    Fiscal Year 2008 Budget Request: U.S. Government Accountability
    Office (19-APR-07, GAO-07-543T).

    This testimony is given in support of the fiscal year 2008 budget
    request for the U.S. Government Accountability Office (GAO)
    before the House Subcommittee on the Legislative Branch,
    Committee on Appropriations. The requested funding will help us
    continue our support of the Congress in meeting its
    constitutional responsibilities and will help improve the
    performance and ensure the accountability of the federal
    government for the benefit of the American people. GAO is
    especially appreciative of the Subcommittee's efforts to help us
    avoid a furlough of our staff during fiscal year 2007. Had we not
    received additional funds this year and not taken other cost
    minimization actions, GAO would have likely been forced to
    furlough most staff for up to 5 days without pay. At the same
    time, due to funding shortfalls, we were not able to make pay
    adjustments retroactive to January 7, 2007. Our testimony today
    focuses on key efforts that GAO has undertaken to support the
    Congress, our fiscal year 2006 performance results, our budget
    request for fiscal year 2008 to support the Congress and serve
    the American people, and proposed legislative changes.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-543T
        ACCNO:   A68644
      TITLE:     Fiscal Year 2008 Budget Request: U.S. Government
    Accountability Office
         DATE:   04/19/2007
      SUBJECT:   Agency missions
    	     Budgets
    	     Federal funds
    	     Budget activities
    	     Budget administration
    	     Human capital planning
    	     Past fiscal year
    	     Performance measures
    	     Strategic planning
    	     Budget requests

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    GAO-07-543T

         * [1]Key Efforts to Support the Congress
         * [2]Performance, Results, and Plans

              * [3]Outcomes of Our Work and the Road Ahead

         * [4]GAO's Fiscal Year 2008 Request to Support the Congress
         * [5]Concluding Remarks
         * [6]GAO's Mission
         * [7]Obtaining Copies of GAO Reports and Testimony

              * [8]Order by Mail or Phone

         * [9]To Report Fraud, Waste, and Abuse in Federal Programs
         * [10]Congressional Relations
         * [11]Public Affairs

    Testimony

    Before Subcommittee on the Legislative Branch, Committee on
    Appropriations, United States House of Representatives

    United States Government Accountability Office

    GAO

    For Release on Delivery Expected at 10:00 a.m. EDT

    Thursday, April 19, 2007

    FISCAL YEAR 2008 BUDGET REQUEST

    U.S. Government Accountability Office

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

    GAO-07-543T

    United States Government Accountability Office
    Washington, DC 20548

    Madam Chair and Members of the Subcommittee:

    I am pleased to appear before the subcommittee today in support of the
    fiscal year 2008 budget request for the U.S. Government Accountability
    Office (GAO). The requested funding will help us continue our support of
    the Congress in meeting its constitutional responsibilities and will help
    improve the performance and ensure the accountability of the federal
    government for the benefit of the American people. An overview of GAO's
    strategic plan for serving the Congress and our core values is included as
    appendix I.

    I would also like to thank you and your subcommittee for your past support
    of GAO. I am especially appreciative of your efforts to help us avoid a
    furlough of our staff during fiscal year 2007. Had we not received
    additional funds this year and not taken other cost minimization actions,
    GAO would have likely been forced to furlough most staff for up to 5 days
    without pay. At the same time, due to funding shortfalls, we were not able
    to make pay adjustments retroactive to January 7, 2007.

    It is through the efforts of our dedicated and capable staff that we were
    able to provide the Congress with the professional, objective, fact-based,
    nonpartisan, non-ideological, fair, and balanced information it needs to
    meet the full range of its constitutional responsibilities. I am extremely
    pleased and proud to say that we helped the federal government achieve a
    total of $51 billion in financial benefits in fiscal year 2006--a record
    high that represents a return on investment of $105 for every dollar the
    Congress invested in us. As a result of our work, we also documented 1,342
    nonfinancial benefits that helped to improve service to the public, change
    laws, and transform government operations. The funding we received in
    fiscal year 2006 allowed us to conduct work that addressed many difficult
    issues confronting the nation, including U.S. border security, Iraq and
    Hurricane Katrina activities, the tax gap and tax reform, and issues
    affecting the health and pay of military service members. Our
    client-focused performance measures indicate that the Congress valued and
    was very pleased with our work overall.

    While fiscal year 2006 was a record year, we will be required to constrain
    vital support to our staff and engagements in fiscal year 2007 in order to
    manage within available funds. Although the additional funding provided by
    the subcommittee allows us to avoid a furlough of our staff, we must
    implement a number of actions to cancel, reduce, or defer costs in order
    to manage within fiscal year 2007 funding constraints. In fact, our fiscal
    year 2007 budget for most programs and line items retains funding levels
    at or near fiscal year 2006 funding levels--requiring that we absorb
    inflationary increases, which in turn reduce our purchasing power, erode
    progress toward our strategic goals, and ultimately affect our client
    service and employee support. For example, in our travel account--a
    critical element in our ability to conduct firsthand evaluation of federal
    funding and program activities--we expect transportation costs and per
    diem rates to rise (as they do annually). Also, our ability to hire staff
    to replace departing staff, address key succession planning challenges and
    skill gaps, and maintain a skilled workforce will be adversely affected.
    While we must hold some critical employee benefits at last year's funding
    level, such as transit benefits and student loan repayments, our pool of
    employees eligible to retire has increased since last year. Also, some
    other agencies may be offering increased benefits that will be attractive
    to our employees and potential recruits. In addition, we have reduced or
    deferred needed targeted investments and initiatives geared to further
    increasing productivity and effectiveness, achieving cost savings, and
    addressing identified management challenges.

