    GAO Performance and Accountability Report Fiscal Year 2006
    (15-NOV-06, GAO-07-2SP).

    Presented is GAO's performance and accountability report for
    fiscal year 2006. In the spirit of the Government Performance and
    Results Act, this annual report informs the Congress and the
    American people about what we have achieved on their behalf.
    Importantly, GAO received a clean opinion from independent
    auditors on our financial statements for the 20th consecutive
    year. The financial information and the data measuring GAO's
    performance contained in this report are complete and reliable.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-2SP
        ACCNO:   A63405
      TITLE:     GAO Performance and Accountability Report Fiscal Year
    2006
         DATE:   11/15/2006
      SUBJECT:   Accountability
    	     Agency missions
    	     Performance measures
    	     Strategic planning

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Product.                                                 **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-07-2SP

    This text file was formatted by the U.S. Government Accountability
    Office (GAO) to be accessible to users with visual impairments, as part
    of a longer term project to improve GAO products' accessibility. Every
    attempt has been made to maintain the structural and data integrity of
    the original printed product. Accessibility features, such as text
    descriptions of tables, consecutively numbered footnotes placed at the
    end of the file, and the text of agency comment letters, are provided
    but may not exactly duplicate the presentation or format of the printed
    version. The portable document format (PDF) file is an exact electronic
    replica of the printed version. We welcome your feedback. Please E-mail
    your comments regarding the contents or accessibility features of this
    document to Webmaster@gao.gov.

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed
    in its entirety without further permission from GAO. Because this work
    may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this
    material separately.

    GAO:

    United States Government Accountability Office:

    Performance and Accountability Report:

    Fiscal Year 2006:

    Serving the Congress and the Nation:

    Accountability * Integrity * Reliability:

    [See PDF for Image]- graphic text:

    Serving The Congress:

    GAO�s Mission:

    GAO exists to support the Congress in meeting its constitutional
    responsibilities and to help improve the performance and ensure the
    accountability of the federal government for the benefit of the
    American people.

    Core Values: Accountability:

    We help the Congress oversee federal programs and operations to ensure
    accountability to the American people. GAO�s analysts, auditors,
    lawyers, economists, information technology specialists, investigators,
    and other multidisciplinary professionals seek to enhance the economy,
    efficiency, effectiveness, and credibility of the federal government
    both in fact and in the eyes of the American people.

    Core Values: Integrity:

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

    Core Values: Reliability:

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

    Scope Of Work:

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

    Source: See Image Sources.

    [End of figure]

    [Table of Contents]

    Contents:

    Abbreviations:

    How to Use This Report:

    Introduction:

    From the Comptroller General:

    Financial Reporting Assurance Statements:

    About GAO:

    Mission:

    Strategic Planning and Management Process:

    Organizational Structure:

    How We Measure Our Performance:

    Part I: Management's Discussion and Analysis:

    Helping the Federal Government Work Better and Be Accountable to the
    American People:

    Focusing on Results:

    Focusing on Our Client:

    Focusing on Our People:

    Focusing on Our Internal Operations:

    Continuing the Dialogue on 21st Century Challenges:

    GAO's High-Risk Program:

    Building and Sustaining Partnerships:

    Managing Our Resources:

    Strategies for Achieving Our Goals:

    Addressing Management Challenges That Could Affect Our Performance:

    Mitigating External Factors That Could Affect Our Performance:

    Part II: Performance Information:

    Performance Information by Strategic Goal:

    Goal 1 Overview:

    Financial Benefits:

    Nonfinancial Benefits:

    Testimonies:

    Goal 2 Overview:

    Financial Benefits:

    Nonfinancial Benefits:

    Testimonies:

    Goal 3 Overview:

    Financial Benefits:

    Nonfinancial Benefits:

    Testimonies:

    Goal 4 Overview:

    Data Quality and Program Evaluation:

    Verifying and Validating Performance Data:

    Program Evaluation:

    Part III: Financial Information:

    From the Chief Financial Officer:

    Overview of Financial Statements:

    Financial Systems and Internal Controls:

    Audit Advisory Committee's Report:

    Independent Auditor's Report:

    Purpose of Each Financial Statement:

    Balance Sheets:

    Statements of Net Cost:

    Statements of Changes in Net Position:

    Statements of Budgetary Resources:

    Statements of Financing:

    Notes to Financial Statements:

    Part IV: From the Inspector General:

    Part V: Appendixes:

    1. Accomplishments and Other Contributions:

    2. GAO's Report on Personnel Flexibilities:

    3. GAO's FISMA Efforts:

    Image Sources:

    Providing Comments on This Report:

    Obtaining Copies of GAO Documents:

    [End of table of Contents]

    Abbreviations:

    CAPPS: Computer-Assisted Passenger Prescreening System:

    CMS: Centers for Medicare & Medicaid Services:

    CSRS: Civil Service Retirement System:

    DD(X): destroyer:

    DHS: Department of Homeland Security:

    DOD: Department of Defense:

    DOE: Department of Energy:

    DOT: Department of Transportation:

    DTV: digital television:

    EEO: Equal Employment Opportunity:

    EEOC: Equal Employment Opportunity Commission:

    EPA: Environmental Protection Agency:

    FAA: Federal Aviation Administration:

    FCC: Federal Communications Commission:

    FDA: Food and Drug Administration:

    FECA: Federal Employees' Compensation Act:

    FEGLIP: Federal Employees Group Life Insurance Program:

    FEHBP: Federal Employees Health Benefit Program:

    FEMA: Federal Emergency Management Agency:

    FERS: Federal Employees Retirement System:

    FFELP: Federal Family Education Loan Program:

    FICA: Federal Insurance Contributions Act:

    FISMA: Federal Information Security Management Act:

    FSI: Forensic Audits and Special Investigations:

    FTE: full-time equivalent:

    GAGAS: generally accepted government auditing standards:

    GAO: Government Accountability Office:

    HHS: Department of Health and Human Services:

    HUD: Department of Housing and Urban Development:

    IG: Office of Inspector General:

    INTOSAI: International Organization of Supreme Audit Institutions:

    IRS: Internal Revenue Service:

    IT: information technology:

    LHA(R): amphibious assault ship replacement:

    MCA: managerial cost accounting:

    MCC: Millennium Challenge Corporation:

    NFC: National Finance Center:

    NIST: National Institute of Standards and Technology:

    OMB: Office of Management and Budget:

    OOI: Office of Opportunity and Inclusiveness:

    OPM: Office of Personnel Management:

    QCI: Quality and Continuous Improvement:

    SSA: Social Security Administration:

    SSI: Supplemental Security Income:

    SSN: Social Security number:

    TANF: Temporary Assistance for Needy Families:

    TSA: Transportation Security Administration:

    TVA: Tennessee Valley Authority:

    UN: United Nations:

    USACE: U.S. Army Corps of Engineers:

    USAID: U.S. Agency for International Development:

    USPS: U.S. Postal Service:

    US-VISIT: United States Visitor and Immigrant Status Indicator
    Technology:

    VA: Department of Veterans Affairs:

    [End of Abbreviations]

    How to Use This Report:

    This report describes the U.S. Government Accountability Office's (GAO)
    performance measures, results, and accountability processes for fiscal
    year 2006. In assessing our performance, we compared actual results
    against targets and goals that were set in our annual performance plan
    and performance budget and were developed to help carry out our
    strategic plan. Our complete set of strategic planning and performance
    and accountability reports is available on our Web site at [Hyperlink,
    http://www.gao.gov/sp.html].

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

    Introduction:

    This section includes the letter from the Comptroller General and a
    statement attesting to the reliability of our performance and financial
    data in this report and the effectiveness of our internal control over
    our financial reporting. This section also includes a summary
    discussion of our mission, strategic planning process, organizational
    structure, and process for assessing our performance.

    Management's Discussion and Analysis:

    This section discusses our agencywide performance results and use of
    resources in fiscal year 2006. It also includes information on the
    strategies we use to achieve our goals and the management challenges
    and external factors that affect our performance.

    Performance Information:

    This section includes details on our performance results by strategic
    goal in fiscal year 2006 and the targets we are aiming for in fiscal
    year 2007. It also includes an explanation of how we ensure the
    completeness and reliability of the performance data used in this
    report.

    Financial Information:

    This section includes details on our finances in fiscal year 2006,
    including a letter from our Chief Financial Officer, audited financial
    statements and notes, and the reports from our external auditor and
    audit advisory committee. This section also includes information on our
    internal controls and an explanation of the kind of information each of
    our financial statements conveys.

    From the Inspector General:

    This section includes our Inspector General's assessment of our
    agency's management challenges:

    Appendixes:

    These sections include detailed write-ups about our most significant
    accomplishments and contributions recorded in fiscal year 2006, and
    information on certain human capital management flexibilities and on
    information security management efforts.

    [End of How to use this report]

    Introduction: From the Comptroller General:

    [See PDF for picture of David M. Walker, Comptroller General of the
    United States]

    Source: GAO.

    [End of Figure]

    November 15, 2006:

    I am now more than halfway through my 15-year tenure as Comptroller
    General of the United States. As time has passed, I have become more
    impressed with the breadth and quality of GAO's work, the ability and
    commitment of our staff, and the positive impact GAO's products and
    activities have on the economy, efficiency, effectiveness, and equity
    of federal programs supporting Americans everywhere. We strive each
    year to provide our client--the Congress--with the objective, fact-
    based, and reliable information it needs to improve the accountability
    of the federal government, and on the basis of our performance outcomes
    and the feedback we received from the Congress, we definitely
    accomplished this goal again in fiscal year 2006.

    We generally exceeded the targets we set for all of our performance
    measures that indicate our ability to produce results for the nation. I
    am extremely proud to say that we helped the federal government achieve
    a total of $51 billion in financial benefits--a record high for us that
    represents a $105 return on every dollar the Congress invested in us.
    As a result of our work we also documented 1,342 nonfinancial benefits
    that like our financial benefits, helped to improve services to the
    public, change laws, and transform government operations. Our client-
    focused performance measures indicate that the Congress valued our work
    and was very pleased with it overall. For example, senior GAO
    executives and I delivered testimonies at 240 hearings covering a range
    of topics, including the tax gap and tax reform, U.S. border security,
    Iraq and Hurricane Katrina activities, and issues affecting the health
    and pay of military servicemembers. Our testimonies significantly
    surpassed the fiscal year 2006 target we set as well as our actual
    performance over the last 4 years, and 92 percent of the congressional
    staff responding to our client feedback survey either strongly or
    generally agreed that our testimonies and written products were
    delivered on time to them. Though we were 6 percentage points shy of
    our timeliness target, we will continue our quest to improve the
    timeliness of our products. In addition, we also met or exceeded four
    of our eight performance measures that gauge how well we developed,
    challenged, and managed our workforce.

    I am also proud that we received a clean opinion from an external,
    independent auditor on our financial statements. I am confident that
    the performance information and the financial data included in this
    performance and accountability report are complete and reliable.

    Reflecting on fiscal year 2006, I am reminded how often our work has
    focused on the major issues affecting this nation, such as the federal
    government's efforts to relieve the suffering and recover from the
    devastation of hurricanes Katrina and Rita and improve disaster
    preparedness and coordination for the future. In fiscal year 2006 we
    issued over 30 reports and testimonies related to disaster
    preparedness, response, and reconstruction. In numerous reports and
    testimonies, we also examined how the federal government funded and
    fought the global war on terrorism and the war in Iraq; managed the
    cost of prescription drugs for Medicare enrollees; and safeguarded
    sensitive information systems to protect U.S. citizens from the
    unauthorized use of their Social Security numbers, passports, and other
    personal information. In these and other areas of our work--some of
    which are highlighted later in this report--millions of average
    Americans benefited from our recommendations that were subsequently
    implemented by various federal agencies and the Congress.

    We worked hard in fiscal year 2006 to help members of the Congress and
    the public better understand the trends and challenges facing the
    United States and its position in the world and to grasp the long-term
    and collateral implications of current policy paths. Through a number
    of reports, testimonies, presentations, and partnerships, we built on
    our groundbreaking report called 21st Century Challenges: Reexamining
    the Base of the Federal Government. This unprecedented effort
    highlights several demographic, economic, and other trends--such as
    longer life spans, slowing workforce growth, and a large national
    deficit--that will have a significant adverse impact on our nation's
    fiscal future. The report also asks a series of questions about, among
    other things, mandatory and discretionary spending and tax policy. I,
    along with representatives from a broad range of concerned groups,
    discussed the serious fiscal imbalances facing the United States at
    town hall meetings in 10 different cities across the country. This
    "Fiscal Wake-up Tour," sponsored by the Concord Coalition, has helped
    to increase awareness about the nation's worsening financial situation
    and encourage discussion about possible solutions. I carried this
    message to congressional decision makers through various testimonies
    and information sessions with various congressional caucuses and many
    congressional members. In addition, we continued to examine federal
    areas and programs at risk of fraud, waste, abuse, and mismanagement
    and those in need of broad-based transformations, and added another
    troubled program to our high-risk list--the National Flood Insurance
    Program.

    Change is not only essential for progress and innovation in the federal
    government as a whole, it is essential for the agencies and
    organizations that support the government, too--and GAO is no
    exception. During fiscal year 2006 we implemented a number of changes
    internally to move us toward our goal of becoming a world-class
    professional services organization. For example, we restructured our
    midlevel, policy analyst staff into two separate pay ranges in response
    to market data collected last year during the development of our
    competency-based performance appraisal system for analysts. These data
    showed that our prior Band II pay range encompassed two distinct levels
    of responsibility, and we made changes to ensure that we achieve the
    goal of equal pay for work of equal value over time. We also
    established market-based pay ranges for our professional and
    administrative support staff as we had done previously for our analyst
    staff. In addition, we began a comprehensive review of how we recruit
    both mission and mission support staff. The review team focused on five
    broad areas: college recruitment, candidate assessment, annual hiring,
    negotiating and processing job offers, and recruiting issues affecting
    administrative and support staff. We also began an outreach program to
    recruit candidates for our new executive exchange program that will
    give private sector employees at various companies, including
    accounting firms and think tanks, a direct hands-on experience in the
    public sector.

    It is vital for all organizations to understand the big picture, learn
    from the past, and be prepared for the future; we attempted to do these
    things in fiscal year 2006 by taking steps to position our workforce
    for the coming years. These actions helped to address some issues
    associated with our various human capital management challenges. We
    also took actions to address our other management challenges focused on
    securing the information we collect and produce and our physical
    environment. However, a significant challenge for us in fiscal year
    2006 was, and will remain in the near term, the federal budget. We and
    other federal agencies took steps to deal with constrained budgets. We
    are currently operating under a continuing resolution at our fiscal
    year 2006 funding level. During the past fiscal year, we tried to
    absorb this funding reduction without seriously disrupting our
    operations by modifying the timing of our hiring decisions and offering
    eligible staff the opportunity to retire early on a targeted, expedited
    basis. We will continue to actively manage these challenges in the
    future.

    During the rest of my tenure I intend to place additional attention on
    helping the Congress examine and address the nation's long-term fiscal
    outlook, health care reform, and the need to transform the Department
    of Defense. We will also work to enhance collaboration with our sister
    agencies in the legislative branch and continue to build partnerships
    with various accountability and other good government organizations.
    When it comes to improving government performance, strengthening
    accountability, and enhancing public trust, I take seriously my
    responsibility as Comptroller General and pledge to continue to guide
    GAO in its efforts to help the government work better for the benefit
    of the American people.

    Signed by:

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

    [End of From the Comptroller General]

    Financial Reporting Assurance Statements:

    November 15, 2006:

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

    We are also responsible for establishing and maintaining adequate
    internal control over financial reporting. GAO conducted its assessment
    of the effectiveness of GAO's internal control over financial reporting
    consistent with Appendix A, OMB Circular A-123, Management's
    Responsibility for Internal Control. Based on the results of this
    assessment, GAO has reasonable assurance that internal control over
    financial reporting as of September 30, 2006, was operating effectively
    and that no material weaknesses exist in the design or operation of the
    internal controls over financial reporting.

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

    * Our financial reporting is reliable--transactions are properly
    recorded, processed, and summarized to permit the preparation of
    financial statements in accordance with U.S. generally accepted
    accounting principles, and assets are safeguarded against loss from
    unauthorized acquisition, use, or disposition.

    * GAO is in compliance with all applicable laws and regulations--
    transactions are executed in accordance with laws governing the use of
    budget authority and other laws and regulations that could have a
    direct and material effect on the financial statements.

    * Our performance reporting is reliable--transactions and other data
    that support reported performance measures are properly recorded,
    processed, and summarized to permit the preparation of performance
    information in accordance with the criteria stated by GAO's management.

    We also believe these same systems of accounting and internal controls
    provide reasonable assurance that GAO is in compliance with the spirit
    of 31 U.S.C. 3512 (commonly referred to as the Federal Managers'
    Financial Integrity Act). This is an objective that we set for
    ourselves even though as part of the legislative branch of the federal
    government, we are not legally required to do so.

    Signed by:

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

    Signed by:

    Gene L. Dodaro:
    Chief Operating Officer:

    Signed by:

    Sallyanne Harper:
    Chief Financial Officer:

    Signed by:

    Gary L. Kepplinger:
    General Counsel:

    [End of Financial Assurance Statements]

    About GAO:

    We exist to support the Congress in meeting its constitutional
    responsibilities and to help improve the performance and ensure the
    accountability of the federal government for the benefit of the
    American people.

    GAO is an independent, nonpartisan, professional services agency in the
    legislative branch of the federal government. Commonly known as the
    "audit and investigative arm of the Congress" or the "congressional
    watchdog," we examine how taxpayer dollars are spent and advise
    lawmakers and agency heads on ways to make government work better. As a
    legislative branch agency, we are exempt from many laws that apply to
    the executive branch agencies. However, we generally hold ourselves to
    the spirit of many of the laws, including 31 U.S.C. 3512 (commonly
    referred to as the Federal Managers' Financial Integrity Act), the
    Government Performance and Results Act of 1993, and the Federal
    Financial Management Improvement Act of 1996.[Footnote 1] Accordingly,
    this performance and accountability report for fiscal year 2006
    supplies what we consider to be information that is at least equivalent
    to that supplied by executive branch agencies in their annual
    performance and accountability reports.

    Mission:

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

    GAO's History:

    The Budget and Accounting Act of 1921 required the President to issue
    an annual federal budget and established GAO as an independent agency
    to investigate how federal dollars are spent. In the early years, we
    mainly audited vouchers, but after World War II we started to perform
    more comprehensive financial audits that examined the economy and
    efficiency of government operations. By the 1960s, GAO had begun to
    perform the type of work we are noted for today--program evaluation--
    which examines whether government programs are meeting their
    objectives.

    Strategic Planning and Management Process:

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

    * Strategic Goal 1: Provide Timely, Quality Service to the Congress and
    the Federal Government to Address Current and Emerging Challenges to
    the Well-Being and Financial Security of the American People:

    * Strategic Goal 2: Provide Timely, Quality Service to the Congress and
    the Federal Government to Respond to Changing Security Threats and the
    Challenges of Global Interdependence:

    * Strategic Goal 3: Help Transform the Federal Government's Role and
    How It Does Business to Meet 21st Century Challenges:

    * Strategic Goal 4: Maximize the Value of GAO by Being a Model Federal
    Agency and a World-Class Professional Services Organization:

    Figure 1: GAO's Strategic Planning Hierarchy:

    [See PDF for Image] - graphic text.

    A four step pyramid that shows GAO's strategic planning hierarchy.

    Step 1: Strategic Goals (4);
    Step 2: Strategic Objectives (21);
    Step 3: Performance Goals (99);
    Step 4: Key Efforts (300+);

    Source: GAO.

    [End of Figure]

    Our work is primarily aligned under the first three strategic goals,
    which span issues that are both domestic and international, affect the
    lives of all Americans, and influence the extent to which the federal
    government serves the nation's current and future interests (see fig.
    2).

    Figure 2: Examples of How GAO Assisted the Nation:

    A Table listing GAO's strategic goals and what it accomplished to reach
    those goals.

    Strategic Goal 1:
    Description: Provide Timely, quality service to the Congress and the
    federal government to address current and emerging challenges to the
    well-being and financial security of the American people; In Fiscal
    year 2006, GAO provided information that helped to:
    * protect Social Security numbers from abuse;
    * ensure the effectiveness of federal investments in science,
    technology, engineering, and mathematics education programs;
    * identify actions needed to improve Federal Emergency Management
    Agency (FEMA) and REd Cross coordination for the 2006 hurricane season;
    * highlight weaknesses in the Department of Health and Human Services'
    communications with beneficiaries about the new Medicare prescription
    drug benefit;
    * identify funding formula and drug pricing disparities in the federal
    AIDS/HIV program;
    * strengthen the oversight of clinical laboratories;
    * identify challenges the Department of Homeland Security (DHS) faces
    in controlling illegal immigration into the United States;
    * assess the thoroughness of the federal fair housing complaint and
    investigation process;
    * improve the management of federal oil and natural gad royalty
    revenue;
    * develop a strategy for managing wildfires;
    * focus on the short- and long-term challenge of financing the nation's
    transportation infrastructure;
    * identify outdated mail delivery performance standards used by the
    U.S. Postal Service (USPS).

    Strategic Goal: 2;
    Description: Provide timely, quality service to the Congress and the
    federal government to respond to changing security threats and the
    challenges of global interdependence; In Fiscal year 2006, GAO provided
    information that helped to:
    * identify current and future funding and cost issues related to
    Department of Defense (DOD) operations in Iraq and Afghanistan;
    * highlight inefficiencies that could hinder DOD's efforts to reform
    its business operations;
    * improve controls over the issuance of passports and visas and
    increase fraud prevention;
    * improve catastrophic disaster preparedness, response, and recovery;
    * improve the ability of federal agencies to cost effectively acquire
    goods and services;
    * improve the management of payments to U.S. producers injured
    financially by unfairly traded imports;
    * alert the Congress to companies that are marketing costly mutual fund
    products with low returns to military servicemembers;
    * identify steps needed to overhaul investment and management processes
    supporting major DOD acquisitions;
    * improve security at nuclear power plants;
    * improve DHS's ability to detect nuclear smuggling at U.S. ports;
    * promote government efforts to secure sensitive systems and
    information;
    * highlight the cost concerns of small public companies that must
    comply with internal control and auditing provisions of the Sarbannes-
    Oxley Act.

    Strategic Goal: 3;
    Description: Help transform the federal government's role and how it
    does business to meet the 21st century challenges; In Fiscal year 2006,
    GAO provided information that helped to:
    * improve congressional oversight of the process for reviewing foreign
    direct investment;
    * strengthen DOD's information systems modernization efforts;
    * highlight serious technical and cost challenges affecting the
    purchase of a critical weather satellite;
    * highlight key practices federal agencies should adopt to prevent data
    breaches and better protect the personal information of U.S. citizens;
    * monitor the development of the 2010 decennial census;
    * identify strategies to reduce the gap between the taxes citizens pay
    and the taxes actually owed;
    * focus attention on the revenue consequences of tax expenditures;
    * identify fraud, waste, and abuse in a component of FEMA's disaster
    assistance program;
    * emphasize the importance of reliable cost information for improving
    governmentwide cost efficiency;
    * expose government contractors who used for personal gain federal
    payroll taxes withheld from their employees.

    Strategic Goal: 4;
    Description: Maximize the value of GAO being a model federal agency and
    a world-class professional services organization; In Fiscal year 2006,
    GAO provided information that helped to:
    * foster among other federal agencies GAO's innovative human capital
    practices, such as broad pay bands; performance-based compensation; and
    workforce planning and staffing strategies, policies, and processes;
    * share GAO's model business and management processes with counterpart
    organizations in the United States and abroad.

    Source: GAO.

    [End of Figure]

    The fourth goal is our only internal one and is aimed at maximizing our
    productivity through such efforts as investing steadily in information
    technology (IT) to support our work; ensuring the safety and security
    of our people, information, and assets; pursuing human capital
    transformation; and leveraging our knowledge and experience. We revisit
    the focus and appropriateness of these four strategic goals each time
    that we update our strategic plan. We are scheduled to issue our next
    strategic plan in early 2007.

    The four strategic goals are supported by strategic objectives that are
    in turn supported by and achieved through numerous performance goals
    and key efforts. Our strategic planning framework for serving the
    Congress, which lists the strategic objectives under each goal, is
    described below.

    [See PDF for image] - graphic text:

    Serving the Congress and the Nation: GAO's Strategic Plan Framework:

    Mission:

    GAO exists to support the Congress in meeting its constitutional
    responsibilities and to help improve the performance and ensure the
    accountability of the federal government for the benefit of the
    American people.

    Themes:

    * Long-Term Fiscal Imbalance;

    * National Security;

    * Global Interdependence;

    * Changing Economy;

    * Demographics;

    * Science and Technology;

    * Quality of Life;

    * Governance;

    Goals and Objectives:

    Provide Timely, Quality Service to the Congress and the Federal
    Government to.

    Address Current and Emerging Challenges to the Well-Being and Financial
    Security of the American People related to.

    * Health care needs and financing;

    * Education and protection of children;

    * Work opportunities and worker protection;

    * Retirement income security;

    * Effective system of justice;

    * Viable communities;

    * Natural resources use and environmental protection;

    * Physical infrastructure;

    Provide Timely, Quality Service to the Congress and the Federal
    Government to.

    Respond to Changing Security Threats and the Challenges of Global
    Interdependence involving.

    * Emerging threats;

    * Military capabilities and readiness;

    * Advancement of U.S. interests;

    * Global market forces;

    Help Transform the Federal Government Government's Role and How It Does
    Business to Meet 21st Century Challenges by assessing.

    * Roles in achieving federal objectives;

    * Government transformation;

    * Key management challenges and program risks;

    * Fiscal position and financing of the government:

    Maximize the Value of GAO by Being a Model Federal Agency and a World-
    Class Professional Services Organization in the areas of.

    * Client and customer satisfaction;

    * Strategic leadership;

    * Institutional knowledge and experience;

    * Process improvement;

    * Employer of choice:

    Core Values:

    * Accountability;

    * Integrity;

    * Reliability;

    Fiscal Years 2004-2009.

    Source: GAO.

    [End of GAO's Strategic Plan Framework]

    An Example of Our Strategic Planning Elements:

    Strategic Goal 1: Provide Timely, Quality Service to the Congress and
    the Federal Government to Address Current and Emerging Challenges to
    the Well-Being and Financial Security of the American People:

    Strategic Objective: An Effective System of Justice:

    Performance Goal: Assess Federal Efforts to Enforce Immigration and
    Customs Laws:

    Key Efforts:

    * Evaluate DHS's border enforcement efforts:

    * Assess implementation of DHS systems for tracking people and cargo
    entering the United States:

    * Assess DHS efforts to process aliens' applications for benefits more
    efficiently:

    * Assess DHS efforts to enforce immigration laws inside U.S. borders:

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

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

    Each year, we hold ourselves accountable to the Congress and to the
    American people for our performance, primarily through the annual
    performance and accountability report. We have included some
    information about our future plans in this report to provide as
    cohesive a view as possible of what we have done, what we are doing,
    and what we expect to do to support the Congress and to serve the
    nation. Last year, the Association of Government Accountants awarded us
    for the fifth consecutive year its Certificate of Excellence in
    Accountability Reporting for our fiscal year 2005 performance and
    accountability report. According to the association, this certificate
    means that we produced an interesting and informative report that
    achieved the goal of complete and fair reporting. We also received an
    award from Graphic Design USA for our fiscal year 2005 report. (See the
    description below.)

    Figure:

    [See PDF for Images] - graphic text.

    Scanned copes of:

    1. "AGA Certificate of Excellence in Accountability Reporting presented
    to the Government Accountability Office.

    In recognition of your outstanding efforts preparing GAO's Performance
    and Accountability Report for the fiscal year ended September 30, 2005.

    A Certificate of Excellence in Accountability is presented by AGA to
    federal government agencies whose annual Performance and Accountability
    Reports achieve the highest standards demonstrating accountability and
    communicating results.

    Signed by:

    John H Hammel:
    Chair, Certificate of Excellence in Accountability Reporting Director:

    Signed by:

    Relmond R. Van Daniker, Executive Director, AGA

    2. 2006 Graphic Design USA presents an American Inhouse Design Award to
    United States Government Accountability Office for Performance and
    Accountability Report 2005:

    3. Cover of the Government Accountability Office's Performance and
    Accountability Report for Fiscal Year 2005.

    Source: GAO.

    [End of Figure]

    Organizational Structure:

    As the Comptroller General of the United States, David M. Walker is the
    head of GAO and is serving a 15-year term that began in November 1998.
    Three other executives join Comptroller General Walker to form GAO's
    Executive Committee; these executives are Chief Operating Officer Gene
    L. Dodaro, Chief Administrative Officer/Chief Financial Officer
    Sallyanne Harper, and General Counsel Gary Kepplinger.

    To achieve our strategic goals, our staff is organized as shown in
    figure 3. For the most part, our 13 research, audit, and evaluation
    teams perform the work that supports strategic goals 1, 2, and 3--our
    three external strategic goals--with several of the teams working in
    support of more than one strategic goal. Senior executives in charge of
    the teams manage a mix of engagements to ensure that we meet the
    Congress's need for information on quickly emerging issues as we also
    continue longer term work efforts that flow from our strategic plan. To
    serve the Congress effectively with a finite set of resources, senior
    managers consult with our congressional clients and determine the
    timing and priority of engagements for which they are responsible. In
    fiscal year 2005, we formed a new unit--Forensic Audits and Special
    Investigations (FSI)--within our Financial Management and Assurance
    team. FSI was designed to provide the Congress with high-quality
    forensic audits; investigations of fraud, waste, and abuse; and
    evaluations of security vulnerabilities and other appropriate
    investigative services as part of its own assignments or in support of
    other teams. FSI follows up on engagements and referrals from our other
    teams when its special services are required to help determine whether
    legislative or administrative actions are necessary. FSI is composed of
    investigators and staff from our former Office of Special
    Investigations; auditors from the Financial Management and Assurance
    team who have experience with forensic audits; and staff in General
    Counsel who worked with FraudNet--our online system designed to
    facilitate the reporting of allegations of fraud, waste, abuse, or
    mismanagement of federal funds.

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

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

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

    Throughout GAO, we maintain a workforce of highly trained professionals
    with degrees in many academic disciplines, including accounting, law,
    engineering, public and business administration, economics, and the
    social and physical sciences. About three-quarters of our approximately
    3,200 employees are based at our headquarters in Washington, D.C; the
    rest are deployed in 11 field offices across the country. GAO Field
    Locations include Atlanta, Boston, Chicago, Dallas, Dayton, Denver,
    Huntsville, Los Angeles, Norfolk, San Francisco, and Seattle. Staff in
    these field offices are aligned with our research, audit, and
    evaluation teams and perform work in tandem with our headquarters staff
    in support of our external strategic goals.

    Figure 3: Organizational Structure:

    [See PDF for image] - graphic text:

    An organization chart showing GAO�s basic structure. The agency�s top
    level of organization was the Executive Committee, which includes the
    Comptroller General, the Chief Operating Officer, the Chief
    Administrative Officer/Chief Financial Officer, and the General
    Counsel. Twenty-three units report directly to the Comptroller General
    and the Chief Operating Officer. The units included the following staff
    offices: Public Affairs, Strategic Planning and External Liaison,
    Congressional Relations, Opportunity and Inclusiveness, and Inspector
    General, which report to the Comptroller General; and Quality and
    Continuous Improvement, which reports to the Chief Operating Officer.

    Other units that report to the Chief Operating Officer include teams
    and field operations that conduct audits, evaluations, and research.
    These teams perform work primarily supporting one of our three external
    strategic goals but several teams perform work in support of multiple
    strategic goals. Generally the teams fall under the following goals:

    Goal 1:

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

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

    Goal 2:

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

    * Acquisition and Sourcing Management;
    * Defense Capabilities and Management;
    * International Affairs and Trade;

    Goal 3:

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

    * Applied Research and Methods;
    * Financial Management and Assurance;
    -Forensic Audits and Special Investigations;
    * Information Technology;
    * Strategic Issues;
    -Federal Budget and Intragovernmental Relations;

    Goal 4:

    Five units that report to the Chief Administrative Officer support our
    fourth goal; which is to maximize the value of GAO by being a model
    federal agency and a world-class professional services organization.
    These are:

    * Controller;

    * Human Capital Office:
    - Chief Human Capital Officer;

    * Information Systems and Technology Services:
    - Chief Information Officer;

    * Knowledge Services:
    - Chief Knowledge Services Officer;

    * Professional Development Program.

    General Counsel's structure largely mirrors the agency's goal
    structure, and attorneys assigned to a goal work with teams on specific
    engagements. General Counsel has support or advisory relationship with
    the goals and teams rather than a direct reporting relationship.
    General Counsel provides audit and other legal support services for all
    goals and staff offices and manages GAO�s procurement law and bid
    protest work.

    Source: GAO.

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

    [End of Figure]

    [End of Organizational Structure]

    How We Measure Our Performance:

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

    For several years, we assessed our performance annually using
    quantitative performance measures that are related to our work results
    and the usefulness of those results to our primary client--the
    Congress. Recently, we expanded our focus to include a more balanced
    set of performance measures that focus on four key areas--results,
    clients, people, and internal operations.[Footnote 2] These categories
    of measures are briefly described below.

    * Results. Focusing on results and the effectiveness of the processes
    needed to achieve them is fundamental to accomplishing our mission. To
    assess our results, we measure financial benefits, nonfinancial
    benefits, recommendations implemented, and percentage of new products
    with recommendations. Financial benefits and nonfinancial benefits
    provide quantitative and qualitative information, respectively, on the
    outcomes or results that have been achieved from our work. They often
    represent outcomes that occurred or are expected to occur over a period
    of several years. The remaining measures are intermediate outcomes in
    that they often lead to achieving outcomes that are ultimately captured
    in our financial and nonfinancial benefits.

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

    * Clients. To judge how well we are serving our clients, we count the
    number of congressional hearings where we are asked to present expert
    testimony as well as our timeliness in delivering products to the
    Congress. Our strategy in this area also draws upon a variety of data
    sources (e.g., our client feedback survey and in-person discussions
    with congressional staff) to obtain information on the services we are
    providing to our congressional clients.

    We set a target at the agencywide level for the number of testimonies
    and then assign a portion of the testimonies as a target for each of
    the external goals--that is, goals 1, 2, and 3--based on their expected
    contribution to the agencywide total. As in measuring the results of
    our work, we track our progress on this measure at the goal level in
    order to understand why we met or did not meet the agencywide target.
    We set agencywide targets for timeliness because we want our
    performance on these measures to be consistent across goals.

    * People. As our most important asset, our people define our character
    and capacity to perform. A variety of data sources, including an
    internal survey, provide information to help us measure how well we are
    attracting and retaining high-quality staff and how well we are
    developing, supporting, using, and leading staff. We set targets for
    these measures at the agencywide level.

    * Internal operations. Our mission and people are supported by our
    internal administrative services, including information management,
    building management, knowledge services, human capital, and financial
    management services. Through an internal customer satisfaction survey,
    we gather information on how well our internal operations help
    employees get their jobs done or improve employees' quality of work
    life. Examples of surveyed services include providing secure Internet
    access and voice communication systems, performance management, and
    benefits information and assistance. Fiscal year 2006 was the first
    year that we reported how well we performed against the targets we set
    for our internal operations measures. We set targets for these measures
    at the agencywide level.

    To establish targets for all of these measures, we examine what we have
    been able to achieve in the past (for example, by looking at our past
    performance (see Table 1) our 4-year rolling averages for our
    testimonies measure and most of our results measures (see Table 2) and
    the external factors that influence our work (see the discussion of
    Mitigating External Factors That Could Affect Our Performance). The
    teams and offices that are directly engaged in the work discuss their
    views of what must be accomplished in the upcoming fiscal year with our
    top executives, who then establish targets for the performance
    measures.

    Once approved by the Comptroller General, the targets become final and
    are presented in our annual performance plan and budget.[Footnote 3] We
    may adjust these targets after they are initially published when our
    expected future work or level of funding provided warrant doing so. If
    we make changes, we include the changed targets in later documents,
    such as this performance and accountability report, and annotate that
    we have changed them. In part II, we include detailed information on
    data sources that we use to assess each of these measures, as well as
    the steps we take to verify and validate the data (see Table 16).

    In the remainder of this report, we assess our performance for fiscal
    year 2006 against our previously established performance targets. We
    also present our financial statements, the independent auditor's
    report, and a statement from GAO's Inspector General.

    [End of About GAO]

    [End of Introduction]

    Part I: Management's Discussion and Analysis:

    Helping the Federal Government Work Better and Be Accountable to the
    American People:

    In fiscal year 2006 major events like the nation's recovery from
    natural disasters, ongoing military conflicts abroad, terrorist
    threats, and potential pandemics focused the public lens again and
    again on the federal government's ability to operate effectively and
    efficiently and provide services to Americans when needed. Our work
    during the year helped the Congress and the public judge how well the
    federal government performed its functions and consider alternative
    approaches for improving operations and laws when performance was less
    than adequate. For example, teams supporting all three of our external
    strategic goals did work related to every facet of the hurricane
    Katrina and Rita disasters--preparedness, response, recovery, long-
    term recovery, and mitigation. We developed a coordinated and
    integrated approach to ensure that the Congress's need for factual
    information about disaster preparedness, response, recovery, and
    reconstruction activities along the Gulf Coast were met. We examined
    how federal funds were used during and after the disaster and
    identified the disaster rescue, relief, and rebuilding processes that
    worked well and not so well throughout the effort. To do this, staff
    drawn from across the agency spent time in the hardest hit areas of
    Louisiana, Mississippi, Alabama, and Texas collecting information from
    government officials at the federal, state, and local levels as well as
    from private organizations assisting with this emergency management
    effort. We briefed congressional staff on our preliminary observations
    early in the fiscal year and subsequently issued over 30 reports and
    testimonies on hurricanes Katrina and Rita by fiscal year end focusing
    on, among other issues, minimizing fraud, waste, and abuse in disaster
    assistance and rebuilding the New Orleans hospital care system.

    In addition to our disaster-related work in the United States and
    abroad, we provided the Congress and the American people with critical
    information related to the oversight of Iraq through over 30 reports,
    briefings, and testimonies during fiscal year 2006. Our work,
    supplemented by staff's firsthand observations in the war zone,
    highlighted issues such as the cost of our nation's war efforts in
    Iraq, the steadily deteriorating security situation in the region,
    long- term logistical challenges to Iraqi forces, and the lack of a
    comprehensive strategy to achieve U.S. goals. We also completed a
    number of reviews examining a wide variety of health care issues in the
    United States and overseas, including how grant funds for people with
    AIDS are distributed in the United States and the impact of certain
    program requirements on the use of funds to fight AIDS globally.

    Through our reports, testimonies, and presentations, we also continued
    our efforts to heighten the awareness of policymakers and the public
    about the nation's worsening financial condition and growing long-term
    fiscal imbalance and the potential impact on programs and policies in
    almost every area of the federal government. We did work in fiscal year
    2006 that continued to encourage debate about many of the long-term
    21st century challenges that we identified last year in our report as
    well as produced reports and testimonies focused on federal programs we
    consider at high risk of fraud, waste, abuse, or mismanagement. We
    performed all of this work and more in accordance with our strategic
    plan, guided by our core values, and consistent with professional
    standards.

    The work we did in fiscal year 2006 as well as some of our past work
    contributed greatly to our impressive performance on our results and
    client measures shown in table 1. We significantly surpassed our
    financial benefits target by $12 billion this fiscal year and exceeded
    our annual target for nonfinancial benefits by about 28 percent. Our
    financial benefits of $51 billion represent a $105 return on every
    dollar invested in us, and the more than 1,300 nonfinancial benefits
    resulting from our work helped to improve the efficiency and
    effectiveness of government programs that serve the public. In
    addition, we exceeded our targets for past recommendations implemented
    and new products with recommendations by 2 percentage points and 5
    percentage points, respectively.

    Table 1: Agencywide Summary of Annual Measures and Targets:

    Performance Measure: Results: Financial benefits (dollars in billions);
    2002 Actual: $37.7 billion;
    2003 Actual: $35.4 billion;
    2004 Actual: $44.0 billion;
    2005 Actual: $39.6 billion;
    2006: Target: $39.0 billion;
    2006: Actual: $51.0 billion;
    Met/Not Met: Met;
    2007 Target: $40.0 billion.

    Performance Measure: Results: Nonfinancial benefits; 2002 Actual: 906;
    2003 Actual: 1,043;
    2004 Actual: 1,197;
    2005 Actual: 1,409;
    2006: Target: 1,050;
    2006: Actual: 1,342;
    Met/Not Met: Met;
    2007 Target: 1,100.

    Performance Measure: Results: Past recommendations implemented; 2002
    Actual: 79%;
    2003 Actual: 82%;
    2004 Actual: 83%;
    2005 Actual: 85%;
    2006: Target: 80%;
    2006: Actual: 82%;
    Met/Not Met: Met;
    2007 Target: 80%.

    Performance Measure: Results: New products with recommendations; 2002
    Actual: 53%;
    2003 Actual: 55%;
    2004 Actual: 63%;
    2005 Actual: 63%;
    2006: Target: 60%;
    2006: Actual: 65%;
    Met/Not Met: Met;
    2007 Target: 60%.

    Performance Measure: Client: Testimonies; 2002 Actual: 216;
    2003 Actual: 189;
    2004 Actual: 217;
    2005 Actual: 179;
    2006: Target: 210;
    2006: Actual: 240;
    Met/Not Met: Met;
    2007 Target: 185.

    Performance Measure: Client: Timeliness[A]; 2002 Actual: N/A[B];
    2003 Actual: N/A;
    2004 Actual: 89%;
    2005 Actual: 90%;
    2006: Target: 98%;
    2006: Actual: 92%;
    Met/Not Met: Not met;
    2007 Target: 95%[C].

    Performance Measure: People: New hire rate; 2002 Actual: 96%;
    2003 Actual: 98%;
    2004 Actual: 98%;
    2005 Actual: 94%;
    2006: Target: 97%;
    2006: Actual: 94%;
    Met/Not Met: Not met;
    2007 Target: 95%[D].

    Performance Measure: People: Acceptance rate; 2002 Actual: 81%;
    2003 Actual: 72%;
    2004 Actual: 72%;
    2005 Actual: 71%;
    2006: Target: 75%;
    2006: Actual: 70%;
    Met/Not Met: Not met;
    2007 Target: 72%[D].

    Performance Measure: People: Retention rate: with retirements; 2002
    Actual: 91%;
    2003 Actual: 92%;
    2004 Actual: 90%;
    2005 Actual: 90%;
    2006: Target: 90%;
    2006: Actual: 90%;
    Met/Not Met: Met;
    2007 Target: 90%[D].

    Performance Measure: People: Retention rate: Without retirements; 2002
    Actual: 97%;
    2003 Actual: 96%;
    2004 Actual: 95%;
    2005 Actual: 94%;
    2006: Target: 94%;
    2006: Actual: 94%;
    Met/Not Met: Met;
    2007 Target: 94%[D].

    Performance Measure: People: Staff development; 2002 Actual: 71%;
    2003 Actual: 67%;
    2004 Actual: 70%;
    2005 Actual: 72%;
    2006: Target: 74%;
    2006: Actual: 76%;
    Met/Not Met: Met;
    2007 Target: 75%.

    Performance Measure: People: Staff utilization; 2002 Actual: 67%;
    2003 Actual: 71%;
    2004 Actual: 72%;
    2005 Actual: 75%;
    2006: Target: 75%;
    2006: Actual: 75%;
    Met/Not Met: Met;
    2007 Target: 78%.

    Performance Measure: People: Leadership; 2002 Actual: 75%;
    2003 Actual: 78%;
    2004 Actual: 79%;
    2005 Actual: 80%;
    2006: Target: 80%;
    2006: Actual: 79%;
    Met/Not Met: Not met;
    2007 Target: 80%.

    Performance Measure: People: Organizational climate; 2002 Actual: 67%;
    2003 Actual: 71%;
    2004 Actual: 74%;
    2005 Actual: 76%;
    2006: Target: 75%;
    2006: Actual: 73%;
    Met/Not Met: Not met;
    2007 Target: 76%.

    Performance Measure: Internal operations[E]: Help get job done; 2002
    Actual: N/A;
    2003 Actual: 3.98;
    2004 Actual: 4.01;
    2005 Actual: 4.10;
    2006: Target: 4.00;
    2006: Actual: N/A;
    Met/Not Met: N/A;
    2007 Target: 4.00.

    Performance Measure: Internal operations[E]: Quality of work life; 2002
    Actual: N/A;
    2003 Actual: 3.86;
    2004 Actual: 3.96;
    2005 Actual: 3.98;
    2006: Target: 4.00;
    2006: Actual: N/A;
    Met/Not Met: N/A;
    2007 Target: 4.00.

    Source: GAO.

    Note: Information explaining all of the measures included in this table
    appears in the Data Quality and Program Evaluations section in part II
    of this report.

    [A] Since fiscal year 2004 we have collected data from our client
    feedback survey on the quality and timeliness of our products, and in
    fiscal year 2006 we began to use the independent feedback from this
    survey as a basis for determining our timeliness.

    [B] N/A indicates that the data are not available yet or are not
    applicable because we did not collect the data during this period.

    [C] Our fiscal year 2007 target for timeliness shown above differs from
    the target we reported for this measure in our fiscal year 2007
    performance budget in January 2006. Specifically, we decreased our
    timeliness target by 3 percentage points to create a challenging target
    given our new method for calculating this measure.

    [D] Our fiscal year 2007 targets for the first four people measures
    shown above differ from the targets we reported for these measures in
    our fiscal year 2007 performance budget in January 2006. Specifically,
    we lowered the new hire rate target by 2 percentage points and the
    acceptance rate target by 3 percentage points and decreased by 1
    percentage point each of the targets associated with retention rate. We
    made these adjustments on the basis of our past performance and future
    budget projections.

    [E] For our internal operations measures, we will report actual data
    for fiscal year 2006 once data from our November 2006 internal customer
    satisfaction survey have been analyzed.

    [End of table]

    We believe we served the Congress very well during fiscal year 2006.
    Our senior executives delivered testimony at 240 hearings, exceeding
    our target of 210 by 14 percent. Many of these testimonies focused on
    fraudulent activity and mismanagement associated with the Hurricane
    Katrina relief effort, the global war on terrorism, and information
    security weaknesses (see the list of selected testimony issues later in
    this report). Though we missed our timeliness target of 98 percent by 6
    percentage points, our performance indicates that 92 percent of
    congressional staff responding to our client feedback survey either
    strongly or generally agreed that our written products were delivered
    on time. We now use our client feedback survey as a basis for our
    timeliness performance measure. It is an electronic survey completed by
    a sample of our congressional clients who requested our testimonies and
    significant products. We discuss the client feedback survey in detail
    part II of this report.

    Concerning our eight people measures, we met or exceeded our targets
    for four of them--retention rate with retirements, retention rate
    without retirements, staff development, and staff utilization--but did
    not meet the remaining four measures--new hire rate, acceptance rate,
    leadership, and organizational climate. We missed our target of 97
    percent for new hire rate by 3 percentage points because we were unable
    to fill the number of positions we had planned for. Similarly, fewer
    prospective employees accepted our job offers than we anticipated,
    which prevented us from meeting our acceptance rate target by 5
    percentage points. We missed our leadership and organizational goals by
    1 percentage point and 2 percentage points, respectively.

    In fiscal year 2006, we used two new performance measures to assess our
    performance related to how well our internal administrative services
    help employees get their jobs done or improve employees' quality of
    work life. These measures are directly related to our goal 4 strategic
    objectives of continuously enhancing our business and management
    processes and becoming a professional services employer of choice. We
    use information from our annual customer satisfaction survey to set
    targets and assess our performance for both of these measures. We will
    report actual data for fiscal year 2006 once data from our November
    2006 internal operations survey have been analyzed. There will always
    be a lag in reporting on this measure because our customer feedback
    survey is distributed after we issue the performance and accountability
    report.

    To help us examine trends over time we also look at 4-year averages of
    our actual performance for our results and client measures except the
    percentage of past recommendations implemented--because it is a
    composite that is drawn from a number of years rather than an annual
    percentage--and timeliness--because we have no trend data for our
    current timeliness measure. Calculating 4-year rolling averages for the
    other measures minimizes the effect of an atypical result in any given
    year. We consider this calculation, along with other factors, when we
    set our performance targets. Table 2 shows that from fiscal year 2002
    through fiscal year 2006 financial and nonfinancial benefits increased
    steadily along with the percentage of new products with
    recommendations. The average number of testimonies, on the other hand,
    declined from fiscal year 2003 through fiscal year 2004, but has
    increased in fiscal years 2005 and 2006. When we set our fiscal year
    2007 target for financial benefits, we considered the rolling averages
    for this measure and the fact that federal agencies are facing serious
    budget constraints that could affect their ability to implement
    recommendations we made for improving their programs. We therefore set
    our fiscal year 2007 target between our fiscal year 2006 and 2007
    rolling averages. For our nonfinancial benefits measure, we tried to
    set a target for fiscal year 2007 that is challenging but that does not
    encourage staff to develop recommendations simply to meet a higher
    agencywide target each year.

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

    Performance measure: Results: Financial benefits(billions); 2002: $26.9
    billion;
    2003: $30.7 billion;
    2004: $35.9 billion;
    2005: $39.2 billion;
    2006: $43.0 billion.

    Performance measure: Results: Nonfinancial benefits; 2002: 775;
    2003: 884;
    2004: 986;
    2005: 1,139;
    2006: 1,248.

    Performance measure: Results: New products with recommendations; 2002:
    42%;
    2003: 48%;
    2004: 54%;
    2005: 58%;
    2006: 61%.

    Performance measure: Client: Testimonies; 2002: 215;
    2003: 205;
    2004: 193;
    2005: 200;
    2006: 206.

    Source: GAO.

    [End of table]

    Though we consider our 4-year rolling averages and our past performance
    when setting our target for the number of hearings at which our senior
    executives testify, we base our testimonies target largely on the
    cyclical nature of the congressional calendar. Our experience has shown
    that during the fiscal year in which an election occurs, generally the
    Congress holds fewer hearings which provide fewer opportunities for us
    to be invited to testify. We believe this decrease in the number of
    hearings occurs because the congressional members are reorganizing
    during the months after the election. We therefore set our fiscal year
    2007 target lower than our past and average performance in anticipation
    of fewer opportunities to testify at congressional hearings.

    Focusing on Results:

    Focusing on outcomes and the efficiency of the processes needed to
    achieve them is fundamental to accomplishing our mission. The following
    four annual measures--financial benefits, nonfinancial benefits, past
    recommendations implemented, and new products containing
    recommendations--indicate that we have fulfilled our mission and
    delivered results that benefit the nation.

    Financial Benefits and Nonfinancial Benefits:

    We describe many of the results produced by our work as either
    financial or nonfinancial benefits. Both types of benefits result from
    our efforts to provide information to the Congress that helped to (1)
    change laws and regulations, (2) improve services to the public, and
    (3) promote sound agency and governmentwide management. In many cases,
    the benefits we claimed in fiscal year 2006 are based on work we did in
    past years because it often takes the Congress and agencies time to
    implement our recommendations or to act on our findings.

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

    Financial Benefits:

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

    * business operations and activities;

    * the structure of federal programs; or:

    * entitlements, taxes, or user fees.

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

    In fiscal year 2006, our work generated about $51 billion in financial
    benefits (see fig. 4), exceeding our target by about 31 percent. Of the
    total amount documented, about $27 billion (or approximately 53
    percent) resulted from changes in laws or regulations (see fig. 5).

    Figure 4: Financial Benefits GAO Recorded in Fiscal Year 2006:

    [See PDF for Image] - graphic text.

    Bar graph with six items:

    2002 Actual: $37.7 billion;
    2003 Actual: $35.4 billion;
    2004 Actual: $44.0 billion;
    2005 Actual: $39.6 billion;
    2006 Target: $39.0 billion;
    2006 Actual: $51.0 billion.

    Source: GAO.

    [End of Figure]

    Figure 5: Types of Financial Benefits Recorded in Fiscal Year 2006 from
    Our Work:

    [See PDF for Image] - graphic text:

    Pie chart with three slices, representing a total of $51 billion in
    financial benefits.

    Information GAO provided to the Congress resulted in statutory or
    regulatory changes: $27.0 billion (53.0%);

    Agencies acted on GAO information to improve services to the public:
    $10.0 billion (19.5%);

    Core business processes improved at agencies and governmentwide
    management reforms advanced by GAO's work: $14.0 billion (27.5%).

    Source: GAO.

    [End of Figure]

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

    To document financial benefits, our staff complete reports documenting
    accomplishments that are linked to specific products or actions. All
    accomplishment reports for financial benefits are documented and
    reviewed by (1) another GAO staff member not involved in the work and
    (2) a senior executive in charge of the work. Also, a separate unit,
    our Quality and Continuous Improvement (QCI) office, reviews all
    financial benefits and approves benefits of $100 million or more, which
    amounted to 96 percent of the total dollar value of benefits recorded
    in fiscal year 2006. Our Office of Inspector General (IG) also
    performed an independent review of accomplishment reports claiming
    benefits of $100 million or more in fiscal year 2006.

    Figure 6 lists several of our major financial benefits for fiscal year
    2006 and briefly describes some of our work contributing to financial
    benefits.

    Figure 6: GAO's Selected Major Financial Benefits Reported in Fiscal
    Year 2006:

    Description: Ensured continued monetary benefits from federal spectrum
    auctions. In 1993 the Congress provided the Federal Communications
    Commission (FCC) authority to use auctions to assign certain spectrum
    licenses, and since then the FCC has conducted 59 auctions that have
    generated over $14.5 billion for the U.S. Treasury. However, critics of
    these auctions asserted, among other things, that auctions raised
    consumer prices, slowed infrastructure deployment, and distorted
    competition. The FCC's auction authority was scheduled to expire on
    September 30, 2007. We reported that auctions had little to no negative
    impact on the wireless industry and are more effective than previous
    assignment mechanisms. We therefore recommended that the Congress
    consider extending the FCC's auction authority beyond the scheduled
    expiration date, which it acted on in 2006. Additionally, the Congress
    established December 31, 2006, as the target date for the completion of
    the digital television (DTV) transition and eventual auction of a
    substantial portion of this spectrum --however, this date could be
    extended if an insufficient number of households adopt DTV
    technologies. We reported in 2002 that the DTV transition would be
    unlikely to occur in 2006 and at the request of the Congress, we
    examined the cost of a subsidy program for DTV technologies to speed
    the DTV transition. In 2005, we testified and provided information on
    (1) the potential cost of a DTV technologies program under various
    scenarios and (2) issues and complexities in the administration of a
    subsidy program. Using much of our work during its deliberations on
    these issues, the Congress subsequently passed legislation that among
    other things, (1) sanctioned a DTV subsidy program and (2) extended the
    FCC's auction authority until 2011. The Congressional Budget Office
    projects a net savings of $7.2 billion from 2006 through 2010, which
    has a net present value of about $6.1 billion. (Goal 1); Amount: $6.1
    billion.

    Description: Encouraged DOD to identify and reduce unobligated funds in
    the military services' operations and maintenance budget. DOD estimates
    that in past years the Congress has reduced its operations and
    maintenance accounts by an average of almost $200 million a year on the
    basis of our unobligated balance analyses. Therefore, to address the
    persistent problem of unobligated balances and to protect DOD
    resources, DOD reduced by about $4.3 billion the military services'
    operations and maintenance baseline program at the appropriation level
    for fiscal years 2007 through 2011 using a methodology similar to the
    one we used to identify unobligated balances. DOD officials stated that
    they took this action because they would rather make the adjustments
    themselves than have the Congress make reductions based on our annual
    analyses. The net present value of the $4.3 billion reduction by DOD is
    about $3.9 billion. (Goal 2);
    Amount: $3.9 billion.

    Description: Recommended payment methods that cut Medicare costs for
    durable medical equipment, orthotics, and prosthetics. Medicare's
    supplementary medical insurance program (Medicare Part B) spent almost
    $7.8 billion for durable medical equipment, prosthetics, orthotics, and
    supplies in 2002 on behalf of its beneficiaries. For most of these
    items, Medicare payments are primarily based on historical charges from
    the mid-1980s, adjusted for inflation in some years, rather than market
    prices. We have repeatedly reported that Medicare payments for some
    medical equipment and supplies are out of line with actual market
    prices. This can occur when providers' costs for equipment and supplies
    have declined over time as competition and efficiencies have increased.
    We suggested several options to the Congress to better align Medicare
    fees with market prices, such as giving the Centers for Medicare &
    Medicaid Services (CMS) authority to conduct competitive bidding for
    these items. The Medicare Prescription Drug, Improvement, and
    Modernization Act of 2003 requires CMS to implement competitive
    acquisition of durable medical equipment, off-the-shelf orthotics, and
    supplies in 10 of the largest metropolitan statistical areas in 2007,
    80 of the largest areas in 2009, and in other areas thereafter. CMS can
    use information on the amounts paid in competitive acquisition areas to
    adjust Medicare payments in other localities. The Congressional Budget
    Office estimated that competitive bidding and the other changes to
    payment methods for durable medical equipment, orthotics, prosthetics,
    and supplies would result in a net reduction in Medicare spending of
    $6.8 billion from fiscal years 2005 through 2013. The Congressional
    Budget Office's estimate would result in a present value financial
    benefit to the Supplementary Medical Insurance Trust Fund of $2.972
    billion for fiscal year 2005 through fiscal year 2009. After
    subtracting estimated costs, the net present value of the total
    financial benefit is $2.905 billion. (Goal 1);
    Amount: $2.9 billion.

    Description: Helped to ensure that certain USPS retirement-related
    benefits would be funded. The Office of Personnel Management (OPM)
    analyzed the funding of USPS's retirement plans and reported in 2002
    that the current level of pension fund contributions would result in a
    surplus of funds and that this surplus would adequately cover future
    pension benefit obligations. At the request of the Congress, we
    reviewed this analysis and a proposal by the administration to change
    the funding formula. We emphasized to the Congress that even though
    USPS had projected a funds surplus, at the time we conducted our review
    USPS had not yet funded $40 billion to $50 billion in postretirement
    health benefits. In response, the Congress passed Pub. L. No. 108-018,
    the Postal Civil Service Retirement System Funding Reform Act of 2003,
    which, among other things, required that any reduction in USPS's annual
    pension fund after 2005 resulting from changes to the funding formula
    be held in an escrow account. The Congress wanted the funds made
    available from any pension payment reductions to be used to address
    USPS's unfunded postretirement health obligations. In 2005, USPS
    determined that it would not generate enough revenue in 2006 to fully
    fund the $3.1 billion escrow requirement for that fiscal year. USPS
    responded by raising postal rates effective January 2006 solely to fund
    the escrow requirement. This action by USPS avoided substantial costs
    to the federal government in the form of appropriations that would have
    been used to cover the escrow shortfall. Raising rates to fund the
    escrow account is projected to result in additional revenue during
    fiscal year 2006 that has a net present value of about $2.2 billion.
    (Goal 3);
    Amount: $2.2 billion.

    Description: Identified recoverable costs for the Tennessee Valley
    Authority (TVA). In past years, we reported that TVA--an independent
    federal government corporation that among other things, provides the
    public with electricity produced by several dams constructed in the
    Tennessee Valley area--had far greater financing and deferred asset
    costs than its competitors. TVA's financial condition gives it little
    flexibility to meet potential future competitive challenges, threatens
    its long- term viability, and places the federal government at
    financial risk. We also reported that the costs associated with TVA's
    three mothballed nuclear units (referred to in our work as deferred
    assets) did not represent viable construction projects and concluded
    that generally accepted accounting principles required TVA to begin
    immediately writing off and recovering the cost of these assets. We
    identified several options for improving TVA's financial condition,
    including raising its electricity rates and using the additional cash
    generated from the rate increase to reduce borrowing or pay down debt.
    In July 2005, TVA announced a rate increase of 7.5 percent effective
    October 1, 2005. This action by TVA will avoid substantial costs to the
    federal government in the form of appropriations that would have to be
    used to address TVA's fiscal challenges. TVA projects that the 7.5
    percent rate increase will provide about $524 million in additional
    annual revenue beginning in fiscal year 2006 and will enable it to
    reduce its debt and amortize the $3.9 billion deferred asset balance
    from one of its mothballed nuclear plants. This financial benefit
    pertains to the first 5 years of the rate increase. The net present
    value of the associated increase in federal revenues is about $1.8
    billion over 5 years. (Goal 3);
    Amount: $1.8 billion.

    Description: Helped to increase collections of civil debt. In July
    2001, we reported that the Department of Justice's (Justice) financial
    litigation units, which are responsible for both criminal and civil
    debt collection, did not have adequate procedures for enforcing
    collections. We made a number of recommendations to the Attorney
    General to help the units improve criminal debt collections and stem
    the growth in reported uncollected criminal debt. One such
    recommendation was to reinforce policies and procedures for entering
    cases into debt tracking systems; filing liens; issuing demand letters,
    delinquent notices, and default notices; performing asset discovery
    work; and using other enforcement techniques. These policies and
    procedures are applicable to the units' civil as well as criminal debt
    collection efforts. In January 2002, Justice completed actions to
    address this recommendation. In conjunction with implementing our
    recommendation, Justice has also provided training materials to unit
    staff involved in debt collection. These actions helped it to increase
    collections of civil debt by about $683.8 million in fiscal year 2002,
    and $719.4 million in fiscal year 2003. The net financial benefit has a
    present value of about $1.58 billion. (Goal 3);
    Amount: $1.6 billion.

    Description: Encouraged the Department of Housing and Urban Development
    (HUD) to take actions to reduce improper payments. For many years HUD
    had done very little to oversee third-party entities (such as local
    public housing agencies and property owners) that are responsible for
    administering its rental assistance programs, including determining
    subsidy amounts and household eligibility. HUD responded to the high-
    risk designation by establishing the Rental Housing Integrity
    Improvement Project in the spring of 2001. As part of the Rental
    Housing Integrity Improvement Project initiative, HUD developed annual
    goals for reducing improper payments from the baseline fiscal year 2000
    level: 15 percent by fiscal year 2003 and 30 percent by fiscal year
    2004. HUD implemented on-site reviews of program administrators--a key
    component of the Rental Housing Integrity Improvement Project
    initiative--starting in June 2002. Other significant actions initiated
    under the Rental Housing Integrity Improvement Project included
    automating the process used to verify tenant-reported income, offering
    additional training to program administrators, and improving program
    guidance. HUD has met its goals for reducing improper payments and
    attributed this reduction to the aggressive steps it has taken under
    the Rental Housing Integrity Improvement Program initiative. The amount
    of financial benefit is the reduction in the estimated improper
    payments in fiscal years 2003 and 2004 relative to those in fiscal year
    2000. The computed reductions were $658 million in fiscal year 2003 and
    $660 million in fiscal year 2004--a total of $1.318 billion with a net
    present value of $1.43 billion. (Goal 1);
    Amount: $1.4 billion.

