Major Management Challenges and Program Risks: A Governmentwide
Perspective (Letter Report, 01/01/99, GAO/OCG-99-1).

As part of its Performance and Accountability Series, GAO provided
information on the major management challenges and program risks facing
federal agencies.

GAO noted that: (1) many agencies continue to struggle with the basic
tenets of performance-based management; (2) challenges for federal
agencies include: (a) defining appropriate results-oriented goals and
measures; (b) aligning organizations and programs in response to current
and emerging demands; (c) rationalizing crosscutting federal program
efforts; (d) creating performance-based intergovernmental partnerships;
and (e) developing the capability to gather and use program performance
information to make decisions; (3) the federal government's performance
has been limited by a failure to manage on the basis of a clear
understanding of the results that agencies are to achieve and how
performance will be gauged; (4) agencies' effectiveness has been
undermined by outmoded organizational and program structures; (5)
organizational issues also are of concern in program areas where
responsibilities are shared among two or more agencies; (6) a challenge
for agencies is to ensure that modern information technology management
practices are consistently defined and properly implemented; (7) while
progress is being made in designing and implementing information
technology investment management strategies, current federal practices
fall short of the statutory expectations; (8) federal decisionmakers
must have reliable and timely performance and financial information to
ensure adequate accountability, manage for results, and make timely and
well-informed judgments; (9) major challenges must be overcome, both at
the agency level and for the U.S. government as a whole in preparing
reliable financial statements; (10) human capital planning must be an
integral part of an organization's strategic and program planning; (11)
while every agency GAO examined has made progress in becoming more
performance-based, the pace and degree of that progress has been uneven
across agencies; and (12) agencies need to recognize that implementing
performance-based management is not a one-time occurrence but must
become the routine basis for how agencies do business and respond to
current and emerging challenges.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OCG-99-1
     TITLE:  Major Management Challenges and Program Risks: A 
             Governmentwide Perspective
      DATE:  01/01/99
   SUBJECT:  Internal controls
             Performance measures
             Accountability
             Risk management
             Information resources management
             Financial management
             Personnel management
             Financial statements
             Strategic planning
             Federal agency reorganization
IDENTIFIER:  Performance and Accountability Series 1999
             
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Cover
================================================================ COVER


Performance and Accountability Series

January 1999

MAJOR MANAGEMENT CHALLENGES AND
PROGRAM RISKS - A GOVERNMENTWIDE
PERSPECTIVE

GAO/OCG-99-1

A Governmentwide Perspective


Abbreviations
=============================================================== ABBREV

  ACE - X
  MTS - X
  CFO - X
  DOD - X
  DOE - X
  EPA - X
  USDA - X
  IRS - X
  VA - X
  HHS - X
  HUD - X
  OPM - X
  INS - X
  SSA - X
  DI - X
  SSI - X
  USDA - X
  HCFA - X
  OMB - X
  IT - X
  PRA - X
  AIMD - X
  CIO - X
  FAA - X
  VBA - X
  FASAB - X
  GAO - X
  NRC - X
  FFMIA - X
  JFMIP - X

Letter
=============================================================== LETTER



January 1999

The President of the Senate
The Speaker of the House of Representatives

This report, which is part of a special series of reports entitled
the Performance and Accountability Series:  Major Management
Challenges and Program Risks, discusses governmentwide challenges
that must be addressed to improve the performance, management, and
accountability of federal agencies.  The other reports in this
special series focus on the challenges confronting individual
agencies.  They collectively show that federal agencies face
daunting, often long-standing challenges for achieving economy,
efficiency, and effectiveness in the federal government's operations. 
The series also underscores the critical role that the principles of
performance-based management can play in successfully providing the
products, services, and results that taxpayers expect.  These
principles are contained in the Chief Financial Officers Act and
related financial management legislation; the Government Performance
and Results Act; and information technology reform legislation,
including the Clinger-Cohen Act and Paperwork Reduction Act. 