    Unfortunately, we expect that these actions will adversely affect our
    ability to respond to congressional requests, making it even more
    difficult to address supply and demand imbalances in areas such as health
    care, homeland security, the global "war on terrorism," energy and natural
    resources, and forensic auditing. Our diminished capacity will likely, in
    turn, ultimately result in reduced annual financial benefits, findings,
    and recommendations to the Congress and the nation and necessitate
    reductions in our

               o ability to provide timely and responsive information to support
               congressional deliberations;
               o testimonies on the Congress's legislative and oversight agenda;
               o products containing recommendations for improvements in
               government operations;
               o analyses of executive branch agencies budget justifications to
               support appropriations decisions;
               o support on reauthorization activities for pending programs, such
               as the farm bill, Head Start, the Children's Health Insurance
               Program, and the No Child Left Behind Act; and
               o oversight of legislative branch programs, including the Capitol
               Visitor Center.

               In an effort to identify areas for potential improvement and help
               ensure accountability, we plan to contract with a public
               accounting firm in fiscal year 2008 to conduct a peer review of
               our financial audit practice and have an international team of
               auditors conduct an external peer review of our performance audit
               practices. GAO has received clean opinions on its previous
               external peer reviews. Consistent with generally accepted
               governmental auditing standards, external peer reviews are
               conducted on a 3-year cycle and serve to validate that the
               Congress and the American people can rely on our work and
               products.

               In recent years, GAO has worked cooperatively with the
               appropriation committees to submit modest budget requests. During
               this period, and for a variety of reasons, GAO has gone from the
               largest legislative branch agency to the third largest in terms of
               total budgetary resources. Adjusting for inflation, GAO's budget
               authority has declined by 3 percent in constant fiscal year 2006
               dollars since fiscal year 2003, as shown in figure 1. These modest
               budget results do not adequately recognize the return on
               investment that GAO has been able to generate. In fact, these
               increases have hampered our progress in rebuilding from the
               downsizing (40 percent reduction in staffing levels) and mandated
               funding reductions that occurred in the 1990s. Although GAO's
               fiscal year 2008 budget request represents a 7 percent increase in
               constant dollar terms over our fiscal year 2007 operating plan, it
               is one of the smallest increases requested in the legislative
               branch.

    Figure 1: Budget Authority in Fiscal Year 2006 Dollars and Full-Time
    Equivalent (FTE) Usage, Fiscal Years 1992-2007

    Shortly after I was appointed Comptroller General in November 1998, I
    determined that the agency should undertake a major transformation effort.
    As a result, GAO has become more results-oriented, partnerial, and client
    focused. With your support, we have made strategic investments; realigned
    the organization; streamlined our business processes; modernized our
    performance classification, compensation, and reward systems; enhanced our
    ability to attract, retain and reward top talent; enhanced the technology
    and infrastructure supporting our staff and systems; and made other key
    investments. These transformational efforts have allowed GAO to model best
    practices, lead by example, and provide significant support to
    Congressional hearings, while achieving record results and very high
    client satisfaction ratings without significant increases in funding.

    We have taken a number of steps to deal with funding shortfalls in the
    past few years; however, we cannot continue to employ the same approaches.
    Our staff has become increasingly stretched and we are experiencing
    backlogs in several areas of critical importance to the Congress (e.g.,
    health care, homeland security, energy and natural resources). In
    addition, we have deferred key initiatives and technology upgrades (e.g.,
    engagement and administrative process upgrades) for several years and it
    would not be prudent to continue to do so. These actions are having an
    adverse effect on employee morale, our ability to produce results, and the
    return on investment that we can generate.

    There is a need for fundamental and dramatic reform to address what the
    government does, how it does business, and who will do the government's
    business. Our support to the Congress will likely prove even more critical
    because of the pressures created by our nation's current and projected
    budget deficit and growing long-term fiscal imbalance. Also, as we face
    current and projected supply and demand imbalance issues and a growing
    workload over the coming years across a wide spectrum of issues, GAO will
    be unable to respond to congressional demands without a significant
    investment in our future. We have exhausted the results that we can
    achieve based on prior investments. Our ability to continue to produce
    record results and assist the Congress in discharging its Constitutional
    responsibilities relating to authorization, appropriations, oversight, and
    other matters will be adversely impacted unless we take action now.