    Description: Supported the Department of Energy's (DOE) efforts to
    reduce its carryover funds. Beginning in its 2001 annual report on
    carryover balances, DOE formally acknowledged our role in helping the
    agency identify, monitor, and reduce its uncosted obligations--funds
    that have been allocated to specific projects, but have not yet been
    spent and are not needed to meet near-term commitments. These uncosted
    obligations are essentially carryover balances that could be used to
    reduce future budget requests. In 1992, we identified (1) uncosted
    obligations as a growing DOE problem and (2) the need for an effective
    system to monitor these funds. Over the years, DOE has developed an
    analytical approach to better identify the portion of its uncosted
    obligations that could be used to offset annual appropriations
    requests, and we have monitored its efforts through our annual review
    of the DOE budget. In 2001, the Congress began working with DOE on how
    to use the carryover balances to offset programmatic costs and reduce
    potential budget requests, and DOE has continued to analyze and provide
    information to the Congress on its reprogramming of carryover balances.
    The appropriation reductions resulting from the congressional actions
    taken in concert with DOE--in response to our work--for fiscal years
    2001 through 2005 are about $1 billion. The implementation costs are
    considered negligible. The net present value is about $1.2 billion.
    (Goal 1);
    Amount: $1.2 billion.

    Source: GAO.

    [End of table]

    Nonfinancial Benefits:

    Many of the benefits that result from our work cannot be measured in
    dollar terms. During fiscal year 2006, we recorded a total of 1,342
    nonfinancial benefits (see fig. 7).

    Figure 7: Nonfinancial Benefits GAO Recorded in Fiscal Year 2006:

    [See PDF for Image]- graphic text:

    Bar graph with six items.

    2002 Actual: 906;
    2003 Actual: 1,043;
    2004 Actual: 1,197;
    2005 Actual: 1,409;
    2006 Targeted: 1,050;
    2006 Actual: 1,342.

    Source: GAO.

    [End of Figure]

    We documented 667 instances where federal agencies used our information
    to improve services to the public, 61 instances where the information
    we provided to the Congress resulted in statutory or regulatory
    changes, and 614 instances where agencies improved core business
    processes or governmentwide reforms as a result of our work. (See fig.
    8.) These actions spanned the full spectrum of issues, from identifying
    the adverse tax impact of combat pay and certain tax credits on low-
    income military families to improving the Department of State's process
    for developing staffing projections for new embassies. In figure 9, we
    provide examples of some of the nonfinancial benefits we claimed as
    accomplishments in fiscal year 2006. The laws that we cite in the first
    section of this figure were passed in fiscal year 2006.

    Figure 8: Types of Nonfinancial Benefits Recorded in Fiscal Year 2006
    from Our Work:

    [See PDF for Image]- graphic text:

    Pie chart with three slices, representing a total of 1,342 nonfinancial
    benefits.

    Core business processes improved at agencies and governmentwide
    management reforms advanced by GAO's work: 614 (46.0%);

    Agencies acted on GAO information to improve services to the public:
    667 (50.0%);

    Information GAO provided to the Congress resulted in statutory or
    regulatory changes: 61 (5.0%).

    Source: GAO.

    Note: Percentages do not add due to rounding.

    [End of Figure]

    Figure 9: GAO's Selected Nonfinancial Benefits Reported in Fiscal Year
    2006:

    Nonfinancial benefits that helped to change laws:

    Deficit Reduction Act of 2005, Pub. L. No. 109-171:

    Our work is reflected in this law in different ways:

    * Strengthening Medicaid program integrity. Our 2005 work was
    considered in writing the provisions of this act that provided for the
    creation of the Medicaid Integrity Program--which seeks to combat
    fraud, waste, and abuse in the Medicaid program--and specified
    appropriations to fund the program. Consistent with our findings, the
    act also required CMS to devote more staff to combating Medicaid
    provider fraud and abuse; to develop a comprehensive plan for the
    Medicaid Integrity Program every 5 fiscal years; and to report annually
    to the Congress on the use, and the effectiveness of activities
    supporting the use, of the appropriated funds. (Goal 1).

    * Improving oversight of the states' performance under the Temporary
    Assistance for Needy Families (TANF) program. We determined that
    differences in how states define the categories of work that count
    toward meeting the federal work requirements under TANF led to
    inconsistent measurement across states and to work participation data
    that could not be used to compare the performance of states. We also
    found that some states lacked internal controls to help ensure the work
    data were reliable. Congressional staff relied heavily on our report in
    writing provisions of this act that require HHS to provide additional
    direction and oversight regarding how to count and verify TANF work
    participation. (Goal 1).

    * Addressing domestic violence. In 2005, we reported that specifically
    addressing domestic violence is important to ensuring that marriage and
    responsible fatherhood programs address its dangers. We concluded that
    while most of these programs did not address the issues of domestic
    violence explicitly, evidence suggested that these issues should be
    explicitly addressed. Our findings influenced lawmakers to require
    through this act that all entities seeking grants to fund marriage
    promotion and responsible fatherhood programs describe how they will
    address domestic violence. (Goal 1).

    * Improving oversight of schools that are lenders. Congressional
    members cited our report on Federal Family Education Loan Program
    lenders as a catalyst for helping them to enact changes addressing the
    lending, contracting, and compliance practices on which we had
    reported. As a result, critical program measures are now in place to
    cover all school lenders, allowing the Department of Education
    (Education) to assess the adequacy of loan procedures, the financial
    resources of lenders, and the accreditation status of all school
    lenders. (Goal 1).

    Safe and Timely Interstate Placement of Foster Children Act of 2006,
    Pub. L. No. 109-239:

    Our work found that data to assess the timeliness of interstate
    placements of foster children were lacking, and that HHS was not able
    to identify states that may need improvements in their processes or may
    be burdened by other states' requests for assistance with placements.
    Congressional staff stated that our findings played a critical role in
    deliberations on the bill that became this act. Consistent with our
    findings, the act requires a state receiving a request to place a child
    for adoption or foster care to complete a home study within 60 days and
    requires the state making the request to respond within 14 days of
    receiving the home study. In addition, the act authorizes funding for
    an incentive program of $1,500 for every home study completed within 30
    days and requires that state plans for child welfare services include
    reference to state efforts to facilitate orderly and timely intrastate
    and interstate placements. (Goal 1).

    Nonfinancial benefits that helped to improve services to the public:

    Strengthening passport and visa issuance processes:

    Our work led the Department of State (State), in coordination with
    other agencies, to improve passport and visa controls. Thousands of
    names have been added to data systems to prevent persons with
    outstanding federal felony warrants from obtaining passports to leave
    the United States, passport information sharing among law enforcement
    agencies has increased, and staff received additional fraud prevention
    training. Also, State directed overseas posts to strengthen visa
    oversight and improve compliance with internal control requirements to
    ensure the integrity of the visa function; increase information
    sharing, especially regarding visa applicants who may pose security
    risks; and improve visa officers' ability to detect fraudulent visa
    applicants. (Goal 2).

    Identified vulnerabilities in the process to verify personal
    information about new drivers:

    To help make states less vulnerable to identity fraud, we recommended
    that the Social Security Administration (SSA) match drivers license
    verification requests submitted by states with SSA's records of
    deceased Social Security number (SSN) owners. At the time of our
    review, SSA was already matching requests with the names, birth dates,
    and SSNs of living SSN owners. By March 2006, SSA had implemented the
    software needed to modify its batch verification process and had begun
    notifying state agencies when the SSNs they were checking on belonged
    to deceased individuals. (Goal 1).

    Contributed to the increased visibility of a transportation information
    sharing program for seniors:

    We recommended that the Administration on Aging take the lead in
    developing a plan--in consultation with the Coordinating Council--for
    publicizing the Eldercare Locator Service as a central forum for
    sharing information on senior transportation and for reaching out to
    seniors and providers who do not use the Internet. In response,
    Administration on Aging officials developed a multifaceted marketing
    campaign to broaden awareness of the service, especially among special
    target groups such as low-income seniors. In addition, the
    Administration on Aging is working to increase public awareness of the
    service through its partnerships with various community and faith-
    based organizations, businesses, and special interest groups. (Goal 1).

    Identified a problem with untimely pay allowances to deployed soldiers:

    In an April 2005 report, we concluded that deployed military
    servicemembers and their families may face more financial problems
    related to pay than their nondeployed counterparts. We found that
    almost 6,000 servicemembers had experienced delays in obtaining their
    family separation allowance each month during their deployment. As a
    result of our recommendation, DOD's military pay operations
    organizations notified their field staff that the family separation
    allowance process should start immediately once they are notified that
    such a transaction is necessary so that the allowance begins within 30
    days of a servicemember's deployment if it is certain the servicemember
    will be on temporary duty for more than 30 days. (Goal 2).

    Helped to protect the public from exposure to pesticides in tobacco
    products:

    The Department of Agriculture implemented our recommendation to
    periodically review and update the pesticides used on tobacco for which
    the department sets residue limits and conducts test. At the time of
    our review in 2003, the department tested tobacco for 20 pesticides
    using 15 residue limits. The department currently tests domestic and
    imported tobacco for 36 pesticides using 44 residue limits and will
    continue to review and update the list of pesticides it tests for and
    establish residue limits. (Goal 1).

    Nonfinancial benefits that helped to promote sound agency and
    governmentwide management:

    Improved the quality of federal voluntary voting system standards:

    Our work on federal voluntary voting equipment standards, and the
    processes for managing them, identified weaknesses that could impede
    effective management of voting systems throughout their life cycles and
    resulted in recommendations for adding usability and quality assurance
    requirements to the standards. The federal Voluntary Voting System
    Guidelines, issued by the U.S. Election Assistance Commission in
    December 2005, satisfied our recommendations by adding requirements for
    usability (such as voter verification of ballots) and accessibility
    (for persons with visual, hearing, mobility, or other limitations), as
    well as quality assurance provisions for voting system vendors. In
    addition, our work recognized that no federal entity held statutory
    authority for updating the standards and asked the Congress to consider
    explicitly assigning this responsibility. The approval of the 2005
    federal guidelines demonstrated the first time federal voting system
    standards were updated by the commission, under authority granted by
    the Help America Vote Act of 2002. The updated standards will help
    increase citizens' confidence and ease in voting, while the execution
    of federal responsibility for maintaining voting standards increases
    the likelihood that they will be current, complete, relevant, and
    utilized by the states. (Goal 3).

    Highlighted weaknesses in the Federal Aviation Administration's (FAA)
    control over computers and other assets:

    During our audit of FAA we found that the agency lacked adequate
    controls over purchases to ensure that physical assets were recorded
    and accounted for in its property management system. We also observed
    instances where computers were not stored in separate and secured
    storage rooms, which gave employees unlimited access to these assets.
    In the fall of 2003, FAA reemphasized that responsible staff should
    record all newly acquired assets in the agency's property management
    system within 30 days of receipt and subsequently revised its guidance
    to require staff to document their entries in the system within 30
    days. FAA also revised its guidance outlining storage requirements for
    high-risk assets, such as computers and computer-related equipment, and
    established procedures to ensure that only authorized personnel have
    access to secured areas where such items are stored. (Goal 3).

    Strengthened oversight of federal personnel actions:

    In our February 2002 report on conversions of political appointees in
    the federal government from noncareer to career positions, we referred
    17 conversions to OPM for its review and action because the
    circumstances surrounding each case could have given the appearance of
    favoritism or political preference even if proper procedures were
    followed. OPM took a number of actions in 2005 in response to our work,
    such as giving four of the six candidates who were bypassed for
    positions priority consideration for equivalent vacancies. OPM also
    took disciplinary action on two of its employees who handled the
    conversions. (Goal 3).

    Encouraged federal agencies to seek savings on purchase cards:

    We recommended that the Director of the Office of Management and Budget
    (OMB) focus governmentwide management attention on the need to take
    advantage of opportunities to achieve savings on purchase card buys for
    goods and services that support official federal activities. In 2005,
    OMB issued a new appendix to its Circular A-123 to consolidate and
    update governmentwide charge card requirements. It also established
    minimum standards and best practices for management of the government
    charge card program. In related guidance, OMB also directs purchase
    card managers to be aware of any agencywide or multi-agencywide
    contracts that will yield better pricing for their organizations. (Goal
    3).

    Identified improper payments in DOD's travel accounts:

    As part of our audit of internal controls over DOD's centrally billed
    travel accounts, we found that DOD had made potentially improper
    reimbursements on about 27,000 travel claims. These payments were
    improper because the airline tickets that the travelers claimed as
    reimbursable expenses were actually purchased by DOD for the travelers.
    We recommended that DOD periodically issue guidance to its officials
    who approve travel vouchers instructing them on how to determine
    reimbursable airline ticket expenses. (Goal 3).

    Source: GAO.

    [End of table]

    In addition to the nonfinancial benefits claimed in fiscal year 2006
    from our audit work, the Congress and the public also benefited from
    some of our other activities in the following ways:

    * On the basis of our work, we referred a number of issues to agency
    inspectors general and the Internal Revenue Service (IRS) for further
    investigation and follow up. Specifically, we referred to FEMA's
    Inspector General 7,000 cases of possible criminal fraud that occurred
    in the agency's Individuals and Households Program for disaster
    assistance during the aftermath of Hurricane Katrina. We also referred
    to IRS 25 cases involving federal contractors who did not forward
    payroll taxes withheld from their employees and other taxes to IRS and
    15 charities that also engaged in abusive and potentially criminal
    activity related to the federal tax system and the Combined Federal
    Campaign--an annual charity drive that gives federal employees the
    opportunity to contribute to more than 22,000 charities.

    * We issued appropriations law decisions and opinions on, among other
    things, the purposes for which appropriated funds may be used, the
    proper disposition of funds received by the government, and potential
    Antideficiency Act violations.

    * We established a repository of Antideficiency Act reports and
    developed a Web site to make selected information from those reports
    publicly available. The Web site allows congressional members and
    staff, heads of agencies, auditors, inspectors general, other federal
    officers, and the public to monitor federal agency performance and
    compliance with the Antideficiency Act. The Congress amended the
    Antideficiency Act in December 2004, authorizing the Comptroller
    General to establish this repository. The repository will include, for
    example, the Antideficiency Act report filed by Education in fiscal
    year 2006 for improperly using appropriations for the purpose of covert
    propaganda. Its report was in response to our September 2005 opinions
    that Education had engaged in covert propaganda when it produced and
    distributed a prepackaged news story on its No Child Left Behind
    program without identifying Education as the source of the
    communication and when it hired a political commentator to endorse the
    program without identifying that the department had paid for the
    endorsement. In the 2005 opinions, we recommended that Education report
    Antideficiency Act violations because it had no appropriation available
    for purposes of covert propaganda.

    * We handled more than 1,000 protests filed by bidders who challenged
    the way individual federal procurements were conducted or how federal
    contracts were awarded, and we issued merit decisions on more than 400
    protests addressing a wide range of issues involving compliance with,
    and the interpretation of, procurement statutes and regulations. In
    fiscal year 2006, we addressed a number of significant protests
    addressing government contracts associated with the aftermath of
    Hurricane Katrina and the war in Iraq.

    * Several of our attorneys served on the Contract Appeals Board to
    resolve appeals on claims by contractors under contract with the
    Architect of the Capitol involving the Capitol Visitor Center, the West
    Refrigeration Plant Expansion, and the Longworth House Office Building.

    * We issued the third edition of volume II of The Principles of Federal
    Appropriations Law, commonly known as the Red Book. The Red Book is
    considered the primary resource in the federal financial community.
    Topics covered in volume II include the availability of appropriations
    (amount); obligation of appropriations; continuing resolutions;
    liability; and relief of accountable officers, grants and cooperative
    agreements, and guaranteed and insured loans.

    Past Recommendations Implemented:

    One way we measure our effect on improving the government's
    accountability, operations, and services is by tracking the percentage
    of recommendations that we made 4 years ago that have since been
    implemented. At the end of fiscal year 2006, 82 percent of the
    recommendations we made in fiscal year 2002 had been implemented (see
    fig. 10), primarily by executive branch agencies. Putting these
    recommendations into practice will generate tangible benefits for the
    nation in the years ahead.

    Figure 10: Percentage of Past Recommendations Implemented in Fiscal
    Year 2006:

    [See PDF for Image]- graphic text:

    Bar graph with six items.

    Four-year implementation rate:

    2002 Actual: 79%;
    2003 Actual: 82%;
    2004 Actual: 83%;
    2005 Actual: 85%;
    2006 Target: 80%;
    2006 Actual: 82%.

    Source: GAO.

    [End of figure]

    The 82 percent implementation rate for fiscal year 2006 exceeded our
    target for the year by 2 percentage points, exceeding and matching our
    performance in fiscal years 2002 and 2003, respectively. As figure 11
    indicates, agencies need time to act on recommendations. Therefore, we
    assess recommendations implemented after 4 years, the point at which
    experience has shown that if a recommendation has not been implemented,
    it is not likely to be.

    Figure 11: Cumulative Implementation Rate for Recommendations Made in
    Fiscal Year 2002:

    [See PDF for Image]- graphic text:

    Bar graph with four items.

    After 1 year: 14%;
    After 2 years: 31%;
    After 3 years: 46%;
    After 4 years: 82%.

    Source: GAO.

    [End of figure]

    New Products Containing Recommendations:

    This year, about 65 percent of the 672 written products we issued
    (excluding testimonies) contained recommendations. (See fig. 12.) We
    track the percentage of new products with recommendations because we
    want to encourage staff to develop recommendations that when
    implemented by the Congress and agencies, produce financial and
    nonfinancial benefits for the nation. However, by setting our target at
    60 percent, we recognize that our products do not always include
    recommendations and that the Congress and agencies often find such
    informational reports just as useful as those that contain
    recommendations. Our informational reports have the same analytical
    rigor and meet the same quality standards as those with recommendations
    and, similarly, can help to bring about significant financial and
    nonfinancial benefits. Hence, this measure allows us ample leeway to
    respond to requests that result in reports without recommendations.

    Figure 12: Percentage of New Products with Recommendations in Fiscal
    Year 2006:

    [See PDF for Image]- graphic text:

    Bar graph with six items.

    2002 Actual: 53%;
    2003 Actual: 55%;
    2004 Actual: 63%;
    2005 Actual: 63%;
    2006 Target: 60%;
    2006 Actual: 65%.

    Source: GAO.

    [End of figure]

    Focusing on Our Client:

    To fulfill the Congress's information needs, we strive to deliver the
    results of our work orally as well as in writing at a time agreed upon
    with our client. Our performance this year indicates that we assisted
    our client--the Congress--well, by significantly exceeding our target
    on the number of hearings we participated in and delivering many of our
    products on time based on the feedback from our client.

    Testimonies:

    Our clients often invite us to testify on our current and past work
    when it addresses issues that congressional committees are examining
    through the hearing process. During fiscal year 2006, experts from our
    staff testified at 240 congressional hearings covering a wide range of
    complex issues (see fig. 13). For example, our senior executives
    testified on a variety of issues, including freight rail rates, AIDS
    assistance programs, and federal contracting. (A summary of issues we
    testified on by strategic goal in fiscal year 2006 is described after
    figure 13 below.) Over 100 of the hearings where we testified were
    related to high-risk areas and programs, which are discussed later in
    this report.

    In fiscal year 2006, we significantly exceeded our target of
    testimonies at 210 hearings by 14 percent and surpassed our performance
    on this measure over the last 4 years. The Congress asked our
    executives to testify about 30 times this fiscal year on Hurricane
    Katrina issues and about 30 times on issues related to terrorism and
    the Iraq conflict, which helped us to perform exceptionally well in
    this area.

    Figure 13: Testimonies:

    [See PDF for Image]- graphic text:

    Bar graph with six items.

    Hearings at which GAO testified:

    2002 Actual: 216;
    2003 Actual: 189;
    2004 Actual: 217;
    2005 Actual: 179;
    2006 Target: 210;
    2006 Actual: 240.

    Source: GAO.

    [End of figure]

    Selected Testimony Issues: Fiscal Year 2006:

    Goal 1:
    Address Challenges to the Well-Being and Financial Security of the
    American people:

    * Health savings accounts;
    * Guardianships that protect incapacitated seniors;
    * Lake Pontchartrain hurricane protection project;
    * Funds to first responders for 9/11 health problems;
    * Immigration enforcement at worksites;
    * Future air transportation system;
    * Nursing home care for veterans;
    * Passenger rail security issues;
    * Freight railroad rates;
    * AIDS drug assistance programs;
    * Federal Housing Administration reforms;
    * Improving intermodal transportation;
    * Hanford nuclear waste treatment plant;
    * Evaluations of supplemental educational services;
    * Factors affecting gasoline prices;
    * Telecommunication spectrum reform;
    * H-1B visa program;
    * Federal crop insurance program.

    Goal 2:
    Respond to Changing Security Threats and the Challenges of
    Globalization:

    * A comprehensive strategy to rebuild Iraq;
    * Deploying radiation detection equipment in other countries;
    * Protecting military personnel from unscrupulous financial products;
    * Sensitive information at DOD and DOE;
    * Hurricane Katrina preparedness, response, and recovery;
    * Alternative mortgage products;
    * Global War on terrorism costs;
    * Transportation Security Administration (TSA) Secure Flight Program;
    * DOD's business systems modernization;
    * U.S. tactical aircraft;
    * National Capital Region Homeland Security Strategic Plan;
    * Polar-orbiting operational environmental satellites;
    * Worldwide AIDS relief plan;
    * Financial stability and management of the National Flood Insurance
    Program;
    * Information security laws;
    * Procurement controls at the United Nations.

    Goal 3:
    Help Transform the Federal Government's Role and How It Does Business:

    * Contract management challenges rebuilding Iraq;
    * DOD's financial and business management transformation;
    * Business tax reform;
    * Astronaut exploration vehicle risks;
    * Improving federal financial management governmentwide;
    * Long-term fiscal challenges;
    * Federal contracting during disasters;
    * Improving tax compliance to reduce tax gap;
    * Protecting the privacy of personal information;
    * DOD acquisition incentives;
    * Decennial census costs;
    * Information security weaknesses at the Department of Veterans'
    Affairs;
    * Improper federal payments for Hurricane Katrina relief;
    * Strengthening OPM's ability to lead human capital reform;
    * Public/Private recovery plan for the Internet;
    * Tax system abuses by General Services Administration contractors;
    * Compensation for federal executives and judges.

    Timeliness:

    To be useful to the Congress, our products must be available when our
    client needs them. In fiscal year 2006, we used the results of our
    client feedback survey as a barometer for how well we are getting our
    products to our congressional clients when they need the information.
    We used this survey as the primary data source for our external
    timeliness measure because the responses come directly from our
    clients. As shown in figure 14, in fiscal year 2006 we missed our
    timeliness target by 6 percentage points. We pilot tested this survey
    in 2002 and 2003 and began collecting actual data in 2004.

    We tally responses from the survey we send to key staff working for the
    requesters of our testimony statements and our more significant written
    products (e.g., engagements assigned an interest level of "high" by our
    senior management[Footnote 4] and those requiring an investment of 500
    staff days or more). Each survey asks the client whether the product
    was delivered on time. Because our products often have multiple
    requesters, we often survey more than one congressional staff person
    per product. In fiscal year 2006, we sought feedback on more than 50
    percent of the written products (including all testimonies) we issued
    that year and had a 28 percent response rate from the congressional
    staff surveyed. We received comments from one or more people for 53
    percent of the products for which we sent surveys. Overall, 92 percent
    of those responding to the survey either strongly or generally agreed
    that our products were delivered on time.

    Figure 14: Timeliness:

    [See PDF for Image]- graphic text:

    Bar graph with six items.

    Percentage of products on time.

    2002 Actual: N/A;
    2003 Actual: N/A;
    2004 Actual: 89%;
    2005 Actual: 90%;
    2006 Target: 98%;
    2006 Actual: 92%.

    Source: GAO.

    Note: We pilot tested our client feedback survey beginning in March
    2002 and collected actual data on our client's satisfaction with the
    timeliness of our products in fiscal year 2004.

    [End of Figure]

    Focusing on Our People:

    We could not have performed as well as we did in fiscal year 2006
    without the support and commitment of our highly professional,
    multidisciplinary staff. Our ability to hire, develop, retain, and lead
    staff is critical to fulfilling our mission of serving the Congress and
    the American people.

    Since 2002, we have refined our processes for measuring how well we
    manage our human capital and have benchmarked our performance in this
    area. In fiscal year 2006, we met four of our eight measures--only
    slightly missing our target for leadership and organizational climate
    by 1 and 2 percentage points, respectively. All eight measures are
    directly linked to our goal 4 strategic objective of becoming a
    professional services employer of choice. For more information about
    our people measures, see Verifying and Validating Performance Data in
    part II of this report.

    New Hire Rate and Acceptance Rate:

    Our new hire rate is the ratio of the number of people hired to the
    number we planned to hire. Annually, we develop a workforce plan that
    takes into account projected workload changes, as well as other changes
    such as retirements, other attrition, promotions, and skill gaps. The
    workforce plan for the upcoming year specifies the number of planned
    hires and, for each new hire, specifies the pay plan, skill type, and
    level. The plan is conveyed to each of our units to guide hiring
    throughout the year. Progress toward achieving the workforce plan is
    monitored monthly by the Chief Operating Officer and the Chief
    Administrative Officer. Adjustments to the workforce plan are made
    throughout the year, if necessary, to reflect changing needs and
    conditions. In fiscal year 2006, our adjusted plan was to hire 450
    staff. However, we were only able to bring on board 392 staff by year-
    end. Of the 450 staff positions, 33 positions were carried over to
    fiscal year 2007 because the applicants could not start until the new
    fiscal year.

    Our acceptance rate measure is a proxy for GAO's attractiveness as an
    employer and an indicator of our competitiveness in bringing in new
    talent. It is the ratio of the number of applicants accepting offers to
    the number of offers made. Table 3 shows that we missed the targets we
    set for new hire rate and acceptance rate by 3 percentage points and 5
    percentage points, respectively. Our calculations for each of these
    measures do not include offers extended to applicants for fiscal year
    2006 vacancies who accepted but will not report for duty until the
    first quarter of fiscal year 2007. In addition, we made a conscious
    decision during the summer to adjust our hiring targets for fiscal year
    2007. This was done because our future budget forecast indications were
    that we may not be able to support hiring at levels we requested in our
    fiscal year 2007 budget request. We therefore reduced the number of new
    hires in the summer to put us in a better position at the end of fiscal
    year 2006 for managing full-time equivalents (FTE) into the next fiscal
    year until the Congress appropriates funds for our fiscal year 2007
    budget. (For more about our recruitment strategy and performance in
    fiscal year 2006, see app. 1.)

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

    Performance measures: New hire rate;
    2002 Actual: 96%;
    2003 Actual: 98%;
    2004 Actual: 98%;
    2005 Actual: 94%;
    2006 Target: 97%;
    2006 Actual: 94%.

    Performance measures: Acceptance rate; 2002 Actual: 81%;
    2003 Actual: 72%;
    2004 Actual: 72%;
    2005 Actual: 71%;
    2006 Target: 75%;
    2006 Actual: 70%.

    Source: GAO.

    Notes: The fiscal year 2006 percentage for our new hire rate (actual)
    does not include offers extended to applicants for fiscal year 2006
    vacancies who accepted but will not report for duty until the first
    quarter of fiscal year 2007. In addition, we made a conscious decision
    during the summer to adjust our hiring targets. This was done because
    our future budget forecast indications were that we may not be able to
    support hiring at levels we requested in our fiscal year 2007 requests.
    We reduced hires in the summer to put us in a better position at the
    end of the fiscal year for managing FTEs into fiscal year 2007 until
    our budget situation was better known. For our fiscal year 2006
    acceptance rate (actual), the number of offers excludes 24 offers made
    for staff reporting in fiscal year 2007.

    [End of table]

    Retention Rate:

    We continuously strive to make GAO a place where people want to work.
    Once we have made an investment in hiring and training people, we would
    like them to stay with us. This measure is one indicator of whether we
    are attaining this objective. We calculate this measure by taking 100
    percent of the on-board strength minus the attrition rate, where
    attrition rate is defined as the number of separations divided by the
    average on-board strength. We calculate this measure with and without
    retirements. Table 4 shows that we met each of our retention rate
    targets in fiscal year 2006. Our actual retention rate including
    retirements has been relatively flat over the last 5 years, and our
    actual retention rate excluding retirements has generally declined by 1
    percentage point each year during this period.

    Staff Development and Utilization, Leadership, and Organizational
    Climate:

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

    In fiscal year 2006, 80 percent of our employees completed the survey,
    and we met our target for two of the four measures and slightly missed
    the remaining two targets. We first conducted this survey in fiscal
    year 2002, and since then favorable responses to our staff utilization
    question increased steadily and leveled off in fiscal year 2006.
    Favorable responses to our leadership question also increased from
    fiscal years 2002 through 2005, dropping only slightly in fiscal year
    2006 (see table 5). In fiscal year 2006, we also revised some of the
    demographic questions to match the categories used by the Partnership
    for Public Service to determine our standing in the annual Best Places
    to Work in the Federal Government rankings. We were cited as one of
    seven federal agencies included in an article entitled "Great Places to
    Work" published in the November 2005 issue of Washingtonian magazine.

    Table 4: Actual Performance and Targets Related to Our Retention Rate
    Including and Excluding Retirements:

    Performance measures: Retention rate: With retirements; 2002 Actual:
    91%;
    2003 Actual: 92%;
    2004 Actual: 90%;
    2005 Actual: 90%;
    2006 Target: 90%;
    2006 Actual: 90%.

    Performance measures: Retention rate: Without retirements; 2002 Actual:
    97%;
    2003 Actual: 96%;
    2004 Actual: 95%;
    2005 Actual: 94%;
    2006 Target: 94%;
    2006 Actual: 94%.

    Source: GAO.

    [End of table]

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

    Performance Measures: Staff development; 2002 Actual: 71%;
    2003 Actual: 67%;
    2004 Actual: 70%;
    2005 Actual: 72%;
    2006 Target: 74%;
    2006 Actual: 76%.

    Performance Measures: Staff utilization; 2002 Actual: 67%;
    2003 Actual: 71%;
    2004 Actual: 72%;
    2005 Actual: 75%;
    2006 Target: 75%;
    2006 Actual: 75%.

    Performance Measures: Leadership;
    2002 Actual: 75%;
    2003 Actual: 78%;
    2004 Actual: 79%;
    2005 Actual: 80%;
    2006 Target: 80%;
    2006 Actual: 79%.

    Performance Measures: Organizational Climate; 2002 Actual: 67%;
    2003 Actual: 71%;
    2004 Actual: 74%;
    2005 Actual: 76%;
    2006 Target: 75%;
    2006 Actual: 73%.

    Source: GAO.

    [End of table]

    Focusing on Our Internal Operations:

    Our mission and people are supported by our internal administrative
    services, including information management, building management,
    knowledge services, human capital, financial management, and other
    services. In fiscal year 2006, we used two new performance measures to
    assess our performance related to how well our internal administrative
    services help employees get their jobs done or improve employees'
    quality of work life. These measures are directly related to our goal 4
    strategic objectives of continuously enhancing GAO's business and
    management processes and becoming a professional services employer of
    choice. We use information from our annual customer satisfaction survey
    to set targets and assess our performance for both of these measures,
    which are shown in table 6 along with baseline data that we recorded
    for them in fiscal year 2003 and fiscal year 2004. The first measure
    encompasses 21 services that help employees get their jobs done, such
    as Internet access, desktop computer equipment, voice and video
    communication systems, shared service centers for copying and courier
    assistance, travel services, and report production. The second measure
    encompasses another 10 services that affect quality of work life, such
    as assistance related to pay and benefits, building security and
    maintenance, and workplace safety and health. Using survey responses,
    we calculate a composite score for each service category that reflects
    employee ratings for (1) satisfaction with the service and (2)
    importance of the service. (For a more in-depth explanation of this
    measure see table 16 in Part II of this report.)

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

    Performance measures: Help get job done; 2002 Actual: N/A;
    2003 Actual: 3.98;
    2004 Actual: 4.01;
    2005 Actual: 4.1;
    2006 Target: 4.0;
    2006 Actual: N/A.

    Performance measures: Quality of work life; 2002 Actual: N/A;
    2003 Actual: 3.86;
    2004 Actual: 3.96;
    2005 Actual: 3.98;
    2006 Target: 4.0;
    2006 Actual: N/A.

    Source: GAO.

    Notes: We will report actual data for fiscal year 2006 once the data
    from our November 2006 internal operations survey have been analyzed.
    N/A indicates that the data are not available yet or are not applicable
    because we did not collect the data during this period.

    [End of Table]

    Continuing the Dialogue on 21st Century Challenges:

    Last fiscal year, we published an unprecedented report called 21st
    Century Challenges: Reexamining the Base of the Federal Government that
    asks a series of probing, sometimes provocative, questions about
    current government policies, programs, and operational practices in 12
    broad areas. The report highlights how much the U.S. government
    reflects organizational models, labor markets, life expectancies,
    transportation systems, security strategies, and other conditions that
    are rooted in the past and uses our analysis of the nation's worsening
    long-term fiscal outlook as the context for raising these questions
    now. Because many of the issues raised in our report cannot be resolved
    quickly in the near term, policymakers will need to develop a strategic
    approach for addressing them over time. Thus, our report was intended
    as one input among many that the Congress will consider as it decides
    (1) its agenda for oversight and program review in the years to come
    and (2) which federal programs and policies should remain priorities,
    which should be overhauled, and which have simply outlived their
    usefulness.

    Through our work and professional partnerships in fiscal year 2006, we
    attempted to provide the information necessary to keep policymakers and
    public and private stakeholders focused on the adverse affects of these
    very serious challenges and thinking about ways to address them. Below
    are a few examples of how our work advanced the discussion of many of
    the issues presented in our 21st Century Challenges report and how we
    contributed to the dialogue.

    * What opportunities exist to streamline and simplify the current tax
    system and thereby make it more transparent, reduce opportunities for
    tax evasion, and decrease taxpayer compliance burden? Fiscal year 2006
    saw a growing debate about the fundamental design of the tax system.
    Concerns about complexity, efficiency, and equity have motivated calls
    for a substantial restructuring of the individual income tax. The
    debate is partly about whether to reform the current income tax so that
    it has a broader base and lower rates or switch in whole or part to
    some form of a consumption tax. But it is also about other fundamental
    design issues, such as whether to maintain different tax treatment for
    corporate and noncorporate business. We testified at three hearings
    examining the current system of taxation for corporations, individuals,
    and businesses and providing principles to guide tax reform as well as
    common dimensions for comparing alternative reform proposals (see Tax
    Compliance: Challenges to Corporate Tax Enforcement and Options to
    Improve Securities Basis Reporting, GAO-06-851T, June 13, 2006;
    Individual Income Tax Policy: Streamlining, Simplification, and
    Additional Reforms Are Desirable, GAO-06-1028T, Aug. 3, 2006; and
    Business Tax Reform: Simplification and Increased Uniformity of
    Taxation Would Yield Benefits, GAO-06-1113T, Sept. 20, 2006). The
    Comptroller General also participated in an October 2005 tax reform
    roundtable and highlighted the need for tax reform during his fiscal
    wake-up tour.

    * Has the government's approach to competitive sourcing--using the
    private sector to do more of the government's business--proven
    successful? Should it be modified to improve results and reduce costs
    in a timely, fair, and equitable manner? Our work this fiscal year has
    continued to highlight problematic aspects associated with the
    government's continually increasing dependence on contractors to carry
    out critical functions, from management and oversight of vital
    government operations and high-dollar investments, to protection of
    government and military facilities, to emergency and large-scale
    logistics operations such as hurricane response and recovery and the
    war in Iraq. In testimonies, we have commented on broader trends that
    have added risks to the contracting function and the government's
    ability to ensure that it is hiring the right contractors at the right
    price. These include the increasing complexity and scope of large
    investments, skill gaps in the acquisition workforce, and long-standing
    weaknesses in oversight. At this time, we are working with the Congress
    to identify work needed to further illuminate problems in contractor
    selection and oversight. Moreover, this year, the Comptroller General
    convened a panel of government management and acquisition experts from
    the private and public sectors and academia, among other things, to
    share insights on the challenges associated with the government's
    growing reliance on contractors and the need to keep inherent
    government functions in the hands of the government.

    * How can we make our current Medicare and Medicaid programs
    sustainable? We met with representatives of the Medicare Payment
    Advisory Commission during fiscal year 2006 to discuss issues related
    to Medicare inpatient hospital payments. At $119.4 billion, spending
    for hospital inpatient services accounted for over a third of total
    Medicare spending in fiscal year 2005. Our discussions with the
    commission centered around (1) its recommendation to CMS to establish a
    new cost methodology for calculating Medicare hospital payments and (2)
    the preliminary results of GAO's research in this area. We also
    continued discussions with the commission once CMS published its new
    cost methodology for public comment. Our report on inpatient hospital
    payments concluded that although there were issues with the traditional
    cost methodology, the overall CMS approach was promising (see Medicare:
    CMS's Proposed Approach to Set Hospital Inpatient Payments Appears
    Promising, GAO-06- 880, July 28, 2006). CMS staff addressed some of the
    methodological issues we raised with their proposal. Although the
    hospital industry did not agree with our conclusions, it did agree with
    our analysis of the problems with the traditional cost methodology.

    * Are the active and reserve components appropriately sized,
    structured, and used to meet the current and future national security
    demands? Is the current business model sustainable for the reserve
    components? In several reports and testimonies issued in fiscal year
    2006, we documented the changing role of the Army's reserve components
    and the mismatch between their new operational responsibilities
    overseas and at home and DOD's approach for organizing, training, and
    equipping these forces as a strategic reserve. For example, we have
    reported on such issues as the declining Army reserve component
    equipment levels caused in part by the large quantities of equipment
    left behind in Iraq to support follow-on forces and the effects of the
    Army's strategy of maintaining reserve forces in peacetime with fewer
    personnel and less equipment than they would need to deploy, and on the
    Army National Guard and the Army Reserve's ability to continue to
    provide ready forces for current operations to train for future
    missions. During fiscal year 2006, our work contributed to a growing
    debate in the Congress and DOD about the need for changes in Army
    reserve component equipping, personnel, and training strategies. The
    Comptroller General testified at a House Government Reform Committee
    hearing in October 2005 on the Army National Guard's growing equipment
    challenges and the need for DOD to provide more detailed plans and
    greater transparency in how the Army National Guard will be integrated
    into Army transformation initiatives. In addition, the Congress
    recently established the Commission on the National Guard and Reserves
    to examine the roles and missions of the guard and its compensation,
    organization, and capabilities. We testified at a commission hearing on
    September 21, 2006, about Army National Guard equipment and personnel
    challenges and highlighted the need for reassessing the Army reserve
    components' business model in light of the reserves' ongoing role in
    supporting overseas operations and homeland missions. We provided the
    commission with briefings, reports, and other support throughout the
    year. Additionally, we shared the results of our work on reserve
    component issues with the Center for Strategic and International
    Studies, which completed a major study of reserve roles, missions, and
    organization in 2006. The study made numerous recommendations that are
    intended to bring about a better match between expectations and roles
    of the reserve components for the 21st century and organizational
    structures, equipping policies, funding, and human capital strategies.

    * How can existing policies and programs be reformed to encourage older
    workers to work longer and to facilitate phased retirement approaches
    to employment? Demographic changes, such as longer life spans and the
    retirement of the baby boomers, pose serious challenges for older
    Americans, employers, and the economy. Our past work as well as our
    work in fiscal year 2006 on older workers has led to congressional and
    federal action that addresses these challenges. For example, we
    reported on the impact that existing policies and programs have on
    encouraging older workers to work longer and facilitate phased
    retirement (see Older Workers: Labor Can Help Employers and Employees
    Plan Better for the Future, GAO-06-80, Dec. 5, 2005, and Older Workers:
    Demographic Trends Pose Challenges for Employers and Workers, GAO-02-
    85, Nov. 16, 2001). Building on our prior work, which recommended that
    the Department of Labor (Labor) convene an interagency task force of
    relevant government agencies to identify policies and legislation to
    extend the work life of older Americans, we determined that all areas
    of the labor market are likely to be affected by the aging of the
    workforce, but that most employers have not made hiring and retaining
    older workers a priority, and many had no specific plans or programs to
    recruit or retain older workers. We identified barriers to offering
    more opportunities as well as examples of programs targeted toward
    older workers. Labor implemented our recommendation and created the
    Taskforce on the Aging of the American Workforce to focus on the impact
    of the aging workforce. Labor noted that this effort responded directly
    to our recommendation as well as to a request from the Senate Special
    Committee on Aging to implement our recommendation. The taskforce
    includes federal agencies from across the government, such as the
    Departments of Commerce, Education, Transportation, and the Treasury,
    and is identifying strategies that enhance the ability of older
    Americans to remain in or reenter the labor market and pursue self-
    employment opportunities and enable businesses to take full advantage
    of this skilled labor pool. In addition, the Comptroller General spoke
    at the White House Conference on Aging, which issued a report in fiscal
    year 2006 to the President and the Congress that resolved to promote
    incentives for older workers to continue working and to remove barriers
    to retaining and hiring older workers, and identified strategies to
    implement them.

    * Is the federal government effectively informed by a key national
    indicator system about the position and progress of the nation as a
    whole--both on absolute and relative bases compared to other nations--
    as a guide to helping set agency and program goals and priorities?
    Following a 2003 forum convened by the Comptroller General, a number of
    organizations, led by the National Academies, came together to form the
    Key National Indicators Initiative (Initiative), an effort to develop a
    system to measure the United States' position and progress in key
    social, economic, and environmental dimensions (go to [Hyperlink,
    http://keyindicators.org/] for more information). Key national
    indicators, for example, can help policymakers and the public better
    understand which programs, policies, and functions are working and
    which are not, helping to inform choices and better target scarce
    resources. During fiscal year 2006, the Initiative developed a
    prototype set of indicators as well as a prototype State of the USA Web
    site. Interest in national indicator systems has grown at the
    international level as well, and in 2006 the Comptroller General
    participated in the planning for the second World Forum sponsored by
    the Organisation for Economic Cooperation and Development that would
    focus on "Measuring and Fostering the Progress of Societies." These
    efforts helped forge links between the Initiative in the United States
    and other efforts under way by other countries and several
    international organizations.

    GAO's High-Risk Program:

    Since 1990, our high-risk program has highlighted long-standing
    challenges facing the federal government that affect its efficient and
    effective operation. Increasingly, the program has focused on those
    major programs and operations that are in urgent need of broad
    transformation and congressional as well as executive branch action, to
    ensure that our national government functions in the most economical,
    efficient, and effective manner possible. Our latest regular update,
    released in January 2005, highlighted 25 troubled areas across
    government. In March 2006, we added the National Flood Insurance
    Program to the high-risk list in recognition of the unexpected
    challenges facing FEMA in managing this program in the wake of the
    catastrophic losses in 2005 resulting from hurricanes Katrina, Rita,
    and Wilma. Many of the current high-risk areas involve critical public
    service providers, such as USPS and IRS, and services provided to
    Medicare and Medicaid recipients through CMS.

    Issued to coincide with the start of each new Congress, our high-risk
    updates have helped sustain attention from members of the Congress who
    are responsible for oversight and from executive branch officials who
    are accountable for performance. Our high-risk list work in fiscal year
    2006 resulted in 217 reports, 107 testimonies, and approximately
    $22 billion in financial benefits.

    Our focus on high-risk problems contributed to the Congress enacting a
    series of governmentwide reforms to address critical human capital
    challenges, strengthen financial management, improve IT practices, and
    instill a more results-oriented government. Overall, our high-risk
    program has served to identify and help resolve serious weaknesses in
    areas that involve substantial resources and provide critical services
    to the public. Of the 44 areas that have appeared on our high-risk list
    since 1990, 16 have improved enough to be removed from the list and 2
    have been consolidated with other areas. We also continue to identify
    other areas that require attention and should be added to the list.
    Table 7 lists each high-risk area, the year it was placed on the high-
    risk list, and the strategic goal under which our work related to each
    high-risk area is generally performed.

    Table 7: GAO's High-Risk List:

    Addressing challenges in broad-based transformations:

    2006 high-risk area: Strategic Human Capital Management[A]; Year
    designated high risk: 2001;
    GAO's strategic goal: 3.

    2006 high-risk area: USPS Transformation Efforts and Long-Term
    Outlook[A];
    Year designated high risk: 2001;
    GAO's strategic goal: 1.

    2006 high-risk area: Managing Federal Real Property[A]; Year designated
    high risk: 2003;
    GAO's strategic goal: 1.

    2006 high-risk area: Protecting the Federal Government's Information
    Systems and the Nation's Critical Infrastructures; Year designated high
    risk: 1997;
    GAO's strategic goal: 3.

    2006 high-risk area: Implementing and Transforming the Department of
    Homeland Security;
    Year designated high risk: 2003;
    GAO's strategic goal: 2.

    2006 high-risk area: Establishing Appropriate and Effective
    Information- Sharing Mechanisms to Improve Homeland Security; Year
    designated high risk: 2005;
    GAO's strategic goal: 3.

    2006 high-risk area: DOD Approach to Business Transformation[A]; Year
    designated high risk: 2005;
    GAO's strategic goal: 2.

    2006 high-risk area: DOD Business Systems Modernization; Year
    designated high risk: 1995;
    GAO's strategic goal: 3.

    2006 high-risk area: DOD Personnel Security Clearance Program; Year
    designated high risk: 2005;
    GAO's strategic goal: 2.

    2006 high-risk area: DOD Support Infrastructure Management; Year
    designated high risk: 1997;
    GAO's strategic goal: 2.

    2006 high-risk area: DOD Financial Management; Year designated high
    risk: 1995;
    GAO's strategic goal: 3.

    2006 high-risk area: DOD Supply Chain Management (formerly Inventory
    Management);
    Year designated high risk: 1990;
    GAO's strategic goal: 2.

    2006 high-risk area: DOD Weapon Systems Acquisition; Year designated
    high risk: 1990;
    GAO's strategic goal: 2.

    Managing federal contracting more effectively:

    2006 high-risk area: DOD Contract Management; Year designated high
    risk: 1992;
    GAO's strategic goal: 3.

    2006 high-risk area: DOE Contract Management; Year designated high
    risk: 1990;
    GAO's strategic goal: 1.

    2006 high-risk area: National Aeronautics and Space Administration
    Contract Management;
    Year designated high risk: 1990;
    GAO's strategic goal: 3.

    2006 high-risk area: Management of Interagency Contracting; Year
    designated high risk: 2005;
    GAO's strategic goal: 3.

    Assessing the efficiency and effectiveness of tax law administration:

    2006 high-risk area: Enforcement of Tax Laws[A, B]; Year designated
    high risk: 1990;
    GAO's strategic goal: 3.

    2006 high-risk area: IRS Business Systems Modernization[C]; Year
    designated high risk: 1995;
    GAO's strategic goal: 3.

    Modernizing and safeguarding insurance and benefit programs:

    2006 high-risk area: Modernizing Federal Disability Programs[A]; Year
    designated high risk: 2003;
    GAO's strategic goal: 1.

    2006 high-risk area: Pension Benefit Guaranty Corporation Single-
    Employer Insurance Program[A];
    Year designated high risk: 2003;
    GAO's strategic goal: 1.

    2006 high-risk area: Medicare Program[A]; Year designated high risk:
    1990;
    GAO's strategic goal: 1.

    2006 high-risk area: Medicaid Program[A]; Year designated high risk:
    2003;
    GAO's strategic goal: 1.

    2006 high-risk area: HUD Single-Family Mortgage Insurance and Rental
    Housing Assistance Programs;
    Year designated high risk: 1994;
    GAO's strategic goal: 1.

    2006 high-risk area: National Flood Insurance Program; Year designated
    high risk: 2006;
    GAO's Strategic Goal: 1.

    Other:

    2006 high-risk area: FAA Air Traffic Control Modernization;
    Year designated high risk: 1995;
    GAO's strategic goal: 3.

    Source: GAO.

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

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

    [C] The IRS financial management high-risk area has been incorporated
    into this high-risk area.

    [End of table]

    In fiscal year 2006, we issued 217 reports and delivered 107
    testimonies related to our high-risk areas and documented financial
    benefits totaling about $22 billion. These results included reviews we
    completed during the fiscal year on the Medicare program that resulted
    in 20 reports and 4 testimonies. For example, we reported on the need
    for HHS to improve communications to prescription drug beneficiaries
    and its contingency plans to address potential problems with the
    transition of dual-eligible beneficiaries from Medicaid to Medicare
    drug coverage. We documented $4.5 billion in financial benefits from
    our past work on the Medicare program. In addition, we evaluated DOD's
    weapon system acquisition process. Some of our significant work in this
    high-risk area included improving the agency's business case for both
    future combat systems and the F-22A Raptor--the Air Force's newest
    fighter aircraft. Our past work in the DOD weapon systems acquisition
    area resulted in approximately $3.34 billion in financial benefits for
    fiscal year 2006. Also, on the basis of our work examining the
    transformation of USPS, we realized $2.2 billion in financial benefits.
    Our efforts continue to bring attention to areas in urgent need of
    improvement and to help the Congress and federal government institute
    reforms to address these high-risk areas.

    We plan to issue our next high-risk update early in 2007. To learn more
    about our work on the high-risk areas or to download our January 2005
    high-risk update in full, go to [Hyperlink,
    http://www.gao.gov/docsearch/featured/highrisk.html].

    Building and Sustaining Partnerships:

    Increasingly, the process for developing solutions to organizational
    and societal problems will require partnering for progress. Such
    partnerships are important because they create opportunities for
    collaboration and cooperation that help all of the organizations
    involved join forces to apply their collective knowledge, experience,
    and expertise to address common challenges. Partnerships help us and
    our partners to enhance our ability to improve government operations
    and service to the public as well as make meaningful changes in our
    internal accountability processes and policies and leverage available
    resources.

    Again this fiscal year, teams and units supporting all four of our
    strategic goals have continued or established important new
    partnerships with a number of organizations. For example, our
    partnership with the International Organization of Supreme Audit
    Institutions (INTOSAI) has been a long-standing relationship--
    cultivated primarily through goal 4's external liaison activities--that
    has resulted in tangible benefits for both organizations. In fiscal
    year 2006, we actively worked on several INTOSAI committees, such as
    the Working Group on Environmental Auditing and the Task Force on
    Accountability for and Audit of Disaster-Related Aid, to discuss mutual
    points of interest, share knowledge, and identify opportunities for
    joint audit activities. Also, we, along with our counterpart audit
    agency in Morocco, acted as INTOSAI emissaries to promote the role of
    supreme audit institutions as partners in a worldwide effort to fight
    corruption, enhance transparency, and promote good governance. In
    addition, our external liaison activities helped to sustain
    partnerships with organizations such as the intergovernmental audit
    forums, the Partnership for Public Service, the Council for Excellence
    in Government, and the Woodrow Wilson International Center for
    Scholars. (For more information about these partnerships, see
    Strategies for Achieving Our Goals later in this section of the
    report.)

    Teams supporting goals 1 through 3 established or maintained
    partnerships with organizations that helped them to exchange
    information about issues related to our performance goals and key
    efforts. For example, some teams continued their ongoing partnerships
    with the National Academies of Sciences, sharing information on such
    areas as the academic knowledge of students with limited English
    proficiency, drinking water security, and the cleanup of radioactive
    wastes. Other teams have an ongoing partnership with the Special
    Inspector General for Iraq Reconstruction and other accountability
    organizations on work related to Iraq reconstruction and U.S. military
    operations. This partnership involves audit notifications, quarterly
    meetings to share knowledge, and reflections of GAO's work in the
    Special Inspector General for Iraq Reconstruction's report to the
    Congress.

    Building on a literature review we performed last fiscal year to
    identify metrics for assessing the quality of partnerships, we began in
    fiscal year 2006 a more formal effort to identify indicators that could
    help us measure how well we develop mutually beneficial relationships
    with other accountability organizations. We have yet to identify any
    agencies that have developed quantitative indicators for measuring the
    effectiveness of partnerships. However, we found the following
    qualitative indicators for assessing these collaborative relationships:
    commitment of time and resources, a clear definition of the roles and
    responsibilities of the partners, the partnerships contribution to
    outcomes, the success of the activity or project supported by the
    partnership, and value for the resources spent. Until we identify a
    satisfactory set of metrics, we will continue to describe the
    partnerships that our teams and units participate in and the outcomes
    and benefits derived from them to help us assess our performance in
    this area.

    Managing Our Resources:

    Resources Used to Achieve Our Fiscal Year 2006 Performance Goals:

    Our financial statements for fiscal year 2006 received an unqualified
    opinion from an independent auditor. The auditor also found our
    internal controls to be effective--which means that no material
    weaknesses were identified--and the auditor reported substantial
    compliance with the requirements for financial systems in the Federal
    Financial Management Improvement Act of 1996. In addition, the auditor
    found no instances of noncompliance with the laws or regulations in the
    areas tested. The statements and their accompanying notes, along with
    the auditor's report, appear later in this report. Table 8 summarizes
    key data. Compared with the statements of large and complex agencies in
    the executive branch, our statements present a relatively simple
    picture of a small yet very important agency in the legislative branch.
    We focus most of our financial activity on the execution of our
    congressionally approved budget with most of our resources devoted to
    the human capital needed for our mission of supporting the Congress
    with professional, objective, fact-based, nonpartisan, nonideological,
    fair, and balanced information and analysis.

    Table 8: GAO's Financial Highlights: Resource Information (Dollars in
    millions):

    Total budgetary resources[A];
    Fiscal year 2006: $497.2 million;
    Fiscal year 2005: $491.5 million.

    Total outlays[A];
    Fiscal year 2006: $488.1 million;
    Fiscal year 2005: $478.7 million.

    Net cost of operations: Goal 1: Well-being and Financial security of
    the American people;
    Fiscal year 2006: $191.9 million;
    Fiscal year 2005: $197.7 million.

    Net cost of operations: Goal 2: Changing security threats and
    challenges of globalization;
    Fiscal year 2006: $154.7 million;
    Fiscal year 2005: $144.2 million.

    Net cost of operations: Goal 3: Transforming the federal government's
    role;
    Fiscal year 2006: $146.8 million;
    Fiscal year 2005: $147.3 million.

    Net cost of operations: Goal 4: Maximizing the value of GAO; Fiscal
    year 2006: $23.7 million;
    Fiscal year 2005: $22.0 million.

    Net cost of operations: Less reimbursable services not attributable to
    goals;
    Fiscal year 2006: ($5.6 million);
    Fiscal year 2005: ($5.4 million).

    Total net cost of operations[A];
    Fiscal year 2006: $511.5 million;
    Fiscal year 2005: $505.8 million.

    Actual FTEs:
    Fiscal year 2006: 3,194;
    Fiscal year 2005: 3,189.

    Source: GAO.

    [A] The net cost of operations figures include nonbudgetary items, such
    as imputed pension and depreciation costs, which are not included in
    the figures for total budgetary resources or total outlays.

    [End of table]

    Our budget consists of an annual appropriation covering salaries and
    expenses, and revenue from reimbursable audit work and rental income.
    For fiscal year 2006, our total budgetary resources increased by $5.7
    million from fiscal year 2005. This increase consists of funds needed
    to cover mandatory and uncontrollable costs and a one time transfer of
    budgetary authority from the U.S. Agency for International Development
    (USAID) for the analysis of U.S.-funded international basic education
    programs.

    Our total assets were $105.6 million, consisting mostly of property and
    equipment (including the headquarters building, land and improvements,
    and computer equipment and software) and funds with the U.S. Treasury.
    The largest dollar change in our assets was in the net value of
    property and equipment, which decreased by $7 million in fiscal year
    2006 as a result of normal depreciation amounts being greater than
    asset purchases. Total liabilities of $97.5 million were composed
    largely of employees' accrued annual leave, amounts owed to other
    government agencies, accounts payable, and employees' salaries and
    benefits. The greatest change in the liabilities is an increase in
    workers' compensation liability. For fiscal year 2006 GAO engaged an
    independent actuarial firm to calculate the Federal Employees'
    Compensation Act (FECA) liability. The methodology used to calculate
    the liability this year more closely reflects GAO's claims' experience
    when compared to the formula provided by Labor used in prior years.

    The net cost of operating GAO during fiscal year 2006 and fiscal year
    2005 was approximately $511 million and $506 million, respectively.
    Expenses for salaries and related benefits accounted for 79 and 78
    percent of our net cost of operations in fiscal years 2006 and 2005,
    respectively. Figure 15 shows how our fiscal year 2006 costs break down
    by category.

    We report net cost of operations according to our four strategic goals,
    consistent with our strategic plan. Goal 2 accounted for the greatest
    dollar increase in our net cost of operations from fiscal year 2005
    through fiscal year 2006. The increase is due to work on Hurricane
    Katrina and Iraq as well as continued efforts in the area of homeland
    security.

    Figure 15: Use of Fiscal Year 2006 Funds by Category:

    [See PDF for Image] - graphic text:

    Pie chart with five items.

    Percentage of Total Net Costs:

    Salaries and benefits: 79.2%;
    Building and hardware maintenance services: 11.4%; Rent (space and
    hardware): 2.3%;
    Depreciation: 2.5%;
    Other: 4.6%.

    Source: GAO.

    [End of Figure]

    Figures 16 and 17 show our net costs by goal for fiscal year 2003
    through fiscal year 2006. Figure 16 shows costs unadjusted for
    inflation, while figure 17 shows the same costs in 2006 dollars, that
    is, adjusted for inflation.

    Figure 16: Net Cost by Goal, Unadjusted for Inflation:

    [See PDF for Image]- graphic text:

    Bar chart with 4 groups of 4 items each.

    Goal 1;
    2003: $186.4 million;
    2004: $194.7 million;
    2005: $197.7 million;
    2006: $191.9 million.

    Goal 2;
    2003: $122.0 million;
    2004: $131.7 million;
    2005: $144.2 million;
    2006: $154.7 million.

    Goal 3;
    2003: $144.9 million;
    2004: $145.8 million;
    2005: $147.3 million;
    2006: $146.8 million.

    Goal 4;
    2003: $20.0 million;
    2004: $23.4 million;
    2005: $22.0 million;
    2006: $23.7 million.

    Source: GAO.

    [End of Figure]

    Figure 17: Net Cost by Goal, Adjusted for Inflation:

    [See PDF for Image]- graphic text:

    Bar chart with 4 groups of 4 items each.

    Goal 1;
    2003: $203.2 million;
    2004: $206.8 million;
    2005: $203.8 million;
    2006: $191.9 million.

    Goal 2;
    2003: $133.0 million;
    2004: $139.9 million;
    2005: $148.7 million;
    2006: $154.7 million.

    Goal 3;
    2003: $157.9 million;
    2004: $154.9 million;
    2005: $151.9 million;
    2006: $146.8 million.

    Goal 4;
    2003: $21.8 million;
    2004: $24.9 million;
    2005: $22.7 million;
    2006: $23.7 million.

    Source: GAO.

    [End of figure]

    Limitation on Financial Statements:

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

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

    Planned Resources to Achieve Our Fiscal Year 2007 Performance Goals:

    As we go to press on this report, the Congress has not yet completed
    action on our fiscal year 2007 budget, and we, like most other federal
    government agencies, are operating at fiscal year 2006 levels under a
    continuing resolution through November 17, 2006, pending enactment of
    the fiscal year 2007 appropriations bills for the federal government.
    We requested $509.4 million--an increase of 5 percent over our fiscal
    year 2006 revised funding level--primarily to cover uncontrollable
    mandatory pay and price level increases and an FTE increase to help
    address supply and demand imbalance issues in responding to
    congressional requests for studies in areas such as health care,
    disaster assistance, homeland security, the global war on terrorism,
    and forensic auditing. At this time, the House has approved a 2 percent
    increase and the full Senate has not acted on our budget request. Table
    9 reflects our requested budget level and FTE positions. Once final
    appropriations decisions are enacted, we will adjust our resources to
    reflect the appropriated amount.

    Table 9: Requested Fiscal Year 2007 Budgetary Resources by Strategic
    Goal:

    Strategic Goal: Goal 1; Provide timely, quality service to the Congress
    and the federal government to address current and emerging challenges
    to the well-being and financial security of the American people; FTEs:
    1,307;
    Amount(dollars in millions): $201.1 million.

    Strategic Goal: Goal 2; Provide timely, quality service to the Congress
    and the federal government to respond to changing threats and the
    challenges of global interdependence; FTEs: 955;
    Amount(dollars in millions): $147.1 million.

    Strategic Goal: Goal 3; Help transform the federal government's role
    and how it does business to meet 21st century challenges; FTEs: 863;
    Amount(dollars in millions): $134.1 million.

    Strategic Goal: Goal 4; Maximize the value of GAO by being a model
    federal agency and a world-class professional services organization;
    FTEs: 142;
    Amount(dollars in millions): $27.1 million.

    Total;
    FTEs: 3,267;
    Amount(dollars in millions): $509.4 million.

    Source: GAO.

    [End of table]

    Our fiscal year 2007 budget request will fund the human capital,
    ongoing operations, and targeted initiatives needed to achieve all four
    of our strategic goals in support of the Congress and the American
    people. Our budget request will support our activities in three broad
    budget areas:

    * human capital, which primarily includes funding for salaries,
    benefits, other compensation, awards and recognition, and training;

    * engagement support, which includes funding for staff travel expenses
    needed to complete our performance and financial audits as well as
    other engagements, contracts for expert advice or assistance to meet
    congressional time frames, and overseas support to enhance our ability
    to conduct oversight of programs and activity in Iraq and elsewhere in
    the Middle East; and:

    * infrastructure operations, which include funding for building
    maintenance, computer hardware maintenance and software, rent,
    financial management activities, recruitment and retention expenses,
    and targeted initiatives to improve, for example, our knowledge
    services and information technology.

    These resources also allow us to continue to address major management
    challenges, such as human capital, information security, and physical
    security. For example, we have taken actions to improve and strengthen
    our physical security position by working toward completing
    implementation of the Integrated Electronic Security System and smart
    card technology. These enhancements allow improved internal and
    external communications and operations with other federal entities. We
    continue to strengthen the technical and physical aspects of our
    emergency preparedness efforts.

