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.
		   
		   GAOï¿½s Mission

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