    Therefore, our fiscal year 2008 budget request is designed to restore
    GAO's funding to more reasonable operating levels. Specifically, we are
    requesting fiscal year 2008 budget authority of $530 million, an 8.5
    percent increase over our fiscal year 2007 funding level. The additional
    funds provided in fiscal year 2007 have helped reduce our requested
    increase for fiscal year 2008 from 9.4 percent to 8.5 percent. This
    funding level also represents a reduction below the request we submitted
    to the Office of Management and Budget (OMB) in January as a result of
    targeted adjustments to our planned fiscal year 2008 hiring plan. Our
    fiscal year 2008 budget request will allow us to achieve our performance
    goals to support the Congress as outlined in our strategic plan1 and
    rebuild our workforce capacity to allow us to better respond to supply and
    demand imbalances in responding to congressional requests. This funding
    will also help us address our caseload for bid protest filings, which have
    increased by more than 10 percent from fiscal years 2002 through 2006. Our
    workload for the first quarter of fiscal year 2007 suggests a continuation
    of this upward trend in bid protest fillings.

    1In March 2007, we issued our updated strategic plan covering fiscal years
    2007-2012 to reflect the agenda for the 110th Congress.

    We will be seeking your commitment and support to provide the funding
    needed to increase GAO's staffing level to a to be determined number not
    to exceed 3,750 over the next 6 years in order to address critical needs
    including supply and demand imbalances, high-risk areas, 21st Century
    Challenges questions, and other areas in need of fundamental reform. Also,
    as we get closer to when GAO may be able to render our opinion on the
    consolidated financial statements of the U. S. government and the
    Department of Defense's financial management and related systems, we will
    need to increase our workforce capacity. We will be providing the Congress
    additional information on the basis for and nature of this target later
    this year.

    In addition, should the Congress decide whether and to what extent to
    create a technology assessment capability within the legislative branch,
    it would be more cost beneficial to establish it within GAO than to create
    a new entity with its own support structure. GAO has effectively conducted
    some technology assessments, at the request of the Congress, in part to
    serve as a beta to determine whether GAO might be an appropriate agency to
    do that work. To establish a basic capability to conduct one assessment
    annually, GAO would require four additional full-time staff and funding to
    obtain contract assistance or provide expertise not readily available
    within GAO. For higher demands, additional technology assessment requests
    would require incremental additional resources --depending on economies of
    scale, timing, and scope of work.

    Importantly, as I noted last year, we also plan to request legislation
    that will assist GAO in performing its mission work, and enhance our human
    capital policies, including addressing certain compensation and benefits
    issues of interest to our employees. We plan to submit our proposal to our
    Senate and House authorization and oversight committees in the near
    future.

    My testimony today will focus on key efforts that GAO has undertaken to
    support the Congress, our fiscal year 2006 performance results, our budget
    request for fiscal year 2008 to support the Congress and serve the
    American people, and proposed legislative changes.

    Key Efforts to Support the Congress

    As is the case with each new Congress, we are beginning to have
    discussions with regard to many new requests for GAO's professional,
    objective, fact-based, nonpartisan, and non-ideological information,
    analysis, and recommendations. On November 17, 2006, I was pleased to
    offer three sets of recommendations for your consideration as part of the
    agenda of the 110th Congress. The first recommendation suggests targets
    for near-term oversight; the second proposes policies and programs in need
    of fundamental reform and re-engineering; the third lists governing
    issues. The proposals represent an effort to synthesize GAO's
    institutional knowledge and special expertise and suggest both the breadth
    and the depth of the issues facing the new Congress. We at GAO stand ready
    to assist the 110th Congress in meeting its constitutional
    responsibilities. To be effective, congressional hearings and other
    activities should offer opportunities to share best practices, facilitate
    governmentwide transformation, and promote accountability for delivering
    positive results.

    On January 9, 2007, we presented GAO's assessment of the key oversight
    issues related to Iraq for consideration in developing the oversight
    agenda of the 110th Congress and in analyzing the President's revised
    strategy for Iraq. This assessment was based on our ongoing work and the
    67 Iraq-related reports and testimonies we have provided to the Congress
    since May 2003. Our work spans the security, political, economic, and
    reconstruction prongs of the U.S. national strategy in Iraq. The broad,
    crosscutting nature of this work helps minimize the possibility of overlap
    and duplication by any individual inspector general. Our work has focused
    on the U.S. strategy and costs of operating in Iraq, training and
    equipping the Iraqi security forces, governance and reconstruction issues,
    the readiness of U.S. military forces, and achieving desired acquisition
    outcomes. Our current work draws on our past work and regular site visits
    to Iraq and the surrounding region, such as Jordan and Kuwait. We plan to
    establish a presence in Iraq beginning later this fiscal year to provide
    additional oversight of issues deemed important to the Congress; subject
    to approval by the U.S. Department of State and adequate funding. We have
    requested supplemental fiscal year 2007 funds of $374,000 to support this
    effort.

    In January of this year, we also issued our High-Risk Series: An Update,
    which identifies federal areas and programs at risk of fraud, waste,
    abuse, and mismanagement and those in need of broad-based transformations.
    The issues affecting many of these areas and programs may take years to
    address, and the report will serve as a useful guide for the Congress's
    future programmatic deliberations and oversight activities. Issued to
    coincide with the start of each new Congress, our high-risk update, first
    issued in 1993, has helped Members of the Congress who are responsible for
    oversight and executive branch officials who are accountable for
    performance. Our high-risk program focuses on major government programs
    and operations that need urgent attention or transformation to ensure that
    our government functions in the most economical, efficient, and effective
    manner possible. Overall, our high-risk program has served to identify and
    help resolve a range of serious weaknesses that involve substantial
    resources and provide critical services to the public. Table 1 details our
    2007 high-risk list.