The performance and accountability series was done at the request of
the Majority Leader of the House of Representatives, Dick Armey; the
Chairman of the House Government Reform Committee, Dan Burton; the
Chairman of the House Budget Committee, John Kasich; the Chairman of
the Senate Committee on Governmental Affairs, Fred Thompson; the
Chairman of the Senate Budget Committee, Pete Domenici; and Senator
Larry Craig.  The series was subsequently cosponsored by the Ranking
Minority Member of the House Government Reform Committee, Henry A. 
Waxman; the Ranking Minority Member, Subcommittee on Government
Management, Information and Technology, House Government Reform
Committee, Dennis J.  Kucinich; Senator Joseph I.  Lieberman; and
Senator Carl Levin. 

The performance and accountability series contains separate reports
on 20 agencies--one on each of the cabinet departments and one each
on most of the major independent agencies as well as the U.S.  Postal
Service.  The challenges discussed in each of these reports are drawn
from work that GAO has done in recent years at the request of the
Congress.  As a result, these reports are based on historical work;
other management challenges and program risks may exist within the
respective agencies.  In addition, GAO is not issuing reports on
independent agencies where it has not done sufficient recent work to
assess major performance and management challenges.  As a result, the
reports are not intended to include all major management challenges
and program risks within the federal government. 

As a companion volume to this series, GAO is issuing a summary update
to the list of government operations that its work has identified as
"high risk" because of their greater vulnerabilities to waste, fraud,
abuse, and mismanagement.  High-risk government operations are also
identified and discussed in detail in the appropriate performance and
accountability series agency reports. 

This new performance and accountability series represents a
complement to GAO's high-risk series, which began in 1990.  An
increasing amount of information is becoming available through the
implementation of the performance-based management legislation that
the Congress has enacted.  This information makes it both possible
and appropriate for GAO to periodically reassess the methodologies
and criteria it uses to determine which operations, functions, and
entities should be included in the performance and accountability
series reports and those which should be identified as "high risk."

GAO plans to undertake a comprehensive review and reassessment of
this area during 1999, employing matrix management and other concepts
for use in our next report series, which is scheduled for 2001.  In
conducting this review and assessment, and consistent with our normal
practices, we will consult with key stakeholders, including selected
congressional and agency representatives, before completing our
approach to the 2001 series. 

Our review effort likely will result in new ways of determining and
presenting major management challenges and program risks, especially
in connection with selected functions (e.g., strategic planning,
organizational alignment, human capital strategies, and contract
management) as well as at the overall department and agency level. 
This reassessment may also result in the consolidation of GAO's
current high-risk series as an important component of an expanded
performance and accountability series.  The ultimate determination of
what should be included in this series and what should be deemed to
be "high risk" will continue to involve the independent,
professional, and objective judgment of GAO professionals. 

Copies of this report series are being sent to the President, the
congressional leadership, all other Members of Congress, the Director
of the Office of Management and Budget, and the heads of other major
departments and agencies. 

David M.  Walker
Comptroller General
of the United States


OVERVIEW
============================================================ Chapter 0

As we approach the 21st century, American citizens are increasingly
demanding improved government services and better stewardship of
public resources.  Responding to these demands will require
government decisionmakers to adopt new ways of thinking, consider
different ways of achieving goals, and use new types of information
to guide decisions.  The federal government is adopting the
principles of performance-based management in an effort to address
these demands. 

Performance-based management seeks to shift the focus of government
performance and accountability away from a preoccupation with
activities--such as grants or inspections--to a focus on the results
or outcomes of those activities--such as real gains in safety,
health, and living standards.  Performance-based management
systematically integrates thinking about organizational structures,
program and service delivery strategies, the use of technology, and
human capital practices into decisions about the results the
government intends to achieve. 

The Congress has put in place a statutory framework to instill
performance-based management into federal agencies.  This framework
includes the Chief Financial Officers (CFO) Act and related financial
management legislation; information technology reform legislation,
including the Clinger-Cohen Act of 1996 and the Paperwork Reduction
Act of 1995; and the Government Performance and Results Act of
1993--commonly known as the "Results Act." In developing this
framework, the Congress sought to create a more focused and
performance-based management and decisionmaking process within the
federal government. 

At the request of selected members of the congressional leadership,
we are issuing this special report series, entitled Performance and
Accountability Series:  Major Management Challenges and Program
Risks.  The series includes separate reports on the challenges
confronting 20 individual agencies.  This report draws from those
individual agency reports to discuss the governmentwide challenges to
performance-based management and the status of efforts needed to
overcome those challenges. 


