    U.S.-China Economic And Security Review Commission: Actions
    Needed to Improve Controls over Key Management Functions
    (28-SEP-07, GAO-07-1128).

    In October 2000, Congress established the U.S.-China Economic and
    Security Review Commission to assess the national security
    implications of the trade and economic relationship between the
    United States and the People's Republic of China and issue an
    annual report by June 1. The 12-member commission has a budget of
    about $3 million. As requested, GAO assessed the extent to which
    the commission has (1) complied with its charter, (2) had an
    organizational structure and policies and procedures for managing
    its operations effectively, and (3) had internal control over the
    financial management and reporting that provides reasonable
    assurance that resources are not at risk. To address these
    objectives, GAO analyzed the commission's charter, annual
    reports, records, and management policies and procedures and
    interviewed commissioners, executive directors, and staff. GAO
    focused on fiscal years 2005 and 2006 financial transactions.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-1128
        ACCNO:   A76810
      TITLE:     U.S.-China Economic And Security Review Commission:
    Actions Needed to Improve Controls over Key Management Functions
         DATE:   09/28/2007
      SUBJECT:   Advisory committees
    	     Economic research
    	     Evaluation methods
    	     Federal regulations
    	     Financial management
    	     Foreign governments
    	     Internal controls
    	     International relations
    	     Performance appraisal
    	     Performance measures
    	     Policy evaluation
    	     Program management
    	     Reporting requirements
    	     Risk management
    	     Schedule slippages
    	     Policies and procedures
    	     Waste, fraud, and abuse
    	     China

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    GAO-07-1128

         * [1]Results in Brief
         * [2]Background
         * [3]The Commission Has Not Fully Complied with Its Charter

              * [4]The Commission Has Reported on Required Economic and Securit
              * [5]The Commission Issued Annual Reports Late or Not at All
              * [6]The Commission Has Implemented Applicable FACA Provisions

         * [7]Weaknesses in Current Organizational Structure and Managemen

              * [8]Organizational Structure for Managing Operations Has Weaknes

                   * [9]Commission Has Not Formally Assigned Most Management
                     Duties
                   * [10]Commission Has Relied on Its Associate Director for
                     Carrying

              * [11]Management Policies and Procedures Have Weaknesses or Are No

                   * [12]Human Capital Policies and Procedures Are Incomplete or
                     Are
                   * [13]Procurement Policies and Procedures Show Weaknesses
                   * [14]Ethics Guidelines Have Some Shortcomings
                   * [15]Commission Has Not Appropriately Documented Its
                     Administrati

         * [16]Ineffective Internal Control over Financial Management and R

              * [17]Key Controls over Non-Payroll-Related Transactions Are Ineff
              * [18]Travel and Purchase Card Programs Lack Key Controls

                   * [19]Travel Card
                   * [20]Purchase Card

              * [21]Time and Attendance Reporting Lacks Proper Approvals

         * [22]Conclusions
         * [23]Matter for Congressional Consideration
         * [24]Recommendations for Executive Action
         * [25]Agency Comments and Our Evaluation
         * [26]Appendix I: Objectives, Scope, and Methodology
         * [27]Appendix II: Timeline of Events Related to USCESRC
         * [28]Appendix III: USCESRC Appropriations and Expenses
         * [29]Appendix IV: Economic and Security Issues Covered by 2002 US
         * [30]Appendix V: Economic and Security Issues Covered by 2004 and
         * [31]Appendix VI: USCESRC Procurement, Fiscal Year 2005
         * [32]Appendix VII: USCESRC Procurement, Fiscal Year 2006
         * [33]Appendix VIII: Comments from USCESRC

              * [34]GAO Comments

         * [35]Appendix IX: GAO Contact and Staff Acknowledgments

              * [36]Order by Mail or Phone

         * [37]PDF6-Ordering Information.pdf

              * [38]Order by Mail or Phone

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    September 2007

    U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

    Actions Needed to Improve Controls over Key Management Functions

    GAO-07-1128

    Contents

    Letter 1

    Results in Brief 3
    Background 6
    The Commission Has Not Fully Complied with Its Charter 7
    Weaknesses in Current Organizational Structure and Management Policies and
    Procedures 18
    Ineffective Internal Control over Financial Management and Reporting 33
    Conclusions 43
    Matter for Congressional Consideration 44
    Recommendations for Executive Action 44
    Agency Comments and Our Evaluation 46
    Appendix I Objectives, Scope, and Methodology 48
    Appendix II Timeline of Events Related to USCESRC 52
    Appendix III USCESRC Appropriations and Expenses 53
    Appendix IV Economic and Security Issues Covered by 2002 USCESRC Annual
    Report 56
    Appendix V Economic and Security Issues Covered by 2004 and 2005 USCESRC
    Annual Reports 58
    Appendix VI USCESRC Procurement, Fiscal Year 2005 59
    Appendix VII USCESRC Procurement, Fiscal Year 2006 61
    Appendix VIII Comments from USCESRC 63
    GAO Comments 67
    Appendix IX GAO Contact and Staff Acknowledgments 69

    Tables

    Table 1: Modifications to the Economic and Security Issue Areas in the
    Commission's Charter 8
    Table 2: Economic and Security Issue Areas Covered by the 2006 Annual
    Report 10
    Table 3: USCESRC Annual Report Issuance Dates 12
    Table 4: Provisions of FACA That Apply to USCESRC 17
    Table 5: Questionable Purchase Card Transactions, July 1, 2005-June 30,
    2006 41
    Table 6: USCESRC Appropriations, Fiscal Years 2001-2007 53
    Table 7: USCESRC Major Operating Expenses, Fiscal Years 2001-2006 54
    Table 8: Economic and Security Issue Areas Covered by the 2002 Annual
    Report 56
    Table 9: Economic and Security Issue Areas Covered by the 2004 and 2005
    Annual Reports 58

    Figures

    Figure 1: Misalignment of Commissioners' Appointment Date and Commission's
    Work Cycle with Reporting Cycle 13
    Figure 2: Actual Ranges of Commissioner Appointment Dates 15
    Figure 3: USCESRC Organizational Chart 21

    Abbreviations

    CRS Congressional Research Service
    EEO equal employment opportunity
    ES Executive Schedule
    FACA Federal Advisory Committee Act
    FAR Federal Acquisition Regulation
    FTR Federal Travel Regulation
    GPO Government Printing Office
    GSA General Services Administration
    OMB Office of Management and Budget
    RFP request for proposal
    T&A time and attendance
    USCESRC U.S.-China Economic and Security Review Commission
    WTO World Trade Organization

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. The published product 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.

    United States Government Accountability Office
    Washington, DC 20548

    September 28, 2007

    The Honorable Robert C. Byrd
    Chairman
    Committee on Appropriations
    United States Senate

    The Honorable J. Dennis Hastert
    House of Representatives

    In October 2000, Congress established the U.S.-China Economic and Security
    Review Commission (USCESRC). The commission is a small advisory body, one
    of few such commissions that report to Congress rather than the President
    or an executive branch agency. The charter of the commission, which does
    not contain a time limit on its authorization, requires it to assess the
    national security implications of the evolving bilateral trade and
    economic relationship between the United States and the People's Republic
    of China. The charter also requires that the commission report the results
    of its work by issuing an annual report by June 1 addressing specific
    economic and security issue areas. The charter makes the commission
    responsible for managing its own operations, with broad discretion and
    minimal oversight or support from other entities. The commission currently
    has a budget of about $3 million and has requested an additional $1
    million for fiscal year 2008. The commission has not been reviewed or
    audited since it was created. In October 2000, Congress established the
    U.S.-China Economic and Security Review Commission (USCESRC). The
    commission is a small advisory body, one of few such commissions that
    report to Congress rather than the President or an executive branch
    agency. The charter of the commission, which does not contain a time limit
    on its authorization, requires it to assess the national security
    implications of the evolving bilateral trade and economic relationship
    between the United States and the People's Republic of China. The charter
    also requires that the commission report the results of its work by
    issuing an annual report by June 1 addressing specific economic and
    security issue areas. The charter makes the commission responsible for
    managing its own operations, with broad discretion and minimal oversight
    or support from other entities. The commission currently has a budget of
    about $3 million and has requested an additional $1 million for fiscal
    year 2008. The commission has not been reviewed or audited since it was
    created.

    To help Congress oversee the commission's activities, you requested that
    we examine the commission's compliance with its charter and the
    commission's management of its operations. In this report, we assess the
    extent to which (1) the commission has complied with its charter, (2) the
    commission has an organizational structure and policies and procedures for
    managing its operations effectively, and (3) internal control over the
    commission's financial management and reporting has provided reasonable
    assurance that resources are not at risk. To help Congress oversee the
    commission's activities, you requested that we examine the commission's
    compliance with its charter and the commission's management of its
    operations. In this report, we assess the extent to which (1) the
    commission has complied with its charter, (2) the commission has an
    organizational structure and policies and procedures for managing its
    operations effectively, and (3) internal control over the commission's
    financial management and reporting has provided reasonable assurance that
    resources are not at risk.

    To address these objectives, we analyzed the commission's statutory
    charter and related laws and regulations, such as the Federal Advisory
    Committee Act (FACA). According to the charter, as amended, the To address
    these objectives, we analyzed the commission's statutory charter and
    related laws and regulations, such as the Federal Advisory Committee Act
    (FACA). According to the charter, as amended, the commission must
    implement FACA, which provides a legal and institutional framework for the
    operation of advisory committees.^1 We reviewed the commission's annual
    reports and records, such as documents describing the organizational
    structure of the commission and its management functions, including those
    related to human capital, procurement, ethics and conflict of interest,
    and budgeting and financial management and reporting. We assessed the
    extent to which the commission has an organizational structure and
    policies and procedures for managing its operations effectively based on
    internal control standards for the federal government.^2 While these
    standards are not binding for legislative branch agencies, they are a
    statement of best practices and adherence to these standards provides
    reasonable assurance regarding the prevention or prompt detection of
    fraud, waste, abuse, and mismanagement. These standards give management of
    federal agencies, regardless of size, the responsibility and discretion to
    develop and implement the mechanisms for internal control necessary for
    providing reasonable assurance that the objectives of the agency are being
    achieved with regard to effective and efficient operations, reliable
    financial reporting, and compliance with applicable laws and regulations.
    In reviewing the commission's financial management and reporting, we
    focused on transactions that occurred during fiscal years 2005 and 2006.
    We did not audit any financial reports generated by or on behalf of the
    commission, and we do not express an opinion on them. We interviewed
    current and former commissioners, current and former executive directors,
    and the current professional and administrative staff. In addition, we
    reviewed information and met with officials from the Congressional
    Research Service (CRS), Government Printing Office (GPO), General Services
    Administration (GSA), Senate Select Committee on Ethics, and Senate Office
    of Public Records. We performed our work from October 2006 to September
    2007 in accordance with generally accepted government auditing standards.
    Further details on our scope and methodology are included in appendix I.

    ^1Advisory committees are any committee, board, council, conference,
    panel, task force, or other similar group established by statute, or by
    the President or an agency, to obtain advice or recommendations for one or
    more agencies and officers of the federal government. 5 U.S.C. App. S3(2).

    ^2See GAO, Standards for Internal Control in the Federal Government,
    [39]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999); for additional
    guidance see GAO, Internal Control Management and Evaluation Tool,
    [40]GAO-01-1008G (Washington, D.C.: August 2001); and OMB, Management's
    Responsibilities for Internal Control, OMB Circular A-123 Revised
    (Washington, D.C., December 2004).

    Results in Brief

    Although the contents of the commission's annual reports have complied
    with reporting requirements, the commission has not met its statutory
    annual reporting deadline. The commission has broad discretion in deciding
    what to report about the issue areas listed in its charter and in
    determining what activities it should undertake to obtain the necessary
    information. However, the commission had issued all of its annual reports
    after the June 1 deadline and the commission did not issue its 2003 annual
    report. In 2005 and 2006, for example, the commission issued its annual
    reports about 5 months late. The commission has not issued its annual
    reports on time because the appointment dates for commissioners and the
    commission work cycle activities are not aligned with the annual report
    issuance deadline. For example, the composition of the commission can
    change significantly in the middle of a reporting cycle. In 2007, the
    2-year terms of seven commissioners will expire on December 31, 5 months
    before the 2008 report is due. The commission will not have a quorum to
    conduct its work until at least two commissioners are appointed or
    reappointed. Finally, the commission has to the extent possible taken
    steps to comply with FACA, as required by a 2005 amendment to the
    commission's charter. As an independent legislative branch entity, the
    commission cannot apply certain FACA provisions, such as those
    presupposing commissions operate within a larger agency, and has
    implemented only those provisions which apply to its activities. However,
    FACA implementation has been problematic, according to the commission,
    because the law's open meeting requirements inhibit the discussion of
    economic and security issues among commissioners during the open annual
    report drafting sessions.

    Weaknesses in the commission's current organizational structure and
    management policies and procedures put the commission at risk of fraud,
    waste, abuse, and mismanagement.

               o In terms of its organizational structure, the commission has not
               formally defined and assigned key management duties and
               responsibilities, which generally should be divided or segregated
               among different people. Instead, it has relied heavily on one
               individual, its associate director, for handling management
               functions, such as those regarding human capital, procurement,
               ethics, and budgeting and financial management and reporting. Most
               commissioners have played a limited and passive role in the
               management of the commission. These organizational arrangements
               hinder the efficient and effective use of commission resources.
               o The commission's management policies and procedures were
               insufficient, incomplete, or not adequately documented, and legal
               and management experts had not reviewed them to ensure they are
               technically sound in accordance with best practices. For example,
               the commission's human capital policies and procedures are
               incomplete or were not fully implemented, while others were not in
               place. Specifically, the commission did not have policies and
               procedures that fully reflect its hiring practices. It had no
               policies and procedures for evaluating staff until it adopted some
               in mid-2006 for use in 2007, and it did not have any guidelines
               for training staff or addressing equal employment opportunity
               (EEO) matters. Its policies and procedures for research
               procurement were not comprehensive, and none existed for
               nonresearch procurement, such as hearing support services and
               office supplies, which accounted for over $450,000 in nonresearch
               expenditures or over two-thirds of the commission's total
               procurement expenditures in 2005 and 2006. Its ethics guidelines
               for commissioners do not include guidance on speaking engagements
               and related payments for travel expenses, and the commission does
               not require commissioners and staff to review and formally
               acknowledge ethics guidelines periodically, in accordance with
               best practices.

               GAO's Standards for Internal Control in the Federal Government^3
               give management the responsibility and discretion for developing
               and implementing internal control necessary for achieving
               organizational objectives, managing operations and staff
               effectively, and curtailing risks. The commission is currently
               developing policy and procedures manuals. However, the absence of
               adequately documented, consolidated, and vetted management
               policies and procedures puts the commission at risk, especially if
               staff responsible for key operations leave the commission.

               The commission's internal control over financial management and
               reporting was not adequate to provide reasonable assurance that
               financial activities were properly processed and recorded and
               complied with federal laws and regulations. Effective internal
               control is the first line of defense in safeguarding assets and
               preventing and detecting errors and fraud. We noted weak or
               missing internal controls in our examination of the commission's
               (1) non-payroll-related transactions, (2) travel and purchase card
               activity, and (3) time and attendance (T&A) reporting. Our tests
               of the commission's non-payroll-related transactions for fiscal
               years 2005 and 2006 found deficiencies, such as missing or
               inadequate supporting documentation, lack of proper authorization
               and approval, and improper classification. The commission's
               application of the government travel and purchase card programs
               lacks written guidance, proper segregation of duties, and adequate
               training. In addition, we identified questionable purchases of
               over $13,000 made with the commission purchase card. Our review of
               the commission's payroll process for fiscal years 2005 and 2006
               showed that the commission's T&A records were not always approved
               in accordance with the policies and procedures described by the
               commission's management. As a result of inadequate control in
               these areas, the commission's financial resources are at an
               increased risk of fraud, waste, abuse, and mismanagement.

