    GAO Performance and Accountability Highlights: Fiscal Year 2007
    (02-JAN-08, GAO-08-2SP).

    This report presents the highlights of GAO's fiscal year 2007
    Performance and Accountability Report. 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. 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, 1, and
    2 percentage points, respectively, in spite of the challenges we
    faced internally. 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. The challenge before us in
    serving the Congress and the nation is to help maintain a
    government that is effective, transparent, and relevant for this
    generation and generations to come. GAO 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.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-08-2SP
        ACCNO:   A79990
      TITLE:     GAO Performance and Accountability Highlights: Fiscal
    Year 2007
         DATE:   01/02/2008
      SUBJECT:   Accountability
    	     Agency missions
    	     Cost control
    	     Financial management
    	     Internal controls
    	     Performance measures
    	     Productivity in government
    	     Quality control
    	     Strategic planning

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    GAO-08-2SP
    [Beginning of Front Cover]

    GAO:

    United States Government Accountability Office:

    Performance and Accountability Highlights:

    Fiscal Year 2007:

    Serving the Congress and the Nation:

    Accountability:

    Reliability:

    Integrity:

    [End of Front Cover]

    Serving The Congress:

    GAO�S Mission:

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

    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 reputation, and GAO's people and
    approach to its work, are designed to ensure both.

    Reliability:

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

    Scope Of Work:

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

    Source: GAO.

    [End of Serving the Congress]

    Contents:

    From the Comptroller General:

    About GAO:

    GAO's Performance:

    GAO's High-Risk Program:

    Resource Issues and Management Challenges:

    From the Chief Financial Officer:

    Overview of Financial Management and Controls:

    GAO's Financial Statements:

    Independent Auditor's Report:

    From the Inspector General:

    [End of Contents]

    From the Comptroller General:

    Figure: Photograph of the Comptroller General of the United States,
    David M. Walker:

    [See PDF for Image of Comptroller General]

    Source: GAO.

    [End of Picture of Comptroller General]

    January 2008:

    I am pleased to present the highlights of 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, effectiveness, 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 both
    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
    GAO's 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, 1, and 2 percentage points, respectively,
    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 spanning many months.

    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 GAO's 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 25 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, 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 employees' jobs 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 are 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 Office 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
    collaboration with the agency's recently elected employees' 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 their 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 in serving the Congress and the nation is to
    help 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 Letter From the Comptroller General]

    About GAO:

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

    GAO is an independent, nonpartisan, professional services agency in the
    legislative branch of the federal government. Commonly known as the
    audit and investigative arm of the Congress or the congressional
    watchdog, we examine how taxpayer dollars are spent and advise
    lawmakers and agency heads on ways to make government work better.

    As a legislative branch agency, we are exempt from many laws that apply
    to the executive branch agencies. However, we generally hold ourselves
    to the spirit of many of the laws, including 31 U.S.C. 3512 (commonly
    referred to as the Federal Managers' Financial Integrity Act), the
    Government Performance and Results Act of 1993, and the Federal
    Financial Management Improvement Act of 1996.[Footnote 1]

    Accordingly, this performance and accountability report for fiscal year
    2006 supplies what we consider to be information that is at least
    equivalent to that supplied by executive branch agencies in their
    annual performance and accountability reports.

    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.

    To accomplish our mission, we use a strategic planning and management
    process that is based on a hierarchy of four elements--strategic goals,
    strategic objectives, performance goals, and key efforts. Our strategic
    plan framework, shown in figure 1 on page 8, outlines our four
    strategic goals and 21 strategic objectives--the two highest levels in
    the hierarchy--that guided our work during fiscal year 2006. Our work
    is primarily aligned under the first three strategic goals, which span
    issues that are both domestic and international, affect the lives of
    all Americans, and influence the extent to which the federal government
    serves the nation's current and future interests (see fig. 2). The
    fourth goal is our only internal one and is aimed at maximizing our
    productivity. Complete descriptions of the steps in our strategic
    planning and management process are included in our strategic plan for
    fiscal years 2004 through 2009, which is available on our Web site at
    [hyperlink, http://www.gao.gov].

