Clients. Our strategy in this area draws upon a variety of data
       sources (e.g., our client feedback survey and in-person discussions
       with congressional staff) to obtain information on the services we are
       providing to our congressional clients. To judge how well we are
       serving our clients, we measure the number of times we are asked to
       present expert testimony at congressional hearings as well as our
       timeliness in delivering products to the Congress.
     + People. As our most important asset, our people define our character
       and capacity to perform. A variety of data sources, including an
       internal survey, provide information to help us measure how well we
       are attracting and retaining high-quality staff and how well we are
       developing, supporting, using, and leading staff.

Beginning with fiscal year 2006, we will add internal operations measures
to the list of measures on which we report. Our mission and people are
supported by our internal administrative services, including information
management, building management, knowledge services, human capital, and
financial management services. Through an internal customer satisfaction
survey, we gather information on how well our internal operations help
employees get their jobs done or improve employees' quality of work life.
Examples of surveyed services include providing secure Internet access and
voice

3In addition, we are continuing to explore measures that could help us
assess how well we develop mutually beneficial relationships with other
accountability organizations. Such partnerships are important because they
(1) create opportunities for collaboration and cooperation that help all
organizations involved address common challenges and enhance their ability
to improve government operations and serve the public better, (2) allow us
and other organizations to make meaningful changes in our internal
accountability processes and policies, and (3) allow us to better leverage
available resources. The Building Partnerships and Strategies for
Achieving Our Goals sections in this report provide additional information
on the partnerships we have established.

communication systems, performance management, and benefits information
and assistance. (For more information about these measures, see p. 41 .)

To establish targets for these measures, we examine what we have been able
to achieve in the past (e.g., by looking at our 4-year rolling averages
for our client measures and most of our results measures, see

p. 24 ) and the external factors that influence our work ( see p. 58 ).
The teams and offices that are directly engaged in the work discuss their
views of what must be accomplished in the upcoming fiscal year with our
top executives, who then establish targets for the performance measures.
Once approved by the Comptroller General, the targets become final and are
presented in our annual performance plan.4 We may adjust these targets
after they are initially published when our expected future work or level
of funding provided warrant doing so. If we make changes, we include the
changed targets in later documents, such as this performance and
accountability report, and annotate the changes. In part II, we include
detailed information on data sources that we use to assess each of these
measures, as well as the steps we take to verify and validate the data
(see p. 82) .

    Measuring the Results of Our Work

We use four of our annual measures-financial benefits, other benefits, the
percentage of past recommendations implemented, and the percentage of new
products with recommendations-to assess our efforts to provide the kind of
information and recommendations that will lead to benefits for the
American people. Financial benefits and other benefits provide
quantitative and qualitative information, respectively, on the outcomes or
results that have been achieved from our work. They often represent
outcomes that occurred over a period of several years. The remaining
measures are intermediate outcomes in that they often lead to achieving
outcomes that are ultimately captured in our financial or other benefits.

For financial benefits and other benefits we first set targets for the
agency as a whole and then we set targets for each of the external
goals-that is, goals 1, 2, and 3-so that the sum of the targets for the
goals equals the agencywide targets. For past recommendations implemented
and percentage of products with recommendations, we set targets and report
performance for the agency as a whole because we want our performance on
these measures to be consistent across goals. We track our performance by
strategic goal in order to understand why we meet or do not meet the
agencywide target. We also use this information to provide feedback to our
teams on the extent to which they are contributing to the overall target
and to help them identify areas in which they need to improve.

    Multiyear Performance Goals

We use two elements in our strategic planning hier-archy-performance goals
and key efforts-as qualitative indicators of our performance. We ask
senior managers to determine whether the performance goals established in
our strategic plan have been met over a multiyear period. To do this,
these managers examine the amount of work conducted and recommendations
made for each key effort supporting each performance goal. Senior managers
also consider any other assistance provided to the client or customer that
is related to these efforts. These managers then judge whether the work
completed collectively for all key efforts actually achieved the
performance goal, and we include the results of those assessments in our
performance and accountability reports.

For all four strategic goals, the multiyear, qualitative performance goals
included in our current strategic plan describe specific areas of work
that we had planned to complete by the end of fiscal year 2005. We assess
our progress toward these multiyear, qualitative performance goals in part
II of this report. However, during fiscal year 2004, we decided to revise
our strategic plan every 3 years, rather than on a 2-year cycle, which
means that we will not set new multiyear performance goals until 2007. To
accommodate this change, for fiscal year 2006, we plan to continue to use
the current performance goals as a basis for aligning our work with our
strategic goals, and will describe the work we did in support of these
multiyear performance goals at the end of fiscal year 2006. In preparing
our fiscal year 2006 budget submission, we made minor revisions that apply
to fiscal year 2006 for some of these performance goals, mainly in the
homeland security

       4Our most recent performance plan is available on our Web site at
                http://www.gao.gov/cgi-bin/getrpt?gao-05-776sp .

and justice areas. These revisions were discussed in our fiscal year 2006
performance plan. In our next strategic plan update, which will cover
fiscal years 2007 through 2012, we will establish revised performance
goals and key efforts that cover fiscal years 2007 through 2009.

    Measuring Client Service

We use two performance measures-the number of testimonies and the
timeliness of our products-as indicators of how well we are meeting our
clients' needs.

We consider requests to present testimony as an indicator that our clients
believe our work can add value to the congressional decision-making
process. We set a target at the agencywide level for the number of
testimonies and then assign a portion of the testimonies as a target for
each of the external goals-that is, goals 1, 2, and 3-based on their
expected contribution to the agencywide total. As in measuring the results
of our work, we track our progress on this measure at the goal level in
order to understand why we met or did not meet the agencywide target.

We also believe that our ability to provide products by the agreed-upon
date means that we have met the clients' needs for providing information
in time for it to be of value to them. We set agencywide targets for
timeliness because we want our performance on these measures to be
consistent across goals. However, we track our progress on this measure at
the team level so that we can provide feedback to our teams on the extent
to which they are contributing to the overall target and to help them
identify areas in which they need to improve.

    Measuring the Management of Our People

Our most important asset is our people, and they determine our capacity to
perform. Therefore, we hold our managers accountable for attracting and
retaining our human resources and determine how well we are performing in
these areas through our new hire rate, acceptance rate, and retention
rate. We also hold our managers accountable for investing in and leading
our human resources. To assess our success in these areas, we track our
performance using the following measures: staff development, staff
utilization, leadership, and organizational development. We set targets
for all of these measures at the agencywide level.

On the pages that follow, we assess our performance for fiscal year 2005
against our previously established performance targets. We also present
our financial statements, the independent auditor's report, and a
statement from GAO's Inspector General.

Part I: Management's Discussion and Analysis

                                     Part I

Management's Discussion and Analysis

Providing Information That Improves Federal Programs Now and in the Future

In fiscal year 2005, the Congress focused its attention on a broad array
of challenging issues affecting the safety, health, and well-being of
Americans here and abroad, and we were able to provide the objective,
fact-based information these decision makers needed to stimulate debate,
change laws, and improve federal programs for the betterment of the
nation. For example, as the war in Iraq continued, we examined how DOD
supplied vehicles, body armor, and other materiel to the troops in the
field; contributed to the debate on military compensation; and highlighted
the need to improve health, vocational rehabilitation, and employment
services for seriously injured soldiers transitioning from the battlefield
to civilian life. We also kept pace with the Congress's information needs
about ways to better protect America from terrorism by issuing products
and delivering testimonies that addressed issues such as security gaps in
the nation's passport operations that threaten public safety and federal
efforts needed to improve the security of checked baggage at airports and
cargo containers coming through

U.S. ports. We explored the financial crisis that weakened the airline
industry and the impact of this situation on the traveling public and
airline employees' pensions.

In addition, we helped to focus the attention of the Congress and the
public on issues affecting the fiscal security and economic stability of
the nation in the long term. In the second quarter of fiscal year 2005, we
issued two products that will assist the Congress as it addresses future
challenges. Our report entitled 21st Century Challenges: Reexamining the
Base of the Federal Government provides a series of illustrative questions
related to 12 areas of federal activity as well as our perspective on
various strategies and approaches that should be considered as a possible
means to address the issues and questions raised in the report. Drawing on
our institutional knowledge and extensive program evaluation and
performance assessment work for the Congress, we presented over 200
specific 21st century questions illustrating the types of hard choices our
nation needs to face as it reexamines what the federal government does and
how it does it. We also issued our High-Risk Series: An Update, which
identifies federal areas and programs at risk of fraud, waste, abuse, and
mismanagement and those in need of broad-based transformations. The issues
affecting many areas and programs discussed in these two products may take
years to address, and these products will serve as a useful guide for the
Congress's future programmatic deliberations and oversight activities.
(see pp. 42 and 43 for more information about our 21st century challenges
and high-risk reports, respectively.) We performed all this work and more
in accordance with our strategic plan, guided by our core values, and
consistent with our professional standards.

As we assisted the Congress in fiscal year 2005, we monitored our
performance using 14 annual performance measures that capture the results
of our work; the assistance we provided to our client-the Congress; and
our ability to attract, retain, develop, and lead a highly professional
workforce (see table 1) . These measures indicate that we had an
impressive year-we met or exceeded our performance targets for 10 of our
14 measures. Two of our results measures-financial benefits and other
benefits-illustrate the outcomes of our work and our value to the nation
because they track federal dollars saved or better used and programmatic
improvements implemented as a result of our work. Two additional results
measures track recommendations implemented and new products with
recommendations that help us to achieve financial and other benefits. Our
client measures-testimonies and timeliness-indicate how well we, as an
information provider, serve the Congress, and our people measures reflect
how well we manage our staff to achieve the results that we do.

           Table 1: Agencywide Summary of Annual Measures and Targets

Source: GAO.

Notes: N/A indicates the information is not available or the target is not
applicable. Our fiscal year 2006 target for the percentage of products
with recommendations differs from the target we reported for this measure
in our fiscal year 2006 performance plan posted on our Web page in June
2005. On the basis of our performance in fiscal year 2005, we increased
this target by 5 percentage points.

In fiscal year 2005, we accomplished real results for We did not achieve
the targets we set for testimothe nation, surpassing our financial
benefits target nies and timeliness. Several testimonies we had for the
year and exceeding our annual target and scheduled were postponed or
canceled so that the all-time record for other (nonfinancial) benefits.
Our Congress could turn its attention to the Supreme financial benefits of
$39.6 billion represents an $83 Court nominations, and during the last
months of return on every dollar invested in us, and the more the fiscal
year, to Hurricane Katrina and its after-than 1,400 other benefits
resulting from our work math. However, we believe we served the Congress
helped to improve the efficiency and effectiveness very well during fiscal
year 2005. Based on feed-of government programs that serve the public. In
back through an electronic survey completed by a addition, we exceeded our
targets for past recom-sample of our congressional clients who requested
mendations implemented and new products with our testimonies and
significant products, 96 percent recommendations by 5 percentage points
and 8 of the responses concerning their overall satisfacpercentage points,
respectively. tion with our products were favorable. These respondents
were pleased with various aspects of our written products and testimony
statements, such as the professional manner in which we conducted our work
and responded orally to questions at congressional hearings, respectively.
We discuss the client feedback survey in detail on p. 37 of this report.

Concerning our eight people measures, which we began to hold managers
accountable for in fiscal year 2005, we are happy to report that we met or
exceeded our annual targets for all but two of them-new hire rate and
acceptance rate. Our performance in this area indicates that we did a very
good job developing, productively using, and managing our staff, but need
to improve our recruiting and hiring processes a little more, which we
have taken steps to do. We discuss these actions in appendix 1 of this
report (see p. 185) .

To help us examine trends over time, we also look at 4-year averages for
all of our results and client measures except the percentage of past
recommendations implemented because it is a composite that is drawn from a
number of years rather than an annual percentage. Calculating 4-year
rolling averages for the other measures minimizes the effect of an
atypical result in any given year. We consider this calculation, along
with other factors, when we set our performance targets. Table 2 shows
that from fiscal year 2001 through fiscal year 2005 financial and other
benefits increased steadily along with the percentage of new products with
recommendations. The average number of testimonies, on the other hand,
declined from fiscal years 2003 through fiscal year 2004, but has
increased in fiscal year 2005. Our ability to provide timely products
leveled off after fiscal year 2002 and fiscal year 2004 at 96 percent, but
increased slightly by 1 percentage point in fiscal year 2005.

         Table 2: Four-Year Rolling Averages for Selected GAO Measures

Performance measure                        2001  2002   2003   2004   2005 
Results                                                              
Financial benefits (dollars in billions)  $22.4 $26.9  $30.7  $35.9  $39.2 
Other benefits                              683  775    884    986   1,139 
New products with recommendations           37%  42%    48%    54%     58% 
Client                                                               
Testimonies                                 225  215    205    193     200 
Timeliness                                  95%  96%    96%    96%     97% 

Source: GAO.

Regarding our qualitative multiyear performance goals, at the close of
fiscal year 2005 (the end of our multiyear performance cycle) we met 96 of
our 99 performance goals. In part II of this report, we present detailed
information about the multiyear performance goals developed to measure our
progress toward achieving each of our four strategic goals.

Focusing on Results

Focusing on outcomes and the efficiency of the processes needed to achieve
them is fundamental to accomplishing our mission. The following five
annual measures indicate that we have fulfilled our mission and delivered
results that benefit the nation.

Financial and Other Benefits

We describe many of the benefits produced by our work as either financial
or other (nonfinancial) benefits. Both types of benefits result from our
efforts to provide information to the Congress that helped to

(1) change laws and regulations, (2) improve services to the public, and
(3) promote sound agency and governmentwide management. In many cases, the
benefits we claimed in fiscal year 2005 are based on work we did in past
years because it often takes the Congress and agencies time to implement
our recommendations or to act on our findings.

To claim either type of benefit, our staff must document the connection
between the benefits reported and the work that we performed.

Financial Benefits

Our findings and recommendations produce measurable financial benefits for
the federal government when the Congress or agencies act on them and the
funds are made available to reduce government expenditures or are
reallocated to other areas. The monetary effect realized can be the result
of changes in

     + business operations and activities;
     + the structure of federal programs; or
     + entitlements, taxes, or user fees.

For example, financial benefits could result if the Congress were to
reduce the annual cost of operating a federal program or lessen the cost
of a multiyear program or entitlement. Financial benefits could also
result from increases in federal reve-nues-due to changes in laws, user
fees, or asset sales-that our work helped to produce.

In fiscal year 2005, our work generated $39.6 billion in financial
benefits ( see fig. 4 ). Of this amount, $19 billion (or approximately 48
percent) resulted from changes in laws or regulations ( see fig. 5 ).

Figure 4: Financial Benefits GAO Recorded in

Fiscal Year 2005
Dollars in billions
50   
                                     $44.0
    40                                  $37.7   $35.4           $37.5   $39.6 
    30              $26.4                                              
20                                                                  
10                                                                  
0                                                                   
                   2001          2002           2003    2004    2005     2005 

Actual Target Actual

Source: GAO.

Figure 5: Types of Financial Benefits Recorded in Fiscal Year 2005 from
Our Work

                               Financial Benefits

                              Total $39.6 billion

$7.7 billion

(19.5%)

$12.8 billion

(32.4%)

$19.0 billion

(48.0%)

Categories

Agenciesacted on GAO information to improve servicesto the public

Information GAO provided to the Congress resulted in statutory or
regulatory changes

Core business processes improved at agenciesand governmentwide management
reformsadvanced by GAO's work

Source: GAO.

Note: Percentages and amounts do not add due to rounding.

Financial benefits included in our performance measures are net
benefits-that is, estimates of financial benefits that have been reduced
by the costs associated with taking the action that we recommended. We
convert all estimates involving past and future years to their net present
value and use actual dollars to represent estimates involving only the
current year. Financial benefit amounts vary depending on the nature of
the benefit, and we can claim financial benefits over multiple years based
on a single agency or congressional action. To ensure conservative
estimates of net financial benefits, reductions in operating cost are
typically limited to 2 years of accrued reductions. Multiyear reductions
in long-term projects, changes in tax laws, program terminations, or sales
of government assets are limited to 5 years. Estimates come from non-GAO
sources and are reduced by any identifiable offsetting costs. These
non-GAO sources are typically the agency that acted on our work, a
congressional committee, or the Congressional Budget Office.

To document financial benefits, our staff complete reports documenting
accomplishments that are linked to specific products or actions. All
accomplishment reports for financial benefits are documented and reviewed
by (1) another GAO staff member not involved in the work and (2) a senior
executive in charge of the work. Also, a separate unit, QCI, reviews all
financial benefits and approves benefits of $100 million or more, which
amounted to 94 percent of the total dollar value of benefits recorded in
fiscal year 2005. Additionally, our IG performs an independent review of
all accomplishment reports claiming benefits of $500 million or more,
which represented about 78 percent in fiscal year 2005.

Figure 6 lists several of our major financial benefits reported in fiscal
year 2005 and briefly describes some of our work contributing to financial
benefits.

 Figure 6: GAO's Selected Major Financial Benefits Reported in Fiscal Year 2005

                     Source:See Image Sources. Source: GAO.

Other Benefits

Many of the benefits that result from our work cannot be measured in
dollar terms. During fiscal year 2005, we recorded a total of 1,409 other
benefits (see fig. 7 ).

Figure 7: Other Benefits GAO Recorded in Fiscal

Year 2005    
Number       
1,500                                                              1,409   
900 1,200       799       906       1,043      1,197     1,000   
600                                                              
300                                                              
             0                                                      
                     2001    2002       2003      2004      2005      2005    

Actual Target Actual

Source: GAO.

We documented 75 instances where the information we provided to the
Congress resulted in statutory or regulatory changes, 595 instances where
federal agencies used our information to improve services to the public,
and 739 instances where agencies improved core business processes or
government-wide reforms as a result of our work. ( See fig. 8 .) These
actions spanned the full spectrum of issues, from identifying that some
soldiers had not been reimbursed for military-related travel costs they
personally incurred to highlighting weaknesses in SSA's policies for
verifying birth certificates when issuing replacement Social Security
cards. In figure 9 we provide examples of some of the other benefits we
claimed as accomplishments in fiscal year 2005. The laws that we cite in
the first section of this figure were passed in fiscal year 2005.

Figure8: Types of Other Benefits Recorded in Fiscal Year 2005 from Our
Work

                                 Other Benefits

                                  Total 1,409

                                    739 595

                                (52.4%) (42.2%)

75

(5.3%)

Categories

Agenciesacted on GAO information to improve servicesto the public

Information GAO provided to the Congress resulted in statutory or
regulatory changes

Core business processes improved at agenciesand governmentwide management
reformsadvanced by GAO's work

Source: GAO.

Note: Percentages do not add due to rounding.

 Figure 9: GAO's Selected Other (Nonfinancial) Benefits Reported in Fiscal Year
                                      2005

                           Source:See Image Sources.

Source: GAO.

In addition to the financial and other benefits claimed in fiscal year
2005 from our work, we also achieved the following results.

Past Recommendations Implemented

One way we measure our effect on improving the government's
accountability, operations, and services is by tracking the percentage of
recommendations that we made 4 years ago that have since been implemented.
At the end of fiscal year 2005, 85 percent of the recommendations we made
in fiscal year 2001 had been implemented ( see fig. 10 ), primarily by
executive branch agencies. Putting these recommendations into practice
will generate tangible benefits for the nation in the years ahead.

Four-year implementation rate

80 90        79%         79%        82%        83%        80%          85% 
      70                                                             
      60                                                             
      50                                                             
      40                                                             
      30                                                             
      20                                                             
      10                                                             
       0                                                             
                2001       2002        2003       2004       2005        2005 

Actual Target Actual

Source: GAO.

The 85 percent implementation rate for fiscal year 2005 exceeded our
target for the year by 5 percentage points as well as our actual
performance for the last 4 years. As figure 11 indicates, agencies need
time to act on recommendations. Therefore, we assess recommendations
implemented after 4 years, the point at which experience has shown that if
a recommendation has not been implemented, it is not likely to be.

New Products Containing Recommendations

This year, about 63 percent of the 637 written products we issued
(excluding testimonies) contained recommendations. ( See fig. 12 .) We
track the percentage of new products with recommendations because we want
to encourage staff to develop recommendations that when implemented by the
Congress and agencies, produce financial and other benefits for the
nation. However, by setting our target at 55 percent, we recognize that
our products do not always include recommendations and that the Congress
and agencies often find such informational reports just as useful as those
that contain recommendations. Our informational reports have the same
analytical rigor and meet the same quality standards as those with
recommendations and, similarly, can help to bring about significant
financial and other benefits. Hence, this measure allows us ample leeway
to respond to requests that result in reports without recommendations.

Multiyear Performance Goals

In addition to our annual measures, we track our progress on 99 multiyear
performance goals. At the end of fiscal year 2005, we met all but 3 of our
performance goals. Our performance goals measure the extent to which we
did the work we had planned to do to support the Congress during fiscal
years 2004 and 2005. Our senior managers developed these performance goals
at the beginning of the assessment cycle (fiscal year 2004) based on their
knowledge of specific subject areas and in consultation with our clients
and customers. However, because congressional or GAO priorities can change
over the period covered by these performance goals, we may not be able to
meet some of them because resources had to be shifted away from planned
work to address new or more urgent priorities. In such circumstances, we
do not necessarily view an unmet performance goal as a problem. Rather, we
believe it shows that we are responsive in carrying out our mission of
serving the Congress and the nation and devoting our resources to efforts
of critical importance. We consider these performance goals qualitative
rather than quantitative because our senior managers determine whether
enough work (i.e., key efforts) has been performed to achieve a
performance goal. In Part II of this report, we list by strategic goal the
multiyear qualitative performance goals supporting each strategic
objective and indicate whether the performance goal was met.

Focusing on Our Clients

To fulfill the Congress's information needs, we strive to deliver the
results of our work orally as well as in writing at a time agreed upon
with our clients. Our performance this year indicates that we assisted our
clients-the Congress-well, though we missed our target on both the number
of hearings we participated in and our ability to deliver products on
time.

Testimonies

Our clients often invite us to testify on our current and past work when
it addresses issues that congressional committees are examining through
the hearing process. During fiscal year 2005, experts from our staff
testified at 179 congressional hearings covering a wide range of complex
issues (see fig. 13 ). For example, our senior executives testified on
improving the security of nuclear material, federal oversight of mutual
funds, and the management and control of DOD's excess property. ( See p.
36 for a summary of issues we testified on by strategic goal in fiscal
year 2005.) Over 70 of our testimonies were related to high-risk areas and
programs, which are discussed on page 43 .

However, in spite of our willingness to testify for our clients, we did
not meet our fiscal year 2005 target of 185 testimonies, primarily because
congressional committees either canceled or postponed several hearings at
which our senior executives were scheduled to testify to focus instead on
the Supreme Court nominations and Hurricane Katrina.

     Figure 13: Testimonies
     Hearings at which GAO testified
     250   
                                       216           217     
     200                                       189             185     179 
     150              151                                            
     100                                                             
     50                                                              
     0                                                               
                   2001         2002          2003    2004    2005    2005 

Actual Target Actual

Source: GAO.

Timeliness

We track the percentage of our products that are delivered on or before
the day we agreed to with our clients because it is critical that our work
be done on time for it to be used by policymakers. As shown in figure 14 ,
in fiscal year 2005 we missed our target of providing 98 percent of them
by the promised date.

Figure 14: Timeliness

Percentage of products on time 100 95% 96% 97% 97% 98% 97%

80

60

40

20

0

2001 2002 20032004 2005 2005

Actual Target Actual

Source: GAO.

Selected Testimony Issues

  Fiscal Year 2005

    GOAL 1:

Address Challenges to the Well-Being and Financial Security of the GOAL 2:
American People

                              Respond to Changing

fS Head Start grants management

                            Security Threats and the

fS Preparing for an influenzaChallenges of

GOAL 3:

pandemic

      Globalization

fS Overseeing the U.S. food supply

      fS Retirement options for seniorsfS Army's modular forcesHelp Transform
      the Federal Government's Role

        * Long-term health care costsandfS U.S. passport fraud government
          budgetsand How It Does Business
        * fS Cargo security strategies
        * Energy demand in the
        * 21st century fS Acquisition challenges facing thefS Long-term
          fiscal issuesaffecting Navy's DD(X) destroyer program the federal
          government
        * Postal service reform legislation
        * fS Tactical aircraft modernization fS Gaps in military pay and
          benefits
        * Veterans' disability claims
        * fS DOD security clearancesfS 21st century challenges for the
        * Social Security reform federal government
        * fS Oil for Food program
        * Wildland fire management fS Air Force procurement protests
        * fS Unmanned aerial vehicles
        * Medicaid financing issues fS Human capital transformation
        * fS Condition of Coast Guard aircraft at DHS
        * Meeting the future demand for and shipsused in deep watersenergy in
          the United StatesfS Preparing for emergenciesat
        * fS Managing violations of restricted federal agencies
     + National air traffic system air space
          * Amtrak's Acela train fS Federal oversight of mutual fS Space
            shuttle workforce issues
          * fS Reducing the tax gap
     + Protecting nuclear material handled funds to ensure investor security
       at science and environmental sitesfS Portsecurity fS U.S. government
       financial
     + Providing services to seriouslyfS Protecting U.S.
       officialsstatementsinjured veterans overseas from terrorist attacksfS
       Management and control of DOD's
          * Rural housing service fS DOD'sbusiness transformation excess
            property
          * fS Pricing federal multiple award
     + Federal real property fS Transportation security issuescontracts
     + Endangered Species Act fS Implementing laws that protect fS
       Performance budgeting
     + Federal oversight of the E-rate the security of information

fS High-risk federal programs

program fS DOD's national security personnel system fS Army National Guard
travel reimbursement issues

                      fS Acquisition challenges facing the

Army's future combat systemsfS Space acquisitionsand investment planning

     + Improper Payments Information Act
     + Agencies' continuity of operations plans
     + DHS'sStudent and Exchange Visitor Information System

As part of its periodic review of our performance measures, the IG
independently examined our process for calculating product timeliness and
found evidence that some staff may be inconsistently applying the policy
for changing a committed issue date, which ultimately affects the
reliability of this measure. The IG also noted that the internal reporting
approach may not adequately represent the most complete assessment of the
requesters' satisfaction with our ability to deliver products when our
clients need them. The IG recommended that GAO management strengthen the
guidance for determining timeliness and consider developing an
alternative, more independent measure to gauge performance in this area.

Therefore, beginning in fiscal year 2006, we will use the results of our
client feedback survey as a barometer for how well we are getting our
products to the Congress when it needs them. We will use this survey as
the primary data source for our external timeliness measure because the
responses come directly from our clients and are free from significant
input by our staff. However, we will continue to use as a supplemental
check to the survey our current process for determining timeliness and
have already taken steps to clarify the guidance related to our process
for changing committed issue dates. Both indicators will help to ensure
that teams supporting strategic goals 1 through 3 continue to complete
engagements on the date mutually agreed to with our clients.

Since March 2002, we have been pilot testing an e-mail survey that we send
to a portion of our clients for direct, independent feedback from them on
their satisfaction with the quality and timeliness of our work and their
interactions with our staff. We tally responses from the survey we send to
key staff working for the requesters of our testimony statements and our
more significant written products (e.g., engagements assigned a risk level
of "high" by our senior management5 and those requiring an investment of
500 staff days or more). Each survey asks the client whether the product
was delivered on time. Because our products often have multiple
requesters, we survey more than one congressional staff person per
product. In fiscal year 2005, we sought feedback on 42 percent of the
products we issued that year and had a 30 percent response rate from the
congressional staff surveyed. Overall, 93 percent of those responding to
the survey either strongly or generally agreed that our products were
delivered on time.

Focusing on Our People

We could not have performed as well as we did in fiscal year 2005 without
the support and commitment of our highly professional, multidisciplinary
staff. Our ability to hire, develop, retain, and lead staff is critical to
fulfilling our mission of serving the Congress and the American people.

Since 2002, we have refined our processes for measuring how well we manage
our human capital and have benchmarked our performance in this area.
Fiscal year 2005 was the first year we held our managers accountable for
our eight people measures, and we met six of them-slightly missing our
targets for new hire rate and acceptance rate by only a few percentage
points. These measures are directly linked to our goal 4 strategic
objective of becoming a professional services employer of choice. For more
information about our people measures, see Verifying and Validating
Performance Data in part II of this report.

New Hire Rate and Acceptance Rate

Our new hire rate is the ratio of the number of people hired to the number
we planned to hire. Annually, we develop a workforce plan that takes into
account projected workload changes, as well as other changes, such as
retirements, other attrition, promotions, and skill gaps. The workforce
plan for the upcoming year specifies the number of planned hires and, for
each new hire, specifies the skill type and the level. The plan is
conveyed to each of our units to guide hiring throughout the year.
Progress toward achieving the workforce plan is monitored monthly by the
Chief Operating Officer and the Chief Administrative Officer. Adjustments
to the workforce plan are made throughout the year, if

5As part of our risk-based, engagement management process, we identify a
new engagement as high risk if the work we need to perform will likely
require a large investment of our resources, involve a complex
methodology, or examine controversial or sensitive issues.

necessary, to reflect changing needs and conditions. In fiscal year 2005,
our adjusted plan was to hire 281 staff. However, we were only able to
bring on board 263 staff by year-end. Our acceptance rate measure is a
proxy for GAO's attractiveness as an employer and an indicator of our
competitiveness in bringing in new talent. It is the ratio of the number
of applicants accepting offers to the number of offers made. Table 3 shows
that we missed the targets we set for new hire rate and acceptance rate by
3 percentage points and 4 percentage points, respectively. Our
calculations for each of these measures do not include offers extended to
applicants for fiscal year 2005 vacancies that were accepted but for which
applicants will not report for duty until the first quarter of fiscal year
2006. In addition, we were unable to fill by year-end critical positions
for accountants/auditors due to market competition.

To more effectively anticipate and acquire the human resources we need now
and in the future, we took steps to improve our recruitment strategy by
expanding the focus of our student employment program. Rather than
targeting our recruitment efforts solely at graduate students who are
available to work with us during the summer, we expanded the program to
include undergraduate students, and we will offer both groups employment
opportunities in the fall and spring as well as during the summer. Our
fiscal year 2006 recruitment strategy, developed in fiscal year 2005,
includes (1) using targeted recruiting for special skill sets and
hard-to-fill positions with an emphasis on diversity and

(2) implementing year-round internships, cooperative education agreements
with five local universities, and governmentwide flexibility for
noncompetitive appointments into our Professional Development Program. We
also launched a pilot program that offers employment to a limited number
of undergraduate cooperative education program participants in September
2005.

 Table 3: Actual Performance and Targets Related to Our New Hire and Acceptance
                                 Rate Measures

Source: GAO.

Note: N/A indicates the data are not available.

                                  Source: GAO.

Staff Development, Staff Utilization, Leadership, and Organizational
Climate

One way that we measure how well we are supporting our staff and providing
an environment for professional growth and improvement is through our
annual employee feedback survey. This Web-based survey, which is conducted
by an outside contractor to ensure the confidentiality of every
respondent, is administered to all of our employees once a year. Through
the survey, we encourage our staff to indicate what they think about GAO's
overall operations, work environment, and organizational culture and how
they rate our managers- from the immediate supervisor to the Executive
Committee-on key aspects of their leadership styles. The survey consists
of over 100 questions.

In fiscal year 2005, 80 percent of our employees completed the survey, and
we met or slightly exceeded our targets for all four measures ( see table
5 ). We first conducted this survey in fiscal year 2002 and since then
favorable responses to questions related to these measures have increased
each year. Our scores this year averaged 8.5 percent higher than the
latest Office of Personnel Management governmentwide survey and 5.25
percent higher than the latest private industry survey. In fiscal year
2005, we also added questions to assess employees' satisfaction with us.
The results of the responses to these questions were used by the
Partnership for Public Service (Partnership) to determine our standing in
the annual Best Places to Work in the Federal Government rankings. In
September 2005, we received an award from the Partnership for our fourth
place ranking.

Table 5: Actual Performance and Targets Related to Our Measures of
Employee Satisfaction with Staff Development, Staff Utilization,
Leadership, and Organizational Climate

Source: GAO.

Note: N/A indicates the data are not available.

Focusing on Our Internal Operations

Our mission and people are supported by our internal administrative
services, including information management, building management, knowledge
services, human capital, financial management, and other services.
Beginning in fiscal year 2006, we will begin using two new performance
measures to assess our performance related to how well our internal
administrative services help employees get their jobs done or improve
employees' quality of work life. These measures are directly related to
our goal 4 strategic objectives of continuously enhancing GAO's business
and management processes and becoming a professional services employer of
choice. We will use information from our annual customer satisfaction
survey to set targets and assess our performance for both of these
measures, which are shown in table 6 along with baseline data that we
recorded for them in fiscal year 2003 and fiscal year 2004. The first
measure encompasses 21 services that help employees get their jobs done,
such as Internet access, desktop computer equipment, and voice and video
communication systems. The second measure encompasses another 10 services
that affect quality of work life, such as assistance related to pay and
benefits, building security, and workplace safety and health. Using survey
responses, we calculate a composite score for each service category that
reflects employee ratings for

(1) satisfaction with the service and (2) importance of the service.

Table 6: Actual Performance and Targets Related to Our Internal Operations
                                    Measures

Performance measures     2000  2001    2002    2003    2004   2005    2006 
                         actual  actual  actual  actual  actual actual target 
Internal operations                                                 
Help get job done         N/A   N/A     N/A    3.98    4.01   N/A      4.0 

Quality of work life N/A N/A N/A 3.86 3.96 N/A

Source: GAO.

Notes: We will report actual data for fiscal year 2005 once the data from
our November 2005 internal operations survey have been analyzed. N/A
indicates that the data are not available yet or not applicable because we
did not collect the data during this period.

21st Century Challenges

We have long had a statutory responsibility for monitoring the condition
of the nation's finances. Recently, in our role as the auditor of the U.S.
gov-ernment's consolidated financial statements, we included an emphasis
paragraph in our audit report for the fiscal year ended September 30,
2004, expressing our concern that the fiscal policies in place today
will-absent unprecedented changes in tax policies, spending policies, or
both-result in large, escalating, and persistent deficits that are
economically unsustainable over the long term. This conclusion is based on
the results of our long-term budget model, which the agency has used since
1992.

Over the long term, the nation's growing fiscal imbalance stems primarily
from the aging of the population, rising health care costs, and lower
federal revenues as a percentage of the economy. These trends are
compounded by the presence of near-term deficits arising from new
discretionary and mandatory spending as well as lower revenues as a share
of the economy. Absent significant changes on the spending side, the
revenue side, or both of the budget, these long-term deficits will
encumber a growing share of federal resources and test the capacity of
current and future generations to afford both today's and tomorrow's
commitments. Continuing on this unsustainable path will gradually erode,
if not suddenly damage, our economy, our standard of living, and
ultimately our national security.

Addressing the nation's long-term fiscal imbalances constitutes a major
transformational challenge that may take a generation to resolve. Given
the size of our projected deficit, we will not be able to grow our way out
of this problem-tough choices will be required. In addition, traditional
incremental approaches to budgeting will need to give way to more
fundamental and periodic reexaminations of the base of government,
ultimately covering discretionary and mandatory programs as well as the
revenue side of the budget. The nature and magnitude of the fiscal,
security, economic, and other adjustments that need to be considered are
not amenable to "quick fixes"; rather they will likely require an
iterative, thoughtful process of disciplined changes and reforms over many
years.

We produced the 21st century challenges report to help the Congress review
and reconsider the base of federal spending and tax programs.6 It is
intended as one input among many that the Congress will receive as it
decides what its agenda will be for oversight and program review. We have
framed the issues presented as illustrative questions for policymakers to
consider as a supplement to their own efforts. The questions are drawn
from our issued work, our strategic plan prepared in consultation with the
Congress, input from several inspectors general, and the institutional
knowledge of our staff. They cover discretionary spending; mandatory
spending, including entitlements; as well as tax policies and programs.
While answers to these questions may draw on our work and that of others,
only elected officials can and should decide which questions to address as
well as how and when to address them.

Having identified the major fiscal challenge facing the nation, and given
our role in supporting the Congress, we believe that we also have an
obligation to provide policymakers with support in identifying issues and
options that could help to address these fiscal pressures. In our 21st
century challenges report, we built on our past and pending work-90
percent of which was requested by the Congress or required by law-to
provide policymakers with a comprehensive compendium of those areas
throughout government that could be ripe for reexamination and review. The
report is consistent with our other products, such as our high-risk
reports (discussed below), in that it pulls together our insights and
previous work for the Congress to help with its budget and programmatic
deliberations and oversight activities.

In developing the 21st century questions, we reflected on the inventory of
future forces working to reshape American society, our place in the world,
and the various roles and responsibilities of the federal government that
were presented in our Strategic Plan for Serving the Congress and the
Nation

6GAO, 21st Century Challenges: Reexaminin  g the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).

(2004-2009). The specific questions raised for each area were informed by
a set of generic evaluation criteria that are useful in evaluating any
government program, policy, function, or activity. The criteria are framed
as questions and are designed to address the legislative basis for the
program, its purpose and continued relevance, its effectiveness in
achieving goals and outcomes, its efficiency and targeting, its
affordability, its sustainability, and its management. We used these
criteria to generate specific 21st century questions about those programs
and priorities already identified. The 21st century questions illustrate
the kinds of issues that a reexamination and review initiative needs to
address.

Copies of this report are available upon request. In addition, this
document is available at no charge on our Web site at http://www.gao.gov .

GAO's High-Risk Program

Since 1990, our high-risk program has highlighted long-standing challenges
facing the federal government. Increasingly, the program has focused on
those major programs and operations that are in urgent need of broad
transformation, and congressional as well as executive branch action, to
ensure that our national government functions in the most economical,
efficient, and effective manner possible. Our latest report, released in
January 2005, highlights 25 troubled areas across government.7 Many of
these areas involve critical public service providers, such as the U.S.
Postal Service and IRS, and services provided to Medicare and Medicaid
recipients through CMS. Table 7 lists each high-risk area, the year it was
placed on the high-risk list, and the strategic goal under which our work
related to each high-risk area is generally performed.

7GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).

Table 7: GAO's 2005 High-Risk List

           Year GAO's designated strategic 2005 high-risk area high risk goal

              Addressing challenges in broad-based transformations

                   Strategic Human Capital Managementa 2001 3

    U.S. Postal Service Transformation Efforts and Long-Term Outlooka 2001 1

                     Managing Federal Real Propertya 2003 1

Protecting the Federal Government's Information Systems and the Nation's
Critical Infrastructures 1997 3

    Implementing and Transforming the Department of Homeland Security 2003 2

Establishing Appropriate and Effective Information-Sharing Mechanisms to
Improve Homeland Security 2005 3

                DOD Approach to Business Transformationa 2005 2

                   DOD Business Systems Modernization 1995 3

                DOD Personnel Security Clearance Program 2005 2

                  DOD Support Infrastructure Management 1997 2

                        DOD Financial Management 1995 3

       DOD Supply Chain Management (formerly Inventory Management) 1990 2

                     DOD Weapon Systems Acquisition 1990 2

                 Managing federal contracting more effectively

                         DOD Contract Management 1992 2

                         DOE Contract Management 1990 1

                        NASA Contract Management 1990 2

                  Management of Interagency Contracting 2005 2

      Assessing the efficiency and effectiveness of tax law administration

                       Enforcement of Tax Lawsa, b 1990 3

                   IRS Business Systems Modernizationc 1995 3

          Modernizing and safeguarding insurance and benefit programs

                Modernizing Federal Disability Programsa 2003 1

 Pension Benefit Guaranty Corporation Single-Employer Insurance Programa 2003 1

                            Medicare Programa 1990 1

                            Medicaid Programa 2003 1

HUD Single-Family Mortgage Insurance and Rental Housing Assistance Programs 1994
                                       1

Other

 Federal Aviation Administration (FAA) Air Traffic Control Modernization 1995 3

Source: GAO.

aLegislation is likely to be necessary, as a supplement to actions by the
executive branch, in order to effectively address this high-risk area.

bTwo high-risk areas-collection of unpaid taxes and earned income credit
noncompliance-have been consolidated to make this area.

cThe IRS financial management high-risk area has been incorporated into
this high-risk area.

Issued to coincide with the start of each new Congress, our high-risk
update has helped sustain attention from members of the Congress who are
responsible for oversight and from executive branch officials who are
accountable for performance. Our focus on high-risk problems contributed
to the Congress enacting a series of government-wide reforms to address
critical human capital challenges, strengthen financial management,
improve IT practices, and instill a more results-oriented government.
Overall, our high-risk program has served to identify and help resolve
serious weaknesses in areas that involve substantial resources and provide
critical services to the public. Of the 43 areas that have appeared on our
high-risk list since 1990, 16 have improved enough to be removed from the
list and 2 have been consolidated with other areas. We also continue to
identify other areas that require attention and should be added to the
list. Further, the current administration has looked to our high-risk
program in shaping governmentwide initiatives such as the President's
Management Agenda, which has at its base many of the areas we had
previously identified as high risk. OMB, in consultation with us, is
currently working to ensure that agencies develop detailed action plans to
address high-risk areas, with the ultimate objective, over time, of seeing
these items removed from our high-risk list.

Our high-risk program includes four high-risk areas added in 2005

     + establishing appropriate and effective information-sharing mechanisms
       to improve homeland security,
     + DOD approach to business transformation,
     + DOD personnel security clearance program, and
     + management of interagency contracting.

One organization-related high-risk area that exemplifies the program's
increasing focus on transformation is DOD's approach to business
transformation. As an organization that spends billions of dollars
supporting the warfighter here and abroad, DOD requires transformation to
meet current and emerging mission and organizational challenges. DOD has
initiated various efforts to transform business operations; however,
current business processes continue to result in reduced effectiveness and
efficiencies at a time when DOD is challenged to maintain a high level of
operations while competing for resources in a fiscally constrained
environment. The Secretary of Defense estimates that improving business
operations could save 5 percent of DOD's annual budget, which would
represent a savings of about $22 billion a year.8 Business transformation
requires long-term cultural change and business process reengineering and
a commitment from the executive and legislative branches of government.
Sound strategic planning is the foundation on which to build, but DOD has
not yet developed a clear strategic and integrated plan for business
reform. For these reasons, we designated-for the first time-DOD's lack of
a strategic and integrated planning approach to its business
transformation as high risk.

In addition, we consolidated four high-risk areas involving IRS into two.
First, we combined the collection of unpaid taxes area and earned income
credit noncompliance area into a single area called enforcement of tax
laws. We determined that while IRS collection efforts and compliance with
the provisions of the earned income credit remain important issues, other
aspects of tax law compliance are also significant. We concluded that the
challenge facing IRS in enforcing the nation's tax laws is better
understood in this broader context. Second, we incorporated the IRS
financial management high-risk area into the IRS business systems
modernization area. We found that the main financial manage-ment-related
challenge still facing IRS is the modernization of its outmoded financial
management controls and processes and that IRS's efforts in this regard
are closely intertwined with its business systems modernization project.

In fiscal year 2005, we also removed the high-risk designation from three
areas: Education's student financial aid programs, FAA's financial
management, and USDA's Forest Service financial management.

In fiscal year 2005, excluding our high-risk update report and its
companion testimony, we issued 183 reports and delivered 75 testimonies
related to our high-risk areas and documented financial benefits totaling
about $26 billion. For example, we exam-

        8This figure is based on DOD's reported fiscal year 2004 budget.

ined challenges in the implementation and transformation of DHS, such as
strengthening internal controls and addressing weaknesses in financial
systems, fully establishing and institutionalizing a departmentwide
strategic framework for managing information, and addressing systematic
problems in human capital and acquisition systems, resulting in 19 reports
and 11 testimonies. We also evaluated the Medicare program and found
weaknesses in program management and oversight of patient safety and care,
inefficient payment policies, and areas vulnerable to fraud and abuse. Our
work in this area resulted in approximately $3.9 billion in financial
benefits for fiscal year 2005. Our efforts continue to bring attention to
areas in urgent need of improvement and to help the Congress and federal
government institute reforms to address these high-risk areas.

To learn more about our work on the high-risk areas or to download the
high-risk update in full, go to
http://www.gao.gov/docsearch/featured/high- risk.html .

Building Partnerships

In fiscal year 2005, we continued to explore indicators that could help us
measure how well we develop mutually beneficial relationships with other
accountability organizations. Such partnerships are important because they
create opportunities for collaboration that help all organizations
involved address common challenges and enhance their ability to improve
government operations and service to the public. Moreover, these
partnerships allow us and other organizations to make meaningful changes
in our internal accountability processes and policies as well as leverage
available resources.

We performed an extensive literature review to identify indicators that
other agencies and organizations in the United States and overseas are
using to measure the success of their partnership efforts. We collected
information on partnership activities at several federal agencies, such as
DOE and HUD and at a social services agency in Australia and a public
works cooperative in England. Though we found no U.S. agencies that have
developed indicators for measuring the health or effectiveness of
partnerships, the foreign organizations articulated the following
qualitative indicators for assessing the performance of these
relationships:

     + commitment (e.g., time and resources devoted to the partnership effort
       and sustained participation by the same individuals),
     + clear definition of roles and responsibilities,
     + contribution to outcomes,
     + success of the activity or project being supported by the partnership,
       and
     + value for resources spent or effective use of resources.

Teams and units supporting all four of our strategic goals have
established key partnerships with a variety of organizations. For example,
our partnership with the International Organization of Supreme Audit
Institutions (INTOSAI) has been a long-standing relationship-cultivated
primarily through goal 4's external liaison activities-that has resulted
in tangible benefits for both organizations. In fiscal year 2005, we
actively worked on several INTOSAI committees, gleaning valuable insights
from the experiences of our counterpart audit institutions. We also helped
INTOSAI produce various publications that help to promote auditing
standards for use around the world. Through forums and roundtable
discussions, we also partnered with the Concord Coalition-a nonpartisan
organization dedicated to informing the public about the need for
responsible fiscal policy-to support its work in educating the public
about financial literacy and the government's long-term fiscal challenges.
Our external liaison activities also helped to sustain partnerships with
organizations such as the Intergovernmental Audit Forums, the Governmental
Accounting Standards Advisory Committee, the Partnership for Public
Service (which now includes the Private Sector Council), the Council for
Excellence in Government, and the Woodrow Wilson International Center for
Scholars; professional associations, such as the Association of Government
Accountants; and various GAO advisory groups. (For more information about
these partnerships, see Strategies for Achieving Our Goals later in this
section of the report.) Finally, teams supporting goals 1 through 3
established or maintained partnerships with organizations that helped them
to exchange information about issues related to our performance goals and
key efforts in these areas. For example, several Managing Our Resources
teams continued their ongoing partnerships with the National Academies of
Science, sharing, for Resources Used to Achieve Our Fiscal Year example,
information on issues such as drinking 2005 Performance Goals

water security, environmental indicators, and wind power development. One
team also supported the National Academies of Science and the Organisation
for Economic Cooperation and Development-a group of 30 member countries
that helps to foster good governance in public service and corporate
activity-in their efforts to advance the development of national
performance indicators. In addition, another team worked collaboratively
on a wide range of emerging transportation issues with the Eno
Transportation Foundation, whose mission is to cultivate creative and
visionary leadership for all modes of transportation.

In the coming years, we will attempt to describe these and other
partnerships that our teams and units participate in and describe the
outcomes and benefits derived from them to help us assess our performance
in this area.

Our financial statements for fiscal year 2005 received an unqualified
opinion from an independent auditor. The auditor found our internal
controls to be effective-which means that no material weaknesses were
identified-and the auditor reported substantial compliance with the
requirements for financial systems in the Federal Financial Management
Improvement Act of 1996. The auditor also found no instances of
noncompliance with the laws or regulations in the areas tested. The
statements and their accompanying notes, along with the auditor's report,
appear later in this report. Table 8 summarizes key data. Compared with
the statements of large and complex agencies in the executive branch, our
statements present a relatively simple picture of a small yet important
agency in the legislative branch. We focus most of our financial activity
on the execution of our congressionally approved budget with most of our
resources devoted to the human capital needed for our mission of
supporting the Congress with professional, objective, fact-based,
nonpartisan, nonideological, fair, and balanced information and analysis.

 Table8: GAO's Financial Highlights: Resource Information (Dollars in millions)

Source: GAO

aThe net cost of operations figures include nonbudgetary items, such as
imputed pension and depreciation costs, which are not included in the
figures for total budgetary resources (which include current and prior
year carryover authority) or total outlays.

Our budget consists of an annual appropriation covering salaries and
expenses and revenue from reimbursable audit work and rental income. For
fiscal year 2005, our total budgetary resources increased by $6.3 million
from fiscal year 2004. This increase consists of funds needed to cover
mandatory and uncontrollable costs and a one time transfer of budgetary
authority from DHS for a review of TSA's calendar year 2000 costs for
screening passengers and property.

Our total assets were $114.4 million, consisting mostly of property and
equipment (including the headquarters building, land and improvements, and
computer equipment and software) and funds with the U.S. Treasury. The
largest dollar change in our assets was in the net value of property and
equipment, which decreased in fiscal year 2005 as a result of normal
depreciation amounts being greater than asset purchases. Total liabilities
of $94.9 million were composed largely of employees' accrued annual leave,
amounts owed to other government agencies, accounts payable, and
employees' salaries and benefits. The greatest changes in the liabilities
were increases in intragovernmental accounts payable and capital lease
liabilities. The increase in intragovernmental accounts payable relates to
amounts due to GSA accrued at the end of the year. The increase in capital
lease liability during fiscal year 2005 is primarily the result of
entering into new leases for the replacement of substantially all the
notebook computers and copiers at GAO headquarters.

The net cost of operating GAO during fiscal year 2005 and fiscal year 2004
was approximately $506 million and $490 million, respectively. Expenses
for salaries and related benefits accounted for 78 and 79 percent of our
net cost of operations in fiscal years 2005 and 2004, respectively. Figure
15 shows how our fiscal year 2005 costs break down by category.

We report net cost of operations according to our four strategic goals,
consistent with our strategic plan. Goal 2 accounted for the greatest
dollar increase in our net cost of operations from fiscal year 2004
through fiscal year 2005. The increase is due to the continued efforts in
homeland security. Costs in goal 4 decreased in fiscal year 2005 as a
result of several goal 4 key efforts being completed during fiscal year
2004, the first year of the 2-year strategic plan period. Examples include
the implementation of the Travel Manager System completed in fiscal year
2004 as well as the development phase efforts for both the
performance-based compensation system and the competency-based appraisal
system.

Figure 15: Use of Fiscal Year 2005 Funds by Category

Percentage of total net costs

Salaries and benefits78.3%

Building and hardware maintenance services10.8%

Rent (space and hardware) 3.9%

Depreciation 2.7%

Other 4.3%

Source: GAO.

Figures 16 and 17 show our net costs by goal for fiscal year 2002 through
fiscal year 2005. Figure 16 shows costs unadjusted for inflation, while
figure 17 shows the same costs in 2005 dollars, that is, adjusted for
inflation.

Figure 16: Net Cost by Goal, Unadjusted for Inflation

Dollars in millions

                                                             200 150 100 50 0

Goal 1 Goal 2 Goal 3Goal 4 2002 178.3 110.5 141.0 25.3

                          2003 186.4 122.0 144.9 20.0

                          2004 194.7 131.7 145.8 23.4

                          2005 197.7 144.2 147.3 22.0

Source: GAO.

Figure 17: Net Cost by Goal, Adjusted for Inflation Dollars in millions

                                                             200 150 100 50 0

Goal 1 Goal 2 Goal 3Goal 4 2002 191.3 118.6 151.3 27.2

                          2003 196.1 128.4 152.5 21.0

                          2004 200.1 135.3 149.8 24.0

                          2005 197.7 144.2 147.3 22.0

Source: GAO.

Audit Advisory Committee

Assisting the Comptroller General in overseeing the effectiveness of GAO's
financial operations is a three-member external Audit Advisory Committee.
The committee's report for fiscal year 2005 appears after our financial
statements and accompanying notes. Current members of the committee are

     + Sheldon S. Cohen (Chairman), CPA and practicing attorney in
       Washington, D.C., former Commissioner and Chief Counsel of the
       Internal Revenue Service, and Senior Fellow of the National Academy of
       Public Administration.
     + Edward J. Mazur, CPA, member of the Governmental Accounting Standards
       Board, former State Comptroller of Virginia, and former Controller of
       the Office of Federal Financial Management in OMB.
     + Charles O. Rossotti, Senior Advisor at The Carlyle Group; former
       Commissioner of Internal Revenue; and founder and former Chief
       Executive Officer and Chairman of American Management Systems, Inc.,
       an international business and IT consulting firm.

Limitation on Financial Statements

Responsibility for the integrity and objectivity of the financial
information presented in the financial statements in this report rests
with our managers. The statements were prepared to report our financial
position and results of operations, consistent with the requirements of
the Chief Financial Officers Act, as amended (31 U.S.C. 3515). The
statements were prepared from our financial records in accordance with the
formats prescribed in OMB Circular A-136, Financial Reporting
Requirements. These financial statements differ from the financial reports
used to monitor and control our budgetary resources. However, both were
prepared from the same financial records.

Our financial statements should be read with the understanding that as an
agency of a sovereign entity, the U.S. government, we cannot liquidate our
liabilities (i.e., pay our bills) without legislation that provides
resources to do so. Although future appropriations to fund these
liabilities are likely and anticipated, they are not certain.

Planned Resources to Achieve Our Fiscal Year 2006 Performance Goals

GAO's resources include budget authority of $490 million for fiscal year
2006 to maintain current operations for serving the Congress as outlined
in our strategic plan and allow us to continue to enhance our
productivity, and maintain the progress we have made in technology and
other transformation areas (see table 9) . This funding level supports
3,217 full-time equivalent (FTE) per-sonnel. Our resources include $483
million in direct canes Katrina and Rita, the Congress is considering
appropriations and estimated revenue of $7 million governmentwide
across-the-board funding reducfrom reimbursable audit work and rental
income. tions that might reduce fiscal year 2006 spending Our fiscal year
2006 resources represent a modest 3 levels, and this could affect our
resources. The percent increase over fiscal year 2005 resources- nature
and extent of any potential funding reducprimarily to fund mandatory pay
and uncontrollable tion is unknown. costs. Following the catastrophic
events of Hurri-

Table 9: Fiscal Year 2006 Budgetary Resources by Strategic Goal

Strategic goal                                            Amounta (dollars 
                                                       FTEs  in millions)     
Goal 1                                                    
Provide timely, quality service to the Congress and                        
the federal government to address current and             
emerging challenges to the well-being and financial       
security of the American people.                    1,286             $194
Goal 2                                                    
Provide timely, quality service to the Congress and                        
the federal government to respond to changing             
threats and the challenges of global                      
interdependence.                                      941              141
Goal 3 Help transform the federal government's role                        
and how it does business to meet 21st century             
challenges.                                           850              129
Goal 4                                                    
Maximize the value of GAO by being a model federal                         
agency and a world-class professional services            
organization.                                         140               26
Total                                               3,217             $490 

Source: GAO.

aThese amounts exclude prior year carryover authority.

Our resources support three broad program areas: human capital, mission
operations, and critical infrastructure. We will also continue to address
our major management challenges, which are human capital, information
security, and physical security. For example, on the human capital front,
to ensure our ability to attract and retain a highly qualified,
high-performing, and diverse workforce, our fiscal year 2006 recruitment
strategy enhances or expands existing programs for internships and
professional development, and provides targeted recruiting for special
skill sets and hard-to-fill positions, and to enhance the agency's
diversity recruiting.

In fiscal year 2006, we plan to implement recommendations resulting from
an assessment of our compensation system being conducted by a
well-regarded consulting firm, to ensure that our compensation is fair and
equitable and aligned with competitive labor markets.

On the information security front, to address the increasing threats due
to compromised information or information systems, we will complete an
audit of network servers and refine monitoring techniques. To extend our
ability to securely access and transmit classified data and information,
we completed installation of security features in seven of our field
offices and plan to continue installation at the remaining field offices
in fiscal year 2006.

On the physical security front, we are working to enhance our
communication with external agencies, improve our internal communications
and operations, and strengthen the technical and physical aspects of our
emergency preparedness efforts.

Strategies for Achieving Our Goals

The Government Performance and Results Act directs agencies to articulate
not just goals, but also strategies for achieving those goals. As detailed
in the following sections, our strategies primarily emphasize providing
information from our work to the Congress and the public in a variety of
forms and continuing and strengthening our internal operations. For all
four strategic goals, the multiyear, qualitative performance goals
included in our current strategic plan describe specific areas of work
that we planned to complete by the end of fiscal year 2005.

Our strategies also emphasize the importance of two overarching
approaches: (1) working with other organizations on crosscutting issues
and

(2) effectively addressing the challenges to achieving our agency's goals
and recognizing the internal and external factors that could impair our
performance. Through these strategies, which have proven successful for us
for a number of years, we plan to achieve the level of performance that is
needed to meet our annual performance measures and our multiyear
performance goals and that in turn will allow us to achieve our strategic
goals.