    Table 1: GAO's 2007 High-Risk List

                                                             Year designated high
    2007 high-risk area                                   risk
    Addressing challenges in broad-based transformations
    Strategic Human Capital Managementa                   2001
    Managing Federal Real Propertya                       2003
    Protecting the Federal Government's Information       1997
    Systems and the Nation's Critical Infrastructures
    Implementing and Transforming the Department of       2003
    Homeland Security
    Establishing Appropriate and Effective                2005
    Information-Sharing Mechanisms to Improve Homeland

    Security
    Department of Defense (DOD) Approach to Business      2005
    Transformationa
    DOD Business Systems Modernization                    1995
    DOD Personnel Security Clearance Program              2005
    DOD Support Infrastructure Management                 1997
    DOD Financial Management                              1995
    DOD Supply Chain Management (formerly Inventory       1990
    Management)
    DOD Weapon Systems Acquisition                        1990
    Federal Aviation Administration Air Traffic Control   1995
    Modernization
    Financing the Nation's Transportation Systema (New)   2007
    Ensuring the Effective Protection of Technologies     2007
    Critical to U.S. National Security Interestsa (New)
    Transforming Federal Oversight of Food Safetya (New)  2007
    Managing federal contracting more effectively
    DOD Contract Management                               1992
    Department of Energy Contract Management              1990
    National Aeronautics and Space Administration         1990
    Contract Management
    Management of Interagency Contracting                 2005
    Assessing the efficiency and effectiveness of tax law
    administration
    Enforcement of Tax Lawsa                              1990
    Internal Revenue Service (IRS) Business Systems       1995
    Modernization
    Modernizing and safeguarding insurance and benefit
    programs
    Modernizing Federal Disability Programsa              2003
    Pension Benefit Guaranty Corporation Single-Employer  2003
    Insurance Programa
    Medicare Programa                                     1990
    Medicaid Programa                                     2003
    National Flood Insurance Program                      2006

    Source: GAO.

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

    In February of this year, we issued a new publication entitled Fiscal
    Stewardship: A Critical Challenge Facing Our Nation that is designed to
    provide the Congress and the American public, in a relatively brief and
    understandable form, selected budget and financial information regarding
    our nation's current financial condition, long-term fiscal outlook, and
    possible ways forward. In the years ahead, our support to the Congress
    will likely prove even more critical because of the pressures created by
    our nation's current and projected budget deficit and growing long-term
    fiscal imbalance. Indeed, as the Congress considers those fiscal
    pressures, it will be grappling with tough choices about what government
    does, how it does business, and who will do the government's business. GAO
    is an invaluable tool for helping the Congress review, reprioritize, and
    revise existing mandatory and discretionary spending programs and tax
    policies.

    In addition, I have participated in a series of town hall forums around
    the nation to discuss the federal government's current financial condition
    and deteriorating long-term fiscal outlook, including the challenges posed
    by known long-term demographic trends and rising health care costs. These
    forums, popularly referred to as the "Fiscal Wake-up Tour," are led by the
    Concord Coalition and also include the Heritage Foundation, the Brookings
    Institution, and a range of "good government" groups. The Fiscal Wake-up
    Tour states the facts regarding the nation's current financial condition
    and long-term fiscal outlook in order to increase public awareness and
    accelerate actions by appropriate federal, state, and local officials.

    Performance, Results, and Plans

    We anticipate that the funds requested for fiscal year 2008 will support
    efforts similar to those just completed in fiscal year 2006. The following
    discussions summarize that work.

    In fiscal year 2006, major events like the nation's recovery from natural
    disasters, ongoing military conflicts abroad, terrorist threats, and
    potential pandemics repeatedly focused the public eye 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 performed 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 was 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 fiscal year 2006 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.

    The following tables provide summary information on GAO's fiscal year 2006
    performance and the results achieved in support of the Congress and the
    American people. Additional information on our performance results can be
    found in Performance and Accountability Highlights Fiscal Year 2006 at
    www.gao.gov.

    Table 2 provides examples of how GAO assisted the nation in fiscal year
    2006.

