GAO Performance and Accountability Report Fiscal Year 2007	 
(15-NOV-07, GAO-08-1SP).					 
                                                                 
Presented is GAO's performance and accountability report for	 
fiscal year 2007. In the spirit of the Government Performance and
Results Act, this annual report informs the Congress and the	 
American people about what we have achieved on their behalf. The 
financial information and the data measuring GAO's performance	 
contained in this report are complete and reliable.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-1SP 					        
    ACCNO:   A78170						        
  TITLE:     GAO Performance and Accountability Report Fiscal Year    
2007								 
     DATE:   11/15/2007 
  SUBJECT:   Accountability					 
	     Agency missions					 
	     Auditing standards 				 
	     Performance measures				 
	     Strategic planning 				 

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GAO-08-1SP

   

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GAO: 

Performance And Accountability Report: 

Fiscal Year 2007: 

Serving the Congress and the Nation: 

United States Government Accountability Office: 

Accountability * Integrity * Reliability: 

[See PDF for Image] - graphic text: 

Serving the Congress: 

Mission: 

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

Accountability: 

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

Integrity: 

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

Reliability: 

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

Scope Of Work: 

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

Source: GAO. 

[End of Figure] 

Table of Contents: 

Abbreviations: 

How to Use This Report: 

Introduction: 

From the Comptroller General: 

Financial Reporting Assurance Statements: 

About GAO: 

Mission: 

Strategic Planning Management Process: 

Organizational Structure: 

How We Measure Our Performance: 

Part I: Management's Discussion and Analysis: 

Promoting a Transparent and Accountable Government by Providing Fact- 
Based, Objective Information to the Congress and the Public: 

Focusing on Results: 

Focusing on Our Client: 

Focusing on Our People: 

Focusing on Our Internal Operations: 

Building and Sustaining Partnerships: 

GAO's High-Risk Program: 

General Counsel Decisions and Other Legal Work: 

Managing Our Resources: 

Strategies for Achieving Our Goals: 

Internal Management Challenges and Mitigating External Factors That 
Could Affect Our Performance: 

Part II: Performance Information: 

Performance Information by Strategic Goal: 

Goal 1 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 2 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 3 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 4 Overview: 

Data Quality and Program Evaluation: 

Verifying and Validating Performance Data: 

Program Evaluation: 

Part III: Financial Information: 

From the Chief Financial Officer: 

Overview of Financial Management and Controls 100: 

Financial Systems and Internal Controls: 

Audit Advisory Committee's Report: 

Independent Auditor's: 

Notes to Financial Statements: 

Part IV: From the Inspector General: 

From the Inspector General: 

Part V: Appendixes: 

1. Accomplishments and Contributions: 

2. GAO's Report on Personnel Flexibilities: 

3. GAO's FISMA Efforts: 

Image Sources: 

Providing Comments on This Report: 

Obtaining Copies of GAO Documents: 

[End of Table of Contents] 

Abbreviations: 

ACF: Administration for Children and Families: 

BEA: business enterprise architecture: 

BMDS: Ballistic Missile Defense System: 

CAO: Chief Administrative Officer and Chief Administrative Office: 

CBO: Congressional Budget Office: 

CBP: Customs and Border Protection: 

CDP: collection due process: 

CFO: Chief Financial Officer: 

CMS: Centers for Medicare & Medicaid Services: 

DHS: Department of Homeland Security: 

DI: disability insurance: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOT: Department of Transportation: 

DTV: digital television: 

EAC: Employee Advisory Council: 

EAS: Emergency Alert System: 

EBT: electronic benefit transfer: 

EEOC: Equal Employment Opportunity Commission: 

EPA: Environmental Protection Agency: 

ERMS: Electronic Records Management System: 

FAA: Federal Aviation Administration: 

FAS: Financial Audit System: 

FBI: Federal Bureau of Investigation: 

FDA: Food and Drug Administration: 

FCC: Federal Communications Commission: 

FCS: Future Combat System: 

FEMA: Federal Emergency Management Agency: 

FFMIA: Federal Financial Management Improvement Act: 

FHA: Federal Housing Administration: 

FICA: Federal Insurance Contributions Act: 

FISMA: Federal Information Security Management Act: 

FMFIA: Federal Managers' Financial Integrity act: 

FOIA: Freedom of Information Act: 

FSI: Forensic Audits and Special Investigations: 

FTA: Federal Transit Administration: 

FTE: full-time equivalent: 

FWS: Federal Wage System: 

GAO: Government Accountability Office: 

GOES-R: Geostationary Operational Environment Satellite-R series: 

GS: General Schedule: 

HHS: Department of Health and Human Services: 

HUD: Department of Housing and Urban Development: 

IDP: individual development plan: 

IED: improvised explosive device: 

IESS: Integrated Electronic Security System: 

IG: Inspector General: 

IFPTE: International Federation of Professional and Technical 
Engineers: 

HIP: Individual and Households Program: 

INTOSAI: International Organization of Supreme Audit Institutions: 

IRS: Internal Revenue Service: 

IS: information security: 

ISTS: Information Systems and Technology Services: 

IT: information technology: 

LEP: limited English proficiency: 

MCA: managerial cost accounting: 

MCC: Millennium Challenge Corporation: 

MDA: Missile Defense Agency: 

MSA: Metropolitan statistical areas: 

NASA: National Aeronautics and Space Administration: 

NCMEC: National Center for Missing and Exploited Children: 

NextGen: Next Generation Air Transportation System: 

NFC: National Finance Center: 

NIST: National Institute of Standards and Technology: 

NPOESS: National Polar-Orbiting Operational Environment Satellite 
System: 

NRC: Nuclear Regulatory Commission: 

NSPS: National Security Personnel System: 

O&M: operations and maintenance: 

OASI: Old Age and Survivors Insurance: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

PBC: performance-based compensation: 

PBGC: Pension Benefit Guaranty Corporation: 

PCA: private collection agency: 

PEO: Program Executive Office: 

PIN: personal identification number: 

PPA: Pension Protection Act of 2006: 

PRISM: Program Review Instrument for Systems Monitoring: 

PT: program and technical: 

QCI: Quality and Continuous Improvement: 

QDR: Quadrennial Defense Review: 

SAN: storage area network: 

SBA: Small Business Administration: 

SBI: Secure Border Initiative: 

SCHIP: State Children's Health Insurance Program: 

SEC: Securities and Exchange Commission: 

SLI: Space Launch Initiative: 

SNF: skilled nursing facility: 

SSA: Social Security Administration: 

SSI: Supplemental Security Income: 

SSN: Social Security number: 

TAP: Transition Assistance Program: 

TSA: Transportation Security Administration: 

TSCA: Toxic Substances Control Act: 

TSP: Thrift Savings Plan: 

UN: United Nations: 

USACE: U.S. Army Corps of Engineers: 

USAID: U.S. Agency for International Development: 

USDA: United States Department of Agriculture: 

USPS: United States Postal Service: 

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

VA: Department of Veterans Affairs: 

[End of Abbreviations] 

How to Use This Report: 

This report describes the U.S. Government Accountability Office's (GAO) 
performance measures, results, and accountability processes for fiscal 
year 2007. In assessing our performance, we compared actual results 
against targets and goals that were set in our annual performance plan 
and performance budget and were developed to help carry out our 
strategic plan. Our complete set of strategic planning and performance 
and accountability reports is available on our Web site at [hyperlink, 
http://www.gao.gov/sp.html]. 

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

Introduction: 

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

Management's Discussion and Analysis: 

This section discusses our agencywide performance results and use of 
resources in fiscal year 2007. It also includes information on the 
strategies we use to achieve our goals and the management challenges 
and external factors that affect our performance. 

Performance Information: 

This section includes details on our performance results by strategic 
goal in fiscal year 2007 and the targets we are aiming for in fiscal 
year 2008. It also includes an explanation of how we ensure the 
completeness and reliability of the performance data used in this 
report. 

Financial Information: 

This section includes details on our finances in fiscal year 2007, 
including a letter from our Chief Financial Officer, audited financial 
statements and notes, and the reports from our external auditor and 
audit advisory committee. This section also includes information on our 
internal controls and an explanation of the kind of information each of 
our financial statements conveys. 

From the Inspector General: 

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

Appendixes: 

These sections include detailed write-ups about our most significant 
accomplishments and contributions recorded in fiscal year 2007 and 
information on certain human capital management flexibilities and on 
information security management efforts. 

[End of How to Use This Report] 

Introduction: From the Comptroller General: 

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

Source: GAO. 

[End of Figure] 

November 15, 2007: 

I am pleased to present our performance and accountability report for 
fiscal year 2007. We accomplished a great deal for the Congress and the 
American people with the resources we received. We continued to focus 
our efforts on increasing the transparency, efficiency, and 
accountability of federal operations by giving the Congress and the 
public the information they need to ensure that the federal government 
makes prudent decisions now and in the future. We performed our work in 
accordance with our strategic plan for serving the Congress, guided by 
our core values, and consistent with applicable professional standards. 
You can be assured that the information in this report is complete and 
reliable and meets our high standards. 

In fiscal year 2007 we exceeded the targets for five of our six key 
performance measures--financial benefits, nonfinancial benefits, past 
recommendations implemented, new products with recommendations, and 
testimonies--that gauge how well we produced results and served our 
client, the Congress. With this level of performance we were able to 
achieve a return on investment for the American people of about $94 for 
every dollar the Congress gave us. Specifically, we recorded $45.9 
billion in financial benefits from our work and 1,354 nonfinancial 
benefits, which helped improve government operations and better serve 
the public. We also documented that the Congress and federal agencies 
implemented 82 percent of the recommendations we made 4 years ago and 
that 66 percent of the new products we issued during the fiscal year 
contained recommendations that in time should have a positive impact on 
the efficiency and effectiveness of the federal government. Moreover, 
this was a banner year for us in testimonies. Our senior executives and 
I delivered testimonies at 276 hearings, 36 more hearings than in 
fiscal year 2006. In fact, our performance on this measure is the 
fourth highest over the last 25 years and an all-time high for us on a 
per capita basis. Though we issued our products on time 94 percent of 
the time, we fell short on our timeliness measure by 1 percentage 
point, just shy of our 95 percent target. 

We also met or exceeded five of the eight targets we set for our people 
measures--new hire rate, acceptance rate, retention rate with 
retirements, retention rate without retirements, and staff development. 
While these measures were largely similar to last year's results, we 
missed the performance targets for staff utilization, leadership, and 
organizational climate by 5 percentage points or less in spite of the 
challenges we faced internally. These challenges included meeting tight 
deadlines and being responsive to our clients when demand for our work 
was extremely high and budgetary and staffing resources were extremely 
constrained. During fiscal year 2007, we also had to manage a large 
workload in the wake of significant human capital transformation 
efforts and other changes within our agency, including a union 
organizing campaign. 

While supporting the Congress's oversight efforts with more than 1,200 
reports and testimonies we issued during the fiscal year, in November 
2006, we sent a letter to the incoming leadership of the new Congress 
suggesting three dozen areas for additional oversight. In addition, we 
welcomed the new congressional Members in January with several special 
publications to help them make the transition to their responsibilities 
as stewards of the federal purse. All of these publications--Fiscal 
Stewardship: A Critical Challenge Facing Our Nation (GAO-07-362SP, 
January 2007); Understanding Similarities and Differences between 
Accrual and Cash Deficits (GAO-07-117SP, December 2006); and 
Understanding the Primary Components of the Annual Financial Report of 
the United States Government (GAO-05-958SP, September 2005)--are 
available through our Web site at [hyperlink, http://www.gao.gov]. 
Though we received a clean opinion on our own financial statements, the 
federal government's books are not yet in order and will require 
focused leadership and sustained attention to get them there, 
especially in connection with the Department of Defense. 

The Congress needs information to make sound judgments that will 
benefit this nation in the short term and over the long run. Thus, to 
further assist our client with its oversight function and aid its 
insight and foresight, we revised our list of federal programs and 
areas at risk of fraud, waste, abuse, and mismanagement and in need of 
broad-based transformation and issued our biennial report card called 
High-Risk Series: An Update (GAO-07-310, January 2007). We continue to 
do this work to bring visibility and urgency to these areas and to 
prompt needed actions sooner rather than later. I also continued to 
speak around the country about the fiscal condition and long-term 
fiscal outlook of our country as part of the Fiscal Wake-Up Tour 
sponsored by the Concord Coalition--a nationwide, nonpartisan, 
grassroots organization dedicated to educating the public about the 
consequences of fiscal deficits and promoting a generationally 
responsible fiscal policy. The tour also involves the Brooking 
Institution and the Heritage Foundation and a range of other 
organizations. To date, the tour has held events in 24 states and the 
District of Columbia reaching thousands of people. The purpose of this 
effort is to state the facts and speak the truth about the fiscal 
challenges that this country faces if we continue to do business in the 
same way, increase public awareness about the consequences, and help 
create the impetus and support for appropriate federal, state, and 
local officials to take much needed and long overdue action. 

Closer to home, we updated our strategic plan to guide our own actions 
in the near future and ensure that we have the foresight needed to 
support the Congress. Our strategic plan includes bodies of work that 
address anticipated requests for evaluations of current and emerging 
issues and anticipated work related to government transformation 
efforts, especially in the areas of homeland security and defense. 
Seven broad themes provide the context for our strategic plan and we 
describe them in detail in Forces That Will Shape America's Future: The 
Themes from GAO's Strategic Plan (GAO-07-467SP, March 2007). We believe 
these themes will shape the many requests and mandates we expect to 
receive from the Congress over the next 3 years as well as the work we 
plan to do under my statutory authority as Comptroller General of the 
United States. 

An effective, transparent government requires a first-rate workforce 
and one of our agencywide goals is to create a model federal agency and 
world-class professional services organization. We want to continue to 
attract staff from a variety of disciplines who can gather the facts 
and develop innovative solutions to both old and new problems 
challenging the federal government. Thus, in fiscal year 2007 we 
improved our recruiting and hiring practices by clarifying our hiring 
goals and making it a priority to aggressively recruit at select 
colleges and universities. We also instituted an executive exchange 
program to help us tap talent outside of the federal government for 
short-term projects. In addition, we began a professional development 
program for entry-level administrative and professional support staff 
(similar to our development program for analyst staff), initiated a 
formal mentoring program, and continued to support employees working 
flexible schedules and telecommuting to help them balance the demands 
of work and home. I am very proud to say that we rated second among 
large federal agencies on the Partnership for Public Service's list of 
the Best Places to Work in the Federal Government for 2007, up from 
fourth place in 2005. Furthermore, in September 2007 we were named as 
one of Washington's top 60 employers by Washingtonian magazine. 

However, not all of our human capital initiatives have been easy--or 
without controversy, especially the 2006 restructuring of our midlevel 
(Band II) analyst workforce. Reforms that affect an employee's pay and 
job classification tend to be very controversial and this is 
particularly true in a workforce like ours that is highly educated and, 
by training and disposition, highly skeptical and analytical. In May 
2007 I testified at oversight hearings to discuss changes we made to 
many of our human capital policies and procedures over the last several 
years and other related issues. For example, employees' pay and 
compensation are now more directly tied to the market and to achieving 
results--measurable outcomes that further the agency's mission. Also, 
jobs for our employees are classified according to employees' roles and 
responsibilities, and pay is based on a employees' job as well as 
market-based conditions and their performance rather than longevity on 
the job. We believe we are the first major federal agency to adopt such 
an approach on an agencywide basis. At the same time, due to my concern 
regarding the trends in ratings differences associated with our 
performance appraisals over time, we also contracted with a private 
firm to assess the possible reasons for the differences and make 
related recommendations. 

For some staff, these changes are unsettling; thus listening and 
responding to employees' concerns and comments is particularly 
important during this time of change. I and the other executives 
encouraged employees to provide their input about the changes taking 
place and the direction the agency is headed--and we heard them. During 
fiscal year 2007, we made certain adjustments to our annual pay 
parameters and I proposed legislation known as the Government 
Accountability Act of 2007, which, if passed, will benefit our existing 
employees and will serve to further enhance our ability to attract, 
retain, and reward a top-flight workforce. For example, under one 
provision of the act, employees below the senior executive level would 
be able to include the bonus part of their performance awards in their 
high-three average salary for retirement purposes, which is not 
currently possible. 

We hope to work through these human capital issues and our other 
management challenges related to physical and information security in 
partnership with the agency's recently elected employee's union, the 
International Federation of Professional and Technical Engineers, which 
will serve as the exclusive representative of entry and midlevel 
analysts as well as other employees in dealing with management on 
issues related to certain terms and conditions of employment. I and the 
rest of management will bargain in good faith with the union and hope 
to reach timely agreements on issues of mutual interest and concern. 

The challenge before us as servants of the Congress and the nation is 
to maintain a government that is effective, transparent, and relevant 
for this generation and generations to come. This agency has never 
wavered in its belief that the Congress and the public deserve to be 
fully informed about all major aspects of government operations. I am 
committed to ensuring that we will continue to "lead by example" in 
transforming government while providing the most professional, 
objective, fact-based, nonpartisan, nonideological, fair, and balanced 
information possible to the Congress and the American people. 

Signed by: 

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

[End of From the Comptroller General] 

Financial Reporting Assurance Statements: 

November 15, 2007: 

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

We are also responsible for establishing and maintaining adequate 
internal control over financial reporting. We conducted an assessment 
of the effectiveness of our internal control over financial reporting 
consistent with the criteria in 31 U.S.C. 3512 (c), (d) (commonly 
referred to as the Federal Managers' Financial Integrity Act (FMFIA) 
and in Appendix A of Office of Management and Budget (OMB) Circular No. 
A-123, Management's Responsibility for Internal Control. Based on the 
results of this assessment, we have reasonable assurance that internal 
control over financial reporting as of September 30, 2007, was 
operating effectively and that no material weaknesses exist in the 
design or operation of the internal control over financial reporting. 

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

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

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

* Our performance reporting is reliable-- transactions and other data 
that support reported performance measures are properly recorded, 
processed, and summarized to permit the preparation of performance 
information consistent with the criteria set forth in the Government 
Performance and Results Act of 1993 and related OMB guidance. 

We also believe that (1) these same systems of accounting and internal 
controls provide reasonable assurance that we are in compliance with 
the spirit of FMFIA and (2) we have implemented and maintained 
financial systems that comply substantially with federal financial 
management systems requirements, applicable federal accounting 
standards, and the U.S. Government Standard General Ledger at the 
transaction level consistent with the requirements in the Federal 
Financial Management Improvement Act (FFMIA) and OMB guidance. These 
are objectives that we set for ourselves even though, as part of the 
legislative branch of the federal government, we are not legally 
required to do so. 

Signed by: 

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

Signed by: 

Gene L. Dodaro: 
Chief Operating Officer: 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer: 

Signed by: 

Gary L. Kepplinger: 
General Counsel: 

[End of Financial Reporting Assurance Statements] 

About GAO: 

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

GAO is an independent, nonpartisan, professional services agency in the 
legislative branch of the federal government. Commonly known as the 
"audit and investigative arm of the Congress" or the "congressional 
watchdog," we examine how taxpayer dollars are spent and advise 
lawmakers and agency heads on ways to make government work better. As a 
legislative branch agency, we are exempt from many laws that apply to 
the executive branch agencies. However, we generally hold ourselves to 
the spirit of many of the laws, including 31 U.S.C. 3512 (commonly 
referred to as the Federal Managers' Financial Integrity Act), the 
Government Performance and Results Act of 1993, and the Federal 
Financial Management Improvement Act of 1996.[Footnote 1] Accordingly, 
this performance and accountability report for fiscal year 2007 
supplies what we consider to be information that is at least equivalent 
to that supplied by executive branch agencies in their annual 
performance and accountability reports. 

Mission: 

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

GAO's History: 

The Budget and Accounting Act of 1921 required the President to issue 
an annual federal budget and established GAO as an independent agency 
to investigate how federal dollars are spent. In the early years, we 
mainly audited vouchers, but after World War II we started to perform 
more comprehensive financial audits that examined the economy and 
efficiency of government operations. By the 1960s, GAO had begun to 
perform the type of work we are noted for todayï¿½program 
evaluationï¿½which examines whether government programs are meeting their 
objectives.

Strategic Planning and Management Process: 

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

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

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

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

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

Figure 1: GAO's Strategic Planning Hierarchy: 

[See PDF for Image] - graphic text: 

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

Step 1: Strategic Goals (4); 
Step 2: Strategic Objectives (21); 
Step 3: Performance goals (93); 
Step 4: Key Efforts (300+). 

Source: GAO. 

[End of Figure] 

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

Figure 2: Examples of How GAO Assisted the Nation: 

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

Strategic Goal 1: 

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

* highlight ways to address problems affecting the delivery of health 
and disability services for injured soldiers and veterans; 

* improve the Food and Drug Administrationï¿½s process for removing 
dangerous drugs from the marketplace; 

* identify physician practice patterns to improve efficiency in the 
Medicare program; 

* encourage the preservation of affordable housing; 

* identify Food Stamp Program areas vulnerable to payment errors and 
fraud; 

* improve the Small Business Administrationï¿½s timely delivery of 
disaster assistance; 

* outline various approaches used in the United States and abroad to 
negotiate drug prices; 

* assess the housing needs of low-income veterans; 

* focus attention on the Pension Benefit Guaranty Corporationï¿½s premium 
structure; 

* evaluate the Federal Housing Administrationï¿½s role and modernizing 
efforts; 

* increase knowledge sharing about federal and state efforts to improve 
older driver safety; 

* highlight inadequacies in the management of federal oil and gas 
royalties; 

* raise awareness about the financial risks to the insurance industry 
posed by climate change; 

* improve transportation efficiency. 

Strategic Goal 2: 

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

* identify key issues for congressional oversight of U.S. efforts to 
stabilize and rebuild Iraq; 

* improve the transparency of military compensation costs; 

* promote federal efforts to secure sensitive information; 

* identify the need for a Chief Management Officer to improve the 
Department of Defenseï¿½s business processes; 

* highlight challenges with securing energy commodity carrying tankers 
from terrorist attacks; 

* strengthen security at airport passenger screening checkpoints; 

* identify shortcomings in the Department of Homeland Securityï¿½s 
program to track the visa status of visitors and immigrants to the 
United States; 

* improve licensing procedures for radioactive materials; 

* enhance the sharing of federal homeland security information with 
states and localities; 

* contribute to congressional dialogue on the U.S. food aid provisions 
of the 2007 Farm bill; 

* improve oversight and procurement practices at the United Nations
improve financial literacy in the United States; 

* better protect consumers who purchase title insurance; 

* improve the financial supervision of holding companies. 

Strategic Goal 3: 

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

* identify the risks of relying on military and homeland security 
contractors; 

* alert the Congress to cost and schedule risks affecting major weapon 
systems; 

* uncover fraud, waste, and abuse in financial assistance payments to 
people affected by hurricanes Katrina and Rita; 

* promote a coordinated approach to improving standards and educating 
professionals in the accountability community; 

* identify multiple approaches needed to reduce the tax gap; 

* enlighten the public about the nationï¿½s long-term fiscal challenges; 

* inform the Congress about the status of recovery and rebuilding 
efforts in the aftermath of hurricanes Katrina and Rita; 

* enhance national preparedness for an influenza pandemic; 

* gauge agenciesï¿½ progress with implementing the Freedom of Information 
Act; 

* ensure that individualsï¿½ personal information is protected; 

* summarize progress and challenges and identify federal financial 
implications of rebuilding the Gulf Coast; 

* strengthen the Department of Defenseï¿½s business systems modernization 
program; 

* strengthen the oversight of an environmental satellite program. 

Strategic Goal 4: 

Description: Maximize the value of GAO by being a model federal agency 
and a world-class professional services organization; 

* inform the Congress and the public through our strategic plan about 
the forces that are likely to shape our nationï¿½s future, its place in 
the world, and the changing role of the federal government; 

* develop and implement the Financial Audit Systemï¿½an automated tool 
used to audit the financial statements of executive branch agencies. 


Source: GAO. 

[End of Figure] 

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

An Example of Our Strategic Planning Elements: 

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

Strategic Objective: A Safe, Secure, and Effective National Physical 
Infrastructure; 

Performance Goal: Assess the Federal Governmentï¿½s Role in Fostering and 
Overseeing Telecommunications in the Public Interest; 

Key Efforts: 

* Assess the federal universal service program in promoting 
the availability and affordability of basic and advanced 
telecommunications services to all Americans; 

* Assess the effectiveness of key federal agencies in managing the 
technical resources needed to meet the growing demand for 
telecommunications services by government and commercial users; 

* Assess the ability of the Federal Communications Commission to 
respond to and resolve legal, regulatory, capacity, and policy issues 
that affect how the commercial telecommunication industry can develop 
and operate. 

The four strategic goals are supported by strategic objectives that are 
in turn supported by and achieved through numerous performance goals 
and key efforts. Our strategic planning framework for serving the 
Congress, which lists the strategic objectives under each goal, is 
depicted on page 12. 

Complete descriptions of the steps in our strategic planning and 
management process are included in our strategic plan for fiscal years 
2007 through 2012, which is available on our Web site at [hyperlink, 
http://www.gao.gov]. This site also provides access to our annual 
performance plans since fiscal year 1999 and our performance and 
accountability reports since fiscal year 2001. 

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

In fiscal year 2007, we revised our strategic plan for the third time 
since we first issued a strategic plan in 2000. The broad goals and 
objectives of our strategic plan for 2007-2012 did not change 
significantly since our last update, but events such as the continuing 
war in Iraq and recent and predicted natural disasters account for some 
modification in emphasis. Seven broad issues or "themes" provide the 
context for our strategic plan (see GAO's Strategic Plan Framework on 
p. 12), many of which were raised repeatedly by our client and other 
stakeholders during our outreach efforts and discussions we initiated 
while preparing the plan. For more information about the themes see 
Forces That Will Shape America's Future: The Themes from GAO's 
Strategic Plan (GAO-07-467SP, March 2007). 

Figure 3: GAO's Strategic Plan Framework: 

[See PDF for Image] - graphic text: 

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

Mission: 

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

Themes: 

* Changing Security Threats; 

* Sustainability Concerns; 

* Economic Growth and Competitiveness; 

* Global Interdependency; 

* Societal Change; 

* Quality of Life; 

* Science & Technology; 

Goals & Objectives: 

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

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

* Health care needs; 

* Lifelong learning; 

* Work benefits and protections; 

* Financial security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

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

* Homeland security; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market force; 

Help Transform the Federal Governmentï¿½s Role and How It t Does Business 
to Meet 21st Century Challenges by assessing... 

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government; 

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

* Client and customer satisfaction; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice; 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability. 

Source: GAO. 

[End of GAO's Strategic Plan Framework] 

Each year, we hold ourselves accountable to the Congress and to the 
American people for our performance, primarily through the annual 
performance and accountability report. 

We have included some information about future plans in this report to 
provide as cohesive a view as possible of what we have done, what we 
are doing, and what we expect to do to support the Congress and to 
serve the nation. Last year, the Association of Government Accountants 
awarded us for the fifth consecutive year its Certificate of Excellence 
in Accountability Reporting for our fiscal year 2006 performance and 
accountability report. According to the association, this certificate 
means that we produced an interesting and informative report that 
achieved the goal of complete and fair reporting. We also received an 
award from Graphic Design USA for the Highlights version of our fiscal 
year 2006 report. (See fig. 4.): 

Organizational Structure: 

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

To achieve our strategic goals, our staff is organized as shown in 
figure 5. For the most part, our 13 evaluation, audit, and research 
teams perform the work that supports strategic goals 1, 2, and 3--our 
three external strategic goals--with several of the teams working in 
support of more than one strategic goal. Also, our Forensic Audits and 
Special Investigations (FSI) unit, within our Financial Management and 
Assurance team, provides the Congress with high-quality forensic 
audits; investigates fraud, waste, and abuse; evaluates security 
vulnerabilities; and conducts other appropriate investigative services 
as part of its own assignments or in support of other teams. In 
addition, FSI follows up on engagements and referrals from our other 
teams when its special services are required to help determine whether 
legislative or administrative actions are necessary. FSI is composed of 
investigators, auditors who have experience with forensic audits, and 
staff in General Counsel who work with FraudNet--our online system 
designed to facilitate follow up of allegations of fraud, waste, abuse, 
or mismanagement of federal funds. 

Senior executives in charge of the teams manage a mix of engagements to 
ensure that we meet the Congress's need for information on quickly 
emerging issues as we also continue longer-term work efforts that flow 
from our strategic plan. To serve the Congress effectively with a 
finite set of resources, senior managers consult with our congressional 
clients and determine the timing and priority of engagements for which 
they are responsible. 

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

Figure 4: GAO's Performance and Accountability Report 2006 Awards: 

[See PDF for Image] - graphic text: 

Scanned copies of: 

1. AGA Certificate of Excellence in Accountability Reported presented 
to the U.S. Government Accountability Office. 

In recognition of your outstanding efforts preparing GAO's Performance 
and Accountability Report for the fiscal year ended September 30, 2006. 

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

Signed by: 

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

Signed by: 

Relmond R. Van Daniker, Executive Director, AGA: 

2. 2007 Graphic Design USA presents an American Inhouse Design Award to 
Government Accountability Office for Performance and 
Accountability Report 2006. 

3. Cover of the Government Accountability Office's Performance and 
Accountability Report for Fiscal Year 2006. 

4. Cover of the Government Accountability Office's Performance and 
Accountability Highlights for Fiscal Year 2006. 

Source: GAO. 

[End of Figure] 

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

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

We maintain a workforce of highly trained professionals with degrees in 
many academic disciplines, including accounting, law, engineering, 
public and business administration, economics, and the social and 
physical sciences. About three-quarters of our approximately 3,200 
employees are based at our headquarters in Washington, D.C; the rest 
are deployed in 11 field offices across the country. Staff in these 
field offices are aligned with our research, audit, and evaluation 
teams and perform work in tandem with our headquarters staff in support 
of our external strategic goals. 

GAO Field Locations: 

Atlanta; 
Boston; 
Chicago; 
Dallas; 
Dayton; 
Denver; 
Huntsville; 
Los Angeles; 
Norfolk; 
San Francisco; 
Seattle. 

Figure 5: Organizational Structure: 

[See PDF for Image] - graphic text: 

An organization chart showing GAOï¿½s basic structure. The agencyï¿½s top 
level of organization was the Executive Committee, which includes the 
Comptroller General, the Chief Operating Officer, the Chief 
Administrative Officer/Chief Financial Officer, and the General 
Counsel. Twenty-three units report directly to the Comptroller General 
and the Chief Operating Officer. The units included the following staff 
offices: Public Affairs, Strategic Planning and External Liaison, 
Congressional Relations, Opportunity and Inclusiveness, and Inspector 
General, which report to the Comptroller General; and Quality and 
Continuous Improvement, which reports to the Chief Operating Officer. 

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

Goal 1: 

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

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

Goal 2: 

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

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

Goal 3: 

Help transform the federal governmentï¿½s role and how it does business 
to meet 21st century challenges. 

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

Goal 4: 

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

* Controller; 

* Human Capital Office: 
- Chief Human Capital Officer; 

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

* Knowledge Services: 
- Chief Knowledge Services Officer; 

* Professional Development Program. 

General Counsel's structure largely mirrors the agency's goal 
structure, and attorneys assigned to a goal work with teams on specific 
engagements. General Counsel has support or advisory relationship with 
the goals and teams rather than a direct reporting relationship. 
General Counsel provides audit and other legal support services for all 
goals and staff offices and manages GAOï¿½s procurement law and bid 
protest work. 

Source: GAO. 

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

[End of Figure] 

[End of Organizational Structure] 

How We Measure Our Performance: 

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

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

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

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

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

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

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

* Internal operations. Our mission and people are supported by our 
internal administrative services, including information management, 
building management, knowledge services, human capital, and financial 
management services. Through an internal customer satisfaction survey, 
we gather information on how well our internal operations help 
employees get their jobs done and improve employees' quality of work 
life. Examples of surveyed services include providing secure Internet 
access and voice communication systems, performance management, and 
benefits information and assistance. Fiscal year 2007 is only the 
second year in which we reported how well we performed against the 
targets we set for our internal operations measures. We set targets for 
these measures at the agencywide level. 

Setting Performance Targets: 

To establish targets for all of our measures, we examine what we have 
been able to achieve in the past (for example, by looking at our 4-year 
rolling averages for most of our results measures (see p. 23) and the 
external factors that influence our work (see p. 60). The teams and 
offices that are directly engaged in the work discuss their views of 
what must be accomplished in the upcoming fiscal year with our top 
executives, who then establish targets for the performance measures. 

Once approved by the Comptroller General, the targets become final and 
are presented in our annual performance plan and budget.[Footnote 3] We 
may adjust these targets after they are initially published when our 
expected future work or level of funding provided warrant doing so. If 
we make changes, we include the changed targets in later documents, 
such as this performance and accountability report, and annotate that 
we have changed them. In part II, we include detailed information on 
data sources that we use to assess each of these measures, as well as 
the steps we take to verify and validate the data (see pp. 78-95). 

On the pages that follow, we assess our performance for fiscal year 
2007 against our previously established performance targets. We also 
present our financial statements, the independent auditor's report, and 
a statement from GAO's Inspector General. 

[End of About GAO] 

[End of Introduction] 

Part I: Management's Discussion and Analysis: 

Promoting a Transparent and Accountable Government by Providing Fact- 
Based, Objective Information to the Congress and the Public: 

The work we did in fiscal year 2007, as well as some of our past work, 
contributed greatly to our performance on our results and client 
measures shown in table 1. We surpassed our financial benefits target 
of $40 billion by almost $6 billion this fiscal year and exceeded our 
annual target for nonfinancial benefits by about 23 percent. Our 
financial benefits of $45.9 billion represent about a $94 return on 
every dollar invested in us. While our financial benefits for fiscal 
year 2007 were lower than what we achieved last fiscal year, due to 
various reasons such as legislation pending at the close of the fiscal 
year, our financial benefits have continued to increase on average over 
the last 4 years as shown in table 2. Also, the more than 1,300 
nonfinancial benefits resulting from our work helped to improve the 
efficiency and effectiveness of government programs that serve the 
public. In addition, we exceeded our targets for past recommendations 
implemented and new products with recommendations by 2 percentage 
points and 6 percentage points, respectively. 

We believe we served the Congress very well during fiscal year 2007. 
Our senior executives delivered testimony at 276 hearings, exceeding 
our target of 185 by 49 percent. Many of these testimonies focused on 
Iraq reconstruction and stabilization efforts, fraudulent activity and 
mismanagement associated with the Hurricane Katrina relief effort, and 
the global war on terrorism (see p. 35 for a list of other topics we 
testified on during fiscal year 2007). Though we missed our timeliness 
target of 95 percent by 1 percentage point, our performance indicates 
that 94 percent of congressional staff responding to our client 
feedback survey either strongly or generally agreed that our written 
products were delivered on time. We discuss the client feedback survey 
in detail part II of this report. 

Concerning our eight people measures, we met or exceeded our targets 
for five of them--new hire rate, acceptance rate, retention rate with 
retirements, retention rate without retirements, and staff development-
-but did not meet the remaining three measures--staff utilization, 
leadership, and organizational climate. We missed our target of 78 
percent for staff utilization by 5 percentage points. We also missed 
our leadership and organizational climate targets by very small 
margins--1 and 2 percentage points, respectively. 

Table 1: Agencywide Summary of Annual Measures and Targets: 

Performance Measure: Results: Financial benefits (dollars in billions); 
2003 Actual: $35.4 billion; 
2004 Actual: $44.0 billion; 
2005 Actual: $39.6 billion; 
2006 Actual: $51.0 billion; 
2007 Target: $40.0 billion; 
2007 Actual: $45.9 billion; 
Met/Not Met: Met; 
2008 Target: $40.0[A] billion. 

Performance Measure: Results: Nonfinancial benefits; 
2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Actual: 1,409; 
2006 Actual: 1,342; 
2007 Target: 1,100; 
2007 Actual: 1,354; 
Met/Not Met: Met; 
2008 Target: 1,150. 

Performance Measure: Results: Past recommendations implemented; 
2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Actual: 85%; 
2006 Actual: 82%; 
2007 Target: 80%; 
2007 Actual: 82%; 
Met/Not Met: Met; 
2008 Target: 80%. 

Performance Measure: Results: New products with recommendations;  
2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Actual: 63%; 
2006 Actual: 65%; 
2007 Target: 60%; 
2007 Actual: 66%; 
Met/Not Met: Met; 
2008 Target: 60%. 

Performance Measure: Client: Testimonies; 
2003 Actual: 189; 
2004 Actual: 217; 
2005 Actual: 179; 
2006 Actual: 240; 
2007 Target: 185; 
2007 Actual: 276; 
Met/Not Met: Met; 
2008 Target: 220. 

Performance Measure: Client: Timeliness[B]; 
2003 Actual: N/A[C]; 
2004 Actual: 89%; 
2005 Actual: 90%; 
2006 Actual: 92%; 
2007 Target: 95%; 
2007 Actual: 94%; 
Met/Not Met: Not met; 
2008 Target: 95%[C]. 

Performance Measure: People: New hire rate; 
2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 95%; 
2007 Actual: 96%; 
Met/Not Met: Met; 
2008 Target: 95%. 

Performance Measure: People: Acceptance rate; 
2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Actual: 71%; 
2006 Actual: 70%; 
2007 Target: 72%; 
2007 Actual: 72%; 
Met/Not Met: Met; 
2008 Target: 72%. 

Performance Measure: People: Retention rate: with retirements; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Actual: 90%; 
2006 Actual: 90%; 
2007 Target: 90%; 
2007 Actual: 90%; 
Met/Not Met: Met; 
2008 Target: 90%. 

Performance Measure: People: Retention rate: Without retirements; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 94%; 
2007 Actual: 94%; 
Met/Not Met: Met; 
2008 Target: 94%. 

Performance Measure: People: Staff development; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Actual: 72%; 
2006 Actual: 76%; 
2007 Target: 75%; 
2007 Actual: 76%; 
Met/Not Met: Met; 
2008 Target: 76%. 

Performance Measure: People: Staff utilization[D]; 
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Actual: 75%; 
2006 Actual: 75%; 
2007 Target: 78%; 
2007 Actual: 73%; 
Met/Not Met: Not met; 
2008 Target: 75%[E]. 

Performance Measure: People: Leadership; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Actual: 80%; 
2006 Actual: 79%; 
2007 Target: 80%; 
2007 Actual: 79%; 
Met/Not Met: Not met; 
2008 Target: 80%. 

Performance Measure: People: Organizational climate; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Actual: 76%; 
2006 Actual: 73%; 
2007 Target: 76%; 
2007 Actual: 74%; 
Met/Not Met: Not met; 
2008 Target: 75%[F]. 

Performance Measure: Internal operations[G]: Help get job done; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: 4.10; 
2006: Actual: 4.10; 
2007: Target: 4.00; 
2007: Actual: N/A[C]; 
Met/Not Met: N/A[C]; 
2008 Target: 4.00. 

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

Source: GAO. 

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

[A] Our fiscal year 2008 target for financial benefits differs from the 
target we reported for this measure in our fiscal year 2008 performance 
budget in January 2007. Specifically, we decreased our financial 
benefits target by $1._ billion based on (1) our assessment of our past 
recommendations that are likely to be implemented by federal agencies 
and the Congress in the coming fiscal year and (2) the impact that our 
constrained budget could have on the work that leads to financial 
benefits. We are currently operating under a continuing resolution 
which is only slightly higher than our fiscal year 200_ funding level. 
See pages 44 to 48 for more information about our budget. 

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

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

[D] Our employee feedback survey asks staff how often the following 
occurred in the last 12 months (1) my job made good use of my skills, 
(2) GAO provided me with opportunities to do challenging work, and in 
general, I was utilized effectively. 

[E] Our fiscal year 2008 target for staff utilization differs from the 
target we reported for this measure in our fiscal year 2008 performance 
budget in January 2007. We lowered the staff utilization target by 3 
percentage points because we determined that, based on our past 
performance, the target was unrealistic, and we reset it at a level 
that is still challenging but more likely to be achieved. 

[F] Our fiscal year 2008 target for organizational climate differs from 
the target we reported for this measure in our fiscal year 2008 
performance budget in January 2007. We decreased the organizational 
climate target by 1 percentage point because we determined that based 
on our past performance, the target was unrealistic, and we reset it at 
a level that is still challenging but more likely to be achieved. 

[G] For our internal operations measures, we will report actual data 
for fiscal year 2007 once data from our November 2007 internal customer 
satisfaction survey have been analyzed. Information explaining all of 
the measures included in this table appears in the Data Quality and 
Program Evaluations section in part II of this report. 

[End of Table] 

Concerning our two internal operations measures, we will assess our 
performance related to how well our internal administrative services 
(e.g., computer support, mail service, and Internet service) help 
employees get their jobs done or improve employees' quality of work 
life once data from our November 2007 annual customer satisfaction 
survey have been analyzed. These measures are directly related to our 
goal 4 strategic objectives of continuously enhancing our business and 
management processes and becoming a professional services employer of 
choice. There will always be a lag in reporting on this measure because 
our customer feedback survey is distributed after we issue the 
performance and accountability report. In fiscal year 2006, we exceeded 
our target of 4.0 by a tenth of a percentage point for our help get job 
done measure and met our 4.0 target for our quality of work life 
measure. These scores indicate that our employees were generally very 
satisfied with the internal administrative services they used during 
their work day. The survey asked staff to rank the importance of each 
service to them and indicate their satisfaction with it on a scale from 
1 to 5. 

To help us examine trends over time, we also look at 4-year averages 
for our results and client measures except the percentage of past 
recommendations implemented--because it is a composite that is drawn 
from a number of years rather than an annual percentage--and 
timeliness--because we have no trend data for our current timeliness 
measure. Calculating 4-year rolling averages for the other measures 
minimizes the effect of an atypical result in any given year. We 
consider this calculation, along with other factors, when we set our 
performance targets. Table 2 shows that from fiscal year 2003 through 
fiscal year 2007 financial benefits, nonfinancial benefits, and new 
products with recommendations have increased steadily during this 
period. The average number of hearings at which we testified has 
climbed since 2004 with a significant increase from fiscal year 2006 to 
2007. 

Though we consider our 4-year rolling averages and our past performance 
when setting our target for the number of hearings at which our senior 
executives testify, we base our testimonies target largely on the 
cyclical nature of the congressional calendar. Our experience has shown 
that during the fiscal year in which an election occurs, generally the 
Congress holds fewer hearings, which provide fewer opportunities for us 
to be invited to testify, because the congressional members are 
reorganizing during the months after the election. However, in fiscal 
year 2007--the year after an election--the new Congress held many more 
hearings than we anticipated and seemed especially interested in our 
work. 

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

Performance measure: Results: Financial benefits(billions); 
2003: $30.7 billion; 
2004: $35.9 billion; 
2005: $39.2 billion; 
2006: $43.0 billion; 
2007: $45.1 billion. 

Performance measure: Results: Nonfinancial benefits; 
2003: 884; 
2004: 986; 
2005: 1,139; 
2006: 1,248; 
2007: 1,325. 

Performance measure: Results: New products with recommendations; 
2003: 48%; 
2004: 54%; 
2005: 58%; 
2006: 61%; 
2007: 64%. 

Performance measure: Client: Testimonies; 
2003: 205; 
2004: 193; 
2005: 200; 
2006: 206 
2007: 228. 

Source: GAO. 

[End of Table] 

Focusing on Results: 

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

Financial Benefits and Nonfinancial Benefits: 

We describe many of the results produced by our work as either 
financial or nonfinancial benefits. Both types of benefits result from 
our efforts to provide information to the Congress that helped to (1) 
change laws and regulations, (2) improve services to the public, and 
(3) promote sound agency and governmentwide management. In many cases, 
the benefits we claimed in fiscal year 2007 are based on work we did in 
past years because it often takes the Congress and agencies time to 
implement our recommendations or to act on our findings. 

To claim either type of benefit, our staff must document the connection 
between the benefits reported and the work that we performed. We can 
claim benefits within 2 years of when the Congress or an agency takes 
action on our recommendations. 

Financial Benefits: 

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

* changes in business operations and activities; 

* the structure of federal programs; or entitlements, taxes, or: 

* user fees. 

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

In fiscal year 2007, our work generated $45.9 billion in financial 
benefits (see fig. 6), exceeding our target by about 15 percent. We 
exceeded the target primarily as a result of a few unexpected and large 
financial accomplishments. Thus, we believe our target of $40.0 billion 
for fiscal year 2008 (shown on p. 21) is reasonable and achievable. Of 
the total amount documented in fiscal year 2007, about $21.1 billion 
(or approximately 46 percent) resulted from changes in laws or 
regulations (see fig. 7). 

Figure 6: Financial Benefits GAO Recorded in Fiscal Year 2007: 

[See PDF for image] - graphic text: 

Bar graph with six items: 

2003 Actual: $35.4 billion; 
2004 Actual: $44.0 billion; 
2005 Actual: $39.6 billion; 
2006 Actual: $51.0 billion; 
2007 Target: $40.0 billion; 
2007 Actual: $45.9 billion. 

Source: GAO. 

[End of Figure] 

Figure 7: Types of Financial Benefits Recorded in Fiscal Year 2007 from 
Our Work: 

[See PDF for image] - graphic text: 

Pie chart with three slices, representing a total of $45.9 billion in 
financial benefits. 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: $21.1 billion (46%); 

Agencies acted on GAO information to improve services to the public: 
$8.5 billion (18.5%); 

Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO's work: $16.3 billion (35.5%). 

Source: GAO. 

[End of Figure] 

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

To document financial benefits, our staff complete reports documenting 
accomplishments that are linked to specific products or actions. All 
accomplishment reports for financial benefits are documented and 
reviewed by (1) another GAO staff member not involved in the work and 
(2) a senior executive in charge of the work. Also, a separate unit, 
our Quality and Continuous Improvement office, reviews all financial 
benefits and approves benefits of $100 million or more, which amounted 
to about 94 percent of the total dollar value of benefits recorded in 
fiscal year 2007. The GAO Inspector General (IG) also performed an 
independent review of all accomplishment reports claiming benefits of 
$500 million or more in fiscal year 2007. 

Figure 8 lists several of our major financial benefits for fiscal year 
2007 and briefly describes some of our work contributing to financial 
benefits. 

Figure 8: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2007: 

Description: Helped to ensure funding for United States Postal Service 
(USPS) retirement-related health care benefits. For many years we have 
reported on USPSï¿½s significant liabilities and obligations, including 
tens of billions of dollars in post-retirement health care benefits 
that were not yet funded. In December 2006, the Postal Accountability 
and Enhancement Act (Pub. L. No. 109-435) was enacted, which created 
the Postal Service Retiree Health Benefits Fund into which USPS is to 
make a series of 10 annual payments to fund its retiree health care 
obligations. In fiscal year 2007, USPS made the first of its annual 
payments into the fund. This $5.4 billion payment, funded through 
additional January 2006 and May 2007 postal service rate increases, 
helped to avoid requiring the federal government to finance this 
substantial obligation. (Goal 3); 
Amount: $5.4. 

Description: Improved the Internal Revenue Serviceï¿½s (IRS) methodology 
for pursuing delinquent taxes. Our previous financial audit work 
determined that IRS did not have systems or procedures in place to 
allow it to identify and actively pursue cases with collection 
potential. We recommended that IRS improve its capacity
to assess the collectibility of delinquent taxes as a way to better 
target debt collection resources. In 2004, IRS began implementing 
sophisticated modeling technology to differentiate between more and 
less productive cases in order to make better resource allocation 
decisions. In 2007, we reported that IRSï¿½s actions
in response to our recommendations increased its collections of 
delinquent taxes using approximately the same level of resources by 
about $4.2 billion or almost 20 percent in fiscal year 2006 from fiscal 
year 2003 levels. (Goal 3); 
Amount: $4.2. 

Description: Encouraged the National Aeronautics and Space 
Administrationï¿½s (NASA) decision to terminate the space launch 
initiative (SLI). In a September 2002 report, we questioned NASAï¿½s 
overall acquisition strategy to develop a new generation of space 
transportation vehiclesï¿½the SLI. We reported that NASA faced 
considerable challenges defining basic requirements for SLI. We also 
noted that most of the key technologies under consideration by SLI were 
very immature and that management controls necessary to estimate cost 
and gauge progress were not in place. We recommended that the NASA 
Administrator take several steps, including completing the reassessment 
of NASAï¿½s Integrated Space Transportation Plan, before moving forward 
with SLI. NASA concurred and in November 2002 took action to delay 
decisions regarding future launch vehicles and refocused SLI on 
conducting basic research on advanced launch technologies
and developing a vehicle to service the International Space Station. In 
2005, NASA terminated the entire SLI program and redirected $3.7 
billion in funding originally programmed for SLI toward future 
exploration activities. (Goal 3); 
Amount: $3.7. 

Description: Helped to reduce food stamp fraud and abuse. Since 1994, 
we repeatedly reported and testified on reducing fraud and abuse in the 
Department of Agricultureï¿½s (USDA) Food Stamp Program by reducing the 
trafficking of benefits. In our 1994 and 1995 reports, we found that 
USDAï¿½s reliance on paper coupons to provide food stamp benefits had 
resulted in fraud and abuse through trafficking, counterfeiting, and 
mail theft. To reduce this fraud and abuse, we supported the use of 
electronic benefit transfer (EBT) systems to replace the coupon-based 
system that states were using. In response, the Congress passed 
legislation that required that each state implement EBT for the Food 
Stamp Program by October 1, 2002, unless the Secretary
of Agriculture granted a waiver. USDA reported in December 2006 that 
the Food Stamp Programï¿½s integrity had substantially improved, 
estimating that trafficking had diverted only about $241 million per 
year between 2002 and 2005ï¿½or about 1 cent of each food stamp 
dollarï¿½compared with an estimated $660 million per yearï¿½or about 3-1/2 
cents of each food stamp dollarï¿½diverted between 1996 and 1998. USDA 
found that the decline in food stamp trafficking corresponded with the 
increased use of EBT. This will result in an estimated $3.4 billion in 
cumulative financial benefits between fiscal years 2005 and 2009. Also, 
in fiscal year 2007 we recommended that USDA use its electronic data to 
perform risk assessments of retailers most likely to traffic in food 
stamp benefits and develop a strategy to increase penalties for this 
offense. USDA responded by proposing new penalties and expedited 
processes. (Goal 1); 
Amount: $3.4. 

Description: Recommended that the Department of Housing and Urban 
Development (HUD) track and reallocate unspent housing funds. We 
recorded about $2.19 billion in financial benefits based on our work 
involving the HUD recaptured fiscal year 2005 unexpended balances. 
Prior to 2002 HUD did not routinely review its unexpended fund balances 
to determine whether these funds could be recaptured. In 2001, we 
expressed concerns over unexpended balances in a briefing to the 
incoming Administration and testified before the Subcommittee on 
Housing and Transportation, Senate Committee on Banking Housing and 
Urban Affairs, about long-standing problems HUD had in the management 
and oversight of its unexpended balances. Using the Public Housing 
Capital fund as an example, we stated, and HUD agreed, that it did not 
have the information it needed to routinely quantify unexpended 
balances that might be available for recapture. Given the importance of 
this information in formulating and justifying budget requests, we 
recommended that HUD (1) develop systems that routinely provide timely 
and reliable information on the status of its unexpended balances to 
quantify amounts available for recapture or rescission, (2) incorporate 
this information into the management of its programs, and (3) use this 
information in formulating budget requests. In response to our 
recommendations, HUD made many operational changes that since 2002 have 
enabled the agency to routinely incorporate information on unexpended 
balances into the management and operation of its programs and to take 
unexpended balances into account in setting forth budget needs. HUD has 
routinely recaptured unutilized funds to offset its budget requests. 
(Goal 1); 
Amount: $2.19. 