Attaining our three external strategic goals (goals 1, 2, and 3) and their
related objectives rests, for the most part, on providing professional,
objective, fact-based, nonpartisan, nonideological, fair, and balanced
information to support the Congress in carrying out its constitutional
responsibilities. To implement the performance goals and key efforts
related to these three goals, we develop and present information in a
number of ways, including

        * evaluating federal policies, programs, and the performance of
          agencies;
        * fS overseeing government operations through financial and other
          management audits to determine whether public funds are spent
          efficiently, effectively, and in accordance with applicable laws;
     + investigating whether illegal or improper activities are occurring;
     + analyzing the financing for government activities;
     + conducting various constructive engagements in which we work
       proactively with agencies, when appropriate, to provide advice that
       may assist their efforts toward positive results;
     + providing legal opinions that determine whether agencies are in
       compliance with applicable laws and regulations;
     + conducting policy analyses to assess needed actions and the
       implications of proposed actions; and

fS providing additional assistance to the Congress in support of its
oversight and decision-making responsibilities.

We conduct specific engagements as a result of requests from congressional
committees and mandates written into legislation, resolutions, and
committee reports. In fiscal year 2005, we devoted 87 percent of our
engagement resources to work requested or mandated by the Congress. We
initiated the remaining 13 percent of the engagement work under the
Comptroller General's authority; much of this work was related to
government programs and operations that we have identified as high risk
for fraud, abuse, and mismanagement; reviews of agencies' budget requests;
and various emerging challenges that are of broad-based interest to the
Congress, such as the cost of the Global War on Terrorism and the status
of the reconstruction efforts in Iraq.9 By making recommendations to
improve the accountability, operations, and services of government
agencies, we contribute to increasing the effectiveness of federal
spending and enhancing the taxpayers' trust and confidence in their
government.

Our staff are responsible for gathering all the relevant data and
following high standards for documenting and supporting the information we
collect and analyze. This information is, more often than not, documented
in a product that is made available to the public. In some cases, we
develop products that contain classified or sensitive information that
cannot be made available publicly. We generally issue around 1,200 to
1,300 products each year, either electronically or in printed format. Our
products include the following:

     + letter reports and chapter reports that when printed, are issued with
       our traditional blue cover;
     + correspondence, which is a written letter that does not have a blue
       cover;

fS testimonies and statements for the record, where the former are
delivered orally by one or more of our senior executives at a hearing and
the latter are provided for inclusion in the congressional record; and

fS oral briefings, which are usually given directly to congressional staff
members.

We also produce special publications on specific issues of general
interest to all Americans, such as our primer on motor fuels that we
prepared to help improve public understanding of the major factors that
influence the U.S. price of gasoline and our guide on Social Security that
answers concisely some basic questions about how the program works and why
it needs to be reformed.10 Collectively, our products always contain
information and often conclusions and recommendations that allow us to
achieve our external strategic goals.

Another means of ensuring that we are achieving our goals is to examine
the impact of our past work and use that information to shape our future
work. Consequently, we evaluate actions taken by federal agencies and the
Congress in response to our past recommendations. The results of these
evaluations are reported in terms of the financial benefits and other
benefits that reflect the value of our work. We actively monitor the
status of our open recommen-dations-those that remain valid but have not
yet been implemented-and report our findings annually to the Congress and
the public (http://www.gao.gov/openrecs.html ).

Similarly, we will use our biennial high-risk report, most recently issued
in January 2005, to provide a status report on major government operations
that we consider high risk because they are vulnerable to waste, fraud,
abuse, and mismanagement or are in need of broad-based transformation. And
we will use our report on 21st century challenges, which was issued in
February 2005, to alert the nation's leaders to current and emerging
issues facing the nation, including the long-range budget challenge, the
human capital crisis, postal reforms, and the federal government's
financial management efforts.

9In fiscal years 2003 and 2004, the work performed under the Comptroller
General's authority represented 8 percent and 10 percent, respectively, of
our engagement efforts.

10GAO, Motor Fuels: Understanding the Factors That Influence the Retail
Price of Gasoline, GAO-05-525SP (Washington, D.C.: May 2005), and Social
Security Reform: Answers to Key Questions, GAO-05-193SP (Washington, D.C.:
May 2005).

These reports are valuable planning tools because they help us to identify
those areas where our continued efforts are needed to maintain the focus
on important policy and management issues that the nation faces.

To attain our fourth strategic goal-an internal goal-and the five related
objectives, we conduct surveys of our congressional clients and internal
customers to obtain feedback on our products, processes, and services, and
perform studies and evaluations to identify ways in which to improve them.

Because achieving our strategic goals and objectives also requires
strategies for coordinating with other organizations with similar or
complementary missions, we

     + use advisory panels and other bodies to inform our strategic and
       annual work planning and
     + initiate and support collaborative national and international audit,
       technical assistance, and other knowledge-sharing efforts.

These two types of strategic working relationships allow us to extend our
institutional knowledge and experience; to leverage our resources; and in
turn, improve our service to the Congress and the American people. Our
Strategic Planning and External Liaison office takes the lead and provides
strategic focus for the work with external partner organizations, while
our research, audit, and evaluation teams lead the work with most of the
issue-specific organizations.

Strategic and Annual Work Planning

Through a series of forums, advisory boards, and panels; periodic
environmental scans; and our speakers' series, we gather information and
perspectives for our strategic and annual planning efforts. In fiscal year
2005, the Comptroller General convened various experts from the public,
private, and nonprofit sectors in a series of forums and panels intended
to enhance our understanding of emerging issues and to identify
opportunities for action.

fS In December 2004, we hosted a forum on long-term fiscal challenges and
issued a report summarizing the discussion in February 2005.

     + In February 2005, we convened a forum on defined benefits pension
       plans, the results of which were reported in June 2005.
     + In March 2005, we convened a roundtable involving the accountability
       community on long-term fiscal challenges, the results of which were
       summarized and shared with the participants.
     + Throughout 2005, we held five sessions of our speakers' series
       Conversations on 21st Century Challenges, wherein prominent leaders
       discuss emerging themes and their implications for public policy. In
       2005, we also initiated the Auditors General Speakers' Series that
       provides unique international perspectives in support of our work;
       speakers included the auditors general of China, Ireland, South Korea,
       and Saudi Arabia.

Advisory boards and panels also support our strategic and annual work
planning for alerting us to issues, trends, and lessons learned across the
national and international audit community that we should factor into our
work. These groups include the Comptroller General's Advisory Board whose
40 members from the public and private sectors have broad expertise in
areas related to our strategic objectives. Through the National
Intergovernmental Audit Forum, chaired by the Comptroller General, and 10
regional intergovernmental audit forums, we consult regularly with federal
inspectors general and state and local auditors. In addition, through the
Domestic Working Group, the Comptroller General and the heads of 18
federal, state, and local audit organizations exchange information and
seek opportunities to collaborate.

We also work with a number of issue-specific and technical panels to
improve our strategic and annual work planning, including the following:

fS The Advisory Council on Government Auditing Standards provides us
guidance on promulgating auditing standards. These standards articulate
auditors' responsibilities when examining government organizations;
programs; activities; functions; and government assistance received by
contractors, nonprofits, and other nongovernmental organizations. The
council's work ensured that the revised standards would be generally
accepted and feasible.

     + The Accountability Advisory Council, made up of experts in the
       financial management community, advises us on audits of the U.S.
       government's consolidated financial statements and emerging issues
       involving financial management and accountability reporting.
     + The Executive Council on Information Management and Technology, whose
       19 members are experts from the public and private sectors and
       representatives of related professional organizations, helps us to
       identify high-risk and emerging issues in the IT arena.
     + The Comptroller General's Educators' Advisory Panel, composed of
       deans, professors, and other academics from prominent universities
       across the United States, advises us on recruiting, retaining, and
       developing staff and on strategic planning matters.

Internationally, we participate in INTOSAI-the professional organization
of the national audit offices of 186 countries. During the fall of 2004,
the INTOSAI Congress unanimously adopted a 5-year strategic plan-the first
in INTOSAI's 50-year his-tory-that was developed by a 10-nation task force
chaired by the Comptroller General. This plan has provided the foundation
for the Governing Board to engage member institutions in advancing
professional audit standards and promoting knowledge sharing.

Collaborating with Others

By collaborating with others, we have strengthened professional standards,
provided technical assistance, leveraged resources, and developed best
practices. In our work with INTOSAI, we chair the accounting and reporting
committee and we are an active member of INTOSAI's auditing standards,
internal control and accounting standards, and other technical committees.
We publish INTOSAI's quarterly International Journal of Government
Auditing in five languages to foster global understanding of standards,
best practices, and technical issues. To help ensure that the public
sector perspectives are reflected in the International Federation of
Accountants Standards Development project, we are working as a member of
INTOSAI's Professional Standards Committee as it collaborates closely with
the International Auditing Assurance Standards Board and the World Bank to
develop international auditing standards.

To build capacity in the national audit offices around the world, we
conduct an international audit fellows program for mid- to senior-level
staff from other countries. In 2005, 20 audit fellows from Africa, Asia,
Europe, Latin America, and the Middle East spent about 4 months at GAO
learning how we are organized to do our work, how we plan our work, and
what methodologies we use, particularly for performance audits. As part of
our strategy to promote continuous learning and sustainability once the
fellows return to their countries, we are working with major donors-such
as the World Bank and the U.S. Agency for International Devel-opment-to
identify or support relevant capacity-building projects in fellows'
institutions. Six current and seven former auditors general as well as
several deputy auditors general, including the current chair of INTOSAI,
are graduates of this program.

Other collaborative activities undertaken by our staff during 2005
included the following:

     + Conferring with the Partnership for Public Service (Partnership), a
       nonprofit, nonpartisan public service organization committed to making
       the government an employer of choice for talented, dedicated Americans
       through educational outreach, research, legislative advocacy, and
       hands-on partnerships with agencies on workforce management issues. In
       late 2004, the Partnership merged with the Private Sector Council,
       another external partner organization dedicated to helping the federal
       government improve its efficiency, management, and productivity
       through the cooperative sharing of knowledge. During 2005, the
       Partnership has collaborated with us on a human capital symposium
       focused on performance management best practices and assisted us on a
       number of engagements.
     + Actively participating in four other Domestic Working Group
       collaborative efforts of federal, state, and local audit officials to
       address issues regarding access to records, grants management,
       long-term fiscal challenges, and governance. Collaborative efforts
       with the Domestic Working Group and the National Association of State
       Auditors, Comptrollers, and Treasurers facilitated our work involving
       the states by fostering a cooperative working relationship with the
       state auditors on over a dozen engagements.

fS Implementing the National Intergovernmental Audit Forum (Forum)
strategic plan that was adopted in December 2004. This plan was developed
by a task force composed of federal, state, and local auditors and an
independent public accountant. The newly established committees have begun
organizing to implement the plan, which seeks to maximize the Forum's
effectiveness in promoting good government and accountability at all
levels of government. In addition, 21 regional Forum meetings were held,
which brought together auditors at all government levels.

Using Our Internal Experts

We coordinated extensively within our own organization on our strategic
and annual performance planning efforts, as well as on the preparation of
our performance and accountability reports. Our efforts are completed
under the overall direction of the Comptroller General and the Chief
Operating Officer. We relied on our Chief Administrative Officer/Chief
Financial Officer and her staff to provide key information, such as the
financial information that is included in part III of this report. Her
staff also coordinated with others throughout the agency to provide the
information on goal 4's results, which appears in part II of this report,
and provided input on other efforts dealing with issues that include
financial management, budgetary resources, training, and security. We
obtained input on all aspects of our strategic and annual performance
planning and reporting efforts from each of our engagement teams and
organizational units through their respective managing directors, as well
as other staff responsible for planning or engagement activities in the
teams. Staff from QCI prepared the report, ensuring, among other things,
that the report addressed comments and suggestions received from the
Association of Government Accountants and other reviewers. In short, we
involved virtually every part of GAO and used our internal expertise in
our planning and reporting efforts.

Addressing Management Challenges That Could Affect Our Performance

At GAO, management challenges are identified by the Comptroller General,
the Executive Committee, and the agency's senior executives through the
agency's strategic planning, management, and budgeting processes. Our
progress in addressing the challenges is monitored through our annual
performance and accountability process. Under strategic goal 4, we
establish performance goals focused on each of our management challenges,
track our progress in completing the key efforts for those performance
goals quarterly, and report each year on our progress toward meeting the
performance goals. Each year we ask our IG to examine manage-ment's
assessment of the challenges and the agency's progress in addressing them.
(See app. 2 for the IG's assessment.)

For fiscal year 2005, we continued to address three management
challenges-human capital, information security, and physical security. We
anticipate that we may need to continue to address these management
challenges in future years because they are evolving and will require us
to continuously identify ways to adapt and improve. We revisit the
challenges each year and refine them when appropriate, and when we believe
we have sufficiently addressed these challenges we will remove them from
our list. We will report any changes as we monitor and report on our
progress in addressing the challenges through our annual performance and
accountability process. The following sections describe our recent and
planned efforts to address these challenges.

The Human Capital Challenge

Given our role as a key provider of professional and objective 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. We spend about 80 percent of our resources on our
people, but without excellent human capital policies and management
practices, we could run the risk of being unable to lead by example and
meet the expectations of the Congress and the American people. Our ability
to meet the needs of the nation could also be impaired if we do not
receive the funding that we need to adequately staff the agency, invest in
our people, and reward our top performers-a mitigating external factor
that we discuss along with others beginning on page 58 in this report.

To recruit, reward, and retain a highly qualified, high-performing, and
diverse workforce remains one of our most important challenges. We
employed a number of strategies to improve our recruitment efforts and
support our workforce plan, including increasing the use of short-term and
time-limited appointments and direct-hire authorities and implementing a
pilot program for undergraduate cooperative education program
participants. We also developed our fiscal year 2006 recruitment strategy
to more directly support the agency's workforce plan. The strategy
includes enhancements or expansions of existing programs, such as the
capability to offer internships in the fall and spring as well as the
summer; fully implementing a cooperative education program; implementing
government-wide flexibility for noncompetitive appointments into the
Professional Development Program-our system for exposing new, entry-level
staff to a variety of engagements, teams, and developmental opportunities
during their first 2 years of employment; and using special teams to
employ targeted recruiting for special skill sets, hard-to-fill positions,
and diversity recruiting.

We continued to enhance our performance management and compensation
systems through new and enhanced policies and processes. To improve our
Performance-Based Compensation System, with the help of a well-regarded
consulting firm, we implemented a revised process for determining
per-formance-based compensation that more directly links individuals'
performance, as reflected by their appraisal, with his or her
compensation. In June 2005, our administrative and professional support
staff completed their first year under a broadband pay system and a
competency-based performance system. To ensure that these staff understood
the new process and to foster staff acceptance, we employed an aggressive
communication strategy that included meetings with staff as well as
Web-based guides and questions and answers. To design a competitive, fair,
and equitable compensation program aligned with competitive labor markets
in which we compete for talent, we worked with the same consulting firm to
perform a market-based compensation study. Based on the results of the
market-based compensation survey, we have invested significantly in
restructuring our analyst and analyst-related specialist Band II pay band
into two pay levels to better align individual staff with our
institutional compensation policies. We expect all compensation system
changes to be implemented in fiscal year 2006. To ensure that our
managers' needs for support and guidance concerning their responsibilities
in the performance management process are met, we established an
organizational and performance consulting service designed to help
managers interpret and address feedback they receive from our annual
employee feedback survey, developed an e-learning course on designated
performance managers' roles and responsibilities, and developed and began
issuing a report for managers and our Employee Advisory Council evaluating
the performance management assessment cycle with recommendations for
improvements. We also improved the accuracy and user-friendliness of our
performance management Web site.

Finally, we continued providing our staff with courses and opportunities
to develop their knowledge and expertise, build their competency, and
strengthen their leadership skills. We designed and delivered 13 new
competency-building courses and implemented an adjunct faculty program to
increase the number of our subject matter experts available to develop
content for new courses, expand the range of courses available, and
provide training throughout the year. We also established a group of
analysts-in-charge representing various teams supporting goals 1 through 3
to discuss best practices related to managing engagements; challenges for
new analysts-in-charge; and techniques for motivating, directing, and
coaching staff. In addition, we upgraded our learning content management
system to make it available on demand any time, anywhere, and provide
improved tracking and reporting capabilities, and developed resource
guides for our administrative professional and support staff that describe
learning opportunities by competency and aid in creating individual
development plans for professional growth. To deliver required core
courses to Band I analyst staff in field offices, we redistributed and
realigned course delivery among three learning hubs rather than
centralizing course delivery in headquarters. We estimate that this
decision will result in a cost avoidance of $500,000 in travel and per
diem, as well as other benefits, such as networking among and across
teams, a sustained focus on learning, larger classes that make more
effective use of adjunct faculty time, and the opportunity to strengthen
matrixed work relationships through shared learning experiences.

We continued to strengthen our strategic human capital management by
realigning our Human Capital Office during fiscal year 2005 to better meet
the needs of our internal customers. By consolidating our services under
four centers of excellence, we will improve our customer focus, clarify
lines of delegated authorities, standardize guidance across the Human
Capital Office, and dedicate more of our resources to direct customer
support.

While we have made progress in addressing the human capital challenge,
more work remains to be done. Some of the largest efforts planned in this
area for fiscal year 2006 include

     + implementing the market-based compensation ranges for our analyst and
       analyst-related staff,
     + determining the market-based compensation ranges for our
       administrative professional and support staff,
     + implementing changes necessary to restructure our analyst Band II
       staff,
          * continuing to strengthen our recruiting processes to better meet
            the needs of the agency and support our strategic goals,
          * fS obtaining a better understanding of the retention factors
            affecting GAO, and
     + identifying an appropriate methodology to successfully implement the
       Comptroller General's authority to determine the amount of annual pay
       adjustments.

The Information Security Challenge

Information system security is a critical activity in ensuring our
information system assets are safe and free from compromise. To address
the increasing threats due to compromised information or information
systems, we implemented a wide range of initiatives to strengthen and
protect the security of our information systems and data.

We enhanced the security of our users' workstations by installing personal
firewall software to prevent download of viruses, anti-spyware to identify
and eliminate malicious programs, and automatic activation of the
screensaver. We also locked the GAO intranet home page as the default home
page to prevent spyware from hijacking the default home page and
downloading more spyware.

In support of the requirements in the Federal Information Security
Management Act, we completed remediation of several key weaknesses and
vulnerabilities during fiscal year 2005. These included, ensuring that
risk assessments, system security plans, reviews performed under National
Institute of Standards and Technology special publication 800-26, and
letters for authorization to operate were in place and that system test
and evaluation reviews and certifications and accreditations were
developed and completed as necessary.

To extend our ability to securely access and transmit classified data and
information, we completed installation of the Secret Internet Protocol
Router Network in seven of our field offices. This network allows our
staff to obtain specific classified data directly from agency officials
via secure e-mail, improves efficiency of our research through direct
access to classified information, posts our classified reports for review
and dissemination, electronically transmits our classified reports to
agencies for comments, and reduces the necessity of using certified mail
for classified data.

Finally, we continued to implement initiatives and improvements to our
Disaster Recovery Program. Our most significant accomplishment was the
completion of our vision of the Disaster Recovery Pro-gram/Continuity of
Operations, which was approved and signed by the Comptroller General and
the Chief Administrative Officer on May 31, 2005. In support of the
program we also developed Emergency Preparedness training video material
for headquarters staff and installed an emergency voice and text
notification system on the network.

We anticipate that information security will continue to be one of our
management challenges in the future. In fiscal year 2006, we will further
address that challenge by completing implementation of centralized
auditing of network servers and devices to better secure our computing
assets within GAO, refining our network monitoring procedures to include
the use of correlation products to automate the detection of potentially
harmful threats to our network, implementing improvements to our disaster
recovery operations, and improving our ability to respond and recover in
the event of a disruption by implementing additional technologies to
lessen our risks.

The Physical Security Challenge

The challenge to provide a safe and secure work environment for employees
remains a constant in light of domestic and international events that can
have a profound impact on the way we conduct business in the United States
and around the world. Protecting our people and our assets is paramount to
agency operations. In fiscal year 2005, we initiated actions to enhance
our communication with external agencies, improve our internal
communications and operations, and strengthen the technical and physical
aspects of our emergency preparedness efforts.

Externally, we established or enhanced contacts and procedures with local
agencies to enable us to receive detailed intelligence that would not
necessarily be provided through normal communication channels and to
ensure coordination with the legislative branch in case of emergency. For
example, we established emergency notification procedures with the Federal
Bureau of Investigation Joint Terrorism Task Force; enhanced relocation
procedures and improved relations with the U.S. Capitol Police, the House
Sergeant of Arms, and the Emergency Preparedness Office; and made
arrangements with the District of Columbia government to receive
up-to-date emergency notifications. We are also an active member of the
Legislative Branch Continuity of Operations Plan Working Group, and we
coordinated and participated in a legislative branch tabletop exercise
involving a simulation of a crisis requiring the House of Representatives
to vacate and relocate elsewhere.

Internally, we took several steps to support our goal of providing a safe
and secure work environment. To ensure that our staff know what to do in
case of an emergency, we conducted our first shelter in place drill for
headquarters, and distributed shelter in place plans for the majority of
our field offices and an emergency preparedness brochure for all staff. To
reduce the agency's security risk, we installed an electronic fingerprint
system that improves the speed with which we can obtain screening through
the Federal Bureau of Investigation, including immediate reports if prints
are not acceptable. In addition, we are now requiring National Crime
Information Center checks for contractors, including fingerprints, which
bring our security requirements and procedures for contractors more in
line with those for our own employees.

To help ensure continued operations, we have completed initiatives in the
areas of technical and physical security. We increased our network access
potential through installing and reactivating additional local area
network ports. This will provide for efficient and effective use of space
in the event that congressional staff need to relocate to our headquarters
building in an emergency. Our physical security was improved this year
with the completion of the perimeter security phase of our security plans.
Projects completed include installation of high-speed rollup doors in the
garage, placement of guard booths at our vehicle entrances, installation
of undervehicle cameras and pop-up barriers, and construction of a
perimeter plinth wall.

We plan to continue to assess our security operations to ensure our
ability to meet ever-changing challenges to our security posture. In
fiscal year 2006 we will be completing work on the Integrated Electronic
Security System, which includes installation of turnstiles at
headquarters, implementation of smart card technology, and upgrading
access control and intrusion detection systems for headquarters and the
field offices. Other efforts to meet this continuing challenge include
procurement of an emergency notification system, and designing and
disseminating a more robust security education and awareness program for
headquarters and the field offices.

Mitigating External Factors That Could Affect Our Performance

Several external factors could affect the achievement of our performance
goals, including the amount of resources we receive, shifts in the content
and volume of our work, and various national and international
developments. Limitations imposed on our work by other organizations or
limitations on the ability of other federal agencies to make the
improvements we recommend are additional factors that could affect the
achievement of our goals.

The external factors that could have the most significant adverse affect
on us are the constrained budget environment in which we currently work
and the uncertain budget future we face. We are experiencing heavy demand
from the Congress for work in a number of subject areas, especially in
disaster recovery and preparedness in the aftermath of Hurricanes Katrina
and Rita and in health care. Given the across-the-board funding reductions
that the Congress is considering for fiscal year 2006, large current
federal budget deficits, and the nation's long-range fiscal imbalance, the
Congress is likely to place an increasing emphasis on fiscal constraint.
While it is unclear how we will ultimately be affected, it is reasonable
to assume that any attempt to exercise additional budgetary discipline in
the legislative branch will include our agency. As a result, while we
believe that we submit reasonable and responsible budget requests and we
know that the return on investment that we generate is unparalleled, we
must plan and prepare for the possibility of significant and recurring
constraints on the resources made available to us. In addition, because
almost 80 percent of our budget is composed of people-related costs, any
serious budget situation will have an adverse impact on our human capital
policies and practices. This, in turn, will have an adverse impact on our
ability to serve the Congress and meet our performance targets. While, as
we noted above, the nature and extent of any such budget constraints
cannot be determined at the present time, our executive team is prudently
engaged in a range of related planning activities that will help us to
manage small reductions in our funding levels and still perform the
high-quality work for the Congress that we are known for. We sincerely
strive to lead by example, and are hopeful that our modest budget requests
supported by our sound business case and proven performance results will
encourage the Congress to provide additional resources to us and other
high-performing entities like ours. If the Congress employs such an
approach, we should be in a good position to continue to provide a high
rate of return on the resources invested in the agency. However, employing
an across-the-board cut or other nontargeted approaches would greatly
impede our ability to do our work and may create perverse incentives for
those agencies who are trying to model our priorities and practices.

A growing area for us also involves our work on bid protests. As required
by law, General Counsel prepares Comptroller General procurement law
decisions that resolve protests filed by disappointed bidders. These
bidders challenge the way individual federal procurements are being
conducted or how the contracts were awarded. In recent years, we have
experienced an increase in the number of bid protests that have been
filed. There is a possibility of a further increase if the executive
branch undertakes a significant number of public or private competitions
under OMB Circular A-76, particularly if statutory changes allow
representatives of employees to protest when the private sector wins these
competitions. We will continue to monitor our workload in this area to
ensure that we meet our statutory responsibilities with minimal negative
impact on our other work.

In addition to current and future budget constraints, another external
factor is the extent to which we can obtain access to certain types of
information. With concerns about operational security being unusually high
at home and abroad, we may have more difficulty obtaining information in a
timely manner and reporting on sensitive issues. Historically, our
auditing and information gathering have been limited whenever the
intelligence community is involved. In addition, we have not had the
authority to access or inspect records or other materials held by other
countries or, generally, by the multinational institutions that the United
States works with to protect its interests. Consequently, our ability to
fully assess the progress being made in addressing national and homeland
security issues may be hampered. Also, we anticipate that more of our
reports may be subject to classification reviews than in the past, which
means that the public dissemination of these products may be limited. We
plan to work with the Congress to identify both legislative and
nonlegislative opportunities for strengthening our access authority as
necessary and appropriate.

As the Congress focuses on unpredictable events- such as natural
disasters, possible public health pandemics, and the global threat posed
by sophisti-cated terrorist networks-the mix of work we are asked to
undertake may change, diverting our resources from some strategic
objectives and performance goals. We can and do mitigate the impact of
these events on the achievement of our goals in various ways. For example
in fiscal year 2005, we

     + stayed abreast of current events (such as the airline industry's
       financial crisis and gasoline prices) and communicated frequently with
       our congressional clients in order to be alert to possibilities that
       could shift the Congress's priorities or trigger new priorities;
     + quickly redirected our resources when appropriate (i.e., on the cost
       and recovery efforts related to Hurricane Katrina) so that we could
       deal with major changes as they occur;
     + maintained broad-based staff expertise (i.e., in our social security,
       health care financing, and homeland security areas) so that we could
       readily address emerging needs; and
     + initiated research under the Comptroller General's authority on a
       limited number of selected topics, such as U.S. tsunami detection and
       preparedness efforts, the status of Iraq's reconstruction, and our
       21st century challenges and high-risk work.

Our ability to effectively manage the demands on our resources could have
an impact on our ability to meet our performance targets. However, we will
continue to manage the congressional requests we receive and the work we
do under the Comptroller General's authority in order to minimize any
negative impact it may have on our ability to meet the needs of the
Congress and the American people.

Part II: Performance Information

Part II

                            Performance Information

Performance Information by Strategic Goal

In the following sections, we discuss how each of contributed toward
meeting the targets for the agenour four strategic goals contributed to
our fiscal year cywide measures that were discussed in the previ2005
performance results. Specifically, for goals 1, 2, ous part of this
report. In addition, for all four and 3-our external goals-we present
perfor-strategic goals, we assess our progress on our qualimance results
for the three annual measures that we tative, multiyear performance goals.
assess at the goal level. Most teams and units also

Goal 1 Overview

Provide timely, quality service to the Congress and the federal government
to address current and emerging challenges to the well-being and financial

security of the American people

Source:See Image Sources.

Our first strategic goal upholds our mission to support the Congress in
carrying out its constitutional responsibilities by focusing on work that
helps address the current and emerging challenges affecting the well-being
and financial security of the American people and American communities.
Our multiyear (fiscal years 2004-2009) strategic objectives under this
goal are to provide information that will help address

     + the health needs of an aging and diverse population;
     + the education and protection of the nation's children;
     + the promotion of work opportunities and the protection of workers;
     + a secure retirement for older Americans;
     + an effective system of justice;
     + the promotion of viable communities;
     + responsible stewardship of natural resources and the environment; and
     + a safe, secure, and effective national physical infrastructure.

These objectives, along with the performance goals and key efforts that
support them, are discussed fully in our strategic plan, which is
available on our Web site at http://www.gao.gov . The work supporting
these objectives was performed primarily by headquarters and field staff
in the following teams: Education, Workforce, and Income Security;
Financial Markets and Community Investment; Health Care; Homeland Security
and Justice; Natural Resources and Environment; and Physical
Infrastructure.

                           Selected Work under Goal 1

Improving the oversight and monitoring of Head Start grantees: We assisted
the Congress and the Department of Health and Human Services (HHS) in
identifying major risk areas in the Head Start program and crafting
solutions to address those risks. For example, we noted the lack of
reliable data on enrollment in Head Start centers nationwide and
highlighted gaps in Head Start's oversight framework that put federal
funds at risk and can reduce the quality or amount of services provided.
HHS is now taking steps to address these and other gaps we identified.
(See app. 1, item 1.36.C.)

Addressing the challenges of pension reform: We urged the Congress to
enact comprehensive pension reform that would reduce the financial risks
to the Pension Benefit Guaranty Corporation and the taxpayer, as well as
to put the defined benefit system on a more stable financial footing. The
Congress subsequently included in draft legislation the key elements that
we suggested. (See app. 1, item 1.47.C.)

Redefining rural: In assessing how a change in the definition of rural
would impact USDA's Rural Housing Service in meeting rural housing needs,
we suggested that the Congress consider changing to a density-based system
as a basis for making more equitable rural housing program eligibility
determinations. (See app. 1, item 1.55.C.)

Improving security at drinking water and wastewater plants: We identified
key activities that can help the Environmental Protection Agency improve
security for the water sector. Because of this work, the agency
established common protocols for monitoring threats; provided simulation
exercises to improve local, state, and regional collaboration; and
significantly expanded training opportunities related to security by
sponsoring several security workshops and seminars on topics such as
wastewater system security, drinking water system preparedness, and
emergency response. (See app. 1, item 1.67.C.)

To accomplish our work under these strategic objectives, we conducted
engagements, audits, analyses, and evaluations of programs at major
federal agencies and developed reports and testimonies on the efficacy and
soundness of those programs.

As shown in table 10 , we did not meet our fiscal year 2005 performance
target for financial benefits for goal 1, but we exceeded our targets for
other benefits and testimonies.

Table 10: Strategic Goal 1's Annual Performance Results and Targets

                       2001  2002   2003   2004   2005    2005    Met/   2006 
Performance       actual actual actual actual target actual not met target 
measure                                                             
Financial                                                           
benefits                                                            
(dollars in        $8.9  $24.1  $23.6  $26.6  $19.6  $15.6  Not met $18.7a 
billions)                                                           
Other benefits       210    226    217  252    240      277     Met   242a 
Testimonies           73    111     80     85     78     88     Met     89 

Source: GAO.

aOur fiscal year 2006 targets for financial benefits and other benefits
differ from the targets we reported for these measures in our fiscal year
2006 performance plan. On the basis of our performance in fiscal year
2005, we lowered these targets from $19.5 billion in financial benefits
and 255 in other benefits, because we anticipate that these benefits
during fiscal year 2006 are more likely to stem from work performed under
goal 2. We did not change the agencywide targets for these measures, but
we made corresponding changes to targets for goals 2 and 3.

To help us examine trends for these measures over time, we look at their
4-year averages, which minimize the effect of an unusual level of
performance in any single year and are shown in table 11 . This table
indicates that financial and other benefits have generally risen over
time, while the number of testimonies has generally declined for goal 1
since fiscal year 2001.

           Table 11: Four-Year Rolling Averages for Strategic Goal 1

Performance measure                       2001   2002   2003   2004   2005 
Financial benefits (dollars in billions) $11.9  $15.2  $17.7  $20.8  $22.5 
Other benefits                            177    190    209    226     243 
Testimonies                               114    110     99     87      91 

Source: GAO.

The following sections describe our performance in goal 1 for each of
these three quantitative performance measures and describe the targets for
fiscal year 2006. This analysis is followed by a discussion of our
multiyear qualitative performance measures.

Financial Benefits

The financial benefits reported for this goal in fiscal year 2005 totaled
$15.6 billion, falling short of the target of $19.6 billion. This
shortfall resulted, in part, because our work focused on nonfinancial
rather than financial benefits. The largest of the financial benefits for
this goal arose from our recommendation that DOE take actions to avoid
costs associated with a nuclear waste disposal process. Other financial
benefits resulting from our work under goal 1 stemmed from HUD recapturing
funds not being used by public housing authorities, HHS avoiding costs in
the Medicare program, and the National

Financial benefits valued at $4.5 billion arose from

costs avoided after the implementation of our recom

mendation that DOE seek legislation to allow more

economical disposal of certain nuclear wastes. (See

app. 1, item 1.60.A.)

Park Service increasing revenues. We describe these and other
accomplishments in the goal 1 section of appendix 1.

Because financial benefits often result from work completed in prior
years, we set our fiscal year 2006 target on the basis of our assessment
of the progress agencies are making in implementing our past
recommendations. Our analysis indicates that financial benefits in the
future for goal 1 are likely to decline. We, therefore, have set the
target for fiscal year 2006 at $18.7 billion, which is higher than what we
achieved this year.

Other Benefits

Other tangible, nonfinancial benefits reported for goal 1 in fiscal year
2005 included 254 actions taken by federal agencies to improve their
services and operations in response to our work and another 23 in which
information we provided to the Congress resulted in statutory or
regulatory changes. This total of 277 other benefits exceeded our target
of 240. We report some of our major accomplishments in detail in the goal
1 section of appendix 1. For fiscal year 2006, we have set a target of
242. While this target is lower than what we achieved this year, it is
about the same as the 4-year average for the goal and is consistent with
our recognition that we are more likely to achieve these benefits under
goals 2 and 3 in the next few years.

Testimonies

Our witnesses testified at 88 congressional hearings related to this
strategic goal, which exceeded the fiscal year 2005 target of 78
testimonies. Among the testimonies given were those on student loan
programs, Social Security reform, Medicare spending, defense health care,
farm program payments, and transportation security ( see p. 36 for a list
of testimony topics by goal). On the basis of our assessment of the
potential need to testify on issues under this goal, we have set a target
of presenting testimony at 89 hearings during fiscal year 2006.

Multiyear Performance Goals

As shown in table 12 , at the close of fiscal year 2005, we met 39 of the
40 performance goals for this strategic goal. We did not meet the goal of
assessing the administrative efficiency and effectiveness of the federal
court and prison systems because we did not receive requests to perform
work in this area and could not undertake self-initiated work because we
needed resources for work requested by the Congress in other areas. For
fiscal year 2006, we are replacing this performance goal with one for
improving the administration of the nation's election system, a goal that
better reflects the interests of our congressional clients.

                      Examples of Goal 1's Other Benefits

                 Paying properly for power wheelchairs for Medi

              care beneficiaries: On the basis of our finding that

             the information provided to Medicare contractors that

process wheelchair claims-one of the program's most

expensive items-provided insufficient detail, new

requirements were established to make more informa

tion available. (See app. 1, item 1.9.A.)

Monitoring states' inventories of childhood vac

cines: The Centers for Disease Control and Prevention

implemented our recommendation to develop a strate

gic plan that includes steps to monitor childhood vac

cine supplies in state depots, which should help

ensure that adequate inventories are available. (See

app. 1, item 1.17.A.)

Estimating tobacco retailer violation rates: Our

work led HHS to increase oversight of states' monitor

ing of tobacco retailers; for example, HHS now visits

states to help assess the accuracy and completeness of

tobacco outlet lists and works with states to improve

standardization of inspection protocols. (See app. 1,

item 1.19.A.)

 Table 12: Strategic Goal 1's Qualitative Performance Goals, Fiscal Years 2004
                                    and 2005

" Met ... Not met Strategic objective/performance goal

            1.1. The health needs of an aging and diverse population

     o 1.1.1. Evaluate Medicare reform, financing, and operations
     o 1.1.2. Assess trends and issues in private health insurance coverage
     o 1.1.3. Assess actions and options for improving the Department of
       Veterans Affairs and the Department of Defense's health care services
     o 1.1.4. Evaluate the effectiveness of federal programs to promote and
       protect the public health
     o 1.1.5. Evaluate the effectiveness of federal programs to improve the
       nation's preparedness for the public health and medical consequences
       of bioterrorism
     o 1.1.6. Evaluate federal and state program strategies for financing and
       overseeing long-term health care
     o 1.1.7. Assess state experiences in providing health insurance coverage
       for low-income populations

           1.2. The education and protection of the nation's children

     o 1.2.1. Analyze the effectiveness and efficiency of early childhood
       education, care, and nutrition programs in serving their target
       populations
     o 1.2.2. Assess options for federal programs to effectively address the
       educational and nutritional needs of elementary and secondary students
     o 1.2.3. Determine the effectiveness and efficiency of child support
       enforcement and child welfare programs in serving their target
       populations
     o 1.2.4. Identify opportunities to better manage postsecondary,
       vocational, and adult education programs and deliver more effective
       services

     1.3. The promotion of work opportunities and the protection of workers

     o 1.3.1. Assess the effectiveness of federal efforts to help adults
       leave welfare for work and to assist other low-income individuals
     o 1.3.2. Analyze the impact of programs designed to maintain a skilled
       workforce and ensure employers have the workers they need
     o 1.3.3. Assess the success of various enforcement strategies to protect
       workers while minimizing employers' burden in the changing work
       environment
     o 1.3.4. Identify ways to improve federal support for people with
       disabilities

                  1.4. A secure retirement for older Americans

     o 1.4.1. Assess the policy challenges facing the future of the Social
       Security system and the need for reform
     o 1.4.2. Bolster retirement security by identifying opportunities to
       foster greater pension coverage, raise personal saving, and increase
       the employment earnings of seasoned workers
     o 1.4.3. Identify opportunities to improve the ability of government
       agencies to administer and protect workers' retirement benefits
     o 1.4.4. Assess the role of the Social Security number in improving
       government operations, minimizing fraud and abuse, and protecting
       citizens from identity theft and other illegal activity

" Met ... Not met Strategic objective/performance goal

                      1.5. An effective system of justice

     o 1.5.1. Identify ways to improve federal agencies' ability to prevent
       and respond to terrorism and other major crimes
     o 1.5.2. Assess the effectiveness of federal programs to control illegal
       drug use
     o 1.5.3. Assess federal efforts to enforce immigration and customs laws
     o 1.5.4. Assess the administrative efficiency and effectiveness of the
       federal court and prison systems

                    1.6. The promotion of viable communities

     o 1.6.1. Assess federal community and economic development assistance
       and its impact on communities
     o 1.6.2. Assess the effectiveness of federal initiatives to assist small
       and minority-owned businesses
     o 1.6.3. Assess how the federal government can balance the promotion of
       home ownership with financial risk
     o 1.6.4. Assess federal efforts to enhance national preparedness and
       capacity to respond to and recover from natural and man-made disasters
     o 1.6.5. Assess how well federal programs that support affordable
       housing meet objectives, manage financial risk, and improve
       recipient's well-being

     1.7. Responsible stewardship of natural resources and the environment

     o 1.7.1. Assess the nation's ability to ensure reliable and
       environmentally sound energy for current and future generations
     o 1.7.2. Assess federal strategies for managing land and water resources
       in a sustainable fashion for multiple uses
     o 1.7.3. Assess environmental protection strategies and programs
     o 1.7.4. Assess efforts to reduce the threats posed by hazardous and
       nuclear wastes
     o 1.7.5. Assess federal programs' ability to ensure a plentiful and safe
       food supply, provide economic security for farmers, and minimize
       agricultural environmental damage

       1.8. Asafe, secure, and effective national physical infrastructure

     o 1.8.1. Assess strategies for identifying, evaluating, prioritizing,
       financing, and implementing integrated solutions to the nation's
       transportation infrastructure challenges
     o 1.8.2. Assess the impact of transportation and telecommunications
       policies and practices on competition and consumers
     o 1.8.3. Assess federal government's role in fostering and overseeing
       telecommunications in the public interest
     o 1.8.4. Assess efforts to improve safety in moving people and goods
       across the nation's transportation system
     o 1.8.5. Assess efforts to improve security in all transportation modes
     o 1.8.6. Assess the U.S. Postal Service's transformation efforts to
       ensure its viability and accomplish its mission
     o 1.8.7. Assess federal efforts to plan for, acquire, manage, maintain,
       secure, and dispose of the government's real property assets

Source: GAO.

Notes: In indicating whether we have met a performance goal, the
responsible senior executive considers, for example, the amount of work
conducted and recommendations made for each key effort under that
performance goal, as well as other assistance provided to the client or
customer that is related to these efforts. The senior executive then
judges whether the work completed collectively for all key efforts has
achieved the performance goal. To view the 153 key efforts for the 40
performance goals above, go to http://www.gao.gov/sp.html.

Goal 2 Overview

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

interdependence

Source:See Image Sources.

The federal government is working to promote foreign policy goals, sound
trade polices, and other strategies to advance the interests of the United
States and its allies while also seeking to anticipate and address
emerging threats to the nation's security and economy. Given the
importance of these efforts, our second strategic goal focuses on helping
the Congress and the federal government respond to changing security
threats and the challenges of global interdependence. Our multiyear
(fiscal years 2004-2009) strategic objectives under this goal are to
support the congressional and federal efforts to

     + respond to emerging threats to security,
     + ensure military capabilities and readiness,
     + advance and protect U.S. international interests, and
     + respond to the impact of global market forces on

U.S. economic and security interests.

These objectives, along with the performance goals and key efforts that
support them, are discussed fully in our strategic plan, which is
available on our Web site at http://www.gao.gov . The work supporting
these objectives is performed primarily by headquarters and field staff in
the following teams: Acquisition and Sourcing Management, Defense
Capabilities and Management, and International Affairs and Trade. In
addition, the work supporting some performance goals and key efforts is
performed by headquarters and field staff from the Information Technology,
Homeland Security and Justice, Financial Markets and Community Investment,
and Natural Resources and Environment teams.

To accomplish our work under these strategic objectives, we conducted
engagements and audits that involved fieldwork related to federal programs

                           Selected Work under Goal 2

Strengthening federal agency information security:

In response to our identification of specific information security
improvements needed at numerous agencies, some agencies strengthened their
information security practices by, among other things, changing access
controls to limit the ability to read, modify, or delete information to
authorized individuals; implementing software change controls to allow
only authorized software programs to operate; and using service continuity
controls to protect computer-dependent operations from significant
disruptions. (See app. 1, item 2.6.A.)

Increasing security of cargo containers to prevent smuggling of weapons of
mass destruction: In response to our recommendations, DHS agreed to
improve its ability to assess security procedures of certain companies,
identify high-risk containers, inspect containers with scanning equipment,
and manage the programs overall to increase the security of cargo
containers in order to prevent terrorists from using such containers to
smuggle weapons of mass destruction into the United States. (See app. 1,
item 2.11.C.)

Identifying challenges to efforts to stabilize and rebuild Iraq: We
identified the challenges to U.S. efforts to stabilize Iraq, reconstruct
Iraq's essential infrastructure, and support its elections. Our work was
widely reported in the national media, helped inform American taxpayers
about U.S. efforts in Iraq, and provided the Congress with crucial
oversight information as it considered legislative action. (See app. 1,
item 2.49.C.)

Bolstering efforts to prevent terrorists and criminals from obtaining U.S.
passports: The Congress expressed grave concerns about the security gaps
that we identified in U.S. passport operations and asked the Departments
of State (State) and Justice to implement our recommendations correcting
these and other systemic weaknesses in State's passport fraud detection
efforts. The agencies have begun implementing actions to close these
critical security gaps. (See app. 1, item 2.50.C.)

that took us across multiple continents, including Australia, Europe,
Africa, Asia, South America, and North America. As in the past, we
developed reports, testimonies, and briefings on our work.

As shown in table 13 , we exceeded our fiscal year 2005 performance
targets for financial and other benefits, but did not meet the target for
testimonies for this goal.

Table 13: Strategic Goal 2's Annual Performance Results and Targets

Performance         2001  2002   2003   2004   2005    2005  Met/     2006 
measure           actual actual actual actual target actual not met target 
Financial                                                           
benefits                                                            
(dollars in       $10.5   $8.4   $7.1   $9.7   $9.4  $13.0      Met $10.5a 
billions)                                                           
Other benefits       188  218    273    369    300      365     Met   282a 
Testimonies           34     38     48     70     52     42 Not met     58 

Source: GAO.

aOur fiscal year 2006 targets for financial benefits and other benefits
differ from the targets we reported for these measures in our fiscal year
2006 performance plan. On the basis of our performance in fiscal year
2005, we raised these targets from $9.1 billion in financial benefits and
275 in other benefits. We did not change the agencywide targets for these
measures, but we made corresponding changes to targets for goals 1 and 3.

To help us examine trends for these measures over time, we look at their
4-year averages, which minimize the effect of an unusual level of
performance in any single year and are shown in table 14 . This table
indicates that financial and other benefits derived from our work have
risen. At the same time, the number of testimonies for goal 2 has remained
stable.

           Table 14: Four-Year Rolling Averages for Strategic Goal 2

Performance measure          2001      2002      2003      2004       2005 
Financial benefits                                                
(dollars in billions)        $6.2      $6.9      $7.9      $8.9       $9.5 
Other benefits                118       154       202      262         306 
Testimonies                       43    41        44        48          50 

Source: GAO.

The following sections describe our performance in goal 2 for each of our
quantitative performance measures and describe the targets for fiscal year
2006. This analysis is followed by a discussion of our multiyear
qualitative performance measures.

Financial Benefits

The financial benefits reported for this goal in fiscal year 2005 totaled
$13 billion, exceeding the target of $9.4 billion. These accomplishments
stemmed from engagements that recommended scaling back a defense program
until the required technology is mature, increasing efficiencies in the
Army's force structure, reducing funding for the Millennium Challenge
Account-an account established to support development in countries around
the world-and for DOD's operations and maintenance, and avoiding costs
associated with the return of excess Army

A financial benefit of about $4.7 billion stemmed from

our findings that the Missile Defense Agency could

scale back its system development efforts until

required technologies are more mature. (See app. 1,

item 2.17.A) .

materiel from Iraq. We describe these and other accomplishments in the
goal 2 section of appendix

1.

Given the large portion of the U.S. budget that defense spending consumes,
we expect our work under this goal to continue to produce economies and
efficiencies that yield billions of dollars in financial benefits for the
American people each year. We set goal 2's fiscal year 2006 target at
$10.5 billion based on its fiscal year 2005 4-year rolling average of $9.5
billion and our assessment of the progress agencies are making in
implementing our past recommendations that might yield financial benefits.

Other Benefits

The other tangible benefits reported for goal 2 in fiscal year 2005
included 341 actions taken by federal agencies to improve their services
and operations in response to our work and another 24 in which information
we provided to the Congress resulted in statutory or regulatory changes.
This total of 365 other benefits exceeded our target of 300. Our success
in this area arose from our increased emphasis on follow-up efforts and
increased monitoring of our progress toward the targets throughout the
year. Some of our major accomplishments are reported in detail in the goal
2 section of appendix 1.

Looking ahead, our assessments of the executive branch's current efforts
to implement our recommendations made under this goal led us to set our
fiscal year 2006 target at 282. This target is lower than our fiscal year
2005 actual performance and 4year average for this measure because we want
to encourage staff to identify significant and meaningful other benefits
rather than numerous, narrowly focused ones that would easily ensure that
we meet a higher target.

Testimonies

Our witnesses testified at 42 congressional hearings related to this
strategic goal, missing our target of presenting testimony at 52 hearings.
Among other things, we testified on U.S. passport fraud, DOD security
clearances, the Oil for Food program, mutual funds, unmanned aerial
vehicles, protecting

U.S. officials oversees from terrorist attacks, and transportation
security issues ( see p. 36 for a list of testimony topics by goal). We
have set our target for presenting testimony at hearings to 58 for fiscal
year 2006. This should be a challenge for us as it is above both our
fiscal year 2005 performance and 4year average for this goal.

                      Examples of Goal 2's Other Benefits

                Improving controls covering technology exports:

We found that a gap in control regulations covering

exports with both military and civilian applications

could enable individuals in most countries to legally

obtain these items without any U.S. government

review and that these items could be used to help

make a cruise missile or unmanned aerial vehicle. The

Department of Commerce subsequently proposed

modifications to its regulations to help close the regu

latory gap. (See app. 1, item 2.1.A.)

Strengthening the visa process as an antiterror

ism tool: Using our work as a primary guide, State

strengthened the visa process as an antiterrorism tool

by, among other things, issuing guidance emphasizing

national security as the department's first priority in the

visa process; developing over 80 standard operating

procedures to ensure that consular officers properly

review visa applications and effectively fulfill their

national security responsibilities; and developing and

enhancing training on analytic interviewing tech

niques, fraud prevention, counterterrorism, and use of

a name check system for passports and visa applica

tions. (See app. 1, item 2.32.A.)

Ensuring decisions to transfer U.S. weapons and technologies to foreign
governments are adequately informed: We found that the National Disclosure
Policy Committee-which approves or denies requests for exceptions to the
criteria used to determine if classified weapons or technologies can be
released to the requesting country-was operating with outdated Central
Intelligence Agency risk assessments. Acting on our recommendations, the
commit-tee's Executive Secretariat requested that the Central Intelligence
Agency provide updated risk assessments for 23 countries, and those
assessments are under way.

(See app. 1, item 2.55.A.)

Multiyear Performance Goals

As shown in table 15 , at the close of fiscal year 2004, we met 22 of our
23 performance goals for this strategic goal. We did not meet the
performance goal of identifying opportunities to embed homeland security
concepts in ongoing national initiatives because our homeland security
resources were needed for other work requested by the Congress and we did
not have resources in the homeland security area to undertake
self-initiated work related to this performance goal. For fiscal year
2006, we plan to drop this performance goal and concentrate our resources
on the remaining homeland security efforts.

 Table 15: Strategic Goal 2's Qualitative Performance Goals, Fiscal Years 2004
                                    and 2005

" Met ... Not met Strategic objective/performance goal

                  2.1. Respond to emerging threats to security

     o 2.1.1. Assess federal homeland security management, responsibility,
       effectiveness, and achievement of mission goals
     o 2.1.2. Identify ways to strengthen strategies related to homeland
       security and their implementation
     o 2.1.3. Evaluate homeland security resource priorities, costs, and
       approaches to stimulate desired investments
     o 2.1.4. Identify opportunities to embed homeland security concepts in
       ongoing national initiatives
     o 2.1.5. Evaluate ways to strengthen government information security and
       protect computer and telecommunications systems that support the
       nation's critical infrastructures
     o 2.1.6. Assess the effectiveness of U.S. and international efforts to
       prevent the proliferation of nuclear, biological, chemical, and
       conventional weapons and sensitive technologies

                2.2. Ensure military capabilities and readiness

     o 2.2.1. Assess DOD's ability to maintain adequate readiness levels
       while addressing the force structure changes needed in the 21st
       century
     o 2.2.2. Assess overall human capital management practices to ensure a
       high-quality total force
     o 2.2.3. Assess the ability of weapon system acquisition programs and
       processes to achieve desired outcomes
     o 2.2.4. Identify ways to improve the economy, efficiency, and
       effectiveness of DOD's support infrastructure and business systems and
       processes
     o 2.2.5. Assess the National Nuclear Security Administration's efforts
       to maintain a safe and reliable nuclear weapons stockpile
     o 2.2.6. Assess whether DOD and the services have developed integrated
       systems, procedures, and doctrines to support joint and coalition
       forces on the battlefield safely and effectively
     o 2.2.7. Analyze and support DOD's efforts to improve planning,
       programming, budgeting, execution, and program performance

             2.3. Advance and protect U.S. international interests

     o 2.3.1. Analyze the plans, strategies, costs, and results of the United
       States and its allies in conflict interventions
     o 2.3.2. Analyze the effectiveness and management of U.S. foreign aid
       and developmental and humanitarian programs and the tools used to
       implement them
     o 2.3.3. Analyze the plans, costs, and outcomes of responding to
       challenges to U.S. strategic interests
     o 2.3.4. Evaluate the extent to which U.S. interests are effectively
       served by U.S. participation in multilateral organizations
     o 2.3.5. Assess the strategies and management practices for U.S. foreign
       affairs functions and activities

2.4. Respond to the impact of global market forces on U.S. economic and security
                                   interests

     o 2.4.1. Analyze how U.S. interests are served through trade agreements
       and U.S. programs
     o 2.4.2. Improve understanding of the effects of a global industrial
       base on U.S. national security interests
     o 2.4.3. Assess how the United States can influence improvements in the
       world financial system
     o 2.4.4. Assess the ability of the financial services industry and its
       regulators to maintain a stable and efficient financial system in the
       face of market change and innovation
     o 2.4.5. Assess the effectiveness of regulatory programs and policies in
       ensuring access to financial services and deterring fraud and abuse in
       financial markets

Source: GAO.

Notes: In indicating whether we have met a performance goal, the
responsible senior executive considers, for example, the amount of work
conducted and recommendations made for each key effort under that
performance goal, as well as other assistance provided to the client or
customer that is related to these efforts. The senior executive then
judges whether the work completed collectively for all key efforts has
achieved the performance goal. To view the 88 key efforts for the 23
performance goals above, go to http://www.gao.gov/sp.html.

Source:See Image Sources.

Our third strategic goal focuses on the collaborative and integrated
elements needed for the federal government to achieve results. The work
under this goal highlights the intergovernmental relationships that are
necessary to achieve national goals. Our multiyear (fiscal years
2004-2009) strategic objectives under this goal are to

     + reexamine the federal government's role in achieving evolving national
       objectives;
     + support the transformation to results-oriented, high-performing
       government;
     + support congressional oversight of key management challenges and
       program risks to improve federal operations and ensure accountability;
       and
     + analyze the government's fiscal position and strengthen approaches for
       addressing the current and projected fiscal gap.

These objectives, along with the performance goals and key efforts that
support them, are discussed fully in our strategic plan, which is
available on our Web site at http://www.gao.gov . The work supporting
these objectives is performed primarily by headquarters and field staff
from the Applied Research and Methods, Financial Management and Assurance,
Information Technology, and Strategic Issues teams. In addition, the work
supporting some performance goals and key efforts is performed by
headquarters and field staff from the Acquisition and Sourcing Management
and Natural Resources and Environment teams. This goal also includes our
bid protest and appropriations law work, which is performed by staff in
General Counsel, and our fraud investigations, which are conducted by
staff from the Forensic Audits and Special Investigations unit within the
Financial Management and Assurance team.

                           Selected Work under Goal 3

Cost effectively managing a multibillion dollar IT investment: DHS program
managers who track cargo entering and leaving the United States
implemented our recommendations related to developing and using enterprise
architecture, following an incremental system acquisition approach,
establishing system acquisition process controls, and ensuring the
independence of DHS's function to oversee the program. (See app. 1, item
3.19.C.)

Improving criminal debt collection: Our efforts resulted in the Congress
directing the Department of Justice to develop a strategic plan with the
other involved federal agencies to improve the federal government's
ability to collect billions of dollars of outstanding criminal debt. The
department has begun to act on this directive. (See app. 1, item 3.20.C.)

Improving governmentwide telecommunications acquisition: Because of
concerns that we raised regarding a governmentwide telecommunications
contract known as Networx, GSA drafted measures to address each of the
pro-gram's goals and is working to revise the draft measures based on our
feedback. In addition, the Congress directed the agency to delay the
release of its final request for proposals until information was available
on the level of service contractors would be required to provide at each
location.

(See app. 1, item 3.21.C.)

Raising awareness of selected technology used to block pornography: We
found that the filters offered by selected peer-to-peer file-sharing
applications-which allow Internet users to find and exchange information,
including images and videos-varied in their ability to block pornographic
images. (See app. 1, item 3.29.C.)

Conducting the first financial audit of the Securities and Exchange
Commission (SEC): Our audit of SEC for the fiscal year ended 2004-the
first conducted at SEC- resulted in a clean opinion on its financial
statements. Nevertheless, we identified material internal control
weaknesses over financial statements and disclosures, recording and
reporting disgorgements and civil penalties, and information security,
which SEC is taking steps to address. (See app. 1, item 3.60.C.)

To accomplish our work under these four objectives, we conducted audits,
evaluations, and analyses in response to congressional requests and
carried out work initiatives under the Comptroller General's authority. As
in the past, we developed reports, testimonies, and briefings on our work.

As shown in table 16 , we exceeded our fiscal year 2005 performance
targets for financial and other benefits for this goal, but did not meet
the target for testimonies at the goal level.