    Table 2: Examples of How GAO Assisted the Nation in Fiscal Year 2006

                                            GAO provided information that helped
    Goal Description                     to...
    1    Provide timely, quality service    o protect Social Security numbers
            to the Congress and the federal    from abuse
            government to address current      o ensure the effectiveness of
            and emerging challenges to the     federal investments in science,
            well-being and financial           technology, engineering, and
            security of the American people    mathematics education programs
                                               o identify actions needed to
                                               improve Federal Emergency
                                               Management Agency and Red Cross
                                               coordination for the 2006
                                               hurricane season
                                               o highlight weaknesses in the
                                               Department of Health and Human
                                               Services' communications with
                                               beneficiaries about the new
                                               Medicare prescription drug benefit
                                               o identify funding formula and
                                               drug pricing disparities in the
                                               federal AIDS/HIV program
                                               o strengthen the oversight of
                                               clinical laboratories
                                               o identify challenges the
                                               Department of Homeland Security
                                               faces in controlling illegal
                                               immigration into the United States
                                               o assess the thoroughness of the
                                               federal fair housing complaint and
                                               investigation processes
                                               o improve the management of
                                               federal oil and natural gas
                                               royalty revenue
                                               o develop a strategy for managing
                                               wildfires
                                               o focus on the short- and
                                               long-term challenges of financing
                                               the nation's transportation
                                               infrastructure
                                               o identify outdated mail delivery
                                               performance standards used by the
                                               U.S. Postal Service
    2    Provide timely, quality service    o identify current and future
            to the Congress and the federal    funding and cost issues related to
            government to respond to           DOD operations in Iraq and
            changing security threats and      Afghanistan
            the challenges of global           o highlight inefficiencies that
            interdependence                    could hinder DOD's efforts to
                                               reform its business operations
                                               o improve controls over the
                                               issuance of passports and visas
                                               and increase fraud prevention
                                               o improve catastrophic disaster
                                               preparedness, response, and
                                               recovery
                                               o improve the ability of federal
                                               agencies to cost effectively
                                               acquire goods and services
                                               o improve the management of
                                               payments to U.S. producers injured
                                               financially by unfairly traded
                                               imports
                                               o alert the Congress to companies
                                               that are marketing costly mutual
                                               fund products with low returns to
                                               military service members
                                               o identify steps needed to
                                               overhaul investment and management
                                               processes supporting major DOD
                                               acquisitions
                                               o improve security at nuclear
                                               power plants
                                               o improve the Department of
                                               Homeland Security's ability to
                                               detect nuclear smuggling at U.S.
                                               ports
                                               o promote government efforts to
                                               secure sensitive systems and
                                               information
                                               o highlight the cost concerns of
                                               small public companies that must
                                               comply with internal control and
                                               auditing provisions of the
                                               Sarbanes-Oxley Act
    3    Help transform the federal         o improve congressional oversight
            government's role and how it       of the process for reviewing
            does business to meet 21st         foreign direct investment
            century challenges                 o strengthen DOD's information
                                               systems modernization efforts
                                               o highlight serious technical and
                                               cost challenges affecting the
                                               purchase of a critical weather
                                               satellite
                                               o highlight key practices federal
                                               agencies should adopt to prevent
                                               data breaches and better protect
                                               the personal information of U.S.
                                               citizens
                                               o monitor the development of the
                                               2010 decennial census
                                               o identify strategies to reduce
                                               the gap between the taxes citizens
                                               pay and the taxes actually owed
                                               o focus attention on the revenue
                                               consequences of tax expenditures
                                               o identify fraud, waste, and abuse
                                               in a component of the Federal
                                               Emergency Management Agency's
                                               disaster assistance program
                                               o emphasize the importance of
                                               reliable cost information for
                                               improving governmentwide cost
                                               efficiency
                                               o expose government contractors
                                               who used for personal gain federal
                                               payroll taxes withheld from their
                                               employees
    4    Maximize the value of GAO by       o foster among other federal
            being a model federal agency       agencies GAO's innovative human
            and a world-class professional     capital practices, such as broad
            services organization              pay bands; performance-based
                                               compensation; and workforce
                                               planning and staffing strategies,
                                               policies, and processes
                                               o share GAO's model business and
                                               management processes with
                                               counterpart organizations in the
                                               United States and abroad

    Source: GAO.

    Outcomes of Our Work and the Road Ahead

    During fiscal year 2006, we used 16 annual performance measures that
    capture the results of our work; the assistance we provided to the
    Congress; our ability to attract, retain, develop, and lead a highly
    professional workforce; and how well our internal administrative services
    help employees get their jobs done and improve their work life (see table
    3). We generally exceeded the targets we set for all of our performance
    measures, which indicate our ability to produce results for the nation and
    serve the Congress.

    Table 3: Agencywide Summary of Annual Measures and Targets

    Performance                                        2005   2006              2008
    measures        2002Actual 2003Actual 2004Actual Actual Actual 2007Target Target
    Results
    Financial            $37.7      $35.4      $44.0  $39.6  $51.0      $40.0  $41.5
    benefits
    (dollars in
    billions)
    Nonfinancial           906      1,043      1,197  1,409  1,342      1,100  1,150
    benefits
    Past                   79%        82%        83%    85%    82%        80%    80%
    recommendations
    implemented
    New products           53%        55%        63%    63%    65%        60%    60%
    with
    recommendations
    Client
    Testimonies            216        189        217    179    240        185    220
    Timeliness             96%        97%        97%    97%    92%        95%    95%
    People
    New hire rate          96%        98%        98%    94%    94%        95%    95%
    Acceptance rate        81%        72%        72%    71%    70%        72%    72%
    Retention rate         91%        92%        90%    90%    90%        90%    90%
    with
    retirements
    Retention rate         97%        96%        95%    94%    94%        94%    94%
    without
    retirements
    Staff                  71%        67%        70%    72%    76%        75%    76%
    development
    Staff                  67%        71%        72%    75%    75%        78%    78%
    utilization
    Leadership             75%        78%        79%    80%    79%        80%    80%
    Organizational         67%        71%        74%    76%    73%        76%    76%
    climate
    Internal
    operations
    Help get job           N/A       3.98       4.01   4.10    4.1        4.0    4.0
    done
    Quality of work        N/A       3.86       3.96   3.98    4.0        4.0    4.0
    life

    Source: GAO.

    Note: N/A indicates the information is not available.