    ^3GAO, Standards for Internal Control in the Federal Government,
    [41]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999).

               This report contains a matter for congressional consideration and
               recommendations to the commission. Specifically, in discussing
               ways to improve the timeliness of the commission's annual reports,
               Congress should consider aligning the commissioners' appointment
               dates with the annual report issuance date so that the entire
               commission has enough time to plan and complete its work cycle
               activities and deliver a report when Members of Congress can best
               make use of the information. We also recommend that the commission
               take steps to improve its organizational structure and management
               policies and procedures. The commission has broad discretion to
               take steps to address our recommendations.

               The commission provided written comments on a draft of this
               report, which are reprinted with our responses in appendix VIII.
               In its letter, the commission concurred with our recommendations
               and noted their potential to ensure that its operations are seen
               to be both legal and appropriate. The commission emphasized that
               its statute is very brief and, with respect to what internal
               control mechanisms it should employ, offers no guidance on most
               such matters and very little on those it addresses. The commission
               indicated that it will follow GAO's internal control standards,
               although these standards are not binding on legislative branch
               entities, such as the commission, and specified that it will
               develop a plan to address the weaknesses identified. The
               commission's letter and technical comments on the draft, which we
               received from the executive director, asked that we clarify
               various parts of our report, which we have done, as appropriate.

    			  Background

               Congress established the U.S.-China Economic and Security Review
               Commission (USCESRC)^4 on October 30, 2000, through Public Law No.
               106-398, which transferred to USCESRC the facilities, material,
               and staff of the U.S. Trade Deficit Review Commission. According
               to the commission's charter, USCESRC must monitor and assess the
               national security implications of the bilateral trade and economic
               relationship between the United States and the People's Republic
               of China. It must report results of its work in annual reports to
               Congress, addressing specific economic and security issue areas.
               The commission has had an annual budget of about $3 million since
               fiscal year 2005 and has requested an additional $1 million to
               fund its operations in fiscal year 2008. Appendix III provides
               additional details on the commission's appropriations and
               expenditures.

               The commission consists of 12 commissioners, all but 3 of whom
               hold other positions. The leadership of the Senate and the House
               of Representatives appoint the commissioners to serve 2-year
               terms, which are staggered. In turn, the commissioners select a
               chairman and vice chairman from among themselves. The chairman and
               vice chairman rotate between Democratic and Republican appointees
               every year. Currently, a Democratic appointee is serving as
               chairman and a Republican appointee as vice chairman. The
               commission meets at the call of the chairman. A majority of
               commissioners must be present for the commission to conduct
               business. Appendix II depicts a timeline of commission-related
               events, including the election dates of all of the chairmen and
               vice chairmen since the inception of the commission.

               Each commissioner is compensated at an hourly rate computed from
               the annual rate of basic pay prescribed for level IV of the
               Executive Schedule (ES-IV). Generally, the commissioners submit a
               signed statement of hours worked on commission activities for a
               given pay period, and they are reimbursed for that time. However,
               a commissioner may not be reimbursed more than the annual rate of
               pay for an ES-IV in a given fiscal year, which was $143,000 for
               fiscal year 2006.

               The commissioners are supported by an executive director, and
               program and administrative support staff. The current executive
               director is a senior executive detailed from the Department of
               Commerce to the commission under a reimbursable agreement. Nine of
               the 11 staff are excepted service federal employees, who have
               1-year appointments and serve at the discretion of the commission.
               Two administrative staff, including the associate director, work
               for the commission under 1-year personal service contracts.

    ^4The commission originally was called the U.S.-China Security Review
    Commission. A 2003 amendment to the commission's charter changed this name
    to U.S.-China Economic and Security Review Commission.

               To produce its report, the commission undertakes activities such
               as holding hearings, conducting research, and traveling on
               fact-finding missions to China and other countries. At the
               direction of the commission, a commissioner or commissioners may
               hold hearings. Currently, at least one Democratic appointee and
               one Republican appointee co-chair each hearing. For example, the
               commission held 14 hearings in 2005 and 8 hearings in 2006 and
               plans to hold 8 hearings in 2007. Also, the commission relied on
               internal research from its professional staff and
               commission-sponsored external research by subject matter experts.

    			  The Commission Has Not Fully Complied with Its Charter

               The commission has not fully complied with the statutory
               requirements set forth in its charter. The commission has covered
               the required economic and security issue areas in its reports.
               However, since it was established in 2000, the commission has
               issued all of its annual reports after the required deadline and
               failed to issue an annual report in 2003. According to the
               commission's charter, the commission is required to submit an
               annual report to Congress no later than June 1. The commission
               submitted interim reports to Congress in 2006 and 2007 in an
               effort to comply with this deadline. Further, the commission has
               implemented those FACA provisions it is capable of applying.

    			  The Commission Has Reported on Required Economic and Security Issue
    			  Areas

               The commission has complied with its statutory charter with regard
               to the subjects on which it reports and the scope of its
               activities. The commission has broad discretion to examine matters
               related to U.S.-China economic and security issue areas. Since the
               commission was established in 2000, Congress amended the statutory
               charter twice to modify the language related to the scope of its
               activities. We compared the mandated issue areas and annual report
               contents and found the commission's annual reports covered the
               statutory economic and security issue areas.

               Despite statutory changes to the charter over time to narrow the
               number and extent of reporting topics, the commission has broad
               discretion on what specific matters to examine. The commission has
               the authority to interpret its own regulations and statute. The
               commission's statutory charter was amended three times, and the
               second and third amendments modified the number of issue areas and
               revised the language related to the scope of the economic and
               security issue areas. The statutory charter originally mandated
               that the commission's annual report "include, at a minimum, a full
               discussion of" the 10 issue areas. In 2003, the second amendment
               to the commission's charter reduced the number of issue areas from
               10 to 9 and revised the language related to the scope of reporting
               to instruct the commission to "focus, in lieu of any other areas
               of work or study" on the 9 issue areas. In 2005, the third
               amendment to the commission's charter reduced the number of issue
               areas from 9 to 8 and revised the language related to the scope of
               reporting to instruct the commission to "investigate and report
               exclusively on each of the following" 8 issue areas. Table 1
               compares the issue areas the commission is mandated to report on
               in the annual report.

    Table 1: Modifications to the Economic and Security Issue Areas in the
    Commission's Charter

                                          Charter amended     Charter amended
    Original charter, October 30,      February 20, 2003:  November 22, 2005:
    2000: 10 issue areas               9 issue areas       8 issue areas
    (1) The portion of trade in goods  Proliferation       Proliferation
    and services with the United       practices           practices
    States that the People's Republic
    of China dedicates to military
    systems or systems of a dual
    nature that could be used for
    military purposes.
    (2) The acquisition by the         Proliferation       Proliferation
    People's Republic of China of      practices           practices
    advanced military or dual-use
    technologies from the United
    States by trade (including
    procurement) and other technology
    transfers, especially those
    transfers, if any, that contribute
    to the proliferation of weapons of
    mass destruction or their delivery
    systems, or that undermine
    international agreements or United
    States laws with respect to
    nonproliferation.
    (3) An overall assessment of the   Proliferation       Proliferation
    state of the security challenges   practices           practices
    presented by the People's Republic
    of China to the United States and
    whether the security challenges
    are increasing or decreasing from
    previous years.
    (4) Any transfers, other than      Corporate reporting (No longer
    those identified under                                 required)
    subparagraph (B), to the military
    systems of the People's Republic
    of China made by United States
    firms and United States-based
    multinational corporations.
    (5) An analysis of the statements  (No longer          (No longer
    and writing of the People's        required)           required)
    Republic of China officials and
    officially sanctioned writings
    that bear on the intentions, if
    any, of the government of the
    People's Republic of China
    regarding the pursuit of military
    competition with, and leverage
    over, or cooperation with, the
    United States and the Asian allies
    of the United States.
    (6) The military actions taken by  Regional economic   Regional economic
    the government of the People's     and security        and security
    Republic of China during the       impacts             impacts
    preceding year that bear on the
    national security of the United
    States and the regional stability
    of the Asian allies of the United
    States.
    (7) Patterns of trade and          Regional economic   Regional economic
    investment between the People's    and security        and security
    Republic of China and its major    impacts             impacts
    trading partners, other than the
    United States, that appear to be
    substantively different from trade
    and investment patterns with the
    United States and whether the
    differences have any national
    security implications for the
    United States.
    (8) The effects, if any, on the    United States       United States
    national security interests of the capital markets     capital markets
    United States of the use by the
    People's Republic of China of
    financial transactions and capital
    flow and currency manipulations.
    (9) Any action taken by the        World Trade         World Trade
    government of the People's         Organization        Organization
    Republic of China in the context   compliance          compliance
    of the World Trade Organization
    that is adverse or favorable to
    the United States national
    security interests.
    (10) The extent to which the trade United States-China United States-China
    surplus of the People's Republic   bilateral programs  bilateral programs
    of China with the United States
    enhances the military budget of
    the People's Republic of China.
                                          Economic reforms    Economic transfers
                                          and United States
                                          economic transfers
    (No requirement)                   Energy              Energy
    (No requirement)                   Media control       Freedom of
                                                              expression

    Source: GAO analysis of USCESRC charter and amendments.

    Our analysis of the content covered in the commission's four public annual
    reports found that the economic and security issue areas were covered as
    required. We found the commission's 2002 annual report covered the 10
    economic and security issue areas mandated at the time. Some chapters
    address more than one reporting requirement and are listed multiple times.
    Furthermore, chapter 4 of the 2002 annual report covers political and
    civil freedoms, which was not a specified issue area but was within the
    scope of reporting because the charter originally mandated the
    commission's annual report "include, at a minimum," the 10 issue areas.
    Appendix IV provides details on the issue areas covered by the
    commission's 2002 annual report. We found the commission's 2004 and 2005
    annual reports covered the 9 economic and security issue areas mandated at
    the time. Appendix V provides details on the 9 issue areas covered by the
    commission's 2004 and 2005 annual reports. We found the commission's 2006
    annual report covered the 8 economic and security issue areas currently
    mandated. See table 2 for the 8 issue areas covered by the commission's
    2006 annual report.

    Table 2: Economic and Security Issue Areas Covered by the 2006 Annual
    Report

    Eight economic and security     Issue areas covered by chapter in 2006
    issue areas required by statute annual report
    (1) Proliferation practices     Chapter 2: China's Global and Regional
                                       Activities and Other Geostrategic
                                       Developments
    (2) Economic transfers          Chapter 3: China's Military Power and Its
                                       Effects on North American Interests and
                                       Regional Security

                                       Chapter 4: A Case Study of the Automotive
                                       Industry That Illustrates Challenges to
                                       U.S. Manufacturing and the U.S. Defense
                                       Industrial Base
    (3) Energy                      Chapter 2: China's Global and Regional
                                       Activities and Other Geostrategic
                                       Developments
    (4) United States capital       Chapter 1: U.S.-China Trade and Economic
    markets                         Relationship
    (5) Regional economic and       Chapter 1: U.S.-China Trade and Economic
    security impacts                Relationship

                                       Chapter 2: China's Global and Regional
                                       Activities and Other Geostrategic
                                       Developments

                                       Chapter 3: China's Military Power and Its
                                       Effects on North American Interests and
                                       Regional Security

                                       Chapter 5: China's Internal Problems,
                                       Beijing's Response, and Implications for
                                       the United States
    (6) United States-China         Chapter 1: U.S.-China Trade and Economic
    bilateral programs              Relationship

                                       Chapter 4: A Case Study of the Automotive
                                       Industry That Illustrates Challenges to
                                       U.S. Manufacturing and the U.S. Defense
                                       Industrial Base
    (7) World Trade Organization    Chapter 1: U.S.-China Trade and Economic
    compliance                      Relationship

                                       Chapter 4: A Case Study of the Automotive
                                       Industry That Illustrates Challenges to
                                       U.S. Manufacturing and the U.S. Defense
                                       Industrial Base
    (8) Freedom of expression       Chapter 6: China's Media and Information
                                       Controls

    Source: GAO analysis of USCESRC charter.

    According to the chairman, the commissioners discuss the mandate in
    relation to the scope of activities and reporting. Furthermore, the
    commissioners discuss the scope of the issue areas identified in the
    commission's statutory charter before reaching consensus on the annual
    work plan. While acknowledging that the mandate restricts the scope of
    reporting to the eight issue areas, several commissioners noted that they
    sometimes debate what the commission should cover under these areas
    because they leave room for interpretation. The chairman stated that the
    commissioners use the issue areas to plan commission activities, including
    research, hearings, and overseas trips.

    The commission has broad discretion to conduct activities to fulfill its
    reporting requirement and can base its reports on a variety of activities.
    During the commission's quarterly business meetings at the conclusion of
    one calendar year and the beginning of the next, commissioners discuss the
    scope of activities identified by the commission's statutory charter and
    reach consensus on the annual work plan. According to its statutory
    charter, the commission can hold hearings, conduct internal and external
    research, secure relevant information from U.S. departments and agencies
    through classified and unclassified briefings, and carry out fact-finding
    missions abroad. For example, the commission used all of these methods to
    collect information for the 2006 annual report. Specifically, the
    commission held eight public hearings on the required economic and
    security related issue areas and delivered a letter to Congress
    summarizing significant findings and providing interim recommendations
    after each. The commission authorized external research contracts on
    issues, such as China's antisatellite and space warfare activities and
    China's oil and gas investments abroad. The commission received briefings
    from several U.S. agencies, such as the Department of Defense and the
    intelligence community. An official commission delegation conducted a
    fact-finding mission to China, Hong Kong, and Taiwan in June 2006.

    During the 2007 reporting cycle, the commission has held five public
    hearings as of July 2007 and plans to hold three others through September
    2007. All examine topics related to the eight mandated economic and
    security issue areas. The commission also plans to award external research
    contracts. For example, the commission recently selected a proposal
    submitted in response to an advertised request for proposals (RFP) and
    awarded a contract providing for a report tracing the parts and components
    supply chains for three key U.S. weapon systems. Throughout 2007, the
    commission plans to receive classified and unclassified briefings from
    U.S. departments, agencies, and the intelligence community. A commission
    delegation traveled to China and Hong Kong in April 2007, and another
    delegation of commissioners and staff traveled to Taiwan and India in
    August 2007.

    The Commission Issued Annual Reports Late or Not at All

    Since its inception, the commission has failed to submit its annual report
    to Congress in time to comply with the statutory reporting deadline. The
    commission's charter requires the commission to submit its annual report
    to Congress no later than June 1 each year. The commission has issued its
    annual reports late or, in one instance for reasons discussed below, not
    at all. The commission was established in October 2000 and was not
    required to submit its first report until March 1, 2002. The charter was
    amended on November 12, 2001, to change the report issuance date to June
    1, 2002. Congress modified the reporting date from March to June because,
    according to a former executive director, the commission "was getting
    organized and it would have been difficult to produce a report by March."
    Even with the congressional amendment extending the reporting date 3
    additional months, the commission issued its 2002 annual report on July
    15, 2002.