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

    The pages that follow offer highlights of our performance and
    accountability report for fiscal year 2006. We also present our
    condensed financial statements and the independent auditor's opinion on
    them. If you would like additional information, please see our full
    performance and accountability report and other performance-related
    documents at [hyperlink, http://www.gao.gov/sp.html].

    GAO Field Locations:

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

    Figure 1: GAO's Strategic Plan Framework:

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

    Mission:

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

    Themes:

    * Long-Term Fiscal Imbalance;

    * National Security;

    * Global Interdependence;

    * Changing Economy;

    * Demographics;

    * Science and Technology;

    * Quality of Life;

    * Governance;

    Goals and Objectives:

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

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

    * Health care needs and financing;

    * Education and protection of children;

    * Work opportunities and worker protection;

    * Retirement income security;

    * Effective system of justice;

    * Viable communities;

    * Natural resources use and environmental protection;

    * Physical infrastructure;

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

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

    * Emerging threats;

    * Military capabilities and readiness;

    * Advancement of U.S. interests;

    * Global market forces;

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

    * Roles in achieving federal objectives;

    * Government transformation;

    * Key management challenges and program risks;

    * Fiscal position and financing of the government;

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

    * Client and customer satisfaction;

    * Strategic leadership;

    * Institutional knowledge and experience;

    * Process improvement;

    * Employer of choice:

    Core Values:

    * Accountability;

    * Integrity;

    * Reliability;

    GAO's Strategic Plan 2007-2012.

    Source: GAO.

    [End of GAO's Strategic Plan Framework]

    Figure 2: Examples of How GAO Assisted the Nation:

    Strategic Goal 1;
    Description: Provide timely, quality service to the Congress and the
    federal government to address current and emerging challenges to the
    well-being and financial security of the American people;
    In fiscal year 2007, GAO provided information that helped to:
    * highlight ways to address problems affecting the delivery of health
    and disability services for injured soldiers and veterans;
    * improve the Food and Drug Administration's 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 Administration's 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 Corporation's premium
    structure;
    * evaluate the Federal Housing Administration's 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;
    In fiscal year 2007, GAO provided information that helped to:
    * 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;
    * alert the Congress to cost and schedule risks affecting major weapon
    systems;
    * identify the need for a Chief Management Officer to improve the
    Department of Defense's 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 Security's
    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;
    In fiscal year 2007, GAO provided information that helped to:
    * identify the risks of relying on military and homeland security
    contractors;
    * 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 nation's 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 agencies' progress with implementing the Freedom of Information
    Act;
    * ensure that individuals' personal information is protected;
    * summarize progress and challenges and identify federal financial
    implications of rebuilding the Gulf Coast;
    * strengthen the Department of Defense's 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;
    In fiscal year 2007, GAO provided information that helped to:
    * inform the Congress and the public through our strategic plan about
    the forces that are likely to shape our nation's future, its place in
    the world, and the changing role of the federal government;
    * develop and implement the Financial Audit System--an automated tool
    used to audit the financial statements of executive branch agencies.

    Source: GAO.

    [End of Examples of How GAO Assisted the Nation]

    [End of About GAO]

    GAO's Performance:

    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. 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.

    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].

    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%.

    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%[C].

    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[G]: Quality of work life;
    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;
    2008: Target: 4.00.

    Source: GAO.

    Note: Information explaining all of the measures included in this table
    appears on pages 78 to 93 in the Data Quality and Program Evaluations
    section in part II of our full 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 $1.5 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.

    [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 2 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.

    [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
    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 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 our full report.

    [End of table]

    Results Measures:

    Focusing on outcomes and the efficiency of the processes needed to
    achieve them is fundamental to accomplishing our mission. The following
    measures 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.

    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.