    In fiscal year 2006, our work generated $51 billion in financial benefits,
    primarily from actions agencies and the Congress took in response to our
    recommendations. Of this amount, about $27 billion resulted from changes
    to laws or regulations, $10 billion resulted from agency actions based on
    our recommendations to improve services to the public, and $14 billion
    resulted from improvements to core business processes. See figure 2 for
    examples of our fiscal year 2006 financial benefits.

    Figure 2: GAO's Selected Major Financial Benefits Reported in Fiscal Year
    2006

    Description                                                         Amount
    Ensured continued monetary benefits from federal spectrum auctions.   $6.1
    Encouraged DOD to identify and reduce unobligated funds in the         3.9
    military services' operations and maintenance budget.
    Recommended payment methods that cut Medicare costs for durable        2.9
    medical equipment, orthotics, and prosthetics.
    Helped to ensure that certain U.S. Postal Service                      2.2
    retirement-related benefits would be funded.
    Identified recoverable costs for the Tennessee Valley Authority.       1.8
    Helped to increase collections of civil debt.                          1.6
    Encouraged the Department of Housing and Urban Development to take     1.4
    actions to reduce improper payments.
    Supported the Department of Energy's efforts to reduce its             1.2
    carryover funds.

    Source: GAO.

    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. For example, we documented 61 instances where
    information we provided to the Congress resulted in statutory or
    regulatory changes, 667 instances where federal agencies improved services
    to the public, and 614 instances where agencies improved core business
    processes or governmentwide reforms were advanced. These actions spanned
    the full spectrum of national 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. See figure 3 for additional
    examples of GAO's nonfinancial benefits in fiscal year 2006.

    Figure 3: 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.

          o Strengthened Medicaid program integrity.
          o Improved oversight of the states' performance under the Temporary
          Assistance for Needy Families program.
          o Addressed domestic violence.
          o Improved oversight of schools that are lenders.
    Safe and Timely Interstate Placement of Foster Children Act of 2006, Pub.
    L. No. 109-239
    Nonfinancial benefits that helped to improve services to the public
    Strengthened passport and visa issuance processes.
    Identified vulnerabilities in the process to verify personal information
    about new drivers.
    Contributed to the increased visibility of a transportation information
    sharing program for seniors.
    Identified a problem with untimely pay allowances to deployed soldiers.
    Nonfinancial benefits that helped to promote sound agency and
    governmentwide management
    Improved the quality of federal voluntary voting system standards.
    Highlighted weaknesses in the Federal Aviation Administration's control
    over computers and other assets.
    Strengthened oversight of federal personnel actions.
    Encouraged federal agencies to seek savings on purchase cards.
    Identified improper payments in DOD's travel accounts.

    Source: GAO.

    During fiscal year 2006, experts from our staff testified at 240
    congressional hearings covering a wide range of complex issues (see table
    4). For example, our senior executives testified on a variety of issues,
    including freight rail rates, AIDS assistance programs, and federal
    contracting. Over 100 of the hearings at which we testified were related
    to areas and programs we designated as high risk.

    Table 4: GAO's Selected Testimony Issues by Strategic Goal, Fiscal Year
    2006

    Goal 1: Address Challenges to the Well-Being and Financial Security of the
    American People
          o Health savings       o Nursing home care      o Hartford nuclear
          accounts               for veterans             waste treatment plant
          o Guardianships        o Passenger rail         o Evaluations of
          that protect           security issues          supplemental
          incapacitated          o Freight railroad       educational services
          seniors                rates                    o Factors affecting
          o Lake                 o AIDS drug              gasoline prices
          Pontchartrain          assistance programs      o Telecommunication
          hurricane              o Federal Housing        spectrum reform
          protection project     Administration           o H-1B visa program
          o Funds to first       reforms                  o Federal crop
          responders for 9/11    o Improving              insurance program
          health problems        intermodal
          o Immigration          transportation
          enforcement at work
          o sites
          o Future air
          transportation
          system
    Goal 2: Respond to Changing Security Threats and the Challenges of
    Globalization
          o A comprehensive      o Alternative            o Polar-orbiting
          strategy to rebuild    mortgage products        operational
          Iraq                   o Global war on          environmental
          o Deploying            terrorism costs          satellites
          radiation detection    o Transportation         o Worldwide AIDS relief
          equipment in other     Security                 plan
          countries              Administration's         o Financial stability
          o Protecting           Secure Flight program    and management of the
          military personnel     o DOD's business         National Flood
          from unscrupulous      systems modernization    Insurance Program
          financial products     o U.S. tactical          o Information security
          o Sensitive            aircraft                 laws
          information at DOD     o National Capital       o Procurement controls
          and the Department     Region Homeland          at the United Nations
          of Energy              Security Strategic
          o Hurricane Katrina    Plan
          preparedness,
          response, and
          recovery
    Goal 3: Help Transform the Federal Government's Role and How It Does
    Business
          o Contract             o Improving tax          o Strengthening the
          management             compliance to reduce     Office of Personnel
          challenges in          the tax gap              Management's ability to
          rebuilding Iraq        o Protecting the         lead human capital
          o DOD's financial      privacy of personal      reform
          and business           information              o Public/private
          management             o DOD acquisition        recovery plan for the
          transformation         incentives               Internet
          o Business tax         o Decennial Census       o Tax system abuses by
          reform                 costs                    General Services
          o Astronaut            o Information            Administration
          exploration vehicle    security weaknesses      contractors
          risks                  at the Department of     o Compensation for
          o Improving federal    Veterans Affairs         federal executives and
          financial              o Improper federal       judges
          management             payments for
          governmentwide         Hurricane Katrina
          o Long-term fiscal     relief
          challenges
          o Federal
          contracting during
          disasters

    Source: GAO.