Description: Helped to increase collections of civil debt. In July 
2001, we reported that the Department of Justiceï¿½s (Justice) financial 
litigation units, which are responsible for both criminal and civil 
debt collection, did not have adequate procedures for enforcing 
collections. We made a number of recommendations to the Attorney
General to help the units improve criminal debt collections and stem 
the growth in reported uncollected criminal debt. One such 
recommendation was to reinforce policies and procedures for entering 
cases into debt-tracking systems; filing liens; issuing demand letters, 
delinquent notices, and default notices; performing asset discovery 
work; and using other enforcement techniques. These policies and 
procedures are applicable to the unitsï¿½ civil as well as criminal debt 
collection efforts. In January 2002, Justice completed actions to 
address this recommendation, including providing training materials to 
unit staff involved in debt collection. These actions helped it to 
increase collections of civil debt in fiscal years 2004 and 2005ï¿½the 
third and fourth years for which we are claiming financial benefits 
over a 5-year periodï¿½by a total of about $1.70 billion on a net present 
value basis. (Goal 3); 
Amount: $1.70. 

Description: Recommended that the Congress reduce the Department of 
Defenseï¿½s (DOD) fiscal year 2007 operations and maintenance budget. The 
congressional appropriations committee conferees reduced DODï¿½s fiscal 
year 2007 operations and maintenance appropriations by $1.459 billion 
based in part on the analysis we provided identifying fiscal year 2004 
and 2005 underexecution of some budget subactivity groups. Staff 
members used the analysis of underexecution (designations exceeded 
obligations) for fiscal years 2004 and 2005 in part to reduce DODï¿½s 
fiscal year 2007 budget request by $598.8 million for subactivity 
groups that have been historically underexecuted. In addition, the 
conferees reduced DODï¿½s fiscal year 2007 budget request by $860.6 
million for peacetime training and flying hour offsets also based in 
part on our analysis of underexecution in multiple subactivity groups 
used to fund these activities. The combined impactï¿½as indicated 
aboveï¿½is about $1.459 billion. (Goal 2); 
Amount: $1.46. 

Description: Identified an opportunity for DOD to reallocate funds to 
cover new initiatives. In a November 2002 report, we suggested that the 
Congress consider extending the deadline for the submission of DODï¿½s 
Quadrennial Defense Review in order to provide additional time for DOD 
to align its upcoming budget request with its newest strategic thinking 
as reflected in the Quadrennial Defense Review. In our view, this extra 
time would allow DOD to take full advantage of the reviewï¿½s results and 
shift resources where they would be needed most, that is, provide for a 
better allocation of resources, and avoid unnecessary costs of lower 
priority programs. The Congress adopted our approach and the 2006 
Quadrennial Defense Review is the first to benefit from the extended 
deadline and reallocate defense resources in accordance with DODï¿½s new 
strategic plan. As a result, DODï¿½s fiscal year 2007 budget shifts 
resources into new programs advocated by the Quadrennial Defense 
Review, including over $1 billion for a special operations initiative
to help fight the war on terror. To pay for these initiatives, DOD 
shaved billions of dollars from other programs. The 2006 Quadrennial 
Defense Review stated that by shifting the completion date of the 
review to coincide with the submission of the Presidentï¿½s fiscal year 
2007 budget request, DOD had included a limited number of new 
initiatives in the budget submission for fiscal year 2007, rather than 
waiting until the fiscal year 2008 budget cycle. The final 
congressional action on DODï¿½s proposal provided a $1.2 billion increase 
in funding for Special Operations Forces in fiscal year 2007. (OMB 
documents state that DOD made offsetting reductions before the 
Presidentï¿½s budget was sent to the Congress.) The financial benefit is 
the $1.2 billion made available from the reallocation of resources. 
(Goal 2); 
Amount: $1.2. 
 
Source: GAO. 

[End of Table] 

Nonfinancial Benefits: 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2007, we recorded a total of 1,354 
nonfinancial benefits (see fig. 9). We significantly exceeded our 
target because of actions taken by agencies governmentwide on several 
of our reports dealing with governmentwide IT and accounting issues. We 
believe that we will achieve our fiscal year 2008 target of 1,150 
nonfinancial benefits (shown on p. 21) though we do not expect there 
will be as many situations similar to fiscal year 2007 where agencies 
will take governmentwide actions on our recommendations. 

Figure 9: Nonfinancial Benefits GAO Recorded in Fiscal Year 2007: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Actual: 1,409; 
2006 Actual: 1,342. 
2007 Target: 1,100; 
2007 Actual: 1,354. 

Source: GAO. 

[End of Figure] 

In fiscal year 2007 we documented 646 instances where federal agencies 
used our information to improve services to the public, 74 instances 
where the information we provided to the Congress resulted in statutory 
or regulatory changes, and 634 instances where agencies improved core 
business processes or governmentwide reforms as a result of our work. 
(See fig. 10.) These actions covered a variety of issues such as 
improving the Department of Veteran's Affairs' (VA) ability to process 
veteran's claims for disability benefits, identifying weaknesses in 
telecommunications data, providing information on the rising cost of 
military pay and compensation, and improving the strategic planning of 
U.S. diplomacy efforts. In figure 11, we provide examples of some of 
the nonfinancial benefits we claimed as accomplishments in fiscal year 
2007. The laws that we cite in the first section of this figure were 
enacted in fiscal year 2007. 

Figure 10: Types of Nonfinancial Benefits Documented in Fiscal Year 
2007 from Our Work: 

[See PDF for Image]- graphic text: 

Pie chart with three slices, representing a total of 1,354 nonfinancial 
benefits. 

Core business processes improved at agencies and governmentwide 
management reforms advances by GAO's work: 634 (46.8%); 

Agencies acted on GAO information to improve services to the public: 
646 (47.7%); 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: 74 (5.5%). 

Source: GAO. 

[End of Figure] 

Figure 11: GAO's Selected Nonfinancial Benefits Reported in Fiscal Year 
2007: 

Nonfinancial benefits that helped to change laws: 

Department of Homeland Security Appropriations Act of 2007, Pub. L. No. 
109-295: 

Our work is reflected in this law in different ways: 

Developing a center to locate children after disasters. After 
hurricanes Katrina and Rita, GAO found that the National Center for 
Missing and Exploited Children (NCMEC) faced problems getting access to 
American Red Cross and Federal Emergency Management Agency (FEMA) data 
because of these organizations' concerns about privacy. GAO found that 
a lesson learned from these disasters is that agreements for data 
sharing between NCMEC and the American Red Cross and FEMA can help 
locate missing persons more quickly. We spoke about these concerns 
several times with congressional staff. Subsequently, Pub. L. No. 109- 
295 provided for a National Emergency Child Locator Center to be 
established within NCMEC and requires the FEMA Administrator to 
establish procedures to make all relevant information available to the 
center in a timely manner to facilitate the expeditious identification 
and reunification of children with their families. The law also 
requires the center to enter into a cooperative agreement with federal 
and state agencies and with other organizations, such as the American 
Red Cross, as necessary to implement their missions. 

Improving FEMA information on the status of hurricane relief and 
recovery funds. In September 2006, we recommended four actions to 
improve reporting by FEMA to the appropriations committees on the 
status of governmentwide hurricane relief and recovery. These actions 
included (1) explicitly recognizing that FEMA's weekly reporting on 
mission assignment obligations and expenditures does not reflect the 
status from a governmentwide perspective, (2) requesting and including 
actual obligation and expenditure data from agencies performing mission 
assignments in FEMA reporting at specified intervals, (3) including in 
the weekly report amounts reimbursed to other agencies that are in 
suspense because FEMA has not yet reviewed and approved the 
documentation supporting the expenditures, and (4) reiterating to 
agencies performing mission assignments FEMA's policies on (a) the 
detailed information required in supporting documentation for 
reimbursements and (b) the timeliness of agency billings. As requested, 
we provided language that was included in Pub. L. No. 109-295 which 
implemented these recommendations. 

The John Warner National Defense Authorization Act for Fiscal Year 
2007, Pub. L. No. 109-364: 

U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, 2007, Pub. L. No. 110-28: 

In December 2005 and January 2007, we reported that DOD and NASA 
structured monetary incentives in ways that led to significant 
disconnects between the fees paid to contractors and program outcomes. 
We made recommendations aimed at strengthening the link between 
incentives and outcomes. The Comptroller General testified on this 
issue in April 2006 and we briefed multiple congressional committees. 
The result has been changes to award and incentive fee policies across 
several agencies including DOD, NASA, and the Department of Homeland 
Security (DHS). Pub. L. No. 109-364 incorporated our recommendations by 
requiring DOD to issue guidance to ensure that award fees are linked to 
acquisition outcomes. In addition, Pub. L. No. 110-28 required all DHS 
award fees to be linked to successful acquisition outcomes. 

Postal Accountability and Enhancement Act, Pub. L. No. 109-435: 

In April 2001, we designated USPS's transformation and long-term 
outlook as a high-risk area because its financial outlook had 
deteriorated significantly and it had no comprehensive plan to address 
its financial, operational, or human capital challenges. We concluded 
that the need for a comprehensive transformation of USPS was more 
urgent than ever and called for the Congress to act on comprehensive 
postal reform legislation. Since then, USPS developed a transformation 
plan to guide its ongoing efforts related to implementing initiatives 
included in its plan and improved its financial outlook. Further, in 
December 2006, the Congress enacted comprehensive postal reform 
legislation to provide a framework for modernizing USPS's rate-setting 
processes and strengthening regulatory oversight and financial 
transparency. Thus, in January 2007, we removed USPS transformation and 
long-term outlook from our high-risk list. 

Foreign Investment and National Security Act of 2007, Pub. L. No. 110- 
49: 

The Exon-Florio amendment to the Defense Production Act authorizes the 
President to conduct investigations and to suspend or prohibit foreign 
acquisitions, mergers, or takeovers of U.S. companies that threaten to 
impair national security. The President delegated the authority to 
investigate transactions to an interagency committee, the Committee on 
Foreign Investment in the United States. In our September 2005 report, 
we found that some members of the committee have narrowly defined what 
constitutes a threat to national security, despite the broad coverage 
of the factors listed in Exon-Florio that may be considered in 
determining a threat to national security. In one case, this narrow 
view resulted in the weakening of enforcement provisions in an 
agreement to mitigate national security concerns. In our report, we 
suggested that the Congress consider amending Exon-Florio to more 
clearly emphasize factors that should be considered in determining the 
potential harm to national security. In response to our report and 
subsequent events, in 2007 the Congress amended Exon-Florio adding 
additional factors to be considered in determining the effect of a 
transaction on national security. 

Implementing Recommendations of the 9/11 Commission Act of 2007, Pub. 
L. No. 110-53: 

Our work is reflected in this law in different ways: 

Reexamining inspection exemptions for inbound cargo. During our review 
of the Transportation Security Administration's (TSA) inbound air cargo 
(i.e., cargo bound for the United States from a foreign country) 
security procedures, we briefed congressional staff on several 
occasions regarding the status of inbound air cargo security and the 
challenges that TSA faces to reducing the vulnerability of the air 
cargo system to terrorist attack. Based on a subsequent report, we 
recommended that TSA establish a time frame for completing an 
assessment of whether existing random inspection exemptions for inbound 
air cargo pose an unacceptable vulnerability to the security of air 
cargo, and take steps, if necessary, to address identified 
vulnerabilities. The Congress included a provision in the 9/11 
Commission Act consistent with our recommendation which requires DHS to 
conduct an assessment of inspection exemptions for cargo transported on 
passenger aircraft and an analysis to assess the risk of maintaining 
such exemptions no later than 120 days from the enactment of the act. 

Reexamining inspection exemptions for domestic air cargo. During our 
review of TSA's domestic air cargo (i.e., cargo that is transported 
within the United States) security procedures, we briefed congressional 
staff regarding the status of domestic air cargo security and the 
challenges that TSA faces to reduce the vulnerability of the air cargo 
system to terrorist attack. Based on a subsequent report, we 
recommended that TSA reexamine the rationale for existing air cargo 
inspection exemptions, determine whether such exemptions leave the air 
cargo system unacceptably vulnerable to terrorist attack, and make any 
needed adjustments to the exemptions. The Congress included a provision 
in the 9/11 Commission Act consistent with this recommendation, by 
requiring DHS to conduct an assessment of inspection exemptions for 
cargo transported on passenger aircraft and an analysis to assess the 
risk of maintaining such exemptions no later than 120 days from the 
enactment of the act. 

Nonfinancial benefits that helped to improve services to the public: 

Strengthened screening procedures for all VA health care practitioners: 

We identified key screening requirements that VA uses to verify the 
professional credentials and personal backgrounds of its health care 
practitioners. We found adequate screening requirements for certain 
practitioners, such as physicians, for whom all licenses are verified 
by contacting state licensing boards. However, screening requirements 
for others, such as currently employed nurses and respiratory 
therapists, are less stringent because they do not require verification 
of all licenses and national certificates. Moreover, they require only 
physical inspection of the credential rather than contacting state 
licensing boards and national certifying organizations. Physical 
inspection alone can be misleading; not all credentials indicate 
whether they are restricted, and credentials can be forged. We 
recommended that VA expand the verification requirement that facility 
officials contact state licensing boards and national certifying 
organizations to include all state licenses and national certificates 
held by applicants and employed practitioners. In response to our 
recommendation, VA directed its medical facilities to document the 
verification of all state licenses and national certificates (held by 
all practitioners applying for VA positions) with the issuing state 
licensing board or national certifying organization. In December 2006, 
VA required facility officials to credential all health care 
practitioners who claim licensure, registration, or certification 
through its electronic credentialing system. In addition, VA required 
its facility officials to establish a mechanism to ensure that multiple 
licenses, registrations, and/or certifications were held in good 
standing by contacting the state boards or issuing organization. VA's 
actions will better ensure the safety of veterans receiving health care 
at VA medical facilities. 

Tightened monitoring criteria in the Environmental Protection Agency's 
(EPA) rule on lead in drinking water: 

In a January 2006 report, we recommended that EPA should reassess 
existing regulations and guidance to ensure the circumstances in which 
states approve water systems for reduced monitoring are appropriate and 
that systems resume standard monitoring following a major treatment 
change. We reported that lead rule implementation experiences to date 
have revealed weaknesses in the regulatory framework. In some cases, 
corrosion control can be impaired by changes to other water treatment 
processes, and controls that would help avoid such impacts may not be 
adequate. In July 2006, EPA proposed to change the federal regulations 
and disallow water systems that exceed the lead action level from 
initiating or remaining on a reduced lead and copper monitoring 
schedule based solely on the results of their water quality parameter 
monitoring (see Federal Register, 71, FR 40828 (July 18, 2006)). EPA 
noted that this change would ensure that reduced monitoring would only 
be permitted in instances in which it has been demonstrated that 
corrosion control treatment is both effective and reliable. Compliance 
with water quality parameters alone may not always indicate that 
corrosion control is effective. 

Encouraged reporting of nursing home fire safety deficiencies: 

As part of our review of nursing home fire safety, we found that 
federal oversight of state fire safety activities is inadequate to 
ensure that existing standards are being enforced. Specifically, we 
found that despite the availability of information on oversight of 
nursing home quality through the Center for Medicare and Medicaid 
Services' (CMS) Nursing Home Compare Web site, no comparable 
information on fire safety was available. Therefore, consumers lack a 
complete picture of a nursing home's compliance with federal health and 
safety requirements when selecting a facility. To provide the public 
with important information about the fire safety status of nursing 
homes, we recommended that the Administrator of CMS make fire safety 
deficiency data available via the Nursing Home Compare Web site, 
including information on whether the facility has automatic sprinklers. 
CMS concurred with our recommendation and began posting this 
information on the Web site in October 2006. 

Improved information security at the Securities and Exchange Commission 
(SEC): 

In our past work we reported that a publicly accessible workstation 
connected to the internal SEC network was not securely configured. We 
recommended that SEC develop and implement procedures to ensure that 
all publicly-accessible workstations were adequately secured and 
configured with the minimum amount of services necessary to accomplish 
their purpose. In response to our recommendation, SEC removed the 
unsecured workstation and developed procedures to ensure that publicly 
located workstations are secure. As a result, SEC has reduced the risk 
that network services can be compromised, disrupted, or disabled via 
publicly accessible workstations. 

Improved coordination to enhance security of nuclear warhead sites in 
Russia: 

We reported in past work that DOD and the Department of Energy (DOE) 
pursued different approaches to securing nuclear warhead sites in 
Russia. We found that DOD and DOE did not know how many additional 
sites they planned to help secure, had not determined which department 
would improve security at sites they both had in their plans, and had 
not worked together to standardize the types of security equipment 
provided to Russia. As a result, we recommended that DOD and DOE work 
more closely together and develop an integrated plan to help secure 
Russia's warhead sites. In response, DOD and DOE improved their 
coordination mechanisms for sharing information and avoiding 
duplication of effort. Under the aegis of National Security Council 
(NSC) guidance, the departments agreed on what sites to upgrade and 
which department would install the upgrade. They have also developed 
common design standards to ensure consistency in the assistance 
provided to Russia warhead storage sites. DOD and DOE have also adopted 
similar approaches in how they manage the contracts for installing the 
security upgrades. 

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

FEMA establishes control to help limit disaster assistance payments to 
individuals with invalid Social Security numbers: 

As part of our audit of FEMA's Individuals and Households Program (IHP) 
to assist the victims of hurricanes Katrina and Rita, we found that 
FEMA did not adequately validate the identity of registrants applying 
for disaster assistance. We identified payments to thousands of IHP 
registrants who provided Social Security numbers that were never issued 
or which belonged to deceased individuals. We recommended that FEMA 
improve internal controls over identity confirmation to provide 
reasonable assurance that disaster assistance payments are made only to 
qualified IHP applicants. FEMA subsequently implemented new edit 
controls intended to ensure that Social Security numbers and names 
submitted by IHP disaster assistance registrants are both appropriately 
matched and valid. FEMA's improved control procedures in this area 
should improve up-front controls over the registration process to 
better ensure that only valid applicants receive IHP payments, thereby 
helping to reduce fraudulent IHP payments based on invalid registration 
data. 

NASA establishes policies for reimbursement by nonofficial travelers on 
passenger aircraft: 

In previous work we found that while NASA used its passenger aircraft 
to transport numerous nonofficial travelers to various events, it did 
not have effective procedures in place for collecting reimbursements 
from these travelers as required by OMB Circular No. A-126. We 
recommended that NASA establish procedures for identifying and 
recovering applicable costs associated with transporting these 
nonofficial travelers. In response to our recommendations, in fiscal 
year 2006, NASA revised its aircraft use policy to include specific 
instructions for identifying and obtaining reimbursements from 
nonofficial travelers. This policy change establishes necessary 
procedures for recovering the applicable costs of providing air 
transportation services to nonofficial travelers, and may result in 
savings to NASA and the federal government for the cost of transporting 
these passengers. 

Army requires credit card vendors to conduct credit checks before 
issuing individually billed travel cards: 

During our audits of the Army's controls over individually billed 
travel cards, we found substantial problems with controls over travel 
card accounts, including issuing cards to individuals without 
conducting credit checks. Credit checks could have revealed travel card 
applicants with poor prior credit histories and helped prevent the 
substantial delinquencies and amounts charged-off identified in our 
audits. GAO recommended that the Army establish policies and procedures 
governing the issuance of individual travel cards to military and 
civilian employees, including evaluating the feasibility of extended 
use of credit checks for all travel card applicants. In response to our 
recommendation, pursuant to a revision to DOD's Financial Management 
Regulation, the Army now requires its travel card contractor to perform 
a credit check on each new card applicant. Under this policy, (1) 
applicants who refuse to permit a credit checks may be asked to self-
certify to their creditworthiness in order to obtain restricted travel 
cards, and (2) applicants who are denied government travel cards due to 
poor credit scores, or inability to meet self-certification 
requirements, will be exempt from mandatory use of the individually 
billed account travel cards. By implementing these requirements, Army 
strengthened management oversight and internal controls over the 
individually billed travel card program and reduced the chance that 
travel cards will be issued to individuals at high risk of not making 
payments or not making payments timely, thus reducing fees and 
eliminating substantial resources spent pursuing and collecting past 
due accounts. 

Source: GAO. 

[End of Table] 

Past Recommendations Implemented: 

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2007, 82 percent of the 
recommendations we made in fiscal year 2003 had been implemented (see 
fig. 12), primarily by executive branch agencies. Putting these 
recommendations into practice generates tangible benefits for the 
nation. 

Figure 12: Percentage of Past Recommendations Implemented in Fiscal 
Year 2007: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Four-year implementation rate: 

2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Actual: 85%; 
2006 Actual: 82%; 
2007: Target: 80%; 
2007: Actual: 82%. 

Source: GAO. 

[End of Figure] 

The 82 percent implementation rate for fiscal year 2007 exceeded our 
target for the year by 2 percentage points, matching our performance in 
fiscal years 2003 and 2006, respectively. Our performance on this 
measure declined from 85 percent in fiscal year 2005 to 82 percent in 
fiscal years 2006 and 2007 because, in some cases, we were unable to 
obtain the agency data that would allow us to fully document that our 
recommendations had been implemented. As figure 13 indicates, agencies 
need time to act on recommendations. Therefore, we assess 
recommendations implemented after 4 years, the point at which 
experience has shown that if a recommendation has not been implemented, 
it is not likely to be. 

Figure 13: Cumulative Implementation Rate for Recommendations Made in 
Fiscal Year 2003: 

[See PDF for Image]- graphic text: 

Bar graph with four items. 

After 1 year: 18%; 
After 2 years: 32%; 
After 3 years: 43%; 
After 4 years: 82%. 

Source: GAO. 

[End of Figure] 

New Products Containing Recommendations: 

In fiscal year 2007, about 66 percent of the 647 written products we 
issued (excluding testimonies) contained recommendations. (See fig. 
14.) We track the percentage of new products with recommendations 
because we want to encourage staff to develop recommendations that when 
implemented by the Congress and agencies, produce financial and 
nonfinancial benefits for the nation. We exceeded our target of 60 
percent by 6 percentage points because our audit teams are emphasizing 
the need to identify possible recommendations as they plan and carry 
out their work. However, we set our target again in fiscal year 2008 at 
60 percent because we recognize that our products do not always include 
recommendations and that the Congress and agencies often find such 
informational reports just as useful as those that contain 
recommendations. Our informational reports have the same analytical 
rigor and meet the same quality standards as those with recommendations 
and, similarly, can help to bring about significant financial and 
nonfinancial benefits. Hence, this measure allows us ample leeway to 
respond to requests that result in reports without recommendations. 

Figure 14: Percentage of New Products with Recommendations in Fiscal 
Year 2007: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Actual: 63%; 
2006 Actual: 65%; 
2007 Target: 60%; 
2007 Actual: 66%. 

Source: GAO. 

[End of Figure] 

Focusing on Our Client: 

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

Testimonies: 

Our clients often invite us to testify on our current and past work 
when it addresses issues that congressional committees are examining 
through the hearing process. During fiscal year 2007, experts from our 
staff testified at 276 congressional hearings covering a wide range of 
complex issues (see fig. 15). (See fig. 16 for a summary of issues we 
testified on by strategic goal in fiscal year 2007.) Over 90 of our 
testimonies were related to high-risk areas and programs, which are 
discussed on page 40. 

In fiscal year 2007, we significantly exceeded our target for 
testimonies at 185 hearings and surpassed our performance on this 
measure over the last 4 years. In fact, only three times in the last 25 
fiscal years have we delivered testimonies at more hearings. The new 
Congress that took office in January 2007 was extremely interested in 
our past and current work on a variety of issues and asked us to 
testify at 91 more hearings than we anticipated even though this was 
during a year following an election when historically our testimonies 
are lower. The Congress asked our executives to testify more than 10 
times this fiscal year on Hurricane Katrina issues and about 20 times 
on issues related to both terrorism and the Iraq conflict. Though lower 
than our actual performance on this measure in 2007, we believe that 
our fiscal year 2008 target of testimonies at 220 hearings is 
challenging and reflects a more typical estimate of the number of 
hearings we are likely to attend after a very busy first year for this 
Congress. 

Figure 15: Testimonies: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Hearings at which GAO testified: 

2003 Actual: 189; 
2004 Actual: 217; 
2005 Actual: 179; 
2006 Actual: 240; 
2007 Target: 185; 
2007 Actual: 276. 

Source: GAO. 

[End of Figure] 

Figure 16: GAO's Selected Testimony Issues in Fiscal Year 2007: 

Selected Testimony Issues: 

Fiscal Year 2007: 

Goal 1: 

Address Challenges to the Well-Being and Financial Security of the 
American People: 

* Federal oversight of food safety; 

* Capacity and service gaps among homeless veterans programs; 

* Reauthorizing the State Children's Health Insurance Program; 

* Claims processing challenges for veterans' disability benefits; 

* FEMA payments on hurricane-damaged properties; 

* Nursing home oversight; 

* Private pension fees; 

* Small Business Administration's disaster preparedness efforts; 

* Improved safety for coal miners; 

* Federal actions to improve child welfare services; 

* Oil and gas royalties; 

* Medicare physician payments; 

* Effects of seller-funded down payments on home loans; 

* Status of the future air traffic control system; 

* USPS reform efforts; 

* Federal real property issues; 

* Emergency management plans for schools. 

Goal 2: 

Respond to Changing Security Threats and the Challenges of 
Globalization: 

* Status of benchmarks for Iraqi government; 

* DOD's management of systems and assets; 

* Improving the military's supply chain; 

* Linking defense strategy with military personnel requirements; 

* Navy shipbuilding; 

* Using best practices for space acquisitions; 

* Vulnerabilities in U.S. export control systems; 

* Combating nuclear smuggling; 

* Securing radiological sources in foreign countries; 

* Improving the efficiency of U.S. food aid procedures; 

* National strategy to enforce intellectual property rights; 

* DHS's major mission and management functions; 

* Risk- management principles and homeland security; 

* Secure border initiative; 

* Bankruptcy reform and credit counseling; 

* National strategy to improve financial literacy; 

* VA's information security management. 

Goal 3: 

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

* Contracting and security challenges in Iraq; 

* Federal acquisitions and contracting challenges; 

* Acquisition challenges at DHS; 

* Security vulnerabilities at unmonitored border locations; 

* Incomplete reporting of federal improper payments; 

* Fiscal stewardship challenges facing the United States; 

* Tax abuses by Medicare Part B providers; 

* Transforming DHS's financial management systems; 

* Challenges facing the polar satellite program; 

* Electronic voting; 

* Balancing individual privacy with homeland security needs; 

* Health information technology and privacy; 

* Long-term fiscal challenges; 

* Tax compliance; 

* Human capital challenges facing the federal government; 

* Rebuilding the Gulf Coast; 

* Preparations for the 2010 Census. 

Source: See Image Sources. 

[End of Table] 

Timeliness: 

To be useful to the Congress, our products must be available when our 
client needs them. We used the results of our client feedback survey as 
a barometer for how well we are getting our products to our 
congressional clients when they need the information. We used this 
survey as the primary data source for our external timeliness measure 
because the responses come directly from our clients. We tally 
responses from the surveys we send to key congressional staff working 
for the requesters of our testimony statements and more significant 
written products (e.g., engagements assigned an interest level of 
"high" by our senior management[Footnote 4] and those requiring an 
investment of 500 staff days or more), which represented 95 percent of 
the written products we issued in fiscal year 2007. Because our 
products usually have multiple requesters, we often survey more than 
one congressional staff person per testimony or product. Each survey 
asks the client whether the product was provided or delivered on time. 
In fiscal year 2007, we had a 28 percent response rate from the 
congressional staff surveyed, which provided us with feedback on 54 
percent of the products for which we sent surveys. 

As shown in figure 17, in fiscal year 2007 we missed our timeliness 
target by 1 percentage point. We have always set our target for 
timeliness high because it is important for us to meet congressional 
needs when they occur, but we have yet to achieve this target. We will 
continue to emphasize to our audit teams the importance of 
communicating with our clients about when they will need testimony 
statements and products and delivering these statements and products 
when agreed to allow them enough time to prepare for hearings and other 
congressional activities. We anticipate these actions will enable us to 
meet our fiscal year 2008 target of 95 percent. 

Figure 17: Timeliness: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Percentage of products on time. 

2003 Actual: N/A; 
2004 Actual: 89%; 
2005 Actual: 90%; 
2006 Actual: 92%; 
2007 Target: 95%; 
2007 Actual: 94. 

Source: GAO. 

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

[End of Figure] 

Focusing on Our People: 

Our highly professional, multidisciplinary staff were critical to the 
level of performance we demonstrated in fiscal year 2007. Our ability 
to hire, develop, retain, and lead staff is a key factor to fulfilling 
our mission of serving the Congress and the American people. 

Over the last 5 fiscal years, we have refined our processes for 
measuring how well we manage our human capital. In fiscal year 2007, we 
met or exceeded our targets for five of our eight people measure. All 
eight measures are directly linked to our goal 4 strategic objective of 
becoming a professional services employer of choice. For more 
information about our people measures, see Verifying and Validating 
Performance Data on page 78 of this report. 

New Hire Rate and Acceptance Rate: 

Our new hire rate is the ratio of the number of people hired to the 
number we planned to hire. Annually, we develop a workforce plan that 
takes into account strategic goals, projected workload changes, and 
other changes such as retirements, attrition, promotions, and skill 
gaps. The workforce plan for the upcoming year specifies the number of 
planned hires and, for each new hire, specifies the pay plan, skill 
type, and level. The plan is conveyed to each of our units to guide 
hiring throughout the year. Progress toward achieving the workforce 
plan is monitored monthly by the Chief Operating Officer and the Chief 
Administrative Officer. Adjustments to the workforce plan are made 
throughout the year, if necessary, to reflect changing needs and 
conditions. In fiscal year 2007, our adjusted plan was to hire 198 
staff. However, we were only able to bring on board 187 staff by year- 
end. Of the 198 staff positions, 3 positions were carried over to 
fiscal year 2008 because the applicants could not start until the new 
fiscal year. Our acceptance rate measure is a proxy for our 
attractiveness as an employer and an indicator of our competitiveness 
in bringing in new talent. It is the ratio of the number of applicants 
accepting offers to the number of offers made. Table 3 shows that we 
exceeded by 1 percentage point the targets we set for our new hire rate 
and met our acceptance rate target of 72 percent. Our calculations for 
each of these measures do not include offers extended to applicants for 
fiscal year 2007 vacancies who accepted but will not report on duty 
until the first quarter of fiscal year 2008. (For more about our 
recruitment strategy and performance in fiscal year 2007, see app. 1, 
p. 182.): 

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

Performance measures: People: New hire rate; 

2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 95%; 
2007 Actual: 96%. 

Performance measures: People: Acceptance rate; 

2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Actual: 71%; 
2006 Actual: 70%; 
2007 Target: 72%; 
2007 Actual: 72%. 

Source: GAO. 

[End of Table] 

Retention Rate: 

We continuously strive to make GAO a place where people want to work. 
Once we have made an investment in hiring and training people, we would 
like them to stay with us. This measure is one indicator of whether we 
are attaining this objective. We calculate this measure by taking 100 
percent minus the attrition rate, where attrition rate is defined as 
the number of separations divided by the average on-board strength. We 
calculate this measure with and without retirements. Table 4 shows that 
both of our retention rate targets have declined 2 percentage points 
since fiscal year 2003, but have remained relatively flat during the 
intervening years. 

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

Performance measures: People: Retention rate: With retirements; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Actual: 90%; 
2006 Actual: 90%; 
2007 Target: 90%; 
2007 Actual: 90%. 

Performance measures: People: Retention rate: Without retirements; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 94%; 
2007 Actual: 94%. 

Source: GAO. 

[End of Table] 

Source: GAO. 

Staff Development and Utilization, Leadership, and Organizational 
Climate: 

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

In fiscal year 2007, about 72 percent of our employees completed the 
survey, and we met our target for staff development but missed the 
remaining three targets (see table 5). Though we did not meet our 
targets for leadership or organizational climate in fiscal year 2007, 
the favorable responses were equal to or slightly better than those in 
fiscal year 2006. We revised our fiscal year 2008 targets slightly for 
leadership and organizational climate and set them at 80 percent and 75 
percent, respectively, to be more realistic, but still challenging. We 
anticipate continued improvement on these measures. Since fiscal year 
2003, favorable responses to our staff utilization measure (see p. 90 
for more information on this measure) have generally increased, but 
declined in fiscal year 2007. We also adjusted this target slightly and 
set it at 75 percent for fiscal year 2008 to ensure that it is 
realistic and challenging, and we plan to perform a comprehensive 
analysis of the factors associated with staff utilization during the 
fiscal year. 

Data from our employee feedback survey are also used by by the 
Partnership for Public Service to determine our standing in the annual 
Best Places to Work in the Federal Government rankings. We were cited 
as second on the list of large federal agencies according to rankings 
released in April 2007 by this organization. We were also selected by 
Washingtonian magazine in September 2007 as a "Great Place to Work" 
from more than 225 candidates because of our interesting work, good pay 
and benefits, collegial staff, employee development, and flexibility. 

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

Performance Measures: People: Staff development; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Actual: 72%; 
2006 Actual: 76%; 
2007 Target: 75%; 
2007 Actual: 76%. 

Performance Measures: People: Staff utilization;  
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Actual: 75%; 
2006 Actual: 75%; 
2007 Target: 78%; 
2007 Actual: 73%. 

Performance Measures: People: Leadership; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Actual: 80%; 
2006 Actual: 79%; 
2007 Target: 80%; 
2007 Actual: 79%. 

Performance Measures: People: Organizational Climate; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Actual: 76%; 
2006 Actual: 73%; 
2007 Target: 76%; 
2007 Actual: 74%. 

Source: GAO. 

[End of table] 

Focusing on Our Internal Operations: 

Our mission and people are supported by our internal administrative 
services, including information management, facility management, 
knowledge services, human capital, financial management, and other 
services. To assess our performance related to how well our internal 
administrative services help employees get their jobs done or improve 
employees' quality of work life, we use information from our annual 
customer satisfaction survey to set targets and assess our performance 
for both of these measures, which are shown in table 6 along with 
baseline data that we recorded for them in fiscal year 2003 and fiscal 
year 2004. We asked staff to rank 31 internal services available to 
them and to indicate on a scale from 1 to 5 their satisfaction with 
each service. Our internal operations measures are directly related to 
our goal 4 strategic objectives of continuously enhancing our business 
and management processes and becoming a professional services employer 
of choice. The first measure encompasses 21 services that help 
employees get their jobs done, such as Internet access, desktop 
computer equipment, voice and video communication systems, shared 
service centers for copying and courier assistance, travel services, 
and report production. The second measure encompasses another 10 
services that affect quality of work life, such as assistance related 
to pay and benefits, building security and maintenance, and workplace 
safety and health. Using survey responses, we calculate a composite 
score for each service category that reflects employee ratings for (1) 
satisfaction with the service and (2) importance of the service. 

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

Performance measures: Internal operations: Help get job done; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: 4.1; 
2006 Actual: 4.1; 
2007 Target: 4.0; 
2007 Actual: N/A. 

Performance measures: Internal operations: Quality of work life; 
2003 Actual: 3.86; 
2004 Actual: 3.96; 
2005 Actual: 3.98; 
2006 Actual: 4.0; 
2007 Target: 4.0; 
2007 Actual: N/A. 

Source: GAO. 

Note: We will report actual data for fiscal year 2007 once the data 
from our November 2007 internal operations survey have been analyzed. 
N/A indicates that the data are not available yet. 

[End of Table] 

Building and Sustaining Partnerships: 

The various societal, economic, and other challenges facing our nation 
are becoming increasingly difficult for public agencies to address, in 
part because these issues tend to cut across different organizations 
and sectors. At the same time, public agencies are being called upon to 
address these complex problems in an era of tighter resources, smaller 
workforce levels, and other constraints. As a result of these trends, 
it will be difficult, if not impossible, for any one agency to address 
these challenges on its own. Moreover, evidence suggests that the most 
effective solutions arise when organizations join forces to apply their 
experience, knowledge, and resources to address common challenges. 

We have long recognized the importance of working collaboratively, and 
teams and units supporting all four of our strategic goals have 
continued their partnerships with a number of organizations, such as 
the National Academies of Sciences, the Council for Excellence in 
Government, and the International Organization of Supreme Audit 
Institutions (INTOSAI). Indeed, our collaborative relationships with 
"good government" and other domestic and international organizations 
enhance our ability to manage risk, address common challenges, improve 
government operations, provide better service to the public, make 
meaningful changes to the accountability process, and leverage 
available resources, all while maintaining our professional 
independence. Simply put, our relationships with our partners and other 
affiliates help us and them to carry out our respective missions. 

In fiscal year 2006, we began a formal effort to identify indicators 
that could help us measure the quality of our collaborative 
relationships. This initiative continued in fiscal year 2007, when a 
special team was created and tasked with developing a methodology that 
would enable us to (1) assess the extent and nature of our 
collaborative activities, (2) quantitatively measure the effectiveness 
of our collaborative activities, and (3) identify options for improving 
those relationships. 

Among other actions, the team reviewed available literature for leading 
practices on partnering, interviewed our senior executives and partner 
organization officials on their collaborative activities, and developed 
and pretested a survey of partner organizations designed to elicit 
information on how well our collaborative relationships were working. 

Moving forward, we expect to finalize the survey and other aspects of 
the methodology and survey these organizations in fiscal year 2008. 

GAO's High-Risk Program: 

Since 1990, our high-risk program has highlighted long-standing 
challenges facing the federal government. Increasingly, the program has 
focused on those major programs and operations that are in urgent need 
of broad-based transformation and congressional as well as executive 
branch action, to ensure that our national government functions in the 
most economical, efficient, and effective manner possible. Our latest 
regular update, released in January 2007, highlights 27 troubled areas 
across government. Many of these areas involve critical public service 
providers, such as USDA, IRS, and CMS, which provides services to 
Medicare and Medicaid recipients. 

Issued to coincide with the start of each new Congress, our high-risk 
updates have helped sustain attention from Members of the Congress who 
are responsible for oversight and from executive branch officials who 
are accountable for performance. Our focus on high-risk problems 
contributed to the Congress enacting a series of governmentwide reforms 
to address critical human capital challenges, strengthen financial 
management, improve IT practices, and instill a more results-oriented 
government. Overall, our high-risk program has served to identify and 
help resolve serious weaknesses in areas that involve substantial 
resources and provide critical services to the public. 

In fiscal year 2007, we determined that sufficient progress was made to 
merit removing the high-risk designation from two areas--the USPS 
transformation efforts and long-term outlook and HUD's single-family 
mortgage insurance and rental housing assistance programs. We also 
designated three new areas as high risk: financing the nation's 
transportation system, ensuring the effective protection of 
technologies critical to U.S. national security interests, and 
transforming federal oversight of food safety. 

Since our program began, the government has taken high-risk problems 
seriously and has made progress toward correcting them. The original 
high-risk list included 14 areas, but over the next 17 years, 33 areas 
were added, 18 areas were removed, and 2 were consolidated to reach the 
current 27 areas. DOD continues to dominate the list with 8 high-risk 
areas of its own and shared responsibility for 7 more. Table 7 lists 
each current high-risk area and the year it was placed on the high-risk 
list. 

Our high-risk list work in fiscal year 2007: 

* 221 reports; 

* 96 testimonies; 

* $13.55 billion in financial benefits. 

In fiscal year 2007, we issued 221 reports and delivered 96 testimonies 
related to our high-risk areas and documented financial benefits 
totaling approximately $13.55 billion. These results included, for 
example, reviews we completed in evaluating DOD's weapon system 
acquisition process. Some of our significant work in this area includes 
reviewing DOD's progress in meeting cost, schedule, and performance 
goals for the Joint Strike Fighter--DOD's most expensive aircraft 
acquisition program--and assessing the challenges to building a new 
type of aircraft carrier, the USS Gerald R. Ford, within budget. Our 
work in the DOD's weapons system acquisition area resulted in $2.6 
billion in financial benefits. In addition, we examined how IRS could 
better enforce tax laws. For example, we made recommendations on how to 
increase the tax compliance of sole proprietors and improve the 
efficiency in the appeals process used by taxpayers facing liens or 
levies. We documented approximately $1.3 billion in financial benefits 
from our past work in the enforcement of tax laws area. To learn more 
about our work on the high-risk areas or to download our January 2007 
high-risk update in full, go to [hyperlink, 
http://www.gao.gov/docsearch/featured/highrisk.html]. 

Table 7: GAO's 2007 High-Risk List: 

Addressing Challenges to Broad-Based Transformation: 

2007 High-risk area: Strategic Human Capital Management[A]; 
Year designated high risk: 2001. 

2007 High-risk area: Managing Federal Real Property[A]; 
Year designated high risk: 2003. 

2007 High-risk area: Protecting the Federal Government's Information 
Systems and the Nation's Critical Infrastructures; 
Year designated high risk: 1997. 

2007 High-risk area: Implementing and Transforming the Department of 
Homeland Security; 
Year designated high risk: 2003. 

2007 High-risk area: Establishing Appropriate and Effective Information-
Sharing Mechanisms to Improve Homeland Security; 
Year designated high risk: 2005. 

2007 High-risk area: DOD Approach to Business Transformation[A]; 
Year designated high risk: 2005. 

2007 High-risk area: DOD Business Systems Modernization; 
Year designated high risk: 1995. 

2007 High-risk area: DOD Personnel Security Clearance Program; 
Year designated high risk: 2005. 

2007 High-risk area: DOD Support Infrastructure Management; 
Year designated high risk: 1997. 

2007 High-risk area: DOD Financial Management; 
Year designated high risk: 1995; 

2007 High-risk area: DOD Supply Chain Management (formerly Inventory 
Management); 
Year designated high risk: 1990. 

2007 High-risk area: DOD Weapon Systems Acquisition; 
Year designated high risk: 1990. 

2007 High-risk area: FAA Air Traffic Control Modernization; 
Year designated high risk: 1995. 

2007 High-risk area: Financing the Nation's Transportation System[A] 
(New); 
Year designated high risk: 2007. 

2007 High-risk area: Ensuring the Effective Protection of Technologies 
Critical to U.S. National Security Interests[A] (New); 
Year designated high risk: 2007. 

2007 High-risk area: Transforming Federal Oversight of Food Safety[A] 
(New); 
Year designated high risk: 2007. 

Managing federal contracting more effectively: 

2007 High-risk area: DOD Contract Management; 
Year designated high risk: 1992. 

2007 High-risk area: DOE Contract Management; 
Year designated high risk: 1990. 

2007 High-risk area: National Aeronautics and Space Administration 
Contract Management; 
Year designated high risk: 1990. 

2007 High-risk area: Management of Interagency Contracting; 
Year designated high risk: 2005. 

Assessing the efficiency and effectiveness of tax law administration: 

2007 High-risk area: Enforcement of Tax Laws[A]; 
Year designated high risk: 1990. 

2007 High-risk area: IRS Business Systems Modernization; 
Year designated high risk: 1995. 

Modernizing and safeguarding insurance and benefit programs: 

2007 High-risk area: Modernizing Federal Disability Programs[A]; 
Year designated high risk: 2003. 

2007 high-risk area: Pension Benefit Guaranty Corporation Single- 
Employer Insurance Program[A]; 
Year designated high risk: 2003. 

2007 High-risk area: Medicare Program[A]; 
Year designated high risk: 1990. 

2007 High-risk area: Medicaid Program[A]; 
Year designated high risk: 2003. 

2007 High-risk area: National Flood Insurance Program[A]; 
Year designated high risk: 2006. 

Source: GAO. 

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

[End of Table] 

General Counsel Decisions and Other Legal Work: 

In addition to our audit and evaluation work, the Congress and the 
public also benefited from some of our other activities in fiscal year 
2007 in the following ways: 

* We handled more than 1,000 protests filed by parties who challenged 
the way individual federal procurements were conducted or how federal 
contracts were awarded, and we issued merit decisions on more than 450 
protests addressing a wide range of issues involving compliance with, 
and the interpretation of, procurement statutes and regulations. In 
fiscal year 2007, we handled numerous protests associated with areas of 
significant current interest. For example, we issued decisions 
concerning the contract for interpreters and translators for U.S. armed 
forces in Iraq as well as the acquisition of major systems, such as the 
Air Force's replacement combat search and rescue vehicle. 

* We issued appropriations law decisions and opinions on, among other 
things, the purposes for which appropriated funds may be used, the 
proper disposition of funds received by the government, potential 
Antideficiency Act violations, and accountability for the use of 
government purchase cards. Three decisions stand out. They addressed 
interagency transactions between the DOD and the Department of the 
Interior and the agencies' failure to prevent the misuse of expired 
appropriations. These three decisions more fully defined the criteria 
for valid interagency agreements, enhancing uniformity and consistency 
within government. 

* For fiscal year 2007, we received 25 Antideficiency Act reports for 
our repository and made selected information from these reports 
publicly available on our web site. Since the Congress amended the 
Antideficiency Act in December 2004 requiring agencies to send us a 
copy of reports of Antideficiency Act violations, we have received a 
total of 68 reports, of which 20 were for 2005 and 23 were for 2006. 
This year's reports, which also report overobligations from earlier 
fiscal years, include an overobligation of the TSA appropriation by 
$195 million because purchase orders were not properly recorded and a 
$126 million violation because of an inaccurate estimation of carryover 
appropriations by the Employment and Training Administration. 

* In 2007 we issued a report on Presidential Signing Statements to the 
Senate Appropriations Committee and the House Judiciary Committee. This 
report consisted of a detailed analysis and history of signing 
statements, an examination of their use by federal courts, and an 
explanation of the grounds on which the President has objected to 
various laws in signing statements. The report also included the 
results of our investigation into whether agencies were executing as 
written 19 provisions of law appearing in the fiscal year 2006 
appropriations acts. We found that agencies were not executing the 
provisions as written in 6 of the 19 cases. 

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

* In 2007 we issued our annual update of volumes 1 and 2 of the Third 
Edition of Principles of Federal Appropriations Law, commonly known as 
the Red Book. The Red Book is available to the public on our web site 
and is considered the primary resource for appropriations law guidance 
in the federal financial community. Volumes 1 and 2 of the Red Book 
each average more than 15,000 inquiries per week on our web site as 
attorneys, budget analysts, financial managers, project managers, 
contracting officers, and accountable officers from all three branches 
of the government access it to research questions about budget and 
appropriations law. The third edition will be complete with publication 
of volume 3 in 2008. In addition, General Counsel taught a 2 ï¿½ day 
course on appropriations law 25 times this fiscal year to 12 agencies. 
The course provides an analytical framework for analyzing 
appropriations law issues to ensure that funds are available for 
obligation with regard to purpose, amount and time. To further 
communication across agencies, General Counsel hosted its third annual 
appropriations law forum in March, with an analysis of significant 
decisions and opinions of 2006 and interactive sessions on 
indemnification clauses and continuing resolutions. 

Managing Our Resources: 

Resources Used to Achieve Our Fiscal Year 2007 Performance Goals: 

Our financial statements for fiscal year 2007 received an unqualified 
opinion from an independent auditor. The auditor found our internal 
controls to be effective--which means that no material weaknesses were 
identified--and the auditor reported substantial compliance with the 
requirements for financial systems in the Federal Financial Management 
Improvement Act of 1996. In addition, the auditor also found no 
instances of noncompliance with the laws or regulations in the areas 
tested. The statements and their accompanying notes, along with the 
auditor's report, appear later in this report. Table 8 summarizes key 
data. Compared with the statements of large and complex agencies in the 
executive branch, our statements present a relatively simple picture of 
a small yet very important agency in the legislative branch. We focus 
most of our financial activity on the execution of our congressionally 
approved budget with most of our resources devoted to the human capital 
needed for our mission of supporting the Congress with professional, 
objective, fact-based, nonpartisan, nonideological, fair, and balanced 
information and analysis. 

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

Total budgetary resources[A]; 
Fiscal year 2007: $498.9 million; 
Fiscal year 2006: $497.2 million. 

Total outlays[A]; 
Fiscal year 2007: $490.5 million; 
Fiscal year 2006: $488.1 million. 

Net cost of operations: Goal 1: Well-being and Financial security of 
the American people; 
Fiscal year 2007: $177.4 million; 
Fiscal year 2006: $191.9 million. 

Net cost of operations: Goal 2: Changing security threats and 
challenges of globalization; 
Fiscal year 2007: $157.5 million; 
Fiscal year 2006: $154.7 million. 

Net cost of operations: Goal 3: Transforming the federal government's 
role; 
Fiscal year 2007: $146.6 million; 
Fiscal year 2006: $146.8 million. 

Net cost of operations: Goal 4: Maximizing the value of GAO; 
Fiscal year 2007: $23.9 million; 
Fiscal year 2006: $23.7 million. 

Net cost of operations: Less reimbursable services not attributable to 
goals; 
Fiscal year 2007: ($5.7 million); 
Fiscal year 2006: ($5.6 million). 

Total net cost of operations[A]; 
Fiscal year 2007: $499.7 million; 
Fiscal year 2006: $511.5 million. 

Actual FTEs: 
Fiscal year 2007: 3,152; 
Fiscal year 2006: 3,194. 

Source: GAO. 

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

[End of Table] 

Our budget consists of an annual appropriation covering salaries and 
expenses, and revenue from reimbursable audit work and rental income. 
Our total assets were $106.5 million, consisting mostly of property and 
equipment (including the headquarters building, land and improvements, 
and computer equipment and software) and funds with the U.S. Treasury. 
Total liabilities of $94 million were composed largely of employees' 
accrued annual leave, amounts owed to other government agencies, 
accounts payable, and employees' salaries and benefits. The greatest 
change in the liabilities is a decrease of $6.1 million in 
intragovernmental accounts payable due to more timely billing from, and 
therefore payments to, other government entities. Also, $3.8 million in 
vendor financed equipment is recorded on the balance sheet as a note 
payable. 

The net cost of operating GAO during fiscal year 2007 and fiscal year 
2006 was approximately $500 million and $511 million, respectively. 
Expenses for salaries and related benefits accounted for 81 and 79 
percent of our net cost of operations in fiscal years 2007 and 2006, 
respectively. Figure 18 shows how our fiscal year 2007 costs break down 
by category. 

We report net cost of operations according to our four strategic goals, 
consistent with our strategic plan. Overall, our net costs of 
operations decreased by $11.8 million, due in part to the change in 
workers' compensation methodology in fiscal year 2006, which increased 
liabilities and expenses by more than $5.5 million; there was no 
similar change in fiscal year 2007. 

Our strategic Goal 1 showed a reduction in net costs of $14.5 million 
in fiscal year 2007 compared to fiscal year 2006. This decline in Goal 

1 costs reflects the continuing shift in our resources towards the 
areas of homeland security, national disaster preparedness, and 
immigration issues, which reside in our strategic Goal 2. 

Figure 18: Use of Fiscal Year 2007 Funds by Category: 

[See PDF for Image] - graphic text: 

Pie chart with five items. 

Percentage of Total Net Costs: 

Salaries and benefits: 80.6%; 
Building and hardware maintenance services: 10.3%; 
Rent (space and hardware): 2.3%; 
Depreciation: 2.7%; 
Other: 4.1%. 

Source: GAO. 