      Table 16: Strategic Goal 3's Annual Performance Results and Targets

Performance         2001  2002   2003   2004   2005    2005  Met/     2006 
measure           actual actual actual actual target actual not met target 
Financial                                                           
benefits                                                            
(billions of        $7.0  $5.2   $4.7   $7.6   $8.5  $11.0      Met  $9.8a 
dollars)                                                            
Other benefits       401  462    553    576    460      767     Met   526a 
Testimonies           42     65     56     60     55     47 Not met     63 

Source: GAO.

aOur fiscal year 2006 targets for financial benefits and other benefits
differ from the targets we reported for these measures in our fiscal year
2006 performance plan. On the basis of our performance in fiscal year
2005, we lowered the financial benefit target from $10.4 billion. We also
raised the target for other benefits from 520. We did not change the
agencywide targets for these measures, but we made corresponding changes
to targets for goals 1 and 2.

To help us examine trends for these measures over time, we look at their
4-year averages, which minimize the effect of an unusual level of
performance in any single year and are shown in table 17 . This table
indicates that documentation of financial and other benefits derived from
our work under this goal have risen, while the number of testimonies for
goal 3 has declined overall.

           Table 17: Four-Year Rolling Averages for Strategic Goal 3

Performance measure          2001      2002      2003      2004       2005 
Financial benefits                                                
(dollars in billions)        $5.3      $5.5      $5.5      $6.1       $7.1 
Other benefits                407       445       480      498         590 
Testimonies                       86    78        67        56          57 

Source: GAO.

The following sections describe our performance in goal 3 for each of our
quantitative performance measures and describe the targets for fiscal year
2006. This analysis is followed by a discussion of our qualitative
performance measures.

Financial Benefits

The financial benefits reported for this goal in fiscal year 2005 totaled
$11 billion, exceeding our target of $8.5 billion. These efforts included
increasing revenues from IRS collections, avoiding costs by using
streamlined federal acquisition strategies, reduced funding due to
improved cash management processes in the Air Force's working capital fund
and to postponement of NASA's Prometheus 1 project, and reducing costs
associated with the 2010 Census. We describe these and other
accomplishments in the goal 3 section of appendix 1.

             A financial benefit of about $1.8 billion stemmed from

our findings that led IRS to increase revenue collec

tions. (See app. 1, item 3.51.A) .

Under goal 3, we typically work on core government business processes and
governmentwide management reforms. Our assessments of the executive
branch's current efforts to implement the recommendations we made in our
work under this goal indicate that financial benefits related to this goal
are likely to be in line with our 4-year average; consequently, we set the
target for financial benefits at $9.8 billion for fiscal year 2006.

Other Benefits

The other tangible benefits reported for goal 3 in fiscal year 2005
included 739 instances in which agencies' core business processes were
improved or governmentwide management reforms were advanced because of our
work. In addition, there were 28 instances in which information we
provided to the Congress resulted in statutory or regulatory changes. This
total of 767 other benefits exceeded our target of 460. The larger number
of other benefits occurred mainly in our financial management and
information technology areas where we tend to make multiple, specific
recommendations for change to more than one entity. We describe some of
our major accomplishments in the goal 3 section of appendix 1.

Looking ahead, our assessments of the executive branch's current efforts
to implement our recommendations made under this goal led us to set a
fiscal year 2006 target of 526 other benefits for goal 3. We recognize
that this target is lower than our fiscal year 2005 actual performance,
but we set it at this level because we want to encourage staff to identify
significant and meaningful other benefits rather than numerous, narrowly
focused ones that would easily ensure that we meet a higher target.

Testimonies

Our witnesses testified at 47 congressional hearings related to this
strategic goal, falling short of the target of 55. Among the testimonies
presented were those on Army Reserve and Army National Guard pay, tax
system abuse by DOD contractors, diploma mills, federal purchase and
travel cards, NASA's shuttle program, and DOD contract management (see p.
36 for a list of testimony topics by goal). For fiscal year 2006, we have
set a target of presenting testimony at 63 hearings because we expect the
level of hearings to be higher than it was in fiscal year 2005; the
anticipated increase stems from our work on bid protests and on
contracting activities resulting from federal Hurricane Katrina cleanup
and recovery efforts.

                      Examples of Goal 3's Other Benefits

                 Adding rigor to the Coast Guard's oversight of

Deepwater program contractors: We found that

(1) the Coast Guard's evaluation of a contractor responsible for
developing and delivering assets for the Deepwater Program-established to
modernize the Coast Guards' aging fleet of ships and aircraft- lacked the
necessary rigor to be effective and (2) two subcontractors were solely
responsible for deciding whether to compete assets or make the assets
themselves. Based on our recommendations, the Coast Guard improved the
criteria for assessing the system integrator's performance and required
the subcontractors to provide notification of decisions to make assets
valued at $10 million or more. (See app. 1, item 3.6.A.)

Preventing improper sales of sensitive clothing

and textile items: On the basis of our findings that it

improperly sold over the Internet excess clothing with

reflectant properties that prevent detection with infra

red technologies, DOD issued a more stringent policy,

which determined that these items are of a sufficiently

critical and sensitive nature to require total destruc-

tion-an action that should help prevent this sensitive

technology from falling into the wrong hands. (See

app. 1, item 3.31.A.)

Improving accountability at the Department of Labor (DOL): We recommended
that OMB revise its audit guidance to require sufficient testing for
auditors to be able to positively state whether agency financial
management systems comply with requirements (positive assurance). DOL's IG
advised us that it had followed our advice and became the first federal
agency to provide positive assurance. (See app. 1, item 3.34.A.)

Improving NASA's cost-estimating processes: Act

ing on our recommendations, NASA has removed bar

riers to cost estimation-such as the lack of reliable

financial and performance data and the lack of incen

tives to measure and monitor cost trends-and

improved its cost-estimating practices. (See app. 1,

item 3.37.A.)

Multiyear Performance Goals

As shown in table 18 , at the close of fiscal year 2005, we met all of the
19 performance goals for this strategic goal.

 Table 18: Strategic Goal 3's Qualitative Performance Goals, Fiscal Years 2004
                                    and 2005

" Met ... Not met Strategic objective/performance goal

  3.1. Reexamine the federal government's role in achieving evolving national
                                   objectives

     o 3.1.1. Examine emerging challenges and opportunities to position the
       federal government for the 21st century
     o 3.1.2. Develop new resources and approaches that can be used to assess
       the nation's position and progress
     o 3.1.3. Explore ways to evaluate the effectiveness of the entire set of
       policy tools that the federal government uses to achieve national
       objectives
     o 3.1.4. Assess how involvement of state and local governments and
       nongovernmental organizations affects federal program implementation
       and achievement of national goals

3.2. Support the transformation to results-oriented, high-performing government

     o 3.2.1. Analyze and support efforts to improve the human capital
       infrastructure key to the successful transformation of the government
     o 3.2.2. Assess and support efforts to improve results-oriented
       management across the government
     o 3.2.3. Analyze efforts to build high-performing organizations
     o 3.2.4. Identify ways to improve the collection, dissemination, and
       quality of federal information
     o 3.2.5. Identify ways to improve financial management infrastructure
       capacity to provide useful information for managing results and costs
       day to day
     o 3.2.6. Assess the government's planning, implementation, and use of
       information technology to improve performance and modernize federal
       programs and operations
     o 3.2.7. Identify ways to improve how federal agencies acquire goods and
       services

3.3. Support congressional oversight of key management challenges and
program risks to improve federal operations and ensure accountability

     o 3.3.1. Highlight the federal programs and operations at highest risk
       and the major performance and management challenges confronting
       agencies
     o 3.3.2. Assess the management and results of the federal investment in
       science and technology and the effectiveness of efforts to protect
       intellectual property
     o 3.3.3. Identify ways to strengthen accountability for the federal
       government's assets and operations

3.4. Analyze the government's fiscal position and strengthen approaches
for addressing the current and projected fiscal gap

     o 3.4.1. Analyze the long-term fiscal position of the federal government
     o 3.4.2. Analyze the structure and information for budgetary choices and
       explore alternatives for improvement
     o 3.4.3. Contribute to congressional deliberations on tax policy
     o 3.4.4. Support congressional oversight of federal tax administration
     o 3.4.5. Assess the reliability of financial information on the
       government's fiscal position and financing sources

Source: GAO.

Notes: In indicating whether we have met a performance goal, the
responsible senior executive considers, for example, the amount of work
conducted and recommendations made for each key effort under that
performance goal, as well as other assistance provided to the client or
customer that is related to these efforts. The senior executive then
judges whether the work completed collectively for all key efforts has
achieved the performance goal. To view the 90 key efforts for the 19
performance goals above, go to http://www.gao.gov/sp.html.

Source:See Image Sources.

The focus of our fourth strategic goal is to make GAO a model
organization. For us, this means that our work is driven by our external
clients and internal customers, our managers exhibit the characteristics
of leadership and management excellence, our employees are devoted to
ensuring quality in our work process and products through continuous
improvement, and our agency is regarded by current and potential employees
as an excellent place to work. Our multiyear (fiscal years 2004-2009)
strategic objectives under this goal are to

     + continuously improve client and customer satisfaction and stakeholder
       relationships;
     + lead strategically to achieve enhanced results;
     + leverage GAO's institutional knowledge and experience;
     + continuously enhance GAO's business and management processes; and
     + become a professional services employer of choice.

These objectives, along with the performance goals and key efforts that
support them, are discussed fully in our strategic plan, which is
available on our Web site at http://www.gao.gov . The work supporting
these objectives is performed under the direction of CAO with assistance
on specific key efforts being provided by staff from the Applied Research
and Methods team and from offices such as Strategic Planning and External
Liaison, Congressional Relations, OOI, QCI, and Public Affairs.

To accomplish our work under these five objectives, we plan to perform
internal studies and complete projects that further the strategic goal.

                           Selected Work under Goal 4

Improving dissemination of GAO products: We continued our pilot to produce
and disseminate GAO reports in an electronic format, and, based on the
positive client feedback we received on the products we provided in
electronic format, we plan to make the use of electronic products routine.
We also improved the process for creating and posting to our Web site the
electronic supplements to our reports, enabling our staff to view all
features of a supplement before it is posted on the Internet, easing
navigation within the electronic supplement, and more readily identifying
the product as a GAO product. (See app. 1, item 4.3.C.)

Enhancing our classification and compensation systems: We more directly
linked the process for determining compensation to an individual's
performance, as reflected on the appraisal, and used a market-based
compensation study to design a competitive, fair, and equitable
compensation program that is aligned with competitive labor markets in
which we compete for talent. In addition, our administrative and
professional support staff completed their first year under a broadband
pay system and a competency-based performance system. (See app. 1, item
4.13.C.)

Improving customer service through use of Web-based technology: We
upgraded our Web-based time and attendance system and our automated
competency-based performance system, developed and implemented a Web-based
request system for scheduling GAO vans that transport our staff to
official meetings, redesigned the Web-based phone book, and deployed a
major enhancement to our Web-based employee locator system. (See app. 1,
item 4.27.C)

Ensuring our IT security: To ensure our IT security we installed personal
firewall software, implemented changes to ensure desktop security and foil
spyware, and implemented an integrated security approach for our Web-based
systems.

(See app. 1, item 4.32.C.)

Ensuring our physical security: We enhanced our physical security by
completing the perimeter security efforts, including installation of high
speed rollup doors, guard booths, undervehicle cameras, pop-up barriers,
and a perimeter plinth wall. (See app. 1, item 4.33.C.)

Multiyear Performance Goals

The annual measures used to assess our performance under our external
strategic goals are not applicable to this internal strategic goal, but
the multiyear qualitative performance goals do apply. As shown in table 19
, at the close of fiscal year 2005, we met 16 of the 17 performance goals
for this strategic goal. We did not meet our performance goal of
maximizing the collection, use, and retention of essential organizational
knowledge. While we completed substantial work for this performance goal,
we will not complete this work until after fiscal year 2005. Specifically,
our work has been slower than we anticipated because funding was rescinded
in fiscal year 2004 and some essential steps-such as developing prototypes
and conducting pilot tests-have taken longer than we initially
anticipated. We now plan to complete efforts under this performance goal
during fiscal year 2006.

 Table 19: Strategic Goal 4's Qualitative Performance Goals, Fiscal Years 2004
                                    and 2005

" Met ... Not met Strategic objective/performance goal

4.1. Continuously improve client and customer satisfaction and stakeholder
                                 relationships

     o 4.1.1. Strengthen communication with congressional clients and more
       broadly measure their satisfaction with GAO's work
     o 4.1.2. Assess internal customer satisfaction with GAO's services and
       processes and implement and measure improvement efforts
     o 4.1.3. Strengthen relationships with GAO's stakeholders and increase
       the accessibility of GAO's products

              4.2. Lead strategically to achieve enhanced results

     o 4.2.1. Integrate planning, budgeting, and performance measurement to
       achieve enhanced results
     o 4.2.2. Strengthen GAO's strategic human capital management to achieve
       enhanced results
     o 4.2.3. Ensure exemplary practices and systems in GAO's fiscal
       operations
     o 4.2.4. Strengthen IT governance practices and processes to achieve
       strategic results

           4.3. Leverage GAO's institutional knowledge and experience

     o 4.3.1. Maximize the collection, use, and retention of essential
       organizational knowledge
     o 4.3.2. Increase GAO's knowledge-sharing capability
     o 4.3.3. Enhance knowledge sharing with other national and international
       accountability and professional organizations

       4.4. Continuously enhance GAO's business and management processes

     o 4.4.1. Improve engagement support services
     o 4.4.2. Use enabling technology to improve GAO's crosscutting business
       processes

             4.5. Become a professional services employer of choice

o  4.5.1. Promote an environment that is fair and unbiased and that values 
      opportunity and inclusiveness                                           
o  4.5.2. Provide GAO staff with tools, technology, and a world-class      
      working environment                                                     
o  4.5.3. Provide a safe and secure workplace                              
o  4.5.4. Enhance employee views about GAO                                 
o  4.5.5. Improve the development and experiences of newly hired staff     

Source: GAO.

Notes: In indicating whether we have met a performance goal, the
responsible senior executive considers, for example, the amount of work
conducted for each key effort under that performance goal, as well as
other assistance provided to the client or customer that is related to
these efforts. The senior executive then judges whether the work completed
collectively for all key efforts has achieved the performance goal. To
view the 80 key efforts for the 17 performance goals above, go to

http://www.gao.gov/sp.html.

Data Quality and Program Evaluation

Verifying and Validating Performance Data

Each year, we measure our performance by

(1) evaluating our annual performance on measures that cover the outcomes
and outputs related to our work results, client service, and management of
our people and (2) assessing our progress in performing work related to
the multiyear qualitative performance goals. To assess our performance in
fiscal year 2005, we used performance data that were complete and actual
(rather than projected) for all of our performance measures. We believe
the data to be reliable because we followed the criteria and verification
and validation procedures described here to ensure the data's quality.

The specific sources of the data for our annual performance measures and
multiyear qualitative performance goals, procedures for independently
verifying and validating these data, and the limitations of these data are
described in table 20 .

Table 20: How We Ensure Data Quality for Our Annual Performance Measures
and Multiyear Performance Goals

                                Results measures

                               Financial benefits

Definition and Our work-including our findings and recommendations-may
produce benefits to the federal

background government that can be estimated in dollar terms. These
benefits can result in better services to the public, changes to statutes
or regulations, or improved government business operations. A financial
benefit is an estimate of the federal monetary effect of agency or
congressional actions. These financial benefits generally result from work
that we completed over the past several years but can also result from
information about questionable activities referred to us by agencies' IGs.
The funds made available as a result of the actions taken in response to
our work may be used to reduce government expenditures, increase revenues,
or reallocate funds to other areas. Financial benefits included in our
performance measures are net benefits-that is, estimates of financial
benefits that have been reduced by the costs associated with taking the
action that we recommended. We convert all estimates involving past and
future years to their net present value and use actual dollars to
represent estimates involving only the current year. Financial benefit
amounts vary depending on the nature of the benefit, and we can claim
financial benefits over multiple years based on a single agency or
congressional action.

Financial benefits are linked to specific recommendations or other work.
To claim that financial benefits have been achieved, our staff must file
an accomplishment report documenting that

(1)
           the actions taken as a result of our work have been completed or
           substantially completed,

(2)
           the actions generally were taken within 2 fiscal years prior to
           the filing of the accomplishment report, (3) a cause-and-effect
           relationship exists between the benefits reported and our
           recommendation or work performed, and (4) estimates of financial
           benefits were based on information obtained from third parties.
           Prior to fiscal year 2002, we limited the period over which the
           benefits from an accomplishment could be accrued to no more than 2
           years. Beginning in fiscal year 2002, we extended the period to 5
           years for certain types of accomplishments known to have multiyear
           effects, such as those associated with multiyear reductions in
           longer term projects, changes embodied in law, program
           terminations, or sales of government assets yielding multiyear
           financial benefits. For financial benefits involving events that
           occur on a regular but infrequent basis-such as the decennial
           census-we may extend the measurement period until the event occurs
           in order to compute the associated financial benefits using GAO's
           present value calculator.

Managing directors decide when their staff can claim financial benefits. A
managing director may choose to claim a financial benefit all in 1 year or
decide to claim it over several years, especially if the benefit spans
future years and the managing director wants greater precision as to the
amount of the benefit.

Data sources Our Accomplishment Reporting System provides the data for
this measure. Teams use this Web-based data system to prepare, review, and
approve accomplishments and forward them to QCI for its review. Once
accomplishment reports are approved, they are compiled by QCI, which
annually tabulates total financial benefits agencywide and by goal.

Verification and validation Our policies and procedures require us to use
the Accomplishment Reporting System to record the financial benefits that
result from our work. They also provide guidance on estimating those
financial benefits. The teams identify when a financial benefit has
occurred as a result of our work. Teams develop estimates based on
third-party sources, such as the agency that acted on our work, a
congressional committee, or the Congressional Budget Office, and file
accomplishment reports based on those estimates. The estimates are reduced
by any identifiable offsetting costs. Teams develop workpapers to support
accomplishments with evidence that meets our evidence standard,
supervisors review the workpapers, and an independent person within GAO
reviews the accomplishment report. The team's managing director or
director is authorized to approve financial accomplishment reports with
benefits of less than $100 million.

The team forwards the report to QCI, which reviews all accomplishment
reports and approves accomplishment reports claiming benefits of $100
million or more. QCI provides summary data on approved financial benefits
to unit managers, who check the data on a regular basis to make sure that
approved accomplishments submitted by their staff have been accurately
recorded. Our Engagement Reporting System also contains fiscal year 2005
accomplishment data. In fiscal year 2005, QCI approved accomplishment
reports covering 94 percent of the dollar value of financial benefits we
reported.

Every year, our IG reviews accomplishment reports that claim benefits of
$500 million or more. In addition, on a periodic basis, the IG
independently tests compliance with our process for claiming financial
benefits of less than $500 million. The IG is currently completing a
review of fiscal year 2005 financial benefits of less than $500 million.

Data limitations Not every financial benefit from our work can be readily
estimated or documented as attributable to our work. As a result, the
amount of financial benefits is a conservative estimate. Estimates are
based on information from third parties and are based on both objective
and subjective data, and as a result, professional judgment is required in
reviewing accomplishment reports. The IG is currently completing a review
of financial benefits, including ensuring that our existing verification
and validation steps are reasonable and adequately minimize any adverse
impact from this limitation.

                         Other benefits (nonfinancial)

Definition and background Our work-including our findings and
recommendations-may produce other benefits to the federal government that
cannot be estimated in dollar terms. These benefits can result in better
services to the public, changes to statutes or regulations, or improved
government business operations. Other (nonfinancial) benefits generally
result from work that we completed over the past several years.

Other benefits are linked to specific recommendations or other work that
we completed over several years. To claim that other benefits have been
achieved, staff must file an accomplishment report that documents that (1)
the actions taken as a result of our work have been completed or
substantially completed, (2) the actions generally were taken within the
past 2 fiscal years of filing the accomplishment report, and (3) a
cause-and-effect relationship exists between the benefits reported and our
recommendation or work performed.

Data sources Our Accomplishment Reporting System provides the data for
this measure. Teams use this automated system to prepare, review, and
approve accomplishments and forward them to QCI for its review. Once
accomplishment reports are approved, they are compiled by QCI, which
annually tabulates total other (nonfinancial) benefits agencywide and by
goal.

Verification and validation Our policies and procedures require us to use
the Accomplishment Reporting System to record the other benefits that
result from our findings and recommendations. Staff in the teams file
accomplishment reports to claim that benefits have resulted from their
work. Teams develop workpapers to support accomplishments with evidence
that meets our evidence standard. Supervisors review the workpapers; an
independent person within GAO reviews the accomplishment report; and the
team's managing director or director approves the accomplishment report to
ensure the appropriateness of the claimed accomplishment, including
attribution to our work.

The team forwards the report to QCI, where it is reviewed for
appropriateness. QCI provides summary data on other benefits to unit
managers, who check the data on a regular basis to make sure that approved
accomplishments from their staff have been accurately recorded.
Additionally, on a periodic basis, the IG independently tests compliance
with our process for claiming other benefits. For example, the IG tested
this process in fiscal year 2005 and found it to be reasonable. The IG
also suggested actions to strengthen documentation of our other benefits
and to encourage the timely processing of the supporting accomplishment
reports. We are currently examining this performance measure and
considering possible alternative methods for determining our impact in
this area.

Data limitations The data may be underreported because we cannot always
document a direct cause-and-effect relationship between our work and
benefits it produced. However, we feel that this is not a significant
limitation on the data because the data represent a conservative measure
of our overall contribution toward improving government.

                  Percentage of products with recommendations

Definition and background We measure the percentage of our written
products (chapter and letter reports and numbered correspondence) issued
in the fiscal year that included at least one recommendation. We make
recommendations that specify actions that can be taken to improve federal
operations or programs. We strive for recommendations that are directed at
resolving the cause of identified problems; that are addressed to parties
who have the authority to act; and that are specific, feasible, and
cost-effective. Some products we issue contain no recommendations and are
strictly informational in nature.

We track the percentage of our written products that are issued during the
fiscal year and contain recommendations. This indicator recognizes that
our products do not always include recommendations and that the Congress
and agencies often find such informational reports just as useful as those
that contain recommendations. For example, informational reports, which do
not contain recommendations, can help to bring about significant financial
and other benefits.

Data sources Our Documents Database records recommendations as they are
issued. The database is updated daily. As our staff monitor implementation
of recommendations, they submit updated information to the database.

                          Verification and validation

Through a formal process, each team identifies the number of
recommendations included in each product and an external contractor enters
them into a database. We provide our managers with reports on the
recommendations being tracked to help ensure that all recommendations have
been captured and that each recommendation has been completely and
accurately stated. Additionally, on a periodic basis, the IG independently
tests the teams' compliance with our policies and procedures related to
this performance measure. For example, during fiscal year 2003, the IG
tested and determined that our process for determining the percentage of
written products with recommendations was reasonable. In fiscal year 2005,
we used the same procedures to compute and report this measure.

Data limitations This measure is a conservative estimate of the extent to
which we assist the Congress and federal agencies because not all products
and services we provide lead to recommendations. For example, the Congress
may request information on federal programs that is purely descriptive or
analytical and does not lend itself to recommendations.

Past recommendations implemented

Definition and background We make recommendations designed to improve the
operations of the federal government. For our work to produce financial or
other benefits, the Congress or other federal agencies must implement
these recommendations. As part of our audit responsibilities under
generally accepted government auditing standards, we follow up on
recommendations we have made and report to the Congress on their status.
Experience has shown that it takes time for some recommendations to be
implemented. For this reason, this measure is the percentage rate of
implementation of recommendations made 4 years prior to a given fiscal
year (e.g., the fiscal year 2005 implementation rate is the percentage of
recommendations made in fiscal year 2001 products that were implemented by
the end of fiscal year 2005). Experience has shown that if a
recommendation has not been implemented within 4 years, it is not likely
to be implemented.

This measure assesses action on recommendations made 4 years previously,
rather than the results of our activities during the fiscal year in which
the data are reported. For example, the cumulative percentage of
recommendations made in fiscal year 2001 that were implemented in the
ensuing years is as follows: 20 percent by the end of the first year
(fiscal year 2002), 31 percent by the end of the second year (fiscal year
2003), 48 percent by the end of the third year (fiscal year 2004), and 85
percent by the end of the fourth year (fiscal year 2005).

Data sources Our Documents Database records recommendations as they are
issued. The database is updated daily. As our staff monitor implementation
of recommendations, they submit updated information to the database.

                          Verification and validation

Through a formal process, each team identifies the number of
recommendations included in each product, and an external contractor
enters them into a database.

Policies and procedures specify that our staff must verify, with
sufficient supporting documentation, that an agency's reported actions are
adequately being implemented. Staff update the status of the
recommendations on a periodic basis. To accomplish this, our staff may
interview agency officials, obtain agency documents, access agency
databases, or obtain information from an agency's IG. Recommendations that
are reported as implemented are reviewed by a senior executive in the unit
and by QCI.

Summary data are provided to the units that issued the recommendations.
The units check the data regularly to make sure the recommendations they
have reported as implemented have been accurately recorded. We also
provide to the Congress a database with the status of recommendations that
have not been implemented, and we maintain a publicly available database
of open recommendations that is updated daily.

Additionally, on a periodic basis, the IG independently tests our process
for calculating the percentage of recommendations implemented for a given
fiscal year. For example, the IG determined that our process was
reasonable for calculating the percentage of recommendations that had been
made in our fiscal year 1999 products and implemented by the end of fiscal
year 2003. In fiscal year 2005, we followed the same process for
calculating the percentage of recommendations that had been made in fiscal
year 2001 products and implemented by the end of fiscal year 2005.

Data limitations The data may be underreported because sometimes a
recommendation may require more than 4 years to implement. We also may not
count cases in which a recommendation is partially implemented. However,
we feel that this is not a significant limitation to the data because the
data represent a conservative measure of our overall contribution toward
improving government.

                                Client measures

Testimonies

Definition and background The Congress may ask us to testify at hearings
on various issues. Participation in hearings is one of our most important
forms of communication with the Congress, and the number of hearings at
which we testify reflects the importance and value of our institutional
knowledge in assisting congressional decision making. When multiple GAO
witnesses with separate testimonies appear at a single hearing, we count
this as a single testimony. We do not count statements submitted for the
record when a GAO witness does not appear.

Data sources The data on hearings at which we testify are compiled in our
congressional hearing system managed by staff in our Congressional
Relations office.

Verification and validation The units responding to requests for testimony
are responsible for entering data in the congressional hearing system.
After a GAO witness has testified at a hearing, our Congressional
Relations office verifies that the data in the system are correct and
records the hearing as one at which we testified. Congressional Relations
provides weekly status reports to unit managers, who check to make sure
the data are complete and accurate. Additionally, on a periodic basis, the
IG independently examines the process for recording the number of hearings
at which we testified. For example, the IG determined that our process for
recording hearings during fiscal year 2003 was reasonable. In fiscal year
2005, we followed the same process for recording hearings.

Data limitations This measure does not include statements for the record
that we prepare for congressional hearings. Also, this measure may be
influenced by factors other than the quality of our performance in any
specific year. The number of hearings held each year depends on the
Congress's agenda, and the number of times we are asked to testify may
reflect congressional interest in work in progress, as well as work
completed that year or the previous year. To mitigate this limitation, we
try to adjust our workload to reflect cyclical changes in the
congressional schedule. We also outreach to our clients on a continuing
basis to increase their awareness of our readiness to participate in
hearings.

Timeliness

Definition and background The likelihood that our products will be used is
enhanced if they are delivered when needed to support congressional and
agency decision making. To determine whether our products are timely, we
compute the proportion of our products that are issued by the dates agreed
to with our clients or, for our work performed under the Comptroller
General's authority, by the dates agreed to internally. The "committed"
issue date for a product can be changed for requester-related reasons and
for other significant reasons beyond GAO's control. Managing directors
approve extensions to committed issue dates for their teams' engagements,
and the teams document in their workpapers the reasons for extensions and
the managing directors' approval. In fiscal year 2005, we extended the
issue date on about one-third of our products.

     Data sources The data supporting this measure are from our Mission and
    Assignment Tracking System, which is used to monitor our progress on our
                                  engagements.

                          Verification and validation

Our staff enter the data supporting this measure into our Mission and
Assignment Tracking System. The data are then uploaded into our Engagement
Reporting System, allowing the teams to monitor their performance on this
measure on a daily basis, if necessary, and resolve any issues. When an
assignment is completed, data on its target and completion dates are
reported to the project manager, who reviews and signs the report to
confirm its accuracy. Additionally, on a periodic basis, the IG
independently examines our process for calculating product timeliness.

Data limitations We do not measure the timeliness of all of our external
products. Products such as staff studies, certain correspondence, and
guidance are not part of our main product line and are excluded. To ensure
that the data for this measure are sound, staff must follow the policy
guidance as described above. However, based on the IG's 2005 review, there
is evidence that some staff may be inconsistently applying the policy for
changing a committed issue date, which ultimately affects the reliability
of our measure. Also, our staff perform the process of changing a
committed issue date, and thus the resulting data may not adequately
represent an independent assessment of the requesters' satisfaction with
our ability to deliver products when our clients need them. To mitigate
these limitations, in fiscal year 2006 we will use our more direct client
feedback survey as the primary indicator for our ability to deliver
products on time to our clients.

Multiyear qualitative performance goals

Definition and background In addition to our other measures, we consult
with our congressional clients and other outside experts in setting our
multiyear qualitative performance goals. Thus, assessing the extent to
which we achieve our performance goals helps focus our efforts on issues
of critical importance and provides a tool for holding ourselves
accountable for the resources the Congress provides. These goals measure
the extent to which we did the work we had planned to do to support the
Congress over a period of time. In this case, they cover fiscal years 2004
and 2005.

For each performance goal, we identify the key efforts needed to achieve
it. To determine whether a performance goal has been met, we assess the
work completed under the goal's key efforts. In making this assessment,
the responsible senior executives for strategic goals 1 through 3-our
external goals-consider, for example, the number of products issued (such
as reports and testimonies) and the recommendations made for each key
effort as well as any other assistance provided to the Congress related to
these efforts. Senior executives then judge whether the work completed
collectively for all key efforts actually achieved the performance goal.
For strategic goal 4-our internal goal-senior executives also judge
whether the performance goals have been met based on the work done on the
goals' key efforts.

Data sources      The data supporting senior executives' assessments come  
                     from our Engagement Reporting System for strategic goals 
                     1 through 3 and from reports produced by the managers    
                     responsible for each key effort for strategic goal 4.    
                     Teams and units maintain the supporting data used.       
Verification and  The assessment of each performance goal under strategic  
validation        goals 1 through 3 is supported by documentation showing, 
                     for example, by key effort the number of reports issued  
                     and recommendations made during the assessment period.   
                     The assessment of the performance goals under strategic  
                     goal 4 is also supported by documentation showing the    
                     work completed under each key effort. Managing directors 
                     in all four goals sign this documentation.               
                     At the end of a multiyear assessment cycle, QCI reviews  
                     the assessments from each of the goals and checks        
                     supporting documentation for a sample of performance     
                     goals to ensure that criteria are consistently applied   
                     and that requirements are met. On a periodic basis, our  
                     IG independently tests our process for determining       
                     whether performance goals are met. The IG is currently   
                     completing its test of our multiyear performance goal    
                     process for fiscal year 2005. The assessment data        
                     represent opinions in the form of qualitative,           
Data limitations  professional judgments that                              
                    senior managers make about their own work performed under
                    each performance goal.
                        However, we feel that the verification and validation
                                      steps that we take minimize any adverse
                    impact from this limitation.
                                         People measures
New hire rate    

Definition and      This performance measure is the ratio of the number of 
                                        people hired to the number we planned 
background     to hire. Annually, we develop a workforce plan that takes   
                  into account projected workload                             
                  changes, as well as other changes, such as retirements,     
                  other attrition, promotions, and skill gaps. The workforce  
                  plan for the upcoming year specifies the number of planned  
                  hires and, for                                              
                   each new hire, specifies the skill type and the level. The 
                                     plan is conveyed to each of our units to 
                  guide hiring throughout the year. Progress toward achieving 
                  the workforce plan is monitored monthly by the Chief        
                  Operating Officer and Chief Administrative Officer.         
                  Adjustments to the                                          
                  workforce plan are made throughout the year, if necessary,  
                  to reflect changing needs and                               
                  conditions.                                                 

Data sources The Executive Committee approves the workforce plan. The
workforce plan is coordinated and maintained by CAO. Data on
accessions-that is, new hires coming on board-is taken from a database
that contains employee data from USDA's National Finance Center (NFC)
database, which handles payroll and personnel data for GAO and other
agencies.

Verification and validation CAO maintains a database that monitors and
tracks all our hiring offers, declinations, and accessions. In
coordination with our Human Capital Office, our CAO staff input workforce
information supporting this measure into the CAO database. While the
database is updated on a daily basis, monthly reports are provided to the
Chief Operating Officer and the Chief Administrative Officer to monitor
progress by GAO units in achieving workforce plan hiring targets. CAO
continuously monitors and reviews accessions maintained in the NFC data
against its database to ensure consistency and to resolve discrepancies.
The office follows up on any discrepancies. In addition, on a periodic
basis, the IG examines our process for calculating the new hire rate.
During fiscal year 2004, the IG independently reviewed this process and
found it to be reasonable. The IG also suggested actions to improve the
documentation of the process used to calculate this measure. We have
implemented the IG's suggestions.

Data limitations There is a lag of one to two pay periods (up to 4 weeks)
before the NFC database reflects actual data. We generally allow
sufficient time before requesting data for this measure to ensure that we
get accurate results.

                                Acceptance rate

Definition and This measure is the ratio of the number of applicants
accepting offers to the number of offers background made. Acceptance rate
is a proxy for GAO's attractiveness as an employer and an indicator of our
competitiveness in bringing in new talent.

Data sources The information required is the number of job offers made
(excluding interns, experts/consultants, and reemployed annuitants), the
number of offers declined, and the number of individuals who come on
board. Our CAO staff maintain a database that contains the job offers made
and accepted or declined. Data on accessions-that is, new hires coming on
board-are taken from a database that contains employee data from USDA's
NFC database, which handles payroll and personnel data for GAO and other
agencies.

                          Verification and validation

Human capital managers in the Human Capital Office work with the CAO to
ensure that each job offer made and its outcome (declination or
acceptance) is noted in the database that is maintained by CAO's staff;
periodic checking is performed to review the accuracy of the database. In
addition, on a periodic basis, the IG examines our process for calculating
the acceptance rate. During fiscal year 2004, the IG independently
reviewed this process and found it to be reasonable. The IG also suggested
actions to improve the documentation of the process used to calculate this
measure and the reporting of this measure. We have implemented the IG's
suggestions.

             Data limitations See New hire rate, Data limitations.

Retention rate

Definition and     We continuously strive to make GAO a place where people 
                                              want to work. Once we have made 
background     an investment in hiring and training people, we would like  
                  to retain them. This measure is one indicator that we are   
                  attaining that objective and is the inverse of attrition.   
                  We calculate this                                           
                  measure by taking 100 percent of the onboard strength minus 
                                          the attrition rate, where attrition 
                  rate is defined as the number of separations divided by the 
                  average on-board strength. We calculate this measure with   
                  and without retirements.                                    

Data sources Data on retention-that is, people who are on board at the
beginning of the fiscal year and are still here at the end of the fiscal
year as well as the average number of people on board during the year-are
taken from a CAO database that contains some data from the NFC database,
which handles payroll and personnel data for GAO and other agencies.

                          Verification and validation

CAO staff continuously monitor and review accessions and attritions
against the contents of their database that has NFC data and they follow
up on any discrepancies. In addition, on a periodic basis, the IG examines
our process for calculating the retention rate. During fiscal year 2004,
the IG reviewed this process and found it to be reasonable. The IG also
suggested actions to improve the documentation of the process used to
calculate this measure. We have implemented the IG's suggestions.

             Data limitations See New hire rate, Data limitations.

Staff development

Definition and background One way that we measure how well we are doing
and identify areas for improvement is through our annual employee feedback
survey. This Web-based survey, which is conducted by an outside contractor
to ensure the confidentiality of every respondent, is administered to all
of our employees once a year. Through the survey, we encourage our staff
to indicate what they think about GAO's overall operations, work
environment, and organizational culture and how they rate our
managers-from the immediate supervisor to the Executive Committee-on key
aspects of their leadership styles. The survey consists of over 100
questions.

This measure is based on staff's favorable responses to four of the six
questions related to staff development on our annual employee survey. This
subset of questions was selected on the basis of senior management's
judgment about the questions' relevance to the measure and specialists'
knowledge about the development of indexes. Staff were asked to respond to
these four questions on a five-point scale or choose "no basis to
judge/not applicable" or "no answer".

Data sources These data come from our staff's responses to an annual
Web-based survey. The survey questions we used for this measure ask staff
how much positive or negative impact (1) internal training, (2)
computer-based training, (3) external training and conferences, and (4)
on-the job-training have on their ability to do your job during the last
12 months. From the staff who expressed an opinion, we calculated the
percentage of staff selecting the two categories that indicate
satisfaction with or a favorable response to the question. For this
measure, the favorable responses were either "very positive impact" or
"generally positive impact."

                          Verification and validation

The employee feedback survey gathers staff opinions on a variety of
topics. The survey is password protected, and only the outside contractor
has access to passwords. In addition, when the survey instrument was
developed, extensive focus groups and pretests were undertaken to refine
the questions and provide definitions as needed. We have historically
achieved a high response rate (over 80 percent) to the survey, which
indicates that its results are largely representative of the GAO
population. In addition, many teams and work units conduct follow-on work
to gain a better understanding of the information from the survey.

In addition, on a periodic basis, the IG independently examines our
process for calculating the percentage of favorable responses for staff
development. The IG examined this process during fiscal year 2004 and
found it to be reasonable. The IG also suggested actions to improve the
documentation of the process used to calculate this measure. We have
implemented the IG's suggestions.

Data limitations The information contained in the survey is the
self-reported opinions of staff expressed under conditions of
confidentiality. Accordingly, there is no way to further validate those
expressions of opinion.

The practical difficulties of conducting any survey may introduce errors,
commonly referred to as nonsampling errors. These errors could result
from, for example, respondents misinterpreting a question or data entry
staff incorrectly entering data into a database used to analyze the survey
responses. Such errors can introduce unwanted variability into the survey
results. We took steps in the development of the survey to minimize
nonsampling errors. Specifically, when we developed the survey instrument
we held extensive focus groups and pretests to refine the questions and
define terms used to decrease the chances that respondents would
misunderstand the questions. We also limited the chances of introducing
nonsampling errors by creating a Web-based survey for which respondents
entered their answers directly into an electronic questionnaire. This
approach eliminated the need to have the data keyed into a database by
someone other than the respondent, thus removing an additional source of
error.

Staff utilization

Definition and background This measure is based on staff's favorable
responses to three of the six questions related to staff utilization on
our annual employee survey. This subset of questions was selected on the
basis of senior management's judgment about the questions' relevance to
the measure and specialists' knowledge about the development of indexes.
Staff were asked to respond to these three questions on a five-point scale
or choose no basis to judge/not applicable" or "no answer." (For
background information about our entire employee feedback survey, see
Staff development.)

Data sources          These data come from our staff's responses to an     
                         annual Web-based survey. The survey questions we     
                         used for this measure ask staff how often the        
                         following occurred in the last 12 months: (1) my job 
                         made good use of my skills; (2) GAO provided me with 
                         opportunities to do challenging work; and (3) in     
                         general, I was utilized effectively. From the staff  
                         who expressed an opinion, we calculated the          
                         percentage of staff selecting the two categories     
                         that indicate satisfaction with or a favorable       
                         response to the question. For this measure, the      
                         favorable responses were either "very positive       
                         impact or "generally positive impact."               
Verification and      See Staff development, Verification and validation.  
validation            
Data limitations      See Staff development, Data limitations. This        
Leadership Definition measure is based on staff's favorable responses to   
and background        10 of 20 questions related to six areas of           
                         leadership on our annual employee survey. This       
                         subset of questions was selected on the basis of     
                         senior management's judgment about the questions'    
                         relevance to the measure and specialists' knowledge  
                         about the development of indexes. Specifically, our  
                         calculation included responses to 1 of 4 questions   
                         related to empowerment, 2 of 4 questions related to  
                         trust, all 3 questions related to recognition, 1 of  
                         3 questions related to decisiveness, 2 of 3          
                         questions related to leading by example, and 1 of 3  
                         questions related to work life. Staff were asked to  
                         respond to these 10 questions on a five-point scale  
                         or choose "no basis to judge/not applicable" or "no  
                         answer." (For background information about our       
                         entire employee feedback survey, see Staff           
                         development, Definition and background.)             

Data sources These data come from our staff's responses to an annual
Web-based survey. The survey questions we used for this measure ask staff
about empowerment, trust, recognition, decisiveness, leading by example,
and work life as they pertain to the respondent's immediate supervisor.
For example, we looked at the responses related to specific qualities of
our managers, such as "My immediate supervisor gave me the opportunity to
do what I do best" and "My immediate supervisor provided meaningful
incentives for high performance." From the staff who expressed an opinion,
we calculated the percentage of staff selecting the two categories that
indicate satisfaction with or a favorable response to the question. For
this measure, the favorable responses were either "always or almost
always" or "most of the time."

Verification and validation See Staff development, Verification and validation.

           Data limitations See Staff development, Data limitations.

                             Organizational climate

Definition and This measure is based on staff's favorable responses to 5
of the 13 questions related to

background organizational climate on our annual employee survey. This
subset of questions was selected on the basis of senior management's
judgment about the questions' relevance to the measure and specialists'
knowledge about the development of indexes. Staff were asked to respond to
these 5 questions on a five-point scale or choose "no basis to judge" or
"no answer." (For background information about our entire employee
feedback survey, see Staff development.)

Data sources These data come from our staff's responses to an annual
Web-based survey. The survey questions we used for this measure ask staff
to think back over the last 12 months and indicate how strongly they agree
or disagree with each of the following statements: (1) a spirit of
cooperation and teamwork exists in my work unit; (2) I am treated fairly
and with respect in my work unit; (3) my morale is good; (4) sufficient
effort is made in my work unit to get the opinions and thinking of people
who work here; and (5) overall, I am satisfied with my job at GAO. From
the staff who expressed an opinion, we calculated the percentage of staff
selecting the two categories that indicate satisfaction with or a
favorable response to the question. For this measure, the favorable
responses were either "strongly agree" or "generally agree."

Verification and validation See Staff development, Verification and validation.

           Data limitations See Staff development, Data limitations.

                          Internal operations measures

Help get job done and Quality of work life

Definition and background To measure satisfaction with GAO internal
operations and solicit ideas on ways to improve them, we administer an
annual web-based survey, known as our customer satisfaction survey, that
asks employees to rate 31 administrative services, on a scale of 1 (low)
to 5 (high), for those services that are important to them and that they
have had experience with or used recently. For each selected service,
employees are asked to indicate their level of satisfaction from 1 to 5,
and provide a written reason for their rating and recommendations for
improvement if desired. Based on the survey results, we calculate
composite scores for two measures: one measure reflects the satisfaction
with the 21 services that help employees get their job done and the second
measure reflects satisfaction with another 10 services that affect quality
of work life.

Since 2003, we have collected baseline data from our internal customer
satisfaction survey, but we will set targets and hold managers accountable
for these two performance measures for the first time in 2006.

Data sources To determine how satisfied GAO employees are with internal
operations, we calculate composite scores for two measures. One measure
reflects the satisfaction with the 21 services that help employees get
their job done. These services include Internet and intranet services, IT
customer support, mail services, and voice communication services. The
second measure reflects satisfaction with another 10 services that affect
quality of work life. These services include assistance related to pay and
benefits, building maintenance and security, and workplace safety and
health. The composite score represents how employees rated their
satisfaction with services in each of these areas relative to how they
rated the importance of those services to them. The importance scores and
satisfaction levels are both rated on a scale of 1 (low) to 5 (high).

                          Verification and validation

To ensure the security of the survey data, the survey is housed on a Web
site maintained by an outside contractor and only the contractor has
access to the password-protected results. We analyze the results by
demographic representation (unit, tenure, location, band level, and job
type) to ensure that its results are largely representative of the GAO
population. In addition, each GAO unit responsible for internal operations
conducts follow-on work, including analyzing the written comments to gain
a better understanding of the information from the survey.

Data limitations The information contained in the survey is
self-contained. Therefore, there is no information to validate the views
expressed by staff. We do not plan any actions to remedy this limitation
because we feel it would violate the pledge of confidentiality that we
make to our staff regarding the survey responses.

Source: GAO.

Program Evaluation

To assess our progress toward our first three strategic goals and their
objectives and to update them for our strategic plan, we evaluate actions
taken by federal agencies and the Congress in response to our
recommendations. The results of these evaluations are conveyed in this
performance and accountability report as financial benefits and other
benefits that reflect the value of our work.

In addition, we actively monitor the status of our open
recommendations-those that remain valid but have not yet been
implemented-and report our findings annually to the Congress and the
public ( http://www.gao.gov/openrecs.html ). We use the results of that
analysis to determine the need for further work in particular areas. For
example, if an agency has not implemented a recommended action that we
consider to be worthwhile, we may decide to pursue further action with
agency officials or congressional committees, or we may decide to
undertake additional work on the matter.

We also use our biennial high-risk series to provide a status report on
those major government operations considered high risk because of their
vulnerabilities to waste, fraud, abuse, and mismanagement or the need for
broad-based transformation. The series is a valuable evaluation and
planning tool because it helps us to identify those areas where our
continued efforts are needed to maintain the focus on important policy and
management issues that the nation faces.

To help ensure the quality of our work supporting strategic goals 1, 2,
and 3, an external peer review was completed of the processes and
practices we use to perform many of our engagements, specifically,
performance audits. The review-conducted by an international team of
auditors that was led by the Office of the Auditor General of Canada-
assessed whether our quality assurance policies and procedures were
suitably designed and operating effectively. The peer review team examined
the design of our engagement quality control system and the audit
documentation for a sample of our products. The reviewers found that we
have designed and implemented an effective system of quality controls for
our performance audits to ensure reasonable compliance with generally
accepted government auditing standards. The review team issued its final
report in April 2005. In addition, a team of external auditors reviewed
our process and procedures for performing our financial audits of other
agencies. In the comment letter accompanying the clean opinion report that
resulted from the financial audit peer review, the auditor included a
suggestion for clarifying our quality control policies and procedures. We
have begun to implement this suggestion.

In addition, a team of independent auditors completed a review of our
financial management and assurance procedures, which we contract for every
3 years. The auditors concluded that our system of quality control for the
accounting and auditing practice was designed to meet applicable quality
control standards and that we complied with this system for the period
reviewed. Thus, the auditors were reasonably assured that our financial
audits conformed with professional standards and gave us a clean opinion.

To help ensure the quality of our internal processes and systems
supporting strategic goal 4, we conducted an evaluation that supported our
strategic objectives under goal 4, in response to a mandate in the House
report on the fiscal year 2005 legislative branch appropriation (H.R. Rep.
No. 108-577). This mandate asked that we identify opportunities to reduce
costs, outsource, and streamline our internal operations. As a result of
our review this year, we streamlined the travel document audit process of
our travel function and have selected a service provider to provide
accounts payable transaction processing services. Both of these actions
will result in measurable cost savings in the future.

In addition, an organizational and performance consulting firm examined
our three-tier pay band system for our analysts and other professional
staff and compared the compensation we provide these two groups with the
compensation received by employees performing comparable work in the U.S.
marketplace. Based on the results of this study, we reassessed the roles
and responsibilities of our midlevel (Band II) analysts and adjusted
compensation levels for other professional staff. As a result of this
study, we are restructuring our analyst and ana-lyst-related specialist
pay bands to better align compensation and responsibilities and adjust
compensation levels for other professional staff.

We also completed a number of other studies and evaluations related to
goal 4's strategic objectives. These studies resulted in internal products
or briefings in fiscal year 2005 that are not available publicly.

     + Financial management. We conducted internal reviews of our compliance
       with requirements set forth in 31 U.S.C. 3512 (commonly referred to as
       the Federal Managers' Financial Integrity Act) and OMB Circular A-127,
       Financial Management Systems. The A-127 review covered consistency
       with the Standard General Ledger, adequacy of integration, reporting
       requirements, general ledger maintenance, and travel manager. The
       Financial Integrity Act review covered payroll testing; Financial
       Management System functions, including reporting; capitalized assets;
       budget administration controls; GAO mission and assignment tracking
       system; and internal controls for purchases, payments, and employee
       reimbursements. These reviews uncovered no problems and showed that we
       have the proper controls in place and that they are being followed.
     + Observations on the performance assessment cycle. The Executive
       Committee reviewed our 2004 annual performance management assessment
       data and requested that

OOI make recommendations for improvements in the areas of staff feedback,
communication, and training. OOI provided draft recommendations to the
managing directors, the Employee Advisory Council, Blacks in Government,
the Hispanic Liaison Group, the Gay and Lesbian Employee Association, the
Asian-American Liaison Group, and an agency representative for veterans,
and forwarded their comments to the Executive Committee.

     + Training for field office staff. We studied how best to deliver core
       training courses to our Band I staff in our field offices and
       determined that the most cost-effective way was to use a "hub"
       approach. Specifically, we identified San Francisco, Denver, and
       Atlanta as our three learning hubs where staff from these and nearby
       offices will complete groups of courses in five sets of 1-week
       sessions. The study concluded that among other things, this approach
       would be significantly less costly than bringing all Band I staff to
       GAO headquarters and result in a cost avoidance of $500,000 in travel
       and per diem expenditures.
     + Electronic records management. In fiscal year 2005 we began pilot
       testing an electronic records management system that will store all of
       our workpapers, reports, and testimonies and make them available to
       all of our staff. We plan to conclude this pilot in fiscal year 2006.
     + Customer satisfaction with internal operations and services. We
       conducted our second customer satisfaction survey to measure customer
       satisfaction with internal operational services, determine the impact
       of our improvement efforts launched as a result of our first survey,
       refine our targets, and make necessary adjustments to improve services
       and reduce the gaps between what our customers expect and the services
       available to them. We also used the information from this survey to
       refine our internal operations measures.
     + IT Security Program assessment. We contracted for an audit of our
       security practices and controls based upon the Federal Information
       Security Management Act and National Institute of Standards and
       Technology guidance. This assessment was designed to analyze the
       effectiveness of our IT Security Program and assist management in
       determining how to best utilize resources to protect our information
       and information systems. It is a critical on-site examination and
       analysis of the program to ascertain the present program status, to
       identify deficiencies or excesses, to determine the protection needed,
       and to make recommendations for improvement.

Part III: Financial Information

Part III

                             Financial Information

                                    From the

                            Chief Financial Officer

                           Source:See Image Sources.

November 15, 2005

I am pleased to report that in fiscal year 2005 the U.S. Government
Accountability Office continued to set the standard for excellence in
government financial management. For the 19th consecutive year,
independent auditors gave our financial statements an unqualified opinion
with no material weaknesses and no major compliance problems. The
financial statements that follow were prepared, audited, and made publicly
available as an integral part of this performance and accountability
report 45 days after the end of the fiscal year. In addition, for the
fourth year in a row, the Association of Government Accountants awarded us
a certificate of excellence in accountability reporting for our fiscal
year 2004 annual performance and accountability report.

During fiscal year 2005 we continued to make strides toward our strategic
goal of becoming a model federal agency and a world-class professional
services organization. We are leading the way in performance management
through new and enhanced policies and processes. With the help of a
consultant, we analyzed and designed a competitive, fair, and equitable
compensation program aligned with the labor markets in which GAO competes
for talent. Further, we invested significantly in restructuring our
analysts' and specialists' pay bands to better align compensation with
responsibilities. In June, our administrative staff completed their first
cycle under a similar competency-based system designed to establish a
clear link between employee performance and GAO's mission, core values,
and strategic goals and objectives. This system will enable fair, honest,
and properly applied measures of performance based on standards that are
reasonable, appropriate, and clear to employees. Having a consistent
competency-based performance management system throughout the agency will
help to ensure that the work of all our staff is aligned with our core
values and strategic direction.

This year, we performed an extensive review of agency operations for
potential cost savings, outsourcing, streamlining, and other opportunities
to increase operational efficiency and effectiveness, as the result of a
mandate in House Report 108-577. We had previously decided to cease
operations of our internal print plant as a result of a reduced demand for
printed products. The closing of the print plant was completed in October
2004, and all our printing needs are now met through contracts. Another
area affected by our streamlining efforts this fiscal year was our
accounting branch within the Office of Financial Management. Aiming to
focus our financial management staff on greater value-added input to GAO
activities, we have begun to shift the efforts of our staff away from
routine transaction processing and toward a greater role in strategic
business decision analysis and support. This shift will occur through a
combination of automation, reallocation of resources within GAO, and
outsourcing some data entry functions. Last year's implementation of the
Travel Manager system has enabled us to streamline the auditing of our
travel vouchers and transfer the remaining efforts from financial
management to field office staff, more efficiently using administrative
resources available throughout the agency. We cross-serviced the accounts
payable function to the Department of the Interior's National Business
Center. This center performs invoice receipt, processing, and payment
activities for a number of other agencies; by utilizing the center's
services, we will realize savings through eliminating data entry positions
and focusing the efforts of the remaining staff on higher end financial
analysis and decision support.

To improve our operations through the use of new technology, we have
embarked on an extensive effort to replace our current financial
management system. Although our current system has served us well over the
years, upgrades are no longer offered and technical support has become
increasingly difficult to find. We have adopted, and are following, best
practice processes to select and implement our next generation financial
management system. This is part of a larger enterprise architecture effort
that will improve integration of all our systems that interact with our
financial data. We also improved our internal communications by
implementing a new system for electronic dissemination and storage of
agencywide communications, a new administrative services Web site, and a
searchable administrative services directory.

Looking forward to fiscal year 2006, we realize that there are many
challenges ahead. In addition to our work on the new financial system, we
continue to voluntarily implement the additional requirements of OMB's
revised Circular A-123, which requires management to specifically
document, assess, and attest to the effectiveness of internal controls
over financial reporting beginning in fiscal year 2006. In addition to
these efforts, we will continue to investigate and implement new
approaches to improve the efficiency and effectiveness of our preparation
of quality products for our clients in the Congress and the American
people.

Sallyanne Harper Chief Financial Officer

                        Overview of Financial Statements

Our financial statements and accompanying notes begin on page 107 .4 Our
financial statements for the fiscal years ended September 30, 2005 and
2004, were audited by an independent auditor, Cotton & Co., LLP.

Cotton & Co., LLP, rendered an unqualified opinion on our financial
statements and an unqualified opinion on the effectiveness of our internal
controls over financial reporting and compliance with laws and
regulations. The auditor also reported that we have substantially complied
with the applicable requirements of the Federal Financial Management
Improvement Act (Improvement Act) of 1996 and found no reportable
instances of noncompliance with selected provisions of laws and
regulations. (For further information about this law, see footnote 1 on
page 9 .) In the opinion of the independent auditor, the financial
statements are presented fairly in all material respects and are in
conformity with generally accepted accounting principles.

Financial Systems and Internal Controls

We recognize the importance of strong financial systems and internal
controls to ensure our accountability, integrity, and reliability. To
achieve a high level of quality, management maintains a quality control
program and seeks advice and evaluation from both internal and external
sources.

We are committed to fulfilling the internal control objectives of 31
U.S.C. 3512, commonly referred to as the Federal Managers' Financial
Integrity Act (Integrity Act). (For further information about this law,
see footnote 1 on page 9. ) Although we are not subject to the act, we
comply voluntarily with its requirements. Our internal controls are
designed to provide reasonable assurance that obligations and costs are in
compliance with applicable laws and regulations; funds, property, and
other assets are safeguarded against loss from unauthorized acquisition,
use, or disposition; and revenues and expenditures applicable to our
operations are properly recorded and accounted for to enable our agency to
prepare reliable financial reports and maintain accountability over our
assets.

Our management assesses compliance with these controls through a series of
comprehensive internal reviews, applying the evaluation criteria in OMB's
guidance for implementing the Integrity Act. The results of these reviews
are discussed with our Audit Advisory Committee, and action is taken to
correct deficiencies as they are identified.

We assessed our internal controls as of September 30, 2005, based on the
criteria mentioned above for effective internal controls in the federal
government. On the basis of this assessment, we believe that as of
September 30, 2005, we have effective internal controls in place.
Additionally, our independent auditor found that we maintained effective
internal controls over financial reporting and compliance with laws and
regulations. Consistent with our evaluation, the auditor found no material
internal control weaknesses.