    Our analysis of the commission's annual report issuance dates reveals
    inconsistent submission dates, with longer delays in 2005 and 2006. For
    example, the delays in the issuance dates ranged from 9 days in 2004 to
    161 days in 2005. The final 2006 report was issued to Congress 151 days
    after the deadline. To comply with the June 1 deadline, the commission
    submitted interim reports in 2006 and 2007. However, the former was 20
    days late; the latter was on schedule. In its budget request for fiscal
    year 2008, the commission has requested the issuance date for the annual
    report be extended to December 1. Table 3 shows the June 1 annual report
    issuance dates since the inception of the commission and number of days
    each annual report was late.

    Table 3: USCESRC Annual Report Issuance Dates

                            2002   2003       2004   2005     2006    2007
    Mandated issuance    June 1 June 1     June 1 June 1   June 1  June 1
    date of annual
    report
    Actual issuance date July   No report  June   November October Planned for
    of annual report     15     issued     10     9        30^a    November^b
    Number of days late  44     Not        9      161      151     Not
                                   applicable                         applicable

    Source: GAO analysis of USCESRC data.

    aUSCESRC submitted an interim report to Congress on June 21, 2006 (20 days
    late).

    bUSCESRC submitted an interim report to Congress on June 1, 2007.

    The commission has not issued its annual reports on time because
    appointment dates for commissioners and the commission work cycle
    activities are not aligned with the annual report issuance deadline.
    Figure 1 shows this misalignment. The commission has scheduled its work
    cycle activities according to when commissioners are appointed, not by the
    statutory June 1 annual reporting date. Currently, the commission's work
    cycle activities for developing, producing, and submitting its annual
    report to Congress is from January through November. The commission
    approves its annual work cycle schedule after the new chairman and vice
    chairman and the new commissioners are in place early in the calendar
    year.^5

    Figure 1: Misalignment of Commissioners' Appointment Date and Commission's
    Work Cycle with Reporting Cycle

    According to the commission's charter, the President pro tempore of the
    Senate, acting on the recommendation of both majority and minority
    leaders, appoints six commissioners, and the Speaker and the Minority
    Leader of the House each select three commissioners for 2-year terms that
    begin in January and end in December of the following year, and they can
    reappoint commissioners; the terms are staggered. They should appoint
    commissioners no later than 30 days after the date on which each new
    Congress convenes. Congress regularly convenes on January 3, unless
    Congress by law designates a different day to convene. Thus, they normally
    should appoint commissioners no later than February 2. In practice, they
    have appointed 26 of 45 commissioners after this date. For example, in
    2003, the commission did not produce an annual report because the required
    number of commissioners to form a quorum was not appointed or reappointed
    until May 6, 2003, giving the commission only 26 days to issue its annual
    report by the June 1 deadline. Figure 2 shows the actual ranges of
    commissioner appointment dates.

    ^5According to internal commission rules, "The chairmanship and vice
    chairmanship of the commission ... shall be for the period beginning six
    weeks after the public release of the Commission's statutorily mandated
    annual public report to the Congress until six weeks after the release of
    the following year's public annual report."

    Figure 2: Actual Ranges of Commissioner Appointment Dates

    Note: No commissioners were appointed in 2002.

    The current misalignment makes it difficult for the commission to develop
    and produce the annual reports on schedule. The chairman, vice chairman,
    and executive director estimate that the commission needs about 11 months
    to conduct the work and research necessary to produce a robust annual
    report that addresses the required economic and security issue areas and
    that reflects bipartisan consensus. Thus, moving the annual report
    submission date or the timing of commissioner appointments would provide a
    work cycle with enough time to develop and produce a report on schedule,
    according to the commission. If the annual work schedule were aligned with
    the June 1 deadline, without changing the commissioners' terms, newly
    appointed commissioners would be required to participate in determining
    key findings and recommendations to Congress based on activities that
    occurred before they were appointed, according to the three most recent
    chairmen. Furthermore, the composition of the commission could change
    significantly in the middle of the reporting cycle. For example, in 2007,
    the 2-year terms of seven commissioners, including the current chairman
    and vice chairman, will expire on December 31, 5 months before the 2008
    report is due. The commission will not have a quorum to conduct its work
    until at least two commissioners are (re)appointed. In its budget request
    for fiscal year 2008, the commission has requested Congress to move the
    annual report issuance date to December 1.

    The Commission Has Implemented Applicable FACA Provisions

    The commission has, to the extent possible, taken steps to comply with
    FACA and adhere to those provisions it can implement. FACA was designed to
    provide for the accountability, management, and transparency of advisory
    committees located within the executive branch. FACA can apply to federal
    advisory committees created by the President, other executive branch
    entities, or an act of Congress.^6 Initially, the legislation establishing
    the commission exempted it from FACA.^7 In November 2005, Congress amended
    the commission's charter so as to apply FACA to its activities.^8 While
    the commission is in compliance with those provisions of FACA it can
    implement, according to commissioners and commission officials,
    implementing some provisions has been problematic.

    The commission is an independent legislative branch entity, and neither
    the legislation mandating applicability of FACA nor its underlying history
    provides the commission with guidance for how it should implement FACA.
    The commission therefore consulted with GSA--which is responsible for
    executive branch compliance with FACA--on how it might implement FACA.
    Based on these consultations and its own interpretation of FACA, the
    commission determined that it could implement certain FACA provisions but
    not others. Table 4 shows the FACA provisions and which of these the
    commission determined it could implement.

    ^6See 5 U.S.C. app. S3(3), 5 U.S.C. S551(1).

    ^7Pub. L. 106-398, sec. 1238.

    ^8Pub. L. 109-108, sec. 635(b).

    Table 4: Provisions of FACA That Apply to USCESRC

                                                                   Implemented by
    Section    Requirement                                      USCESRC
    5          Imposes responsibilities on congressional        No
                  committees and on the executive branch with
                  respect to the establishment and oversight of
                  advisory committees.
    6          Requires the President or his delegate to        No
                  report to Congress regarding proposals for
                  action (or reasons for inaction) with respect
                  to recommendations made by Presidential
                  advisory committees. Requires the President to
                  report annually on the activities, status, and
                  changes in composition of advisory committees
                  in existence during the preceding fiscal year.
    7          Requires the GSA Administrator to engage in      No
                  various oversight activities with respect to
                  advisory committees. Requires the GSA
                  Administrator to establish pay guidelines and
                  mandates a pay ceiling for all members and
                  staff of any advisory committee.
    8          Imposes administrative responsibilities on       No
                  agency heads.
    9(a)       Places limitations on the establishment of       No
                  advisory committees.
    9(b)       Forbids advisory committees from engaging in     Yes
                  policy-making or policy-implementing actions
                  unless directed to do so by statute or
                  presidential order.
    9(c)       Charter requirement.                             Yes
    10         Requires advisory committee meetings to be open  Yes
                  to the public. Requires timely notice of
                  advisory committee meetings to be published in
                  the Federal Register. Requires advisory
                  committees to permit interested persons to
                  attend and file statements. Requires advisory
                  committees to maintain detailed minutes of
                  their meetings.
    11         Requires advisory committees to make available   Yes
                  transcripts of advisory committee meetings.
    12         Requires agencies to maintain records that will  Yes
                  fully disclose the disposition of funds that
                  may be at the disposal of its advisory
                  committees and the nature and extent of the
                  advisory committees' activities.
    13         Requires the GSA Administrator to file advisory  Yes
                  committee reports and background papers with
                  the Library of Congress.
    14(a), (c) Establishes procedures for the termination of    No
                  advisory committees.
    14(b)      Requires advisory committees that are renewed    Yes
                  to file a new charter.
    15         Imposes restrictions on agencies' use of advice  No
                  or recommendations provided by the National
                  Academy of Sciences or the National Academy of
                  Public Administration.

    Source: GAO analysis of FACA.

    Note: Sections 1 (Short title), 2 (Statement of congressional findings and
    purposes), 3 (Definitions), and 4 (Applicability of FACA), do not impose
    requirements.

    According to GSA officials, the commission has taken reasonable steps to
    comply with the spirit of FACA. For example, after consulting with GSA,
    the commission sent an official to a 2-day GSA training session on how to
    comply with FACA. Also, the commission has adhered to the provisions of
    FACA that require advisory committees to allow the public to attend
    meetings and file statements. Specifically, the commission currently
    advertises its meetings and holds public hearings and open annual report
    drafting sessions. However, the commission cannot implement the FACA
    sections imposing certain administrative requirements on agency heads
    because those sections apply to commissions operating within larger
    agencies.

    Opening annual report drafting sessions to the public is problematic,
    according to the commission, because the presence of public observers,
    including Chinese and other international press and foreign officials,
    inhibits the discussion of economic and security-related issues among
    commissioners. For example, the 2006 annual report drafting sessions were
    open to the public, and the commission's discussions and personal opinions
    related to findings and recommendations were reported in the national and
    international press prior to the commission reaching consensus.
    Additionally, drafts of the commission's annual report were made available
    to the media prior to commissioners reaching final concurrence on official
    findings and congressional recommendations. As a result, the commission
    included in its fiscal year 2007 budget a request that FACA no longer be
    applied to it. However, in its fiscal year 2008 budget request, the
    commission dropped the removal request.

    Weaknesses in Current Organizational Structure and Management Policies and
    Procedures

    Weaknesses in the current organizational structure and management policies
    and procedures hinder the effectiveness of the commission's operations and
    put the commission at risk of fraud, waste, abuse, and mismanagement.
    According to internal control standards for the federal government the
    organization structure provides the general framework for management to
    plan, direct, and control operations to achieve its objectives and
    internal control activities are designed and implemented to help ensure
    that management's directives are carried out.^9 Specifically, in terms of
    its organizational structure, the commission has not formally defined and
    assigned key duties and responsibilities that are typically divided or
    segregated among different people in order to reduce the risk of error or
    fraud. The commission has heavily relied on its associate director for
    managing most administrative operations and staff, and commissioners have
    generally played a passive role in the management of the commission. In
    terms of management policies and procedures, the commission has not
    appropriately documented and communicated human capital, procurement,
    ethics, and financial management policies and procedures to commissioners
    and staff.

    ^9See [42]GAO/AIMD-00-21 .3.1. The five standards for internal control
    include: control environment, risk assessment, control activities,
    information and communications, and monitoring.

    Organizational Structure for Managing Operations Has Weaknesses

    Weaknesses in the commission's current organizational structure for
    managing administrative operations and staff hinder its effectiveness and
    put the commission at risk of fraud, waste, abuse, and mismanagement.
    According to the control environment standard, management should ensure
    that the organizational structure, among other things, is appropriate for
    the organization's size and functions, clearly defines areas of
    responsibility, appropriately delegates authority, and establishes a
    suitable hierarchy for reporting. Specifically, the commission has not
    defined and assigned key management duties and responsibilities, which are
    typically divided or segregated among different people. Also, most if not
    all of these duties and responsibilities have fallen on a single
    individual, the associate director.

      Commission Has Not Formally Assigned Most Management Duties and
      Responsibilities

    The commission has not formally assigned key management duties and
    responsibilities in accordance with the control environment standard.
    Specifically, we found that the commission has not formally assigned human
    capital, procurement, or budgeting and financial management and reporting
    responsibilities to any administrative staff. The only exception is that
    the commission designated the associate director as the ethics officer,
    making her responsible for, among other things, helping commissioners and
    staff address ethics and conflict-of-interest matters.

    Regardless of its size, under both the control environment standard and
    human capital principles, an organization should have individuals with
    specialized knowledge, skills, and abilities necessary to perform one or
    more of these complex and technical administrative responsibilities
    effectively.^10 Commission officials told us during our review that they
    recognize the commission has to clarify administrative roles and
    responsibilities, identify individuals who will be responsible for them,
    and segregate duties among staff. Figure 3 shows the organizational
    structure of the commission and, illustrates, among other things, that the
    commission formally has an ethics officer but no human capital,
    procurement, financial, or other administrative officers and no legal
    counsel.^11

    ^10Workforce planning to assure the availability of these competencies may
    include consideration of permanent, part-time, or contract employees. See
    GAO, Human Capital: Key Principles for Effective Strategic Workforce
    Planning, [43]GAO-04-39 (Washington, D.C.: Dec. 11, 2003).

    ^11The research and legal fellows and interns do not perform any
    administrative functions. They report through the administrative
    structure, but they get their assignments from and deliver their products
    to program staff.

    Figure 3: USCESRC Organizational Chart

    This failure to formally assign administrative responsibilities across the
    organization hinders checks and balances and monitoring, undermines
    segregation of responsibilities, compromises the accountability for and
    effectiveness of administrative procedures, and puts the commission at
    risk. For example, the commission has not formally assigned responsibility
    for procurement to a qualified official. The chairman, executive director,
    and associate director have played de facto roles as procurement officers
    by signing contracts, and currently the executive director is acting as
    procurement officer for most research contracts. In the absence of a
    formally designated procurement officer, it is not clear who has the
    authority to negotiate and sign contracts, who should receive goods and
    services and maintain records, and who should monitor procurement
    decisions and activities, compromising the integrity of procurement
    activities. Also, it is not clear whether individuals carrying out these
    activities have the necessary background, expertise, experience, and
    training to do so.

      Commission Has Relied on Its Associate Director for Carrying Out Most
      Management Duties and Responsibilities

    Since its inception, the commission has delegated to its associate
    director the responsibility for running most management functions and
    supervising all administrative staff, thereby creating risks. This
    concentration of duties and responsibilities is not in accordance with a
    good internal control environment. Most commissioners have played a
    limited and passive role in the management of the organization. Most
    commissioners work part time, and they told us that they focus on
    producing the annual report rather than on management matters. Under the
    direction of the chairman and vice chairman, the executive director is
    responsible for the overall management of the commission, including
    program as well as administrative operations and staff. However, the
    executive director has mainly focused on managing the commission's program
    operations and staff, which also concentrate on producing the annual
    report. As a result, the commission has greatly relied on its associate
    director, who reports to the executive director, chairman, and vice
    chairman, for leading administrative operations and staff (see fig. 3).

    Almost all administrative duties and responsibilities have fallen to the
    associate director. According to the position description, the associate
    director must have expert knowledge of federal rules and regulations on
    human capital, procurement, and budgeting and financial management and
    reporting, which involve highly legal and technical problems and sensitive
    issues. Also, the associate director must have knowledge of the
    commission's program objectives and policies to carry out a full range of
    work activities related to operations and administration. In addition, the
    incumbent must have the ability to work on a bipartisan basis with
    commission members and to handle administratively confidential and
    personal information. The associate director told us that her position
    description accurately reflects her responsibilities.

    Moreover, she is responsible for managing nine administrative issue areas.
    These are broad and varied and include managing

               o government ethics;
               o personnel management;
               o security clearances;
               o procurement;
               o budget and financial management;
               o facilities and administrative services;
               o public and media affairs;
               o hearings, briefings, and meetings; and
               o other duties, such as representing the commission in interagency
               meetings, planning and carrying out administrative projects and
               studies, and training and supervising subordinate staff.

               For example, as the ethics officer, she is responsible for
               providing ethics training, collecting and reviewing financial
               disclosure forms, and providing advice on conflict-of-interest
               matters. Also, she serves as the principal adviser to the
               executive director and the commission on personnel-related
               matters; interprets and applies personnel and pay authorities
               provided to the commission; interprets and applies legislative
               branch guidance, authorities, and legal requirements and federal
               personnel regulations and directives affecting the commission; and
               seeks opinions and guidance from the U.S. Senate Legal Counsel,
               GSA, and the Office of Personnel Management on personnel matters
               for which no clear guidance exists.

