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 [email protected]. 

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: 

GAOï¿½s 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. GAOï¿½s 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 GAOï¿½s 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 GAOï¿½s 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. GAOï¿½s 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 GAOï¿½s basic structure. The agencyï¿½s 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 governmentï¿½s 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 GAOï¿½s 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 [email protected], 
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. ***