    Regarding information security, we continue our focus on data
    protection using encryption at the desktop, increasing our vigilance of
    the centralized auditing of network servers and devices. This will give
    us the ability to securely access and transmit classified data and
    information.

    To ensure our ability to recruit, reward, and retain a highly
    qualified, high-performing, and diverse workforce, human capital
    remains one of our most important challenges. We continue to utilize
    hiring flexibilities and a variety of sourcing strategies that will
    allow us to continue moving to a more performance-oriented and market-
    based compensation system. This will help ensure that we are well
    equipped to serve the Congress and the American people.

    Strategies for Achieving Our Goals:

    The Government Performance and Results Act directs agencies to
    articulate not just goals, but also strategies for achieving those
    goals. As detailed in the following sections, our strategies primarily
    emphasize providing information from our work to the Congress and the
    public in a variety of forms and continuing and strengthening our
    internal operations. For all four strategic goals, the multiyear,
    qualitative performance goals included in our current strategic plan
    describe specific areas of work that we addressed in fiscal year 2006.

    Our strategies also emphasize the importance of two overarching
    approaches: (1) working with other organizations on crosscutting issues
    and (2) effectively addressing the challenges to achieving our agency's
    goals and recognizing the internal and external factors that could
    impair our performance. Through these strategies, which have proven
    successful for us for a number of years, we plan to achieve the level
    of performance that is needed to do the work we agreed to do for the
    Congress (reflected in our qualitative performance goals) and meet our
    annual performance measures, and that, in turn, will allow us to
    achieve our strategic goals.

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

    * evaluating federal policies, programs, and the performance of
    agencies;

    * overseeing government operations through financial and other
    management audits to determine whether public funds are spent
    efficiently, effectively, and in accordance with applicable laws;

    * investigating whether illegal or improper activities are occurring;

    * analyzing the financing for government activities;

    * conducting various constructive engagements in which we work
    proactively with agencies, when appropriate, to provide advice that may
    assist their efforts toward positive results;

    * providing legal opinions that determine whether agencies are in
    compliance with applicable laws and regulations;

    * conducting policy analyses to assess needed actions and the
    implications of proposed actions; and:

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

    We conduct specific engagements as a result of requests from
    congressional committees and mandates written into legislation,
    resolutions, and committee reports. In fiscal year 2006, we devoted 85
    percent of our engagement resources to work requested or mandated by
    the Congress. We initiated the remaining 15 percent of the engagement
    work under the Comptroller General's authority. Much of this work
    addressed various challenges that are of broad-based interest to the
    Congress, such as the global war on terrorism, the cost and status of
    the reconstruction efforts in Iraq, and our reviews related to the 2005
    hurricane season.[Footnote 5] Also covered by this work were government
    programs and operations that we have identified as high risk for fraud,
    abuse, and mismanagement as well as reviews of agencies' budget
    requests to help support congressional decision making. By making
    recommendations to improve the accountability, operations, and services
    of government agencies, we contribute to increasing the effectiveness
    of federal spending and enhancing the taxpayers' trust and confidence
    in their government.

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

    * letter reports and chapter reports that when printed, are issued with
    our traditional blue cover;

    * correspondence, which is a written letter that does not have a blue
    cover;

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

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

    We also produce special publications on specific issues of general
    interest to all Americans, such as our primer on motor fuels that we
    prepared to help improve public understanding of the major factors that
    influence the U.S. price of gasoline and our guide on Social Security
    that answers concisely some basic questions about how the program works
    and why it needs to be reformed.[Footnote 6] Collectively, our products
    always contain information and often conclusions and recommendations
    that allow us to achieve our external strategic goals.

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

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

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

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

    * use advisory panels and other bodies to inform our strategic and
    annual work planning and:

    * initiate and support collaborative national and international audit,
    technical assistance, and other knowledge-sharing efforts.

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

    Strategic and Annual Work Planning:

    Through a series of forums, advisory boards, and panels; periodic scans
    of international and national issues that affect the political and
    social environment we work in, and our speakers' series, we gather
    information and perspectives for our strategic and annual planning
    efforts. In fiscal year 2006, the Comptroller General convened various
    experts from the public, private, and nonprofit sectors in a series of
    forums and panels intended to enhance our understanding of emerging
    issues and to identify opportunities for action.

    * In July 2006, we hosted a forum on federal procurement sourcing
    management.

    * In September 2006, we convened a forum on global competitiveness,
    specifically on implications for the nation's higher education system.

    * In March 2006, we continued our speakers' series, Conversations on
    21st Century Challenges, wherein prominent leaders speak to our staff
    on issues affecting the United States and its place in the world.
    Robert Reich, former Secretary of Labor and professor of public policy
    at the University of California at Berkeley spoke to the staff about
    strategies for building public support for good government. Past
    speakers have included Connie Morella, Ambassador of the Organization
    for Economic Cooperation and Development and General Wesley K. Clark, a
    4-star military officer and NATO Supreme Allied Commander.

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

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

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

    * The Accountability Advisory Council, made up of experts in the
    financial management community, advises us on audits of the U.S.
    government's consolidated financial statements and emerging issues
    involving financial management and accountability reporting in the
    public and private sectors.

    * The Executive Council on Information Management and Technology, whose
    19 members are experts from the public and private sectors and
    representatives of related professional organizations, helps us to
    identify high-risk and emerging issues in the IT arena.

    * The Comptroller General's Educators' Advisory Panel, composed of
    deans, professors, and other academics from prominent universities
    across the United States, advises us on recruiting, retaining, and
    developing staff and on strategic planning matters.

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

    Collaborating with Others:

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

    To build capacity in the national audit offices around the world, we
    conduct an international audit fellows program for mid-to senior-level
    staff from other countries. In 2006, 12 audit fellows from Africa,
    Asia, Europe, Latin America, and the South Pacific spent about 4 months
    at GAO learning how we are organized to do our work, how we plan our
    work, and what methodologies we use, particularly for performance
    audits. As part of our strategy to promote continuous learning and
    sustainability once the fellows return to their countries, we are
    working with major donors--such as the World Bank and USAID--to
    identify or support relevant capacity-building projects in fellows'
    institutions. Seven current and eight former auditors general as well
    as several deputy auditors general, including the current chair of
    INTOSAI, are graduates of this program.

    Other collaborative activities undertaken by our staff during 2006
    included the following:

    * Participating in three Domestic Working Group collaborative efforts
    of federal, state, and local audit officials to address issues
    regarding access to records, grants management, and governance.
    Collaborative efforts with the Domestic Working Group and the National
    Association of State Auditors, Comptrollers, and Treasurers facilitated
    our work involving the states by fostering a cooperative working
    relationship with the state auditors on over a dozen engagements,
    including our work on the federal response to hurricanes Katrina and
    Rita.

    * Implementing the National Intergovernmental Audit Forum strategic
    plan that was adopted in December 2004. This plan was developed by a
    task force composed of federal, state, and local auditors and an
    independent public accountant. The newly established committees have
    begun organizing to implement the plan, which seeks to help maximize
    the forum's effectiveness in promoting good government and
    accountability at all levels of government. In 2006, the forum advanced
    its strategic plan through the activities of its knowledge sharing,
    communications, standards liaison, and emerging issues committees. In
    addition, 12 regional forum meetings were held, which brought together
    auditors at all government levels. We also cosponsored the 16th
    Biennial Forum of Government Auditors, which was attended by over 300
    members of the U.S. accountability community. This conference helped
    advance the public sector accountability profession's understanding of
    and ability to respond to the many challenges facing the nation in the
    21st century. In addition, we also held a forum on Federal Oversight
    and the Inspectors General in May 2006.

    * Facilitating collaboration between our teams and federal and state
    auditors, which, among other things, helped us to minimize duplication
    of efforts, leverage resources, and gain access to people and
    information.

    * Supporting the Comptroller General as part of the Concord Coalition's
    initiative to educate the public on America's long-term fiscal
    challenges.

    * Hosting a series of meetings to "connect people to people" in an
    effort to improve our working relationships and better leverage our
    resources with our sister agencies and IGs. We hosted the first of what
    we hope to be a series that introduced the leadership and senior
    executives of the Congressional Research Service to our leadership and
    team managing directors. Also, we hosted the first ever meeting between
    our leadership and team managing directors with members of the
    President's Council on Integrity and Efficiency and the Executive
    Council on Integrity and Efficiency, whose respective members are
    primarily inspectors general appointed by the President and by agency
    heads.

    * Receiving about 700 visitors from 94 countries, including officials
    from our counterpart organizations, parliaments, and central government
    ministries.

    * Engaging in capacity-building efforts on a bilateral basis with our
    Iraqi counterparts with plans to leverage that work to benefit other
    counterparts in the region.

    * Redesigning our external Web page for the auditing and accountability
    community to enhance access to information available from us and other
    sources. This effort updated both the content and the format of the Web
    page to facilitate accessing desired information based on user's
    comments. The Web page now highlights what users believe is most
    important and provides expanded access to auditing guidance and
    methodology not previously available.

    * Implementing the authority for an executive exchange program granted
    under the Human Capital Reform Act of 2004. After the GAO order was
    finalized, we developed the operating program, which involved
    establishing policies and procedures as well as the process from
    program application to exit. We also developed materials and
    collaborated with our Public Affairs office and our accountability
    partners to publicize the program. In addition, we outreached to a
    number of private sector organizations to recruit candidates.

    * Developing and issuing the international protocols to strengthen our
    relationships with our stakeholders in the international community. We
    issued the final version in January 2006.

    Using Our Internal Experts:

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

    Addressing Management Challenges That Could Affect Our Performance:

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

    For fiscal year 2006, we continued to address three management
    challenges--physical security, information security, and human capital.
    We anticipate that we may need to continue to address all three of
    these management challenges in future years because they are evolving
    and will require us to continuously identify ways to adapt and improve.
    We revisit the challenges each year and refine them when appropriate,
    and when we believe we have sufficiently addressed these challenges we
    will remove them from our list. We will report any changes as we
    monitor and report on our progress in addressing the challenges through
    our annual performance and accountability process. The following
    sections describe our recent and planned efforts to address these
    challenges.

    Physical Security Challenge:

    We continue to take essential actions to protect our people and our
    assets to ensure continuity of agency operations. The domestic and
    international climate demands that we constantly assess our physical
    security profile and seek ways to improve and strengthen it. We took
    positive steps in fiscal year 2006 to centralize and strengthen our
    policies and operations, improve our internal and external
    communications and information-sharing efforts, and upgrade and enhance
    our technical capabilities.

    In the third quarter of fiscal year 2006, we established our Office of
    Emergency Preparedness to help ensure that GAO can continue to carry
    out its functions in the face of natural or man-made disasters or other
    disruptions. The unit also provides policy and oversight for GAO's
    emergency planning activities, including continuity of operations,
    information systems disaster recovery, GAO building occupant emergency
    plans, and shelter-in-place plans, and better integration with GAO's
    field offices.

    To strengthen our internal and external communications and information
    sharing we meet on a regular basis with the Legislative Branch
    Continuity of Operations Plan Working Group as well as the Executive
    Branch Continuity of Operations Working Group. The Office of Emergency
    Preparedness provides proactive coordination with sister agencies in
    the legislative branch, executive branch agencies, and local law
    enforcement in the area of contingency planning and for information/
    intelligence-sharing purposes. In fiscal year 2006 we also sought to
    better inform, educate, and prepare our staff by conducting a shelter-
    in-place drill; conducting awareness activities in September, National
    Preparedness Month; and briefing approximately 1,100 employees in the
    areas of handling classified information, handling sensitive but
    unclassified information, shelter in place, identity theft, DOE
    security requirements, and espionage.

    To enhance our capability to communicate to staff during emergency
    situations we procured an emergency notification system. We also
    initiated implementation of the Integrated Electronic Security System
    with the relocation of the Emergency Operations Center from the first
    floor of the headquarters building to its new location in the basement.

    In fiscal year 2007, we plan to complete a number of initiatives; these
    will address many of the aspects of the physical security management
    challenge, but we will need to complete other initiatives in order to
    remove it from our list. For example, in fiscal year 2007, we plan to
    make progress on the implementation of the Integrated Electronic
    Security System, including the installation of turnstiles and upgrading
    of the access control and intrusion detection systems for headquarters;
    however, the implementation of smart card technology, a critical
    component of our physical security efforts, will not be completed
    during the upcoming fiscal year. In addition, during fiscal year 2007,
    the Office of Emergency Preparedness plans to update the continuity of
    operations plan; develop and disseminate a pandemic influenza
    implementation plan; create a working group and establish continuity
    points of contact throughout GAO to help ensure that the needs of the
    organization, including GAO's field locations, are considered in
    developing and implementing emergency plans; and create an emergency
    preparedness Web site on GAO's intranet.

    The Information Security Challenge:

    Information system security continues to be a critical activity in
    ensuring our information system and assets are effectively protected
    and free from compromise. In fiscal year 2006, we established a wide
    range of goals and implemented numerous initiatives to address
    information system security. These included implementing centralized/
    correlated auditing of network servers and devices to effectively
    monitor and better secure our computing assets within GAO, refining our
    information security procedures to maintain compliance with new federal
    guidance, implementing improvements to our disaster recovery
    operations, and improving our ability to respond and recover in the
    event of a disruption by implementing additional technologies to lessen
    our risks. These efforts are described in detail in appendix 3.

    Given the constantly evolving nature of threats to information systems
    and assets, information security will continue to be a management
    challenge for us and all government and private sector entities in the
    foreseeable future. In fiscal year 2007, we will further address the
    challenge of keeping our systems and information secure by focusing on
    data protection using encryption at the desktop, increasing our
    vigilance of the centralized auditing of network servers and devices to
    better secure our computing assets within GAO, responding to new and
    updated security guidance from the National Institute of Standards and
    Technology and OMB, refining our security processes and procedures,
    expanding our capabilities for identity management to better control
    access to the GAO network, implementing improvements to our contingency
    operations, and improving our overall ability to respond to the
    changing threats by implementing appropriate new technologies to reduce
    or manage risks.

    Human Capital Challenge:

    The skills, knowledge, and dedication of our workforce make it possible
    for the agency to deliver the results and performance expected of us by
    our clients and customers. A scan of the strategic environment suggests
    that competition for talent among knowledge-based organizations will
    only continue to increase, challenging our ability to maintain a top-
    notch workforce capable of providing quality products and services to
    the Congress. To prepare for this competitive environment as well as
    for the retirement of our "baby boom" employees, we have initiated
    efforts aimed at retention of institutional knowledge and experience
    and enhancement of our succession planning and talent acquisition
    efforts.

    Recruiting, rewarding, and retaining a highly qualified, high-
    performing, and diverse workforce in today's competitive environment
    remains one of our most important challenges. In fiscal year 2006, we
    completed a comprehensive review of our recruitment and hiring
    activities, resulting in over 40 recommendations, which will begin to
    be implemented in fiscal year 2007 in the areas of college recruitment,
    candidate assessment, interviewing/hiring, offer negotiating and
    processing, and administrative and professional support staff and other
    hires. In addition, we continued to utilize hiring flexibilities and a
    variety of sourcing strategies, including our student employment
    program. By working with outside organizations, such as the Hispanic
    Association of Colleges and Universities, we have sought to strengthen
    our workforce diversity. To improve consistency in the consideration
    process we revised our entry-level analyst hiring strategy. The
    interview process is now more centralized and structured than in the
    past.

    One of our greatest challenges is maintaining the right mix of
    experienced and knowledgeable staff to carry out our engagements and
    meet our client's needs. GAO is facing unusual circumstances because of
    continuity and succession concerns resulting from downsizing and
    reduced hiring in the 1990s. Currently, over 41 percent of GAO's
    analysts and related staff have fewer than 5 years of agency
    experience, requiring even greater emphasis on learning and development
    than previously. To help ensure that our newest entry-level staff
    acquire the skills they need to become proficient performers as quickly
    as possible, we implemented a training and development program
    consisting of 12 courses encompassing 159 hours of orientation and core
    analytic skills training that must be completed by entry-level
    employees within their first 2 years with GAO. Courses are developed to
    align with GAO's strategic goals as well as the competencies we use to
    manage performance and evaluate proficiency.

    We continued to focus on implementing and enhancing a market-based
    compensation system in which (1) pay ranges are set to be competitive
    with the labor markets in which GAO competes for talent, (2) all staff
    have the opportunity but not the entitlement to advance to the top of
    the pay range, and (3) pay ranges may overlap to adequately reward
    expertise, leadership, and performance. GAO's compensation system is
    the result of a 2-year effort in which a leading compensation
    consulting firm assisted us in establishing salary ranges for GAO
    employees that are competitive with those of comparable organizations,
    including selected government, not-for-profit, and professional
    services entities in the labor markets in which GAO competes for
    talent. In fiscal year 2006, our efforts to further enhance our
    compensation systems include restructuring our Band II analyst
    position, creating two pay ranges to better align individual staff
    according to whether a Band II employee has responsibility for work
    activities involving the development of staff. We also adopted the use
    of a standardized rating score in our competency-based appraisal
    system, to mitigate differences in organizational rating patterns and
    convert an employee's appraisal average to a number that reflects the
    relative position of an individual appraisal average to a comparative
    group average. Finally, we decoupled from the General Schedule annual
    across-the-board increase, and established a new performance-oriented
    market-based compensation system that includes an annual adjustment
    component.

    While we have made progress in addressing human capital issues, more
    work remains to be done and we will keep human capital as a management
    challenge. Some of the key efforts planned in this area for fiscal year
    2007 include the following:

    * Implementing the recruitment task force recommendations:

    * Establishing a community of practice involving senior leadership,
    recruiters, and human capital professionals to enhance the recruiting
    and hiring process:

    * Implementing a voluntary mentoring program to maximize successful
    development at GAO:

    * Enhancing the leadership development programs to prepare managerial
    talent:

    * Improving the integration of human capital metrics systems:

    * Increasing the transparency and the staff's knowledge of the market-
    based compensation process:

    Mitigating External Factors That Could Affect Our Performance:

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

    As the Congress focuses on unpredictable events--such as terrorism,
    natural disasters, and military conflicts and threats abroad--the mix
    of work we are asked to undertake may change, diverting our resources
    from some strategic objectives and performance goals. We can and do
    mitigate the impact of these events on the achievement of our goals in
    various ways. For example in fiscal year 2006, we:

    * stayed abreast of current events (such as protecting our ports and
    borders and preventing possible pandemics) and communicated frequently
    with our congressional clients in order to be alert to possibilities
    that could shift the Congress's priorities or trigger new priorities;

    * quickly redirected our resources when appropriate (e.g., on the cost
    and recovery efforts related to Hurricane Katrina) so that we could
    deal with major changes as they occurred;

    * maintained broad-based staff expertise (i.e., in our Social Security,
    health care financing, and homeland security areas) so that we could
    readily address emerging needs; and:

    * initiated research under the Comptroller General's authority on
    several selected topics, including various issues relating to Iraq, the
    U.S. federal elections, and our 21st century challenges and high-risk
    work.

    We are experiencing heavy demand from the Congress for work in a number
    of subject areas, especially in the disaster recovery and preparedness
    areas in the aftermath of Hurricane Katrina and in the health care
    area. Our ability to effectively manage this demand could have an
    impact on our ability to meet our performance targets. We will continue
    to manage these requests in order to minimize any negative impact they
    may have on our ability to meet the needs of the Congress and the
    American people. Given large current federal budget deficits and the
    nation's long-range fiscal imbalance, the Congress is likely to place
    increasing emphasis on fiscal constraint. While it is unclear how we
    will ultimately be affected, it is reasonable to assume that any
    attempt to exercise additional budgetary discipline in the legislative
    branch will include our agency. As a result, while we believe that we
    submit reasonable and responsible budget requests and we know that the
    return on investment that we generate is unparalleled, we must plan and
    prepare for the possibility of significant and recurring constraints on
    the resources made available to the agency. In addition, because almost
    80 percent of our budget is composed of people-related costs, any
    serious budget situation will likely have an impact on our human
    capital policies and practices. This, in turn, would have an impact on
    our ability to serve the Congress and meet our performance targets.
    While, as noted above, the nature and extent of any such budget
    constraints cannot be determined at the present time, our executive
    team is engaged in a range of related planning activities. It is both
    appropriate and prudent for us to engage in such planning. At the same
    time, we are hopeful that the Congress will recognize that performance-
    based budgeting concepts would support providing additional resources
    to entities with prudent budget requests and proven performance
    results. If the Congress employs such an approach, we should be in a
    good position to continue to provide a high rate of return on the
    resources invested in the agency.

    A growing area for us involves our work on bid protests. As required by
    law, our General Counsel prepares Comptroller General procurement law
    decisions that resolve protests filed by disappointed bidders. These
    bidders challenge the way individual federal procurements are being
    conducted or how the contracts were awarded. In recent years, we have
    experienced an increase in the number of bid protests that have been
    filed, and in fiscal year 2005 the Congress enacted legislation that
    expanded our authority to allow certain representatives of affected
    government employees to protest when the private sector wins a private-
    public competition. We will continue to monitor our workload in this
    area to ensure that we meet our statutory responsibilities with minimal
    negative impact on our other work.

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

    [End of Part I: Management's Discussion and Analysis]

    Part II: Performance Information:

    Performance Information by Strategic Goal:

    In the following sections, we discuss how each of our four strategic
    goals contributed to our fiscal year 2006 performance results.
    Specifically, for goal 1, 2, and 3-our external goals-we present
    performance results for the three annual measures that we assess at the
    goal level. Most teams and units also contributed toward meeting the
    targets for the agencywide measures that were discussed in the previous
    part of this report.

    Goal 1 Overview: Provide timely, quality service to the Congress and
    the federal government to address current and emerging challenges to
    the well-being and financial security of the American people.

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

    * the health needs of an aging and diverse population;

    * the education and protection of the nation's children;

    * the promotion of work opportunities and the protection of workers;

    * a secure retirement for older Americans;

    * an effective system of justice;

    * the promotion of viable communities;

    * responsible stewardship of natural resources and the environment;
    and:

    * a safe, secure, and effective national physical infrastructure.

    These objectives, along with the performance goals and key efforts that
    support them, are discussed fully in our strategic plan, which is
    available on our Web site at [Hyperlink, http://www.gao.gov]. The work
    supporting these objectives was performed primarily by headquarters and
    field office staff in the following teams: Education, Workforce, and
    Income Security; Financial Markets and Community Investment; Health
    Care; Homeland Security and Justice; Natural Resources and Environment;
    and Physical Infrastructure. Almost every goal 1 team examined some
    aspect of the hurricane Katrina and Rita disasters. Also, in line with
    our performance goals and key efforts, goal 1 staff reviewed a variety
    of programs affecting the nation's students and schools, employees and
    workplaces, health providers and patients, and social service providers
    and recipients. In addition, rather than focusing on the federal court
    and prison system, goal 1 performed more work related to the nation's
    election system in response to the interests of our congressional
    clients.

    Selected Work under Goal 1:

    Informing beneficiaries about the new Medicare prescription drug
    benefit: We identified shortcomings in the quality of communications
    with beneficiaries about Medicare's new prescription drug benefit and
    their prescription drug plan choices. We found that selected
    publications, the 1-800-MEDICARE help line, and the Medicare Web site
    were not always clear, accurate, and easy to use. We recommended that
    the CMS Administrator enhance the quality of its communications through
    these outlets. (See app. 1, item 1.12.C.)

    Protecting SSNs from identity fraud and abuse: We found that private
    entitites-such as banks and telecommunications companies- shared SSns
    with contractors for limited purposes, relied on accepted industry
    practices, and used the terms of their contracts to protect the
    personal information shared with contractors. However, our review of
    four industries revealed gaps in federal law and agency oversight. We
    recommended that the Congress consider possible options for addressing
    gaps in federal requirements for safeguarding SSns shared with
    contractors. (See app. 1, item 1.30.N.)

    [End of Selected Work under Goal 1]

    To accomplish our work under these strategic objectives in fiscal year
    2006, we conducted engagements, audits, analyses, and evaluations of
    programs at major federal agencies, such as the Departments of
    Education, Health and Human Services, Homeland Security,
    Transportation, Housing and Urban Development, and the Interior, and
    developed reports and testimonies on the efficacy and soundness of
    programs they administer.

    As shown in table 10, we met our fiscal year 2006 performance targets
    for financial benefits, nonfinancial benefits, and testimonies for goal
    1.

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

    Performance measure: Financial benefits (billions of dollars); 2002
    Actual: $24.1 billion;
    2003 Actual: $23.7 billion;
    2004 Actual: $26.6 billion;
    2005 Actual: $15.6 billion;
    2006 Target: $18.7 billion[A];
    2006 Actual: $22.0 billion;
    Met/Not Met: Met;
    2007 Target: $20.2 billion.

    Performance measure: Nonfinancial benefits; 2002 Actual: 226;
    2003 Actual: 217;
    2004 Actual: 252;
    2005 Actual: 277;
    2006 Target: 242[A];
    2006 Actual: 268;
    Met/Not met: Met;
    2007 Target: 256.

    Performance measure: Testimonies;
    2002 Actual: 111;
    2003 Actual: 80;
    2004 Actual: 85;
    2005 Actual: 88;
    2006 Target: 89;
    2006 Actual: 97;
    Met/Not Met: Met;
    2007 Target: 78.

    Source: GAO.

    [A] Our fiscal year 2006 targets for financial benefits and
    nonfinancial benefits differ from the targets we reported for these
    measures in our fiscal year 2006 performance plan. Based on our
    performance in fiscal year 2005, we lowered these targets from $19.5
    billion in financial benefits and 255 in nonfinancial benefits, because
    we anticipated that these benefits during fiscal year 2006 were more
    likely to stem from work performed under goal 2. We did not change the
    agencywide targets for these measures, but we made corresponding
    changes to targets for goals 2 and 3.

    [End of table]

    To help us examine trends for these measures over time, we look at
    their 4-year averages, which minimize the effect of an unusual level of
    performance in any single year and are shown in table 11. This table
    indicates that financial and nonfinancial benefits have generally risen
    over time, while the number of testimonies has generally declined for
    goal 1 since fiscal year 2002.

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

    Performance measure: Financial benefits(dollars in billions); 2002:
    $15.2 billion;
    2003: $17.7 billion;
    2004: $20.8 billion;
    2005: $22.5 billion;
    2006: $22.0 billion.

    Performance measure: Nonfinancial benefits; 2002: 190;
    2003: 209;
    2004: 226;
    2005: 243;
    2006: 254.

    Performance measure: Testimonies;
    2002: 110;
    2003: 99;
    2004: 87;
    2005: 91;
    2006: 88.

    Source: GAO.

    [End of table]

    The following sections describe our performance under goal 1 for each
    of these three quantitative performance measures and describe the
    targets for fiscal year 2007.

    Financial Benefits:

    Our work influenced legislation that ultimately resulted in a net
    reduction in Medicare spending that had a net present value of about
    $2.9 billion from 2005 through 2009. (See app. 1, item 1.4.F.)

    The financial benefits reported for this goal in fiscal year 2006
    totaled $22 billion, exceeding the target of $18.7 billion by about $3
    billion. This was largely due to a single financial benefit of over $6
    billion that resulted from our work involving the Federal
    Communications Commission's spectrum license auctions. Other financial
    benefits resulting from our work under goal 1 included reducing
    Medicare spending and costs, recapturing unexpended balances from some
    HUD programs, reducing improper payments at HUD, and reducing the
    Department of Energy's appropriations by better managing carryover
    balances. We describe these and other accomplishments in the goal 1
    section of appendix 1.

    Because financial benefits often result from work completed in prior
    years, we set our fiscal year 2007 target on the basis of our
    assessment of the progress agencies are making in implementing our past
    recommendations. Our analysis indicates that financial benefits in the
    future for goal 1 are likely to decline. We, therefore, have set the
    target for fiscal year 2007 at $20.2 billion.

    Nonfinancial Benefits:

    Nonfinancial benefits reported for goal 1 in fiscal year 2006 included
    248 actions taken by federal agencies to improve their services and
    operations in response to our work and another 20 in which information
    we provided to the Congress resulted in statutory or regulatory
    changes. This total of 268 nonfinancial benefits exceeded our target of
    242. We report some of our major accomplishments in detail in the goal
    1 section of appendix 1. For fiscal year 2007, we have set a target of
    256 for nonfinancial benefits. While this target is lower than what we
    achieved this year, it is about the same as the 4-year average for the
    goal and is consistent with our recognition that we are more likely to
    achieve these benefits under goals 2 and 3 in the next few years.

    Examples of Goal 1's Nonfinancial Benefits:

    Improving agency coordination for the 2006 hurricane season: We
    identified FEMA's lack of a system to track Red Cross requests for
    assistance as one of three specific areas where inadequate coordination
    between these two organizations hampered the provision of federal mass
    care assistance to victims of the 2005 Gulf Coast hurricanes. We
    recommended improvements in these areas, and in response to our work,
    the agencies have signed an agreement that confirms their commitment to
    sharing information about and coordinating their disaster relief
    activities. (See app. 1, item 1.21.N.)

    Improving access to transportation for disadvantaged communities: We
    reported that the Department of Transportation (DOT) needs to improve
    its oversight of how transit agencies and metropolitan planning
    agencies are implementing DOT's guidance on making transportation
    services accessible to persons with limited English proficiency. DOT
    has taken some action to implement our recommendations, including
    creating a new limited English proficiency Web site that provides a
    clear link to its guidance. (See app.1, item 1.51.N.)

    Testimonies:

    Our witnesses testified at 97 congressional hearings related to this
    strategic goal, which exceeded the fiscal year 2006 target of 89
    testimonies. Among the testimonies given were those on nursing home
    care for veterans, the Hanford nuclear waste treatment plant,
    telecommunications spectrum reform, and federal crop insurance. (See
    the list of selected testimony topics in part I of this report.) On the
    basis of our assessment of the potential need to testify on issues
    under this goal, we have set a target of presenting testimony at 78
    hearings during fiscal year 2007.

    Goal 2 Overview: Provide timely, quality service to the Congress and
    the federal government to respond to changing security threats and the
    challenges of global inderdependence.

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

    * respond to emerging threats to security,

    * ensure military capabilities and readiness,

    * advance and protect U.S. international interests, and:

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

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

    Selected Work under Goal 2:

    Improving the military's plans for and response to disasters: While the
    military mounted a massive response after Hurricane Katrina that saved
    many lives, we found that among other things, a lack of timely damage
    assessments, communications difficulties, uncoordinated search and
    rescue efforts, and unexpected logistics responsibilities adversely
    affected its response. DOD has begun to implement many of our
    recommendations to address such problems, including developing more
    proactive, detailed operational plans for how the military will respond
    to future catastrophes. (See app.1, item 2.25.C.)

    Increasing accountability and transparency related to reconstruction in
    Iraq: We recommend that the National Security Council take several
    steps to complete the U.S. strategy for rebuilding Iraq to improve its
    usefulness to the Congress and identify the current costs and future
    resources needed to implement the strategy, such as the costs of
    maintaining U.S. military operations and training and equipping Iraqi
    security forces. Our work also identified the need to clarify the roles
    and responsibilities of U.S. government agencies involved in the
    reconstruction and improve performance measures to help track the
    impact of U.S. efforts. (See app.1, item 2.43.C.)

    [End of Selected Work under Goal 2]

    To accomplish our work in fiscal year 2006 under these strategic
    objectives, we conducted engagements and audits that involved fieldwork
    related to programs that took us across multiple continents, including
    Europe, Africa, Asia, South America, and North America. As in the past,
    we developed reports, testimonies, and briefings on our work.

    As shown in table 12, we met our fiscal year 2006 performance targets
    for financial benefits, nonfinancial benefits, and testimonies for this
    goal.

    Table 12: Strategic Goal 2's Annual Performance Results and Targets:

    Performance measure: Financial benefits(billions of dollars); 2002
    Actual: $8.4 billion;
    2003 Actual: $7.1 billion;
    2004 Actual: $9.7 billion;
    2005 Actual: $12.9 billion;
    2006 Target: $10.5 billion[A];
    2006 Actual: $12.0 billion;
    Met/Not Met: Met;
    2007 Target: $9.8 billion.

    Performance measure: Nonfinancial benefits; 2002 Actual: 218;
    2003 Actual: 273;
    2004 Actual: 369;
    2005 Actual: 365;
    2006 Target: 282[A];
    2006 Actual: 449;
    Met/Not Met: Met;
    2007 Target: 290.

    Performance measure: Testimonies;
    2002 Actual: 38;
    2003 Actual: 48;
    2004 Actual: 70;
    2005 Actual: 42;
    2006 Target: 58;
    2006 Actual: 68;
    Met/Not Met: Met;
    2007 Target: 52.

    Source: GAO.

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

    [End of table]

    To help us examine trends for these measures over time, we look at
    their 4-year averages, which minimize the effect of an unusual level of
    performance in any single year and are shown in table 13. This table
    indicates that financial and nonfinancial benefits derived from our
    work have risen. At the same time, the number of testimonies for goal 2
    has remained stable.

    Table 13: Four-Year Rolling Averages for Strategic Goal 2:

    Performance measure: Financial benefits(billions of dollars); 2002:
    $6.9 billion;
    2003: $7.9 billion;
    2004: $8.9 billion;
    2005: $9.5 billion;
    2006: $10.4 billion.

    Performance measure: Nonfinancial benefits; 2002: 154;
    2003: 202;
    2004: 262;
    2005: 306;
    2006: 364.

    Performance measure: Testimonies;
    2002: 41;
    2003: 44;
    2004: 48;
    2005: 50;
    2006: 57.

    Source: GAO.

    [End of table]

    The following sections describe our performance under goal 2 for each
    of our quantitative performance measures and describe the targets for
    fiscal year 2007.

    Financial Benefits:

    Our work highlighting challenges in developing and implementing a
    passenger prescreening program influenced TSA to cancel its program,
    resulting in financial benefits of over $300 million from fiscal year
    2005 through fiscal year 2008. (See app. 1, item 2.3.F.)

    The financial benefits reported for this goal in fiscal year 2006
    totaled $12 billion, exceeding the target of $10.5 billion. Among other
    things, these accomplishments stemmed from engagements related to
    unobligated balances in DOD operations and maintenance accounts as well
    as reductions in appropriations for the Millennium Challenge
    Corporation, the global war on terrorism, military personnel, and the
    V- 22 aircraft program. We describe these and other accomplishments in
    the goal 2 section of appendix 1.

    Given the large portion of the U.S. budget that defense spending
    consumes, we expect our work under this goal to continue to produce
    economies and efficiencies that yield billions of dollars in financial
    benefits for the American people each year. We set our fiscal year 2007
    target at $9.8 billion based on our assessment of the progress agencies
    are making in implementing our past recommendations that might yield
    financial benefits.

    Nonfinancial Benefits:

    The nonfinancial benefits reported for goal 2 in fiscal year 2006
    included 419 actions taken by federal agencies to improve their
    services and operations in response to our work and another 30 in which
    information we provided to the Congress resulted in statutory or
    regulatory changes. This total of 449 nonfinancial benefits exceeded
    our target of 282. Our success in this area arose from our increased
    emphasis on follow-up efforts and increased monitoring of our progress
    toward the targets throughout the year. Some of our major
    accomplishments are reported in detail in the goal 2 section of
    appendix 1.

    Looking ahead, our assessments of the executive branch's current
    efforts to implement our recommendations made under this goal led us to
    set our fiscal year 2007 target at 290. This target is lower than our
    fiscal year 2006 actual performance and 4-year average for this measure
    because we want to encourage staff to identify significant and
    meaningful nonfinancial benefits rather than numerous, narrowly focused
    ones that would easily ensure that we meet a higher target.

    Examples of Goal 2's Nonfinancial Benefits:

    Improving outcomes of DOD's sea system acquisitions: We identified
    challenges facing the Navy's long-range shipbuilding plan--including
    demanding mission requirements that can result in more costly ships
    that cannot be built in the numbers desired to meet program missions
    and sustain shipyard workload. In response to our work, the Navy has
    taken steps to increase overall confidence in cost estimates and plans
    to conduct independent reviews of cost estimates for future aircraft
    carriers. (See app. 1, item 2.19.N.)

    Better managing foreign language requirements: The Army and the Foreign
    Commercial Service have taken actions in response to our recommendation
    that they adopt a strategic, results-oriented human capital approach to
    manage their foreign language requirements. For example, after we found
    that the Army's strategies did not fully meet the need for some foreign
    language skills and were not part of a coordinated plan of action, the
    Secretary of the Army issued a detailed road map, which fully addressed
    our recommendations. The Foreign Commercial Service completed a
    worldwide review to more accurately identify existing language
    proficiency shortfalls and developed a detailed corrective plan of
    action, which has been aggressively implemented. (See app. 1, item
    2.42.N.)

    Testimonies:

    Our witnesses testified at 68 congressional hearings related to this
    strategic goal, exceeding our target of presenting testimony at 58
    hearings. Among other things, we testified on Hurricane Katrina
    preparedness, response, and recovery; alternative mortgage products;
    polar-orbiting operational environmental satellites; and the worldwide
    AIDS relief plan. (See the list of selected testimony topics in part I
    of this report.) We have set our target for presenting testimony at
    hearings at 52 for fiscal year 2007.

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

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

    * reexamine the federal government's role in achieving evolving
    national objectives;

    * support the transformation to results-oriented, high-performing
    government;

    * support congressional oversight of key management challenges and
    program risks to improve federal operations and ensure accountability;
    and:

    * analyze the government's fiscal position and strengthen approaches
    for addressing the current and projected fiscal gap.

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

    Selected Work under Goal 3:

    Improving grant effectiveness. We recommended that OMB take further
    steps to obtain grantees' views and concerns to streamline and simplify
    grant management processes. We also identified strategies to improve
    the timing, targeting, and flexibility of increased federal Medicaid
    assistance to states during economic downturns and options for
    improving the targeting of Community Development Block Grant funds
    toward communities with the greatest need and least capacity to meet
    those needs. (See app. 1, item 3.2.C.)

    Improving the information used to decide how billions of federal IT
    dollars are spent: In fiscal year 2006, agencies submitted capital
    asset plan and business case information for IT investments totaling
    over $65 billion. We found that there was inadequate underlying support
    for information reported at selected agencies, raising questions
    regarding the sufficiency of the business cases for major IT
    investments. (See app. 1, item 3.20.C.)

    Identifying commercial tax preparation problems: Ina limited study that
    included an undercover investigation, we found that paid tax preparers
    employed by national tax preparation chains made mistakes in all 19 of
    our undercover visits. Some of the mistakes were substantial. (See app.
    1, item 3.41.C.)

    [End of Selected Work under Goal 3]

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

    As shown in table 14, we exceeded our fiscal year 2006 performance
    targets for financial benefits, nonfinancial benefits, and testimonies
    for this goal.

    Table 14: Strategic Goal 3's Annual Performance Results and Targets:

    Performance measure: Financial benefits(dollars in billions); 2002
    Actual: $5.2 billion;
    2003 Actual: $4.7 billion;
    2004 Actual: $7.6 billion;
    2005 Actual: $11.0 billion;
    2006 Target: $9.8 billion[A];
    2006 Actual: $17.0 billion;
    Met/Not Met: Met;
    2007 Target: $10.0 billion.

    Performance measure: Nonfinancial benefits; 2002 Actual: 462;
    2003 Actual: 553;
    2004 Actual: 576;
    2005 Actual: 767;
    2006 Target: 526[A];
    2006 Actual: 625;
    Met/Not Met: Met;
    2007 Target: 554.

    Performance measure: Testimonies;
    2002 Actual: 65;
    2003 Actual: 56;
    2004 Actual: 60;
    2005 Actual: 47;
    2006 Target: 63;
    2006 Actual: 73;
    Met/Not Met: Met;
    2007 Target: 55.

    Source: GAO.

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

    [End of Table]

    To help us examine trends for these measures over time, we look at
    their 4-year averages, which minimize the effect of an unusual level of
    performance in any single year and are shown in table 15. This table
    indicates that documentation of financial and nonfinancial benefits
    derived from our work under this goal have risen, while the number of
    testimonies for goal 3 has declined overall.

    Table 15: Four-Year Rolling Averages for Strategic Goal 3:

    Performance measure: Financial benefits(dollars in billions); 2002:
    $5.5 billion;
    2003: $5.5 billion;
    2004: $6.1 billion;
    2005: $7.1 billion;
    2006: $10.1 billion.

    Performance measure: Nonfinancial benefits; 2002: 445;
    2003: 480;
    2004: 498;
    2005: 590;
    2006: 630.

    Performance measure: Testimonies;
    2002: 78;
    2003: 67;
    2004: 56;
    2005: 57;
    2006: 59.

    Source: GAO.

    [End of table]

    The following sections describe our performance under goal 3 for each
    of our quantitative performance measures and describe the targets for
    fiscal year 2007.

    Financial Benefits:

    Our work on vehicles donated to charities led to legislation that
    revises the tax rules by limiting the value that taxpayers can claim
    for donated vehicles, which will result in increased tax revenues of
    over $1 billion over a 5-year period collections. (See app. 1, item
    3.40.F.)

    The financial benefits reported for this goal in fiscal 2006 totaled
    $17 billion, exceeding our target of $9.8 billion. These efforts
    included work that led to the National Aeronautics and Space
    Administration reducing planned funding for its Prometheus 1 project,
    IRS increasing tax collections, the Tennessee Valley Authority taking
    steps to increase revenues, and the Department of Justice increasing
    debt collections. We describe these and other accomplishments in the
    goal 3 section of appendix 1.

    Under goal 3, we typically work on core government business processes
    and governmentwide management reforms. Our assessments of the executive
    branch's current efforts to implement the recommendations we made in
    our work under this goal indicate that financial benefits related to
    this goal are likely to be in line with our 4-year average;
    consequently, we set the target for financial benefits at $10 billion
    for fiscal year 2007.

    Nonfinancial Benefits:

    Nonfinancial benefits reported for goal 3 in fiscal year 2006 included
    614 instances in which agencies' core business processes were improved
    or governmentwide management reforms were advanced because of our work.
    In addition, there were 11 instances in which information we provided
    to the Congress resulted in statutory or regulatory changes. This total
    of 625 nonfinancial benefits exceeded our target of 526. The larger
    number of nonfinancial benefits occurred mainly in our financial
    management and IT areas where we tend to make multiple, specific
    recommendations for change to more than one entity. We describe some of
    our major accomplishments in the goal 3 section of appendix 1.

    Looking ahead, our assessments of the executive branch's current
    efforts to implement our recommendations made under this goal led us to
    set a fiscal year 2007 target of 554 nonfinancial benefits for goal 3.
    We recognize that this target is lower than our fiscal year 2006 actual
    performance, but we set it at this level because we want to encourage
    staff to identify significant and meaningful nonfinancial benefits
    rather than numerous, narrowly focused ones that would easily ensure
    that we meet a higher target.

    Examples of Goal 3's Nonfinancial Benefits:

    Connecting contract award fee payments to program outcomes: We reported
    that while DOD contractors can earn award and incentive fees for strong
    contract performance, DOD generally did not link award fees to desired
    outcomes and paid an estimated $8 billion in award fees over a 5-year
    period regardless of outcomes. The Congress subsequently passed
    legislation that should improve the administration of award and
    incentive fees. (See app. 1, item 3.3.N.)

    Reducing financial hardships on battle-injured soldiers: We reported
    that financial hardships of battle-injured soldiers who served in Iraq
    and Afghanistan resulted from problems with pay and travel
    reimbursement systems and processes and left battle-injured soldiers
    and their families without sufficient funds to meet everyday expenses.
    In response, legislation was enacted to alleviate these hardships and
    the Department of the Army canceled debts totaling over $2.3 million
    for 2,835 soldiers. (See app. 1, item 3.28.N.)

    Testimonies:

    Our witnesses testified at 73 congressional hearings related to this
    strategic goal, exceeding the target of 63. Among the testimonies
    presented were those on astronaut exploration vehicle risks, improving
    tax compliance to reduce the tax gap, improper federal payments for
    Hurricane Katrina relief, and compensation for federal executives and
    judges. (See the list of selected testimony topics in part I of this
    report.) For fiscal year 2007, we have set a target of presenting
    testimony at 55 hearings because we expect the level of hearings to be
    lower than it was in fiscal year 2006.

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

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

    * continuously improve client and customer satisfaction and stakeholder
    relationships,

    * lead strategically to achieve enhanced results,

    * leverage GAO's institutional knowledge and experience,

    * continuously enhance GAO's business and management processes, and:

    * become a professional services employer of choice.

    These objectives, along with the performance goals and key efforts that
    support them, are discussed fully in our strategic plan, which is
    available on our Web site at [Hyperlink, http://www.gao.gov]. The work
    supporting these objectives, which consists of internal studies and
    projects, is performed under the direction of the Chief Administrative
    Officer with assistance on specific key efforts being provided by staff
    from the Applied Research and Methods team and from offices such as
    Strategic Planning and External Liaison, Congressional Relations,
    Opportunity and Inclusiveness, Quality and Continuous Improvement, and
    Public Affairs.

    Selected Work under Goal 4:

    Integrating planning, budgeting, and performance measurement: We
    integrated our budget and workforce planning management functions to
    ensure alignment of our people, assets, and costs with other
    organizational needs. To help achieve our performance targets, we
    established monthly hiring targets, which enabled us to achieve a 99
    percent utilization rate of our authorized personnel strength this
    year. (See app. 1, item 4.5.C.)

    Strengthening our human capital management: we strengthened our
    competency-based performance system by implementing a market-based
    compensation system that makes pay ranges competitive with the labor
    markets in which GAO competes for talent, restructuring our Band II
    analyst staff into two pay levels to better align individual staff with
    our institutional compensation policies, and establishing a uniform
    appraisal and pay process and timeline for all staff. (See app. 1, item
    4.6.C.)

    Improving our records management process: We implemented the Electronic
    Records Management System to improve our records management process and
    provide an institutionalized and transparent means to staff to comply
    with records management. (See app. 1, item 4.10.C.)

    Improving engagement support services: We developed and launched the
    Web-based Hurricane Central portal to provide rapid, comprehensive
    access to past GAO work; act as an easily accessible collection and
    coordination point for data being gathered; and serve as the prototype
    for other portals. (See app. 1, item 4.11.C.)

    Improving our emergency preparedness profile: We established the Office
    of Emergency Preparedness to provide a unified, proactive focus on
    emergency preparedness planning in our headquarters and field offices
    and to coordinate with other legislative branch agencies and local law
    enforcement entities. (See app. 1, item 4.18.C.)

    Data Quality and Program Evaluation:

    Verifying and Validating Performance Data:

    Each year, we measure our performance by evaluating our annual
    performance on measures that cover the outcomes and outputs related to
    our work results, client service, and management of our people and
    internal operations. To assess our performance in fiscal year 2006, we
    used performance data that were complete and actual (rather than
    projected) for all of our performance measures. We believe the data to
    be reliable because we followed the verification and validation
    procedures described here to ensure the data's quality.

    The specific sources of the data for our annual performance measures,
    procedures for independently verifying and validating these data, and
    the limitations of these data are described in table 16.

    Table 16: How We Ensure Data Quality for Our Annual Performance
    Measures:

    Results measures:

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

    Financial benefits are linked to specific recommendations or other
    work. To claim that financial benefits have been achieved, our staff
    must file an accomplishment report documenting that (1) the actions
    taken as a result of our work have been completed or substantially
    completed, (2) the actions generally were taken within 2 fiscal years;
    prior to the filing of the accomplishment report, (3) a cause-and-
    effect relationship exists between the benefits reported and our
    recommendation or work performed, and (4) generally estimates of
    financial benefits were based on information obtained from non-GAO
    sources. Prior to fiscal year 2002, we limited the period over which
    the benefits from an accomplishment could be accrued to no more than 2
    years. Beginning in fiscal year 2002, we extended the period to 5 years
    for certain types of accomplishments known to have multiyear effects,
    such as those associated with multiyear reductions in longer term
    projects, changes embodied in law, program terminations, or sales of
    government assets yielding multiyear financial benefits. Financial
    benefits can be claimed for past or future years. In addition, for
    financial benefits involving events that occur on a regular but
    infrequent basis--such as the decennial census--we may extend the
    measurement period until the event occurs in order to compute the
    associated financial benefits using GAO's present value calculator.

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

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

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

    The team forwards the report to QCI, which reviews all accomplishment
    reports and approves accomplishment reports claiming benefits of $100
    million or more. QCI provides summary data on approved financial
    benefits to unit managers, who check the data on a regular basis to
    make sure that approved accomplishments submitted by their staff have
    been accurately recorded. Our Engagement Reporting System also contains
    accomplishment data for the fiscal year. In fiscal year 2006, QCI
    approved accomplishment reports covering 96 percent of the dollar value
    of financial benefits we reported.

    Every year, our IG reviews accomplishment reports that claim benefits
    of $500 million or more. In addition, on a periodic basis, the IG
    independently tests compliance with our process for claiming financial
    benefits of less than $500 million. For example, the IG reviewed fiscal
    year 2006 financial benefits of $100 million or more. The IG suggested
    clarification to certain policies for claiming financial benefits and
    improvements to documenting accomplishment reports. We clarified our
    guidance and will update our policy manual in fiscal year 2007.

    Financial benefits: Data limitations;
    Not every financial benefit from our work can be readily estimated or
    documented as attributable to our work. As a result, the amount of
    financial benefits is a conservative estimate. Estimates are based on
    information from non-GAO sources and are based on both objective and
    subjective data, and as a result, professional judgment is required in
    reviewing accomplishment reports. We feel that the verification and
    validation steps that we take minimize any adverse impact from this
    limitation.

    Results Measures:

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

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

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

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

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

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

    Results Measures:

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

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

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

    Percentage of products with recommendations: Verification and
    validation;
    Through a formal process, each team identifies the number of
    recommendations included in each product and an external contractor
    enters them into a database. We provide our managers with reports on
    the recommendations being tracked to help ensure that all
    recommendations have been captured and that each recommendation has
    been completely and accurately stated. Additionally, on a periodic
    basis, the IG independently tests the teams' compliance with our
    policies and procedures related to this performance measure. For
    example, during fiscal year 2006, the IG tested and determined that our
    process for determining the percentage of written products with
    recommendations was reasonable. The IG also suggested actions to
    improve the process for developing, compiling, and reporting these
    statistics.

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

    Results measures:

    Past recommendations implemented: Definition and background;
    We make recommendations designed to improve the operations of the
    federal government. For our work to produce financial or nonfinancial
    benefits, the Congress or other federal agencies must implement these
    recommendations. As part of our audit responsibilities under generally
    accepted government auditing standards, we follow up on recommendations
    we have made and report to the Congress on their status. Experience has
    shown that it takes time for some recommendations to be implemented.
    For this reason, this measure is the percentage rate of implementation
    of recommendations made 4 years prior to a given fiscal year (e.g., the
    fiscal year 2006 implementation rate is the percentage of
    recommendations made in fiscal year 2002 products that were implemented
    by the end of fiscal year 2006). Experience has shown that if a
    recommendation has not been implemented within 4 years, it is not
    likely to be implemented.

    This measure assesses action on recommendations made 4 years
    previously, rather than the results of our activities during the fiscal
    year in which the data are reported. For example, the cumulative
    percentage of recommendations made in fiscal year 2002 that were
    implemented in the ensuing years is as follows: 14 percent by the end
    of the first year (fiscal year 2003), 31 percent by the end of the
    second year (fiscal year 2004), 46 percent by the end of the third year
    (fiscal year 2005), and 82 percent by the end of the fourth year
    (fiscal year 2006).

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

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

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

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

    Additionally, on a periodic basis, the IG independently tests our
    process for calculating the percentage of recommendations implemented
    for a given fiscal year. For example, the IG determined that our
    process was reasonable for calculating the percentage of
    recommendations that had been made in our fiscal year 2002 products and
    implemented by the end of fiscal year 2006. The IG also suggested
    actions to improve the process for developing, compiling, and reporting
    this statistic.

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

    Client measures:

    Testimonies: Definition and background;
    The Congress may ask us to testify at hearings on various issues.
    Participation in hearings is one of our most important forms of
    communication with the Congress, and the number of hearings at which we
    testify reflects the importance and value of our institutional
    knowledge in assisting congressional decision making. When multiple GAO
    witnesses with separate testimonies appear at a single hearing, we
    count this as a single testimony.

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

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

    Testimonies: Verification and validation;
    The units responding to requests for testimony are responsible for
    entering data in the congressional hearing system. After a GAO witness
    has testified at a hearing, our Congressional Relations office verifies
    that the data in the system are correct and records the hearing as one
    at which we testified. Congressional Relations provides weekly status
    reports to unit managers, who check to make sure the data are complete
    and accurate. Additionally, on a periodic basis, the IG independently
    examines the process for recording the number of hearings at which we
    testified. For example, the IG determined that our process for
    recording hearings during fiscal year 2006 was reasonable.

    Testimonies: Data limitations;
    None.

    Client measures:

    Timeliness: Definition and background;
    The likelihood that our products will be used is enhanced if they are
    delivered when needed to support congressional and agency decision
    making. To determine whether our products are timely, we compute the
    proportion of favorable responses to questions related to timeliness
    from our electronic client feedback survey. Because our products often
    have multiple requesters, we often survey more than one congressional
    staff person per product. Thus, we base our timeliness result on the
    surveys sent out for key products issued during the fiscal year. We
    send a survey to key staff working for the requesters of our testimony
    statements and a survey to requesters of our more significant written
    products--specifically, engagements assigned an interest level of
    "high" by our senior management and those requiring an investment of
    500 GAO staff days or more. One question on each survey asks the
    respondent whether the product was delivered on time. When a product
    that meets our survey criteria is released to the public, we
    electronically send relevant congressional staff an e-mail message
    containing a link to a survey. When this link is accessed, the survey
    recipient is asked to respond to the questions using a five- point
    scale--strongly agree, generally agree, neither agree nor disagree,
    generally disagree, strongly disagree--or choose "not applicable/no
    answer." For this measure, favorable responses are "strongly agree" and
    "generally agree."

    Timeliness: Data sources;
    To identify the products that meet our survey criteria (all testimonies
    and other products that are high interest or involve 500 staff days or
    more), we run a query against GAO's Documents Database maintained by a
    contractor. To identify appropriate recipients of the survey for
    products meeting our criteria, we ask the engagement teams to provide
    in GAO's Product Numbering Database e-mail addresses for congressional
    staff serving as contacts on a product. Relevant information from both
    of these databases is fed into our Product by Product Survey Approval
    Database that is managed by QCI. This database then combines product,
    survey recipient, and data from our Congressional Relations staff and
    creates an e-mail message with a Web link to a survey. (Congressional
    Relations staff serve as the GAO contacts for survey recipients.) The e-
    mail message also contains an embedded client password and unique
    client identifier to ensure that a recipient is linked with the
    appropriate survey. Our Congressional Feedback Database creates a
    survey record with the product title and number and captures the
    responses to every survey sent back to us electronically.

    Timeliness: Verification and validation;
    QCI staff review a hard copy of a released GAO product or access its
    electronic version to check the accuracy of the addressee information
    in the Product by Product Survey Approval Database. QCI staff also
    check the congressional staff directory to ensure that survey
    recipients listed in the Product by Product Survey Approval Database
    appear there. In addition, our Congressional Relations staff review the
    list of survey recipients entered by the engagement teams and identify
    the most appropriate congressional staff person to receive a survey for
    each requester. Survey e-mail messages that are inadvertently sent with
    incorrect e-mail addresses automatically reappear in the survey
    approval system. When this happens, QCI staff correct any obvious
    typing errors and resend the e- mail message or contact the
    congressional staff person directly for the correct e-mail address and
    then resend the message.

    Timeliness: Data limitations;
    We do not measure the timeliness of all of our external products
    because we do not wish to place too much burden on busy congressional
    staff. Testimonies and written products that meet our criteria for this
    measure represent more than 50 percent of the congressionally requested
    products we issued during fiscal year 2006. We exclude from our
    timeliness measure low and medium interest reports requiring fewer than
    500 staff days to complete, reports addressed to agency heads or
    commissions, some reports mandated by the Congress, classified reports,
    and reports completed under the Comptroller General's authority. Also,
    if a requester indicates that he or she does not want to complete any
    surveys, we will not send a survey to this person again, even though a
    product subsequently requested meets our criteria. The response rate
    for our client feedback survey is about 28 percent. We received
    comments from one or more people for 53 percent of the products for
    which we sent surveys.

    People measures:

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

    New hire rate: Data sources;
    The Executive Committee approves the workforce plan. The workforce plan
    is coordinated and maintained by the Chief Administrative Office. Data
    on accessions--that is, new hires coming on board--is taken from a
    database that contains employee data from the Department of
    Agriculture's National Finance Center (NFC) database, which handles
    payroll and personnel data for GAO and other agencies.

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

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

    People measures:

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

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

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

    Acceptance rate: Data limitations;
    See New hire rate, Data limitations.

    People measures:

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

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

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

    Retention rate: Data limitations;
    See New hire rate, Data limitations.

    People measures:

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

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

    Staff development: Data sources;
    These data come from our staff's responses to an annual Web-based
    survey. Two of the survey questions we used for this measure ask staff
    how much positive or negative impact (1) external training and
    conferences and (2) on-the-job training had on their ability to do
    their jobs during the last 12 months. From the staff who expressed an
    opinion, we calculated the percentage of staff selecting the two
    categories that indicate satisfaction with or a favorable response to
    the question. For this measure, the favorable responses were either
    "very positive impact" or "generally positive impact." In addition, one
    survey question asks staff how useful and relevant internal (Learning
    Center) training courses are to their work. From staff who expressed an
    opinion, we calculated the percentage of staff selecting the three
    categories that indicate satisfaction with or a favorable response to
    the question. For this measure, the favorable responses were "very
    greatly useful and relevant," "greatly useful and relevant," and
    "moderately useful and relevant."

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

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

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

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

    People measures:

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

    Staff utilization: Data sources;
    These data come from our staff's responses to an annual Web-based
    survey. The survey questions we used for this measure ask staff how
    often the following occurred in the last 12 months: (1) my job made
    good use of my skills; (2) GAO provided me with opportunities to do
    challenging work; and (3) in general, I was utilized effectively. From;
    the staff who expressed an opinion, we calculated the percentage of
    staff selecting the two categories that indicate satisfaction with or a
    favorable response to the question. For this measure, the favorable
    responses were either "very positive impact" or "generally positive
    impact."

    Staff utilization: Verification and validation;
    See Staff development, Verification and validation.

    Staff utilization: Data limitations;
    See Staff development, Data limitations.

    People measures:

    Leadership: Definition and background;
    This measure is based on staff's favorable responses to 10 of 20
    questions related to six areas of leadership on our annual employee
    survey. This subset of questions was selected on the basis of senior
    management's judgment about the questions' relevance to the measure and
    specialists' knowledge about the development of indexes. Specifically,
    our calculation included responses to 1 of 4 questions related to
    empowerment, 2 of 4 questions related to trust, all 3 questions related
    to recognition, 1 of 3 questions related to decisiveness, 2 of 3
    questions related to leading by example, and 1 of 3 questions related
    to work life. Staff were asked to respond to these 10 questions on a
    five-point scale or choose "no basis to judge/not applicable" or "no
    answer." (For background information about our entire employee feedback
    survey, see Staff development, Definition and background.)

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

    Leadership: Verification and validation;
    See Staff development, Verification and validation.

    Leadership: Data limitations;
    See Staff development, Data limitations.

    People measures:

    Organizational climate: Definition and background;
    This measure is based on staff's favorable responses to 5 of the 13
    questions related to organizational climate on our annual employee
    survey. This subset of questions was selected on the basis of senior
    management's judgment about the questions' relevance to the measure and
    specialists' knowledge about the development of indexes. Staff were
    asked to respond to these 5 questions on a five- point scale or choose
    "no basis to judge" or "no answer." (For background information about
    our entire employee feedback survey, see Staff development.)

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

    Organizational climate: Verification and validation;
    See Staff development, Verification and validation.

    Organizational climate: Data limitations;
    See Staff development, Data limitations.

    Internal operations measures:

    Help get job done and Quality of work life: Definition and background;
    From an annual employee survey, we calculate a composite score from
    questions related to how well internal processes help employees get
    their jobs done and how these processes affect employees' quality of
    work life. To measure satisfaction with 31 internal administrative
    services and solicit ideas on ways to improve them, we administer an
    annual survey that asks employees to rate, on a scale of 1 (low) to 5
    (high), those services that are important to them and that they have
    experience with or used recently. Then, for each selected service,
    employees are asked to indicate their level of satisfaction (from 1 to
    5), and provide a written reason for their rating and recommendations
    for improvement if desired. This Web-based survey covers 21 work-
    related services and 10 quality of work life areas and is conducted by
    an outside contractor.

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

    Help get job done and Quality of work life: Verification and
    validation;
    The survey is housed on a Web site maintained by an outside contractor,
    and only the contractor has access to the password-protected results.
    We analyze the results by demographic representation (unit, tenure,
    location, band level, and job type) to ensure that the results are
    largely representative of the GAO population. In addition, each GAO
    unit responsible for administrative services conducts follow-on work,
    including analyzing the written comments to gain a better understanding
    of the information from the survey.

    Help get job done and Quality of work life: Data limitations;
    The information contained in the survey is self- contained. Therefore,
    there is no information with which to validate the views expressed by
    staff. We do not plan any actions to remedy this limitation because we
    feel it would violate the pledge of confidentiality that we make to our
    staff regarding the survey responses.

    Source: GAO.

    [End of table]

    Program Evaluation:

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

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

    We also use our biennial high-risk series to provide a status report on
    those major government operations considered high risk because of their
    vulnerabilities to waste, fraud, abuse, and mismanagement or the need
    for broad-based transformation. The series is a valuable evaluation and
    planning tool because it helps us to identify those areas where our
    continued efforts are needed to maintain the focus on important policy
    and management issues that the nation faces. (See [Hyperlink,
    http://www.gao.gov/docsearch/featured/highrisk.html].)

    To continuously improve the quality of our work supporting strategic
    goals 1, 2, and 3, we formed several task teams to address suggestions
    resulting from an external peer review of our performance auditing
    processes and practices. For example, one task team examined whether we
    could achieve process efficiencies for nonaudit services and documented
    the wide variation in the types of activities GAO conducts and the size
    of the potential universe of work that could be properly classified as
    nonaudits. Because nonaudits do not meet the generally accepted
    government auditing standards (GAGAS) definition of an audit, they do
    not require the same level of documentation as audits. The team
    developed proposed GAGAS revisions intended to improve the
    identification and categorization of nonaudit services.