[End of Figure] 

Figures 19 and 20 show our net costs by goal for fiscal year 2004 
through fiscal year 2007. Figure 19 shows costs unadjusted for 
inflation, while figure 20 shows the same costs in 2007 dollars, that 
is, adjusted for inflation. 

Figure 19: Net Cost by Goal, Unadjusted for Inflation: 

[See PDF for Image]- graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2004: $194.7 million; 
2005: $197.7 million; 
2006: $191.9 million; 
2007: $177.4 million. 

Goal 2; 
2004: $131.7 million; 
2005: $144.2 million; 
2006: $154.7 million; 
2007: $157.5 million. 

Goal 3; 
2004: $145.8 million; 
2005: $147.3 million; 
2006: $146.8 million; 
2007: $146.6 million. 

Goal 4; 
2004: $23.4 million;
2005: $22.0 million; 
2006: $23.7 million; 
2007: $23.9 million. 

Source: GAO. 

[End of Figure] 

Figure 20: Net Cost by Goal, Adjusted for Inflation: 

[See PDF for Image]- graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2004: $213.2 million; 
2005: $209.8 million; 
2006: $197.1 million; 
2007: $177.4 million. 

Goal 2; 
2004: $144.2 million; 
2005: $153.0 million; 
2006: $158.9 million; 
2007: $157.5 million. 

Goal 3; 
2004: $159.7 million; 
2005: $156.3 million; 
2006: $150.8 million; 
2007: $146.6 million. 

Goal 4; 
2004: $25.6 million;
2005: $23.3 million; 
2006: $24.3 million; 
2007: $23.9 million. 

Source: GAO. 

[End of Figure] 

Limitation on Financial Statements: 

Responsibility for the integrity and objectivity of the financial 
information presented in the financial statements in this report rests 
with our managers. The statements were prepared to report our financial 
position and results of operations, consistent with the requirements of 
the Chief Financial Officers Act, as amended (31 U.S.C. 3515). The 
statements were prepared from our financial records in accordance with 
the formats prescribed in OMB Circular No. A-136, Financial Reporting 
Requirements. These financial statements differ from the financial 
reports used to monitor and control our budgetary resources. However, 
both were prepared from the same financial records. 

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

Planned Resources to Achieve Our Fiscal Year 2008 Performance Goals: 

As we go to press on this report, the Congress has not completed action 
on our fiscal year 2008 budget request. We, as well as the rest of the 
federal government, are operating under a continuing resolution 
appropriation at near fiscal year 2006 levels through November 16, 
2007, pending enactment of the fiscal year 2008 appropriations bills 
for the federal government. 

Our fiscal year 2008 budget request to the Congress for about $530 
million would allow us to continue to perform a range of oversight-, 
insight-, and foresight-related engagements to support the Congress in 
meeting the full range of its constitutional responsibilities and to 
meet the performance goals outlined in our Strategic Plan. The 
requested resources will allow us to rebuild our workforce to a level 
that will position us to better respond to increasing supply and demand 
imbalances in responding to congressional requests, cover mandatory pay 
and uncontrollable cost increases, continue to be regarded as an 
employer of choice, undertake critical investments in technology 
improvements and other transformational areas, and ensure that we can 
effectively support the Congress's legislative agenda. Our request 
represents an increase of about 8.5 percent over our fiscal year 2007 
funding level. At this time, the House of Representatives has approved 
a 4.5 percent increase above 2007. The Senate Appropriations Committee 
has proposed a 6 percent increase above fiscal year 2007 funding 
levels, but the full Senate has not yet acted on our request. Table 9 
reflects our requested funding level and full-time equivalent (FTE) 
figures to support the Strategic Plan. We will update our fiscal year 
2008 funding and FTE numbers when the final appropriation has been 
approved by the Congress. 

Table 9: Requested Fiscal Year 2008 Budgetary Resources by Strategic 
Goal: 

Strategic Goal: Goal 1; 
Provide timely, quality service to the Congress and the federal 
government to address current and emerging challenges to the well-being 
and financial security of the American people; 
FTEs: 1,213; 
Amount(dollars in millions): $193 million. 

Strategic Goal: Goal 2; Provide timely, quality service to the Congress 
and the federal government to respond to changing threats and the 
challenges of global interdependence; 
FTEs: 1,000; 
Amount(dollars in millions): $160 million. 

Strategic Goal: Goal 3; Help transform the federal government's role 
and how it does business to meet 21st century challenges; 
FTEs: 860; 
Amount(dollars in millions): $137 million. 

Strategic Goal: Goal 4; Maximize the value of GAO by being a model 
federal agency and a world-class professional services organization; 
FTEs: 144; 
Amount(dollars in millions): $40 million. 

Total; 
FTEs: 3,217; 
Amount(dollars in millions): $530 million. 

Source: GAO. 

[End of Table] 

Our fiscal year 2008 budget request aligns the budget in support of 
three broad program areas, human capital, engagement support and 
infrastructure operations. These programs align to all four of our 
strategic goals in support of the Congress and the American people. Our 
budget request will support activities in the following areas: 

* Human capital. Provides resources to support our most important 
asset--our employees--and cover salaries and benefits, training and 
development, awards and recognition, and recruitment and retention 
programs, such as transit subsidy and student loan repayment programs. 
Human capital costs represent about 80 percent of our total budgetary 
resources. For fiscal year 2008, we are requesting funds to support an 
increase to achieve a staffing level of 3,217 FTEs which will allow us 
to fill critical vacancies, meet succession-planning needs, rebuild our 
capacity, and address supply and demand imbalances in responding to 
congressional requests. 

* Engagement support. Provides resources for contractual services and 
staff travel needed to perform engagements to support the Congress's 
legislative agenda, restore travel to more normal levels, and increase 
our oversight in the Middle East to provide more timely and responsible 
information on U.S. activities in the area. 

* Infrastructure operations. Includes resources activities, such as 
building maintenance, computer hardware maintenance and software, field 
office rent, financial management activities, and targeted initiatives. 
We plan to allocate 20 percent of our total budget request for 
infrastructure operations and critical infrastructure initiatives 
previously deferred during budget shortfalls. 

Our fiscal year 2008 budget request seeks necessary resources to 
rebuild and enhance our workforce, knowledge capacity, employee 
programs, and infrastructure. In the years ahead our support to the 
Congress will likely prove even more critical based on pressures 
created by our nation's current and projected budget deficit and 
growing long-term fiscal imbalances. 

Our budget request seeks to maximize our effectiveness and credibility 
while achieving three elements essential to increased value and 
mitigating risk--incentives, transparency, and accountability. With 
these elements in mind we use our resources to address major management 
challenges surrounding human capital, information security and physical 
security. We capitalized on opportunities that minimize related risks, 
while staying mindful of the big picture and the long-term view. Using 
long-term perspectives to transform our organization and operations to 
better meet today's needs as well as future needs, we are in the 
business of helping government work better for and holding it 
accountable to the American people. 

Strategies for Achieving Our Goals: 

The Government Performance and Results Act directs agencies to 
articulate not just goals, but also strategies for achieving those 
goals. As detailed in the following sections, we emphasize two 
overarching strategies for achieving our goals: (1) providing 
information from our work to the Congress and the public in a variety 
of forms and (2) continuing and strengthening our internal operations. 
Specifically, our strategies emphasize the importance of working with 
other organizations on crosscutting issues and effectively addressing 
the challenges to achieving our agency's goals and recognizing the 
internal and external factors that could impair our performance. 
Through these strategies, which have proven successful for us for a 
number of years, we plan to achieve the level of performance that is 
needed to meet our annual performance measures as well as our multiyear 
performance goals. (For all four strategic goals, the multiyear 
performance goals included in our current strategic plan describe 
specific areas of work that we addressed in fiscal year 2007.) This 
level of performance, in turn, will allow us to achieve our strategic 
goals. 

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

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

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

* investigations to assess whether illegal or improper activities are 
occurring; 

* analyses of the financing for government activities; 

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

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

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

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

We conduct specific engagements as a result of requests from 
congressional committees and mandates written into legislation, 
resolutions, and committee reports. In fiscal year 2007, we devoted 90 
percent of our engagement resources to work requested or mandated by 
the Congress. We initiated the remaining 10 percent of the engagement 
work under the Comptroller General's authority. Much of this work 
addressed various challenges that are of broad-based interest to the 
Congress, such as the global war on terrorism, the cost and status of 
the reconstruction efforts in Iraq, and our reviews related to the 2005 
hurricane season.[Footnote 5] Also covered by this work were government 
programs and operations that we have identified as at high risk for 
fraud, waste, abuse, and mismanagement as well as reviews of agencies' 
budget requests to help support congressional decision making. By 
making recommendations to improve the accountability, operations, and 
services of government agencies, we contribute to increasing the 
effectiveness of federal spending and enhancing the taxpayers' trust 
and confidence in their government. 

Our staff are responsible for following high standards for gathering, 
documenting, and supporting the information we collect and analyze. 
More often than not, this information is documented in a product that 
is made available to the public. In some cases, we develop products 
that contain classified or sensitive information that cannot be made 
available publicly. We generally issue around 1,200 to 1,300 products 
each year, electronically and in printed format. In addition, we 
publish about 250 to 350 legal decisions and opinions each year. Our 
products include the following: 

* letter reports, chapter reports, and written correspondence; 

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

* oral briefings, which are usually given directly to congressional 
staff members; and: 

* legal decisions and opinions resolving bid protests and addressing 
issues of appropriations law, as well as opinions on the scope and 
exercise of authority of federal officers. 

We also produce special publications on specific issues of general 
interest to all Americans, such as our report on fiscal stewardship and 
our series of issue papers to assist the Congress in developing its 
oversight agenda for the situation in Iraq.[Footnote 6] Our 
publication, Principles of Federal Appropriations Law, is viewed both 
within and outside of the government as the primary resource on federal 
case law related to the availability, use, and control of federal 
funds. In addition, we maintain the government's repository of reports 
on Antideficiency Act violations and make available on our Web site 
various information extracted from those reports. Collectively, our 
products always contain information and often conclusions and 
recommendations that allow us to achieve our external strategic goals. 

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

Similarly, we use our biennial high-risk report, most recently issued 
in January 2007, to provide a status report on major government 
operations that we consider high risk because they are vulnerable to 
fraud, waste, abuse, and mismanagement or are in need of broad-based 
transformation. We also use our report on 21st century challenges, 
which was issued in February 2005, to alert the nation's leaders to 
current and emerging issues facing the nation, including the long-range 
budget challenge, the human capital crisis, postal reforms, and the 
federal government's financial management efforts. These reports are 
valuable planning tools because they help us to identify those areas 
where our continued efforts are needed to maintain the focus on 
important policy and management issues that the nation faces. 

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

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

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

* maintain strategic working relationships with other national and 
international government accountability and professional organizations, 
including the federal inspectors general, state and local audit 
organizations, and other national audit offices. 

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

Strategic and Annual Work Planning: 

Through forums and a number of ongoing advisory boards and panels, we 
gather information and perspectives for our strategic and annual 
performance planning efforts. In fiscal year 2007, the Comptroller 
General convened various experts from the public, private, and 
nonprofit sectors in eight forums and panels intended to enhance our 
understanding of emerging issues and to identify opportunities for 
action. The forums included discussions on options for extending the 
working life of older workers, modernizing disability policies and 
programs, exploring the feasibility of the Chief Management Officer and 
Chief Operations Officer concepts, controlling health care costs, 
addressing 21st century transportation challenges, improving financial 
market regulation, addressing issues related to environmental 
accounting, and closing the tax gap. We also updated our Strategic Plan 
for 2007 through 2012. Our update included a significantly revamped 
themes section that outlined for the Congress and the public the forces 
that will shape our country's future. 

We continued our speakers' series Conversations on 21st Century 
Challenges, wherein a prominent national leader spoke to our staff on 
issues affecting the United States and its place in the world. These 
speakers included General Anthony Zinni, USMC (retired); Norman 
Ornstein, Resident Scholar, American Enterprise Institute for Public 
Policy; Marian Wright Edelman, Founder, Children's Defense Fund; and 
Norman Mineta, Vice-Chairman, Hill and Knowlton. 

Advisory boards and panels also support our strategic and annual work 
planning by alerting us to issues, trends, and lessons learned across 
the national and international audit community that we should factor 
into our work. These groups include the Comptroller General's Advisory 
Board, whose 40 members from the public and private sectors have broad 
expertise in areas related to our strategic objectives. Through the 
National Intergovernmental Audit Forum, chaired by the Comptroller 
General, and 10 regional intergovernmental audit forums, we consult 
regularly with federal inspectors general and state and local auditors. 
In addition, through the Domestic Working Group, the Comptroller 
General and the heads of 18 federal, state, and local audit 
organizations exchange information, experiences, and best practices, 
and seek opportunities to collaborate. Internationally, the Global 
Working Group, comprising of the Comptroller General and 18 heads of 
national audit offices, serves the same purpose through its annual 
meeting. And our leadership role in INTOSAI provides further 
opportunities for us to benefit from international perspectives, 
insights, and contacts, and to help strengthen accountability globally 
with a special focus on developing countries receiving development 
assistance from the United States. 

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

* The Advisory Council on Government Auditing Standards provides us 
guidance on promulgating auditing standards. These standards articulate 
auditors' responsibilities when examining government organizations; 
programs; activities; functions; and government assistance received by 
contractors, nonprofits, and other nongovernmental organizations. The 
council's work helped to ensure that the revised standards would be 
generally accepted and feasible. On July 27, 2007, we issued a revision 
of the standards. It includes updates of the quality control and peer 
review sections. 

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

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

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

Internationally, we participate in INTOSAI--the professional 
organization of the national audit offices of 186 countries. During the 
fall of 2004, the INTOSAI Congress unanimously adopted a 5-year 
strategic plan--the first in INTOSAI's 50-year history--that was 
developed by a 10-nation task force chaired by the Comptroller General. 
The plan has provided the foundation for the Governing Board to engage 
member institutions in advancing professional audit standards and 
promoting knowledge sharing and best practices. In fiscal year 2007, we 
made significant contributions to implement the strategic plan and 
strengthen INTOSAI as a model international organization by serving as 
goal liaison for the organization's capacity-building committee and as 
vice-chair of its finance and administration committee. Looking to the 
next 5-year period, the Comptroller General has been asked by INTOSAI 
to chair a task force to update the current strategic plan. 

Collaborating with Others: 

By collaborating with others to implement the INTOSAI strategic plan, 
we have strengthened professional standards, provided technical 
assistance, leveraged resources, and developed best practices. In our 
work with INTOSAI, we chair the accounting and reporting subcommittee 
and are an active member of INTOSAI's auditing standards, internal 
control, and other technical subcommittees. We publish INTOSAI's 
quarterly International Journal of Government Auditing in five 
languages to foster global understanding of standards, best practices, 
and technical issues. An expanded and more robust journal web presence 
this year has made the Journal more useful to INTOSAI members, more 
accessible to our global readership, and positioned the journal to take 
full advantage of technology. 

To help ensure that the public sector perspectives are reflected in the 
International Federation of Accountants Standards Development project, 
we are working as a member of INTOSAI's Professional Standards 
Committee as it collaborates closely with the International Auditing 
Assurance Standards Board and the World Bank to develop international 
auditing standards. 

To build capacity in national audit offices around the world, we 
conduct an international auditor fellows program for mid-to senior- 
level staff from other countries. In 2007, 15 audit fellows from Asia, 
Africa, Europe, Latin America, the Caribbean, and the South Pacific 
spent about 4 months with us learning how we are organized to do our 
work, how we plan our work, and what methodologies we use, particularly 
for performance audits. As part of our strategy to promote continuous 
learning and sustainability once the fellows return to their countries, 
we are working with major donors--such as the World Bank, regional 
development banks, and the U.S. Agency for International Development-- 
to identify or support relevant capacity-building projects in fellows' 
institutions. Seven current and eight former auditors general as well 
as several deputy auditors general, including the current chair of 
INTOSAI, are graduates of this program. This year we forged an 
agreement with the World Bank (the Bank would pick up much of the 
costs, including transport, subsistence, and interpretation) and the 
INTOSAI Development Initiative (IDI) to collaborate on a pilot seminar 
in November 2007 involving the heads of 30 national audit offices. The 
seminar would focus on knowledge sharing of best practices on 
organizational transformation. 

Other collaborative activities undertaken by our staff during 2007 
included the following: 

* Participating in two Domestic Working Group collaborative efforts of 
federal, state, and local audit officials to address issues regarding 
governance and pandemic preparedness. Collaborative efforts with the 
Domestic Working Group and the National Association of State Auditors, 
Comptrollers, and Treasurers facilitated our work involving the states 
by fostering cooperative working relationships with the state auditors 
on almost 20 engagements, including our work on Medicaid and FEMA's 
process to estimate funds needed to respond to a disaster. 

* Implementing the National Intergovernmental Audit Forum strategic 
plan that was adopted in December 2004. This plan was developed by a 
task force composed of federal, state, and local auditors and an 
independent public accountant. The newly established committees 
continue organizing to implement the plan, which seeks to help maximize 
the forum's effectiveness in promoting good government and 
accountability at all levels of government. In 2007, the forum advanced 
its strategic plan through the activities of its knowledge-sharing, 
communications, standards liaison, and emerging issues committees. In 
addition, 16 regional forum meetings were held, which brought together 
auditors at all government levels. These conferences helped advance the 
public sector accountability profession's understanding of and ability 
to respond to the many challenges facing the nation in the 21st 
century. 

* Facilitating collaboration between our teams and federal, state, 
local, and international auditors, which, among other things, helped us 
to minimize duplication of efforts, leverage resources, and gain access 
to people and information. We used our database and networks to help 
"push out" electronically the revised Yellow Book to the domestic and 
international accountability communities. 

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

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

* Receiving about 461 visitors from 71 countries, including officials 
from our counterpart organizations, parliaments, and central government 
ministries. 

* Signing an interagency agreement with the Department of State to fund 
the translation of our audit standards (the Yellow Book) into Arabic in 
support of the professional development goals of the Iraqi national 
audit office and our other audit agency counterparts in the Arabic 
speaking world, and to provide a bilateral capacity program for 
selected audit staff from our Iraqi counterpart institution. 

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

* Bringing value to our agency by using various human capital exchange 
authorities. For example, we used our network and authority for the 
Executive Exchange Program to successfully recruit the first two 
participants for this program. It was a win-win situation for both 
KPMG, the home organization for the private sector participants, and 
us. The participants worked on a number of special projects in our 
Financial Management and Assurance Team that included updating 
financial audit guidance and developing agency protocols for financial 
audits. They were also involved in other leadership development 
opportunities. Positive articles on the candidates' experiences while 
participating in this program were published by the Federal Times and 
the Association of Government Accountants. We also recruited our first 
ever Commerce Science Fellow who brought his engineering expertise to 
our Applied Research and Methods team. 

Using Our Internal Experts: 

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

Internal Management Challenges and Mitigating External Factors That 
Could Affect Our Performance: 

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

For fiscal year 2007, we continued to address three management 
challenges--physical security, information security, and human capital. 
We anticipate that we will continue to need to address all three 
challenges in future years because they are evolving and will require 
us to continuously identify ways to adapt and improve. We will report 
any changes as we monitor and report on our progress in addressing the 
challenges through our annual performance and accountability process. 
The following sections describe our recent and planned efforts to 
address these challenges. 

Physical Security Challenge: 

We continue to build on our previous efforts and pursue new initiatives 
to protect our people and assets and ensure continuity of operations. 
The domestic and international climate remains such that we must 
constantly assess our physical security profile and continuity of 
operations programs and identify and implement improvements to 
strengthen them. 

During fiscal year 2007, we realigned the Office of Emergency 
Preparedness (OEP), first established in the third quarter of fiscal 
year 2006. OEP is now under the Chief Information Officer, who has 
taken the lead for our continuity of operations and emergency 
preparedness operations. Since the realignment, OEP has centralized and 
strengthened policies and operations, improved internal and external 
communication and information-sharing efforts, and upgraded and 
enhanced its technical capabilities. 

In its policy and oversight role for emergency planning OEP developed 
program policy and documents to help ensure that we can continue to 
carry out our functions in the face of natural or man-made disasters or 
other disruptions. In addition, OEP centralized all previously 
established planning efforts into the "Continuity Program Document" and 
"Continuity Program Support Documents" to ensure a more effective 
response to any event. 

To ensure better communications and information-sharing between 
congressional agencies OEP meets regularly with both the Legislative 
Branch Continuity of Operations Plan Working Group and the Executive 
Branch Continuity of Operations Working Group. In addition, OEP 
continues to coordinate with sister agencies in the legislative branch, 
executive branch agencies, and local law enforcement for contingency 
planning efforts and information/intelligence-sharing purposes. In 
fiscal year 2007 we formalized program strategy and concepts of 
operations. 

OEP enhanced our capability to communicate to staff during emergency 
situations by developing and refining the emergency notification system 
procured in fiscal year 2006. Specific response groups have been 
identified and established in the system for alert when needed. This 
fiscal year OEP also further improved its visibility and access to 
emergency preparedness information with the launching of an emergency 
preparedness Web site on our intranet. 

In the area of physical security, we constantly assess our physical 
security profile and seek ways to improve it. Our last independent 
security assessment was conducted following 9-11 in what was a very 
different threat environment. Since that time we have deployed many 
physical and procedural security enhancements. Accordingly, we 
initiated a contract at the end of fiscal year 2007 for an updated 
security assessment to review all security programs, assess recent 
enhancements against our current threat environment and revalidate our 
planned next steps. 

We relocated and activated our Security Operations Center and the 
adjacent Emergency Operations Center. Subsequently, we have implemented 
incremental improvements to our Integrated Electronic Security System, 
including installation of intrusion detection systems and 
infrastructure enhancements necessary for continued system upgrades. 

We believe that physical security will remain a management challenge in 
fiscal year 2008. Some of our planned initiatives will be subject to 
collective bargaining as they may affect the terms and conditions of 
bargaining unit employees. Some of the most significant efforts planned 
to address this challenge in fiscal year 2008 include the following: 

* Launching a formal test training and exercise program for continuity 
of operations in coordination with the legislative and executive 
branches and local law enforcement. 

* Refining the emergency notification system and the emergency 
preparedness Web site to enhance our internal communications. 

* Carrying out a security assessment of our current security programs 
and associated risks to personnel, property, and information.

* Installing card readers that comply with Homeland Security 
Presidential Directive 12, which requires issuance of secure and 
reliable forms of identification to employees and contractors using 
U.S. government facilities and information services, allowing both 
physical access to facilities as well as logical access to information. 

The Information Security Challenge: 

Information system security continues to be a critical activity in 
ensuring our information system and assets are effectively protected 
and free from compromise. While we are not required by law to comply 
with the Federal Information Security Management Act (FISMA),[Footnote 
7] we have adopted FISMA requirements to help us meet the challenges 
posed in ensuring information system security. 

In fiscal year 2007, we established a wide range of goals and embarked 
on numerous initiatives to address information system security. For 
example, we: 

* Worked to improve the protection of data on workstations by 
identifying a desktop encryption product (which converts all the data 
on the hard drive to a form that cannot be read by unauthorized people) 
and conducting a limited deployment of it on workstations containing 
higher risk data. We expect to deploy this encryption technology on all 
workstations throughout the agency in the coming year. 

* Enhanced our enterprise Internet security by increasing our 
capability to screen Internet traffic against potential threats. 

* Improved our ability to effectively monitor and better secure our 
computing assets with an enterprise event correlation application 
(which allows us to collect and analyze the results of various 
monitoring tools) to enhance our centralized auditing of network 
servers and devices; 

* Refined our procedures for information security in our security 
program plan to maintain compliance with new federal guidance on 
information security. 

* Improved our ability to respond and recover in the event of a 
disruption by enhancing communications and restoration capabilities at 
our disaster recovery operations to lessen our risks. These and other 
efforts are discussed in detail in our report on our FISMA activities 
in appendix 3. 

While new challenges to information systems security can often be 
addressed with technology improvements, an overall information security 
program can only be effective when these systems security efforts are 
fully integrated with it and with an agency's physical security 
program. In recognition of this need for integration, several of our 
units--Information Systems and Technology Services, the Office of 
Security, the Learning Center, and Knowledge Services--partnered 
together to develop an integrated information security awareness 
education and training program. In 2007, we produced a video of the 
Comptroller General emphasizing our employee's responsibilities 
regarding information security and data protection. We also produced a 
new information security computer-based training program and required 
all personnel to complete it. Our goal has been to ensure that 
information protection requirements extend across the life cycle of 
documentation: from data collection, report production, data 
transmission and storage to the eventual archival and destruction of 
data. 

Given the constantly evolving nature of threats to information systems 
and assets, information security will continue to be a management 
challenge for us and all government and private sector entities in the 
foreseeable future. Some of our planned initiatives may be subject to 
collective bargaining as they may affect the terms and conditions of 
employment of bargaining unit employees. Some of the most significant 
efforts planned to address the information security challenge in fiscal 
year 2008 include: 

* focusing on data protection encryption and identity management to 
better control access to our internal network and information; 

* increasing the centralized auditing and monitoring of network servers 
and devices to better secure our computing assets within the agency; 

* enhancing our security awareness training for staff that includes 
recurring presentations by senior management and focused role-based 
instructions; 

* responding to new and updated security guidance from the National 
Institute of Standards and Technology and OMB; 

* refining our security processes and procedures, enhancing our 
contingency operations, and improving our overall ability to respond to 
the changing threats by implementing appropriate new technologies, such 
as smart card technology to reduce or manage risks. 

Human Capital Challenge: 

Competition for talent among knowledge-based organizations is rising as 
the demographics of the workforce shift to a younger and less 
experienced workforce and knowledge and skill gaps occur--particularly 
at mid and more senior levels--as a result of retirements. The need to 
sustain a knowledge and skills-based workforce is critical as it is 
this workforce that makes it possible for us to deliver the results and 
performance expected by our clients and customers. 

Our ability to have the right mix of experienced and knowledgeable 
staff to carry out our engagements and meet our client's needs is an 
ongoing challenge. We continue to face continuity and succession issues 
from downsizing and reduced hiring from the mid to late 1990s and as a 
result, are facing continuity and succession issues. At the beginning 
of fiscal year 2007, over 42 percent of our analysts and related staff 
had fewer than 5 years of agency experience, making learning and 
development--as well as leadership--of this staff of paramount 
importance. This demographic change has also created some cultural 
challenges as our workforce evolves into a multi-generational 
workforce, with many diverse interests and needs and with differing 
attitudes toward the workplace and a career. This is an area that we 
are currently reviewing and plan to focus on as we move forward, given 
the potential for changing turnover dynamics and the likelihood of 
greater mobility among this workforce. 

Not surprisingly, recruiting, rewarding and retaining a highly 
qualified, high performing, and diverse workforce also remains one of 
our most important challenges. Over the past year, we have begun 
implementing enhancements to our recruitment and hiring activities 
which were recommended after an extensive review in 2006 of both our 
recruiting programs and best practice research. These enhancements are 
chiefly focused on recruiting and communications strategies/tools to 
ensure consistent and effective approaches for talent acquisition--from 
the first meeting on a college campus to the first day of employment. 
While we have focused these efforts primarily on our entry level hiring 
and student intern programs, we have also extended them to upper level 
hiring, as well. All efforts also include a focus on diversity to 
ensure that our programs and practices support a diverse workforce and 
reinforce our commitment to diversity. 

To address learning and development, we continue to offer more courses 
electronically and have adopted a blended learning approach mixing 
classroom training with web-based training to ensure that all staff 
members have access to learning. In fiscal year 2007, a team comprised 
of staff and managers from various mission teams and units completed an 
evaluation of our leadership development programs and made 
recommendations to our Learning Board and Executive Committee for a 
comprehensive program to enhance the ability of staff at all levels to 
prepare for leadership roles. We plan to implement these 
recommendations in fiscal year 2008. In addition, in fiscal year 2007, 
we inaugurated a new agencywide mentoring program. We currently have 
155 participants in both individual and group mentoring activities and 
expect the program to expand over the coming year. 

We have been a leader in the federal government in implementing 
competency-based performance management, performance-based 
compensation, and more recently a market-based pay system in which (1) 
pay ranges are set competitive with the labor markets in which we 
compete for talent; (2) staff are rewarded based on their performance; 
(3) staff have the opportunity to advance to the top of the pay range; 
(4) pay ranges provide some overlap to adequately reward expertise, 
leadership and performance; and (5) pay policies are grounded on the 
principle of equal pay for work of equal value. From a change 
management perspective, such major transformational efforts affecting 
staff performance and pay, however, can be quite difficult and require 
strong leadership and commitment. This was true with the decoupling of 
our pay system from the governmentwide annual across-the-board 
adjustments, our move to market-based pay, and changes in the analyst 
Band II pay band. 

Our Office of Opportunity and Inclusiveness performs an annual review 
of our employees' performance appraisal data to ensure that the ratings 
are fair and unbiased. In 2006, the trend showed that the most 
significant differences in performance rating averages were between 
African Americans and Caucasians at all mission analysts' band levels, 
and that the gap was increasing. To address this challenge, in fiscal 
year 2007 we awarded a contract to an external consultant to analyze 
the African American and Caucasian performance appraisal data from 2002 
through 2006 and to assess and compare the skills, assignments, 
engagement roles, training, education, and recruiting practices for 
African Americans and Caucasians. In addition, the consultant will 
identify best practices internally and externally that might enhance 
our performance management systems and assist in reducing the gap. 

An organizing campaign by the International Federation of Professional 
and Technical Engineers (IFPTE) took place over the last year. On 
September 19, 2007, our Band I and Band II analysts elected the IFPTE 
as their exclusive representative in dealing with our management on the 
terms and conditions of their employment. In accordance with labor 
relations law, we postponed work on several initiatives regarding our 
current performance and pay programs and also maintained absolute 
neutrality during the election period. With the outcome of the union 
vote, our management is committed to working constructively with 
employee union representatives to forge a positive labor management 
relationship and to establish our first collective bargaining 
agreement. 

Finally, over the past year, the expectations of our clients and 
customers have risen as requests for our services have increased, 
creating an ever burgeoning workload, and resulting in some supply and 
demand imbalances. Our ability to meet expectations and balance these 
workload demands is heavily dependent on our annual funding. Because 
our workforce costs comprise about 80 percent of our annual 
appropriations, only 20 percent of the budget is available to fund all 
other agency needs. Without funding to adequately staff the agency, 
invest in our people, and reward our top performers, our ability to 
deliver the requested services will ultimately to be negatively 
impacted. 

While we have made much progress, we believe human capital will still 
present a management challenge next fiscal year. Some of our planned 
initiatives may be subject to collective bargaining as they may affect 
the terms and conditions of bargaining unit employees. Some of the most 
significant efforts planned in this area for fiscal year 2008 include 
the following: 

* Working cooperatively and productively with the newly elected labor 
union to establish our first collective bargaining agreement; 

* Completing the implementation of the recruitment task team 
recommendations; 

* Implementing an aggressive hiring strategy to rebuild our workforce 
and acquire needed talents and skills; 

* Implementing a structured leadership development program to prepare 
managerial talent; 

* Providing more transparency and knowledge of our of market-based 
compensation approach; 

* Focusing on the workforce impact of cultural issues created by 
generational issues as well as diversity in general; 

* Instituting better, more comprehensive human capital metrics; 

* Developing an action plan for addressing the findings and 
recommendations identified in the African American performance 
appraisal study; 

* Improving the efficiency and effectiveness of the Human Capital 
Office in support of these human capital initiatives. 

Mitigating External Factors: 

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

As the Congress focuses on unpredictable events--such as terrorism, 
natural disasters, and military conflicts and threats abroad--the mix 
of work we are asked to undertake may change, diverting our resources 
from some strategic objectives and performance goals. We can and do 
mitigate the impact of these events on the achievement of our goals in 
various ways. For example in fiscal year 2007, we: 

* stayed abreast of current events (such as vulnerabilities in the 
nation's food supply system, the quality of health facilities and 
services for soldiers returning from military conflicts abroad, and 
fraud and abuse plaguing disaster assistance programs) and communicated 
frequently with our congressional clients in order to be alert to 
possibilities that could shift the Congress's priorities or trigger new 
priorities; 

* quickly redirected our resources when appropriate (i.e., to respond 
to a record number of requests for our senior executives to testify on 
our current and past work covering a wide range of topics such as the 
Iraq war and the global war on terrorism) so that we could deal with 
major changes as they occurred; 

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

* initiated evaluations under the Comptroller General's authority on a 
limited number of selected topics, including the status of Iraq's 
reconstruction efforts and our 21st century challenges and high-risk 
work, and fiscal challenges discussions. 

We are experiencing heavy demand from the Congress for work in a number 
of subject areas, including monitoring the progress of the global war 
on terrorism and the continuing challenges it presents; exploring 
economic issues facing U.S. financial markets and American consumers, 
such as concerns facing the subprime mortgage market; analyzing where 
funds are being spent through off-budget vehicles such as tax 
expenditures, and continuing our work on disaster relief issues, such 
as reviews of the installation of new pumps in New Orleans and the 
reconstruction of areas ravaged by hurricanes Katrina and Rita. Yet, 
our resources have declined: adjusted for inflation, our budget 
authority has declined by 3 percent in constant fiscal year 2006 
dollars since fiscal year 2003. Similarly, our FTE usage has declined 
by more than 3 percent since fiscal year 2003--from 3,269 to an 
estimated 3,152 FTEs. In fiscal year 2007, we worked with 42 fewer FTEs 
than last fiscal year. In short, both our budget authority and FTE 
usage are at their lowest level since fiscal year 2001. Our ability to 
effectively manage this demand could have an impact on our ability to 
meet our performance targets and satisfy congressional requests for our 
work. We will continue to manage the Congress's requests in order to 
minimize any negative impact on our ability to meet its needs. However, 
if the Congress continues to rely on us to provide assistance in these 
and other areas, the growing imbalance between our workload and our 
available resources must be addressed. Over time, the consistently high 
performance that the Congress expects of us will simply be 
unsustainable if our workload continues to grow while our resources 
continue to lag. 

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

A growing area for us involves our work on bid protests. As required by 
law, our General Counsel's office prepares Comptroller General 
procurement law decisions that resolve protests filed by disappointed 
bidders. These bidders challenge the way individual federal 
procurements are being conducted or how the contracts were awarded. In 
recent years, we have experienced an increase in the number of bid 
protests that have been filed. For example, the number of protest 
filings in fiscal year 2007 was 23 percent higher than the number filed 
in fiscal year 2001 and 6 percent higher than the number filed in 
fiscal year 2006. In fiscal year 2005 the Congress enacted legislation 
that expanded our authority to allow certain representatives of 
affected government employees to protest when the private sector wins a 
private-public competition. We will continue to monitor our workload in 
this area to ensure that we meet our statutory responsibilities with 
minimal negative impact on our other work. 

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

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

Part II: Performance Information: 

Performance Information by Strategic Goal: 

In the following sections, we discuss how each of our four strategic 
goals contributed to our fiscal year 2007 performance results. 
Specifically, for goals 1, 2, and 3--our external goals--we present 
performance results for the three annual measures that we assess at the 
goal level. Most teams and units also contributed toward meeting the 
targets for the agencywide measures that were discussed in the previous 
part of this report. 

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

Our first strategic goal upholds our mission to support the Congress in 
carrying out its constitutional responsibilities by focusing on work 
that helps address the current and emerging challenges affecting the 
well-being and financial security of the American people and American 
communities. Our multiyear (fiscal years 2007-2012) strategic 
objectives under this goal are to provide information that will help 
address

* the health needs of an aging and diverse population; 

* lifelong learning to enhance U.S. competitiveness; 

* benefits and protections for workers, families, and children; 

* financial security for an aging population; 

* a responsive, fair, and effective system of justice; 

* the promotion of viable communities; 

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

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

These objectives, along with the performance goals and key efforts that 
support them, are discussed fully in our strategic plan, which is 
available on our Web site at [hyperlink, http://www.gao.gov]. The work 
supporting these objectives was performed primarily by headquarters and 
field office staff in the following teams: Education, Workforce, and 
Income Security; Financial Markets and Community Investment; Health 
Care; Homeland Security and Justice; Natural Resources and Environment; 
and Physical Infrastructure. In line with our performance goals and key 
efforts, goal 1 staff reviewed a variety of programs affecting the 
nation's students and schools, employees and workplaces, health 
providers and patients, and social service providers and recipients. In 
addition, goal 1 staff performed work for our congressional clients 
related to improving the nation's law enforcement systems and federal 
agencies' ability to prevent and respond to terrorism and other major 
crimes. 

Selected Work under Goal 1: 

Improving care for veterans transitioning from military service: We 
identified the Departments of Defenseï¿½s (DOD) and Veteran Affairsï¿½ (VA) 
inability to electronically share medical records for severely injured 
servicemembers transferred from DOD to VA polytrauma facilities. Real-
time access to DODï¿½s medical records is needed to determine whether 
servicemembers are medically stable enough to participate in vigorous 
rehabilitation activities. In May 2007, VA reported that three of the 
four polytrauma facilities now have access to DODï¿½s electronic medical 
records. (See app. 1, item 1.06.C.):

Identifying financial risks to the federal government caused by a 
changing climate: Our work raised awareness that climate change poses 
extraordinary fiscal challenges to federal insurance programs. The 
Federal Emergency Management Agency (FEMA) and the Department of 
Agriculture (USDA), the key federal agencies with potentially 
multibillion-dollar insurance liabilities associated with future 
climate change impacts, stated that they will report to the Congress on 
potential climate change-related losses for FEMAï¿½s National Flood 
Insurance Program and USDAï¿½s Federal Crop Insurance Corporation and the 
mitigation options they may use to reduce their exposure to loss. (See 
app. 1, item 1.31.C.): 

[End of Selected Work Under Goal 1] 

To accomplish our work under these strategic objectives in fiscal year 
2007, we conducted engagements, audits, analyses, and evaluations of 
programs at major federal agencies, such as the Departments of 
Education, Health and Human Services, Homeland Security, 
Transportation, Housing and Urban Development, and the Interior and 
developed reports and testimonies on the efficacy and soundness of 
programs they administer. 

As shown in table 10, we did not meet our fiscal year 2007 performance 
targets for financial benefits and nonfinancial benefits but exceeded 
our testimonies target for goal 1. 

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

Performance measure: Financial benefits (billions of dollars); 
2003 Actual: $23.7 billion; 
2004 Actual: $26.6 billion; 
2005 Actual: $15.6 billion; 
2006 Actual: $22.0 billion; 
2007 Target: $20.2 billion; 
2007 Actual: $12.9 billion; 
Met/Not Met: Not met; 
2008 Target[A]: $13.8 billion. 

Performance measure: Nonfinancial benefits; 
2003 Actual: 217; 
2004 Actual: 252; 
2005 Actual: 277; 
2006 Actual: 268; 
2007 Target: 256; 
2007 Actual; 238; 
Met/Not met: Not met; 
2008 Target[A]: 238. 

Performance measure: Testimonies; 
2003 Actual: 80; 
2004 Actual: 85; 
2005 Actual: 88; 
2006 Actual: 97; 
2007 Target: 78; 
2007 Actual: 125; 
Met/Not Met: Met; 
2008 Target[A]: 84. 

Source: GAO. 

[A] Our fiscal year 2008 targets for these three measures differ from 
the targets we reported in our fiscal year 2008 performance budget in 
January 2007. Specifically, we decreased our target for financial 
benefits from $21.2 billion and lowered the number of nonfinancial 
benefits and hearings at which we testify from 25 7 and 9 0, 
respectively, because we shifted some work previously performed under 
goal 1 to goal 2 in our new strategic plan for 2007-2012.

[End of Table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages, which minimize the effect of an unusual level of 
performance in any single year. These averages are shown in table 11. 
This table indicates that goal 1 nonfinancial benefits have generally 
risen over time, while the number of hearings at which we testify has 
exhibited a more wave-like trend during the 5-year period since fiscal 
year 2003. 

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

Performance measure: Financial benefits(dollars in billions); 
2003: $17.7 billion; 
2004: $20.8 billion; 
2005: $22.5 billion; 
2006: $22.0 billion; 
2007: $19.3 billion. 

Performance measure: Nonfinancial benefits; 
2003: 209; 
2004: 226; 
2005: 243; 
2006: 254; 
2007: 259. 

Performance measure: Testimonies; 
2003: 99; 
2004: 87; 
2005: 91; 
2006: 88; 
2007: 99. 

Source: GAO. 

[End of Table] 

The following sections describe our performance under goal 1 for each 
of these three quantitative performance measures and describe the 
targets for fiscal year 2008. 

Financial Benefits: 

Example of Goal 1ï¿½s Financial Benefits: 

Our work influenced legislation requiring states to implement 
electronic benefit transfer in place of paper coupons to reduce fraud 
and abuse in the Food Stamp Program. This action resulted in an 
estimated $3.4 billion in cumulative financial benefits from fiscal 
years 2005 through 2009. (See app. 1, item 1.25.F.):

[End of Example of Goal 1's Financial Benefits] 

The financial benefits reported for this goal in fiscal year 2007 
totaled $12.9 billion, which missed the target of $20.2 billion by 
about $7.3 billion. This was due in large part to the work in goal 1 
supporting goals 2 and 3 and the evermore highly matrixed nature of our 
work. For example, a financial benefit for $5.4 billion related to the 
United States Postal Service (USPS) payment of post-retirement health 
care costs, which is reported in goal 3 (see p. 168), is the result of 
a joint effort by our Financial Management and Assurance team in goal 3 
and the Physical Infrastructure team in goal 1. While reported in goal 
3, this financial benefit could have just as well been reported in goal 
1 given the joint nature of the teams' work. We describe goal 1 
accomplishments in the goal 1 section of appendix 1. 

Because financial benefits often result from work completed in prior 
years, we set our fiscal year 2008 target on the basis of our 
assessment of the progress agencies are making in implementing our past 
recommendations. Our analysis indicates that financial benefits in the 
future for goal 1 are likely to increase only slightly. We, therefore, 
have set the target for fiscal year 2008 at $13.8 billion, rather than 
$21.2 billion as reported in our fiscal year 2008 performance plan. 

Nonfinancial Benefits: 

Nonfinancial benefits reported for goal 1 in fiscal year 2007 included 
214 actions taken by federal agencies to improve their services and 
operations in response to our work and another 24 in which information 
we provided to the Congress resulted in statutory or regulatory 
changes. This total of 238 nonfinancial benefits did not meet our 
target of 256. We report some of our major nonfinancial accomplishments 
in detail in the goal 1 section of appendix 1. For fiscal year 2008, we 
have set a target of 238 for nonfinancial benefits. This target is the 
same as what we achieved this fiscal year and is consistent with our 
recognition that we are more likely to achieve these benefits under 
goals 2 and 3 in the next few years. We decreased this target by 19 
compared with the nonfinancial benefits target we reported in our 
fiscal year 2008 performance plan. 

Examples of Goal 1ï¿½s Nonfinancial Benefits: 

Improving disclosure of pension plan information to plan participants: 
Our work identified ways to improve the transparency of pension plan 
information. For example, we recommended requiring that all plan 
participants receive information about plan investments and the minimum 
benefit amount that the Pension Benefit Guaranty Corporation guarantees 
if a plan is terminated. The Pension Protection Act of 2006 addressed 
these concerns by, among other things, allowing qualified advisers to 
offer investment advice to participants in defined contribution plans 
and adding new disclosure requirements. (See app. 1, item 1.18.N.): 

Enacting comprehensive postal reform legislation: In 2001, we 
designated the USPS transformation as a high-risk area because its 
financial outlook had significantly deteriorated and it lacked a 
comprehensive plan to address financial, operational, and human capital 
challenges. Since then, USPS developed a transformation plan, and the 
Congress enacted comprehensive postal reform legislation in the areas 
of rate setting, regulatory oversight, and financial transparency. In 
2007, we removed the USPSï¿½s transformation from our high-risk list. 
(See app.1, item 1.36.N.): 

[End of Examples of Goal 1's Nonfinancial Benefits] 

Testimonies: 

Our witnesses testified at 125 congressional hearings related to this 
strategic goal, which exceeded the fiscal year 2007 target by 47 
testimonies, about 60 percent. Among the testimonies given were those 
related to FEMA payments on hurricane-damaged properties, safety 
enhancements for coal miners, federal actions to improve child welfare 
services, and USPS reform efforts. (See p. 35 for a list of testimony 
topics by goal.) On the basis of our assessment of the potential need 
to testify on issues under this goal, we have set a target of 
presenting testimony at 84 hearings during fiscal year 2008, which 
represents 6 fewer hearings than we reported as our target in our 
fiscal year 2008 performance plan. 

Example of Goal 1ï¿½s Testimonies: 

Evaluating the role and modernization of the Federal Housing 
Administration (FHA): In a series of testimonies, we examined trends in 
the use of FHA-insured mortgages, FHAï¿½s risk management, and the 
implications of a legislative proposal to overhaul the agencyï¿½s 
products and processes. For example, while noting that FHA could be a 
vehicle to provide lower-cost and more sustainable mortgage options to 
some subprime borrowers, we also emphasized the need for improvements 
in risk management to ensure that FHA operates in a financially sound 
manner. Our work informed congressional debate on the benefits and 
risks of FHA modernization legislation under consideration. (GAO-07-
615T): 

[End of Example of Goal 1's Testimonies] 

[End of Goal 1] 

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

The federal government is working to promote foreign policy goals, 
sound trade policies, and other strategies to advance the interests of 
the United States and its allies while also seeking to anticipate and 
address changing threats to the nation's security and economy. Given 
the importance of these efforts, our second strategic goal focuses on 
helping the Congress and the federal government respond to various 
types of threats to our nation and the challenges of global 
interdependency. Our multiyear (fiscal years 2007-2012) strategic 
objectives under this goal are to support the congressional and federal 
efforts to: 

* protect and secure the homeland from threats and disasters, 

* ensure military capabilities and readiness, 

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

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

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

Selected Work under Goal 2: 

Improving tanker security: We identified the challenges facing the 
federal government in securing the transportation of energy commodities 
by tankers from terrorist attacks, including the challenges resulting 
from an increase in liquefied natural gas shipments to the United 
States. We recommended that the Secretary of Homeland Security direct 
the Coast Guard to develop a resource allocation plan to meet these new 
liquefied natural gas security requirements with other existing 
security responsibilities. The Department of Homeland Security (DHS) 
agreed with our recommendation. (See app. 1, item 2.06.C.): 

Improving DODï¿½s management approach to major weapon systems 
acquisition: We reported that leading commercial companies achieve 
success in product development by using portfolio management, which 
addresses product investment collectively from an enterprise level. In 
contrast, DOD approves proposed programs with much less consideration 
of its overall portfolio. We recommended that DOD establish a portfolio 
management approach to ensure delivery of a balanced mix of weapon 
systems programs at the right time and cost and establish a single 
point for determining which programs are allowed in the portfolio. The 
Congress has required DOD to address our recommendations. (See app. 1, 
item 2.23.C.):

[End of Selected Work Under Goal 2] 

To accomplish our work in fiscal year 2007 under these strategic 
objectives, we conducted engagements and audits that involved fieldwork 
related to programs that took us across multiple continents, including 
Europe, Africa, Asia, South America, and North America. As in the past, 
we developed reports, testimonies, and briefings on our work. 

As shown in table 12, we exceeded our fiscal year 2007 performance 
targets for financial benefits, nonfinancial benefits, and testimonies 
for this goal. 

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

Performance measure: Financial benefits(billions of dollars); 
2003 Actual: $7.1 billion; 
2004 Actual: $9.7 billion; 
2005 Actual: $12.9 billion; 
2006 Actual: $12.0 billion; 
2007 Target: $9.8; 
2007 Actual: $10.3; 
Met/Not Met: Met; 
2008 Target[A]: $11.3 billion. 

Performance measure: Nonfinancial benefits; 
2003 Actual: 273; 
2004 Actual: 369; 
2005 Actual: 365; 
2006 Actual: 449; 
2007 Target: 290; 
2007 Actual: 468; 
Met/Not Met: Met; 
2008 Target[A]: 322. 

Performance measure: Testimonies; 
2003 Actual: 48; 
2004 Actual: 70; 
2005 Actual: 42; 
2006 Actual: 68; 
2007 Target: 52; 
2007 Actual: 73; 
Met/Not Met: Met; 
2008 Target[A]: 69. 

Source: GAO. 

[A] Our fiscal year 2008 targets for these three measures differ from 
the targets we reported in our fiscal year 2008 performance budget in 
January 2007. Specifically, we increased our target for financial 
benefits from $9.8 billion, nonfinancial benefits from 309, and the 
number of hearings at which we testify from 59 because we shifted some 
work previously performed under goal 1 to goal 2 in our new strategic 
plan for 2007-2012 and anticipate continued congressional interest in 
our work on homeland security issues and the Iraq war. 

[End of Table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages, which minimize the effect of an unusual level of 
performance in any single year and are shown in table 13. This table 
indicates that goal 2 financial benefits, nonfinancial benefits, and 
testimonies have steadily increased over the last 5 years. 

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

Performance measure: Financial benefits(billions of dollars); 
2003: $7.9 billion; 
2004: $8.9 billion; 
2005: $9.5 billion; 
2006: $10.4 billion; 
2007: $11.2 billion. 

Performance measure: Nonfinancial benefits; 
2003: 202; 
2004: 262; 
2005: 306; 
2006: 364; 
2007: 413. 

Performance measure: Testimonies; 
2003: 44; 
2004: 48; 
2005: 50; 
2006: 57; 
2007: 63. 

Source: GAO. 

[End of Table] 

The following sections describe our performance under goal 2 for each 
of our quantitative performance measures and describe the targets for 
fiscal year 2008. 

Financial Benefits: 

Example of Goal 2's Financial Benefits: 

Our work highlighted the risks associated with developing and 
implementing the Armyï¿½s Future Combat System. Citing the risks we 
reported and preserving the ability for DOD to change course, the 
Congress cut the systemï¿½s budget request by $254 million. (See app. 1, 
item 2.17.F.):

[End of Example of Goal 2's Financial Benefits] 

The financial benefits reported for this goal in fiscal year 2007 
totaled $10.3 billion, exceeding the target of $9.8 billion. Among 
other things, these accomplishments stemmed from engagements related to 
better allocating resources to fund new military capabilities, 
streamlining our embassy presence overseas, and reducing funding for 
the Millennium Challenge Corporation, which oversees a foreign 
assistance program. We describe these and other accomplishments in the 
goal 2 section of appendix 1. 

Given the large portion of the U.S. budget that defense spending 
consumes, we expect our work under this goal to continue to produce 
economies and efficiencies that yield billions of dollars in financial 
benefits for the American people each year. We set our fiscal year 2008 
target at $11.3 billion based on our assessment of the progress 
agencies are making in implementing our past recommendations that might 
yield financial benefits. 

Nonfinancial Benefits: 

The nonfinancial benefits reported for goal 2 in fiscal year 2007 
included 432 actions taken by federal agencies to improve their 
services and operations in response to our work and another 36 in which 
information we provided to the Congress resulted in statutory or 
regulatory changes. This total of 468 nonfinancial benefits greatly 
exceeded our target of 290. Our success in this area arose from our 
increased emphasis on follow-up efforts and increased monitoring of our 
progress toward the targets throughout the year. Some of our major 
accomplishments are reported in detail in the goal 2 section of 
appendix 1. 