In addition, we are committed to fulfilling the objectives of the
Improvement Act, which is also covered within 31 U.S.C. 3512. Although we
are not subject to the act, we voluntarily comply with its requirements.
We believe that we have implemented and maintained financial systems that
comply substantially with federal financial management systems
requirements, applicable federal accounting standards, and the United
States Government Standard General Ledger at the transaction level as of
September 30, 2005. We made this assessment based on criteria established
under the Improvement Act and guidance issued by OMB. Also, our auditor
reported

4 Note 14 to the financial statements describes our Davis Bacon Act trust
function. For more detailed Davis Bacon Act financial information, contact
our General Counsel.

that we had substantially complied with the applicable requirements of the
Improvement Act as of September 30, 2005.

GAO's IG also conducts audits and investigations that are internally
focused, functions as an independent fact-gathering adviser to the
Comptroller General, and reviews all accomplishment reports totaling $500
million or more. During fiscal year 2005, the IG examined compliance with
our policy and procedures for conflict-of-interest determinations,
recruiting and hiring, performance evaluations, career advancement,
professional development, continuing professional education, GAO's
information security program and practices, performance-based compensation
process for analysts and attorneys, and benefits for transit and parking.
In addition, the IG independently tests our compliance with procedures
related to our performance data on a rotating basis over a 3-year period;
these actions are specifically identified in the table that begins on page
83 . No material weaknesses were reported by the IG. During fiscal year
2005, we completed actions related to 12 IG recommendations, none of which
affected the financial statements. There are no unresolved issues.

Our Audit Advisory Committee assists the Comptroller General in overseeing
the effectiveness of our financial reporting and audit processes, internal
controls over financial operations, and processes to ensure compliance
with laws and regulations relevant to our financial operations.

As of September 30, 2005, the committee consisted of Sheldon S. Cohen
(Chairman), Edward J. Mazur, and Charles O. Rossotti, whose relevant
experience was described on page 49 of this report. The com-mittee's
report and the report from our independent auditors are included on the
following pages.

                       Audit Advisory Committee's Report

The Audit Advisory Committee (the Committee) assists the Comptroller
General in overseeing the U.S. Government Accountability Office's (GAO)
financial operations. As part of that responsibility, the Committee meets
with agency management and its internal and external auditors to review
and discuss GAO's external financial audit coverage, the effectiveness of
GAO's internal controls over its financial operations, and its compliance
with certain laws and regulations that could materially impact GAO's
financial statements. GAO's external auditors are responsible for
expressing an opinion on the conformity of GAO's audited financial
statements with the U.S. generally accepted accounting principles. The
Committee reviews the findings of the internal and external auditors, and
GAO's responses to those findings, to ensure that GAO's plan for
corrective action includes appropriate and timely follow-up measures. In
addition, the Committee reviews the draft Performance and Accountability
Report, including its financial statements, and provides comments to
management who has primary responsibility for the Performance and
Accountability report. The Committee met two times with respect to its
responsibilities as described above. During these sessions, the Committee
met with the internal and external auditors without GAO management being
present and discussed with the external auditors the matters that are
required to be discussed by generally accepted auditing standards. Based
on procedures performed as outlined above, we recommend that GAO's audited
statements and footnotes be included in the 2005 Performance and
Accountability Report.

Sheldon S. Cohen Chairman Audit Advisory Committee

                          Independent Auditor's Report

                      Purpose of Each Financial Statement

     + A balance sheet presents the combined amounts we had available to use
       (assets) versus the amounts we owed (liabilities) and the residual
       amounts after liabilities were subtracted from assets (net position).
     + A statement of net cost presents the annual cost of our operations.
       The gross cost less any offsetting revenue earned from our activities
       is used to arrive at the net cost of work performed under our four
       strategic goals.
     + A statement of changes to net position presents the accounting items
       that caused the net position section of the balance sheet to change
       from the beginning to the end of the fiscal year.
     + A statement of budgetary resources presents how budgetary resources
       were made available to us during the fiscal year and the status of
       those resources at the end of the fiscal year.
     + A statement of financing reconciles the resources available to us with
       the net cost of operating the agency.

Financial Statements

U.S. Government Accountability Office Balance Sheets As of September 30,
2005 and 2004

(Dollars in thousands)

2004 Assets

Intragovernmental Funds with the U.S. Treasury and cash (Note 2 and 3 )

$67,169 Accounts receivable (Note 2 ) 1,501

Total Intragovernmental

68,670

Property and equipment, net ( Note 4 )

49,180 Other 382

$118,232

Total Assets

Liabilities

Intragovernmental ( Note 2 ) Accounts payable

$7,359 Employee benefits (Note 6 )

1,928 Workers' compensation ( Note 7 )

1,961

Total Intragovernmental

11,248

Accounts payable

12,749 Salaries and benefits ( Note 6 )

15,035 Accrued annual leave and other ( Note 5 )

29,958 Workers' compensation ( Note 7 )

9,819 Capital leases ( Note 9 )

5,934

84,743

Total Liabilities

Net Position

Unexpended appropriations

34,621 Cumulative results of operations

(1,132)

33,489

Total Net Position ( Note 13 )

$118,232

Total Liabilities and Net Position

The accompanying notes are an integral part of these statements.

Financial Statements

U.S. Government Accountability Office

Statements of Net Cost For Fiscal Years Ended September 30, 2005 and 2004

(Dollars in thousands)

Net Costs by Goal

Goal 1: Well-Being/Financial Security of American People

$194,733 Less: reimbursable services

(2)

Net goal costs

194,731

Goal 2: Changing Security Threats/Challenges of Global Interdependence

131,745 Less: reimbursable services

(85)

Net goal costs

131,660

Goal 3: Transforming the Federal Government's Role

148,196 Less: reimbursable services (2,435)

Net goal costs

145,761

Goal 4: Maximize the Value of GAO

23,410 Less: reimbursable services

-

Net goal costs

23,410

(5,493)

Less: reimbursable services not attributable to goals

$490,069

Net Cost of Operations ( Note 10 )

The accompanying notes are an integral part of these statements.

Financial Statements

U.S. Government Accountability Office

Statements of Changes in Net Position For Fiscal Years Ended September 30,
2005 and 2004

(Dollars in thousands)

2004

Cumulative Results of Unexpended OperationsAppropriations

$2,338 $40,327

Balances, Beginning of Fiscal Year

Budgetary Financing Sources

Current year appropriations

-457,606 Appropriations transferred in Lapsed budget authority

-(1,809) Appropriations used 461,503 (461,503)

Other Financing Sources

Intragovernmental transfer of property and equipment

(788) Federal employee retirement benefit costs paid by OPM and imputed to
GAO ( Note 6 )

25,884

Total Financing Sources

486,599 (5,706)

(490,069)

Net Cost of Operations

Net Change

(3,470) (5,706)

($1,132) $34,621

Balances, End of Fiscal Year

The accompanying notes are an integral part of these statements.

Financial Statements

U.S. Government Accountability Office

Statements of Budgetary Resources For Fiscal Years Ended September 30,
2005 and 2004

(Dollars in thousands)

Budgetary Resources ( Note 11 )

Current year appropriations

$457,606 Transfers of budget authority

Unobligated appropriations, beginning of fiscal year

18,895 Reimbursable services ( Note 10 )

8,015 Cost-sharing and pass-through CPA contract reimbursements 3,006

$487,522

Total Budgetary Resources

Status of Budgetary Resources

Obligations incurred

$471,647 Unobligated appropriations, end of fiscal year

14,066 Lapsed budget authority 1,809

$487,522

Total Status of Budgetary Resources

Relationship of Obligations to Outlays

Obligations incurred

$471,647 Obligated balance, net -beginning of fiscal year

50,487 Less: Obligated balance, net - end of fiscal year

(53,103)

Total Outlays

469,031 Less: Reimbursable services

(8,015) Cost-sharing and pass-through CPA contract reimbursements

(3,006)

$458,010

Net Outlays

Outlays

Disbursements

$469,031 Collections

(11,021)

$458,010

Net Outlays

The accompanying notes are an integral part of these statements.

Financial Statements

U.S. Government Accountability Office

Statements of Financing For Fiscal Years Ended September 30, 2005 and 2004

(Dollars in thousands)

Resources Used to Finance Activities

Budgetary Resources Obligated

Obligations incurred

$471,647 Less: Reimbursable services ( Note 10 )

(8,015) Cost-sharing and pass-through CPA contract reimbursements

(3,006) Net obligations 460,626

Other Resources

Intragovernmental transfer of property and equipment

(788) Federal employee retirement benefit costs paid by OPM and imputed to
GAO ( Note 6 )

25,884

25,096

Net other resources used to finance activities

485,722

Total resources used to finance activities

Resources Used to Finance Items Not Part of the Net Cost of Operations

Net decrease in unliquidated obligations

Costs capitalized on the balance sheet

(11,703)

Total resources used to finance items not part of the net cost of
operations

(10,827)

474,895

Total resources used to finance the net cost of operations

Components That Require/Generate Resources in Future Periods

Increase/(decrease) in Workers' Compensation, Accrued Annual Leave, and
Other Liabilities ( Note 12 )

(1,630)

Costs That Do Not Require Resources

Depreciation 16,804

$490,069

Net Cost of Operations

The accompanying notes are an integral part of these statements.

                         Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies

Reporting Entity

The accompanying financial statements present the financial position, net
cost of operations, changes in net position, budgetary resources, and
financing of the U.S. Government Accountability Office (GAO). GAO, an
agency in the legislative branch of the federal government, supports the
Congress in carrying out its constitutional responsibilities. GAO carries
out its mission primarily by conducting audits, evaluations, analyses,
research, and investigations and providing the information from that work
to the Congress and the public in a variety of forms. The financial
activity presented relates primarily to the execution of GAO's
congressionally approved budget. GAO's budget consists of an annual
appropriation covering salaries and expenses and revenue from reimbursable
audit work and rental income. The revenue from audit services and rental
income is included on the Statement of Budgetary Resources as
"reimbursable services." The financial statements, except for federal
employee benefit costs paid by the Office of Personnel Management (OPM)
and imputed to GAO, do not include the effects of centrally administered
assets and liabilities related to the federal government as a whole, such
as interest on the federal debt, which may in part be attributable to GAO;
they also do not include activity related to GAO's trust function
described in Note

14 .

Basis of Accounting

GAO's financial statements have been prepared on the accrual basis of
accounting in conformity with Generally Accepted Accounting Principles for
the federal government. Accordingly, revenues are recognized when earned
and expenses are recognized when incurred, without regard to the receipt
or payment of cash. These principles differ from budgetary reporting
principles. The differences relate primarily to the capitalization and
depreciation of property and equipment, as well as the recognition of
other long-term assets and liabilities. The statements were also prepared
in conformity with Office of Management and Budget (OMB) Circular A-136,

Financial Reporting Requirements.

Assets

Intragovernmental assets are those assets that arise from transactions
with other federal entities. Funds with the U.S. Treasury composed the
majority of intragovernmental assets on GAO's balance sheet.

Funds with the U.S. Treasury

The U.S. Treasury processes GAO's receipts and disbursements. Funds with
the U.S. Treasury represent appropriated funds Treasury will provide to
pay liabilities and to finance authorized purchase commitments.

Accounts Receivable

GAO's accounts receivable are due principally from federal agencies for
reimbursable services; therefore, GAO has not established an allowance for
doubtful accounts.

Property and Equipment

The GAO building qualifies as a multi-use heritage asset, is GAO's only
heritage asset, and is reported with property and equipment on the balance
sheet. The designation of multi-use heritage asset is a result of both
being listed in the National Register of Historic Places and being used in
general government operations. Statement of Federal Financial Accounting
Standards No. 16 requires accounting for multiuse heritage assets as
general property, plant, and equipment to be included in the balance sheet
and depreciated. Maintenance of the building has been kept on a current
basis. The building is depreciated on a straight-line basis over 25 years.

Generally, property and equipment individually costing more than $15,000
are capitalized at cost. Building improvements and leasehold improvements
are capitalized when the cost is $25,000 or greater. Bulk purchases of
lesser value items that aggregate more than $150,000 are also capitalized
at cost. Assets are depreciated on a straight-line basis over the
estimated useful life of the property as fol-lows: building improvements,
10 years; computer equipment, software, and capital lease assets, ranging
from 3 to 6 years; leasehold improvements, 5 years; and other equipment,
ranging from 5 to 20 years. GAO's property and equipment have no
restrictions as to use or convertibility except for the restrictions
related to the GAO building's classification as a multi-use heritage
asset.

Liabilities

Liabilities represent amounts that are likely to be paid by GAO as a
result of transactions that have already occurred.

Accounts Payable

Accounts payable consists of amounts owed to federal agencies and
commercial vendors for goods, services, and other expenses received but
not yet paid.

Federal Employee Benefits

GAO recognizes its share of the cost of providing future pension benefits
to eligible employees over the period of time that they render services to
GAO. The pension expense recognized in the financial statements equals the
current service cost for GAO's employees for the accounting period less
the amount contributed by the employees. OPM, the administrator of the
plan, supplies GAO with factors to apply in the calculation of the service
cost. These factors are derived through actuarial cost methods and
assumptions. The excess of the recognized pension expense over the amount
contributed by GAO and employees represents the amount being financed
directly through the Civil Service Retirement and Disability Fund
administered by OPM. This amount is considered imputed financing to GAO
(see Note 6 ).

GAO recognizes a current-period expense for the future cost of
postretirement health benefits and life insurance for its employees while
they are still working. GAO accounts for and reports this expense in its
financial statements in a manner similar to that used for pensions, with
the exception that employees and GAO do not make current contributions to
fund these future benefits.

Federal employee benefit costs paid by OPM and imputed to GAO are reported
as resources on the Statements of Changes in Net Position and Financing
and are also included as a component of net cost by goal on the Statements
of Net Cost.

Annual, Sick, and Other Leave

Annual leave is recognized as an expense and a liability as it is earned;
the liability is reduced as leave is taken. The accrued leave liability is
principally long-term in nature. Sick leave and other types of leave are
expensed as leave is taken.

Contingencies

GAO has certain claims and lawsuits pending against it. Provision is
included in GAO's financial statements for losses considered probable and
estimable. Management believes that losses from certain other claims and
lawsuits are reasonably possible but are not material to the fair
presentation of GAO's financial statements and provision for these losses
is not included in the financial statements.

Note 2. Intragovernmental Assets, Liabilities, and Revenues

Intragovernmental assets, liabilities, and revenues arise from
transactions with other federal entities. Details of GAO's
intragovernmental assets, liabilities, and revenues, by agency, as of
September 30, 2005 and 2004, are as follows:

Intragovernmental assets as of September 30, 2005 and 2004:
Dollars in thousands                  
                               Fund balance with
Fiscal Year 2005 intragovernmental    Treasury Accounts receivable   Total 
assets                                                             
Department of the Treasury             $65,875                   - $65,875 
Cash                                         3                   -       3 
Federal Deposit Insurance Corporation        -                $613     613 
Securities and Exchange Commission           -                 233     233 
Other                                        -                  31      31 
Total intragovernmental assets         $65,878                $877 $66,755 

Dollars in thousands

                               Fund balance with
Fiscal Year 2004 intragovernmental    Treasury Accounts receivable   Total 
assets                                                             
Department of the Treasury             $67,163                   - $67,163 
Cash                                         6                   -       6 
Federal Deposit Insurance Corporation        -                $546     546 
Securities and Exchange Commission           -                 850     850 
Other                                        -                 105     105 
Total intragovernmental assets         $67,169              $1,501 $68,670 

Intragovernmental liabilities as of September 30, 2005 and 2004:

Dollars in thousands Dollars in thousands

Fiscal Year 2005 intragovernmental  Accounts Employee   Workers'   
liabilities                         payable  benefits compensation   Total 
General Services Administration      $10,363        -            - $10,363 
Department of Labor                      284        -    $2,121      2,405 
Office of Personnel Management           549   $1,701            -   2,250 
Department of the Treasury                 -      561            -     561 
Government Printing Office               227        -            -     227 
Department of Veterans Affairs           139        -            -     139 
Other                                    243        -            -     243 
Total intragovernmental liabilities  $11,805   $2,262    $2,121    $16,188 

Fiscal Year 2004 intragovernmental  Accounts  Employee   Workers'   
liabilities                          payable  benefits compensation  Total 
General Services Administration        $5,559        -            - $5,559 
Office of Personnel Management              -   $1,884            -  1,884 
Department of the Treasury                661       44            -    705 
Government Printing Office                361        -            -    361 
Department of Agriculture                 271        -            -    271 
Department of Labor                       215        -    $1,961     2,176 
Other                                     292        -                 292 

        Total intragovernmental liabilities $7,359 $1,928 $1,961 $11,248

Intragovernmental revenues for fiscal years 2005 and 2004:

Dollars in thousands

        Intragovernmental revenue                2005               2004 
        U.S. Army Corps of Engineers            $4,856            $4,799 
        Federal Deposit Insurance                           
        Corporation                              1,774             1,540 
        Securities and Exchange                             
        Commission                               1,057               849 
        State Department                          248                361 
        Other                                     420                390 
        Total intragovernmental revenue         $8,355            $7,939 
        Intergovernmental revenue               $8,355            $7,939 
        Nongovernmental revenue                          67           76 
        Total revenue                           $8,422            $8,015 

GAO's pricing policy for reimbursable services is to seek reimbursement
for actual costs incurred, including overhead costs where allowed by law.
Therefore, revenues, as listed above, and costs that generated those
revenues are equivalent.

Note 3. Funds with the U.S. Treasury and Cash

GAO's funds with the U.S. Treasury consist of only appropriated funds. GAO
also maintains cash imprest funds for use in daily operations. The status
of these funds as of September 30, 2005 and 2004 is as follows:

Dollars in thousands

                                                            2005         2004 
Unobligated balance                                           
Available                                         $1,296            $3,609 
Unavailable                                       9,781             10,451 
Obligated balances not yet                                    
disbursed                                         54,798            53,103 
Total funds with U.S. Treasury                    65,875            67,163 
Cash                                                        3            6 
Total funds with U.S. Treasury and cash          $65,878           $67,169 

Note 4. Property and Equipment, Net

The composition of property and equipment as of September 30, 2005, is as
follows:

Dollars in thousands

                                                      Accumulated  
Classes of property and          Acquisition value depreciation Book value 
equipment                                                       
Building                                   $15,664   $10,652        $5,012 
Land                                         1,191            -      1,191 
Building improvements                      112,855    93,638        19,217 
Computer and other equipment and            33,663    22,290        11,373 
software                                                        
Leasehold improvements                       5,956        5,152        804 
Assets under capital lease                  20,223    10,529         9,694 
Total property and equipment              $189,552   $142,261      $47,291 

The composition of property and equipment as of September 30, 2004, is as
follows:

Dollars in thousands

                                                      Accumulated  
Classes of property and          Acquisition value depreciation Book value 
equipment                                                       
Building                                   $15,664   $10,025        $5,639 
Land                                         1,191            -      1,191 
Building improvements                      109,389    87,413        21,976 
Computer and other equipment and            34,525    20,533        13,992 
software                                                        
Leasehold improvements                       5,091        4,895        196 
Assets under capital lease                  30,321    24,135         6,186 
Total property and equipment              $196,181   $147,001      $49,180 

The decrease in the acquisition value of assets under capital lease in
fiscal year 2005 relates to the retirement of fully depreciated assets
during fiscal year 2005 in conjunction with implementing a new asset
management system.

Note 5. Liabilities Not Covered by Budgetary Resources

The liabilities on GAO's Balance Sheets as of September 30, 2005 and 2004,
include liabilities not covered by budgetary resources, which are
liabilities for which congressional action is needed before budgetary
resources can be provided. Although future appropriations to fund these
liabilities are likely and anticipated, it is not certain that
appropriations will be enacted to fund these liabilities. The composition
of liabilities not covered by budgetary resources as of September 30, 2005
and 2004, is as follows:

Dollars in thousands 2005 2004

Intragovernmental liabilities- Workers' compensation $2,121 $1,961

Salaries and benefits- Comptrollers General retirement plan 2,836 2,937

Accrued annual leave and other 30,093 29,958

Workers' compensation 10,357 9,819

Capital leases 9,657 5,934

Total liabilities not covered by budgetary resources $55,064 $50,609

Note 6. Federal Employee Benefits

All permanent employees participate in the contributory Civil Service
Retirement System (CSRS) or the Federal Employees Retirement System
(FERS). Temporary employees and employees participating in FERS are
covered under the Federal Insurance Contributions Act (FICA). To the
extent that employees are covered by FICA, the taxes they pay to the
program and the benefits they will eventually receive are not recognized
in GAO's financial statements. GAO makes contributions to CSRS, FERS, and
FICA and matches certain employee contributions to the thrift savings
component of FERS. All of these payments are recognized as operating
expenses.

In addition, all permanent employees are eligible to participate in the
contributory Federal Employees Health Benefits Program (FEHBP) and Federal
Employees' Group Life Insurance Program (FEGLIP) and may continue to
participate after retirement. GAO makes contributions through OPM to FEHBP
and FEGLIP for active employees to pay for their current benefits. GAO's
contributions for active employees are recognized as operating expenses.
Using the cost factors supplied by OPM, GAO has also recognized an expense
in its financial statements for the estimated future cost of
postretirement health benefits and life insurance for its employees. These
costs are financed by OPM and imputed to GAO.

Amounts owed to OPM and Treasury as of September 30, 2005 and 2004, are
$2,262,000 and $1,928,000, respectively, for FEHBP, FEGLIP, FICA, FERS,
and CSRS contributions and are shown on the Balance Sheet as an employee
benefits liability.

Details of the major components of GAO's federal employee benefit costs
for the years ended September 30, 2005 and 2004, are as follows:

Dollars in thousands

Federal Employee Benefits Costs 2005 2004

Federal employee retirement benefit costs paid by OPM and imputed to GAO:

Estimated future pension costs (CSRS/FERS) $11,476 $13,341

Estimated future postretirement health and life insurance (FEHBP/FEGLIP)
13,833 12,543

Total $25,309 $25,884

       Pension expenses                   
       (CSRS/FERS)                            $28,583            $26,896 
       Health and life insurance                           
       expenses (FEHBP/FEGLIP)                $15,130            $14,257 
       FICA payment made by GAO               $15,261            $14,545 
       Thrift Saving Plan - matching                       
       contribution by GAO                     $8,439             $7,889 

Comptrollers General and their surviving beneficiaries who qualify and so
elect to participate are paid retirement benefits by GAO under a separate
retirement plan. These benefits are paid from current year appropriations.
Because GAO is responsible for future payments under this plan, the
estimated present value of accumulated plan benefits of $2,836,000 as of
September 30, 2005, and $2,937,000 as of September 30, 2004, is included
as a component of salary and benefit liabilities on GAO's Balance Sheet.

Note 7. Workers' Compensation

The Federal Employees' Compensation Act (FECA) provides income and medical
cost protection to covered federal civilian employees injured on the job,
employees who have incurred a work-related occupational disease, and
beneficiaries of employees whose death is attributable to a job-related
injury or occupational disease. Claims incurred for benefits for GAO
employees under FECA are administered by the Department of Labor (DOL) and
are paid, ultimately, by GAO.

For fiscal year 2004, and again in fiscal year 2005, GAO used estimates
provided by DOL to report the FECA liability. This practice is consistent
with the practices of other federal agencies.

GAO recorded an estimated liability for claims incurred but not reported
as of September 30, 2005 and 2004, which is expected to be paid in future
periods. This estimated liability of $10,357,000 and $9,819,000 as of
September 30, 2005 and 2004, respectively, is reported on GAO's Balance
Sheets. GAO also recorded a liability for amounts paid to claimants by DOL
as of September 30, 2005 and 2004, of $2,121,000 and $1,961,000,
respectively, but not yet reimbursed to DOL by GAO. The amount owed to DOL
is reported on GAO's Balance Sheets as an intragovernmental liability.

Note 8. Building Lease Revenue

The U.S. Army Corps of Engineers (USACE) entered into an agreement with
GAO to lease the entire third floor of the GAO building. USACE provided
all funding for the third floor renovation. Occupancy began August 3,
2000, for an initial period of 3 years, with options to renew on an annual
basis for 7 additional years. Total rental revenue to GAO includes a base
rent, which remains constant for the entire 10-year period, plus operating
expense reimbursements at a fixed amount for the first 3 years, with
escalation clauses from year 4 through year 10 if the option years are
exercised. Beginning in fiscal year 2002, USACE leased additional space on
the sixth floor with occupancy lasting through the original lease term.

Rent received by GAO for fiscal year 2005 and 2004 was $4,856,000 and
$4,799,000, respectively. These amounts are included in reimbursable
services on the Statements of Budgetary Resources and Financing ( see Note
2 ). Total rental revenue for the remaining period of the 10-year lease is
as follows:

Dollars in thousands

                                                      Total rental
             Fiscal year ending September 30              revenue* 
             2006                                           $4,916 
             2007                                            4,978 
             2008                                            5,045 
             2009                                            5,111 
             2010                                            5,179 
             Total                                         $25,229 

*If option years are exercised.

Note 9. Leases

Capital Leases

GAO has entered into capital leases for office equipment and computer
equipment under which the ownership of the equipment covered under the
leases transfers to GAO when the leases expire. When GAO enters into these
leases, the present value of the future lease payments is capitalized, net
of imputed interest, and recorded as a liability. The acquisition value
and accumulated depreciation of GAO's capital leases are shown in Note 4,
Property and Equipment, Net. As of September 30, 2005 and 2004, the
capital lease liability was $9,657,000 and $5,934,000, respectively. This
increase in capital lease liability is a result of replacing substantially
all the copiers and notebook computers at GAO during 2005 and recording
new capital lease liabilities.

These lease agreements are written as contracts with a base year and
option years. The option years are subject to the availability of funds.
Early termination of the leases for reasons other than default is subject
to a negotiation between the parties. These leases are lease-to-ownership
agreements. GAO's leases are short term in nature and no liability exists
beyond the years shown in the following table. GAO's estimated future
minimum lease payments under the terms of the leases are as follows:

            Dollars in thousands                      
            Fiscal year ending September 30                    Total 
            2006                                              $5,019 
            2007                                               4,015 
            2008                                               1,343 
            2009                                                 241 
            2010                                                  54 
            Total estimated future lease payments             10,672 
            Less: imputed interest                           (1,015) 
            Net capital lease liability                       $9,657 

Operating Leases

GAO leases office space, predominately for field offices, from GSA and has
entered into various other operating leases for office communication and
computer equipment. Lease costs for office space and equipment for fiscal
year 2005 and fiscal year 2004 amounted to approximately $10,752,000 and
$7,991,000, respectively. Leases for equipment under operating leases are
generally less than 1 year, therefore there are no associated future
minimum lease payments. Estimated future minimum lease payments for field
office space under the terms of the leases are as follows:

Dollars in thousands

            Fiscal year ending September 30                    Total 
            2006                                              $7,559 
            2007                                               4,293 
            2008                                               3,435 
            2009                                               2,859 
            2010                                               2,376 
            2011 and thereafter                                3,845 
            Total estimated future lease payments            $24,367 

Leased property and equipment must be capitalized if certain criteria are
met (see Capital Leases description). Because property and equipment
covered under GAO's operating leases do not satisfy these criteria, GAO's
operating leases are not reflected on the Balance Sheets. However, annual
lease costs under the operating leases are included as components of net
cost by goal in the Statements of Net Cost.

Note 10. Net Cost of Operations

Expenses for salaries and related benefits for fiscal year 2005 and fiscal
year 2004 amounted to $395,783,000 and $389,104,000, respectively, which
were about 78 percent of GAO's annual net cost of operations in fiscal
year 2005 and 79 percent in fiscal year 2004. Included in the net cost of
operations are federal employee benefit costs paid by OPM and imputed to
GAO of $25,309,000 in fiscal year 2005 and $25,884,000 in fiscal year
2004.

Revenues from reimbursable services are shown as an offset against the
full cost of the goal to arrive at its net cost. Earned revenues that are
insignificant or cannot be associated with a major goal are shown in
total, the largest component of which is rental revenue from the lease of
space in the GAO building. Revenues from reimbursable services for fiscal
year 2005 and fiscal year 2004 amounted to $8,422,000 and $8,015,000,
respectively. Further details of the intragovernmental components are
provided in Note 2 .

The net cost of operations represents GAO's operating costs that must be
funded by financing sources other than revenues earned from reimbursable
services. These financing sources are presented in the Statements of
Changes in Net Position.

Note 11. Budgetary Resources

Budgetary resources made available to GAO include current appropriations,
spending authority from budget transfers, unobligated appropriations, and
reimbursements arising from both revenues earned by GAO from providing
goods and services to other federal entities for a price (reimbursable
services) and cost-sharing and pass-through contract arrangements with
other federal entities.

For fiscal year 2004 differences exist between the total budgetary
resources on the Statements of Budgetary Resources and the budget
authority amount in the fiscal year 2006 President's Budget. These
differences are due to (1) unobligated funds available in expired accounts
not included in the President's Budget submission and (2) reimbursements
from cost-sharing and pass-through contract arrangements that could not
have been anticipated at the time the President's Budget was developed. In
addi-tion, as the fiscal year 2007 President's Budget is not yet
available, comparison between the Statements of Budget Resources and the
actual fiscal year 2005 data in the President's Budget cannot be
performed.

For fiscal year 2005, budget transfers consisted of budget authority
transferred from the Department of Homeland Security for a review of the
Transportation Security Administration's calendar year 2000 cost for
screening passengers and property. Reimbursements from cost-sharing and
pass-through contract arrangements consisted primarily of collections from
other federal entities (1) for the support of the Federal Accounting
Standards Advisory Board and (2) to utilize GAO contracts to obtain
services. The costs and reimbursements for these activities are not
included in the Statements of Net Cost.

Note 12. Components That Require/Generate Resources in Future Periods

Increases/decreases in workers' compensation, accrued annual leave, and
other liabilities are reported in the Statements of Financing. These
changes represent the increases/decreases in liabilities not covered by
budgetary resources, as reported in Note 5 .

Dollars in thousands

       Fiscal year ending September 30                    2005       2004 
       Liabilities not covered by budgetary                    
       resources                                    $55,064    $50,609    
       Liabilities that are not components                     
       of net cost:                                            
       Capital leases                               (9,657)       (5,934) 
       Current year liabilities not covered                    
       by budgetary resources that are                         
       components of net cost                           45,407     44,675 
       Prior year liabilities that are not                     
       components of current year net                          
       costs                                        (44,675)   (46,305)   
       Increase/(decrease) in workers'                         
       compensation, accrued annual                            
       leave, and other liabilities, as                        
       reported on the Statements of Financing            $732 $(1,630)   

Note 13. Net Position

Net position on the balance sheets consist of unexpended appropriations
and cumulative results of operations. Unexpended appropriations are the
sum of the total unobligated appropriations and undelivered goods and
services. Cumulative results of operations represent the excess of
financing sources over expenses since inception. Details of the components
of GAO's cumulative results of operations for the fiscal years ended
September 30, 2005 and 2004, are as follows:

Dollars in thousands

                                                       2005       2004 
          Investment in property and                        
          equipment, net                            $47,291    $49,180 
          Other - supplies inventory                    217        297 
          Liabilities not covered by                        
          budgetary resources                   (55,064)      (50,609) 
          Cumulative results of operations      $(7,556)      $(1,132) 

Liabilities not covered by budgetary resources are liabilities for which
congressional action is needed before budgetary resources can be provided.
See Note 5 for breakdown.

Note 14. Davis-Bacon Act Trust Function

GAO is responsible for administering for the federal government the trust
function of the Davis-Bacon Act receipts and payments and publishes
separate, audited financial statements for this fund. GAO maintains this
fund to pay claims relating to violations of the Davis-Bacon Act and
Contract Work Hours and Safety Standards Act. Under these acts, DOL
investigates violation allegations to determine if federal contractors owe
additional wages to covered employees. If DOL concludes that a violation
has occurred, GAO collects the amount owed from the contracting federal
agency, deposits the funds into an account with the U.S. Treasury, and
remits payment to the employee. GAO is accountable to the Congress and to
the public for the proper administration of the assets held in the trust.
Trust assets under GAO's administration totaled approximately $4,666,000
as of September 30, 2005. These assets are not the assets of GAO nor the
federal government and are held for distribution to appropriate claimants.
During fiscal year 2005, receipts and disbursements in the trust amounted
to $526,000 and $612,000, respectively. Because the trust assets and
related liabilities are not assets and liabilities of GAO, they are not
included in the accompanying financial statements.

Part IV

Appendixes Part IV: Appendixes

                   1. Accomplishments and Other Contributions

In pursuing our strategic goals during fiscal year 2005, we recorded
hundreds of accomplishments and made numerous other contributions. This
appendix provides details on the most significant of these. In reporting
accomplishments (designated by an A in the item number below) and other
contributions (designated by a C in the item number below), we are holding
ourselves accountable for the resources we received to implement our
strategic plan. The accomplishments document financial benefits or other
benefits achieved through action on our findings or recommendations.

Typically, the accomplishments describe work that we completed in prior
fiscal years because it takes time to implement recommendations, realize
benefits, and record them. The other contributions, which often refer to
work completed in fiscal year 2005, describe instances in which we
provided information or recommendations that aided congressional decision
making or informed the public debate to a significant degree. At the end
of each accomplishment and contribution summary, we list the reference
number for products associated with the work discussed. In the online
version of this document, readers can link directly to these products if
they want additional information.

Strategic Goal 1

Provide Timely, Quality Service to the Congress and the Federal Government
to Address Current and Emerging Challenges to the Well-Being and Financial
Security of the American People

Source:See Image Sources.

The health needs of an aging and diverse population

1.1.A. Improving the Call Transfer Process Used by 1-800-MEDICARE: In
2004, we found that the 24-hour 1-800-MEDICARE help line, operated by the
Department of Health and Human Ser-vices's (HHS) Centers for Medicare &
Medicaid Services (CMS), did not answer 10 percent of the calls we placed
to test its accuracy, often because it automatically transferred some
calls to claims administration contractors that were not open for business
at the time of the calls. This call transfer process prohibited callers
from accessing information during nonbusiness hours, even though
1-800-MEDICARE operates 24-hours a day. As a result, we recommended that
CMS revise the routing procedures of 1-800-MEDICARE to ensure that calls
are not transferred or referred to claims administration contractors' help
lines during nonbusiness hours. In response, CMS finished converting its
call routing procedures. As a result, calls placed after normal business
hours will be routed to the main 1-800-MEDICARE line, which operates
24-hours a day. (GAO-05-130 )

1.2.A. Reforming Medicare Payments for Inhalation Therapy Drugs: We
provided information on the costs to suppliers of dispensing inhalation
therapy drugs to Medicare beneficiaries. The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 revised the payment formula for
most outpatient drugs, including inhalation therapy drugs, covered under
Medicare part B. Under the revised formula, effective 2005, Medi-care's
payment was intended to be closer to acquisition costs. We found that
under the previous system, the higher dispensing costs incurred by some
suppliers were covered by the excess payments for these drugs, but that
under the revised payment system, the necessary costs of dispensing
inhalation therapy drugs may not be covered. As we recommended, CMS-the
agency that administers Medicare-evaluated the costs of dispensing
inhalation therapy drugs and used our analysis to help set an appropriate
dispensing fee. (GAO-05-72 )

1.3.A. Requiring Out-of-Cycle Inspections for Medicare Suppliers: Although
durable medical equipment suppliers are inspected when applying for
Medicare billing privileges and reinspected every 3 years, this
predictable timing has allowed suppliers intent on committing fraud to
create the illusion of legitimacy long enough to enter the program. The
Medicare contractor responsible for screening suppliers conducts
out-of-cycle inspections but is not required to do so by its contract and
can curtail this activity at any time. Because conducting out-of-cycle
inspections has been valuable, we recommended routinely conducting them to
better identify potentially fraudulent suppliers. During the course of our
review of the supplier screening process, we held discussions on this
topic with CMS staff who were writing the statement of work for a new
contract that is scheduled to be awarded in December 2005. As a result,
CMS included language in the new contract that will require the contractor
to conduct random, out-of-cycle site visits as resources permit. (
GAO-05-656 )

1.4.A. Identifying Chain Suppliers for Medicare Site Inspections: Site
inspections of durable medical equipment suppliers help verify their
compliance with Medicare's standards and help safeguard the program
against fraud. CMS allows its enrollment contractor to exempt suppliers in
chains with 25 or more locations from the inspections. However, the
contract did not clearly state that all 25 locations in the chain have to
have active billing numbers. As a result, we found that the contractor had
been exempting some suppliers in chains that currently had fewer than 25
locations with active billing numbers, including some with locations that
had billing privileges revoked due to noncompliance with Medicare's
standards. After we informed CMS, the agency revised its contract to
clarify that a chain consisted of 25 or more active supplier locations. (
GAO-05-656 )

1.5.A. Classifying Inpatient Rehabilitation Facilities: In an April 2005
report, we recommended that CMS refine the rule used by Medicare to
classify inpatient rehabilitation facilities. Medicare classifies these
facilities using the "75 percent rule." If a facility can show that during
1 year, at least 75 percent of its patients required intensive
rehabilitation for 1 of 13 specified conditions, it may be classified as
an inpatient rehabilitation facility and paid at a higher rate than is
paid for less intensive rehabilitation in other settings, such as an acute
care hospital or a skilled nursing facility. Enforcement of the rule was
suspended in 2002, resumed in July 2004, and suspended again in January
2005 pending issuance of our report on the rule. We found that there are
patients in these facilities who may not need the intense level of
services provided in them and that CMS has not been routinely reviewing
admissions to these facilities to determine if they were medically
justified. We recommended that CMS conduct reviews for medical necessity
and produce more information about the effectiveness of inpatient
rehabilitation to support future efforts to refine the rule over time to
increase its clarity about which types of patients are most appropriate
for inpatient rehabilitation facilities. CMS generally agreed with our
recommendations and issued a regulation on June 24, 2005, to resume
enforcement of the procedures for classifying these facilities, stating
that facilities that do not comply with the requirements of the rule would
have their classification terminated. ( GAO-05-366 and GAO-05-825T )

1.6.A. Improving Medicare Communications with Providers: To improve
communications with physicians, we recommended that the administrator of
CMS adopt a standard approach that would promote the quality, consistency,
and timeliness of communications by publishing a national bulletin for
physicians. We found that bulletins issued by Medicare contractors were
poorly organized and contained dense legal language. We also noted that
some failed to include information or provided little advance notice about
upcoming program changes. CMS implemented our recommendation by developing
a series of educational articles, "Medlearn Matters," which are available
at CMS's Web site and replace the individual articles previously developed
by each Medicare contractor. (GAO-02-249 )

1.7.A. Improving Medicare Call Center Responses to Policy-Oriented
Inquiries from Providers: To improve the accuracy and completeness of
responses to policy-oriented inquiries from providers, we recommended that
the Administrator of CMS create a process to routinely screen and triage
calls by routing complex policy-oriented questions to staff with the
expertise to adequately address them. We found that the responses of call
center customer service representatives to our policy-oriented questions
were largely incorrect. Among other things, we noted that these call
centers did not have the capability of identifying the subject of
providers' questions so their calls could be routed to the most
appropriate customer service representatives. We recommended that the
Administrator of CMS take steps to ensure that all customer service
representatives have the necessary tools to respond to such calls by
developing clear and easily accessible policy-oriented materials that are
electronically searchable. CMS instructed most of its contractors to
develop an inquiry triage process for telephone inquiries by January 2005.
Call centers must have at least two levels of customer service
representatives dedicated to responding to provider inquiries. Questions
requiring in-depth research must be referred to a new group of staff,
known as Provider Relations Research Specialists, who are trained to do
the necessary research to provide complete and accurate responses to the
inquiries. (GAO-04-669 )

1.8.A. Improving Home Health Performance Standards and Oversight: In 2002,
we reported that CMS's oversight of state home health agency survey
activities was limited and needed to be improved. CMS responded by
developing annual performance standards as a way to routinely monitor
important state home health survey activities. For example, states are now
evaluated to ensure that all home health agencies are surveyed at least
once every 3 years, as required by statute. States are now evaluated on
whether deficiencies found dur-ing home health surveys are appropriately
and sufficiently supported and documented. Finally, states are now
evaluated on whether home health complaints and incidents are
appropriately prioritized based on the seriousness of the allegations
received and whether those alleging immediate jeopardy to a patient are
investigated within 2 working days of receipt by the state agency. These
new standards allow CMS to monitor state performance over time and to work
with state agencies to improve the quality of home health survey
activities and ultimately the care provided to Medicare home health
beneficiaries. In the same report, we stated that CMS had not applied the
oversight tools that it uses to monitor state nursing home surveys to the
survey activities of home health agencies. As a result, CMS officials
generally were unaware of the variability in the extent to which states
cited home health deficiencies and were unable to offer insights as to the
underlying causes. Since our report, CMS has created a Web-based data
reporting system that accumulates and stores data related to a variety of
home health agency survey activities, including overdue surveys and home
health agencies with identified serious deficiencies. Thus, CMS and states
are now able to readily access important data related to home health
survey activities to ensure that problems are addressed in a timely manner
and Medicare beneficiaries receive the best quality care available. (
GAO-02-382 )

1.9.A. Paying Properly for Power Wheelchairs for Medicare Beneficiaries:
In 2004, we examined the steps taken by CMS to respond to improper
payments by the Medicare program for power wheelchairs. Medicare spending
for power wheelchairs-one of the Medicare program's most expensive items
of equipment-had increased more than fourfold from 1999 through 2003. We
reported that the information provided to Medicare contractors that
process wheelchair claims did not provide sufficient detail for
determining if power wheelchair claims should be paid, and we recommended
that documentation supplied to these contractors be revised. In August
2005, CMS established a new requirement that the relevant clinical
documentation from a patient's medical record be maintained by the
supplier along with a written prescription for the power wheelchair and be
submitted to the contractor upon request. ( GAO-04-716T and GAO-05-43 )

1.10.A. Leveraging Experts' Knowledge in Implementing Medicare Competitive
Bidding:

Each year, Medicare pays billions of dollars for beneficiaries' medical
equipment and supplies. We have repeatedly reported that Medicare payments
for some of these items are out of line with actual market prices. In
2007, CMS is slated to begin a large-scale effort to conduct Medicare
competitive bidding for medical equipment and supplies. In September 2004,
we recommended that as it implements the competitive bidding program, the
agency seek input from individuals with technical knowledge about the
items and services suppliers provide to beneficiaries. Subsequently, CMS
appointed an advisory and oversight committee to advise the agency about
the implementation of competitive bidding and about standards for
suppliers that want to participate in the Medicare program. ( GAO-04-765 )

1.11.A. Revising the Health Insurance Portability and Accountability Act's
(HIPAA) Model Certificate of Creditable Group Health Plan Coverage: HIPAA
sets minimum federal standards for certain aspects of private health
insurance to improve access to health insurance for people obtaining
coverage through employment as well as for those purchasing it as
individuals. For example, HIPAA limits the time that preexisting
conditions may be excluded from coverage for many people changing jobs and
guarantees access to coverage for certain individuals losing group
coverage. HIPAA also requires that each person losing health coverage
receive a certificate that documents the length of prior coverage. We
determined, however, that the model certificate the federal agencies had
developed as part of the 1997 interim rules had limitations as an
educational tool. For example, it neither explicitly informed consumers
that they had a group-to-individual portability right nor highlighted any
of the restrictions on this right. To more explicitly inform consumers of
their HIPAA rights, we recommended that HHS's Health Care Financing
Administration-now known as CMS-and the Department of Labor (DOL) revise
the model certificate to highlight key provisions and restrictions of the
law and to inform consumers about appropriate contacts for additional
information. As a result of our work, in 2004 HHS, DOL, and the Department
of the Treasury (Treasury) issued final regulations for health coverage
portability for group health plans and group health insurance issuers. The
final regulations cite our recommendation and include a modified
certificate of creditable coverage, which includes an explicit description
of HIPAA's portability rights and lists telephone numbers that can be
called for additional information. (GAO/HEHS-99-100 )

1.12.A. Making Medicare's Coverage Process More Understandable: Each year,
CMS makes important decisions on whether new technology will be covered
for Medicare's beneficiaries. However, the rationale for CMS's decisions
has sometimes been uncertain because of the lack of clear coverage
criteria. In 2003, we recommended that CMS develop written criteria for
assessing whether a medical service or item is reasonable and necessary
and could be covered by Medicare. In 2004, CMS published information on
how it intends to develop public guidance discussing factors to be
considered in making coverage decisions. In addition, CMS issued draft
guidance in 2005 on how it would make coverage decisions for certain items
or services for which sufficient data are not available. CMS also stated
that it will seek public input on possible topics for new guidance
documents. (GAO-03-175 )

1.13.A. Determining Higher Payments' Effects on Nurse Staffing: The
Congress enacted a temporary increase in the nursing component of the
Medicare payment rate for skilled nursing facilities, effective April 1,
2001, and directed us to assess the impact of the increased payments on
nursing staff in skilled nursing facilities. We found that after the
nursing-related payment rate increase took effect, nurse staffing per
patient day changed little. The payment increase expired September 30,
2002, and the Congress did not reinstate it during fiscal year 2005,
resulting in a cost avoidance of about $2 billion. ( GAO-03-176 )

1.14.A. Assessing Medicare's Skilled Nursing Facility Payment Rate: A 1999
law authorized CMS to raise all Medicare payment rates for skilled nursing
facilities by 4 percent for 2 years. Prior to the September 30, 2002,
expiration of this 4 percent add-on, provider representatives argued that
the add-on should be restored, citing payment shortfalls from other
payers. In a 2002 report, however, we found that under the prospective
payment system, most freestanding skilled nursing facilities' Medicare
payments substantially exceeded the costs of caring for Medicare patients,
contributing to facilities' overall positive financial condition.
Specifically, the median Medicare margin was about 8 percent in 1999 and
almost 19 percent in 2000. Consequently, the Congress declined to restore
the 4 percent add-on from 2002 through 2005. The Medicare Payment Advisory
Commission also contributed to this congressional decision by reporting
similar results about the facilities' Medicare payments. (GAO-03-183 )

1.15.A. Strengthening Guidelines for Nursing Home Fire Investigations: In
2004, we reported on two recent nursing home fires in which 31 residents
died. Our review revealed weaknesses in federal fire safety standards for
nursing homes and in federal and state oversight. To improve federal
oversight of state fire safety activities and better ensure the adequacy
of federal fire safety standards, we recommended that the Administrator of
CMS ensure thorough investigations are conducted following multiple-death
nursing home fires so that fire safety standards can be reevaluated and
modified where appropriate. In response to our study, CMS developed and
issued a standardized procedure to ensure that both state survey agencies
and its own staff take appropriate action to investigate health facility
fires that result in serious injury or death. ( GAO-04-660 )

1.16.A. Developing a Strategy to Ensure an Appropriate Workforce: In June
2004, we recommended that the Substance Abuse and Mental Health Services
Administration develop a detailed succession strategy to ensure that it
has the appropriate workforce to carry out its mission. We reported that
it had not developed a detailed succession strategy to prepare for the
loss of essential expertise and to ensure that the agency continues to
have the ability to fill key positions. In February 2005, the Substance
Abuse and Mental Health Services Administration developed a succession
planning document that includes strategies related to recruitment, the
selection process, training, and leadership development. The document also
includes strategies for anticipating the loss of or additional coverage
needed for critical positions and job functions. (GAO-04-683 ) 1.17.A.
Monitoring States' Inventories of Childhood Vaccines: The Centers for
Disease Control and Prevention has implemented our recommendation to
develop a strategic plan that includes steps to monitor childhood vaccine
supplies in state depots. The agency's strategic plan for the expansion of
the pediatric vaccine stockpiles indicates that the agency will "Monitor
state inventory levels on a routine basis." Specifically, its National
Immunization Program requires states and other grantees to report, via
automated software or monthly reports, the total number of doses of 18
childhood vaccines that are in stock at the state's central and secondary
depots. ( GAO-02-987 )

1.18.A. Counting Clinical Research Expenditures at the National Institutes
of Health (NIH): In a 2002 report describing NIH's implementation of the
Clinical Research Enhancement Act of 2000, we stated that NIH's reports of
clinical research expenditures did not include precise figures because the
process of counting clinical research dollars varied widely across NIH's
institutes and centers. We recommended that NIH strengthen its tracking
and reporting of intramural and extramural expenditures for clinical
research by developing and implementing a consistent, accurate, and
practical way for all institutes and centers to count intramural and
extramural clinical research expenditures. NIH implemented this
methodology in order to respond to our recommendation, to make the
reporting of clinical research transparent and rational, and to provide
accurate and consistent data. (GAO-02-965 )

1.19.A. Estimating Tobacco Retailer Violation Rates: To help ensure the
quality of states' estimates of tobacco retailer violation rates, we
recommended that the Secretary of HHS direct the Administrator of the
Substance Abuse and Mental Health Services Administration to help states
improve the validity of their samples by working more closely with them;
revising the inspection protocol guidance to better reflect research
results, particularly regarding the ages of minor inspectors, and working
with states to develop a more standardized inspection protocol; and
ensuring that all states' retailer violation rates exclude invalid
inspections, particularly those in which the ages of minors and outcomes
of inspections are unknown. The agency reported that in addition to other
activities, it (1) is requiring states that selected their samples from a
list of outlets to annually report and justify the accuracy and
completeness of their tobacco outlet lists, making site visits to help
states assess the accuracy and completeness of tobacco outlet lists,
offering technical assistance to states on improving the quality and
validity of samples drawn from outlet lists, and conducting reviews of
states' sampling frames;

(2) will work with states to discontinue the use of 14-year-olds as
inspectors by 2007 and will continue to work with states to improve
standardization of inspection protocols and carefully monitor changes in
inspector characteristics over time; and (3) has instituted review
protocols that require states to exclude inspections that do not include
the age or sex of minor inspectors and the outcome of inspections. The
agency also developed a computer system to assist states in estimating
violation rates by using software that only operates if complete data sets
that include the age and gender of each inspector and the outcome of the
inspection are entered in the system, and it reported that in fiscal year
2005, the majority of states used the system to report their survey data
and inspection results. (GAO-02-74 )

1.20.A. Improving Processing of Premium Changes from Health Plans: The
Trade Adjustment Assistance Reform Act of 2002 established the health
coverage tax credit (HCTC), which pays 65 percent of the premium cost for
qualified individuals. For the advance credit, the HCTC program remits its
share of the premium payment directly to the health plan. We found that
enrollees sometimes face delays in having the correct amount of their
advance HCTC payment adjusted and paid promptly to their health plans if
they fail to notify the HCTC program office when their health plans change
their premiums. This problem was attributed largely to the time it takes
for HCTC enrollees to notify the HCTC program of their new premiums and
for the HCTC program to adjust the allowable premium amount. In September
2004, we recommended that the Commissioner of Internal Revenue encourage
participating health plans to provide notification of changes in premiums
directly to the HCTC program office in order to simplify payment
processing and avoid disruptions resulting from premium changes. In its
comments to our draft report, the Internal Revenue Service (IRS) stated
that it agreed that accepting notification of premium changes from
participating health plans would be an administrative improvement, and it
would develop an action plan to address the recommenda-tion. In December
2004, IRS's proposal to standardize the HCTC program's ability to process
bulk premium changes made upon a health plan's request was approved by the
HCTC executive change control board. The change was imple mented in the
spring of 2005. (GAO-04-1029 )

1.21.A. Improving Monitoring and Tracking of Physical Exam Programs:
Servicemembers who leave the military and file disability claims with the
Department of Veterans Affairs (VA) may be subject to potentially
duplicative physical exams in order to meet requirements of both the
Department of Defense (DOD) and VA. To streamline the process for these
servicemembers, DOD and VA have attempted to coordinate their physical
exam requirements by developing a single separation exam program. We
recommended that DOD and VA develop systems to monitor and track the
progress of implementing the single separation exam program. VA hired an
official in November 2004 to monitor the single separation exam program at
certain sites where VA and DOD have memorandums of understanding in place.
This official monitors and tracks the progress of the single separation
exam program in several ways. First, each VA regional office must provide
a monthly report on the sites' activities. Included in these reports is
information on the number of single separation exams that have been
conducted. In addition, this official has conducted on-site evaluations at
five locations and is planning to make seven additional site visits in the
near future. The official will use information obtained during these site
visits to develop best practices for other single separation exam programs
and plans to continue to conduct site visits in the future. DOD uses VA's
tools and its database to monitor the progress of single separation
examination sites. Each month, DOD reviews VA's database to determine
where a program is in place. (GAO-05-64 )

1.22.A. Supporting DOD's Implementation of a Uniform Pharmacy and Tiered
Co-payment System: In a 2001 report, we recommended that the Secretary of
Defense complete the development and implementation of a formulary of
brand-name drugs applicable to defense pharmacy programs, including the
use of tiered retail and mail order pharmacy co-payments. A formulary is a
list of drugs that health care organizations encourage or require their
providers to use when they write prescriptions for patients, thus allowing
the organizations to secure better prices for those drugs. DOD concurred
with the recommendation and published a notice in the Federal Register
that it was amending regulations to implement a uniform formulary drug
list for DOD's Military Health Care System. The amendment states that the
pharmacy benefits program, which includes the uniform formulary and an
associated tiered co-payment structure, is applicable to all of the
uniformed services. Under a tiered system, the co-payment borne by
beneficiaries is generally lower for drugs on the uniform list of
formulary drugs and higher for drugs not on the list. (GAO-01-588 )

1.23A. Improving VA and DOD Capabilities to Electronically Order
Medications and Perform Drug Interaction Checks: In 2002, we recommended
that VA and DOD require providers to use computerized order entry of
medications for shared patients where it is available. DOD agreed with
this recommendation, and a pilot project is ongoing between DOD and VA in
Hawaii in which electronic medication orders will be placed in the DOD
system and electronically pushed to the VA system. The first phase is
operational and allows DOD's Composite Health Care System providers to
order prescriptions for dispensing at the VA Medical Center Honolulu
pharmacy. Development of the second phase began in September 2004 and will
allow VA Medical Center Honolulu providers to order prescriptions for
dispensing at DOD's Tripler Army Medical Center. The interface system was
developed on the legacy Composite Health Care System. The pilot system
will be modified to work on Composite Health Care System II, which began
worldwide deployment in January 2004. In the same report, we recommended
that the agencies develop the capability to perform a comprehensive drug
interaction check that uses medication information from all VA and DOD
facilities and mail order operations and DOD's network pharmacies.
According to DOD, the departments are exploring alternatives to best meet
the legislative requirements for achieving a "real-time interface, data
exchange, and checking of prescription drug data of outpatients and using
national standards for the exchange of outpatient medication information."
In June 2005, DOD reported that DOD and VA have developed a pharmacy
interface as part of a multiphase project to support the agencies' goal of
complete health care data systems interoperability. The agencies'
bidirectional pharmacy, which enables the electronic exchange of
prescription information between two pharmacies-Tripler Army Medical
Center and the Veteran Affairs Pacific Island Health Care
System-represents a significant achievement in advancing interoperability
between VA and DOD health care information systems. A phased-in deployment
of the new system is scheduled from October through December 2005. (
GAO-02-1017 )

1.24.A. Purchasing Surgical Supplies More Economically: In June 2002
testimony, we reported that joint contracting for surgical and medical
supplies could yield meaningful savings for VA and DOD. Specifically, we
pointed out that our analysis of about 100 identical medical and surgical
items that VA and DOD contract for separately indicated that joint
purchasing would yield savings. We also noted that the future of joint
procurement initiatives depends on each department's commitment to joint
procurement. In July 2005, VA and DOD demonstrated a commitment to joint
procurement by announcing their decision to standardize the purchase of
nearly 200 general surgical instruments throughout the military and VA
health care sys-tems-an action that should save about $180,000 annually. (
GAO-02-872T )

1.25.A. Improving VA's Oversight Policy for Community Nursing Homes: In
July 2001, we reported on weaknesses in VA's oversight of community
nursing homes under contract to VA. Among other issues, we reported that
VA lacked a comprehensive policy for overseeing community nursing homes.
We recommended that VA establish a policy for overseeing all community
nursing homes that may rely on annual state inspections and comparative
reviews to assess the sufficiency of state survey data. In response to our
recommendation, VA has established such a policy, as outlined in its
community nursing home oversight procedures handbook, dated June 4, 2004.
This handbook provides a protocol for conducting community nursing home
oversight, relying on initial and annual state reviews, monthly site
visits, and a comparative review by VA to assess the sufficiency of state
surveys. ( GAO-01-768 )

1.26.A. Providing Guidance for VA and DOD Health Resource Sharing: In
2000, we suggested that the Congress provide guidance and direction to VA
and DOD to further encourage the sharing of health care resources. Through
the National Defense Authorization Act of Fiscal Year 2003, the Congress
directed VA and DOD to

(1)
           develop and publish a joint strategic vision statement and a joint
           strategic plan to shape, focus, and prioritize the coordination
           and sharing efforts among appropriate elements of the two
           departments; (2) establish a DOD-VA Health Executive Committee to
           recommend to the secretaries the strategic direction for the joint
           coordination and sharing efforts between and within the two
           departments;

(3)
           establish a joint incentives fund program to provide incentives to
           implement, fund, and evaluate creative coordination and sharing
           initiatives; and