   THE CHALLENGES
---------------------------------------------------------- Chapter 0:1



   (See figure in printed
   edition.)


      ADOPTING A RESULTS
      ORIENTATION
-------------------------------------------------------- Chapter 0:1.1

Our work on federal performance and accountability issues, including
our assessments of progress in implementing the Results Act, has
found that many agencies continue to struggle with the basic tenets
of performance-based management.  The uneven pace of progress across
the federal government is not surprising, because agencies still are
in the early years of undertaking the changes that performance-based
management entails.  The challenges for federal agencies include (1)
defining appropriate results-oriented goals and measures, (2)
aligning organizations and programs in response to current and
emerging demands, (3) rationalizing crosscutting federal program
efforts, (4) creating performance-based intergovernmental
partnerships, and (5) developing the capability to gather and use
program performance information to make decisions. 

Too often, the federal government's performance has been limited by a
failure to manage on the basis of a clear understanding of the
results that agencies are to achieve and how performance will be
gauged.  The challenges at the Immigration and Naturalization Service
(INS), the Internal Revenue Service (IRS), the Social Security
Administration (SSA), and the Department of Veterans Affairs (VA)
illustrate the importance of establishing results-oriented goals and
performance measures and management and accountability systems to
ensure that those goals and measures are used to make decisions. 

Our work also has found that agencies' effectiveness has been
undermined by outmoded organizational and program structures. 
Agencies such as the Department of Energy (DOE) need clearer lines of
authority and accountability to better ensure public health and
safety, and agencies such as the Department of Agriculture (USDA) and
the Department of Defense (DOD) need to streamline organizational
structures to better meet agency missions and conserve resources. 
For example, the end of the Cold War provides DOD with the
opportunity to reduce the size and cost of its infrastructure and
thereby free up resources for other priorities, including modernizing
its forces and maintaining high levels of readiness.  Through the
base closure process, DOD has been able to identify and reduce excess
capacity.  While these actions have been taken, the majority of them
have been within the separate military services and considerable
duplicative capacity remains across DOD. 

Organizational issues also are of concern in program areas where
responsibilities are shared among two or more agencies.  As shown in
table 1, our work involving over 30 program areas across the
government has repeatedly shown that mission fragmentation and
program overlap are widespread and that crosscutting federal program
efforts are not well coordinated.  In program area after program
area, we have found that unfocused and uncoordinated crosscutting
programs waste scarce funds, confuse and frustrate taxpayers and
other program customers, and limit overall program effectiveness. 



                                     Table 1
                     
                        Areas of Fragmentation and Overlap
                            Discussed in GAO Products

Mission areas                 Programs
------------------------  --  --------------------------------------------------
Agriculture                    Food safety

 Commerce and housing           Financial institution regulation
 credit

 Community and regional         Community development
 development                    Economic development
                                Emergency preparedness
                                Housing
                                Rural development

 Education, training,           Early childhood programs
 employment                     Employment training
 and social services            Student aid

 General science, space,        High performance computing
 and technology                 National laboratories
                                Research and development facilities
                                Small business innovation research

 General government             Federal statistical agencies

 Health                         Long-term care
                                Substance abuse
                                Nuclear health and safety
                                Telemedicine

 Income security                Child care
                                Welfare and related programs
                                Youth programs

 International affairs          Educational programs
                                Policy formulation and implementation
Law enforcement                Border inspections
                                Drug control
                                Investigative authority
                                Drug trafficking
                                Combating terrorism

 Natural resources and          Federal land management
 environment                    International environmental programs
                                Hazardous waste cleanup
                                Water quality
--------------------------------------------------------------------------------
Crosscutting programs in food safety, combating terrorism, and
federal land management are but three examples of the many
crosscutting areas where better coordination among federal agencies
is clearly needed.  For example, the fragmented federal approach to
ensure the safety and quality of the nation's food--where as many as
12 different agencies administer over 35 different laws overseeing
food safety--is inefficient and hinders the government's efforts to
efficiently and effectively protect consumers from unsafe food. 
Estimates of foodborne illness range widely, from 6.5 million to 81
million cases annually, and cause between 500 to 9,100 related deaths
each year.  Also, estimates of the cost of medical treatment and
productivity losses associated with these illnesses and deaths range
from $6.6 billion to $37.1 billion. 