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

    Figure 3: GAO's Selected Major Financial Benefits Reported in Financial
    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 USPS's 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 Service's (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 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
    Administration's (NASA) decision to terminate the space launch
    initiative (SLI). In a September 2002 report, we questioned NASA's
    overall acquisition strategy to develop a new generation of space
    transportation vehicles--the 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 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 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 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. 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
    Program's integrity had substantially improved, estimating that
    trafficking had diverted only about $241 million per year between 2002
    and 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 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 Justice's (Justice) financial
    litigation units, which are responsible for both criminal and civil
    debt collection, did not have adequate procedures for enforcing
    collections. We made a number of recommendations to the Attorney
    General to help the units improve criminal debt collections and stem
    the growth in reported uncollected criminal debt. One such
    recommendation was to reinforce policies and procedures for entering
    cases into debt-tracking systems; filing liens; issuing demand letters,
    delinquent notices, and default notices; performing asset discovery
    work; and using other enforcement techniques. These policies and
    procedures are applicable to the units' civil as well as criminal debt
    collection efforts. In January 2002, Justice completed actions to
    address this recommendation, 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 2005--the
    third and fourth years for which we are claiming financial benefits
    over a 5-year period--by 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
    Defense's (DOD) fiscal year 2007 operations and maintenance budget. The
    congressional appropriations committee conferees reduced DOD's 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 DOD's
    fiscal year 2007 budget request by $598.8 million for subactivity
    groups that have been historically underexecuted. In addition, the
    conferees reduced DOD's 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 impact--as indicated above--
    is 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 DOD's
    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 review's 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 DOD's new
    strategic plan. As a result, DOD's 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 President's 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 DOD's proposal provided a $1.2 billion increase
    in funding for Special Operations Forces in fiscal year 2007. (Office
    of Management and Budget (OMB) documents state that DOD made offsetting
    reductions before the President's 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 GAO's Selected Major Financial Benefits Reported in Financial
    Year 2007]

    [End of Financial Benefits]

    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.

    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. In figure
    4, 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 4: 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; and;

    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 that 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 Department of Veterans
    Affairs (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
    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 GAO's Selected Nonfinancial Benefits Reported in Fiscal Year
    2007]

    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,
    primarily by executive branch agencies. Putting these recommendations
    into practice generates tangible benefits for the nation.

    New Products Containing Recommendations:

    In fiscal year 2007, about 66 percent of the 647 written products we
    issued (excluding testimonies) contained recommendations. 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.

    Client Measures:

    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.

    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. 5 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 (see page 41 in our full fiscal
    year 2007 performance and accountability report).

    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
    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.

    Figure 5: 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 GAO's Selected Testimony Issues in Fiscal Year 2007]

    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 2] 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.

    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.

    People Measures:

    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.

    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. We exceeded by 1
    percentage point the targets we set for our new hire rate and met our
    acceptance rate target of 72 percent. (For more about our recruitment
    strategy and performance in fiscal year 2007, see app. 1, p. 182 in our
    full performance and accountability report for fiscal year 2007.)

    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. Both of our
    retention rate targets have declined 2 percentage points since fiscal
    year 2003, but have remained relatively flat during the intervening
    years.

    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. 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 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.

    Internal Operations Measures:

    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. 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. 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. We will report actual data for fiscal year 2007 once the data
    from our November 2007 internal operations survey have been analyzed.
    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.

    [End of GAO's Performance]

    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 information technology 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 2 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.

    [End of Our high-risk list work in fiscal year 2007]

    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 systems
    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 weapon systems 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 2: GAO's 2007 High-Risk List:

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Strategic Human Capital Management[A];
    Year designated high risk: 2001.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Manging Federal Real Property[A];
    Year designated high risk: 2003.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Protecting the Federal Government's Information Systems and the
    Nation's Critical Infrastructures;
    Year designated high risk: 1997.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Implementing and Transforming the Department of Homeland Security;
    Year designated high risk: 2003.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Establishing Appropriate and Effective Information-Sharing Mechanisms
    to Improve Homeland Security;
    Year designated high risk: 2005.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A];
    Year designated high risk: 2005.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Business Systems
    Modernization;
    Year designated high risk: 1995.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Personnel Security
    Clearance Program;
    Year designated high risk: 2005.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Support Infrastructure
    Management;
    Year designated high risk: 1997.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Financial Management;
    Year designated high risk: 1995.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Supply Chain Management
    (formerly Inventory Management);
    Year designated high risk: 1990.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    DOD Approach to Business Transformation[A]: DOD Weapon Systems
    Acquisition;
    Year designated high risk: 1990.