(4)
           establish a health care resources sharing project to serve as a
           test for evaluating the feasibility, the advantages, and the
           disadvantages of measures and programs designed to improve the
           sharing and coordination of health care resource sharing.
           (GAO/HEHS-00-52 )

1.27.C. Highlighting Increasing Financial Burden of Long-term Care
Spending: In an April 2005 testimony, we reported that projected spending
for long-term care services for the elderly could nearly quadruple from
2000 through 2050. Public payers primarily finance the cost of long-term
care services, especially the Medicaid program, which is one of the
largest funding sources. Projected increases in long-term care spending
have significant implications for federal and state budgets, as future
spending is expected to also rely heavily on public payers. We highlighted
these growing concerns, which will be fueled in part by the aging baby
boom generation, and identified several areas that the Congress needs to
consider as it shapes any reform proposals. Our information helped focus
congressional and public attention to the increasing federal and state
budgetary issues due to long-term care and will continue to inform future
congressional debate as the Congress, states, and the American public
search for solutions to this growing problem. ( GAO-05-564T )

1.28.C. Ensuring Seamless Transition from DOD to VA Health Care: In our
work to ensure that servicemembers who leave active duty (veterans) are
able to make a smooth transition from DOD health care services to VA
health care services, we found that DOD does not have specific procedures
for routinely transmitting to VA health information on servicemembers who
are likely to be discharged from the military because of their medical
conditions and may seek VA health care services in the future.
Additionally, DOD does not share information on the responses to the
postdeployment health assessment questionnaire for Reserve and National
Guard members who have left active duty. This questionnaire is completed
following deployment to a location outside of the United States, including
locations involved in Operation Enduring Freedom and Operation Iraqi
Freedom. VA officials state that aggregate information from the
postdeployment health assessment questionnaires would help VA plan for the
future health care needs of these new veterans. The Congress used our
findings to hold hearings and to stress the need to improve the exchange
of medical information from DOD to VA. In response to our findings, VA and
DOD continue to work together to identify the medical information that is
needed to ensure a smooth transition from DOD to VA health care ser vices.
(GAO-05-722T and GAO-05-1052T )

1.29.C. Improving VA's Patient Safety Program: The Institute of Medicine's
estimate that 98,000 patients die each year from accidents at U.S.
hospitals makes patient safety a critical issue. We measured clinicians'
familiarity with, participation in, and cultural support of VA's Patient
Safety Program at four VA facilities. We found that three-fourths of the
clinicians were familiar with the concepts of teams investigating causes
of unintentional adverse events. In addition, at one facility, the culture
blocked participation for many clinicians. Clinicians articulated that a
culture change could be stimulated by VA leadership actions and open
communication. VA will implement an action plan to improve patient safety
at its facilities by setting goals to increase staff familiarity with the
major concepts of the program, participating in teams that investigate
causes of unintentional adverse events, and promoting cultural support of
the program-to the extent that each facility has established mutual trust
and fostered comfort in reporting close calls and adverse events. In
addition, VA plans to develop tools for measuring these goals by specific
facility and to develop interventions when goals have not been met.
(GAO-05-83 )

1.30.C. Identifying Needed Changes in Managing Medicare Appeals: We
identified weaknesses in a plan prepared by the Social Security
Administration (SSA) and HHS regarding the transfer of the Medicare
appeals workload from SSA to HHS. Our work found that important details
concerning the transfer-mandated by the Congress to be completed by
October 1, 2005-were omitted from the plan. We recommended that the
Secretary of HHS and the Commissioner of SSA take steps to complete a
substantive and detailed transfer plan that includes contingency
provisions. At the request of the Senate Committee on Finance, we
continued to monitor both agencies' efforts and subsequently identified
three areas of concern-maintaining appellant access, meeting critical
human resource needs, and resolving operational issues. The Senate
Committee on Finance relied on our work in urging the agencies to take
action to ensure that Medicare beneficiaries have access to a fair and
accessible appeals process. ( GAO-05-45 and GAO-05-703R )

The education and protection of the nation's children

1.31.A. Using Student Data for Commercial Activities: As required under
the No Child Left Behind Act, the Department of Education (Education)
addressed pupil privacy by notifying states and school districts of the
requirements to develop policies that cover the collection, disclosure,
and use of personal data about students for commercial purposes and that
include requirements for parental notification and permission. In 2004, we
reported that many school districts had not developed effective policies
that corresponded to state and federal law and others did not understand
or were unaware of the guidance. After we recommended that Education take
additional action to help districts implement effective policies, the
agency worked with state education associations to provide training on the
new requirements and discussed them at a National School Boards
Association conference. Education also plans to disseminate the policy
requirements to all states affiliated with the National School Boards
Association and through the associa-tion's free e-mail service that
provides participants with weekly updates on legal issues. ( GAO-04-810 )

1.32.A. Improving Compliance with the Individuals with Disabilities in
Education Act: The Individuals with Disabilities Act requires states to
provide educational and related services that facilitate learning to
students with disabilities based on their individual needs. We reported
that Education's system for resolving noncompliance with the act often
takes several years and that some of the data used to monitor state
compliance are weak. We recommended that Education improve its system of
resolving noncompliance by shortening the amount of time it takes to issue
a report of noncompliance, by tracking changes in response times under the
new monitoring process, and by developing and providing states with more
guidance for collecting data. As a result, Education instituted an
improved monitoring process and created a database to facilitate tracking.
The agency also provided guidance to states and developed a state survey
for better data collection, offering states assistance with analyzing and
reporting the data. Education also created the Center on Secondary,
Transition, and Postsecondary School Outcomes for Students with
Disabilities to help states implement and improve data systems to measure
outcomes for students with disabilities and met with states to help them
develop outcome measurement systems to improve special education data
reporting. ( GAO-04-879 )

1.33.A. Strengthening Mediation to Resolve Disputes over Special Education
Services:

School districts and families may disagree about what kinds of special
services, if any, are needed for children and how they should be provided.
Some disagreements that cannot be resolved quickly become formal disputes
that can be costly, both financially and in terms of the harm done to
relationships. We found that officials in several states emphasized the
importance of using mediation, a voluntary process, to resolve these
disputes. Mediation was successful in achieving agreements, strengthening
relationships and fostering communication between families and educators,
resolving disputes more quickly, and reducing costs. However, the degree
to which mediation was offered and used varied among the states we
visited, and mediation agreements were not always implemented or enforced.
The Congress noted that our report showed that the incidence of formal
dispute resolution mechanisms, including mediation, has been generally low
relative to the number of children with disabilities and included an
amendment to the Individuals with Disabilities Education Improvement Act
requiring mediation agreements to be executed through a legally binding
agreement, enforceable in any state court of competent jurisdiction or in
a district court of the United States. The act was reauthorized in
December 2004. (GAO-03-897 )

1.34.A. Clarifying Guidance on Using the Wage Withholding Process to
Collect Child Support Payments: Changes to the wage withholding process
can reduce the number of noncustodial parents who have their wages
improperly withheld. In a 2002 report, we reviewed the wage withholding
form used by private firms and state child support enforcement agencies.
HHS's Office of Child Support Enforcement, which establishes enforcement
policies and guidance, issued a wage withholding form, along with
guidance, for employers to use for automatically deducting amounts from an
employee's wages or income to pay a debt or child support obligation. The
office considers wage withholding the most effective tool for collecting
child support, reporting that it is responsible for over 60 percent of
successful collections. However, we found that the form and guidance made
it difficult for employers to determine whether a private firm sent the
form or if an appropriate authority had approved wage withholding. As a
result, wages were inappropriately withheld from noncustodial parents.
Consequently, we recommended specific changes to the form and guidance.
The Office of Child Support Enforcement established a task group of
stakeholders in the child support enforcement community to address these
recommendations, and the group made several changes and clarifications to
the form and guidance that resolved our concerns. The office subsequently
informed state and tribal agencies administering child support enforcement
plans of the revised form and guidance and stated that all public and
private firms should use the revised form immediately. ( GAO-02-349 )

1.35.C. Influencing Temporary Changes in Subsidy Payments for 9.5 Percent
Loans: To encourage lenders to make student loans under the Federal Family
Education Loan Program, the federal government guarantees lenders a
statutorily specified rate of return-called lender yield. Some lenders may
issue tax-exempt bonds to raise capital to make or purchase loans; loans
financed with such bonds issued prior to October 1, 1993, are guaranteed a
minimum lender yield of 9.5% (hereafter called 9.5% loans). When the
interest rate paid by borrowers is less than the lender yield, the
government pays lenders the difference-a subsidy called special allowance
payments. In September 2004, we reported that subsidy payments for 9.5%
loans had increased significantly in recent years, rising from $209
million in fiscal year 2001 to over $600 million in fiscal year 2004. We
identified loopholes in legislation and regulatory guidance that enabled
lenders to maintain or increase the amount of 9.5% loans they held in
three ways-recycling, refunding bonds, and transferring. We suggested that
the Congress change the yield for loans made or purchased in the future
with the proceeds of tax-exempt bonds issued prior to October 1, 1993, and
any associated refunding bonds, to better reflect market interest rates.
As a result of our work, the Congress enacted the Taxpayer-Teacher
Protection Act in October 2004, which temporarily changed the lender yield
on certain loans to one that reflects market interest rates. This
legislative change will save the government $285 million in fiscal years
2005 and 2006. In addition, as part of the Higher Education Act
reauthorization, the Congress passed legislation in July 2005 that would
permanently end the minimum 9.5 percent yield and could avert millions in
future subsidy payments. ( GAO-04-1070 )

1.36.C. Improving the Oversight and Monitoring of Head Start Grantees:
Through a series of testimonies and reports, we assisted the Congress and
HHS's Administration for Children and Families in identifying major risk
areas in the Head Start program and crafting solutions to address those
risks. For example, we reported on the lack of reliable data on enrollment
in Head Start centers throughout the country. We also highlighted gaps in
Head Start's oversight framework that put federal funds at risk and can
reduce the quality or amount of services that the program can provide to
poor children and their families. The agency does not have a comprehensive
risk assessment strategy that would allow it to identify weaknesses in
grantees that could limit the program's ability to achieve its objectives.
Further, the agency does not have a process in place to ensure that
oversight reviews are conducted in accordance with the framework it
designed to assess grantee compliance with program and financial
management requirements. Also, the agency does not effectively use
grantees' financial reports and audits in its day-to-day monitoring
activities to identify high-risk grantees and resolve their problems. HHS
is now taking steps to address these and other gaps we identified. Once
these gaps have been addressed, we recommended that the Administration for
Children and Families make greater use of its authority to seek
competition in communities that are currently served by poorly performing
Head Start grantees. The agency plans to work with the Congress to seek
changes in the law that would give the Secretary more flexibility in
replacing poorly performing grantees. Head Start reauthorization bills
incorporated measures to define underenrollment and prescribed methods to
ensure that underenrollment is promptly addressed. The bills also provide
the Secretary with more flexibility to seek competition in those cases
where a community has been served by a high-risk grantee. (GAO-04-17 ,
GAO-05-176 , GAO-05-465T, and GAO-05-473T )

The promotion of work opportunities and the protection of workers

1.37.A. Improving SSA's Disability Claims Process: In response to several
of our recommendations, SSA took action to improve its disability claims
decision-making process. SSA developed and implemented the Case Processing
and Management System, a nationwide system to support case processing
operations, which is intended to speed up hearings and appeal decisions.
To further increase efficiency, SSA has established electronic folders for
use at all levels. SSA also designated a lead component agency to compile
racial bias and misconduct complaint information filed against
administrative law judges, who make disability determination decisions at
the hearings level. SSA created a form to capture key information on
racial bias and misconduct, and now stores the data in an electronic
database, as we recommended. As a result, SSA can more readily identify
patterns of racial bias and misconduct in complaints against
administrative law judges and improve its assessment of the judges'
decision-making accuracy. In addition, we reported that applicants had
difficulty understanding the five-step disability determination process
and the importance of providing SSA with information about how their
disability prevented them from substantial gainful activity. In compliance
with our recommendations, the agency's Web site now includes clarifying
information on all steps in the process and makes its interactive adult
disability report more readily available to all claimants. These efforts
can expedite the claims process and help SSA make the right decisions on
the disability process as early as possible. ( GAO-02-322 , GAO-02-831 ,
and GAO-05-495 )

1.38.A. Helping to Expand Apprenticeship Programs: In a 2001 report, we
found that DOL lacked a systematic process to expand apprenticeship-an
employee training program administered by DOL-and did not systematically
locate resources for apprenticeships needing funds. Employers' negative
perceptions of the program also impeded its use. We recommended that DOL
work with state apprenticeship councils and others to identify occupations
that need skilled labor and could support apprenticeships and to develop
plans to encourage apprenticeship in these occupations; share information
about apprenticeships, especially among employers in occupations that
traditionally have not used apprenticeship; and help identify funding to
develop apprenticeships. In addressing these concerns, DOL implemented the
Advancing Apprenticeship Initiative, which trained staff to work in
high-growth industries new to apprenticeship, and developed marketing
materials tailored to specific industries. DOL approved several
apprenticeships in these industries. The agency also established the
federal Advisory Committee on Apprenticeship to foster communication among
business, labor, and the public sector and to advise DOL. Additionally,
DOL used the Internet to share information about occupations that were new
to apprenticeships. Finally, DOL leveraged $18.5 million in federal funds
for marketing and pilot projects in growing industries and secured almost
$5.5 million in private funds to stimulate apprenticeship development. (
GAO-01-940 )

1.39.A. Improving Oversight at the Mine Safety and Health Administration:
DOL's Mine Safety and Health Administration improved oversight of its
programs through changes to its operations, guidance, and data collection
efforts, addressing many of the concerns raised in our 2003 report. We
found weaknesses (1) in the agency's oversight of 6month district
inspections, timely correction of hazards identified during inspections,
guidance to inspectors, and data collection to evaluate performance and
prevent future accidents and (2) in the agency's preparation for a likely
shortage of inspectors in the future. Subsequently, the agency implemented
a process for quarterly review of key inspection data to monitor the
status of timely abatement of violations; increased the focus of its
accountability program on core inspection activities, including the
correction of hazards; adopted measures and standard operating procedures
to improve the monitoring of 6-month reviews; stepped up its reviews and
evaluation of inspection data and, when deficiencies were identified, took
corrective action; and developed national procedures to ensure accident
investigation data are entered into its Accident Investigation database.
The agency also expedited the hiring process for inspectors and expanded
recruitment possibilities by using a new competency-based recruitment
approach that provides more flexibility and fills vacancies much faster.
In addition, in 2005, the agency identified ways to improve data
collection from contractors to better track fatalities, injury rates, and
trends and revised its General Inspections Procedures Handbook, which is
now available on each inspector's computer for ready access to all the
guidance needed to conduct an inspection. Such efforts can strengthen
oversight to better protect the safety and health of coal miners. (
GAO-03-945 )

1.40.A. Improving Coordination to Enhance Charitable Contributions in
Disasters: Many large charities reported raising billions of dollars to
aid survivors of the September 11, 2001, terrorist attacks. We found that
questions about how best to use the funds as well as service delivery
difficulties complicated charities' responses to this disaster. We
recommended that the Federal Emergency Management Agency (FEMA) convene a
working group to implement strategies for future disasters. With FEMA's
encouragement, national voluntary agencies developed the Collaborative
Assistance Network (Network) to promote a coordinated approach to
providing disaster relief services. The Network seeks to identify ways to
coordinate more effectively and efficiently with voluntary and government
agencies in catastrophic and major disaster events. Work groups consisting
of representatives from national voluntary agencies are seeking to (1)
ensure access to available services by sharing service delivery
information and client data and (2) streamline the intake process and
minimize the administrative burden by identifying common application form
requirements and accepted standards for document verification. (
GAO-03-259 ) 1.41.C. Improving Enforcement of Fugitive Felon Provisions:
To better implement the fugitive felon provisions of the Personal
Responsibility and Work Opportunity Reconciliation Act, we recommended
that the Secretary of HUD test the feasibility and effectiveness of
routinely matching its nationwide tenant file with the National Crime
Information Center arrest warrant database to help identify tenants in
housing assistance programs nationwide who are fugitive felons and subject
to eviction. According to a HUD Office of Inspector General (IG)
semiannual report to the Congress, the IG established the Fugitive Felon
Initiative to assist HUD in responding to this recommendation. Under this
initiative, the IG began computer matching its nationwide tenant file with
the U.S. Marshals Ser-vice's arrest warrant database, the Federal Bureau
of Investigation's National Crime Information Center arrest warrant
database, and the wanted person data maintained by state and local law
enforcement agencies. In August 2005, HUD's IG reported that the
initiative had resulted in the apprehension of over 5,900 wanted felons. (
GAO-02-716 )

1.42.C. Addressing the Health Problems of Nuclear Weapons Workers: We
assisted the Congress in crafting major improvements to a program intended
to compensate individuals who worked in nuclear weapons facilities and
developed illnesses due to exposure to hazardous materials. We identified
program features that would likely lead to inconsistent benefit outcomes
for claimants, in part because the program depended on varying state
workers compensation systems to provide benefits. We also presented
several options for improving the consistency of benefit outcomes and a
framework for assessing these options. As a result, the Congress
overhauled the program as part of the Ronald W. Reagan National Defense
Authorization Act for Fiscal Year 2005. This legislation replaced the
program with a new one that federalizes the payment of benefits and
provides a schedule of uniform benefit payments for eligible individuals.
(GAO-04-249T, GAO-04-298T, GAO-04-515 , GAO-04-516 , and GAO-04-571T )

1.43.C. Improving Transitional Assistance to Seriously Injured
Servicemembers: In our work on transitional assistance to seriously
injured servicemembers and Reserve and National Guard members, including
vocational rehabilitation and employment services, we found that more
collaboration between VA and DOD is needed to expedite services for
seriously injured servicemembers. We also found that enhanced services
could improve transition assistance for Reserve and National Guard
members. The Congress used our findings to hold hearings and highlight the
need to improve these services. In response to our recommendation, VA and
DOD have taken initial steps, including signing a memorandum of
understanding, to lay the groundwork for sharing data and improving their
assistance to seriously injured servicemembers and Reserve and National
Guard members as they transition to civilian life. ( GAO-05-167 and
GAO-05-544 )

A secure retirement for older Americans

1.44.A. Improving Management at the Employee Benefits Security
Administration:

Our report on the DOL's Employee Benefits Security Administration's
management resulted in improvements to strengthen safeguards for
participants in employee benefit plans protected by the Employee
Retirement Income Security Act. In studying concerns about the agency's
enforcement program, we identified weaknesses in the agency's enforcement
strategy, investigative process, and human capital management. We made
recommendations to address the lack of information needed to assess
benefit plans' noncompliance with the act, lack of coordination to share
best practices information on investigations, lack of a centrally
coordinated quality review process to ensure the proper conduct of
investigations, and failure of the agency to consider succession planning
and workforce retention as part of its human capital strategy. The agency
subsequently issued a report on a noncompliance study and initiated
additional studies that provided the information needed to identify
compliance improvements. The agency established a Best Practices Sharing
Team that developed a Web site on which investigators can share
investigative plans and practices, and the agency developed a process to
review case quality that ensures the independence of the case reviewer. In
addition, the agency assessed its workforce retention and training needs
and included this analysis in its Human Capital Strategic Management Plan,
which addresses areas such as skill shortages, future staffing needs, and
competency requirements. ( GAO-02-232 ) 1.45.A. Avoiding
Disproportionately Adverse Effects on Pension Plan Participants from
Securities and Exchange Commission (SEC) Regulations: Market timing by
mutual fund investors has negatively affected pension plan participants
and other long-term investors. In an effort to stop this abusive practice,
SEC issued proposed regulations that would impose mandatory redemption
fees on certain mutual fund transactions. We analyzed the potential
effects of these proposed regulations on pension plan participants and, in
a 2004 report, concluded that it could result in plan participants paying
fees intended to deter market timing, even where there is clearly no
intent to engage in abusive trading. Many such transactions are automated
and, therefore, the plan participant would have no control over whether he
or she is assessed a redemption fee. Thus, the proposed rule could affect
plan participants more adversely than other investors. We recommended that
SEC's Commissioners change the proposed regulations to prevent pension
plan participants from being more adversely affected than other investors.
SEC addressed this concern in a final rule issued in March 2005 that made
the fees no longer mandatory. In this way, mutual fund companies may
exempt any pension plan transaction where there is clearly no intent to
engage in market timing. (GAO-04-799 )

1.46.A. Strengthening the Integrity of the Social Security Card and Other
Identification Documents: We recently reported on weaknesses in SSA's
enumeration processes and found that SSA's policies for verifying birth
certificates for children under age 1 and issuing replacement Social
Security cards were weak and could expose SSA to fraud. Because Social
Security numbers are central to many aspects of American life, they are
vulnerable to fraud and financial crimes and, thus, sought by identity
thieves. We also reported on the verification of identity documents for
drivers' licenses, noting that visual inspection of key documents lent
itself to possible identity fraud. To demonstrate this, our investigators
were able to obtain licenses in two states using counterfeit documents and
the Social Security numbers of deceased persons. Subsequently, the
Congress included provisions in the Intelligence Reform and Terrorism
Prevention Act mandating that SSA implement regulations for independently
verifying birth documents for all field office Social Security number
applicants, limit the number of replacement cards issued to individuals,
and add death and fraud indicators to Social Security number verification
systems for state agencies issuing drivers' licenses and identity cards.
In addition, the Congress passed the Real ID Act of 2005, which
established federal identification standards for state drivers' licenses
and other such documents, and mandated third-party verification of
identity documents. ( GAO-04-11 , GAO-04-768T, GAO-04-1099T, and GAO-05-59
)

1.47.C. Addressing the Challenges of Pension Reform: Numerous reports and
testimonies in 2005 urged the Congress to take timely action to enact
comprehensive pension reform. The goal of such reform is to reduce the
financial risks to the Pension Benefit Guaranty Corporation and the
taxpayer, as well as to put the defined benefit system on a more stable
financial footing. We urged that the Congress consider, for example,
revisions to the existing rules governing the funding of defined benefit
plans so that plans would be better funded and thus more able to meet
benefit promises to plan participants. We also urged that there be changes
to the Pension Benefit Guaranty Corporation insurance premium structure in
how shutdown benefits are funded by plan sponsors, and that the Congress
address the legal uncertainty concerning hybrid pension plans like cash
balance plans. All of these key elements have been included in legislation
in both the House and the Senate. In addition, we organized a Comptroller
General forum involving experts and policymakers to discuss the many
aspects of pension reform. The discussion and ensuing report have
contributed to the Congress's and the public's understanding of the issues
in this high-risk area and helped shape the proposed legislation. (
GAO-05-360T, GAO-05-578SP, and GAO-05-794T )

An effective system of justice

1.48.A. Limiting Terrorists' Access to Guns: In a January 2005 report, we
identified a number of potential problems in the procedures that the
Federal Bureau of Investigation and applicable state agencies follow when
a potential gun purchaser is identified as a valid match with a terrorist
watch list record. While being on the watch list does not, in itself,
disqualify an applicant from purchasing a gun, it is extremely important
that steps are taken to ensure that the applicant does not have other
disqualifying factors. These other factors could include a felony
conviction or illegal alien status. The Federal Bureau of Investigation
and states are allowed to share information with other law enforcement
officials in order to validate the match and to ensure that other factors
that would prohibit the sale are fully investigated. We made a number of
recommendations intended to ensure that all allowable information is
shared in cases of potential matches with the terrorist watch list and
that states handle these cases consistently. Our recommendations have been
adopted. ( GAO-05-127 )

1.49.C. Improving Immigration Enforcement:

In several reports, we stressed that the Department of Homeland Security
(DHS) should use performance information and employee feedback to manage
its programs and operations. We reported that the federal response to
alien smuggling could be improved if DHS tracked the results of alien
smuggling referrals by U.S. Customs and Border Protection to U.S.
Immigration and Customs Enforcement, that decisions about how to allocate
scarce DHS resources could be improved if DHS developed additional
measures on the performance of its Border Patrol-operated interior traffic
checkpoints, and that future DHS transformations and communications
strategies could be improved if DHS sought feedback from employees about
their ideas and concerns. DHS concurred with our recommendations in these
areas, and we believe that their implementation will contribute to DHS's
effectiveness in enforcing the nation's immigration laws and addressing
long-standing management challenges. We also contributed to congressional
debate by describing immigration-related management challenges confronting
DHS, quantifying the costs of incarcerating criminal aliens, questioning
the usefulness of an annual address reporting requirement for aliens, and
describing how DHS has addressed immigration enforcement objectives. (
GAO-05-66 , GAO-05-81 , GAO-05-204 , GAO-05-305 , GAO-05-337R , and
GAO-05-435 )

1.50.C. Improving Evaluation of Contractor Performance: In a June 2005
report, we recommended that DHS's U.S. Citizenship and Immigration
Services (USCIS) take steps to ensure that specific performance
measurement requirements are finalized before awarding new
performance-based contracts for operating USCIS call centers and that
performance evaluation records are properly maintained. While discussing
these issues during the course of our work, USCIS officials told us they
planned to take the corrective actions. Further, in its formal comments on
our draft report, DHS generally agreed with our recommendations, noting
that a draft solicitation for new contracts specifically identified
nonnegotiable performance requirements and that written records of
performance assessments and performance evaluation meetings will be
maintained and readily available for review by interested parties. These
actions will improve USCIS's efforts in evaluating the performance of
contractor-operated call centers and encourage quality services at the
call centers. (GAO-05-526 )

1.51.C. Providing Evidence regarding Effectiveness of Adult Drug Courts:
With 1,200 operating drug courts in 2004, and an additional 500 being
planned, it is extremely important that their effectiveness be assessed.
Drug court programs generally allow some defendants with substance abuse
problems to enter these programs as an alternative to prison or probation.
The combination of court supervision and substance abuse treatment is
intended to reduce recidivism and drug abuse relapse compared to more
traditional sentencing. Our review of 27 methodologically strong
evaluations of drug courts provided evidence supporting drug courts as a
means to reduce recidivism. Data concerning relapse was less clear for
several reasons. While our review did not allow us to pinpoint specific
aspects of drug courts that lead to their success, it was clear that
program actions that help participants stay in and complete the program
were linked to recidivism reductions. This is an important piece of
information, given that the 2005 National Drug Control Strategy calls for
an increase in federal drug court spending from about $40 million to about
$70 million in 2006. ( GAO-05-219 )

The promotion of viable communities

1.52.A. Improving Oversight of Federal Housing Administration (FHA)
Lenders: In a November 2004 report, we recommended ways that the
Department of Housing and Urban Development (HUD) could improve its
oversight of lenders participating in FHA's single-family mortgage
insur-ance programs. Due in part to poor lender oversight, we have
designated HUD's single-family mortgage insurance programs as high risk.
In response to our report, HUD (1) issued updated standards for granting
FHA lenders the authority to underwrite loans and determine their
eligibility for FHA mortgage insurance without HUD's prior review, (2)
revised the system used to evaluate the underwriting quality of loans
insured by FHA so that it better reflects the risks different errors pose
to the insurance fund, and (3) issued guidance specifying when action must
be taken against lenders that fail to comply with FHA's program
requirements. These changes will help HUD identify the lenders that pose
the greatest insurance risk to the department and hold lenders accountable
for poor performance. ( GAO-05-13 )

1.53.A. Reducing the Cost of Federal Subsidized Housing Projects: We
determined that HUD had not developed the systems it needed to track the
status of unexpended balances in its project-based Section 8 housing
program and therefore could not use this information to help manage the
program and formulate budget requests for it. Because of our work, the
Congress required HUD to better enforce the legislative provisions
requiring the recapture of capital funds not being utilized by public
housing authorities. HUD recaptured about $2.531 billion in fiscal year
2003, or about $2.7 billion in current dollars. ( GAO-01-663T )

1.54.C. Improving First Responder Interoperable Communications: We noted
that interoperable communications equipment was being bought without the
fundamental first step of developing a clear, comprehensive plan for what
needed to be communicated, to whom, and when. Without such a plan it was
not possible to know whether the equipment purchased would meet defined
needs. We recommended that DHS, through its grant guidance, encourage each
state to establish a single statewide body to develop a single
comprehensive statewide interoperability plan and that grant funding
depend on conformance with such a plan. In its report accompanying the
fiscal year 2006 appropriations bill, the Senate Committee on
Appropriations directed that before grant dollars could be obligated for
interoperable equipment, jurisdictions must certify that they have
implementation plans that include governance structures, policies,
procedures, training, and planned exercises. ( GAO-04-231T, GAO-04-740 ,
and GAO-04-1057T )

1.55.C. Redefining Rural: We assessed how a change in the definition of
rural would affect the

U.S. Department of Agriculture's (USDA) Rural Housing Service in meeting
rural housing needs. By

(1)
           presenting a time line of how the Congress had increased
           population limits over the past 50 years,

(2)
           building on our prior work on Rural Housing Service management
           issues and how changes in technology and demographics have linked
           rural to urban areas, and (3) using geographically coded national
           data to show that such questionable eligibility determinations
           also exist nationwide, we were able to suggest that the Congress
           consider changing to a density-based system as a basis for making
           more equitable rural housing program eligibility determinations.
           The Rural Housing Service's Administrator agreed (1) that it does
           not make sense to use outdated boundaries, (2) to take our
           suggestion to work with USDA's Economic Research Service to
           develop a density-based system, (3) to propose legislative
           changes, and (4) to fix the data reliability problems we
           identified. The changes that the Administrator has agreed to make
           will help the Rural Housing Service use its scarce resources more
           efficiently and allocate its funding more fairly and equitably in
           accord with the intent and purposes of rural housing programs. The
           new rural definition could also have major implications for other
           federal agencies that allocate resources by population or
           location. ( GAO-05-110 )

Responsible stewardship of natural resources and the environment

1.56.A. Preparing for Asian Soybean Rust:

Beginning in February 2005, we raised concerns regarding USDA's
preparations for Asian soybean rust, which is a harmful, quick-spreading
fungal disease that first appeared in the United States in 2004 and
threatens America's $16 billion annual soybean production. As a result of
our recommendations, USDA (1) developed a coordinated federal-state plan
to manage the disease; (2) provided soybean producers with additional
guidance on farming practices and documentation required to file an Asian
soybean rust insurance claim; (3) authorized the use of about $1.2 million
in contingency funding to help monitor, report, and manage the disease
during the 2005 growing season; and (4) agreed to revise its insurance
data system so that it can collect information on the number and dollar
amounts of claims submitted and paid as a result of Asian soybean rust. (
GAO-05-668R )

1.57.A. Improving Transparency of Water Bank Operations: In March 2005, we
reported that the Bureau of Reclamation's Klamath Project water bank
management and accounting practices lacked transparency, creating
confusion and doubt among stakeholders such as farmers, environmentalists,
and tribes. A credible water bank is essential to easing conflicts over
water use among these groups by increasing river flows for salmon while
ensuring irrigation water for farmers under ongoing drought conditions.
Acting on our recommendation, the bureau improved the information provided
to stakeholders by creating a water bank Web page, updated biweekly, with
information on how much water has been delivered by the water bank, the
current water delivery schedule, links to real-time water flow gauges and
other information, and documents relevant to water bank management.
(GAO-05-283 )

1.58.A. Improving the Bonneville Power Administration's (BPA) Financial
Condition:

BPA, which markets 45 percent of the electric power consumed in the
Pacific Northwest, experienced significant financial problems in 2001 and
2002 while substantially increasing its electric power rates. BPA's
open-ended obligation to provide power to the region was the primary cause
of these rate increases. In response to our recommendations, BPA agreed to
limit the power it sells at its lowest rate to the amount generated by the
Federal Power System and to sell any additional power at rates that
reflect the cost of generating or acquiring that power. These rate
policies will help ensure that BPA remains competitive in the changing
electricity industry and reduce the risk of BPA defaulting on its Treasury
debt. ( GAO-04-694 )

1.59.A. Realizing Financial Benefits in the Environmental Protection
Agency's (EPA) Superfund Program: During the past few years, we have noted
that opportunities exist for EPA to recover unspent funds from inactive
contracts under its Superfund program-established in 1980 to locate,
investigate, and clean up the worst hazardous waste sites nationwide. In
2001, we developed a method for targeting potential deobligations and
shared this approach with EPA. During our fiscal year 2005 budget
justification review process, EPA acknowledged that our method for
identifying deobligations was very useful in identifying unspent funds and
that this method is still in use today. The deobligated funds have enabled
the agency to address its backlog of hazardous waste sites that need
remediation without receiving additional appropriations to conduct these
cleanups. The financial benefits resulting from these deobligations in
fiscal year 2005 total about $370 million. (Based on briefings)

1.60.A. Reducing Nuclear Waste Cleanup Costs: Our work over the last 2
years helped to avoid a substantial increase in the cost of treating and
disposing of high-level nuclear waste at the Department of Energy's (DOE)
Savannah River Site. DOE's long-standing plan for treating the waste was
in jeopardy because of a legal challenge that could have resulted in the
agency pursuing a substantially more costly treatment and disposal
alternative that had little added environmental benefit. We recommended
that DOE seek legislative clarification from the Congress to minimize
delays and cost increases. In October 2004, the Congress clarified DOE's
authority to follow its planned treatment and disposal strategy, thus
avoiding a cost increase at the Savannah River Site of $55 billion to $60
billion. The cost avoidance for fiscal years 2005 through 2009 will be
about $4.5 billion. ( GAO-03-593 , GAO-03-930T, and GAO-04-611 )

1.61.A. Improving the Security of the Plum Island Animal Disease Center:
In September 2003, we found that security at the federal Plum Island
Animal Disease Center, which contains highly contagious foreign animal
disease pathogens, was insufficient and needed substantial improvement. We
found that the center's physical security was incomplete, that the
security force's response capability was limited, and that the security
plan did not consider the possibility of a terrorist attack. In addition,
center officials were not adequately controlling access to areas where
pathogens are located, in part by allowing access by foreign scientists
without security clearances. DHS, which assumed overall responsibility for
Plum Island from USDA in June 2003, agreed with our assessment and
recommendations. Subsequently, these departments have taken many actions
to improve physical security and security planning for Plum Island, such
as the addition of guards, security lighting, surveillance cameras, locks,
alarms, and visitor inspections. Access to the pathogens has been
restricted. Also, a Federal Protective Service officer has been assigned
to Plum Island, and this step is expected to facilitate a further
strengthening of the security response force. ( GAO-03-847 )

1.62.A. Protecting Our Food Supply from Deliberate Contamination: In 2003,
we reported that USDA and the Food and Drug Administration- the principal
federal agencies responsible for ensuring food safety-issued security
guidelines to help food processors identify measures to prevent or
mitigate the risk of deliberate contamination during food production.
However, we reported that the majority of federal food safety inspectors
were not receiving training on food security issues addressed by the
guidelines. To increase the inspectors' knowledge and understanding of
food security issues and facilitate their discussions about the guidelines
with food processors, we recommended that such training be provided. This
year, USDA directed its food inspectors to implement food security
verification procedures during their routine food safety inspections. As
part of implementing these new security procedures, the agency has
provided training on the security guidelines for industry and on practical
antiterrorist strategies. ( GAO-03-342 )

1.63.A. Reducing Overlaps and Duplication in Federal Food Safety
Activities: During 2005, we continued to report and testify on the
organization of federal food safety functions-a highly complex and
fragmented system that stems from 30 principal laws and is administered by
15 federal agencies. This system results in inefficient use of resources,
inconsistent oversight and enforcement, and ineffective coordination. In
the past, we have recommended that the federal statutes be streamlined and
that food safety functions be consolidated into a single agency. This
year, our work identified overlapping and duplicative inspection
activities conducted by USDA and the Food and Drug Administration at
food-processing facilities that fall under the regulatory jurisdiction of
both agencies. Although the agencies have entered into an agreement to
make more efficient use of their resources and to reduce overlap and
duplication, we found that they are not routinely communicating findings
of mutual concern, such as sanitation problems affecting foods produced at
these facilities- whether the foods fall under USDA or Food and Drug
Administration jurisdiction. We recommended that the agencies ensure
implementation of the agreement. USDA took prompt action and in June 2005
issued a directive, entitled Responsibilities in Dual Jurisdiction
Establishments. The directive states that each agency's resources and
experience will be used efficiently and that duplication of inspection
effort is to be avoided. It also states that USDA and the Food and Drug
Administration agree to communicate at the district office level about

(1) findings of hazardous, contaminated, or mislabeled foods; (2)
processes that may result in contamination or recalls; or (3) food
tampering. (GAO-05-213 )

1.64.A. Improving Recreation Fee Programs on Federal Lands: Our work over
the past several years has helped the Congress to establish and assess the
impacts of the recreational fee demonstration program. Under this trial
program, the Congress authorized the Department of the Interior's National
Park Service, Bureau of Land Management, and Fish and Wildlife Service and
USDA's Forest Service to charge fees to visitors to, among other things,
reduce the maintenance backlog at federal parks and historic places and
protect these lands from the wear and tear caused by visitors. Since the
program's inception in 1996, we have identified issues that needed to be
addressed to improve the program's effectiveness. These issues included
providing (1) a more permanent source of funds to enhance stability, since
the current program had to be reauthorized every 2 years; (2) the
participating agencies with greater flexibility in how and where they
apply fee revenues; and (3) improvements in interagency coordination in
the collection and use of revenue fees to better serve visitors by making
the payment of fees more convenient and equitable and reducing visitor
confusion about similar or multiple fees being charged at nearby or
adjacent federal recreational sites. As a result of this body of work, the
Congress designed and enacted the Federal Lands Recreation Enhancement
Act, which addresses all of our reported issues, including providing a
more permanent source of funding for the agencies. ( GAO/RCED-99-7 ,
GAO/T-RCED-99-77 , GAO/T-RCED-99-101 , GAO/RCED-00-37R , GAO-02-10 ,
GAO-03-470 , and GAO-04-745T )

1.65.A. Providing Federal Assistance to Alaska Native Villages Affected by
Flooding and Erosion: We reported that while 184 out of 213 Alaska Native
villages are affected to some extent by flooding and erosion, these
villages often have difficulty qualifying for federal assistance to combat
these problems. We recommended that the Denali Commission (established by
the Congress to provide economic development services and to meet
infrastructure needs in rural Alaska) adopt a policy to guide investment
decisions and project designs in villages affected by flooding and
erosion. We also identified four alternatives that could increase federal
service delivery to the affected villages. In response to our findings,
the Denali Commission adopted an investment policy, which will ensure that
federal funds are expended in the most effective and efficient manner
possible, and the Congress provided the Secretary of the Army authority to
carry out "structural and nonstructural projects for storm damage
prevention and reduction, coastal erosion, and ice and glacial damage in
Alaska, including relocation of affected communities and construction of
replacement facilities." ( GAO-04-142 and GAO-04-895T )

1.66.C. Clarifying Policies on Wetlands: The

U.S. Army Corps of Engineers (USACE) is responsible for implementing
Section 404 of the Clean Water Act, our nation's primary wetlands
protection program. Under this program, a property owner must obtain a
permit from USACE before undertaking any activities that may degrade or
destroy waters or wetlands that fall under federal jurisdiction. In 2004,
we reported that USACE's district offices and staff were interpreting and
applying federal regulations differently when determining whether a water
or wetland falls under federal jurisdiction and that these differences
might result in different jurisdictional decisions in similar situations.
As we recommended, USACE is evaluating its districts' differing practices
and determining what revisions to its guidance will be needed to ensure
more consistency in decisions about which waters and wetlands fall under
federal jurisdiction. ( GAO-04-297 ) 1.67.C. Improving Security at
Drinking Water and Wastewater Plants: We identified key activities that
can help EPA improve security for the water sector. As a result of this
work, EPA has begun to implement a number of these actions. First, the
agency established common protocols for monitoring threats. In particular,
it developed a list of Standardized Analytical Methods, providing a common
standard for environmental laboratories' use in measuring contamination
events and their associated threats. In addition, EPA provided simulation
exercises to improve local, state, and regional collaboration.
Specifically, it provided drinking water and wastewater systems with a
series of tabletop exercises to help them prepare and carry out emergency
response plans and strengthen relationships between utilities and local,
state, and federal officials in the event of a terrorist attack. Finally,
EPA significantly expanded training opportunities related to security by
sponsoring several security workshops and seminars on topics such as
wastewater system security, drinking water system preparedness, and
emergency response. As a result, water sector personnel have additional
tools and training opportunities to support them in their efforts to
protect against terrorist attacks. (GAO-04-29 , GAO-04-1098T, and
GAO-05-165 )

1.68.C. Improving Oversight of EPA Grant Programs: EPA has long faced
problems in managing its grants, which constitute over one-half of the
agency's annual budget, or $4 billion annually. Our work over the past 3
years has identified the major challenges facing EPA in managing its
grants, including awarding, overseeing, and obtaining results from grants.
EPA issued a 5-year grants management plan and policies, which for the
first time offers a comprehensive road map with goals and milestones for
addressing the challenges we identified. However, we found that the
policies and plan will require strengthening, enhanced accountability, and
sustained commitment to succeed. For example, EPA's new oversight policy
mandates more in-depth monitoring of grantees, but it does not build in a
process for analyzing the results of in-depth monitoring to address
systemic grantee problems. In addition, its 5-year plan does not
completely address how EPA will hold all managers and staff accountable
for successfully fulfilling their responsibilities. Our recommendations,
which EPA has begun to implement, will help to ensure that EPA is
providing effective oversight of grants and holding managers and staff
accountable for their grants management responsibilities. ( GAO-03-846 ,
GAO-04-383R , GAO-04-459 , and GAO-05-149R )

1.69.C. Improving EPA's Knowledge of Environmental Conditions: In a
November 2004 report, we recommended that EPA establish clear lines of
responsibility and accountability among its various organizational
components and identify specific requirements for developing and using
environmental indicators. Environmental indicator sets assemble
quantitative measures of conditions and trends to assess the state of the
environment and natural resources and to gauge progress toward specific
goals. We reported that EPA needs to develop a more systematic approach to
developing these indicators to ensure that information on environmental
conditions and trends is incorporated into EPA's efforts to plan
strategically, allocate resources, and assess progress toward meeting
environmental goals and objectives. EPA is currently working to link its
indicators to the agency's strategic planning activities and investigating
opportunities to link environmental information to management reporting
and accountability systems. (GAO-05-52 )

1.70.C. Identifying Challenges to Ensuring Competition in Natural Gas
Markets: Recent reports on the impact of soaring natural gas prices have
outlined the volatile nature of natural gas prices that are driven by
supply and demand imbalances. However, these reports also have highlighted
the important role the federal government plays in ensuring that prices
are determined in a competitive and informed marketplace. We found that
federal agencies face major challenges in ensuring that natural gas prices
are determined in a competitive and informed marketplace. For example, we
found that the Federal Energy Regulatory Commission lacks an adequate
regulatory and oversight approach and is reviewing its statutory authority
and market monitoring tools. The Commodity Futures Trading Commission does
not have regulatory authority for over-the-counter derivatives markets. It
does have anti-manipulation authority and is currently investigating what
role, if any, these markets played in the natural gas price spike of 2000
through 2001. Finally, the Energy Information Administration has an
outdated natural gas data collection program, but has made efforts to
reassess its data needs to provide more useful information. ( GAO-03-46 )
1.71.C. Enhancing Oversight of Electricity Markets: Our recent reports on
electricity market restructuring have encouraged the Federal Energy
Regulatory Commission to, among other things, enhance its oversight of
these markets to reduce the potential that firms could inappropriately
exercise the use of market power, reduce the uncertainty private companies
face when upgrading transmission lines to their power plants, and support
consumer pricing and other programs that encourage consumers to adjust
their electricity usage in response to changes in market conditions.
Action in this last area alone-encouraging consumers to respond to
changing electricity market conditions-could save billions of dollars as
well as enhance reliability in the U.S. electricity sector more generally.
(GAO-04-204 and GAO-04-844 )

1.72.C. Identifying the Effects of Oil Mergers on Consumers: Our work on
the effects of mergers and market concentration in the U.S. petroleum
industry, which found that the wave of mergers and market concentration
that occurred in the 1990s led to higher gasoline prices, prompted a
reevaluation by the Federal Trade Commission of how it reviews petroleum
industry mergers in an effort to protect

U.S. consumers from potential anticompetitive effects of such mergers in
the future. ( GAO-04-96 )

1.73.C. Improving the Nuclear Regulatory Commission's Oversight of Nuclear
Power Plants: In a series of reports and testimonies, we have identified a
number of challenges to the Nuclear Regulatory Commission's ability to
effectively regulate the safety and security of the nation's commercial
nuclear power plants. We have made a number of recommendations to improve
force-on-force exercises (mock terrorist attacks) that test nuclear power
plants' defenses, and we are currently assessing the process the
commission used to revise the design basis threat, which describes the
terrorist threat plants are required to defend against. As part of this
review, we have observed force-on-force exercises at two nuclear power
plants and confirmed that the commission is implementing improvements we
recommended that will better enable the commission to evaluate plants'
ability to defend against terrorist attacks. In 2005, we reported that
plants' control and accounting of radioactive spent nuclear fuel have been
uneven and that the commission should establish specific requirements and
inspection procedures for control and accounting of loose fuel rods and
segments. In response to our recommendation, the commission is clarifying
its guidance to plants on control and accounting of spent fuel and
revising its inspection procedures-actions that if properly implemented,
will reduce the risk that plants will report additional cases of missing
spent nuclear fuel. ( GAO-03-752 , GAO-04-1064T, GAO-05-339 , and
GAO-05-754T )

A safe, secure, and effective national physical infrastructure

1.74.A. Improving Oversight of State Highway Safety Programs: In 2003 we
reported that National Highway Traffic Safety Administration (NHTSA)
regional offices were inconsistent in their oversight of state highway
safety programs. Consequently, states with relatively poor safety
performance sometimes received less oversight than states with better
safety performance. We recommended that NHTSA provide clear guidance to
its regional offices on the appropriate use of program management reviews
and program improvement plans. In response to our recommendations, NHTSA
developed new policies for its regional offices on when it is appropriate
to use management reviews and improvement plans to assist state highway
safety programs. Among other things, the new procedures direct NHTSA
regional offices to conduct management reviews in each state at least
every 3 years. In addition, the new procedures direct NHTSA regional
offices to work with a state in collaboratively developing a performance
enhancement plan (formerly known as an improvement plan) when a state
fails to meet performance goals, shows substandard performance, or fails
to show improvement toward priority safety program goals over a 3year
period. The Congress is considering specifying these improvements and
mandating that we perform a follow-up review. ( GAO-03-474 )

1.75.A. Updating Assessments of Highway Traffic Safety Data Systems: In a
November 2004 report, we recommended that the Congress consider requiring
states to have assessments of their traffic records safety data systems
that are no more than 5 years old in order to participate in NHTSA's
traffic safety data improvement program. According to NHTSA officials,
these assessments were valuable starting points in helping states take
stock of the strengths and weaknesses of their entire systems. During our
review, we found some assessments submitted by states that were nearly 10
years old. We also found assessments based on recent information reflected
the dynamic and often changing reality of state safety data systems. In
August 2005, the Congress passed the Safe, Accountable, Flexible, and
Efficient Transportation Equity Act of 2005. The act included our
recommendation that states have up-to-date assessments or audits of their
highway safety data and traffic records systems in order to participate in
NHTSA's state traffic safety information system improvements grant
program. By implementing this eligibility requirement, NHTSA will have
improved monitoring of state progress and have made a more detailed
accounting of traffic data system improvements made as a result of the
grant program. (GAO-05-24 )

1.76.A. Improving NHTSA's Oversight Efforts:

We found that NHTSA was inconsistent in its use of management reviews and
improvement plans in providing oversight of state highway safety programs.
We recommended that NHTSA develop guidance on the use of management and
improvement plans. In response, NHTSA, in April 2004, reported to the
Congress that it was establishing new procedures to address problems we
identified. These new procedures included conducting triennial management
reviews and establishing performance enhancement plans for states that
fail to meet program goals over 3-year period. In February 2005, we
discussed incorporating our recommendations and alternative language for
the surface transportation reauthorization bill with congressional staff.
In July 2005, the Congress passed the Safe, Accountable, Flexible and
Efficient Transportation Equity Act: a Legacy for Users, which enacted the
NHTSA policies established directly in response to our recommendations.
The law directs NHTSA to conduct triennial management reviews of state
highway safety programs and program reviews of states that fail to make
substantial progress in meeting priority program goals over a 3-year
period. (GAO-03-474 )

1.77.A. Authorizing the Retention of Proceeds from Real Property: In 2003,
we reported that most agencies could not retain the proceeds from the sale
of unneeded property and this acted as a disincentive to disposing of
unneeded property. We concluded that agencies should be permitted to
retain proceeds for reinvestment from real property where a need exists.
Subsequently, in the 2005 Consolidated Appropriations Act, for fiscal year
2005 the Congress authorized the Administrator of the General Services
Administration (GSA) to retain the net proceeds from the conveyance of
real and related personal property. These proceeds are to be deposited
into the Federal Buildings Fund and are to be used for GSA's real property
capital needs. (GAO-03-122 )

1.78.A. Identifying Improvements Needed to Strengthen Security and Achieve
Efficiencies in Airport Passenger and Checked Baggage Screening: We
conducted a body of work assessing the physical screening of airport
passengers and their checked baggage, as well as the prescreening of
passenger names against terrorist watch lists, designed to identify and
prevent terrorist threats. We found that insufficient screener staffing
and a lack of high-speed Internet and intranet connectivity at the
nation's airports resulted in the majority of screeners not meeting
legislatively mandated screener training requirements, and that weakness
and vulnerabilities continued to exist in passenger and checked baggage
screening systems. We also found that DHS's Transportation Security
Adminis-tration's (TSA) internal solutions for deploying explosive
detection systems to screen checked baggage resulted in operational
inefficiencies and diminished security, and that its efforts to install
in-line baggage screening systems have been limited. Related to passenger
prescreening against terrorist watch lists, we found the effectiveness of
TSA's Secure Flight program in identifying passengers who should undergo
additional security scrutiny had not been determined, and that TSA had not
resolved how passenger data would be transmitted from air carriers to TSA
to support Secure Flight operations. We also reported that TSA did not
comply with Privacy Act requirements by not fully disclosing to the public
its use of personal information from commercial data sources during
testing as required. Specifically, a TSA contractor collected more than
100 million commercial data records containing personal information, such
as name, date of birth, and telephone number, without informing the
public. Based on this work, we made numerous recommendations to strengthen
screener training, systematically evaluate baggage screening needs at
airports, and manage the risks associated with Secure Flight's development
and implementation. TSA agreed to take corrective actions in these areas.
Several pieces of legislation were passed requiring a plan and guidelines
for installing in-line baggage screening systems and measures to
strengthen Secure Flight's development and implementation, based in part
on our work. ( GAO-05-324 , GAO-05-356 , GAO-05-365 , GAO-05-457 , and
GAO-05-864R )

1.79.C. Implementing Postal Reforms to Address Structural and Systemic
Deficiencies: Our testimony identified the need for comprehensive postal
reform legislation to address challenges that threaten the U.S. Postal
Ser-vice's long-term outlook and identified some of the key principles for
postal reform, including the need for additional managerial flexibility to
improve the efficiency of postal operations and increased transparency and
accountability for results, which have been incorporated into pending
postal reform legislation. We also reported that the Postal Service faces
challenges in eliminating excess capacity in its mail processing
infrastructure, but its infrastructure realignment strategy was not
sufficiently clear or accountable. The Congress referred to our work
related to postal infrastructure realignment and said that it would work
to ensure that the Postal Service implemented our recommendations.
Language in postal reform legislation would require the Postal Service to
report to the Congress on how it plans to modernize its infrastructure and
provide greater transparency through annual reports on its progress in
this area. We also testified that one of the key elements of postal reform
is to clarify the Postal Ser-vice's mission and role so that it remains
focused on universal postal service. Two of our reports on the Postal
Service's electronic commerce activities contributed to language in
pending postal reform legislation to limit the Postal Service's mission to
delivering physical mail pieces to avoid the financial costs the Postal
Service has incurred when it ventured away from its core business.
(GAO/GGD-00-188 , GAO-02-79 , GAO-05-261 , and GAO-05-453T )

1.80.C. Improving Congressional Oversight of the Airline Industry's
Financial Condition: We reported on the deteriorating financial condition
of the U.S. commercial airline industry, providing the Congress with some
key insights into the underly-ing structural problems hampering the
industry's recovery. Since 2001, the major U.S. airlines have lost more
than $30 billion, with four major U.S. legacy airlines-Delta, Northwest,
United, and US Air-ways-operating under bankruptcy protection. United and
US Airways terminated their pension programs, transferring their plans to
the Pension Benefit Guaranty Corporation at a net cost to the corporation
of $9.7 billion; plan participants lost $5.3 billion in benefits (in
constant 2005 dollars). We also reported that the airlines faced a
considerable liquidity crisis over and above pension funding requirements.
Legislative pension reform allowing airlines to amortize pension
contributions over more years would relieve some of the liquidity
pressures, but does not ensure that they will avoid bankruptcy because it
does not fully address other fundamental structural problems, such as
other high fixed costs. ( GAO-05-83 , GAO-05-945 , and GAO-05-835T )

1.81.C. Identifying Federal Action Needed to Secure Cargo Transported by
Air: We found that TSA took initial steps in applying a risk-based managed
approach to address air cargo security. However, TSA had not yet
established a methodology or schedule for completing assessments of
vulnerabilities and critical assets. We also found that TSA had not
developed measures to assess the adequacy of air carrier compliance and
systematically analyze audit results to target future inspections, or
assessed the effectiveness of its enforcement actions to ensure compliance
with security requirements. We also found that TSA's future plans for
enhancing air cargo security pose financial, operational, and
technological challenges to the agency and air cargo industry
stakeholders, and that TSA may have underestimated the cost of proposed
security measures. We recommended that among other actions, TSA complete
assessments of air cargo vulnerabilities and critical assets; develop
measures to gauge air carrier compliance; and ensure that data used in
identifying elevated risk cargo are complete, accurate, and current. TSA
generally concurred with the findings and recommendations in the
restricted version of the report. (Based on a report that contains
sensitive material and is not available to the public)

1.82.C. Improving Federal and Private Sector Efforts to Secure General
Aviation: We found that a systematic assessment of threats to general
aviation-all aviation other than commercial and military-had not been
conducted, and that TSA and the Federal Aviation Administration (FAA) had
taken limited steps to secure related airports, aircraft, and
infrastructure. We also found that TSA has not established policies and
procedures for reviewing and revalidating the need for flight restrictions
that limit access to airspace for indefinite periods that could negatively
affect the general aviation industry. We further found limitations in
TSA's process for requiring background checks of foreign candidates for
U.S. flight training schools. We recommended, among other things, that TSA
develop a plan for implementing a risk-managed approach to strengthen
general aviation security, and that FAA establish a documented process for
reviewing and revalidating flight restrictions. TSA and FAA agreed to take
corrective actions, and legislation, based on input from our work, was
passed requiring DHS to improve pilot licenses to prevent tampering and
alterations. TSA issued an interim final rule in July 2005 to restore
limited general aviation aircraft operations at Reagan National airport.
(GAO-05-144 )

1.83.C. Identifying Federal Action Needed to Strengthen Airport Perimeter
Security and Access Controls: We conducted a comprehensive review of
airport perimeter security and access controls that addressed and made
associated recommendations related to employee access to secure airport
areas, including airport employee screening requirements. We briefed
numerous congressional committees on this work and conferred with
congressional staff as language was drafted for the Intelligence Reform
and Terrorism Prevention Act of 2004. We also briefed the 9/11
Commission-whose recommendations formed the basis for this act-on our
results in this area. ( GAO-04-728 )

1.84.C. Enhancing Federal Leadership Needed to Address Rail Security: We
found that TSA had not completed risk assessments of the passenger rail
industry, or completed a methodology for determining how to analyze and
characterize risks that have been identified through other risk assessment
initiatives. The lack of a risk management framework will make it
difficult for TSA to compare risks across sectors, prioritize them, and
allocate resources accordingly. We also found that federal and rail
industry officials raised questions about the feasibility of implementing
and complying with TSA rail security directives. We also observed security
practices among certain foreign passenger rail systems or their
governments that are currently not used by the domestic rail operators or
the U.S. government, which could be considered for use in the United
States. We recommended, among other things, that TSA develop a plan for
completing its methodology for conducting risk assessments and develop
rail security standards that can be measured and enforced. We also
recommended that TSA consider the feasibility of implementing certain
security practices in the United States that are currently used by foreign
rail operators. DHS, the Department of Transportation, and Amtrak reviewed
a draft of this report and generally agreed with the report's
recommendations. Further, DHS stated that it appreciated the thorough
analysis and discussion of rail security initiatives within our report and
that it will continue to be cognizant of the areas of passenger rail
security where further improvements can be made. ( GAO-05-851 )

1.85.C. Coordinating Agencies' Facility Protection Efforts and Promoting
Key Practices: The Interagency Security Committee is chaired by DHS and is
composed of representatives from most agencies. In November 2004, we
recommended that DHS direct the committee to develop an action plan that
identifies resource needs, goals, and time frames for meeting its
responsibilities, and propose strategies for addressing the challenges it
faces. Such an action plan would provide a road map for DHS to use in
developing resource priorities and for the committee to use in
communicating its planned actions to agencies and other stakeholders,
including the Congress. DHS agreed to implement this recommendation. In
addition, the committee has begun to implement our recommendation to
establish a set of key practices that could guide agencies' efforts in the
facility protection area. This initiative could be used to evaluate agency
actions, identify lessons learned, and develop strategies for overcoming
challenges. ( GAO-05-49 )

1.86.C. Providing Critical Information for the Congress Regarding Issues
Related to the Digital Television Transition: Since 2002, we have reported
why the transition from analog to digital television will not be likely to
end by 2006- the target date originally set by the Congress. We have
provided critical recommendations and information for policymakers to
consider in their attempts to further the transition. Completing this
transition is critical because the return of radio frequency spectrum used
for analog broadcast television at the end of the digital television
transition will provide many benefits to society, such as easing the
spectrum scarcity facing public safety first responders; engendering
economic growth and consumer value from spectrum redeployed to wireless
services; and affording the federal government auction revenues, which
could range from about $10 billion to $30 billion according to some
studies. We reported on the digital television transition in Germany, and
the Congress is now considering providing subsidies to low-income
households, which was a feature of the German transition plan. This year,
we also provided information on the likely costs of a subsidy to certain
households for the purchase of digital television equipment and we also
testified about the administrative issues that may arise in implementing a
subsidy program. Legislation has been introduced in both the Senate and
House aimed at speeding the transition using a subsidy program. (
GAO-05-258T )

1.87.C. Enhancing the New Car Assessment Program: In 2005, we reported
that NHTSA's New Car Assessment Program, which subjects new vehicles to
crash and rollover tests, is at a crossroads and needs to be changed to
remain relevant. For example, we found that the usefulness of current
testing has been eroded by changes in the vehicle fleet that have occurred
since the program began in 1978. The growing number of large pickups,
minivans, and sport utility vehicles in the nation's vehicle fleet is
creating different safety risks, particularly with regard to the
incompatibility of large and small vehicles and vehicle rollover, which we
found that the New Car Assessment Program does not fully address. In
addition, the very success of the program has brought it to a point where
it is not clear that the program's goals can continue to be met. Because
almost all vehicles today receive top ratings in frontal and side crash
tests, the program provides little incentive for manufacturers to further
improve vehicle safety and does not provide consumers with information
that differentiates the safety of one vehicle compared to another-two key
goals of the program. Our recommendations will have continuing value in
improving the safety of new vehicles. The agency generally agreed with the
report, and it plans to address the key issues we raised to improve the
program-namely, examining the growing size of vehicles in the nation's
fleet, the risks associated with vehicle rollover, new technologies that
can help prevent crashes from occurring, and ways to provide the public
with improved safety information in a more timely manner. (GAO-05-370 )

1.88.C. Reevaluating the Funding of Highway and Transit Grant Programs: In
light of the nation's long-term fiscal outlook and the need to
fundamentally reexamine the base of federal spending, we have highlighted
the need to reevaluate highway and transit grant programs financed through
the Highway Trust Fund. The trust fund was created to construct the
interstate highway sys-tem-although the system is now complete, the
program's basic financing and delivery mechanisms have not changed. Most
highway grant funds are apportioned by formula, without regard to the
needs or capacity of recipients. Evidence also suggests that increased
federal highway grants do not result in commensurate increases in overall
investment because states and localities in part substitute federal funds
for funds they otherwise would have spent on highways. The Department of
Transportation has established performance measures and outcomes to
enhance mobility and security, but the program has no mechanism to link
funding with the accomplishment of these measures and outcomes.