Another aspect of performance-based management involves having
federal agencies work with their state partners to instill similar
approaches in the management of intergovernmental programs.  Under
these efforts, the federal government and the states seek agreement
on the results to be achieved, focus accountability within the
intergovernmental system on those agreed-upon results, and provide
states with the flexibility needed to achieve their results.  These
partnerships can be particularly important today when services
traditionally provided by the federal government are increasingly
being provided by state and local governments in partnership with the
federal government.  The Environmental Protection Agency (EPA) and
the Department of Health and Human Services (HHS) are two examples of
agencies that have such partnership efforts under way. 

As federal agencies become increasingly performance-based, they will
need new types of information--results-oriented information--that is
different from that which has traditionally been collected by federal
agencies.  The challenge confronting federal agencies is to obtain
timely and reliable results-oriented performance information and to
ensure that program evaluations are undertaken that allow for the
informed use of that information.  The situations at EPA, HHS, INS,
and the Department of Labor represent typical examples of the
challenges in developing results-oriented information that the
government as a whole confronts. 

For example, state water quality reports required by the Clean Water
Act are a key source of information for measuring progress in
cleaning up the nation's lakes, rivers, and streams.  However, EPA
has found that the wealth of environmental data EPA and states
collect are often difficult to compile in a meaningful way. 
Inconsistencies in water quality assessments that are due to states
using methodologies that differ make it difficult for EPA to
aggregate the data.  Therefore, using information from various
sources presents a challenge when attempting to conclusively
determine whether the quality of rivers, lakes, and streams is
getting better or worse over time. 


      EFFECTIVELY USING
      INFORMATION TECHNOLOGY TO
      ACHIEVE PROGRAM RESULTS
-------------------------------------------------------- Chapter 0:1.2

Like most organizations, federal agencies increasingly depend on
information technology to improve their performance and meet mission
goals.  As detailed in our High-Risk Series:  An Update report that
is accompanying the performance and accountability series,
satisfactorily resolving the Year 2000 date conversion problem and
information security concerns pose enormous challenges for agencies. 
More generally, the federal government spends billions of dollars
each year on information technology.  The return on investment from
much of this spending has been disappointing--in some cases,
virtually nonexistent--and has often resulted in projects with huge
cost overruns and limited improvements in performance. 

The challenge for agencies, therefore, is to ensure that modern
information technology management practices are consistently defined
and properly implemented.  These practices help to ensure that
information technology dollars are directed toward prudent
investments that achieve cost savings, increase productivity, and
improve the timeliness and quality of service delivery.  Constructive
changes are occurring in this regard.  For example, federal policies
and guidance are being updated to align with the information
technology management principles established in the Clinger-Cohen
Act.  In addition, several agencies are implementing new information
technology management approaches that are in line with legislative
reforms. 

While progress is being made in designing and implementing
information technology investment management strategies, current
federal practices fall short of the statutory expectations.  Recent
reviews we have conducted in numerous federal agencies raise
particular concerns about

  -- fundamental weaknesses in the way information technology
     investment decisions are made, including (1) a lack of clarity
     about how these investments are being or will be used to improve
     performance or help achieve specific agency goals and (2)
     incomplete data on which to base informed decisions;

  -- slow progress in designing and implementing information
     technology architectures before proceeding with massive system
     modernization efforts;

  -- inadequate or immature software development, cost estimation,
     and systems acquisition practices; and

  -- the need to build effective chief information officer leadership
     and organizations. 


      ESTABLISHING FINANCIAL
      MANAGEMENT CAPABILITIES THAT
      EFFECTIVELY SUPPORT
      DECISIONMAKING AND
      ACCOUNTABILITY
-------------------------------------------------------- Chapter 0:1.3

Federal decisionmakers must have reliable and timely performance and
financial information to ensure adequate accountability, manage for
results, and make timely and well-informed judgments.  However,
historically such information has not been routinely available across
government.  The combination of reforms ushered in by the Results Act
and the CFO Act will, if successfully implemented, systematically
fill this void and generate the necessary foundation to effectively
manage and run performance-based organizations. 