    High risk area: Addressing Challenges in Broad-Based Transformations:
    FAA Air Traffic Control Modernization;
    Year designated high risk: 1995.

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

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

    High risk area: Addressing Challenges in Broad-Based Transformations:
    Transforming Federal Oversight of Food Safety[A] (New);
    Year designated high risk: 2007.

    High risk area: Managing Federal Contracting More Effectively: DOD
    Contract Management;
    Year designated high risk: 1992.

    High risk area: Managing Federal Contracting More Effectively: DOE
    Contract Management;
    Year designated high risk: 1990.

    High risk area: Managing Federal Contracting More Effectively: National
    Aeronautics and Space Administration Contract Management;
    Year designated high risk: 1990.

    High risk area: Managing Federal Contracting More Effectively:
    Management of Interagency Contracting;
    Year designated high risk: 2005.

    High risk area: Assessing the Efficiency and Effectiveness of Tax Law
    Administration: Enforcement of Tax Laws[A];
    Year designated high risk: 1990.

    High risk area: Assessing the Efficiency and Effectiveness of Tax Law
    Administration: IRS Business Systems Modernization;
    Year designated high risk: 1995.

    High risk area: Modernizing and Safeguarding Insurance and Benefit
    Programs: Modernizing Federal Disability Program[A];
    Year designated high risk: 2003.

    High risk area: Modernizing and Safeguarding Insurance and Benefit
    Programs: Pension Benefits Guaranty Corporation Single-Employer
    Insurance Program[A];
    Year designated high risk: 2003.

    High risk area: Modernizing and Safeguarding Insurance and Benefit
    Programs: Medicare Program[A];
    Year designated high risk: 1990.

    High risk area: Modernizing and Safeguarding Insurance and Benefit
    Programs: Medicaid Program[A];
    Year designated high risk: 2003.

    High risk area: Modernizing and Safeguarding Insurance and Benefit
    Programs: 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, to effectively address this high-risk area.

    [End of table]

    [End of GAO's High-Risk Program]

    Resource Issues and Management Challenges:

    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 3 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.

    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 6 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.

    Table 3: GAO's Financial Highlights: Resource Information (Dollars in
    millions):

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

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

    Net cost of operations;
    Fiscal Year 2007: [Empty];
    Fiscal Year 2006: [Empty].

    Goal 1: Well-being and financial security of the American people;
    Fiscal Year 2007: $177.4;
    Fiscal Year 2006: $191.9.

    Goal 2: Changing security threats and challenges of globalization;
    Fiscal Year 2007: 157.5;
    Fiscal Year 2006: 154.7.

    Goal 3: Transforming the federal government's role;
    Fiscal Year 2007: 146.6;
    Fiscal Year 2006: 146.8.

    Goal 4: Maximizing the value of GAO;
    Fiscal Year 2007: 23.9;
    Fiscal Year 2006: 23.7.

    Less reimbursable services not attributable to goals;
    Fiscal Year 2007: (5.7);
    Fiscal Year 2006: (5.6).

    Total net cost of operations;
    Fiscal Year 2007: $499.7;
    Fiscal Year 2006: $511.5.

    Actual full-time equivalents (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 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 6: 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 Use of Fiscal Year 2007 Funds by Category]

    Planned Resources to Achieve Our Fiscal Year 2008 Performance Goals:

    Our fiscal year 2008 appropriation of $507.3 million was signed by the
    President on December 26, 2007. Our fiscal year 2008 appropriation
    represents an increase of 3.7 percent over our fiscal year 2007 funding
    level. For the first 3 months of this fiscal year, we and most of the
    federal government operated under a continuing resolution appropriation
    at last fiscal year's funding level.