    GAO's Fiscal Year 2008 Request to Support the Congress

    Our fiscal year 2008 budget request seeks the resources necessary to allow
    GAO to rebuild and enhance its workforce, knowledge capacity, employee
    programs, and infrastructure. These items are critical to ensure that GAO
    can continue to provide congressional clients with timely, objective, and
    reliable information on how well government programs and policies are
    working and, when needed, recommendations for improvement. In the years
    ahead, our support to the Congress will likely prove even more critical
    because of the pressures created by our nation's current and projected
    budget deficit and growing long-term fiscal imbalance. GAO is an
    invaluable tool for helping the Congress review, reprioritize, and revise
    existing mandatory and discretionary spending programs and tax policies.

    Consistent with our strategic goal to be a model agency, we continuously
    assess our operations to ensure that GAO remains an effective,
    high-performing organization, providing timely, critical support to the
    Congress while being fiscally responsive. Our objective is to be an
    employer of choice; maintain skills/knowledge, performance-based, and
    market-oriented compensation systems; adopt best practices; benchmark
    service levels and costs against comparable entities; streamline our
    operations to achieve efficiencies; assess opportunities for
    cross-servicing, outsourcing, or business process re-engineering; and
    leverage technology to increase efficiency, productivity, and results. We
    also continue to partner within and across the legislative branch through
    the legislative branch Chief Administrative Officers, financial
    management, and procurement councils.

    Transformational change and innovation is essential for progress. Our
    fiscal year 2008 budget request includes funds to regain the momentum
    needed to achieve these goals. Our fiscal year 2008 budget request will
    allow GAO to

               o address supply and demand imbalances in responding to
               congressional requests for studies in areas such as health care,
               homeland security, the global "war on terrorism," energy and
               natural resources, and forensic auditing;
               o address our increasing bid protest workload;
               o be more competitive in the labor markets where GAO competes for
               talent;
               o address critical human capital components, such as knowledge
               capacity building, succession planning, and staff skills and
               competencies;
               o enhance employee recruitment, retention, and development
               programs;
               o restore program funding levels and regain our purchasing power;
               o undertake critical initiatives necessary to continuously
               re-engineer processes geared to increasing our productivity and
               effectiveness and addressing identified management challenges; and
               o pursue critical structural and infrastructure maintenance and
               improvements.

               Our fiscal year 2008 budget request represents an increase of
               $41.7 million (or 8.5 percent) over our fiscal year 2007 funding
               level and includes about $523 million in direct appropriations and
               authority to use about $7.5 million in offsetting collections as
               illustrated in table 5. This request reflects a reduction of
               nearly $5.4 million in nonrecurring fiscal year 2007 costs used to
               offset the fiscal year 2008 increase.

               Table 5: Fiscal Year 2008 Budget Request, Summary of Requested
               Changes

    Dollars in thousands
                                                                       Cumulative
    Budget category                         FTEs   Amount percentage of change
    FY 2007 enacted budget authority       3,159 $488,627
    FY 2008 requested changes
    Nonrecurring FY 2007 costs                   ($5,374)               (1.1%)
    Mandatory pay costs                            19,841                 3.0%
    Uncontrollable cost increases                   5,079                 4.0%
    Rebuild our capacity                      58   14,826                 7.0%
    Critical investments in technology
    improvements and other
    transformationareas                             7,314                 8.5%
    Net FY 2008 increase                      58  $41,686                 8.5%
    FY 2008 budget authority               3,217 $530,313

               Source: GAO.

               Mandatory pay and uncontrollable cost increases. We are requesting
               $24.9 million to cover anticipated mandatory performance-based pay
               and uncontrollable inflationary increases resulting primarily from
               annual across-the-board and performance-based increases,
               annualization of prior fiscal year costs, and an increase in the
               number of compensable days in fiscal year 2008. These costs also
               include uncontrollable inflationary increases imposed by vendors
               as the cost of doing business.

               Rebuilding our capacity. Our fiscal year 2007 budget request
               sought funds to support an increase of 50 FTEs from 3,217 to
               3,267. However, in order to manage within expected funding levels
               in fiscal year 2007, we will significantly curtail hiring by about
               50 percent below the previous year, resulting in a projected FTE
               utilization of 3,159--well below our planned level. In fiscal
               years 2007 and 2008, we anticipate attrition of over 600 staff
               that will result in a significant drain on GAO's knowledge
               capacity or institutional memory. Further, almost 20 percent of
               all GAO staff will be eligible for retirement by the end of fiscal
               year 2008, including almost 45 percent of our senior executive
               service.