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
set our fiscal year 2008 target at 322. This target is lower than our 
fiscal year 2007 actual performance and 4-year average for this measure 
because we want to encourage staff to identify significant and 
meaningful nonfinancial benefits rather than numerous, narrowly focused 
ones that would easily ensure that we meet a higher target. However, we 
set this target higher than the one we reported in our fiscal year 2008 
performance plan of 309. 

Example of Goal 2's Nonfinancial Benefits: 

Improving oversight of contractors on the battlefield: Among the 
challenges DOD faced in overseeing contractors on the battlefield was 
the lack of visibility over the number of contractors supporting 
deployed forces and the services that the contractors provide. In 
response to our work, DOD implemented a system designed to provide 
commanders with this information and appointed a DOD focal point to 
improve the agencyï¿½s management and oversight of contractors assisting 
the troops. (See app. 1, item 2.21.N.): 

[End of Example of Goal 2's Nonfinancial Benefits] 

Testimonies: 

Our witnesses testified at 73 congressional hearings related to this 
strategic goal in fiscal year 2007, exceeding our target of presenting 
testimony at 52 hearings. Among other things, we testified on 
transforming DOD's business practices, combating nuclear smuggling, and 
DHS's Secure Border Initiative as well as credit counseling and 
financial literacy. (See p. 35 for a list of testimony topics by goal.) 
We have set our target for presenting testimony at hearings to 69 for 
fiscal year 2008, 10 hearings higher than the target we reported in our 
fiscal year 2008 performance plan. 

Examples of Goal 2's Testimonies: 

Creating a chief management officer at DOD to guide business 
transformation efforts: We supported establishing a senior-level 
position at DOD with significant authority and a sufficient term to 
provide focused and sustained leadership over the departmentï¿½s business 
transformation efforts. At a time of increasing military operations and 
growing fiscal constraints, billions of dollars have been wasted 
annually because of the lack of adequate transparency and appropriate 
accountability across DODï¿½s business areas. (GAO-07-229T): 

Identifying key issues for oversight of U.S. efforts to stabilize and 
rebuild Iraq: Our September 2007 bench-mark report and related 
testimonies found that the Iraqi government had not met most of its 18 
key legislative, security, and economic benchmarks. The Departments of 
State and Defense agreed with our recommendations to improve the 
quality of information provided to the Congress on the progress being 
made in meeting these benchmarks. (GAO-07-1230T):

[End of Examples of Goal 2's Testimonies] 

[End of Goal 2] 

Goal 3 Overview: Help transform the federal governmentï¿½s role and how 
it does business to meet 21st century challenges: 

Our third strategic goal focuses on the collaborative and integrated 
elements needed for the federal government to achieve results. The work 
under this goal highlights the intergovernmental relationships that are 
necessary to achieve national goals. Our multiyear (fiscal years 2007- 
2012) strategic objectives under this goal are to: 

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

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

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

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

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

Selected Work under Goal 3: 

Ensuring personal privacy in the face of increasing threat: Our work 
found that individualsï¿½ personal information could be inadequately 
protected by DHS and other federal agencies, which may compromise 
individualsï¿½ privacy rights or expose their information to misuse. For 
example, we reported that DHS had not taken sufficient action to assess 
privacy risks before developing a sophisticated data mining tool. 
Further, we analyzed the lessons learned from a data breach at VA in 
making a recommendation regarding assistance to individuals affected by 
data breaches at federal agencies. (See app. 1, item 3.12.C.): 

Revising Government Auditing Standards: We issued a major revision to 
the Government Auditing Standards that organizes, clarifies, and 
strengthens the principles for audits of government programs and 
entities. The 2007 revision updates and clarifies chapters on financial 
audits, performance audits, and attestation engagements. Auditors at 
every level of government as well as certified public accountant firms 
conducting audits of government programs are currently implementing the 
revised standards. (See app. 1, item 3.19.C.):

[End of Selected Work Under Goal 3] 

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

As shown in table 14, we significantly exceeded our fiscal year 2007 
performance targets for financial benefits, nonfinancial benefits, and 
testimonies for this goal. 

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

Performance measure: Financial benefits(dollars in billions); 
2003 Actual: $4.7 billion; 
2004 Actual: $7.6 billion; 
2005 Actual: $11.0 billion; 
2006 Actual: $17.0 billion; 
2007 Target: $10.0 billion; 
2007 Actual: $22.8 billion; 
Met/Not Met: Met; 
2008 Target[A]: $14.9 billion. 

Performance measure: Nonfinancial benefits; 
2003 Actual: 553; 
2004 Actual: 576; 
2005 Actual: 767; 
2006 Actual: 625; 
2007 Target: 554; 
2007 Actual: 648; 
Met/Not Met: Met; 
2008 Target[A]: 590. 

Performance measure: Testimonies; 
2003 Actual: 56; 
2004 Actual: 60; 
2005 Actual: 47; 
2006 Actual: 73; 
2007 Target: 55; 
2007 Actual: 74; 
Met/Not Met: Met; 
2008 Target[A]: 67. 

Source: GAO. 

[A] Our fiscal year 2008 targets for these three measures differ from 
the targets we reported in our fiscal year 2008 performance budget in 
January 2007. Specifically, we increased our targets for financial and 
nonfinancial benefits from $10.5 billion and 584, respectively, because 
we believe our past work on issues such as improper payments and IT 
will allow us to achieve these more challenging targets. However, we 
anticipate that though the Congress will continue its interest in our 
work on issues such as military contractors and acquisitions, the 
number of hearings at which we will be asked to testify will likely 
decline slightly. 

[End of Table] 

To help us examine trends for these measures over time, we look at 
their 4-year averages--shown in table 15--which minimize the effect of 
an unusual level of performance in any single year. This table 
indicates that documentation of financial and nonfinancial benefits 
derived from our work under this goal has generally risen during the 5- 
year period shown, with a large increase in nonfinancial benefits 
recorded in 2006 compared with the previous year. The number of 
hearings during which our senior executives testified on goal 3 issues 
was relatively flat from fiscal years 2004 to 2006, but increased in 
fiscal year 2007. 

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

Performance measure: Financial benefits(dollars in billions); 
2003: $5.5 billion; 
2004: $6.1 billion; 
2005: $7.1 billion; 
2006: $10.1 billion; 
2007: $14.6 billion. 

Performance measure: Nonfinancial benefits; 
2003: 480; 
2004: 498; 
2005: 590; 
2006: 630; 
2007: 654. 

Performance measure: Testimonies; 
2003: 67; 
2004: 56; 
2005: 57; 
2006: 59; 
2007: 64. 

Source: GAO. 

[End of Table] 

The following sections describe our performance under goal 3 for each 
of our quantitative performance measures and describe the targets for 
fiscal year 2008. 

Financial Benefits: 

Example of Goal 3's Financial Benefits: 

In response to our work, agencies such as DOD, the Department of 
Transportation (DOT), and USDA have improved their oversight of 
information technology (IT) investments resulting in a reduction in 
their planned IT expenditures of more than $1.3 billion. For example, 
USDA coordinated its various IT investment boards and narrowed the 
scope of information system projects to reduce risk and increase 
efficiency. (See app.1, item 3.05.F.):

[End of Example of Goal 3's Financial Benefits] 

The financial benefits reported for this goal in fiscal 2007 totaled 
$22.8 billion, more than double our target of $10.0 billion. These 
efforts included work that led to reductions in planned IT expenditures 
at several federal agencies, the termination of the National Aeronautic 
and Space Administration (NASA) space launch initiative (SLI), FEMA 
taking action to recoup and collect millions of dollars in improper or 
fraudulent assistance payments it made following hurricanes Katrina and 
Rita, and improved collections of federal nontax and criminal debts. We 
describe these and other accomplishments in the goal 3 section of 
appendix 1. 

Under goal 3, we typically work on core government business processes 
and governmentwide management reforms. Our assessments of the executive 
branch's current efforts to implement the recommendations we made in 
our work under this goal indicate that financial benefits related to 
this goal are likely to be in line with our 4-year average. 
Consequently, we set the target for financial benefits at $14.9 billion 
for fiscal 2008, which is $4.4 billion higher than the target we 
reported in our fiscal year 2008 performance plan. 

Nonfinancial Benefits: 

Examples of Goal 3's Nonfinancial Benefits: 

Strengthening the link between contract incentives and outcomes across 
government: We reported that DOD and NASA structured monetary 
incentives in ways that led to significant disconnects between the 
award fees paid to contractors and program outcomes. For example, DOD 
paid an estimated $8 billion in award fees on contracts regard-less of 
program outcomes. The Congress enacted legislation incorporating most 
of our recommendations directed at DOD, which strengthened the link 
between award fee criteria and acquisition outcomes. Moving toward more 
outcome-based award-fee criteria will give contractors an increased 
stake in helping agencies develop more realistic targets up front or 
risk receiving fewer award fees when cost, schedule, and performance 
targets are not met. (See app. 1, item 3.07.N.): 

Improving research and setting goals to reduce the tax gap: We made 
several recommendations to the Internal Revenue Service (IRS) to 
improve its efforts to reduce the tax gap. For example, we recommended 
that IRS set a long-term voluntary compliance goal to help measure the 
success of its compliance efforts. In its 2007 budget justification, 
IRS established a goal of 85 percent voluntary compliance by 2009. (See 
app. 1, item 3.28.N.):

[End of Examples of Goal 3's Nonfinancial Benefits] 

Nonfinancial benefits reported for goal 3 in fiscal year 2007 included 
634 instances in which agencies' core business processes were improved 
or governmentwide management reforms were advanced because of our work. 
In addition, there were 14 instances in which information we provided 
to the Congress resulted in statutory or regulatory changes. This total 
of 648 nonfinancial benefits exceeded our target of 554. The larger 
number of nonfinancial benefits occurred mainly in our financial 
management and information technology areas where we tend to make 
multiple, specific recommendations for change to more than one entity. 
We describe some of our major accomplishments in the goal 3 section of 
appendix 1. 

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
set a fiscal year 2008 target of 590 nonfinancial benefits for goal 3. 
We recognize that this target is lower than our fiscal year 2007 actual 
performance, but we set it at this level because we want to encourage 
staff to identify significant and meaningful nonfinancial benefits and 
limit the number of narrowly focused ones that would easily ensure that 
we meet a higher target. 

Testimonies: 

Our witnesses testified at 74 congressional hearings related to this 
strategic goal in fiscal year 2007, exceeding the target of 55 by about 
35 percent. Among the testimonies presented were those related to 
contracting and security challenges in Iraq, security vulnerabilities 
at unmonitored borders, electronic voting, tax abuses by Medicare 
providers, and challenges facing the polar satellite program. (See p. 
35 for a list of testimony topics by goal.) For fiscal year 2008, we 
have set a target of presenting testimony at 67 hearings because we 
expect the level of hearings to be lower than it was in fiscal year 
2007. 

Example of Goal 3's Testimonies: 

Identifying fraud, waste, and abuse in Katrina and Rita financial 
assistance payments: Our work related to FEMAï¿½s Individual and 
Households Program identified from $600 million to $1.4 billion in 
improper or potentially fraudulent financial assistance payments made 
by FEMA following hurricanes Katrina and Rita. We referred thousands of 
cases we considered potentially improper and fraudulent to the Katrina 

Fraud Task Force for appropriate criminal investigation. (See GAO-07-
418T): 

[End of Examples of Goal 3's Testimonies] 

[End of Goal 3] 

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

The focus of our fourth strategic goal is to make us a model 
organization. This means that our work is driven by our external 
clients and internal customers, our managers exhibit the 
characteristics of leadership and management excellence, our employees 
are devoted to ensuring quality in our work process and products 
through continuous improvement, and our agency is regarded by current 
and potential employees as an excellent place to work. Our multiyear 
(fiscal years 2007-2012) strategic objectives under this goal are to: 

* improve client and customer satisfaction and stakeholder 
relationships, 

* lead strategically to achieve enhanced results, 

* leverage our institutional knowledge and experience, 

* enhance our business and management processes, and: 

* become a professional services employer of choice. 

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

To accomplish our work under these five objectives, we performed 
internal studies and completed projects that further the strategic 
goal. 

Selected Work under Goal 4: 

Enhancing client service: We completed a pilot of e-dissemination of 
products to our congressional clients to enhance the quality and 
timeliness of service. During fiscal year 2007, we avoided 
approximately $48,800 in costs for the 51 reports issued. Based on the 
cost-effectiveness of e-dissemination and the positive client feedback 
we recently fully implemented e-dissemination for the majority of our 
products. (See app. 1, item 4.01.C.): 

Converting to a new financial management system: We completed 
preparations and testing for conversion as of the new fiscal year to 
our new financial management system, GAO Delphi. We are able to take 
advantage of DOTï¿½s Enterprise Service Center expertise and economies of 
scale for select accounting functions, allowing our staff to transition 
to a greater focus on analysis and customer service. (See app. 1, item 
4.07.C.): 

Improving work life programs: We increased our support for several of 
our work life programs and services that help our employees to balance 
work and personal life. These initiatives included increasing the 
capacity of the headquarters day care center through expansion of the 
physical facility, enhancing the Student Loan Repayment Program to 
support more applicants, and increasing our approval of telework 
applications by 200 percent. (See app. 1, item 4.16.C.): 

Updating our external Web site: We launched a new and improved version 
of [hyperlink, http://www.gao.gov], implementing numerous 
recommendations resulting from an independent review. We improved our 
navigation and searching capabilities, and incorporated the reviewerï¿½s 
principles and methodology into our standards and processes. (See app. 
1, item 4.09.C.):

[End of Selected Work under Goal 4] 

[End of Goal 4] 

Data Quality and Program Evaluation: 

Verifying and Validating Performance Data: 

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

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

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

Results measures: 

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

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

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

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

Financial Benefits: Verification and validation; 
Our policies and procedures require us to use the Accomplishment 
Reporting System to record the financial benefits that result from our 
work. They also provide guidance on estimating those financial 
benefits. The team identifies when a financial benefit has occurred as 
a result of our work. The team develops estimates based on non-GAO 
sources, such as the agency that acted on our work, a congressional 
committee, or the Congressional Budget Office, and files accomplishment 
reports based on those estimates. When non-GAO estimates are not 
readily available, teams may use GAO estimates--developed in 
consultation with our experts, such as the Chief Economist, Chief 
Actuary, or Chief Statistician, and corroborated with a knowledgeable 
program official from the executive agency involved. The estimates are 
reduced by significant identifiable offsetting costs. The team develops 
workpapers to support accomplishments with evidence that meets our 
evidence standard, supervisors review the workpapers, and an 
independent person within GAO reviews the accomplishment report. The 
team's managing director or director is authorized to approve financial 
accomplishment reports with benefits of less than $100 million. 

The team forwards the report to QCI, which reviews all accomplishment 
reports and approves accomplishment reports claiming benefits of $100 
million or more. QCI provides summary data on approved financial 
benefits to team managers, who check the data on a regular basis to 
make sure that approved accomplishments submitted by their staff have 
been accurately recorded. Our Engagement Reporting System also contains 
accomplishment data for the fiscal year. In fiscal year 2007, QCI 
approved accomplishment reports covering 94 percent of the dollar value 
of financial benefits we reported. 

Every year, our Office of Inspector General (IG) reviews accomplishment 
reports that claim benefits of $500 million or more. For fiscal year 
2007, the IG reviewed accomplishment reports covering 74 percent of the 
dollar value of financial benefits we reported. In addition, on a 
periodic basis, the IG independently tests compliance with our process 
for claiming financial benefits of less than $500 million. For example, 
the IG reviewed fiscal year 2006 financial benefits of $100 million or 
more and found our reporting process to be sound overall. However, the 
IG recommended improvements to the clarity of certain policies related 
to reporting financial accomplishments and the documentation supporting 
selected accomplishment reports. We clarified our guidance and updated 
our policy manual in fiscal year 2007. 

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

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

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

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

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

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

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

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

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

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

Percentage of products with recommendations: Verification and 
validation; 
Through a formal process, each team identifies the number of 
recommendations included in each product and an external contractor 
enters them into a database. We provide our managers with reports on 
the recommendations being tracked to help ensure that all 
recommendations have been captured and that each recommendation has 
been completely and accurately stated. Additionally, on a periodic 
basis, the IG independently tests the teams' compliance with our 
policies and procedures related to this performance measure. For 
example, during fiscal year 2006, the IG tested and determined that our 
process for determining the percentage of written products with 
recommendations was reasonable. The IG also recommended actions to 
improve the process for developing, compiling, and reporting these 
statistics. We have implemented the IG's recommendations for fiscal 
year 2007. Since then, we have used the same procedures to compute and 
report this measure. 

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

Past recommendations implemented: Definition and background; 
We make recommendations designed to improve the operations of the 
federal government. For our work to produce financial or nonfinancial 
benefits, the Congress or federal agencies must implement these 
recommendations. As part of our audit responsibilities under generally 
accepted government auditing standards, we follow up on recommendations 
we have made and report to the Congress on their status. Experience has 
shown that it takes time for some recommendations to be implemented. 
For this reason, this measure is the percentage rate of implementation 
of recommendations made 4 years prior to a given fiscal year (e.g., the 
fiscal year 2007 implementation rate is the percentage of 
recommendations made in fiscal year 2003 products that were implemented 
by the end of fiscal year 2007). Experience has shown that if a 
recommendation has not been implemented within 4 years, it is not 
likely to be implemented. 

This measure assesses action on recommendations made 4 years 
previously, rather than the results of our activities during the fiscal 
year in which the data are reported. For example, the cumulative 
percentage of recommendations made in fiscal year 2003 that were 
implemented in the ensuing years is as follows: 18 percent by the end 
of the first year (fiscal year 2004), 32 percent by the end of the 
second year (fiscal year 2005), 43 percent by the end of the third year 
(fiscal year 2006), and 82 percent by the end of the fourth year 
(fiscal year 2007). 

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

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

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

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

Additionally, on a periodic basis, the IG independently tests our 
process for calculating the percentage of recommendations implemented 
for a given fiscal year. For example, the IG determined that our 
process was reasonable for calculating the percentage of 
recommendations that had been made in our fiscal year 2002 products and 
implemented by the end of fiscal year 2006. The IG also recommended 
actions to improve the process for developing, compiling, and reporting 
this statistic. In fiscal year 2007, we implemented the IG's 
recommendation for calculating the percentage of recommendations that 
had been made in fiscal year 2003 products and implemented by the end 
of fiscal year 2007. 

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

[End of Results measures] 

Client measures: 

Testimonies: Definition and background; 
The Congress may ask us to testify at hearings on various issues, and 
these hearings are the basis for this measure. Participation in 
hearings is one of our most important forms of communication with the 
Congress, and the number of hearings at which we testify reflects the 
importance and value of our institutional knowledge in assisting 
congressional decision making. When multiple GAO witnesses with 
separate testimonies appear at a single hearing, we count this as a 
single testimony. We do not count statements submitted for the record 
when a GAO witness does not appear. 

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

Testimonies: Verification and validation; 
The units responding to requests for testimony are responsible for 
entering data in the Congressional Hearing System. After a GAO witness 
has testified at a hearing, Congressional Relations verifies that the 
data in the system are correct and records the hearing as one at which 
we testified. Congressional Relations provides weekly status reports to 
unit managers, who check to make sure that the data are complete and 
accurate. Additionally, on a periodic basis, the IG independently 
examines the process for recording the number of hearings at which we 
testified. For example, the IG determined that our process for 
recording hearings during fiscal year 2006 was reasonable. In fiscal 
year 2007, we followed the same process for recording hearings. 

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

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

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

Timeliness: Verification and validation; 
QCI staff review a hard copy of a released GAO product or access its 
electronic version to check the accuracy of the addressee information 
in the Product by Product Survey Approval Database. QCI staff also 
check the congressional staff directory to ensure that survey 
recipients listed in the Product by Product Survey Approval Database 
appear there. In addition, our Congressional Relations staff review the 
list of survey recipients entered by the engagement teams and identify 
the most appropriate congressional staff person to receive a survey for 
each requester. Survey e-mail messages that are inadvertently sent with 
incorrect e-mail addresses automatically reappear in the survey 
approval system. When this happens, QCI staff correct any obvious 
typing errors and resend the e- mail message or contact the 
congressional staff person directly for the correct e-mail address and 
then resend the message. The IG also periodically reviews the 
timeliness performance measure and last reviewed it in fiscal year 
2005--the last year before we began to use the independent feedback 
from the survey as a basis for determining our timeliness. 

Timeliness: Data limitations; 
We do not measure the timeliness of all of our external products 
because we do not wish to place too much burden on busy congressional 
staff. Testimonies and written products that meet our criteria for this 
measure represent more than 50 percent of the congressionally requested 
products we issued during fiscal year 2007. We exclude from our 
timeliness measure low and medium interest reports requiring fewer than 
500 staff days to complete, reports addressed to agency heads or 
commissions, some reports mandated by the Congress, classified reports, 
and reports completed under the Comptroller General's authority. Also, 
if a requester indicates that he or she does not want to complete any 
surveys, we will not send a survey to this person again, even though a 
product subsequently requested meets our criteria. The response rate 
for our client feedback survey is about 28 percent. We received 
comments from one or more people for about 54 percent of the products 
for which we sent surveys in fiscal year 2007. 

[End of Client measures] 

People measures: 

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

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

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

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

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

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

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

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

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

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

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

Data limitations; See New hire rate, Data limitations. 

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

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

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

Staff development: Verification and validation; 
The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
In fiscal year 2007, our response rate to this survey was about 74 
percent, which indicates that its results are largely representative of 
the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey. 

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

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

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

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

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

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

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

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

Leadership: Data sources; 
These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff about 
empowerment, trust, recognition, decisiveness, leading by example, and 
work life as they pertain to the respondent's immediate supervisor. 
Specifically the survey asked staff the following questions about their 
immediate supervisor during the last 12 months: (1) gave me the 
opportunity to do what I do best; (2) treated me fairly; (3) acted with 
honesty and integrity toward me; (4) ensured that there was a clear 
link between my performance and recognition of it; (5) gave me the 
sense that my work is valued; (6) provided me meaningful incentives for 
high performance; (7) made decisions in a timely manner; (8) 
demonstrated GAO's core values of accountability, integrity, and 
reliability; (9) implemented change effectively; and (10) dealt 
effectively with equal employment opportunity and discrimination 
issues. From the staff who expressed an opinion, we calculated the 
percentage of staff selecting the two categories that indicate 
satisfaction with or a favorable response to the question. For this 
measure, the favorable responses were either "always or almost always" 
or "most of the time.". 

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

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

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

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

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

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

[End of People measures] 

Internal operations measures: 

Help get job done and quality of work life: Definition and background; 
To measure how well we are doing at delivering internal administrative 
services to our employees and identify areas for improvement, we 
conduct an annual Web-based survey in November. The customer 
satisfaction survey on administrative services, conducted by an outside 
contractor to ensure the confidentiality of every respondent, is 
administered to all of our employees once a year. Through the survey we 
encourage our staff to indicate how satisfied they are with 19 services 
that help them get their jobs done and another 10 services that affect 
their quality of work life. 

As part of the survey, employees are asked to rate, on a scale of 1 
(low) to 5 (high), those services that are important to them and that 
they have experience with or used recently. Then, for each selected 
service, employees are asked to indicate their level of satisfaction 
from 1 (low) to 5 (high), and provide a written reason for their rating 
and recommendations for improvement if desired. Based on employees' 
responses to these questions, we calculate a composite score. 

Help get job done and quality of work life: Data sources; 
These data come from our staff's responses to an annual Web-based 
survey. To determine how satisfied GAO employees are with internal 
administrative services, we calculate composite scores for two 
measures. One measure reflects the satisfaction with the 19 services 
that help employees get their jobs done. These services include 
Internet and intranet services, IT customer support, mail services, and 
voice communication services. The second measure reflects satisfaction 
with another 10 services that affect quality of work life. These 
services include assistance related to pay and benefits, building 
maintenance and security, and workplace safety and health. The 
composite score represents how employees rated their satisfaction with 
services in each of these areas relative to how they rated the 
importance of those services to them. The importance scores and 
satisfaction levels are both rated on a scale of 1 (low) to 5 (high). 

Help get job done and quality of work life: Verification and 
validation; 
The satisfaction survey on administrative services is housed on a Web 
site maintained by an outside contractor, and only the contractor has 
the ability to link the survey results with individual staff. Our 
survey response rate was 48 percent in 2006. To ensure that the results 
are largely representative of the GAO population, we analyze the 
results by demographic representation (unit, tenure, location, band 
level, and job type). Each GAO unit responsible for administrative 
services conducts follow-on work, including analyzing written comments 
to gain a better understanding of the information from the survey. 

In addition, on a periodic basis, the IG independently assesses the 
internal operations performance measures. The IG examined the measures 
during fiscal year 2007 and found the measures reasonable. The IG also 
recommended actions to improve the measures' reliability and 
objectivity. We are in the process of implementing the IG's 
recommendations. 

Help get job done and quality of work life: Data limitations; 
The information contained in the survey is the self- reported opinion 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion. We do 
not plan any actions to remedy this limitation because we feel it would 
violate the pledge of confidentiality that we make to our staff 
regarding the survey responses. 

The practical difficulties of conducting any survey may introduce 
errors, commonly referred to as nonsampling errors. These errors could 
result from, for example, respondents misinterpreting a question or 
entering their data incorrectly. Such errors can introduce unwanted 
variability into the survey results. We limit the chances of 
introducing nonsampling errors by using a Web-based survey for which 
respondents' enter their answers directly into an electronic 
questionnaire. This eliminates the need to have the data keyed into a 
database by someone other than the respondent. 

[End of Internal operations measures] 

Source: GAO. 

[End of Table] 

Program Evaluation: 

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

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

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

To continuously improve the quality of our work supporting strategic 
goals 1, 2, and 3 in fiscal year 2007, we performed our annual 
inspection of our quality control system for audits completed during 
calendar year 2006. The inspection team concluded that our quality 
control system was suitably designed and operating effectively to 
provide us with reasonable assurance that we (1) conformed in all 
material respects with Government Auditing Standards and (2) provided 
the Congress and other users of our products with independent, 
objective, and reliable information during the year ended December 31, 
2006. 

The inspection team found that our quality assurance framework includes 
the key controls necessary to ensure quality products. The team also 
found that engagement teams followed these controls in all material 
aspects. The inspection team did not identify any instances where our 
work was not reliable or contained material errors. Further, the 
inspection team identified a number of noteworthy developments with 
respect to our quality control system during this year's inspection. 
Many of these developments have broad applicability to our analyst 
staff and some represent practices that mission teams may consider 
adopting. For example, one team enhanced its review of official 
workpapers developed and maintained for each engagement known as 
Engagement Management and Product Files to ensure their correct and 
timely completion and another team developed a template to ensure 
process control in instances where multiple staff are used to check the 
facts in a product resulting from an engagement. 

We also completed a number of studies and evaluations related to goal 
4's strategic objectives. These studies resulted in internal products 
or briefings in fiscal year 2007 that are not available publicly. 

* Financial management practices and processes. We conducted internal 
control reviews as set forth in 31 U.S.C. 3512 (commonly referred to as 
the Federal Managers' Financial Integrity Act); Office of Management 
and Budget (OMB) Circular No. A-127, Financial Management Systems; and 
OMB Circular No. A-123, Management's Responsibility for Internal 
Control, Appendix A. Under the Federal Managers' Financial Integrity 
Act requirements, we reviewed quarterly payroll transactions and under 
A-127, we reviewed three modules--Financial Reporting Requirements; 
Preparation, Execution, and Reporting of GAO's Budget in Accordance 
With Requirements; and Training and User Support. We assessed our 
internal control over financial reporting consistent with A-123 by 
testing key cycles, specifically those that represent large- dollar 
flows or have high-risk factors, and conducting limited testing on 
cycles with low risk or that had few or no remediation actions from 
last year. On the basis of the results of these assessments, we 
concluded that we had reasonable assurance that internal control over 
financial reporting as of September 30, 2007, was operating effectively 
and that no material weaknesses exist in the design or operation of the 
internal controls over financial reporting. 

* Cost- benefit analysis of legislative history digitization project. 
To ensure that staff can easily access our legislative histories 
electronically, we began an initiative to "digitize" or scan all our 
legislative histories into a Web-based database that will allow full-
text searches of the PDF format of this information. We conducted a 
digitization pilot and found that the cost of using in-house services 
for digitization would far outweigh the benefits. We awarded a no-cost 
contract to digitize over the next 4 years all the documents that 
constitute the legislative histories of 21,000 public laws from 1921 to 
1995 that we have collected in exchange for the contractor's exclusive 
right to market and sell access to the digitized versions of these 
histories. 

* Automated background check system. We piloted the Office of Personnel 
Management's automated personnel security background investigation 
system known as eQIP. The pilot demonstrated that we could reduce the 
processing time for these investigations by an estimated 50 percent at 
no additional cost to us. As a result of this successful pilot, we 
fully implemented eQIP on October 1, 2007. 

* Interest in our in-house mentoring program. We conducted a Web-based 
survey to measure the level of staff interest in having a mentor or 
being a mentor and to gain an understanding of what staff expect to 
gain from a mentoring relationship. Among the 831 employees who 
responded to the survey, 637 indicated a desire to participate in the 
mentoring program as a mentor or mentee. Both groups expressed an 
interest in learning about or helping others to enhance leadership 
skills, supervise others, work through difficult situations, plan and 
manage a career, and manage work relationships. 

[End of Part II: Performance Information] 

Part III: Financial Information: 

From the Chief Financial Officer: 

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

November 15, 2007: 

I am pleased to report that during fiscal year 2007 the U.S. Government 
Accountability Office continued to lead by example in government 
financial management. For the 21st consecutive year, independent 
auditors gave our financial statements an unqualified opinion with no 
material weaknesses and no major compliance problems. The financial 
statements that follow were prepared, audited, and made publicly 
available as an integral part of this performance and accountability 
report 45 days after the end of the fiscal year. Our fiscal year 2006 
report received a certificate of excellence in accountability reporting 
from the Association of Government Accountants (AGA). Our annual 
reports have received this AGA honor each year since we first applied 
with our fiscal year 2001 performance and accountability report. 

In fiscal year 2007 we institutionalized the rigorous process of 
documenting, updating, and reviewing internal controls after 
successfully implementing the Office of Management and Budget's (OMB) 
revised Circular No. A-123, Appendix A last fiscal year. As a result of 
these efforts we have been able to improve on and strengthen the design 
and implementation of our internal control practices throughout the 
financial management process. This year we continued to address those 
minor weaknesses identified in fiscal year 2006 testing that remained 
outstanding by fiscal year end. We instituted a rotating testing 
schedule of the major cycles so that our A-123 testing team reviews, 
updates, and tests the designated cycles at least once every 3 years. 

This fiscal year we also focused many of our resources on preparing for 
our new financial management system. The software solution is the 
Department of Transportation Enterprise Service Center's (ESC) Delphi, 
Oracle Federal Financials. Implementation of our new financial 
management system, GAO Delphi, followed widely accepted best industry 
practices for project management including independent verification and 
validation of our interfaces, test approach, and cutover and 
contingency plans. In addition to the normal testing prior to 
implementation, we built in a 2-month parallel processing phase to 
further validate our production readiness and ensure that GAO Delphi 
would meet agency business needs and internal and external reporting 
requirements. We plan to take advantage of ESC's expertise and 
economies of scale as our service provider for select accounting 
functions, particularly those involving transaction data entry, while 
our staff will maintain appropriate control and oversight of the cross- 
serviced processes. Reducing the amount of data entry done in-house 
will allow our financial management staff to focus more on analysis and 
customer service. As fiscal year 2008 began, we successfully converted 
to the new system. Future phases include implementation of an 
integrated workforce planning and budget formulation solution and an E- 
Gov travel solution. 

In addition to our extensive efforts on our financial systems, we have 
enhanced our product, business, and management processes to streamline 
operations and save the taxpayer money. During fiscal year 2007 we 
successfully completed our extended pilot of the electronic 
dissemination of our print engagement-related products avoiding $48,800 
in costs, and we project future annual savings of about $300,000 
annually in printing-related costs. The pilot showed that we can 
provide products more quickly to our client in electronic format while 
maintaining a high level of customer satisfaction. In tandem with this 
e-dissemination effort we have implemented a new digital printing 
contract which will provide the option to print only the quantity of 
the product needed for distribution to the requester and key recipients 
instead of the 150-copy minimum requested by outside contract print 
companies. To further improve our analysts' business processes, we have 
enhanced our internal electronic audit system, the Financial Audit 
System (FAS), which enables our staff to more comprehensively and 
accurately audit the financial statements of executive branch agencies. 
In addition to enabling us to provide an improved consolidated 
financial statement to our clients, we expect the improvements we have 
implemented will allow us to: reduce travel costs by increasing remote 
access capability; increase the efficiency of our audit work through 
enhanced automated analysis capabilities and project management tools; 
and minimize the effort required for audit start-ups through automated 
planning, staffing, and audit documentation tools. 

The coming fiscal year promises many challenges including 
institutionalizing the day-to-day use of the new financial management 
system. We expect to see our hard work pay off with a smooth transition 
as we begin providing more meaningful management reporting throughout 
the organization and by taking advantage of our service provider's 
services in entering accounting data. As always, we remain focused on 
our role in the legislative branch to support the Congress in meeting 
its constitutional responsibilities, to help improve the performance 
and ensure the accountability of the government for the benefit of the 
American people, and to continue to focus on and enhance our internal 
operations and services to better achieve our strategic goal of being a 
model federal agency. 

Signed by: 

Sallyanne Harper: 

Chief Financial Officer: 

Overview of Financial Management and Controls: 

Our financial statements and accompanying notes begin on page 
108.[Footnote 8] Our financial statements for the fiscal years ended 
September 30, 2007 and 2006, were audited by an independent auditor, 
Clifton Gunderson, LLP. Clifton Gunderson, LLP, rendered an unqualified 
opinion on our financial statements and an unqualified opinion on the 
effectiveness of our internal controls over financial reporting and 
compliance with laws and regulations. The auditor also reported that we 
have substantially complied with the applicable requirements of the 
Federal Financial Management Improvement Act of 1996 (Improvement Act) 
and found no reportable instances of noncompliance with selected 
provisions of laws and regulations. In the opinion of the independent 
auditor, the financial statements are presented fairly in all material 
respects and are in conformity with generally accepted accounting 
principles. 

Financial Systems and Internal Controls: 

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

We complied with the spirit and intent of Appendix A, OMB Circular No. 
A-123, Management's Responsibility for Internal Control, which provides 
guidance for agencies' assessments of internal control over financial 
reporting. We performed this assessment by identifying, analyzing, and 
testing internal controls for key business processes. Based on the 
results of the assessment, we have reasonable assurance that internal 
control over financial reporting, as of September 30, 2007, was 
operating effectively and that no material control weaknesses exist in 
the design or operation of the internal controls over financial 
reporting. Additionally, our independent auditor found that we 
maintained effective internal controls over financial reporting and 
compliance with laws and regulations. Consistent with our assessment, 
the auditor found no material internal control weaknesses. 

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

In addition, we are committed to fulfilling the objectives of the 
Improvement Act, which is also covered within 31 U.S.C. 3512. Although 
not subject to the act, we voluntarily comply with its requirements. We 
believe that we have implemented and maintained financial systems that 
comply substantially with federal financial management systems 
requirements, applicable federal accounting standards, and the United 
States Government Standard General Ledger at the transaction level as 
of September 30, 2007. We made this assessment based on criteria 
established under the Improvement Act and guidance issued by OMB. Also, 
our auditor reported that we had substantially complied with the 
applicable requirements of the Improvement Act as of September 30, 
2007. 

GAO's Inspector General (IG) also conducts audits and investigations 
that are internally focused, functions as an independent fact-gathering 
adviser to the Comptroller General, and reviews all accomplishment 
reports totaling $500 million or more. During fiscal year 2007, the IG 
examined compliance with our policy and procedures for conflict-of- 
interest determinations and conducted reviews of the Comptroller 
General's vouchers for the official representation account, the 
compensatory time for travel program, and our information security 
program. In addition, the IG implemented and managed an internal 
hotline for use by our employees and contractors to report potential 
fraud, waste, and abuse in our operations. Finally, the IG 
independently tests our compliance with procedures related to our 
performance data on a rotating basis over a 3-year period; these 
actions are specifically identified in the table that begins on page 
79. No material weaknesses were reported by the IG. During fiscal year 
2007, we completed actions related to seven IG recommendations, none of 
which affected the financial statements. There are no unresolved 
issues. 

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

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

* Edward J. Mazur, CPA; Senior Advisor for Governmental Financial 
Management at Cherry, Bekaert & Holland, LLP; past member of the 
Governmental Accounting Standards Board; former State Comptroller of 
Virginia; and a former Controller of the Office of Federal Financial 
Management in the Office of Management and Budget. 

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

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

Audit Advisory Committee's Report: 

The Audit Advisory Committee (the Committee) assists the Comptroller 
General in overseeing the U.S. Government Accountability Office's (GAO) 
financial operations. As part of that responsibility, the Committee 
meets with agency management and its internal and external auditors to 
review and discuss GAO's external financial audit coverage, the 
effectiveness of GAO's internal controls over its financial operations, 
and its compliance with certain laws and regulations that could 
materially impact GAO's financial statements. GAO's external auditors 
are responsible for expressing an opinion on the conformity of GAO's 
audited financial statements with the U.S. generally accepted 
accounting principles. The Committee reviews the findings of the 
internal and external auditors, and GAO's responses to those findings, 
to ensure that GAO's plan for corrective action includes appropriate 
and timely follow-up measures. In addition, the Committee reviews the 
draft Performance and Accountability Report, including its financial 
statements, and provides comments to management who have primary 
responsibility for the Performance and Accountability Report. The 
Committee met twice with respect to its responsibilities as described 
above. During these sessions, the Committee met with the internal and 
external auditors without GAO management being present and discussed 
with the external auditors the matters that are required to be 
discussed by generally accepted auditing standards. Based on procedures 
performed as outlined above, we recommend that GAO's audited statements 
and footnotes be included in the 2007 Performance and Accountability 
Report. 

Signed by: 

Sheldon S. Cohen: 

Chairman: 

Audit Advisory Committee: 

[End of Audit Advisory Committee's Report] 

Independent Auditor's Report: 

Clifton Gunderson LLP: 
Certified Public Accountants and Consultants: 

11710 Beltsville Drive, Suite 300: 
Calverton, Maryland 20705-3106: 
telephone: 301-931-2050: 
fax: 301-931-1710: 
[hyperlink, http://www.cliftoncpa.com] 

Independent Auditor's Report: 

Comptroller General of the United States: 

In our audits of Government Accountability Office (GAO) for fiscal 
years 2007 and 2006, we found: 

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

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

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

* No reportable noncompliance with laws and regulations we tested. 

The following sections discuss in more detail (1) these conclusions, 
(2) our conclusions on Management's Discussion and Analysis and other 
supplementary information, and (3) our objectives, scope and 
methodology. 

Opinion on Financial Statements: 

In our opinion, the financial statements including the accompanying 
notes present fairly, in all material respects, in conformity with 
accounting principles generally accepted in the United States of 
America, GAO's assets, liabilities and net position as of September 30, 
2007 and 2006, and net costs; changes in net position; and budgetary 
resources for the years then ended. 

Opinion on Internal Control: 

In our opinion, GAO maintained, in all material respects, effective 
internal control over financial reporting (including safeguarding 
assets) and compliance as of September 30, 2007, that provided 
reasonable assurance that misstatements, losses, or noncompliance 
material in relation to the financial statements would be prevented or 
detected on a timely basis. Our opinion is based on criteria 
established under 31 U.S.C. 3512 (c), (d), the Federal Managers' 
Financial Integrity Act, and the Office of Management and Budget (OMB) 
Circular A-123, Management's Responsibility for Internal Control. 

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

Opinion on FFMIA Compliance: 

In our opinion, GAO's financial management systems, as of September 30, 
2007, substantially complied with the following requirements of FFMIA: 
(1) federal financial management systems requirements, (2) federal 
accounting standards, and (3) the United States Government Standard 
Genera/ Ledger (SGL) at the transaction level. Our opinion is based on 
criteria established under FFMIA, OMB Circular No. A-127, Financial 
Management Systems (which includes the Joint Financial Management 
Improvement Program/Office of' Federal Financial Management series of 
system requirements documents), accounting principles generally 
accepted in the United States of America, and the SGL. 

Compliance with Laws and Regulations: 

Our tests for compliance with selected provisions of laws and 
regulations disclosed no instances of noncompliance that would he 
reportable under Government Auditing Standards or OMB audit guidance. 
However, the objective of our audit was not to provide an opinion on 
overall compliance with laws and regulations. Accordingly, we do not 
express such an opinion. 

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

Consistency of Other Information: 

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

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

Objectives, Scope, and Methodology: 

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

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

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

With respect to internal control related to significant performance 
measures included in the MD&A, we obtained an understanding of the 
design of the internal control relating to the existence and 
completeness assertions and determined whether they had been placed in 
operation, as required by OMB Bulletin No. 07-04. Our procedures were 
not designed to provide assurance on internal control over reported 
performance measures and, accordingly, we do not express an opinion on 
such control. 

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

We are responsible for planning and performing our examination to 
obtain reasonable assurance about whether GAO's financial management 
systems substantially complied with the three FFMIA requirements. We 
examined, on a test basis, evidence about GAO's substantial compliance 
with those requirements. and performed such other procedures as we 
considered necessary in the circumstances. 

We are also responsible for testing compliance with selected provisions 
of laws and regulations that have a direct and material effect on the 
financial statements. We did not test compliance with all laws and 
regulations applicable to GAO. We limited our tests of compliance to 
those laws and regulations required by OMB audit guidance that we 
deemed applicable to the financial statements for the fiscal year ended 
September 30, 2007. We caution that noncompliance may occur and not be 
detected by these tests and that such testing may not be sufficient for 
other purposes. 

We conducted our audit and examinations in accordance with auditing 
standards generally accepted in the United States of America; 
Government Auditing Standards, issued by the Comptroller General of the 
United States; attestation standards established by the American 
Institute of Certified Public Accountants; and OMB Bulletin No. 07-04, 
Audit Requirements fair Federal Financial Statements. We believe that 
our audit and examinations provide a reasonable basis for our opinions.

Signed by: 

Clifton Gunderson: 

Calverton, Maryland: 

November 7, 2007: 

Purpose of Each Financial Statement: 

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

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

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

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

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

Financial Statements: 
U.S. Government Accountability Office: 
Balance Sheets as of September 30, 2007 and 2006: 

(Dollars in thousands): 

Assets: 

Intragovernmental: Funds with the U.S. Treasury and cash (Note 3); 
2007: $63,626; 
2006: $63,919. 

Intragovernmental: Accounts receivable; 
2007: $977; 
2006: $1,022. 

Total Intragovernmental; 
2007: $64,603; 
2006: $64,941. 

Property and equipment, net (Note 4); 
2007: $41,566; 
2006: $40,293. 

Other; 
2007: $372; 
2006: $358. 

Total Assets; 
2007: $106,541; 
2006: $105,592. 

Liabilities: 

Intragovernmental: Accounts payable; 
2007: $6,232; 
2006: $12,068. 

Intragovernmental: Employee benefits (Note 6); 
2007: $2,968; 
2006: $2,379. 

Intragovernmental: Workers' compensation (Note 7); 
2007: $2,364; 
2006: $2,337. 

Total Intragovernmental; 
2007: $11,564; 
2006: $16,784. 

Accounts payable; 
2007: $11,280; 
2006: $10,815. 

Salaries and benefits; 
2007: $16,827; 
2006: $16,852. 

Accrued annual leave and other (Note 5); 
2007: $29,572; 
2006: $30,299. 

Workers' compensation (Note 7); 
2007: $16,368; 
2006: $15,910. 

Capital leases (Note 9); 
2007: $4,542; 
2006: $6,872. 

Note Payable (Note 5); 
2007: 3,779; 
2006: -.

Total Liabilities; 
2007: $93,932; 
2006: $97,532. 

Net Position: Unexpended appropriations; 
2007: $30,562; 
2006: $25,951. 

Net Position: Cumulative results of operations; 
2007: ($17,953); 
2006: ($17,891). 

Total Net Position (Note 13); 
2007: $12,609; 
2006: $8,060. 

Total Liabilities and Net Position; 
2007: $106,541; 
2006: $105,592. 

The accompanying notes are an integral part of these statements: 

[End of balance sheets] 

Financial Statements: 
U.S. Government Accountability Office: 
Statements of Net Cost For Fiscal Years Ended September 30, 2007 and 
2006. 

(Dollars in thousands): 

Net Costs by Goal (Note 2). 

Goal 1: Well-Being/Financial Security of American People; 
2007: $177,376; 
2006: $191,880. 

Less: reimbursable services; 
2007: -; 
2006: -. 

Net goal costs; 
2007: $177,376; 
2006: $191,880. 

Goal 2: Changing Security Threats/Challenges of Global Interdependence; 
2007: $157,568; 
2006: $154,727. 

Less: reimbursable services; 
2007: -; 
2006: -. 

Net goal costs; 
2007: $157,568; 
2006: $154,727. 

Goal 3: Transforming the Federal Government's Role; 
2007: $148,959; 
2006: $149,913. 

Less: reimbursable services; 
2007: ($2,391); 
2006: ($3,144). 

Net goal costs; 
2007: $146,568; 
2006: $146,769. 

Goal 4: Maximize the Value of GAO; 
2007: $23,924; 
2006: $23,664. 

Less: reimbursable services; 
2007: -; 
2006: -. 

Net goal costs; 
2007: $23,924; 
2006: $23,664. 

Less: reimbursable services not attributable to goals; 
2007: ($5,730); 
2006: ($5,561). 

Net Cost of Operations (Note 10); 
2007: $499,706; 
2006: $511,479. 

The accompanying notes are an integral part of these statements. 

[End of Statements of Net Cost] 

Financial Statements: 
U.S. Government Accountability Office: 
Statements of Changes in Net Position For Fiscal Years Ended September 
30, 2007 and 2006. 

(Dollars in thousands): 

Cumulative Results of Operations, Beginning of fiscal year; 
2007: ($17,891); 
2006: ($7,556). 

Budgetary Financing Sources - Appropriations used; 
2007: $474,925; 
2006: $476,081. 

Other Financing Sources: Intragovernmental transfer of property and 
equipment; 
2007: ($27); 
2006: ($61). 

Other Financing Sources: Federal employee retirement benefit costs paid 
by OPM and imputed to GAO (Note 6); 
2007: $24,746; 
2006: $25,124. 

Total Financing Sources; 
2007: $499,644; 
2006: $501,144. 

Net Cost of Operations; 
2007: ($499,706); 
2006: ($511,479). 

Net Change; 
2007: ($62); 
2006: ($10,335). 

Cumulative Results of Operations, End of fiscal year; 
2007: ($17,953); 
2006: ($17,891). 

Unexpended Appropriations, Beginning of fiscal year; 
2007: $25,951; 
2006: $27,003. 

Budgetary Financing Sources and Uses: Current year appropriations; 
2007: $485,894; 
2006: $482,395. 

Budgetary Financing Sources and Uses: Appropriations transferred in; 
2007: -; 
2006: $250. 

Budgetary Financing Sources and Uses: Permanently not available; 
2007: ($6,358); 
2006: ($7,616). 

Budgetary Financing Sources and Uses: Appropriations used; 
2007: ($474,925); 
2006: ($476,081). 

Total unexpended appropriations, End of fiscal year; 
2007: $30,562; 
2006: $25,951. 

Net Position; 
2007: $12,609; 
2006: $8,060. 

The accompanying notes are an integral part of these statements. 

[End of Statements of changes in net position] 

Financial Statements: 
U.S. Government Accountability Office: 
Statements of Budgetary Resources For Fiscal Years Ended September 30, 
2007 and 2006: 

(Dollars in thousands): 

Budgetary Resources (Note 11): Unobligated balance, beginning of fiscal 
year; 
2007: $8,492; 
2006: $11,080. 

Budgetary Resources (Note 11): Budget authority: Appropriations; 
2007: $485,894; 
2006: $482,395. 

Budgetary Resources (Note 11): Budget authority: Spending authority 
from offsetting collections: Earned and collected; 
2007: $10,698; 
2006: $10,930. 

Budgetary Resources (Note 11): Budget authority: Spending authority 
from offsetting collections: Changes in unfilled customer orders- 
advance received; 
2007: $136; 
2006: $189. 

Budgetary Resources (Note 11): Budget authority: Spending authority 
from offsetting collections: Subtotal; 
2007: $496,728; 
2006: $493,514. 

Budgetary Resources (Note 11): Nonexpenditure transfers, net and 
actual; 
2007: -; 
2006: $250. 

Budgetary Resources (Note 11): Permanently not available; 
2007: ($6,358); 
2006: ($7,616). 

Total Budgetary Resources; 
2007: $498,862; 
2006: $497,228. 

Status of Budgetary Resources: Obligations incurred: Direct; 
2007: $480,731; 
2006: $479,842. 

Status of Budgetary Resources: Obligations incurred: Reimbursable; 
2007: $8,121; 
2006: $8,705. 

Status of Budgetary Resources: Obligations incurred: Subtotal; 
2007: $488,852; 
2006: $488,547. 

Status of Budgetary Resources: Unobligated balance-Apportioned; 
2007: $3,170; 
2006: $1,089. 

Status of Budgetary Resources: Unobligated balance not available; 
2007: $6,840; 
2006: $7,592. 

Total Status of Budgetary Resources; 
2007: $498,862; 
2006: $497,228. 

Change in Unpaid Obligated Balance: Unpaid Obligated balance, beginning 
of fiscal year; 
2007: $55,238; 
2006: $54,798. 

Change in Unpaid Obligated Balance: Obligations incurred; 
2007: $488,852; 
2006: $488,547. 

Change in Unpaid Obligated Balance: Less: Gross Outlays; 
2007: ($490,474); 
2006: ($488,107). 

Change in Unpaid Obligated Balance: Unpaid Obligated balance, end of 
fiscal year; 
2007: $53,616; 
2006: $55,238. 

Net Outlays: Gross outlays; 
2007: $490,474; 
2006: $488,107. 

Net Outlays: Less: Offsetting collections; 
2007: ($10,645); 
2006: ($11,119). 

Net outlays; 
2007: $479,829; 
2006: $476,988. 

The accompanying notes are an integral part of these statements: 

[End of Statements of Budgetary Resources] 

[End of Financial Statements] 

Notes to Financial Statements: 

Note 1. Summary of Significant Accounting Policies: 

Reporting Entity: 

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

Basis of Accounting: 

GAO's financial statements have been prepared on the accrual basis of 
accounting in conformity with generally accepted accounting principles 
for the federal government. Accordingly, revenues are recognized when 
earned and expenses are recognized when incurred, without regard to the 
receipt or payment of cash. These principles differ from budgetary 
reporting principles. The differences relate primarily to the 
capitalization and depreciation of property and equipment, as well as 
the recognition of other long-term assets and liabilities. The 
statements were also prepared in conformity with OMB Circular No. A- 
136, Financial Reporting Requirements. 

Assets: 

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

Funds with the U.S. Treasury: 

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

Accounts Receivable: 

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

Property and Equipment: 

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

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

Liabilities: 

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

Accounts Payable: 

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

Federal Employee Benefits: 

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

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

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

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

Annual, Sick, and Other Leave: 

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

Contingencies: 

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

Estimates: 

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

[End of Note 1] 

Note 2. Intragovernmental Costs and Exchange Revenue: 

Intragovernmental costs arise from exchange transactions made between 
two reporting entities within the federal government in contrast with 
public costs which arise from exchange transactions made with a 
nonfederal entity. Intragovernmental costs and exchange revenue for the 
years ended September 30, 2007 and 2006, are as follows: 

Dollars in thousands: 

Goal 1: 

Intragovernmental costs; 
2007: $16,930; 
2006: $19,857. 