               In addition, in terms of budgeting and financial management and in
               coordination with the chairman and executive director, she is
               responsible for

               o developing budget plans, goals, and objectives for overall
               projects and spending levels;
               o working with the GSA budget office;
               o developing and reviewing other budget data for automated input
               into the Office of Management and Budget (OMB) MAX system;
               o responding to OMB requests for supplemental information;

               o developing budget material in support of the commission's budget
               requests and congressional budget justifications;
               o supporting the chairman and other commissioners at hearings and
               meetings;
               o generating documents that provide spending authority, OMB
               apportionment of carryover, and appropriated funds;
               o assuring the accuracy of the monthly and year-end Report of
               Budget Execution of OMB and the Treasury Department; and
               o monitoring OMB directives for commission application and
               appropriate action.

               To fulfill her duties and responsibilities, the associate director
               has limited administrative support. Commission officials told us
               that because the commission is small and has a small budget, it
               cannot afford to secure the services of management specialists
               with the expertise that it needs in different areas, including
               legal expertise on administrative matters. During our review, the
               commission hired an assistant director/office manager to improve
               its administrative capabilities. However, this individual has
               limited responsibilities and does not supervise any administrative
               staff. We observed that the four other administrative staff worked
               under the close supervision of the associate director because they
               were also new hires or because sometimes they could not resolve
               problems without assistance. It was not clear that some of the
               administrative staff had the background, experience, and training
               to carry out responsibilities if the associate director delegates
               them. For example, a staff member who performs budget and
               financial management duties has recently required extensive
               assistance to solve problems related to a financial spreadsheet
               used in day-to-day operations. Furthermore, she said that she
               would benefit from training on accounting and related software. We
               found that commission staff had received little internal or
               external training.

               Concentration of duties and responsibilities creates risks. By
               concentrating so many responsibilities in one individual, this
               organizational arrangement, among other things, curtails checks
               and balances and monitoring, hampers segregation of
               responsibilities, and requires that this individual have a high
               level of legal and technical expertise in administrative
               functions, such as human capital, procurement, and budgeting and
               financial management and reporting. For example, as the sole
               purchase cardholder, the associate director has broad authority in
               procuring supplies and services for the commission. However, as
               the designated funds' manager of the commission, the associate
               director may also approve the payments of these purchases omitting
               any supervisory review of the purchase card transactions made with
               commission appropriations.

               Concentration of duties and responsibilities also creates risks
               because key staff may leave the organization. The associate
               director has been with the commission since its inception. Thus,
               she has worked with all of the chairmen, vice chairmen, and
               executive directors of the commission. The associate director is a
               retired federal official working under a personal services
               contract for the commission. According to the chairman and
               executive director, the commission does not have qualified back-up
               staff or a plan for transitioning staff to take on the associate
               director's multiple responsibilities should the associate director
               leave the commission.

               Management Policies and Procedures Have Weaknesses or Are Not Present

               The commission's policies and procedures for managing
               administrative operations and staff are insufficient, incomplete,
               or not adequately documented, thereby impairing their
               effectiveness and putting the commission at risk of fraud, waste,
               abuse, and mismanagement. Effective internal control activities
               help ensure that management's directives are carried out and are
               an integral part of an entity's stewardship of government
               resources. Control activities are the policies, procedures,
               techniques, and mechanisms that enforce management's directives,
               such as the process for approving new hires and authorizing rates
               of pay. Specifically, despite the commission's adopting 17 rules
               and other efforts to put management policies and procedures in
               place since October 2002, human capital, procurement, ethics, and
               financial management and reporting policies and procedures are
               insufficient or incomplete, and many basic operational practices
               are not documented.^12 We found no evidence that legal and
               management experts have vetted policies and procedures to ensure
               they are technically sound, which is a best practice. Furthermore,
               existing policies and procedures are not fully documented and
               consolidated in policy and procedures manuals.

    ^12We discuss the commission's financial management and reporting policies
    and procedures in the next section of this report.

                 Human Capital Policies and Procedures Are Incomplete or Are Missing

               The commission's human capital policies and procedures are
               insufficient or incomplete. Because of these internal control
               weaknesses, human capital procedures do not provide reasonable
               assurance that these activities, such as hiring, evaluating,
               training, and EEO practices, are performed effectively. Under
               effective internal control, management should have appropriate,
               comprehensive, documented, and fair procedures for hiring,
               training, evaluating, compensating, and terminating staff.
               Specifically, the commission has only partially implemented formal
               performance evaluation procedures. Also, it has incomplete formal
               procedures for hiring and does not have formal procedures
               regarding training and EEO. Legal and management experts have not
               vetted human capital policies and procedures to ensure they are
               technically sound.

               The commission did not evaluate any of its staff prior to 2005.^13
               Nevertheless, it provided bonuses to staff without having formal
               ratings in 2004 and 2006. The commission is in the process of
               implementing staff performance evaluation policy and procedures
               adopted in May 2006. The commission did not develop and implement
               these staff evaluation procedures before because, according to
               commission officials, it did not have the resources to do so.
               According to the executive director, the commission informally
               evaluated staff in 2005 and 2006 and will formally evaluate its
               staff in 2007. The commission's new employee performance
               management policy and procedures aim to motivate staff to perform
               at their highest levels and give supervisors instruments to
               evaluate employees' performance. These policies and procedures
               rely on four tools: a position description for each employee's
               position, an employee performance plan, an annual performance
               evaluation for each employee and, if needed, a performance
               improvement plan to enhance the performance of an employee whose
               work is unsatisfactory. The employee performance management
               calendar starts with the preparation of the employee performance
               plans in December of the previous year, continues with the staff
               evaluation period from January to December, and ends with the
               finalization of individual performance evaluations in February of
               the following year. Based on these performance evaluations,
               supervisors recommend salary increases and cash awards in late
               February. Following these recommendations, the commission may give
               salary increases and cash awards in March. The commission started
               implementation of these procedures for calendar year 2007 in
               December 2006 with the development of individual performance plans
               and intends to finish implementing the procedures in early 2008.
               According to the executive director, the implementation is on
               schedule, and staff have their individual performance plans on
               file. Because the commission is still implementing the procedures
               for 2007, we did not evaluate the new policy and procedures.

    ^13The commission currently has an executive director and 11 program and
    administrative staff. The executive director is a senior executive
    detailed to the commission from the Department of Commerce. Most of the
    staff are excepted service employees, have 1-year appointments, and serve
    at the discretion of the commission. Two administrative staff, including
    the associate director, are working for the commission under personal
    service contracts.

               The commission has incomplete written procedures for hiring staff.
               Under the charter of the commission, the chairman may appoint, fix
               the compensation, and terminate the employment of the executive
               director and any other staff. Under rules 4 and 5 of the
               commission, as amended in November 2005, the commission must
               approve the hiring and firing of the executive director, and the
               chairman and vice chairman must approve the hiring and firing of
               other staff after consultation with other commissioners. However,
               beyond these rules, the commission has not formalized its hiring
               practices through further written procedures that would help
               ensure that hiring new program and administrative staff is fair,
               transparent, and competitive. For instance, no procedure in place
               captures that, since 2006, the commission has developed vacancy
               announcements, based on its position descriptions, and publicly
               advertised them through its Web site and various media, such as
               USAJOBS and the OPM Web site. Furthermore, the roles played by the
               executive director and the associate director in managing human
               capital are not formally defined, and the records that the
               commission and these officials have to keep during hiring are not
               formalized in written procedures.

               The commission does not have written training guidelines for its
               program and administrative staff. Training allows an organization
               to invest in its human capital and focus this investment on
               organizational goals and objectives. It helps ensure that staff
               have the knowledge, skills, and abilities to fulfill their
               responsibilities. Internal and external training of administrative
               staff help them comply with policies and procedures, safeguard
               resources, and prevent errors. Some of the commission's program
               and administrative staff told us that training would help them
               improve their professional and technical skills. For example,
               staff mentioned that systematic support for training would help
               them improve language or technical skills. Staff stated that the
               commission should have training guidelines in place so that they
               have a fair opportunity to develop their skills. Staff told us
               that they had individually requested training support. Without
               training guidelines, the commission cannot ensure that training
               supports organizational objectives and that staff has fair access
               to it.

               The commission does not have written equal employment opportunity
               (EEO) procedures. Although the commission is not subject to EEO
               legislation, commission officials told us that the commission has
               followed EEO principles, but it has no written procedures.
               According to these officials, the commission is aware of the
               importance of these procedures when, for example, hiring or
               terminating staff. A lawsuit that the commission settled with a
               former staff member was partially based on an EEO complaint. In
               the absence of these EEO procedures, the commission cannot ensure
               that human capital procedures (such as recruitment, hiring,
               evaluation, promotion, compensation, awards, and training
               procedures) are fairly implemented. Also, it cannot monitor
               EEO-related results.

    			    Procurement Policies and Procedures Show Weaknesses

               The commission has some written procedures for research-related
               procurement, but it does not have written procedures for
               non-research-related procurement. Because of this internal control
               weakness, procurement procedures do not provide reasonable
               assurance that procurement activity is performed effectively and
               is not subject to fraud, waste, and abuse. Also, procurement
               procedures need to ensure as much transparency, competition, and
               accountability as possible.^14 However, legal and procurement
               experts have not vetted the commission's procurement rule to
               ensure that it is technically sound or in accordance with best
               practices.

               Specifically, regarding research-related procurement, rule 12 of
               the commission states that the chairman and vice chairman must
               support research contracts after receiving recommendations from
               the co-chairs of the commission's research working group. The
               research working group is responsible for defining research needs
               and preparing research proposals. It has four members--two
               co-chairs and two other commissioners. The chairman and the vice
               chairman select the co-chairs of the group from among the
               commissioners from different political parties. Rule 12 also says
               that the full commission must approve research contracts in excess
               of $25,000.

    ^14The Federal Acquisition Regulation generally does not apply to the
    commission because it is a legislative branch entity. However, see 41
    U.S.C. S 5, which requires advertising of purchases and contracts for
    supplies or services except (1) when the amount involved in any one case
    does not exceed $25,000, (2) when public exigency requires immediate
    delivery, (3) when only one source of supply is available and the
    government purchasing or contracting officer so certifies, or (4) when the
    services are of a technical and professional nature or under government
    supervision and paid for on a time basis. The law applies to legislative
    branch agencies other than the House, Senate, and Architect of the Capitol
    and the officers and employees thereof. 41 U.S.C. S 5a.

               This research-related procurement procedure does not include
               practices the commission has used since 2005 to ensure the
               transparency and competitiveness of its research-related
               procurement. Under these undocumented practices, for example, if
               the research working group determines that funding outside
               research would contribute to the commission's mission, it prepares
               a request for proposal (RFP) with support from the commission's
               staff. After approving the RFP, the commission puts the RFP on its
               Web site and disseminates it to selected academic institutions and
               policy institutes. However, the commission does not use other
               means to widely circulate the RFP. After examining all of the
               responses to the RFP, the research working group selects one and
               recommends it to the chair and vice chair, or to the commission.

               In fiscal year 2005, the commission competitively awarded seven
               research contracts for a total of $105,475 (see app. VI). Only one
               of these was above $25,000. In fiscal year 2006, the commission
               competitively awarded five research contracts for a total of
               $77,926. None of these was above $25,000. During 2007, the
               commission plans to continue awarding research contracts using
               these practices.

               In contrast, the commission does not have any written procedures
               in place for nonresearch procurement. This procurement involves a
               variety of items, such as the costs of hearings, consulting
               services, and office supplies and equipment. In fiscal years 2005
               and 2006, the commission spent about 65 percent and 77 percent,
               respectively, of its total procurement budget in nonresearch
               procurement (see apps. VI and VII). In the absence of
               nonresearch-related procurement procedures, the commission has
               limited assurance that the procurement is as transparent,
               competitive, or best value for price as possible, or that
               responsibilities for it are segregated among qualified staff. For
               example, as discussed in the following section on financial
               management and reporting, the commission made significant
               purchases of office equipment, however, the staff did not document
               these pricing and purchasing decisions and it is difficult to
               verify that the best value was obtained. Earlier, we noted the
               absence of a formally designated procurement officer can
               compromise the integrity of procurement activities and together
               with the lack of procedures put the commission at risk of fraud,
               waste, abuse, and mismanagement.

               During our review, we identified a transaction that fell outside
               the scope of our individual transaction testing. The transaction
               involved computer consulting work conducted by a relative of the
               associate director that initially did not appear to be approved by
               the commission. We learned that the associate director's son, who
               is not an employee of the commission and not under formal contract
               with the commission, had access to the commission's computer
               system and the sensitive information it contains. The associate
               director confirmed that her son had had access to and worked on
               the system. She explained that her son had set up the computer
               system for the Trade Deficit Review Commission and was paid for
               those services by that entity. Subsequently, at its inception,
               USCESRC inherited this computer system. The associate director
               told us that 4 years later, in 2004, when the system experienced a
               major failure due to an external power surge, she obtained expert
               and consulting services from her son to assist with the recovery
               of the data and redesign and upgrade of the system, for which the
               commission paid him $6,600. The associate director acting as
               contracting/ordering officer approved the invoice authorizing the
               payment to her son. In addition to the invoice, she also gave us a
               copy of the statement of work relating to the invoice. We have
               seen no other documentation relating to this work other than the
               statement of work and the invoice.

               The chairman, vice chairman, and executive director of the
               commission at that time informed us that they knew the associate
               director planned to obtain the services of her son, but, because
               of lack of formal procedures for approving nonresearch
               procurement, they were unaware of the details. After 2004, when
               problems arose with the system, he continued to provide assistance
               and other services without receiving additional reimbursement from
               the commission. As a part of providing assistance and other
               services, he had access to the system both at the commission and
               off site via the Internet. We brought this matter to the attention
               of the current chairman and executive director, and they told us
               they were aware that the associate director's son had worked on
               the system after 2004 to troubleshoot the system he had developed.
               In the absence of formal approvals or documentation of his work
               for the commission after 2004, they were unaware of his providing
               other services to the commission and about the terms and
               conditions he was operating under. The current chairman and
               executive director were confident that he had received no
               compensation for these services.^15 They also indicated that as a
               result of our inquiry, they intended to take steps to stop this
               person from having further access to the computer system and
               providing further support and services to the commission without
               the approval of the chairman and vice chairman.

               When the commission accepts services without remuneration, as
               authorized by law, it has to document such action in order to
               protect the government's financial interest should the provider of
               the services submit a payment claim for such services. Further,
               since this situation involved access to the commission's computer
               system, the commission has to document the scope of the access
               authority granted, which if intentionally exceeded would, among
               other things, constitute a possible violation of legislation
               dealing with fraud and related activities in connection with
               computers.^16

    			    Ethics Guidelines Have Some Shortcomings

               The commission's ethics procedures for both commissioners and
               staff have shortcomings. According to guidance for a good internal
               control environment, management should have appropriate,
               comprehensive, and documented written ethics policies and
               procedures and require that all members of an organization
               periodically acknowledge ethics policy and procedures by
               signature. Specifically, two rules of the commission provide
               ethics guidelines for commissioners and staff. According to
               commission rule 16, commissioners must exercise impartial judgment
               in performing their duties; may never solicit or accept a gift as
               part of their official duties, other than a gift of incidental
               value; may not use their position in the commission or the
               information they receive as part of their duties for personal
               gain; and may not receive a present of any kind, other than of
               incidental value, from China and Taiwan. This existing rule does
               not include ethics guidelines regarding speaking engagements and
               payment of related travel expenses. The commission has discussed
               establishing guidelines on speaking engagements but has not done
               so, according to commission officials. The commission has not
               vetted its ethics procedures for commissioners with legal and
               management experts to ensure these procedures are technically
               sound, in accordance with best practices.