    In fiscal year 2006 we reviewed several of our performance measures to
    ascertain whether the measures were effectively achieving desired
    results. As a result of this review, we modified our measure of
    timeliness (see the explanation in table 16) and eliminated as a
    measure the extent to which we have achieved our multiyear qualitative
    performance goals. In past years we used two elements in our strategic
    planning hierarchy-- performance goals and key efforts--as qualitative
    indicators of our performance and have referred to them as multiyear
    performance goals. We revised these performance goals and key efforts
    when we updated our strategic plan, and we asked senior managers to
    determine whether the performance goals established in our strategic
    plan had been met over a multiyear period. However, we never set
    targets for these performance goals; rather, we used our qualitative
    assessment of them to help us gauge whether and to what extent the work
    we did annually for the Congress linked to the broader efforts outlined
    in our 6-year strategic plan. Therefore, we decided that beginning in
    fiscal year 2006 (1) this progress assessment should serve as tracking
    or management information and should not be characterized as a
    performance measure and (2) we will no longer report publicly on the
    status of these performance goals unless our work deviates
    significantly from our strategic plan. In our next strategic plan
    update, which will cover fiscal years 2007 through 2012, we will
    establish revised performance goals and key efforts that cover fiscal
    years 2007 through 2009 and will use them to track internally whether
    our work was consistent with our strategic plan. We will continue to
    describe in our performance and accountability reports the work we did
    that supported each of our strategic goals and helped us to achieve our
    annual quantitative performance measures during the fiscal year.

    In addition, an organizational and performance consulting firm examined
    the mission, job roles and responsibilities, hiring, and retention
    issues associated with our administrative and professional support
    staff and matched their jobs duties and compensation with those of
    comparable federal and private sector employees in the Washington,
    D.C., area. Based on the results of this study, the firm developed
    recommended pay ranges based on market median salaries, and we
    restructured the compensation ranges for these staff into three pay
    plans. (This study is available publicly.)

    We also completed a number of other studies and evaluations related to
    goal 4's strategic objectives. These studies resulted in internal
    products or briefings in fiscal year 2006 that are not available
    publicly.

    * Customer satisfaction with internal operations and services. We
    conducted our third customer satisfaction survey to measure customer
    satisfaction with internal operational services, determine the impact
    of our improvement efforts launched in response to customer feedback
    from previous surveys, refine our targets, and make necessary
    adjustments to improve services and reduce the gaps between what our
    customers expect and the services available to them. We also used the
    information from this survey to refine our internal operations
    measures.

    * Human capital sourcing strategies. A task team comprehensively
    reviewed all aspects of our recruitment and hiring processes for all
    types of staff. This team organized into five task teams focused on
    college recruitment, candidate assessment, interviewing and hiring,
    offer negotiating and processing, and administrative and professional
    support staff and other hires. The team made over 40 recommendations
    for refining and enhancing our human capital sourcing strategies and
    processes. Some of the more immediate recommendations have already been
    implemented.

    * Financial management. We conducted internal reviews of our compliance
    with requirements set forth in 31 U.S.C. 3512 (commonly referred to as
    the Federal Managers' Financial Integrity Act); OMB Circular A-127,
    Financial Management Systems; and OMB Circular A-123, Management's
    Responsibility for Internal Control, Appendix A. The Federal Managers'
    Financial Integrity Act review covered the quarterly review of payroll
    transactions and the financial management systems review covered
    reporting requirements, security controls, and training. We assessed
    our internal control over financial reporting consistent with OMB
    Circular A-123, documenting our business processes; identifying,
    analyzing, and testing major internal controls over financial
    reporting; and taking corrective action where necessary. Based on the
    results of this assessment, we concluded that GAO has reasonable
    assurance that internal control over financial reporting as of
    September 30, 2006, was operating effectively and that no material
    weaknesses exist in the design or operation of the internal controls
    over financial reporting. This is the first year that GAO has provided
    this internal control assertion.

    * Enterprise architecture management. Our Information Technology team
    completed an audit of the status of GAO's enterprise architecture
    management program using the same Enterprise Architecture Management
    Maturity Framework and criteria used to assess the content of executive
    branch agencies' enterprise architecture programs. We determined that
    our enterprise architecture program had reached stage 3 (with stage 1
    being the lowest maturity level and stage 5 being the highest) and is
    making progress toward reaching stage 4. This compares very favorably
    with the 28 enterprise architecture programs we reviewed, where 21 were
    at stage 1, 3 were at stage 2, 4 were at stage 3, and none were at
    higher stages.

    * GAO's Internet and intranet. We contracted with the Nielsen Norman
    Group to evaluate our Internet and intranet and make recommendations to
    improve the presence and usability of these sites. The Nielsen Norman
    Group delivered an evaluation of the external Web site in July 2006 and
    a preliminary evaluation of the internal Web site in September 2006. A
    project team was assembled in August 2006, and it developed a schedule
    and milestones for addressing the external Web site findings. Some
    changes have already been implemented and others are planned through
    January 2007.

    * IT total cost of ownership benchmark study. We completed our Total
    Cost of Ownership Benchmark study with a contractor, comparing our
    fiscal year 2005 budgeted expenditures to the spending of private
    sector professional services peers in 15 different IT areas. The
    results of the analysis showed that in total, we accomplish the same
    workload as the most efficient quartile of peers. Our overall IT costs,
    within the contractor's model, were $5.5 million lower than the peer
    average and $2 million lower than the average for the most efficient
    quartile of peers. The contractor made recommendations concerning
    telecommunications and cell phones. We addressed the telecommunications
    issues through the rollout of a new telephone system in headquarters
    and a new voicemail system agencywide, and we are conducting a review
    of the cell phone program to address those concerns.

    * Publishing services benchmark study. We contracted for a benchmark
    study comparing our publishing services to five other agencies and
    private organizations. The results showed that we produce the second
    highest number of publications among those reviewed, and we do so at a
    significantly lower average cost per product. We are now in the process
    of implementing recommendations from the study and forming a community
    of practice with the benchmark partners to further improve our
    operations.

    [End of Part II: Performance Information]

    Part III: Financial Information:

    From the Chief Financial Officer:

    [See PDF for Photograph of Chief Financial Officer, Sallyanne Harper]

    Source: GAO.

    [End of Figure/photograph]

    November 15, 2006:

    I am pleased to report that in fiscal year 2006 the U.S. Government
    Accountability Office continued to focus on leading by example in
    government financial management. For the 20th consecutive year,
    independent auditors gave our financial statements an unqualified
    opinion with no material weaknesses and no major compliance problems.
    In keeping with a widely recognized best practice, we contract with a
    different audit firm every 5 years to ensure that our financial
    operations continue to be reviewed objectively. Consequently, this
    fiscal year we used a different independent accounting firm than we
    have used for the past 5 years to audit our financial statements. The
    financial statements that follow were prepared, audited, and made
    publicly available as an integral part of this performance and
    accountability report 45 days after the end of the fiscal year. In
    addition, for the fifth year in a row, the Association of Government
    Accountants awarded us a certificate of excellence in accountability
    reporting for our fiscal year 2005 performance and accountability
    report.

    During fiscal year 2006 we achieved milestones in two major financial
    management initiatives. We successfully implemented the Office of
    Management and Budget's (OMB) revised Circular A-123, Appendix A, which
    provides for federal agencies to take steps to review, document, and
    improve internal control practices. The process was resource intensive,
    requiring substantial time commitment from personnel throughout GAO as
    well as contractors. Our testing team found some internal control
    weaknesses with our existing internal control design and
    implementation. We were able to put remediation plans into place by
    September 30, 2006, for those weaknesses considered to be the highest
    priority. The results of this effort include management's assurance
    statement regarding the effectiveness of our internal controls, more
    thorough documentation of processes and related internal controls, and
    a vision of how to integrate this effort into our culture for the long
    term.

    Another significant milestone this fiscal year was in our efforts to
    replace our outdated financial management system, taking full advantage
    of today's improved technological offerings. We selected our next
    generation financial management system, along with a service provider,
    after a disciplined process to review and define our financial
    management requirements. As a result, we have entered into an
    interagency agreement with DOT, an OMB-designated financial management
    line of business service provider, to implement our new official system
    of record for fiscal year 2008. We are also considering DOT for
    provision of other financial services as part of our strategy of
    focusing our financial management efforts on greater value-added input
    to our activities by shifting staff away from routine transaction
    processing and toward a greater role in strategic business decision
    analysis and support.

    This fiscal year we explored and implemented multiple improvements to
    streamline our business operations and find potential cost savings to
    the agency. By implementing mandatory electronic earnings and leave
    statements, we have eliminated processing issues and thousands of paper
    forms per year, resulting in a $30,000 per year savings to the agency.
    By outsourcing the domestic and international mail processing function
    and reducing agency mail costs early in fiscal year 2006, we realized a
    32 percent reduction in postage costs this year, improved the level of
    service, and gained more flexibility in the deployment of resources. To
    provide all staff equal access to core training, we implemented a
    structure of "learning hubs," where training is provided to field-based
    entry-level (Band I) analysts at specified field offices. This
    structure also enables us to use adjunct faculty time more efficiently
    and reduces travel costs associated with core training by 50 percent.
    For more details on these and other goal 4 accomplishments, refer to
    appendix 1, Strategic Goal 4, later in this report.

    The coming fiscal year promises many challenges, including the
    implementation of our new financial management system and
    institutionalizing the internal control review process begun this year.
    As always, we remain focused on our role in the legislative branch to
    support the Congress in meeting its constitutional responsibilities and
    to help improve the performance and ensure the accountability of the
    government for the benefit of the American people.

    Signed by:

    Sallyanne Harper:
    Chief Financial Officer:

    [End of From the Chief Financial Officer]

    Overview of Financial Statements:

    Our financial statements and accompanying notes begin after the
    auditor's letter.[Footnote 7] Our financial statements for the fiscal
    years ended September 30, 2006 and 2005, were audited by the
    independent audit firms Clifton Gunderson LLP and Cotton & Co. LLP,
    respectively.

    Clifton Gunderson LLP, rendered an unqualified opinion on our financial
    statements and an unqualified opinion on the effectiveness of our
    internal controls over financial reporting and compliance with laws and
    regulations. The auditor also reported that we have substantially
    complied with the applicable requirements of the Federal Financial
    Management Improvement Act (Improvement Act) of 1996 and found no
    reportable instances of noncompliance with selected provisions of laws
    and regulations. In the opinion of the independent auditor, the
    financial statements are presented fairly in all material respects and
    are in conformity with generally accepted accounting principles.

    Financial Systems and Internal Controls:

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

    We complied with the spirit and intent of Appendix A of OMB Circular A-
    123, Management's Responsibility for Internal Control, which provides
    guidance for agencies' assessments of internal control over financial
    reporting. We performed this assessment by identifying, analyzing, and
    testing internal controls for key business processes. Based on the
    results of the assessment, we have reasonable assurance that internal
    control over financial reporting, as of September 30, 2006, was
    operating effectively and that no material control weaknesses exist in
    the design or operation of the internal controls over financial
    reporting. Additionally, our independent auditor found that we
    maintained effective internal controls over financial reporting and
    compliance with laws and regulations. Consistent with our assessment,
    the auditor found no material internal control weaknesses.

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

    In addition, we are committed to fulfilling the objectives of the
    Improvement Act, which is also covered within 31 U.S.C. 3512. Although
    not subject to the act, we voluntarily comply with its requirements. We
    believe that we have implemented and maintained financial systems that
    comply substantially with federal financial management systems
    requirements, applicable federal accounting standards, and the U.S.
    Government Standard General Ledger at the transaction level as of
    September 30, 2006. We made this assessment based on criteria
    established under the Improvement Act and guidance issued by OMB.

    GAO's IG also conducts audits and investigations that are internally
    focused, functions as an independent fact-gathering adviser to the
    Comptroller General, and reviews all accomplishment reports totaling
    $500 million or more. During fiscal year 2006, the IG examined
    compliance with our policy and procedures for conflict-of-interest
    determinations, recruiting and hiring, continuing professional
    education, audit documentation security and retention, performance-
    based compensation for administrative professional and support staff,
    and GAO's information security program. In addition, the IG tests our
    compliance with procedures related to our performance data on a
    rotating basis over a 3-year period; these actions are specifically
    identified in table 16. No material weaknesses were reported by the IG.
    During fiscal year 2006, we completed actions related to two IG
    recommendations and several IG suggestions, none of which affected the
    financial statements. There are no unresolved issues.

    Our Audit Advisory Committee assists the Comptroller General in
    overseeing the effectiveness of our financial reporting and audit
    processes, internal controls over financial operations, and processes
    that ensure compliance with laws and regulations relevant to our
    financial operations. The committee is composed of individuals who are
    independent of GAO and have outstanding reputations in public service
    or business with financial or legal expertise. The current members of
    the committee are as follows:

    * Sheldon S. Cohen (Chairman), a certified public accountant and
    practicing attorney in Washington, D.C., a former Commissioner and
    Chief Counsel of the Internal Revenue Service, and a Senior Fellow of
    the National Academy of Public Administration.

    * Edward J. Mazur, CPA; Member of the Governmental Accounting Standards
    Board, former State Comptroller of Virginia, and a former Controller of
    the Office of Federal Financial Management in OMB.

    * Charles O. Rossotti, senior advisor at The Carlyle Group; former
    Commissioner of the Internal Revenue Service; and founder and former
    Chief Executive Officer and Chairman of American Management Systems,
    Inc., an international business and information technology consulting
    firm.

    The committee's report and that of our independent auditors are
    included on the following pages.

    Audit Advisory Committee's Report:

    The Audit Advisory Committee (the Committee) assist the Comptroller
    General in overseeing the U.S. Government Accountability Office's (GAO)
    financial operations. As part of that responsibility, the Committee
    meets with agency management and its internal and external auditors to
    review and discuss GAO's external financial audit coverage, the
    effectiveness of GAO's internal controls over its financial operations,
    and its compliance with certain laws and regulations that could
    materially impact GAO's financial statements. GAO's external auditors
    are responsible for expressing an opinion on the conformity of GAO's
    audited financial statements wit the U.S. generally accepted accounting
    principles. The Committee reviews the findings of the internal and
    external auditors, and GAO's responses to those findings, to ensure
    that GAO's plan for corrective action includes appropriate and timely
    follow-up measures. In addition, the Committee reviews the draft
    Performance and Accountability Report, including its financial
    statements, and provides comments to management who has primary
    responsibility for the Performance and Accountability Report. The
    Committee met three times with respect to its responsibilities as
    described above. During these sessions, the Committee met with the
    internal and external auditors without GAO management being present and
    discussed with the external auditors the matters that are required to
    be discussed by generally accepted auditing standards. Based on
    procedures performed as outlined above, we recommend that GAO's audited
    statements and footnotes be included in the 2006 Performance and
    Accountability Report.

    Signed by:

    Sheldon S. Cohen:
    Chairman:
    Audit Advisory Committee:

    [End of Audit Advisory Committee's Report]

    Independent Auditor's Report:

    Clifton Gunderson LLP:
    Certified Public Accountants & Consultants: Centerpark I:
    4041 Powder Mill Road, Suite 410:
    Calverton, Maryland 20703-3106:
    tel: 301-931-2050:
    fax: 301-931-1710:
    www.cliftoncpa.com:

    Independent Auditor's Report:

    Comptroller General of the United States:

    We have audited the accompanying balance sheet of Government
    Accountability Office (GAO) as of September 30, 2006, and the related
    statements of net cost, changes in net position, budgetary resources,
    and financing for the year then ended. The financial statements of GAO
    as of September 30, 2005 were audited by other auditors whose report
    dated November 1, 2005, expressed an unqualified opinion on those
    financial statements. In our audit of GAO for fiscal year 2006, we
    found:

    * the financial statements are presented fairly, in all material
    respects, in conformity with accounting principles generally accepted
    in the United States of America;

    * GAO had effective internal control over financial reporting
    (including safeguarding assets) and compliance with laws and
    regulations,

    * GAO's financial management systems substantially complied with the
    applicable requirements of the Federal Financial Management Improvement
    Act of 1996 (FFMIA), and:

    * no reportable noncompliance with laws and regulations we tested.

    The following sections discuss in more detail (1) these conclusions and
    our conclusions on Management's Discussion and Analysis and other
    accompanying information and (2) the scope of our audit.

    Opinion on Financial Statements:

    In our opinion, the accompanying 2006 financial statements including
    the accompanying notes present fairly, in all material respects, in
    conformity with accounting principles generally accepted in the United
    States of America, the financial position of GAO as of September 30,
    2006, and its net cost, changes in net position, budgetary resources
    and financing for the year then ended.

    Opinion on Internal Control:

    In our opinion, GAO maintained, in all material respects, effective
    internal control over financial reporting (including safeguarding
    assets) and compliance as of September 30, 2006, that provided
    reasonable assurance that misstatements, losses, or noncompliance
    material in relation to the financial statements would be prevented or
    detected on a timely basis. Our opinion is based on criteria
    established under 31 U.S.C. 3512 (c), (d), the Federal Managers'
    Financial Integrity Act, and the Office of Management and Budget (OMB)
    Circular A-123, Management's Responsibility for Internal Control.

    We noted other nonreportable matters involving internal control and its
    operation that we will communicate in a separate management letter.

    Opinion on FFMIA Compliance:

    In our opinion, GAO's financial management systems substantially
    complied with federal financial management systems requirements,
    applicable federal accounting standards, and the United States
    Government Standard General Ledger at the transaction level, as of
    September 30, 2006. Our opinion is based on criteria established under
    FFMIA section 803 (a) requirements.

    Compliance with Laws and Regulations:

    Our tests for compliance with selected provisions of laws and
    regulations disclosed no instances of noncompliance that would be
    reportable under Government Auditing Standards or OMB Bulletin No. 06-
    03, Audit Requirements for Federal Financial Statements. However, the
    objective of our audit was not to provide an opinion on overall
    compliance with laws and regulations. Accordingly, we do not express
    such an opinion.

    This conclusion is intended solely for the use of the management of
    GAO, OMB, and Congress and is not intended to be, and should not be,
    used by anyone other that these specified parties.

    Consistency of Other Information:

    The Management's Discussion and Analysis (MD&A) included as Part I is
    not a required part of the financial statements but is supplementary
    information required by accounting principles generally accepted in the
    United States of America. We have applied certain limited procedures,
    which consisted principally of inquiries of management regarding the
    methods of measurement and presentation of the required supplementary
    information. However, we did not audit the information and express no
    opinion on it.

    The introductory information, performance information and appendixes
    listed in the table of contents are presented for additional analysis
    and are not a required part of the financial statements. Such
    information has not been subjected to the auditing procedures applied
    in the audit of the financial statements and, accordingly, we express
    no opinion on them.

    Objectives, Scope, and Methodology:

    Management is responsible for (1) preparing the financial statements in
    conformity with accounting principles generally accepted in the United
    States of America; (2) establishing, maintaining, and assessing
    internal control to provide reasonable assurance that broad control
    objectives of FMFIA are met; (3) implementing, maintaining and
    assessing financial management systems to provide reasonable assurance
    of substantial compliance with the requirements of FFMIA; and (4)
    complying with applicable laws and regulations.

    We are responsible for planning and performing our audit to obtain
    reasonable assurance about whether the financial statements are free of
    material misstatement. An audit includes examining, on a test basis,
    evidence supporting the amounts and disclosures in the financial
    statements. An audit also includes assessing the accounting principles
    used and significant estimates made by management, as well as
    evaluating the overall financial statement presentation.

    We are responsible for planning and performing our examination to
    obtain reasonable assurance about whether management maintained
    effective internal control over financial reporting (including
    safeguarding of assets) and compliance with applicable laws and
    regulations based on criteria established under 31 U.S.C. 3512 (c),
    (d), the Federal Managers' Financial Integrity Act, and OMB Circular A-
    123, Management's Responsibility for Internal Control. Our examination
    included obtaining an understanding of internal control related to
    financial reporting (including safeguarding assets) and compliance with
    laws and regulations (including execution of transactions in accordance
    with budget authority); testing relevant internal controls over
    financial reporting (including safeguarding assets) and compliance,
    evaluating the design and operating effectiveness of internal control;
    and performing such other procedures as we considered necessary in the
    circumstances. We did not test all internal controls relevant to
    operating objectives as broadly defined by the Federal Managers'
    Financial Integrity Act.

    With respect to internal control related to significant performance
    measures included in the MD&A, we obtained an understanding of the
    design of the internal control relating to the existence and
    completeness assertions and determined whether they had been placed in
    operation, as required by OMB Bulletin No. 06-03. Our procedures were
    not designed to provide assurance on internal control over reported
    performance measures and, accordingly, we do not express an opinion on
    such control.

    Because of inherent limitations in any internal control, misstatements
    due to error or fraud may occur and not be detected. Also, projections
    of any evaluation of the internal control to future periods are subject
    to the risk that the internal control may become inadequate because of
    changes in conditions, or that the degree of compliance with the
    policies or procedures may deteriorate.

    We are responsible for planning and performing our examination to
    obtain reasonable assurance about whether GAO's financial management
    systems substantially complied with federal financial management
    systems requirements, applicable federal accounting standards, and the
    United States Government Standard General Ledger at the transaction
    level based on criteria established under FFMIA section 803 (a)
    requirements. We examined, on a test basis, evidence about GAO's
    substantial compliance with those requirements, and performed such
    other procedures as we considered necessary in the circumstances.

    We are also responsible for testing compliance with selected provisions
    of laws and regulations that have a direct and material effect on the
    financial statements. We did not test compliance with all laws and
    regulations applicable to GAO. We limited our tests of compliance to
    those laws and regulations required by OMB audit guidance that we
    deemed applicable to the financial statements for the fiscal year ended
    September 30, 2006. We caution that noncompliance may occur and not be
    detected by these tests and that such testing may not be sufficient for
    other purposes.

    We conducted our audit and examinations in accordance with auditing
    standards generally accepted in the United States of America:
    Government Auditing Standards, issued by the Comptroller General of the
    United States: attestation standards established by the American
    Institute for Certified Public Accountants; and OMB Bulletin No. 06-03,
    Audit Requirements for Federal Financial Statements. We believe that
    our audit and examinations provide a reasonable basis for our opinions.

    Signed by:

    Clifton Gunderson LLP:
    Calverton, MD:
    November 3, 2006:

    [End of Independent Auditor's Report]

    Purpose of Each Financial Statement:

    The financial statements on the next five pages present the following
    information:

    * A balance sheet presents the combined amounts we had available to use
    (assets) versus the amounts we owed (liabilities) and the residual
    amounts after liabilities were subtracted from assets (net position).

    * A statement of net cost presents the annual cost of our operations.
    The gross cost less any offsetting revenue earned from our activities
    is used to arrive at the net cost of work performed under our four
    strategic goals.

    * A statement of changes in net position presents the accounting items
    that caused the net position section of the balance sheet to change
    from the beginning to the end of the fiscal year.

    * A statement of budgetary resources presents how budgetary resources
    were made available to us during the fiscal year and the status of
    those resources at the end of the fiscal year.

    * A statement of financing reconciles the resources available to us
    with the net cost of operating the agency.

    Financial Statements:
    U.S. Government Accountability Office: Balance Sheets as of September
    30, 2006 and 2005:

    (Dollars in thousands)

    Assets:

    Intragovernmental: Funds with the U.S. Treasury and cash (Note 3);
    2006: $63,919
    2005: $65,878.

    Intragovernmental: Accounts receivable; 2006: $1,022;
    2005: $877.

    Total Intragovernmental;
    2006: $64,941;
    2005: $66,755.

    Property and equipment, net (Note 4); 2006: $40,293;
    2005: $47,291.

    Other;
    2006: $358;
    2005: $310.

    Total Assets;
    2006: $105,592;
    2005: $114,356.

    Liabilities:

    Intragovernmental: Accounts payable;
    2006: $12,068;
    2005: $11,805.

    Intragovernmental: Employee benefits (Note 6); 2006: $2,379;
    2005: $2,262.

    Intragovernmental: Workers' compensation (Note 7); 2006: $2,337;
    2005: $2,121.

    Total Intragovernmental;
    2006: $16,784;
    2005: $16,188.

    Accounts payable;
    2006: $10,815;
    2005: $12,121.

    Salaries and benefits (Note 6);
    2006: $16,852;
    2005: $16,493.

    Accrued annual leave and other (Note 5); 2006: $30,299;
    2005: $30,093.

    Workers' compensation (Note 7);
    2006: $15,910;
    2005: $10,357.

    Capital leases (Note 9);
    2006: $6,872;
    2005: $9,657.

    Total Liabilities;
    2006: $97,532;
    2005: $94,909.

    Net Position: Unexpended appropriations; 2006: $25,951;
    2005: $27,003.

    Net Position: Cumulative results of operations; 2006: ($17,891);
    2005: ($7,556).

    Total Net Position (Note 13);
    2006: $8,060;
    2005: $19,447.

    Total Liabilities and Net Position;
    2006: $105,592;
    2005: $114,356.

    The accompanying notes are an integral part of these statements:

    [End of balance sheets]

    Financial Statements:

    U.S. Government Accountability Office:

    Statements of Net Cost For Fiscal Years Ended September 30, 2006 and
    2005.

    (Dollars in thousands).

    Net Costs by Goal.

    Goal 1: Well-Being/Financial Security of American People; 2006:
    $191,880;
    2005: $197,761.

    Less: reimbursable services;
    2006: -;
    2005: ($31).

    Net goal costs;
    2006: $191,880;
    2005: $197,730.

    Goal 2: Changing Security Threats/Challenges of Global Interdependence;
    2006: $154,727;
    2005: $144,281.

    Less: reimbursable services;
    2006: -;
    2005: ($81).

    Net goal costs;
    2006: $154,727;
    2005: $144,200.

    Goal 3: Transforming the Federal Government's Role; 2006: $149,913;
    2005: $150,196.

    Less: reimbursable services;
    2006: ($3,144);
    2005: ($2,878).

    Net goal costs;
    2006: $146,769;
    2005: $147,318.

    Goal 4: Maximize the Value of GAO;
    2006: $23,664;
    2005: $22,034.

    Less: reimbursable services;
    2006: -;
    2005: -.

    Net goal costs;
    2006: $23,664;
    2005: $22,034.

    Less: reimbursable services not attributable to goals; 2006: ($5,561);
    2005: ($5,432).

    Net Cost of Operations (Note 10);
    2006: $511,479;
    2005: $505,850.

    The accompanying notes are an integral part of these statements.

    [End of Statements of Net Cost]

    Financial Statements:

    U.S. Government Accountability Office:

    Statements of Changes in Net Position For Fiscal Years Ended September
    30, 2006 and 2005.

    (Dollars in thousands);

    Cumulative Results of Operations, Beginning of Fiscal year; 2006:
    ($7,556);
    2005: ($1,132).

    Budgetary Financing Sources: Appropriations Used; 2006: $476,081;
    2005: $474,118.

    Other Financing Sources: Intragovernmental transfer of property and
    equipment;
    2006: ($61);
    2005: ($1).

    Other Financing Sources: Federal employee retirement benefit costs paid
    by OPM and imputed to GAO (Note 6);
    2006: $25,124;
    2005: $25,309.

    Total Financing Sources;
    2006: $501,144;
    2005: $499,426.

    Net Cost of Operations;
    2006: ($511,479);
    2005: ($505,850).

    Net Change;
    2006: ($10,335);
    2005: ($6,424).

    Cumulative Results of Operations, End of Fiscal year; 2006: ($17,891);
    2005: ($7,556).

    Unexpended Appropriations, Beginning of fiscal year; 2006: $27,003;
    2005: $34,621.

    Budgetary Financing Sources and uses: Current year appropriations;
    2006: $482,395;
    2005: $470,973.

    Budgetary Financing Sources: Appropriations transferred in; 2006: $250;
    2005: $1,644.

    Budgetary Financing Sources: Permanently not available; 2006: ($7,616);
    2005: ($6,117).

    Budgetary Financing Sources: Appropriations used; 2006: ($476,081);
    2005: ($474,118).

    Total unexpended appropriations, End of fiscal year; 2006: $25,951;
    2005: $27,003.

    Net Position;
    2006: $8,060;
    2005: $19,447.

    The accompanying notes are an integral part of these statements;

    [End of Statements of changes in net position]

    Financial Statements:

    U.S. Government Accountability Office:

    Statements of Budgetary Resources For Fiscal Years Ended September 30,
    2006 and 2005:

    (Dollars in thousands);

    Budgetary Resources (Note 11): Unobligated balance, beginning of fiscal
    year;
    2006: $11,080;
    2005: $14,066.

    Budgetary Resources (Note 11): Budget authority: Appropriations;
    2006: $482,395;
    2005: $470,973.

    Budgetary Resources (Note 11): Budget authority: Spending authority
    from offsetting collections: Earned and collected; 2006: $10,930;
    2005: $10,892.

    Budgetary Resources (Note 11): Budget authority: Spending authority
    from offsetting collections: Changes in unfilled customer orders-
    advance received;
    2006: $189;
    2005: -.

    Budgetary Resources (Note 11): Budget authority: Spending authority
    from offsetting collections: Subtotal; 2006: $493,514;
    2005: $481,865.

    Budgetary Resources (Note 11): Nonexpenditure transfers, net,
    anticipated and actual;
    2006: $250;
    2005: $1,644.

    Budgetary Resources (Note 11): Permanently not available; 2006:
    ($7,616);
    2005: ($6,117).

    Total Budgetary Resources;
    2006: $497,228;
    2005: $491,458.

    Status of Budgetary Resources: Obligations incurred: Direct; 2006:
    $479,842;
    2005: $471,956.

    Status of Budgetary Resources: Obligations incurred: Reimbursable;
    2006: $8,705;
    2005: $8,422.

    Status of Budgetary Resources: Obligations incurred: Subtotal; 2006:
    $488,547;
    2005: $480,378.

    Status of Budgetary Resources: Unobligated balance-Apportioned; 2006:
    $1,089;
    2005: $1,299.

    Status of Budgetary Resources: Unobligated balance not available; 2006:
    $7,592;
    2005: $9,781.

    Total Status of Budgetary Resources;
    2006: $497,228;
    2005: $491,458.

    Change in Obligated balance: Obligated balance, beginning of fiscal
    year;
    2006: $54,798;
    2005: $53,103.

    Change in Obligated balance: Obligations incurred; 2006: $488,547;
    2005: $480,378.

    Change in Obligated balance: Less: Gross Outlays; 2006: ($488,107);
    2005: ($478,683).

    Change in Obligated balance: Obligated balance, end of fiscal year;
    2006: $55,238;
    2005: $54,798.

    Net Outlays: Gross outlays;
    2006: $488,107;
    2005: $478,683.

    Net Outlays: Less: Offsetting collections; 2006: ($11,119);
    2005: ($10,892).

    Net outlays;
    2006: $476,988;
    2005: $467,791.

    The accompanying notes are an integral part of these statements:

    [End of Statements of Budgetary Resources]

    Financial Statements:

    U.S. Government Accountability Office:

    Statements of Financing For Fiscal Years Ended September 30, 2006 and
    2005:

    (Dollars in thousands);

    Resources Used to Finance Activities:

    Budgetary Resources Obligated: Obligations incurred; 2006: $488,547;
    2005: $480,378.

    Budgetary Resources Obligated: Less: Reimbursable services (Note 10);
    2006: ($8,705);
    2005: ($8,422).

    Budgetary Resources Obligated: Less: Cost-sharing and pass-through
    contract reimbursements;
    2006: ($2,225);
    2005: ($2,470).

    Budgetary Resources Obligated: Net obligations; 2006: $477,617;
    2005: $469,486.

    Other Resources: Intragovernmental transfer of property and equipment;
    2006: ($61);
    2005: ($1).

    Other Resources: Federal employee retirement benefit costs paid by OPM
    and imputed to GAO (Note 6);
    2006: $25,124;
    2005: $25,309.

    Other Resources: Net other resources used to finance activities; 2006:
    $25,063;
    2005: $25,308.

    Total resources used to finance activities; 2006: $502,680;
    2005: $494,794.

    Resources Used to Finance Items Not Part of the Net Cost of Operations:
    Net (increase)/decrease in unliquidated obligations; 2006: ($1,536);
    2005: $4,632.

    Resources Used to Finance Items Not Part of the Net Cost of Operations:
    Costs capitalized on the balance sheet; 2006: ($8,939);
    2005: ($9,069).

    Total resources used to finance items not part of the net cost of
    operations;
    2006: ($10,475);
    2005: ($4,437).

    Total resources used to finance the net cost of operations; 2006:
    $492,205;
    2005: $490,357.

    Components That Require Resources in Future Periods: Increase in
    Workers' Compensation, Accrued Annual Leave, and Other Liabilities
    (Note 12);
    2006: $5,764;
    2005: $732.

    Costs That Do Not Require Resources: Depreciation; 2006: $13,510;
    2005: $14,761.

    Net Cost of Operations;
    2006: $511,479;
    2005: $505,850.

    The accompanying notes are an integral part of these statements:

    [End of Statements of Financing]

    [End of Financial Statements]

    Notes to Financial Statements:

    Note 1. Summary of Significant Accounting Policies:

    Reporting Entity:

    The accompanying financial statements present the financial position,
    net cost of operations, changes in net position, budgetary resources,
    and financing of the United States Government Accountability Office
    (GAO). GAO, an agency in the legislative branch of the federal
    government, supports the Congress in carrying out its constitutional
    responsibilities. GAO carries out its mission primarily by conducting
    audits, evaluations, analyses, research, and investigations and
    providing the information from that work to the Congress and the public
    in a variety of forms. The financial activity presented relates
    primarily to the execution of GAO's congressionally approved budget.
    GAO's budget consists of an annual appropriation covering salaries and
    expenses and revenue from reimbursable audit work and rental income.
    The revenue from audit services and rental income is included on the
    Statement of Budgetary Resources as "reimbursable services." The
    financial statements, except for federal employee benefit costs paid by
    OPM and imputed to GAO, do not include the effects of centrally
    administered assets and liabilities related to the federal government
    as a whole, such as interest on the federal debt, which may in part be
    attributable to GAO; they also do not include activity related to GAO's
    trust function described in Note 14.

    Basis of Accounting:

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

    Assets:

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

    Funds with the U.S. Treasury:

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

    Accounts Receivable:

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

    Property and Equipment:

    The GAO headquarters building qualifies as a multiuse heritage asset,
    is GAO's only heritage asset, and is reported with property and
    equipment on the balance sheet. The designation of multiuse heritage
    asset is a result of both being listed in the National Register of
    Historic Places and being used in general government operations.
    Statement of Federal Financial Accounting Standards No. 29 requires
    accounting for multiuse heritage assets as general property, plant, and
    equipment to be included in the balance sheet and depreciated.
    Maintenance of the building has been kept on a current basis. The
    building is depreciated on a straight-line basis over 25 years.

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

    Liabilities:

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

    Accounts Payable:

    Accounts payable consists of amounts owed to federal agencies and
    commercial vendors for goods and services received.

    Federal Employee Benefits:

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

    FECA provides income and medical cost protection to covered federal
    civilian employees injured on the job, employees who have incurred a
    work-related occupational disease, and beneficiaries of employees whose
    death is attributable to a job-related injury or occupational disease.
    Claims incurred for benefits for GAO employees under FECA are
    administered by the Department of Labor (Labor) and are paid,
    ultimately, by GAO (see Note 7).

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

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

    Annual, Sick, and Other Leave:

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

    Contingencies:

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

    Estimates:

    Management has made certain estimates and assumptions when reporting
    assets, liabilities, revenue, and expenses, and in the note
    disclosures. Actual results could differ from these estimates.

    Reclassifications:

    Certain prior year amounts have been reclassified to conform to current
    year presentation.

    [End of Note 1]

    Note 2. Intragovernmental Costs and Exchange Revenue:

    Intragovernmental costs arise from exchange transactions made between
    two reporting entities within the federal government in contrast with
    public costs that arise from exchange transactions made with a
    nonfederal entity.Intragovernmental costs and exchange revenue for the
    years ended September 30, 2006 and 2005, are as follows:

    Dollars in thousands:

    Goal 1:

    Intragovernmental costs;
    2006: $19,857;
    2005: $12,911.

    Public costs;
    2006: $172,023;
    2005: $184,850.

    Total Goal 1 costs;
    2006: $191,880;
    2005: $197,761.

    Intragovernmental earned revenue;
    2006: -;
    2005: ($31).

    Public earned revenue;
    2006: -;
    2005: -.

    Total goal 1 earned revenue;
    2006: -;
    2005: ($31).

    Net goal 1 costs;
    2006: $191,880;
    2005: $197,730.

    Goal 2:

    Intragovernmental costs;
    2006: $16,012;
    2005: $9,419.

    Public costs;
    2006: $138,715;
    2005: $134,862.

    Total Goal 2 costs;
    2006: $154,727;
    2005: $144,281.

    Intragovernmental earned revenue;
    2006: -;
    2005: ($81).

    Public earned revenue;
    2006: -;
    2005: -.

    Total goal 2 earned revenue;
    2006: -;
    2005: ($81).

    Net goal 2 costs;
    2006: $154,727;
    2005: $144,200.

    Goal 3:

    Intragovernmental costs;
    2006: $15,513;
    2005: $9,805.

    Public costs;
    2006: $134,400;
    2005: $140,391.

    Total Goal 3 costs;
    2006: $149,913;
    2005: $150,196.

    Intragovernmental earned revenue;
    2006: ($3,144);
    2005: ($2,878).

    Public earned revenue;
    2006: -;
    2005: -.

    Total goal 3 earned revenue;
    2006: ($3,144);
    2005: ($2,878).

    Net goal 3 costs;
    2006: $146,769;
    2005: $147,318.

    Goal 4:

    Intragovernmental costs;
    2006: $2,449;
    2005: $1,438.

    Public costs;
    2006: $21,215;
    2005: $20,596.

    Earned revenue;
    2006: $-;
    2005: $-.

    Net goal 4 costs;
    2006: $23,664;
    2005: $22,034.

    Earned revenue not attributable to goal: Intragovernmental; 2006:
    ($5,492);
    2005: ($5,365).

    Earned revenue not attributable to goal: Public; 2006: ($69);
    2005: ($67).

    Total earned revenue not attributable to goals; 2006: ($5,561);
    2005: ($5,432).

    [End of table]

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

    [End of Note 2]

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

    GAO's funds with the U.S. Treasury consist of only appropriated funds.
    GAO also maintains cash imprest funds for use in daily operations. The
    status of these funds as of September 30, 2006 and 2005, is as follows:

    Dollars in thousands:

    Unobligated balance: Available;
    2006: $1,087;
    2005: $1,296.

    Unobligated balance: Unavailable;
    2006: $7,592;
    2005: $9,781.

    Obligated balances not yet disbursed; 2006: $55,238;
    2005: $54,798.

    Total funds with U.S. Treasury;
    2006: $63,917;
    2005: $65,875.

    Cash;
    2006: 2;
    2005: 3.

    Total funds with U.S. Treasury and cash; 2006: $63,919;
    2005: $65,878.

    [End of table]

    [End of Note 3]

    Note 4. Property and Equipment, Net:

    The composition of property and equipment as of September 30, 2006, is
    as follows:

    Dollars in thousands:

    Classes of property and equipment: Building; Acquisition value:
    $15,664;
    Accumulated depreciation: $11,278;
    Book value: $4,386.

    Classes of property and equipment: Land; Acquisition value: $1,191;
    Accumulated depreciation: -;
    Book value: $1,191.

    Classes of property and equipment: Building improvements; Acquisition
    value: $115,048;
    Accumulated depreciation: $98,246;
    Book value: $16,802.

    Classes of property and equipment: Computer and other equipment and
    software;
    Acquisition value: $34,791;
    Accumulated depreciation: $24,502;
    Book value: $10,289.

    Classes of property and equipment: Leasehold improvements; Acquisition
    value: $6,237;
    Accumulated depreciation: $5,432;
    Book value: $805.

    Classes of property and equipment: Assets under capital lease;
    Acquisition value: $23,014;
    Accumulated depreciation: $16,194;
    Book value: $6,820.

    Classes of property and equipment: Total property and equipment;
    Acquisition value: $195,945;
    Accumulated depreciation: $155,652;
    Book value: $40,293.

    [End of table]

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

    Dollars in thousands:

    Classes of property and equipment: Building; Acquisition value:
    $15,664;
    Accumulated depreciation: $10,652;
    Book value: $5,012.

    Classes of property and equipment: Land; Acquisition value: $1,191;
    Accumulated depreciation: $-;
    Book value: $1,191.

    Classes of property and equipment: Building improvements; Acquisition
    value: $112,855;
    Accumulated depreciation: $93,638;
    Book value: $19,217.

    Classes of property and equipment: Computer and other equipment and
    software;
    Acquisition value: $33,663;
    Accumulated depreciation: $22,290;
    Book value: $11,373.

    Classes of property and equipment: Leasehold improvements; Acquisition
    value: $5,956;
    Accumulated depreciation: $5,152;
    Book value: $804.

    Classes of property and equipment: Assets under capital lease;
    Acquisition value: $20,223;
    Accumulated depreciation: $10,529;
    Book value: $9,694.

    Classes of property and equipment: Total property and equipment;
    Acquisition value: $189,552;
    Accumulated depreciation: $142,261;
    Book value: $47,291.

    [End of table]

    [End of note 4]

    Note 5. Liabilities Not Covered by Budgetary Resources:

    The liabilities on GAO's Balance Sheets as of September 30, 2006 and
    2005, include liabilities not covered by budgetary resources, which are
    liabilities for which congressional action is needed before budgetary
    resources can be provided. Although future appropriations to fund these
    liabilities are likely and anticipated, it is not certain that
    appropriations will be enacted to fund these liabilities. The
    composition of liabilities not covered by budgetary resources as of
    September 30, 2006 and 2005, is as follows:

    Dollars in thousands:

    Intragovernmental liabilities-Workers' compensation; 2006: $2,337;
    2006: $2,121.

    Salaries and benefits-Comptrollers General retirement plan; 2006:
    $2,982;
    2005: $2,836.

    Accrued annual leave and other;
    2006: $30,299;
    2005: $30,093.

    Workers' compensation;
    2006: $15,910;
    2005: $10,357.

    Capital leases;
    2006: $6,872;
    2005: $9,657.

    Total liabilities not covered by budgetary resources; 2006: $58,400;
    2005: $55,064.

    [End of table]

    [End of Note 5]

    Note 6. Federal Employee Benefits:

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

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

    Amounts owed to OPM and Treasury as of September 30, 2006 and 2005, are
    $2,379,000 and $2,262,000, respectively, for FEHBP, FEGLIP, FICA, FERS,
    and CSRS contributions and are shown on the Balance Sheets as an
    employee benefits liability.

    Details of the major components of GAO's federal employee benefit costs
    for the years ended September 30, 2006 and 2005, are as follows:

    Dollars in thousands:

    Federal Employee Benefits Costs: Federal employee retirement benefit
    costs paid by OPM and imputed to GAO: Estimated future pension
    costs(CSRS/FERS);
    2006: $10,369;
    2005: $11,476.

    Federal Employee Benefits Costs: Federal employee retirement benefit
    costs paid by OPM and imputed to GAO: Estimated future post-retirement
    health and life insurance (FEHBP/FEGLIP); 2006: $14,755;
    2005: $13,833.

    Federal Employee Benefits Costs: Federal employee retirement benefit
    costs paid by OPM and imputed to GAO: Total; 2006: $25,124;
    2005: $25,309.

    Federal Employee Benefits Costs: Pension expenses(CSRS/FERS); 2006:
    $29,145;
    2005: $28,583.

    Federal Employee Benefits Costs: Health and life insurance expenses;
    2006: $15,765;
    2005: $15,130.

    Federal Employee Benefits Costs: FICA payment made by GAO; 2006:
    $15,882;
    2005: $15,261.

    Federal Employee Benefits Costs: Thrift Savings Plan-matching
    contribution by GAO;
    2006: $8,836;
    2005: $8,439.

    [End of table]

    Comptrollers general and their surviving beneficiaries who qualify and
    so elect to participate are paid retirement benefits by GAO under a
    separate retirement plan. These benefits are paid from current year
    appropriations. Because GAO is responsible for future payments under
    this plan, the estimated present value of accumulated plan benefits of
    $2,982,000 as of September 30, 2006, and $2,836,000 as of September 30,
    2005, is included as a component of salary and benefit liabilities on
    GAO's Balance Sheets.

    [End of Note 6]

    Note 7. Workers' Compensation:

    For fiscal year 2005, GAO used estimates provided by Labor to report
    the FECA liability. This practice is consistent with the practices of
    other federal agencies. For fiscal year 2006, GAO utilized the services
    of an independent actuarial firm to calculate its FECA liability. As a
    result, the actuarial methodology has changed and is more closely
    reflective of GAO's claims experience. The FECA liability increased by
    $5,553,000 in fiscal year 2006, and is reflected as a current year
    expense distributed to the four goals on the fiscal year 2006 Statement
    of Net Cost.

    GAO recorded an estimated liability for claims incurred but not
    reported as of September 30, 2006 and 2005, which is expected to be
    paid in future periods. This estimated liability of $15,910,000 and
    $10,357,000 as of September 30, 2006 and 2005, respectively, is
    reported on GAO's Balance Sheets. GAO also recorded a liability for
    amounts paid to claimants by Labor as of September 30, 2006 and 2005,
    of $2,337,000 and $2,121,000, respectively, but not yet reimbursed to
    Labor by GAO. The amount owed to Labor is reported on GAO's Balance
    Sheets as an intragovernmental liability.

    [End of Note 7]

    Note 8. Building Lease Revenue:

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

    Rent received by GAO for fiscal years 2006 and 2005 was $4,978,000 and
    $4,856,000, respectively. These amounts are included in reimbursable
    services shown on both the Statements of Net Cost and the Statements of
    Financing. Total rental revenue for the remaining period of the 10-year
    lease is as follows:

    Dollars in thousands:

    Fiscal year ending September 30: 2007; Total rental revenue*: $4,978.

    Fiscal year ending September 30: 2008; Total rental revenue*: $5,045.

    Fiscal year ending September 30: 2009; Total rental revenue*: $5,111.

    Fiscal year ending September 30: 2010; Total rental revenue*: $5,179.

    Fiscal year ending September 30: Total; Total rental revenue*: $20,313.

    * If option years are exercised.

    [End of table]

    [End of Note 8]

    Note 9. Leases:

    Capital Leases:

    GAO has entered into capital leases for office equipment and computer
    equipment under which the ownership of the equipment covered under the
    leases transfers to GAO when the leases expire. When GAO enters into
    these leases, the present value of the future lease payments is
    capitalized, net of imputed interest, and recorded as a liability. The
    acquisition value and accumulated depreciation of GAO's capital leases
    are shown in Note 4, Property and Equipment, Net. As of September 30,
    2006 and 2005, the capital lease liability was $6,872,000 and
    $9,657,000, respectively. The decrease in capital lease liability is a
    result of fewer lease agreements entered into in fiscal year 2006 than
    in fiscal year 2005.

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

    Dollars in thousands:

    Fiscal year ending September 30: 2007; Total: $4,702.

    Fiscal year ending September 30: 2008; Total: $2,029.

    Fiscal year ending September 30: 2009; Total: $635.

    Fiscal year ending September 30: 2010; Total: $173.

    Fiscal year ending September 30: Total estimated future lease payments;
    Total: $7,539.

    Fiscal year ending September 30: Less: imputed interest; Total: ($667).

    Fiscal year ending September 30: Net capital lease liability; Total:
    $6,872.

    [End of table]

    Operating Leases:

    GAO leases office space, predominately for field offices, from the
    General Services Administration and has entered into various other
    operating leases for office communication and computer equipment. Lease
    costs for office space and equipment for fiscal year 2006 and fiscal
    year 2005 amounted to approximately $11,477,000 and $10,752,000,
    respectively. Leases for equipment under operating leases are generally
    less than 1 year, therefore there are no associated future minimum
    lease payments. Estimated future minimum lease payments for field
    office space under the terms of the leases are as follows:

    Dollars in thousands:

    Fiscal year ending September 30: 2007; Total:  $7,986.

    Fiscal year ending September 30: 2008; Total:  $4,151.

    Fiscal year ending September 30: 2009; Total:  $3,757.

    Fiscal year ending September 30: 2010; Total:  $3,535.

    Fiscal year ending September 30: 2011; Total:  $3,412.

    Fiscal year ending September 30: 2012 and thereafter; Total:  $8,362.

    Fiscal year ending September 30: Total estimated future lease payments;
    Total:  $31,203.

    [End of table]

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

    [End of Note 9]

    Note 10. Net Cost of Operations:

    Expenses for salaries and related benefits for fiscal year 2006 and
    fiscal year 2005 amounted to $405,199,000 and $395,783,000,
    respectively, which were about 79 percent of GAO's annual net cost of
    operations in fiscal year 2006 and 78 percent in fiscal year 2005.
    Included in the net cost of operations are federal employee benefit
    costs paid by OPM and imputed to GAO of $25,124,000 in fiscal year 2006
    and $25,309,000 in fiscal year 2005.

    Revenues from reimbursable services are shown as an offset against the
    full cost of the goal to arrive at its net cost. Earned revenues that
    are insignificant or cannot be associated with a major goal are shown
    in total, the largest component of which is rental revenue from the
    lease of space in the GAO building. Revenues from reimbursable services
    for fiscal year 2006 and fiscal year 2005 amounted to $8,705,000 and
    $8,422,000, respectively.

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

    [End of Note 10]

    Note 11. Budgetary Resources:

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

    For fiscal year 2005 a difference exists between the unobligated
    balance at the beginning of the fiscal year and the unobligated
    balances not available shown on the Statements of Budgetary Resources
    and the Program and Financing Schedule in the fiscal year 2007 Budget
    of the United States (President's Budget). These differences are due to
    the fact that unobligated balances in expired accounts are not included
    in the President's Budget submission. Also, a difference exists in the
    reimbursable obligations incurred because the Statements of Budgetary
    Resources exclude reimbursements from cost-sharing and pass-through
    contract arrangements. As the fiscal year 2008 President's Budget will
    not be published until February 2007, a comparison between the fiscal
    year 2006 data reflected on the Statements of Budgetary Resources and
    fiscal year 2006 data in the President's Budget cannot be performed.
    The fiscal year 2008 President's Budget will be available on OMB's Web
    site and directly from the Government Printing Office.

    Comparison of GAO's fiscal year 2005 Statement of Budgetary Resources
    with the corresponding information presented in the 2007 President's
    Budget is as follows:

    Dollars in thousands:

    Fiscal year 2005 Statement of Budgetary Resources; Budgetary Resources:
    $491,458;
    Obligations Incurred: $480,378.

    2007 President's Budget-Fiscal year 2005 Actual; Budgetary Resources:
    $483,000;
    Obligations Incurred: $482,000.

    Difference;
    Budgetary Resources: $8,458;
    Obligations Incurred: ($1,622).

    [End of table]

    For fiscal year 2006, budget transfers consisted of budget authority
    transferred from USAID for the analysis of U.S.-funded international
    basic education programs. Reimbursements from cost-sharing and pass-
    through contract arrangements consisted primarily of collections from
    other federal entities (1) for the support of the Federal Accounting
    Standards Advisory Board and (2) to utilize GAO contracts to obtain
    services. The costs and reimbursements for these activities are not
    included in the Statements of Net Cost.

    Budgetary resources obligated for undelivered orders at the end of
    fiscal years 2006 and 2005 totaled $17,459,000 and $15,922,000,
    respectively.

    GAO's apportionments fall under Category A, quarterly appointment.
    Apportionment categories of obligations incurred for fiscal years 2006
    and 2005 are as follows:

    Dollars in thousands:

    Fiscal year ending September 30: Direct-Category A; 2006: $479,842;
    2005:  $471,956.

    Fiscal year ending September 30: Reimbursable-Category A; 2006: $8,705;
    2005: $8,422.

    Fiscal year ending September 30: Total obligations incurred; 2006:
    $488,547;
    2005: $480,378.

    [End of table]

    [End of Note 11]

    Note 12. Components That Require Resources in Future Periods:

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

    Dollars in thousands:

    Fiscal year ending September 30: Liabilities not covered by budgetary
    resources;
    2006: $58,400;
    2005: $55,064.

    Fiscal year ending September 30: Liabilities that are not components of
    net cost: Capital leases;
    2006: ($6,872);
    2005: ($9,657).

    Fiscal year ending September 30: Liabilities that are not components of
    net cost: Other;
    2006: ($357);
    2005: -.

    Fiscal year ending September 30: Current year liabilities not covered
    by budgetary resources that are components of net cost; 2006: $51,171;
    2005: $45,407.

    Fiscal year ending September 30: Prior year liabilities that are not
    components of current year net costs; 2006: ($45,407);
    2005: ($44,675).

    Fiscal year ending September 30: Increase in workers' compensation,
    accrued annual leave, and other liabilities as reported on the
    Statements of Financing;
    2006: $5,764;
    2005: $732.

    [End of table]

    [End of Note 12]

    Note 13. Net Position:

    Net position on the Balance Sheets comprises unexpended appropriations
    and cumulative results of operations. Unexpended appropriations are the
    sum of the total unobligated appropriations and undelivered goods and
    services. Cumulative results of operations represent the excess of
    financing sources over expenses since inception. Details of the
    components of GAO's cumulative results of operations for the fiscal
    years ended September 30, 2006 and 2005, are as follows:

    Dollars in thousands:

    Investment in property and equipment, net; 2006: $40,293;
    2005: $47,291.

    Other-supplies inventory;
    2006: $216;
    2005: $217.

    Liabilities not covered by budgetary resources; 2006: ($58,400);
    2005: ($55,064).

    Cumulative results of operations;
    2006: ($17,891);
    2005: ($7,556).

    [End of table]

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

    [End of Note 13]

    Note 14. Davis-Bacon Act Trust Function:

    GAO is responsible for administering for the federal government the
    trust function of the Davis-Bacon Act receipts and payments and
    publishes separate, audited financial statements for this fund. GAO
    maintains this fund to pay claims relating to violations of the Davis-
    Bacon Act and Contract Work Hours and Safety Standards Act. Under these
    acts, Labor investigates violation allegations to determine if federal
    contractors owe additional wages to covered employees. If Labor
    concludes that a violation has occurred, GAO collects the amount owed
    from the contracting federal agency, deposits the funds into an account
    with the U.S. Treasury, and remits payment to the employee. GAO is
    accountable to the Congress and to the public for the proper
    administration of the assets held in the trust. Trust assets under
    GAO's administration as of September 30, 2006 and 2005, totaled
    approximately $4,485,000 and $4,666,000, respectively. These assets are
    not the assets of GAO or the federal government and are held for
    distribution to appropriate claimants. During fiscal years 2006 and
    2005, receipts in the trust amounted to $774,000 and $526,000 and
    disbursements amounted to $954,000 and $612,000, respectively. Because
    the trust assets and related liabilities are not assets and liabilities
    of GAO, they are not included in the accompanying financial statements.

    [End of Note 14]

    [End of Notes to Financial Statements]

    [End of Part III]

    Part IV: From the Inspector General:

    From the Inspector General:

    Memorandum:

    Date: November 2, 2006:

    To: Comptroller General:

    From: Inspector General - Frances Garcia [Signature]:

    Subject: GAO Management Challenges and Performance Measures:

    We have examined management's assessment of the management challenges.
    Based on our work and institutional knowledge, we agree that physical
    security, information security, and human capital are management
    challenges that may affect our performance. We are in agreement with
    management's assessment of progress made in addressing these
    challenges.

    During fiscal year 2006, we reviewed accomplishment reports totaling 96
    percent of the total dollar value reported, including most
    accomplishment reports of $100 million or more, and found that GAO had
    a reasonable basis for claiming these benefits. In addition, we
    assessed GAO's processes for determining performance on the number of
    testimonies, the percentage of new products with recommendations, and
    the percentage rate of recommendations implemented and found that
    statistics reported for these measures were reasonable. We also
    completed our review of fiscal year 2005 qualitative measures, which
    led to GAO discontinuing public reporting of these measures and
    retaining them for internal use.

    [End of letter from the Inspector General]

    [End of Part IV]

    Part V: Appendixes:

    1. Accomplishments and Other Contributions:

    In pursuing our strategic goals during fiscal year 2006, we recorded
    hundreds of accomplishments and made numerous other contributions. This
    appendix provides details on the most significant of these. In
    reporting financial benefits, nonfinancial benefits, and contributions
    (designated by an F, N, or C in the item number below), we are holding
    ourselves accountable for the resources we received to implement our
    strategic plan.

    Typically, the accomplishments describe work that we completed in prior
    fiscal years because it takes time to implement recommendations,
    realize benefits, and record them. The other contributions, which often
    refer to work completed in fiscal year 2006, describe instances in
    which we provided information or recommendations that aided
    congressional decision making or informed the public debate to a
    significant degree. At the end of each accomplishment and contribution
    summary, we list the reference number for products associated with the
    work discussed. In the online PDF version of this document, readers can
    link directly to these products if they want additional information.