The CFO Act sets expectations for agencies to develop and deploy more
modern financial management systems, to routinely produce sound cost
and performance information, and to develop results-oriented reports
on the government's financial condition by integrating budget,
accounting, and program information.  The challenge for agencies is
to fully meet the ambitious yet important expectations set by the CFO
Act.  Toward that end, all 24 agencies covered by the CFO Act have
been preparing annual audited financial statements beginning with
fiscal year 1996.  Eleven of these agencies received unqualified
audit opinions for fiscal year 1997--up from 6 for fiscal year 1996. 
Table 2 shows the audit opinions received by all 24 CFO Act agencies
for fiscal year 1997. 



                                     Table 2
                     
                       The 24 CFO Act Agencies' Fiscal Year
                     1997 Financial Statement Audit Opinions

Opinions                   Agencies
-------------------------  -----------------------------------------------------
Unqualified audit           Department of Education
opinions                    Department of Energy
                            Department of Interior
                            Department of Labor
                            Department of State
                            Environmental Protection Agency
                            General Services Administration
                            National Aeronautics & Space Administration
                            Nuclear Regulatory Commission
                            Small Business Administration
                            Social Security Administration

                            Health & Human Services
Qualified audit opinions    Housing & Urban Development
                            Veterans Affairs
                            National Science Foundation

                            Department of Agriculture
Disclaimers                 Department of Commerce
                            Department of Defense
                            Department of Justice
                            Department of Transportation
                            Agency for International Development

                            Treasury received an unqualified opinion on
Other                      its administrative financial statements and a
                           qualified opinion on its custodial schedules.

                            Federal Emergency Management Agency
                           received an unqualified opinion on a
                           financial statement for a part of the agency.
                           Financial statements were not prepared for
                           the whole agency.

                            Office of Personnel Management's Retirement
                           Fund and Life Insurance Fund received
                           unqualified opinions; revolving funds, health
                           benefits, and salaries and expenses received
                           disclaimers.
--------------------------------------------------------------------------------
At the same time, major challenges must be overcome, both at the
agency level and for the U.S.  government as a whole in preparing
reliable financial statements.  The most serious challenges are
framed by the results of our first-ever audit of the government's
consolidated financial statements for fiscal year 1997; deficiencies
in the statements prevented us from being able to form an opinion on
their reliability.  In summary, these deficiencies were significant: 
widespread financial system weaknesses; problems with fundamental
recordkeeping; incomplete documentation; and weak internal
controls--including computer controls.  These deficiencies prevented
the government from accurately reporting a large portion of its
assets, liabilities, and costs.  These deficiencies also affected the
reliability of the consolidated financial statements and undermined
agencies' ability to (1) accurately measure the full cost and
financial performance of programs and (2) effectively and efficiently
oversee and safeguard federal assets and manage operations. 


      BUILDING, MAINTAINING, AND
      MARSHALING THE HUMAN CAPITAL
      NEEDED TO ACHIEVE RESULTS
-------------------------------------------------------- Chapter 0:1.4

Leading performance-based organizations understand that effectively
managing the organization's employees--or human capital--is essential
to achieving results.  Only when the right employees are on board and
provided the training, tools, structure, incentives, and
accountability to work effectively is organizational success
possible.  Thus, human capital planning must be an integral part of
an organization's strategic and program planning; human capital
itself should be thought of not as a cost to be minimized but as an
asset to be enhanced. 

The challenge--and opportunity--confronting federal agencies as they
seek to become more performance-based is to align their human capital
policies and practices with their program goals and strategies.  For
example, the continuing difficulties that the Department of Housing
and Urban Development (HUD) has had in planning for and effectively
using its human capital are among the most pressing challenges the
agency faces.  One of HUD's 2020 Management Reform Plan's goals was
to reduce staffing from about 10,500 to 7,500 by 2002.  However, we
found that HUD's target levels were not based on a systematic
analysis of how many staff it needed to carry out a given
responsibility or function.  This weakness in HUD's human capital
planning is particularly troubling because, in the past, not having
enough staff with the necessary skills has limited HUD's ability to
perform essential functions, such as monitoring multibillion dollar
federal programs. 

