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

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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][email protected]

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
[email protected].

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

Visible links
  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
  42. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-04-39
  44. http://www.gao.gov
  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:[email protected]
  49. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1128
  50. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1128
  52. http://www.gao.gov/
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  54. http://www.gao.gov/fraudnet/fraudnet.htm
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