    Strategic Goal 1:

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

    The health care needs of an aging and diverse population:

    1.1.N. Developing a Planning Model for Managing Excess Department of
    Veterans Affairs (VA) Real Property: In 2003, we recommended that VA
    pilot test, and modify if necessary, a capital asset planning model to
    be used in its Capital Asset Realignment for Enhanced Services process
    to manage excess buildings found throughout VA's national health care
    system. As we recommended, VA used the model in the Great Lakes network
    to evaluate and dispose of unneeded buildings, principally through
    enhanced-use leasing arrangements. In addition, VA made several
    modifications to the model, including establishing new capital asset
    managers in each network to facilitate disposal or lease of excess
    property, developing a scorecard to track facility utilization and
    condition, and creating a departmentwide information technology (IT)
    system for analyzing, monitoring, and managing its capital assets. The
    Capital Asset Realignment for Enhanced Services process resulted in the
    realignment of inpatient services at a number of VA's inpatient
    facilities and decisions regarding the continued use of existing
    structures at many of these locations. For example, in January 2005, VA
    transferred an underutilized hospital in Chicago through an enhanced-
    use lease, and is advancing numerous other enhanced-use arrangements
    and is examining the continued use of existing buildings through 21
    capital plan and reuse studies. (GAO-03-326):

    1.2.N. Including Conflict-of-Interest Questions in the Food and Drug
    Administration's (FDA) Protocol for Evaluating the Performance of
    Mammography Certification Agencies: The Mammography Quality Standards
    Act of 1992 and its reauthorization acts of 1998 and 2004 established
    national quality standards for mammography to help ensure the quality
    of mammography services. Under these acts, FDA is responsible for
    ensuring that all mammography facilities are accredited by an FDA-
    approved accreditation body and have obtained a certificate from FDA or
    an FDA-approved certification body permitting them to provide
    mammography services. In addition, FDA is responsible for reviewing and
    approving measures that accreditation and certification bodies use to
    avoid conflicts of interest in carrying out their work. Regulations
    require that FDA conduct annual performance evaluations of
    accreditation bodies' and certification bodies' compliance with certain
    standards. As part of our study on access to mammography services, we
    examined the measures state accreditation and certification bodies have
    taken to avoid conflicts of interest and FDA's oversight of state
    bodies' performance in this area. As a result of conversations that we
    had with FDA officials during the course of our work, FDA revised its
    protocol for evaluating the performance of certification bodies to
    include specific inquiries related to conflicts of interest. The
    revised protocol requires FDA officials to (1) review any changes that
    the certification bodies made to their conflict-of-interest policies
    and procedures since FDA's last annual evaluation, (2) review any
    complaints related to conflicts-of-interest involving state personnel
    or inspectors and the resolution of the complaints, and (3) cover the
    topic of conflict of interest issues in the annual reports it prepares
    on the performance of certification bodies. In the past, FDA officials
    had informally asked questions about conflicts of interest during
    conversations with state bodies' staff. Including questions on
    conflicts of interest in the protocols gives FDA officials greater
    assurance that this issue is consistently covered during annual
    performance evaluations of state certification agencies. (GAO-06-724):

    1.3.N. Strengthening Medicaid Program Integrity: Fraud, waste, and
    abuse drain vital Medicaid program dollars in ways that hurt both
    taxpayers and beneficiaries. States are the first line of defense
    against Medicaid fraud, waste, and abuse; but at the federal level, the
    Centers for Medicare & Medicaid Services (CMS) is responsible for
    supporting and overseeing states' efforts. In 2005, we testified that
    while CMS had activities to oversee and support state efforts to
    address fraud and abuse in the Medicaid program, the agency had not
    devoted the staff and financial resources to its efforts commensurate
    with the risks involved. For example, in fiscal year 2005, CMS
    dedicated an estimated eight full-time equivalent employees to support
    and oversee states' anti-fraud-and-abuse operations for a program that
    spent over $168 billion for Medicaid benefits in fiscal year 2004.
    Furthermore, we testified that funding for some of CMS's most promising
    anti-fraud-and-abuse activities had declined in recent years,
    threatening the continuation of these efforts. We also pointed out that
    CMS lacked plans to guide federal and state agencies that were working
    to prevent or deter Medicaid fraud and abuse. Our 2005 work was
    considered during development of provisions of the Deficit Reduction
    Act, enacted in February 2006, which provided for the creation of the
    Medicaid Integrity Program and specified appropriations to fund the
    program. The act also required CMS to devote an additional 100 full-
    time equivalent (FTE) staff to combating Medicaid provider fraud and
    abuse; to develop a comprehensive plan for the Medicaid Integrity
    Program every 5 fiscal years; and to report annually to the Congress on
    the use, and the effectiveness of activities supporting the use, of the
    appropriated funds. (GAO-05-855T):

    1.4.F. Using Competition and Other Cost-Reducing Techniques to Set
    Medicare Payments for Durable Medical Equipment and Supplies:
    Medicare's Supplementary Medical Insurance program (Medicare Part B)
    spent almost $7.8 billion for durable medical equipment, prosthetics,
    orthotics, and supplies in 2002. For most of these items, Medicare
    payments are primarily based on historical charges from the mid-1980s,
    adjusted for inflation in some years, rather than market prices. We
    have repeatedly reported that Medicare payments for some medical
    equipment and supply items are out of line with actual market prices
    and have suggested several options to the Congress to better align
    Medicare fees with market prices. These included giving CMS authority
    to conduct competitive bidding for durable medical equipment,
    prosthetics, orthotics, and supplies or basing Medicare payments on the
    lower of the fee schedule amount or the lowest amount a provider has
    agreed to accept from other payers. In June 2002, we testified on these
    issues. Additionally, we were consulted by key congressional staff
    about pricing for these items and competitive bidding issues during
    2003 and provided guidance as they were drafting legislative provisions
    that affected Medicare payment for these products. In December 2003,
    the Medicare Prescription Drug, Improvement, and Modernization Act of
    2003 was signed into law. This law requires CMS to implement
    competitive acquisition of durable medical equipment, off-the-shelf
    orthotics, and supplies in 10 of the largest metropolitan statistical
    areas in 2007, 80 of these areas in 2009, and in other areas
    thereafter. CMS can use information on the amounts paid in competitive
    acquisition areas to adjust Medicare payments in other localities. The
    law also instituted a multiyear freeze on payment increases for certain
    products and mandated reductions beginning in 2005 for certain products
    that the Department of Health and Human Services (HHS) Office of
    Inspector General had reported as having overly high Medicare payment
    rates. Competitive bidding and the other changes to Medicare's payment
    methods for durable medical equipment, orthotics, prosthetics, and
    supplies stemming from the law--exclusive of the administrative costs-
    -would result in an estimated net present value financial benefit of
    $2.9 billion to the Supplementary Medical Insurance Trust Fund for
    fiscal years 2005 through 2009. (GAO-03-1006, GAO-03-101, GAO-02-833T,
    GAO-02-576, and GAO/HEHS-00-79):

    1.5.N. Improving Inspections of Medicare Suppliers: CMS, the agency
    that administers Medicare, contracts with the National Supplier
    Clearinghouse to screen potential suppliers of durable medical
    equipment, prosthetics, orthotics, and supplies and to enroll and
    reenroll those that comply with the program's standards. Suppliers,
    with certain exceptions, are subject to unannounced on-site inspections
    by the clearinghouse. The inspections verify that the supplier meets
    Medicare's standards, including whether the supplier can fill orders
    from inventory. Suppliers may store inventory off-site or rely on
    another business to provide their inventory. However, a supplier cannot
    contract to obtain inventory with a business that is excluded from the
    Medicare program, any state health programs, or any other federal
    procurement or nonprocurement program. In September 2005, we reported
    that neither CMS nor the clearinghouse explicitly requires site
    inspectors to verify that a supplier has a genuine source of inventory
    when it is stored at, or purchased from, another location, or to assess
    the company serving as the source of inventory. Without such
    verification, the clearinghouse would not know whether the off-site
    inventory exists or whether the source of inventory is legitimate. We
    also reported that prior to a reenrollment inspection, the
    clearinghouse does not routinely provide its site inspectors with the
    dollar amounts and specific items a supplier has billed to Medicare.
    Knowing a supplier's billing history would enable inspectors to
    determine whether the supplier's submitted claims coincide with its
    inventory, invoices, and other documentation in beneficiary files.
    Based on our findings we recommended that CMS require the clearinghouse
    to (1) evaluate the legitimacy of the supply location or source and any
    related contracts when suppliers report having inventory that is
    primarily maintained off-site or supplied through another company and
    (2) provide information from suppliers' billing histories to inspectors
    before they conduct on-site inspections to help them assess whether
    suppliers' inventory or contracts to obtain inventory are congruent
    with the suppliers' Medicare payments. In its fiscal year 2006
    statement of work, CMS required the clearinghouse to make site visits
    to a supplier's off-site inventory storage location and to make site
    visits to businesses that sell the supplier inventory or fill orders
    through inventory-supply contracts. CMS also required the clearinghouse
    to provide suppliers' billing histories to inspectors prior to having
    them conduct on-site inspections. (GAO-05-656):

    1.6.N. Collecting Better Data on Veterans in Nursing Homes: In November
    2004, we recommended that VA collect and report data on the number of
    veterans (1) served in community nursing homes and state veterans'
    nursing homes based on the requirements of the Millennium Act or VA's
    policy on nursing home eligibility and (2) with long and short stays in
    community nursing homes and state nursing homes. This lack of data
    impeded VA's ability to strategically plan how best to serve veterans.
    In response to our recommendations, VA now has information on the
    eligibility of veterans (based on the requirements of the Millennium
    Act or VA's eligibility policy) in community nursing homes as well as
    information on the number of veterans with long and short stays in
    community nursing homes for the 15-month period from October 1, 2004,
    to December 30, 2005. (GAO-05-65):

    1.7.N. Identifying and Recording the Sprinkler Status of Nursing Homes:
    We found that CMS did not know the sprinkler status of nursing homes,
    lacked a way to capture this information on its survey report forms,
    and that such information was not recorded in its On-Line Survey,
    Certification, and Reporting system database. We recommended that CMS
    identify the extent to which each nursing home does or does not have
    sprinklers. According to a CMS official, the agency revised its survey
    report forms and, as of August 2006, had identified the sprinkler
    status of virtually all nursing homes nationwide. The agency also began
    recording nursing home sprinkler-status information in its On-Line
    Survey, Certification, and Reporting system database. (GAO-04-660):

    1.8.N. Eliminating Dietary Supplements Containing Ephedrine Alkaloids:
    In July 1999, we reported on FDA's proposed rule that would establish a
    dosing regimen, require warning statements, and affect other aspects of
    product labeling for dietary supplements containing ephedrine
    alkaloids. Among other issues, we reported concerns about the strength
    of the information upon which FDA based specific elements of its
    proposed rule. Specifically, we found that FDA needed to provide
    stronger evidence on the relationship between the intake of dietary
    supplements containing ephedrine alkaloids and the occurrence of
    adverse reactions that support the proposed dosing levels and duration
    of use limits. Consistent with one of our recommendations, in 2003 FDA
    withdrew the provisions of the ephedrine alkaloids proposal relating to
    the dietary dosing regime and duration limits and reopened the proposed
    rule for further comment. After obtaining and reviewing further
    evidence concerning ephedrine alkaloids' safety and effectiveness, FDA
    issued a final rule prohibiting the sale of dietary supplements
    containing ephedrine alkaloids in February 2004. (GAO/HEHS/GGD-99-90):

    1.9.N. Encouraging Manufacturers of Controlled Substances to Develop
    Risk Management Plans: In early 2000, media reports began to surface in
    several states that OxyContin, a schedule II controlled substance, was
    being abused, that is, used for nontherapeutic purposes or for purposes
    other than those for which it was prescribed, and illegally diverted.
    We reported that according to FDA and the Drug Enforcement
    Administration, the abuse of OxyContin is associated with serious
    consequences, including addiction, overdose, and death. We recommended
    that FDA guidance encourage drug manufacturers that submit applications
    for schedule II controlled substances to include risk management plans
    that contain a strategy for monitoring the use of these drugs and
    identifying potential abuse and diversion problems. Consistent with our
    recommendation, FDA issued guidance in March 2005 that recommends
    sponsors of schedule II controlled substances develop and use risk
    minimization action plans. Though FDA had approved one schedule II
    controlled substance since our recommendation and that application
    included a detailed risk minimization action plan, the manufacturer of
    this controlled substance subsequently provided FDA information showing
    abuse of the controlled substance and suspended sales and marketing of
    it. (GAO-04-110):

    1.10.N. Using a More Accurate Measure of VA Home-Based Primary Care
    Workload: In September 2004, we recommended that VA use the number of
    visits to measure and report the amount of home-based primary care
    veterans receive. We had determined that the amount of home-based
    primary care that veterans receive was overstated in the workload
    measurement that VA used, noting that a more precise measurement would
    offer a better comparison of home-based primary care with other
    noninstitutional long-term care services. In response to our
    recommendation, VA began measuring in fiscal year 2005 the number of
    visits veterans receive that it reviews (along with unduplicated number
    of patients served and average daily census) as part of program
    management. (GAO-04-913):

    1.11.N. Holding Nursing Homes Accountable for Past Noncompliance with
    Federal Quality Standards: In November 2004, we reported that CMS's
    policy on citing deficiencies arising from nursing homes' past
    noncompliance with federal quality standards was flawed and ambiguous.
    Previously, past noncompliance occurred when a current survey revealed
    no deficiencies but determined that an egregious violation of federal
    standards occurred in the past and was not identified during an earlier
    survey. However, CMS's policy did not define what constituted an
    egregious violation or relate egregious violations to its scope and
    severity grid (which defines serious deficiencies as actual harm or
    immediate jeopardy). Thus, we recommended that the Administrator of CMS
    revise the agency's policy in order to hold nursing homes more
    accountable for all past noncompliance resulting in harm to residents.
    In October 2005, CMS issued a revised past noncompliance policy that
    holds homes accountable for all past noncompliance resulting in harm to
    residents, not just care problems deemed to be egregious; clarifies how
    to address recently identified past deficiencies; and clarifies the
    methods for determining whether past noncompliance has been corrected.
    (GAO-05-78):

    1.12.C. Informing Beneficiaries about the New Medicare Prescription
    Drug Benefit: In a series of reports and a testimony, we identified
    shortcomings in the quality of communications with beneficiaries about
    Medicare's new prescription drug benefit and their prescription drug
    plan choices. Examining media used by CMS to inform beneficiaries, we
    found that selected publications, the 1-800-MEDICARE help line, and the
    Medicare Web site were not always clear, accurate, and easy to use. Our
    review of call centers operated by prescription drug plan sponsors
    found that customer service representatives' responses were generally
    prompt and courteous, but the accuracy of the information provided was
    relatively low and highly variable. These findings highlight the need
    to improve both CMS and plan sponsor communication to better serve
    Medicare beneficiaries faced with important and difficult plan choices.
    (GAO-06-715T, GAO-06-710, and GAO-06-654):

    1.13.C. Identifying Limitations in Federal Evacuation Assistance for
    Health Facilities: In reports and testimony following Hurricane Katrina
    and the 2005 hurricane season, we identified challenges faced in
    evacuating hospital patients and nursing home residents during recent
    hurricanes and limitations that constrain the federal government's
    assistance with these evacuations. We found two limitations in the
    National Disaster Medical System--a program identified in the National
    Response Plan to assist state and local governments with evacuations.
    First, it is not designed to move patients or residents out of
    hospitals or nursing homes to mobilization points, such as airports,
    where National Disaster Medical System transportation begins, and
    relies on state and local governments to provide this transportation.
    This reliance on state and local governments is inadequate when
    multiple facilities in the community have to evacuate simultaneously
    and compete for too few vehicles. Second, the National Disaster Medical
    System is not designed for nursing home residents or other people who
    do not need hospital care, and the needs of this population during
    evacuations have been overlooked in federal plans. We recommended that
    the Department of Homeland Security (DHS) clearly delineate (1) how the
    federal government will assist state and local governments with the
    transportation of patients and residents out of hospitals and nursing
    homes and (2) how to address the needs of nursing home residents during
    evacuations. DHS stated that it will take the recommendations under
    advisement as it revises the National Response Plan. (GAO-06-826, GAO-
    06-790T, and GAO-06-443R):

    1.14.C. Strengthening Oversight of Clinical Lab Quality: We identified
    numerous weaknesses in oversight of the approximately 36,000 clinical
    labs that must be surveyed biennially because they perform certain
    complex tests and made 13 recommendations to CMS to strengthen its
    oversight of lab quality. Lab oversight is critical because inaccurate
    or unreliable lab tests may lead to improper treatment, unnecessary
    mental and physical anguish for patients, and higher health care costs.
    We found that CMS lacked comparable data from all survey organizations
    to allow it to monitor trends in the quality of lab testing.
    Furthermore, oversight weaknesses made it difficult to determine the
    quality of lab testing because the weaknesses masked quality problems.
    For example, the greater weight that CMS and survey organizations
    sometimes placed on their educational, as opposed to their regulatory,
    role may lead to an understatement of serious lab quality problems.
    Moreover, CMS agencywide staffing limitations have prevented the
    program from hiring staff sufficient to ensure adequate oversight. Our
    key recommendations to the Administrator of CMS intended to strengthen
    oversight included (1) standardizing the reporting of survey
    deficiencies to permit meaningful comparisons across survey
    organizations; (2) working with survey organizations to ensure that
    educating lab workers does not preclude appropriate regulation, such as
    identifying and reporting deficiencies that affect lab testing quality;
    and (3) hiring sufficient staff to fulfill CMS's oversight
    responsibilities. CMS concurred with 11 of our 13 recommendations and
    noted that the report provided insights into areas where it can
    improve, augment, and reinforce oversight. (GAO-06-416):

    1.15.C. Improving the Distribution of Ryan White Comprehensive AIDS
    Resources Emergency Act Funds and Oversight of AIDS Drug Assistance
    Programs: Through a series of testimonies and reports, we assisted the
    Congress in its preparation for reauthorizing the Ryan White
    Comprehensive AIDS Resources Emergency Act by examining (1) how grant
    funds that provide health care, medications, and support services for
    people with HIV/AIDS are distributed under the act and (2) prices AIDS
    Drug Assistance Programs paid for HIV/AIDS drugs. We found that
    multiple provisions of the act's grant funding formulas result in
    funding not being comparable per AIDS case across grantees and that
    funding would shift among grantee jurisdictions if HIV case counts were
    incorporated along with estimated living AIDS case counts in allocating
    fiscal year 2004 grants. We also found that some AIDS Drug Assistance
    Programs reported paying prices for some drugs that were above amounts
    HHS's Health Resources and Services Administration identified as a
    measure of an economical use of grant funds--340B prices--and that the
    agency does not routinely determine whether the prices that the AIDS
    Drug Assistance Programs report paying are no higher than the 340B
    prices. We suggested that the Congress take six specific actions to
    modify provisions of the act, including revising the funding formulas.
    The Congress is using our work in reauthorizing the act. (GAO-06-703T,
    GAO-06-681T, GAO-06-646, GAO-06-332, and GAO-05-841T):

    The Education And Protection Of The Nation's Children:

    1.16.F. Changing Lender Yields on Federal Student Loans to Save
    Billions of Dollars: Over $1.2 billion in subsidy payments was saved
    because of our review of federal subsidy payments for certain Federal
    Family Education Loan Program (FFELP) loans. We examined loans financed
    with tax-exempt bonds issued prior to October 1, 1993, with a
    guaranteed minimum 9.5 percent yield and found that under existing laws
    and regulations, lenders used various methods to increase the volume of
    loans guaranteed the minimum 9.5 percent yield. Federal subsidy
    payments for FFELP loans increased from $209 million in fiscal year
    2001 to over $600 million in fiscal year 2004, in part, because of
    these methods. We recommended that the Congress change the yield for
    loans made or purchased in the future with the proceeds of pre-October
    1, 1993, tax-exempt bonds, and any refunding bonds, to better reflect
    market interest rates. The Congress relied heavily on our report to
    develop and promote legislation to change the lender yield, frequently
    citing our findings as it debated legislation. In October 2004, the
    Congress passed the Taxpayer-Teacher Protection Act, which temporarily
    changed the lender yield on loans financed with pre-October 1, 1993,
    tax-exempt bonds. These changes were in effect until December 31, 2005,
    but the law was extended for 3 additional months until March 31, 2006.
    The combined financial benefits from the original law plus the
    extension totaled over $344 million. In February 2006, the Congress
    passed the Deficit Reduction Act of 2005, which permanently changed the
    lender yield, requiring that loans made or purchased after February 8,
    2006, with proceeds of tax-exempt bonds issued prior to October 1,
    1993, have a lender yield based on market interest rates. Lenders that
    hold less than $100 million in 9.5 percent loans will be able to
    continue to receive the minimum 9.5 percent yield until December 31,
    2010, at which time the yield will change to one based on market
    interest rates. Financial benefits generated by this change will
    continue over 10 years and will total $930 million in fiscal year 2006
    alone. The combined financial benefits from the temporary and permanent
    lender yield changes are over $1.2 billion. (GAO-04-1070 and GAO-04-
    107):

    1.17.N. Improving Oversight of Schools That Are Lenders: The Congress
    addressed our findings and recommendations from our review of FFELP,
    which helps students pay for postsecondary education. We found that
    schools serving as lenders under FFELP reported differing
    interpretations of the law regarding their authority to originate
    Parent Loans for Undergraduate Students, that the Department of
    Education (Education) had not issued guidance available to all school
    lenders on this issue, and that school lenders occasionally lent to
    students who did not attend their schools. We also found that not all
    school lenders asked for contract proposals in selecting the
    organizations they would use to finance, originate, service, and
    purchase their FFELP loans. Further, the law did not specify how the
    premiums received for the sale of loan portfolios should be used, but
    schools used the funds to meet institutional needs, such as student
    recruitment or faculty improvement. Finally, only schools that
    originate or hold more than $5 million in loans under FFELP were
    required to submit an annual independent compliance audit to the Office
    of Federal Student Aid for the purposes of assessing regulatory
    compliance and financial management. In passing the Deficit Reduction
    Act of 2005, the Congress addressed these issues, with members citing
    our report as inspiration. The act restricts school lenders from
    providing Parent Loans for Undergraduate Students and from providing
    loans to students not enrolled at their schools. Not only did this
    clarify loan requirements under FFELP, it also ensured consistent
    compliance across lending institutions. In addition, the act now
    requires schools to enter into contracts on a competitive basis with
    outside organizations that finance, service, or administer loans, and
    requires them to use the proceeds received from the sale of their loans
    for need-based grant programs. This clarifies how schools should
    administer FFELP and can ensure that schools provide another source of
    funds for needy students. Finally, the act expanded the audit
    requirement to all lenders. As a result, critical program measures are
    now in place to cover all school lenders, allowing Education to assess
    the adequacy of loan procedures, the financial resources of lenders,
    and the accreditation status of all school lenders. (GAO-05-184):

    1.18.N. Expediting Interstate Placements of Special Needs Adoptions:
    Our work played a critical role in shaping legislation to facilitate
    the placement and improve the protection of adoptive and foster
    children across state lines. Concerns were raised that interstate
    placements delayed adoptions of children with special needs, often
    because of delays in completing home studies of prospective families
    that may result in special needs children lingering in foster care. Our
    work found that data to assess the timeliness of interstate placement
    were lacking, and that HHS was not been able to identify states that
    may need improvements in their processes or may be burdened by other
    states' requests for assistance with placements. We recommended that
    HHS help states collect and report data related to the interstate
    placement processes, especially the time needed to complete home
    studies and the sending and receiving state for each child placed
    across state lines. We also recommended that the agency assess the
    extent to which home studies cause delays or impede interstate
    adoptions and identify which states are facilitating timely interstate
    placements. And if the agency's findings supported such action, it
    should consider proposing legislation to reward states for facilitating
    placements across state lines. Congressional staff stated that our
    findings played a critical role in deliberations on the bill that
    became The Safe and Timely Interstate Placement of Foster Children Act
    of 2006 (Pub. L. No. 109-239). Enacted in July 2006, the act aims to
    accelerate interjurisdictional placements and improve the protection of
    adoptive and foster children across state lines. It requires a state
    receiving a request to place a child for adoption or foster care to
    complete a home study within 60 days and the state making the request
    to then respond within 14 days of receiving the home study. In
    addition, the law authorizes funding for an incentive program of $1,500
    for every home study completed within 30 days and requires that state
    plans for child welfare services include reference to state efforts to
    facilitate orderly and timely placements within and between states.
    (GAO-05-292):

    1.19.N. Improving the Collection of Child Support Payments: State child
    support enforcement programs rely on Social Security numbers (SSN) to
    locate the addresses, income, and assets of noncustodial parents. In
    2002, we reported that six states were not collecting SSNs for child
    support enforcement, as required. We recommended that HHS's Office of
    Child Support Enforcement more effectively track compliance with this
    requirement and take formal actions when necessary. As a result, the
    agency committed to strengthen its efforts to monitor and oversee state
    plan compliance regarding SSNs and drivers' licenses. Specifically, the
    agency notified states of its intent to disapprove their child support
    plans and cease all federal child support funding if immediate action
    was not taken. Subsequently, all six states identified by the agency as
    noncompliant took action. For example, two states amended their state
    plans, effective June 2004, to include the use of SSNs. In addition,
    the Office of Child Support Enforcement determined that one state had
    the required legislation but had not implemented the requirement for
    SSNs on drivers' licenses. After receiving notice from the agency, the
    state implemented the legislation in May 2004. As a result, all states
    are now in compliance and able to use this enforcement tool to help
    collect child support payments. (GAO-02-239):

    1.20.C. Ensuring the Effectiveness of Federal Investments in Science,
    Technology, Engineering, and Mathematics Programs: In October 2005, we
    reported that the federal government funded 207 education programs
    across 13 separate federal agencies at a cost of $2.8 billion in fiscal
    year 2004. Despite the importance of ensuring that the United States
    remains a world leader in scientific and technological innovation, we
    noted that agencies had reported little about the effectiveness of
    federal investments in increasing the number of students and graduates
    pursuing science, technology, engineering, and mathematics degrees and
    occupations or improving educational programs in these fields. While
    some experts suggest that additional investments are warranted, we
    noted that it was important to know the extent to which existing
    federal programs are appropriately targeted and making the best use of
    available federal resources. Based on our report, the Congress
    established an Academic Competitiveness Council and charged it to (1)
    identify all federal programs with a mathematics and science focus, (2)
    identify the target populations being served by such programs, (3)
    determine the effectiveness of such programs, (4) identify areas of
    overlap or duplication in such programs, and (5) recommend ways to
    efficiently integrate and coordinate such programs. The Congress
    continued to rely on our work concerning science, technology,
    engineering, and mathematics issues throughout 2006. In May 2006, for
    example, we provided updated information on these issues in testimony
    at a hearing that examined American competitiveness issues.
    Additionally, our report and testimony have subsequently been cited
    during congressional deliberations over newly proposed legislation
    concerning federal science, technology, engineering, and mathematics
    programs. (GAO-06-114 and GAO-06-702T):

    The Promotion Of Work Opportunities And The Protection Of Workers:

    1.21.N. Improving Agency Coordination for the 2006 Hurricane Season: We
    identified three specific areas where inadequate coordination between
    the Federal Emergency Management Agency (FEMA) and the Red Cross
    hampered the provision of federal mass care assistance to victims of
    the 2005 Gulf Coast hurricanes. These areas were (1) differing views of
    FEMA and the Red Cross about certain key roles and responsibilities,
    which strained their working relationships; (2) frequent rotations of
    Red Cross staff, which constrained their ability to develop strong
    working relationships with employees of other agencies; and (3) FEMA's
    lack of a system to track requests for assistance submitted by the Red
    Cross, which slowed service delivery. We recommended improvements in
    all these areas, and some progress has been made. For example, the Red
    Cross has hired additional employees to improve coordination with state
    emergency management agencies. In addition, the Red Cross is revising
    training and taking additional steps to improve coordination.
    Furthermore, FEMA and the Red Cross have executed a new memorandum of
    understanding that sets forth their agreement to cooperate in a variety
    of areas related to disaster response and recovery. The memorandum
    confirms the organizations' commitment to sharing information about
    relief operations and coordinating their activities with respect to
    disaster operations, service delivery, training, the issuance of public
    information, and communications technology. These efforts can help
    ensure greater coordination after the next disaster. (GAO-06-712):

    1.22.N. Reducing Unemployment Insurance Overpayments: Our 2002
    testimony on the Unemployment Insurance program helped to convince the
    Congress that access to data sources could help states avoid
    overpayments of unemployment insurance benefits. We reported that the
    Department of Labor (Labor) and the states do not always take the
    necessary steps to adequately verify unemployment insurance claimants'
    initial and continuing eligibility for benefits. We found that some
    states rely heavily on claimants to self-report information concerning
    whether they are working when determining their eligibility for
    benefits, contributing to overpayments. Furthermore, we concluded that
    states could reduce overpayments if they had access to additional data
    sources, such as the National Directory of New Hires. This directory is
    a comprehensive source of unemployment insurance, wage, and new hires
    data for the whole nation. However, the law limited access to the
    directory and did not permit individual states to obtain data from it
    for purposes of verifying claimants' eligibility for unemployment
    insurance. We testified that having such access would allow Labor to
    verify unemployment insurance claimants' employment and benefit status
    in other states. In August 2004, the Congress passed the State
    Unemployment Tax Act Dumping Prevention Act (Pub. L. No. 108-295),
    which included language that provided states with the authority to
    access the directory. Congressional staff confirmed that our testimony
    was instrumental in showing the utility of providing states with access
    to this database as a means of reducing overpayments and preventing
    fraud. (GAO-02-820T):

    1.23.N. Reducing Fraud in Benefit Payments to Veterans: Our review of
    the Veterans Benefits Administration's efforts to prevent payments to
    deceased veterans led to the arrest of individuals who were defrauding
    the government. We examined the Veterans Benefits Administration's
    interagency database matching process and found that it did not
    identify veterans who died during the application process, which
    resulted in improper benefit payments to veterans after their deaths.
    We discovered this by matching VA data on beneficiaries with Social
    Security Administration (SSA) data on deaths and identifying 857
    veterans or survivors receiving VA disability compensation or pension
    benefits at a time when SSA identified them as deceased. Of these
    cases, we reviewed 28 and found evidence that deceased veterans were
    receiving benefits. We recommended that VA review the remaining cases
    that were not included in our assessment to determine the extent to
    which payments were improperly sent to beneficiaries after they had
    died and, when appropriate, to recover those payments. VA agreed to
    review these cases and, after doing so, forwarded several cases to VA's
    Inspector General for follow-up. After investigating, the Inspector
    General determined that VA had improperly sent benefits to deceased
    veterans in several cases. This led to the arrest of individuals who
    were defrauding the government in three cases. (GAO-03-906):

    1.24.N. Ensuring Effective and Equitable Measures to Assess States'
    Performance and Penalties under the Temporary Assistance for Needy
    Families (TANF) Program: Under TANF, welfare recipients are expected to
    participate in work activities comprising 12 different categories. HHS
    is responsible for reporting participation rates in these work
    activities to the Congress and using them to identify states that are
    not meeting the required participation levels and, thus, may be subject
    to penalties. However, we found that states are being measured by
    different standards and the participation rates cannot be used to
    compare states' performance. Specifically, we determined that
    differences in how states define the categories of work that count
    toward meeting the federal work participation requirements led to
    inconsistent measurement of work participation across states. Unless
    the measure is clear and consistent for all those potentially subject
    to penalty, it can result in misleading information and inequitable
    penalty assessments. We also found that some states lacked internal
    controls to help ensure the work participation data were reliable. We
    recommended that HHS issue regulations providing for its oversight of
    states' definitions and more guidance to states on counting hours of
    work activities. Congressional staff relied heavily on our report when
    they drafted new requirements for TANF reauthorization. As a result,
    the Deficit Reduction Act of 2005 (Pub. L. No. 109-171), which
    reauthorized TANF, included requirements for HHS to provide additional
    direction and oversight regarding how to count and verify allowable
    work activities. To comply with the law, HHS issued regulations that
    more fully define the categories of work, require each state to provide
    a Work Verification Plan that includes a description of how each work
    activity counted by the state meets the federal definitions and how the
    state ensures its work participation data are reliable, and provide for
    HHS to review and approve the plans and impose a penalty if a state
    fails to maintain adequate procedures for ensuring the accuracy of its
    work participation data. These revised regulations should help make the
    work participation data useful for assessing states' performance under
    TANF and imposing penalties on states that do not meet required levels
    of work participation. (GAO-05-821):

    1.25.N. Addressing Domestic Violence: Our work influenced lawmakers to
    require certain marriage promotion programs to include education on
    domestic violence. In 2005, we examined the extent to which state TANF
    programs were spending TANF funds on marriage and responsible
    fatherhood programs and how, if at all, they were addressing domestic
    violence. We reported that research funded by HHS found that many
    unmarried parents face a variety of challenges that may impede their
    ability to form stable marriages. Assessment of these barriers, in
    particular domestic violence, could point out the need for referral to
    other kinds of appropriate help. Furthermore, addressing domestic
    violence specifically is important to ensuring that programs address
    its dangers. We concluded that while most marriage and fatherhood
    promotion programs did not address the issues of domestic violence
    explicitly, evidence suggested that these issues should be explicitly
    addressed. Our findings significantly influenced lawmakers to require
    that marriage promotion programs include education on domestic
    violence. In February 2006, the Congress enacted the Deficit Reduction
    Act of 2005, which reauthorized the TANF program. This act requires
    that all entities seeking grants to fund marriage promotion and
    responsible fatherhood activities consult with domestic violence
    experts or coalitions to develop these activities and describe how they
    will address domestic violence. (GAO-05-701):

    1.26.N. Expanding Eligibility for and Awareness of Worker Benefits: The
    trade adjustment assistance program, the primary federal program
    serving workers laid off as a result of international trade, added two
    new benefits in 2002: health insurance assistance, known as the health
    coverage tax credit, and wage insurance for older workers, known as
    alternative trade adjustment assistance. To be eligible for the health
    coverage tax credit, trade adjustment assistance participants must be
    eligible for or receiving extended income support or receiving benefits
    under the trade adjustment assistance program's wage insurance program.
    Labor's implementing guidance required that to be eligible for extended
    income support, and therefore for the health coverage tax credit,
    workers had to be enrolled in training or have a waiver of the training
    requirement--even before the workers had reached their statutory
    training enrollment deadlines. In 2004, we reported that as a result,
    almost all states increased the number of training waivers issued to
    workers who are eligible for trade adjustment assistance to help them
    quickly become eligible for the health coverage tax credit. Labor
    officials reported that this increase in waivers resulted in a
    significant administrative workload. On May 25, 2006, Labor issued
    guidance to states that revised the eligibility criteria for extended
    income support and the health coverage tax credit. Under this new
    guidance, workers who have not yet reached their training enrollment
    deadlines may be eligible for extended income support and the health
    coverage tax credit without being in training or having a training
    waiver. In the guidance, Labor cites our findings as a significant
    reason for its revision of the eligibility criteria. This new policy
    will reduce the administrative burden on states, allow workers to have
    quicker access to the health coverage tax credit, and let states devote
    more resources to assessing workers' needs and developing meaningful
    service plans that lead to reemployment. In a related report issued in
    2006, we found that many workers were unaware of and did not receive
    health coverage tax credits and alternative trade adjustment assistance
    benefits. States' efforts to inform workers about these benefits were
    mixed; some states did not believe their duties included conducting
    outreach on these benefits. We recommended ways to improve awareness
    and noted that workers need information beyond what is available at
    initial informational meetings. Labor subsequently raised these issues
    at its national conferences for state trade adjustment assistance and
    rapid response coordinators. The agency discussed how to conduct better
    outreach, and encouraged states to ensure that counseling sessions
    assess a worker's need for these benefits and to distribute fact sheets
    at rapid response meetings with workers. (GAO-04-1012):

    1.27.N. Improving the Delivery of Youth Services: Labor implemented
    several recommendations we made to enhance youth programs under the
    Workforce Investment Act. Our February 2004 report recommended that
    Labor coordinate with Education to clarify how schools can work with
    workforce officials to connect school dropouts with local Workforce
    Investment Act youth programs, increase the availability of guidance
    and technical assistance to local areas, and establish regional
    monitoring procedures to oversee state efforts to validate performance
    data. Labor addressed these recommendations with several actions. In
    July 2004, the agency issued guidance articulating a new strategic
    vision to serve out-of-school youth that encourages state and local
    workforce systems to partner with public school systems. Conversely,
    alternative education institutions are encouraged to work with the
    Workforce Investment Act one-stop career centers to obtain information
    on local workforce training programs and local labor markets, including
    career information. Labor and Education held Regional Youth Forums and
    conference calls that convened education and workforce groups to
    exchange information and provide technical assistance. Through its Web
    site, Labor now provides information on specific strategies for
    partnerships between the workforce system and community colleges to
    reach youth who are out of school or at risk of dropping out. In
    addition, Labor disseminated guidance through its Performance
    Enhancement Project, which uses online training, face-to-face
    workshops, and targeted technical assistance to help states and local
    areas most in need. One workshop focused on designing and delivering
    effective Workforce Investment Act youth programs, including programs
    serving out-of-school youth. These efforts can help ensure states and
    localities get the necessary training and assistance to broaden
    services to out-of-school youth. Finally, Labor developed its Core
    Monitoring Guide in 2005 that provides a consistent framework for on-
    site monitoring of all employment and training grants. It requires
    monitoring officials to review the grantee's management information
    system and determine whether it incorporates a data validation process
    to ensure accuracy. Several regions conducted monitoring visits to
    review data validation files and compare findings against data
    submitted to Labor. This guide can improve the consistency of oversight
    procedures and reliability of Workforce Investment Act youth
    performance outcome data. (GAO-04-308):

    A Secure Retirement For Older Americans:

    1.28.F. Reducing Liabilities of Social Security Trust Funds by Billions
    of Dollars: Our findings on the Social Security coverage of medical
    residents helped the Social Security Trust Funds avert losses of $3.9
    billion. A court ruled in 1998 that medical residents were not liable
    for Social Security contributions for wages paid because the court
    considered medical residents to be students and, therefore, qualified
    for an exception to paying Federal Insurance Contributions Act taxes
    and Social Security coverage. The Congress asked us to review the
    matter. We found that no federal law provides that medical residents
    are uniformly subject to, or exempt from, paying Federal Insurance
    Contributions Act taxes. However, federal law contains provisions that
    medical residents could potentially be exempt if they are employed by
    the school, college, or university at which they are students, enrolled
    and regularly attending classes. We also noted that the ruling had
    generated applications for tax refunds from medical residents (and
    medical institutions paying the employer's share of Social Security)
    totaling more than $162 million as of August 2000. SSA estimated that
    the exemption would increase liabilities to the Social Security Trust
    Funds by $3.9 billion from 2001 through 2010. The Department of the
    Treasury, the Internal Revenue Service (IRS), and SSA used our findings
    to develop and promote regulatory changes to address this issue. IRS
    issued final regulations, which took effect on April 1, 2005,
    clarifying that employees who are working enough hours to be considered
    full-time employees (40 hours or more per week) are not students for
    the purposes of the exception. Thus, medical residents working at least
    40 hours per week would now be covered by Federal Insurance
    Contributions Act and Social Security. As a result, the Social Security
    Trust Funds will avert liabilities of $3.9 billion spanning a 10-year
    period, including $410 million in fiscal year 2006 alone. (GAO/HEHS/
    GGD-00-184R):

    1.29.N. Targeting Supplementary Security Income Residency Violations:
    Our work has contributed to better targeting of overpayments of
    Supplementary Security Income (SSI) benefits resulting from residency
    violations, which totaled about $118 million from 1997 through 2001. We
    recommended ways that SSA, which administers SSI, could address
    weaknesses we found in detecting and deterring residency violations.
    The agency agreed with our recommendations and took action. We
    recommended that SSA expand the use of unannounced home visits to help
    target violations and investigate the potential of emerging third-party
    databases to help field staff more accurately verify whether SSI
    recipients are violating program regulations. SSA subsequently
    contacted the remaining states, whose Medicaid agencies generally
    conduct the visits for both SSI residency and Medicaid purposes, to
    determine their willingness to enter into similar agreements. This led
    to agreements with seven additional states. SSA also reported that
    these visits would lead local SSA offices to take action to stop
    benefit payments to ineligible beneficiaries. As recommended, SSA began
    using third-party data sources to detect SSI residency requirement
    violations, including data exchanges with DHS regarding individuals
    deported from the United States and individuals who notify DHS that
    they will be out of the country for an extended period, and therefore
    not eligible for benefits. With more data at its disposal, SSA
    forwarded over 2,000 alerts to its field offices for further
    investigation. Finally, we recommended high-risk factors that the
    agency could test for effectiveness as part of its risk analysis
    system, which identifies recipients who are more likely to be overpaid.
    SSA considered the factors and incorporated some, such as past period
    of excess resources, into its redetermination profiling system to
    select cases for redetermination. These efforts can improve detection
    and deterrence so that only eligible individuals receive SSI benefits.
    (GAO-03-724):

    1.30.N. Protecting SSNs from Identity Fraud and Abuse: Our work on the
    protection of SSNs led to agency and congressional action, and
    continues to be used by the Congress. Members of the Congress were
    concerned about what types of entities were sharing personal
    information, including SSNs, with contractors; what industry practices,
    if any, were being followed; and what federal agencies were doing to
    regulate and monitor the sharing of SSNs between private sector
    entities and their contractors. In 2003, we recommended that SSA change
    the way it verified driver license information and SSNs, otherwise
    states would be vulnerable to customers who may be fraudulently using a
    deceased person's identity information to obtain a driver license. The
    Intelligence Reform and Terrorism Prevention Act of 2004 required SSA
    to address this recommendation. As of March 2006, SSA had installed
    software that revised its verification method and began informing
    driver licensing agencies when the SSNs for which they request
    verification belong to deceased individuals. In a 2005 report, we
    recommended that to fully protect against fraud and abuse, SSA
    establish procedures for handling, securing, and tracking birth
    certificates obtained for verification purposes. In 2006, SSA issued
    procedures for handling and securing birth certificates in its Program
    and Operations Manual System. In 2006, we issued a report describing
    when private entities--such as banks, telecommunication companies, and
    tax preparation companies--share SSNs with contractors. We found that
    these entities share SSNs with contractors for limited purposes and
    rely on accepted industry practices and used the terms of their
    contracts to protect the personal information shared with contractors.
    Our review of four industries revealed gaps in federal law and agency
    oversight. At the Congress's request, we testified about the gaps in
    SSN protection practices within government agencies and across industry
    sectors, noting that two recommendations we made to strengthen
    government agency practices were implemented, and that some agencies
    began taking steps to eliminate SSNs from their identification cards.
    To address remaining issues, the Congress is considering actions such
    as convening a group of government officials to develop a unified
    approach to safeguarding SSNs and restricting the use and display of
    SSNs to third-party contractors. These efforts can better protect SSNs
    from identity fraud and abuse. (GAO-06-586T, GAO-06-238, GAO-05-115,
    and GAO-03-920):

    1.31.C. Contributing to the Understanding of the Relationship between
    Demographics, Financial Markets, and Retirement Security: The first
    wave of baby boomers will become eligible for Social Security early
    retirement benefits in 2008. In addition to concerns about how the
    boomers' retirement will strain the nation's retirement and health
    systems, concerns also have been raised about the possibility of
    boomers selling large amounts of financial assets in retirement, with
    relatively fewer younger U.S. workers available to purchase these
    assets. Some observers have suggested that such a sell-off could
    precipitate a market "meltdown," a sharp and sudden decline in asset
    prices, or reduce long-term rates of return, while others have noted
    that such an outcome could be mitigated by a rising demand for U.S.
    financial assets from developing countries and by immigration. Because
    views range widely on the potential impact, our July 2006 report put
    this issue into perspective by analyzing the concern from several
    different angles--analyzing the distribution of financial assets among
    boomers; synthesizing the academic research and views of financial
    industry representatives; and highlighting the importance of rates of
    return in the context of trends affecting other sources of retirement
    income, such as Social Security and traditional pensions. We found that
    while the boomers' retirement is not likely to cause a sharp decline in
    asset prices, the retirement security of boomers and others will likely
    depend more on individual savings and returns on such savings. This is
    due, in part, to the decline in traditional pensions that provide
    guaranteed retirement income and the rise in account-based defined
    contribution plans. Also, fiscal uncertainties surrounding Social
    Security and rising health care costs will ultimately place more
    personal responsibility for retirement saving on individuals. Our
    report will help the Congress, policymakers, and citizens better
    understand the potential range of effects that economic and demographic
    trends have on retirement income and how to weigh those risks and make
    better decisions about retirement planning. (GAO-06-718):

    An Effective System Of Justice:

    1.32.C. Addressing the Challenges of Immigration Reform: In several
    reports this past year, we identified challenges DHS faced in
    controlling illegal immigration into the United States. We reported
    that the widespread use of counterfeit documents has allowed
    unauthorized workers to obtain jobs and that a voluntary electronic
    employment eligibility verification program operated by DHS, for which
    about 9,000 employers have registered, holds promise for limiting the
    ability of unauthorized workers to obtain jobs. We also reported that
    DHS faces extensive challenges in meeting a congressionally mandated
    deadline that required all persons entering the United States to
    present a passport or other document or combination of documents by
    January 2008--a deadline that has since been extended to June 1, 2009.
    We also reported that immigration benefit fraud remains a serious
    problem and that most who committed immigration fraud were not
    penalized. The Congress used these reports in developing proposed
    legislation that would require all employers to electronically verify
    all new employees' authorization to work, extend the deadline requiring
    all persons to present a passport or other documents, and increase
    penalties for those who commit immigration fraud. (GAO-06-1055, GAO-06-
    814R, GAO-06-741R, GAO-06-259, and GAO-05-813):

    The Promotion Of Viable Communities:

    1.33.C. Improving the Federal Housing Administration's Risk Management
    and Estimation of Program Costs: In 2005 and 2006, we issued a series
    of reports identifying weaknesses in the Federal Housing
    Administration's ability to manage risks and estimate costs for its
    single-family mortgage insurance products. For example, we noted that
    the agency lacked sufficient controls to manage risks associated with
    the growing proportion of loans with down-payment assistance,
    consistently underestimated the costs associated with claims on its
    insured loans, and developed its mortgage scorecard (an automated
    credit assessment tool) using data that were outdated by the time the
    agency implemented the scorecard. In response to our recommendations,
    the Federal Housing Administration incorporated the source of down-
    payment assistance in its actuarial review of the insurance fund, plans
    to update its mortgage scorecard on a regular basis, and is testing
    additional variables found to influence credit risk for possible
    inclusion in the scorecard. These changes will help the agency reduce
    the risk of losses in its single-family mortgage insurance program and
    more reliably estimate program costs. (GAO-06-868T, GAO-06-435, GAO-06-
    24, GAO-05-875, and GAO-05-194):

    1.34.C. Identifying Improvements Needed in Credit Card Disclosures: We
    found that consumers had difficulty identifying and understanding the
    rates and fees that could affect their credit card costs. As part of
    reviews we conducted of credit card issues, we found that credit card
    pricing now features a variety of interest rates and other charges. For
    example, cardholders who make late payments may pay a penalty of as
    high as $39 per occurrence and could have their interest rates
    increased to 30 percent or more. However, our interviews with consumers
    revealed that their understanding of the terms and conditions in
    disclosure statements supplied by credit card providers was limited. We
    interviewed consumers and used a usability consultant to analyze the
    readability of the disclosures that the largest issuers provide to
    cardholders. We found that the disclosures obscured important
    information in text, failed to group and label related material, and
    used small typefaces. We recommended that as the Federal Reserve
    completes its efforts to revise card disclosures that it involve
    consumers in assessing the usability and readability of new disclosure
    formats and language and consider using usability experts to assist
    with the design and testing of any new disclosures. We also identified
    information that the Federal Reserve could use in developing newly
    mandated disclosures to inform consumers of the consequences of making
    only the minimum payment on their credit cards. (GAO-06-929):

    1.35.C. Providing More Timely Disaster Assistance: We evaluated the
    Small Business Administration's disaster loan program. We determined
    that several factors affected the agency's ability to provide timely
    disaster assistance and caused a significant loan application backlog
    for several months following Hurricane Katrina. We recommended, in a
    July 2006 report, that the agency reassess the maximum user capacity of
    its Disaster Credit Management System based on lessons learned from the
    Gulf Coast hurricanes and information available from catastrophe risk
    modeling firms and disaster simulations. We also recommended that the
    agency expedite plans to identify ways to more efficiently process
    disaster loan applications. The agency said that it was considering
    using catastrophe risk models and disaster simulations as part of its
    disaster planning process. The agency also said it was considering
    resuming its business process reengineering efforts to provide for a
    secure Internet-based application for disaster loans. These actions
    will improve the agency's ability to provide timely assistance in
    response to future disasters. (GAO-06-860):

    1.36.C. Improving the Fair Housing Intake and Investigation Processes:
    As a follow-up to an April 2004 report on the Department of Housing and
    Urban Development's oversight and management of the fair housing
    process, in October 2006, we reported on the thoroughness of fair
    housing intake (the receipt and recording of inquiries and complaints)
    and investigation (the collection of evidence) processes, as well as
    complainants' satisfaction with these processes and with attempts to
    reach mutually acceptable solutions on their complaints. We found that
    (1) the department needed better assurance that intake and
    investigation processes were consistently thorough and (2) significant
    numbers of complainants were dissatisfied with the fair housing
    complaint process, its outcome, and certain aspects of intake and
    investigation. We recommended that the department establish standards
    and benchmarks for initial intake activities, improve data needed to
    monitor the timeliness of these activities, and improve planning and
    documentation of investigations. The department has taken steps to
    better monitor the fair housing intake and investigation processes and
    has incorporated some of our recommendations into its policies and
    procedures. (GAO-06-79 and GAO-04-463):

    1.37.C. Improving Oversight of Community Development Block Grants: In
    our July 2006 report we determined that recipients of Community
    Development Block Grants spend the majority of their grants on public
    improvements (such as water lines and street improvements) and housing,
    but the Department of Housing and Urban Development does not centrally
    maintain the data needed to determine recipient compliance with
    statutory spending limits on public services and administration and
    planning. We recommended that the department maintain the data needed
    to determine whether recipients comply with these limits. In addition,
    the department uses a computerized risk-based system and approach to
    determine whether additional recipient oversight is needed. However,
    the department failed to solicit adequate staff input on the system's
    development and has not planned how to backfill these oversight
    positions with needed skills for monitoring as existing oversight
    employees retire or leave the agency. We recommended that the
    department develop a workforce plan and seek opportunities to solicit
    input from its staff who will be using the computer system. Further,
    the department has not developed guidance establishing a consistent
    framework for holding grant recipients accountable for deficiencies
    identified through monitoring. We recommended the department consider
    developing guidance for the program that details what conditions should
    be considered when taking corrective actions and what specific
    conditions warrant different types of corrective actions. The
    department agreed with our findings and recommendations. (GAO-06-732):

    1.38.C. Improving the National Flood Insurance Program: For nearly 30
    years we have reported on a variety of issues that affect the National
    Flood Insurance Program, including concerns related to the sufficiency
    of the program's financial resources, compliance with mandatory
    purchase requirements, the costly impact of repetitive loss properties,
    and most recently our concerns about FEMA's billion-dollar flood map
    modernization efforts and management and oversight of the program. In
    March 2006, we designated the National Flood Insurance Program as a
    high-risk program. Because of the unprecedented magnitude and severity
    of floods resulting from hurricanes in 2005, the program incurred
    losses more than the total claims paid in the history of the program.
    It is highly unlikely that the program will generate sufficient
    revenues to repay funds borrowed from the Treasury to cover the 2005
    flood losses. In response in part to our recommendations, FEMA has
    taken some steps to address these concerns, for example, by working to
    increase participation in the program; implement requirements of the
    Flood Insurance Reform Act of 2004 and improve its management and
    oversight of the program; and more strategically plan to update the
    nation's flood maps, the foundation of the program. (GAO-06-497T, GAO-
    06-335T, GAO-06-183T, GAO-06-174T, and GAO-06-119):

    1.39.C. Improving the Nation's Public Housing: In February 2006, we
    testified on the roles that the Department of Housing and Urban
    Development, public housing agencies, capital markets, and service
    organizations play in the operation of the nation's public housing. Our
    testimony was based on several reports we have issued regarding public
    housing since 2002, including a series of three reports on the
    department's multibillion-dollar HOPE VI program to revitalize severely
    distressed public housing and, more recently, the extent of severe
    distress in public housing for the elderly and persons with
    disabilities. The department has implemented a number of our
    recommendations aimed at improving its guidance to public housing
    authorities and its oversight of programs. Our testimony also noted the
    challenges public housing authorities face in carrying out their
    required management and reporting responsibilities, including
    difficulty with the department's data systems and the lack of resources
    for hiring and training staff, and their use of community service
    organizations to assist public housing residents--particularly the
    elderly and residents with disabilities. (GAO-06-419T, GAO-06-163, GAO-
    04-109, GAO-03-91, and GAO-03-55):

    1.40.C. Evaluating Community and Economic Development Programs: We
    evaluated the Empowerment Zone and Enterprise Community programs. These
    programs provided additional tax benefits and $1 billion in grants to
    selected high-poverty communities. A variety of activities were used by
    the selected communities intended to improve social and economic
    conditions. However, the federal agencies responsible for the programs
    did not collect information on the program expenditures for these
    activities and did not provide state and local entities with the
    guidance necessary to ensure consistent program monitoring. Further, as
    we noted in our 2004 report, data on the actual amounts of tax benefits
    used nationwide or in individual communities were not available from
    IRS or other sources. Our September 2006 report noted that these
    communities and zones showed some improvements in poverty,
    unemployment, and economic growth, but we could not definitively tie
    these changes to participation in the programs. A number of challenges
    exist in this type of evaluation, and the lack of data on the use of
    program funds and tax benefits further limited our analysis. We
    observed that if the Congress authorizes similar programs it should
    consider requiring that data on the use of program funds and tax
    benefits be collected. (GAO-06-734SP, GAO-06-727, and GAO-04-306):

    1.41.C. Estimating the Cost of Section 8 Rental Housing Assistance: The
    annual appropriations for the Department of Housing and Urban
    Development's Section 8 rental housing assistance programs doubled over
    a 6-year period to over $20 billion. The Congress has sought ways to
    limit its growth in costs. Section 8--a key federal tool for
    subsidizing rents for low-income households--consists of two major
    programs: housing choice vouchers, which allow households to rent units
    of their choice in the private market, and project-based, which pays
    subsidies to landlords to subsidize specific units. Analysis of factors
    driving the cost growth has been limited in part because the department
    did not separately report budgetary costs for each program. In an April
    2006 report, we provided, for the first time, information on outlays
    for the individual Section 8 programs and found that allowing for
    inflation, the voucher program was driving the growth in costs. More
    specifically, over 40 percent of the growth in voucher outlays from
    1998 through 2004 was due to decisions to expand the number of assisted
    households, while over 50 percent of the growth was due to increases in
    the average cost per voucher household. We also found that over half of
    the increase in the average cost per voucher household resulted from
    rising market rents and about one-quarter from program administrators'
    decisions to increase the maximum allowable amount of rental subsidy
    they can pay for assisted households. Our analysis of the impact of
    these factors will help inform the Congress as it considers options for
    reforming the voucher program. (GAO-06-405):

    Responsible Stewardship Of Natural Resources And The Environment:

    1.42.F. Reducing Nuclear Waste Cleanup Costs: Our work helped to avoid
    an increase in the cost of treating and disposing of radioactive high-
    level waste in 11 tanks at the Department of Energy's (DOE) Idaho
    National Laboratory. A legal challenge could have required DOE to treat
    and dispose of its waste at Idaho using an expensive vitrification
    technology and to exhume and dispose of the storage tanks holding the
    waste. We recommended that DOE seek legislative clarification from the
    Congress to ensure that possible delays and cost increases could be
    minimized. In response, DOE sought and obtained clarification of its
    waste determination authority from the Congress. In October 2004, the
    Congress passed and the President signed legislation (Fiscal Year 2005
    National Defense Authorization Act), which, among other things,
    clarified DOE's authority to define certain wastes as other than high-
    level waste. As a result, DOE was able to apply less expensive
    treatment technologies and disposal options at the Idaho site, thus
    realizing a financial benefit of about $441 million through fiscal year
    2010. (GAO-03-593, GAO-03-930T, and GAO-04-611):

    1.43.C. Improving Management of Federal Oil and Natural Gas Royalty
    Revenue: In 2006, in response to congressional concerns about the
    amount of oil and natural gas royalties collected by the federal
    government in a period of ever-increasing energy prices, we provided a
    series of briefings and a report to the Congress that has improved the
    understanding and future management of federal oil and natural gas
    royalties. Specifically, we explained that oil and gas royalties have
    not kept pace with the increases in oil and gas prices from 2001 to
    2005 largely because of decreases in production sold. In addition, we
    have brought to light that royalty relief provisions could result in
    forgone revenue on future oil and gas production, according to the
    Minerals Management Service's preliminarily estimates, of up to $60
    billion depending on the results of pending litigation. The Congress
    has several active proposals to change and clarify these royalty relief
    provisions so that these significant royalty revenues are collected in
    the future. (GAO-06-786R):

    1.44.C. Reducing the Threat of Wildland Fires to Our Nation's
    Communities and Ecosystems: In a series of reports and testimonies over
    the past several years, we reported on and made several recommendations
    related to Forest Service and Department of the Interior efforts to
    reduce the accumulation of dense vegetation on federal lands that has
    been fueling large, intense, and sometimes catastrophic wildland fires.
    Consistent with our findings and recommendations, the House and Senate
    appropriations committees, in their reports on the Department of the
    Interior, Environment, and Related Agencies Appropriation Bill for
    fiscal year 2007, each provided direction to the agencies regarding
    their wildland fire management activities. Both agencies were directed
    to (1) develop and implement a comprehensive and cohesive strategy that
    identifies long-term options and funding required to respond to
    wildland fire management needs; (2) outline, by January 31, 2007, the
    tactical details on how they will produce such a strategy by June 30,
    2007; and (3) not expend funds on the fire program analysis system,
    designed to identify the most cost-efficient and effective distribution
    of firefighting resources, unless and until the Secretaries of
    Agriculture and the Interior certify that the systems will be completed
    in a timely fashion and include full participation of state partners.
    In addition, the Forest Service was directed to (1) indicate, before
    distributing any funds, how fuel reduction funding will be prioritized
    and allocated to regions and (2) separately track acreage of fuel
    reductions designed to maintain safe conditions, in addition to acreage
    where fuels are reduced to improve conditions, in order to more
    accurately capture the results of agency activities. (GAO-06-671R, GAO-
    05-923T, GAO-05-627T, GAO-05-147, and GAO-03-805):

    1.45.C. Improving Federal Agency Management of Electronic Waste: The
    federal government spends more than $60 billion per year on electronic
    equipment, making it the world's largest purchaser of electronics, yet
    federal agencies have little incentive to procure, operate, and dispose
    of electronic equipment in an environmentally friendly manner. The
    Environmental Protection Agency (EPA) has implemented several promising
    voluntary programs that with broader federal agency participation,
    could (1) position the federal government in a leadership role to help
    develop a nationwide electronics recycling infrastructure and (2)
    ensure environmentally preferable management of products with
    significant amounts of toxic substances. However, participation in
    these programs is quite limited. We recommended that EPA take more
    significant steps to require federal agencies to participate in the
    budding voluntary programs. As a direct result of our report, in
    February 2006, EPA strengthened its Federal Electronics Challenge (a
    program with some Energy Star-like attributes for electronic products)
    by expanding outreach to nonparticipating federal facilities--
    increasing federal facility participation from 26 to 113, or 20 percent
    of the federal workforce. According to the program manager for the
    Federal Electronics Challenge, in addition to the environmental
    benefits associated with more responsible handling of federal
    electronic waste, EPA's fiscal year 2006 environmental benefits
    calculations will show substantial dollar savings associated with
    increased participation in the Federal Electronics Challenge resulting
    from our recommendation. (GAO-06-47):

    1.46.C. Improving Security at Nuclear Power Plants: Our work has
    resulted in the Nuclear Regulatory Commission taking actions to improve
    its regulatory and oversight processes related to protecting commercial
    nuclear power plants against potential terrorist attacks. We
    recommended that responsibility for obtaining feedback from the nuclear
    industry and other stakeholders on proposed changes to the design basis
    threat (the threat that nuclear power plants must be prepared to defend
    against) be assigned to a commission office outside the threat
    assessment section. This action would enable staff to assess the threat
    without creating the potential for or appearance of the industry
    influencing their analysis. We also recommended that the Nuclear
    Regulatory Commission continue to evaluate and implement measures to
    strengthen the force-on-force exercises (mock attacks) that it uses to
    test the plants' defenses. In response to our recommendations, the
    commission has transferred the responsibility for accepting stakeholder
    feedback on proposed design basis threat changes to other sections, and
    stakeholder feedback will not be obtained until after the threat
    assessment staff has provided its initial threat assessment to senior
    commission management. The Nuclear Regulatory Commission also has
    further efforts under way to improve its force-on-force inspection
    methodology, particularly looking for ways to reduce artificiality in
    these mock attacks. (GAO-06-555T and GAO-06-388):

    1.47.C. Reducing Vulnerability to Fraud, Waste, and Abuse in the
    Federal Crop Insurance Program: Federal crop insurance protects
    producers against losses from natural disasters. In 2005, the crop
    insurance program provided $44 billion in protection, at a cost of $2.7
    billion, including an estimated $117 million in losses from fraud,
    waste, and abuse. In September 2005, we reported on the need for the
    Department of Agriculture to strengthen procedures and processes to
    prevent and detect fraud, waste, and abuse in the federal crop
    insurance program. We testified on this issue in June 2006. Among other
    things, we found that the department's data-mining analyses were
    incomplete because of a lack of coordination and data sharing among the
    department's agencies. We also found that approved insurance providers
    did not complete all required quality assurance reviews of claims. As a
    result, we identified millions of dollars in improper claims payments
    in 2003 and 2004. Based on our recommendations, the department has
    taken steps to strengthen its processes by (1) improving coordination
    and information sharing between its Risk Management Agency and its Farm
    Service Agency, (2) strengthening oversight of insurance providers' use
    of quality controls, and (3) developing regulations to implement new
    sanction authorities. (GAO-06-878T and GAO-05-528):

    1.48.C. Improving the Consistency of Federal Jurisdiction over the
    Nation's Waters and Wetlands: In February 2004, we reported on the lack
    of consistency in how district offices of the U.S. Army Corps of
    Engineers (USACE) were interpreting and applying federal regulations
    when determining which waters and wetlands are subject to federal
    jurisdiction. In our report, we recommended that USACE evaluate these
    differences and resolve them, as appropriate. During the time when
    USACE was implementing our recommendations, the Supreme Court decided
    to hear two prominent cases challenging USACE's jurisdiction over
    certain kinds of wetlands. The Supreme Court issued its decision in
    June 2006. Although a divided Court failed to produce a majority
    opinion clarifying the extent of USACE's jurisdiction under the Clean
    Water Act, each of the three opinions given by the justices in the case
    relied on the information contained in our 2004 report. The cases have
    now been remanded back to the U.S. Court of Appeals for the 6th Circuit
    and most experts believe that lower courts will continue to address the
    jurisdictional issue on a case-by-case basis unless the Congress acts
    or USACE promulgates clear guidelines. (GAO-04-297):

    1.49.C. Improving Coordination and Leadership for Restoring
    Environmental Conditions in the Great Lakes Basin: Our work identified
    over 148 federal and 51 state programs funding environmental
    restoration activities in the Great Lakes Basin using several different
    strategies that were not coordinated or unified in a manner comparable
    to other large restoration projects. Measurable indicators for
    assessing restoration progress were absent for determining whether
    environmental conditions were improving. Our findings to improve
    coordination and develop measurable indicators were instrumental in the
    formation of the Great Lakes Interagency Task Force by executive order.
    Using a unique collaborative process involving all levels of
    government, tribes, and local communities, the task force developed the
    Great Lakes Regional Collaboration Strategy in December 2005. This
    strategy was developed by eight teams over the course of a year and
    represented a coordinated approach we recommended for addressing
    environmental issues such as invasive species and a coordinated
    approach for developing indicators. (GAO-03-515):

    1.50.C. Improving the Safety of Underground Storage Tanks: In May 2001,
    we reported a number of problems with EPA's and states' implementation
    of the federal underground storage tank program. At the time, the
    states and EPA could not ensure that all active tanks had been upgraded
    to meet the federal leak detection and spill, overfill, and corrosion
    protection requirements, nor could they guarantee that the installed
    equipment was being properly operated and maintained. In addition to
    specific recommendations to EPA that the agency has implemented over
    the years, we recommended that the Congress take a number of actions to
    strengthen EPA's and states' ability to inspect the tanks and enforce
    federal requirements. Acting on our recommendations, the Congress
    included specific provisions in the Energy Policy Act of 2005, enacted
    in August 2005, to increase enforcement and tighten the standards for
    underground storage tanks. Specifically, the Energy Policy Act
    establishes minimum inspection requirements for all regulated tanks,
    prohibits delivery of regulated substances into noncompliant tanks, and
    establishes training requirements for personnel responsible for daily
    tank operation and maintenance. The Energy Policy Act provides for a
    gradual phase-in of the new requirements over several years, beginning
    in August 2006. Currently, EPA is working closely with the states to
    implement the act's requirements. (GAO-01-464):

    A Safe, Secure, And Effective National Physical Infrastructure:

    1.51.N. Improving Access to Transportation for Disadvantaged
    Communities: We issued two reports in 2005 on improvements that are
    needed in federal efforts to improve transportation access for
    disadvantaged communities. First, in the aviation area, we reported
    that the Department of Transportation's (DOT) implementation of the
    Small Community Air Service Development Program--which provides grants
    to help small, underserved airports improve their air service--has
    achieved mixed results since only about half of the airports that had
    received grants as of September 2005 reported air service improvements
    that were self-sustaining after the grant was over. We also found that
    DOT's Air Service Development Zone concept--where DOT works annually
    with one grant recipient on ways to attract business to areas
    surrounding the airport and to develop land use options--had no
    identifiable effect on any one of the three locations designated from
    2002 through 2004. In response to our recommendation, DOT developed
    enhanced guidance for communities requesting designation as an Air
    Service Development Zone. Second, in the transit area, we reported that
    DOT needed to improve its oversight of how transit agencies and
    metropolitan planning agencies are implementing DOT's guidance on
    making transportation services accessible to persons with limited
    English proficiency. DOT has taken some action to implement our
    recommendations, including creating a new limited English proficiency
    Web site that provides a clear link to its guidance. (GAO-06-52 and
    GAO- 06-21):

    1.52.F. Improving Spectrum Management by Extending the Federal
    Communications Commission's Auction Authority and Speeding the Digital
    Television Transition: Since 1993, the Federal Communications
    Commission has conducted auctions to assign certain spectrum licenses,
    which are used for various commercial wireless communications services.
    This market-based mechanism has generated over $14.5 billion for the
    U.S. Treasury. However, some parties have raised concerns about the use
    of auctions, contending that the auctions raise consumer prices. In
    December 2005, we reported that auctions appeared to have little or no
    impact on end-user prices, infrastructure deployment, and competition,
    and that they mitigated the problems associated with comparative
    hearings and lotteries, which the commission previously used to assign
    licenses. We therefore recommended that the Congress extend the
    commission's auction authority beyond the scheduled expiration date of
    September 30, 2007. In another report, we reviewed the legislatively
    mandated transition from analog to digital television transmission,
    which would free valuable parts of the spectrum for auction, and
    concluded that the transition was unlikely to occur by the December 31,
    2006, target date. In two subsequent congressional testimonies, we
    provided information to help speed the digital television transition,
    including (1) the cost of various scenarios for subsidizing converter
    devices that would enable consumers' analog television sets to receive
    over-the-air digital broadcasts and (2) the issues and complexities in
    administering a subsidy program. In the Deficit Reduction Act of 2005,
    the Congress extended the commission's auction authority and sanctioned
    a subsidy program for converter devices. The net present value of the
    projected financial benefits associated with these provisions of the
    legislation is $6.1 billion. (GAO-06-526T, GAO-06-236, GAO-05-623T,
    GAO- 05-258T, and GAO-03-277):