In addition, while a wide range of factors must be considered when
selecting highway or transit projects, decision makers often do not use
formal analytical tools when evaluating projects, and even when they do,
these analyses generally do not drive investment decisions. The Federal
Highway Administration oversees the expenditure of tens of billions of
federal dollars a year but lacks goals and measures that guide its
activities, workforce plans that support these goals and measures, and
data collection and analysis efforts to identify problems and transfer
lessons learned. To improve federally funded highway and transit programs,
we suggested that the Congress consider expanding the mandate of a
proposed national commission to assess possible changes to the federal-aid
highway program, including changes to the program's design, structure, and
funding formulas; the roles of the various levels of government; and the
inclusion of greater performance and outcome-oriented features. In
addition, we recommended that the Federal Highway Administration link its
activities and staff expectations to oversight goals and measures; develop
workforce plans that support its goals and measures; and develop the
capability to track costs, identify problems, and transfer lessons
learned. (GAO-04-802 , GAO-05-172 , GAO-05-173 , and GAO-05-325SP )

Strategic Goal 2

Provide Timely, Quality Service to the Congress and the Federal Government
to Respond to Changing Security Threats and the Challenges of Global

Interdependence

Source:See Image Sources.

Respond to emerging threats to security

2.1.A. Improving Controls Covering Technology Exports: In response to our
recommendation, the Department of Commerce (Commerce) reviewed whether the
existing catchall provision to address missile proliferation by certain
entities-such as terrorist organizations or individu-als-sufficiently
protects U.S. national security interests, reported the results of the
review, and proposed modifications to the rule to help close the
regulatory gap. We reported that a gap in control regulations covering
exports with both military and civilian applications (dual-use exports)
could enable individuals in most countries to legally obtain, without any
U.S. government review, U.S. dual-use items not on the Commerce Control
List that could be used in making a cruise missile or unmanned aerial
vehicle. ( GAO-04-175 )

2.2.A. Improving Controls over Computer Exports: In response to our
recommendation to address the shortcomings of computer export controls, a
Commerce council convened a panel of government and industry
representatives to develop a replacement for the current method of
measuring the composite theoretical performance of high-performance
computers. The council advises Commerce on the technical parameters for
export controls applicable to dual-use commodities and the administration
of these controls. Composite theoretical performance is currently measured
in millions of theoretical operations per second. The council's experts
met and reached a consensus on using a new, simpler method for measuring
performance. (GAO-01-10 ) 2.3.A. Improving Processes to Share Information
on Maritime Threats: In April 2005, we identified U.S. Coast Guard
procedures for providing security clearances that needed to be improved to
get classified threat information to key state, local, and private sector
stakeholders involved in port security. These stakeholders needed access
to classified information, but did not have federal security clearances
allowing them to receive the threat information. Lack of adequate guidance
from Coast Guard Headquarters had stalled the process to provide
clearances to more than 350 state, local, and private sector officials.
Based on our findings, the Coast Guard provided the guidance and took
other steps to expedite the process. This improvement will make it easier
for key stakeholders in maritime activities to get sensitive threat
information and thus take appropriate protective actions to ensure port
security. ( GAO-05-394 )

2.4.A. Improving Management of U.S. Coast Guard Deepwater Program: Based
on a body of work assessing the U.S. Coast Guard's Deepwater program, we
identified areas for improved program oversight and management. We found
that while the Coast Guard generated some limited information on the
condition of its legacy assets, the majority of the Coast Guard's measures
were not sufficiently robust to link an asset's declining condition to
degradation in mission capabilities or performance. We noted that without
such measures, the extent and severity of the decline in the existing
deepwater legacy assets and their true condition could not be fully
determined. Based on our findings, the Coast Guard has begun developing
improved measures to more accurately capture data on the extent to which
its deepwater legacy assets are degraded in their mission capabilities.
This improvement will provide more accurate and mean-ingful information to
the Coast Guard as well as to DHS as it decides where to spend limited
budget dollars to obtain the greatest capabilities in the Deepwater
program. In addition, we recommended the Coast Guard update the original
2002 Deepwater acquisition schedule in time to support the fiscal year
2006 Deepwater budget submission to DHS and the Congress and at least once
a year thereafter to support each budget submission. We also recommended
that the updated schedule include the current status of asset acquisition
phases, interim phase milestones, and the critical paths linking assets.
Based on our recommendations, the Coast Guard has taken steps to update
the outdated schedule and has indicated that it plans to continue to
update the schedule each month for internal efforts. The Coast Guard
Deepwater Deputy Program Executive Officer agrees that these efforts to
update the Deepwater acquisition schedule and integrate the individual
schedules of the assets have improved the Coast Guard's overall management
of the program. (GAO-05-307T, GAO-05-651T, and GAO-05-757 )

2.5.A. Ensuring Proper Implementation of Biometrics for Aviation Security:
In our May 2004 testimony on the use of biometrics (a wide range of
technologies that can be used to verify identity by measuring and
analyzing human characteristics) for aviation security, we reported on the
need to identify how biometrics will be used to improve aviation security
prior to making a decision to design, develop, and implement biometrics.
Using information from our statement, the House introduced a bill on July
22, 2004, directing TSA to establish system requirements and performance
standards for using biometrics, and to establish processes (1) to prevent
individuals from using assumed identities to enroll in a biometric system
and (2) to resolve exceptions. These provisions were later included in an
overall aviation security bill and were eventually included in the
Intelligence Reform and Terrorism Prevention Act of 2004. (GAO-04-785T )

2.6.A. Strengthening Federal Agency Information Security: In 2005, we
identified specific information security improvements needed at the
following agencies: DHS, IRS, SEC, FAA, the Defense Logistics Agency, and
the Federal Deposit Insurance Corporation. Also, on the basis of our prior
recommendations, agencies-including VA, IRS, the Bureau of the Public
Debt, the Federal Deposit Insurance Corporation, the Federal Reserve, and
Commerce-took numerous actions to strengthen their information security
practices. Actions included improvements to agencies' information security
programs to aid in understanding risks and selecting and properly
implementing effective controls; access controls to limit the ability to
read, modify, or delete information to authorized individuals; software
change controls to allow only authorized software programs to operate; and
service continuity controls to protect computer-depen-dent operations from
significant disruptions. (GAO-05-262 , GAO-05-482 , GAO-05-486 ,
GAO-05-567T, GAO-05-700 , and GAO-05-712 )

2.7.C. Improving the Government's Ability to Respond to Terrorist Attacks
and Other Emergencies: We helped the Congress move toward ensuring that
the federal government is prepared for emergencies, including terrorist
attacks. For example, we reported, based on detailed assessments of
continuity of operations plans at major federal agencies, that agencies
had not yet identified their essential functions that must be accomplished
in an emergency and that none of the plans met the requirements of federal
guidance. This work has focused congressional, agency, and public interest
on these issues. Further, consistent with our recommendations, the
Homeland Security Council initiated a major effort to identify essential
functions governmentwide, including the identification of eight national
essential functions and a process for identifying related agency-level
functions. In addition, FEMA, which is the executive agent for continuity
of operations planning, issued improved guidance addressing the
prioritization of essential functions and the identification of associated
resources. Finally, two agencies that did not have continuity plans in
place have now developed them. As a result of these actions, the federal
government is better positioned to respond to emergencies and continue
essential services during and after emergencies of all types. ( GAO-05-577
and GAO-05-619T )

2.8.C. Assessing and Improving Chemical Facility Security: In March 2005,
we reported that DHS has estimated that there are about 4,000 chemical
manufacturing facilities in the United States, but the exact number is
uncertain. About 1,100 of these facilities belong to two major chemical
associations that require their member compa-nies and facilities to take
actions to assess and improve their security. Only those facilities that
are subject to the Maritime Transportation Security Act are required by
federal law or regulation to take any actions to assess and improve their
security, and the Coast Guard has not yet assessed the effectiveness of
those actions. The Congress directed DHS to begin vulnerability
assessments of those chemical facilities at highest risk and develop a
protection strategy for the chemical sector that includes clear,
measurable benchmarks for improving security and sharing lessons learned
throughout the sector. (GAO-05-327 )

2.9.C. Promoting Government Efforts to Address Emerging Security Threats:
In fiscal year 2005, we reported on three emerging information security
issues facing the federal government: security of wireless networks in the
federal government; information security of third-party services; and
emerging cybersecurity threats, such as spam, phishing, spyware, and
malware. We found that agencies generally were not effectively applying
the requirements in the Federal Information Security Management Act of
2002 (FISMA) to protect and maintain the confidentiality, integrity, and
availability of their information and information systems. Also, we noted
that by relying on a contractor's assessment of an agency's information
systems, an agency official may not obtain a clear understanding of the
effectiveness of security controls or be assured of the validity of the
responses without independent testing. The Office of Management and Budget
(OMB) recognized the significance of our findings and took immediate
action, implementing several recommendations. Specifically, OMB made key
changes to improve its fiscal year 2005 FISMA reporting instructions to
the federal agencies, including (1) specifying that self-reporting by
contractors does not meet agencies' FISMA requirements to ensure the
security of their information systems and (2) requiring agencies to report
on their policies and special procedures pertaining to new technologies
and emerging threats, including wireless, spyware, and malware. OMB's
actions could help to focus federal agencies' efforts to address and
mitigate these emerging information security issues. ( GAO-05-231 ,
GAO-05-362 , and GAO-05-383 ) 2.10.C. Improving Policies and Oversight
Needed for TSA's Designation of Sensitive Security Information: In June
2005, we reported that TSA lacked guidance and procedures, aside from the
regulations themselves, for determining what constitutes sensitive
security information. TSA also lacked a system of internal controls to
ensure that the sensitive security information designation is being
appropriately applied. It is clearly very important that some information
related to threats to or protection of our transportation systems be held
out of the public domain. However, it is also the case that the public has
a legitimate interest and need for information related to threats and
vulnerabilities. While TSA has indicated that it was already in the
process of taking some steps to develop guidance and to institute internal
control procedures, our work reinforced the need to take steps to ensure
proper application of the sensitive security informa tion designation.
(GAO-05-677 )

2.11.C. Increasing Security of Cargo Containers to Prevent Smuggling of
Weapons of Mass Destruction: We identified a number of limitations in two
DHS programs designed to increase the security of cargo containers and
prevent terrorists from using such containers to smuggle weapons of mass
destruction into the United States. The department was reducing its
scrutiny of shipments from certain companies before it had assurances that
the companies had adequate security procedures in place. We also found
that not enough staff had been assigned to identify high-risk containers
at several key ports. In addition, the department did not have technical
requirements in place to assess the ability of foreign countries to
inspect the containers with scanning equipment. Finally, the department
had not developed performance measures to evaluate the performance of
these cargo container programs. In response to our recommendations, the
department agreed to improve its ability to assess company security
procedures, identify high-risk containers, inspect containers with
scanning equipment, and manage the programs overall. ( GAO-05-404 ,
GAO-05-466T, and GAO-05-557 )

2.12.C. Enhancing Government and Private Sector Critical Infrastructure
Protection Efforts: Critical infrastructure protection activities are
intended to enhance the security of the public and private infrastructures
that are essential to our national security, economic security, and public
health and safety. Critical infrastructures include energy, information
technology (IT) and telecommunications, water supply, and the defense
industrial base. Over the last several years, we helped promote the
progress made by federal agencies and nonfederal infrastructure sectors in
implementing the activities required and suggested by federal critical
infrastructure protection policy. For example, we highlighted where the
government needed to improve public health IT infrastructure, which
affects the nation's ability to respond to public health emergencies,
including bioterrorism. In May 2005, we reported on DHS's progress in
fulfilling 13 key cybersecurity-related critical infrastructure protection
responsibilities identified in law and federal policies. We noted that
while DHS has initiated multiple efforts, it has not fully addressed any
of the 13 key cybersecurity-related responsibilities, and it has much work
ahead in order to be able to fully address them. We also reported that DHS
faces a number of challenges that have impeded its ability to fulfill its
cyber critical infrastructure protection responsibilities. Key challenges
include achieving organizational stability, gaining organizational
authority, overcoming hiring and contracting issues, increasing awareness
about cybersecurity roles and capabilities, establishing effective
partnerships with stakeholders (other federal agencies, state and local
governments, and the private sector), achieving two-way information
sharing with these stakeholders, and demonstrating the value DHS can
provide. This work resulted in recommendations that DHS strengthen its
ability to implement key cybersecurity responsibilities by prioritizing
and completing critical activities and resolving underlying challenges.
(GAO-05-308 and GAO-05-434 )

Ensure military capabilities and readiness

2.13.A. Rebalancing Army Force Structure to Create Needed Units and Avoid
$3.4 Billion of Costs: In May 2001, we recommended that the Department of
the Army establish mission criteria to provide a firmer basis for its
strategic reserve, domestic support, and homeland defense requirements. At
the time of our review, the Army reported it was experiencing a
45,000-position shortfall in its warfighting force, and we were concerned
that the Army might not be making the best allocation of its available end
strength among all of its mission requirements. In response, the Army
programmed force structure changes affecting 34,018 spaces over the period
covering fiscal years 2004 through 2009, increasing available units for
military police, military intelligence, special forces, chemical, civil
affairs, and psychological operations. Army officials agreed that these
actions have created a substantial cost avoidance of at least $3.4 billion
because the Army was able to rebalance the force to create needed units,
with minimal increases in authorized end strength. ( GAO-01-485 )

2.14.A. Improving DOD's Weapon Acquisition Process: Since 1990, we have
designated DOD's weapon acquisitions as a high-risk area due largely to
persistent cost increases, schedule delays, and performance shortfalls. In
our March 2005 report on 54 weapon acquisition programs, which represent a
total investment of over $800 billion, we noted significant cost growth
and schedule delays-largely the result of programs not complying with
DOD's policy on demonstrating high levels of technology, design, and
production knowledge before key program commitments were made. Just 4
years ago, the largest 5 programs cost about $281 billion; today, in the
same base year dollars, the largest 5 programs cost about $521 billion. In
light of these facts, the Congress called for more oversight and better
outcomes from weapon system programs. In response, DOD established the
Defense Acquisition Performance Assessment Project to assess every aspect
of the current acquisition system and provide a road map for restructuring
DOD's weapon acquisition system. Additionally, the Air Force has been
directed to take actions to improve its software development practices, as
our work demonstrated that additional controls would help increase
successful outcomes of complex software-intensive weapon systems. (
GAO-04-393 and GAO-05-301 )

2.15.A. Contributing to Properly Funding the Military's Needs: We reviewed
the reasonableness of DOD's fiscal year 2005 budget request, its use of
budgeted funds in prior years, and its future resource needs. By the end
of September 2004, we identified billions of dollars in potential costs
avoided and opportunities for DOD to improve its internal oversight of the
use and tracking of funds. Overall, our work contributed to multiple
actions that resulted in total financial benefits of about $2.4 billion.
Specifically, our work analyzing various aspects of DOD's operation and
maintenance budget request for fiscal year 2005 resulted in the Congress
reducing DOD's budget by almost $2 billion because of high unobligated
balance levels and an overstatement of need in the civilian pay budget
request. For example, our papers assisted the Congress in identifying
funds not used by providing analyses of average unobligated balances for
fiscal years 1999 through 2003 and the unexpended balances canceled and
reverted to the U.S. Treasury for fiscal years 1994 through 1998. The
congressional conferees subsequently reduced DOD's fiscal year 2005
operation and maintenance budget by $833.1 million for the active and
reserve military components and defense agencies. We also reported that
the Defense Emergency Response Fund for the war on terrorism continued to
maintain a high level of unobligated funds for several years. Based on our
continued monitoring of these funds, the Congress directed DOD to transfer
about $130 million in unobligated funds to the Iraqi Freedom Fund. Our
past work also prompted DOD to become more engaged in managing its
contracts looking for opportunities for greater economy and efficiency.
The Army estimated that by adopting our recommendations for increased
monitoring, it was able to save over $300 million in its Balkan support
contracts. ( GAO-05-328 )

2.16.A. Improving the Outcomes of DOD's Aircraft System Acquisitions:
DOD's F/A-22 Raptor, Joint Strike Fighter, Global Hawk Unmanned Aerial
Vehicle, and E-10A Command and Control Aircraft programs-which together
represent about a $322 billion investment-have not captured key knowledge
early enough to efficiently and effectively manage program risks. Since
the F/A-22's inception in 1986, the Air Force has planned for large
investments in new capabilities without developing a new business case to
justify these investments or aircraft quantities. The Joint Strike Fighter
program has encountered serious design problems that required major
changes to reduce the weight of the aircraft, and further design changes
are likely. Delayed delivery, as well as reduced quantities, of both the
F/A-22 and the Joint Strike Fighter could require existing aging aircraft
to remain in the inventory longer. The Global Hawk program has been
restructured twice to develop and produce a new and larger aerial vehicle
in half the time originally planned. The accelerated schedule depends on a
risky acquisition strategy that has already resulted in cost increases,
schedule slippages, and performance trade-offs. Consistent with our
recommendations, the Congress is considering

(1) funding reductions that would slow Joint Strike Fighter development to
allow the program to mature and (2) decreased procurement of the Global
Hawk until a new acquisition strategy that reduces risk and justifies
further investments is completed. Our review of the E-10A program raised
questions about the overall business case for the program as well as DOD's
strategy to make important decisions before critical knowledge about the
aircraft's design, manufacturing, and reliability was known. DOD
subsequently reduced the program's budget by a total of $600 million and
delayed the program by 5 years until it could demonstrate more knowledge
about the aircraft. ( GAO-05-6 , GAO-05-271 , GAO-05-273 , GAO-05-304 ,
GAO-05-390T, and GAO-05-519T )

2.17.A. Improving DOD's Missile Defense System Acquisitions: DOD plans to
spend nearly $67 billion over the next 6 years to develop and field
ballistic missile defenses. The diverse set of technologies that must be
developed, integrated, and deployed across an array of land-, air-, sea-,
and space-based platforms makes this system a challenging and risky
endeavor, as evidenced by recent test failures and the delayed activation
of an initial capability. Although DOD aims to place capabilities in the
hands of the warfighter more quickly and with the flexibility to respond
to an evolving threat, DOD has been unable to deliver the quantities
promised within the original cost estimates- due in part to a lack of
knowledge about the emerging technologies. Additionally, the year-to-year
variability of the program's goals has made congressional oversight of the
execution of this program difficult. Based on our reporting of these
issues since 2003, DOD has taken a more knowl-edge-based approach to
developing an element of the system. Over a 5-year period-from fiscal year
2005 through fiscal year 2009-program funding will be reduced by about
$5.2 billion, which has a present value of about $4.7 billion. DOD has
also taken specific actions to ensure that the fielded system is
adequately tested and that the Congress has adequate information to
conduct oversight of this large and complex program. ( GAO-03-441 ,
GAO-04-409 , and GAO-05-243 ) 2.18.A. Improving DOD's Acquisition Business
Processes: For fiscal year 2003, the Congress appropriated $47 billion to
the military departments and the Missile Defense Agency for defense
research and development-$3.8 billion dollars of which DOD subsequently
shifted, or reprogrammed, from one research and development account to
another or temporarily withheld. Although the Congress permits such
reprogramming, we found that programs had reprogrammed funds multiple
times and some had inflated their budget requests in anticipation of
funding adjustments. At the same time, reporting on reprogrammed funds has
been of limited use in terms of content and timing. As a result of our
work, the Congress has taken action to end inappropriate reprogramming
practices and to provide detailed and timely data on reprogramming and
withholding activity. The Congress is considering restricting DOD's
ability to rebaseline programs-a practice we found reduced cost increases
below the threshold that would trigger required reporting to the
Congress-as well as directing DOD to analyze alternatives to weapon system
programs that exceeded their original cost baselines by more than 15
percent. ( GAO-04-944 and GAO-05-182 )

2.19.C. Improving the Outcomes of Land System Acquisitions: The Army's
Future Combat Systems-a networked suite of light and agile weapons and
other systems-is, in the Army's words, the "greatest technology and
integration challenge the Army has ever undertaken." An investment of well
over $100 billion, we found that this program is at significant risk for
not delivering required capability within cost and schedule estimates.
Nearly 2 years after program launch and with $4.6 billion invested,
requirements are still changing and only 1 of the system's more than 50
technologies has sufficiently matured. Based on our findings, the Congress
has begun to take action to restrict funding for key program elements
until certain requirements have been met and demonstrated, and to require
independent analyses of the rationale and cost of additional requirements
for the systems. Significantly enhanced communications and networking
capabilities are also critical to the Future Combat Systems' success.
However, we have reported that each of the key communications programs is
struggling to meet ambitious sets of user requirements and steep technical
challenges within highly compressed schedules. In particular, the Joint
Tactical Radio System program has been unable to mature and integrate
technologies and come up with an effective design to meet key
require-ments-delaying the delivery of capabilities to the warfighter. As
a result, the program is significantly over cost and behind schedule, and
DOD is considering options for restructuring it. In light of our findings,
the Congress has proposed reducing the funding for the program in fiscal
year 2006 and introduced legislation requiring DOD to strengthen the
management and oversight of the Joint Tactical Radio System development
efforts and to report on its plans for restructuring the program.
(GAO-05-442T and GAO-05-669 )

2.20.C. Improving the Outcomes of DOD's Sea System Acquisitions: The
Navy's DD(X) Destroyer is designed to be an advanced, multimission ship
that will support forces ashore. The first ship is expected to cost over
$3 billion. However, as the program approached two key milestones, it was
clear that the destroyer's demanding requirements and time frames
presented substantial challenges that greatly increased the risk of cost
overruns, schedule delays, and degraded performance. As a result of our
work, the Congress is considering rescinding fiscal year 2005 funds for
the program and delaying approval of advance procurement funds for fiscal
year 2006. The Navy is also developing a new class of surface warship-the
Littoral Combat Ship-that is being designed to use helicopters, unmanned
vehicles, and other systems that operate at a distance from the ship and
that can be rapidly reconfigured to accomplish specific mine,
antisubmarine, and surface warfare missions. However, like the destroyer,
this program's requirements, operations, and technology created a number
of challenges so that within the program's tight schedule between the
delivery of the initial version of the ship and subsequent-and more
sophisticated- versions, there would be little time to draw on lessons
learned. As a result of our work, the Congress has begun to take action to
limit the Navy's ability to procure subsequent versions until the results
of an operational evaluation of the initial version is completed and the
Navy has reported on its acquisition strategy for the subsequent versions.
(GAO-04-973 , GAO-05-255 , GAO-05-752R , and GAO-05-924T ) 2.21.C.
Highlighting Issues Confronting DOD in Managing Its Facilities
Infrastructure: For several years, our reports on DOD infrastructure have
frequently cited the underfunding of maintenance and repairs, resulting in
the deterioration of facilities, and the negative effects on the quality
of life for those living and working at military installations and on
their ability to accomplish their mission activities. Our July 2005 report
on DOD's selection process and recommendations for its 2005 round of base
realignments and closures indicated the process followed was generally
logical, was reasoned and well documented, and has the potential for
financial benefits and some reductions in excess infrastructure capacity;
however, mechanisms will be needed to monitor implementation of finalized
recommendations to validate and periodically update projected financial
benefit estimates. In June 2005, we recommended that DOD resolve
long-standing inconsistencies among the services' definitions of base
operations and support functions and expedite development and consistent
application of a model for determining requirements. Also in June 2005, we
reported that military training ranges are in varying degrees of
degradation or lacked the necessary upgrades to meet training needs. DOD
concurred with our recommendations that focused on the need for a more
comprehensive approach for addressing deficiencies to ensure that its
military ranges are sustainable and modernized, provide for more realistic
training, and achieve DOD's transformation goals. Finally, our May 2005
report on DOD's efforts to privatize its utility systems found that the
department's economic analyses supporting individual utility privatization
decisions gave an unrealistic sense of financial benefit to a program that
generally increases government costs in order to pay contractors for
enhanced services and capital improvements. We made several
recommendations to help ensure the reliability of future analyses and to
improve the implementation and oversight the program. ( GAO-05-433 ,
GAO-05-534 , GAO-05-556 , and GAO-05-785 )

2.22.C. Contributing to Congressional Oversight of Transformation of the
Armed Forces: Transformation is one of three top priorities of the
National Military Strategy. DOD's transformation includes a number of
efforts to adopt new operational concepts, restructure forces, and
rebalance its active and reserve components in order to prepare the force
to meet future global challenges. We contributed to congressional
oversight of DOD's transformation plans by reporting on three key areas:
DOD's New Triad, which defines the strategic capabilities that play a
critical role in defending the United States; the Army's modular force
initiative; and DOD's initiatives to rebalance active and reserve forces.
First, we reported on the need for greater visibility of projected
spending and future investments for DOD's New Triad. The New Triad is an
effort by DOD to significantly change its definition and conceptual
framework for its strategic capabilities to include not only the nuclear
capabilities, but also offensive conventional strike forces, active and
passive defenses, and a revitalized defense infrastructure. Second, we
testified on the Army's efforts to convert its division-based force to a
modular brigade-based force-considered to be the most significant
restructuring of the Army since World War II. We noted that the Army will
be challenged to provide its new modular units with some required skilled
personnel and equipment needed to achieve planned capabilities. We also
reported on the services' plans to move servicemembers to high-demand
specialties and noted that the plans are not fully developed and funding
has not been identified to implement the planned changes. Finally, we
reported that the Army's current policy of maintaining its reserve forces
at low levels of readiness has resulted in unplanned and ad hoc transfers
of personnel and equipment to deploying units, which have degraded the
ability of nondeployed units to prepare for future overseas or homeland
missions. ( GAO-05-21 , GAO-05-200 , GAO-05-443T, GAO-05-540 , GAO-05-660
, and GAO-05-962R )

2.23.C. Contributing to Improved Warfighter Support and Readiness: We
identified five systemic deficiencies in the way DOD's supply chain
provided support to U.S. troops in Iraq that led to shortages of tires,
batteries, body armor, up-armored high-mobility multipurpose wheeled
vehicles and armor kits, and other items. DOD's ability to achieve its
goal of providing sufficient numbers of the right items at the right time
to meet the warfighter's needs was impeded by inaccurate Army war reserve
spare parts requirements, inaccurate supply forecasts, insufficient and
delayed funding, delayed acquisition, and ineffective distribution. We
recommended that DOD take numerous actions to enhance logistics support to
deployed forces, such as update war reserve models and run them annu-ally
to determine war reserve requirements, develop models for computing supply
requirements for operations and provide the item managers with timely
information for making supply decisions, assess the industrial-base
capacity to meet updated demands for critical items, clearly state who has
responsibility and authority for synchronizing supply distribution from
the United States to deployed units during operations, and establish
common supply information systems that can requisition and match incoming
supplies to facilitate expeditious and accurate distribution. ( GAO-05-275
)

2.24C. Contributing to Congressional Oversight of the Development and
Design of DOD's National Security Personnel System:

DOD's new personnel management system-the National Security Personnel
System-will have far-reaching implications for civil service reform across
the federal government. If designed and implemented properly, this system
could serve as a model for governmentwide transformation in human capital
management. The 2004 National Defense Authorization Act gave DOD
significant flexibilities for managing more than 700,000 defense civilian
employees. In February 2004, DOD and the Office of Personnel Management
(OPM) released for public comment the proposed regulations for the new
system. We contributed to the debate by providing the Congress with timely
information and testimony on the far-reaching implications that DOD's new
personnel management system will have, not just for the management of the
department, but for civil service reform across the federal government.
For example, the Comptroller General testified on our preliminary
observations on DOD's proposed National Security Personnel System
regulations in such areas as pay and performance management, adverse
actions and appeals, and labor-management relations; the multiple
challenges DOD faces in implementing the new system; and a governmentwide
framework to advance human capital reform. In addition, our written
products on DOD's efforts to design its new personnel management system
helped the Congress monitor and assess the progress of DOD's
implementation effort. (GAO-05-432T, GAO-05-517T, GAO-05-559T, GAO-05-641R
, GAO-05-770R , GAO-05-771R , and GAO-05-730 ) 2.25.C. Helping Shape the
Debate on Improving Military Compensation: The cost to provide military
compensation-which includes a myriad of pays, benefits, and deferred
compensa-tion-has grown steeply in recent years. This upward cost trend is
especially dramatic for certain military-related entitlements, like
providing lifetime health care for retired members and their families. The
growth has been somewhat obscured, however, because the total cost of
military compensation is scattered around the federal budget, leaving the
Congress with an incomplete picture of the true costs. We reported in July
2005 that the cost to the government for providing active duty
compensation had grown by fiscal year 2004 to about $158 billion, or
approximately $112,000 for each active duty member. More than half these
costs were for benefits and deferred compensation, such as retirement and
health care. DOD's approach is inefficient and may not be appropriate for
meeting the human capital demands facing the military in the 21st century.
Moreover, it has left many military members unsatisfied with their pay and
benefits, despite their large and growing costs. Our work has served to
stimulate and shape the debate within the executive branch. For example,
the Comptroller General in July 2005 briefed the Defense Advisory
Committee on Military Compensation. Our findings also alerted the
President, the Congress, and the American people that DOD's approach may
not be affordable in the longer term, especially when considered against
the inevitable fiscal constraint facing the military and the nation.
People are an organization's most important asset, but DOD must balance
its investments across a wide range of programs, including infrastructure
and hardware. Like many other federal programs described in our report
entitled 21st Century Challenges: Reexamining the Base of the Federal
Government, we believe military compensation is an area for reexamination.
( GAO-05-325SP and GAO-05-798 )

2.26.C. Influencing DOD's Plan to Improve Supply Chain Management: In
April 2005, the Director of OMB testified his agency agreed that fixing
the management deficiencies highlighted by our high-risk report has the
potential to save billions of dollars, dramatically improve service, and
strengthen public confidence and trust in the performance and
accountability of government. He then announced a DOD, OMB, and GAO
collaborative effort to reduce DOD's supply chain manage-ment risk level.
To more efficiently and effectively supply support to the warfighter, DOD
would prepare a plan for improving the visibility over supplies, the
accuracy of supply forecasting, and the seamless distribution of supplies
in support of deployed forces. Since then, DOD has been developing its
plan for improving management practices and soliciting comments from OMB
and GAO on its format and content. The draft plan cites goals, specific
focus areas for improvement, the responsible organizations, baseline
metrics and data for measuring progress, performance targets for fiscal
years 2005 through 2007, and details on 10 specific initiatives it expects
will contribute to achieving these targets. We are waiting for DOD to
finalize and fully implement the plan. (GAO-05-207 )

2.27.C. Improving the Use of Private Security Providers in Iraq: The
United States is spending billions of dollars to reconstruct Iraq while
combating an insurgency that has targeted military and contractor
personnel and the Iraqi people. This environment, coupled with the fact
that providing security for agencies and contractors is not part of the
U.S. military's stated mission, created a need for

U.S. government agencies and reconstruction contractors to obtain
substantially more security services than are typically needed when
operating in other countries. Our work found that neither the agencies nor
the reconstruction contractors were fully prepared to address this need.
As a result, contractors had difficulty obtaining suitable security
providers, and coordination between the military and private security
providers continued to be problematic. In addition, agencies had limited
data on the role, cost, and implications of using private security
providers in Iraq. Our work provided the Congress information to increase
its understanding of the issues associated with using private security
providers to support reconstruction efforts and prompted DOD and other
reconstruction agencies to initiate efforts to address the issues we
identified. (GAO-05-737 )

2.28.C. Improving the Outcomes of DOD's Space System Acquisitions: In
fiscal year 2006 alone, DOD expects to spend almost $20 billion to develop
and procure satellites and other space systems. These systems collect
information on the capabilities and intentions of potential adversaries
and enable U.S. military forces to be warned of missile attacks and to
communicate and navigate while avoiding hostile actions, making them
increasingly critical to every facet of military operations as well as the
U.S. economy and homeland security. DOD's introduction of these important
capabilities over time has not come without difficulties. Space system
acquisitions have experienced problems over the past decade that have
driven up costs by billions of dollars and delayed the delivery of needed
capabilities to the warfighter. Since 2003, we have pointed out that DOD's
acquisition policies and processes have not fostered a disciplined,
knowledge-based approach to acquisitions. In response to our reports, DOD
revised its policies and processes to increase the knowledge about space
programs before investment decisions are made, and the Congress has held
hearings on how to get better outcomes from space system acquisitions.
(GAO-05-570R and GAO-05-891T )

2.29.C. Improving Management of Funding for the Global War on Terrorism:
We recently reviewed the reasonableness of DOD's fiscal year 2005
supplemental budget request to support the Global War on Terrorism, its
use of budgeted funds in prior years, its future resource needs, and the
status of its war expenditures. We identified significant problems with
DOD's processes for recording and reporting costs related to the war,
raising concerns about the reliability of cost data used by DOD and the
Congress in determining future funding needs. We also reported separately
on the adequacy of supplemental appropriations for the war, identifying
gaps between funding and war-related expenses, and the various actions DOD
took to cover the difference, including deferring programs, to free up
funds to help cover the gaps. We found that DOD had not considered using
all available funds that were intended to support the war. If DOD had done
so, it could have reduced or eliminated the gaps. We made several
recommendations to help improve the reliability of DOD's cost reporting.
In response, DOD has taken a range of corrective actions, including
revising pertinent guidance, correcting recording errors, and establishing
new methods for determining and reporting costs. (GAO-05-767 and
GAO-05-882 )

2.30.C. Improving Management of DOD's Business Transformation Efforts: DOD
spends billions of dollars to sustain key business operations intended to
support the warfighter, including systems and processes related to the
man-agement of contracts, finances, the supply chain, support
infrastructure, and weapons systems acquisition. DOD has embarked on a
series of efforts to reform its business operations, including modernizing
underlying IT business systems. However, serious inefficiencies remain.
The areas of DOD's overall management approach that remain high risk
include business transformation; business systems modernization; contract,
financial, supply chain, and support infrastructure management; and weapon
systems acquisition. Furthermore, limitations in DOD's approach to
strategic planning and budgeting hinder its efforts to transform military
capabilities and supporting business operations. During this fiscal year,
we reported and testified on inefficiencies in DOD's business operations,
such as the lack of sustained leadership, the lack of a strategic and
integrated business transformation plan, and inadequate incentives. In
particular, we pointed out the need for DOD to establish a chief
management official to lead the department's overall business
transformation efforts. In response to our work, DOD has acknowledged the
need for better leadership accountability and has designated a senior
official to be the focal point for business transformation. It has also
stated that it is developing a plan to guide key business reform efforts.
We will continue to monitor DOD's efforts in these areas. ( GAO-05-140T,
GAO-05-207 , GAO-05-520T, and GAO-05-629T )

Advance and protect U.S. international interests

2.31.A. Designating American Samoa as a High-Risk Grantee: After the
Congress cited our December 2004 report and its recommendations, the
Deputy Assistant Secretary of the Interior announced in June 2005 that the
department was designating the American Samoa government as a high-risk
grantee as a tool to encourage other federal agencies to support the
fiscal reform process in American Samoa. We had assisted the Congress in
drafting language for a congressional report that would implement our
recommendation. According to the report, the committee had reviewed our
recent report concerning accountability for federal grants to American
Samoa and urged the Secretary to use his authority to encourage other
agencies to consider designating American Samoa a high-risk grantee. In
order to be removed from high-risk category, the American Samoa government
will have to satisfy three conditions: (1) complete single audits by the
statutory deadline, resulting in materially clean opinions, for 2
consecutive years; (2) have a balanced budget for 2 consecutive years,
without regard for nonrecurring windfalls such as insurance settlements;
and (3) remain in compliance with the memorandum of agreement executed
with the Department of the Interior in 2002, as well as the related fiscal
reform plan. (GAO-05-41 )

2.32.A. Strengthening the Visa Process as an Antiterrorism Tool: Using our
work as a primary guide, the Department of State (State) has strengthened
the visa process as an antiterrorism tool. State issued guidance
emphasizing national security as the department's first priority in the
visa process; developed more than 80 standard operating procedures to
ensure that consular officers properly review visa applications,
effectively fulfill their national security responsibilities, and have a
step-by-step, unambiguous guide for all procedures; established special
teams to visit posts and reinforce standard operating procedures and
management practices; and developed and enhanced training on analytic
interviewing techniques, fraud prevention, counterterrorism, and the use
of the Consular Lookout and Support System to check names on visa and
passport applications. ( GAO-03-132NI )

2.33.A. Improving Programs to Protect Internally Displaced Persons: In
response to our work, the United Nations established a specific division
to coordinate overall efforts to assist internally displaced persons-those
forced to flee their homes because of armed conflict and persecution but
who remain within their own country. The United Nations High Commissioner
for Refugees (UNHCR) conducted a detailed review of its efforts to assist
and protect displaced persons and, according to State officials, has
implemented a more robust response for internally displaced persons.
Ending a bureaucratic stalemate that lasted several years, the United
States Agency for International Development (USAID) was designated the
lead U.S. agency for internally displaced persons and instituted triweekly
coordination meetings with State. In response to our recommendation that
the Secretary of State strengthen international organizations' protection
efforts by implementing training programs and forming country-level
protection working groups, United Nations' organizations, U.S. government
agencies, and nongovernmental organizations implemented internally
displaced persons training programs for their staff. Also, according to
State and USAID officials, country-level protection working groups are
standard practice in countries with refugees and internally displaced
persons. For example, in Sudan there are three protection working groups
in Darfur. Finally, in response to our recommendations that the Secretary
of State include a focus on internally displaced persons in annual
reporting, State increased the breadth and scope of internally displaced
persons reporting in its annual human rights report. State also improved
the reporting format on internally displaced persons' issues by
concentrating the bulk of its findings into one section of the individual
country reports and harmonizing report language. ( GAO-01-803 )

2.34.A. Improving Efforts to Employ U.S. Citizens at United Nations'
Organizations: In response to our recommendations for increasing efforts
to achieve equitable representation of Americans employed in United
Nations' organizations, State has undertaken several actions. Beginning in
2002, State incorporated U.S. employment targets for the United Nations
and a strategy for implementing those targets in its performance and
accountability report. State's recruitment strategy includes establishing
and coordinating governmentwide efforts, promoting the detail and transfer
of federal employees, and working with United Nations' agencies to
encourage their hiring of more Americans. Also, State directed its
missions to United Nations' organizations to redouble their efforts to
promote increased U.S. representation on the staffs of United Nations'
agencies by meeting with each of the heads of the major United Nations'
agencies for which they were responsible. Each mission received specific
guidance on what either the prescribed geographic distribution targets or
negotiated targets were for each organization. As part of this effort,
State provided each mission the department's annual reports to the
Congress on efforts by the United Nations to employ Americans with
specific instructions to share the report with United Nations' officials
and encourage better recruitment of U.S. citizens. Consequently, some
United Nations' agencies are more aware of U.S. employment issues and have
taken strides to ensure that the United States does not fall below its
geographical target. For example, because many of their U.S. employees
will be eligible for retirement soon, the Secretariat has invited the
United States to offer the National Competitive Recruitment exam. (
GAO-01-839 )

2.35.A. Improving Information on International Development Results: As a
result of our work, USAID reported that it aggregated performance data for
agencywide reporting in sectors where data are sufficiently comparable to
use as common indicators. We recommended that USAID's Administrator
provide clearer evidence of progress toward achieving agency outcomes,
including, where possible, aggregate performance results across agency
objectives and the activities under them. Although USAID reported that it
made progress toward achieving the selected outcomes, the extent of the
progress was unclear because the agency based its support on disaggregated
and, in some cases, out-of-date and selective data. (GAO-01-721 )

2.36.A. Improving Reporting of Microenterprise Results: USAID uses
information from its Microenterprise Results Reporting system to prepare
annual reports. This system was created to track USAID's funding and
program data related to small, informally organized businesses, called
microenterprises. In response to our recommendations to improve the
accuracy and completeness of its annual reports, USAID has undertaken
several corrective actions that included adding language citing the
limitations of its data on outreach to the poor and improving the
collection, analysis, and reporting of data on meeting its spending
targets. For example, it issued new guidance on what information should be
collected, added requirements to perform spot checks on the data to
improve accuracy, provided better instructions to clearly stipulate what
portion of USAID assistance to institutions can be reported as
microenterprise funding, and added clarifications in its annual report to
better inform the reader of USAID's contribution to the institutions.
Additionally, USAID took several actions to improve the completeness and
accuracy of its reporting on microfinance institution sustainability.
These actions include a requirement that each institution explain its
sustainability calculations, that USAID review and follow up on
problematic calculations, and that annual reports highlight the variance
in sustainability reporting.

Finally, USAID's report will now indicate that USAID funding alone is not
responsible for the accomplishments highlighted. ( GAO-04-171 )

2.37.A. Improving Workforce Planning at USAID: In response to our
recommendation that the USAID Administrator develop and institutionalize a
strategic workforce planning and management system to help the agency plan
for changes in its workforce and continue operations in an uncertain
environment, USAID initiated a comprehensive workforce analysis and
planning effort to predict workload and staffing demands for the future,
identify current workforce gaps, and develop necessary solutions to close
those gaps. The workforce plan institutes a process that will allow the
agency to project its staffing requirements and to develop targeted
initiatives to meet those requirements. Plans have been made to integrate
the workforce planning model and its results into other agency planning
processes. We reported that USAID's ability to deliver foreign assistance
in an uncertain environment was becoming increasingly difficult as a
result of several human capital vulnerabilities, such as its ad hoc
approach to workforce planning. (GAO-03-946 )

2.38.A. Significantly Reducing the Wait for Student Visas: As a result of
our work, science students and scholars should be able to obtain visas
significantly faster now than in 2004. In response to our recommendation,
the Secretary of State, in coordination with the Director of the Federal
Bureau of Investigation, the Secretary of Homeland Security, and others,
reduced the length of time it takes for science students and scholars to
obtain visas by taking several actions to improve the program and shorten
the time allotted for security checks from 56 days to 15 days. For
example, State and an intelligence agency agreed that the agency would
reduce its response time from 15 to 10 days. (GAO-04-371 and GAO-05-198 )

2.39.A. Expanding Refugee Protection: State worked with UNHCR to respond
to our recommendations to reform elements of UNHCR's human capital
management, including its staffing system, in order to better protect
refugee women and girls from sexual abuse and violence. Specifically,
UNHCR implemented a new personnel rotation policy to fill positions at
hardship posts, began a pilot program to provide training on protection
for nongovernmental organizations working with UNCHR in the field,
institutionalized a project to fill staffing gaps, and included
discussions on the prevention of sexual exploitation of refugee women and
girls at meetings and in an annual report. State urged UNHCR to undertake
these changes and contributed funding for projects to provide training on
protection and provide UNHCR with personnel to fill staffing gaps.
(GAO-03-663 )

2.40.A. Developing More Comprehensive Interagency Strategic Plans for
Democracy Assistance: In response to our work, USAID and State included in
their first jointly prepared strategic plan a strategic goal of advancing
the growth of democracy and good governance. The plan refers to working
with key partners and crosscutting programs and highlights key areas of
focus, including promoting the rule of law and developing governance and
human rights infrastructures. The two agencies also (1) established a
joint policy council to ensure that interagency coordination is
implemented at the working level and (2) are developing a common tool at
the country level to reflect strategic planning. USAID also held training
sessions for democracy officers aimed at enhancing the quality of
democracy programs by providing exposure to the latest academic thinking,
programming from other regions, and comparison among similar approaches
now being undertaken in Latin America. ( GAO-03-358 )

2.41.A. Improving the Accountability and Effectiveness of Microenterprise
Programs:

In response to our recommendations intended to improve program
accountability and effectiveness, the House International Relations
Committee crafted legislation to improve the accountability and impact of
microeconomic development funds. Specifically, the Congress noted that
USAID is not currently organized to adequately coordinate, implement, and
monitor such programs. The Congress passed the Microenterprise Results and
Accountability Act of 2004 in December 2004. The law required USAID to
establish an Office of Microenterprise Development and implement a program
of central funding in order to improve program effectiveness,
accountability, and efficiency. ( GAO-04-171 ) 2.42.A. Reducing the Amount
Requested for the Millennium Challenge Account: Our work contributed to
the Congress's decision to appropriate $1.5 billion for the Millennium
Challenge Account in fiscal year 2005-a reduction of $1 billion from the
President's request. In March and June 2004, we provided budget papers and
follow-up briefings to the Congress to help it assess the Presi-dent's
$2.5 billion fiscal year 2005 budget request for the account, which is a
new foreign assistance program intended to provide economic assistance to
countries that demonstrate a commitment to ruling justly, investing in
people, and encouraging economic freedom. Our work made a unique
contribution by providing a framework for identifying the relationships
and trade-offs between funding levels, compact length, and numbers of
compacts under several illustrative scenarios. We showed the impact of
reducing the President's budget request by about $1 billion; suggested
that the Millennium Challenge Account could compensate for lower levels of
funding by reducing compact length, assistance target levels, or both; and
estimated the effect of funding compacts partly from future
appropriations. The fiscal year 2005 appropriations conference report
recommended that the account negotiate shorter duration compacts because
of budget constraints and directed it to fund compacts from existing
appropriations, rather than partially using future appropriations. (Based
on briefings)

2.43.A. Improving Consultation on United Nations' Peacekeeping: In
September 2001, we recommended that the Secretary of State provide the
Congress with timely, detailed, and complete information about shortfalls
for new or substantially revised peacekeeping operations and plans to
mitigate the shortfalls. In response, State has provided detailed
briefings to the Congress each month about new or substantially revised
operations and the issues that confront the department. Also, in its
notifications to the Congress, State now includes discussions about the
shortfalls in operations and the steps to mitigate them. ( GAO-01-917 )

2.44.A. Improving Oversight of the Multinational Force and Observers
(MFO):

We recommended that State ensure that staff with accounting expertise
carry out financial oversight responsibilities for MFO-the body that
monitors the peace treaty between Egypt and Israel-and that State's MFO
Advisory Board should monitor and document State compliance with its
oversight guidelines. In response, the board included representatives from
State's IG to review MFO audits and adopted a mission statement to ensure
adequate and documented review and analysis of MFO's activities and budget
in accordance with established guidelines. State's IG reviewed MFO's
latest annual external audit and financial statements in August 2004 and
found no problems. A State official said that the IG will routinely
participate on the board and will check on the quality of MFO's audits
through an annual review of MFO-audited financial statements and relate
them to prior years' statements. Moreover, any irregularities will be
brought to the attention of State bureaus. We noted that State had not
provided employees who possess the expertise to carry out many of its
financial oversight responsibilities for MFO. ( GAO-04-883 )

2.45.A. Improving USAID's Caribbean Housing Reconstruction Program: Based
on our observations, USAID and its primary contractor for housing refined
their selection criteria and implemented mechanisms to make sure only
those most in need obtained assistance. We are concurrently monitoring the
progress of USAID's efforts to repair damage in Grenada, Jamaica, and
Haiti caused by several hurricanes. We had previously identified
weaknesses in the selection process, observing that the contractor did not
have mechanisms for staff conducting site inspections to verify that
people applying for housing assistance were only those in most need.
(Based on a briefing)

2.46.A. Improving Counternarcotics Assistance to Colombia: In response to
our recommendations, State and DOD provided a report to the Congress
detailing support for U.S. counternarcotics assistance to Colombia,
including funding, training, maintenance, and logistics for the
U.S.-provided helicopters. A subsequent DOD white paper also outlined
timeliness, planning, and coordination to eventually turn operations and
maintenance responsibilities over to the Colombians. We recommended that
the Secretaries of State and Defense (1) determine training and logistical
support requirements and identify future funding sources to support the
U.S.-provided helicopters and other major equipment items already
delivered to Colombia and (2) complete U.S. implementation plans and
coordinate with Plan Colombia-Colom-bia's integrated strategy to meet its
most pressing challenges, including combating the narcotics industry-so
that any future U.S. assistance is adequately supported and plans for its
use are clearly identified and agreed to. (GAO-01-26 )

2.47.C. Strengthening Accountability at the Global Fund: Based partly on
our work, legislation was introduced that would make 25 percent of the
U.S. contribution to The Global Fund to Fight AIDS, Tuberculosis, and
Malaria conditional on the Secretary of State's certification that the
fund has undertaken certain actions, including actions to

(1) establish clear progress indicators upon which to determine the
release of incremental disbursements, (2) release such disbursements only
if positive results have been attained based on these indicators, and (3)
provide support and oversight to country-level entities to enable them to
fulfill their mandates. ( GAO-05-639 )

2.48.C. Overseeing the United Nations' Reform and the Oil for Food
Program: Earlier this year, we testified before the Congress that the
United Nations had not assessed the status and impact of its reforms or
developed a system to monitor and evaluate program results. We also
identified 702 findings and 667 recommendations in the 58 internal audit
reports of the Oil for Food program in Iraq but noted several limitations
on scope and authority. Partly on the basis of our work, the Congress
introduced a bill requiring reforms in the United Nations' accountability
and directing us to review the implementation of United Nations reforms.
The Congress also cited our report on United Nations reform efforts in a
draft United Nations reform bill. (GAO-05-346T and GAO-05-392T )

2.49.C. Identifying Challenges to Efforts to Stabilize and Rebuild Iraq:
We identified the challenges to U.S. efforts to stabilize Iraq,
reconstruct Iraq's essential infrastructure, and support its elections. We
reported that the United States has provided about $24 billion for these
purposes from fiscal years 2003 through 2005. Our analysis of Iraq's
security showed that the insurgency in Iraq has grown in intensity and
sophistication. Moreover, the difficulty in training and equipping Iraqi
forces and developing capable and loyal Iraqi leadership challenge efforts
to stabilize Iraq and withdraw U.S. troops. We found that U.S.
reconstruction efforts have made some progress in increasing Iraq's
electrical generation capacity, refurbishing oil facilities, restoring
some water treatment plants, and rehabilitating some health facilities.
However, as of May 2005, Iraq's crude oil production and power generation
were lower than before the 2003 conflict, and some completed water
projects were not functioning as intended. Moreover, reconstruction faces
significant challenges, such as rebuilding in an insecure environment,
ensuring that rehabilitated infrastructure is maintained after projects
are turned over to the Iraqis, and measuring program results. In the water
and sanitation sector, we recommended actions to improve U.S. efforts to
measure progress and impact and to help the Iraqis operate and maintain
new and repaired facilities. We also reported that the United States
provided about $130 million to support Iraq's elections. All these
findings were widely reported in the national media, helped inform
American taxpayers about U.S. efforts in Iraq, and provided the Congress
with crucial oversight information as it considers legislative action.
(GAO-05-431T, GAO-05-872 , GAO-05-876 , and GAO-05-932R )

2.50.C. BolsteringEfforts to Prevent Terrorists and Criminals from
Obtaining U.S. Passports: Our work uncovered alarming security gaps in
U.S. passport operations that made it more difficult to protect U.S.
citizens from terrorists, criminals, and others who would do harm to the
United States. We found that State was not receiving information from the
Terrorist Screening Center-estab-lished to, among other things, provide
continual operational support for thousands of federal screeners
worldwide-on certain persons listed in the federal government's
consolidated terrorist watch list and, therefore, could not integrate that
information into its name-check system. We also found that State was not
routinely obtaining the names of other individuals wanted by both federal
and state law enforcement authorities for various crimes-some very
serious. We made a number of recommendations for correcting these and
other systemic weaknesses that we identified in State's passport fraud
detection efforts. The Congress expressed grave concerns about the
security vulnerabilities we identified and, citing maintaining the
integrity of the U.S. passport as a critical component of our global
effort to fight terrorism, called upon State and the Department of Justice
(Justice) to implement our recommendations. The agencies have begun
implementing actions to close these critical security gaps. ( GAO-05-477
and GAO-05-853T )

Respond to the impact of global market forces on U.S. economic and
security interests

2.51.A. Using Better Measures for Trade Adjustment Assistance Outcomes: In
response to our recommendations to establish more effective measures of
desired outcomes of Trade Adjustment Assistance Centers, which were
established to assist firms that have been adversely affected by import
competition, Commerce established new measures to determine the percentage
of clients taking action as a result of the assistance facilitated by the
centers and the percentage of those actions taken by centers' clients that
achieved the expected results. Commerce subsequently reported that the
performance measures were established to determine the value added to the
centers, to further define the relevance of the assistance by the centers,
and to determine if the assistance facilitated by the centers is market
based. This responds to our second recommendation that Commerce apply
these measures as criteria to evaluate the effectiveness of the centers in
helping injured firms adjust to import competition. (GAO-01-12 )

2.52.A. Strengthening DOD's Anti-Tamper Program: U.S. weapons and
technologies that are exported, stolen, or lost or damaged during combat
and routine missions are vulnerable to reverse engineering and other
exploitations, which can weaken

U.S.
           military advantage, shorten the expected life of a system, and
           erode the U.S. industrial base's technological competitiveness. In
           an effort to protect

U.S.
           weapons and technologies from exploitation, in 1999 DOD
           established a policy directing each military service to implement
           anti-tamper tech-niques-a policy that has proven difficult to
           implement on individual weapon systems. Consistent with
           recommendations we made in March 2004, DOD issued a report that
           provides guidance to program managers about the relative cost and
           effectiveness of generic anti-tamper techniques. According to DOD,
           the guidance will help program managers consider anti-tamper
           technologies in the design, development, and fielding of their
           systems. (GAO-04-302 )

2.53.A. Improving Oversight of Trade Adjustment Assistance: We identified
expenditures of almost $1.7 million for training, trade readjustment
allowances, relocation, and job search allowances that were reported for
trade adjustment petitions that according to DOL's database, were not
certified and had been denied. Based on our analysis and recommendation,
DOL identified reports from 31 states that included petitions that had
been denied and asked the states to review their reports to determine
whether these were data entry errors or if benefits were wrongly paid. As
of March 2003, none of the states had identified any wrongly paid
benefits, according to DOL. Further, DOL stated that it has corrected all
errors that it has identified. ( GAO-01-59 and GAO-01-988T )

2.54.A. Improving Monitoring of Community Adjustment and Investment
Program: In response to our recommendation, Treasury set up a system to
monitor the number of jobs created or preserved by the borrowers of its
loans and loan guarantees, as well as by grant recipients, in distressed
communities under the Community Adjustment and Investment Program. The
program conducted its first survey of job creation and preservation
outcomes in September 2002 and plans to do its first survey of another
program soon. Grant recipients report quarterly and in a final report on
progress in meeting the annual goals. The Congress created the program in
December 1993 to assist communities suffering job losses due to changing
trade patterns with Mexico and Canada. (GAO/NSIAD-00-229 )

2.55.A. Ensuring Decisions to Transfer U.S. Weapons and Technologies to
Foreign Governments Are Adequately Informed: In 2001, transfers of U.S.
weapons and technologies to foreign governments totaled over $12 billion,
representing 46 percent of the world market share-a 15 percent increase
from 1997. Before transfers are approved, the U.S. government must first
determine if classified weapons or technologies can be released to the
requesting country according to criteria set out in the National
Disclosure Policy. To make this determination, a number of federal
agencies and committees assess a number of factors including the risks
that would be involved if a classified weapon or technology were to be
compromised or end up in unfriendly hands. These assessments are based, in
part, on intelligence infor-mation. However, in July 2003, we found that
the National Disclosure Policy Committee-which reviews and approves or
denies requests for exceptions to the National Disclosure Policy-was
operating with outdated Central Intelligence Agency risk assessments.
Acting on our recommendations, the committee's Executive Secretariat
requested that the Central Intelligence Agency provide updated risk
assessments for 23 countries. ( GAO-03-694 )

2.56.A. Improving Training under Trade Adjustment Assistance: The Congress
acted on our matters for congressional consideration when it passed the
Trade Act of 2002, inserting language to amend the Trade Act of 1974.
Specifically, the language (1) permits workers to receive payments during
breaks in training lasting up to 30 days, which allows workers to continue
to receive income benefits during unavoidable, extended interruptions in
training; (2) standardizes the training enrollment deadline for
trade-affected workers; (3) refines training waiver policies for certified
workers; and

(4) expedites review of petitions by the Secretary of Labor, reducing the
time from 60 to 40 days, thereby permitting displaced workers to more
quickly access retraining and financial support ser vices. (GAO-01-59 and
GAO-01-988T )

2.57.A. Improving Information Security Practices: In response to the
September 11, 2001, terrorist attacks, we have examined and reported on
the adequacy of the steps that financial market participants have taken to
reduce their vulnerability to attacks, including those by hackers
attempting to gain unauthorized access to a specific organization's
networks or systems or those arising from malicious computer viruses or
worms that seek to damage data or deny access to legitimate users. From
October 2003 through April 2005, we reviewed the measures taken by
selected critical financial market organizations, including exchanges,
clearing organizations, and payment system processors, to protect
themselves from electronic attacks. As part of these reviews, we found
that the selected financial market organizations were taking steps to
prevent their operations from being disrupted by electronic attacks. Each
of the organizations had implemented the major elements of a sound
information security program. However, at each of these organizations, we
identified 11 to 38 suggested improvements that could be taken to further
improve their protections against attacks. Many of the improvements we
identified related to how these organizations could implement additional
controls to prevent unauthorized access to networks and information
systems and to better detect intrusion attempts when they occur. We
briefed staff from SEC and the Federal Reserve Board of Governors on the
detailed results of our reviews, and they both indicated that they will
use our work to monitor the progress of the organizations they oversee in
implementing the information security improvements. ( GAO-05-679R )

2.58.A. Strengthening the Government's Ability to Monitor Foreign
Investors' Compliance with National Security Agreements: In 1988, the
Congress passed the Exon-Florio amendment to the Defense Production Act,
authorizing the President to suspend or prohibit a foreign acquisition of

U.S. companies if the acquisition poses a threat to national security. In
some cases, the Committee on Foreign Investment in the United States-an
interagency committee that is chaired by the Secretary of the Treasury and
is responsible for reviewing foreign acquisitions-may negotiate an
agreement with the foreign investor on measures to mitigate national
security concerns. However, in 2002, we reported that weaknesses in some
agreements made it difficult to ensure compliance. Specifically, we found
that agreements did not indicate the agency responsible for monitoring
compliance and lacked monitoring provisions, such as time frames for
implementing mitigation measures and consequences for noncompliance.
Consistent with our suggestions, the committee has begun including
specific time frames for compliance and the specific member agency office
responsible for reviewing compliance with recently negotiated agreements.
(GAO-02-736 )

2.59.C. Contributing to Federal Financial Literacy Efforts: Research has
shown that many Americans lack the knowledge of basic personal economics
they need to make informed financial judgments and manage their money
effectively. Yet financial literacy is increasingly important in a world
where consumers must choose from an array of complicated financial
products and services and employees must take on more responsibility for
their retirement savings. Our financial literacy forum contributed to
federal and nationwide discussion on possible topics, target populations,
and methods of delivery for federal financial education efforts and the
role of program evaluation. Our study on con-sumer knowledge and behavior
regarding credit reporting outlined ways to improve consumers'
understanding of the information contained in credit reports and how their
actions can influence the contents of their reports. The study will help
the Financial Literacy and Education Commission- which was established to
improve financial literacy and education of people in the United
States-and other groups following its lead to identify and penetrate
particular demographic groups that would benefit the most from financial
education efforts. (GAO-05-95 and GAO-05-223 )

2.60.C. Developing an Approach to Analyze Offshoring of Services:
Offshoring of services generally refers to an organization's purchase from
other countries of services that it previously produced or purchased
domestically, such as software programming or services provided by
telephone call centers. Our offshoring work has provided the Congress with
an analytical approach for understanding a controversial and politically
sensitive topic. The work took advantage of our ability to assemble a
crosscutting team to analyze complex data to craft a unique report, which
has served as the basis for numerous public presentations in the United
States and Europe. Our analysis led the international Organisation for
Economic Cooperation and Development to adopt our approach. The government
of Sweden sought out the team for further coordination of the Organisation
for Economic Cooperation and Development's efforts to understand the
impact of offshoring in Europe. We are now routinely included in
offshoring panel discussions, due to our objective and clear analysis of
the practice and concept of offshoring and the multiple

U.S. databases that relate to offshoring. (GAO-04-932 )

2.61.C. Improving Transparency of U.S. Reporting on Currency Manipulation
Issues:

In a 2005 review of currency manipulation issues, we provided
comprehensive analysis on a key international policy issue and increased
the transparency of Treasury reporting on its manipulation assessments.
Our report provided objective information on the legal determinants of
currency manipulation, differences between currency undervaluation and
manipulation, and the basis for recent Treasury findings. Partly in
response to our ongoing work, Treasury added information to its semiannual
currency report about its criteria for manipulation assessments. In
addition, Treasury introduced a link to Web-based information about U.S.
consultations with the International Monetary Fund to meet a legislative
requirement. ( GAO-05-351 )

2.62.C. Prompting Action to Reform the U.S. Export Control System: Over
the years, we have reported on the need to address weaknesses and
inefficiencies in export controls to ensure that U.S. interests-economic
as well as military-are safeguarded and that defense-related items do not
fall into the wrong hands. We have made numerous recommendations aimed at
correcting these weaknesses and inefficiencies, such as clarifying
jurisdiction over the export of missile technologies and establishing
formal guidelines for reviewing and monitoring the flow of export license
applications. Despite our findings and recommendations, we reported early
this year that the export control system remained fundamentally unchanged.
As a result of our work, the Congress has begun to take action to
reexamine and reform the U.S. export control system. ( GAO-02-63 ,
GAO-02-120 , GAO-05-234 , and GAO-05-468R )

Source:See Image Sources.