Human capital will become an increasingly prominent issue for the
federal government as agencies implement the performance-based
management agenda established by the Congress in the 1990s.  Whereas
financial management, information technology management, and
results-oriented goal setting and performance measurement have all
been the subject of major reform legislation this decade, no
consensus has emerged on the fundamental structural or policy changes
that may be needed to better align the federal government's human
capital approaches with the new performance-based management and
accountability framework. 

This is especially true in connection with linking agencies'
strategic plans with their performance measurement and individual
reward systems.  Ultimately, human capital reforms (for example,
changes to the civil service system) will be necessary in order to
fully realize the benefits which can be gained through a well-defined
performance-based management and accountability framework.  In that
regard, we will collaborate with the Congress to develop a body of
work that helps to define the guiding principles and best practices
for federal human capital issues. 


   PROGRESS AND NEXT STEPS
---------------------------------------------------------- Chapter 0:2



   (See figure in printed
   edition.)

Across the federal government, agencies have been making real,
although difficult, progress over the last few years in implementing
performance-based management.  These efforts have confirmed that
fundamental improvements in management and results are possible when
an organization undertakes a disciplined approach to implementing the
performance-based management principles embodied in the congressional
framework.  While every agency we have examined has made progress in
becoming more performance-based, the pace and degree of that progress
has been uneven across agencies.  A primary difference in the rate of
progress is the degree of attention, visibility, and commitment that
top agency leadership gives this area.  As the reports included in
our performance and accountability series demonstrate, a great deal
of hard and sustained work remains to be done.  The steps that
individual agencies need to take in response to their particular
challenges are detailed in the respective individual agency reports. 

On a governmentwide basis, agencies must ensure that the statutory
framework the Congress established is effectively implemented.  More
generally, agencies need to recognize that implementing
performance-based management is not a one-time occurrence but must
become the routine basis for how agencies do business and respond to
current and emerging challenges.  Ultimately, performance-based
management should become an integral part of an agency's culture. 
The transition process must include proven "change management"
approaches to be successful and sustained.  Top management within
agencies must provide the consistent leadership necessary to direct
the needed management changes and to ensure that momentum is
maintained.  The Office of Management and Budget (OMB) can build on
the initiatives it already has taken and continue to reinforce
agencies' efforts by using program performance and cost information
to help guide its decisions and by assisting and overseeing agencies'
efforts. 

We have long advocated that congressional committees of jurisdiction
hold augmented oversight hearings on each of the major agencies at
least once each Congress and preferably on an annual basis. 
Information on the linkages among plans, programs, budgets, and
performance results--which should become available as agencies'
implementation of performance-based management moves forward--could
provide a consistent starting point for each of these hearings. 
Congressional use of results-oriented program performance and cost
information in its decisionmaking about federal policies and programs
will also spur agencies' efforts to implement the statutory framework
by sending the unmistakable message to the agencies that the Congress
remains serious about performance-based management and
accountability. 


MAJOR PERFORMANCE AND MANAGEMENT
CHALLENGES
============================================================ Chapter 1

As we approach the 21st century, government decisionmakers and
managers in various democracies around the world are confronting
strikingly similar challenges to public management and service
delivery.  Although the specific circumstances vary, these
governments are responding to citizens who expect public sector
organizations to be significantly more effective without increases in
spending. 

At the same time, decisionmakers and managers are finding that
achieving results on public issues, such as promoting economic
development, ensuring economic security, protecting the environment,
and securing their nation's borders, increasingly requires
coordinated responses from numerous public and private entities. 
This growing awareness of the interconnection of vital public issues
is being driven in part by the intractable nature of the social and
policy problems that governments confront, the globalization of
national economies, and the rapid growth in communication and
information flows made possible by the increasing use of technology. 

Faced with these challenges, foreign governments--and state and local
governments here in the United States--have recognized that the
traditional ways of doing the public's business are becoming less
effective in meeting current and emerging demands.  In response,
these governments have implemented major public sector management
reform initiatives.\1 While these initiatives have been crafted in
response to different needs, political environments, and cultures,
the reform initiatives are taking a generally consistent direction. 
Performance-based management, the unifying theme of these reform
initiatives, seeks to shift the focus of government performance and
accountability away from a preoccupation with activities--such as
grants or inspections--to a focus on the results of those
activities--such as real gains in safety, health, and living
standards. 