    ^15Commission rule 10 provides that "no outside consultants or other
    personnel, either by contract, detail, volunteer or through remunerative
    agreement, may be hired without the approval of the Chairperson and Vice
    Chairperson."

    ^1618 U.S.C. S 1030.

               Commission rule 17 requires staff to comply with Senate ethics
               rules. In March 2007, the executive director conducted the
               commission's first training on the Senate ethics rules for all
               program and administrative staff. He also gave each staff member a
               copy of the ethics rules. Previously, he and the associate
               director, who is the formally designated ethics officer, had
               discussed these ethics rules with staff individually.

               We found no evidence that the commission requires commissioners
               and staff to periodically acknowledge ethics policy and procedures
               by signature. In addition, the commission has no rule about
               entering into contracts with relatives of commissioners and staff,
               in accordance with best practices.

               In terms of financial disclosure, we found that commission
               officials who should have filed financial disclosure reports had
               done so, and the reports did not show conflict of interest.
               Commissioners and staff who are required by the Ethics in
               Government Act of 1978^17 to file financial disclosure reports
               must file the reports with the Secretary of the Senate in its
               Office of Public Records. Commission officials who earned a rate
               of pay equal to or in excess of $109,808 for a period equal to or
               in excess of 60 days must file financial disclosure reports.
               Senate ethics rules note that public disclosure of an official's
               personal financial interests is a key component of an effective
               code of conduct. After collecting and processing the forms, the
               Office of Public Records sends the forms to the Senate Select
               Committee on Ethics and, within 30 days, makes them available to
               the public electronically. If the committee needs additional
               information or finds errors in the forms, commissioners and staff
               may need to file amendments.

               According to our review of commission and Senate records,
               commission officials who should have filed financial disclosure
               forms had done so since the inception of the commission. The
               reports covering 2006 were due on May 15, 2007. According to the
               commission's ethics officer, six commissioners, including one
               former commissioner, should have filed these reports. Three of
               them did so, and the other three requested and received a filing
               extension until August 15, 2007. The three commissioners who
               requested extensions filed their reports by the August deadline,
               according to the associate director.

    ^17Pub. L. 95-521, as amended (codified as an appendix to title 5 of the
    United States Code).

                 Commission Has Not Appropriately Documented Its Administrative
    				 Procedures

               The commission has not sufficiently documented its ethics, human
               capital, procurement, and budgeting and financial management and
               reporting policies and procedures to ensure their effectiveness
               and to inform and guide commissioners and staff.^18 Effective
               internal control activities would include a comprehensive
               collection of management policies and procedures, which are
               properly managed and maintained, so that management and staff can
               apply these activities properly.

               Without a complete collection of comprehensive management policies
               and procedures, commissioners and staff do not have access to
               documents in paper or electronic form containing all of the
               information needed for effectively implementing these policies and
               procedures, and the commission is at risk, especially if staff
               responsible for key operations leave the commission. More
               important, without a systematic effort to consolidate management
               policies and procedures, some remain incomplete, unwritten, or not
               vetted by legal and administrative experts. The commission is
               currently working to consolidate its management policies and
               procedures by developing office manuals. For example, the
               commission has in draft a policy manual and a procedures manual.
               Commission officials acknowledged the need for policy and
               procedures manuals but told us the manuals have not been completed
               because of a lack of resources.

    			  Ineffective Internal Control over Financial Management and Reporting

               The commission's internal control over financial management and
               reporting was not adequate to provide reasonable assurance that
               financial activities were properly processed and recorded and
               complied with federal laws and regulations. Effective internal
               control is the first line of defense in safeguarding assets and
               preventing and detecting errors and fraud. We noted weak or
               missing internal control in our examination of the commission's
               (1) non-payroll-related transactions, (2) travel and purchase card
               activity, and (3) time and attendance (T&A) reporting. Our tests
               of the commission's non-payroll-related transactions for fiscal
               years 2005 and 2006 found deficiencies, such as missing or
               inadequate supporting documentation, lack of proper authorization
               and approval, and improper classification. The commission's
               application of the government travel and purchase card programs
               lacks written guidance, proper segregation of duties, and adequate
               training. In addition, we identified questionable purchases of
               over $13,000 made with the commission purchase card. Our review of
               the commission's payroll process for fiscal years 2005 and 2006
               showed that the commission's T&A records were not always validated
               by the employee or approved in accordance with the policy
               described by the commission's management. As a result, the
               commission's financial resources are at an increased risk of
               fraud, waste, abuse, or mismanagement.

    ^1844 U.S.C. S 3101 provides that the head of each federal agency shall
    make and preserve records containing adequate and proper documentation of
    the organization, functions, policies, decisions, procedures, and
    essential transactions of the agency and designed to furnish the
    information necessary to protect the legal and financial rights of the
    government and of persons directly affected by the agency's activities.
    The law applies to legislative branch establishments other than the House,
    Senate, and the Architect of the Capitol. 44 U.S.C. S 2901 (14).

               Key Controls over Non-Payroll-Related Transactions Are Ineffective

               Our tests of the commission's non-payroll-related transactions for
               fiscal years 2005 and 2006 found deficiencies such as missing or
               inadequate supporting documentation, lack of proper authorization
               or approval, and improper classification. We statistically sampled
               59 commission non-payroll-related debit transactions totaling
               approximately $1.1 million from fiscal years 2005 and 2006.^19 Ten
               of the 59 transactions had one or more internal control failures,
               leading us to conclude that the controls commission staff said
               were in place were not operating effectively. Based on the results
               of our work, we estimate that the total dollar value of
               non-payroll-related debit transactions with ineffective controls
               during the 2-year period we examined is not more than $1.2
               million.^20 The following are examples of the type of internal
               control weaknesses identified in our sample transactions:

               o Four transactions lacked proper documentation to support
               travel-related expenditures centrally billed to the commission
               travel credit card. The invoices submitted to GSA for payment
               processing included only the credit card statement without
               supporting documentation, such as copies of approved travel
               authorizations or vouchers and lodging invoices. Although we found
               annotations on certain credit card statements indicating that
               amounts were internally cross-referenced by the commission to
               individuals' travel vouchers, copies of approved vouchers or
               support for the lodging expenses incurred were not attached for
               GSA verification. In other sample items tested, reimbursements for
               business expenses were processed for commission staff or
               commissioners with only an e-mail or a handwritten note as
               supporting documentation. Typically, the invoice or bill from the
               supplier or vendor represents the claim against the government for
               the items sent or delivered, and is also used to verify that
               quantities, prices, and calculations are accurate.^21

    ^19The sample population consisted of 1,991 non-payroll-related debit
    transactions totaling approximately $4.5 million for fiscal years 2005 and
    2006. See appendix I for additional details related to the population.

    ^20We are 95 percent confident that the total dollar value of
    non-payroll-related debit transactions with ineffective controls is not
    more than $1.2 million. This $1.2 million estimate exceeds the tolerable
    amount in error of $224,715, which is 5 percent of the debit population
    total of $4.5 million.

    			  o Two transactions were not properly authorized and approved: both
               were payments under what the commission called a personal services
               contract for hours worked and miscellaneous business expenses
               claimed for reimbursement by the associate director.^22 The first
               transaction, in the amount of $3,823.60, was approved by the
               office manager, who was subordinate to the contract payee. In the
               second transaction, for $5,315.69, the contract payee signed the
               commission chairman's name approving the payment that the contract
               payee claimed, and therefore independent verification that the
               services had been received and conformed to the specifications of
               the contract was not documented. Although the commission is
               relatively small, the separation of key duties and
               responsibilities is a key control to reduce the risk of error or
               fraud. According to GAO's Standards for Internal Control in the
               Federal Government,^23 no one individual should control all key
               aspects of a transaction.

    			  o Our sample included two large transactions totaling $90,075 that
               were improperly reported as expenses for fiscal year 2006 by the
               commission at the end of fiscal year 2006. The items, for $70,000
               and $20,075, were obligations for renovations to the commission's
               office space that were finalized in fiscal year 2007. Because the
               goods and services had not been received by the end of fiscal year
               2006, these two items should not have been reported as expenses in
               fiscal year 2006. These errors were not detected by commission
               staff until we questioned the transactions as part of our testing.
               According to the commission staff, the errors occurred when the
               commission notified GSA that the funds should be obligated based
               on the purchase order but mistakenly placed the obligated balances
               on the pending accruals worksheet submitted to GSA at year end. In
               following up, we found that the related goods and services were
               received and paid for in fiscal year 2007.

    ^21GAO, Streamlining the Payment Process While Maintaining Effective
    Internal Control,GAO/AIMD-21.3.2  (Washington, D.C.: May 2000).

    ^22The commission's associate director was the contract payee in both
    transactions.

    ^23GAO/AIMD-21.3.1

               During our review, we also noted that the commission did not
               develop or document criteria for official representation expenses
               or a means to properly track appropriated funds for this purpose.
               Appropriations for the commission for fiscal years 2005^24 and
               2006^25 included a provision that no more than $5,000 of the
               amount appropriated each year was available for official
               representation expenses, which include entertainment.
               Representation appropriations permit officials of agencies whose
               activities involve substantial contact with foreign officials to
               reciprocate for courtesies extended to them.^26 According to the
               associate director, this is how the commission has defined its use
               of representation expense, based upon the commissioners'
               discussions. However, neither the decision to limit representation
               expense to the entertainment of foreign nationals on trips to Asia
               nor the criteria for classifying transactions as representation
               expenses has been documented. Also, the commission did not have a
               formal means to track such transactions for fiscal years 2005 and
               2006, as indicated by the manual schedules of representation
               expenses that were prepared at our request and were adjusted based
               on our inquiries. The final schedules provided to us for
               representation expenses for fiscal years 2005 and 2006 totaled
               $2,687 and $4,996, respectively. However, without definitional
               guidance and a formal means of accumulating these transactions, it
               is difficult to determine the completeness and accuracy of the
               amounts provided. As a result, it is difficult for commission
               management to know whether the commission kept within its $5,000
               statutory limit on representation, and we could not ascertain if
               it had done so.

    			  Travel and Purchase Card Programs Lack Key Controls

               The commission's travel card and purchase card programs lack
               written guidance, proper segregation of duties, and adequate
               training. In addition, we identified questionable purchases of
               over $13,000 made with the commission purchase card. According to
               internal control standards,^27 management is responsible for
               developing policies and procedures that fit the agency's operation
               and are an integral part of operations. As discussed earlier,
               internal control standards also state that key duties need to be
               divided or segregated among different people to reduce the risk of
               error and fraud. This should include separating the
               responsibilities for authorizing, processing, recording, and
               reviewing transactions, and handling any related assets. Internal
               control standards also require that all personnel possess and
               maintain a level of competence that allows them to accomplish
               their assigned duties, as well as understand the importance of
               developing and implementing good internal control. This includes
               identifying appropriate knowledge and skills as well as providing
               needed training.

    ^24Pub. L. No. 108-447, 118 Stat.2912 (2004)

    ^25Pub. L. No. 109-108, 119 Stat.2334 (2005).

    ^26GAO, Principles of Federal Appropriation Law, 3rd ed., vol. I,
    [45]GAO-04-261SP (Washington, D.C.: January 2004)

    ^27GAO/AIMD-00-21.3.1.

                 Travel Card

               We noted a lack of written policies and procedures for authorizing
               and approving temporary duty travel for commissioners, staff, and
               invited guests in the 23 travel card transactions we examined for
               fiscal years 2005 and 2006. The Federal Travel Regulation^28 (FTR)
               states that internal policies and procedures must be established
               for processing travel authorizations and travel reimbursements as
               well as establishing policies and procedures relating to payment
               of per diem expenses and miscellaneous expenses. The associate
               director confirmed that the commission applies the guidance in the
               FTR. The lack of written guidance puts the commission at risk of
               not processing all travel-related expenses consistently and in
               accordance with the FTR. In reviewing the travel card
               transactions, we noted that one cardholder's purchases totaling
               approximately $4,000 were for personal use. Although we did not
               find any indication that the individual sought reimbursement from
               the commission for these transactions, the FTR states that
               government-issued travel cards may be used only for official
               travel-related expenses.^29

    ^2841 C.F.R. Parts 300-304. Travel expenses, including per diem in lieu of
    subsistence, of the commission are authorized and allowed at rates
    authorized for employees of agencies under subchapter I of chapter 57 of
    title 5, United States Code, while away from their homes or regular places
    of business. 22 U.S.C. S 7002(e)(2). The rates are established by the
    Federal Travel Regulation.

    ^2941 C.F.R. Part 301-70.706

               We also found instances where an individual both authorized travel
               and approved/certified travel expenses for reimbursement.
               According to our discussion with commission officials and staff,
               all travel is to be authorized by the commission chairman. In
               instances where the chairman is the traveler, he or she authorizes
               his or her own travel. However, the associate director sometimes
               signs for the chairman authorizing travel. The associate director
               also prepares travel vouchers claiming reimbursement for travel
               expenses for the commissioners and staff or designates an
               administrative assistant to do so. Then, as the designated
               approving official, the associate director approves the travel
               voucher claim for reimbursement. We also observed some instances
               where the associate director signed the traveler's name and also
               approved the claim for reimbursement. In order to have proper
               segregation of duties, no one individual should control all
               aspects of a transaction.^30 Also, the FTR states that the
               traveler must ensure all travel expenses are prudent and necessary
               and submit the expenses in the form of a proper claim.^31 This is
               documented with the traveler signing the travel voucher in block
               13 of Standard Form 1012, whereby the traveler asserts that, "I
               certify that this voucher is true and correct to the best of my
               knowledge and belief, and that the payment of credit has not been
               received by me." This certification was lacking on several
               commission travel claims we reviewed because the traveler did not
               sign the voucher. By not following proper procedures for claiming
               and reimbursing travel expenses, the commission is subject to an
               increased risk of fraud or error.

               The commission's associate director, who has responsibility for
               travel card use and is the approving official, has received no
               formal training in administering the travel card program.
               According to GAO's internal control standards, all personnel need
               to possess and maintain a level of competence that allows them to
               accomplish their assigned duties, as well as understand the
               importance of developing and implementing good internal control.
               This includes identifying appropriate knowledge and skills as well
               as providing needed training. Based on the travel vouchers we
               reviewed, the associate director appeared to be knowledgeable
               about some travel regulations, such as the disallowance of certain
               unauthorized expenses on travel claims -- including alcoholic
               beverages or individual entertainment charges^32 on hotel
               invoices. However, formal training on the FTR could have increased
               compliance with the FTR, such as submitting claims for payment
               within 5 days after completing a trip^33 or authorizing first^34
               or business^35 class travel as required by the FTR. Of the 22
               travel voucher claims^36 we reviewed, only 1 was submitted within
               the 5-day time period. Also, documentation of FTR-required
               authorization for first or business class travel was not provided
               in seven instances.

    ^30GAO/AIMD-00-21.3.1.

    ^3141 C.F.R. Part 301-71.203

    ^3241 C.F.R. Part 300-3.1 Glossary of Terms, under Per diem allowance, (b)
    Meals.