Reexamine the federal government's role in achieving evolving national
objectives

3.1.A. Enhancing the Knowledge Base on Indicators: We have been working as
a catalyst regarding approaches and options for measuring national
performance using comprehensive key indicator systems. The U.S. government
has invested billions of dollars in a rich variety of topical information
(on the economy, the environment, and society and culture) that could
underpin a national system. However, although several states, counties,
and cities have developed key indicator systems, the United States lacks
such a system at the national level. A comprehensive key indicator system
for the United States could serve as a trusted source for reliable,
fact-based information that could inform a much-needed reexamination of
the base of existing programs, policies, functions, and activities. In
fiscal year 2005, we issued the results of a wide-ranging study of
comprehensive key indicator systems in the United States and elsewhere. We
also contributed to the planning and implementation of the Organisation
for Economic Development's first World Forum on Key Indicators. The
participation of over 500 officials representing 43 nations provided a key
opportunity to share experiences and an impetus for further action and
improvement. One such action was publication of the 2005 Fact-book and an
interactive Web site that present a range of statistics on member
countries. At the Forum, representatives of the Key National Indicators
Initiative discussed efforts to develop a comprehensive key national
indicator system for the United States. We helped build the foundation for
the Key National Indicators Initiative effort, which is housed under the
National Academies. ( GAO-03-672SP and GAO-05-1 ) 3.2.C. Reexamining the
Base of the Federal Government: In February 2005, we issued a report
calling for, defining, and illustrating how to carry out a fundamental
reexamination of what the federal government does, how it does it, who
does it, and how it gets paid for. Prompted by unsustainable fiscal
commitments and the need to ready the federal government for the emerging
challenges of the 21st century, the federal government and the Congress
need to reexamine entitlements, tax policy, and discretionary spending
governmentwide. The Congress held two hearings to learn more about such
reexamination, and it has been a focal point of sustained outreach efforts
agencywide. The report has been instrumental in beginning to shape both
the interest of some in the Congress in how to deal with the 21st century
challenges, as well as the lens through which we structure and prioritize
our own work. ( GAO-05-325SP, GAO-05-317T, and GAO-05-352T )

Support the transformation to results-oriented, high-performing government

3.3.A. Improving the Defense Information Systems Agency's (DISA) IT
Investment Planning and Management Controls: In March 2002, we identified
numerous opportunities for DISA to improve planning and management
controls over its $3.5 billion annual IT spending. Implementation of our
recommendations helped DISA realize improvements in its strategic planning
(including development of a strategic plan and implementation of a plan),
organizational structure management, enterprise architecture management
(including soon using the architecture to support IT investment
decisions), IT investment management (including soon implementing
portfolio management), customer relations management, and knowledge
management. While responding to these recommendations required major
change in its management systems and required years to complete, the
changes realized to date helped DISA focus on improving warfighter support
and better focus its IT spending. ( GAO-02-50 )

3.4.A. Achieving Significant Financial Benefits by Leveraging DOD's Buying
Power: In fiscal year 2004, DOD spent over $127 billion on service
contracts-more than two-thirds of the $189 billion spent by the entire
federal government in that year. Despite this significant share of
spending, DOD's management of service procurement is inefficient and
ineffective and the dollars are not always well spent. Many private
companies have managed their procurements by using spend analysis, which
involves analyzing spending patterns and coordinating procurement in order
to achieve substantial financial benefits. In response to our report, DOD
and contractor project managers pilot-tested Web-based technology that
links and pulls data from disparate sources; maps and organizes the data
into a common taxonomy of products, services, and suppliers; and produces
spend analysis reports. The proposed virtual spend data warehouse will
enable DOD to identify high-volume, high-dollar services and product
spending-opportunities for strategic sourcing that will result in
financial benefits and quality improvements. In March 2005, DOD approved a
business case analysis to seek follow-on funding for developing a
departmentwide spend analysis system. DOD projects $4 billion to $10
billion in annual financial benefits once the system is in place and used
to support strategic sourcing across DOD. ( GAO-03-661 )

3.5.A. Encouraging Efficiency in DHS Acquisitions: In March 2003, 22
federal agencies and organizations essentially merged to form DHS-a
transformation GAO has designated high risk since 2003. With a budget of
almost $40 billion, DHS was challenged to leverage its substantial buying
power and boost administrative efficiency. Based on our work, DHS has
developed acquisition strategies for purchasing goods and services that
include basic office supplies, ammunition, weapons, and IT. As a result of
these strategies, DHS reported approximately $14 million in cost
reductions and cost avoidances for fiscal year 2004, with cost reductions
expected to continue to grow, according to agency officials. At the same
time, DHS was challenged to maintain an effective acquisition workforce.
The contracting workforce of one of DHS's largest entities-with annual
obligations for goods and services totaling $1.7 billion-had not grown
sufficiently to manage an increased workload. In addition, Immigration and
Naturalization Service field offices relied heavily on contracting
officers who performed contracting duties along with their mission-related
responsibilities and who are not career contracting officers. Consistent
with our recommendations, DHS developed a plan, based on best practices,
that defines the acquisition workforce, focuses on the need for continual
training, and implements a certification program. DHS also phased out all
collateral duty contracting officers, allowing only those individuals with
specific contracting officer authority to execute contracts and related
agreements on DHS's behalf. (GAO-02-230 , GAO-03-799 , GAO-04-870 , and
GAO-05-179 )

3.6.A. Providing Needed Rigor to the Coast Guard's Oversight of Deepwater
Program Contractors: The Coast Guard established the Deepwater program to
modernize and replace its fleet of ships and aircraft used for search and
rescue, drug interdiction, offshore inspection, and other missions that
generally occur beyond 50 miles from shore. Deepwater is the largest and
most complex procurement project in the Coast Guard's history. In June
2002, the Coast Guard awarded a contract to a system integrator to develop
and deliver the Deepwater assets, and from fiscal years 2002 through 2004,
the Congress appropriated almost $1.5 billion for the program. However, in
March 2004 we reported that the Coast Guard's evaluation of the system
integrator's performance lacked the rigor to effectively assess the
contractor's performance. We also found that the two
subcon-tractors-Lockheed Martin and Northrop Grum-man-were solely
responsible for deciding whether to compete Deepwater assets or make the
assets themselves, and the Coast Guard had no insight into these
decisions. Based on our recommendations, the Coast Guard has improved the
criteria for assessing the system integrator's performance and has asked
the system integrator to provide notification of a subcontractor decision
to make instead of compete assets valued at $10 million or more.
(GAO-04-380 ) 3.7.A. Ensuring Continued Investment in GSA's Online
Purchasing System: In 1995, GSA launched Advantage, an Internet-based
system for ordering products and services online. As of 2002, GSA had
spent $84 million to develop, implement, and maintain the system. However,
5 years after the system was launched, only 35 percent of all
government-contracted vendors participated in the program, and agencies
were largely using the system to compare pricing. To ensure GSA's level of
investment matched customer needs, we recommended that the agency develop
a business case for an online ordering and market research system such as
Advantage. In January 2005, GSA selected a new business strategy that
would significantly enhance the system's capabilities to serve as a broker
between buyers and suppliers and provide agencies with an automated tool
for formulating acquisition requirements and developing requests for
quotes. Although GSA expects to invest $124 million to implement the
enhanced system, the agency projects over $1.5 billion in financial
benefits from electronic transactions, spend analyses (reviews of
expenditures that shows how money is spent on goods and services), a
searchable procurement data repository, and competitive pricing. This
financial benefit has a present value of just over $1.3 billion.
Consistent with our recommendation, GSA's new business strategy also calls
for reviewing and adding as appropriate new performance measures to track
results and outcomes of the enhanced system. (GAO-03-328 )

3.8.A. Delivering Results through Performance-Based Service Contracting:
In fiscal year 2004, federal agencies spent roughly $189 billion acquiring
services from contractors-an area we have designated high risk for over a
decade for DOE, DOD, and the National Aeronautics and Space Administration
(NASA), which together account for most of the federal spending on
services. To achieve greater financial benefits and better outcomes, the
Congress and OMB have encouraged agencies to use performance-based service
contracting, where the contracting agency specifies the desired outcome
and the contractor decides how best to achieve this outcome. Although
performance-based contracts can encourage contractors to find innovative
ways to deliver services and offer other significant benefits, agencies
historically have not widely used this strategy. Consistent with our
recommendations-particularly when acquiring unique and complex services
that require strong government oversight, OMB's Office of Federal
Procurement Policy improved its guidance for using performance-based
contracting and established a fiscal year 2005 target for using
perfor-mance-based service acquisition methods. The office also partnered
with the Defense Acquisition University, the Federal Acquisition
Institute, federal government agencies, and industry associations to
establish an online acquisition center of excellence. The Services
Acquisition Reform Act of 2003 provides an additional incentive for the
use of perfor-mance-based contracting by giving executive agencies
authority to treat qualifying contracts or task orders as contracts for
commercial items. The act also requires agencies to collect data on these
contracts and OMB to report to the Congress on the use of this incentive.
Finally, OMB has taken steps to better track civilian agencies' use of
performance-based service contracting. ( GAO-02-1049 and GAO-03-716T )

3.9.A. Promoting a Well-Trained Federal Acquisition Workforce: Procurement
reforms, technological changes, and downsizing have placed unprecedented
demands on the federal acquisition workforce. Acquisition workers are now
expected to have greater knowledge of market conditions, industry trends,
and the technical details of the commodities and services they procure.
Despite congressional reforms enacted in the 1990s to ensure the federal
acquisition workforce has the right skills to meet such challenges, we
reported in July 2002 that agencies needed to better define and track
their acquisition workforce training to inform the agencies' human capital
strategic planning and ensure an adequately trained acquisition workforce.
A number of actions have been taken in response to recommendations we
made. As required by the Services Acquisition Reform Act of 2003, GSA
established an acquisition workforce training fund, and certain civilian
executive agencies have designated noncareer chief acquisition officers to
establish clear lines of authority, accountability, and responsibility for
acquisition decisions. OMB's Office of Federal Procurement Policy required
each chief acquisition officer to implement a budget strategy that
reflects his or her agency's workforce development needs and
organizational structure and to appoint an individual with acquisition
experience to lead the agency's acquisition career management program. The
interagency Chief Acquisition Officer Council has established a Human
Capital Working Group that is assessing skills required in the federal
acquisition workforce, identifying skill gaps, and target ing training
funds to those gaps. (GAO-02-737 and GAO-03-281 )

3.10.A. Improving OMB's Competitive Sourcing Processes: Under competitive
sourcing, federal agencies open their commercial activities to competition
among public and private sector sources, and this process begins each year
with agencies developing inventories of their commercial positions. A
large body of our work from 2000 through 2004 recommended sustained
improvement in the use of annual inventories and greater consistency in
classifying commercial positions to support competitive sourcing as well
as revisions to processes for the performance of commercial activities
that are described in OMB Circular A-76, Performance of Commercial
Activities. In addition, we recommended various improvements to OMB's
proposed revisions to Circular A-76 processes to bring them more in line
with the Commercial Activities Panel's principles for improving the
competitive sourcing decisions of the government. The congressionally
mandated panel, chaired by the Comptroller General and composed of federal
and private sector experts, stressed the importance of linking sourcing
policy with agency missions, promoting sourcing decisions that provide
value to the taxpayer regardless of the service provider selected, and
ensuring greater accountability for performance. In response to our work
and the inclusion of competitive sourcing as one of the President's
management initiatives, OMB has undertaken a sustained effort since 2003
to improve and maintain a governmentwide commitment to developing useful
annual inventories, improving guidance for classifying commercial
positions, and incorporating most of the A-76 sourcing principles adopted
by the panel. In fiscal years 2003 and 2004, OMB reported that agencies'
competitive sourcing efforts will yield billions of dollars in finan cial
benefits. (GAO/GGD/NSIAD-00-244 , GAO-02-498T, GAO-02-1022R , GAO-03-391R
, GAO-03-1022T, and GAO-04-367 )

3.11.A. Improving Collection of Delinquent Nontax Debt: In a series of
reports and testimonies over the past several years, we promoted federal
agencies' use of key provisions of the Debt Collection Improvement Act of
1996 to collect non-tax delinquent debt, which exceeds $70 billion
annually. Acting on our recommendations, Treasury and other federal
agencies have continued to take steps to implement the act's key
provisions to improve collections. For example, Treasury included
additional federal salary payments in its payment offset program and
continued to offset Social Security payments to recover delinquent debts.
Also, certain agencies-including Education and HHS-have published final
rules allowing the implementation of administrative wage garnishment under
the Debt Collection Improvement Act. These actions, along with additional
steps taken by Treasury and other agencies to improve debt collection
processes in response to our recommendations, have added about $374
million to a steady stream of recoveries. ( GAO/T-AIMD-98-195 ,
GAO/AFMD-90-12 , GAO-02-308 , GAO-02-313 , and GAO-02-463 )

3.12.A. Assessing Programs Related to a Common Outcome: To review the
relative contributions of similar programs to common or crosscutting goals
and outcomes and to facilitate comparisons and trade-offs between such
programs, we recommended that OMB conduct Program Assessment Rating Tool
(PART) assessments of similar programs and activities in the same year.
Consistent with these recommendations, for the fiscal year 2006 budget,
OMB used PART in conducting two crosscutting analyses to inform the
President's Budget request-Community and Economic Development programs and
Rural Water programs. The Community and Economic Development analysis
formed the basis for the administration's proposal to consolidate various
of these programs into a $3.7 billion program at Commerce. The budget also
indicated the administra-tion's intention to develop recommendations to
consolidate and reform Rural Water programs. (GAO-04-174 )

3.13.A. Monitoring the Effectiveness of OMB's PART : To improve OMB's
ability to judge the efficacy of PART, we recommended that the Director of
OMB centrally monitor agency implementation and progress on PART
recommendations and report such progress in OMB's budget submission to the
Congress. Consistent with this recommendation, in the PART Summary
Worksheets submitted with the fiscal year 2006 President's Budget Request,
OMB reported on the status of each program's recommendations. In April
2005, OMB also implemented PARTWeb, a Web-based data collection tool to,
among other things, centrally track the implementation and status of PART
recommendations. (GAO-04-174 )

3.14.A. Assisting Agencies in Implementing Leading Diversity Management
Practices: In January 2005, we identified nine leading practices that
experts agreed should be considered when an organization is developing and
implementing diversity management. We also provided examples of how 10
selected federal agencies implemented these practices. As the federal
government strives to better manage its diverse workforce, our report is
being used by agencies to begin the dialogue necessary to create an
environment that is inclusive of individual differences, responsive to the
diverse needs of employees, and ultimately provides for accountability and
fairness for all employees. For example, in July 2005, the Census Bureau
held a diversity fair that focused on five of the diversity management
practices discussed in our report (top leadership commitment, diversity as
part of an orga-nization's strategic plan, diversity linked to
performance, employee involvement, and diversity training). A panel of
officials from the selected agencies featured in our report discussed
their agencies' implementation of the practices with Census Bureau
employees in the morning, and executives from those agencies engaged in a
frank discussion with Census Bureau executives in the afternoon about
implementation strategies and barriers. ( GAO-05-90 )

3.15.A. Controlling the Cost of the 2010 Census: A body of congressionally
requested products we issued in 2004 on plans for the 2010 Census
contributed to congressional decision making that will reduce the life
cycle cost of the next decennial headcount by around $807 million, and
could produce better quality data. Specifically, members of the Congress
cited findings contained in our report on census cost and design issues to
secure legislative support for operational reforms that could help control
the cost of the 2010 Census, the price tag of which is currently estimated
at more than $11 billion. These same reforms, which include a
short-form-only census and various technological improvements, could
produce more accurate and timely information for data users as well.
Additional taxpayer savings stemmed from our review of the feasibility of
counting U.S. citizens living abroad.

We concluded that enumerating this population group would not be
cost-effective because of the difficulties in obtaining an adequate
response rate and other challenges. Partly as a result of our findings and
recommendation to the Congress, legislators eliminated funding for any
future planning and testing activities. ( GAO-04-37 and GAO-04-898 )

3.16.A. Strengthening Senior Executive Performance Management:
High-performing organizations understand that their top leadership needs
to lead the way to transform their agencies' cultures to be more
results-oriented, customer focused, and collaborative in nature.
Recognizing this important leadership role, the Congress authorized a new
performance-based pay system for members of the federal government's
Senior Executive Service in 2003. Yet we found that Education, HHS, and
NASA had opportunities to use their performance management systems more
strategically. Based on a report we issued in May 2004, these agencies are
now implementing a series of recommendations that can help them provide a
clear and direct linkage between their senior executives' performance and
organizational results. ( GAO-05-69SP and GAO-05-832SP )

3.17.C. Helping Enhance Legislative Branch Agencies' Efforts to Improve
Performance and Accountability: Our work has assisted legislative branch
agencies in guiding their respective management improvement and
transformation efforts. The Government Printing Office used our work to
guide the realignment of its human capital office, which will assist its
leadership in managing its workforce and will support its overall
transformation. To help ensure that the Office of Compliance maintains
institutional continuity into the future, the Congress acted on our
recommendations to amend the Congressional Accountability Act to permit
the reappointment of its Board of Directors to an additional term. We
encouraged the Architect of the Capitol and the U.S. Capital Police to
make needed improvements to basic management functions, such as IT,
financial management, strategic planning, and human capital management. We
also provided recommendations to the Architect of the Capitol on ways to
improve cost and schedule management of the Capitol Visitors Center
project. As a result of our work, the Architect strengthened project
management resources and obtained new cost and schedule estimates; and the
Congress pro-vided additional funds for the project. Additionally, we
surveyed all of the legislative branch agencies to identify their efforts
to cross-service and outsource administrative services, implement
management and operational improvements, and streamline organizational
structures and operations. Our survey also provided the legislative branch
agencies the opportunity to document their efforts to incorporate best
practices and to make management improvements in the areas of IT,
financial management, strategic planning, human capital management, and
acquisition. ( GAO-04-85 , GAO-04-299 , GAO-04-400 , GAO-04-830 ,
GAO-04-966 , GAO-05-714T, GAO-05-811T, GAO-05-910T, and GAO-05-1037T )

3.18.C. Strengthening the Nation's Border Security: DHS's United States
Visitor and Immigrant Status Indicator Technology (US-VISIT) program is a
legislatively required, multibillion-dollar effort to track the entry and
exit of foreign visitors traveling to the United States. In reviewing the
fiscal year 2005 expenditure plan for the US-VISIT program, we identified
a number of areas where USVISIT could improve its program management
activities, including developing reliable cost estimates and managing
system capacity to support mission needs, and provided the Congress with
information upon which to make funding decisions. We noted that the
program office was not employing the kind of rigorous and disciplined
management controls typically associated with successful programs and that
as the program grows in scope and complexity, these controls would become
even more critical. The US-VISIT program management office concurred with
our recommendations and has begun implementing some of our
recommendations, including establishing an effective program office
structure, developing effective risk management processes and plans, and
developing a human capital strategy. ( GAO-05-202 )

3.19.C. Helping the Government Cost Effectively Manage Multibillion-Dollar
IT Modernizations and Investments: DHS's Automated Commercial Environment
is a multibillion-dollar program that tracks cargo entering and leaving
the United States. Managers of the program have implemented our past
recommendations related to developing and using enterprise architecture,
following an incremental system acquisition approach, establishing system
acquisition process controls, and ensuring the independence of its
function to oversee the program. Further, DHS has improved management of
the program by reducing the degree of concurrent system development
activities and reconciling program cost estimates with independent
estimates. Our recent recommendations have focused on the need for DHS to
strengthen accountability for the Automated Commercial Environment program
and better ensure the delivery of promised system capabilities and
benefits within budget and on time. ( GAO-03-406, G AO-04-719, and
GAO-05-267 )

3.20.C. Improving Criminal Debt Collection:

To improve the federal government's ability to collect billions of dollars
of outstanding criminal debt, we recommended that Justice work with other
agencies involved in criminal debt collection, including the
Administrative Office of the U.S. Courts, Treasury, and OMB, to develop a
strategic plan that would improve interagency processes and coordination
with regard to criminal debt collection activities. In subsequent reports,
we continued to identify criminal debt collection problems and followed up
with Justice on the status of this and other related recommendations. We
kept interested congressional parties informed of the status of
outstanding criminal debt and Justice's lack of progress in implementing
this recommendation, which resulted in the Congress directing the Attorney
General to develop a strategic plan with the other involved federal
agencies to improve criminal debt collection. Specifically, the conference
report that accompanied the Consolidated Appropriations Act of 2005
included language to further the implementation of our 2001 recommendation
on establishing an interagency task force for more effectively managing,
accounting for, reporting, and collecting criminal debt. As a result,
Justice has begun to meet with the Administrative Office of the U.S.
Courts, Treasury, and OMB as a joint task force to develop the strategic
plan as recommended. (GAO-01-664 , GAO-04-338 , and GAO-05-80 )

3.21.C. Improving Agency Preparation for Governmentwide Telecommunications
Acquisition: During fiscal year 2005, we reviewed GSA's planning for a
governmentwide telecommunications acquisition program, known as Networx.
In March 2005, we testified on GSA's progress in addressing management
challenges identified during our earlier reviews, including a lack of
performance measures and inadequate transition planning for the Networx
contracts. During our review, we identified several areas of concern to
GSA officials, which they subsequently addressed. For example, we
determined that GSA had not established performance measures to aid in
program management. GSA subsequently drafted measures to address each of
the program's goals and is working to revise the draft measures based on
our feedback. Also, we pointed out that GSA had not provided potential
offerors with enough information on the level of service they would be
required to provide at each location. Without this information, offerors
would have had difficulty preparing realistic proposals. In response, GSA
delayed the release of its final request for proposals until information
on the required levels of service was available. (GAO-04-1085T and
GAO-05-361T )

3.22.C. Improving OMB Oversight of At-Risk IT Investments: In April 2005,
we recommended that OMB strengthen its oversight of major IT investments
by better utilizing the business cases it collects and analyzes as part of
the annual formulation of the President's Budget. In the President's
Budget for Fiscal Year 2005, OMB reported that based on its evaluation of
the projects' business cases, about half of the 1,200 major IT investments
submitted by agencies for funding were at risk. The total value of these
investments was about $22 billion out of a total IT budget of about $60
billion. We reported that OMB never aggregated these at-risk projects into
a single list and that its oversight of these projects was inconsistent,
which limited the potential value of the management watch list. We
recommended that OMB create a centralized capability for creating and
monitoring these at-risk projects and that it use the additional insights
provided in its statutorily mandated reporting to the Congress. The
governmentwide analysis and consolidated tracking of projects' risk level
made possible by an aggregated management watch list will enhance OMB's
and the Congress's ability to ensure that funds are being wisely spent and
to take effective and timely action on the billions in IT investments
judged to be at risk. ( GAO-05-276 )

3.23.C. Improving OPM's Ability to Manage Retirement System Modernization:
We reported that OPM did not have key system acquisition, change
management, and investment management processes in place to help manage
its Retirement Systems Modernization program and recommended that OPM
establish the management processes needed for effective oversight of that
program. Subsequently, OPM initiated efforts to develop a comprehensive
acquisition strategy, identify interdependencies between project
components, develop project tracking processes, establish risk management
processes, and implement investment management processes. The agency also
identified milestones for completing these activities over the next few
months. As a result of our review, OPM is working to improve its ability
to manage its modernization program. In addition, the Congress is better
informed about the status of OPM's acquisition and is now in a better
position to oversee OPM's project management of its retirement systems
modernization program. ( GAO-05-237 )

3.24.C. Getting the Best Value for Goods and Services through Interagency
Contracts: Federal agencies are increasingly relying on interagency
contracts, leveraging the government's aggregate buying power to procure
commonly used goods and services more efficiently. From 1994 through 2004,
GSA's interagency contract sales alone jumped almost 750 percent to $32.5
billion. Given the rapid growth of taxpayer dollars involved- along with
the limited expertise of users and administrators and unclear
accountability for ensuring proper use-we designated interagency contract
management as a high-risk area in January 2005. Our work since then has
continued to draw attention to the risks associated with interagency
contracting arrangements, such as noncompetitive prices for goods and
services, orders placed outside the scope of contracts, and inadequate
management controls. To ensure the government is getting the best value
from these types of contracting arrangements, we recommended that agencies
clarify roles and responsibilities and establish clear, consistent, and
enforceable policies and processes. DOD and other agencies are beginning
to take action to respond to our recommendations. ( GAO-05-201 ,
GAO-05-207 , GAO-05-229 , and GAO-05-456 )

3.25.C. Leveraging the Government's Significant Buying Power: In fiscal
year 2004, federal agencies procured more than $327 billion in goods and
services. Despite this significant cost, it is not clear that the federal
government is fully leveraging its enormous buying power because agency
procurement processes are decentralized. Recognizing the potential to use
federal purchasing dollars more wisely, several of our reports examined
best commercial procurement practices to reduce costs, stay competitive,
and improve service levels. From 2002 through 2004, we reported how
leading companies were implementing strategic sourcing approaches to
leverage their buying power and foster new ways of doing business, and
recommended several actions that agencies could take to adopt similar best
practices to achieve the type of financial benefits and procurement
performance improvements experienced by these companies. In May 2005, OMB
adopted a new policy directing federal agencies to implement the types of
strategic sourcing approaches we recommended, and beginning next year,
agencies must report annually on their strategic sourcing outcomes,
including price reductions for goods and services and total procurement
cost reductions. According to OMB's federal procurement policy officials,
OMB aligned much of its May 2005 strategic sourcing policy with the
commercial best practices identified in our reports. (GAO-02-230 ,
GAO-03-661 , and GAO-04-870 )

3.26.C. Helping Customs Improve its Modernization Program: Our work has
resulted in DHS's Customs and Border Protection improving its ability to
manage its multibillion-dollar IT modernization program and provided the
Congress with information on which to base funding decisions. Our
recommendations have focused on the need for Customs and Border Protection
to strengthen accountability for its modernization program and better
ensure the delivery of promised system capabilities and benefits within
budget and on time. The agency's progress toward addressing our earlier
recommendations that it reduce the degree of concurrent system development
activities, reconcile program cost estimates with independent estimates,
and address human capital weaknesses has improved management of its
modernization program. Adoption of our earlier recommendations related to
developing and using an enterprise architecture, following an incremental
system acquisition approach, establishing system acquisition process
controls, and ensuring the independence of its function to oversee the
modernization program has resulted in reduced exposure to risk. (
GAO-03-406 , GAO-04-719 , and GAO-05-267 ) 3.27.C. Improving the Federal
Government's Collection, Use, and Dissemination of Federal Information: We
have provided assistance to the Congress in ensuring that federal
information is effectively managed and leveraged to improve agency
performance and protect citizens' rights. For example, since key
amendments to the Freedom of Information Act were passed in 1996, we have
produced a body of work reporting on agency actions to implement the act,
and congressional decision makers as well as the press have come to rely
on our reports to gauge agencies' progress. In early 2005, bills were
introduced to make further amendments to the act, we were asked to provide
key status information at a May 2005 hearing on such measures as the
numbers of Freedom of Information Act requests agencies have been
processing annually and the size of the backlog of open requests that is
carried over from one year to the next. Our analysis has provided a basis
of discussion and debate for the Congress, the news media, and the public.
We also made contributions to the Congress's upcoming reauthorization of
the Paperwork Reduction Act, which provides the framework for managing
federal information. In February, we sponsored a forum to explore
reauthorization issues, which was attended by experts and key stakeholders
in the executive and legislative branches. In addition, we reported on
agencies' efforts to review proposed information collec-tions-a critical
process added to the act in the last reauthorization-and made suggestions
to the Congress to strengthen the act's paperwork reduction requirements.
On the issue of privacy, we commented on emerging issues in reporting on
five case studies involving federal efforts to mine data, including
personal information, and identified ways to improve privacy and security
protections. In addition, we reported on shortcomings in TSA's initial
public privacy notices on Secure Flight, its new passenger screening
system, and as a result, the agency took prompt action to more fully
disclose its use of personal information. Regarding records management, we
made contributions toward ensuring that valuable electronic records
created today will be accessible in the future by reporting on the
progress that the National Archives and Records Administration has made in
developing an advanced electronic records archive. ( GAO-05-12 ,
GAO-05-405 , GAO-05-420 , GAO-05-424 , GAO-05-648T, GAO-05-864R ,
GAO-05-866 , and GAO-04-927 )

3.28.C. Using IT to Transform Health Care:

Our work has helped to highlight the importance of IT in health care
delivery and public health by identifying benefits of selected IT
applications, which, among other things, have reduced costs, improved
quality of care, and improved communications within health care delivery
organizations and insurers. We have also highlighted the limited progress
being made by federal agencies to improve the public health IT
infrastructure, which affects the nation's ability to respond to public
health emergencies, including bioterrorism. In addition, several
significant bipartisan bills focused on health IT have been introduced in
the House and the Senate that address interoperability standards,
improvements to patient safety, and grants for health IT projects that
demonstrate costs and benefits-areas of importance emphasized by our work.
Our reports and resulting recommendations are also helping to drive HHS
improvements such as the appointment of a National Coordinator for Health
IT whose objective is to help transform the health care industry's use of
IT. In July 2004, the National Coordinator issued the framework for
strategic action, which outlined an approach to the nationwide
implementation of electronic health records and interoperable health IT.
This framework addresses the adoption of data standards and actively
involves the private sector (such as the American Health Information
Community task force) as integral components needed to transform the use
of IT for health care delivery. In addition, HHS has issued requests for
proposals for developing a prototype of a National Health Information
Network architecture. Later this year, the National Coordinator is
expected to release a comprehensive strategic plan, which we anticipate
will implement our recommendations. ( GAO-03-139 , GAO-04-224 ,
GAO-04-947T, GAO-04-991R , GAO-05-308 , GAO-05-309R , and GAO-05-628 )

3.29.C. Improving the Understanding of Selected File-Sharing Programs:
Peer-to-peer file-sharing programs represent a major change in the way
Internet users find and exchange information by allowing direct
communication between computer users who can access and share digital
music, images, and video files. These programs also can be a conduit for
sharing pornographic images and videos. During fiscal year 2005, we
reviewed selected electronic file sharing applications to

(1) determine the extent to which they provide easy access to pornographic
images and (2) assess the ability of the applications' filters to block
pornographic images. We found that pornographic images are easily shared
and accessed by the selected file-sharing applications, and that the
pornography filters offered by the selected programs varied in their
ability to block pornographic images. Our review contributed substantially
to the Congress's and the public's understanding of the uses of
peer-to-peer file-sharing applications to access and share pornography. (
GAO-05-634 )

3.30.C. Ensuring Executive Branch Agency Compliance with Continuity of
Operations Guidance: We identified weaknesses in the processes agencies
had used to identify the essential functions that should be quickly
restored after being disrupted by an emergency and the plans to support
restoring them (known as continuity of operations plans). These weaknesses
included inconsistencies in the number of functions identified by agencies
and the inclusion of functions that appeared to be of secondary
importance. In response to these concerns, the President's Homeland
Security Advisor began an interagency effort in January 2005 to define
governmentwide essential functions and to review and validate
agency-identified essential functions. Also, DHS published revised
guidance for agency continuity planning. Our most recent evaluation found
that agencies had already begun addressing weaknesses identified in our
original assessment. For example, two major agencies that did not have
continuity plans in place in October 2002 have since implemented plans. In
addition, the recent steps taken by DHS and the White House could result
in an increased emphasis on the most critical government functions and
better planning to ensure that those functions are quickly restored
regardless of the type of event that caused the disruption. ( GAO-04-160 ,
GAO-04-638T, GAO-05-577 , and GAO-05-619T )

Support congressional oversight of key management challenges and program
risks to improving federal operations and ensuring accountability

3.31.A. Preventing Improper Sales of Sensitive Clothing and Textile Items:
Our audit of controls over excess DOD property found that DOD improperly
sold excess clothing with infrared reflectant properties over the Internet
to the public. Infrared reflectant technology prevents detection and State
has established criteria for designating certain of these items as defense
articles. In response to our work, DOD issued a more stringent policy than
State's guidelines. DOD determined these items to be of a sufficiently
critical and sensitive nature to require the same demilitarization control
as significant military equipment-total destruction-an action that should
help prevent this sensitive technology from falling into the wrong hands.
(GAO-04-15NI and GAO-04-81TNI )

3.32.A. Bolstering Governmentwide Actions to Identify and Report Improper
Payments:

Since fiscal year 2000, our recommendations aimed at raising the level of
attention given to improper payments by the agencies that are subject to
the Chief Financial Officers Act of 1990 contributed to the Congress
passing the Improper Payments Information Act of 2002. This act required
all agencies to identify programs and activities susceptible to
significant improper payments, estimate the annual amount of improper
payments, and report on the amount of and their actions to reduce their
improper payments. Fiscal year 2004 marked the first year that federal
agencies governmentwide were required by the act to report improper
payment information. From our review of fiscal year 2004 performance and
accountability reports, the 11 programs or activities that provided this
information for the first time reported improper payments totaling over
$700 million. For example, HHS disclosed an improper payment amount of
$255 million for its Head Start program. Similarly, USDA disclosed an
improper payment amount of $125 million for its Federal Crop Insurance
Corporation program. USDA, which has a long history of analyzing payment
error rates for the Food Stamp Program, also reported that the improper
payment rate for the Food Stamp Program had been reduced significantly,
primarily due to the rate reduction in improper overpayments.
Specifically, Food Stamp Program improper overpayments declined from

6.16 percent in base year 2002 to 5.05 percent in fiscal year 2003,
resulting in a $249.7 million reduction in improper overpayments for
fiscal year 2003. On the basis of our analysis of USDA statistically
projected error rates and OMB's reduction estimates of the Food Stamp
Program, we expect to continue to see financial benefits stemming from
these changes over the next 4 fiscal years. (GAO-02-749 , GAO-03-750T,
GAO-03-991T, GAO-04-99 , and GAO-04-631T )

3.33.A. Ensuring That USCIS Becomes Self-supporting: We determined that
fees USCIS collected were not sufficient to fully fund the cost of
processing applications for U.S. citizenship and naturalization as
contemplated by existing law. USCIS charged fees to process applications
for U.S. citizenship and naturalization, but was also receiving
appropriated funds to pay for administrative and overhead costs. Our work
highlighted the need for USCIS, among other things, to increase its fees
in order to alleviate the need for appropriated funds. In April 2004,
USCIS increased its fees, thereby enabling it to discontinue its partial
reliance on taxpayer financing. The additional federal revenues for fiscal
years 2004 and 2005 were $551 million. (GAO-04-309R )

3.34.A. Improving Accountability at DOL:

OMB's audit guidance for reporting compliance with the Federal Financial
Management Improvement Act of 1996 (FFMIA) calls for either reporting
identified problems or stating that none came to auditors' attention
during testing. In our annual report on FFMIA, we recommended that OMB
revise its audit guidance to require auditors to perform sufficient
testing to be able to positively state whether an agency's systems
substantially complied with the act's requirements (positive assurance).
Although OMB has not done so, in fiscal year 2004, DOL's IG contracted
with an independent public accounting firm to perform sufficient testing
to allow positive assurance of FFMIA compliance, if warranted. DOL's IG
advised us that DOL had decided to be the first federal agency to provide
positive assurance because of our continual emphasis on this topic.
Positive assurance provides users with substantially greater confidence
that agency systems provide the reliable, useful, and timely management
information envisioned by the act. (GAO-02-29 , GAO-03-1062 , and
GAO-05-881 )

3.35.A. Helping NASA Recognize Significant Challenges with the Prometheus
1 Project: In 2003, NASA initiated the Prometheus 1 project to explore the
outer reaches of the solar system. However, in February 2005, we reported
that the Prometheus 1 project, which the Congressional Budget Office
estimated would cost about $10 billion, faced challenges in setting
realistic requirements, preparing reliable cost estimates, and advancing
complex critical technologies-chal-lenges NASA has had difficulty
overcoming in a number of other costly space initiatives. Additionally,
the approved funding for Prometheus 1 was inadequate to support a planned
2015 launch to Jupiter's icy moons. Based on concerns about cost and
technical complexity and consistent with our recommendations, NASA has
deferred the Jupiter Icy Moons Orbiter mission indefinitely and is
shifting the focus of its Prometheus 1 project. Eliminating the Jupiter
Icy Moons Orbiter mission from its fiscal year 2006 budget request reduces
NASA's funding needs by more than $1.1 billion through fiscal year 2009. (
GAO-05-242 )

3.36.A. Strengthening NASA's Integrated Financial Management Program: For
more than a decade, we have identified NASA's contract management as a
high-risk area-in part, because the agency lacked an integrated financial
management system, hampering its ability to oversee contracts, control
program costs, and ensure an effective human capital management strategy.
In April 2000, NASA initiated the Integrated Financial Program-its third
effort at modernizing its financial management system. More than 3 years
later, we reported that insufficient processes for ensuring adequate
funding reserves for contingencies-along with uncertain reliability of
cost estimates and optimistic schedules-put the program at risk of
schedule delays and cost growth. In our fiscal year 2005 review, we found
that NASA has implemented a methodology that enables programs to identify
high-severity risks and determine their direct relationship to reserves,
which is in line with our recommendation. This methodology should help the
agency ensure that the program's reserve funding is sufficient to cover
the potential cost impact of risks and unknowns. (GAO-04-118 ) 3.37.A.
Improving NASA's Cost-Estimating Processes: NASA's inability to collect,
maintain, and report the full cost of its programs-along with persistent
cost growth-has put NASA's contract management on our high-risk list for
more than a decade. Through a review of selected programs, we found that
NASA lacks the basic cost-estimating processes needed to establish
priorities, quantify risks, and make informed investment decisions. As a
result, programs may be restructured to fit available resources,
increasing the risk of cost and schedule overruns and failure to meet
program objectives. We also identified a number of barriers to
implementing effective cost-estimating practices, including the lack of
reliable financial and performance data and the lack of incentives to
measure and monitor cost trends. Acting on recommendations we made in May
2004, NASA has taken actions to remove these barriers and improve its
cost-estimat-ing practices, including establishing requirements to
facilitate the efficient and effective use of NASA's cost-estimating
staff, requirements for independent assessments at program and project
milestones, and enforcement mechanisms for ensuring that project
cost-estimating requirements are met before the project proceeds to the
next milestone. (GAO-04-642 )

3.38.A. Avoiding Additional Losses from Loan Sales: We found that the
Small Business Administration (SBA) improperly calculated the results of
billions of dollars of loan sales and could not determine the value of its
remaining disaster loan portfolio. We recommended that SBA correct the
calculation of the results of its loan sales and determine the value of
its remaining disaster loan portfolio before conducting additional sales.
In response, SBA conducted a detailed review of its financial records
relating to the disaster loan program, including the completed loan sales,
and shortly thereafter discontinued the loan sale program. SBA's analysis
identified a fundamental flaw in the method used to determine whether a
sale was beneficial to the government and allowed SBA to develop a more
reliable process to calculate the results of a sale and to value the
remaining loan portfolio. SBA's analysis showed that its prior sales of
disaster loans resulted in losses of over $900 million as opposed to gains
as previously reported. Prior to our review, SBA had intended to sell its
remaining disaster portfolio of about $3 billion as well as loans
disbursed in the future. Had SBA pro-ceeded with these sales using the
same flawed pricing model, it would have continued to incur significant
losses, estimated to be approximately $441.4 million over 5 years. (
GAO-03-87 )

3.39.A. Increasing the Collection of Delinquent Federal Taxes: We have
long advocated increased use of Treasury's offset program to intercept
federal payments to those who have delinquent nontax and tax debt. Under
this program, federal payments can be levied to pay taxpayers' outstanding
tax debt. We identified missed collection opportunities because few
payment streams were subject to the offset program, including those of
disbursing offices outside of Treasury. We noted that millions of dollars
of tax debt could be collected if Treasury levied such federal payments
using its existing capacity. Fiscal year 2004 marked the first significant
success due to (1) increasing numbers of programs subject to the levy
program and (2) IRS releasing substantially more tax debt to be included
in the levy program. We determined that tax levy collections using
Treasury's levy authority for fiscal years 2004 and 2005 totaled $308
million dollars. ( GAO/T-AIMD-98-195 , GAO/GGD-00-65 , and GAO-01-711 )

3.40.A. Revising DOD Working Capital Fund Appropriations: Over the years,
we have reviewed various aspects of defense working capital funds,
including cash management requirements. Our work on cash management this
year showed that (1) the Air Force working capital fund would exceed the
cash requirement at the end of fiscal year 2005 and (2) the Navy's working
capital fund budget did not project excess cash at the end of fiscal year
2005, but these projections have not been reliable in recent years. Based
on our review, the Congress reduced the Air Force and Navy fiscal year
2005 appropriations for operation and maintenance by a total of just under
$1.3 billion due to excessive cash amounts. ( GAO-04-498 )

3.41.A. Improving Accountability at DHS: At the time that it was created
in 2003, DHS was not subject to two key financial management improvement
laws-the Chief Financial Officers Act of 1990 and FFMIA-whose key goals
are, among other things, providing the Congress and agency management with
reliable financial information for daily management and decision making
and improving financial management systems and controls to properly
safeguard the government's assets. Because of the size of DHS, the
internal control weaknesses it inherited, and the importance of these laws
in improving financial management, we urged the Congress to require DHS to
be subject to these laws. We also supported the concept of DHS obtaining
internal control opinions over financial reporting, similar to what
Sarbanes-Oxley requires for publicly traded companies. On October 16,
2004, the Department of Homeland Security Financial Accountability Act was
signed in to law by the President, requiring DHS to comply with the
provisions of these laws. The act also requires DHS to obtain an opinion
on its internal controls over financial reporting, making it the first
agency covered by the Chief Financial Officers Act that is required to do
so. (GAO-03-1134T, GAO-04-774 , and GAO-04-945T )

3.42.C. Increasing Reuse of Excess DOD Property: Our assessment of DOD's
excess property program showed that DOD does not have management controls
in place to maximize reuse of excess items. Of $33 billion in excess
commodity disposals in fiscal years 2002 through 2004, $4 billion were
reported to be in new, unused, and excellent condition. DOD found in-house
use for $495 million (12 percent) of these items. However, the remaining
$3.5 billion (88 percent) represented significant waste and inefficiency
because new, unused, and excellent condition items were transferred and
donated outside of DOD, sold for pennies on the dollar, or destroyed even
though other DOD units concurrently bought many of these same items. We
identified at least $400 million of fiscal year 2002 and 2003 commodity
purchases for which new, unused, and excellent condition items were
available for reutilization. In response, the Defense Logistics Agency
pledged to have systems improvements in place by January 2006 to prevent
purchases of new items when identical items are available for
reutilization. ( GAO-05-277 and GAO-05-729T )

3.43.C. Focusing Attention on Financial Hardships Experienced by Army
Guard and Reserve Soldiers: We reported that injured and ill Army Reserve
soldiers-who are entitled to extend their active duty status to receive
treatment-had been inappropriately removed from active duty status in the
automated systems that control pay and access to medical care. Many of our
case study sol-diers incurred severe, permanent injuries fighting for
their country, including loss of a limb, hearing loss, and back injuries.
Nonetheless, these soldiers had to navigate the Army's convoluted and
poorly defined process for extending active duty service. In responding to
our report, DOD described its completed, ongoing, and planned actions to
address each of our 22 recommendations. If effectively implemented, these
actions should be important steps in developing comprehensive, effective
solutions for dealing with Reserve component soldiers with
service-connected injuries or illnesses. (GAO-05-125 and GAO-05-322T )

3.44.C. Improving Travel Reimbursement Process for Mobilized Army Guard
Soldiers:

We reported and testified that mobilized Army Guard soldiers have
experienced significant problems getting accurate, timely, and consistent
reimbursements for out-of-pocket travel expenses. Army Guard soldiers in
our case study units reported a number of problems that they and their
families endured due to delayed or unpaid travel reimbursements, including
debts on their personal credit cards, difficulty paying their monthly
bills, and inability to make child support payments. As a result of our
recommendations, DOD is taking action to correct the deficiencies noted in
the areas of processes, human capital, and automated systems. However,
with regard to DOD's longer term automated systems initiatives, we
identified problems that raise concerns about whether and when complete
and lasting solutions to these issues will be implemented. ( GAO-05-79 and
GAO-05-400T )

3.45.C. Identifying Airline Passenger and Property Screening Costs:
Funding for aviation security programs remains a central issue because
passenger and air carrier security fees are not sufficient to fully cover
TSA's costs. In the post-Septem-ber 11 environment, passenger screening
and who pays for it are highly visible and extremely sensitive topics to
the traveling public, air carriers, airports, security companies, trade
organizations, and the federal government. One of the fees that TSA is
authorized to collect is currently based on airlines' self-reported costs
of providing passenger and property screening during calendar year 2000.
These self-reported amounts totaled $319 million. Because this amount was
much lower than anticipated, the Congress asked us to provide an
independent assessment of the airlines' passenger and property screening
costs in 2000, the last full year prior to September 11, 2001. We
estimated that passenger and property screening costs in 2000 for the
major cost components were about $448 million or $129 million more than
the air carriers reported. Accordingly, we recommended-and TSA agreed to
consider-using the analysis and estimates in our study in determining the
future basis for this fee. (GAO-05-558 )

3.46.C. Supporting the Congress in Its Efforts to Focus on the Importance
of Internal Control: The 1982 Federal Managers' Financial Integrity Act
required the Comptroller General to issue internal control standards and
OMB to issue guidelines for agencies to follow in assessing their internal
controls. In 2004, OMB revised its internal control guidance contained in
Circular A-123, in an effort to strengthen the requirements for conducting
management's assessment of internal control over financial reporting and
bring a principles-based approach to establishing and reporting on
internal control. In February of 2005, we provided our views on OMB's
revised circular, highlighting issues critical to successful
implementation of the revised circular. We also outlined the importance of
internal control, summarized the Congress's long-standing interest in
internal control and the related statutory framework, and discussed our
experiences and lessons learned from agency internal control assessments
since the early 1980s. ( GAO-05-321T )

3.47.C. Helping NASA to Address Its Human Capital Challenges: At the end
of this decade, NASA plans to retire its Space Shuttle. Retiring the space
shuttle-and in the larger context, implementing the President's new vision
for space explo-ration-will require NASA to rely on its most important
asset: its workforce. The space shuttle workforce currently consists of
about 2,000 civil service and 15,600 contractor personnel, including a
large number of scientists and engineers. After we began our work on
NASA's human capital challenges related to retiring the Space Shuttle,
NASA directed panel teams to examine human capital as an element of the
shuttle program's mission execution and transition needs. Consistent with
our findings, the teams made various recommendations on steps that should
be taken to address human capital concerns, including developing and
implementing a critical skills retention plan, developing a communication
plan to ensure the workforce is informed, establishing an agencywide team
to integrate human capital planning efforts, and developing a detailed
budget that includes funding for human capital retention and reduction
strategies. (GAO-05-230 and GAO-05-718T )

3.48.C. Modernizing the Accountability Profession for the 21st Century: We
were actively engaged with other accountability organizations in building
a solid foundation for an effective and ethical accountability profession
prepared for the challenges of the 21st century. We provided leadership on
key issues involving fair presentation of financial reporting overall and
key aspects of auditing standards. We also provided the essential public
interest perspective in the development of

U.S. and international auditing standards that will fundamentally
strengthen audit performance and improve the effectiveness of audits in
the private and public sectors. We also continued to provide leadership in
accountability for all levels of government auditors and financial
management professionals in the United States-state, local, and
federal-through training, technical advice, and leadership in auditing and
internal control standards. Our experts responded to thousands of
auditors' inquiries on the Government Auditing Standards, and provided
training sessions at more than 50 professional conferences and workshops
across the country for state, local, and federal government auditors and
financial management professionals. In addition, we contributed insight
and recommendations to ongoing Sarbanes-Oxley Act reforms, which posed
significant challenges for corporations and auditors. In venues such as an
SEC roundtable and the Public Company Accounting Oversight Board's
Standing Advisory Group, we contributed to efforts to improve and
streamline the audit process. On the international front, we provided
leadership in developing strong, globally accepted auditing standards for
the International Organization of Supreme Audit Institutions (INTOSAI),
which is an association of national government audit organizations, and
the International Auditing and Assurance Standards Board, which is working
to establish auditing standards to be used around the world. (Based on
briefings)

Analyze the government's fiscal position and strengthen approaches for
addressing the current and projected fiscal gap

3.49.A. Improving GSA's Capital Financing Decisions: In our December 2004
report, we recommended that GSA's Administrator, among others, perform
business case analyses and ensure that the full range of funding
alternatives, including the technical feasibility of useful segments, are
analyzed when making capital financing decisions. In a May 12, 2005,
letter to the Comptroller General, GSA's Administrator wrote that in
response to our recommendation, GSA will develop a pro forma business case
analysis that is similar to the analysis used for projects using
appropriated funds and can be used for Energy Savings Performance
Contracts, which provide capital improvements, such as lighting retrofits
and ventilation systems, for federal facilities without the government
recording the full cost up-front. In addition, GSA has promulgated
supplemental internal procedures to be followed when entering into these
contracts. The procedures require the performance of a life cycle cost
analysis as part of the contract evaluation process. (GAO-05-55 )