    1.53.C. Enhancing Fiscal Oversight of the Washington Metropolitan Area
    Transit Authority: Through a series of products issued in 2005 and
    2006, we provided the Congress with information that it used to develop
    the National Capital Transportation Amendments Act of 2005 (H.R. 3496).
    This proposed legislation would make $1.5 billion in federal funding
    available to the Washington Metropolitan Area Transit Authority if,
    among other things, the local governments supporting the transit
    authority established dedicated sources of revenue for the transit
    agency. In May 2006, we reported on issues that needed to be resolved
    by the federal government and the jurisdictions that support the
    transit authority should they choose to provide it with dedicated
    funding. We also testified in July 2005 on options for providing
    spending safeguards and oversight of any additional federal assistance
    provided to the transit authority, should the Congress decide to
    provide such assistance. Our information was used by the Congress to
    design several provisions of H.R. 3496 that are aimed at improving
    accountability for any additional federal assistance. H.R. 3496 was
    passed by the full House of Representatives in July 2006. (GAO-06-516,
    GAO-05-922T, and GAO-05-358T):

    1.54.C. Improving Oversight of Freight Rail Rates, Competition, and
    Capacity: The Staggers Rail Act of 1980 largely deregulated the freight
    railroad industry, giving the railroads freedom to price their services
    according to market conditions and encouraging greater reliance on
    competition to set rates. The act also recognized that some shippers
    might not have access to competitive alternatives and might be subject
    to unreasonably high rates. It established a threshold for rate relief
    and granted the Interstate Commerce Commission and the Surface
    Transportation Board the authority to develop a rate relief process for
    those "captive" shippers. In June 2006, we reported that an increasing
    share of potentially captive shippers were paying rates substantially
    above the threshold for rate relief. We noted that federal agencies had
    no recent assessment of the state of competition or where an
    inappropriate exercise of market (pricing) power might exist. Such an
    assessment would allow decision makers to identify areas where
    competition is lacking and to assess the need for and merits of
    targeted approaches to address the situation. We also reported that the
    railroad industry's ability to meet what is expected to be significant
    increases in demand over the next 15 to 25 years is largely uncertain.
    Investments in rail projects can produce public benefits--for example,
    shifting truck freight traffic to railroads can reduce highway
    congestion. (GAO-06-898T):

    1.55.C. Assisting Congressional Oversight of the Capitol Visitor Center
    Construction Project: The success of any construction project often
    depends on the effectiveness of the project management and the ability
    of the project team to manage and control changes to the project costs
    and schedule. At the request of the Congress, we have continued to
    monitor the progress of the construction of the Capitol Visitor Center
    estimated to cost nearly $600 million and open to the public in
    September 2007. We testified almost monthly on the status of the cost
    and schedule of this project. Our work has led to greater transparency
    of the progress and management of the project. We have urged the
    project management team to develop an integrated project schedule,
    which has allowed the team to better understand and mitigate the
    implications of delays or unexpected events on the project. We have
    provided timely cost and schedule risk assessments to the Congress,
    enabling it to ensure that the project was adequately funded and hold
    the Architect of the Capitol accountable for the progress of the
    project. We have continually questioned the expected cost and
    completion date for the project, which has resulted in the project
    management team revising its estimates and exploring options to
    mitigate cost overruns and project delays. (GAO-06-828T, GAO-06-827T,
    GAO-06-803T, GAO-06-665T, and GAO-06-528T):

    1.56.C. Improving the U.S. Postal Service's (USPS) Delivery Performance
    Standards, Measurement, and Reporting: In 2006, we reported on the USPS
    delivery performance standards and results, which are central to its
    mission of providing universal postal service. These performance
    standards and results have been a long-standing concern for mailers and
    the Congress. We reported that USPS has delivery standards for its
    major types of mail, but some standards have not been updated in a
    number of years to reflect changes in how mail is prepared and
    delivered. These outdated standards are unsuitable as benchmarks for
    setting realistic expectations for timely mail delivery; measuring
    delivery performance; or improving service, oversight, and
    accountability. We also reported that USPS does not measure and report
    its delivery performance for most types of mail. Specifically,
    representative measures cover less than one-fifth of mail volume and do
    not include Standard Mail, bulk First-Class Mail, Periodicals, and most
    Package Services. Therefore, transparency is limited with regard to its
    overall performance in timely mail delivery. Without sufficient
    transparency, it is difficult for USPS and its customers to identify
    and address delivery problems, and for the Congress, the Postal Rate
    Commission, and others to hold management accountable for results and
    conduct independent oversight. The report recommended that USPS take
    actions to modernize its delivery standards; implement delivery
    performance measures for major types of mail by providing clear
    commitment and more effective collaboration with mailers; and improve
    the transparency of delivery performance standards, measures, and
    results. Sponsors of postal reform legislation, which is pending
    conference approval, have recognized the need for action in this area,
    and Senate and House reform bills passed in this session of the
    Congress would require USPS to modernize its service standards and
    report its standards annually, respectively. (GAO-06-733):

    1.57.C. Improving Congressional Oversight of the Performance of the
    Airline Industry: In 2005, we had reported on the tenuous finances of
    some airlines that had led to bankruptcy and pension terminations, in
    particular among those airlines that predated regulation. The Congress
    expressed concern about airline pension defaults and charged us with
    analyzing the impact of reregulating the airline industry on reducing
    potential pension defaults. We reported on the broad changes in the
    industry since deregulation in 1978, particularly concerning changes in
    airfares and service. Overall, median fares have declined almost 40
    percent (in constant dollars) since 1980, and markets have generally
    become more competitive. We also reported that reregulating the
    industry would likely reverse many of the benefits that consumers have
    gained and would not save airline pensions. Although a number of
    airlines have failed and some have terminated their pension plans,
    those changes resulted from the entry of more efficient competitors,
    poor business decisions, and inadequate pension funding rules. We had
    previously recommended that broad pension reform is needed. (GAO-06-
    630):

    1.58.C. Improving Congressional Oversight of the Reconstruction of
    Public Hospitals in New Orleans: We reported on efforts to rebuild
    hospital inpatient care and emergency department services in New
    Orleans after Hurricane Katrina devastated the area, providing the
    Congress with important information about the hurricane damage to the
    public hospitals and the costs of restoring these hospitals. The
    Medical Center of Louisiana at New Orleans, consisting of Charity and
    University hospitals, is part of the statewide Louisiana State
    University system and served as the primary safety net hospital for
    many local residents. We reported that Charity and University
    hospitals, which were either in poor physical condition or in need of
    significant repairs prior to Hurricane Katrina, sustained significant
    damage from the hurricane and remained closed. We also reported that
    FEMA estimated that it would cost over $35 million to repair both
    hospitals, and that Louisiana State University estimated the costs to
    be much higher. We concluded that given the uncertainty about the
    ultimate amount of the federal contribution and the uncertainty of how
    a future health care system should be configured, the decision about
    whether to repair an existing facility or build a new one will be
    complicated. (GAO-06-1003 and GAO-06-576R):

    1.59.C. Informing Congressional Oversight of the Planning and
    Implementation of the Next Generation Air Transportation System: In
    2003, the Congress created the Joint Planning and Development Office
    within the Federal Aviation Administration (FAA) to bring together
    several federal agencies to plan for and coordinate a transformation to
    the "next generation air transportation system"--a system intended to
    safely accommodate an expected possible tripling of air traffic by
    2025. In testimonies before a number of congressional committees, we
    reported that the Joint Planning and Development Office had made
    progress in facilitating collaboration and had set forth a vision for
    the next generation system. However, we found that the office faced
    challenges in leveraging the resources of its partner agencies and in
    convincing its nonfederal stakeholders that the government is fully
    committed to the next generation system. Lastly, the Joint Planning and
    Development Office must also work to provide the Congress with
    realistic cost estimates for the entire next generation effort.
    Implementation of the next generation system will fall in large part to
    FAA. We reported that FAA faces challenges in institutionalizing recent
    improvements in its management and acquisition processes, as well as in
    obtaining the expertise and resources needed to implement the next
    generation system. We noted that transforming the national airspace
    system while the current system continues to operate will be an
    enormously complex undertaking. (GAO-06-915T, GAO-06-778R, GAO-06-
    738T, GAO-06-653T, and GAO-06-574T):

    1.60.C. Improving Telecommunications for All Americans: We continued to
    build a body of work on the status of commercial telecommunications
    services across the country and on related consumer issues. For
    example, although the Congress and the President have indicated that
    high-speed (or broadband) access for all Americans is critically
    important for the economy, we found that the Federal Communications
    Commission may not have adequate data to provide a highly accurate
    depiction of the residential broadband infrastructure. This makes it
    difficult to assess the extent of gaps in the availability of broadband
    service in local markets, especially in rural areas. We also found that
    although the telephone subscribership rate for Native Americans living
    on tribal lands was substantially below the national average in 2000
    (68.6 percent versus 97.6 percent), there are no data with which to
    determine how the rate of telephone and Internet subscribership on
    tribal lands has changed since then. We recommended steps to improve
    the data available for broadband and Native American telecommunications
    so that policymakers can assess progress in these areas and develop
    appropriate actions to assist underserved populations. (GAO-06-426,
    GAO- 06-425, GAO-06-338, and GAO-06-189):

    1.61.C. Reexamining the Nation's Passenger Rail Service: In fiscal year
    2004, Amtrak served about 25 million passengers. It operates a 22,000-
    mile network providing service to 46 states and the District of
    Columbia, mainly using track owned by freight railroads. Amtrak was
    supposed to have achieved operational self-sufficiency by 2002.
    However, it continues to depend on an annual federal subsidy of more
    than $1 billion to remain solvent. In June 2002, Amtrak's president
    began major efforts to improve efficiency. In October 2005, we reported
    that Amtrak's basic business systems need to be strengthened to help
    achieve financial stability and meet future operating challenges.
    Despite efforts instituted by its then-president, Amtrak continued to
    lack a meaningful strategic plan that provided a clear mission and
    measurable corporatewide goals, strategies, and outcomes. We also
    reported that Amtrak's financial reporting and financial management
    practices were weak in several areas. For example, Amtrak has not
    developed sufficient cost information to target potential areas to cut
    costs, accurately measure performance, and demonstrate efficiency. We
    also reported that developing greater transparency, accountability, and
    oversight is critical for achieving operational success. Such efforts
    will be needed to address operating losses that already exceed $1
    billion annually and are projected to grow by 40 percent within 4
    years. (GAO-06-470 and GAO-06-145):

    1.62.C. Addressing Long-standing Problems in Managing Federal Real
    Property: Related to our high-risk designation for the federal real
    property management area, we have pursued a body of work assessing
    progress made by the administration and agencies to address long-
    standing problems that include excess and underutilized property,
    deteriorating facilities, unreliable real property data, overreliance
    on leasing, and the challenge of protecting federal facilities because
    of the threat of terrorism. We testified in October 2005 on the status
    of the leasing problem, and in February 2006, we testified on the
    status of the excess and underutilized property problem. Also related
    to excess property, we reported in June 2006 on opportunities to
    improve oversight of the public benefit conveyance program, where the
    government gives unneeded property to state and local governments and
    nonprofits for various purposes, such as education and wildlife
    conservation. Related to VA, we reported in April 2006 on joint
    ventures between VA and its medical affiliates to jointly construct and
    operate medical facilities and related challenges and lessons learned.
    In the area of facility protection, we reported in May 2006 on examples
    of methods used by entities outside the U.S. government to measure the
    performance of their facility protection programs. (GAO-06-511, GAO-06-
    472, GAO-06-248T, and GAO-06-136T):

    1.63.C. Improving Transportation Safety and Program Design: In
    assessing a broad range of issues involving aviation, highway, motor
    carrier, pipeline, and transit safety, we reported that DOT had, in
    many cases, designed programs and implemented them in a way to help
    meet its goals of reducing transportation-related deaths and injuries.
    For example, in the aviation, pipeline, and transit areas, the
    department is carrying out programs that focus on threat identification
    and mitigation in addition to programs that determine whether regulated
    entities are meeting minimum safety standards. These risk management
    programs are beneficial because they require systematic assessment of
    safety threats and can identify safety problems that might be missed
    under more traditional compliance programs. In other areas, we
    concluded that the department had strengthened its motor carrier
    enforcement activities, improved crash data that are used in a variety
    of ways for federal and state decision making, and developed well-
    designed programs in the areas of aviation technical training and motor
    carrier safety grants. However, a common theme among some of the
    activities that we assessed this year was the need to perform
    evaluations and to better link efforts and performance measures to
    overall agency goals and to better show the impact of these activities
    on reducing deaths and injuries. We will continue to report to the
    Congress when federal safety agencies are doing a good job and work
    with them regarding these and other areas for improvement that we have
    identified. (GAO-06-946, GAO-06-821, GAO-06-266T, GAO-06-156, and GAO-
    06-103):

    1.64.C. Improving Oversight of DOT's Research Programs and
    Transportation Statistics: DOT's Research and Innovative Technology
    Administration--which includes the Bureau of Transportation
    Statistics-- is responsible for overseeing DOT's approximately $1
    billion annual investment in research, development, and technology
    activities. The agency was established in 2005, in part, because of
    concerns that we raised in a May 2003 report about its predecessor
    organization. In August 2006, we reported that the Research and
    Innovative Technology Administration had established several groups and
    practices for carrying out its responsibilities, but lacked performance
    goals, a clear implementing strategy, and an evaluation plan. Also, the
    agency had only partially implemented four of the five recommendations
    that we made in our 2003 report to improve DOT's coordination and
    evaluation of research, and had not implemented the other. For example,
    while it had taken some action to review research, development, and
    technology activities for duplication and opportunities for joint
    efforts, the Research and Innovative Technology Administration had not
    established the scope of activities to be reviewed; the methodology of
    the review; or how the results will be used to make decisions about
    future research, development, and technology activities. In our 2006
    report, we made several recommendations to enhance the agency's ability
    to manage and ensure the effectiveness of research, development, and
    technology activities and to improve the processes used by the Bureau
    of Transportation Statistics to identify its primary users and solicit
    and incorporate feedback from those users. DOT agreed with the findings
    and recommendations in the report. (GAO-06-917 and GAO-03-500):

    1.65.C. Improving the Efficiency and Sustainability of Capital
    Investment in Our Transportation Infrastructure: Our work helped
    illuminate short-term funding challenges and assist the Congress in
    facing the long-term challenges of sustainability, equity, and
    efficiency in financing capital investment in our nation's
    transportation infrastructure. For example, in 2006 we reported on the
    growing imbalance between revenues and outlays facing the Highway Trust
    Fund and concerns about the future of the Airport and Airway Trust
    Fund. In the longer term, we reported that fuel taxes (the mainstay of
    highway finance for 80 years) are declining in purchasing power while
    more fuel-efficient vehicles and alternative-fueled vehicles undermine
    the viability of using fuel taxes to finance transportation at all. In
    light of the pending long-term fiscal crisis that requires a
    fundamental reexamination of all federal programs, we have helped frame
    the discussion about future approaches. Our June 2006 report discussed
    how highway tolling has promise to raise revenues and to improve
    capital investment decisions by better targeting spending for new
    capacity and enhancing private investment. We highlighted strategies
    states that choose to pursue tolling could apply to help overcome
    challenges to its use. Also, our September 2006 report analyzed options
    for funding the national airspace system, emphasizing those options
    that offered the greater promise of linking revenues to costs. (GAO-06-
    973, GAO-06-572T, GAO-06-562T, and GAO-06-554):

    1.66.C. Identifying Reasons for Increases in Judiciary Rental Payments:
    The federal judiciary's rental obligations to the General Services
    Administration for court-related space have increased from $780 million
    to $990 million, or 27 percent from fiscal years 2000 through 2005,
    after controlling for inflation--primarily because of a simultaneous
    net increase in space from 33.6 million to 39.8 million rentable square
    feet, a 19 percent increase nationwide. Much of the net increase in
    space was the result of new courthouses that the judiciary has taken
    occupancy of since 2000. In addition, we found that growing energy and
    security costs also contributed to the increases. We found that neither
    the judiciary nor the General Services Administration had routinely and
    comprehensively analyzed the factors influencing the rent increases.
    The lack of a full understanding of the reasons for the increases in
    judiciary rent, in our view, contributed to the growing hostility
    between the judiciary and the General Services Administration over the
    rental bills. Compounding this, the federal judiciary faces several
    challenges to managing its rental obligations, including costly new
    construction requirements, a lack of incentives for efficient space
    use, and a lack of space allocation criteria for appeals and senior
    judges. We recommended that the judiciary track rent trends and improve
    its management of space and associated costs by providing incentives
    for efficient use and updating its space allocation criteria. (GAO-06-
    892T and GAO-06-613):

    [End of Strategic Goal 1]

    Strategic Goal 2:

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

    Respond To Emerging Threats To Security:

    2.1.N. Improving Monitoring of Compliance with Export License
    Requirements: In response to our recommendations, the Department of
    Commerce (Commerce) took steps to better monitor compliance with
    specific conditions regarding the export of controlled dual-use
    technologies to citizens of foreign countries and to better identify
    foreign nationals potentially subject to relevant export licensing
    requirements. We reported that vulnerabilities in Commerce's export
    control system could help China and other countries of concern improve
    their military capabilities. As a result, Commerce undertook a pilot
    program to better assess compliance with all license conditions by
    working with exporters to ensure they have export management systems
    capable of tracking and ensuring compliance with license conditions,
    and by detecting and prosecuting violations of license conditions.
    During this pilot, Commerce identified six investigative leads that
    were sent to its field offices for additional investigative action.
    Commerce now has access to a relevant Department of State (State)
    database to expedite its review of cases. This database provides
    Commerce with additional details regarding visa applicants. State has
    also referred cases to Commerce. Commerce also established a screening
    process with DHS so that any changes in a person's visa status that
    might require specific export licenses are forwarded to Commerce for
    review. (GAO-02-972):

    2.2.N. Promoting Government Efforts to Secure Sensitive Systems and
    Information: Our continued work helped federal agencies identify needed
    information security improvements. In fiscal year 2006, such agencies
    included the Securities and Exchange Commission, the Defense Logistics
    Agency, the Federal Deposit Insurance Corporation, the Federal Reserve,
    HHS, IRS, and CMS. Also, on the basis of our prior recommendations,
    agencies--including IRS, the Securities and Exchange Commission, the
    Federal Deposit Insurance Corporation, and Commerce--took numerous
    actions to strengthen their information security practices. Actions
    included improvements to agencies' information security programs to aid
    in understanding risks and selecting and properly implementing
    effective controls; access controls to limit to only authorized
    individuals the ability to read, modify, or delete information;
    software change controls to allow only authorized software programs to
    operate; and service continuity controls to protect computer-dependent
    operations from significant disruptions. In fiscal year 2006, we also
    informed the public debate on the need for the federal government to
    effectively protect personally identifiable information. Following a
    highly publicized loss of computerized data, for example, we testified
    on actions that federal agencies can take to prevent data breaches and
    to provide sufficient notification to individuals when such breaches
    occur. Highlighting that the development and implementation of a robust
    information security program is central to the agencies' ability to
    protect their sensitive and personal information, we also testified and
    reported on actions that agencies can take to protect this information,
    including (1) completing and maintaining accurate inventories of major
    systems; (2) prioritizing information security efforts based on system
    risk levels; and (3) strengthening controls that are to prevent, limit,
    and detect access to their information and information systems. (GAO-
    06-897T, GAO-06-527T, GAO-06-408, GAO-06-328, GAO-06-267, and GAO-06-
    31):

    2.3.F. Benefiting Financially from Cancellation of the Transportation
    Security Administration's (TSA) Computer-Assisted Passenger
    Prescreening System (CAPPS) II Program: In March 2003, TSA began
    developing a government-operated passenger prescreening program that
    would match air carrier passenger names against names on the
    government's consolidated terrorist watch list. In November 2001, the
    Congress passed the Aviation and Transportation Security Act (Pub. L.
    No. 107-71), which required a computer-assisted passenger prescreening
    system be used to evaluate all passengers. TSA subsequently began an
    effort to develop a new prescreening system known as CAPPS II that
    unlike the current system, which operates as part of each air carrier's
    reservation system, would be operated by TSA. Further, in July 2004,
    the National Commission on Terrorists Attacks upon the United States,
    also known as the 9/11 Commission, reported that the current passenger
    prescreening system needed improvements, and that this passenger
    screening should be performed by the federal government. For nearly 18
    months, TSA faced challenges in developing and implementing a passenger
    prescreening program. We documented these challenges in products that
    highlighted delays in key activities and incomplete system planning,
    including system functionality deliverables and cost estimates. Also,
    we demonstrated that TSA had not completely addressed specific concerns
    of the Congress relating to the program's development and operation and
    the public's acceptance of CAPPS II. For example, TSA did not address
    the accuracy of the databases that would be used to prescreen passenger
    names, conduct tests that would stress test the program and ensure
    system functionality, establish both safeguards to reduce opportunities
    for abuse and security measures to protect against unauthorized access
    by hackers, and provide adequate privacy protections to passengers who
    would be screened. In part, because our work highlighted these issues
    that continued to plague the program's development, TSA canceled CAPPS
    II's development in August 2004. With the cancellation of CAPPS II,
    projected program funding resulted in a financial benefit of over $300
    million (2006 dollars) for the entire program from fiscal year 2005
    through fiscal year 2008. (GAO-05-356, GAO-05-324, GAO-04-592T, GAO-04-
    504T, and GAO-04-385):

    2.4.N. Facilitating the Sharing of Information Critical to Homeland
    Security: In response to the government's failure to share information
    on terrorists before the September 11, 2001, attacks, the Congress and
    the President created a Program Manager for Information Sharing within
    the new Office of the Director of National Intelligence and, as a first
    priority, tasked the manager with establishing governmentwide policies
    and procedures for sharing. In a March 2006 report, we pointed out that
    more than 4 years after September 11, the nation still lacked such
    policies and procedures and had made slow progress in resolving
    problems, and we recommended that the Director of National Intelligence
    address any barriers that the manager faced in completing this task,
    such as insufficient resources. In response, key congressional
    subcommittee chairs sent the Director of National Intelligence a letter
    urging action on our work, we briefed key members, and they sponsored a
    hearing on this issue. We also reported that agencies were using a
    myriad of different labels--such as Sensitive but Unclassified and Law
    Enforcement Sensitive--to restrict access to, and require special
    handling of, certain terrorism information. This caused confusion and
    posed barriers to sharing, especially with state and local partners. We
    recommended that the Director of National Intelligence develop a policy
    to consolidate the number of labels and provide for their more
    consistent use, as well as consider the results of our governmentwide
    survey on agency labeling practices as baseline data for their policy
    development. Members of the group said that by responding to our
    recommendations and using our data, they were able to accelerate their
    efforts and save time. (GAO-06-385):

    2.5.C. Assessing the Federal Response to Security Threats on Board
    Commercial Aircraft: During 2006, in response to congressional
    requests, we assessed the extent to which DHS and TSA effectively
    prepared for, detected, and responded to security threats on board
    commercial aircraft. Specifically, we found that DHS made limited
    progress in providing for a surge capacity through cross-training other
    DHS law enforcement agents to supplement the Federal Air Marshal
    Service or in enhancing the service's career opportunities through
    ground-based and other assignments. We also found weaknesses in the
    reporting, tracking, and following up of incidents that negatively
    affected the Federal Air Marshal Service's ability to perform its
    missions. Regarding the use of less-than-lethal weapons on board
    commercial aircraft, we found that additional study is needed of the
    safety and effectiveness of these weapons on board commercial aircraft
    before their use, and that appropriate controls and formal criteria are
    needed to ensure that air carrier requests to use these weapons are
    appropriately considered. As a result of our work, DHS agreed to
    strengthen management controls for addressing incidents that negatively
    affect the Federal Air Marshal Service's ability to conduct its
    missions, and further study the safety and effectiveness of less-than-
    lethal weapons on board commercial aircraft should air carrier interest
    in these weapons resume. (GAO-06-475 and GAO-06-203):

    2.6.C. Strengthening Maritime Transportation Security at Home and
    Abroad: Through reports and testimony, we continued to review
    implementation of the Maritime Transportation Security Act of 2002 and
    supply chain security programs by the Coast Guard, Customs and Border
    Protection, and other stakeholders in the United States and overseas.
    In the areas of risk management--an approach that we advocated and the
    executive branch and the Congress endorsed--our work identified some
    key progress being made and challenges that lie ahead within DHS. The
    Secretary has made risk management at ports and across all critical
    infrastructures a key priority for DHS. In the area of domestic port
    security, our review of information sharing at ports led to the Coast
    Guard implementing our recommendation to better track and increase
    security clearances among nonfederal stakeholders, increasing their
    access to critical threat information. In the area of container
    security, our reviews of Customs and Border Protection partnerships
    with the private sector and foreign governments led to that agency
    adopting our recommendations to better manage its programs to identify
    and inspect high-risk containers whose volume and importance to the
    U.S. economy keep growing. Across all areas of maritime security, our
    in-depth analyses helped provide oversight of the executive branch
    during a year when the Congress held a number of hearings and drafted
    legislation on port security. Many of these hearings and much of the
    legislation focused specifically on our related findings and
    recommendations. For example, the Security and Accountability for Every
    Port Act, enacted in October 2006, included several provisions related
    to our recommendations for management improvements. (GAO-06-933T, GAO-
    06-91, GAO-05-557, GAO-05-404, and GAO-04-838):

    2.7.C. Strengthening Federal Oversight of Surface Transportation
    Security: In response to congressional requests, we examined federal
    and private sector efforts to strengthen surface transportation
    security, to include the passenger rail industry and worker access to
    transportation facilities. We found that rail security efforts remain
    fragmented and the roles and responsibilities of the various federal
    agencies involved in passenger rail security are not clear. We also
    reported that federal and rail industry officials raised questions
    about the feasibility of implementing and complying with federal
    security directives, stating that they were not consistent with
    industry best practices. Consequently, we recommended, among other
    things, the development of security standards that reflect industry
    best practices. Regarding transportation worker credentials, we found
    that DHS and industry stakeholders face major challenges in addressing
    problems identified during the testing of the Transportation Worker
    Identification Credential program and in ensuring that key components
    of the program--such as enrolling workers and issuing identification
    credential cards in a timely manner to a significantly larger
    population of workers and using program technology, such as biometric
    card readers--can work effectively in the maritime sector. Further, TSA
    did not adequately plan for or oversee the contract to test the
    Transportation Worker Identification Credential program, resulting in
    changes after award and a doubling of contract costs. TSA also did not
    effectively oversee the contractor's performance to ensure that all key
    components of the program were tested. In response to this work, DHS
    agreed with our recommendations. (GAO-05-851 and GAO-06-982):

    2.8.C. Improving Coast Guard Resource and Acquisition Management: The
    Coast Guard continues to face management challenges in two major areas:
    balancing its homeland and nonhomeland security missions and managing
    its acquisition programs. With regard to balancing its various
    missions, the Coast Guard is unlike many other DHS components because
    it has substantial missions not related to homeland security. These
    missions include maritime navigation, icebreaking, managing marine
    life, protecting the marine environment, marine safety, and search and
    rescue for mariners in distress. The Coast Guard must continue
    executing these traditional missions at a time that its homeland
    security obligations have increased significantly. The Maritime
    Transportation Security Act placed many new port security
    responsibilities on the Coast Guard. In addition, the Coast Guard has
    created special teams to prevent and respond to terrorist attacks.
    Furthermore, unpredictable natural disasters, such as Hurricane
    Katrina, can place intense demands upon all Coast Guard resources.
    While the Coast Guard budget has increased significantly, it is still
    challenged by the need to manage its resources across all of its
    responsibilities. In part because of our recommendations, the Coast
    Guard has a number of initiatives under way to determine how to best
    leverage its resources to maximize performance. With regard to
    acquisitions, the Coast Guard has made progress in managing its largest
    acquisition--known as the Deepwater program--to replace or upgrade its
    cutters and aircraft. Specifically, the Coast Guard has implemented
    several of our recommendations to improve oversight, ensure contractor
    accountability, and control future costs. However, despite these
    management improvements, some Deepwater assets have recently
    experienced major setbacks. For example, the Coast Guard suspended the
    conversion of 110-foot cutters to 123-foot cutters after structural
    problems developed. In addition, the Coast Guard recently suspended
    design work on the replacement for the 110-foot cutter because of
    concerns about the viability of the composite hull design proposed by
    the contractor. Other Coast Guard acquisition programs--such as the
    Rescue 21 emergency distress and communications system--have also
    experienced major cost increases, schedule delays, and performance
    shortfalls. (GAO-06-903, GAO-06-764, and GAO-06-448T):

    2.9.C. Improving Security Controls over a Key Communication Network
    Used by CMS: HHS's CMS facilitates the processing and payment of
    Medicare and Medicaid claims. In an August 2006 report, we reported
    that CMS's computing resources and financial and medical information
    are at increased risk of unauthorized disclosure and disruption of
    service. We found significant weaknesses in electronic access and other
    system controls on a contractor-owned and contractor-operated network
    that threatened the confidentiality and availability of sensitive CMS
    financial and medical information when it was transmitted across the
    network. We recommended that the CMS Administrator take steps to ensure
    that information security policies and standards are fully implemented.
    According to the CMS Administrator, CMS has moved aggressively to
    implement corrective actions for the reported weaknesses, and is taking
    steps to ensure that information security policies and standards are
    fully implemented. Our review informed the Congress of how CMS may
    strengthen information security controls over this key contractor-owned
    and contractor-operated communication network. (GAO-06-750):

    2.10.C. Improving Strategic Planning in the National Capital Region:
    The national capital region is an area comprising the District of
    Columbia and surrounding counties and cities in the states of Maryland
    and Virginia. This region is the only area in the nation that has a
    statutorily designated regional coordinator--the Office of the National
    Capital Region Coordination--within DHS. In past years and again this
    year, we stressed the importance of the Office of National Capital
    Region Coordination working with other agencies in the national capital
    region to complete a regional strategic plan to establish goals and
    priorities for enhancing first responder capacities. Such a plan could
    be used to guide the effective use of federal funds and monitor program
    achievement. We emphasized that as it completes its strategic plan, the
    national capital region could focus on strengthening (1) initiatives
    that will accomplish objectives under the region's strategic goals; (2)
    performance measures and targets that indicate how the initiatives will
    accomplish identified strategic goals; (3) milestones or time frames
    for initiative accomplishment; (4) information on the resources and
    investments for each initiative; and (5) organizational roles,
    responsibilities, coordination, and integration and implementation
    plans. The national capital region has finalized a strategic plan that
    incorporates our recommendations. (GAO-06-1096T and GAO-06-559T):

    2.11.C. Improving DHS's Ability to Detect Nuclear Smuggling at U.S.
    Ports of Entry: In March 2006, we reported and testified that DHS had
    made progress in deploying radiation detection equipment at U.S. ports
    of entry, but the agency's program goals are unrealistic and the
    program's cost estimate is uncertain. Because of concerns about DHS's
    ability to deploy advanced technology radiation detection equipment,
    which is more expensive than currently fielded equipment, the total
    program costs are uncertain and our analysis indicated that DHS could
    incur a $342 million cost overrun. As a result of our recommendation,
    DHS performed a cost-benefit analysis of its program to deploy advanced
    technology radiation detection equipment. We also identified problems
    with DHS's procedures for inspecting vehicles for radiation.
    Specifically, we noted that DHS inspectors had no way to verify the
    authenticity of Nuclear Regulatory Commission licenses and that
    inspectors are not required to open containers to inspect them even
    though under some circumstances doing so could improve security. As a
    result of our recommendation, DHS and the Nuclear Regulatory Commission
    are working to establish a system through which DHS inspectors can
    verify the authenticity of Nuclear Regulatory Commission licenses.
    (GAO- 06-389):

    2.12.C. Improving Catastrophic Disaster Preparedness, Response, and
    Recovery: In a statement for the record, testimony, and report, we
    found that that while significant government and private resources were
    mobilized to respond to hurricanes Katrina and Rita, these capabilities
    were clearly overwhelmed and there was widespread dissatisfaction with
    the results. Many of the lessons from these hurricanes were similar to
    those we identified more than a decade ago in the aftermath of
    Hurricane Andrew, such as the critical importance of clearly defined,
    communicated, and understood leadership roles, responsibilities, and
    lines of authority in advance of such events. We recommended clarifying
    the roles and responsibilities of key federal officials, clarifying
    various aspects of the National Response Plan, and strengthening
    planning and response capabilities. In response to our recommendations
    and similar recommendations from other Hurricane Katrina
    investigations, DHS has implemented major changes, including revising
    the National Response Plan; clarifying federal roles and
    responsibilities; improving FEMA regional preparedness and leadership
    capabilities; strengthening logistics and distribution systems; and
    conducting reviews of state, territory, and large urban area
    catastrophic planning to identify areas for specific corrective
    actions. (GAO-06-618, GAO-06-467T, GAO-06-442T, and GAO-06-365R):

    2.13.C. Strengthening Oversight of Passenger and Baggage Screening
    Operations at U.S. Commercial Airports: Since September 11, 2001, we
    have issued numerous reports and testimonies, based on congressional
    requests and mandates, assessing the effectiveness of passenger and
    baggage screening operations at U.S. airports. Among other things, we
    reported that TSA has taken steps to strengthen screener training and
    performance, but that screeners did not have the time needed to take
    required training and, despite new security measures, covert testing
    identified that security vulnerabilities continued to exist. We further
    reported that TSA could improve its management of checked baggage
    screening operations by strengthening their tracking of the usage of
    alterative screening procedures and testing the security trade-offs of
    these procedures. We also found that TSA faces significant management
    challenges that may adversely affect its ability to implement the
    Secure Flight program, in which domestic passenger information will be
    matched against terrorist watch lists, to include not following a
    disciplined development process or determining how privacy protections
    are to be ensured. TSA took corrective actions to (1) strengthen
    screener training and performance and the management of its checked
    baggage screening operations and (2) halt development of the Secure
    Flight program until requirements were fully defined. (GAO-06-869, GAO-
    06-371T, GAO-06-374T, GAO-06-166, and GAO-05-457):

    Ensure Military Capabilities And Readiness:

    2.14.F. Improving the Outcomes of the Department of Defense's (DOD)
    Space System Acquisitions: DOD's space acquisition programs continue to
    face substantial challenges. At times, cost growth has approached or
    exceeded 100 percent, causing DOD to nearly double its investment in
    programs that face technical and other problems. Many programs are also
    experiencing significant schedule delays--as much as 6 years--
    postponing delivery of promised capabilities to the warfighter.
    Outcomes have been so disappointing in some cases that DOD has had to
    go back to the drawing board to consider new ways to achieve the same
    capability. Moreover, as we testified this year, the dollars available
    for new systems and for the discovery of promising new technologies
    have been reduced by about $12 billion over the next 5 years because of
    cost growth. This year, with new leadership, DOD has committed to
    adopting practices we have recommended for improving outcomes--starting
    with its Transformational Satellite Communications System. These
    include delegating the maturation of technologies to the science and
    technology community, adopting an evolutionary development approach,
    funding science and technology appropriately so that technology
    breakthroughs can be continually pursued, and improving collaboration
    on requirements. The Congress has continued to step forward to reduce
    funds for space programs that we have identified as posing high risk,
    require more careful analysis for investment and programmatic
    decisions, and encourage DOD to pursue projects designed to introduce
    cost-and time-saving approaches in the future. (GAO-06-626T, GAO-06-
    537, GAO-06-449, GAO-05-570R, and GAO-05-155):

    2.15.N. Improving Homeland Defense: We have issued several products
    that provide important insights into the nation's efforts to provide
    homeland defense. First, in July 2005, we issued a classified report
    and testimony on securing and defending U.S. airspace. During our
    review, we identified gaps in the simultaneous, time-critical,
    multiagency response to airspace violations, and the need for FAA to
    increase interagency sharing of some of its data. FAA has implemented
    some of our report recommendations on data sharing. Second, we have
    produced multiple reports addressing the key role that the National
    Guard plays in homeland defense. In October 2005, we reported and
    testified that the declining equipment and readiness status of
    nondeployed Army National Guard units could adversely affect the
    Guard's ability to perform homeland security missions. We recommended
    that DOD develop and provide the Congress with a strategy and specific
    plan for enhancing the Army National Guard's equipment status. The
    Office of the Secretary of Defense has since tasked the Army to report
    on actions taken to implement our recommendations and develop such a
    plan. Third, in May 2006, we issued a report on the National Guard
    Civil Support Teams, which are tasked with identifying weapons of mass
    destruction and providing advice and assistance after a weapons of mass
    destruction event. We found that confusion on Civil Support Team
    mission preparation could impede coordination between state authorities
    and local emergency management officials on the appropriate use of the
    Civil Support Teams. Also, the National Guard Bureau faces challenges
    in the administration and management of the Civil Support Teams that
    could impede both the progress of newer teams and the long-term
    sustainment of the program. We made recommendations to clarify Civil
    Support Team mission preparations and develop guidance that would help
    with management challenges. DOD generally agreed with our
    recommendations. (GAO-06-498, GAO-06-170T, GAO-06-111, and GAO-05-
    928T):

    2.16.N. Contributing to Properly Funding the Military's Needs: We
    reviewed the reasonableness of DOD's fiscal year 2006 budget request
    and identified billions of dollars in potential costs that could be
    avoided and opportunities for DOD to improve its internal oversight of
    the use and tracking of funds. Overall, our work contributed to
    multiple actions that resulted in total financial benefits of about
    $6.3 billion. The Congress used our analyses of unobligated balances
    (unspent funds) that we provided to the authorization and appropriation
    committees to make changes to the operation and maintenance budgets by
    the amounts we identified. To address the problem of persistent
    unobligated balances, DOD reduced the military services' operation and
    maintenance funding for fiscal years 2007 through 2011 during its
    annual program and budget review by about $4.3 billion. Our analyses of
    DOD's operation and maintenance expenditures for fiscal year 2005 also
    resulted in the Congress reducing DOD's budget for fiscal year 2006 by
    $1.07 billion because of high unobligated balances in its budget. In
    addition, our analyses of DOD's active and reserve military personnel
    expenditures for fiscal year 2005 resulted in the Congress reducing
    DOD's budget for fiscal year 2006 by $872.4 million, again because of
    high unobligated balances. (GAO-05-767 and oral briefings):

    2.17.F. Improving the Outcomes of DOD's Land System Acquisitions: The
    Army has described its Future Combat System as one of the most complex
    weapon acquisition programs ever executed. The program, which involves
    developing and integrating a family of 18 systems and an information
    network, is currently estimated to cost $160.7 billion--a 76 percent
    increase since program start. We continued to report this year that 3
    years into the system's development, the Army has yet to reach the
    level of knowledge it should have attained at program start. The
    elements of a sound business case--firm requirements, mature
    technologies, a knowledge-based acquisition strategy, a realistic cost
    estimate, and sufficient funding--are still not demonstrably present.
    None of the Future Combat System's 49 critical technologies was at a
    level of maturity recommended by DOD policy at the start of a program,
    and some may not reach full maturity until after production begins. We
    also reported that two key complementary systems of the Future Combat
    System network--the Joint Tactical Radio System and Warfighter
    Information Network-Tactical--have struggled to meet ambitious user
    requirements, steep technical challenges, and aggressive schedules,
    raising uncertainty about the Future Combat System network's ability to
    provide promised capabilities. DOD has been taking action to address
    our concerns by restructuring the Joint Tactical Radio System and
    Warfighter Information Network-Tactical programs to make them more
    executable, synchronizing their development schedules, and performing
    more network-related testing within the Future Combat System program.
    In light of the risks we identified, the Congress reduced funding for
    the Future Combat System and the Joint Tactical Radio System programs
    by $236 million and $334 million, respectively. (GAO-06-564T, GAO-06-
    367, GAO-05-669, and GAO-05-442T):

    2.18.N. Ensuring Timely Payment of Family Separation Allowance: In our
    April 2005 report (GAO-05-348), we found that the financial conditions
    of deployed and nondeployed servicemembers and their families are
    similar, but deployed servicemembers and their families may face
    additional financial problems related to pay. DOD administers the
    family separation allowance to assist deployed servicemembers and their
    families with the added expenses incurred because of involuntary
    separations in support of contingency operations like Operation Iraqi
    Freedom. Our work further noted that almost 6,000 servicemembers had
    experienced delays in obtaining their monthly $250 family separation
    allowance during their deployment. This pay problem was due, in part,
    to service procedures being confusing and not always followed. We
    recommended and DOD concurred that the Defense Finance and Accounting
    Service and the military services take necessary action to ensure that
    servicemembers receive the family separation allowance on a monthly
    basis during deployments. As a result, the military pay operations
    organizations notified field activities to emphasize the importance of
    timely input of family separation allowance documents. The notification
    also explained that the field activities should input the family
    separation allowance transaction immediately upon receipt so that the
    allowance is started within 30 days of deployment if it is certain the
    member would be on temporary duty for more than 30 days. (GAO-05-638R
    and GAO-05-348):

    2.19.N. Improving the Outcomes of DOD's Sea System Acquisitions: The
    Navy is embarking on an ambitious and expensive undertaking to develop,
    design, and construct a number of new ship classes. Using advanced
    technologies and automation, the Navy expects these vessels to
    successfully execute missions in a variety of environments with reduced
    crews and at lower costs. Our past reports have identified several
    programs, including the DD(X) destroyer and the Littoral Combat Ship,
    that are at risk of cost overruns and schedule delays because of the
    ambitious nature of the programs, gaps in critical knowledge, and
    questionable cost estimates. This year we identified challenges facing
    the Navy's long-range shipbuilding plan--including demanding mission
    requirements that can result in more costly ships that cannot be built
    in the numbers desired to meet program missions and sustain shipyard
    workload. These tensions portend the potential trade-offs that will
    likely have to be made. In response to our work, DOD has taken steps to
    reduce risks on its Littoral Combat Ship program, such as initiating a
    change in the helicopter force structure to support the new
    capabilities provided by ship. In addition, the Navy has taken steps to
    increase overall confidence in cost estimates and plans to conduct
    independent reviews of cost estimates for future aircraft carriers. To
    ensure Navy programs accumulate critical knowledge when needed, the
    Congress has taken actions, including limiting procurement funding for
    the Littoral Combat Ship and the LHA(R) amphibious assault ship
    programs until the Navy certifies that a stable design exists. (GAO-06-
    587T, GAO-05-924T, GAO-05-752R, GAO-05-255, and GAO-04-973):

    2.20.N. Contributing to Congressional Oversight of Governmentwide
    Efforts to Improve the Personnel Security Clearance Process: In January
    2005, we designated DOD's personnel security clearance program a high-
    risk area, because of growing delays in completing personnel background
    investigations and numerous impediments that hindered DOD's ability to
    eliminate its long-standing clearance backlog. These delays affect the
    entire federal government because about one-third of the approximately
    2.5 million DOD-issued security clearances are for contractors working
    for 23 other federal agencies. In February 2005, when DOD transferred
    its clearance background investigative function to the Office of
    Personnel Management (OPM), the average wait for a top secret clearance
    was over 1 year. In June 2005, Executive Order 13381 assigned the
    Office of Management and Budget (OMB) responsibility for improving the
    security clearance process governmentwide. In November 2005, OMB issued
    a governmentwide improvement plan, and we testified before the Congress
    on our assessment of the plan. Our testimony highlighted a number of
    positive aspects, but also noted that the plan needed improvement in
    several areas. Over the next year, the Congress has requested that we
    continue to work with OMB and OPM to improve the governmentwide plan.
    (GAO-06-233T and GAO-04-632):

    2.21.N. Improving U.S. Southern Command's Force Protection for In-
    Transit Forces: Our October 2003 report on U.S. Southern Command's
    antiterrorism approach for in-transit forces pointed out several
    shortcomings, including the lack of a force protection working group
    that could continuously review antiterrorism and force protection
    measures and emerging threats, the failure of its approach to apply to
    certain vessels--called voyage charters--that are chartered by the
    Military Sealift Command (now called the Sealift Logistics Command),
    and the absence of oversight mechanisms for in-transit forces similar
    to those DOD uses to evaluate antiterrorism measures at fixed
    installations. We made four recommendations to improve U.S. Southern
    Command's approach. As a result, U.S. Southern Command established a
    Mission Assurance Working Group in October 2004 to meet in-transit
    security needs. Also, in January 2005, a memorandum of agreement was
    signed by the Commander of U.S. Naval Forces Southern Command and the
    Commander of Sealift Logistics Command, Atlantic, establishing a
    working relationship for antiterrorism and force protection support,
    including when Naval Forces, Southern Command, will provide
    antiterrorism/force protection augmentation to Sealift Logistics
    Command vessels, including voyage charters. Lastly, in order to improve
    oversight through its antiterrorism program assessment process, the
    Joint Staff has incorporated changes to the Joint Staff Higher
    Headquarters Program Review Process to include requirements for
    analyses of existing vulnerability assessments to identify positive and
    negative trends, concerns, and implementation shortfalls, as well as
    the in-transit focus of the combatant commands prior to conducting an
    assessment. (GAO-04-80NI and GAO-03-731NI):

    2.22.N. Recommending Changes in U.S. Forces for Domestic Military
    Missions (Homeland Defense): We recommended that the Secretary of
    Defense assess domestic military requirements and determine if steps
    should be taken to structure U.S. forces to better accomplish domestic
    military missions while maintaining proficiency for overseas combat
    missions. DOD has done so: in October 2004, the Assistant Secretary of
    Defense for Homeland Defense sent a memo to the Secretary of Defense in
    which force requirements were assessed and identified for the domestic
    military missions. Additionally, in written comments on the draft
    report, DOD stated that force structure changes would be determined
    through the Quadrennial Defense Review process. The 2006 Quadrennial
    Defense Review identifies several areas in which DOD has assessed and
    determined that the force structure needed to be changed to better
    provide for homeland defense and support to civil authorities. For
    example, the Quadrennial Defense Review states that DOD will better
    focus the use of reserve components' competencies for homeland defense
    and civil support operations, and seek changes to authorities to
    improve access to National Guard and reserve consequence management
    capabilities and capacity in support of civil authorities. (GAO-03-
    670):

    2.23.N. Improving DOD's Missile Defense Outcomes: DOD plans to spend
    more than $58 billion over the next 6 years to develop and field
    ballistic missile defenses. The diverse set of technologies that must
    be developed, integrated, and deployed across an array of land-, air-,
    sea-, and space-based platforms makes this system a challenging and
    risky endeavor. Although DOD aims to place capabilities in the hands of
    the warfighter more quickly and with the flexibility to respond to an
    evolving threat, DOD has been unable to deliver the quantities promised
    within the original cost estimates--in part because of a lack of
    knowledge about emerging technologies. This year, for example, we
    reported that while DOD followed a knowledge-based strategy with
    elements not being fielded, such as Airborne Laser and Kinetic Energy
    Interceptor, it did not for its ground-based missile defense system,
    which is designed to destroy intercontinental ballistic missiles during
    the midcourse phase of their flight. More specifically, it allowed this
    segment of the program to concurrently mature technology, complete
    design activities, and produce and field assets before end-to-end
    testing of the system--all at the expense of cost, quantity, and
    performance goals. As a result, the performance of some Ground-based
    Midcourse Defense Interceptors is uncertain because the program was
    inattentive to quality assurance. In response to our work, DOD has
    improved planning for operational testing for missile defense and
    strengthened cost reporting. Concurrently, the Congress has recognized
    the value of following a knowledge-based strategy and asked DOD to
    review its approach with the aim of better positioning missile defense
    elements for success. (GAO-06-327, GAO-05-243, GAO-04-409, and GAO-03-
    441):

    2.24.N. Ensuring That the Services Comply with Health Protection and
    Surveillance Requirements for Servicemembers: In September 2003, we
    recommended that the Secretary of Defense direct the Assistant
    Secretary of Defense for Health Affairs to establish an effective
    quality assurance program that will help ensure that the military
    services comply with the force health protection and surveillance
    requirements for all servicemembers. We found that the Army and Air
    Force, in particular, had not assessed many active duty servicemembers
    before and after their deployment overseas, provided certain
    immunizations, or centrally maintained health-related documentation.
    Additionally, DOD had no quality assurance oversight program. On
    January 9, 2004, the Assistant Secretary of Defense for Health Affairs
    issued a policy entitled "Policy for Department of Defense Deployment
    Health Quality Assurance Program." This policy established a quality
    assurance program that "supports the Force Health Protection
    requirements associated with ongoing deployments and problems
    identified during reviews by the General Accounting Office." The
    program was designed with the following key elements that addressed
    DOD's health requirements and our concerns: (1) periodic reports of
    completed health assessments, (2) periodic reports of service-specific
    quality assurance efforts, (3) periodic visits to installations to
    perform their own assessments, and (4) annual reports on the status of
    the Deployment Health Quality Assurance Program to the Assistant
    Secretary of Defense for Health Affairs. The policy became effective
    immediately. (GAO-03-1041):

    2.25.C. Identifying Improvements Needed in How the Military Plans for
    and Responds to Catastrophic Disasters: While the military mounted a
    massive response after Hurricane Katrina that saved many lives, we
    found that better planning and exercises were needed to identify the
    types of military capabilities that would be needed in the wake of such
    disasters. Several factors affected the military's ability to gain
    situational awareness and organize and execute its response, including
    a lack of timely damage assessments, communications difficulties, force
    integration problems, uncoordinated search and rescue efforts, and
    unexpected logistics responsibilities. DOD has begun to implement many
    of our recommendations to address such problems, including developing
    more proactive, detailed operational plans for how the military will
    respond to future catastrophes. Similarly, because plans were not in
    place when the hurricane struck, the U.S. government had to develop ad
    hoc procedures to manage the millions of dollars in cash and in-kind
    assistance (like food and clothing) provided by foreign governments. In
    response to our recommendations to improve the accountability of
    international assistance received for domestic disasters, a steering
    group--comprising representatives from State; DHS, including FEMA; and
    other agencies--has established procedures and installed systems to
    improve the accountability of international cash and in-kind donations.
    (GAO-06-808T, GAO-06-643, and GAO-06-460):

    2.26.C. Improving DOD's Management of Reserve Forces: During fiscal
    year 2006, we issued two reports containing recommendations to DOD for
    improving its management of the 1.4 million citizen-soldiers who serve
    in the National Guard and the Reserves. Today, reservists represent
    about half of the nation's total force. Since September 11, 2001, more
    than 300,000 reservists have been deployed to Iraq and Afghanistan. We
    contributed to congressional oversight by reporting on two key areas:
    DOD's management of the health status of reservists, and DOD's efforts
    to outreach and educate employers about employment protections afforded
    to reservists under federal law as they transition between their active
    duty service and their civilian jobs. Regarding reserve health status,
    we reported that because of incomplete and unreliable data, DOD was
    unable to determine the extent to which the reserve components complied
    with (1) a legislative requirement that reservists have medical
    examinations every 5 years and an annual certificate of their medical
    status and (2) a DOD policy requiring reservists to have annual dental
    and physical fitness evaluations. To help ensure better visibility over
    reserve component's compliance with medical and fitness requirements,
    we recommended that DOD establish a management control framework and
    execute a plan for establishing quality assurance for data reliability
    and tracking compliance with routine medical and physical fitness
    examinations. Regarding outreach to reserve employers, DOD's efforts
    have been hindered because only limited employer information is
    available. Although reservists have been required to provide employer
    information since 2003--a requirement based on a recommendation in our
    2002 report, DOD's efforts to collect this information are still
    incomplete. As of August 2005, about 40 percent of reservists had not
    provided their civilian employer information. DOD officials stated that
    the compliance rate is tied to command attention and enforcement. We
    recommended, and DOD agreed, that the department should take steps to
    enforce compliance with its policy requiring reservists to report their
    civilian employer information. (GAO-06-105 and GAO-06-60):

    2.27.C. Improving the Outcomes of DOD's Aircraft System Acquisitions:
    Acquisitions of new aircraft systems represent some of DOD's largest
    investments. Costs for DOD's F-22A Raptor and Joint Strike Fighter
    aircraft alone are expected to be about $320 billion. Despite the
    magnitude of spending, our work this year has shown that DOD has not
    adequately justified critical aircraft investments or taken actions
    necessary to stem cost and schedule growth. We reported that the F-22A
    business case is not executable in part because of a 198-aircraft gap
    between what the Air Force requires and what DOD estimates it can
    afford. The Joint Strike Fighter program, which has 90 percent of its
    investments still in the future, plans to concurrently test and produce
    aircraft, weakening the program's business case and jeopardizing its
    recapitalization efforts. For both programs, DOD has not presented an
    investment strategy for tactical aircraft systems that measures needs,
    capability gaps, alternatives, and affordability. We also reported that
    the Global Hawk program has incurred cost and schedule setbacks because
    of critical gaps in technical knowledge, and that the Navy's EA-18G
    aircraft and the Army's unmanned Warrior aircraft are at risk of such
    setbacks for the same reasons--adding more pressure to DOD's overall
    investment in aircraft. Because of our work, DOD has begun to take
    action to lessen risks in the Global Hawk program, and the Congress has
    held hearings on how the Joint Strike Fighter and F-22A programs should
    be structured in going forward into production, proposing significant
    reductions in the Joint Strike Fighter program. (GAO-06-593, GAO-06-
    455R, GAO-06-446, GAO-06-356, and GAO-06-222R):

    2.28.C. Transforming Processes Underpinning Major DOD Acquisitions: Our
    reviews continued to demonstrate that DOD is simply not positioned to
    deliver high-quality products on time and within budget. In our fourth
    annual review of selected major weapon systems--which represent an
    investment of over $850 billion--we found that DOD's weapons programs
    often exceed development cost estimates by approximately 30 to 40
    percent, miss deadlines, and experience performance shortfalls and cuts
    in planned quantities. In a separate review, we found that DOD
    frequently bypasses key steps in product development that we have
    recommended--and that DOD has adopted in its acquisition policy--and
    continues to pursue revolutionary, rather than evolutionary or
    incremental, advances in capability without the technology, design, and
    production knowledge needed to keep costs and schedules in check. In
    looking at how programs could be managed better, we have pointed to the
    need for DOD to (1) adopt a departmentwide investment strategy that
    prioritizes programs based on realistic and credible current and future
    threat-based customer needs, (2) enforce existing policies and adhere
    to practices that ensure new programs are executable, and (3) make it
    clear who is responsible for what and hold people accountable when
    these responsibilities are not fulfilled. The Congress has begun to
    take action to require DOD to develop and implement a comprehensive
    strategy for enhancing the ability of program managers to execute their
    programs through enhanced training, improved career paths, improved
    resources and support, and increased accountability. (GAO-06-585T, GAO-
    06-391, and GAO-06-368):

    2.29.C. Improving Management of DOD's Business Transformation Efforts:
    DOD spends billions of dollars to sustain key business operations
    intended to support the warfighter, including systems and processes
    related to the management of contracts, finances, the supply chain,
    support infrastructure, and weapon systems acquisition. DOD has
    embarked on a series of efforts to reform its business operations,
    including modernizing its underlying IT (business) systems. However,
    serious inefficiencies remain and many of DOD's business areas remain
    on our high-risk list. Furthermore, limitations in DOD's approach to
    strategic planning and budgeting hinder its efforts to transform
    military capabilities and supporting business operations. During this
    fiscal year, we reported and testified on the need for DOD to develop a
    risk-based approach to investment decision making and to take steps to
    develop sustained leadership, an integrated and enterprisewide business
    transformation plan, and adequate incentives to guide transformation.
    In particular, we pointed out the need for DOD to establish a chief
    management official to lead the department's overall business
    transformation efforts. To its credit, DOD has embarked on a number of
    steps intended to advance business transformation, including the
    development of a business enterprise architecture and enterprise
    transition plan, and the creation of an agency to oversee business
    transformation. We will continue to monitor DOD's efforts in these
    areas. (GAO-06-658, GAO-06-497T, GAO-06-234T, and GAO-06-219):

    2.30.C. Improving DOD's Efforts to Recruit and Retain Enlisted
    Personnel: DOD must recruit and retain hundreds of thousands of
    servicemembers each year to fill almost 1,500 occupational specialties
    spread across the active and reserve components. In fiscal year 2006,
    we reported that 5 of 10 active and reserve components--the Army, Army
    Reserve, Army National Guard, Air National Guard, and Navy Reserve--
    missed their aggregate recruiting goals by 8 to 20 percent. While most
    of the components met their aggregate retention goals, the Navy
    experienced retention shortages in fiscal year 2005 of up to 8 percent.
    Meeting aggregate recruiting and retention goals, however, tells only
    half the story. Our work showed that even when DOD met its overall
    recruiting and retention goals, it had too many personnel in some
    occupations and not enough in others. Specifically, we found that about
    20 percent of DOD's 1,484 occupations were consistently overfilled and
    41 percent were consistently underfilled in at least 5 of the 6 years
    from fiscal years 2000 through 2005. In fiscal year 2005 alone, almost
    31,000 personnel too many served in occupations that had been
    consistently overfilled. Given that in fiscal year 2004 it costs the
    taxpayer about $103,000 annually, on average, to compensate each
    enlisted active duty member, it is costly to have more personnel than
    needed. Also, in fiscal year 2005, DOD was short 112,000 personnel in
    consistently underfilled occupations, like Army and Marine Corps
    personnel who can defuse roadside bombs. DOD does not have the
    necessary information on 84 percent of its occupational specialties to
    develop an effective plan to address the causes of the components'
    recruiting and retention challenges. We recommended that DOD require
    all components to report on all (not just critical) overfilled and
    underfilled occupational specialties, and that DOD develop a management
    action plan to help components to address the causes of their
    recruiting and retention challenges. (GAO-06-134):

    2.31.C. Providing Oversight of Military Operations in Iraq and
    Afghanistan: During fiscal year 2006, we continued to inform the
    Congress on significant issues related to DOD's ongoing operations in
    Iraq and Afghanistan in support of the global war on terrorism. In
    particular, we reported, testified, and recommended improvements
    related to funding, costs, and future commitments; the ongoing and
    long- term challenges related to repairing and replacing equipment; the
    production and installation of Army and Marine Corps truck armor; and
    coordination between the U.S. military and private security providers.
    Among other things, our work showed neither DOD nor the Congress
    reliably knows the cost of the global war on terrorism military
    operations and how appropriated funds are being used, or have
    historical data useful in considering future funding needs because of
    numerous problems with DOD's processes, use of estimates instead of
    actual cost data, and the lack of supporting documentation. Because of
    the extensive wear and tear on equipment, the Army and the Marine Corps
    face a number of ongoing and long-term challenges that will affect the
    timing and cost of equipment reset. Delays in providing truck armor
    kits to deployed troops placed them at greater risk as they conducted
    wartime operations in vehicles not equipped with preferred levels of
    protection. In addition, private security providers continue to enter
    the battle space without coordinating with the military, putting both
    the military and security providers at a greater risk for injury. In
    response, DOD is developing a training program for units deploying to
    Iraq to understand the roles and responsibilities of private security
    providers and modified a policy to begin collecting data on the cost of
    providing security to reconstruction contractors in Iraq. In addition,
    DOD agreed to modify policies pertaining to response to urgent wartime
    needs that may speed up the process in the future. We will continue to
    monitor DOD's efforts. (GAO-06-885T, GAO-06-865T, GAO-06-604T, GAO-06-
    274, GAO-06-160, and GAO-05-882):

    2.32.C. Enhancing the Use of Privatization for Improving Military
    Family Housing: Since the enactment of the Fiscal Year 1996 National
    Defense Authorization Act, which provides for private sector financing,
    ownership, and operation of military housing, privatization has become
    DOD's primary means for improving family housing and meeting
    requirements when the communities near installations do not have an
    adequate supply of suitable, affordable housing. Since the program's
    inception, we have issued an extensive body of work influencing the
    department's implementation and management of the program. Most
    recently, in April 2006, we reported on the need to improve DOD's
    oversight of the program. First, the Navy's methods for overseeing its
    awarded projects have not been adequate to identify and address
    operational concerns in some projects or to ensure accurate reporting
    of project information. Second, the value of DOD's primary oversight
    tool--the semiannual privatization program evaluation report--has been
    limited because it lacks a focus on key performance metrics, contains
    inaccurate data, and has not been timely. Third, data on servicemember
    satisfaction with the housing are inconsistent and incomplete. We made
    several recommendations to improve the department's oversight of
    awarded housing privatization projects and to help ensure that the size
    of future projects is reliably determined. In response, DOD generally
    agreed with our recommendations and initiated actions to address our
    concerns. (GAO-06-438, GAO-04-556, GAO-02-624, GAO/NSIAD-00-71, and
    GAO/NSIAD-98-178):

    2.33.C. Transforming Defense Forces: During fiscal year 2006, we
    provided the Congress with numerous analyses that identified challenges
    with DOD's plans for adapting its forces to meet 21st century threats.
    A common theme of this work has been that DOD and the services lack
    effective approaches for setting priorities; managing risk; and
    developing affordable, executable plans for force transformation. For
    example, we reported and testified that the Army faces significant
    challenges in executing its plan to reorganize active and reserve
    component Army divisions into modular brigades. We also reported that
    the Army's cost estimate for implementing modular brigades has grown
    from $28 billion in 2004 to $52.5 billion in 2006. Because of our work,
    congressional defense committees have inserted several provisions in
    the fiscal year 2007 defense authorization bill that would require the
    Army to provide more detailed information on its plans and further
    assess the modular unit designs. We also assessed Air Force efforts to
    develop a future tactical aviation force structure plan for its active
    and reserve units and found that the Air Force has not fully developed
    an effective plan to assess transformation initiatives in several
    states to more closely integrate active and reserve component units.
    Because of our report, the Air Force finalized its strategic plan for
    implementing these initiatives and agreed to establish goals and
    metrics for evaluating progress and determining whether the initiatives
    should be expanded. (GAO-06-745, GAO-06-548T, GAO-06-232, and GAO-05-
    926):

    Advance And Protect U.S. International Interests:

    2.34.N. Strengthening Passport and Visa Issuance Processes: Using our
    work as a primary guide, State, in coordination with other agencies,
    has continued to improve controls over the issuance of passports and
    visas. It has added thousands of names to its data systems to prevent
    persons with outstanding federal felony warrants from obtaining
    passports to leave the United States. In addition, State has improved
    passport fraud prevention through increasing information sharing among
    law enforcement agencies, additional fraud prevention training for
    passport officials, and hiring of additional staff. Regarding visas,
    State has directed overseas posts to strengthen oversight and improve
    compliance with internal control requirements to ensure the integrity
    of the visa function, increase information sharing to ensure that visa
    officers have the best information available on visa applicants who may
    pose security risks, and improve visa officers' ability to detect
    fraudulent visa applicants. In addition, in response to our work, the
    Secretary of State and the Attorney General reached a consensus on
    legal measures that could facilitate investigations of visa malfeasance
    and have proposed amendments to law to the judicial branch for its
    consideration. (GAO-06-115, GAO-05-859, and GAO-05-477):