Defining performance and accountability in such terms requires a
management orientation that moves beyond what government can largely
control--the activities it undertakes--to an orientation that is more
concerned with what government merely influences--results--and how
best to achieve those results.\2 Such an approach to public
management also systematically integrates thinking about
organizational structures, program and service delivery strategies,
the use of technology, financial management, and human capital
policies and practices into decisions about the results that the
organization intends to achieve. 

At the federal level, the Congress has put in place a statutory
framework to instill such a performance-based approach into the
management of federal agencies.  This framework includes the Chief
Financial Officers (CFO) Act and related financial management
legislation; information technology reform legislation, including the
Clinger-Cohen Act of 1996 and the Paperwork Reduction Act (PRA) of
1995; and the Government Performance and Results Act of
1993--commonly known as the "Results Act."\3

In enacting this framework, the Congress sought to create a more
focused, performance-based management and decisionmaking process
within both the


Congress and the executive branch.  This statutory framework provides
the basis for developing fully integrated information about agencies'
missions and strategic priorities, results-oriented goals that flow
from those priorities, performance data to show progress in achieving
those goals, the relationship of information technology investments
to the achievement of performance goals, and accurate and audited
financial information about the costs of achieving results. 

As a result of agencies' implementation of this framework, a
tremendous amount of new information is being generated--from agency
plans that are produced under the Results Act and audited financial
statements produced under the financial management reform
legislation--that had not been available on a consistent,
governmentwide basis in the past.  This new information is providing
deeper understandings of the performance and management challenges
confronting each agency and helping to target program areas needing
the most attention.\4 As described in this report and evidenced
throughout our performance and accountability series, the federal
government as a whole also confronts a number of major challenges to
improving governmentwide performance and management.  These
governmentwide performance and management challenges include: 



   (See figure in printed
   edition.)

The current statutory framework provides most of the fundamental
building blocks for agencies to address these challenges and become
more performance-based.  Over the last several years, we have issued
a large number of reports, guides, and other products aimed at
helping to show the Congress and agencies how they can use the
performance-based management principles embodied in the statutory
framework to guide decisionmaking.\5 A central theme of that work has
been that an integrated implementation of the statutory requirements
is essential if agency managers, the Congress, and other
decisionmakers are to find the framework useful. 

The improved performance and decisionmaking that the Congress expects
will not occur simply because, for example, an agency issues a
strategic plan or financial statement.  Rather, performance and
decisionmaking are improved when agency managers and congressional
and other decisionmakers use the information in those documents and
the performance-based management processes that underpin them. 


--------------------
\1 Managing for Results:  Experiences Abroad Suggest Insights for
Federal Management Reforms (GAO/GGD-95-120, May 2, 1995) and Managing
for Results:  State Experiences Provide Insights for Federal
Management Reforms (GAO/GGD-95-22, Dec.  21, 1994). 

\2 Managing for Results:  Measuring Program Results That Are Under
Limited Federal Control (GAO/GGD-99-16, Dec.  11, 1998). 

\3 Managing for Results:  The Statutory Framework for
Performance-Based Management and Accountability (GAO/GGD/AIMD-98-52,
Jan.  28, 1998). 

\4 Managing for Results:  Using GPRA to Assist Congressional and
Executive Branch Decisionmaking (GAO/T-GGD-97-43, Feb.  12, 1997). 

\5 See "Related GAO Products" at the end of this report for a list of
our reports, guides, and other products. 


   ADOPTING A RESULTS ORIENTATION
---------------------------------------------------------- Chapter 1:1



   (See figure in printed
   edition.)

The cornerstone of federal efforts to successfully meet current and
emerging public demands is the adoption of a results orientation--a
clear sense of what results the agency wants to achieve, how the
organization is aligned to achieve results, how it will measure
progress toward those results, how those results will be achieved,
what data will be gathered to support decisionmaking, and what
incentives and accountability mechanisms will be used to help ensure
success.  Under the Results Act, multiyear strategic plans and annual
performance plans are the primary vehicles for agencies to use in
adopting this results orientation and clearly communicating their
strategic vision and results to the Congress and other
decisionmakers.  Agencies' first strategic plans, covering at least 5
years, were issued by September 30, 1997.  Building on these
strategic plans, the first annual performance plans were developed
for fiscal year 1999, which began October 1, 1998. 