    Internal Management Challenges:

    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 page 56 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.

    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). 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.

    OEP enhanced our capability to communicate to staff during emergency
    situations by developing and refining the emergency notification
    system.

    In addition, 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;

    * relocated and activated our Security Operations Center and the
    adjacent Emergency Operations Center; and:

    * improved 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.

    * Implementing 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.

    Information Security Challenge:

    Information system security continues to be a critical activity in
    ensuring our information system and assets are effectively protected
    and free from compromise.

    In fiscal year 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 that converts all the data on
    the hard drive to a form that cannot be read by unauthorized people,

    * enhanced our enterprise Internet security by increasing our
    capability to screen Internet traffic against potential threats and
    improved our ability to effectively monitor and better secure our
    computing assets, and:

    * 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
    Federal Information Security Management Act (FISMA) efforts in our full
    performance and accountability report.

    An overall information security program can only be effective when
    systems security efforts are fully integrated with technology
    improvements 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 employees' 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, and 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,

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

    * refining our security processes and procedures.

    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. 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 a
    challenge of paramount importance. This demographic change has also
    created some cultural challenges as our workforce evolves into a
    multigenerational 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 that
    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 composed
    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 in 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. (For a discussion of our personnel flexibilities, see
    appendix 2 in our full performance and accountability report for fiscal
    year 2007.)

    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 analyst 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 constitute 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 be negatively affected.

    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.

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

    For more information about our human capital challenge and other
    management challenges, see part I in our full performance and
    accountability report.

    Mitigating External Factors That Could Affect Our Performance:

    Several external factors could affect the achievement of our
    performance goals, including the amount of resources we receive, shifts
    in the content and volume of our work, and 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 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 so that we could deal with major changes as
    they occurred, maintained broad-based staff expertise 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 our 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. 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 Resource Issues and Management Challenges]

    From the Chief Financial Officer:

    Figure: Picture of the Chief Financial Officer, Sallyanne Harper:

    [See PDF for image]

    Source: GAO.

    [End of Picture of Chief Financial Officer]

    January 2008:

    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:

    [End of Letter From the Chief Financial Officer]

    Overview of Financial Management and Controls:

    Our condensed financial statements and accompanying notes begin on page
    49. 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. 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 are 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 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. 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.

    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.

    [End of Overview of Financial Management and Controls]

    Financial Statements:
    U.S. Government Accountability Office:
    Condensed Balance Sheets:
    As of September 30, 2007 and 2006:
    (Dollars in thousands):

    Assets: Intragovernmental assets including funds with the U.S.
    Treasury;
    2007: $64,603;
    2006: $64,941.

    Assets: Property and equipment, net;
    2007: $41,566;
    2006: $40,293.

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

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

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

    Liabilities: Accounts payable and salaries and benefits;
    2007: $28,107;
    2006: $27,667.

    Liabilities: Accrued annual leave and other;
    2007: $29,572;
    2006: $30,299.

    Liabilities: Workers' compensation;
    2007: $16,368;
    2006: $15,910.

    Liabilities: Capital leases and note payable;
    2007: $8,321;
    2006: $6,872.

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

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

    The accompanying note is an integral part of these statements.

    [End of Condensed Balance Sheets]

    Financial Statements:
    U.S. Government Accountability Office:
    Condensed Statements of Net Cost:
    For Fiscal Years Ended September 30, 2007 and 2006:
    (Dollars in thousands):

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

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

    Net Costs by Goal: Goal 3: Transforming the Federal Government's Role;
    2007: $146,568;
    2006: $146,769.

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

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

    Net Costs by Goal: Net Cost of Operations;
    2007: $499,706;
    2006: $511,479.

    The accompanying note is an integral part of these statements.

    [End of Condensed Statements of Net Cost]

    Financial Statements:
    U.S. Government Accountability Office:
    Condensed 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: Employee benefit costs imputed to GAO;
    2007: $24,746;
    2006: $25,124.

    Other Financing Sources: Other;
    2007: ($27);
    2006: ($61).

    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 used;
    2007: (474,925);
    2006: (476,081).