Public costs; 
2007: $160,446; 
2006: $172,023. 

Total goal 1 costs; 
2007: $177,376; 
2006: $191,880. 

Goal 2: 

Intragovernmental costs; 
2007: $15,040; 
2006: $16,012. 

Public costs; 
2007: $142,528; 
2006: $138,715. 

Total goal 2 costs; 
2007: $157,568; 
2006: $154,727. 

Goal 3: 

Intragovernmental costs; 
2007: $14,218; 
2006: $15,513. 

Public costs; 
2007: $134,741; 
2006: $134,400. 

Total goal 3 costs; 
2007: $148,959; 
2006: $149,913. 

Goal 3 intragovernmental earned revenue; 
2007: ($2,391); 
2006: ($3,144). 

Net goal 3 costs; 
2007: $146,568; 
2006: $146,769. 

Goal 4: 

Intragovernmental costs; 
2007: $2,284; 
2006: $2,449. 

Public costs; 
2007: $21,640; 
2006: $21,215. 

Total goal 4 costs; 
2007: 23,924; 
2006: 23,664. 

Earned revenue not attributable to goals: Intragovernmental; 
2007: ($5,640); 
2006: ($5,492). 

Earned revenue not attributable to goals: Public; 
2007: ($90); 
2006: ($69). 

Total earned revenue not attributable to goals; 
2007: ($5,730); 
2006: ($5,561). 

[End of Table] 

Goals 1, 2, and 4 have no associated intragovernmental revenue and all 
public earned revenue collected is not attributable to goals. GAO's 
pricing policy for reimbursable services is to seek reimbursement for 
actual costs incurred, including overhead costs where allowed by law. 
Therefore, revenues, as listed above, and costs that generated those 
revenues are equivalent. 

[End of Note 2] 

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

GAO's funds with the U.S. Treasury consist of only appropriated funds. 
GAO also maintains cash imprest funds for use in daily operations. The 
status of these funds as of September 30, 2007 and 2006, is as follows: 

Dollars in thousands: 

Unobligated balance: Available; 
2007: $3,168;
2006: $1,087. 

Unobligated balance: Unavailable; 
2007: $6,840; 
2006: $7,592. 

Obligated balances not yet disbursed; 
2007: $53,616; 
2006: $55,238. 

Total funds with U.S. Treasury; 
2007: $63,624; 
2006: $63,917. 

Cash; 
2007: 2; 
2006: 2. 

Total funds with U.S. Treasury and cash; 
2007: $63,626; 
2006: $63,919. 

[End of Table] 

[End of Note 3] 

Note 4. Property and Equipment, Net: 

The composition of property and equipment as of September 30, 2007, is 
as follows: 

Dollars in thousands: 

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $11,905; 
Book value: $3,759. 

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191. 

Classes of property and equipment: Building improvements; 
Acquisition value: $106,565; 
Accumulated depreciation: $90,152; 
Book value: $16,413. 

Classes of property and equipment: Computer and other equipment and 
software; 
Acquisition value: $40,575; 
Accumulated depreciation: $27,032; 
Book value: $13,543. 

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $6,125; 
Accumulated depreciation: $5,540; 
Book value: $585. 

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $23,762; 
Accumulated depreciation: $17,687; 
Book value: $6,075. 

Classes of property and equipment: Total property and equipment; 
Acquisition value: $193,882; 
Accumulated depreciation: $152,316; 
Book value: $41,566. 

[End of Table] 

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

Dollars in thousands: 

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $11,278; 
Book value: $4,386. 

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191. 

Classes of property and equipment: Building improvements; 
Acquisition value: $115,048; 
Accumulated depreciation: $98,246; 
Book value: $16,802. 

Classes of property and equipment: Computer and other equipment and 
software; 
Acquisition value: $34,791; 
Accumulated depreciation: $24,502; 
Book value: $10,289. 

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $6,237; 
Accumulated depreciation: $5,432; 
Book value: $805. 

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $23,014; 
Accumulated depreciation: $16,194; 
Book value: $6,820. 

Classes of property and equipment: Total property and equipment; 
Acquisition value: $195,945; 
Accumulated depreciation: $155,652; 
Book value: $40,293. 

[End of Table] 

[End of Note 4] 

Note 5. Liabilities Not Covered by Budgetary Resources: 

The liabilities on GAO's Balance Sheets as of September 30, 2007 and 
2006 include liabilities not covered by budgetary resources, which are 
liabilities for which congressional action is needed before budgetary 
resources can be provided. Although future appropriations to fund these 
liabilities are likely and anticipated, it is not certain that 
appropriations will be enacted to fund these liabilities. The 
composition of liabilities not covered by budgetary resources as of 
September 30, 2007 and 2006, is as follows: 

Dollars in thousands: 

Intragovernmental liabilities-Workers' compensation; 
2007: $2,364; 
2006: $2,337. 

Salaries and benefits-Comptrollers' General retirement plan; 
2007: $3,113; 
2006: $2,982. 

Accrued annual leave and other; 
2007: $29,572; 
2006: $30,299. 

Workers' compensation; 
2007: $16,368; 
2006: $15,910. 

Capital leases; 
2007: $4,542; 
2006: $6,872. 

Note payable; 
2007: $3,779; 
2006: -. 

Total liabilities not covered by budgetary resources; 
2007: $59,738; 
2006: $58,400. 

[End of Table] 

The majority of the note payable represents financing for 
telecommunications equipment purchased in fiscal year 2007 with an 
interest rate of 8.75 percent and future principle payments as follows: 
fiscal year 2008, $786,000; fiscal year 2009, $858,000; fiscal year 
2010, $936,000; fiscal year 2011, $1,021,000. 

[End of Note 5] 

Note 6. Federal Employee Benefits: 

All permanent employees participate in the contributory Civil Service 
Retirement System (CSRS) or the Federal Employees Retirement System 
(FERS). Temporary employees and employees participating in FERS are 
covered under the Federal Insurance Contributions Act (FICA). To the 
extent that employees are covered by FICA, the taxes they pay to the 
program and the benefits they will eventually receive are not 
recognized in GAO's financial statements. GAO makes contributions to 
CSRS, FERS, and FICA and matches certain employee contributions to the 
thrift savings component of FERS. All of these payments are recognized 
as operating expenses. 

In addition, all permanent employees are eligible to participate in the 
contributory Federal Employees Health Benefit Program (FEHBP) and 
Federal Employees Group Life Insurance Program (FEGLIP) and may 
continue to participate after retirement. GAO makes contributions 
through OPM to FEHBP and FEGLIP for active employees to pay for their 
current benefits. GAO's contributions for active employees are 
recognized as operating expenses. Using the cost factors supplied by 
OPM, GAO has also recognized an expense in its financial statements for 
the estimated future cost of postretirement health benefits and life 
insurance for its employees. These costs are financed by OPM and 
imputed to GAO. 

Amounts owed to OPM and Treasury as of September 30, 2007 and 2006, are 
$2,968,000 and $2,379,000, respectively, for FEHBP, FEGLIP, FICA, FERS, 
and CSRS contributions and are shown on the Balance Sheet as an 
employee benefits liability. 

Details of the major components of GAO's federal employee benefit costs 
for the years ended September 30, 2007 and 2006, are as follows: 

Dollars in thousands: 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Estimated future pension 
costs(CSRS/FERS); 
2007: $9,115; 
2006: $10,369. 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Estimated future postretirement 
health and life insurance (FEHBP/FEGLIP); 
2007: $15,631; 
2006: $14,755. 

Federal Employee Benefits Costs: Federal employee retirement benefit 
costs paid by OPM and imputed to GAO: Total; 
2007: $24,746; 
2006: $25,124. 

Federal Employee Benefits Costs: Pension expenses(CSRS/FERS); 
2007: $29,895; 
2006: $29,145. 

Federal Employee Benefits Costs: Health and life insurance expenses 
(FEHBP/FEGLIP); 
2007: $16,100; 
2006: $15,765. 

Federal Employee Benefits Costs: FICA payment made by GAO; 
2007: $16,581; 
2006: $15,882. 

Federal Employee Benefits Costs: Thrift Savings Plan-matching 
contribution by GAO; 
2007: $9,596; 
2006: $8,836. 

[End of Table] 

Comptrollers General and their surviving beneficiaries who qualify and 
so elect to participate are paid retirement benefits by GAO under a 
separate retirement plan. These benefits are paid from current year 
appropriations. Because GAO is responsible for future payments under 
this plan, the estimated present value of accumulated plan benefits of 
$3,113,000 as of September 30, 2007, and $2,982,000 as of September 30, 
2006, is included as a component of salary and benefit liabilities on 
GAO's Balance Sheet. 

[End of Note 6] 

Note 7. Workers' Compensation: 

GAO utilizes the services of an independent actuarial firm to calculate 
its FECA liability. GAO recorded an estimated liability for claims 
incurred but not reported as of September 30, 2007 and 2006, which is 
expected to be paid in future periods. This estimated liability of 
$16,368,000 and $15,910,000 as of September 30, 2007 and 2006, 
respectively, is reported on GAO's Balance Sheet. GAO also recorded a 
liability for amounts paid to claimants by Labor as of September 30, 
2007 and 2006, of $2,364,000 and $2,337,000, respectively, but not yet 
reimbursed to Labor by GAO. The amount owed to Labor is reported on 
GAO's Balance Sheet as an intragovernmental liability. 

[End of Note 7] 

Note 8. Building Lease Revenue: 

In fiscal year 2000 the U.S. Army Corps of Engineers (USACE) entered 
into an agreement with GAO to lease the entire third floor of the GAO 
building. USACE provided all funding for the third floor renovation. 
Occupancy began August 3, 2000, for an initial period of 3 years, with 
options to renew on an annual basis for 7 additional years. Total 
rental revenue to GAO includes a base rent, which remains constant for 
the entire 10-year period, plus operating expense reimbursements at a 
fixed amount for the first 3 years, with escalation clauses from year 4 
through year 10 if the option years are exercised. Beginning in fiscal 
year 2002, USACE leased additional space on the sixth floor with 
occupancy lasting through the original lease term. 

Rent received by GAO for fiscal year 2007 and 2006 was $4,978,000 and 
$4,916,000, respectively. These amounts are included in reimbursable 
services shown on the Statement of Net Costs. Total rental revenue for 
the remaining period of the 10-year lease is as follows: 

Dollars in thousands: 

Fiscal year ending September 30: 2008; 
Total rental revenue*: $5,045. 

Fiscal year ending September 30: 2009; 
Total rental revenue*: $5,111. 

Fiscal year ending September 30: 2010; 
Total rental revenue*: $5,179. 

Fiscal year ending September 30: Total; 
Total rental revenue*: $15,335. 

* If option years are exercised. 

[End of Table] 

[End of Note 8] 

Note 9. Leases: 

Capital Leases: 

GAO has entered into capital leases for office equipment and computer 
equipment under which the ownership of the equipment covered under the 
leases transfers to GAO when the leases expire. When GAO enters into 
these leases, the present value of the future lease payments is 
capitalized, net of imputed interest, and recorded as a liability. The 
acquisition value and accumulated depreciation of GAO's capital leases 
are shown in Note 4, Property and Equipment, Net. As of September 30, 
2007 and 2006, the capital lease liability was $4,542,000 and 
$6,872,000, respectively. 

These lease agreements are written as contracts with a base year and 
option years. The option years are subject to the availability of 
funds. Early termination of the leases for reasons other than default 
is subject to a negotiation between the parties. These leases are lease-
to-ownership agreements. GAO's leases are short term in nature and no 
liability exists beyond the years shown in the table below. GAO's 
estimated future minimum lease payments under the terms of the leases 
are as follows: 

Dollars in thousands: 

Fiscal year ending September 30: 2008; 
Total: $2,755. 

Fiscal year ending September 30: 2009; 
Total: $1,361. 

Fiscal year ending September 30: 2010; 
Total: $776. 

Fiscal year ending September 30: 2011; 
Total: $186. 

Fiscal year ending September 30: 2012; 
Total: $2. 

Fiscal year ending September 30: Total estimated future lease payments; 
Total: $5,080. 

Fiscal year ending September 30: Less: imputed interest; 
Total: ($538). 

Fiscal year ending September 30: Net capital lease liability; 
Total: $4,542. 

[End of Table] 

Operating Leases: 

GAO leases office space, predominately for field offices, from the 
General Services Administration and has entered into various other 
operating leases for office communication and computer equipment. Lease 
costs for office space and equipment for fiscal year 2007 and fiscal 
year 2006 amounted to approximately $13,629,000 and $11,477,000, 
respectively. Leases for equipment under operating leases are generally 
less than 1 year, therefore there are no associated future minimum 
lease payments. Estimated future minimum lease payments for field 
office space under the terms of the leases are as follows:

Dollars in thousands: 

Fiscal year ending September 30: 2008; 
Total:  $6,073. 

Fiscal year ending September 30: 2009; 
Total:  $3,818. 

Fiscal year ending September 30: 2010; 
Total:  $3,819. 

Fiscal year ending September 30: 2011; 
Total:  $3,176. 

Fiscal year ending September 30: 2012; 
Total:  $2,916. 

Fiscal year ending September 30: 2013 and thereafter; 
Total:  $4,787. 

Fiscal year ending September 30: Total estimated future lease payments; 
Total:  $24,589. 

[End of Table] 

Leased property and equipment must be capitalized if certain criteria 
are met (see Capital Leases description). Because property and 
equipment covered under GAO's operating leases do not satisfy these 
criteria, GAO's operating leases are not reflected on the Balance 
Sheet. However, annual lease costs under the operating leases are 
included as components of net cost by goal in the Statement of Net 
Cost. 

[End of Note 9] 

Note 10. Net Cost of Operations: 

Expenses for salaries and related benefits for fiscal year 2007 and 
fiscal year 2006 amounted to $402,772,000 and $405,199,000, 
respectively, which were about 81 percent of GAO's annual net cost of 
operations in fiscal year 2007 and 79 percent in fiscal year 2006. 
Included in the net cost of operations are federal employee benefit 
costs paid by OPM and imputed to GAO of $24,746,000 in fiscal year 2007 
and $25,124,000 in fiscal year 2006. 

Revenues from reimbursable services are shown as an offset against the 
full cost of the goal to arrive at its net cost. Earned revenues that 
are insignificant or cannot be associated with a major goal are shown 
in total, the largest component of which is rental revenue from the 
lease of space in the GAO building. Revenues from reimbursable services 
for fiscal year 2007 and fiscal year 2006 amounted to $8,121,000 and 
$8,705,000, respectively. Further details of the intragovernmental 
components are provided in Note 2. 

The net cost of operations represents GAO's operating costs that must 
be funded by financing sources other than revenues earned from 
reimbursable services. These financing sources are presented in the 
Statement of Changes in Net Position. 

[End of Note 10] 

Note 11. Budgetary Resources: 

Budgetary resources made available to GAO include current 
appropriations, spending authority from budget transfers, prior years' 
unobligated appropriations, and reimbursements arising from both 
revenues earned by GAO from providing goods and services to other 
federal entities for a price (reimbursable services) and cost-sharing 
and pass-through contract arrangements with other federal entities. 
Reimbursements from cost-sharing and pass-through contract arrangements 
consisted primarily of collections from other federal entities 1) for 
the support of Federal Accounting Standards Advisory Board and 2) to 
utilize GAO contracts to obtain services. The costs and reimbursements 
for these activities are not included in the Statement of Net Cost. 

For fiscal year 2006, budget transfer consisted of budget authority 
transferred from USAID for the analysis of U.S.-funded international 
basics education programs. There were no transfers of budgetary 
authority for fiscal year 2007. 

Comparison of GAO's fiscal year 2006 Statement of Budgetary Resources 
with the corresponding information presented in the 2008 President's 
Budget is as follows: 

Dollars in thousands: 

Fiscal year 2006 Statement of Budgetary Resources; 
Budgetary Resources: $497,228; 
Obligations Incurred: $488,547. 

Expired unobligated balances; 
Budgetary Resources: ($5,489); 
Obligations Incurred: -. 

Unobligated balances apportioned for future periods; 
Budgetary Resources: ($1,627); 
Obligations Incurred: -. 

Rounding differences; 
Budgetary Resources: ($112); 
Obligations Incurred: ($547). 

2008 President's Budget; 
Budgetary Resources: $490,000; 
Obligations Incurred: $488,000. 

[End of Table] 

As the fiscal year 2009 President's Budget will not be published until 
February 2008, a comparison between the fiscal year 2007 data reflected 
on the Statement of Budgetary Resources and fiscal year 2007 data in 
the President's Budget cannot be performed, though we expect similar 
differences will exist. The fiscal year 2009 President's Budget will be 
available on OMB's Web site and directly from the Government Printing 
Office. 

Budgetary resources obligated for undelivered orders at the end of 
fiscal years 2007 and 2006 totaled $20,550,000 and $17,459,000, 
respectively. GAO's apportionments fall under Category A, quarterly 
apportionment. Apportionment categories of obligations incurred for 
fiscal years 2007 and 2006 are as follows: 

Dollars in thousands: 

Fiscal year ending September 30: Direct-Category A; 
2007: $480,731; 
2006:  $479,842. 

Fiscal year ending September 30: Reimbursable-Category A; 
2007: $8,121; 
2006: $8,705. 

Fiscal year ending September 30: Total obligations incurred; 
2007: $488,852; 
2006: $488,547. 

[End of Table] 

[End of Note 11] 

Note 12. Reconciliation of Net Costs of Operations to Budget: 

In fiscal year 2006 this reconciliation was presented as a fifth 
statement, the statement of financing. In accordance with OMB Circular 
A-136, revised June 2007, presentation requirement for this information 
is now a footnote disclosure. Details of the relationship between 
budgetary resources obligated and the net costs of operations for the 
fiscal years ending September 30 are as follows: 

Dollars in thousands: 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Budgetary Resources Obligated: Obligation incurred; 
2007: $488,852; 
2006: $488,547. 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Budgetary Resources Obligated: Less: Reimbursable services; 
2007: ($8,121); 
2006: ($8,705). 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Budgetary Resources Obligated: Cost Sharing and pass-through contract 
reimbursements; 
2007: ($2,577); 
2006: ($2,225). 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Budgetary Resources Obligated: Net Obligations; 
2007: $478,154; 
2006: $477,617. 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Non-budgetary Resources: Intragovernmental transfer of property and 
equipment; 
2007: ($27); 
2006: ($61). 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Non-budgetary Resources: Federal Employee retirement benefit costs paid 
by OPM imputed to GAO; 
2007: $24,746; 
2006: $25,124. 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Non-budgetary Resources: Net non-budgetary resources used to finance 
activities; 
2007: $24,719; 
2006: $25,063. 

Fiscal year ending September 30: Resources Used to Finance Activities: 
Non-budgetary Resources: Total resources used to finance activities; 
2007: $502,873; 
2006: $502,680. 

Fiscal year ending September 30: Resources used that do not fund Net 
Cost of Operations: Net increase in unliquidated obligations; 
2007: ($3,091); 
2006: ($1,536). 

Fiscal year ending September 30: Resources used that do not fund Net 
Cost of Operations: Assets capitalized; 
2007: ($14,631); 
2006: ($8,939). 

Fiscal year ending September 30: Resources used that do not fund Net 
Cost of Operations: Total resources that do not fund Net Cost of 
Operations; 
2007: ($17,722); 
2006: ($10,475). 

Fiscal year ending September 30: Resources used that do not fund Net 
Cost of Operations: Total resources used to finance Net Cost of 
Operations; 
2007: $485,151; 
2006: $492,205. 

Fiscal year ending September 30: Components of Net Costs that Require 
Resources in Future Periods: Increase in workers' compensation; 
2007: $485; 
2006: $5,770. 

Fiscal year ending September 30: Components of Net Costs that Require 
Resources in Future Periods: (Decrease)/Increase in accrued annual 
leave; 
2007: ($340); 
2006: $119. 

Fiscal year ending September 30: Components of Net Costs that Require 
Resources in Future Periods: Increase/(Decrease) in other liabilities; 
2007: $101; 
2006: ($125). 

Fiscal year ending September 30: Components of Net Costs that Require 
Resources in Future Periods: Total Components of Net Cost that Require 
budgetary resources in future periods; 
2007: $246; 
2006: $5,764. 

Fiscal year ending September 30: Costs that do not Require Resources: 
Depreciation; 
2007: $14,309; 
2006: $13,510. 

Fiscal year ending September 30: Net Cost of Operations; 
2007: $499,706; 
2006: $511,479.

[End of Table] 

[End of Note 12] 

Note 13. Net Position: 

Net position on the Balance Sheets comprises unexpended appropriations 
and cumulative results of operations. Unexpended appropriations is the 
sum of the total unobligated appropriations and undelivered goods and 
services. Cumulative results of operations represent the excess of 
financing sources over expenses since inception. Details of the 
components of GAO's cumulative results of operations for the years 
ended September 30, 2007 and 2006, are as follows: 

Dollars in thousands: 

Investment in property and equipment, net; 
2007: $41,566; 
2006: $40,293. 

Other-supplies inventory; 
2007: $219; 
2006: $216. 

Liabilities not covered by budgetary resources; 
2007: ($59,738); 
2006: ($58,400). 

Cumulative results of operations; 
2006: ($17,953); 
2005: ($17,891). 

[End of Table] 

Liabilities not covered by budgetary resources are liabilities for 
which congressional action is needed before budgetary resources can be 
provided. See Note 5 for components. 

[End of Note 13] 

Note 14. Davis-Bacon Act Trust Function: 

GAO is responsible for administering for the federal government the 
trust function of the Davis-Bacon Act receipts and payments and 
publishes separate, audited financial statements for this fund. GAO 
maintains this fund to pay claims relating to violations of the Davis- 
Bacon Act and Contract Work Hours and Safety Standards Act. Under these 
acts, Labor investigates violation allegations to determine if federal 
contractors owe additional wages to covered employees. If Labor 
concludes that a violation has occurred, GAO collects the amount owed 
from the contracting federal agency, deposits the funds into an account 
with the U.S. Treasury, and remits payment to the employee. GAO is 
accountable to the Congress and to the public for the proper 
administration of the assets held in the trust. Trust assets under 
GAO's administration as of September 30, 2007 and 2006, totaled 
approximately $4,151,000 and $4,485,000, respectively. These assets are 
not the assets of GAO nor the federal government and are held for 
distribution to appropriate claimants. During fiscal years 2007 and 
2006, receipts in the trust amounted to $373,000 and $774,000 and 
disbursements amounted to $708,000 and $954,000, respectively. Because 
the trust assets and related liabilities are not assets and liabilities 
of GAO, they are not included in the accompanying financial statements. 

[End of Note 14] 

[End of Notes to Financial Statements] 

[End of Part III] 

Part IV: From the Inspector General: 

From the Inspector General: 

Memorandum: 

Date: October 26, 2007: 

From: Inspector General - Francis Gardia [Signature] 

Subject: GAO Management Challenges and Performance Measures: 

We have examined management's assessment of the management challenges. 
Based on our work and institutional knowledge, we agree that physical 
security, information security, and human capital continue to be 
management challenges that may affect GAO's performance. We also agree 
with management's assessment of progress made in addressing these 
challenges. 

During fiscal year 2007, we reviewed all accomplishment reports of $500 
million or more, which totaled 74 percent of the total dollar value 
reported. Based on our reviews, we believe that GAO had a reasonable 
basis for claiming these benefits. In addition, we assessed GAO's 
fiscal year 2006 performance measures for how well its internal 
administrative services help employees get their jobs done and improve 
the quality of their work life. Overall, we found that these measures 
were reasonable and that methods used to measure performance were 
appropriate, but we also made recommendations to help improve their 
objectivity and reliability. 

[End of letter from the Inspector General] 

[End of Part IV] 

Part V: Appendixes: 

1. Accomplishments and Contributions: 

In pursuing our strategic goals during fiscal year 2007, we recorded 
hundreds of accomplishments and made numerous other contributions. This 
appendix provides details on the most significant of these. In 
reporting financial benefits, nonfinancial benefits, and contributions 
(designated by an F, N, or C in the item number below), we are holding 
ourselves accountable for the resources we received to implement our 
strategic plan. 

Typically, the accomplishments describe work we completed in prior 
fiscal years because it takes time to implement recommendations, 
realize benefits, and record them. The other contributions, which often 
refer to work completed in fiscal year 2007, describe instances in 
which we provided information or recommendations that aided 
congressional decision making or informed the public debate to a 
significant degree. At the end of each accomplishment and contribution 
summary, we list the reference numbers for products associated with the 
work discussed. In the online PDF version of this document, readers can 
link directly to these products if they want additional information. 

Strategic Goal 1: 

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

The health needs of an aging and diverse population: 

1.01.F. Avoiding an Increase in Medicare Payment for Skilled Nursing 
Facilities (SNF): In 2000, the Congress increased the nursing portion 
of Medicare's daily rate for SNFs by 16.66 percent for 2 years, and 
also directed us to assess the impact of the increase on nursing staff 
ratios and recommend whether it should continue. Our analysis of 
available data showed that, in aggregate, SNFs' nurse staffing ratios 
changed little after the payment increase took effect. We suggested in 
November 2002 that the Congress consider our finding that the payment 
increase was not effective in raising nurse staffing when determining 
whether the increase should continue. Our work influenced the Congress 
in its 2003 decision not to include an increase in subsequent 
legislation, despite strong opposition from the nursing facility 
industry. In 2007, Medicare reduced its costs by an estimated $1 
billion by avoiding this increase in the SNF payment rate. (GAO-03-
176): 

1.02.F. Avoiding Making a Permanent Add-on to Medicare Payment for 
SNFs: The Congress required the Centers for Medicare & Medicaid 
Services (CMS) to temporarily raise Medicare payment rates for SNFs by 
4 percent from October 1, 2000, through September 30, 2002. Prior to 
and after the expiration of this add-on, provider representatives 
argued that it should be made permanent, citing payment shortfalls from 
other payers. However, our 2002 report on payment adequacy found that 
most freestanding SNFs had payments that exceeded their costs of caring 
for Medicare beneficiaries, leaving them with a Medicare margin of 
almost 19 percent in 2000. Our work contributed to the congressional 
decision in 2003 not to make the 4 percent payment increase permanent. 
This allowed Medicare to reduce its costs by an estimated $600 million 
in 2007. (GAO-03-183): 

1.03.F. Limiting States Claiming of Medicaid Matching Funds for 
Targeted Case Management: In 2005, we reported that there were risks 
associated with Medicaid's provision of targeted case management--a 
service to help beneficiaries gain access to needed medical, social, 
educational, and other services. We highlighted instances where states 
were using targeted case management services to inappropriately 
increase federal reimbursement by claiming services that should not be 
paid by Medicaid funds and made a recommendation to establish and 
clarify federal policy on payment for these services. Based in part on 
information we provided, the Deficit Reduction Act of 2005 clarified 
the definition of targeted case management services and specified when 
federal funding could be used for them. Based on a Congressional Budget 
Office (CBO) estimate, these provisions will result in financial 
benefits of $768.6 million in the first 5 years of implementation. (GAO-
05-748, GAO-05- 836T): 

1.04.C. Identifying Options for Changes in Medicare Physician Payment 
Methods: Since 2002, we have conducted a substantial body of work to 
identify options for the Congress to consider in improving Medicare's 
fee-for- service physician payment system. Some of our work has focused 
on technical issues, such as adjusting payments for geographic 
variations in the cost of running a medical practice and the amounts 
paid for specific types of care, such as therapy and imaging services. 
We have also focused more broadly on Medicare's system of updating 
payments for physician services and on Medicare beneficiary access to, 
and utilization of, such services. Most recently, our report and 
testimonies on profiling physician practices to improve the efficiency 
of Medicare have received considerable attention by the Congress and 
may become a part of legislated changes currently being debated by the 
committees with jurisdiction over Medicare. (GAO-07-862T, GAO-07-307, 
GAO-06-1008T, GAO-05-119, GAO-05-326T): 

1.05.C. Assisting the Congress with Information to Reauthorize the Food 
and Drug Administration (FDA) Legislation: We conducted a body of work, 
including reports and testimonies, that assisted the Congress in 
developing a bill to reauthorize industry user fees for FDA and reform 
many FDA activities. For example, our reports identified deficiencies 
in FDA's oversight of marketed drugs and in FDA's monitoring of direct-
to- consumer advertising of prescription drugs, discussed barriers to 
the development of new drugs, reported that the Best Pharmaceuticals 
for Children Act has led to improved labeling for pediatric drugs, and 
found that there are barriers to the use of accredited organizations 
outside of FDA to conduct inspections of medical device manufacturing 
facilities. The Food and Drug Administration Amendments Act of 2007 
(Pub. L. No. 110-85), which became law on September 27, 2007, addresses 
many of the concerns we raised. For example, the law gives FDA the 
authority to require pharmaceutical firms to conduct studies of their 
marketed drugs when FDA identifies the need for information about a 
possible safety issue. The law also directs that funds from user fees 
be used to improve the monitoring of drug advertisements, requires 
establishment of a foundation to help modernize the development of new 
drugs, and reauthorizes the act. (GAO-06-402, GAO-07-54, GAO-07-49, GAO-
07-157, GAO-07-557): 

1.06.C. Improving Care for Veterans Transitioning from Military 
Service: We rapidly responded to congressional concerns about 
unsanitary living conditions at Walter Reed Medical Center by 
testifying twice on a body of work showing that servicemembers injured 
in combat face an array of significant medical and financial challenges 
as they begin their recovery process in the Departments of Defense's 
(DOD) and Veterans Affairs' (VA) care systems. For example, we 
identified DOD's and VA's inability to electronically share medical 
records for severely injured servicemembers--those with traumatic brain 
injuries or other complex trauma, such as missing limbs--that were 
transferred from DOD to one of four VA polytrauma facilities. We found 
during visits to polytrauma facilities in 2005 that none of the 
facilities had real-time access to the injured servicemembers' DOD 
electronic medical records, which is needed to determine whether 
servicemembers are medically stable enough to participate in vigorous 
rehabilitation activities. Subsequent to that report, in May 2007, VA 
reported that three of the four polytrauma facilities now have access 
to DOD's electronic medical records. Our January 2005 report found that 
servicemembers whose disabilities are definitely or likely to result in 
military separation may not be able to benefit from early intervention 
for rehabilitation by VA health care because DOD and VA sometimes 
worked at cross purposes. For example, DOD was concerned that VA's 
outreach to provide early intervention rehabilitation services to 
wounded servicemembers who had not yet been discharged conflicted with 
the military's retention goals. Finally, we reported in May 2006 that 
despite DOD's efforts, it cannot provide reasonable assurance that 
servicemembers who need referrals for mental health examinations 
receive them. (GAO-07-589T, GAO-07-606T, GAO-06- 794R, GAO-05-167, GAO-
06-397): 

1.07.C. Enrolling Dual Eligible Beneficiaries in Medicare Prescription 
Drug Plans: In a series of reports and testimonies, we identified 
shortcomings in CMS's process and policy for enrolling dual-eligible 
beneficiaries before and since the implementation of the Medicare drug 
benefit on January 1, 2006. Our 2005 report cautioned that potential 
problems may leave some dual- eligible beneficiaries facing 
difficulties in immediately obtaining necessary drugs. We noted that 
some individuals may not be identified for automatic enrollment in a 
drug plan due to potential inaccuracies in state or federal data, and 
that beneficiaries' prescription drugs may not be on their assigned 
drug plan's formulary. We alerted CMS that its contingency plans to 
address potential transition problems may not be effective. In our 2007 
report, we reported that CMS's enrollment procedures and implementation 
of its Part D coverage policy generate challenges for some dual-
eligible beneficiaries, pharmacies, and the Medicare program. Medicare 
pays drug plans to provide these beneficiaries with several months of 
retroactive coverage, but until March 2007, CMS did not inform 
beneficiaries of their right to be reimbursed for drug costs incurred 
during these periods. We estimated that Medicare paid plans millions of 
dollars in 2006 for coverage during periods for which dual-eligible 
beneficiaries may not have sought reimbursement for their drug costs. 
In response to our recommendation, CMS has added language to enrollment 
notices indicating that beneficiaries may be eligible for reimbursement 
of some drug costs. (GAO-07-272, GAO-07-1022T, GAO-07-824T, GAO-06-
278R): 

1.08.C. Reauthorizing the State Children's Health Insurance Program 
(SCHIP): In November and December of 2006, we conducted discussions 
with staff members of the Senate Committee on Finance regarding the 
reauthorization of SCHIP. In particular, the committee was interested 
in having us conduct a review of SCHIP over its 10-year period and 
testify on issues facing the Congress as it considers reauthorization. 
We delivered testimony before the Senate Committee on Finance and then 
subsequently before the Subcommittee on Health, Committee on Energy and 
Commerce. Our testimony focused on the growth in enrollment and program 
spending, the current design of states' programs, and issues identified 
for consideration during SCHIP reauthorization. Both testimonies helped 
set the stage for the reauthorization debate and raised key issues that 
required resolution among Members of the Congress. In particular, our 
work on adult coverage, states' eligibility levels for children, and 
spending trends raised issues that were important to provide an 
informed basis for the debate and final SCHIP legislation. (GAO-07- 
447T, GAO-07-501T, GAO-07-558T): 

Lifelong learning to enhance U.S. competitiveness: 

1.09.N. Enhancing Oversight of Head Start Grantees: We found weaknesses 
in the Program Review Instrument for Systems Monitoring (PRISM) system 
for assessing Head Start grantees, which is administered by the 
Department of Health and Human Services' Administration for Children 
and Families (ACF). ACF had no process in place to ensure that its 
reviewers consistently followed on-site review standards, so we 
recommended that it develop a way to assess the results of PRISM 
reviews and ensure consistent treatment of grantees with similar 
problems. ACF corroborated our findings and implemented a standardized 
set of performance indicators and a uniform review protocol. Although 
ACF began training staff for PRISM reviews, we found that it was 
unclear whether training on the PRISM process alone would adequately 
equip reviewers to assess the management of Head Start grantees and 
recommended that ACF ensure that training and certification is provided 
for all PRISM reviewers. ACF subsequently offered additional training 
for its PRISM reviewers and implemented a certification process to 
verify credentials and ensure the quality of reviewers. Finally, we 
identified concerns with the independence and credibility of PRISM 
review team leaders who reviewed grantees within their home regions. 
ACF changed its process to ensure that leaders only review grantees 
outside of their home regions. (GAO-06-167): 

1.10.N. Improving Services to Students with Limited English 
Proficiency: In a review of services for students with limited English 
proficiency (LEP), we found that state academic assessments may not 
produce valid and reliable results for these students and that some 
states may need more technical assistance to develop valid tests for 
them. We recommended that the Department of Education (Education) 
determine what additional technical assistance states need to assess 
the academic knowledge of LEP students in a valid manner and provide 
the identified additional assistance. We also determined that while 
most states offer some accommodations to LEP students to improve 
assessment results in elementary and secondary grades, there was a lack 
of research on what specific accommodations are appropriate for LEP 
students and their effectiveness in improving the validity of 
assessment results. We recommended that the agency support additional 
research in this area and disseminate the results to states. Addressing 
these concerns, Education announced an LEP Partnership initiative to 
provide technical assistance to help states develop more valid and 
reliable assessments for these students. The agency and the partnership 
launched several technical assistance projects, such as developing 
guides for simplified assessments and conducting translations of them. 
They are also preparing a handbook on appropriate accommodations for 
LEP students. In addition, an Education-funded study on accommodations 
for LEP students was published in October 2006, which is available as a 
resource on Education's Web site. (GAO-06-815): 

1.11.N. Increasing Supplemental Education Services to Students: The No 
Child Left Behind Act requires districts with Title I-funded schools 
that have not met state performance goals for 3 consecutive years to 
offer their low-income students supplemental educational services, such 
as tutoring. States and districts share responsibility for providing 
these services through a state-approved provider. In August 2006, we 
reported that states and districts sought the flexibility to use 
Education's pilot program that allowed districts in need of improvement 
to act as providers of these services. Having districts serve as 
providers could increase access to students in rural districts and 
increase participation by lowering costs. We recommended that Education 
consider expanding this pilot. After we provided our findings and 
recommendations to Education, the agency announced the expansion of the 
pilot to include additional districts and the continuation of the pilot 
for other districts. As a result, more students are likely to receive 
supplemental education services. (GAO-06-758): 

Benefits and protections for workers, families, and children: 

1.12.F. Denying Benefits to Fugitive Felons: We determined the scope of 
the Social Security Administration's (SSA) authority to deny benefits 
to fugitive felons and to release information about Old Age and 
Survivors Insurance (OASI) and Disability Insurance (DI) beneficiaries 
who are fugitive felons. Although fugitive felons are ineligible for 
Supplemental Security Income (SSI) benefits, it was not clear whether 
SSA also had the authority to deny other benefits. SSA will, upon 
request, provide law enforcement agencies with the current addresses 
and Social Security numbers (SSN) of fugitive felons who are SSI 
recipients. We concluded that SSA did not have the authority to deny 
OASI and DI benefits to fugitive felons and that the Congress would 
have to amend Title II of the Social Security Act to explicitly 
disqualify fugitive felons from receiving these benefits. In the Social 
Security Protection Act of 2004 (Public Law 108-203), the Congress 
subsequently amended the Social Security Act to deny these benefits to 
fugitive felons. Payment of these benefits was prohibited as of January 
1, 2005, resulting in a savings over the fiscal year 2005-2007 period 
of over $180 million. (GAO-02-459R): 

1.13.N. Meeting the Needs of Reserves and National Guard Members: We 
found that members of the Reserves and National Guard returning from 
active duty got less help with transitioning to new jobs than other 
separating military personnel due to the time constraints of 
demobilization. Though many reservists and guard members have jobs 
before they leave for active duty, their employers may not hold their 
jobs for them until they return as regulated by law or their companies 
may have gone out of business or into bankruptcy in their absence. 
Moreover, other reservists and guard members who are self-employed or 
desire better jobs when they return to civilian life may also need job 
assistance. We recommended that the DOD work with its partners to 
explore options to enhance their participation in the transition 
assistance program (TAP). DOD reported to the Congress in May 2006 that 
it would address these issues. In 2007, DOD launched a new Web site, 
accessible even after demobilization, that provides information covered 
by TAP and allows members to create individualized plans that are 
accessible for their lifetimes, translate their military skills into 
civilian language, develop rï¿½sumï¿½s, and conduct job searches in their 
local areas. In addition, we found that VA had no data on the 
participation of separating military personnel in its disabled 
transition assistance program and TAP briefings and no data on the 
number and location of the program sessions it provided. After we 
recommended that VA develop a tracking system, VA implemented a new 
reporting system to provide such data, including participation by 
military service and by status as full-time active duty personnel or by 
Reserves or National Guard members on active duty. (GAO-05-544): 

1.14.N. Improving Disability Programs: Our many reports and testimonies 
on disability programs had a significant impact on congressional policy 
making, helped frame the current debate surrounding disability services 
and benefits for veterans and injured servicemembers, and prompted 
agencies to take action. In the Congress, members relied on our many VA 
testimonies, citing our recommendations for improving VA and DOD 
disability systems in support of future appropriations and proposed 
legislation. We briefed congressional committees and participated in a 
national roundtable on disability issues, including VA's inability to 
process veterans' claims for disability benefits in a timely, accurate, 
and consistent manner. The President's Commission on Care for America's 
Returning Wounded Warriors took our briefing and recommendations into 
account when developing its own plan for improving DOD and VA 
disability systems. In addition, in response to our recommendations, 
SSA improved its disability review and evaluation processes and took 
steps to enhance the cost-effectiveness and integrity of continuing 
disability reviews. Finally, we convened a Comptroller General's forum 
to address some of the key issues related to modernizing federal 
disability policy. Forum participants, including federal officials, 
researchers, employers, and advocate groups, suggested a number of 
steps that could be taken by stakeholders to inform the debate and to 
help move current policy toward achieving a 21st century disability 
policy. (GAO-07-906R, GAO-07-98, GAO-07-562T, GAO-07-934SP, GAO-07- 
512T): 

1.15.N. Establishing a Child Locator Center for Disasters: After 
hurricanes Katrina and Rita, we found that the National Center for 
Missing and Exploited Children (NCMEC) faced problems getting access to 
American Red Cross and Federal Emergency Management Agency (FEMA) data 
because of these organizations' concerns about privacy. We determined 
that agreements for data sharing between NCMEC and the American Red 
Cross and FEMA can help locate missing persons more quickly in 
disasters. We expressed our concerns and as a result legislation was 
introduced and later enacted in 2006 as part of the Department of 
Homeland Security Appropriations Act of 2007 (Pub. L. No. 109-295). 
This legislation provides for a National Emergency Child Locator Center 
to be established within NCMEC. According to the act, the FEMA 
Administrator will establish procedures to make all relevant 
information available to the center in a timely manner to facilitate 
the expeditious identification and reunification of children with their 
families. The law also requires that the center enter into cooperative 
agreements with federal and state agencies and organizations, such as 
the American Red Cross, to implement its mission. (GAO-06-680R): 

Financial security for an aging population: 

1.16.F. Reforming the Pension System: Our reports and testimonies on 
pension reform had an impact on pension reform legislation and saved 
billions of dollars. We recommended that the Congress consider pension 
reform as a way to improve the financial viability of the Pension 
Benefit Guaranty Corporation's (PBGC) single-employer program--a 
program that we designated as high risk in 2003. Specifically, we 
suggested that PBGC's premium structure should be reexamined to see 
whether premiums could better reflect the risk posed by various plans 
to the pension system. We also suggested increasing the flat-rate 
premium--the per-participant premium paid by sponsors of PBGC-insured 
plans--and restructuring the variable rate premium--the premium paid by 
sponsors of certain underfunded plans. The Deficit Reduction Act, 
enacted in 2006 (Pub. L. No. 109-171), included provisions to increase 
the flat-rate premium and index it to wage growth starting in 2007. CBO 
estimated that this would increase premium payments by $5.8 billion 
from 2006 to 2015. The Pension Protection Act of 2006 (PPA) (Pub. L. 
No. 109-280) changed the variable rate premium structure so that PBGC's 
variable rate premiums are now paid on 100 percent of a plan's 
underfunding. Previously, certain plans that were 90 percent funded 
could be exempted from variable rate premiums. PPA also changed the 
variable rate premium for small employers with plan underfunding. The 
combined effects of these variable rate premium changes, as estimated 
by CBO, will increase PBGC's premium collections by $5 billion over the 
2007-2016 period. We estimate that the federal government will realize 
a financial benefit of $756 million for fiscal years 2006 and 2007 as a 
result of our work on these two pension reform laws. (GAO-07-794T, GAO- 
06-429, GAO-05-578SP, GAO-05-360T, GAO-04-90): 

1.17.N. Enhancing the Security of the Thrift Savings Plan (TSP) 
WebSite: During a review of customer service provided by TSP, including 
service provided through its Web site, we identified a lack of key 
security features typically used by financial services firms. For 
example, the Web site included the use of SSNs as account numbers, four-
character numeric personal identification numbers (PIN), and no lock-
out feature to lock participants' accounts after a certain number of 
unsuccessful login attempts. After we reported this to TSP officials, a 
lock-out feature was added, a longer alphanumeric PIN was implemented, 
and TSP switched to non-SSN-based user names. SSNs are no longer used 
on the TSP Web site. (GAO-05-38): 

1.18.N. Improving Disclosure of Pension Plan Information to Plan 
Participants: Our reports and testimonies on pensions identified ways 
to improve the transparency of pension plan information. We recommended 
requiring that all plan participants receive information about plan 
investments and the minimum benefit amount that PBGC guarantees, if 
their plans are terminated. We also recommended that the Congress 
consider proposals to restructure program guarantees for shutdown 
benefits. PPA (Pub. L. No. 109-280) addressed these concerns. It 
provides for qualified advisers to offer investment advice to 
participants in defined contribution plans and added new disclosure 
requirements. For instance, the act expanded the annual funding notice 
requirement to include multiemployer plans, not just single-employer 
plans, and required single-employer plans to include a summary of the 
PBGC rules governing plan termination. More plan information must be 
provided by both multiemployer and single-employer plans, such as 
information on the plan's funding and asset allocation policy, any plan 
amendment, and how to obtain a copy of the plan's annual report. The 
act speeds up the time when notices must be provided. It limits the 
ability of certain plans to make lump-sum payments or to increase 
benefits, requires certain plans to freeze normal benefit increases, 
and prohibits plans from paying benefits for unpredictable contingent 
events, such as shutdown benefits to workers in facilities that are 
closed. Further, shutdown benefits must now be treated like other plan 
amendments with phase-in 5 years before termination. (GAO-06-285, GAO-
04-90): 

A responsive, fair, and effective system of justice: 

1.19.N. Addressing Federal Law Enforcement Coordination and Management: 
In 2007 we reported on several federal law enforcement coordination and 
management issues. We reported that the Departments of Homeland 
Security, Justice, Commerce, and State were not effectively 
coordinating with each other to enforce export control laws and 
regulations. In response to our recommendation, the Department of 
Justice (Justice) began providing the Departments of Commerce 
(Commerce) and State (State) quarterly reports on the outcomes of 
criminal cases for export control violations. We also reported that to 
combat human trafficking crimes, the Department of Homeland Security 
(DHS) and Justice needed to expand collaboration and develop and 
implement a strategic framework to coordinate efforts to investigate 
and prosecute these crimes. In addition, in response to our 
recommendations regarding management concerns, the Director of the 
Federal Bureau of Investigation (FBI) announced the creation of the 
Associate Deputy Director position to oversee key management functions, 
which is comparable to the Chief Operating Officer/Chief Management 
Officer position we recommended in 2002, and began addressing strategic 
human capital needs for managing the FBI's information technology 
programs, particularly the FBI's Sentinel intelligence analysis and 
investigative support modernization program. (GAO-07-19, GAO-07-265, 
GAO-07-915): 

1.20.N. Addressing Federal Law Enforcement Training Needs: In 2007, we 
reported the results of our surveys of 105 federal civilian law 
enforcement agencies on their specific authorities to carry out certain 
functions and on their mandatory basic training programs; 81 agencies 
reported using the Federal Law Enforcement Training Center. We had 
reported in 2003 that the center faced an increasing demand for its 
facilities in the post-9/11 security environment and recommended it 
address capacity constraints and planning challenges. By 2007 the 
center had developed contingency planning, an approach for estimating 
future construction needs, and an automated scheduling system. (GAO-07- 
121, GAO-07-815): 

The promotion of viable communities: 

1.21.C. Improving the Small Business Administration's (SBA) Capacity to 
Provide Timely Disaster Assistance: In a February 2007 report, we found 
that SBA engaged in limited disaster planning prior to the Gulf Coast 
hurricanes, such as Hurricane Katrina, which likely contributed to the 
initial challenges that the agency faced in processing the related 
surge in disaster loan applications on a timely basis. We recommended 
that SBA take several steps to enhance its disaster planning process, 
such as assessing whether the use of disaster simulations or 
catastrophe models would enhance its disaster planning process. We also 
recommended that SBA establish time frames for completing key elements 
of its disaster plan, such as cross training agency staff not typically 
involved in disaster relief efforts to provide backup support and a 
long-term strategy for acquiring adequate office space in case of an 
emergency. SBA agreed to implement these recommendations, which should 
enhance the agency's capacity to provide critical disaster assistance 
on a timely basis in a future disaster. (GAO-07-114): 

1.22.C. Evaluating the Role and Modernization of the Federal Housing 
Administration(FHA): In two June 2007 reports and a series of 
testimonies, we examined trends in the use of FHA-insured mortgages, 
FHA's risk management, and the implications of a legislative proposal 
to overhaul the agency's products and processes. Our analysis showed 
that FHA's share of the market for home purchase mortgages dropped 
sharply from 1996 through 2005, most significantly among minority 
borrowers who accounted for a growing share of subprime loans in that 
period. While noting that FHA could be a vehicle to provide lower-cost 
and more sustainable mortgage options to some subprime borrowers, we 
also emphasized the need for continued improvements in risk management 
to ensure that FHA operates in a financially sound manner in the face 
of potential program changes. Additionally, we analyzed how the 
proposed changes could affect the demand for FHA-insured loans, the 
cost and availability of insurance to borrowers, and the budgetary 
costs of the insurance program. Our reports and testimonies informed 
congressional debate on the benefits and risks of FHA modernization 
legislation under consideration by this Congress. (GAO-07-645, GAO-07-
708, GAO-07-1109T, GAO-07-1033T, GAO-07-615T): 

1.23.C. Improving the Preservation of Affordable Housing: In light of 
the pressing need for rental housing affordable to low-income 
households and concerns that the Department of Housing and Urban 
Development (HUD) may not be committed to maintaining its housing 
stock, in April 2007 we recommended that HUD modify its one-for-one 
replacement policy for project-based Section 8 units and address 
property owners' concerns about operating cost reimbursements in high-
cost areas. We found that although the majority of owners leave the 
program for economic or market reasons, growing owner frustration could 
upset the balance, causing more owners to consider opting out even when 
economic conditions could be overcome or mitigated. HUD generally 
agreed with our recommendations and stated that it would be considering 
a more flexible policy to better accommodate market demand and would be 
working with the industry to improve its preservation efforts. In 
addition, the 2008 House Appropriations Committee Report stated that it 
encouraged HUD to implement the reforms we suggested and that the 
committee was looking forward to discussing the reforms with HUD. (GAO- 
07-290): 

1.24.C. Assessing the Housing Needs of Low-Income Veterans: Through a 
first- ever analysis of combined data from the U.S. Census Bureau, VA, 
and HUD, we provided comprehensive data on low-income military veterans 
who rent. Our analysis showed that over half of veteran renter 
households, representing an estimated 2.3 million such households, were 
low income in 2005 (their household incomes were 80 percent or less of 
their areas' median household incomes). Further, an estimated 1.3 
million of these low-income veteran households had housing 
affordability problems--that is, their rental costs exceeded 30 percent 
of their incomes--but only a small percentage lived in overcrowded or 
inadequate housing. By some measures better off than their nonveteran 
counterparts, veteran low-income households were less likely to receive 
HUD rental assistance. Factors potentially contributing to this low 
level of assistance included differences in the extent of housing needs 
among veteran and other households and preferences that are used by 
public housing authorities and property owners that administer the 
programs. Our work provided important data to inform debate on proposed 
legislation to provide additional rental housing benefits to veterans. 
(GAO-07-1012): 

Responsible stewardship of natural resources and the environment: 