    ^3341 C.F.R. Part 301-52.7

                 Purchase Card

               The commission did not have written policies and procedures
               concerning use of the purchase card. The purchase card is used to
               buy products or obtain services for everyday operations. Although
               the commission is generally not covered by the Federal Acquisition
               Regulation (FAR), the commission, as a participant in GSA's
               SmartPay Program, is subject to the FAR for purchases of supplies
               and services made with the government purchase card. The associate
               director told us she was not aware of the laws, regulations, and
               procurement policies and procedures under the FAR as it related to
               the use of the purchase card. Further, she was not aware of any
               restrictions on the use of the card other than using it for
               meeting commission objectives. For example, the associate director
               was not aware of the micro-purchase threshold, currently at
               $3,000.^37 While we noted over $13,000 of computer hardware and
               software purchases that appeared on the commission's June 2006
               purchase card statement, each individual item did not exceed the
               micro-purchase threshold. The commission purchased this computer
               equipment via the Internet because, according to the associate
               director, they were the best value. Commission staff did not
               document these pricing and purchasing decisions and the FAR does
               not require documentation of competitive quotations solicited
               under the micro-purchase threshold amount if the contracting
               officer or other individual appointed for purchases under the
               purchase card program considers the price to be reasonable.^38
               While we noted over $13,000 of computer hardware and software
               purchases that appeared on the commission's June 2006 purchase
               card statement, each individual item did not exceed the
               micro-purchase threshold. Nevertheless, it is difficult to verify
               that the best value was obtained without documentation of the
               pricing decisions.

    ^3441 C.F.R. Part 301-10.123

    ^3541 C.F.R. Part 301-10.124

    ^36Although we examined 23 travel card transactions, one transaction did
    not involve a travel voucher. According to the associate director, the
    transaction authorized the travel expenses for an invited guest to appear
    at a hearing, paid for by the commission.

    ^37The $3,000 micro-purchase threshold generally applies; however,
    exceptions exist. For example, the micro-purchase threshold is $2,000 for
    acquisitions of construction subject to the Davis-Bacon Act.

    ^3848 C.F.R. Part 13.202 (a) (2).

               Although the associate director is officially the sole authorized
               purchase cardholder for the commission, we identified cases in
               which the associate director asked other staff to use the purchase
               card to buy products or obtain services. For those transactions,
               the staff signed the purchase card receipts even though they were
               not the authorized cardholder. Sometimes it was not clear who was
               involved in particular transactions. For example, we reviewed one
               receipt signed by someone other than the associate director in the
               amount of $408 for toner cartridges, and the associate director
               could not tell us whose signature was on the receipt. Effective
               internal control requires that transactions are authorized and
               executed only by persons acting within the scope of their
               authority.^39 This is the principal means of assuring that only
               valid transactions to commit resources are initiated or entered
               into.^40

               The commission's associate director has not received formal
               training in administering the purchase card program. The associate
               director purchased bottled water monthly with the purchase card,
               which is an example of an improper transaction. Improper
               transactions occur when appropriated funds are used for which
               appropriations are generally not available.^41 Bottled water is
               typically considered a personal expense, and appropriated funds
               may be used for it only with documentation that available drinking
               water poses a health risk.^42 Training of the purchase cardholder
               and all staff in the laws and regulations applying to purchase
               card transactions is an important step in ensuring that the
               purchase card is not misused.

               As shown in table 5, we identified questionable purchases totaling
               over $13,000 made with the commission purchase card. We considered
               questionable transactions as those where items were purchased at
               an excessive cost or for a questionable government need, or the
               support was insufficient for a determination. They included
               transactions at Macy's, Sam Goody, and Corner Bakery.

    ^39GAO/AIMD-00-21-3.1.

    ^40GAO/AIMD-00-21-3.1.

    ^4131 U.S.C. S 1301. Also, see [46]GAO-04-261SP

    ^42B-303920, March 21, 2006, Clarence Maddox -- Relief of liability for
    improper payments of bottled water.

               Table 5: Questionable Purchase Card Transactions, July 1,
               2005-June 30, 2006

    Type             Number of transactions     Amount
    Food purchases                       31  $9,385.74
    Senate gift shop                      7   2,405.50
    Other items                          12   1,362.20
    Total                                50 $13,153.44

               Source: GAO analysis of Citibank data.

               The associate director told us that all of the questionable
               purchases we identified were for official commission business.
               According to the commission, all of the purchases from the Senate
               gift shop were small items such as pens or business card cases
               that were presented as gifts during commission fact-finding trips
               to China and Taiwan. Over three-fourths of the purchases in table
               5 were for food, which included catering for commission hearings
               or quarterly business meetings. According to the associate
               director, the food was primarily for commissioners, commission
               staff, and witnesses working exclusively on a particular hearing
               where it may have been inconvenient or counterproductive to break
               for lunch. We did observe instances where nongovernmental
               personnel participated in various panel sessions at certain
               hearings, and it may have been beneficial for scheduling purposes
               to provide lunch or other refreshments. However, as a general
               rule, the government may not furnish free food to employees at
               their official duty station even when they are working under
               unusual circumstances.^43

    ^43B-272985, Meal Expenses for CIA Security Detail, December 30, 1996,
    B-169235, April 6, 1970.

               Time and Attendance Reporting Lacks Proper Approvals

               Our review of the commission's payroll process for fiscal years
               2005 and 2006 showed that the commission's T&A records were not
               always completed and approved in accordance with the policies and
               procedures described by the commission. We reviewed all applicable
               T&A records for four commissioners in fiscal years 2005 and 2006
               and found that 37 percent were not reviewed and approved by the
               executive director in accordance with the described policies and
               procedures. We also reviewed selected T&A records for three
               commission staff for fiscal years 2005 and 2006 and found that
               over one-half were not approved by the executive director, and 10
               of the 25 staff T&A records we reviewed were not approved by a
               certifying officer in accordance with commission policy. According
               to the commission staff responsible for payroll, the certifying
               officer is responsible for (1) reviewing T&A records to ensure
               that each one is properly approved by the executive director and
               (2) affirming that the hours are accurately entered into the
               online payroll data entry system that the commission uses to
               communicate with GSA. Failure to adhere to this policy increases
               the risk that inaccurate or inappropriate time charges will be
               entered into the system, resulting in potential errors in wages
               paid and recorded by the commission. Supervisory authorization and
               approval is a key part of ensuring the propriety of T&A
               information. According to GAO's time and attendance guidance,^44
               the supervisor or other authorized official should review and
               authorize employees' planned work schedules and applications for
               leave, and review and approve employee submissions of actual time
               worked and leave taken, as well as information in T&A reports, and
               any adjustments or corrections to T&A records.

               This lack of T&A oversight is further compounded by the fact that
               the commission's 12 members generally had differing approaches to
               charging time incurred on commission activities. We identified a
               great range in the number of hours charged by the commissioners in
               fiscal years 2005 and 2006, from some commissioners who did not
               charge any time to commission activities, to one commissioner who
               charged almost 1,900 hours in one fiscal year. We also noted
               several instances where the number of hours charged to commission
               activities and paid to a commissioner exceeded the standard 80
               hours for the pay period. While exceeding 80 hours in a given pay
               period is permissible, this practice and other changes to the time
               and attendance information resulted in numerous manual adjustments
               to the Commission's recorded payroll to reflect the excess hours
               or retroactive time.^45 Manual adjustments can lead to
               inaccuracies and inconsistencies and provide opportunities for
               error. Further, manual adjustments increase the importance of
               reconciliations to ensure that all data are captured and recorded
               in a timely fashion. The accuracy of time and attendance
               information is particularly important because the amount of time
               devoted to commission activities is a factor46 in commission
               ethics filing requirements.

    ^44GAO, Maintaining Effective Control over Employee Time and Attendance
    Reporting, [47]GAO-03-352G (Washington, D.C.: January 2003).

    ^45Manual adjustments were also made to reimburse commissioners for hours
    retroactively if commissioners' time and attendance records were not
    submitted timely.

               Conclusions

               Congress created the commission almost seven years ago to advise
               it about the impact of China's growing economic and military
               capabilities on the United States. The commission's primary
               vehicle for communicating its findings to Congress and the
               American people is the annual report. However, the commission has
               issued none by the mandated deadline because the appointment dates
               for commissioners and the commission's work cycle schedule are not
               aligned with the annual report issuance deadline. Seven of the
               current 12 commissioners' terms will expire in December 2007, and
               a reconstituted commission will again face the challenge of
               meeting a June 1 reporting deadline. Unless the commissioners'
               appointment dates and the commission's work cycle schedule are
               aligned with the report issuance date, it is unlikely the
               commission will issue future reports on time.

               Despite the permanent status of the commission indicated by the
               lack of a sunset provision in its charter, the commissioners have
               not focused their attention on the management operations of the
               organization. Instead, the commission has relied on its associate
               director, who has a small administrative staff with limited
               expertise and capacity, to manage the diverse and complex
               activities necessary to support a federal agency. The commission's
               ethics, human capital, procurement, and financial management
               policies and procedures can be improved to enhance their
               effectiveness and to provide reasonable assurance that the
               commission is not at risk of potential fraud, waste, abuse, and
               mismanagement. In this regard, the commission has started to take
               steps to address some of the issues we have identified and has
               requested a substantial increase in its appropriations to, in
               part, to address these weaknesses. Nevertheless, we found
               practices that the commission needs to address in the areas of
               human capital, procurement, ethics, and financial management. Even
               though the organization is small in size, the commission has a
               responsibility and duty to effectively and efficiently manage the
               resources provided by Congress. The commission has wide discretion
               to determine how to do so in a way appropriate for its size. The
               need for internal controls is heightened by the fact that it is
               not subject to the degree of oversight and legal requirements of
               most federal agencies.

    ^46Officers and employees of the legislative branch who are compensated
    for a period in excess of 60 days during a calendar year at the annual
    rate of pay equal to or in excess of 120 percent of the basic rate of pay
    in effect for the Grade GS-15 of the general schedule must file a public
    disclosure report with the Senate.

               Matter for Congressional Consideration

               To improve the timeliness of the commission's annual reports,
               Congress should consider aligning the commissioners' appointment
               dates with the annual report issuance date. Depending on its
               needs, Congress could, for example, either move the commissioners'
               appointment date from January to July, so that the commission has
               enough time to plan and issue its report by June 1 the following
               year, or keep the commissioners' appointment date in January and
               move the report issuance date to December 1.

    			  Recommendations for Executive Action

               To improve management of its operations and reduce risks, the
               commission should apply internal control standards aimed at (1)
               strengthening its organizational structure so that key management
               duties and responsibilities are segregated and (2) improving its
               management policies and procedures so that they are
               well-documented, communicated, and consistently applied and
               reflect expert legal and managerial advice where appropriate.

               Specifically, we recommend that the commission take the following
               five actions:

               o Review the organization's staffing needs for management
               functions, including human capital, procurement, budgeting, and
               financial management; properly segregate key duties and
               responsibilities among specific officials; and ensure that these
               officials have appropriate knowledge, experience, and training to
               perform these management functions.
               o Fully implement recently developed human capital polices and
               procedures for evaluating the commission's professional and
               administrative staff, and put in place comprehensive written
               hiring, training, and EEO-related procedures.
               o Establish comprehensive written research and
               non-research-related procurement policies and procedures that
               ensure transparency and competition as much as possible.
               o Expand the ethics guidance for commissioners to include
               guidelines for speaking engagements and payment of related travel
               expenses, and require that commissioners and staff review and
               formally acknowledge the ethics guidance periodically.

               o Put in place policy and procedures manuals and obtain advice
               from legal and management experts to make sure that policies and
               procedures are technically sound.

               Furthermore, to improve internal control over financial management
               and reporting, the commission should document applicable policies
               and procedures and communicate them to applicable commission
               staff, and segregate key duties and responsibilities, to the
               extent possible, so that no one individual controls all key
               aspects of a transaction.

               Specifically, we recommend that the commissioners take the
               following three actions:

               o Strengthen key controls over non-payroll-related transactions by

                            o ensuring that all transactions are supported by
                            adequate documentation and are properly authorized,
                            approved, and classified; and
                            o developing and documenting criteria for classifying
                            transactions for the purpose of official
                            representation, and developing and documenting a
                            means to track such transactions within its
                            accounting and reporting structure.

               o Implement key controls over the commission's government travel
               and purchase card programs by

                            o providing training for staff who administer and use
                            the government travel and purchase card programs, and
                            o developing and documenting commission policies and
                            procedures with regard to food provided at commission
                            hearings, quarterly business meetings, or any related
                            events, in compliance with federal appropriations law
                            prohibiting free food to government employees.

               o Conduct all T&A reporting in accordance with commission policies
               and procedures by checking for proper authorization and approval
               before processing T&A records as part of the biweekly payroll
               procedures, and verifying that approval and certification is
               documented.

    			  Agency Comments and Our Evaluation

               We provided a draft of this report to the commission and GSA. We
               obtained written comments from the commission, which are reprinted
               with our responses in appendix VIII. GSA had no comments on our
               draft. The commission concurred with our recommendations and noted
               that these recommendations have the potential to help ensure that
               its operations are both legal and appropriate. The commission
               indicated that it will follow GAO's internal control standards to
               develop a plan for addressing our recommendations even though
               these standards are not binding on legislative branch entities,
               such as the commission. The commission emphasized that its charter
               is brief and offered the commission little guidance on what
               internal control mechanisms it should employ and how they should
               be structured and applied. Regarding the commission's request for
               GAO to serve as the commission's official legal and management
               expert, in order to be able to conduct work in accordance with
               GAGAS, GAO prefers not to accept any nonaudit work that could
               potentially create an independence impairment in fact or in
               appearance with respect to the entities it reviews. While GAO is
               willing to share (nonbinding) advice, the commission is
               responsible for making such decisions and implementing the
               policies and procedures to manage its operations. The commission
               can secure the services of needed legal and management experts by
               hiring them and developing them through training, for example, or
               by contracting with outside parties for these services. The
               commission's comments on the draft of the report, including the
               technical comments we received from the executive director, asked
               that we clarify various parts of our report. We revised our
               report, as appropriate.

               We are sending copies of this report to interested congressional
               committees, USCESRC, and GSA. We will also make copies available
               to others upon request. In addition, the report will be available
               at no charge on the GAO Web site at [44]http://www.gao.gov .

               If you and your staffs have any questions about this report,
               please contact me at (202) 512-4347. Contact points for our
               Offices of Congressional Relations and Public Affairs may be found
               on the last page of this report. GAO staff who made major
               contributions to this report are listed in appendix IX.

               Loren Yager
    			  Director, International Affairs and Trade

    			  Appendix I: Objectives, Scope, and Methodology

               In this report, we assess the extent to which (1) the U.S.-China
               Economic Security Review Commission (USCESRC) has complied with
               its charter, (2) the commission has had an organizational
               structure and policies and procedures for managing its operations
               effectively, and (3) internal control over the commission's
               financial management and reporting has provided reasonable
               assurance that resources are not at risk.

               To assess the compliance of the commission with its reporting
               requirements and other provisions specified in its charter, we
               obtained and analyzed the commission's statutory charter;^1
               pertinent legislation and regulations, such as the Federal
               Advisory Committee Act (FACA); and related commission
               documentation. According to its charter, as amended, the
               commission must implement FACA, which provides a legal and
               institutional framework for the operation of advisory committees.
               We observed two quarterly business meetings of the commission on
               February 2 and May 25, 2007. We interviewed the 12 current
               commissioners and two former commissioners, including a former
               chairman of the commission and a commissioner who left the
               commission when his appointment expired at the end of 2006. Also,
               we interviewed the current executive director and the two previous
               executive directors of the commission. We reviewed information and
               met with officials from the General Services Administration (GSA)
               and the Congressional Research Service (CRS).