    Budgetary Financing Sources and Uses: Permanently not available and
    other;
    2007: (6,358);
    2006: (7,366).

    Total Unexpended Appropriations, End of fiscal year;
    2007: 30,562;
    2006: 25,951.

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

    The accompanying note is an integral part of these statements.

    [End of Condensed Statements of Changes in Net Position]

    Financial Statements:
    U.S. Government Accountability Office:
    Condensed Statements of Budgetary Resources:
    For Fiscal Years Ended September 30, 2007 and 2006:
    (Dollars in thousands):

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

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

    Budgetary Resources: Budget authority: Spending authority from
    offsetting collections;
    2007: 10,834;
    2006: 11,119.

    Budgetary Resources: Budget authority: Spending authority from
    offsetting collections: Subtotal;
    2007: 496,728;
    2006: 493,514.

    Budgetary Resources: Budget authority: Permanently not available and
    other;
    2007: (6,358);
    2006: (7,366).

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

    Status of Budgetary Resources: Obligations incurred;
    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 Obligated Balance: Obligated balance, beginning of fiscal
    year;
    2007: $55,238;
    2006: $54,798.

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

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

    Change in Obligated Balance: 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 note is an integral part of these statements.

    [End of Condensed Statements of Budgetary Resources]

    Note to Financial Statements:

    Summary of Significant Accounting Policies:

    Reporting Entity:

    The accompanying condensed 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.

    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.

    Property and Equipment:

    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.

    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. The
    Office of Personnel Management (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.

    The Federal Employees' Compensation Act (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 and are paid, ultimately, by GAO.

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

    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.

    [End of Financial Statements]

    Independent Auditor's Report:

    Clifton Gunderson LLP:
    Certified Public Accountants and Consultants:
    11710 Beltsville Drive:
    Suite 300:
    Calverton, Maryland:
    tel: 301-931-2050:
    fax: 301-931-1710:
    [hyperlink, http://www.cliftoncpa.com]:
    Offices in 17 states and Washington, DC:
    Member of HLB International:

    Independent Auditor's Report:

    We have audited the balance sheets of the Government Accountability
    Office (GAO) as of September 30, 2007 and 2006, and the related
    statements of net costs, changes in net position, and budgetary
    resources for the years then ended. In our report dated November 7,
    2007, we expressed an unqualified opinion on those financial
    statements. We performed our audit 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; and Office of Management and Budget's (OMB) Bulletin 07-
    04, Audit Requirements for Federal Financial Statements.

    In our opinion, the information set forth in the accompanying condensed
    financial statements is fairly stated, in all material respects, in
    relation to the financial statements from which it has been derived.

    Our report also included our opinion that GAO maintained effective
    internal control over financial reporting (including the safeguarding
    of assets) and compliance with laws and regulations as of September 30,
    2007. We did not evaluate all internal controls relevant to operating
    objectives. In addition, because of inherent limitations in any
    internal control, misstatements due to error or fraud may occur and not
    be detected. Also, projection 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.

    Our report also included our opinion that GAO's financial management
    systems substantially complied with the requirements of the Federal
    Financial Management Improvement Act of 1996 (FEMIA).

    We also reported that we found no reportable noncompliance with laws
    and regulations tested. However, the objective of our audit was not to
    provide an opinion on GAO's overall compliance with laws and
    regulations, and we do not express such an opinion. 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. Our conclusion
    on compliance with laws and regulations is intended for Congress and
    GAO's management and should not be used by anyone other than these
    specified parties.

    Signed by:

    Clifton Gunderson LLP:

    Calverton, Maryland:
    November 7, 2007:

    [End of Independent Auditor's Report]

    From the Inspector General:

    Memorandum:

    Date: October 26, 2007:

    To: Comptroller General:

    From: Inspector General - Frances Garcia:

    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 From the Inspector General]

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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] 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.

    Government Accountability Office:
    [hyperlink, http://www.gao.gov/cgi-bin/getrpt?rptno=GAO-08-2SP]

    [End of Performance and Accountability Highlights]