1.25.F. Reducing Food Stamp Fraud and Abuse: Since 1994, we repeatedly 
reported and testified on reducing fraud and abuse in the Department of 
Agriculture's (USDA) Food Stamp Program by reducing the trafficking of 
benefits. In our 1994 and 1995 reports, we found that USDA's reliance 
on paper coupons to provide food stamp benefits had resulted in fraud 
and abuse through trafficking, counterfeiting, and mail theft. To 
reduce this fraud and abuse, we supported the use of electronic benefit 
transfer (EBT) systems to replace the coupon-based system that states 
were using. EBT cards require users to enter PINs to authorize 
transactions. This makes it more difficult to traffic in food stamp 
coupons and provides a wealth of electronic data that helps USDA's Food 
and Nutrition Service detect suspicious patterns of transactions by 
users and retailers. In response, the Congress passed legislation that 
required that each state implement EBT for the Food Stamp Program's by 
October 1, 2002, unless the Secretary of Agriculture granted a waiver. 
USDA reported in December 2006 that the Food Stamp Program' integrity 
had substantially improved, estimating that trafficking had diverted 
only about $241 million per year from 2002 to 2005--or about 1 cent of 
each food stamp dollar--compared with an estimated $660 million per 
year--or about 3-1/2 cents of each food stamp dollar--diverted from 
1996 to 1998. USDA found that the decline in Food Stamp trafficking 
corresponded with the increased use of EBT. This will result in an 
estimated $3.4 billion in cumulative financial benefits from fiscal 
years 2005 to 2009. Also, in fiscal year 2007 we recommended that USDA 
use its electronic data to perform risk assessments of retailers most 
likely to traffic in food stamp benefits and develop a strategy to 
increase penalties for this offense. USDA responded by proposing new 
penalties and expedited processes. (GAO-07-422T, GAO-07-53, GAO-02- 
332, GAO/RCED-00-61, GAO/OGC-95-1, GAO/T-RCED-94-125): 

1.26.N. Restoring the Chesapeake Bay: In response to concerns about the 
deterioration of the Chesapeake Bay, the nation's largest estuary, in 
1983 the Congress established the Chesapeake Bay Program (bay program) 
within the Environmental Protection Agency (EPA) to direct and conduct 
the restoration of the bay. In October 2005, we reported that 
deficiencies in the bay program's strategies for assessing, reporting, 
and managing restoration progress were undermining the success of the 
restoration effort. Acting on our findings, in its reports on the 
Department of the Interior, Environment, and Related Agencies for 
fiscal year 2007 and 2008, the Senate Appropriations Committee directed 
the Bay Program to immediately implement all of the recommendations 
contained in our report. In response to our recommendations, the bay 
program (1) has adopted an initial integrated approach for assessing 
bay health and management actions taken to restore the bay, (2) has 
developed a new reporting format that describes the bay's current 
health and the progress made in implementing management actions, (3) 
has instituted an independent review process to ensure the scientific 
integrity of its reports, (4) has adopted a funding priority framework, 
and (5) is developing a strategic implementation plan that will 
integrate and unify all its various planning documents and work plans. 
When complete, the bay program will be better able to move the 
restoration forward in a more strategic and well-coordinated manner. 
(GAO-06-96): 

1.27.C. Improving Management of Federal Oil and Natural Gas Royalty 
Revenue: In response to congressional concerns about the amount of oil 
and natural gas royalties collected by the federal government during a 
period of high energy prices and industry profits, we reported and 
testified on royalties management, the costs of royalty relief, and the 
share of revenue received by the federal government for oil and natural 
gas production. We testified regarding the Minerals Management 
Service's inadequacies in negotiating price thresholds with lessees, 
implementing internal controls for the royalty in-kind program, and 
accurately collecting royalty data. We also updated previous work on 
the provisions for royalty relief for leases issued under the Outer 
Continental Shelf Deep Water Royalty Relief Act of 1995, concluding 
that these provisions could cost the government over $10 billion. 
Further, because the final costs have yet to be determined, we 
recommended that the service report future forgone royalties to the 
Congress. The Congress is now actively considering changing and 
clarifying those royalty relief provisions so that these significant 
royalty revenues are collected in the future. In addition, we provided 
the Congress with information indicating that the total revenue 
received by the federal government from industry for the rights to 
develop oil and gas on federal lands and within federal waters is among 
the lowest in the world. The Congress is also using information from 
this report as it considers new oil and gas tax legislation. (GAO-07- 
369T, GAO-07-590R, GAO-07-682T): 

1.28.C. Bringing Needed Attention to the Federal Oversight of Food 
Safety: While this nation enjoys a plentiful and varied food supply 
that is generally considered to be safe, we have found over the past 
decade that the federal oversight of food safety is fragmented, with 15 
agencies collectively administering at least 30 laws related to food 
safety. Recent outbreaks of E. coli in spinach and salmonella in peanut 
butter, along with contamination in pet food, have highlighted the 
risks posed by accidental food contamination. In January 2007, we 
designated the federal oversight of food safety as a high-risk area 
because of the need to transform this system to reduce risks to public 
health as well as the economy. In addition, in February 2007 and April 
2007, we testified on the fragmented federal food safety system and on 
the limitations in the government's food recall programs, respectively. 
In our testimonies, we reported that USDA and FDA could do a better job 
carrying out their food recall programs so that they can quickly remove 
potentially unsafe food from the marketplace. As a result of our work, 
the Office of Management and Budget (OMB) has recently asked us to help 
it, USDA, and FDA develop action plans that will address shortcomings 
in the federal oversight of food safety. (GAO-07-785T, GAO-07-449T, GAO-
07-310): 

1.29.C. Informing Congressional Oversight of Federal Wildland Fire 
Management Activities: Since 1999, we have reported on the need for 
federal agencies to develop a cohesive, long-term strategy to address 
costly and destructive wildland fires. In response to our past 
recommendations, in 2006 the Subcommittee on Interior, House Committee 
on Appropriations, directed the Forest Service and Department of the 
Interior to develop such a cohesive, long-term strategy. Congressional 
interest and involvement in this issue remained strong and, during 
fiscal year 2007, we reported and testified on this and other issues 
before a number of congressional committees associated with federal 
agencies' management of wildland fires, such as cost containment and 
prioritizing hazardous fuel reduction funds. In its fiscal year 2008 
report, the Subcommittee on Interior, House Committee on 
Appropriations, citing preliminary findings from our review of the 
agencies' allocation of hazardous fuel reduction funds and selection of 
fuel reduction projects, directed federal agencies to take actions to 
improve their processes for allocating their hazardous fuel reduction 
funds. (GAO-07-427T, GAO-07- 655, GAO-07-1017T, GAO-06-671R, GAO-05-
147): 

1.30.C. Improving Planning and Financial Management Practices at the 
U.S. Army Corps of Engineers (the Corps): The Corps has traditionally 
managed its nearly $4 billion civil works budget using a "just-in-time" 
strategy where it allocated and moved funds among projects based on 
perceived need rather than on a set of formal, standardized criteria 
and priorities. As a result, we found that the Corps was moving 
billions of dollars among hundreds of projects each year, sometimes 
unnecessarily. This approach for managing its civil works 
appropriations had become the Corps' substitute for an effective and 
fiscally prudent planning and financial management system. Also, the 
way that the Corps categorized the movement of funds among projects 
limited congressional oversight of some projects. In September 2005, we 
recommended that the Corps place greater emphasis on the use of 
financial planning approaches and priority-setting mechanisms for 
managing its civil works projects. We also recommended that the Corps 
establish guidance on what actions would be subject to congressional 
oversight, change the way that it allocates funds from an annual basis 
to a more frequent basis to reflect actual project needs, periodically 
review project schedules and performance and revise project allocations 
as needed, and establish priorities for when the movement of funds 
among projects is warranted. Based on our work, the Congress provided 
new guidance to the Corps on when and how it could move funds among 
civil works projects and, in December 2005, the Corps issued a new 
engineering circular for managing its civil works program that 
incorporated the congressional direction and implemented our 
recommendations. (GAO-05 -946): 

1.31.C. Identifying Financial Risks to the Federal Government Caused by 
a Changing Climate: Our March 2007 report, Climate Change: Financial 
Risks to Federal and Private Insurers in Coming Decades Are Potentially 
Significant, raised awareness among the Congress and the administration 
that while climate change is now widely accepted as a serious 
environmental threat, it also poses extraordinary fiscal challenges to 
federal insurance programs and the insurance industry. After our 
testimony before key congressional committees and discussions with FEMA 
and USDA--the key federal agencies with potentially multibillion-dollar 
insurance liabilities associated with future climate change impacts-- 
the two agencies provided assurances that they will implement our 
recommendation that they analyze and report to the Congress on (1) 
potential climate change-related losses to their key insurance programs 
(FEMA's National Flood Insurance Program and USDA's Federal Crop 
Insurance Corporation) and (2) alternative mitigation options they may 
use to reduce their exposure to loss. (GAO-07-285, GAO-07-760T): 

1.32.C. Reducing Risks Posed by Toxic Substances: In response to 
congressional concerns about EPA's ability to identify and control 
risks to human health and the environment from chemicals, we provided a 
series of reports to the Congress over the past several years that 
identified potential revisions to the Toxic Substances Control Act 
(TSCA) in order to make the act more effective. EPA is currently acting 
on a series of recommendations we made to improve the agency's ability 
to protect human health and the environment from chemical risks through 
its efforts to (1) prioritize chemicals produced at high volumes for 
further review, (2) initiate actions to require chemical companies to 
more fully justify their claims of confidentiality concerning 
information on the chemicals they produce, and (3) evaluate and improve 
regulatory environmental models used to identify harmful health and 
environmental effects of chemicals used in commerce. In addition, our 
most recent report on chemical regulation provides congressional 
leaders, who are currently considering potential changes to TSCA, with 
a comparative analysis of TSCA and the European Union's recently 
enacted chemical control legislation--highlighting areas in which the 
European approach would address some of the long-term problems that we 
have identified in implementing TSCA. (GAO-07-825, GAO-06-217R, GAO-06- 
1032T, GAO-05-458): 

1.33.C. Reducing Improper Farm Program Payments: Farmers receive about 
$20 billion annually in federal farm program payments for crop 
subsidies, conservation practices, and disasters. In July 2007, we 
reported that USDA is not conducting annual eligibility determinations 
of estates of deceased individuals receiving farm program payments, as 
required by its regulations. The determinations are either not done or 
not done thoroughly. As a result, USDA cannot be assured that the 
payments made to these estates are proper. In addition, we reported 
that USDA made $1.1 billion in farm program payments to 172,801 
deceased individuals from 1999 through 2005. Of this $1.1 billion, 40 
percent was made to individuals deceased for 3 or more years and 19 
percent to individuals deceased for 7 or more years. Because USDA lacks 
adequate management controls, such as cross-matching its payment data 
with SSA's Death Master File, USDA was unaware that it was making 
payments to deceased individuals. We testified on these issues in July 
2007. We recommended that USDA conduct all required annual eligibility 
determinations, cross-match its data with the Death Master File, and if 
improper payments were made, recover the appropriate amounts. In 
response, USDA directed its field offices to review all estates open 
for more than 2 years that will receive 2007 program payments. It also 
is working with SSA to obtain access to its Death Master File. USDA 
plans to cross- match its data with this file annually. (GAO-07-818, 
GAO-07-1137T): 

A safe, secure, and effective national physical infrastructure: 

1.34.N. Identifying Weaknesses in Telecommunications Data: In a series 
of reports issued in 2006, we identified weaknesses in data-gathering 
efforts at the Federal Communications Commission (FCC). These data- 
gathering weaknesses hinder the ability of the government to adequately 
assess the impact of federal policies and programs and to target 
federal assistance. We found these weaknesses in a variety of 
commission efforts, including deployment of broadband service, 
competition for dedicated-access services, and telecommunications 
services for Native Americans on tribal lands. As a result, we 
recommended that FCC determine what data are necessary and the costs 
and burdens associated with gathering those data. In February 2007, FCC 
adopted a Notice of Proposed Rule-making that invoked our report and 
recommendation that it assess its efforts at gathering data on 
broadband deployment. In the notice, which sought comments about how it 
could acquire the data that it needs to assess broadband service, the 
commission noted that broadband service is critical to the nation's 
present and future prosperity and acknowledged that broadband data are 
essential for it to assess the success of its policies. (GAO-07-80, GAO-
06-189, GAO-06-426): 

1.35.N. Helping People Make More Informed Decisions When They Move 
Their Household Goods: In 2001, we found that the Federal Motor Carrier 
Safety Administration--the federal regulator for the interstate 
household goods moving industry--had done little to stem the growth of 
consumer problems in the industry. Among other things, we recommended 
that the agency make general information on the number and the nature 
of consumer complaints against individual moving companies available to 
the public so that the public could better protect itself, particularly 
against unscrupulous moving companies. In July 2007, the Federal Motor 
Carrier Safety Administration included on its Web site complaint data 
about individual household goods movers that are prominent, easily 
accessible, and searchable by consumers. This action, as a result of 
our work, directly touches Americans who are looking to safeguard their 
cherished personal possessions and improves their chances of doing so. 
(GAO-01-318): 

1.36.N. Enacting Comprehensive Postal Reform Legislation: In April 
2001, we designated the U.S. Postal Service's (USPS) transformation and 
long- term outlook as a high-risk area because the Service's financial 
outlook had deteriorated significantly and it had no comprehensive plan 
to address its financial, operational, or human capital challenges. We 
concluded that the need for a comprehensive transformation of USPS was 
more urgent than ever and called for the Congress to act on 
comprehensive postal reform legislation. Since then, USPS has developed 
a transformation plan to guide its ongoing efforts related to 
implementing initiatives included in its plan. Further, in December 
2006, the Congress enacted comprehensive postal reform legislation to 
provide a framework for modernizing USPS's rate-setting processes and 
strengthening regulatory oversight and financial transparency. Thus, in 
January 2007, we removed USPS's transformation and long-term outlook 
from our high-risk list. (GAO-07-684T, GAO-07-685T, GAO-04-108T, GAO- 
01-598T): 

1.37.C. Addressing Congestion in the National Airspace System: 
According to the Federal Aviation Administration (FAA), by 2015 the 
national airspace system will need to accommodate 1 billion passengers 
per year--260 million more than in 2006. FAA also predicts that 10,000 
traditional business jets, turboprops, and very light jets will be 
added to the fleet by 2017. In a series of testimonies, we reported on 
FAA's efforts to plan and begin implementing the Next Generation Air 
Transportation System (NextGen), which is intended to make use of new 
technologies and procedures to meet these increasing demands for system 
capacity. We informed the Congress that although much progress has been 
made in planning NextGen, a number of important issues remain 
unresolved. For example, we recommended that FAA explore the extent to 
which its staff possesses the necessary technical and contract 
management expertise to implement NextGen. In response to our 
recommendation, FAA has contracted with the National Academy of Public 
Administration to conduct an independent assessment of FAA's skill 
sets. Other unresolved issues include identifying the precise content 
and associated costs of NextGen infrastructure and determining which 
entities will fund and conduct some of the necessary research, 
development, demonstration projects, and training that will be needed 
to achieve certain NextGen capabilities. (GAO-07-25, GAO-07-693T, GAO- 
07-784T): 

1.38.C. Improving the Effectiveness of the Emergency Alert System(EAS): 
Effective emergency warnings via various telecommunications modes allow 
people to take actions that save lives, reduce damage, and reduce human 
suffering. Hurricane Katrina and the terrorist attacks of September 11, 
2001, highlighted the need for timely, accurate emergency information 
and underscored the vulnerability of America's emergency response 
infrastructure. While a wide-reaching public alert system is critical 
to the public safety, in March 2007, we reported that the current EAS 
faces a range of technical, cultural, and other challenges, such as 
interfacing with newer communications technologies and issuing alerts 
in multiple languages. Further, we identified a lack of ongoing testing 
of the distribution system used to disseminate national-level emergency 
alerts. Additionally, we found challenges to the development of an 
integrated alert system, including gaining collaboration among EAS 
stakeholders to ensure that all elements of the system can work 
together and providing adequate training for EAS participants. We 
recommended that FEMA and FCC develop and implement a plan to verify 
the dependability and effectiveness of the distribution system and 
establish a forum to discuss emerging and other issues related to the 
implementation of an integrated public alert and warning system. DHS 
concurred with the intent of our recommendations, and FCC is taking 
steps to improve EAS capabilities and coordination. These actions will 
help ensure that EAS is capable of operating as intended and that 
coordination with a variety of stakeholders on the implementation of an 
integrated public alert and warning system exists. (GAO-07-411): 

1.39.C. Improving Access to Transportation for Disadvantaged 
Communities: We identified needed improvements to federal efforts to 
provide access to transportation for disadvantaged communities. For 
example, we testified that the Department of Transportation (DOT) 
should examine the results of its grants to increase air service to 
small communities to improve aviation programs' ability to connect 
small communities to the national air system. In other work we found 
that gaps in federal evacuation assistance to state and local 
governments hindered many local governments' ability to evacuate 
transportation-disadvantaged populations in the face of disasters like 
Hurricane Katrina. As we recommended, DHS is updating its National 
Response Plan to clarify the roles and responsibilities of cognizant 
agencies and taking other steps give greater consideration to the needs 
of transportation-disadvantaged populations. Finally, we reviewed the 
Federal Transit Administration's (FTA) Job Access and Reverse Commute 
program that improves mobility of low-income persons seeking work and 
recommended that FTA update its oversight processes to help it evaluate 
and oversee the program. By the time we completed our work, FTA 
officials indicated that they were already taking steps to incorporate 
the program in their existing review processes. (GAO-07-793T, GAO-07-
44, GAO-07-43): 

1.40.C. Improving Transportation Efficiency: We continue to study ways 
to improve the efficiency of our nation's transportation system. 
Intermodal transportation, which enables freight and passengers to 
cross different modes of transportation, can improve mobility, reduce 
congestion, and cut costs. We identified actions DOT could take to 
address barriers to intermodal transportation--including increasing 
collaboration between operating administrations. DOT officials stated 
that our work provided a starting point for constructive discussions 
between the executive branch and the Congress on innovative solutions 
to intermodal challenges. We also identified techniques to efficiently 
use existing infrastructure--such as improving operations--and ways to 
fund infrastructure refinements and monitor efficiency, such as user 
fees and performance measures, respectively. Finally, we identified 
ways to reduce fuel use. For example, we found that raising current 
fuel economy standards for cars and light trucks, reforming the 
program, or both could increase fuel savings. This work is informing 
the current national debate about how to reduce fuel use. Based on work 
done by the Transportation Research Board, the Department of Energy 
estimated that underinflated tires negatively affect safety and 
increase fuel use--about 1.2 billion gallons by cars and light trucks 
in 2005. We reviewed federal policies on tire inflation and identified 
a number of technologies used to reduce tire underinflation that have 
the potential to increase safety and fuel economy when used properly. 
The federal government is addressing this inefficiency by providing 
information for both the public and federal fleet managers. (GAO-07- 
921, GAO-07-246R, GAO-07-718, GAO-07-920): 

1.41.C. Improving Knowledge Sharing on Older Driver Safety Issues Among 
States: Older drivers are more likely to suffer injuries or die in 
crashes than drivers in most other age groups. Older driver safety will 
become an increasingly significant safety issue as our population ages--
by 2030 the number of licensed drivers aged 65 and older is expected to 
nearly double to about 57 million. In April 2007, we reported that (1) 
states have, to varying degrees, adopted federally recommended road 
design and construction practices to make roadways easier for older 
drivers to navigate; (2) while more than half of the states have 
implemented licensing requirements for older drivers that are more 
stringent than requirements for younger drivers, states' assessment 
practices are not comprehensive; and (3) although some states have 
implemented key practices to improve older driver safety, knowledge 
sharing among states is limited. Consequently, we recommended that DOT 
establish a communication mechanism to share information that would 
help states improve older driver safety, including information on the 
effectiveness of road design and construction practices to improve the 
driving environment, comprehensive practices to assess driver fitness, 
and leading practices implemented by states. In response, the 
department is enhancing existing Web sites and communication methods to 
provide more comprehensive and up-to-date information on both federal 
and state efforts to improve older driver safety. (GAO-07-413): 

1.42.C. Influencing Legislation to Reauthorize the Funding Structure 
for FAA: The administration proposed sweeping change to FAA's funding 
structure that would change it from one based largely on excise taxes 
and a General Fund contribution to one based on user fees. We testified 
that although the viability of the funding structure would be 
influenced by such factors as the availability of the General Fund 
contribution, structural changes in the aviation industry, and certain 
policy choices, the current funding structure could potentially fund 
planned FAA operations. Our testimonies were major factors in the 
decisions of the Senate and House authorizing committees to propose 
legislation to largely maintain the current funding structure for FAA. 
(GAO-07-25, GAO-07-885, GAO-07-625T, GAO-07-636T, GAO-07-1163T): 

1.43.C. Improving Motor Carrier Safety: About 5,500 people are killed 
and another 160,000 are injured each year in crashes involving large 
commercial trucks and buses. While the Federal Motor Carrier Safety 
Administration does a good job in identifying interstate commercial 
carriers that pose high crash risks, we identified ways that it can 
improve. The agency employs a decision model that uses its expert 
judgment to weight carriers' crashes and safety violations for the 
purposes of identifying high-risk carriers. We found that the agency 
could easily improve the identification by 9 percent (identifying 
carriers that experienced about twice as many crashes) if it employed a 
statistical regression model approach. We also found that the agency 
could identify more high-risk crashes using its current model if it 
gives more attention to carriers that experienced crashes because our 
work showed that the incidence of past crashes is the strongest 
predictor of whether a carrier will have crashes in the future. In 
response to these reports, the Federal Motor Carrier Safety 
Administration noted that our report provided useful insights and 
offered a potential avenue for further improving the effectiveness of 
its efforts to reduce crashes involving motor carriers. Adopting either 
of these approaches should allow the Federal Motor Carrier Safety 
Administration to better target its enforcement efforts to improve 
safety and reduce crashes that can lead to deaths and injuries, which 
is especially important because it can only review about 2 percent of 
the nation's motor carriers each year. (GAO-07-585, GAO-07-584): 

[End of Strategic Goal 1] 

Strategic Goal 2: 

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

Protect and secure the homeland from threats and disasters: 

2.01.N. Assessing Security Vulnerabilities in the Nuclear Regulatory 
Commission's (NRC) Nuclear Materials Licensing Program: In 2003, we 
reported that weaknesses in the NRC licensing program could allow 
terrorists to obtain radioactive materials that could be used in "dirty 
bombs." NRC issued new licensing guidance in December 2006. However, 
our 2007 covert investigation demonstrated that the new guidance was 
ineffective. Specifically, our investigators were able to obtain a 
license to obtain radioactive materials from NRC by using a bogus 
company whose address was a rented post office box. Once we received 
the NRC license, we sought to purchase radioactive material and could 
have acquired enough to reach a level that NRC considers to be 
dangerous. When notified of our operation, NRC immediately suspended 
its licensing program and within days issued supplemental interim 
licensing guidance. The new guidance generally requires that NRC 
conduct a site visit or face-to-face meeting prior to issuing a new 
license--making it more difficult for someone with malevolent 
intentions to obtain an NRC radioactive materials license. We also 
recommended additional actions to further strengthen controls in this 
area in our July 2007 testimony. (GAO-07-1038T, GAO-03-804): 

2.02.N. Improving Homeland Defense: As a result of prior work, we are 
seeing improvements in homeland defense, particularly in the protection 
of U.S. airspace. Our 2005 testimony and classified report on the 
interagency management of violations to restricted airspace prompted 
the June 2006 requirement in national security and homeland security 
presidential directives--NSPD-47 and HSPD-16--for a national strategy 
for aviation security. The national strategy was issued on March 26, 
2007, and called for interagency collaboration to develop several 
supporting plans to address specific threats and challenges identified 
in the presidential directives. Since our testimony and report were 
issued, the agencies have also implemented most of our recommendations, 
resulting in significant changes in how the interagency community 
manages the protection of restricted airspace and leading to 
improvements in interagency information sharing and national-level 
planning for protection of all U.S. restricted airspace. For example, 
FAA is now sharing vital information from its pilot deviations database 
with DOD, and common definitions between the several agencies that 
participate in the protection of U.S. airspace are facilitating the 
coordination and communication vital to protecting U.S. airspace. The 
interagency participants have also established information-sharing 
requirements and protocols, addressed security clearance issues, and 
reviewed interagency command and control processes that are followed 
during a violation of restricted airspace. (GAO-05-928T): 

2.03.N. Reducing Risks Associated with a Component of the Secure Border 
Initiative (SBI): DHS's SBI is a multiyear, multibillion-dollar program 
to secure U.S. borders. One element of SBI is SBInet--the U.S. Customs 
and Border Protection program responsible for developing a 
comprehensive border protection system through a mix of technology, 
infrastructure, and personnel. In fiscal year 2007, the Congress 
appropriated $1.2 billion for the program and asked us to review the 
SBInet expenditure plan. As part of our review, we identified a 
significant risk to the program's schedule and costs because of its 
reliance on concurrent and interdependent tasks. We found that DHS 
planned to install SBInet technology in multiple sectors along the 
southwest border before lessons could be learned from the pilot 
deployment project. We pointed out that the greater the degree of 
concurrency, the greater a program's exposure to cost, schedule, and 
performance risks. Among other things, we recommended that DHS 
reexamine the level of concurrency and appropriately adjust the 
acquisition strategy. In March 2007, DHS submitted a revised SBInet 
expenditure plan for fiscal year 2007 to the Congress. In response to 
our recommendation, the new plan delayed some technology deployment 
and, in its place, accelerated tactical infrastructure construction, 
thus reducing the risk of program inefficiencies and consequent cost 
escalation and schedule delays. (GAO-07-309): 

2.04.C. Enhancing Federal Homeland Security Information Sharing with 
States and Localities: In an April 2007 report and a May 2007 
testimony, we highlighted information-sharing and duplication of effort 
risks that DHS faced in developing its primary information-sharing 
information technology (IT) application, the Homeland Security 
Information Network. Our work showed that DHS had not worked 
effectively with a key state and local information-sharing program that 
is operated and managed by state and local officials nationwide with 
the goal of providing homeland security and related information 
services to law enforcement, emergency responders, and other public 
safety officials. In particular, we found that DHS had not coordinated 
with this program to fully develop joint strategies and policies, 
procedures, and other means to operate across agency boundaries, which 
are key practices for effective coordination and collaboration and a 
means to enhance information sharing and avoid duplication of effort. 
One major consequence of DHS not fully adhering to these practices has 
been that the network and the state and local program are duplicative 
in that they target similar user groups, such as emergency management 
agencies, and have similar features, such as electronic bulletin 
boards, collaboration tools, and document libraries. We made several 
recommendations to help DHS ensure that the network is effectively 
coordinated with all key state and local information-sharing 
initiatives and that duplicative efforts are avoided. DHS agreed with 
all of our recommendations and has actions planned and under way to 
implement them. (GAO-07-455, GAO-07-822T): 

2.05.C. Promoting Government Efforts to Secure Sensitive Systems and 
Information: Our continued work in fiscal year 2007 helped agencies 
identify needed information security (IS) improvements and helped to 
inform the public debate on the need for the federal government to 
effectively protect personally identifiable information. We testified 
that despite agencies' reported progress in implementing IS 
requirements, recently reported incidents involving data loss or theft, 
computer intrusions, and privacy breaches underscore the need for 
further improvements. Our work highlighted the need to effectively 
implement IS at numerous agencies--including DHS, the FBI, the Internal 
Revenue Service (IRS), the Securities and Exchange Commission (SEC), 
and VA--and offered recommendations to improve security over government 
programs, such as correcting security weaknesses at DHS that affect the 
program to manage the entry and exit of foreign nationals and at the 
FBI that affect critical networks transmitting sensitive law 
enforcement information. We also emphasized the need to strengthen 
governmentwide guidance and reporting on agencies' periodic testing of 
security controls, so that agencies are aware of weaknesses in their 
systems. Based on our prior recommendations, agencies--including IRS, 
SEC, the Federal Reserve, and USDA--took action to strengthen security 
that included improvements to agencies' IS programs that aid in 
understanding risks and selecting and properly implementing needed 
controls, access controls that limit access to information to 
authorized individuals only, and service continuity controls that 
protect computer-dependent operations from disruptions. (GAO-07-65, GAO-
07 -368, GAO-07 -870, GAO-07-751T, GAO-07- 1264T): 

2.06.C. Improving Tanker Security: In fiscal year 2007, we identified 
challenges the federal government faced in securing the transportation 
of energy commodities by tankers from terrorist attacks. These 
challenges exist throughout the supply chain, from where the tankers 
load their cargo, through their ocean voyages, and into the ports where 
they unload. Because the government has its greatest ability to reduce 
risks to tankers in U.S. waters and ports, we paid particular attention 
to governmental activity in these locations. We found that to meet 
these challenges federal agencies, and particularly the U.S. Coast 
Guard, had taken significant actions. For example, the Coast Guard had 
set security standards to guide local Coast Guard units and enlisted 
the help of state and local governments in its efforts. However, given 
the Coast Guard's inability to meet its own security requirements in 
some locations, increases in liquified natural gas shipments to the 
United States, and the potential consequences of a terrorists attack on 
liquified natural gas tankers, we recommended that the Secretary of 
Homeland Security direct the Coast Guard to develop a resource 
allocation plan that balances the need to meet new liquified natural 
gas security responsibilities with other existing security 
responsibilities and other Coast Guard missions. DHS agreed with our 
recommendation, and since the report was issued DHS has continued to 
recognize the need to identify the resources necessary to manage risk 
in the maritime environment. (GAO-07-316, GAO-07-840T, and a sensitive 
but unclassified report also issued in fiscal year 2007. The public 
version of this document will be available shortly.): 

2.07.C. Strengthening Security at Airport Passenger Screening 
Checkpoints: In a series of reports, testimonies, and briefings to the 
Congress, we reported on the Transportation Security Administration's 
(TSA) passenger checkpoint screening procedures, which have been 
scrutinized and questioned by the traveling public and the Congress in 
recent years. For example, in December 2005, TSA allowed passengers to 
carry small scissors and small tools onto aircraft, resulting in 
concern among Members of the Congressional and industry 
representatives. In addition, following the alleged August 2006 liquid 
explosives terrorist plot, TSA modified passenger screening procedures 
several times in an effort to defend against the threat of terrorists' 
use of liquid explosives onboard commercial aircraft. We determined 
that TSA implemented a reasonable approach to modifying passenger 
checkpoint screening procedures, in part by making efforts to balance 
security, efficiency, and customer concerns. We made recommendations 
for improving documentation and evaluation of proposed changes to 
passenger screening procedures. TSA officials generally agreed with our 
recommendations and have taken actions to improve the documentation for 
substantive proposed procedural changes and to strengthen the agency's 
evaluation of proposed procedures. These actions, when fully 
implemented will enable TSA to better justify its passenger screening 
procedure modifications to the Congress and the traveling public. (GAO- 
07-634, GAO-07-623R, GAO-07-448T, GAO-07-375, GAO-06-371T): 

2.08.C. Assessing Federal and Private Sector Efforts to Develop 
Infrastructure Protection Plans: Through a series of reports, 
testimonies, and member briefings, we provided the Congress with a look 
at collaboration efforts between DHS and other federal agencies with 
private sector infrastructure owners and operators to ensure that the 
nation's most critical infrastructure assets and key resources are 
protected from terrorists and natural disasters. We called attention to 
the disparity in the progress infrastructure sectors had made in 
developing plans designed to protect key infrastructure, as well as the 
comprehensiveness of the plans. As a result, the Congress has asked us 
to launch several engagements to further explore these issues. (GAO-07- 
1075T, GAO-07-706R, GAO-07-626T, GAO-07-39): 

2.09.C. Assessing DHS's Methodology for Using Risk Assessments to 
Allocate Home land Security Grant Funds: For the second successive 
year, in response to a congressional mandate, we analyzed DHS's 
methodology for considering and applying risk assessments in allocating 
over $1.7 billion in fiscal 2007 homeland security grant funds. We 
provided multiple briefings to Members of the Congress and 
congressional staff on the methodology, the changes in the methodology 
from 2006 to 2007, and the potential impact of changes in specific 
variables used to assess the risk from terrorism for potential grant 
applicants, such as urban areas within the United States. Our work was 
also the focus of a House Appropriations Committee hearing, and the 
Senate-passed version of the fiscal year 2008 appropriations bill for 
DHS includes a mandate for us to assess the methodology to be used for 
the 2008 grant allocation process. Our work has enhanced congressional 
oversight by providing clear, objective information on and analysis of 
DHS's methodology for 2006 and 2007 and provided information DHS could 
use to maximize the efficiency and effectiveness of the grant program 
and make the most of increasingly limited homeland security funds. 
Partly as the result of our work, DHS is undertaking a more detailed 
analysis of the impact of changes in the use of specific variables. 
(GAO-07-381R): 

2.10.C. Identifying Shortcomings in DHS's Operation of the United 
States Visitor and Immigrant Status Indicator Technology (US-VISIT) at 
Land Ports of Entry: We identified continuing challenges to the 
effective implementation of the US-VISIT program at land ports of 
entry, for both incoming and exiting persons required to participate in 
US-VISIT, which involves biometric identification of foreign visitors 
using digital fingerprints and photographs. Although intended to record 
both the entry and subsequent exit of foreign visitors--and to 
highlight those who overstayed their visas--we found that there was no 
current technology that would provide a timely and reliable method by 
which to record the exit of all visitors at land ports of entry. In 
response, DHS subsequently suspended its plans to implement an exit 
component until a viable capability can be deployed at land ports of 
entry. However, DHS has yet to explain how US-VISIT is to (1) establish 
a comprehensive biometric identification system to record individuals' 
arrival and departure at land ports and identify those who have 
overstayed their visas and (2) strategically align with other border 
security initiatives that are intended to enhance border security and 
prevent illegal immigration. Also, with regard to entry, our work 
showed that US-VISIT had improved DHS's ability to process visitors and 
verify identities, but management controls in place to identify 
computer processing problems and evaluate operations were insufficient 
and inconsistently administered. As a result, DHS was not in the best 
position to identify and quantify problems, evaluate alternatives, 
allocate resources, track progress, and learn from any mistakes that 
may have been made while deploying and operating US-VISIT at land ports 
of entry. (GAO-07-248, GAO-07-378T): 

2.11.C. Analyzing DHS Budget Justifications for Fiscal Year 2007: We 
provided technical assistance to the Congress in reviewing the 
President's justification for requests for funds. This work was done to 
provide the Congress with information to evaluate the support for and 
adequacy of the President's justification for requests. For example, 
our prior work had shown that within the aviation security area, 
programs such as Secure Flight--which is to match passenger information 
against terrorist watch lists--had experienced implementation 
challenges that raised questions about the program future funding 
needs. We suggested that the committees consider restricting the Secure 
Flight budget request until TSA provides an expenditure plan that 
includes detailed descriptions of key goals, objectives, requirements, 
and milestones. We also suggested that funds be restricted for the 
Science & Technology Directorate because of serious financial 
management deficiencies, among other things. The Congress, in the DHS 
appropriations bill for fiscal year 2007 and the accompanying 
conference report, adopted a number of our suggested budget actions 
resulting in reductions and restrictions of about $1 billion to help 
ensure that homeland security investments are appropriately focused. 
(No product issued.): 

2.12.C. Improving the Deepwater Program: In a series of testimonies and 
a report, we identified the key challenges affecting (1) new Deepwater 
asset deployment and (2) management of the Deepwater program and the 
Coast Guard's efforts to address these challenges. We reported that 
while the Coast Guard has made progress with the design, acquisition, 
and delivery of some Deepwater assets, ongoing problems with other 
assets raise questions about the Coast Guard's ability to maintain a 
system-of-systems approach in which the retirement of legacy assets is 
to be synchronized with the introduction of new Deepwater assets. We 
also noted that as problems are encountered and delivery dates for new 
Deepwater assets slip, the overall operational capabilities of 
Deepwater assets and the system-of-systems could be reduced, especially 
in the short term. Further, we reported that because of problems with 
program management, contractor accountability, and cost controls, the 
Coast Guard has taken on more direct responsibility for the acquisition 
management and support for key Deepwater assets. However, we noted that 
until the Coast Guard has sufficient staff with the requisite skills 
and abilities to carry out these expanding responsibilities, the 
Deepwater program will remain at risk in terms of getting what is 
needed on time and at a fair price. Our work provided the Congress with 
timely information on the status of the program at a time when it was 
increasing its oversight of the cost, schedule, and performance of the 
program. (GAO-07-874, GAO-07-575T, GAO-07-460T, GAO-07-446T, GAO-07- 
453T): 

2.13.C. Assessing the Federal Response to In-flight Security Threats: We reported on the procedures that more than 15 federal agencies and 
entities follow to coordinate their responses to security threats that 
occur onboard commercial aircraft in flight. We identified the nature 
and extent of each agency's involvement in addressing different types 
of threats (i.e., high-risk or suspicious passengers, etc.), the tools 
they use to communicate about the threats, and a four-stage process 
that they follow to resolve incidents, including identifying the 
threat, sharing pertinent information to collaboratively assess its 
severity, deciding on and implementing the appropriate in-flight 
response, and if necessary, completing the law enforcement response. No 
comprehensive summary or assessment of these procedures existed prior 
to the completion of our work, and articulating these procedures has 
allowed agencies to better understand each others' roles and 
responsibilities and coordinate their responses to identified threats. 
We recommended that (1) the involved agencies develop a concept of 
operations plan that outlines the general interagency coordination 
strategy and delineates lines of communication among them, (2) each 
involved agency document its internal standard operating procedures and 
establish mechanisms for sharing these procedures with other agencies, 
and (3) key agencies involved in interagency exercises fully document 
and disseminate the results of the exercises to ensure that follow-up 
action items are addressed as appropriate. (GAO-07-891 R): 

2.14.C. Assessing DHS's Mission and Management Progress Its First 4 
Years: In response to a bipartisan and bicameral request, we assessed 
DHS's progress by identifying a total of 171 performance expectations 
within 14 mission and management areas (e.g., border security and 
immigration enforcement or financial and acquisition management). 
Analyzing our and the DHS Office of Inspector General's prior work and 
updated information provided by DHS, we determined the extent to which 
DHS has taken actions to generally achieve each performance 
expectation. Using these analyses, we then assessed whether DHS has 
made limited, modest, moderate, or substantial progress in each area. 
We found that after 4 years, DHS has attained some level of progress in 
all of its major mission and management areas but the rate of progress 
among these areas varies. For example, progress in surface and aviation 
transportation security has been moderate while IT and human capital 
management progress has been limited. Our work shows that it will be 
essential for the department to address how key underlying themes have 
affected DHS's implementation efforts--agency transformation, strategic 
planning and results management, risk management, information sharing, 
and partnerships and coordination--as it moves forward. By 
comprehensively summarizing and updating 4 years of our work, our 
report provides congressional and other stakeholders with a broad view 
of DHS's progress, and highlights areas for future oversight and 
review. (GAO- 07-454): 

Ensure military capabilities and readiness: 

2.15.F. Transforming Defense Forces by Better Allocating Resources to 
Fund New Capabilities: In a November 2002 report, we asked the Congress 
to consider extending the deadline for the submission of DOD's 
Quadrennial Defense Review (QDR) in order to provide additional time 
for DOD to align its upcoming budget request with its newest strategic 
thinking as reflected in the QDR. In our view, this extra time would 
allow DOD to take full advantage of QDR results and shift resources 
where they would be needed most, that is, provide for a better 
allocation of resources, and avoid unnecessary costs of lower priority 
programs. The Congress adopted our suggestion, and DOD's 2006 QDR is 
the first to benefit from the extended deadline and better allocation 
of defense resources to implement DOD's new strategic plan. As a 
result, DOD's fiscal year 2007 budget shifts resources into new 
programs advocated by the QDR, to include a $1 billion special 
operations initiative to help fight the war on terrorism, rather than 
having to wait until the fiscal year 2008 budget cycle. To pay for 
these initiatives, OMB stated that DOD had shaved billions of dollars 
from other lower priority programs. The DOD Comptroller's office has 
confirmed that final congressional action on DOD's proposal was to 
provide a $1.2 billion increase in funding for Special Operations 
Forces in fiscal year 2007. (GAO-03-13): 

2.16.F. Contributing to Properly Funding the Military's Needs: We 
reviewed the reasonableness of DOD's fiscal year 2007 budget request 
and identified billions of dollars in potential costs that could be 
avoided and opportunities for DOD to improve its internal oversight of 
the use and tracking of funds. Overall, our work contributed to 
multiple actions that resulted in total financial benefits of about 
$3.2 billion. The Congress used our analyses of unobligated balances; 
operations and maintenance execution trends; and active, reserve, and 
civilian personnel expenditures for fiscal year 2006 to reduce the 
fiscal year 2007 budget. We also reported on ways for DOD to improve 
its cost reporting for the global war on terrorism. As a result of our 
report and briefings, DOD adjusted its cost reports, revised cost 
reporting procedures to expand reporting categories, and implemented 
steps intended to improve reliability. (GAO-07-76): 

2.17.F. Reducing Cost, Schedule, and Performance Risks for the Army's 
Future Comb at System(FCS): The Army's FCS is a program characterized 
by bold goals and innovative concepts--transformational capabilities, a 
system-of- systems approach, new technologies, a first-of-a-kind 
information network, and a total investment cost of more than $200 
billion. As such, the program is considered high risk and in need of 
special oversight and review. Since 2004, we have pointed out that the 
Army has far less knowledge about FCS and its potential for success 
than is needed to fulfill the basic elements of a business case. For 
example, the Army has yet to fully define FCS requirements, mature key 
technologies, and fully estimate costs. In response to our 
recommendations, the Congress has acted to reduce risk and increase 
oversight for FCS. For example, the Congress has directed DOD to 
conduct and report on the results of a milestone "go/no-go" review of 
the FCS program, following its preliminary design review with the aim 
of ensuring that there is a business case for continuing the program. 
In addition, citing risks that we reported and the need for DOD to 
preserve its ability to change course, the House Committee on Armed 
Services recommended a budget cut of $325.8 million in fiscal year 
2007. Ultimately, the conference committee cut the FCS budget request 
by $254 million. In response to our recommendations, the Army has also 
made several adjustments to the program, including revising production 
rates to more affordable levels. (GAO-06-367, GAO-06-478T, GAO-06- 
564T): 

2.18.N. Strengthening Security of Forces and Military Presence 
Restructuring: Our evaluations of DOD's antiterrorism program and 
global posture strategy have resulted in actions that can lead to more 
a more effective application of force protection resources at military 
installations and facilitate congressional oversight responsibilities. 
We reported that service headquarters and commands did not use a 
comprehensive results-oriented management framework to guide their 
efforts to improve the security of forces at military installations. 
Therefore, DOD and the Congress would not be able to determine if the 
billions being invested to improve force protection at installations 
were being applied efficiently and effectively. In 2005, each military 
service responded to our recommendations and developed strategic 
planning and program implementation tools to guide their efforts and 
prioritize funding requirements. In September 2006, we also reported on 
DOD's strategy to restructure the size and location of U.S. military 
forces overseas, and identified several challenges DOD faces in 
implementing this strategy that add to the uncertainty of the costs and 
potential outcomes of DOD's efforts. We concluded that Congress may not 
have a clear understanding of the extent to which objectives are being 
achieved or whether resources are being efficiently and effectively 
applied, and recommended that the Congress require DOD to periodically 
report on its progress. As a result of the issues raised in our work, 
the Senate Committee on Appropriations directed DOD to provide an 
updated report on the Global Posture Initiative to better inform the 
Congress of its efforts. (GAO-06-852, GAO-03-14): 

2.19.N. Improving Transparency over Military Compensation Costs: Our 
work has shed light on how rapidly military compensation costs have 
been growing, providing decision makers better information about the 
total costs of personnel and the implications of adding deferred 
benefits. Active duty and reserve compensation costs grew 32 percent 
and 47 percent, respectively, from fiscal years 2000 to 2006. However, 
we found that military compensation costs were scattered across 
multiple federal agencies, so a true picture of total costs was not 
available. Consistent with our recommendations, the President's budget 
request for fiscal 2007 contained an exhibit that depicted total active 
duty compensation costs and their allocation to cash, noncash, and 
deferred benefits--an important first step in improving transparency. 
(GAO-07- 828, GAO-05-798): 

2.20.N. Enhancing DOD's Evaluation of Its National Security Personnel 
System (NS PS): In June 2005, we evaluated DOD's efforts to design and 
implement its new civilian personnel management system--NSPS. We 
determined that evaluating the impact of NSPS would be an ongoing 
challenge for DOD. We recommended that the NSPS Program Executive 
Office (PEO) develop procedures for evaluating NSPS that contain 
results-oriented performance measures and reporting requirements. These 
evaluation procedures could be broadly modeled on the evaluation 
requirements of the Office of Personnel Management (OPM) demonstration 
projects. In response to our recommendation, the NSPS PEO developed an 
NSPS evaluation plan that provides documentation of the nature, rigor, 
and intent of the evaluation. The plan also includes measurable goals 
or objectives; expected results or outcomes; a description of the 
procedures, methods, and techniques that will be used to show whether 
the objectives have been achieved; and a description of the data 
collection and analysis procedures to be used to assess the program's 
success or failure from a qualitative and quantitative standpoint. This 
action will improve the department's visibility and oversight needed to 
benchmark progress, make system improvements, and provide the Congress 
with the assessments needed to determine whether NSPS is truly the 
model for governmentwide transformation in human capital management. 
(GAO-07-851): 

2.21.N. Improving Oversight of Contractors on the Battlefield: We have 
issued a series of reports focused on contract management and the 
oversight challenges faced by DOD as it increases its dependence on 
contractors on the battlefield. Among the challenges DOD faced was the 
lack of visibility over the number of contractors supporting deployed 
forces and the services the contractors provide and a lack of senior 
leadership to resolve the challenges. Our December 2006 report made 
recommendations to address these challenges and DOD has implemented 
them. For example, in January 2007, DOD implemented a system designed 
to provide commanders with greater visibility over the number of 
contractors supporting deployed forces and the services being provided 
by the contractors. Additionally, in response to our recommendation 
that the Secretary of Defense appoint a focal point dedicated to 
leading DOD's efforts to improve contract management and oversight, the 
Office of the Assistant Secretary of Defense (Program Support) was 
established to act as the focal point. The Congress has also used our 
work to direct the department to make managing contractors who support 
deployed forces a higher priority at DOD. For example, the House 
Appropriations Committee withheld 15 percent of the fiscal year 2007 
DOD supplemental operation and maintenance appropriations until DOD was 
able to provide information on the number and types of contractors in 
Iraq and Afghanistan. This provision was included in the legislation 
after we testified before the House Appropriations Committee's 
Subcommittee on Defense that DOD did not know the number of contractors 
in Iraq. (GAO-07-145, GAO-07-525T): 

2.22.C. Supporting the Congress in Oversight of Intelligence 
Acquisitions: Our support to the Congress this past year helped to 
expand and strengthen its oversight of intelligence acquisitions. For 
example, we briefed committees on findings related to the development 
of a new satellite system equipped with radar sensors. We found that 
while the program was attempting to adopt best practices for technology 
development, important agreements on requirements, funding, and system 
usage had not been worked out, and it was questionable whether the 
system--which is projected to be one of the most expensive satellite 
development efforts ever--was affordable. Our work supported the 
decisions made by the Senate Select Committees on Intelligence and the 
Senate Committee on Armed Services to make dramatic cuts to the program 
so that investments could be more focused on necessary technology 
development. Our work was also used by the Senate Intelligence 
Committees in drafting legislation aimed at reforming acquisition 
processes and requiring the intelligence community to institute more 
disciplined management and oversight controls. In addition, we were 
requested to brief committees on the results of our work on the use of 
risky contracting techniques by intelligence agencies. (GAO-07-273, GAO-
07-559, GAO-07-1029R): 

2.23.C. Improving DOD's Management Approach to Major Weapon Systems 
Acquisitions: Over the next several years, DOD plans to invest $1.4 
trillion in major weapons programs. Although DOD produces the best 
weapons in the world, it fails to deliver weapon systems on time, 
within budget, and with desired capabilities. This year, we reported 
that leading commercial companies achieve success in product 
development by using an integrated portfolio management approach to 
prioritize market needs and allocate resources through a strong 
governance structure. Through portfolio management, all of a company's 
product investments are addressed collectively from an enterprise 
level, rather than as independent and unrelated initiatives. In 
contrast, DOD approves proposed programs with much less consideration 
of its overall portfolio and commits to them earlier and with less 
knowledge of cost and feasibility. While DOD has taken steps to 
identify warfighting needs through a joint requirements process, its 
service-centric structure and fragmented decision-making processes do 
not allow for the portfolio management approach used by successful 
commercial companies. We recommended that DOD establish such an 
approach to ensure delivery of a balanced mix of weapon system programs 
at the right time and right cost and establish a single point of 
accountability for determining which acquisition programs are allowed 
in the portfolio. As a result, the Congress has required DOD to address 
our recommendations for improvements in its portfolio management 
process and has urged DOD to expand its use of portfolio management 
initiatives already under way to include additional portfolios. (GAO-07-
388): 

2.24.C. Improving Transparency, Accountability, and Oversight of 
Ballistic Missile Defense: Over the next 5 years, DOD plans to invest 
an additional $49 billion, or 13 percent of its research and 
development budget, to develop and field the Ballistic Missile Defense 
System (BMDS). The Missile Defense Agency (MDA) began developing the 
BMDS in 2002 in 2- year blocks, with each block increasing the number 
of fielded assets and enhancing the existing system. To field the BMDS 
quickly, DOD granted MDA authority to defer entry of the BMDS into 
DOD's acquisition cycle until management of the system is handed over 
to a military service. Therefore, the BMDS never formally entered the 
acquisition phase that triggers compliance with certain acquisition 
laws that provide transparency into program progress and decisions. In 
annual missile defense reports, we have pointed out that because MDA is 
not required to seek higher-level approval of its program goals or have 
program cost or system operational effectiveness and suitability 
independently verified, the agency has operated with considerable 
autonomy to change goals and plans. This has made it difficult to 
reconcile program outcomes with original expectations and to determine 
the actual cost of each block of individual BMDS assets. Based on our 
reporting of these issues, MDA is implementing a new acquisition 
strategy that includes setting firm program goals for each block, 
reporting variances against those goals, and accounting for cost in a 
manner that ensures each block's full cost is transparent to decision 
makers. (GAO-07-387, GAO-06-327): 

2.25.C. Transforming Defense Forces by Improving Reserves' Mission 
Capabilities: Our work on the changing roles and missions of the 
National Guard supported the work of the Commission on the National 
Guard and Reserves as well as congressional oversight. We reported on 
the changing roles of the reserves, the negative effects of the heavy 
use of the reserve components for their future missions, and the lack 
of validated requirements for the National Guard's civil support 
missions. The Congress created the commission in 2005 to conduct a 
comprehensive examination of roles of the Guard and Reserves and to 
recommend any needed changes in laws and policies governing the 
National Guard and Reserves. We testified twice before the commission, 
highlighting the need to align the Reserves' business model with their 
21st century roles and other issues, including reserve component 
equipment and personnel readiness, DOD's initiatives to improve reserve 
readiness, recruiting and retention challenges, and reserve pay and 
compensation. The commission based several key recommendations to the 
Congress in its March 2007 report on our reports and testimonies. In 
addition, the House Armed Services Committee included a requirement in 
its 2008 defense authorization bill that would require DOD to report on 
National Guard readiness for its civil support missions. (GAO-07-397T, 
GAO-07- 709, GAO-07-984): 

2.26.C. Creating a Chief Management Officer at DOD to Guide Business 
Transformation Efforts: During fiscal year 2007, we recommended that 
DOD develop a planning process that results in a comprehensive, 
integrated, enterprisewide plan or set of plans to guide DOD's business 
transformation efforts. We also suggested that the Congress consider 
enacting legislation to establish a separate, full-time Chief 
Management Officer position at DOD with significant authority, 
experience, and a sufficient term to provide focused and sustained 
leadership over the department's business transformation efforts. At a 
time of increasing military operations and growing fiscal constraints, 
billions of dollars have been wasted annually because of the lack of 
adequate transparency and appropriate accountability across DOD's 
business areas. DOD's lack of a comprehensive enterprisewide business 
transformation plan linked with performance goals, objectives, and 
rewards for all key business areas has been a continuing weakness. DOD 
also continues to lack the sustained leadership at the right level to 
achieve successful and lasting transformation. In addition, as of 
October 2007, both the House and Senate Armed Services Committees had 
proposed language in their respective versions of the National Defense 
Authorization Act for Fiscal Year 2008 that calls for the Secretary of 
Defense to either assign responsibilities to a high-level official to 
address management issues within the department (House version) or to 
establish a Chief Management Officer (Senate version). As a result of 
our work, DOD is taking steps to improve its planning process. (GAO-07- 
1072, GAO-07-310, GAO-07-229T): 