               To assess the organizational structure and procedures the
               commission has in place to manage its administrative operations
               and staff and achieve its mission effectively, we obtained and
               analyzed commission records, such as documents describing the
               organizational structure of the commission and ethics and conflict
               of interest, human capital, procurement, and financial management
               procedures that the commission had in place during our review.

               In reviewing these organizational structure and policy and
               procedures, we focused on whether they, as internal control
               mechanisms, are in accordance with internal control standards for
               the federal government, such as the internal control environment
               and internal control activities standards.^2 While these standards
               are not binding for legislative branch agencies, they are a
               statement of best practices and adherence to these standards
               provides reasonable assurance against fraud, waste, abuse, and
               mismanagement. These standards give management of federal
               agencies, regardless of size, the responsibility and discretion to
               develop and implement mechanisms for internal control necessary
               for achieving organizational objectives, managing operations and
               staff effectively, and ensuring the agency is not at risk.
               Effective internal control provides reasonable, not absolute,
               assurance of meeting agency objectives.

    ^1The commission was created on October 30, 2000, by the Floyd D. Spence
    National Defense Authorization Act for 2001 S 1238, Pub. L. No. 106-398,
    114 STAT. 1654A-334 (2000).

    ^2GAO, Standards for Internal Control in the Federal Government,
    GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

               In analyzing the organizational structure and administrative
               procedures, we assessed whether they were properly documented,
               communicated, and implemented. In analyzing human capital and
               equal employment opportunity procedures, we secured commission
               information and reviewed GAO guidance. A GAO expert reviewed the
               human capital information. In reviewing procurement procedures, we
               obtained commission documentation and GAO information. A GAO
               expert reviewed the procurement information. In reviewing ethics
               and conflict of interest procedures, we obtained commission
               documentation and Senate Select Committee on Ethics, and the
               Secretary of the Senate Office of Public Records information. A
               GAO expert reviewed the ethics and conflict of interest
               information.

               In assessing the organizational structure and administrative
               procedures, we observed two quarterly business meetings of the
               commission on February 2 and May 25, 2007, respectively. We
               interviewed the 12 current commissioners and 2 former
               commissioners, including a former chairman of the commission, and
               a commissioner who left the commission when his appointment
               expired at the end of 2006. Also, we interviewed the current
               executive director and the two previous executive directors of the
               commission. In addition, we interviewed all of the commission
               staff, including six program staff and six administrative staff.
               The latter included the associate director and office
               manager/assistant director who are responsible for administrative
               matters. We reviewed information and met with officials from the
               Senate Select Committee on Ethics, and the Secretary of the Senate
               Office of Public Records.

               In order to determine the extent to which the commission
               effectively executes its financial management and reporting
               responsibilities in accordance with internal control standards, we
               gained an understanding of the commission's overall financial
               management and reporting process by interviewing the commission
               officials and staff with those responsibilities. We also spoke
               with representatives of GSA's External Services Division to gain
               an understanding of GSA's role in the commission's financial
               management and reporting process. We used applicable law and
               commission policy, as well as our standards for internal control
               in the federal government as our criteria. We developed our
               understanding of the key processes and controls over
               non-payroll-related transactions, travel and purchase card
               transactions, and payroll, from inception at the commission's
               office up until the point that the commission submits vouchers to
               GSA for processing. We then assessed the extent to which certain
               key controls and procedures were effectively applied to the
               various types of transactions at the commission.

               We selected a statistical sample of 59 debit transactions totaling
               approximately $1.1 million from a population of 1,991 debit
               transactions totaling approximately $4.5 million for fiscal years
               2005 and 2006 to test specific internal control activities over
               non-payroll-related transactions, such as adequacy of supporting
               documentation, evidence of proper authorization or approval, and
               proper classification. The non-payroll-related population included
               transactions related to purchasing, travel, leases, payment to
               contracted employees and other miscellaneous transactions. Results
               from the statistical sample were projected to the population of
               non-payroll-related transactions for years 2005 and 2006.^3 To
               test the reliability of the non-payroll-related transaction data
               provided, we (1) performed electronic testing of required data
               elements, (2) reviewed existing information about the data and the
               system that produced it, and (3) worked closely with commission
               and GSA officials to identify any data problems. When we found
               discrepancies such as zero-dollar transactions or those with
               descriptions we could not understand such as nonfederal summary
               codes, we brought them to GSA's attention and worked with them to
               correct the discrepancies before conducting our analyses. We
               determined that the data were sufficiently reliable for the
               purposes of our report.

               To examine commission travel card transactions, we obtained a
               database of commission travel card transactions from Citibank for
               fiscal years 2005 and 2006 and used data mining techniques to
               select potentially questionable travel card transactions. Our
               selections were made based on the dollar amount of an individual
               transaction, transaction volume on individually billed travel card
               accounts, group travel events, and any transactions associated
               with what are generally considered to be popular vacation areas.
               We traced selected transactions to supporting documentation,
               examined supporting evidence, and made appropriate inquiries to
               the associate director for transactions meeting these criteria.

    ^3The sample population consisted of nonpayroll expenses totaling
    approximately $4.5 million. This excluded transactions with $0 and credit
    balances and with nonfederal summary codes.

               To examine commission purchase card transactions, we obtained a
               database of commission purchase card transactions from Citibank
               for July 2005 through June 2006 and used data mining techniques to
               select potentially questionable purchase card transactions based
               on merchant category codes. This database covered 3 months of
               fiscal year 2005 (July 1, 2005, through September 30, 2005) and 9
               months of fiscal year 2006 (October 1, 2005, through June 30,
               2006) which we considered sufficient for our review.

               To test the controls over the commission's payroll transactions,
               we used a nonstatistical sample because we could not readily
               obtain detailed or aggregated salary information in electronic
               format for either staff or commissioners by fiscal year. We
               performed analytical procedures to assess if salary expenses were
               reasonable for fiscal year 2005 and 2006. We nonstatistically
               selected four commissioners and verified that they were paid at
               the authorized rates of pay for fiscal years 2005 and 2006. We
               also nonstatistically selected eight staff and recalculated their
               respective salaries for fiscal years 2005 and 2006 based on their
               authorized rate of pay. In order to assess the time and attendance
               part of the payroll process, we reviewed all T&A records for the
               same four commissioners for fiscal years 2005 and 2006 to
               determine whether they were completed and approved in accordance
               with the policy as described by the commission. We also selected
               three of the eight staff persons previously sampled
               nonstatistically, and reviewed all respective T&A records for
               fiscal years 2005 and 2006 to determine whether they were
               completed and approved in accordance with commission policy.

               We did not audit the commission's Statement of Budget Execution
               (Standard Form 133) or the Year-End Closing Statement (Standard
               Form 2108), nor do we express an opinion on them.

               We performed our work from October 2006 to September 2007 in
               accordance with generally accepted government auditing standards.

    			  Appendix II: Timeline of Events Related to USCESRC

    			  Appendix III: USCESRC Appropriations and Expenses

               From its inception in fiscal year 2001 through fiscal year 2007,
               the commission has received approximately $17.4 million in
               appropriations to fund its operations, as indicated in table 6.
               The commission has requested $4 million for fiscal year 2008.
               According to the commission, the $1 million in additional funding
               will support, among other things, internal and external research
               efforts and implementation of GAO recommendations.

               Table 6: USCESRC Appropriations, Fiscal Years 2001-2007

    Dollars in millions
    Fiscal year         Appropriations net of rescissions  Availability
    2001                                         $ 4.69^a  no-year^b
    2002                                              -^c  _
    2003                                             1.79  no-year
    2004                                             1.99  1-year
    2005                                             2.98  no-year
    2006                                             2.96  2-year
    2007                                             2.97  2-year
    Total                                          $17.38

               Source: GAO analysis of USCESRC data.

               a2001 DOD Appropriations Act, P.L. 106-259, August 9, 2000,
               appropriated $3 million to the commission, and 2001 Supplemental
               Appropriations Act, P.L. 107-20 July 24, 2001, appropriated $1.7
               million to the commission out of the Department of the Treasury's
               appropriation.

               bNo-year authority indicates that appropriations are not limited
               to a specific fiscal year or expiration date.

               cThe commission did not receive any appropriations for fiscal year
               2002, as it was just beginning operations and had not used most of
               the no-year funds appropriated in fiscal year 2001.

               The commission's largest annual expense is for the commissioner
               and staff salaries, as shown in table 7. Other annual commission
               expenses include contracting research and professional services,
               leasing office space in Washington, D.C., and incurring other
               costs to carry out its mission.

    Table 7: USCESRC Major Operating Expenses, Fiscal Years 2001-2006

                                              Fiscal Year
    Expense
    type             2001       2002       2003       2004       2005       2006
    Salaries     $530,008 $1,748,600   $984,075 $1,427,406 $1,313,359 $1,114,165
    and
    benefits
    Travel         20,602    220,304     43,149    213,806    278,242    165,313
    Leases         20,172    277,607    242,007    281,945    300,388    289,427
    Printing        8,265     49,223     13,231     22,231     21,915     18,525
    Contractual   181,997    624,225    184,270    339,076    582,700    396,114
    labor
    Other         193,841     77,965    115,154    192,783    233,644    228,255
    Total        $954,855 $2,997,924 $1,581,886 $2,477,246 $2,730,248 $2,211,798
    expenses

    Source: GAO summary of USCESRC data.

    Note: Balances are unaudited.

    The commission is not subject to any financial reporting or audit
    requirements. The commission developed a set of rules that require the
    commission to prepare a report detailing budget and expenditure
    information to be submitted to the commissioners for their review. The
    Commission Rules also require quarterly reporting of the status of funds,
    personnel actions, status of procurement of contracts, and other financial
    information.^1 According to the executive director, the status of funds
    report is an internal document used to keep track of commission
    expenditures against its approved annual spending plan.

    The commission entered into an agreement with the GSA Heartland Finance
    Center in Kansas City, Missouri, to perform financial reporting
    and accounting each fiscal year.2 This includes processing (1) obligations
    and payments that have been authorized by the commission, (2) receipts and
    disbursements of funds available to the commission from the U.S. Treasury,
    and (3) all applicable payroll functions. GSA also provides quarterly
    reports and year-end financial information to OMB and the Department of
    the Treasury. GSA does not have an oversight role described in its
    memorandum of understanding with the commission.

    ^1The commission maintains and heavily relies on an internal custom-built
    database which stores information on various areas such as payroll and
    personnel, travel, purchases, and other spending data. This database is
    the source for internal reports on open obligations, vendors, travel,
    budget estimates and the Status of Funds. This system does not interface
    with the official execution of budgeted funds as maintained and reported
    by GSA on behalf of the commission.

    ^2The General Services Administration in Kansas City, Missouri, services
    the commission's payroll and accounting reporting needs. GSA's National
    Payroll Center (NPC) furnishes all necessary payroll support functions as
    provided by GSA's Payroll Accounting and Reporting System. NPC tracks and
    monitors all activities, from initial hire through final payment at
    separation or retirement. Payroll services include processing time and
    attendance (T&A) records as submitted online through GSA's Electronic Time
    and Attendance System. The GSA External Services Division provides
    financial reporting and necessary accounting functions related to the
    commission's Treasury account. This includes processing all accounting
    transactions and reporting certain information to OMB and the Department
    of the Treasury regarding the commission's status of fund balances on a
    quarterly basis as well as the year-end reporting.

    Appendix IV: Economic and Security Issues Covered by 2002 USCESRC Annual
    Report

    We found the commission's 2002 annual report covered the 10 economic and
    security issue areas mandated at the time. Table 8 provides details on the
    issue areas covered by the commission's 2002 annual report.

    Table 8: Economic and Security Issue Areas Covered by the 2002 Annual
    Report

    Ten economic and security issue areas        Issue areas covered by
    required by statute                          chapter in 2002 annual report
    (1) The portion of trade in goods and        Chapter 10: Technology
    services with the United States that the     Transfers and Military
    People's Republic of China dedicates to      Acquisition Policy
    military systems or systems of a dual nature
    that could be used for military purposes.
    (2) The acquisition by the People's Republic Chapter 9: The Defense Budget
    of China of advanced military or dual-use    and the Military Economy
    technologies from the United States by trade
    (including procurement) and other technology Chapter 10: Technology
    transfers, especially those transfers, if    Transfers and Military
    any, that contribute to the proliferation of Acquisition Policy
    weapons of mass destruction or their
    delivery systems, or that undermine
    international agreements or United States
    laws with respect to nonproliferation.
    (3) Any transfers, other than those          Chapter 6: China's Presence
    identified under subparagraph (B), to the    in U.S. Capital Markets
    military systems of the People's Republic of
    China made by United States firms and United Chapter 9: The Defense Budget
    States-based multinational corporations.     and the Military Economy
    (4) An analysis of the statements and        Chapter 1: China's
    writing of the People's Republic of China    Perceptions of the United
    officials and officially-sanctioned writings States and Strategic Thinking
    that bear on the intentions, if any, of the
    Government of the People's Republic of China
    regarding the pursuit of military
    competition with, and leverage over, or
    cooperation with, the United States and the
    Asian allies of the United States.
    (5) The military actions taken by the        Chapter 7: Proliferation and
    Government of the People's Republic of China Chinese Relations with
    during the preceding year that bear on the   Terrorist-Sponsoring States
    national security of the United States and
    the regional stability of the Asian allies   Chapter 8: Cross-Strait
    of the United States.                        Security Issues
    (6) The effects, if any, on the national     Chapter 6: China's Presence
    security interests of the United States of   in U.S. Capital Markets
    the use by the People's Republic of China of
    financial transactions and capital flow and
    currency manipulations.
    (7) Any action taken by the Government of    Chapter 3: China and the
    the People's Republic of China in the        World Trade Organizational
    context of the World Trade Organizational    structure
    structure that is adverse or favorable to
    the United States national security
    interests.
    (8) Patterns of trade and investment between Chapter 2: Trade and
    the People's Republic of China and its major Investment
    trading partners, other than the United
    States, that appear to be substantively
    different from trade and investment patterns
    with the United States and whether the
    differences have any national security
    implications for the United States.
    (9) The extent to which the trade surplus of Chapter 2: Trade and
    the People's Republic of China with the      Investment
    United States enhances the military budget
    of the People's Republic of China.
    (10) An overall assessment of the state of   Chapter 5: China's Growth as
    the security challenges presented by the     a Regional Economic Power
    People's Republic of China to the United
    States and whether the security challenges
    are increasing or decreasing from previous
    years.
    (No requirement)                             Chapter 4: Political and
                                                    Civil Freedoms

    Source: GAO analysis of USCESRC data.

    Appendix V: Economic and Security Issues Covered by 2004 and 2005 USCESRC
    Annual Reports

    We found the commission's 2004 and 2005 annual reports covered the nine
    economic and security issue areas mandated at the time. Table 9 provides
    details on the issue areas covered by the commission's 2004 and 2005
    annual reports.