3.50.A. Permanently Reauthorizing Selected Franchise Fund Pilots: In
August 2003, the Congress was considering the reauthorization of the six
franchise fund pilots operating at the Department of the Interior,
Commerce, Treasury, VA, HHS, and EPA. These franchise funds, authorized by
the Government Management Reform Act of 1994, are part of a group of 34
intragovernmental revolving funds that were created to provide common
administrative support services required by many federal agencies. For
example, the Commerce Franchise Fund's business line provides IT
infrastructure support services to the agency. The Congress established
these self-supporting, businesslike entities to provide such services on a
fully reimbursable basis. We concluded in our report that increasing the
period of authorization would help to ease the concerns of current and
potential clients about franchise fund stability and might allow franchise
funds to add new business lines. The Congress provided permanent authority
to the Commerce and Treasury franchise funds in the Consolidated
Appropriations Acts of 2004 and 2005, respectively. ( GAO-03-1069 )

3.51.A. Improving IRS's Methodology for Pursuing Delinquent Taxes: Our
report on IRS's fiscal year 1999 financial statements stated that IRS did
not have systems or procedures in place to allow it to identify and
actively pursue cases that may have some collection potential. We
recommended that IRS improve its capacity to assess the collectibility of
delinquent taxes as a way of deciding on which debts to focus collection
efforts. In 2004, IRS began implementing sophisticated modeling technology
to differentiate between more and less productive cases in order to make
better resource allocation decisions. IRS's analysis showed that its
collections of delinquent taxes with approximately the same resources
increased by about $1.8 billion, or 8.4 percent from the previous year.
(GAO-01-42 )

3.52.A. Improving Agency Capital Planning: In 2004, we evaluated VA,
National Park Service, and Bureau of Prisons capital planning practices
against the practices used by leading private companies and state and
local governments that we identified in a 1998 report. We found that
capital plans were not being done or needed to be centralized or expanded
to reflect all the capital investment decisions made by the agencies. We
also noted that the Congress and OMB should receive the plans to make
agencies' longer term priorities transparent and to promote a longer term
perspective in capital decision making. Since our 2004 report, all three
agencies developed and improved capital plans, making them available to
key decision makers. Also, as agencies developed such plans, capital asset
management systems and asset inventories were improved as part of their
efforts to better determine actual capital asset needs. ( GAO-04-138 )

3.53.A. Revising Tax Rules on Expatriation of Individuals: Certain high
income or high net worth individuals are subject to an alternative method
of income taxation for the 10 years after they relinquish their U.S.
citizenship or noncitizens terminate their residency. In our May 2000
report to the Joint Committee on Taxation, we provided information on IRS,
Immigration and Naturalization Service, and State Department procedures
for preventing individuals who do not comply with these tax rules from
reentering the United States, analyses of their tax returns, and
information related to their country of citizenship and residence after
leaving the United States. In February 2003, the committee issued a report
on the tax law and immigration treatment of relinquishment of citizenship
and termination of long-term residency. The report extensively cited our
assistance to the committee and provided the basis for the American Jobs
Creation Act of 2004 to revise the tax rules related to citizenship
relinquishment or residency termination. To accompany the conference
agreement, the committee estimated that budget effect of the revised tax
rules for the 2005 to 2014 period will be to increase revenues about $377
million. We are recognizing $121 million of this increased revenue over
the 2005 to 2009 period as an accomplishment. (GAO/GGD-00-110R )

3.54.C. Contributing to the Tax Reform Debate: We issued several products
in fiscal year 2005 that looked at the cost, complexity, and fairness of
our tax system. For example, two products focused on a major contributor
to these costs, tax expenditures. One looked at tax expenditures as a
whole, noting their growth and lack of oversight compared to federal
spending. The other found that the rules governing the tax expenditures
for higher education are complex and taxpayers often make decisions
counter to their own financial interest. We also reviewed the literature
on the costs of the current tax system-economic efficiency and compliance
costs beyond the taxes actually paid-and reported that estimates of
compliance burden range from 1.0 to 1.5 percent of Gross Domestic Product,
while estimates of the economic efficiency losses are on the order of 2 to
5 percentage points of Gross Domestic Product. Complexity also breeds
noncompliance. As we reported, IRS estimates that the tax gap is over a
quarter of a trillion dollars. Lack of confidence in the current tax
system is driving proposals for reform. We also issued a special
publication providing background on revenue needs, the criteria for a good
tax system, and key questions to help policymakers and the public make up
their own minds on tax reform proposals. (GAO-05-527T, GAO-05-684 ,
GAO-05-690 , GAO-05-753 , GAO-05-878 , and GAO-05-1009SP ) 3.55.C.
Analyzing the Federal Government's Long-term Fiscal Imbalance: We continue
to provide updated analyses of our nation's large and growing long-term
fiscal challenge and the risks it poses to our future. Simply put, our
nation's fiscal policy is on an unsustainable course. Absent substantive
policy change, a growing imbalance between expected federal spending and
tax revenue will lead to escalating and ultimately unsustainable federal
deficits and debt. We hosted a forum in December 2004 to identify ways to
broaden public understanding and dialogue so that action could be more
likely, more informed, and more immediate. Taken together, our efforts
have helped foster collaborations between groups and individuals across
the political and policy spectrum aiming at increased public understanding
of the nature, magnitude, and potential consequences of the long-term
fiscal challenge. ( GAO-05-282SP )

3.56.C. Conducting the First GAO Appropriations Law Forum: We held our
first Appropriations Law Forum on March 10, 2005, to highlight the more
relevant federal appropriations law topics from the year as well as
provide members of the community an opportunity to discuss appropriations
law issues and to meet other appropriations counsel. Over 100 attorneys
from government agencies participated in the forum, which focused on the
Congress's power of the purse, with sessions that included an overview of
significant decisions issued in 2004, a discussion of interagency
transactions, and an overview of the availability of appropriated funds to
purchase food. Material from the forum was subsequently posted on our Web
site and is routinely used by federal appropriations law practitioners.
(Based on a forum)

3.57.C. Achieving the First Annual Update of the Red Book: In March 2005,
we published the first annual update of the third edition of volume I of
Principles of Federal Appropriations Law (known as the Red Book) to
improve its value as a timely, exemplary resource for understanding
federal appropriations law matters. The update presented a cumulative
supplement to the published third edition text that includes all relevant
decisions from January 1 to December 31, 2004. It was posted
electronically on our Web site and contains links to all cited our
decisions. The update has served as an invaluable new reference tool for
the entire federal government and has been welcomed by the federal
procurement community, composed of hundreds of attorneys and even more
practitioners, as an extremely helpful publication. (GAO-05-354SP )

3.58.C. Amending the Antideficiency Act to Include GAO: We drafted
legislative language amending the Antideficiency Act to require the heads
of executive agencies and the Mayor of the District of Columbia to
transmit to the Comptroller General copies of reports of violations at the
same time violations are reported to the Congress and the President. Our
provision was inserted into the Consolidated Appropriations Act 2005. We
also drafted report language for the Senate report, which instructs us to
establish a central repository of Antideficiency Act reports and states
that the Comptroller General will track all Antideficiency Act reports,
including responses to Comptroller General legal decisions and opinions
and findings in audit reports and financial statement reviews. (Based on
legal assistance)

3.59.C. Increasing the Oversight of the Vehicle Donations Program: The
American Jobs Creation Act of 2004 included a provision limiting the
amount that a taxpayer can claim for a donated motor vehicle, boat, or
plane to the gross proceeds received from the sale when the value exceeds
$500 and the item is sold by the charitable organization. Prior to this
law, IRS's guidance instructed taxpayers donating vehicles to charities to
establish the value of a donation based on its fair market value. Our
November 2003 report on charitable vehicle donations stated that the
proceeds received by charities from vehicle donations were 5 percent or
less of the value donors claimed as a deduction on their tax returns. We
consulted with congressional staff on a legislative proposal to address
the problem by allowing taxpayers to only take a tax deduction for the
selling price of the donated vehicle instead of the fair market value. As
a direct result of our report, a bill was introduced in the Congress that
included a revenue raiser to address the vehicle donations problem, and
this revenue raiser was ultimately included in the American Jobs Creation
Act. (GAO-04-73 )

3.60.C. Advancing Accountability with the First Financial Audit of SEC: We
conducted the first-ever audit of SEC for the fiscal year ended 2004. SEC
plays a prominent and critically important role in overseeing the U.S.
securities markets and in enforcing accountability for corporations whose
securities are traded in those markets. Completion of the first financial
statement audit of SEC represented a significant advance in the
commission's accountability to the public. SEC earned an unqualified, or
clean, opinion on its financial statements, meaning that we found that its
financial statements and accompanying notes are presented fairly in all
material respects and in conformity with generally accepted accounting
principles. We also found that in preparing its first complete set of
financial statements, SEC had made significant progress in building a
financial reporting structure. Nevertheless, we found that SEC had
material weaknesses in internal control over financial statements and
disclosures, recording and reporting disgorgements and civil penalties,
and information security, and therefore we issued an adverse opinion on
internal control. In congressional testimony, the Comptroller General said
that SEC must lead by example in internal control. He said that a higher
standard of accountability is important to SEC as a government regulator
and to the success of its programs, activities, and leadership in the
business community. SEC agreed with the majority of our recommendations
and has taken steps to address the weaknesses we found. (GAO-05-244 ,
GAO-05-693R , and GAO-05-880T )

Source:See Image Sources.

Continuously improve client and customer satisfaction and stakeholder
relationships

4.1.C. Strengthening Communication with our Congressional Clients: To
provide new members of the Congress and their staff with information about
GAO and our working relationship with the Congress and to obtain
information on client needs, the Comptroller General and the Congressional
Relations staff met with new members and their staffs and have continued
to meet and seek feedback from other committee members and staff who have
been long-standing clients of GAO. We also sought to further improve our
products, processes, and services by routinely providing feedback from our
Web-based client survey to our managing directors who direct engagements
supporting goals 1, 2, and 3. (Based on internal activities)

4.2.C. Measuring Congressional Satisfaction with Our Work: We collect
feedback on our products (all testimonies and high interest and higher
cost written products) from every congressional committee, expanding our
coverage from our two oversight committees. We received 96 percent
favorable responses to our client feedback survey for fiscal year 2005.
Feedback on the nature of the comments has been provided to our managing
directors, and our training now incorporates some of the most frequently
received feedback. (Based on internal activities)

4.3.C. Developing Options for Electronic Dissemination: As part of our
ongoing pilot project to test the feasibility of producing and
disseminating GAO reports in an electronic format, we provided over 70
products to various congressional requesters in an electronic format
rather than generating hard copy reports. Electronic reports allow our
clients to search and excerpt text more easily and to follow Web links for
further information. Client feedback on our electronic dissemination
process has been positive, and we plan to make the use of electronic
products routine. As part of another effort, we modified processes for our
electronic supplements, which are electronic copies of the complete
results of Web-based surveys that were conducted in conjunction with our
work and are posted on our Web site. Specifically, we modified the
software program that generates these supplements and simplified the
process for creating and posting them. As a result, paperwork requirements
involved in requesting a product number are reduced for our staff, staff
can view all features of the supplement before it is posted on the
Internet, clients and other readers can more easily navigate within the
electronic supplement, and the product is more readily identified as a GAO
product. (Based on internal activities)

4.4.C. Assessing Internal Customer Satisfaction with Our Services and
Processes: In fiscal year 2004, we launched the Chief Administrative
Office (CAO) customer satisfaction survey and established baselines for
key performance indicators. Based on an analysis of the gap between
customer expectations and satisfaction with services provided, we
established targets for improvement for the most important CAO areas, and
CAO units developed and implemented a number of improvement efforts. We
conducted the second customer satisfaction survey in November 2004 to
measure the impact of our improvement efforts, refine our targets, and
make necessary adjustments to reduce the gap between customer expectations
and the satisfaction with services provided. The fol-lowing are examples
of the improvements we made. To improve communications, we implemented a
new system for disseminating and storing agencywide communications and
notices; a new administrative services Web site (the GAO Administrative
Gateway) to provide information about our administrative services in a
more customer-focused and user-friendly format, including direct links to
CAO unit Web sites; and a searchable administrative services directory. We
also addressed two major IT pain points identified in the survey: (1) we
replaced the software that allowed secure network access in conference
rooms but resulted in considerable network slowness and response times for
users with one that enhances security while providing simple, direct, and
stable access to the network, reducing customer frustration and the number
of help desk calls, and (2) we procured new network printers with greater
paper capacity, finishing capabilities, and print speed to replace an
aging fleet of printers that were prone to breakdowns and were
inconveniently located for staff. (Based on internal activities)

4.5.C. Assessing GAO Staff Views on Overall Operations and the Work
Environment: We launched our fifth employee feedback survey in May 2005, a
confidential survey conducted online that provides an opportunity for our
employees to provide their views on GAO's work environment. The results
are used to assess employees' satisfaction with GAO and are analyzed to
compile the people measures that are discussed in parts I and II of this
report. Eighty percent of our employees completed the survey, and the
overall results were very positive with improvement recorded in every
people measure. Our scores averaged 8.5 percent higher than the latest OPM
governmentwide survey and 5.25 percent higher than the latest private
industry survey. This year we also added questions to assess employees'
satisfaction with GAO. The results of the responses to these questions
were used by the Partnership for Public Service to determine our standing
in the annual Best Places to Work in the Federal Government rankings. In
September, we received an award from the Partnership for Public Service
for our fourth place ranking. (Based on internal activities) 4.6.C.
Strengthening Relationships with Our Stakeholders and Increasing the
Accessibility of Our Products: We developed and issued international
protocols to strengthen our relationships with our stakeholders in the
international community. We released the draft protocols for a 1-year
pilot in October 2005 and plan to issue the final version in early fiscal
year 2006. We also continued work on our agency protocols, which provide
clearly defined and transparent policies and practices on how we interact
with the executive branch agencies in performing our work. Since we began
pilot-testing the protocols in December 2002, we have been monitoring
their application. During that time we have received comments indicating
that the protocols (1) help to ensure a consistent and unified GAO
approach throughout the federal government and (2) could benefit, in some
areas, from additional clarification. In response to these comments, we
revised the protocols in October 2004 to clarify our relationship with the
agencies where we perform work and our methods of communicating and
exchanging information with them. Where applicable, we also revised the
protocols to reflect the updated congressional protocols that were issued
July 16, 2004. The international peer review team that independently
assessed the effectiveness of our quality assurance system for conducting
performance audits cited GAO's agency protocols in its April 2005 report
as a good practice that will be of interest to other national audit
offices. (Based on internal activities)

4.7.C. Achieving External Recognition: We won an American Graphic Design
Award for excellence in communication and design for our publication About
GAO, a brochure that provides an overview of GAO and its history, mission,
and key performance statistics. Fewer than 10 percent of the approximately
10,000 entries from advertising agencies, graphic design firms, corporate
creative departments, and publishers were selected for an award by a panel
of judges from the design and publishing fields. In addition, one of our
systems-the Electronic Assistance Guide for Leading Engagements, which
brings together in one place on the intranet everything our staff members
need to carry out an engagement-was selected by the E-Gov Institute from
among 120 entries as one of 14 government IT applications to receive its
Pioneer Award. This award recognizes government organizations that have
illustrated results-oriented government during the past year. Finally, our
Chief Information Officer was recognized as one of the 10 recipients of
Government Computer News' government IT leadership awards for
"demonstrating the essential qualities of leadership." (Based on internal
activities)

Lead strategically to achieve enhanced results

4.8.C. Integrating Planning, Budgeting, and Performance Measurement: We
continued our efforts to integrate our planning, budgeting, and
measurement process to ensure a logical, timely, and accurate progression
of information from one activity to the next during the fiscal year
process while avoiding duplication of effort in information gathering and
report preparation. For example, we aligned the contents of and time
frames for the performance plan, performance and accountability report,
and budget with our new 3-year strategic planning process. We also
established a matrixed team to document the entities and activities
associated with the workforce plan, budget, and human capital to help
ensure integration of the time frames and content of planning and
performance measurement. To improve performance measurement, we continued
to refine our measures by dropping the measure that counted the number of
recommendations we made in our reports annually and introducing two new
measures related to our internal operations. Beginning in fiscal year
2006, these internal operations measures will help us track our ability to
provide useful administrative services that help staff perform their jobs
and contribute to the quality of their work lives. We also continued to
explore ways to assess our performance in creating and sustaining
partnerships with external organizations and entities. (Based on internal
activities)

4.9.C. Improving Our Strategic and Budget Planning Processes: As part of
our planning activities for the fiscal year 2005 performance and
accountability report, we incorporated lessons learned from the successful
issuance of our fiscal year 2004 performance and accountability report on
November 15. We accelerated issuance of this report from January 31 to
November 15 to comply with OMB guidelines and the spirit of the Government
Performance and Results Act. We also modified the format and revised some
text in the fiscal year 2004 and 2005 performance and accountability
reports to address suggestions and recommendations from external
reviewers, such as the Association for Government Accountants, and the
Mercatus Center. For the fourth year in a row, the Association of
Government Accountants awarded our performance and accountability report
the Certificate of Excellence in Accountability Reporting. We also
implemented changes to our budget and resource planning process designed
to improve the efficiency of the process and ensure increased integration
among IT investments, budget, procurement, and workforce planning. The
revised process will help ease customers' administrative burden, provide
greater consistency among the resource planning components, and provide a
more comprehensive assessment of our resource needs. (Based on internal
activities)

4.10.C. Strengthening Our Strategic Human Capital Management: Based on
feedback from our customer satisfaction survey, our Human Capital Office
was realigned in June 2005 to consolidate services under four centers of
excellence: the Talent Acquisition and Human Capital Consulting Center,
the Learning Center, the Performance and Pay Management Center, and the
Human Capital Strategic and Operations Center. This consolidation enables
us to improve our customer focus and our understanding of our customer
needs. In addition, the realignment has helped to clarify lines of
delegated authorities, standardized guidance across the Human Capital
Office, and allowed us to dedicate more of our resources to direct
customer support. (Based on internal activities)

4.11.C. Retaining and Attracting Staff: To more effectively anticipate and
secure an adequate supply of talent for current and future needs, we have
improved our recruitment strategy by redefining the student employment
program to include both graduate and undergraduate career experiences
during the fall and spring as well as the summer and increasing the use of
short-term and time-limited appointments and direct-hire authorities. Our
fiscal year 2006 recruitment strategy, developed this year and recently
approved by our Executive Committee, includes year-round internships;
implementing cooperative education agreements with five local
universities; implementing governmentwide flexibility for noncompetitive
appointments into the Professional Development Program; and using targeted
recruiting for special skill sets, hard-to-fill positions, and diversity
recruiting. We also launched a pilot program that offers employment to a
limited number of undergraduate cooperative education program participants
in September 2005. (Based on internal activities)

4.12.C. Refining Performance Management:

We enhanced and improved our communications with managers and staff in
fiscal year 2005 through implementation of a number of initiatives such as
providing an organizational and performance consulting service to address
organizational needs of our managers; issuing a report to our managing
directors and the Employee Advisory Council that evaluates the performance
management assessment cycle with recommendations for improvement;
redesigning the performance management Web site to improve its
user-friendliness; providing direct links to performance Web site
information in GAO notices, e-mails, policy documents, and other forms of
communication to staff; and developing an e-learning course-Roles and
Responsibilities of the Designated Performance Manager-that provides our
managers and supervisors with timely access to the information on our
performance management process and their responsibilities. We also made
specific improvements to the analysts, specialists, and investigators
performance management system, including shortening the processing time
for appraisals, pay, and promotion decisions; distinguishing feedback on
performance from feedback on pay and promotion potential; and reducing the
amount of paperwork required. (Based on internal activities)

4.13.C. Enhancing Our Classification and Compensation Systems: We
continued to enhance our performance management and compensation systems
through new and enhanced policies and processes. We revised the process
for determining performance-based compensation so that the compensation is
more directly linked to an individual's performance, as reflected on the
appraisal. In addition, our administrative and professional support staff
completed their first year under a broadband pay system and a
competency-based performance system in June 2005. To ensure that these
staff understood the new process, as well as to foster staff acceptance,
we employed an aggressive communication strategy that included meetings
with staff, as well as Web-based guides and questions and answers. We also
sought to strengthen our compensation system. To design a competitive,
fair, and equitable compensation program aligned with competitive labor
markets in which we compete for talent, we worked with a consulting firm
to perform a market-based compensation study. Based on the results of the
study, we have invested significantly in restructuring our analyst and
analyst-related specialist Band II pay band into two pay levels to better
align compensation and responsibilities. Other improvements we have
implemented to ensure our managers' needs for support and guidance
concerning their responsibilities in the performance management process
are met include establishing an organizational and performance consulting
service, developing an e-learning course on designated performance
managers' roles and responsibilities, developing and issuing a report for
managers and our Employee Advisory Council evaluating the performance
management assessment cycle with recommendations for improvements, and
improving the accuracy and user-friendliness of our performance management
Web site. (Based on internal activities)

4.14.C. Enhancing Opportunities for Training: We designed 13 new
competency-building courses that focused on expanding the professional
skills of auditors, assisting supervisors in providing oversight to the
engagement process, and equipping designated performance managers to
develop assigned staff. As a result, our staff have an opportunity to
improve the quality of our writing, our methodological analysis, and our
ability to identify appropriate developmental activities for continued
professional growth. To further strengthen our definition of effective
leadership and provide new leaders with an opportunity for peer-to-peer
mentoring and problem solving, we have established a community of practice
consisting of analysts-in-charge who graduated from a course on
supervision. This community of practice meets regularly to discuss best
practices; challenges facing new analysts in charge; techniques for
motivating, directing, and coaching staff; how to effectively use and
contribute to our performance management system; and tools to improve
performance. We also implemented an adjunct faculty program, certifying
line auditors as adjunct faculty. This program enlarges the number of
subject matter experts available to develop content for new courses,
expands the range of courses available for more experienced staff, and
meets the needs of both headquarters and field staff. To deliver required
core curricula to Band I analyst staff in the field offices in the most
cost-effective manner, we developed and implemented a hub approach whereby
we deliver courses that have been grouped into five sets of week-long
sessions at three learning hubs (San Francisco, Denver, and Atlanta). This
decision was based on our analysis that showed it would cost twice as much
to centralize Band I program delivery in headquarters as it would to
distribute and realign programs among the three learning hubs. This
represents a cost avoidance of $500,000 in travel and per diem and offers
a number of intangible benefits, such as networking among and across
teams, a sustained focus on learning, larger classes that make more
effective use of adjunct faculty time, and the opportunity to strengthen
matrixed work relationships through shared learning experiences. (Based on
internal activities)

4.15.C. Providing Online Job Aids and Support Tools: To increase our
ability to provide courses, job aids, or performance support tools to our
staff online, in December 2004 we implemented an upgraded learning content
management system. The upgraded system makes this learning content
available on demand, anytime, anywhere, for our staff. It also provides
the ability to identify core, required curricula for designated staff;
track completion of the courses; capture information on completion of
commercially licensed professional development courseware and simulations
into our training information system; generate management, utilization,
and course completion reports; and effectively launch e-learning developed
in GAO directly to the learner's desktop. To bring equity to learning
opportunities for both analyst and mission support staff, we organized
information about the over 1,900 professional development courses deployed
to our desktops last fiscal year as well as other centrally taught,
instructor-led classes into online learning resource guides for
administrative professional and support staff. The resource guides, which
parallel the design for analyst staff, organize learning opportunities by
competency, suggest job developmental activities, and lay out practical
learning tracks for staff and their supervisors to use in creating
individual development plans for professional growth. (Based on internal
activities) 4.16.C. Ensuring Exemplary Practices and Systems in Our Fiscal
Operations: Our fiscal year 2005 financial statements were prepared, and
the audit was completed with a clean opinion within 45 days after the end
of the fiscal year. This quick turnaround allowed the statements and
audi-tor's report to be included in the performance and accountability
report in the time frame mandated by OMB. Based on a fiscal year 2004
financial statement audit recommendation by our independent external
auditors, we have developed an Anti-Fraud Program within GAO. Key elements
of the program will include creation of an Anti-Fraud Web site and
employee awareness training. Employees will be able to report significant
instances of fraud, waste, and abuse in our operations anonymously and
without fear of retaliation to the Anti-Fraud Web site, which will be
overseen by our IG. Fraud awareness training modules will be included in
our internal ethics training and the Web-based computer security awareness
training that staff must take annually. Finally, in anticipation of a
focused effort in fiscal year 2006 to replace our current financial
management system, we established a steering committee, a management team,
and a project team to analyze agency requirements and select the
replacement system. (Based on internal activities)

4.17.C. Strengthening IT Governance Practices and Processes: In fiscal
year 2005, we took actions related to two surveys of our IT organization.
The first survey reviewed how we compared with peer organizations of
similar technical complexity, size, and workload in terms of costs. While
the overall results were positive and showed that we are very competitive
with our peers, there were two areas identified for potential cost
reductions- desktop hardware and voice communications. In replacing our
installed base of notebook computers by the close of fiscal year 2005, we
have achieved some of these cost reductions. And we have an effort under
way to contract for a voice communications system, which will yield
additional financial benefits and reduce the number of support staff
required for voice communications, bringing us within the competitive
range for like organizations. The second survey assessed the skills of our
IT staff in business and IT technical areas and evaluated how well we are
positioned in workforce planning compared to peer organizations. Based on
the survey results, we identified our skill strengths and weaknesses,
training needs, and current and future workforce gaps and initiated an
action plan to address the identified skill gaps and ensure workforce
continuity and talent management. (Based on internal activities)

Leverage GAO's institutional knowledge and experience

4.18.C. Maximizing the Collection, Use, and Retention of Essential
Organizational Knowledge: As a knowledge-based professional services
organization, it is important that we identify and implement strategies to
increase organizational knowledge retention and transfer. We began a pilot
of an electronic records management system, which we plan to implement in
fiscal year 2006, that will capture our records-such as our workpapers,
reports, and testimonies-and make them accessible electronically to all
GAO staff. We plan to implement the final version of this system in fiscal
year 2006. We have also made more types of organizational information
accessible by beginning to digitize certain document collections-such as
the legislative histories and the General Counsel's files that document
legal research-and identifying GAO data sets, databases, and data models
to make them available as well. We are currently assessing the policy and
cultural implications of making all GAO records available to all GAO
staff. In addition, we established a working group of employees from
different parts of the agency to explore ways we could improve our
reporting. These efforts may include creating new product types, revising
our existing reporting format, or using other communication modes. Key
members of this group also began to develop short- and long-term
communications standards for various media to guide the presentation of
all of our publications. (Based on internal activities)

4.19.C. Increasing Our Knowledge-Sharing Capability: The Human Capital
Reform Act of 2004 granted authority for an executive exchange program
with private sector organizations. This year, we finalized our policy for
an executive exchange program and received Executive Committee approval
for the forms, templates, and brochures we developed to be used in the
program. This program will further the institutional interests of GAO and
the Congress by providing training and skill development opportunities for
our employees as well as obtaining the expertise of selected private
sector employees. In fiscal year 2005, we also implemented several changes
to improve customer satisfaction with our external Web site, including
integration of our products database with a search engine that provides
more relevant and targeted results for customers using our search utility
and links to both primary and related GAO products, an enhanced
presentation of search results, enhanced capabilities for narrowing a
full-text search, updated content on several pages, and making more site
visitors eligible for the satisfaction survey through expansion of the
survey throughout the site and using a version of the survey that works
with popup blockers and additional browser types. Overall, customer
satisfaction with the site, as measured by the American Customer
Satisfaction Index, increased six points from June 2004 to September 2005.
We also initiated development of Web-based just-in-time training for many
of our Web-based library databases. These databases will have instantly
available step-by-step instructions that are only a click away on all GAO
desktops. Finally, as part of continuing efforts to support operations, we
have developed standards to aid analysts in conducting their research.
These standards are available on the Knowledge Services and Information
Services Web sites as well as in the Electronic Assistance Guide for
Leading Engagements. To accompany the standards, we included a formatted
checklist that analysts can use as a tool in performing literature
searches. (Based on internal activities)

4.20.C. Enhancing Knowledge Sharing with Other National Accountability and
Professional Organizations: We convened a number of forums, symposia, and
other meetings to provide opportunities for an exchange of knowledge
between accountability and professional organizations, experts, and
stakeholders within the United States. For example, we held Comptroller
General forums that covered topics such as long-term fiscal challenges and
defined benefit pension plans. In addition, our speakers' series, called
Conversations on 21st Century Challenges, brought five distinguished
leaders to speak to our staff on issues affecting the United States and
its place in the world. Nationally, our continued participation in the
Domestic Working Group-a group of federal, state, and local auditors that
meets to discuss mutual challenges-on efforts such as access to records,
governance, long-term fiscal challenges, and grants management facilitated
collaboration between GAO teams and state auditors on 14 issues. The
Partnership for Public Service and the National Association of State
Auditors, Controllers, and Treasurers assisted us on a number of
engagements and helped to facilitate our access to state and local
auditors on engagements relating to improper payments. Through the
National Intergovernmental Audit Forum, we convened 21 regional forum
meetings to update federal, state, and local auditors on changes to
professional audit standards, the implications of Sarbanes-Oxley for the
audit profession, and other key issues affecting the audit community. In
addition, we helped organize and develop briefings on program evaluation
for OMB examiners in response to concerns about how they were assessing
agency program evaluations with PART. As a result, these examiners should
be able to more realistically judge the quality of the evaluation evidence
presented to them and communicate more clearly to agency staff what
evaluation information they need. (Based on internal activities)

4.21.C. Enhancing Knowledge Sharing with International Accountability and
Professional Organizations: Internationally, we continued to provide
leadership in the implementation of INTOSAI's first strategic plan by
having the Comptroller General serve as the Vice-Chair of the Governing
Board's newly created Finance and Administration Committee and as board
liaison for the strategic plan's capacity building goal. He also chairs
INTOSAI's Accounting and Reporting Committee and several GAO employees are
active members of the Auditing Standards, Internal Control Standards,
Information Technology, Public Debt, and other technical committees. This
year, we played a major role in developing international internal control
standards that were adopted at the INTOSAI Congress. To help ensure that
U.S. public sector perspectives are reflected in the International
Federation of Accountants' standards development project, we are
collaborating closely with the International Auditing and Assurance
Standards Board and the World Bank. We also expanded our global network
and reputation by promoting education and knowledge sharing through the
International Auditor Fellowship Program and the Visitor Program in which
20 fellows from Africa, Asia, Latin America, the Caribbean, and Eastern
Europe participated. We received about 600 visitors from 63 countries,
including officials from our counterpart organizations, parliaments, and
central government ministries. We also initiated the Auditors General
Speaker Series that provides unique international perspectives and
insights in support of our work. Speakers in this series included the
auditors general of South Korea, China, Saudi Arabia, and Ireland. (Based
on internal activities)

Continuously enhance GAO's business and management processes

4.22.C. Improving Engagement Support Services: In fiscal year 2005, we
improved engagement support services through various efforts. For example,
we streamlined and simplified the Audit Documentation Set as part of the
final phase of the document's pilot test, which was launched in January
2004. The Audit Documentation Set helps to ensure that our engagements are
consistent with the generally accepted government auditing standards and
our Quality Assurance Framework and that our work and engagement-related
decisions have been systematically documented. After revising the January
2004 document based on extensive comments from analyst staff, we solicited
comments from staff again in May 2005 and issued the final version of the
Audit Documentation Set in July 2005. The new version should require less
time to complete because it eliminated duplicate requirements and no
longer requires documentation of steps where not applicable responses are
self-evident. In a separate effort, we implemented two changes to improve
the efficiency of the report production process and enhance customer
service in response to comments we received through internal surveys.
Specifically, we reduced the number of Product Assistance Groups-which
provide services such as graphics design, editing and writing assistance,
and report production- from four to three and realigned the teams and
offices that they serve. In addition, we placed a full-time manager in
charge of outside printing and graphics procurement, which has become more
important since the elimination of our in-house printing capacity in
fiscal year 2004. These changes will allow us to continue to support
product development more efficiently and economically. (Based on internal
activities) 4.23.C. Obtaining a Clean Opinion on Our Performance Audit
Practice: We obtained a clean opinion on our performance audit practice
from an international team of experienced audi-tors-the first time that we
have sought such an opinion. The independent reviewers concluded that we
have designed and implemented an effective system of quality controls to
provide reasonable assurance of complying with generally accepted
government auditing standards, which are designed to ensure that audits of
government activities are objective, independent, and reliable. This
opinion validated that the Congress and the American people can rely on
our work and products. (Based on internal activities)

4.24.C. Improving Staff Assignments: Throughout the fiscal year, we rolled
out first a prototype and then a pilot of our staffing information system,
which is intended to integrate staffing data from related but disparate
systems, reduce staff time spent researching staffing and engagement data,
and enable better staffing decisions by identifying staff skills and
availability early in the job process. The system should provide more
visibility to current and future engagement staffing needs and a uniform
means for staff to express future assignment preferences and short-term
availability. Having a common system will also support the engagement
staffing process across all GAO teams and maximize the use of staff by
facilitating their assignment to multiple activities (multitasking) and
sharing of staff expertise across teams (matrixes). (Based on internal
activities)

4.25.C. Initiating Process Improvement: We identified two areas-travel and
accounts payable- for alternative sourcing in order to aid our financial
management office in achieving its vision of shifting the efforts of our
staff away from routine transaction processing and toward a greater role
in policy, guidance development, reporting, and oversight. We selected a
service provider to perform routine data entry functions, and we have
transferred post-travel audits of travel documents to field office staff,
resulting in increased efficiency and productivity of our workforce. To
improve our IT operations, we used a competency diagnostic tool provided
through the Chief Information Officer Executive Board-an organization that
provides strategic, case-study-based research to senior IT executives- to
examine the organization of our IT operations from the perspective of our
Information Systems and Technology Services staff. The tool focuses on
eight core areas of IT management-governance, performance measurement,
security, infrastructure, applications, vendor management, talent
management, and business enablement. Analysis of the results by the
Executive Board included benchmarking our organization against other
public and private IT organizations and making recommendations for
improvement, which included expanding the use of the diagnostic tool to
examine the organization of our IT operations from the perspective of all
GAO customers. In addition, following the closing of our in-house print
plant, the increase of electronic-only report issuances has resulted in
both financial benefits and efficiency gains. Reports no longer need to be
printed on a 24-hour schedule to meet issue dates, resulting in
significant financial benefits and allowing the teams and the Product
Assistance Groups additional time to produce higher quality reports. We
set a ceiling of 200 for printed copies of products, resulting in printing
cost reductions that will total an estimated $189,000 over 2 years. (Based
on internal activities)

4.26.C. Using Enabling Technology to Improve Our Crosscutting Business
Processes: We completed several efforts in fiscal year 2005 to provide
better efficiency in our business processes. We automated two
processes-the awards nomination process and the posting of individualized
pay-sav-ing staff time. The automated awards nomination process also
provides award nomination tracking and approval and payment status and
automatically sends out status reports on the nomination via e-mail. We
installed ceiling-mounted projectors in five meeting rooms in headquarters
to allow staff to use the equipment without needing to reserve equipment
or schedule support staff ahead of time. We also acquired and deployed a
Web-based, user-friendly, cost-effective project management software
package that allows our staff to view files received from other agencies
that use that software. (Based on internal activities)

4.27.C. Using Web-Based Technology to Improve or Replace Existing Systems:
We improved our customer service in several areas using Web-based
technology. In response to customer requests for a more user-friendly
interface, we upgraded our Web-based time and attendance system, which
streamlined data entry so that time charges can be entered all on one
screen, provided staff the ability to charge compensatory time while on
travel, and enhanced the administrative functions to support the needs of
our human capital staff. We also upgraded our automated competency-based
performance system to include our administrative professional and support
services staff during their first year under the new competency-based
system and incorporate revised attorney competencies, new security
requirements, new report features, enlarged font for improved readability,
and online help and system feedback links. We improved our customer
service for employees requesting GAO transportation to business meetings
by providing a Web-based request system to take the place of the manual
system used to collect information to schedule GAO vans and drivers. This
new system allows users a more dependable way to submit requests and
allows property management staff to make better-informed decisions when
scheduling vans and drivers. In addition, we redesigned the Web-based
phone book, making it more user-friendly, including additional information
and mail and location links, and improving its search capabilities.
Finally, we deployed a major enhancement to our Web-based employee locator
system to enable easy location of our employees when they are on official
business travel overseas. (Based on internal activities)

Become a professional services employer of choice

4.28.C. Promoting an Environment That Is Fair and Unbiased and Values
Opportunity and Inclusiveness: The Office of Opportunity and Inclusiveness
(OOI) made recommendations concerning proposed agency policy on reasonable
accommodations and corresponding guidance. As a result, we developed a
defined program for reasonable accommodation to (1) ensure a systematic
approach to providing a safe and efficient workplace for staff members who
have disabilities as defined by the Americans with Disabilities Act and

(2) enhance the role of the reasonable accommodations coordinator as a
central contact person who follows the accommodation process from the
point of request through implementation. At the request of the Comptroller
General, OOI drafted several recommendations addressing recent trends
noted in our 2004 annual assessment data and concerns in the areas of
staff feedback, communication, and training. These recommendations were
discussed with a cross section of employee groups and forwarded with
comments to the Executive Committee, which approved the recommendations.
As a result, OOI set up a task force to determine how best to implement
the recommendations. OOI also addressed the issue of sexual harassment in
the workplace, conducting a number of workshops at the request of team
managers. These workshops served to emphasize the agency's zero tolerance
posture concerning sexual harassment. (Based on internal activities)

4.29.C. Promoting Diversity: To help ensure that we attract a diverse pool
of applicants for our vacant positions, we expanded our equal employment
opportunity hiring statement in our vacancy announcements to specify the
basis for our hiring selections, and we began providing a contact person
and number for applicants who need a reasonable accommodation for the
application process. To help retain talent we acquired through the summer
internship program, the OOI Managing Director met with our 2005 summer
interns to discuss his office's role and to provide guidance on important
steps that interns can take to enhance their chances for successful
conversion to permanent GAO employment. To increase retention of our
Professional Development Program employees, the OOI Managing Director met
with the their advisors to discuss the importance of ensuring that all
program participants are provided appropriate training opportunities as
well as the opportunity to demonstrate their abilities in all performance
competencies. In addition, OOI provided several presentations during the
fiscal year aimed at providing staff with information and reinforcing the
agency's position on diversity and promoting a fair and unbiased work
environment, including a panel discussion on diversity in the workforce; a
presentation to new Band II analysts on the importance of promoting an
environment that is fair and unbiased and that values opportunity and
inclusiveness for all staff; and a presentation to Senior Executive
Service employees on leading practices for maintaining diversity, focusing
on top leadership commitment and ways in which officials can communicate
that commitment. Our Asian American Liaison Group also continued to
actively promote diversity and provide opportunities for GAO staff
professional development. This group actively coordinates with the Human
Capital Office to define and meet transparent recruiting goals and is
spearheading creation of a committee to aid the Human Capital Office in
increasing and targeting diversity recruitment in the most fair and
efficient manner and improving overall diversity yield. To provide
professional development opportunities, the group hosted external speakers
such as the U.S. Postal Service's Vice President of Diversity Development,
an expert from the American Association of Retired Persons, and a panel
featuring four Asian American congressional staff. In addition, the group
and the Human Capital Office cosponsored a self-assessment workshop to
provide practical tools for GAO employees to use to highlight their
accomplishments, addressing cultural and other sensitivities that may
affect one's ability to do so effectively. (Based on internal activities)

4.30.C. Upgrading Tools and Technology: We completed a number of major
upgrades to our tools and technology in fiscal year 2005, such as
replacing outdated phone systems and equipment in the Chicago, Denver, Los
Angeles, Seattle, and Dallas Field Offices to increase reliability and
stability of the systems; replacement of older servers with up-to-date,
bigger, and faster equipment; upgrading our server software, making it
easier to patch and update and providing easier server administration and
improved security; replacing existing copiers and multifunction machines
with modern, more reliable units to reduce downtime for customers and
standardize our printing hardware platform; installing updated desktop and
office productivity software on our notebook computers, resulting in a
single notebook platform that reduces maintenance costs; providing remote
access software that is more reliable, is more secure, and provides
worldwide access for dial-in users, supplementing available digital
subscriber line and cable access; and installing a major software upgrade
on the new notebooks that provides better access to the most up-to-date
hardware drivers, tools, security updates, patches, and customer-requested
product changes, as well as better organization of e-mail. (Based on
internal activities)

4.31.C. Providing a World-Class Working Environment: We completed all
physical relocations of staff related to our organizational realignment,
enabling more efficient function of organizations through proximity of
staff requiring close interaction. We also awarded a new 5-year contract
for cafeteria services, providing reasonably priced, quality meals for our
employees. In the area of IT, we significantly enhanced the reliability
and availability of access to the Internet by obtaining a redundant
Internet connection that provides two paths to the Internet and ensures
that users will have access to a fast Internet connection in the event
that one connection fails or experiences slowness. In response to user
comments on the customer feedback survey, we provided enhanced audio for
videoconferences by making technical improvements. We upgraded our
broadcast communications system that delivers live and prerecorded
programs to our staff's desktops by replacing equipment, which increased
capacity to meet growing demand by increasing storage capacity and
improving the video file distribution process. We are now able to deliver
live programs to all GAO desktops nationwide, replacing the use of video
teleconferencing in the field offices. Finally, we upgraded our cable
television service by moving to satellite television, which, among other
things, will improve reception for televisions in managing directors'
offices and the cafeteria and provide closed-circuit television
programming capabilities. (Based on internal activities)

4.32.C. Ensuring the Security of Our IT Systems: We strengthened security
through personal firewall software that prevents the download of viruses
while staff are on travel or working from home and other software that
helps identify and eliminate malicious programs. In addition, we improved
network security by automatically activating the screensaver after a
period of inactivity, removing several games that were preinstalled on our
new notebook computers, and locking the GAO intranet page as the default
home page to prevent spyware from hijacking the default home page and
downloading more spyware. Based on the results of a third-party
independent annual assessment conducted to ensure that our systems and
network meet industry security standards, we created a plan of action and
milestones to remediate vulnerabilities, bringing us into compliance with
FISMA requirements. This ensures that risk assessments, the system
security plan, information security program assessments, and operator
authorizations are in place for all major systems and other systems as
required and that we have developed and completed system test and
evaluation reviews and certi-fications and accreditations as necessary. In
conjunction with the upgrade to our time and attendance system, we
implemented an integrated security approach that protects and validates
transactions in our Web-based systems, ensuring that no changes have been
made once a transaction is approved. While the function is transparent to
the user, internal controls capability is significantly enhanced and it
also addresses the need for digital signatures in a Web-based environment.
We also continued installation of the Secret Internet Protocol Router
Network in our field offices and completed the process in Seattle,
Norfolk, Los Angeles, Huntsville, Denver, Dallas, and Atlanta. This
network access allows our staff to obtain specific classified data
directly from agency officials via secure e-mail, improves the efficiency
of our research through direct access to classified information, posts our
classified reports for review and dissemination, electronically transmits
our classified reports to agencies for comments, and reduces the need to
use certified mail for classified data. (Based on internal activities)

4.33.C. Providing a Safe and Secure Workplace: To meet our goal of
providing a safe and secure workplace for our employees, we implemented
internal procedures and policies to enhance our security posture. For
example, we conducted our first shelter in place drill for our
headquarters staff, and developed and distributed shelter in place plans
for the majority of our field offices; we further enhanced our
communications with staff by developing and distributing an Emergency
Preparedness Plan brochure; and we began requiring that contractors
undergo a check conducted by our Security and Safety unit (through the
Federal Bureau of Investigation's National Crime Information Center) and
be fingerprinted, reducing the agency's security risk. We also improved
the speed with which we can obtain the results of the Federal Bureau of
Investigation's screening of fingerprints taken for security checks by
procuring and installing an electronic fingerprint system. The system
allows for instant transfer of information to the bureau and reports
immediately if prints are not acceptable. Our employees are also happier
with this system as it is an inkless, paperless process. In the event that
emergency relocation of staff in the headquarters building is required, we
have provided additional network access for displaced teams by installing
and activating additional local area network ports in some conference and
training rooms, and have reactivated existing disconnected local area
network ports in all remaining conference rooms in headquarters. We
completed the perimeter security build out phase of our security plans,
including installation of high-speed rollup doors, guard booths,
undervehicle cameras, pop-up barriers, and a perimeter plinth wall.
Finally, we completed a number of significant items in support of our
Disaster Recovery Program. We completed the vision of the Disaster
Recovery Program/Continuity of Operations, which was approved and signed
by the Comptroller General and Chief Administrative Officer on May 31,
2005; developed video materials for Emergency Preparedness training for
headquarters staff; and installed an emergency voice and text notification
system on the network. (Based on internal activities)

4.34.C. Enhancing Emergency Coordination:

Externally, to increase our ability to obtain detailed intelligence and
ensure coordination with the legislative branch in case of an emergency,
we established contacts and procedures with local agencies, including
establishment of emergency notification procedures with the Federal Bureau
of Investiga-tion's Joint Terrorism Task Force; enhancement of relocation
procedures and relations with the U.S. Capitol Police, House Sergeant of
Arms, and emergency preparedness offices; participation as a member of the
Legislative Branch CAO Council on Continuity of Operations Plans;
coordination of and participation in the Legislative Branch CAO Table Top
Exercise; and completion of arrangements with the District of Columbia
government to receive up-to-date emergency notifications. (Based on
internal activities)

                         2. From the Inspector General

                   3. GAO's Report on Personnel Flexibilities

The GAO Personnel Flexibilities Act of 2000 (Pub. L. No. 106-303) and the
GAO Human Capital Reform Act of 2004 (Pub. L. No. 108-271) require us to
provide a review of the actions we have taken in fiscal year 2005 under
specific sections of these acts. This appendix details the activities we
have undertaken separately for each act.

GAO Personnel Flexibilities Act of 2000

Several sections of this act were made permanent by the 2004 act; the
actions taken related to these provisions are reported under the new act.
Section 3 of the 2000 act amended our prior reduction-in-force procedures,
added a new provision, and required us to report the effect of using this
authority on preference eligibles such as disabled veterans. During fiscal
year 2005, one GAO employee was separated using reduction-in-force
procedures and that individual was not a preference eligible.

GAO Human Capital Reform Act of 2004

The first two sections of this act made permanent our authority to offer
voluntary early retirement and voluntary separation incentive payments. We
revised our regulations for offering voluntary early retirement on
November 15, 2004. These regulations allow us to announce agencywide
voluntary retirement opportunities with specific time frames and, under an
exception provision, allow us to authorize early retirement for up to 5
employees in any organizational unit in any fiscal year without an
agencywide announcement. During fiscal year 2005, a voluntary early
retirement opportunity was offered from November 2 through December 16,
2004. Applicants were required to retire between December 31, 2004, and
January 3, 2005. Of the 9 applications that were received, 7 were approved
(all 7 applicants separated in the required time period) and 2 were
denied. Under the exception provision, there have been 12 applications for
early retirement, of which 8 were approved (6 of these applicants
separated in fiscal year 2005 and 2 will separate in fiscal year 2006), 2
were denied, and 2 are pending decision. This authority has been very
helpful in reshaping our workforce by reducing the number of high-graded
managers and replacing many of them with entry-level and midlevel hires
who possess the skills and knowledge that will allow us to accomplish our
mission and serve the needs of the Congress and the American people for
many years to come.

The voluntary separation incentive provision requires us to make the
payment out of current appropriations and to pay an additional amount into
the retirement fund. In certain circumstance, these costs can be
considerable and, given the many demands on our resources, present a
strong financial incentive to use the provision sparingly, if at all.
Thus, we anticipate little or no use of this authority. For this reason,
as well as to avoid creating unrealistic employee expectations, we have
not developed and issued regulations to implement this authority.

Section 3 of the act established a requirement that an employee must be
performing at a satisfactory level in order to receive an annual pay
adjustment and amended 31 U.S.C. 732(c), which required our employees' pay
to be adjusted at the same time and to the same extent as the General
Schedule, to authorize the Comptroller General to determine the amount of
annual pay adjustments and described the factors to be considered in
making those determinations. The Comptroller General's authority under
section 3 is effective for increases on or after October 1, 2005. On
January 4, 2005, we issued regulations addressing the satisfactory
performance requirement for GAO's analysts and attorneys (employees
covered by validated competency-based appraisal systems for at least one
full appraisal cycle). The regulations provided for withholding annual
increases from any employee whose performance on any competency was rated
below expectations. These regulations will be revised to make this
requirement applicable to all remaining employees prior to the January
2006 annual adjustment, at which time those employees will have completed
one full appraisal cycle under the new competency-based appraisal system.
We plan to issue regulations covering the determination of pay adjustments
prior to January 2006-the first opportunity for the Comptroller General to
exercise this authority.

Section 4 authorizes the Comptroller General to establish pay retention
regulations applicable to employees who are placed in lower grades or
bands as a result of workforce restructuring, reclassification, or other
appropriate circumstances. Draft regulations are currently under review.
We intend to complete the review and consultation process and implement
the regulation prior to January 2006.

Section 6 authorizes GAO to provide increased annual leave to key
employees. We posted draft regulations for employee comment on December
29, 2004. These regulations would permit designated key employees with
less than 3 years of federal service to earn 6 hours of annual leave per
pay period. GAO's Executive Committee is considering employee comments
before finalizing the regulations and, due to the complicated nature of
the many issues raised, we anticipate finalization of the regulations and
implementation of this provision in early fiscal year 2006.

Section 7 authorized GAO to establish an Executive Exchange Program. After
soliciting and analyzing employees' comments on draft regulations, we
issued the final regulations on May 20, 2005. We also developed draft
forms, templates, and brochures to be used in implementing this program in
fiscal year 2006.

Section 9 incorporated additional requirements for GAO's performance
management system, all of which are addressed by our competency-based
appraisal systems. Additionally, we conduct an annual review and
assessment of our performance management policies and processes as part of
ongoing continuous improvement.

Finally, section 10 requires us to consult with any interested groups or
associations representing officers and employees of GAO when implementing
changes brought about by this act. As evidenced in the narrative above,
this is a practice that we have implemented for several years. Typically,
in implementing changes such as those in this act, we consult with
interested groups and associations within GAO, provide them with draft
policies and regulations, and obtain input from them on suggested
clarifications or changes to the policies and regulations. We carefully
consider this input and incorporate it, when appropriate, before
distributing policies and regulations for comment to all employees. We
will continue this practice in implementing the changes relating to the
act and have already taken steps to ensure that all GAO groups,
associations, and employees are aware of the impending changes in the
performance management system related to this act.

4. GAO's Federal Information Security Management Act Efforts

Federal IT security management, policy, and procedures continue to evolve,
and we have focused efforts on integrating these evolving policies and
practices into our IT processes. During the past year, we stepped up
efforts to improve our information security program, processes, and
procedures, implementing key requirements set forth in FISMA provisions
enacted under the E-Government Act of 2002, in National Institute of
Standards and Technology 800 series guidance, and in Federal Information
Processing Standards Publication 199. While we are not obligated by law to
comply with FISMA, we have adopted FISMA requirements to help ensure that
we establish an effective information security program and to fulfill our
goal of being a model federal agency.

We have instituted a wide range of programs and processes to assess, on a
recurring basis, the status of our information security program, including
the results of internal reviews by program offices and security staff.
Consistent with FISMA requirements, our IG independently evaluated our
information security program during fiscal year 2005. The IG commented on
our progress in correcting identified weaknesses and implementing FISMA
requirements and offered additional recommendations to further strengthen
our IT security program. We also follow the standard practice of using a
public accounting firm, as well as other external sources, to provide
independent external evaluations and testings of IT controls on our major
applications. Results of these reviews and evaluations, to date, have
identified no material weaknesses in our major applications. In addition,
we have substantially elevated information systems security consciousness
at GAO by putting into practice requirements consistent with FISMA through
our efforts to

fS implement an enterprisewide risk-based security program;

     + develop essential policies, procedures, and reporting mechanisms to
       ensure that our security program is integrated into every aspect of IT
       system life cycle planning and maintenance;
     + provide recurring security training and awareness to all of our staff;
     + integrate security into our capital investment control process; and
     + implement an enterprise disaster recovery solution.

We have defined security initiatives that have pointed to the need for
changes in our existing technology infrastructure, as well as new security
tools and appliances. During fiscal year 2005, we undertook a number of
projects that have significantly improved our information security
program. Among these projects are the following:

fS Certification and accreditation methodology.

We have revised the IT policy and procedures on certification and
accreditation of our information systems. This policy establishes the
foundation for our requirement to certify and accredit information systems
that we supported. In addition, the methodology identifies activities,
documentation, and the timeliness necessary to provide a complete risk
assessment.

fS Certification and accreditation of the General Support System and major
applications. We have completed revision of documentation for the
certification and accreditation of our information systems, which includes
the General Support System (our network) and four major applications. An
update to existing risk assessments, system security plans, National
Institute of Standards and Technology Special Publication 800-26 reviews,
system tests and evaluations were accomplished to ensure the appropriate
security controls had been implemented, risk to GAO was validated, and
system documentation included current approval by the designated approval
authority.

     + Vulnerability assessment. We have instituted a process consistent with
       the requirements cited in FISMA to scan the General Support System for
       vulnerabilities and potential areas that could be exploited. We
       integrated this process with our network operations to maintain
       up-to-date patched systems to ensure a stable network. Using a
       scanning software tool, each network device is scanned on a routine
       schedule to identify vulnerabilities that are remediable via patches
       and configuration changes in order to ensure secure services and
       system standardization and meet our network hardening guidelines.
     + Wireless network protocol implementation.

We have implemented the use of the Institute of Electrical and Electronics
Engineers 802.1x protocol-which covers network access control and is used
to provide authenticated network access-in our team and conference rooms,
nationwide. This validation process ensures computer equipment that
connects to our network is in fact GAO equipment, removing the potential
risk for non-GAO equipment to have uncontrolled access to our network. The
initial deployment of this technology was implemented in fiscal year 2005.
This technology is also being examined for use beyond conference rooms in
fiscal year 2006.

fS Centralized plan of actions and milestones.

Tracking the results of various audits of our information systems was
previously accomplished separately, using the methodologies specific to
each audit. By integrating these tracking methods into a single program,
we were able to gain synergy in monitoring the risks and remediation
efforts and improve security within our information systems.

fS Enterprise FISMA tool. The procurement of an automated tool to enhance
the security tracking and documentation of our information systems was
completed in late 2005. This program will become our source for managing
audit findings and remediation efforts, documenting annual assessments,
and tracking certification and accreditation.

     + Enterprise event correlation application. We procured an event
       correlation engine, in late fiscal year 2005, to assist with the
       monitoring of diverse network traffic that identifies potential
       threats to our network environment. The use of this tool will allow
       the effective use of limited resources to minimize risk to GAO while
       vigilantly monitoring network activities.
     + Classified processing upgrade. In the past, our investigative mission
       work requiring electronic access to classified defense information had
       been limited to select sites with limited access. During fiscal year
       2005, we expanded our Secret Internet Protocol Router Network
       connections to seven GAO field office sites, providing each site with
       a secure computing facility and new equipment. Rooms were outfitted
       with dedicated switches, routers, firewalls, intrusion detection
       devices, servers, and workstations. Installation at the remaining
       field locations is scheduled to occur in fiscal year 2006.
     + Enterprise anti-spyware. We deployed an enterprise anti-spyware
       application as part of the standard desktop image. This application
       automatically monitors and remediates various types of intrusion and
       monitoring programs, such as adware and Trojan viruses, to prevent
       desktops from becoming infected with spyware. The implementation of
       this program has significantly reduced the amount of work required to
       reimage desktops due to spyware.
     + Enterprise Internet screening. We piloted the implementation of an
       Internet screening tool that provides antivirus and anti-spyware
       protection to our Web-based activities. This package will provide
       added security for the Web and improve the overall security posture
       for GAO's information systems.
     + Security Program Plan. We implemented a formalized Security Program
       Plan that provides the road map of activities for our Information
       Systems Security Group over the next few years to improve both the
       program and technical components of our network security. We also
       established a number of working groups to effectively support our
       security program. The IT Security Users Group meets monthly to share
       information about security-related activities, including policy,
       procedures, and guidance, on the network, while the Remediation Group
       meets

monthly to provide input on activities related to the remediation of
findings documented from audits and maintained in the centralized plan of
actions and milestones.

fS FISMA Month. We instituted a novel program that takes place each August
and is called FISMA Month. Because FISMA reporting is key to our annual
security assessment, implementing FISMA Month focuses staff on the time
frames and review requirements and helps to ensure that the documentation
of our program activities is complete and up-to-date. This activity
provides a snapshot of our program that has been in effect the entire
year.

fS Security awareness training. We implemented a robust security awareness
training program, which included awareness training for all of our staff
and contractors and specialized security training for staff with enhanced
access to the GAO network (primarily our IT operations staff). All
training used Web-based courses.

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