2.27.C. Providing Oversight of Military Operations in Iraq and 
Afghanistan: Our continued work in evaluating U.S. military operations 
in Iraq and Afghanistan has led to key congressional actions to provide 
enhanced oversight and helped frame significant issues for 
congressional and public debate. Our work has included numerous reports 
and testimonies on such topics as DOD's ability to provide trained and 
ready forces for ongoing operations and timely force protection 
solutions to support deployed troops, to secure Iraqi munitions storage 
sites, and to help train and develop the logistics capabilities of 
Iraq's security forces. Specifically, the Congress has used our ongoing 
work reviewing the department's efforts to defeat improvised explosive 
devices (IED) in directing actions, through legislation, to improve 
strategic planning and operations at the newly established Joint IED 
Defeat Organization. Our work and testimony examining logistics 
capabilities of Iraq's security forces has also enhanced congressional 
oversight and, along with work on U.S. military trainers, supported the 
House Armed Services Committee's efforts to prepare its own public 
report on the status of Iraq's security forces. Our work on the 
department's efforts to repair and replace equipment used in current 
operations raised the Congress's awareness that its oversight of reset 
programs may be limited because the Army and Marine Corps are not fully 
capturing and reporting how they are investing reset funds, totaling 
about $49 billion since fiscal year 2002. Our work has also prompted 
the Congress to take legislative action to require DOD to address 
readiness issues. (GAO-07-503R, GAO- 07-582T, GAO-07-439T): 

2.28.C. Improving the Army's Management of Its Pre-Positioned 
Equipment: Our work in evaluating the status, readiness, and employment 
of the Army's pre-positioned equipment sets around the world has 
identified significant pre-positioned equipment shortages, readiness 
concerns, management challenges, and maintenance problems. Our work has 
also identified significant corrosion issues that have adversely 
affected the readiness and usability of pre-positioned equipment assets 
in storage. More recently, our ongoing work has identified that the 
Army has downloaded and issued to units much of its afloat and ground-
based pre-positioned equipment, which has resulted in low fill rates 
among the pre-positioned equipment sets and concerns within the 
Congress and DOD regarding the lack of availability of pre-positioned 
equipment for potential future contingencies. As a result of our work 
in this area, the Congress has enacted several pieces of legislation 
designed to improve the management, readiness, employment, and future 
accessibility of Army pre-positioned equipment. (GAO-07-144, GAO-06-
709): 

Advance and protect U.S. international interests: 

2.29.F. Streamlining the U.S. Overseas Presence through Embassy 
Rightsizing: In June 2002, we developed a rightsizing methodology for 
linking overseas staffing needs to the security, mission, and operating 
costs of U.S. embassies and consulates. In April 2003, we reported that 
the size and construction costs for embassy and consulate construction 
projects are directly related to the number of staff who would use 
those facilities and that the process for developing such staffing 
projections lacked a systematic approach or comprehensive rightsizing 
analysis; thus, the U.S. government risks building new embassy 
compounds designed for the wrong number of staff. We recommended that 
State develop a formal, standard, and comprehensive process for 
establishing staffing projections for new embassy compounds. In June 
2003, State implemented a new process for projecting long-term staffing 
needs when planning and designing new embassy compounds, which included 
a mandatory rightsizing analysis, along with procedures for 
documenting, vetting, and approving the projections. From June 2006 
through February 2007, State reported that comprehensive rightsizing 
reviews significantly reduced the project scopes and construction costs 
of 25 new facilities, resulting, overall, in the reduction of more than 
1,300 positions, as well as a $93.8 million savings in capital 
construction costs, $170.4 million savings in annual operating costs, 
$1.3 million annual savings from reduced maintenance requirements, and 
$21 million in other annual savings derived from a reduction in Capital 
Security Cost Sharing fees for State and other agencies. (GAO-03-411, 
GAO-02-780): 

2.30.F. Reducing the Fiscal Year 2007 Appropriation for the Millennium 
Challenge Corporation (MCC): Our work contributed to the Congress's 
appropriating $1.77 billion for MCC for fiscal year 2007--$1.23 billion 
less than the President requested. MCC oversees a foreign assistance 
program intended to provide economic assistance to countries 
demonstrating a commitment to ruling justly, investing in people, and 
encouraging economic freedom. MCC is authorized to provide assistance 
to countries that enter into public compacts with the United States. In 
February 2006, to assist in the fiscal year 2007 budget deliberations, 
we published correspondence providing estimates of future MCC 
obligations under two illustrative scenarios. In a constrained budget 
environment, our work provided a framework for identifying the trade-
offs between different funding levels and the numbers and sizes of 
compacts that MCC could support, and showed that MCC could operate with 
a smaller fiscal year 2007 appropriation than requested because it 
would most likely not obligate the balance of its prior years' 
appropriations until late in fiscal year 2007. Our work informed and 
supported the appropriations, budget, and authorizing committees' 
decisions about MCC funding for fiscal year 2007. For example, the 
House and Senate authorizing committees cited our report in their views 
and estimates to the House and Senate budget committees for the fiscal 
year 2007 budget request for foreign operations. In addition, MCC 
officials said our analysis was used by corporation officials and 
congressional appropriators to frame key discussions about the 
potential impact of various appropriations levels on compact 
assistance. (GAO-06-466R): 

2.31.N. Improving Strategic Planning of U.S. Public Diplomacy Efforts: 
Since 2003, we have issued a series of reports on U.S. public diplomacy 
efforts that are led by State and supported by the communication 
activities of other key agencies such as the U.S. Agency for 
International Development (USAID), DOD, and the Broadcasting Board of 
Governors. We have reported, among other things, that government 
communication efforts are not supported by an interagency strategy and 
face a number of practical challenges, including insufficient resources 
and staff, shortfalls in foreign language capabilities, burdensome 
administrative requirements, security concerns that limit embassy 
staff's ability to interact with local populations, and a general 
absence of in-depth research. We have made recommendations in each of 
these areas and actions have been taken. Most notably, in June 2007, an 
interagency policy coordinating committee, headed by State, released a 
U.S. National Strategy for Public Diplomacy and Communication. The 
release of this strategy addresses our concern that the lack of an 
interagency strategy complicated the task of conveying consistent 
messages, increased the risk of communication mistakes, and lessened 
the likelihood that the United States would achieve mutually 
reinforcing benefits from the communication activities of involved 
agencies. (GAO-07-904, GAO-05-323, GAO-03-951): 

2.32.N. Depositing Antidumping and Countervailing Duties in the 
U.S. Treasury: In 2005, we reported on the Continued Dumping and 
Subsidy Offset Act (the Byrd Amendment), which provided funding from 
import duties to U.S. companies deemed injured by unfair trade. In the 
program's first 4 years, Customs and Border Protection (CBP) disbursed 
about $1 billion to U.S. producers injured by unfairly traded (dumped 
or subsidized) imports, with just five of these producers receiving 
about half the total amount. After an active debate in which our report 
figured prominently in congressional remarks, the Congress passed and 
the President signed legislation in early 2006 to phase out the 
amendment so that antidumping and countervailing duties collected would 
go to the U.S. Treasury. The phaseout began on September 30, 2007. 
Also, following our report's recommendations, CBP has taken steps to 
improve program management and accountability for disbursements. (GAO-
05-979): 

2.33.C. Improving the Efficiency and Effectiveness of U.S. Food Aid: 
Our work contributed significantly to the Congress's dialogue on its 
reauthorization of the food aid provisions of the 2007 Farm Bill. Since 
2002, the Congress has appropriated an average of $2 billion per year 
for U.S. food aid programs to needy countries, which delivered an 
average of 4 million metric tons of agricultural commodities per year. 
Despite growing demand for food aid, delivery requires an average of 4 
to 6 months, and rising business and transportation costs have 
contributed to a 43 percent decline in average tonnages delivered over 
the last 5 years. For the largest U.S. food aid program, these costs 
represent approximately 65 percent of total food aid expenditures. We 
found that multiple challenges hinder the efficiency and effective use 
of U.S. food aid, and U.S. agencies do not adequately monitor food aid 
programs. As a result, the programs are vulnerable to not getting the 
right food to the right people at the right time. To improve efficiency 
of food aid delivery, we made several recommendations in areas such as 
logistical planning, transportation contracting, food quality, and 
monetization. The Administrator of USAID and the Secretary of 
Transportation generally agreed with our recommendations and are 
addressing our concerns. We also recommended improving the effective 
use food aid by enhancing the monitoring of programs, the reliability 
and use of needs assessments, the use of nonfood resources, and 
interagency coordination in updating food products and specifications. 
The Administrator of USAID generally agreed with our recommendations 
and is working to address them. (GAO-07-560, GAO-07-616T, GAO-07-905T): 

2.34.C. Identifying Key Issues for Oversight of U.S. Efforts to 
Stabilize and Rebuild Iraq: Our work informed the Congress about the 
challenges faced in stabilizing and rebuilding Iraq. Our January 2007 
compendium identified oversight issues and recommendations from our 
recent reports. We recommended that the United States develop a 
national strategy to address the political, security, and economic 
challenges it faces in Iraq and to identify U.S. costs. We found that 
DOD does not provide the Congress with information on the readiness of 
each Iraqi unit, which hinders congressional oversight. Our May 2007 
report described challenges faced in rebuilding Iraq's oil and 
electricity sectors and recommended that the United States work with 
those ministries to craft a strategic plan to restore the sectors. We 
recommended installing a metering system to improve accountability in 
Iraq's oil sector and developing comprehensive hydrocarbon legislation 
to improve Iraq's legal environment and attract investment. We also 
reported that DOD could not account for thousands of weapons provided 
to the Iraqi security forces. DOD endorsed our recommendations to 
determine what accountability procedures apply to the equipment 
distributed and to ensure that staff and resources meet the new 
requirements. Our September 2007 benchmark report found that the Iraqi 
government had not met most of its 18 key legislative, security, and 
economic benchmarks. State and DOD agreed with our recommendations to 
improve the quality of information provided to the Congress on the 
progress being made in meeting these benchmarks. (GAO-07-426T, GAO-07-
612T, GAO-07-637T, GAO- 07-677, GAO-07-711): 

2.35.C. Reforming Procurement and Oversight at the United Nations(UN): 
In 2006 and 2007 we issued several reports and testified before the 
Congress on the UN's vulnerability to fraud, waste, abuse, and 
mismanagement due to weaknesses in oversight and procurement practices. 
We found that UN funding arrangements constrained the ability of the 
Secretariat's internal oversight unit to operate independently and 
direct resources toward high-risk areas as needed. The UN Secretariat 
has taken actions that address some of our recommendations on oversight 
and have been reported to the General Assembly, including establishing 
an Independent Audit Advisory Committee that is expected to be 
operational in early 2008. We also reviewed the internal oversight 
functions at six other UN organizations and found that their internal 
audit and evaluation offices had not fully implemented international 
auditing or UN evaluation standards. Three of the six UN organizations 
we reviewed have endorsed our recommendations to improve oversight and 
consider establishing independent audit committees accountable to their 
governing bodies. For procurement, we found serious weaknesses in 
internal controls. Specifically, the UN lacks an effective 
organizational structure for managing procurement, has not demonstrated 
a commitment to improving its procurement workforce, and has not 
adopted specific ethics guidance. State endorsed our recommendation 
that it work with member states to address UN procurement weaknesses, 
and the UN subsequently announced actions to address some of these 
weaknesses, including efforts to ensure proper accountability and 
training of all involved in procurement. (GAO-07-597, GAO-07-14, GAO- 
06-577, GAO-06-575, GAO-06-226T): 

2.36.C. Strengthening Anti-Human Trafficking Interventions: Our first 
report on human trafficking drew attention to several key concerns, 
including that (1) the estimates of the number of trafficking victims 
are questionable and (2) State's annual report assessing foreign 
governments' compliance with minimum standards to eliminate human 
trafficking has incomplete explanations about its ranking decisions and 
is not used consistently to develop antitrafficking programs. Baseline 
estimates of the number of trafficking victims provide benchmarks for 
measuring the impact of certain antitrafficking interventions. The lack 
of such reliable baseline estimates has made it difficult to ensure 
that organizations fund antitrafficking interventions with the greatest 
impact. Our follow-up review on human trafficking found that 
governments, international organizations, and nongovernmental 
organizations must overcome challenges that have impeded collaboration 
in the past for their efforts to be successful. It also found that U.S. 
government-funded antitrafficking projects often lack important 
elements that allow projects to be monitored, and little is known about 
project impact due to difficulties in conducting evaluations. In 
addition, we convened a panel of experts who identified and discussed 
ways to address the factors that make it difficult to monitor and 
evaluate antitrafficking projects; their suggestions included improving 
information on the nature and severity of human trafficking and 
addressing monitoring and evaluation weaknesses in the design of 
antitrafficking projects. (GAO-07-1034): 

2.37.C. Highlighting Afghanistan Oversight Issues for the Congress: In 
2007 the United States accelerated its efforts to secure, stabilize, 
and rebuild Afghanistan. In May 2007 we provided to the Congress a 
compendium of key oversight issues. This product was based on our 
continuing and prior work on Afghanistan, which, since 2003, has 
addressed food and agricultural assistance, reconstruction assistance, 
efforts to establish Afghan national security forces, and drug control 
programs. Through this work we identified needed programmatic 
improvements and obstacles that have limited success. For most U.S. 
efforts, we identified the need for improved planning, including the 
development of strategic plans that have measurable goals, specific 
time frames, cost estimates, and identification of external factors 
that could significantly affect efforts. Some additional needed 
improvements we identified included better coordination among the 
United States and other donor nations, more flexible options for 
program implementation, and timelier project implementation. We also 
concluded that several obstacles, especially deteriorating security and 
the limited institutional capacity of the Afghan government, challenged 
the effectiveness of U.S. efforts. In this compendium, we suggested 
that the Congress review a number of issues. (GAO-07-801SP): 

Respond to the impact of global market forces on U.S. economic and 
security interests: 

2.38.C. Preventing Identify Theft: In a June 2007 report on data 
breaches and identity theft, we provided the Congress with information 
to help assess the need for a federal statutory requirement to notify 
individuals whose personal information has been breached. We found that 
according to information from government agencies, trade associations, 
and news media, breaches of sensitive personal data by companies, 
government agencies, and a wide variety of other organizations have 
occurred frequently in recent years. Additionally, we found that it is 
not well known how often such breaches have led to identity theft, but 
available data indicated that most breaches had not resulted in 
detected incidents of identity theft. We reported that requiring 
affected consumers to be notified of a data breach may encourage better 
security practices and help prevent or mitigate identity theft, but 
would also pose certain costs and challenges, such as expenses to 
develop incident response plans and identify and notify affected 
individuals. We concluded that should the Congress choose to enact a 
federal notification requirement, a risk-based notification standard-- 
designed to alert consumers only when a risk of harm exists--could 
avoid undue burden on organizations and unnecessary and 
counterproductive notifications of breaches that present little risk. 
(GAO-07-737): 

2.39.C. Raising Awareness of Vulnerabilities in the Export Control 
System: For over a decade, we have identified weaknesses in the 
effectiveness and efficiency of the export control system and other 
government programs designed to protect technologies critical to 
national security-- prompting us to designate this as a new high-risk 
area. In 2006, our reports revealed newly identified shortcomings in 
the export control system's ability to protect the export of controlled 
information. Specifically, we determined that State and Commerce, which 
regulate defense-related exports, had less oversight of exports of 
controlled information than they did of controlled goods. Our work 
further determined that the departments had not fully assessed the 
risks associated with the variety of means, such as e-mails and foreign 
participation in research efforts, used to transfer controlled 
information to foreign nationals at both companies and universities. 
This vulnerability is exacerbated in an era of rapid advances in 
communication and increased globalization. Our past and ongoing work 
has laid out a framework for addressing weaknesses and reexamining the 
fundamentals of the export control system. Recently, this work formed 
the basis for a congressional hearing in July 2007, attracted 
international press coverage, and prompted calls for fundamental reform 
of the system. (GAO-07-1135T, GAO-07-69, GAO-07-70): 

2.40.C. Improving Americans' Financial Literacy: In a December 2006 
report, we found that the federal National Strategy for Financial 
Literacy lacked certain key elements needed for it to play a meaningful 
role in guiding federal efforts to improve Americans' financial 
literacy. We recommended that the Financial Literacy and Education 
Commission modify this strategy to, among other things, incorporate 
specific goals and benchmarks and concretely define financial literacy. 
We also identified opportunities for ensuring that the commission's Web 
site best served consumers, as well as for ensuring that the 
commission's reviews of federal financial literacy activities were 
meaningful and independent. In response to our work, the commission's 
April 2007 report to the Congress provided a concrete definition of 
financial literacy to guide its work. The commission also said that by 
2009 it would follow our recommendations to conduct usability testing 
and measure customer satisfaction with its Web site. Further, the 
commission began taking measures recommended in our report to ensure 
that its reviews of federal financial literacy activities are conducted 
by an independent third party. (GAO-07-100, GAO-07-777T): 

2.41.C. Improving Financial Supervision of Holding Companies: 
Responding to the dramatic changes in the financial services industry, 
the Federal Reserve, the Office of Thrift Supervision, and SEC oversee 
the risk management practices of holding companies on a consolidated 
basis. Consolidated supervision recognizes the increased importance of 
enterprise risk management by large, complex financial services firms, 
and enables supervisors to oversee the risks of financial services 
firms on the same level that the firms manage those risks. In response 
to our report, SEC restructured its consolidated supervision program to 
strengthen the prudential goals of the program. SEC is also 
implementing our recommendation that it develop and make publicly 
available a description of the program in order to foster greater 
transparency. Also following our report, the office proposed changes in 
its consolidated supervision framework to more explicitly and 
transparently focus its supervision of holding company risk-management 
strategies. We had recommended such changes to facilitate consistency 
with other supervisory agencies as well as consistent treatment of the 
office diverse population of holding companies. (GAO-07-154): 

2.42.C. Improving the Transparency of the Regulatory Process for the 
Base II Frame work: In a February 2007 report, we identified numerous 
challenges that banking regulators and banks were facing in moving to 
implement the new Basel II capital framework. We determined that 
increased transparency going forward could help reduce ambiguity and 
respond to questions and concerns among banks and industry stakeholders 
about how the rules will be applied, their ultimate impact on capital, 
and the regulators' ability to oversee their implementation. We 
concluded that with safeguards in place, it was appropriate for U.S. 
banking regulators to proceed with finalizing Basel II and begin the 
transition period, but we identified ways to help reduce the 
uncertainty about the impact of Basel II on required levels of 
regulatory capital, improve the transparency of the process, and 
address the impediments regulators were facing. Consistent with our 
recommendations, the regulators have developed a process to assess the 
performance of proposed rules, which they believe will provide a 
structured and prudent framework for managing the implementation of 
Basel II in the United States. (GAO-07- 253): 

2.43.C. Improving Consumer Protections When Purchasing Title Insurance: 
In an April 2007 report, we identified characteristics of the current 
title insurance market--including weaknesses in state and federal 
regulatory efforts and alleged illegal kickbacks paid by title agents 
to realtors, builders, and mortgage brokers--that raised questions 
about the prices paid by consumers for title insurance, which is a 
required part of almost all home purchases or mortgage refinancings. We 
reported that in order to better protect consumers and increase their 
ability to comparison shop for title insurance, HUD and state insurance 
regulators should strengthen their oversight of title agents, 
especially those owned by realtors or mortgage brokers that have a 
financial interest in referring consumers to a particular title agent. 
In response to the issues identified by our work, HUD has made plans to 
improve its consumer education efforts, and state insurance regulators 
and title industry officials have begun planning ways to better detect 
and deter illegal kickbacks as well as to promote price competition 
beneficial to consumers. (GAO-07-401): 

2.44.C. Improving SEC Enforcement Operations: We found that while SEC's 
Division of Enforcement (Enforcement) is planning improvements to its 
investigation management processes and information systems, these 
planned changes may not address all existing limitations. For example, 
Enforcement has not established written processes and criteria for its 
new centralized approach for reviewing and approving new 
investigations, which could limit the effectiveness of this new 
approach. Additionally, Enforcement has not taken sufficient steps to 
ensure the reliability of data that will be entered into a new 
investigation management system. We also found that Enforcement's 
decentralized approach to managing the Fair Fund program, under which 
funds are returned to investors who suffered losses due to violations 
of securities laws or regulations, had contributed to distribution 
delays. We recommended that SEC and Enforcement take several actions to 
improve Enforcement's capacity to manage the investigative process and 
the Fair Fund program, which SEC has agreed to implement. As a result, 
Enforcement should be better positioned to identify and punish 
violations of the securities laws and regulations and compensate 
investors for their losses. (GAO-07-830): 

[End of Strategic Goal 2] 

Strategic Goal 3: 

Help transform the federal governmentï¿½s role and how it does business 
to meet 21st century challenges: 

Reexamine the federal government's role in achieving evolving national 
objectives: 

3.01.F. Developing Common Cross-Agency Grant Reporting Systems: In our 
2005 report, we found that efforts toward common electronic systems for 
reporting financial and performance information for financial 
assistance (primarily grants) had not been developed, although they 
were required under Pub. L. No. 106-107, the Federal Financial 
Assistance Management Improvement Act. The report concluded that the 
lack of continuity toward meeting Pub. L. No. 106-107's requirement to 
develop a common reporting system for similar programs could prevent 
agencies from reaching the act's goals. We recommended that OMB ensure 
that efforts to develop common grant-reporting systems are undertaken 
on a schedule that would result in significant progress by the time 
Pub. L. No. 106-107 sunsets in November 2007. The co-chair of the cross-
agency team established by OMB to oversee the reforms said that the 
report raised the issue to the team's attention and helped it focus on 
what needed to be done and make faster progress. Following the report's 
release, it was discussed in several forums, and those working on the 
initiative drafted a detailed business case that included plans for 
implementation. The updated 2007 business plan estimated the net 
present value of cumulative financial benefits after deducting the 
system costs through fiscal year 2008 to be $127.4 million from 
eliminating or reducing the costs associated with multiple agencies 
developing and maintaining grants management systems and financial 
benefits through fiscal year 2015 of $3.4 billion (with a net present 
value of $1.5 billion). (GAO-06-566, GAO-05-335): 

3.02.C. Rebuilding the Gulf Coast in the Aftermath of Hurricanes 
Katrina and Rita: Our work on Gulf Coast rebuilding has informed the 
Congress on the status of recovery and rebuilding efforts in the wake 
of hurricanes Katrina and Rita, and has helped to provide a framework 
for congressional oversight in this area. We have testified on 
challenges facing the rebuilding effort, as well as potential financial 
implications for the federal government. Our work has also focused on 
identifying good practices and potential reforms to assist the nation 
in responding to, and rebuilding from, future catastrophic disasters. 
For example, we reported on the use of state-to-state emergency 
management compacts and developed several recommendations to help 
federal agencies better leverage state and local resources in the 
future. The Congress, the media, policy and research institutions, 
community planning groups, and the senior leadership of DHS's Office of 
the Federal Coordinator for Gulf Coast Rebuilding have all made use of 
our work to better understand the scope of the resources needed and to 
improve coordination and cooperation between the government and 
nongovernmental organizations involved in the ongoing rebuilding 
effort. (GAO-07-1079T, GAO-07-809R, GAO-07-854, GAO-07-574T): 

3.03.C. Enhancing National Preparedness for a Potential Influenza 
Pandemic: Our work helped inform the Congress and highlighted 
opportunities for federal agencies to improve the nation's preparedness 
for and response to a potential influenza pandemic. Agencies have 
agreed to follow our recommendations in several areas. DHS and the 
Department of Health and Human Services agreed to develop rigorous 
testing, training, and exercises for pandemic influenza to ensure that 
federal leadership roles and responsibilities are clearly defined, 
understood, and work effectively. FEMA plans to work with OPM to 
formally define the role of federal executive boards (which are 
interagency coordinating groups designed to strengthen management and 
intergovernmental relations) in emergency planning and response. USDA 
agreed to develop a response plan that identifies critical tasks and 
related capabilities, develop standard criteria for state response 
plans; work with states on how to overcome potential problems, and 
determine the amount of antiviral medications needed and how to supply 
them to workers responding to an outbreak of highly pathogenic avian 
influenza among poultry. DHS and USDA agreed that further clarification 
of the roles during certain emergencies is needed. DOD agreed to take 
steps to clarify roles and responsibilities within the department and 
with the combatant commands, better communicate with its own personnel, 
improve planning, link funding and performance measures with goals, and 
identify the resources that combatant commands need. Financial market 
regulators have set dates by which organizations critical to the 
operation of the securities markets should complete their pandemic 
response plans. (GAO- 07-781, GAO-07-696, GAO-07-652, GAO-07-604, GAO-
07-515): 

Support the transformation to results-oriented, high-performing 
government: 

3.04.F. Monitoring the Development and Operation of the 2010 Census: 
Through a series of testimonies and reports, we have continued to 
monitor the development and operation of the 2010 Census for our 
congressional clients. Specifically, we recommended that the U.S. 
Census Bureau (Bureau) thoroughly test the second or replacement 
questionnaire mailing to recipients who did not return the initial 
census form. The second mailing would boost the mail-back response rate 
by several percentage points, which in turn would reduce the number of 
costly personal visits enumerators would need to make to collect the 
information in person from each nonresponding household. Bureau 
officials agreed, tested the replacement mailing in 2006, and have told 
us that they are firmly committed to including the replacement mailing 
in the 2010 Census. On a net present value basis, the use of a 
replacement mailing should reduce the cost of the decennial census by 
about $436 million. (GAO-05-9, GAO-07-1132T, GAO-07-1106T, GAO-07- 
1063T, GAO-07-361): 

3.05.F. Realizing Financial Benefits from Implementing IT Management 
Practices: In response to our recommendations and best practices 
guides, federal agencies such as DOD, DOT, the National Aeronautics and 
Space Administration (NASA), VA, and USDA have taken steps to enhance 
their capability to oversee IT investments and improve IT investment 
decision making. For example, USDA has improved its capability to (1) 
align and coordinate the responsibilities of the department's various 
IT investment management boards for decision making related to IT 
investments, including crosscutting investments; (2) ensure that 
proposed IT investments support work processes that have been 
simplified or redesigned to reduce costs and improve effectiveness, and 
make maximum use of commercial-off-the-shelf software; and (3) 
structure information systems investments into manageable projects as 
narrow in scope and brief in duration as practicable to reduce risk, 
promote flexibility and interoperability, increase accountability, and 
better correlate mission need with current technology and market 
conditions. Taking these and similar steps to implement a more robust 
IT investment management process and more effective IT investment 
decision making helped to enable USDA and the other agencies to reduce 
a total of more than $1.3 billion in planned IT expenditures from their 
annual IT portfolios. (GAO-04-49, GAO/AIMD-10.1.13): 

3.06.F. Improving Federal Agency Modernization Blueprints: Over the 
last several years, we have reported on efforts across the federal 
government to advance the state of department and agency modernization 
blueprints, or enterprise architectures, and have made a range of 
recommendations. This work has continued to result in improvements to 
both enterprise architecture content and use in federal department's 
and agencies. Specifically, in 2007, we reported that DOD's departments 
corporate Business Enterprise Architecture (BEA) had addressed the core 
elements in our Enterprise Architecture Management Maturity Framework, 
better positioning the department to realize the transformational value 
of its BEA, and that DHS had continued to evolve its enterprise 
architecture, including making progress in addressing our 
recommendations. Among other things, DHS's efforts have resulted in a 
cost avoidance of $93.1 million from using its enterprise architecture 
to consolidate multiple existing geospatial programs. (GAO-07-564, GAO- 
07-733, GAO-06-831, GAO-04-777): 

3.07.N. Strengthening the Link between Contract Incentives and Outcomes 
across Government: In December 2005 and January 2007, we reported that 
DOD and NASA structured monetary incentives in ways that led to 
significant disconnects between the fees paid to contractors and 
program outcomes. For instance, DOD paid an estimated $8 billion in 
award fees on contracts regardless of outcomes. In both reports, we 
made recommendations aimed at strengthening the link between incentives 
and outcomes. The Comptroller General testified on this issue in April 
2006 and we briefed multiple congressional committees. The result has 
been changes to award and incentive fee policies across several 
agencies, including DOD, NASA, and DHS. DOD and NASA have emphasized 
the need to link award fee criteria to acquisition outcomes. The 
Congress also enacted legislation incorporating most of our 
recommendations directed at DOD, and the emergency supplemental 
appropriation law for 2007 required all DHS award fees to be linked to 
successful acquisition outcomes. Further, legislation encouraging the 
Director of National Intelligence to make similar changes has been 
introduced in the Congress. Moving toward more outcome-based award fee 
criteria will give contractors an increased stake in helping agencies 
develop more realistic targets up front or risk receiving less fee when 
unrealistic cost, schedule, and performance targets are not met. Once 
these steps are implemented, the agencies have the potential to realize 
significant cost savings as a result of better acquisition outcomes or 
lower fee payments to contractors. (GAO-07-58, GAO-06-66, GAO-06-409T): 

3.08.C. Providing a Road Map for Fundamental Procurement Reform in the 
District of Columbia: The District's history of procurement problems--
which include poor planning, excessive use of sole-source contracts, 
and unauthorized personnel committing government resources--is well 
documented. Our January 2007 report compared the District's procurement 
law, processes, and management and oversight practices to guiding 
principles of public procurement and to reform efforts of other cities 
faced with similar challenges. We found that the District's procurement 
contained numerous exceptions to its uniform procurement law and did 
not provide the right structure and authority to manage and oversee the 
entire acquisition function across all entities. To better ensure that 
every dollar of its more than $1.8 billion procurement investment is 
well spent, we outlined a comprehensive road map with a number of 
recommendations to the Mayor and Chief Financial Officer (CFO) that 
included submitting a plan to the Congress to reform the procurement 
law and system to better promote transparency, accountability, and 
competition, and minimize fraud, waste, and abuse. We were called to 
testify before the City Council and, citing our report as the impetus 
for change, the Council committed to moving the District forward with 
procurement reform in line with our numerous recommendations. The Mayor 
has since submitted a plan to the Congress that reflects our 
recommendations, and has recently nominated a Chief Procurement Officer 
with extensive public procurement experience. The CFO is also revising 
a financial order to address our concerns about unauthorized 
commitments. (GAO-07-159): 

3.09.C. Strengthening Oversight of Costly Yet Critical Environmental 
Satellite Programs: In recent years, we have provided assistance to the 
Congress by helping oversee the government's acquisition of major 
satellite programs: the $12.5 billion National Polar-orbiting 
Operational Environmental Satellite System (NPOESS) program, which is 
to replace two existing polar-orbiting systems, and the planned $7 
billion Geostationary Operational Environmental Satellite-R series 
(GOES-R) program, which is to replace the current series that will 
reach the end of its useful life in approximately 2014. Both are 
considered critical to the United States' ability to maintain the 
continuity of data required for weather forecasting and global climate 
monitoring through the years 2026 and 2028, respectively. Since 2002, 
we have issued multiple reports and testimonies identifying risks 
facing NPOESS and, more recently, GOES-R. Most recently, we reported on 
the NPOESS program's serious technical challenges and actions required 
for program success, and on the lessons the GOES-R program would have 
to learn to ensure its success--and recommended increasing and 
improving program management and mitigating serious risks on both 
programs. We testified in September 2006 on GOES-R, in June 2007 on 
NPOESS, and in July 2007 on both programs. Our work has helped focus 
congressional, agency, and public attention on these important programs 
and has led to ongoing changes in the management structure of the 
satellite program offices, more active oversight by high-level agency 
officials, and more awareness of the technical and managerial issues 
facing the programs by the Congress. (GAO-07-498, GAO-07-910T, GAO-07-
1099T, GAO-06-993, GAO- 06-1129T): 

3.10.C. Strengthening DOD Business Systems Modernization Management: 
For decades, DOD has been challenged in modernizing its timeworn 
business systems. In 1995, we designated DOD's business systems 
modernization program as high risk, and we continue to designate it as 
such today. From May 2001 through May 2007, our body of work on DOD's 
institutional approach to modernizing its business systems, coupled 
with our reviews of specific business system investments, has produced 
recommendations that provide an impetus and framework for modernization 
success. The Congress has embraced these recommendations in legislative 
mandates to DOD, such as those in the Ronald W. Reagan National Defense 
Authorization Act for Fiscal Year 2005, and the department has largely 
agreed and taken actions to implement them. To its credit, the 
department continues to make progress in establishing corporate 
management controls, such as its BEA, corporate investment structures 
and processes, and increased oversight and life management discipline 
on its largest business system investments. Key to success in going 
forward will be ensuring that these approaches and abilities are 
extended to and employed on component organizations' (military 
departments and defense agencies) business system modernization 
efforts. As in the past, our continued efforts to monitor DOD's 
progress on establishing and implementing the full range of system 
modernization and maintenance controls will be beneficial in helping 
the department make further positive strides on this highly important 
initiative. (GAO-07-229T, GAO-07-538, GAO-07-733, GAO-06-171, GAO-06- 
215): 

3.11.C. Improving the Government's Approach to Interoperable 
Communications: In reviewing a key e-government initiative intended to 
improve communications interoperability among first responders, we 
reported on progress with the over $2 billion in federal grants awarded 
to states and localities and highlighted the need for DHS to take a 
more strategic approach to improving interoperable communications among 
federal, state, and local first responders. More recently, as mandated 
by the Congress, DHS has been working to develop a new office that is 
responsible for making such improvements across all levels of 
government. In addition, as a result of our report, the Senate 
Committee on Homeland Security and Governmental Affairs sent a letter 
to the Secretary of the Department of Homeland Security reinforcing the 
importance of the issues identified in our report and encouraging DHS 
to implement our recommendations. (GAO-07-301): 

3.12.C. Ensuring Personal Privacy in the Face of Increasing Threats: We 
helped the Congress address increasing concerns that individuals' 
personal information could be inadequately protected by DHS and other 
federal agencies, potentially compromising individuals privacy rights 
or exposing their information to misuse, such as through identity 
theft. For example, in February 2007, we reported that DHS had not 
taken sufficient action to assess privacy risks before developing a 
sophisticated data-mining tool. Because of the prominence of our 
findings, a hearing was held to discuss the report, which also received 
significant media coverage. We also reported on the progress and 
accomplishments of the DHS Chief Privacy Officer, citing several areas 
for improvement that were subsequently discussed at a separate hearing. 
Beyond DHS, we analyzed lessons learned from the well-publicized data 
breaches at VA and other agencies to develop a key recommendation 
regarding assistance to individuals affected by data breaches at 
federal agencies. (GAO-07-293, GAO-07-630T, GAO-07-522, GAO-07-1024T, 
GAO-07-657): 

3.13.C. Helping to Gauge Agency Progress in Implementing the Freedom of 
Information Act(FOIA): We assisted the Congress by analyzing FOIA 
request processing at major agencies and describing trends, which 
include a small but steady rise in reported requests pending at the end 
of each fiscal year. We also analyzed the FOIA improvement plans that 
these agencies developed in response to an executive order, comparing 
them with the major areas of focus in the order. We presented these 
results at a hearing in February 2007 and in a March report. As a 
result of our FOIA work, we were consulted on the development of 
several bills intended to strengthen FOIA, and our analysis provided a 
basis of discussion and debate for congressional decision makers. This 
work is part of our ongoing body of work on FOIA implementation and 
improvement, on which both the Congress and the press have come to rely 
in gauging agencies' progress in this area. (GAO-07-441, GAO-07-491T): 

Support congressional oversight of key management challenges and 
program risks to improving federal operations and ensuring 
accountability: 

3.14.F. Informing the Termination of the Space Launch Initiative: In a 
September 2002 report, we questioned NASA's overall acquisition 
strategy to develop a new generation of space transportation vehicles-
-the Space Launch Initiative (SLI). We reported that NASA faced 
considerable challenges defining basic requirements for SLI. We also 
noted that most of the key technologies under consideration by SLI were 
very immature and that management controls necessary to estimate cost 
and gauge progress were not in place. We concluded that NASA's goal of 
defining SLI requirements by the November 2002 time frame may not be 
realistic and that the agency must determine whether developing a 
second generation vehicle was still worthwhile given plans to extend 
the life of the Space Shuttle and reduce the capabilities of the 
International Space Station. We recommended that the NASA Administrator 
take several steps, including completing the reassessment of NASA's 
Integrated Space Transportation Plan, before moving forward with SLI. 
NASA concurred and, in November 2002, took action to delay decisions 
regarding future launch vehicles and refocused SLI on conducting basic 
research on advanced launch technologies and developing a vehicle to 
serve the International Space Station. Two years later, NASA finalized 
its decisions regarding new launch vehicles and adopted a new 
overarching strategy for all space transportation, known as the Vision 
for Space Exploration. In 2005, NASA terminated the entire SLI program 
and redirected $3.7 billion in funding originally programmed for SLI 
toward future exploration activities. (GAO-02-1020): 

3.15.F. Identifying Improper or Potentially Fraudulent Hurricane 
Disaster Assistance Payments: Our audit and investigative work related 
to FEMA's Individual and Households Program (IHP) estimated that it 
made from $600 million to $1.4 billion in improper or potentially 
fraudulent financial assistance payments following hurricanes Katrina 
and Rita. We referred over 22,000 potential fraud cases to the Katrina 
Fraud Task Force for appropriate criminal investigation. These cases 
included (1) duplicate payments to individuals who registered and 
received assistance twice using the same SSN and address of damaged 
property, (2) individuals who obtained IHP assistance using invalid 
SSNs (e.g., those belonging to deceased or other individuals), (3) 
individuals who received multiple emergency assistance payments (in 
violation of the Stafford Act), and (4) rental assistance payments to 
federal and state prisoners incarcerated at the time of the hurricanes. 
As of May 2007, FEMA reported that it had begun actions to recoup $700 
million--and collected $16 million--in improper financial assistance 
payments. (GAO- 07-252T, GAO-07-300, GAO-07-418T, GAO-06-655): 

3.16.F. Funding USPS Postretirement Health Care Obligations: OPM 
analyzed the funding of USPS's retirement plans and reported in 2002 
that the current level of pension fund contributions would result in a 
surplus of funds and that this surplus would adequately cover future 
pension benefit obligations. At the request of the Congress, we 
reviewed OPM's analysis and a proposal by the administration to change 
the funding formula. We emphasized to the Congress that even though 
USPS had a projected pension surplus, at the time we conducted our 
review USPS had not yet funded $40 billion to $50 billion in 
postretirement health care benefits. In response, the Congress passed 
Pub. L. No. 108-18, the Postal Civil Service Retirement System Funding 
Reform Act of 2003, which, among other things, required that any 
savings accruing to USPS after fiscal year 2005 as a result of the 
enactment of the act be held in an escrow account until further 
legislation was enacted that would resolve the disposition of these 
funds. The Congress wanted the funds made available from any pension 
payment reductions to be used to address, among other things, USPS's 
unfunded postretirement health care obligations. USPS responded by 
raising postal rates effective January 2006 solely to fund the escrow 
requirement. In December 2006, the Congress passed Pub. L. No. 109-435, 
the Postal Accountability and Enhancement Act, that required USPS to 
make a series of 10 annual payments into the newly created Postal 
Service Retiree Health Benefits Fund for fiscal years 2007 through 2016 
to help fund USPS's unfunded retiree health care obligations. The first 
of these payments totaled $5.4 billion--a financial benefit to the 
federal government resulting from our work. (GAO-04-238, GAO-03-448R, 
GAO-02-170): 

3.17.F. Reducing Federal Improper Payments: Since fiscal year 2000, our 
recommendations have been aimed at raising the level of attention given 
to improper payments and contributed to the Congress passing the 
Improper Payments Information Act of 2002. The provisions of this 
legislation coincide with our recommendations that agencies take 
actions to estimate, reduce, and publicly report improper payments. 
Fiscal year 2006 marked the third year that federal agencies 
governmentwide were required to report improper payment information 
under the act in their performance and accountability reports. For 
fiscal year 2006, 19 agencies consisting of 60 programs reported 
improper payment estimates totaling about $42 billion, including 15 
newly reported programs or activities. Agencies also have made progress 
in reducing their improper payments. In fiscal year 2007, we estimated 
that our improper payments work resulted in a reduction of improper 
payments of about $1 billion (present value) during fiscal year 2006. 
(GAO-07-635T, GAO-07-92, GAO-06-581T, GAO-05-245, GAO-02-749): 

3.18.C. Exposing the Risks Posed by the Government's Increasing 
Reliance on Contractors: Commercial firms are playing an increasing 
role in performing Government work. For example, contractors are 
performing as system integrators for major development projects, like 
weapons and ships. In this role, a commercial firm performs a broader 
range of activities than a traditional contractor, including activities 
once performed by the government. Also, commercial services are being 
substituted for government labor. In DOD alone, contracts for such 
services have increased over 70 percent in the last 10 years. In the 
last year, we have reported and testified several times on the 
oversight risks posed by this increased reliance on contractors. 
Specifically, we reported that the large growth in service acquisitions 
by DOD had not been a managed outcome and that the department did not 
have a sense of where it wanted such acquisitions to be in the future. 
We reported concerns over the Coast Guard's management and oversight of 
its largest acquisition, the $24 billion Deepwater program, in part due 
to its inability to effectively oversee and hold the system integrator 
accountable. We also reported that the Army's relationship with the 
contractor serving as system integrator for its $200 billion FCS 
program posed risks for the Army's ability to provide oversight over 
the long term. As a result, H.R. 2722 contains restrictions on DHS's 
use of lead system integrators and H.R. 1585 prohibits DOD's use of 
lead system integrators after October 1, 2011. (GAO-07-20, GAO-07-380, 
GAO-07-874, GAO-07-672T, GAO-07-359T): 

3.19.C. Revising Government Auditing Standards: In 2007, we issued a 
major revision to the Government Auditing Standards that organizes, 
clarifies, and strengthens the standards for audits of government 
programs and entities. The 2007 revision achieves increased harmony of 
Government Auditing Standards with other U.S. and international 
standards, sets out fundamental ethical principles, strengthens the 
emphasis on audit quality, and highlights the importance of auditing in 
promoting public sector accountability and providing information for 
improving government operations. The 2007 revision also updates and 
clarifies chapters on financial audits, performance audits, and 
attestation engagements. Overall, our 2007 revision is aimed at helping 
government accountability professionals rise to the challenge of 
producing high-quality audits that lead to better government. Auditors 
in federal, state, and local governments, as well as certified public 
accountant (CPA) firms conducting audits of government programs, are 
currently implementing our revised standards. (GAO-07-731G): 

3.20.C. Transforming the Accountability Profession: Throughout 2007, we 
joined with standard setters both domestically and internationally to 
promote a coordinated approach to transformation of the accountability 
profession to meet the rapid pace of technological advance and 
globalization, and the widespread influence of the Sarbanes-Oxley Act. 
With executives, managers, auditors, investigators, and others in the 
accountability process eager to stay up-to-date on Government Auditing 
Standards revisions and current accountability issues, we gave dozens 
of presentations across the country and abroad to help educate and 
train a body of professionals who are informed on the issues and able 
to apply current standards effectively. We continued to work for 
stronger and more congruent standards through letters of comment to 
other standard setters and coordination with the three other principal 
standard setters that make up the Auditing Standards Coordinating 
Forum. We helped shape the accountability agenda through our 
participation in an advisory group for the Public Companies Accounting 
Oversight Board, presented our views on Sarbanes-Oxley guidance to SEC, 
and worked with the International Organization of Supreme Audit 
Institutions (INTOSAI) to draft international guidance to help public 
sector auditors ensure the accountability of government programs and 
financial management to the people they serve. (Based on 
presentations): 

3.21.C. Identifying Potential Fraud in the Federal Transit Benefits 
Program: We conducted forensic audit and investigative work concerning 
the largest portion of the federal transit benefits program, the 
National Capital Region's $140 million program. As a result of our 
work, we estimated that federal employees in the National Capital 
Region claimed at least $17 million in potentially fraudulent transit 
benefits during 2006. We found instances in which National Capital 
Region federal employees improperly sold transit benefits on the 
Internet auction site eBay and the community Web site Craigslist and 
claimed benefits they did not need. Based on the potentially fraudulent 
activities uncovered by our work, on May 14, 2007, OMB issued a 
memorandum to the heads of departments and agencies requiring them to 
implement specific additional internal controls to better ensure that 
only qualified applicants receive federal transit benefits. In 
addition, we referred the cases we identified of potential federal 
employee fraud to the inspectors general for potential criminal 
prosecution or other appropriate administrative disciplinary action. 
(GAO-07-724T): 

Analyze the government's fiscal position and strengthen approaches for 
addressing the current and projected fiscal gap: 

3.22.F. Improving Collection of Federal Nontax and Criminal Debts: Over 
the past several years, we have rigorously promoted federal agencies' 
use of key debt collection processes and procedures to improve 
collections of delinquent federal nontax civil debts (most of which 
were over 6 months delinquent) and criminal debts owed to the federal 
government and victims of crime. In fiscal year 2006, reported 
delinquent federal nontax civil debts totaled about $65 billion, and 
criminal debts totaled about $35 billion. Education, Justice, and the 
Department of the Treasury (Treasury) have continued to take steps to 
improve collection of these debts based largely on our recommendations. 
In fiscal year 2007, we estimated that improved collections have added 
$2.2 billion to a steady stream of debt recoveries. (GAO-04-338, GAO- 
02-313, GAO-01-664): 

3.23.F. Improving IRS Methodology for Pursuing Delinquent Taxes: Our 
previous financial audit work determined that IRS did not have systems 
or procedures in place to allow it to identify and actively pursue 
cases with collection potential. We recommended that IRS improve its 
capacity to assess the collectibility of delinquent taxes as a way to 
better target debt collection resources. In 2004, IRS began 
implementing sophisticated modeling technology to differentiate between 
more and less productive cases in order to make better resource 
allocation decisions. In 2007, we reported that IRS's actions in 
response to our previous recommendations increased its collections of 
delinquent taxes using approximately the same level of resources by 
about $4.2 billion or almost 20 percent in fiscal year 2006 from fiscal 
year 2003 levels. (GAO-01-42): 

3.24.F. Modifying Collection Due Process Appeals: The Congress twice 
modified the Collection Due Process (CDP) program based on our October 
2006 report. First, we found that on average businesses that requested 
a CDP appeal for failure to pay employment taxes were delinquent for 
nearly 1-1/2 years and had a median tax liability of more than $30,000. 
Citing our report, the Senate Finance Committee proposed modifying CDP 
procedures for employment tax cases to deny a prelevy CDP hearing, 
authorize IRS to continue collection activity, and provide for a 
postlevy CDP hearing. The change was enacted in the Small Business and 
Work Opportunity Tax Act of 2007. The Joint Committee on Taxation 
estimated that the change will increase tax collections by about $146.3 
million (net present value) over a 5-year period. Second, we estimated 
that 5 percent of taxpayers who requested a CDP hearing raised 
frivolous arguments (arguments without a legal basis). IRS had 
repeatedly submitted proposals to increase the frivolous submissions 
penalty from $500 to $5,000. The increase was enacted in the Tax Relief 
and Health Care Act of 2006. Committee staff said our work confirmed 
the need for legislative action. The committee estimated that 
collections will increase by about $13.7 million (net present value) 
over 5 years due to this change. (GAO-07-112): 

3.25.F. Collecting Delinquent Taxes by Contracting with Private 
Collection Agencies (PCA): We reviewed IRS's preparations to implement 
a proposal being considered by the Congress to authorize IRS to 
contract with PCAs to collect delinquent tax debts. Committee and 
conference reports on the proposed law referred to our report 
conclusion that "If Congress does authorize PCA use, IRS's planning and 
preparations to address the critical success factors for PCA 
contracting provide greater assurance that the PCA program is heading 
in the right direction to meet its goals and achieve desired results." 
The Congress subsequently enacted the law authorizing IRS to implement 
the program which, in fiscal years 2007 through 2011, is expected to 
yield about $408 million ($365 million in present value) in net revenue 
to the federal government. (GAO-04-492): 

3.26.F. Increasing Tax Collections by Revising IRS's Withholding 
Compliance Program: In November 2003, we recommended that IRS assess 
the value of its Questionable Form W-4 program and determine whether 
the program should continue in its current form. An IRS task force 
acted on our recommendation and concluded that the program was not 
operating effectively. Subsequently, IRS eliminated the Questionable 
Form W-4 program and said it would enhance its withholding compliance 
program by making more effective use of information reported on the 
Form W-2 wage and tax statements to ensure that employees have enough 
federal income taxes withheld from their wages. The enhanced 
withholding compliance program has better ensured proper withholding 
from employees' wages. Based on IRS's data and assumptions, we 
conservatively estimated that the new program has resulted in the 
collection of $423 million (net present value) in additional income 
taxes for fiscal years 2005 and 2006. (GAO-04-79R, GAO-03-913R): 

3.27.N. Improving Federal Financial Reporting: For the 10th consecutive 
year, we were unable to express an opinion on the U.S. government's 
fiscal year 2006 consolidated financial statements because of ongoing 
material weaknesses in internal control and financial reporting issues. 
Nonetheless, through our continuing efforts as the principal auditor of 
the U.S. government's consolidated financial statements, we were able 
to effect a number of significant improvements to the understandability 
and utility of federal financial reporting during 2007. For example, 
because of our recommendations, Treasury took action to increase the 
understandability and utility of these statements by adding important 
contextual information in the Management's Discussion and Analysis 
section of the U.S. government's fiscal year 2006 financial report. In 
addition, Treasury improved compliance with generally accepted 
accounting principles and disclosure of required information in several 
areas, including the federal employee and veteran benefits payable; 
earmarked funds; and property, plant, and equipment. Further, our 
January 2007 special product, Fiscal Stewardship: A Critical Challenge 
Facing Our Nation, used the results of our financial statement audit 
work as a foundation for a high-level summary of the nation's current 
financial condition, long-term fiscal outlook, and possible ways 
forward. (GAO-07-362SP): 

3.28.N. Improving Research and Setting Goals to Reduce the Tax Gap: In 
July 2005, we made various recommendations to IRS to improve its 
efforts to reduce the tax gap. One recommendation was that IRS develop 
plans to periodically measure tax compliance for areas of the tax gap 
that have been previously measured (e.g., individual taxpayers) and 
study ways to cost effectively measure compliance for other parts of 
the tax gap. IRS agreed with our recommendation and in June 2007 
announced its plans to launch a new compliance study of individual 
taxpayers that will be part of a series of annual studies of such 
taxpayers. Another recommendation was that IRS set a long-term 
voluntary compliance goal to help measure the success of its compliance 
efforts and focus on achieving results. In its 2007 budget 
justification, IRS established a goal of 85 percent voluntary 
compliance by 2009. (GAO-05-753): 

3.29.C. Addressing Our Nation's Long-term Fiscal Challenge: We 
continued our effort in fiscal year 2007 to help members of the 
Congress and the public better understand the implications of current 
policies and the long-term fiscal challenges facing our nation. In 
particular, the Comptroller General continued and expanded GAO's 
participation in the Fiscal Wake-Up Tour sponsored by the Concord 
Coalition. In this effort--which grew out of our forum on the long-term 
fiscal challenge-- analysts from the Brookings Institution and the 
Heritage Foundation join the Concord Coalition and the Comptroller 
General in town hall meetings and forums around the nation. The focus 
of our education effort is simple: long-term simulations show ever-
larger deficits resulting in a federal debt burden that ultimately 
spirals out of control--continuing on our current unsustainable fiscal 
path will gradually erode, if not suddenly damage, our economy, our 
standard of living, and ultimately our national security. This message 
has also been reinforced in the Comptroller General's testimonies, 
speeches, and presentations. Another contribution to the effort was 
publication of Fiscal Stewardship: A Critical Challenge Facing Our 
Nation in late January 2007; this publication was designed to present 
selected financial statement and budget information together in a 
manner accessible to the general public. The success of this public 
education effort in increasing public awareness of the nation's fiscal 
challenges is evidenced by (1) increased media coverage, including a 60 
Minutes segment, an appearance by the Comptroller General on The 
Colbert Report television show, and editorials calling attention to 
this problem and the need for action, and (2) a large increase in 
requests for Fiscal Wake-Up Tour town hall meetings by members of the 
Congress and local community leaders. (GAO-07-1144T, GAO-07 -1261R, GAO-
07-389T, GAO-07- 362SP, GAO-07-1164CG): 

[End of Strategic Goal 3] 

Strategic Goal 4: 

Maximize the value of GAO by being a model federal agency and a world-
class professional services organization

Improve client and customer satisfaction and stakeholder relationships: 

4.01.C. Strengthening Communication with Our Congressional Clients and 
Measuring Congressional Satisfaction with Our Work: We explored and 
implemented technology solutions in several areas that facilitate our 
staff's ability to meet the clients' needs and enhance the quality and 
timeliness of client service. We continued our pilot of e-dissemination 
of our products to congressional clients to more fully understand the 
nuances involved in implementation on a larger scale. We avoided 
approximately $48,800 in costs for the 51 reports issued during fiscal 
year 2007. Based on the cost-effectiveness of e-dissemination and the 
positive response from our clients, we recently have fully implemented 
E-dissemination for the vast majority of our products, both for our 
client and internally. The advantages include the following: 

* Almost instant availability of a completed product to our client. 