               Thus, in fiscal year 2008, we are seeking funds to rebuild our
               staff and knowledge capacity. In fiscal year 2008, we plan to hire
               about 490 staff--the maximum that we could reasonably
               absorb--increasing our FTE utilization to 3,217. While we are
               tempering our immediate FTE request, increasingly higher demands
               are being placed on GAO. We are experiencing supply and demand
               imbalances in several areas of critical importance to the Congress
               (e.g., health care, homeland security, and energy and natural
               resources). We have also seen an increase in the number of bid
               protest filings.

               Also, to remain competitive in the labor markets, we need to
               increase employee benefits in areas such as student loan
               repayments and transit subsidies where funding constraints in
               fiscal year 2007 limit our flexibility. For example, effective in
               January 2007, the IRS increased the monthly benefit for transit
               subsidies for eligible employees who commute using public
               transportation. GAO, however, is unable to extend this increased
               benefit to staff.

               In addition, we need to ensure that staff have the appropriate
               tools and resources to perform effectively, including training and
               development, travel funds, and technology. And when our staff
               perform well, they should be appropriately rewarded.

               Undertake critical investments. We are requesting funds to
               undertake critical investments that would allow us to implement
               technology improvements and streamline and re-engineer work
               processes to enhance the productivity and effectiveness of our
               staff, conduct essential investments that have been deferred as
               the result of funding constraints and cannot continue to be
               deferred, and implement responses to changing federal conditions,
               such as smart card technology. Also, during recent years, we
               reduced, deferred, and slowed the pace of critical upgrades (e.g.,
               engagement and administrative process upgrades) and deferred
               nonessential administrative activities. In fiscal year 2008, we
               would like to have sufficient funding to take action to protect
               our current investments and continue to be a model agency and lead
               by example.

               Legislative authority. We are requesting legislation to establish
               a Board of Contract Appeals at GAO to adjudicate contract claims
               involving contracts awarded by legislative branch agencies. GAO
               has performed this function on an ad hoc basis over the years for
               appeals of claims from decisions of the Architect of the Capitol
               on contracts that it awards. Recently we have agreed to handle
               claims arising under Government Printing Office contracts. The
               legislative proposal would promote efficiency and predictability
               in the resolution of contractor and agency claims by consolidating
               such work in an established and experienced adjudicative component
               of GAO and would permit GAO to recover its costs of providing such
               adjudicative services from legislative branch users of such
               services.

               We also plan to request legislation that will assist GAO in
               performing its mission work and enhance our human capital
               policies, including addressing certain compensation and benefits
               issues of interest to our employees. While there are a number of
               important provisions, today I will only discuss several of the
               significant ones. Regarding provisions concerned with mission
               work, we have identified a number of legislative mandates that are
               either no longer meeting the purpose intended or should be
               performed by an entity other than GAO. We are working with the
               cognizant entities and the appropriate authorization and oversight
               committees to discuss the potential impact of legislative relief
               for these issues.

               Another provision would update the existing authority of the
               Comptroller General to administer oaths when appropriate for an
               audit or investigation. The Comptroller General has long had the
               authority to "administer oaths to witnesses when auditing and
               settling accounts".2 Because of the variety of audits and
               investigations GAO now performs, we propose the deletion of "when
               auditing and settling accounts" so that in those limited
               circumstances where appropriate, the Comptroller General may
               authorize the administration of oaths to witnesses. To keep the
               Congress apprized of difficulties we have interviewing agency
               personnel and obtaining agency views on matters related to ongoing
               mission work, we will suggest new reporting requirements. When
               agencies or other entities ignore a request by the Comptroller
               General to have personnel provide information under oath, make
               personnel available for interviews, or provide written answers to
               questions, the Comptroller General would report to the Congress as
               soon as practicable and also include such information in the
               annual report to the Congress.

    231 U.S.C. 711(4).

               In regard to GAO's human capital flexibilities, among other
               provisions, we are proposing a flexibility that allows us to
               better approximate market rates for professional positions by
               increasing our maximum pay for other than the Senior Executive
               Service and Senior Level from GS-15, step 10, to Executive Level
               III. Additionally, under our revised and contemporary merit pay
               system, certain portions of an employee's merit increase, below
               applicable market-based pay caps, are not permanent. Since this
               may impact an employee's high three for retirement purposes,
               another key provision of the bill would enable these nonpermanent
               payments to be included in the retirement calculation for all GAO
               employees, except senior executives and senior level personnel.

    		   Concluding Remarks

               In summary, I believe that you will find our budget request
               reasonable, responsible, and well-justified given the important
               role that GAO plays and the unparalleled return on investment that
               GAO generates. We are grateful for the Congress's continued
               support of our mutual effort to improve government and for
               providing the resources that allow us to be a world-class
               professional services organization. We are proud of our record
               performance and the positive impact we have been able to effect in
               government over the past year and believe an investment in GAO
               will continue to yield substantial returns for the Congress and
               the American people. Our nation will continue to face significant
               challenges in the years ahead. GAO's expertise and involvement in
               virtually every facet of government positions us to provide the
               Congress with the timely, objective, and reliable information it
               needs to discharge its constitutional responsibilities.

               Madam Chair and Members of the Subcommittee, this concludes my
               prepared statement. At this time, I would be pleased to answer any
               questions that you or other Members of the Subcommittee may have.

    		   GAO�s Mission

               The Government Accountability Office, the audit, evaluation and
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