    2.35.N. Increasing Accountability of International Disaster Recovery
    Assistance: In response to our May 2006 recommendation, the U.S. Agency
    for International Development (USAID) Administrator has taken actions
    to improve U.S. disaster reconstruction efforts overseas. Based on our
    recommendation that USAID provide guidance to staff responsible for
    implementing disaster recovery and reconstruction programs, USAID
    posted lessons learned from some of its previous disaster
    reconstruction efforts on an intranet site for staff to access. Our
    review of this U.S. international disaster reconstruction program is a
    continuation in a series of work, beginning with our review of U.S.
    assistance to Central America following Hurricane Mitch in 1998. In
    addition, our review of USAID's ongoing disaster reconstruction program
    in numerous countries affected by the December 2004 tsunami in the
    Indian Ocean supported our contributions to the International
    Organization of Supreme Audit Institutions (INTOSAI). Specifically, we
    provided key information to high-level GAO officials who are actively
    involved in an INTOSAI task force, established after the tsunami, to
    promote the exchange of information; facilitate the coordination of
    audits; enhance the transparency of flows of funds; and based on
    lessons learned, develop best practices to enhance post disaster
    accountability of aid. (GAO-06-645):

    2.36.N. Improving Financial Reporting and Strategy for U.S. Assistance
    to Afghanistan: In response to our work, State has improved its
    financial reporting on U.S. assistance to Afghanistan and USAID has
    completed a comprehensive strategy to guide its assistance efforts in
    Afghanistan and helped the Afghan government develop a strategy for
    rehabilitating its agricultural sector. We reported that the U.S.
    officials lacked complete financial data, which hindered their ability
    to oversee the assistance to Afghanistan. Subsequently, the President
    signed Pub. L. No. 108-458, which, among other things, called for the
    Secretary of State to report annually on the Afghan assistance
    activities funded by the United States and the source of funds by
    fiscal year, agency, and program. We also reported that the United
    States lacked a complete and integrated assistance strategy for
    Afghanistan, which hampered the U.S. government's ability to focus
    available resources and hold itself accountable for results. In
    response to our recommendations, USAID completed a strategy describing
    goals, objectives, resource levels, and obstacles and initiated an
    effort to develop a performance plan to measure the extent to which
    development efforts are achieving their objectives. Further, we
    reported that previous assistance from the international community did
    not significantly contribute to the reconstruction of Afghanistan's
    agricultural sector and was not adequately coordinated with the Afghan
    government. In response to our recommendations, USAID and other members
    of the international community helped the Afghan government develop a
    strategy for Afghanistan's agricultural sector. (GAO-04-403 and GAO-03-
    607):

    2.37.F. Reducing the Fiscal Year 2006 Appropriation for the Millennium
    Challenge Corporation (MCC): Our work contributed to the Congress's
    decision to appropriate $1.77 billion for MCC for fiscal year 2006, a
    reduction of $1.23 billion from the President's request. In May and
    June 2005, we provided budget papers, follow-up briefings, and
    additional analysis to the Congress to help it assess the President's
    $3 billion fiscal year 2006 budget request for MCC, which oversees a
    new foreign assistance program intended to provide economic assistance
    to countries that demonstrate a commitment to ruling justly, investing
    in people, and encouraging economic freedom. MCC is authorized to
    provide assistance to countries that enter into public compacts with
    the United States. In a constrained budget environment, our work made a
    unique contribution by (1) providing a framework for identifying the
    trade-offs between different funding levels and the numbers and size of
    compacts that MCC could support and (2) assessing the impact of
    delaying assistance to some (lower-middle-income) countries. Our work
    also showed that MCC could operate with a smaller fiscal year 2006
    appropriation than requested because, except under the most optimistic
    assumptions, MCC would not obligate the balance of its prior years'
    appropriations until late 2006 or early 2007. Our work informed and
    supported appropriations and authorizing committees' decisions about
    MCC funding for fiscal year 2006. The Senate appropriations committee
    report, for example, in recommending a lower level of funding than
    requested, reflected our conclusions about MCC obligations and cited
    specific data that we prepared comparing the actual and projected size
    of MCC compacts. In addition, MCC officials told us that our analysis
    was used by corporation officials and congressional appropriators to
    frame key discussions about the potential impact of various
    appropriations levels. (Based on briefings):

    2.38.F. Streamlining U.S. Overseas Presence by Applying Rightsizing
    Technologies and Processes: In response to our recommendation, State
    implemented a new process for projecting long-term staffing needs when
    planning and designing new embassy compounds, which ultimately resulted
    in a cost avoidance of about $83 million for eight new embassy
    construction projects. We reported that State's process for developing
    staffing projections lacked a systematic approach or comprehensive
    rightsizing analysis; thus, the U.S. government risks building new
    embassy compounds that are designed for the wrong number of staff. We
    recommended that State develop a formal, standard, and comprehensive
    process for establishing staffing projections for new embassy
    compounds. State subsequently implemented a new process for projecting
    long-term staffing needs when planning and designing new embassy
    compounds, which included a mandatory zero-based rightsizing analysis,
    along with procedures for documenting, vetting, and approving the
    projections. Moreover, in light of continuing security vulnerabilities
    at overseas posts, the House Committee on Appropriations reported that
    it intended to ensure that all U.S. agencies funded in the fiscal year
    2006 Science, State, Justice, Commerce, and Related Agencies
    Appropriations Bill Report complete a comprehensive rightsizing
    analysis, and directed State to reflect the application of a
    rightsizing methodology in the fiscal year 2007 budget request. (The
    appropriations bill became law on November 22, 2005.) In that same
    legislation, the House Committee directed the International Trade
    Administration to provide a detailed report to the Committee on the
    rightsizing methodology followed to determine the appropriate size and
    location of its overseas presence anticipated for the next 5 to 10
    years. (GAO-03-411 and GAO-02-780):

    2.39.N. Strengthening Vetting of Foreign Security Forces That Receive
    U.S. Assistance: In response to our recommendation, State issued
    guidance to strengthen management controls for vetting foreign security
    units that receive U.S. security assistance. U.S. law restricts the
    provision of funds to units of foreign security forces when the
    department has credible evidence that the unit has committed gross
    violations of human rights. Agency guidance extends these restrictions
    to individuals of foreign security forces and requires posts to
    establish procedures to vet candidates for U.S.-sponsored training for
    possible violations. However, we found no evidence that U.S. officials
    vetted an estimated 6,900 foreign security trainees--about 4,000
    Indonesian, 1,200 Filipino, and 1,700 Thai police--trained by the
    Department of Justice with Department of State law enforcement
    assistance from fiscal years 2001 through 2004. To help provide
    assurance that foreign candidates of U.S. security assistance programs
    comply with existing legislative restrictions and State policies on
    human rights, we recommended that State strengthen management controls
    by issuing new guidance. State's new guidance states that posts must
    assign a single point of contact in the overseas mission with
    responsibility for oversight of and compliance with vetting procedures,
    and discusses documentation requirements. (GAO-05-793):

    2.40.F. Increasing Sales of Excess Property Overseas: Because of our
    work, State sold 45 properties at 29 overseas posts for $59.2 million
    from the third quarter of fiscal year 2004 through the first quarter of
    fiscal year 2006. We previously identified millions of dollars in
    unneeded overseas real estate that State could potentially sell. Based
    on our recommendation, an independent advisory panel was established to
    help State decide which properties should be sold. We then assessed
    State's performance in working with the new panel in identifying and
    disposing of excess property. We found that although progress had been
    made, State still had a large number of unneeded properties in its
    inventory, had inaccuracies in its inventory database causing some
    properties not to be properly identified, and had failed to sell
    several of the properties recommended by the advisory board. (GAO-02-
    590):

    2.41.N. Improving Reporting on Defense Drawdowns: Based on our work,
    the Defense Security Cooperation Agency is reporting more accurate and
    timely information on drawdowns of defense articles and services. The
    President has special statutory authority to order the drawdown of
    defense articles--such as aircraft, vehicles, various weapons, and
    spare parts--and services or military education and training from DOD
    and military service inventories and transfer them to foreign countries
    or international organizations. We found that the Defense Security
    Cooperation Agency's congressionally mandated reports to the Congress
    on drawdowns were inaccurate and incomplete. We noted that the agency
    relied on the military services for its data, but the services did not
    regularly provide updates to the agency. In addition, when the services
    provided drawdown data to the agency, they were in various formats and
    agency staff had to convert them into the agency's drawdown records. As
    a result, errors occurred. To address our recommendation, the Defense
    Security Cooperation Agency updated its drawdown handbook to
    specifically direct the military services to update their drawdown
    programming and delivery data at least monthly and enter them directly
    into the relevant system. The military services are updating their
    information as required. (GAO-02-1027):

    2.42.N. Better Managing Foreign Language Requirements: The Army and the
    Foreign Commercial Service have taken actions in response to our
    recommendation that they adopt a strategic, results-oriented human
    capital approach to manage their foreign language requirements. The
    Secretary of the Army issued a detailed Defense Language Transformation
    Roadmap, which fully addressed our recommendation. We previously found
    that the Army's strategies did not fully meet the need for some foreign
    language skills and were not part of a coordinated plan of action with
    regard to foreign language recruitment, training, payments, and
    workforce restructuring. Army officials told us that shortages of staff
    with needed foreign language skills adversely affected agency
    operations and hindered U.S. efforts. The Foreign Commercial Service
    has taken a number of actions to respond to our report recommendation.
    These actions include completing a worldwide review of language-
    designated positions overseas to more accurately identify existing
    proficiency shortfalls; instituting a pilot program to offer language
    training throughout the United States; establishing an award language
    incentive program; and developing a detailed corrective plan of action,
    which has been closely monitored and aggressively implemented. (GAO-02-
    375):

    2.43.C. Tracking the Impact of U.S. Reconstruction Efforts in Iraq: Our
    work helped inform the Congress and the American public about the
    progress and challenges faced in the United States' efforts to
    stabilize and rebuild Iraq. In January 2006, in response to our
    recommendation, State reported that it is finalizing better outcome-
    oriented performance measures to track the impact of U.S.
    reconstruction efforts. These efforts are currently under way. Our work
    has also highlighted how endemic corruption undermines U.S. and Iraqi
    government efforts to improve the transparency and accountability of
    Iraq's national and provincial governments. In our assessment of the
    U.S. strategy for Iraq, we recommended that the National Security
    Council take several steps to complete the strategy to improve its
    usefulness to the Congress. Specifically, we recommended that the
    council identify the current costs and future resources needed to
    implement the strategy, such as the costs of maintaining U.S. military
    operations and training and equipping Iraqi security forces. In
    addition, our work identified the need to clarify the roles and
    responsibilities of U.S. government agencies, and to improve
    performance measures to help track the impact of U.S. efforts. (GAO-06-
    953T, GAO-06-788, and GAO-06-697T):

    2.44.C. Advancing Management Reforms in the United Nations (UN): Our
    work on UN management reforms has led State to advance efforts to
    strengthen the independence of the UN internal oversight unit and has
    also promoted UN procurement reform. First, we found that UN funding
    arrangements constrained its oversight unit's ability to operate
    independently and direct resources toward high-risk areas as needed. As
    a result, high-risk areas can be and have been excluded from
    examination, including the Oil for Food program for which billions of
    dollars were found to have been misused. We recommended that the UN
    establish reliable funding arrangements for its internal oversight unit
    to ensure the auditors' independence. State endorsed our recommendation
    and has advanced UN reforms by working with member states to strengthen
    the independence of the UN internal oversight unit. Second, we found
    that weaknesses in internal controls in UN procurement exposed UN
    resources to significant risk of waste, fraud, and abuse. We
    recommended that State work with member states to address UN
    procurement weaknesses. State endorsed our recommendation and the UN
    subsequently announced actions aimed at addressing some of these
    weaknesses, including efforts to ensure proper accountability and
    training of all involved in procurement. (GAO-06-701T, GAO-06-577, GAO-
    06-575, and GAO-06-226T):

    Respond To The Impact Of Global Market Forces On U.S. Economic And
    Security Interests:

    2.45.N. Making the Trade Advisory Committee System More Relevant: The
    Office of the U.S. Trade Representative, in conjunction with other
    federal agencies, has taken several steps to update the international
    trade advisory system to make it more relevant to the U.S. economy and
    trade policy needs, as we recommended. Specifically, the Office of the
    U.S. Trade Representative, Commerce, and the Department of Agriculture
    have more closely aligned the system's structure and composition with
    the current economy and increased the system's ability to meet
    negotiator needs more reliably. For example, the Department of
    Agriculture created a new Agricultural Technical Advisory Committee for
    processed foods because exports of high-value products have increased.
    Also, the Office of the U.S. Trade Representative and Commerce split
    the service industry into several committees to better meet negotiator
    needs. Commerce, the Office of the U.S. Trade Representative, and EPA
    have also better incorporated new trade issues and interests into the
    system. For example, the Office of the U.S. Trade Representative
    responded to the increased interest in fisheries subsidies expressed
    during international trade negotiations by helping to create a new
    subcommittee to study such subsidies. (GAO-02-876):

    2.46.N. Strengthening Controls over the Conflict Diamond Trade: In June
    2002, we reported that the Kimberley Process's proposal for an
    international diamond certification scheme did not contain the controls
    necessary to ensure that it will be effective in stemming the flow of
    conflict diamonds, which are rough diamonds used by rebel movements to
    finance their military activities, including attempts to undermine or
    overthrow legitimate governments. Since the November 2002 adoption of
    the international certification system for rough diamonds, State and
    the Department of the Treasury have cochaired the Kimberley Process
    Implementation Coordinating Committee. In response to our
    recommendation, the Secretary of State, in consultation with relevant
    government agencies, has worked to incorporate better controls in the
    international diamond certification scheme, known as the Kimberley
    Process Certification Scheme, to deter conflict diamonds from entering
    the legitimate market. The U.S. government has worked with other
    Kimberley Process Certification Scheme participant governments to
    ensure that the structure for implementing the scheme encompasses key
    internal controls, including working groups that (1) monitor
    implementation by conducting peer reviews of participants and the
    process, (2) report statistical data on the production and trade of
    rough diamonds to identify anomalies, and (3) identify solutions to
    technical problems for participants requiring assistance. (GAO-02-
    678):

    2.47.C. Phasing Out and Improving Management of Payments to Producers
    under the Byrd Amendment: In February 2006, after an active debate
    where our report figured prominently in congressional remarks, the
    President signed legislation terminating the Byrd Amendment or
    Continued Dumping and Subsidy Offset Act, as of the end of fiscal year
    2007. In the program's first 4 years, Customs and Border Protection
    disbursed about $1 billion to U.S. producers that had claimed and
    demonstrated they were injured by unfairly traded (dumped or
    subsidized) imports, with just five firms receiving about half the
    total amount. The phaseout of the program provides for continued
    disbursements to producers of antidumping duties collected on imports
    that enter up to September 2007; thereafter the duties will go to the
    U.S. Treasury. (GAO-05-979):

    2.48.C. Updating Trends in Financial Restatements and Their Impact on
    Market Capitalization: In a July 2006 report, we issued our update of
    trends in financial restatement announcements. We found that the number
    of restatement announcements resulting from financial reporting fraud,
    accounting errors, or both has continued to increase since 2002,
    reflecting an increased focus on financial reporting and internal
    controls following the implementation of the Sarbanes-Oxley Act of
    2002. Moreover, restatement announcements have continued to adversely
    affect market capitalization of restating companies in the short term
    and over time, but the market appears to react to certain types of
    restatements more severely than other types. We also found that despite
    changes to required disclosures involving certain restatements,
    companies continue to disclose restatements in a variety of formats.
    Our report includes recommendations to the Securities and Exchange
    Commission to help ensure compliance with its reporting requirements
    for financial restatement announcements and make consistent existing
    commission guidance on public company disclosures of restatements that
    result in nonreliance on previously issued financial statements. This
    would include investigating the instances of potential noncompliance
    that we identified and taking any necessary actions to correct them.
    Moreover, to improve the consistency and transparency of information
    provided to markets about restatements, we recommended that the
    commission harmonize existing instructions and guidance concerning
    specific reporting requirements for all determinations of nonreliance
    on previously issued financial statements, such as restatements,
    irrespective of whether such information has been disclosed in a
    periodic report or elsewhere. The Securities and Exchange Commission
    stated that it would examine the instances of potential noncompliance
    and carefully consider harmonizing guidance concerning Form 8-Ks. (GAO-
    06-678):

    2.49.C. Ensuring Privacy and Data Security Laws Enforcement: In a June
    2006 report, we found that the applicability of federal privacy and
    data security laws to information resellers was limited. These
    companies collect and resell large amounts of personal information on
    nearly all Americans, and some have experienced data security breaches
    in recent years. To ensure that personal data are protected on a more
    consistent basis, we suggested that the Congress consider requiring
    information resellers to safeguard all sensitive personal information
    they hold. To facilitate more effective enforcement, we also suggested
    that the Congress provide the Federal Trade Commission with the
    authority to seek civil penalties for violations of privacy and
    safeguarding provisions of the Gramm-Leach-Bliley Act. Our report also
    identified limitations in the enforcement of these privacy and
    safeguarding provisions with regard to insurance companies and
    recommended that additional measures be taken by state insurance
    regulators and the National Association of Insurance Commissioners.
    (GAO-06-674):

    2.50.C. Improving Bank Secrecy Act Compliance Oversight: In April 2006,
    we completed our study on Bank Secrecy Act compliance and reported that
    the banking regulators and the Financial Crimes Enforcement Network had
    made significant progress in strengthening the framework for consistent
    Bank Secrecy Act oversight through increased coordination, the
    development of an interagency examination manual, the implementation of
    improved Bank Secrecy Act data and violation tracking systems, and
    increased concurrent enforcement actions. We noted that significant
    work remained to be done to make Bank Secrecy Act oversight consistent
    across the financial services industry. To further strengthen Bank
    Secrecy Act oversight, we recommended that the network and the banking
    regulators communicate emerging risks through updates of the
    interagency examination manual and other guidance, periodically review
    Bank Secrecy Act violation data to determine if additional guidance is
    needed, and jointly assess the feasibility of developing a uniform
    classification system for Bank Secrecy Act compliance problems. In a
    joint response, the network and the five banking regulators supported
    our recommendations and said they are committed to ongoing interagency
    coordination to address them. (GAO-06-386):

    2.51.C. Addressing the Impact of the Sarbanes-Oxley Act on Smaller
    Public Companies: In April 2006, we reported that the Sarbanes-Oxley
    Act has had a positive impact on investor protection and confidence.
    However, the act's requirements have resulted in disproportionately
    higher cost on smaller public companies as a percentage of revenues.
    The costs associated with complying with the act, along with other
    market forces, may have encouraged some companies to become private. We
    identified several factors that contributed to the costs of
    implementing the act. We noted it was critical that the Securities and
    Exchange Commission carefully assess the available guidance to smaller
    public companies regarding compliance with the financial internal
    control reporting provisions of the act (section 404) to determine
    whether additional guidance was needed. Subsequently, the commission
    announced that it would issue additional guidance regarding compliance
    with the act's financial internal control reporting provisions. On July
    11, 2006, the commission published a concept release as a prelude to
    its forthcoming guidance for management in assessing a company's
    internal controls for financial reporting. According to the Commission
    Chairman, the goal of the concept release was to obtain public comment
    to help the commission "write meaningful guidance for all public
    companies--large, small, foreign, and domestic--for the benefit of all
    of their shareholders." (GAO-06-361):

    2.52.C. Protecting Military Personnel from Harmful Financial Products:
    We found that a small number of companies had sold a product to
    thousands of junior enlisted servicemembers that combined life
    insurance with a savings fund promising high returns. However, these
    products are much more costly than the life insurance that military
    members already receive, had features that were illegal in some states,
    and resulted in few servicemembers amassing any savings from their
    purchase. Servicemembers were also being marketed a mutual fund product
    with high up-front sales charges that was more costly and provided
    lower returns than alternatively available products. As a result, we
    recommended that the Congress consider banning such products and
    require insurance regulators to ensure that products being sold to
    servicemembers meet existing insurance requirements. In September 2006,
    the Congress enacted legislation that incorporated our recommendations.
    (GAO-06-245T and GAO-06-23):

    2.53.C. Improving Congressional Oversight of the Process for Reviewing
    Foreign Direct Investments That Could Affect U.S. National Security: In
    1988, the Congress enacted legislation authorizing the President to
    suspend or prohibit a foreign acquisition of U.S. companies that posed
    a threat to national security. Such acquisitions are reviewed by an
    interagency committee--the Committee on Foreign Investment in the
    United States--chaired by the Secretary of the Treasury. In 2005, we
    reported that committee members did not agree on how national security
    should be defined, what criteria should be applied to determine whether
    a case should be investigated, and the methods for providing additional
    review time in complex cases. Currently, companies are allowed to
    withdraw from the process to avoid missing the required completion time
    frames. In some cases, the acquisition was completed although national
    security concerns had been raised. In a few cases, the companies never
    returned to complete the process. Further, from 1997 through 2004, only
    two cases required a presidential determination--the criteria for
    congressional reporting--inhibiting transparency and congressional
    oversight. Because of our report and several high-visibility
    acquisitions that confirmed the issues raised in our report, Senate and
    House committees held hearings and have initiated legislation to
    correct the problems we identified. Several of our recommendations have
    been incorporated into those legislative proposals. (GAO-05-686):

    [End of Strategic Goal 2]

    Strategic Goal 3:

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

    Reexamine The Federal Government's Role In Achieving Evolving National
    Objectives:

    3.1.C. Informing Congressional Oversight of Agencies' Regulatory
    Efforts: In a series of testimonies over the past year, we contributed
    to a comprehensive congressional study of the state of administrative
    law, process, and procedure. Drawing on over 60 reports and testimonies
    that reviewed federal regulatory procedures and practices, we
    identified impediments to agencies implementing laws and executive
    orders designed to enhance and improve federal rule making and other
    regulatory activities. We also identified emerging trends and changes
    in the regulatory environment that merit closer congressional
    attention. The congressional study to which this information
    contributed will be used to identify priority items for consideration
    by the reauthorized Administrative Conference of the United States, an
    independent, nonpartisan, public-private agency that would conduct
    studies and develop recommendations to improve agencies' administrative
    processes, procedures, and practices. The information we provided also
    contributed to consideration of legislative proposals to amend existing
    regulatory reform statutes, such as the Regulatory Flexibility Act.
    (GAO-06-998T, GAO-06-601T, and GAO-06-228T):

    3.2.C. Improving Grant Effectiveness: In two reports and a testimony
    over the past year, we addressed challenges agencies and the Congress
    face in making federal grant programs more effective. In a report on
    the governmentwide efforts to streamline and simplify grant management
    processes, we recommended that OMB take further steps to obtain
    grantees' views and concerns. OMB agreed with our recommendations and
    will continue making improvements related to the streamlining and
    simplification of grant management processes. We also issued a report
    on strategies to improve the timing, targeting, and flexibility of
    increased federal Medicaid assistance to states during economic
    downturns. In addition, we testified on options for improving the
    targeting of Community Development Block Grant funds toward communities
    with the greatest need and least capacity to meet those needs. (GAO-06-
    904T and GAO-06-566):

    Support The Transformation To Results-Oriented, High-Performing
    Government:

    3.3.N. Connecting Contract Award Fee Payments to Desired Program
    Outcomes: Through award and incentive fees, DOD contractors can
    collectively earn billions of dollars for strong contract performance.
    However, we recently reported that DOD generally does not link award
    fees to desired acquisition outcomes. On award fee contracts that were
    active from fiscal years 1999 through 2003, DOD paid out an estimated
    $8 billion in award fees regardless of outcomes. For example, the F-22A
    aircraft program paid over 90 percent of available award fees on the
    system development contract despite the fact that the program had
    experienced almost 50 percent growth in costs and was delayed over 2
    years. Further, for an estimated 52 percent of DOD award fee contracts,
    DOD provided additional opportunities for these contractors to earn
    previously unearned fees. Despite the billions it has paid in fees, DOD
    has not compiled data, conducted analyses, or developed performance
    measures to support its belief that these fees improve contractor
    performance. As a result of our report and subsequent testimony by the
    Comptroller General, both the House and Senate have passed legislation
    that implements the recommendations we made to improve the
    administration of award and incentive fee contracts. In addition, DOD
    has issued guidance addressing many of the issues we have raised. (GAO-
    06-66):

    3.4.N. Designing a More Cost-effective Decennial Census: Our ongoing
    assessments of the design and implementation of the 2010 Census
    continued to highlight for the Congress the growing cost of this
    nationwide enumeration (currently estimated at more than $11 billion),
    as well as various technical, methodological, and procedural challenges
    the U.S. Census Bureau (Census) needs to resolve to help produce a
    cost- effective head count in 2010. For example, in response to
    findings and recommendations contained in our reports, Census (1)
    strengthened its procedures for identifying group quarters, which
    include dormitories, prisons, and nursing homes; (2) examined its
    marketing program to help boost the mail response rate; (3) developed
    comprehensive data quality standards; and (4) tested wording and
    formatting changes to make the census questionnaire less confusing to
    respondents. These actions will help Census to control costs, improve
    risk management, and obtain and disseminate better quality data from
    the next national head count. (GAO-05-86, GAO-05-9, GAO-04-37, and GAO-
    02-196):

    3.5.N. Working with the Congress to Devise and Implement Tools for
    Strengthened Oversight: We worked with congressional staff to identify
    what performance, budgeting, and financial information was available
    and how it could be accessed and used to ensure timely and constructive
    oversight of programs under their committee's jurisdiction. FAA was
    chosen as a case study to show what information was available and how
    it could be used for congressional oversight. We suggested to committee
    staff and FAA and DOT officials various Web-based methods to improve
    congressional access to FAA's information, including a subscription
    service, where committee staff could sign up to be notified via e-mail
    when relevant parts of FAA's Web site were updated. FAA officials
    adopted this suggestion and FAA has begun to provide subscription
    service on selected Web pages, including pages about aircraft, news,
    and licenses and certificates. (GAO-06-378):

    3.6.N. Increasing Competition for Defense Task Orders: DOD spends
    billions of dollars every year through the issuance of task orders
    under contracts that allow multiple awards or through an interagency
    transaction under the General Services Administration's federal supply
    schedule program. Statutory competition requirements apply to such task
    orders, although the law allows for those requirements to be waived
    under specified circumstances. Our review of a sample of task orders
    placed by five DOD buying organizations found that competition
    requirements were waived in nearly half of the task orders reviewed.
    The frequent use of competition waivers for DOD task orders was one of
    the factors that prompted us to include interagency contracting on our
    high-risk program list. We recommended that DOD develop additional
    guidance on the circumstances that would warrant a waiver of
    competition, require that waivers be fully documented, and elevate the
    approval levels for certain sole-source orders. The department agreed
    with and has implemented the recommendations. DOD's actions should help
    provide safeguards for ensuring that competition waivers are used only
    in appropriate circumstances. Increased competition should result in
    better procurement value for the department. (GAO-04-874):

    3.7.F. Reducing Costs Associated with the Government's Student and
    Exchange Visitor Program: DHS's Student and Exchange Visitor
    Information System, which is managed by the Student and Exchange
    Visitor Program, collects and records information on foreign students,
    exchange visitors, and their dependents prior to their entering the
    United States, upon their entry, and during their stay. In 1996, the
    Congress required that foreign students and exchange visitors pay a fee
    to cover the costs of the Student and Exchange Visitor Information
    System. In June 2004, we reported that although almost 7 years had
    passed since collection of the fee was required, the Student and
    Exchange Visitor Program did not have approved plans for collecting a
    fee for implementing and administering the program. As a result, we
    recommended that DHS take the necessary steps to provide for the
    expeditious implementation of the fee collection. Student and Exchange
    Visitor Program officials reported that the agency began collecting the
    fee in September 2004 and became fully fee funded as of October 1,
    2004, an action that is estimated to save about $230 million from
    fiscal years 2005 through 2009. (GAO-05-440T and GAO-04-690):

    3.8.N. Continuing Oversight and Assistance to Legislative Branch
    Agencies' Efforts to Improve Performance and Accountability: Through
    ongoing oversight, we continue to support legislative branch agencies
    in their respective management improvement and transformation efforts.
    Our work, for example, helped to increase the transparency of
    information behind legislative branch budget calculations and led to
    further efforts by the Legislative Branch Financial Management Council
    to standardize the approach taken in developing estimates for personnel
    and price-level increases. Among the legislative branch agencies, the
    Office of Compliance has acted on a number of recommendations from our
    past review, such as improving its efforts to educate the legislative
    branch agencies about the provisions of the Congressional
    Accountability Act and completing the required occupational safety and
    health inspections of all legislative branch facilities covered by the
    act. To help manage its day-to-day operations, the Government Printing
    Office has taken steps to ensure that its managers have the financial
    information needed to track progress toward their transformation goals.
    The Architect of the Capitol has strengthened its estimating, tracking,
    and reporting of full-time equivalent and personnel positions based on
    a number of our recommendations. We continue to work with the United
    States Capitol Police and the Architect of the Capitol to ensure that
    they address long-standing issues affecting management of human
    capital, financial systems, information systems, projects, and
    operations. (GAO-06-290, GAO-04-830, GAO-04-400, and GAO-04-85):

    3.9.N. Leveraging the Government's Buying Power through Strategic
    Sourcing: Our examination of leading private sector companies has shown
    that these organizations have been able to achieve significant savings
    by increasing the visibility of their procurement spending through a
    technique known as spend analysis, and then coordinating or leveraging
    that spending across the organization through a process called
    strategic sourcing. Some federal agencies have embraced that concept as
    well, with similar results. For example, DOD has projected annual
    savings ranging from $4 billion to $10 billion once its ongoing
    strategic sourcing pilot project is implemented departmentwide. But not
    all agencies have made such progress. In part in response to our
    recommendation, OMB required all federal agencies to identify at least
    three commodities they believe would be appropriate to use for testing
    the strategic sourcing concept. It is anticipated that in light of the
    priority OMB has assigned to this initiative, agencies throughout the
    government will realize significant financial benefits through the
    adoption of strategic sourcing techniques. (GAO-04-870, GAO-03-661, and
    GAO-02-230):

    3.10.N. Improving Program Management Capability of DHS's Multibillion-
    Dollar Investment: Over the last few years, we have identified numerous
    opportunities for DHS to improve the program management capability of
    its multibillion-dollar United States Visitor and Immigrant Status
    Indicator Technology (US-VISIT) program. US-VISIT is a legislatively
    required program for controlling and monitoring the preentry, entry,
    status, and exit of hundreds of millions of foreign national travelers
    who enter and leave the United States at over 300 air, sea, and land
    ports of entry. Our recommendations have been aimed at strengthening US-
    VISIT's program management capability and improving DHS's ability to
    make informed US-VISIT investment decisions to better ensure the
    delivery of mission capabilities and value on time, and commensurate
    with costs and risk. While much remains to be accomplished until these
    capabilities are fully implemented, the program office has implemented
    some of our recommendations, which have resulted in defined program
    office roles and responsibilities to help ensure that program staff
    understand what they are to do, how they relate to each other, and how
    they fit into the organization, and the acquisition of an independent
    verification and validation contractor to provide management with
    objective insight into the program's processes and associated work
    products. The program office has also made progress toward implementing
    several other of our recommendations, which include establishing a
    process improvement program for defining and implementing critical
    acquisition management controls, including developing effective risk
    management processes and plans, and developing and implementing a human
    capital strategy. (GAO-06-296, GAO-05-202, GAO-04-586, and GAO-03-
    563):

    3.11.N. Improving the Quality of Federal Voluntary Voting System
    Standards: Our work on federal voluntary voting equipment standards,
    and the processes for managing them, identified weaknesses that could
    impede effective management of voting systems throughout their life
    cycles and resulted in recommendations for adding usability and quality
    assurance requirements to the standards. The federal Voluntary Voting
    System Guidelines, issued in December 2005, satisfied our
    recommendations by adding requirements for usability (such as voter
    verification of ballots) and accessibility (for persons with visual,
    hearing, mobility, or other limitations), as well as quality assurance
    provisions for voting system vendors. Moreover, our work recognized
    that no federal entity held statutory authority for updating the
    standards and asked the Congress to consider explicitly assigning this
    responsibility. The approval of the 2005 federal guidelines by the U.S.
    Election Assistance Commission marked the first time federal voting
    system standards were updated by this federal agency, under authority
    granted by the Help America Vote Act of 2002. The updated standards
    will help increase citizens' confidence and ease in voting, while the
    execution of federal responsibility for maintaining voting standards
    increases the likelihood that they will be current, complete, relevant,
    and utilized by the states. (GAO-02-52):

    3.12.N. Improving OMB Program Evaluation Guidance: We helped federal
    evaluation officials organize and develop a briefing on program
    evaluation for OMB examiners in response to concerns about how
    examiners were assessing agency program evaluations with the Program
    Assessment Rating Tool. The briefing clarified that experimental
    research designs involving random assignment, while highly rigorous,
    were not feasible for many mature federal programs, and provided
    examples of alternative evaluation methods. OMB subsequently posted the
    briefing slides on its Web site as a supplemental resource for
    conducting Program Assessment Rating Tool assessments. As a result,
    both examiners and agency staff should be able to more realistically
    judge the quality of the evaluation evidence presented to them and
    communicate more clearly about their evaluation information needs.
    (Based on briefing):

    3.13.N. Strengthening DOD Business Systems Modernization Management:
    For decades DOD has not been successful in repeated attempts to
    modernize its timeworn business systems and operations. In 1995, we
    first designated DOD's business systems modernization as high-risk and
    we continue to designate it as such today. From May 2001 through May
    2006, our body of work on DOD's institutional approach to modernizing
    its business systems as well as our reviews of specific business system
    investments have produced recommendations that provide a comprehensive
    framework for establishing and implementing the institutional
    management controls associated with successful modernization efforts
    (developing and enforcing an enterprise architecture, adopting
    structures and processes for informed investment decision making, and
    employing rigorous and disciplined system acquisition practices). The
    Congress has embraced these recommendations in legislative mandates to
    DOD, such as those in the Ronald W. Reagan National Defense
    Authorization Act for Fiscal Year 2005, and DOD has largely agreed and
    taken actions to implement them. The result has been important progress
    in DOD's definition and implementation of institutional approaches and
    abilities to acquire and deploy modern business systems. (GAO-06-658,
    GAO-06-234T, GAO-06-219, GAO-06-215, and GAO-06-171):

    3.14.C. Improving the Federal Government's Collection, Use, and
    Dissemination of Federal Information: We provided assistance to the
    Congress in ensuring that federal information is effectively managed
    and leveraged to improve agency performance and protect citizens'
    rights. For example, we played a key role in highlighting issues and
    concerns surrounding a well-publicized data breach at VA that exposed
    the personal data of more than 26 million veterans to potential
    identity theft. At several congressional hearings, we testified on key
    practices that agencies should adopt, both to limit the chances of such
    breaches occurring in the future as well as to respond effectively in
    cases when they do occur. Our pointers were widely reported in the
    press, and we were consulted in drafting legislation to codify
    responsive actions all federal agencies would be required to take. As
    privacy concerns took center stage in 2006 with media reports that
    government agencies were inspecting large amounts of personal
    information acquired from commercial sources, we reported detailed
    information about how the DHS and the Department of Justice were
    handling personal information obtained from commercial sources and made
    recommendations based on established privacy protection principles. At
    a separate hearing, we were then called on to provide perspective on
    the role of chief privacy officers in federal agencies by delineating
    the major challenges they face. We also produced a body of work on
    agency actions to implement the Freedom of Information Act and the
    Paperwork Reduction Act, and congressional decision makers as well as
    the press have come to rely on our reports to gauge agencies' progress.
    We were asked to provide key status information at hearings in July
    2006 on such measures as the numbers of Freedom of Information Act
    requests agencies have been processing annually and information
    requests that have been approved by OMB. Our analysis provided a basis
    of discussion and debate for the Congress, the news media, and the
    public. (GAO-06-974T, GAO-06-866T, GAO-06-833T, GAO-06-777T, GAO-06-
    609T, and GAO-06-477T):

    3.15.C. Restructuring Executive and Judicial Pay: Leading organizations
    understand that they need senior leaders who are drivers of continuous
    improvement and stimulate and support efforts to facilitate change and
    achieve related transformation efforts. However, we have found that the
    federal government as a whole may face challenges in offering
    competitive compensation to its senior leaders given current pay
    structures for executive and judicial positions. To assist the Congress
    in any possible restructuring of selected executive and judicial pay
    plans, in a June 2006 report, we identified certain principles that
    should be considered to attract and retain the quality and quantity of
    executive leadership necessary to address 21st century challenges.
    Specifically, executive and judicial pay plans should be, among other
    things, sensitive to hiring and retention trends; reflective of
    responsibilities, knowledge and skills, tenure, and contributions;
    transparent to the Congress and other leadership; market sensitive; and
    sustainable over the longer term given known cost trends and risks and
    future fiscal imbalances. To help address the challenges in offering
    competitive compensation to executive and judicial positions, we also
    noted that a commission may be an option for exploring ways to maintain
    a reasonable relationship across these positions and to the relevant
    markets, such as nonprofit and educational organizations or state and
    local governments. (GAO-06-1116T and GAO-06-708):

    3.16.C. Improving DHS's Ability to Develop Internet Recovery Plans:
    Since the early 1990s, growth in the use of the Internet has
    revolutionized the way that our nation communicates and conducts
    business. Consequently, recovery plans are needed to help make sure the
    nation can respond to catastrophic Internet failure brought on by a
    natural disaster or a potential attack. In a June 2006 report and July
    2006 testimony, we reported that DHS faces key challenges in developing
    a public/private Internet recovery. We recommended that DHS work with
    the private sector to better define its role, revise key plans that are
    relevant for Internet recovery, and improve organizational efficiency,
    and suggested that the Congress consider developing a legal framework
    that would give DHS the authority to provide assistance to restore
    Internet services. DHS concurred with our recommendations and is
    initiating discussions among Internet and policy experts to identify
    and prioritize key issues and planning to develop an action plan based
    on the 2006 Cyber Storm exercise. Also as a result of our review, the
    Congress is better informed about the need for legislative authority
    for Internet recovery and is in a better position to consider a legal
    framework that will provide DHS with the necessary authorities to
    execute effective Internet recovery plans. (GAO-06-863T and GAO-06-
    672):

    3.17.C. Strengthening Oversight of a Costly Yet Critical Environmental
    Satellite Program: Over the last several years, we have assisted the
    Congress by helping oversee the federal government's procurement of the
    $11.5 billion National Polar-orbiting Operational Environmental
    Satellite System, a program critical to our nation's future ability to
    forecast weather. Since 2002, we have issued multiple reports and
    testimonies identifying risks facing the satellite system. Most
    recently, in November 2005 and March 2006 testimonies before House and
    Senate committees, we reported on the program's serious technical
    challenges and expected cost increases and schedule delays. We also
    noted that the satellite system's problems involved multiple levels of
    managing, including the subcontractor, contractor, program office, and
    executive leadership. Our work has helped focus congressional, agency,
    and public attention on this important satellite program. Our efforts
    have led to ongoing changes in the management structure of the
    satellite's program office, more active oversight of the program by
    high-level agency officials, and more awareness of the technical and
    managerial issues facing the program by the Congress. (GAO-06-573T and
    GAO-06-249T):

    3.18.C. Identifying and Bringing Needed Attention to Contract
    Vulnerabilities: In recent years, federal agencies have spent more than
    $300 billion annually to procure a variety of goods and services and
    are increasingly turning to contractors to achieve vital government
    missions. This past year, we found substantial weaknesses in the
    screening process for prospective Army contract security guards, the
    Small Business Administration's oversight of sole-source contracts
    awarded to firms owned by Alaska Native Corporations, and the
    negotiation and awarding of contracts in emergencies. In our review of
    Army contract guards, we identified a total of 89 guards at two
    installations who had records relating to criminal offenses, including
    cases that involved assault and other felonies. Our review of firms
    owned by Alaska Native Corporations--which are eligible to receive
    sole- source contracts for any dollar amount through the Small Business
    Administration's 8(a) program--found that procuring agencies needed
    improved practices pertaining to oversight to ensure these contracting
    methods were used appropriately and taxpayer dollars are spent
    effectively. Further, we found that the agency's oversight of the
    program needed significant improvement to prevent waste and abuse. Our
    review of contracts awarded in emergencies highlighted the need for
    tools and techniques to ensure contracting can be done quickly and
    effectively. For example, in its efforts to secure classrooms in
    Hurricane Katrina's aftermath, USACE did not use available information
    to negotiate lower prices for classroom usage. These reports--along
    with highly visible cases of fraud, waste, and abuse--have called
    attention to the need for broad improvements in federal contracting.
    (GAO-06-714T, GAO-06-454, GAO-06-399, and GAO-06-284):

    3.19.C. Improving Census's Management of Key Automation Projects for
    the Upcoming 2010 Decennial Census: Census plans to invest over $3
    billion in the use of automation for the 2010 decennial census and the
    bureau initiated several acquisitions, including the Decennial Response
    Integration System and Field Data Collection Automation program. In a
    March 2006 testimony, we reported that the bureau needed to improve its
    capabilities to effectively manage these important acquisitions. We
    recommended that the project teams implement activities, including
    performing planned requirements management activities, developing risk
    mitigation plans for key risks, and establishing internal and
    contractor performance measures. Census concurred with our
    recommendations, and Census's project teams are implementing
    improvements that include establishing performance measures and risk
    mitigation plans for these key projects. By assisting the Congress to
    oversee this important effort, we have helped to minimize risks that
    could have negatively affected implementation of the government's
    upcoming 2010 Decennial Census. (GAO-06-444T):

    3.20.C. Improving the Accuracy and Reliability of Government
    Information Used to Decide How Billions of Federal IT Dollars Are
    Spent: Each year, agencies submit to OMB a Capital Asset Plan and
    Business Case--the exhibit 300--to justify each request for a major IT
    investment and to demonstrate to agency management, as well as OMB,
    that the disciplines of good project management have been employed for
    each proposed investment. In fiscal year 2006, these requests totaled
    over $65 billion. However, in January 2006, we found that there was
    inadequate underlying support for information reported in the exhibit
    300s at selected agencies, raising questions regarding the sufficiency
    of the business cases for major IT investments and the quality of
    project management. Importantly, without adequate support for these
    budget justifications, OMB and agency executives may be depending on
    unreliable information to make critical decisions on IT projects, thus
    putting millions and millions of dollars at risk. Our work brought to
    light key risks that can potentially undermine the government's federal
    budget and oversight processes when information is not reported
    accurately and reliably. OMB accepted our findings and indicated that
    it will work with agencies and the Chief Information Officer's Council
    to identify additional guidance needed. (GAO-06-250):

    3.21.C. Assisting Agencies and the Congress in Developing and
    Maintaining a Diverse Workforce: We continued work examining the
    overall policy framework for equal employment opportunity (EEO) and
    diversity in the federal workplace, agency-specific efforts to improve
    the EEO complaint process, and factors that affect representation of
    Hispanics in the federal workforce. We reported the views of federal
    EEO and human capital officials that EEO requirements are similar or
    redundant, that guidance and feedback from the Equal Employment
    Opportunity Commission (EEOC) and OPM was not always useful, and that
    EEOC and OPM could be doing more to help them carry out their agency-
    specific responsibilities. We made recommendations that OPM and EEOC
    regularly coordinate in carrying out their overlapping responsibilities
    and seek additional perspectives from agency human capital and EEO
    managers. EEOC and OPM both acknowledged that their collaborative
    efforts could be strengthened. As a result of our work, OMB made a
    similar recommendation to OPM to collaborate more with EEOC. Also, in a
    2006 report, we made recommendations to DOD to develop a sound
    evaluation plan for a pilot program it has under way to reduce civilian
    DOD employee EEO complaint processing time. DOD generally concurred
    with our recommendations. As for Hispanic representation in the federal
    workforce, in August 2006 we reported that education and citizenship
    had the greatest effect on Hispanic representation and recommended that
    OPM and EEOC take citizenship into account in their comparisons of the
    federal workforce to the civilian labor force. Federal agencies
    continue to use our reports as they work to strengthen their EEO
    operations and diversity management. For example, in 2006 VA
    interviewed the analyst-in-charge of our 2005 report on diversity
    management leading practices for an in-house broadcast and provided a
    link to the report on its Web site. (GAO-06-832, GAO-06-538, GAO-06-
    214, GAO-05-195, and GAO-05-90):

    3.22.C. Strengthening Management over OPM's Retirement System
    Modernization: OPM manages the systems that process retirement benefits
    for most federal civilian employees--in fiscal year 2003, over 198,000
    claims were processed and over $50 billion in benefits were paid. OPM
    is trying to modernize these systems through a program called
    Retirement Systems Modernization. In February 2005, we reported that
    OPM lacked sound system acquisition, change management, and investment
    management processes to help manage this critically important program.
    We recommended that OPM establish the management processes needed for
    effective oversight of the Retirement Systems Modernization program and
    OPM concurred. Immediately OPM began to implement our recommendations
    and initiated efforts to develop sound management processes. As a
    result of our review, OPM is working to improve its ability to manage
    Retirement Systems Modernization and the Congress is better informed to
    make key legislative decisions in overseeing OPM's project management
    of its Retirement Systems Modernization program. (GAO-05-237):

    3.23.C. Assessing the Nation's Preparedness for and Response to a
    Pandemic Influenza: We developed and have begun implementing an
    integrated strategy that lays out how we will contribute both to the
    nation's efforts to prepare for, respond to, and recover from a
    possible pandemic influenza and to the Congress's decision making and
    oversight related to these efforts. This strategy is intended to help
    the United States prepare for a pandemic in ways that are sustainable
    over the longer term, encompassing approaches to enhance critical
    capabilities that will have value to public health preparedness and
    disaster response and recovery even if a pandemic does not occur in the
    near or immediate term. It builds upon our large body of work,
    contained in over 120 reports and testimonies, conducted over many
    years, on areas such as prior disasters, assessments of public health
    capacities, and efforts to address the year 2000 computer challenges.
    Based on lessons learned from prior work and considering the unique
    characteristics of an influenza pandemic, we developed six key themes
    to guide work on these issues. These themes are leadership, authority,
    and coordination; detecting threats and managing risks; planning,
    training, and exercising; capacity to respond and recover; information
    sharing and communication; and performance and accountability. The
    strategy was developed and is being implemented by our Pandemic Working
    Group, a highly matrixed effort involving all mission teams. Working
    with committees across the Congress, we have several engagements
    currently under way that are contributing to this strategy by helping
    address key issues under the six themes. (GAO-06-1042, GAO-06-740T,
    GAO- 06-221T, GAO-05-863T, and GAO-05-577):

    3.24.C. Modernizing Federal Financial Management Systems: Our March
    2006 report identified several key causes of financial management
    system implementation failures and discussed best practices to reduce
    related risks to acceptable levels. While about $20 billion was
    budgeted for IT spending on financial management systems for fiscal
    year 2006, modernization efforts often exceed budgeted cost, have
    extended delivery dates, and do not provide anticipated system
    functionality and performance. OMB has recognized the need for
    governmentwide solutions versus stand-alone agency efforts. OMB's
    financial management shared service provider concept is in the early
    stage and does not yet include certain elements integral to success.
    OMB's guidance to agencies incorporated many of the best practices
    discussed in our report, and the Congress has utilized the key concepts
    of our report in subsequent hearings. Adherence to best practices
    identified in our report will be at the core of successfully
    modernizing the government's financial management systems to provide
    accurate, reliable, and timely information on operating results. (GAO-
    06-184):

    3.25.C. Promoting the Use of Cost Accounting to Better Inform
    Government Decision Making: To bring focus to the role of reliable cost
    information in improving agency cost efficiency governmentwide, we
    continued a series of reviews of managerial cost accounting (MCA)
    practices at 10 large federal agencies during 2006, presenting how
    these agencies prepare and use MCA information. MCA, a tool that
    integrates corresponding performance and cost data, helps agencies
    inform management decisions and achieve their missions, given the
    constrained budgetary environment. Our reports identified the reviewed
    agencies' key practices, which other agencies can adopt to improve
    their processes. For example, we highlighted the effect of strong
    leadership on transitioning from budget-based to cost-based decision
    making and the critical impact of nonfinancial as well as financial
    data reliability on cost analysis. We made recommendations ranging from
    improving leadership by issuing MCA policy and implementation
    procedures, to studying the full cost of services provided to
    nongovernmental entities, to improving controls over the data used in
    making cost-based decisions. Departments we reviewed have already taken
    action to improve their MCA procedures, such as one calling for
    component agencies to certify compliance with federal MCA requirements
    annually and another implementing procedures to improve data
    reliability. Our work has been highlighted in presentations by the
    chief financial officer of one of the agencies we reviewed and in a
    certified public accountant newsletter. (GAO-06-1002R, GAO-06-599R, and
    GAO-06-301R):

    Support Congressional Oversight Of Key Management Challenges And
    Program Risks To Improve Federal Operations And Ensure Accountability:

    3.26.F. Contributing to the Elimination of the National Aeronautics and
    Space Administration's Prometheus 1 Project: In February 2005, we
    issued a report that questioned whether the National Aeronautics and
    Space Administration had established initial justification for its
    investment in the Prometheus 1 project--a project to develop nuclear
    power and propulsion systems for deep space probes like the Jupiter Icy
    Moons Orbiter--and how the agency planned to ensure that critical
    technologies were mature prior to program start. To ensure that program
    requirements matched available resources, we recommended that the
    agency establish a firm business case for the project. Agency officials
    concurred and initially eliminated the Jupiter Icy Moons Orbiter
    Mission from the agency's fiscal year 2006 budget request (a reduction
    with a present value of $1.1 billion that was highlighted in our 2005
    performance and accountability report) and directed the Prometheus 1
    project to complete an analysis of alternatives to identify a mission
    with reduced technical, schedule, and operational risks. Upon
    completion of the analysis, which determined that nuclear power systems
    were not essential to meet early stage program requirements, the
    National Aeronautics and Space Administration reduced its Prometheus 1
    project fiscal year 2007 budget request by nearly $2.4 billion through
    2010, effectively eliminating the program. (GAO-05-242):

    3.27.F. Reducing Improper Payments: Since fiscal year 2000, our
    recommendations were aimed at raising the level of attention given to
    improper payments, including annually estimating and reporting improper
    payments for agencies' programs, and contributed to the Congress
    passing the Improper Payments Information Act of 2002. This act
    required that all agencies annually review and identify programs and
    activities that may be susceptible to significant improper payments,
    estimate the annual amount of improper payments, and report on the
    amount of and their actions to reduce their improper payments. Fiscal
    year 2005 marked the second year that federal agencies governmentwide
    were required to report improper payment information under the Improper
    Payments Information Act in their performance and accountability
    reports. For fiscal year 2005, 18 agencies consisting of 57 programs
    reported improper payment estimates totaling in excess of $38 billion
    for some or all of their susceptible programs. We noted that agencies
    made progress in addressing improper payments by implementing processes
    and controls to identify and estimate improper payments. For example,
    the Department of Agriculture reported a total improper payment error
    rate of 5.88 percent for the Food Stamp Program, the lowest in the
    program's history, resulting in a $439.2 million (present value)
    decrease in improper overpayments for fiscal year 2004. (GAO-06-581T,
    GAO-05-245, GAO-02-749, and GAO/AIMD-00-10):

    3.28.N. Reducing Hardships on Battle-Injured Soldiers: Over the past 3
    years, our reports and testimonies detailed financial hardships of
    battle-injured soldiers who served in Iraq and Afghanistan during the
    global war on terrorism. These hardships, which resulted from problems
    with pay and travel reimbursement systems and processes, left battle-
    injured soldiers and their families without sufficient funds to meet
    everyday expenses. Some soldiers went without food while staying in
    military hospitals recovering from their war injuries because they were
    required to pay for their meals. Other soldiers who were overpaid
    through no fault of their own had their debts reported to credit
    bureaus and private collection agencies. In response to our work, DOD
    proposed and the Congress enacted legislation to (1) prohibit requiring
    certain injured servicemembers to pay for meals provided by military
    medical treatment facilities, (2) provide travel and transportation
    allowances for family members to visit hospitalized servicemembers
    injured during combat operations, (3) provide combat-related injury
    rehabilitation pay, and (4) cancel certain soldier debts occurring on
    or after October 7, 2001--the date designated as the beginning of the
    Operation Iraqi Freedom/Operation Enduring Freedom deployment. In
    addition, the Army suspended debt collection action for battle-injured
    soldiers and worked with the Defense Finance and Accounting Service to
    audit soldier pay accounts. As of July 25, 2006, the Army reported that
    debts totaling over $2.3 million for 2,835 soldiers who were sick,
    injured, or killed in combat had been canceled. (GAO-06-657T, GAO-06-
    494, GAO-05-400T, GAO-05-322T, GAO-05-125, GAO-05-79, GAO-04-990T, GAO-
    04-911, and GAO-04-413T):

    3.29.F. Improving Collections of Federal Nontax and Criminal Debt: In a
    series of reports over the past several years, we promoted federal
    agencies' use of key debt collection processes and procedures to
    improve collection of delinquent federal nontax civil and criminal debt
    owed to the federal government and victims of crime. Delinquent federal
    nontax civil and criminal debt exceeded $60 billion and $40 billion,
    respectively, in fiscal year 2005. Acting on our recommendations, the
    Department of the Treasury, the Department of Justice, and other
    federal agencies have continued to take steps to improve collections.
    For example, Education is now implementing administrative wage
    garnishment under the authority of the Debt Collection Improvement Act
    of 1996, which authorizes garnishment of up to 15 percent of disposable
    pay. In addition, the Department of Justice's financial litigation
    units, which are responsible for the collection of certain civil and
    criminal debt, have implemented several key debt collection procedures,
    including procedures for searching for assets, issuing demand letters,
    and filing liens, and procedures that enable the financial litigation
    units to take a more proactive role in criminal debt collection efforts
    by the U.S. Courts and their probation offices. These actions to
    improve debt collection processes and procedures in response to our
    recommendations have added over $2 billion to a steady stream of
    recoveries. (GAO-04-338, GAO-02-313, and GAO-01-664):

    3.30.F. Financing the USPS's Unfunded Postretirement Health
    Obligations: In our December 2001 report we raised the question of
    whether USPS was appropriately funding future civil service pension
    payments. In May 2002, we asked OPM to perform an analysis of the
    funding status of USPS's pension obligations related to the Civil
    Service Retirement System. In November 2002, OPM reported that based on
    the current level of contributions set forth in law, USPS would
    significantly overfund the benefit obligations. As part of our response
    to a bipartisan and bicameral request to review OPM's analysis and the
    administration's legislative proposal to change the funding formula, we
    emphasized that USPS had $40 billion to $50 billion in postretirement
    health care benefits that were not yet funded. In response, the
    Congress passed Pub. L. No. 108-18, the Postal Civil Service Retirement
    System Funding Reform Act of 2003, which, among other things, required
    that any reduction in USPS's annual pension funding after 2005
    resulting from changing the funding formula be held in an escrow
    account. It was the sense of the Congress that among other things, the
    funds made available from the pension payment reductions would be used
    to address the service's unfunded postretirement health obligations.
    USPS raised postal rates effective January 2006 to fund the escrow,
    which is projected to result in additional net revenue of $2.2 billion
    during fiscal year 2006. (GAO-02-170):

    3.31.C. Exposing Government Contractors That Have Abused the Federal
    Tax System: Over 3,800 General Services Administration contractors had
    tax debts totaling over $1.4 billion as of June 30, 2005. Many did not
    pay payroll taxes withheld from their employees to IRS, which in some
    cases could be considered a felony. Some companies we investigated
    diverted payroll taxes for personal gain--in the form of significant
    personal assets, including commercial properties, expensive homes, and
    luxury vehicles. Several gambled hundreds of thousands of dollars at
    the same time they did not pay the taxes owed. Neither federal law nor
    General Services Administration policies require contracting officers
    to specifically consider tax debts in making contracting decisions, at
    either initial award or contract extension. In some instances, tax
    delinquent contractors were awarded contracts over their competitors
    because they offered lower prices. In other words, failure to pay taxes
    may have given the delinquent taxpayers an unfair competitive advantage
    over their tax compliant competitors. Because of our work, we referred
    25 General Services Administration contractors we investigated to IRS.
    (GAO-06-492T):

    3.32.C. Implementing a Framework for Fraud Prevention, Detection, and
    Prosecution in Individual Disaster Assistance Programs: In 2006, we
    reported that the government's need to quickly provide assistance to
    victims of natural and other disasters, including acts of terrorism,
    exposed disaster assistance programs to significant risk of fraud,
    waste, and abuse. Through statistical sampling, we estimated that FEMA
    made $600 million to $1.4 billion in improper and potentially
    fraudulent payments to individuals who applied for direct assistance
    following hurricanes Katrina and Rita. We determined that internal
    control weaknesses, including lack of address verification, ineffective
    duplicate detection, and lack of identity verification, among others,
    allowed these improper activities to occur. The control weaknesses are
    further illustrated through our undercover work, whereby we received
    several FEMA checks by using falsified identities, bogus addresses, and
    fabricated stories. We referred over 6,000 instances of suspected
    wrongdoing to the appropriate law enforcement agencies. Our work
    reemphasizes the need to implement GAO's internal control framework to
    minimize fraud, waste, and abuse. The framework identifies an effective
    system of fraud prevention controls to be one that includes up-front
    controls, postpayment detection and monitoring, and prosecution. (GAO-
    06-954T, GAO-06-844T, GAO-06-655, and GAO-06-403T):

    3.33.C. Demonstrating Vulnerabilities in Our Nation's Border Security:
    In March 2006, we reported on the vulnerabilities of our nation's
    borders to the smuggling of radioactive sources from undercover work we
    performed. In one instance, we succeeded in getting radioactive sources
    sent to an address in Washington, D.C., by representing to the vendor
    that the materials were for the calibration of personal radiation
    detection pagers. This occurred because suppliers were not required to
    determine whether prospective buyers have legitimate uses for
    radioactive sources or to ask a buyer to produce a Nuclear Regulatory
    Commission document authorizing the buyer to receive, acquire, possess,
    and transfer radioactive resources. In a different body of work, our
    investigators succeeded in bringing across both the northern and
    southern borders enough radioactive materials to make two separate
    dirty bombs. In these cases, the radiation portal monitors at the two
    borders properly detected the presence of radioactive material.
    However, our entry was approved when we presented a counterfeit Nuclear
    Regulatory Commission document and bill of lading. (GAO-06-940T, GAO-
    06-939T, GAO-06-583T, and GAO-06-545R):

    3.34.C. Leading Progress in Accountability Reforms: Our leadership
    furthered progress in accountability reform in a number of venues. We
    advised regulators on improvements to auditing standards and
    regulations. Our report identified the concerns of smaller public
    companies regarding the costs of complying with statutory internal
    control assessment and auditing provisions and made recommendations to
    the Securities and Exchange Commission while emphasizing the
    overarching objectives of investor protection. We also promoted reform
    through our participation on standard-setting task forces of the
    Auditing Standards Board, roundtable discussions sponsored by the
    Securities and Exchange Commission and the Public Company Accounting
    Oversight Board, recommendations to the Public Company Accounting
    Oversight Board through its Standing Advisory Group, and formal
    comments on proposed standards. Through the U.S. Auditing Standards
    Coordinating Forum, we worked closely with the Public Company
    Accounting Oversight Board and the Auditing Standards Board on the
    development of guidance for auditors and coordination on emerging
    issues. (GAO-06-361):

    3.35.C. Leading through Strengthened Government Auditing Standards,
    2006 Revision, Exposure Draft: A new draft edition of the Government
    Auditing Standards, or Yellow Book, as the standards are popularly
    known, provides auditors of government agencies stronger and clearer
    standards to guide their work. The product of intensive staff review
    and revision in such crucial areas as ethical responsibilities and
    audit quality, the standards incorporated comments from our standards
    advisory council and others across the accountability community. The
    resulting draft provides a strong foundation for government auditors in
    a demanding environment. It is infused with principles that form the
    focus of a separate ethics chapter. In the area of audit quality, risk-
    based requirements strengthen, streamline, and rationalize internal
    inspections and peer reviews. The framework for performance audits of
    government programs is refurbished with a risk-based approach as well
    and with clear principles that facilitate high-quality audits. This
    significant update advances our goal of modernizing U.S. government
    standards while working toward congruence with other standards, both
    nationally and internationally. (GAO-06-729G):

    3.36.C. Improving Controls over Payments to Contractors: Our recently
    completed audits of selected contracted activities at two federal
    agencies demonstrated the effect of mismanagement of two areas in
    federal contracting that we have reported as high risk--interagency
    contracting and contract management at DOE. Our audits identified
    fundamental weaknesses in the control environment over contracted
    activities at the Federal Bureau of Investigation (and its federal
    contracting partner, the General Services Administration) and DOE (and
    its federal contracting partner, Space and Naval Warfare Systems
    Center, New Orleans). We found ineffective review and approval
    processes for contractor invoices that did not enable the agencies to
    verify that goods and services billed for had actually been received
    and charged at the agreed-upon amounts. We also found the need to
    clearly define the roles and responsibilities of each party to the
    agreements. In addition, we found that contractor services, including
    subcontracted work, were not adequately monitored; labor rates were not
    verified; and other direct costs lacked adequate supporting
    documentation. We reported that these fundamental control weaknesses
    contributed to over $36 million of improper payments, questionable
    payments, or both. Further, given the poor control environments and the
    fact that we reviewed only selected payments, other improper payments
    or questionable payments may have been made that have not been
    identified. We made recommendations to strengthen controls over
    payments to contractors and to mitigate the risk of paying improper
    contract costs in the future. The agencies indicated that they had
    taken some corrective actions to improve controls over payments to
    contractors, including changes to improve interagency contracting
    procedures; however, we concluded that further improvements are needed.
    (GAO-06-547 and GAO-06-306):

    Analyze The Government's Fiscal Position And Strengthen Approaches For
    Addressing The Current And Projected Fiscal Gap:

    3.37.F. Improving IRS's Methodology for Pursuing Delinquent Taxes: Our
    report on IRS's fiscal year 1999 financial statements stated that IRS
    did not have systems or procedures in place to allow it to identify and
    actively pursue cases that may have some collection potential. We
    recommended that IRS improve its capacity to assess the collectibility
    of delinquent taxes as a way of deciding on which debts to focus
    collection efforts. In 2004, IRS began implementing sophisticated
    modeling technology to differentiate between more and less productive
    cases in order to make better resource allocation decisions. IRS's
    analysis showed that its collections of delinquent taxes with
    approximately the same resources increased by about $1.9 billion, or
    8.8 percent, in fiscal year 2005 from fiscal year 2003 levels. (GAO-01-
    42):

    3.38.N. Improving the Quality of the Federal Government's Financial
    Management and Reporting: As in the past 8 fiscal years, we were again
    unable to express an opinion on the U.S. government's consolidated
    financial statements because of ongoing material weaknesses in internal
    control and accounting and reporting issues. However, our efforts are
    contributing to significant improvements in (1) enhancing the
    understandability of financial information disclosed in the
    consolidated financial statements, (2) the quality of the financial
    statement audits performed by the agencies' auditors, and (3) agencies'
    management representations. For example, because of our
    recommendations, OMB and the Department of the Treasury clarified
    inaccurate information contained in the Management's Discussion and
    Analysis section of the fiscal year 2005 consolidated financial
    statements report. Also, in response to our recommendations,
    improvements were made in auditing the fund balance with Treasury and
    related disbursement activity at some agencies. These improvements are
    a result of our continuous effort to fulfill our responsibilities both
    as principal auditor of the U.S. government's consolidated financial
    statements and for improving the quality of the federal government's
    financial management and reporting. (GAO-06-169, GAO-05-610R, GAO-05-
    608R, GAO-05-607R, and GAO-05-603R):

    3.39.F. Helping the Tennessee Valley Authority (TVA) Identify the Need
    to Begin Recovering the Costs of Its Deferred Nuclear Assets: In 1995,
    1997, and 2001, we reported that TVA had far greater costs for debt
    financing and deferred assets than its competitors, which would give it
    little flexibility to meet potential future competitive challenges. We
    concluded that TVA's financial condition threatened its long-term
    viability and placed the federal government at financial risk. We
    identified several options for TVA to improve its financial condition,
    including raising its electricity rates and using the additional cash
    generated from the rate increase to reduce its outstanding debt and
    thereby its financing cost. The additional revenue from the rate
    increase would also allow TVA to begin recovering the cost of its
    deferred nuclear generating assets without incurring losses on its
    financial statements. Congressional and administration officials
    focused attention on this issue as a result. Over time, TVA began to
    acknowledge that it needed to improve its financial flexibility by
    reducing the balance of its outstanding debt and beginning to recover
    the costs of its deferred assets. Effective October 1, 2005, TVA raised
    its power rates by an average of 7.5 percent. TVA plans to use the
    proceeds from this increase to reduce debt and recover $3.9 billion of
    the cost of a deferred nuclear generating plant. If these plans are
    implemented, TVA's financial flexibility and competitive prospects
    should be improved. (GAO-01-327, GAO/T-AIMD-99-295, GAO/AIMD-99-142,
    and GAO/AIMD-97-110):

    3.40.F. Strengthening Efficiency of IRS Programs: Our work on tax
    expenditures--credits, deductions, and other tax benefits--brought
    attention to the growing number of these provisions and their large
    revenue consequences. Revenue losses from tax expenditures exceeded all
    discretionary spending in several recent years. In part, we reported on
    the need to assess whether the benefits of these provisions are greater
    than their revenue losses. Work we did on one such provision, the
    charitable deduction available for donated vehicles, led to legislation
    revamping the allowable amounts for charitable donations of vehicles.
    The legislation is expected to increase revenues by about $1 billion
    over 5 years. In another area, IRS eliminated a requirement that
    employers submit information on taxpayers claiming in excess of 10
    withholding allowances when we found this information may be incomplete
    and outdated. Eliminating this requirement avoided $4.1 million in IRS
    program costs. Additionally, IRS plans to make better use of wage and
    tax information reporting to better monitor withholding compliance.
    (GAO-05-690, GAO-04-73, and GAO-04-79R):

    3.41.C. Identifying Commercial Tax Preparation Problems: In April 2006,
    we testified about the serious problems that taxpayers can face if they
    use paid tax return preparers. In a limited study that included an
    undercover investigation, we found that paid tax preparers employed by
    national tax preparation chains made mistakes in all 19 of our
    undercover visits. Some of the mistakes were substantial, resulting in
    refund claims that were thousands of dollars higher than they should
    have been and exposing taxpayers to IRS enforcement action. Other
    mistakes reduced taxpayers' refunds below what they should have been,
    sometimes by large amounts. This work resulted in national media
    coverage at the height of tax season, alerting taxpayers to the
    potential for serious preparer mistakes. The requesters of the work
    wrote to IRS to press for attention to the issues we found and asking
    for follow-up reports from IRS. Additionally, we spoke at six 2006 IRS
    Nationwide Tax Forums to audiences of tax preparers about the need for
    care in their work. (GAO-06-563T):

    3.42.C. Identifying Budget Process Reforms: In a testimony and report
    issued in 2006, we highlighted the need for budget decision makers to
    consider and address the long-term fiscal exposures facing the nation.
    We pointed out that while Social Security and health programs are the
    major drivers of the long-term spending outlook, they are not the only
    promises the federal government has made to the future. It also
    undertakes a wide range of responsibilities, programs, and activities
    that may obligate it to future spending or create an expectation for
    such spending. We reported that to address the nation's fiscal
    imbalance, existing entitlement programs must be restructured, the base
    of discretionary and other spending must be reexamined, and tax policy
    and enforcement must be reviewed and revised. To help achieve this, we
    suggested budget process reforms, such as restoration of realistic
    discretionary spending caps and pay-as-you-go discipline applied to
    both mandatory spending and revenue legislation. We also argued for
    better incentives and signals, triggers, and default mechanisms to
    address the fiscal exposures the federal government has already made.
    Triggers, for example, could constrain growth in mandatory programs by
    prompting a response if the trigger is reached. However, unlike
    controls on discretionary spending, there is some tension between the
    idea of triggers and the nature of mandatory spending programs designed
    to provide benefits based on eligibility formulas. Thus, we emphasized
    the need to carefully design both triggers and the triggered response.
    (GAO-06-761T and GAO-06-276):

    3.43.C. Prompting Better Data and Planning for Reducing the Federal Tax
    Gap: The federal tax gap, which is roughly the annual difference
    between the amounts of taxes owed and paid voluntarily, reached an
    estimated $345 billion for tax year 2001. Our work contributed to a
    spate of congressional and IRS activity. Since we started our work in
    2004, the Congress has asked for our testimony four times, highlighting
    attention on the tax gap. Recently, the Congress asked IRS to produce a
    plan by fall 2006 for reducing the tax gap that highlights a strategic
    approach and set of priorities--a finding we had in our report. In our
    last two testimonies, we identified approaches--such as cost basis
    reporting for sales of securities--and criteria for devising a tax gap
    reduction strategy. IRS also has taken action on all of our 2005 report
    recommendations--periodically measuring tax compliance, collecting
    better data on the reasons for noncompliance, and setting a voluntary
    compliance goal. Finally, we are undertaking several engagements
    responding to congressional requests that focus on specific
    noncompliance issues that contribute to the tax gap. (GAO-06-1000T,
    GAO- 06-453T, GAO-06-208T, GAO-05-753, and GAO-05-527T):

    [End of Strategic Goal 3]

    Strategic Goal 4:

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

    Continuously Improve Client And Customer Satisfaction And Stakeholder
    Relationships:

    4.1.C. Strengthening Communication with our Congressional Clients and
    Measuring Congressional Satisfaction with Our Work: In fiscal year 2006
    we explored and implemented technology solutions in several areas that
    facilitate our staff's ability to meet the clients' needs and enhance
    the quality and timeliness of client service. First, we piloted
    electronic dissemination of our reports to our congressional clients
    using a secure process that allows us to maintain the confidentiality
    of our reports and e-mail correspondence with the Congress. This faster
    and more cost-effective method was well received by most of our
    clients, and avoided approximately $61,000 in costs for the 82 reports
    disseminated electronically. The success of this effort will serve as a
    prototype for future electronic dissemination of our products to our
    clients. Second, we continued development of the Financial Audit
    System, which enables our staff to more comprehensively and accurately
    audit the financial statements of executive branch agencies. In April
    2006, we deployed a release that allowed our staff to scan and load
    over 3,000 files from the fiscal year 2005 consolidated financial
    statement audit into the Financial Audit System. In addition to
    enabling us to provide an improved consolidated financial statement to
    our clients, we estimate that implementation of the Financial Audit
    System will allow us to redirect 150 staff days to other critical work.
    Third, we improved our Weapons Systems Database, which centrally stores
    data on more than 200 operational weapons systems and 80 developmental
    weapons systems, with the ability to query and view information across
    weapons systems programs and perform micro and macro trend analysis. By
    improving the trace and verification links for the database source data
    and modifying budget input capabilities to permit entry of different
    types of procurement funding, we improved the quality and quantity of
    information we can provide to our clients. Finally, we acquired off-
    the-shelf software that enables our staff to easily maintain contact
    information on state, local, federal, and international auditing and
    accountability communities. This user-friendly system replaces multiple
    informal and paper contact systems, allows for better control of
    valuable contact information, and enables us to respond more quickly to
    inquiries or requests from our clients. In addition to these
    technology- related efforts, we initiated several efforts aimed at
    strengthening understanding of records release issues. Our General
    Counsel staff provided several briefings to congressional staff
    concerning facts and legal issues involved in public requests for
    release of records relating to congressionally requested work. They
    also participated in discussions with counsel from other federal
    agencies to resolve concerns about release of interview write-ups,
    resulting in continued cooperation from these agencies on important
    jobs being performed for the Congress. We also drafted an important
    clarification to our regulations regarding availability of our records
    to the public to ensure consistency in the handling of records that
    contain information regarding communications between GAO and
    congressional members. This clarification, which will contribute to
    improved communication with congressional clients, has been submitted
    to the Federal Register for notice and comment.

    4.2.C. Assessing Internal Customer Satisfaction with Our Services and
    Processes and Views on Overall Operations and the Work Environment: The
    third annual GAO Customer Satisfaction Survey was conducted in November
    2005. Nearly 1,600 GAO staff provided input to the survey, which
    measures employee satisfaction with our administrative services. Using
    a scale of 1 (low) to 5 (high), overall scores for administrative
    services that help employees get their jobs done (e.g., IT, report
    production, and travel) improved from 4.01 to 4.10 and the overall
    scores for services that improve employees' quality of work life (e.g.,
    benefits and transit subsidies) improved from 3.96 from 3.98. Chief
    Administrative Office units reviewed the results and developed action
    plans to address customer issues and recommendations. In addition to
    the customer survey, we initiated another internal assessment tool to
    focus on our publishing services. Our methodologists refined product-
    by-product satisfaction survey reporting tools and made them available
    in real time to our publishing managers. The results of this assessment
    guide improvement efforts in publishing services.

    4.3.C. Strengthening Relationships with Our Stakeholders and Increasing
    the Accessibility of Our Products: We completed our work on
    international protocols, issuing the final version to our stakeholders
    in the international community in January 2006. The protocols provide
    clearly defined and transparent policies and practices on how we will
    interact with U.S. federal departments and agencies, other national
    governments, and international organizations in performing our
    international work. We also strengthened our relationship with other
    agencies by drafting a new exemption that will permit greater
    protection and flexibility in the handling of our records of interviews
    of agency officials. These changes to our regulations will enhance the
    open, frank, and honest exchange of information with other agencies
    during the course of our audits, evaluations, or investigations.

    4.4.C. Achieving External Recognition: We are one of four federal
    agencies to receive a Support Center Certification from the Help Desk
    Institute for our GAO IT Help Desk, a collaborative effort between
    government and contractor staff. This certification of excellence is
    given to organizations that adhere to best practices and demonstrate a
    commitment to service desk quality. Our recruiting video, "Inside GAO,"
    won first place in the public relations video category of the 2005 Blue
    Pencil and Gold Screen Awards sponsored by the National Association of
    Government Communicators in 2006. In the same competition, Comptroller
    General Walker's speech, "Tsunami Relief: Challenges and
    Opportunities," which he delivered at the international conference on
    managing relief funds in Jakarta, Indonesia, on April 25, 2005, won a
    certificate of excellence for speech writing. For the fifth year in a
    row, the Association of Government Accountants awarded our performance
    and accountability report the Certificate of Excellence in
    Accountability Reporting. We also received the American Graphic
    Designers Award for the layout and design of the report. In addition,
    we received a 2006 American Inhouse Design award from Graphic Design
    USA for our guide entitled Understanding the Primary Components of the
    Annual Financial Report of the United States Government (GAO-05-958SP),
    which helps people understand the information in and components of the
    Consolidated Financial Report of the United States Government.

    4.5.C. Integrating Planning, Budgeting, and Performance Measurement: In
    fiscal year 2006, we combined the contents of our budget justification
    and performance plan into a performance budget to better meet
    Government Performance and Results Act and OMB performance and
    accountability reporting requirements and the needs of our clients. We
    also effectively integrated our budget and workforce planning
    management functions to ensure efficient alignment of our people,
    assets, and costs with organizational needs. In addition, we
    established monthly hiring targets to more strategically and
    systematically ensure achievement of our fiscal year 2006 hiring and
    FTE goals. As a result, we achieved a 99 percent utilization rate of
    our authorized FTE allocation. In seeking to further enhance our
    services to our clients and the American people, we fine-tuned our set
    of performance measures, adding two new process-oriented measures and
    modifying the client service timeliness measure by relying more
    directly on feedback from our congressional customers.

    4.6.C. Strengthening Our Strategic Human Capital Management: In fiscal
    year 2006, we made great strides in implementing workforce
    flexibilities granted by the Human Capital Reform Act of 2004. We
    implemented the authority to make annual pay rate adjustments
    separately from executive branch agencies by decoupling our January
    2006 annual increase from the General Schedule and linking it to
    employee performance. We revised our policies in support of the
    flexibilities, including voluntary early retirement and voluntary
    separation payments, new authorities for employees demoted as a result
    of workforce restructuring or reclassification to retain their
    salaries, and provisions for 20 days of annual leave for certain
    employees with less than 3 years of federal service. The Human Capital
    Reform Act of 2004 also granted authority for an executive exchange
    program with private sector organizations, which will further the
    institutional interests of GAO and the Congress by providing training
    and skill development opportunities for our employees and obtaining the
    expertise of selected private sector employees. We established the
    program's policies, procedures, and processes; developed marketing
    materials; collaborated with our Public Affairs office and our
    accountability partners to publicize the program; and outreached to a
    number of private sector organizations (e.g., corporations and
    accounting, consulting, and financial firms) to recruit candidates. We
    took proactive steps to enhance our human capital recruiting and
    sourcing strategies to address gaps in our workforce, increase
    diversity, and attract high-quality talent. A task team comprehensively
    reviewed all aspects of our recruitment and hiring processes for all
    types of staff. This team organized into five task teams focused on
    college recruitment, candidate assessment, interviewing and hiring,
    offer negotiating and processing, and administrative professional and
    support staff and other hires. The team made over 40 recommendations
    for refining and enhancing our human capital sourcing strategies and
    processes. Some of the more immediate recommendations have already been
    implemented, including providing campus executives, campus managers,
    and recruiters with an inventory of best recruiting practices and a tip
    sheet to help candidates navigate our online job application process;
    initiating use of a new standardized form for campus representatives to
    record their impressions of potential candidates; revising our job
    announcements and job applications to better reflect current job
    descriptions and career paths and more clearly link them to job
    competencies; and increasing the involvement of senior managers in
    selecting campus representatives and interviewers. In addition, we
    augmented our recruiting and hiring program by initiating year-round
    internship opportunities, establishing a cooperative education
    agreement with five local universities, employing a governmentwide
    flexibility for noncompetitive entry-level appointments, and using
    direct hire teams for targeted recruiting for hard-to-fill positions.
    We also partnered with the Hispanic Association of Colleges and
    Universities and the Washington Center to identify Hispanic and Native
    American students for our student employment program and began a pilot
    cooperative education program with the University of Michigan. An
    organizational and performance consulting firm examined the mission,
    job roles and responsibilities, hiring, and retention issues associated
    with our administrative professional and support staff and matched
    their jobs, duties, and compensation with those of comparable federal
    and private sector employees in the Washington, D.C., area. Using the
    results from this study, the firm developed recommended pay ranges
    based on market median salaries, and we restructured the compensation
    ranges for these staff into three pay plans. In addition, building on
    our recent efforts to implement a competency-based performance
    management system, we implemented several new initiatives to enhance
    our program. These included (1) implementing a market-based
    compensation system that makes pay ranges competitive with the labor
    markets in which GAO competes for talent, (2) restructuring our Band II
    analyst staff by creating two pay levels to better align individual
    staff with our institutional compensation policies, (3) establishing a
    uniform appraisal and pay process and timeline for all staff, (4)
    enhancing the online appraisal system for users by embedding the work
    activities and standards into the electronic appraisal form, (5)
    developing and distributing total compensation letters to all staff,
    and (6) developing a system to adjust for unit and band trends and to
    give all staff equitable compensation consideration.

    4.7.C. Enhancing Training Opportunities: We marked our progress in
    designing and delivering competency-based learning by introducing
    numerous new core analytic skills courses and implementing Web-based
    learning development programs. The availability of Web-based programs
    allows team managing directors to designate courses, simulations, and
    books specific to the content needs of their staff, tightening the link
    between the acquisition and application of professional knowledge on
    our engagements. We recompeted our contract for access to and support
    for online learning, saving nearly $42,000 over 2005 costs. To better
    market our mandatory training courses, we developed "Supervisor
    Highlights," which summarizes course content and suggests questions
    supervisors can use to set the stage for learning and to determine
    whether staff have retained lessons learned. We also developed and
    successfully piloted a learning checklist for interns. This new
    approach to orienting and providing basic GAO skills training to
    interns has greatly compressed the time they need to become familiar
    with our processes, reduced travel required for field-based interns to
    attend headquarters-led programs, and substantially improved access to
    learning by making GAO-specific content available on demand. We also
    implemented the final stage of our Adjunct Faculty Certification
    program, which trains and certifies our staff members who serve as
    adjunct faculty in content knowledge and presentation skills of our
    mandatory and elective curricula; and we certified, under industry-
    validated performance standards, 26 new adjunct faculty members. In
    addition, we upgraded the online course evaluation process to improve
    our response rate from participants, enable instructors to receive near
    real-time feedback, and enable us to conduct quality assurance analysis
    across multiple courses within a curriculum.

    4.8.C. Ensuring Exemplary Practices and Systems in Our Fiscal
    Operations: In fiscal year 2006, we undertook several initiatives to
    ensure that our fiscal operations are exemplary. In the fourth quarter
    of fiscal year 2006, we entered into an interagency agreement for a
    shared services arrangement with DOT's Enterprise Services Center to
    implement Delphi, an integrated financial and acquisition management
    systems solution. Delphi will comply with the General Services
    Administration's Financial Systems Integration Office requirements and
    provide timely and accurate information for our managers, better
    support performance and accountability reporting, accommodate
    accelerated reporting requirements, provide enhanced financial
    reporting capabilities for management use, and support auditable
    financial statements that result in clean audit reports. In fiscal year
    2006, we identified and selected a new public accounting firm to audit
    our financial statements. Selecting a competent and qualified
    independent accounting firm to perform the year-end audit of our
    financial statements underscores our integrity in managing our fiscal
    operations and is critical to support our goal of being a model for
    other agencies. We also assessed our internal control over financial
    reporting consistent with OMB Circular A-123, Management's
    Responsibility for Internal Control, Appendix A, documenting our
    business processes; identifying, analyzing, and testing major internal
    controls over financial reporting; and taking corrective action where
    necessary. As a result of this assessment, we were able to make an
    assurance statement on our internal control over financial reporting as
    of September 30, 2006. This is the first year that we have provided
    such an internal control assertion.

    4.9.C. Strengthening IT Governance Practices and Processes: This year
    we completed several major efforts to further strengthen our IT
    governance. In April 2006, we rolled out the IT Life Cycle, a framework
    that integrates portfolio management and project management and
    provides a standard, repeatable, and integrated approach for IT staff
    in performing their work. Coupled with this was a documented crosswalk
    of the various interrelated IT methodologies. To help guide our staff
    and business partners through the IT Life Cycle and IT methodologies,
    we developed a Project Management Workshop focused on how we manage our
    IT work. We piloted the workshop during August and September 2006 and
    will schedule all IT staff and business partners to take the workshop
    by March 2007. In September 2006, we also completed a major revision to
    the Information Technology Investment Guide to cover how we manage all
    IT investments, not just those under the purview of our Information
    Technology Investment Committee; introduce the IT Life Cycle; discuss
    the relationship between our strategic IT planning and budgeting and IT
    project management processes; provide more specificity about the
    criteria and processes for selecting, controlling, and evaluating IT
    investments; and clarify unit and staff information necessary for
    participation in the IT project management process. We also continued
    our work during fiscal year 2006 on a long-term effort to develop and
    maintain a GAO enterprise information architecture that provides an
    integrated view of our business processes. We updated the Enterprise
    Data Model to incorporate major ongoing projects, such as the Financial
    Management System replacement, and performed a thorough quality
    assurance review of the data model. In developing our Strategic
    Business Architecture, we continued to review the work management lines
    of business in preparation for the upcoming redesign of our management
    information systems. We also revised our Shared Business Model to
    consolidate similar business functions and activities and realign
    others. By reducing the number of business lines from 29 to 12 and more
    accurately reflecting our business activities, we expect to reduce the
    complexity of making the organizational transition to the "target"
    environment. Finally, in April 2006, we completed an internal audit of
    the status of our enterprise architecture management program using the
    same Enterprise Architecture Management Maturity Framework and criteria
    used to assess the content of executive branch agencies' enterprise
    architecture programs. We determined that our enterprise architecture
    program had reached stage 3 (with stage 1 being the lowest maturity
    level and stage 5 being the highest) and is progressing toward stage 4.
    By contrast, of the 28 major agency enterprise architecture programs we
    have reviewed, 4 programs were at stage 3 and none were at stages 4 or
    5 (see GAO-06-831).

    Leverage GAO's Institutional Knowledge And Experience:

    4.10.C. Maximizing the Collection, Use, and Retention of Essential
    Organizational Knowledge: With agencywide implementation of the
    Electronic Records Management System in fiscal year 2006, we have
    significantly improved our records management process and provided an
    institutionalized and transparent means for staff to comply with
    records management. Resulting benefits include a reduction in staff
    time and costs associated with records cleanup, off-site storage,
    secure destruction, and courier services; a reduction in the volume of
    paper records maintained and stored in GAO offices; automatic linking
    of documents to the appropriate records retention schedule; and
    enhanced access to our information assets, promoting knowledge sharing
    and information reuse. In conjunction with this effort, we developed
    records management training for all our staff, emphasizing the
    importance of records management and the proper preservation of
    electronic records. In addition, we initiated a new records management
    concept of categorizing agency records in broad areas. We are in the
    vanguard in implementing such a system, and executive branch agencies
    are using our concept as a model for their own records management
    systems. For the first time in several years, we reviewed and updated
    the GAO Thesaurus, which is used to index GAO documents and to retrieve
    information from the GAO documents database--to ensure that thesaurus
    terms were still relevant and current. As a result, we added over 900
    new terms and reindexed existing GAO products to include the new terms.
    These reports are now more accessible to our staff and a foundation has
    been created for developing a future GAO corporate taxonomy. We
    completed our pilot effort to digitize GAO legislative histories,
    digitizing over 200 histories and adding them to an internal Web-based
    database. For the first time, our staff were able to perform full-text
    searches of the Portable Document Format versions of these histories.
    This pilot confirmed that there is a need to digitize this valuable
    collection, but digitizing all 20,616 legislative histories would be
    costly and time consuming. As an alternative, we have issued a
    statement of work that would allow us to partner with a commercial
    vendor at no cost to digitize the collection. In return, we will grant
    the vendor access to this unique collection, and the vendor could then
    market and sell access to the histories to recoup its digitization
    costs.

    4.11.C. Increasing Our Knowledge-Sharing Capability: To increase our
    knowledge-sharing capability and improve customer satisfaction, we
    completed numerous enhancements to our external Web site. Specific
    improvements include major revisions of Web pages that offer research
    requests, subscriptions to e-mail updates, ordering of GAO products,
    and information that may be of interest to the auditing and
    accountability community. We also modified the search engine settings
    to improve the relevance of results and added a topic search capability
    for full-text searching to improve the ability to narrow search results
    by topic. Features offered now include a news feed (in five formats)
    for daily notification of published audit reports and legal products;
    automated Featured Issues listings for Comptroller General Forums,
    Transportation Security, and U.S. Elections; and a new product line
    called Comptroller General Presentations. As a result, we have
    maintained a steady customer satisfaction rating of 74 using the
    American Customer Satisfaction Index, which is a national, cross-
    industry index that measures citizen satisfaction with services. This
    is slightly above the September 2006 average score for federal Web
    sites using the index to rate satisfaction. To further discover ways in
    which we can improve our external and internal Web sites, we contracted
    with the Nielsen Norman Group to evaluate and make recommendations to
    improve the presence and usability of these sites. The Nielsen Norman
    Group delivered an evaluation of the external Web site in July 2006
    and, in August, we assembled a project team that developed a schedule
    and milestones for addressing its findings. The Nielsen Norman Group
    also delivered an evaluation of the internal Web site in September
    2006. Some changes have already been implemented. We created a Web-
    based portal, Hurricane Central, and released it to all GAO staff in
    November 2005. The portal was developed in close collaboration with
    mission teams for the purpose of enabling us to quickly evaluate a
    number of issues related to Hurricane Katrina and its aftermath. Staff
    can obtain rapid and comprehensive access to our relevant completed
    work, including products and workpapers, and the portal acts as an
    easily accessible collection and coordination point for data being
    gathered. The portal provides the means to identify staff working on
    this issue and enables staff to contact others via embedded e-mail
    addresses. Hurricane Central has served as the working prototype for
    the Pandemic Influenza Hub that was recently deployed for the heavily
    matrixed avian and pandemic influenza work and will also serve as the
    prototype for the future enterprisewide portal. To improve knowledge
    sharing across GAO, we enhanced our system for disseminating and
    storing agencywide communications and notices. For the past year, our
    employees have received a weekly e-mail message summarizing new
    communications. All communications are archived on an intranet Web
    site, where they can be searched by key word, topic, or date. Based on
    customer feedback, we redesigned the weekly e-mail and the intranet
    site to make it easier for employees to access and identify important
    information by streamlining the look and organization of both
    communication vehicles; featuring more descriptive subject lines and
    narrative information; and organizing the weekly e-mail by four
    categories: time-critical, policy, program, and process updates,
    events, and other. The search function on the notices Web site was also
    enhanced to make it easier to locate previously published information.

    4.12.C. Enhancing Knowledge Sharing with National and International
    Accountability and Professional Organizations: We convened a number of
    forums, symposia, and other meetings to provide opportunities for an
    exchange of knowledge between accountability and professional
    organizations, experts, and stakeholders within the United States. For
    example, we held Comptroller General forums that covered topics on
    federal procurement sourcing management, global competitiveness and
    higher education, and federal oversight and the offices of inspector
    general (IG). In addition, our speakers' series, called Conversations
    on 21st Century Challenges, brought distinguished leaders to speak to
    our staff on issues affecting the United States and its place in the
    world. Nationally, we collaborated with the Domestic Working Group, a
    group of federal, state, and local auditors founded by the Comptroller
    General, on two projects--one related to access to records and the
    other related to grants management--both of which resulted in issued
    reports. In addition, our investment in relationships with federal,
    state, and local auditors paid off in the aftermath of the federal
    response to hurricanes Katrina and Rita. We facilitated collaboration
    and knowledge sharing between GAO teams and federal, state, and local
    auditors in the affected states; among other things, this helped us
    minimize duplication of efforts, leverage our resources, and gain
    access to people and information. The intergovernmental audit forums
    convened 12 regional meetings to update federal, state, and local
    auditors on key issues affecting the audit community, including a very
    well-received forum meeting on emergency response and preparedness. In
    addition, we cosponsored the 16th Biennial Forum of Government
    Auditors, which was attended by over 300 members of the U.S.
    accountability community. This conference helped advance the public
    sector accountability profession's understanding of and ability to
    respond to the many challenges facing the nation in the 21st century.
    As the leader of the National Intergovernmental Audit Forum, we also
    advanced its strategic plan by facilitating and participating in the
    activities of its knowledge-sharing, communications, standards liaison,
    and emerging issues committees. Also this year, we hosted a series of
    meetings to connect people to people in an effort to improve our
    working relationships and better leverage our resources with our sister
    agencies and the IGs. We hosted the first of what we hope to be a
    series of meetings that introduced the leadership and senior executives
    of the Congressional Research Service to our leadership and team
    managing directors. In addition, we hosted the first-ever meeting
    between our leadership and team managing directors with the agency
    inspectors general. Internationally, we continued to provide leadership
    in the implementation of INTOSAI's first strategic plan by having the
    Comptroller General serve as the Vice-Chair of the Governing Board's
    newly created Finance and Administration Committee and as board liaison
    for the strategic plan's capacity-building goal. He also chairs
    INTOSAI's Accounting and Reporting Committee, and several of our
    employees are active members of several technical committees. To help
    ensure that U.S. public sector perspectives are reflected in the
    International Federation of Accountants' standards development project,
    we are collaborating closely with the International Auditing and
    Assurance Standards Board and the World Bank. We also expanded our
    global network and reputation by promoting education and knowledge
    sharing through the International Auditor Fellowship Program in which
    12 fellows from Africa, Asia, Eastern Europe, Latin America, and the
    South Pacific participated. Through our international visitor program,
    we received about 700 visitors from 94 countries, including officials
    from our counterpart organizations, parliaments, and central government
    ministries. We also have initiated the first phase of a capacity-
    building initiative with our Iraqi counterparts that will be supported
    by Department of State funding, and we plan to leverage that work to
    benefit other counterparts in the Middle East.

    Continuously Enhance GAO's Business And Management Processes:

    4.13.C. Improving Engagement Support Services: In fiscal year 2006, we
    continued to reexamine our core support functions and identified
    several areas where we could enhance efficiency and cost-effectiveness.
    In our financial management function we outsourced commercial accounts
    payable, reducing our costs by $53,000 annually. We also performed a
    review of our personal property function and determined that merging
    that function with our real property function would allow us
    flexibility and better utilization of staff and contract resources. We
    achieved additional savings by outsourcing our domestic and
    international mail processing, realizing a 32 percent reduction in
    postage costs, an improvement in the level of service, and additional
    resource flexibility. In our IT functional area we completed our Total
    Cost of Ownership Benchmark study, which involved a contractor
    comparing our fiscal year 2005 budgeted expenditures to the spending of
    private sector professional services peers in 15 different IT areas.
    The results of the analysis showed that in total, we accomplish the
    same workload as the most efficient quartile of peers. Our overall IT
    costs, within the contractor's model, were $5.5 million lower than the
    peer average and $2 million lower than the average for the most
    efficient quartile of peers. While the results were very positive, the
    contractor recommended that we further analyze voice telecommunications
    and our cell phone program, where costs were higher than our
    professional services peers primarily because of higher labor costs.
    Our rollout of the new telephone system in headquarters and the new
    voicemail system agencywide has addressed the telecommunications
    recommendations, and we are conducting a review of the cell phone
    program to explore less costly contractual arrangements and revalidate
    business needs. As one of the initial steps in streamlining our
    engagement management efforts, we developed and implemented a Record of
    Interview System during fiscal year 2006. A major impetus for
    developing this online system was the need to streamline and coordinate
    our numerous efforts related to the Hurricane Katrina work. The system
    provides for better coordination on engagement contacts beyond the
    individual engagement team by capturing relevant information on planned
    and actual interview contacts made to obtain engagement-related
    information. Another significant step in streamlining our engagement
    management efforts was developing and deploying the Engagement Results
    Phase--an application that was designed to integrate five separate
    systems used by GAO analysts in the final stages of the engagement
    process and to provide easier access to these tools through a single
    access point. An analyst can sign on once and be authenticated to the
    five systems simultaneously. Once logged in, analysts can easily move
    from one system to another. We formed a task team to determine whether
    process efficiencies could be achieved for nonaudit services. Because
    certain of our activities do not meet the generally accepted government
    auditing standards (GAGAS) definition of an audit, they do not require
    the same level of documentation as audits. In fiscal year 2006, a GAO
    task team documented the wide variation in the types of activities we
    conduct and the size of the potential universe of work that could be
    properly classified as nonaudits. The team also developed proposed
    GAGAS revisions intended to improve the identification and
    categorization of nonaudit services. Finally, the task team is
    developing guidance specifically for nonaudit services that should lead
    to process efficiencies. We also determined that additional discussion
    and disclosure regarding methods and sources of information would
    enhance our written products. Based on this determination, we developed
    guidance and disseminated it through electronic media, such as the
    Electronic Assistance Guide for Leading Engagements, and training
    curricula, which should enhance our products' credibility and
    strengthen their messages. In addition, we made progress in
    streamlining our engagement management process in the areas of risk
    management, our annual inspection program, and a staffing information
    system. To better align our engagement process with our risk management
    approach, a task team developed a conceptual framework that reflects
    the key phases of an audit, identified opportunities to reduce the
    amount of data entered multiple times into the various engagement
    management systems, and documented system architecture to allow for the
    single entry of key data. To improve the efficiency of our annual
    inspection program, we combined the financial and performance audit
    inspections into a single process thereby using fewer staff hours. We
    also switched from an equal representation approach to using a
    statistically valid sample when selecting engagements for full detail
    review and for determining the number of staff to interview regarding
    their understanding of our quality assurance framework. In addition, we
    incorporated more criteria for determining deficiencies into the
    inspection training program. We also have efforts under way to enhance
    the functionality of the inspections database and information
    management system. Our staffing information system significantly
    streamlined our engagement staffing process by saving time in
    researching engagement staffing and collecting staffing data from
    disparate systems, providing a common system that supports the
    engagement staffing process across all GAO teams, improving access to
    and use of information related to the staffing process, and improving
    capability to identify staff skills and availability early in the job
    process. We made progress developing and implementing publishing
    process improvements designed to simplify and standardize operations
    among Product Assistance Groups and teams and to maximize the use of
    available resources. As a result of a review of our audit report
    publishing process by an interdisciplinary team, which was facilitated
    by a consultant, we designed and began implementing an improved process
    focused on a single point of contact and enhanced communication. The
    new process is easier and quicker for teams and has improved quality
    control of our final products. We also completed a benchmarking study
    comparing our publishing practices in the areas of costs, staffing, and
    workflow to those of five benchmarking partners. We are forming a
    community of practice with these partners to further explore the
    recommendations from the study, gather supplemental information, and
    pilot test several recommended processes. Finally, we enhanced the
    user- friendliness of and access to our Product Assistance Group
    Management and Tracking System through improved data collection and
    tracking capabilities.

    4.14.C. Using Enabling Technology to Improve Our Crosscutting Business
    Processes: We implemented enabling technology in a number of our human
    capital functions to automate delivery of our human capital services.
    The System Signer was implemented for our time and attendance system,
    webTA, in fiscal year 2006. The System Signer enables us to meet
    electronic signature requirements designed to protect the integrity of
    data by identifying any tampering with the data between the time a
    supervisor approves a webTA record and processing by the National
    Finance Center. Other examples of human capital functions we enhanced
    by implementing enabling technology include automating the electronic
    earning and leave statement, resulting in $30,000 in savings per year
    and elimination of paper forms; developing and disseminating an
    automated pay calculator to be used in conjunction with our
    performance- based compensation system; converting the telework
    application process to a paperless online system accessible to staff
    and capable of providing real-time data to our human capital staff;
    providing a self- service online retirement calculator to staff that
    provides immediate feedback and eliminates human capital staff time
    previously required for manual calculations; implementing an agencywide
    process for electronic self-certification for continuing professional
    education credits, reducing duplicate reporting of credits, improving
    timeliness and accuracy of individual staff continuing professional
    education tracking reports, and enabling us to track completion of
    external training; developing and implementing a standardized approval
    process for continuing professional education units for team-led
    learning events and a response and tracking system to ensure consistent
    guidance on credit approval and provide an audit trail; and
    implementing a statistically valid, random-sampling methodology to
    check for errors in the continuing professional education database to
    ensure compliance with GAGAS criteria and guidance for auditor staff
    professional development.

    Become A Professional Services Employer Of Choice:

    4.15.C. Promoting an Environment That Is Fair, Unbiased, and Values
    Opportunity and Inclusiveness: Acting on recommendations from our
    Office of Opportunity and Inclusiveness (OOI), we restructured the
    reasonable accommodations program to ensure a systematic approach to
    providing a safe and efficient workplace for staff members who have
    disabilities as defined by the Americans with Disabilities Act. We
    enhanced the role of the Reasonable Accommodations Coordinator, who
    will follow the accommodation process from the point of request through
    implementation. In addition, we established an Accommodations Committee
    to oversee and assist with decision making, and finalized, published,
    and disseminated an order setting out the policies, procedures, and
    responsibilities for the program. We also developed performance
    recommendations geared toward making the performance assessment and
    engagement assignment processes more transparent. Implementation of
    these recommendations would enhance our staff's understanding of their
    team's rationale for assigning certain roles and improve the quality of
    feedback provided to staff to provide them with a clearer picture of
    where they stand and what they need to do to advance. We updated our
    Sexual Harassment Policy to direct staff and managers to report any
    unprofessional conduct of a sexual nature, including such conduct
    perpetrated by or against non-GAO employees, to the Director, OOI. The
    policy, which discusses prevention, reporting, and investigation and
    correction, has also been posted in a new location on the Human Capital
    Office Web site for increased visibility. In addition to updating our
    policy, the Director, OOI, also discussed sexual harassment in four
    separate sessions to inform staff and to emphasize and reinforce our
    commitment to a zero tolerance policy. We took several steps this
    fiscal year to examine and improve our intern program. OOI and our
    Human Capital Office are piloting efforts in the areas of interviewing
    and assigning interns, to help ensure that all interns are provided a
    core group of experiences to help them make good decisions about
    working at GAO. The Director, OOI, also discussed OOI's role with our
    summer interns in fiscal year 2006 to outline important steps that
    interns can take to enhance their chance for successful conversion to
    permanent GAO employment. Finally, in the fourth quarter of this fiscal
    year, OOI interviewed interns from throughout the agency to obtain
    their overall impressions of the intern program, as well as their
    specific experiences, including work assignments, supervisors, feedback
    provided, performance assessments, training and developmental
    opportunities, and suggestions for improvements. This information is
    being assessed to determine what improvements may be made to the intern
    program to help ensure that we hire and retain a diverse range of
    qualified individuals.

    4.16.C. Providing Tools, Technology, and a World-Class Working
    Environment: We upgraded and enhanced a number of technology tools and
    systems to ensure the reliability of the systems supporting myriad
    business processes and to promote productivity. Among the many
    improvements to our tools and systems are implementation of the direct
    satellite television upgrade to improve reception, provide additional
    channels that deliver live and prerecorded programs to staff at their
    desktops, and provide closed-circuit television programming
    capabilities; replacement of 300 outdated workstations with new
    workstations to provide faster processing speed and memory and upgraded
    standard software applications; replacement of 30 obsolete video
    teleconferencing units with new high-capacity units to permit an
    increased number of simultaneous conference connections for the cost of
    one connection and eliminate setup by our service provider, resulting
    in a projected $200,000 annual savings; and replacement of network
    printers to expand capacity and deploying of a network monitoring tool
    to allow technicians to proactively address network printer problems
    before they affect users. We also replaced our headquarters telephone
    and voicemail systems to provide a modern telecommunications system
    that also positions us for future enhancements, such as technologies
    that transport the human voice over the Internet protocol. These major
    telecommunications upgrades were funded through operations at no
    additional costs to GAO. More importantly, by implementing the new
    voicemail system, we expect to save $1.1 million over the next 5 years
    through a reduction in costs needed to support the system. The new
    voicemail system and a new collaboration tool we implemented are
    especially useful to our staff when they are on travel or teleworking.
    The voicemail system has integrated voicemail and e-mail messaging,
    which automatically sends an e-mail (or a text message) to a user-
    specified address and announces that a new voicemail message is waiting
    for retrieval. In addition, another feature gives callers the option of
    transferring from a staff member's voicemail to a cell phone or a phone
    at a remote work location. Earlier in the fiscal year we had tested a
    prototype of these two features, which quickly demonstrated the benefit
    of the tools. Another tool we implemented was a Web-based application
    called Secure Meeting that allows staff to collaborate securely with
    other GAO staff in headquarters and field offices by sharing a desktop
    in real time. And, because it is Web-based, it just requires access to
    the Internet and a Web browser and no special software. This means that
    users can safely participate in a secure meeting session when they
    telework or travel and can collaborate with others who are not in a GAO
    office or facility or connected to the GAO network, including agency
    officials, private sector firms, or professional association staff.
    Finally, we completed a comprehensive renovation of the Local Area
    Network Operations Center, including new cabinets, managed power, and
    wiring. This upgrade provides the ability to support more servers in
    the center and provides a centralized, conditioned, and managed power
    supply that more effectively protects network systems from power
    disruptions. It also allowed us to consolidate the servers to a
    location with adequate power and environmental support to lessen the
    risk of disruption to network services. Of even more importance, the
    upgrade has significantly modernized our network infrastructure and
    positioned us for future technology enhancements.

    4.17.C. Enhancing Our Family-Friendly and Work Life Programs: To
    encourage broader and more meaningful participation in our employee
    suggestion program, we revamped the program's Web site and suggestion
    form, making them more accessible and user-friendly and improved the
    transparency and consistency of acceptance and rejection decision
    making. The criteria for consideration and acceptance of a suggestion
    were expanded to include a broader range of quality of work life
    suggestions. In addition, there are now three levels of awards for
    implemented suggestions that are linked to the impact of the suggestion
    on agency operations: gold awards ($500 and a certificate) for
    suggestions that substantially improve productivity, cost savings, or
    the quality of a product or service; silver awards ($100 and a
    certificate) for suggestions that improve productivity, cost savings,
    or the quality of a product or service; and bronze awards (certificate)
    for suggestions that improve the quality of work life or clarify or
    correct information already available. We also have increased employee
    participation in our telework program by implementing an expanded,
    centralized approval process to allow and encourage more staff to
    participate. As a result, we saw an increase in the number of employees
    with approved telework agreements. We distributed about $2 million in
    transit subsidies to 2,062 employees in fiscal year 2006 compared to
    2,004 employees in fiscal year 2005. In addition, this year we provided
    286 employees with student loan repayments totaling $1.4 million,
    compared to last year when we provided 218 employees with repayments
    totaling $1.17 million. We also increased the payment limit of the
    student loan repayment program to $10,000 for fiscal year 2006 in line
    with the maximum allowable by law. And we finished planning and began
    constructing an expanded on-site day care facility to address an
    increase in employee demand for child care services.

    4.18.C. Providing a Safe and Secure Workplace: In the summer of fiscal
    year 2006, we established the Office of Emergency Preparedness to
    provide proactive coordination and a unified focus on emergency
    preparedness planning in our headquarters and field offices, with other
    legislative branch agencies, and with local law enforcement entities.
    The Office of Emergency Preparedness's areas of responsibility include
    the Continuity of Operations Plan, the Occupant Emergency Plan, GAO
    Continuity Operations for a Pandemic, the Shelter in Place Plan, the
    Disaster Recovery Plan, and other contingency plans as required. The
    Continuity of Operations Plan has been approved by the Comptroller
    General and the GAO Continuity Operations for a Pandemic has been
    developed and submitted to the Executive Committee for review and
    approval. The Continuity Program strategy, which will tie together all
    aspects of emergency preparedness in one document, has also been
    approved. As part of our effort to ensure our IT security, we provided
    security training to all applications developers, ensured that
    developers are kept current on security threats, and made security an
    ongoing applications development activity. By combining broad knowledge
    of manual security testing with a commercial software security testing
    utility, we have developed parallel processes for vulnerability
    assessment and mitigation, development standards, code reviews, and
    security testing. And we have developed a threat methodology unique to
    GAO to further strengthen application security. This fiscal year we
    completed installation of the Secret Internet Protocol Router Network-
    -DOD's network for sharing data classified up to the secret level--in
    our field offices. Access to this network in the field offices allows
    our staff to obtain specific classified data directly from agency
    officials via secure e-mail, improves the efficiency of our research
    through direct access to classified information that staff often used
    to wait weeks to obtain, lets our staff post classified reports for
    review and dissemination, and permits electronic transmission of
    classified GAO reports to agencies for their comment. The secure
    network also reduces the necessity to handle certified mail for
    classified data. While disaster recovery continues to be an ongoing
    project, several significant items were completed in fiscal year 2006.
    Most important, in June 2006, we moved our off-site disaster recovery
    operation to a superior and less costly legislative branch combined
    disaster recovery facility called the alternate computing facility,
    which is located outside of the immediate Washington, D.C., area. The
    move has improved our security posture and aligned our activities with
    those of other legislative branch counterparts, while reducing the cost
    of our operations. In addition, we continued to expand our capabilities
    at the alternate computing facility and enhanced our emergency
    notification system to better enable us to provide critical IT services
    in the event of a disaster. This move will save us $145,000 annually
    and allow us to better coordinate our continuity of operations efforts
    with other legislative branch organizations. In fiscal year 2006, we
    remediated key vulnerabilities in our information security management
    in compliance with Federal Information Security Management Act (FISMA)
    requirements. See appendix 3 for more information on our
    accomplishments in this area.

    4.19.C. Improving the Development and Experiences of New Staff: We
    began two initiatives in fiscal year 2006 that further enhance the
    development of new staff in our professional development program.
    First, we began linking and integrating our recruiting and interviewing
    processes with our professional development program staff assignment
    and job management processes. Specifically, we took the knowledge
    gained from our recruiting and hiring processes and used it to more
    clearly identify developmental objectives for new staff; place new
    staff on to engagements; and assign roles and responsibilities that
    better match staff's education, experience, skills, and interests. As a
    result, staff develop more effectively and quickly, are more
    productive, and will likely stay with GAO longer. Second, we
    implemented a new policy of assigning professional development program
    staff to at least one engagement from initiation of the engagement to
    transmission of a product to an agency, which provides staff with the
    opportunity to see and apply a broad range of tasks in a highly
    integrated manner and provides a better foundation for those staff to
    ultimately lead engagements in the future.

    [End of Strategic Goal 4]

    2. GAO's Report on Personnel Flexibilities:

    The GAO Personnel Flexibilities Act of 2000 (Pub. L. No. 106-303) and
    the GAO Human Capital Reform Act of 2004 (Pub. L. No. 108-271) require
    us to provide a review of the actions we have taken in fiscal year 2006
    under specific sections of these acts. This appendix details the
    activities we have undertaken separately for each act.

    GAO Personnel Flexibilities Act of 2000:

    Several sections of this act were made permanent by the 2004 act; the
    actions taken related to these provisions are reported under the new
    act.

    GAO Human Capital Reform Act of 2004:

    The first two sections of this act made permanent our authority to
    offer voluntary early retirement and voluntary separation incentive
    payments. We revised our regulations for offering voluntary early
    retirement on November 15, 2004. These regulations allow us to announce
    agencywide voluntary early retirement opportunities with specific time
    frames and, under an exception provision, allow us to authorize early
    retirement for up to five employees in any organizational unit in any
    fiscal year without an agencywide announcement. During fiscal year
    2006, a voluntary early retirement opportunity was offered from January
    9 through February 17, 2006. Applicants were required to retire prior
    to March 17, 2006. Of the 16 applications that were received, 13 were
    approved and 3 were denied. Under the exception provision, another 15
    applicants were approved and separated during fiscal year 2006. This
    authority has been very helpful in reshaping our workforce by reducing
    the number of high-graded staff and replacing many of them with entry-
    level and midlevel hires who possess the skills and knowledge that will
    allow us to accomplish our mission and serve the needs of the American
    people for many years to come.

    Under section 2 of the 2000 act, we were given temporary authority to
    offer voluntary separation payments of up to $25,000 to employees for
    the purpose of realigning the workforce to meet budgetary constraints
    or mission needs, correct skills imbalances, or reduce high-graded
    positions. This authority was also made permanent in the 2004 act. The
    voluntary separation incentive provision has not yet been implemented
    by regulation. The costs associated with voluntary separation
    incentives can be considerable, and given the many demands on agency
    resources, these costs present a strong financial incentive to use the
    provision sparingly, if at all.

    Section 3 of the 2004 act established a requirement that an employee
    must be performing at a satisfactory level in order to receive an
    annual pay adjustment and amended 31 U.S.C. 732 (c), which required our
    employees' pay to be adjusted at the same time and to the same extent
    as the General Schedule, to authorize the Comptroller General to
    determine the amount of annual pay adjustments and described the
    factors to be considered in making those determinations. The
    Comptroller General's authority under section 3 was effective for
    increases on or after October 1, 2005. Regulations were issued in
    January 2005 to address the satisfactory performance requirement for
    GAO's analysts and attorneys who were covered by validated competency-
    based appraisal systems for at least one full appraisal cycle. The
    regulations were further updated and released January 20, 2006.

    Section 4 authorizes the Comptroller General to establish pay retention
    regulations applicable to employees who are placed in lower grades or
    bands as a result of workforce restructuring, reclassification, or
    other appropriate circumstances. These regulations were issued
    effective January 20, 2006.

    Section 6 authorized GAO to provide increased annual leave to key
    employees. These regulations were issued effective January 23, 2006.
    These regulations contain a provision permitting designated key
    employees with less than 3 years of federal service to earn 6 hours of
    annual leave each pay period.

    Section 7 authorized GAO to establish an Executive Exchange Program.
    Final regulations were issued on May 20, 2005. On January 9, 2006, a
    vacancy announcement was posted to invite individuals to apply for the
    Executive Exchange Program at GAO. At this point, we have had no hires
    using this authority.

    Section 9 amended 31 U.S.C. 732 (d) and incorporated additional
    requirements for GAO's performance management system. GAO's competency-
    based appraisal systems address all of these factors. However, there is
    an annual review and assessment of our performance appraisal policies
    and processes as part of ongoing continuous improvement.

    Finally, section 10 requires us to consult with any interested groups
    or associations representing officers and employees of GAO when
    implementing changes brought about by this act. This is a practice that
    we have continuously utilized within GAO. We have provided draft
    policies and regulations to and obtained input on suggested
    clarifications or changes to the policies and regulations from
    interested groups and associations. We carefully consider this input
    and incorporate it, when appropriate, before distributing policies and
    regulations for comment to all employees.

    Supplemental information on our personnel flexibilities is available (see GAO-07-289SP).

    3. GAO's FISMA Efforts:

    Ensuring IT security is a top priority for GAO. Although not obligated
    by law to comply with FISMA under the EGovernment Act of 2002, we have
    adopted FISMA requirements to strengthen our information security
    program and demonstrate our ongoing commitment to lead by example. As
    threats--both intentional and inadvertent--to the security of IT
    systems and information assets have steadily increased, federal IT
    security policies and practices as defined by the National Institute of
    Standards and Technology (NIST) 800 series guidance and in federal
    information processing standards publications have evolved to respond
    to this changing landscape of IT security. As existing NIST guidance
    has been updated and new guidance disseminated, we have adjusted our
    internal IT security policies and procedures, as well as expanded our
    efforts to effectively integrate these governmentwide policies and
    practices into our IT processes.

    During the past year, we accelerated efforts to improve our information
    security program by implementing key requirements set forth in the
    recently published NIST Special Publication 800-53, Recommended
    Security Controls for Federal Information Systems. We have instituted a
    wide range of programs and processes to assess the status of our
    information security program on a recurring basis. These efforts
    include using the results of internal reviews by program offices, the
    GAO Inspector General, and security staff. For example, our Inspector
    General independently evaluates our information security program
    annually, consistent with FISMA requirements, and identifies any
    weaknesses in our implementation of FISMA while offering additional
    recommendations to further strengthen our IT security program. In
    addition, we follow the standard practice of using a public accounting
    firm, as well as other external sources, to provide independent
    external evaluations and testing of IT controls on our major
    applications. And, in the last quarter of fiscal year 2006, we
    contracted for a penetration test of our network resources to further
    assess the effectiveness of our security policies and practices.
    Results of these reviews and evaluations, to date, have identified no
    material weaknesses in our major applications or unauthorized access to
    our network resources.

    By putting into practice security requirements consistent with FISMA,
    we have substantially elevated information systems security
    consciousness at GAO through our efforts to:

    * implement and refine an enterprisewide, risk-based security program;

    * develop and update essential policies, procedures, and reporting
    mechanisms to ensure that our security program is integrated into every
    aspect of IT system life cycle planning and maintenance;

    * provide recurring security training and awareness to all of our
    staff;

    * integrate security into our capital investment control and project
    management processes; and:

    * implement and refine an enterprise disaster recovery solution.

    We have also defined security initiatives that focus on changes in our
    technology infrastructure, as well as on new security tools and
    appliances.

    Among the projects undertaken during fiscal year 2006 that have
    significantly improved our information security program are the
    following:

    * Security Program Plan. The dynamic nature of security threats
    requires that our Information Systems Security Group constantly monitor
    activities and adjust to thwart these challenges and meet the needs of
    GAO. Therefore, we have refined our Security Program Plan that provides
    the road map of activities over the next few years to improve both the
    program and technical components of our network security and to reflect
    new IT security requirements and challenges. We have conducted monthly
    IT security working group, users group, and remediation group sessions
    to effectively support security education and remediation activities.
    We held our second annual FISMA Month in August 2006 to focus staff on
    the annual FISMA assessment. And we have implemented an updated, more
    robust security awareness training program for all GAO staff.

    * Enterprise FISMA support. We standardized using an automated tool to
    support our FISMA efforts. This tool is now our integrated source for
    managing audit findings and remediation efforts, for documenting annual
    assessments, and for tracking certification and accreditation. By
    integrating these tracking methods into a single program, the tool
    allows us to achieve consistency in monitoring risks and remediation
    efforts and improving security within and across our information
    systems. We are currently in the process of upgrading this tool to
    reflect changes required by NIST Special Publication 800-53.

    * Certification and accreditation of information systems. We have
    updated our IT policy and procedures on certification and accreditation
    of our information systems, including the initial security assessment.
    This process helps identify key features of an information system with
    respect to data classification, system boundaries and network
    interactions, and associated risk to GAO. The initial security
    assessment provides an integrated look into the IT project management
    process, serving as a check and balance for project advancement, and
    establishes the foundation for our processes to certify and accredit
    information systems that we support. In addition, we have implemented
    NIST Special Publication 800-53, providing effective documentation of
    security controls for information systems. We have also ensured that
    risk assessments; system security plans; reviews performed under NIST
    Special Publication 800-26, Guide for Information Security Program
    Assessments and System Reporting Form; and letters for authorization to
    operate are in place. And, in support of our internal control
    compliance review efforts, we have revised the documentation required
    for the certification and accreditation of our new information systems,
    as well as our existing systems. Finally, we have updated our existing
    risk assessments and system security plans and accomplished system
    tests and evaluations to ensure that the appropriate security controls
    have been implemented, the risk to GAO has been validated, and the
    system documentation included up-to-date approval by the designated
    approval authority.

    * Enterprise event correlation application. We have implemented an
    event correlation engine to assist with the monitoring of diverse
    network traffic. This tool integrates security events that identify
    potential threats to our network environment. It enables the
    integration and automation of security event auditing, which in turn
    affords the effective use of limited resources, minimizing risk to GAO
    while vigilantly monitoring network activities.

    * Enterprise workstation security. We have deployed enterprise
    solutions protecting GAO workstations with two-factor authentication
    and antispyware, antivirus, and personal firewall applications as part
    of the standard desktop image. These applications provide the controls
    for access and remediation of security threats to the workstation. They
    automatically monitor and remediate various types of threats to the
    workstation by preventing intrusion and monitoring programs, such as
    Adware and Trojan viruses, to prevent desktops from becoming infected
    with spyware. The implementation of this integrated solution has
    significantly reduced risk to GAO and the need to reimage workstations
    affected by spyware.

    * Enterprise Internet screening. Our requirements for access to
    information are vast. Our pilot implementation of an Internet screening
    tool provides antivirus and antispyware protection to our Web-based
    services. While we are currently testing the blocking features of this
    tool to eliminate access to sites determined not business related, the
    tool has already provided added security for our Internet access to Web
    applications and improved the overall security posture for GAO's
    network.

    * Vulnerability assessment. We instituted a standard process,
    consistent with the requirements cited in FISMA, scanning all network
    systems, devices, and workstations for vulnerabilities in order to
    ensure secure services and system standardization and to meet our
    updated network security guidelines. Weekly scans are conducted to
    verify that security patches have been applied to these systems and
    devices. And scan results are briefed weekly to the Chief Information
    Officer with corrective actions identified and tracked.

    * Application vulnerability assessment. We have integrated a
    vulnerability assessment tool into our application development process.
    This tool complements our overall network vulnerability process. This
    application assessment process assists in validating the code and
    coding practices used in our applications and allows for remediation
    prior to deploying an application. Moreover, implementing this security
    process into our current coding methodology has reduced the time needed
    to develop in-house applications and ensured a process to validate
    potential risks in commercial off-the-shelf packages.

    * Wired network protocol implementation. In an effort to limit access
    to the GAO network, we have implemented the Institute of Electrical and
    Electronics Engineers 802.1x protocol to restrict network access in our
    team and conference rooms to GAO notebooks only. The validation process
    ensures computer equipment that connects to our network is, in fact,
    GAO equipment, removing the potential risk for non-GAO equipment to
    have uncontrolled access to our network resources. As the network
    infrastructure is updated, we will expand the use of this technology
    beyond conference rooms.

    * Classified processing upgrade. We completed the expansion of our
    Secret Internet Protocol Router Network to 10 GAO field office sites,
    providing each site with a secure computing facility and new equipment
    and communications links to process classified information. This
    network allows our staff to obtain specific classified data directly
    from agency officials via secure e-mail, improves efficiency of our
    research through direct access to classified information, posts our
    classified reports for review and dissemination, electronically
    transmits our classified reports to agencies for comments, and reduces
    the necessity of using certified mail for classified data. Upgrades to
    the communications links to improve transmission are planned for
    completion in fiscal year 2007.

    * Disaster recovery. We moved our off-site disaster recovery operations
    from a commercial site to an alternative computing facility hosted by
    the legislative branch. The move has both improved our security posture
    and aligned our activities with those of other legislative branch
    counterparts, while reducing the cost of our operations. In addition,
    we continued to expand our capabilities at the alternative computing
    facility and enhanced our emergency notification system, to better
    enable us to provide critical IT services in the event of a disaster.

    Image Sources:

    This section contains credit and copyright information for images and
    graphics in the printed version of this product, as appropriate, when
    that information was not listed adjacent to the image or graphic.

    Front cover: GAO (flag and Capitol):

    Inside front cover: GAO (flag and Capitol):

    Page i: GAO (flag and Capitol):

    Pages 1, 19, 59, 91, 117, and 119: GAO (flag and Capitol):

    Page 25: Art Explosion (coins), PhotoDisc (bills):

    Page 29: Art Explosion (Lincoln Memorial and sculpture of Lincoln):

    Page 34: PhotoAlto (coins), Comstock (bills and magnifying glass):

    Page 61 and 121: GAO(flag), National Archives (Constitution):

    Page 65 and 144: Dynamic Graphics (Satellite dish), MapArt (Map), Art
    Explosion (Earth):

    Page 68 and 162: PhotoDisc (cogs and globe):

    Page 71 and 175: Eyewire (Statue of Liberty), PhotoDisc (clouds):

    Inside back cover: GAO (GAO's Web site):

    Back cover: GAO (flag):

    Providing Comments on This Report:

    To provide comments for improving this report, please contact our Chief
    Quality Officer, who can be reached at (202) 512-6100, at qci@gao.gov,
    or at the following address:

    U.S. Government Accountability Office: 441 G Street NW, Room 6K17Q:
    Washington, D.C. 20548:

    Obtaining Copies of GAO Documents:

    The fastest and easiest way to obtain copies of GAO documents at no
    cost is through GAO's Web site (www.gao.gov). Each weekday, GAO posts
    newly released reports, testimony, and correspondence on its Web site.
    To have GAO e-mail you a list of newly posted products every afternoon,
    go to www.gao.gov and select "Subscribe to Updates."

    However, you can also order GAO documents by mail or by phone. The
    first copy of each printed report is free. Additional copies are $2
    each. A check or money order should be made out to the Superintendent
    of Documents. GAO also accepts VISA and MasterCard. Orders for 100 or
    more copies mailed to a single address are discounted 25 percent.

    Orders should be sent to:

    U.S. Government Accountability Office: 441 G Street NW, Room LM:
    Washington, D.C. 20548:

    To order documents by phone, call:

    Voice: (202) 512-6000:
    TDD: (202) 512-2537:
    Fax: (202) 512-6061:

    This report and a compact highlights version will be available through
    our Web site at [Hyperlink, http://www.gao.gov/sp.html].

    Also linked to that page are our strategic plan and our past
    performance and accountability publications.

    Other Web pages of possible interest:

    Reports and Testimonies:

    Download GAO's most recent products or search an extensive archive of
    past products to download those of interest [Hyperlink,
    http://www.gao.gov/docsearch/repandtest.html]

    Legal Products:

    Download legal decisions and opinions about appropriations, bid
    protests, and major federal agency rules [Hyperlink,
    http://www.gao.gov/legal.htm]

    For the press:

    Check out the Reporter's Guide to GAO and other resources for the media
    [Hyperlink, http://www.gao.gov/press.html]

    Careers at GAO:

    Review current job openings, apply online, and learn about GAO's teams
    and offices at [Hyperlink, http://www.gao.gov/jobopp.htm]

    FraudNet:

    Report allegations of fraud, waste, abuse, or mismanagement of federal
    funds [Hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]

    E-mail alerts:

    Get automatic updates on new GAO products [Hyperlink,
    http://www.gao.gov/subtest/subscribe.html]

    FOOTNOTES

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

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

    [3] Our most recent performance plan is available on our Web site at
    [Hyperlink, http://www.gao.gov/cgi-bin/getrpt?rptno=GAO-07-146SP].

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

    [5] In fiscal years 2004 and 2005, the work performed under the
    Comptroller General's authority represented 10 percent and 13 percent,
    respectively, of our engagement efforts.

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

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

    [End of Performance and Accountability Report 2006]

    *** End of document. ***