* Capability to search, excerpt, and forward the product to others 
electronically. 

* Streamlining of our publication process due to elimination of 
printing time. 

* Estimated annual savings of about $300,000 in printing costs. 

* Possibility for future electronic enhancements in information 
presentation such as color and multimedia elements and Internet-only 
presentation of Web-based survey results and tables that summarize 
information from databases. 

To maximize our ability to gauge client satisfaction with our products 
and determine improvements needed, we implemented several strategies 
including the development of electronic surveys that can be responded 
to via Blackberry devices, alerting recipients of upcoming surveys by e-
mail or telephone, and following up with nonrespondents by e-mail or 
telephone. 

4.02.C. Assessing Internal Customer Satisfaction with Our Services and 
Processes and Implementing and Measuring Improvement Efforts: The 4th 
annual GAO Customer Satisfaction Survey was conducted in November 2006 
where 1,500 of our staff provided input on their satisfaction with our 
administrative services. We measured (1) 19 services that help 
employees get their jobs done (e.g., IT, report production, and travel) 
and (2) 10 services that improve employees' quality of work life (e.g., 
benefits and transit subsidies). For the first time we met or exceeded 
our target of 4.0 for both measures. The score for services that help 
employees get their jobs done remained the same at 4.1, and the score 
for services that affect quality of work life increased from 3.98 to 
4.0. Chief Administrative Office units reviewed the results, developed 
action plans to address customer issues and recommendations, and 
implemented several improvements. Examples include launching the 
Information Systems and Technology Services (ISTS) Solutions Center 
(described below); automating the distribution of transit benefits; 
upgrading Internet Protocol Television, a technology that allows video 
to be viewed over the Web, to provide direct broadcasts to all our 
field locations; redesigning the GAO Library Services Web site; and 
assigning office move responsibility to our Commercial Facilities 
Management contractor for better coordination and service to our 
customers. 

In the IT services area--which was identified by our customers as the 
most important service in getting their jobs done and considered "Best- 
In-Class" in comparison to other professional services peer 
organizations--we developed and launched the ISTS Solutions Center, a 
searchable knowledge base for guidance, instruction, and tips regarding 
our computing environment; and an IT Service Metrics Dashboard to 
provide monthly update information on the status of our IT systems and 
service, such as outages, support calls, hardware/software security, 
remote access, and videoconferencing. As a result, we are providing 
more readily accessible, comprehensive information to our customer, 
saving time and increasing productivity for our customer and our ISTS 
staff; increasing transparency with our customers; and providing 
additional opportunity for customer feedback. 

To supplement the GAO Customer Satisfaction Survey, we gathered 
additional customer feedback on our knowledge services through the 
Product Assistance Group Customer Satisfaction Survey, Shared Services 
Centers comment boxes, and Library Research Survey. We began and 
completed several initiatives to improve services and enhance customer 
knowledge, including 

* increasing library training efforts on authenticating Internet 
resources, advanced Internet searching, and using various online 
databases; 

* developing a new brochure to better explain the revised publishing 
process; 

* improving customer service procedures and notification processes; 
and: 

* improving copier/printer availability for customers. 

4.03.C. Strengthening Relationships with our Stakeholders: We leveraged 
our resources to improve institutional capacity building and transform 
the accounting profession internationally through negotiations with 
State, the World Bank, and INTOSAI. An interagency agreement with State 
was signed to fund translation of the Government Auditing Standards 
into Arabic and provide training for our Iraqi counterparts. We also 
negotiated a memorandum of understanding with the World Bank and the 
INTOSAI Development Initiative to jointly sponsor the first Supreme 
Audit Institution Transformation Seminar. 

Domestically, we held the second annual meeting with the inspectors 
general that brought together GAO, the President's Council on Integrity 
and Efficiency, and the Executive Council on Integrity Efficiency and 
resulted in a consensus to meet annually as well as a proposal to 
improve collaboration, coordination, and communication between GAO and 
the inspectors general. We also developed an operations manual to guide 
teams in convening and reporting on the results of Comptroller General 
forums and roundtables. 

Lead strategically to achieve enhanced results: 

To achieve our strategic goal of being a model federal agency, we must 
ensure that our strategic leadership is focused on achieving results. 
We continued to strengthen and further integrate our strategic planning 
and our performance, financial, and IT management to maximize results, 
manage risks, enhance responsiveness, and ensure exemplary practices 
and procedures. To accomplish this, we built on our established base of 
strong strategic planning, workforce and succession planning, sound 
financial management, and targeted performance measures. 

4.04.C. Ensuring a Seamless Strategic Planning, Workforce Planning, and 
Budget Process to Maximize Results and Manage Risks with Current and 
Expected Resources: This fiscal year we issued an update to our 
Strategic Plan for 2007- 2012. To facilitate the update, we engaged 
with our client, the Congress, and leveraged the Comptroller General's 
Advisory Board, the Domestic Working Group, and the Global Working 
Group to help determine global and national forces and trends shaping 
our work for the next 5 years, resulting in a substantially revised 
themes document. 

During a very difficult budget year, we successfully demonstrated 
enhancements to our overall resources planning and decision making 
through continued integration of our budget, workforce planning, and 
human capital programs. Through integrated planning and sophisticated 
analysis and modeling, we identified budgetary options to maximize 
results and manage risks within current and expected resources, 
providing the Comptroller General and the Executive Committee with 
viable options to make informed, complex, and timely decisions in the 
best interest of the organization and its people. 

To better align staff learning and development with succession 
planning, we created a new feature in the workforce planning call for 
managing directors to indicate their interest and needs for unit- 
dedicated services from the Learning Center for their teams and offices 
in the upcoming year. These services include workshops on performance 
management issues, team-building activities, group facilitation 
assistance, assistance in creating Web-based tutorials or e-learning 
products, assistance in creating instructor-led learning or knowledge- 
sharing programs, assistance in identifying training resources for 
staff, supervisory training, and 360-degree and upward feedback 
assessments. 

4.05.C. Achieving External Recognition: We received several notable 
external recognitions this year: 

* For the sixth time, the Association of Government Accountants awarded 
our performance and accountability report the Certificate of Excellence 
in Accountability Reporting. 

* The Federal Section of the International Public Management 
Association for Human Relations selected GAO to receive one of the two 
Leading Edge Awards it bestows each year, recognizing small and large 
federal organizations that have demonstrated progress toward effective 
alignment of their human capital strategies with agency mission and 
goals. Our award was in the small agency category and recognizes our 
work in addressing human capital challenges in our overall 
transformation efforts. 

* We received a 2007 second place ranking among large agencies in the 
Best Places to Work Survey conducted by the Partnership for Public 
Service and the Institute for the Study of Public Policy Implementation 
at American University. 

* We are again included in CIO Magazine's "CIO 100" list in recognition 
of our effective use of information technology innovation to meet 
critical business needs. 

* Two of our products--the 2006 Performance and Accountability 
Highlights (GAO-07-3SP, January 2007) and Fiscal Stewardship: A 
Critical Challenge Facing the Nation (GAO-07-362SP, January 2007)--were 
among the 800 documents selected from more than 4,000 national and 
international entries from the public and private sectors that received 
American Inhouse Design Awards. 

* We received the 2007 Archivist's Award in Records Management this 
year for our Electronic Records Management System (ERMS), a system 
designed to enable us to use electronic records to conduct agency 
business and to comply with the Federal Records Act and records 
management regulations. 

4.06.C. Strengthening Our Strategic Human Capital Management to Achieve 
Enhanced Results: Building on the work of a 2006 recruiting and hiring 
task team, we made great progress in our efforts to further enhance our 
recruiting and hiring processes. We implemented recommendations that 
resulted in: 

* enhanced communication and coordination with our service management 
team on hiring and staffing issues; 

* a fully revised, competency-driven application form and process; 

* an aggressive and diversified hiring strategy focused on year-round 
hiring; 

* a more user- friendly and informative Web presence; 

* a more coordinated and focused diversity outreach effort; and: 

* better coordination and understanding of Human Capital Office (HCO) 
services. 

In performing its annual analysis of our performance appraisal data, 
our Office of Opportunity and Inclusiveness discovered a growing gap 
between performance rating averages for African American and Caucasian 
analysts. To address this gap we contracted with an external consultant 
to analyze African American and Caucasian performance appraisal data 
from 2002 through 2006 and make recommendations for reversing this 
trend. 

We successfully implemented our Executive Exchange Program this year. 
As a result, we were able to leverage our resources and promote 
understanding of agency-level auditors' work and use of consistent 
approaches, enabling auditors to use the work of other CPAs. We hosted 
two private sector accounting firm executives for 4 months, having them 
work on projects relating to federal agency audits and agency financial 
statement issues and developing protocols for staff working on the 
consolidated financial audit. The participants were able to make a 
major contribution to our organization by developing protocols that 
will assist our staff in understanding the work of agency-level 
auditors and promote the use of consistent approaches so that auditors 
can use the work of other CPAs. Our management, the two executives, and 
their employer all felt this was a valuable experience and a way to 
gain perspectives on how GAO and the private sector operate. 

Our market-and performance-based compensation system (PBC), which was 
fully implemented in 2006, was refined based on analysis and feedback 
from the fiscal year 2006 pay adjustments, and a series of fact sheets 
explaining all aspects of the system were developed and disseminated. 
The following modifications were made and implemented as of January 
2007: 

* All staff receive 100 percent of their PBC amount. 

* The distribution of the PBC amount between a base pay increase and 
bonus requires that a minimum of 50 percent be provided as base pay up 
to the applicable competitive compensation limit of the Band with the 
actual percentage to be determined annually by the Comptroller General. 

* The Band III speed bump was eliminated. 

* A minimum bonus amount of $100 was established. 

* A communications analyst pay process was established that parallels 
the Professional Development Program and provides for appraisals and 
pay adjustments for Band I CAs every 26 weeks for the first 2 years of 
service. 

4.07.C. Ensuring Sound Financial Practices and Robust Systems in Our 
Fiscal Operations: We had a very active, productive, and challenging 
year as we converted to a new financial management system. The new 
system will ensure that (1) our people and processes are enabled 
through technology and sound fiscal operations practices and systems 
and (2) our decision- making capabilities are enhanced. For a more in-
depth discussion of the system, see "From the Chief Financial Officer" 
in part III, Financial Information. 

We successfully completed our fiscal year 2007 OMB Circular No. A-123 
and No. A-127 reviews, which resulted in no finding of material 
nonconformance. As a result, we reported an assurance statement on our 
internal control over financial reporting as of September 30, 2007. 

We provided leadership in legislative branch agencies' collaborative 
efforts on crosscutting technology and policy matters to improve the 
efficiency and effectiveness of government. Our efforts helped define 
standard budget formulation practices and processes, identify economy 
of scale opportunities through cross-servicing financial and business 
services in the legislative branch, and share internal control best 
practices. 

We built on our successful launching last year of the Financial Audit 
System (FAS) by implementing several enhancements to integrate FAS with 
our ERMS. This enabled us to upload over 3,500 documents to ERMS in 
less than 15 minutes, eliminating the need for staff to inventory, 
pack, and ship to storage hard copy documents; saving the cost of off- 
site storage and retrieval; and freeing up physical storage space in 
headquarters used for storage of prior year audit documents. 

Leverage our institutional knowledge and experience: 

4.08.C. Maximizing the Collection, Use, and Retention of Essential  
Organizational Knowledge: We further enhanced ERMS, a vital system for 
enabling our staff to use electronic records to conduct agency business 
and to comply with the Federal Records Act and records management 
regulations. We developed and disseminated protocols and guidance for 
organizing documents more easily, and briefed and trained our staff, 
thus improving our staff's abilities to appropriately share documents 
through ERMS and increasing our knowledge-sharing capabilities. 

We implemented several improvements to our primary internal 
communications process, the Notices weekly e-mail and archival and 
searchable Web site, thereby enhancing staff's ability to easily access 
accurate and complete information in a timely manner. We added 
capability to highlight communications from the Comptroller General, 
and to distinguish between notices geared to all staff or for 
headquarters staff only. We also reorganized the listing of notices on 
the intranet homepage to mirror the organization by category of the 
weekly Notices e-mail, and added a link at the end of each Notice to 
link users to related notices. 

To further enhance our communications and address a need not covered by 
Notices, we developed a desktop electronic bulletin board for sharing 
information agencywide on a variety of activities or events not related 
to the official business of the agency but of interest and importance 
to our employees. We are currently testing and will be launching it 
early next fiscal year. 

4.09.C. Increasing Our Knowledge-Sharing Capability: We redesigned the 
GAO Libraries Web site and portal this fiscal year to enhance 
information sharing and accessibility. We made available to all our 
staff an information portal that provides an access point for more than 
200 databases, including [hyperlink, http://www.Lexis.com]. The portal 
more prominently features our libraries' catalog, making it easier to 
determine what books the libraries own and what journals, magazines, 
and newspapers our staff can access electronically and in print. 

We launched a new intranet site for our Office of Opportunity and 
Inclusiveness that provides our employees convenient access to 
information about the office's services and policies. The site provides 
information and resources on diversity efforts, conflict resolution and 
mediation, the discrimination complaint process, sexual harassment, and 
interpreting services, as well as a link to the No FEAR Act that 
requires federal agencies, among other things, to inform their current, 
past, and prospective employees about their rights and protections 
under federal antidiscrimination and whistleblower protection laws. 

Acting on recommendations from an independent review of our external 
Web site by the Nielsen Norman Group, we launched a new and improved 
version of the site, [hyperlink, http://www.gao.gov], during the fourth 
quarter. This new version implements 40 of the 51 recommendations from 
the group, including improved navigation and searching, and 
incorporates the group's principles and methodology into our standards 
and processes. We will address the remaining 11 recommendations in the 
upcoming year. 

4.10.C. Enhancing Knowledge Sharing with National and International 
Accountability and Professional Organizations: To enhance knowledge 
sharing and capacity building among the members of INTOSAI and the 
wider accountability community, we launched a new Web site for the 
INTOSAI International Journal of Government Auditing. The Web site is 
user- friendly and provides ready access to more readers worldwide. In 
addition, it provides the platform for the next transformation phase, 
which will focus on best practices and benchmarking studies, and 
facilitate interaction among supreme audit institutions through 
discussion groups and communities of practice. 

Enhance our business and management processes: 

4.11.C. Streamlining the Engagement Process and Improving Engagement 
Services: To enhance our engagement services, we instituted 
clarifications to our quality assurance policies and procedures. These 
clarifications should better prepare us for an upcoming external peer 
review of our quality assurance policies and procedures related to 
government auditing standards and our compliance with these standards 
in conducting our work. Some of the clarifications included: 

* updating our policy manual and clarifying other existing policies; 

* assessing the needs of new hires and providing them with quality 
assurance and peer review training; 

* implementing early critical sections of the revised Yellow Book; and: 

* developing and communicating a preparation strategy to leadership and 
assigned staff. 

We also implemented several improvements to the annual inspection 
program that resulted in increased efficiency of the process, improved 
process documentation, and greater understanding across the GAO audit 
community. These changes included revising inspection terminology and 
doctrine to reflect audit community practice, refining the deliberative 
and analytic processes, and reducing the number of forms and required 
signatures. 

We continued to advance our strategy enhancements in the economy and 
efficiency of our publishing and printing processes by implementing 
several changes, including: 

* negotiating and implementing a new digital printing contract, which 
enhances our move to e-dissemination and the capability to print only 
the quantity of our product needed for planned distribution to the 
requester and key recipients instead of the 150- copy minimum required 
when sent to an outside contract printer; 

* implementing preflight and quality reviews earlier in the publication 
process to ensure file correctness and functionality far in advance of 
final processing, allow earlier quality assurance staff involvement, 
and reduce errors in products; 

* revising our quality checklist forms used before the product goes to 
final production; 

* successfully establishing a contract vehicle to utilize off- site 
contract editing support for peak periods, enabling the production 
department to meet critical editing needs when production levels are 
greater than existing resources can handle; and: 

* more clearly defining the publishing process by creating and posting 
on our intranet a publishing process chart, Product Assistance Group 
brochure, and standardized guidance for the use of management-tracking 
information. 

We also implemented improvements for e-supplements and technical 
appendixes to our products that make them easier for staff to find and 
use. We issued guidance in the Electronic Assistance Guide for Leading 
Engagements so that staff have a single official location to obtain 
guidance on when and how to create e-supplements and technical 
appendixes. In addition, we created an efficient technology solution to 
make the results of non-Web-based surveys available as e-supplements, 
so that the presentation of results is consistent and clearer to the 
reader. 

4.12.C. Improving our Administrative and Management Processes and Using 
Enabling Technology to Improve Crosscutting Processes: We improved our 
administrative and management processes by streamlining, applying 
enabling technology, and implementing cost and program efficiencies. 
These efforts increased the efficiency, timeliness, and effectiveness 
of our services to our customers. These improvements included upgrades 
to Web-based applications and sites, a number of cost-saving measures, 
and enhancements to our performance management system and our 
suggestion program. 

Through upgrades and additions to our Web-based applications and Web 
sites, we increased the efficiency and effectiveness of several mission 
support operations. Examples of these improvements include: 

* providing automatic self-certification for the Learning Center course 
evaluation; 

* automatic routing of telework application e-mails to decision makers; 

* developing a GAO-wide Honor Awards site for managers and staff to 
enter nominations and the honor awards screening committee to enter the 
committee's recommendations to the Executive Committee, and a site for 
GAO-wide Honor Award recipients to schedule photography appointments; 

* creating new Web sites for (1) the mentoring program, (2) the staff 
and contractor exit system, (3) external GAO Web site usability 
testing, (4) staff applications to "Dine with Dave," (5) a location to 
address requests or inquiries from the general public as a security 
measure for our mission work site, (6) the financial disclosure 
information and process, and (7) the Program and Technical Development 
Program; and: 

* upgrading 100 Web sites with the latest versions of PHP, a scripting 
language that converts a static Web site into a dynamic one, and MySQL, 
an open source database, to support our Web surveys. 

We instituted several cost-saving procedures/systems this fiscal year 
to improve the efficiency of our administrative systems: 

* Installed a toll-free ISTS Help Desk telephone number, eliminating 
long-distance charges for staff teleworking or traveling outside the 
D.C. Metro area who need IT assistance. 

* Modified the procedures for shipping supplies and IT equipment to the 
field offices, including direct shipment of ink cartridges, and use of 
UPS Next Day Air Saver services for shipment of IT equipment, for a 20 
percent cost saving per shipment. 

* Automated the van scheduling system, reducing the human resources 
required for the function and providing automatic verification and 
confirmation information to the requester. 

* Awarded a no-cost contract to digitize the documents that constitute 
the legislative histories of 21,000 public laws from 1921 to 1995 in 
exchange for the contractor's exclusive right to market and sell access 
to the digitized versions of these histories, thus preserving the 
integrity of these files and improving the searchability of this 
valuable information resource. 

To enhance our performance management system, we upgraded and enhanced 
the automated Individual Development Plan (IDP) based on feedback we 
received during the pilot. These changes reinforce our professional 
development requirement; facilitate all levels of IDP review; establish 
the capability to capture, review, communicate, update an IDP 
throughout the appraisal cycle; link IDPs with appraisals; and provide 
reports to managers and HCO. 

Become a Professional Services Employer of Choice: 

4.13.C. Promoting an Environment That Is Fair and Unbiased and That 
Values Opportunity and Inclusiveness: We inaugurated our first 
agencywide mentoring program in fiscal year 2007. The program crosses 
all bands and career tracks to provide facilitated career discussion, 
online learning resources, group mentoring, and one-to-one mentoring 
for staff. We have 75 individuals currently participating in the one-to-
one mentoring, and another 80 participating in the seven mentoring 
groups that have been formed. 

We significantly strengthened our summer intern program this year to 
ensure that interns experience a more structured and consistent program 
in terms of their team experience, training, and feedback. 
Specifically, we improved the program's operating guidance, enhanced 
training and responsibility for intern coordinators, revised the intern 
evaluation form, and implemented a structure for independent review of 
the interns' work experience and conversion process. Feedback from the 
interns has been very positive; the program changes will be fully 
evaluated after intern conversion offers are considered for fiscal year 
2008 entry-level hiring, and additional improvements will be identified 
for the fiscal year 2008 intern cycle. 

4.14.C. Providing Tools, Technology, and a World-class Working 
Environment: To provide an attractive and productive environment in our 
Atlanta, Denver, and Seattle field offices, we contracted for 
additional space. The space was used to accommodate new staff, and 
provide additional conference and team rooms, secure rooms, and video 
conferencing rooms. 

We successfully awarded a consolidated facilities management contract 
to ensure effective and efficient operations and maintenance of our 
headquarters building and provide support services to the legislative 
branch. We were able to consolidate other contracts into the 
consolidated facilities management contract to eliminate duplicative 
costs for administration and management of the contracts. 

We completed the installation and configuration of a storage area 
network (SAN) in the GAO headquarters LAN Operations Center. 
Installation of the SAN has allowed us to reduce backup time, reduce 
the time it takes to put a file server into production, and improve 
system availability through less intrusive backup methods and storage 
availability, and has improved the speed of response to requests for 
data restores. In addition, the SAN upgrade has improved our disaster 
recovery and continuity capabilities and positioned us to support 
future infrastructure enhancements. 

4.15.C. Providing a Safe and Secure Workplace: We piloted the OPM 
automated system for personnel security background investigations, 
eQIP, and implemented the system on October 1, 2007, at no cost to the 
agency, based on the pilot results showing an estimated 50 percent 
reduction in processing time. eQIP allows personnel security background 
investigation forms to be completed, encrypted, and transmitted to the 
OPM servers over the Internet. In addition, we began scanning field 
office fingerprint charts, reducing the number of rejections by OPM by 
an estimated 30 percent. 

We made substantial progress in upgrading our security systems, and 
hence, our security posture. With our completion of Phase I of our 
Integrated Electronic Security System (IESS), we also established 
contingency planning alternatives in case of emergency and laid the 
groundwork for implementation of an agencywide automated entry control 
system and the integration of the field office security systems. 
Specific accomplishments include: 

* relocating the Security Operations Center to a more secure location, 

* constructing a new Emergency Operations Center, 

* upgrading the access control system, 

* creating a GAO Security Local Area Network, and: 

* converting to an upgraded IESS server, database, and software. 

To increase our employees' awareness of IS issues, we aggressively 
pursued initiatives to improve and better coordinate the IS awareness 
program, completing the following actions: 

* developed an awareness briefing delivered to all staff by the 
Comptroller General, 

* developed and offered computer-based training that consolidates 
information and IS awareness training requirements, and: 

* delivered customized security awareness briefings to nearly 1,800 
employees directly involved in external engagements. 

4.16.C. Enhancing Employee Views about GAO: Results from our Employee 
Feedback Survey show that our staff's satisfaction with the support 
supervisors provide for programs to balance work and personal life has 
continued to increase year after year. This year, 87.2 percent of 
respondents strongly or generally agreed that their current supervisor 
supported these programs, up from 86.8 percent in fiscal year 2006. 

We enhanced several of our work life programs and services to better 
meet the needs of our employees. Two noteworthy examples are: 

* increasing the capacity of the headquarters daycare center through 
expansion and: 

* providing more supportive and private accommodations for nursing 
mothers in field offices. 

Our student loan repayment program, under which we will repay a portion 
of an eligible employee's student loan debt, is intended to help us 
retain highly qualified individuals with critical knowledge and skills, 
especially those recently hired. An employee or a candidate for 
employment must sign a service agreement under which the individual 
agrees to a specified period of employment with us of not less than 3 
years in return for repayments toward a student loan previously 
obtained by the candidate or employee. The program continued to be an 
important and popular one for our staff. From fiscal year 2006 to 
fiscal year 2007 the number of applicants increased from 324 to 363, we 
increased our program budget from $1.4 million to $1.7 million, and the 
number of recipients increased from 285 to 320. The amounts provided 
were $4,500 per employee for general category recipients and $7,500 for 
special category recipients. 

Our telework program also continues to be a valuable tool for both 
managers and employees in balancing work requirements and personal 
needs. In fiscal year 2007 there were 1,718 more telework agreements 
than in the previous year, a 200 percent increase. We had 2,370 
employees participating in the telework program on short-term, 
episodic, or continuing agreements. Currently more than 75 percent of 
our staff are enrolled in the telework program, far exceeding the 
estimated 39 percent enrollment for the entire federal government. In 
addition, we improved our telework program application process with 
implementation of a web-based application and approval system. We also 
conducted a survey on the telework program to determine customer 
satisfaction and possible improvement opportunities, and will identify 
opportunities for improvement in fiscal year 2008. The survey also 
showed that 97 percent of our employees consider telework to be 
extremely important or very important, and 98 percent of our employees 
would recommend it to other employees. 

4.17.C. Improving the Development and Experiences of Newly Hired Staff: 
We successfully launched a new professional development program for our 
entry-level program and technical specialists. The program was 
developed to maximize productivity, enhance job satisfaction, increase 
staff retention, and serve as an effective recruitment tool. This 2- 
year program helps newly hired or assigned specialists acquire or 
enhance job competencies and gain work experiences to help them succeed 
in our organization. This is particularly important from a succession 
planning perspective since 60 percent of our administrative 
professional and support staff managers and leaders are currently 
eligible or are within 5 years of being eligible to retire. The 
program, which is modeled after the analyst professional development 
program, provides orientation, targeted job experiences and 
assignments, enhanced guidance and supervision, almost 100 hours of 
required training, and progress and salary reviews every 26 weeks. 

We also implemented a new approach to ensure that 100 percent of newly 
hired staff receive all their mandatory training in a timely and 
organized fashion. Under the learning hub concept, introduced last 
fall, cohorts of field-based Band I analysts travel to a specified 
field office where they receive their mandatory training during a 
series of 2-1/2-to-3-day "bundles." 

[End of Strategic Goal 4] 

2. GAO's Report on Personnel Flexibilities: 

As required by section 11 of the GAO Human Capital Reform Act of 2004 
(Pub. L. No. 108-271), GAO is reporting actions that have been taken in 
fiscal year 2007 under sections 2, 3, 4, 6, 7, 9, and 10. 

Section 2 of this act made permanent GAO's authority to offer voluntary 
early retirement and voluntary separation incentive payments. During 
fiscal year 2007, 16 employees applied for voluntary early retirement, 
13 of these applications were approved and 12 employees ultimately 
separated during the reporting period. Thirteen of the 16 applicants 
applied for voluntary early retirement during an agencywide 
opportunity, which was open for 36 days, from October 17, 2006, through 
November 22, 2006. Applicants were required to retire between November 
28 and December 10, 2006. Of the 13 applications submitted during this 
agencywide opportunity, 10 were approved and 3 were denied; 
subsequently, 9 of the approved applicants separated. The additional 3 
applicants retired under the provision in our implementing regulations 
allowing employees to request a voluntary early retirement outside of 
an announced opportunity. The use of this authority in this fiscal year 
and over the past several years has supported GAO's overall efforts to 
reshape our workforce to ensure that we have the appropriate numbers 
and levels of staff with those skills and knowledge that will allow us 
to accomplish our mission to support the Congress and to help improve 
the performance and ensure the accountability of the federal government 
for the benefit of the American people. 

As noted in prior reports, GAO has not authorized any voluntary 
separation incentive payments because of the high cost associated with 
the required contribution to the retirement fund. For each separation, 
GAO must pay the retirement fund at least 45 percent of the employee's 
final basic pay. This is simply too costly. GAO recently submitted 
draft legislation to the Congress that would eliminate this payment, 
which is not applicable to most executive branch agencies that have 
voluntary separation incentive authority. 

Section 3 of the act authorizes the Comptroller General to determine 
the amount of annual pay adjustments for employees of GAO who are 
performing at a satisfactory level, and prescribes the factors to be 
considered in making those determinations. In fiscal year 2007, the 
Comptroller General authorized a 2.4 percent base pay increase 
effective February 18, 2007, for all employees covered by GAO's banded 
performance-based compensation (PBC) systems who were performing at a 
satisfactory level and who were paid within competitive compensation 
limits. In addition to this adjustment, employees were eligible for PBC 
using a budget factor of 2.15 percent. 

For purposes of the annual adjustment, employees (with the exception of 
Band IIB analysts with salaries above the "speed bump") were considered 
to be performing at a satisfactory level if they were rated at meets 
expectations or higher on all competencies. Thirteen employees were 
rated below expectations on one or more competencies and did not 
receive the annual adjustment. In the case of Band IIB analysts, in 
addition to meeting expectations on all competencies, Band IIB analysts 
were also required to have an appraisal average in the top 50 percent 
of their comparison groups if their salaries exceeded the Band IIB 
"speed bump" (i.e., $121,600 in Washington, D.C.) Two Band IIB 
employees did not receive the annual adjustment because their appraisal 
averages were not in the top 50 percent, and another 4 received a 
partial adjustment. 

Finally, 30 Band I employees and 106 Band IIA employees in the 
"transition range" had salaries in excess of competitive compensation 
limits and therefore did not receive annual adjustments. 

As noted above, GAO employees were also eligible for PBC using a budget 
factor of 2.15 percent. GAO's compensation regulations for the fiscal 
year 2006 appraisal cycle (paid in 2007) were modified from the prior 
year's after notice and comment. Among other changes, the revised 
regulations allowed all employees, regardless of whether they were over 
the competitive compensation limit, to receive 100 percent of their PBC 
as an adjustment to their base pay up to the applicable cap with any 
remaining amounts provided as lump-sum bonuses. The Band III "speed 
bump" was also eliminated in fiscal year 2007. 

Consistent with section 31 U.S.C. 732 (c)(3), the Comptroller General 
considered various data to determine the amount of GAO's compensation 
adjustments, including: 

* salary planning data reported by the professional services, public 
administration and general industry organizations, 

* the General Schedule adjustment, 

* purchasing power indices, 

* additional PBC amounts and the appropriate distribution of funds 
between these two components, and: 

* GAO's funding levels. 

As to GAO's funding levels, GAO submitted its fiscal year 2007 budget 
request on January 13, 2006. In recognition of the fiscal constraints 
facing the federal government, GAO held its requested increase to 5 
percent over fiscal year 2006. GAO requested funds to support an 
increase of 50 full time equivalents to help meet supply and demand 
imbalances in supporting congressional requests. The Comptroller 
General, in his oral remarks before the House Appropriations Committee 
in March 2006, requested the committee's support for our request, 
considering our track record of accomplishments. 

Our budget request estimated the January 2007 annual adjustment at 2.7 
percent based on guidance from the Appropriations Committee and the 
Legislative Branch Financial Managers' Council and assumed that pay 
parity between the military and civilian work-forces would be 
maintained. Our estimate for performance-based merit increases included 
a 1.65 percent budget factor and assumed a 65/35 split between base pay 
increases and cash bonuses, though not specifically stated in our 
budget request. 

From October 2006 to February 2007, GAO and other agencies operated 
under a series of continuing resolutions, which provided funding at 
fiscal year 2006 levels. Language contained in the continuing 
resolutions, precluded agencies from using furloughs as an option to 
help manage funding constraints. On February 15, 2007, the Congress 
enacted a joint resolution, which provided funding for the balance of 
the fiscal year. The joint resolution provided GAO funding at a level 
slightly above fiscal year 2006 levels, that is, the rescission-reduced 
fiscal year 2006 level plus 50 percent of the estimated cost of the 
January 2007 annual pay adjustment. GAO submitted its operating plan to 
the House and Senate Appropriations Committees on March 16, 2007, and 
estimated the annual pay adjustment at 2.4 percent and PBC increases, 
which GAO calculated using a budget factor of 2.15 percent, with 100 
percent base pay increases up to the maximum. 

During the period leading up to the enactment of the joint resolution, 
GAO prepared several impact statements for the House and Senate 
Appropriations Committees indicating the adverse consequences if GAO 
were required to operate in fiscal year 2007 at or near the rescission- 
reduced fiscal year 2006 funding level. In the fiscal year 2008 budget 
submitted on January 26, 2007, and related testimony, the Comptroller 
General reiterated the negative consequences of operating at these 
levels. 

Thus, while most GAO employees received both an annual adjustment and 
PBC, budget considerations necessitated some action on the part of the 
Comptroller General, including deferring the increases for three pay 
periods until February 18, 2007. Although the 2.4 percent increase was 
less than the 2.64 percent provided to Washington, D.C., employees paid 
under the General Schedule, virtually all GAO employees were eligible 
for additional PBC that could greatly increase the amount of permanent 
pay provided them. By contrast, in the executive branch, while all 
employees receive an annual adjustment, many employees receive step 
increases only every 2 or 3 years and may in fact be capped with no 
opportunity for lump-sum bonuses. The average pay adjustment in 
February 2007 for analyst and attorney staff who were covered by the 
annual PBC process was slightly over 4 percent. 

GAO's Senior Executive Service and senior level staff received the same 
1.7 percent increase authorized for Senior Executive Service positions 
in the executive branch, although the date was deferred to February 18, 
2007, as it was for other GAO staff. GAO, however, did not increase the 
maximum pay rate for Senior Executives and senior level staff in order 
not to have them paid in excess of the pay of a member of the Congress. 

GAO's Personnel Appeals Board and student employees are paid by 
reference to the General Schedule (GS), and GAO's wage grade employees 
are paid by reference to the Federal Wage System (FWS) salary rates. 
These employees received the same percentage across-the-board 
adjustment on the same effective date as the increases authorized for 
GS and FWS employees. Likewise, the pay ranges for these employees 
incorporated the changes made to the comparable executive branch pay 
ranges. 

There is one Administrative Professional and Support Staff (APSS) 
employee who is on pay retention under the GAO pay retention 
regulations established in January 2006 under the authority of section 
4 of the act. This employee has been subject to pay retention 
provisions continuously since prior to passage of Pub L. No. 108-271. 

Under section 6, certain key employees with less than 3 years service 
for purposes of leave accrual may be treated as if they had 3 years of 
federal service. Therefore, they would earn 160 hours on an annual 
basis instead of 104 hours. These key employees must be occupying 
positions that are difficult to fill or have unique or unusually high 
qualifications and would be difficult to recruit without additional 
incentives. Four employees received this benefit during fiscal year 
2007. 

Section 7 authorized GAO to establish an Executive Exchange Program. 
During fiscal year 2007, this authority was used to bring in two 
executives from private industry, each for a period of 4 months. At 
GAO, the executives worked on several special projects related to 
federal agency audits and agency financial statement issues. In 
addition to helping revise the GAO/PCIE Financial Audit Manual, they 
used their experience as auditors of agency financial statements to 
help develop protocols to help GAO interact with the agency-level 
auditors (inspectors general as well as public accounting firms) during 
GAO's audit of the U.S. government's consolidated financial statement. 
This program was considered a success from GAO's standpoint and it met 
the expectation of the private industry employer that was involved. It 
is anticipated that this authority will continue to be used on a 
sporadic basis. 

Section 9 relates to GAO's performance management system and, among 
other things, requires a link between the performance management system 
and the agency's strategic plan, adequate training on the 
implementation and operation of the system, and a process for ensuring 
ongoing performance feedback. Even before the imposition of these 
requirements, GAO's performance management system was in conformity 
with the statutory requirements of section 9. GAO continues to comply 
with these requirements and conducts ongoing reviews and analysis of 
the performance appraisal system. An evaluation of the fiscal year 2006 
appraisal and pay cycle was deferred pending the outcome of the then 
ongoing union election. 

Section 10 requires the Comptroller General to consult with any 
interested groups or associations representing officers and employees 
of GAO before implementing any changes under the act. During this 
reporting period, changes to GAO's compensation regulations were issued 
for notice and comment. However, even prior to the passage of the act, 
the Comptroller General and other relevant agency officials were 
meeting periodically with the Employee Advisory Council (EAC) to 
discuss current and emerging issues of mutual interest and concern, 
especially those in the human capital area. GAO also uses employee 
forums focus groups, and other mechanisms to obtain employee input on 
major proposals. GAO provides all employees with advance copies of 
draft orders concerning proposed policies and regulations for their 
comments prior to publication in final form. These steps were taken in 
regard to the promulgation of all policies and regulations implementing 
the provisions of the Human Capital Reform Act of 2004. The Executive 
Committee considered all input from EAC members and other GAO employees 
before implementing any changes. 

In regard to human capital management at GAO, sections 2, 3, 4, 6, 7, 
9, and 10 have provided GAO with valuable tools to reshape its 
workforce and acquire and retain the necessary talent to carry out its 
mission, meet its performance goals, and fulfill its strategic plan. 
These sections collectively are an important component of GAO's overall 
human capital management. These and other human capital tools and 
flexibilities support the achievement of GAO's strategic objective to 
be a world-class professional services organization and model federal 
agency. Without these provisions, GAO would have difficulty attracting 
and retaining top-flight talent in adequate numbers to properly support 
the Congress and serve the American people within current and expected 
resource levels. 

3.GAO's FISMA Efforts: 

A significant effort for GAO is the protection of data and access to 
information. Although not obligated by law to comply with the Federal 
Information Security Management Act (FISMA) under the EGovernment Act 
of 2002, we have adopted FISMA requirements to strengthen our 
information security program and demonstrate our ongoing commitment to 
lead by example. The intentional and inadvertent threats to the 
security of IT systems and information assets have steadily increased 
requiring constant vigilance over the GAO network. In addition, the 
federal IT security policies and practices, as defined by the National 
Institute of Standards and Technology (NIST) 800 series guidance and in 
Federal Information Processing Standards (FIPS) publications, continue 
to evolve in response to this changing landscape of IT security. As 
existing NIST guidance has been updated and new guidance disseminated, 
we have adjusted our internal IT security policies and procedures, as 
well as expanded our efforts to effectively integrate these government- 
wide policies and practices into our IT processes. 

During the past year, we continued our efforts to improve our 
information security program by implementing key requirements set forth 
in the recently published NIST Special Publication 800-53, Recommended 
Security Controls for Federal Information Systems. We have instituted a 
wide range of programs and processes to assess the status of our 
information security program on a recurring basis. These efforts 
include using the results of internal reviews by program offices, the 
GAO Inspector General, and security staff. For example, our Inspector 
General independently evaluates our information security program 
annually, consistent with FISMA requirements, and identifies any 
weaknesses in our implementation of FISMA while offering additional 
recommendations to further strengthen our IT security program. As a 
consequence, we follow the standard practice of using a public 
accounting firm, as well as other external sources, to provide 
independent external evaluations and testing of IT controls on our 
major applications. And, in the last quarter of fiscal year 2007, we 
contracted for the system test of a select group of our information 
systems to further assess the effectiveness of our security policies 
and practices. 

By putting into practice security requirements consistent with FISMA, 
we have substantially elevated information systems security 
consciousness at GAO through our efforts to: 

* implement and refine an enterprisewide, risk-based security program; 

* develop and update essential policies, procedures, and reporting 
mechanisms to ensure that our security program is integrated into every 
aspect of IT system life cycle planning and maintenance; 

* provide recurring security training and awareness to all of our 
staff; 

* integrate security into our Capital Planning and Investment Control 
and project management processes; and: 

* implement and refine an enterprise disaster recovery solution. 

We have also defined security initiatives that focus on changes in our 
technology infrastructure, as well as on new security tools and 
appliances. Among the projects undertaken during fiscal year 2007 that 
have significantly improved our information security program are the 
following: 

* Security Program Plan. The dynamic nature of security threats 
requires that our Information Systems Security Group constantly monitor 
activities and adjust to thwart these challenges and meet the needs of 
GAO. Therefore, we have refined our Security Program Plan that provides 
the road map of activities over the next few years to improve both the 
program and technical components of our network security and to reflect 
new IT security requirements and challenges. We have conducted monthly 
IT security working group, users group, and remediation group sessions 
to effectively support security education and remediation activities. 
We established and held our third annual FISMA Month in August 2007 to 
focus staff on the annual FISMA assessment. And we continue to excel in 
our robust security awareness training program with over 98 percent 
completion for all GAO staff. 

* Enterprise FISMA support. We have completed the upgrade of our 
automated tool to support our FISMA tracking efforts to reflect the 
controls required by NIST Special Publication 800-53. Using this tool, 
we now have an integrated source for managing audit findings and 
remediation efforts, for documenting annual assessments, and for 
tracking certification and accreditation progress. By integrating these 
tracking methods into a single program, the tool allows us to achieve 
consistency in monitoring risks and remediation efforts and improving 
security within and across our information systems. 

* Certification and accreditation of information systems. We have 
implemented two key updates to our certification and accreditation 
process which include a comprehensive initial security assessment and a 
continuous monitoring process. The initial security assessment 
documents key aspects of an information system with respect to data 
classification, system boundaries and network interactions, privacy 
information, and associated risk to GAO. The initial security 
assessment is an integrated component of our IT project management 
process, serving as a check and balance for project advancement, and 
establishes the foundation for our processes to certify and accredit 
information systems that we support. In addition, we have updated the 
system security plan template to reflect the 17 families of security 
controls for information systems in NIST Special Publication 800-53. In 
implementing a continuous monitoring process, we have updated the 
annual reviews performed under NIST Special Publication 800-26, Guide 
for Information Security Program Assessments to meet the requirements 
of the NIST 800-53 system controls. Finally, we have updated our 
existing risk assessments and system security plans, accomplished 
system tests and evaluations to ensure that the appropriate security 
controls have been implemented, documented the continuous monitoring of 
each system and ensured that the system documentation is up-to-date 
supporting annual financial assessments. 

* Enterprise event correlation application. A core component of our 
capability to monitor our diverse network traffic is the implementation 
of an event correlation engine. We have increased that vast amount of 
data being monitored with the upgrade to our internal network intrusion 
detection systems. This upgrade provides additional insight of the 
traffic between our servers and applications by establishing a baseline 
of system communications. Integrating this tool with the event 
correlation engine provides an integration of security events that 
identify potential threats to our network environment. The event 
correlation engine enables the integration and automation of security 
event auditing, which in turn affords the effective use of limited 
resources, minimizing risk to GAO while vigilantly monitoring network 
activities. 

* Enterprise workstation security. To enhance our enterprise 
workstation security solution, we have started adding desktop 
encryption as a means to protect data at the desktop and mobile media 
devices. Our previous solution standard included two-factor 
authentication, anti-spyware, anti-virus, and a personal firewall 
application as part of the standard desktop image. These enterprise 
applications provide the controls for access and remediation of 
security threats to the workstation while providing centralized policy 
management and control. They automatically monitor and remediate 
various types of threats to the workstation by preventing intrusion and 
monitoring programs, such as Adware and Trojan viruses, to prevent 
desktops from becoming infected with malware, and protect data from 
unauthorized access. The implementation of this integrated solution has 
significantly reduced risk to GAO. 

* Enterprise Internet screening. Our requirements for access to 
information on the Internet are vast. Our pilot implementation of an 
Internet screening tool provides antivirus and antispyware protection 
to our Web-based services. This tool is capable of implementing GAO's 
Internet access policy by blocking non-business-related sites. It has 
already provided added security for our Internet access to Web sites 
and applications by improving the overall security posture for GAO's 
network. 

* Vulnerability assessment. Consistent with the requirements cited in 
FISMA, we continue with a standard process using an enterprise 
assessment tool of scanning all network systems, devices, and 
workstations for vulnerabilities in order to ensure secure services and 
system standardization and to meet our updated network security 
guidelines. Weekly scans are conducted to verify weaknesses in our 
information systems and validate that security patches for known 
vulnerabilities have been applied to these systems and devices. The 
ISTS leadership is briefed on scan results with corrective actions 
identified and tracked. 

* Application vulnerability assessment. As a standard process, we have 
integrated a vulnerability assessment tool into our Web application 
development process. This tool complements our overall network 
vulnerability process and ensures a process to validate potential risks 
in commercial off-the-shelf packages and in-house- developed 
applications. This application assessment process assists in validating 
the code and coding practices used in our applications and allows for 
remediation prior to deploying an application. Moreover, since 
implementing this security process into our current coding methodology, 
it has reduced the time needed to develop in-house applications by the 
development of secure coding practices that are reusable. 

* Wired network protocol implementation. In an effort to limit access 
to the GAO network, we have implemented the Institute of Electrical and 
Electronics Engineers 802.1x protocol to restrict network access in our 
team and conference rooms to GAO notebooks only. The validation process 
ensures computer equipment that connects to our network is, in fact, 
GAO equipment, removing the potential risk for non-GAO equipment to 
have uncontrolled access to our network resources. As the network 
infrastructure is updated, we will examine how to expand the use of 
this technology beyond conference rooms in fiscal year 2008. 

* Classified processing upgrade. We completed the expansion of our 
Secret Internet Protocol Router Network, known as SIPRNet to 10 GAO 
field office sites, providing each site with a secure computing 
facility and new equipment and communications links to process 
classified information. This network allows our staff to obtain 
specific classified data directly from agency officials via secure e- 
mail, improves efficiency of our research through direct access to 
classified information, posts our classified reports for review and 
dissemination, electronically transmits our classified reports to 
agencies for comments, and reduces the necessity of using certified 
mail for classified data. We completed the upgrades to the 
communications links to all field offices and headquarters, improving 
transmission capabilities to meet the increased demand for classified 
information. 

* Disaster recovery. The successful implementation of our alternative 
computing facility hosted by the legislative branch is complete. The 
move has both improved our security posture and aligned our activities 
with those of our legislative branch counterparts, while reducing the 
cost of our operations. Last year, we enhanced our emergency 
notification system to improve communications support to GAO staff. 
This year, we continued to expand our capabilities at the facility by 
implementing a high speed connection between GAO headquarters and the 
facility to better enable us to provide critical IT services in the 
event of a disaster. The high speed link provides for failover 
connections between headquarters, field offices and the facility. 

Image Sources: 

This section contains credit and copyright information for images and 
graphics in this product, as appropriate, when that information was not 
listed adjacent to the image or graphic. 

Front cover and pages i, 1, 19, 63, 97, 125, and 127: GAO (flag, 
Capitol balcony), Corbis (Statue of Thomas Jefferson and Inscription of 
his Words at the Jefferson Memorial, Capitol dome interior, 
Contemplation of Justice statue): 

Page 25: GAO (flag), PhotoDisc (bills): 

Page 29: GAO (flag), PhotoDisc (cogs): 

Page 35: PhotoDisc (bills), GAO (Capitol): 

Page 65 and 129: GAO (flag), Corbis (statue of Thomas Jefferson and 
inscription of his words at the Jefferson Memorial): 

Page 69 and 145: GAO (flag), Corbis (Contemplation of Justice statue): 

Page 73 and 163: GAO (flag), Corbis (Capitol dome interior): 

Page 77 and 174: GAO (flag, Capitol balcony): 

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Footnotes: 

[1] The Federal Managers' Financial Integrity Act requires ongoing 
evaluations and annual reports on the adequacy of the systems of 
internal accounting and administrative control of each agency. The 
Government Performance and Results Act seeks to improve public 
confidence in federal agency performance by requiring that federally 
funded agencies develop and implement accountability systems based on 
performance measurement, including setting goals and objectives and 
measuring progress toward achieving them. The Federal Financial 
Management Improvement Act emphasizes the need to improve federal 
financial management by requiring that federal agencies implement and 
maintain financial management systems that comply with federal 
financial management systems requirements, applicable federal 
accounting standards, and the U.S. Government Standard General Ledger 
at the transaction level. 

[2] In addition, we are continuing to explore measures that could help 
us assess how well we develop mutually beneficial relationships with 
other accountability organizations. Such partnerships are important 
because they (1) create opportunities for collaboration and cooperation 
that help all organizations involved address common challenges and 
enhance their ability to improve government operations and serve the 
public better, (2) allow us and other organizations to make meaningful 
changes in our internal accountability processes and policies, and (3) 
allow us to better leverage available resources. In part I of this 
report, the section on Building and Sustaining Partnerships describes 
our progress with measuring the quality of our partnerships and the 
section on Strategies for Achieving Our Goals provides additional 
information about the partnerships we established or continued in 
fiscal year 2007. 

[3] Our most recent performance plan is available on our Web site at 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?rptno=GAO-07-421SP]. 

[4] As part of our risk-based engagement management process, we 
identify a new engagement as high interest if the work we need to 
perform will likely require a large investment of our resources, 
involve a complex methodology, or examine controversial or sensitive 
issues. 

[5] In fiscal years 2005 and 2006, the work performed under the 
Comptroller General's authority represented 13 percent and 15 percent, 
respectively, of our engagement efforts. 

[6] Fiscal Stewardship: A Critical Challenge Facing Our Nation (GAO- 07-
362SP, January 2007) and Securing, Stabilizing, and Rebuilding Iraq: 
Key Issues for Congressional Oversight (GAO-07-308SP, January 2007). 

[7] FISMA was signed into law as part of the E-Government Act of 2002 
(Pub. L. No. 107-347) and its goals include the development of a 
comprehensive framework to protect the federal government's 
information, operations, and assets. To ensure the adequacy and 
effectiveness of information security controls, FISMA requires agency 
program officials, Chief Information Officers, and Inspectors General 
to conduct annual reviews of an agency's information security program 
and report the results to OMB. 

[8] Note 14 to the financial statements describes our Davis- Bacon Act 
trust function. For more detailed Davis-Bacon Act financial 
information, contact our General Counsel. 

[End of Performance and Accountability Report 2006] 

*** End of document. ***