    Table 9: Economic and Security Issue Areas Covered by the 2004 and 2005
    Annual Reports

    Nine economic and      Issue areas covered by    Issue areas covered by
    security issue areas   chapter in 2004 annual    chapter in 2005 annual
    required by statute    report                    report
    (1) Proliferation      Chapter 5: China's        Chapter 4: China's Global
    practices              Proliferation Practices   and Regional Activities
                              and the Challenges of     and Geostrategic
                              North Korea               Developments
    (2) Economic reforms   Chapter 1: China's        Chapter 1: U.S.-China
    and United States      Industrial Investment,    Trade and Economic
    economic transfers     and Exchange Rate         Relationship
                              Policies

                              Chapter 7: China's
                              High-Technology
                              Development and
                              U.S.-China Science and
                              Technology Cooperation
    (3) Energy             Chapter 6: China's Energy Chapter 4: China's Global
                              Needs and Strategies      and Regional Activities
                                                        and Geostrategic
                                                        Developments
    (4) United States      Chapter 3: China's        Chapter 1: U.S.-China
    capital markets        Presence in the Global    Trade and Economic
                              Capital Markets           Relationship

                                                        Chapter 4: China's Global
                                                        and Regional Activities
                                                        and Geostrategic
                                                        Developments
    (5) Corporate          Chapter 1: China's        Chapter 1: U.S.-China
    reporting              Industrial Investment,    Trade and Economic
                              and Exchange Rate         Relationship
                              Policies

                              Chapter 3: China's
                              Presence in the Global
                              Capital Markets
    (6) Regional economic  Chapter 4: China's        Chapter 3: China's
    and security impacts   Regional Economic and     Military Power and
                              Security Impacts and the  America's Interests
                              Challenges of Hong Kong
                              and Taiwan                Chapter 4: China's Global
                                                        and Regional Activities
                              Chapter 8: China's        and Geostrategic
                              Military Modernization    Developments
                              and the Cross-Strait
                              Balance
    (7) United             Chapter 7: China's        Chapter 2: China's
    States-China bilateral High-Technology           High-Technology
    programs               Development and           Development and
                              U.S.-China Science and    Implications for the U.S.
                              Technology Cooperation    Defense Industrial Base
    (8) World Trade        Chapter 2: China in the   Chapter 1: U.S.-China
    Organizational         World Trade               Trade and Economic
    structure compliance   Organizational structure: Relationship
                              Compliance, Monitoring,
                              and Enforcement
    (9) Media control      Chapter 9: Media and      Chapter 5: China's Media
                              Information Control in    and Information Controls
                              China

    Source: GAO analysis of USCESRC data.

    Appendix VI: USCESRC Procurement, Fiscal Year 2005

    Description                          Amount  Notes
    Research procurement
    Manufacturing Policy Project        $40,000  Report on advanced technology
                                                    products for Palo Alto
                                                    hearing
    Manufacturing Policy Project         $6,000  U.S. patent laws working
                                                    paper
    MBG Information Services             $3,000  Briefing paper Palo Alto
                                                    hearing
    MBG Information Services            $14,000  Monitor and analyze
                                                    U.S.-China economic
                                                    development
    McBee Strategic Consulting          $10,000  Advice, strategies, and
                                                    facilitation for Seattle
                                                    hearing
    Michael Pillsbury                   $22,475  Report on Chinese plan to
                                                    acquire and utilize U.S.
                                                    technology
    Stewart & Stewart                   $10,000  World Trade Organization
                                                    compliance study for Feb.
                                                    Hearing (Feb. 2005)
    Total, research procurement        $105,475
    Nonresearch procurement
    Hearings
    Bell Harbor International           $10,533  Field hearing rental program
    Conference Center, Hoover                    equipment
    Institute, Stanford University,
    Prague Security Studies
    Bell Harbor International           $18,357  Field hearing expenses
    Conference Center, Lotos Club,
    Stanford University, Prague
    Security Studies
    U.S. Senate Catering, Corner        $12,327  D.C. hearings, meetings, and
    Bakery, and others                           briefings (catering expenses)
    Total, hearings                     $41,217
    IT support
    Karterian Systems Group Richard     $46,116  IT Support Contract
    Harris
    Consultant services
    Jefferson Communications             $5,800  Media relations for WTO
                                                    hearing Feb. 3-4, 2005
    Robert F. Ellsworth                 $18,900  Hearing consulting--multiple
                                                    hearings
    Sequoia Public Relations             $2,000  Media relations for Palo Alto
                                                    hearing April 22-23, 2005
    James Swanson                        $1,344  Consulting Proliferation
                                                    Hearing March 10, 2005
    Maochun Yu (US Naval Academy)        $4,790  Translation of news articles
                                                    Chinese to English
    Blanka Owensova                      $1,002  Translations from Czech to
                                                    English (Prague symposia)
    Total, consultant services          $33,836
    Hearing photographers
    Kittner & Kittner Inc., Robert       $3,040
    March, Elsa Ruiz, Ralph Alswang
    Hearing transcription
    Miller Reporting & Alderson         $17,419  D.C. hearings and classified
    Reporting                                    briefings
    Miller Reporting, Quail & Cook      $12,224  Field hearings
    Realtime and others
    Total, hearing transcription        $29,643
    Other nonresearch procurement
    Staples, Bond Business Products     $21,187  General operating supplies
    and others
    CDWG, Circuit City, Corex           $10,787  Computer hardware and
    Technology, Dell, Dr. Symantec,              software
    Foxit, Iolo Technology, HP, and
    others
    Business Week, China Trade Extra,    $8,510  Subscriptions
    Financial Times, Inside U.S.-China
    Trade, IWP newsletters, The Hill,            Publications
    Kanwa, leadership directories,
    National Journal, New York Times,
    OAG Online, Rollcall, South China
    Morning Post, trade reports,
    Washington Post, Wall Street
    Journal and others

    Amazon, Brookings Institute, Duke
    Press, USGPO and others
    State Services Organization          $6,019  Office upgrade and property
                                                    management
    Total, other nonresearch            $46,503
    procurement
    Total, all nonresearch procurement $200,355
    Total, all procurement             $305,830

    Source: GAO analysis of USCESRC data.

    Note: Balances are unaudited.

    Appendix VII: USCESRC Procurement, Fiscal Year 2006 Appendix VII: USCESRC
    Procurement, Fiscal Year 2006

    Description                               Amount  Notes
    Research procurement
    MBG Information Services                 $10,500  Economic and trade data
                                                         analysis
    John K. Douglas and Matthew Nelson        $5,600  China's energy strategy
                                                         and diplomacy with the
                                                         Middle East
    The University Group                     $15,000  Defense industrial base
                                                         issues and
                                                         recommendations
    Eurasia Group                            $22,826  Oil and gas investments
                                                         outside China
    Michael Pillsbury                        $24,000  China's antisatellite
                                                         and space warfare policy
    Total, research procurement              $77,926
    Nonresearch Procurement
    Hearing costs
    University of Michigan                      $750  Detroit field hearing
    U.S. Senate Catering, U.S. House         $10,168  D.C. hearings, meetings,
    Catering (Haute on the Hill), Au Bon              and briefings (catering
    Pain, Corner Bakery, Park Place                   expenses)
    Catering, High Noon Catering, and
    others
    State Services Organization               $2,400  D.C. meetings and
                                                         briefings
    Total, hearing costs                     $13,318
    IT support
    Karterian Systems Group                  $45,000  IT support contract
    Consultant services
    Robert F. Ellsworth                       $6,300  Advisory consulting for
                                                         multiple hearings
    Andrew Gudgel                             $5,495  Technical editing of
                                                         annual report
    State Department                          $4,024  In-Country interpreters
                                                         Asia trip
    Maochun Yu                                $2,579  Executive Summary
                                                         translation English to
                                                         Chinese
    Jefferson Communications                  $2,228  Media relations for
                                                         annual report
    Total, consultant services               $20,626
    Hearing photographers                         $0
    Hearing transcription
    Miller Reporting                         $10,497  D.C. hearings
    McLaughlin Reporting                      $8,713  D.C. hearings
    McLaughlin Reporting                      $1,870  Detroit field hearings
    Total, hearing transcription             $21,080
    Other nonresearch procurement
    Staples, Bond Business Products, and     $24,000  General operating
    others                                            supplies
    C2 Solutions Group, CDWG, CompUSA,       $30,300  Computer hardware,
    Dell, HP, Netgear, Newegg, Softmart,              software, and equipment
    and others
    Business Week, China Trade Extra,         $8,700  Subscriptions
    Inside U.S.-China Trade, Financial
    Times Online, The Hill, leadership                Publications
    directories, Manufacturing News,
    National Journal, New York Times,
    Nexis, OAG Online, Rollcall, South
    China Morning Post, trade reports,
    Washington Post, Wall Street Journal,
    World Trade Online, Washington Trade
    Daily, and others

    Amazon, Powells, and others
    Regional Construction Company            $91,690  Office upgrade
                                                         (construction and
                                                         materials)
    Total, other nonresearch procurement    $154,690
    Total, all nonresearch procurement      $254,714
    Total, all procurement                  $332,640

    Source: GAO analysis of USCESRC data.

    Note: Balances are unaudited.

    Appendix VIII: Comments from USCESRC

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 2.

    See comment 1.

    See comment 5.

    See comment 4.

    See comment 3.

    Note: Page numbers in draft report may differ from those in this report.

    The following are GAO's comments on the commission's letter dated
    September 11, 2007.

    GAO Comments

               1. In the Highlights and on page 2, it is clear that GAO's
               assessment of organizational structure and management policies and
               procedures is based on internal control standards for the federal
               government. While these standards are not binding for legislative
               branch agencies, we advocate all federal entities follow them
               because they are a statement of best practices and adherence
               provides reasonable assurance regarding the prevention or prompt
               detection of fraud, waste, abuse, and mismanagement. We encourage
               the commission to adopt these standards, which give management of
               federal agencies, regardless of size, the responsibility and
               discretion to develop and implement the mechanisms for internal
               control necessary for providing reasonable assurance that the
               objectives of the agency are being achieved with regard to
               effective and efficient operations, reliable financial reporting,
               and compliance with applicable laws and regulations.
               2. We characterize the commission's views on pages 5 and 46.
               3. With regard to the section on internal control over financial
               reporting, and the projection of the results of the statistical
               sample over nonpayroll transactions, the commission requested
               specific wording changes related to the potential impropriety or
               illegality of all or any specific transactions. We did not make
               those changes because the objective of the sampling performed was
               to determine whether the controls over non-payroll-related
               transactions were in place and operating effectively. As stated in
               the objectives, scope, and methodology in appendix I, we selected
               a statistical sample of 59 debit transactions totaling
               approximately $1.1 million from a population of 1,991 debit
               transactions totaling approximately $4.5 million for fiscal years
               2005 and 2006 to test specific internal control activities over
               non-payroll-related transactions, such as adequacy of supporting
               documentation, evidence of proper authorization or approval, and
               proper classification. The non-payroll-related population included
               transactions related to purchasing, travel, leases, payment to
               contracted employees and other miscellaneous transactions. Results
               from the statistical sample were projected to the population of
               non-payroll-related transactions for fiscal years 2005 and 2006,
               where we estimated that the dollar value on non-payroll-related
               debit transactions with ineffective controls during the 2-year
               period we examined is not more than $1.2 million. Because this
               $1.2 million estimate exceeds the tolerable error of $224,715, we
               concluded that the controls were ineffective as stated in the
               report.
               4. The commission partially disagreed with our observation that
               free food was being provided to the commissioners because,
               beginning in fiscal year 2006, it began a practice of deducting
               the cost of the food from commissioner salaries. We did not review
               the specific transaction details related to this practice, and we
               are unable to say to what portion of the $9,386 this practice
               applies. Further, this practice does not ensure that the
               commission prevents the use of appropriated funds to furnish free
               food to government employees and is subject to errors and
               inconsistencies.
               5. On page 46 of the report, we note that GAO prefers not to
               accept any nonaudit work that could potentially create an
               independence impairment in fact or in appearance with respect to
               the entities it reviews.

    Appendix IX: GAO Contact and Staff Acknowledgments

    GAO Contact

    Loren Yager, (202) 512-4347 or [48]yagerl@gao.gov

    Staff Acknowledgments

    In addition to the contact named above, Adam Cowles (Assistant Director),
    Sharon Byrd, Richard Cambosos, Stephen Donahue, Mark Dowling, Elizabeth
    Martinez, Mary Arnold Mohiyuddin, Jeremy Rothgerber, Juan Tapia-Videla,
    McCoy Williams, and Matthew Wood made key contributions to this report.
    The team benefited from the expert advice and assistance of Martin de
    Alteriis, Karen Deans, Francine DelVecchio, William Doherty, Etana
    Finkler, Carol Henn, India Jenkins, Ramon Rodriguez, Debra Rucker, Jena
    Sinkfield, and William Woods.

    (320436)

    To view the full product, including the scope
    and methodology, click on [49]GAO-07-1128 .

    For more information, contact Loren Yager at (202) 512-4347 or
    yagerl@gao.gov.

    Highlights of [50]GAO-07-1128 , a report to congressional requesters

    September 2007

    U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

    Actions Needed to Improve Controls over Key Management Functions

    In October 2000, Congress established the U.S.-China Economic and Security
    Review Commission to assess the national security implications of the
    trade and economic relationship between the United States and the People's
    Republic of China and issue an annual report by June 1. The 12-member
    commission has a budget of about $3 million. As requested, GAO assessed
    the extent to which the commission has (1) complied with its charter, (2)
    had an organizational structure and policies and procedures for managing
    its operations effectively, and (3) had internal control over the
    financial management and reporting that provides reasonable assurance that
    resources are not at risk. To address these objectives, GAO analyzed the
    commission's charter, annual reports, records, and management policies and
    procedures and interviewed commissioners, executive directors, and staff.
    GAO focused on fiscal years 2005 and 2006 financial transactions.

    [51]What GAO Recommends

    To improve the timeliness of the commission's annual reports, Congress
    should consider aligning the commissioners' appointment dates with the
    annual report issuance date. GAO makes eight recommendations to improve
    the commission's organizational structure and management policies and
    procedures. The commission concurred with all of these recommendations.

    Although the contents of the commission's annual reports have complied
    with statutory reporting requirements, the commission has not met the
    annual reporting deadline. It issued its 2005 and 2006 reports over 5
    months late because the commissioners' appointment dates and the
    commission work cycle activities are not aligned with the annual reporting
    deadline. For example, over half the commissioners' terms will expire in
    December, 5 months before they are to approve and issue the 2008 report.
    However, the commission has taken steps to comply with applicable
    provisions of the Federal Advisory Committee Act.

    The commission's organizational structure and management policies and
    procedures have weaknesses and are not in accordance with GAO's internal
    control standards for the federal government. The commission has not
    formally defined and assigned key management duties and responsibilities
    that are typically divided or segregated among different people. Also,
    policies and procedures were insufficient, incomplete, or not adequately
    documented. For example, GAO found that the commission had no written
    policies or procedures to ensure that the procurement of certain goods and
    services was transparent, competitive, and at the best value.

    Internal control over financial management and reporting was not adequate
    to provide reasonable assurance that activities were properly processed
    and recorded and complied with federal laws and regulations. GAO noted
    weak or missing internal controls in three broad areas. In examining
    non-payroll-related financial transactions, GAO found inadequate
    documentation, lack of proper authorization and approval, and improper
    classification, including $13,000 in questionable purchases. The purchase
    and travel card programs lacked written guidance, proper segregation of
    duties, and adequate training. Also, time and attendance records were not
    always approved according to the commission's policies and procedures. As
    a result of inadequate control in these areas, the commission's financial
    resources are at an increased risk of fraud, waste, abuse, and
    mismanagement.

    Commissioners' Appointment Date and Work Cycle Are Not Aligned with
    Reporting Cycle

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    References

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      39. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-01-1008G
      41. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
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      45. http://www.gao.gov/cgi-bin/getrpt?GAO-04-261SP
      46. http://www.gao.gov/cgi-bin/getrpt?GAO-04-261SP
      47. http://www.gao.gov/cgi-bin/getrpt?GAO-03-352G
      48. mailto:yagerl@gao.gov
      49. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1128
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