Our work on federal performance and accountability issues, including
assessing progress in implementing the Results Act, has found that
many agencies continue to struggle to implement the basic tenets of
performance-based management.\6 The uneven pace of progress across
the federal government is not surprising because agencies still are
in the early years of undertaking the changes that performance-based
management entails. 

The challenge for federal agencies is to make significant progress in
several areas, including (1) defining results-oriented goals and
measures, (2) aligning organizations and programs in response to
current and emerging demands, (3) rationalizing crosscutting federal
program efforts, (4) creating performance-based intergovernmental
partnerships, and (5) developing the capability to gather and use
results-oriented performance information to make decisions.  The
Results Act provides agencies with a mechanism to establish and
continuously refine and update their results orientation.  Moreover,
as will be discussed below, successfully addressing these challenges
will require agencies to make progress in meeting human capital
issues, in particular implementing incentive and accountability
mechanisms. 


--------------------
\6 The Government Performance and Results Act:  1997 Governmentwide
Implementation Will Be Uneven GAO/GGD-97-109, June 2, 1997 and
Managing for Results:  Prospects for Effective Implementation of the
Government Performance and Results Act (GAO/T-GGD-97-113, June 3,
1997). 


      DEFINING RESULTS-ORIENTED
      GOALS AND MEASURES
-------------------------------------------------------- Chapter 1:1.1

Too often, the federal government's performance has been limited by a
failure to manage on the basis of a clear understanding of the
results agencies are to achieve and how performance will be gauged.\7
These understandings are vital because federal programs are designed
and implemented in dynamic environments where competing program
priorities and stakeholders' needs must continuously be balanced and
new needs must be addressed.  The challenges at the Immigration and
Naturalization Service (INS), the Internal Revenue Service (IRS), the
Social Security Administration (SSA), and the Department of Veterans
Affairs (VA) show the importance--and the difficulty, in many
cases--of establishing a set of goals and performance measures that
cover the variety of results that agencies are expected to achieve. 

INS has come under severe criticism for the difficulty it has had in
carrying out two of its core missions.  On the one hand, INS is to
enforce laws to prevent aliens from entering the country illegally,
and on the other hand, it is to provide services and benefits to
legal immigrants.  The Commission on Immigration Reform and other
organizations have concluded that INS has achieved only limited
success in both its enforcement and services and benefits missions,
in part because of "mission overload."

As a part of its enforcement mission, INS is to remove deportable
criminal aliens from this country.  However, we found that INS failed
to identify nearly 2,000 potentially deportable aliens who were
released from prison between January 1 and June 30, 1997.  These
criminal aliens were released into U.S.  communities without INS
having determined whether they posed a risk to public safety. 
Hundreds of these criminal aliens were aggravated felons who, by law,
should have been placed in removal proceedings while in prison and
taken into INS custody upon release; some were subsequently
rearrested for new crimes, including felonies. 

As part of its services and benefits mission, INS is to facilitate
the processing of aliens' applications for citizenship.  However, INS
has had problems in providing these services and benefits.  In order
to become a naturalized citizen, aliens must meet certain
requirements, such as being of good moral character.  We have
reported that INS' failure to conduct complete criminal history
checks on all applicants before granting citizenship resulted in
individuals with felony convictions improperly becoming naturalized. 

Similarly, IRS has been criticized for not successfully balancing two
key priorities:  revenue collection and the fair and respectful
treatment of taxpayers.  After a series of well-publicized hearings
highlighting cases of reported taxpayer abuse, the Congress passed
the IRS Restructuring and Reform Act of 1998, and the Commissioner of
Internal Revenue began implementing a multiyear plan for the agency
aimed at improving customer service. 

IRS' traditional performance goals and measures, such as amounts
collected from taxpayers, had created incentives to maximize
enforcement results.  They did not create sufficient incentives to
ensure that taxpayers received fair treatment.  Under proposed
changes, IRS plans to emphasize identifying, as promptly as possible,
taxpayers who may have compliance problems and then addressing the
particular problems of those taxpayers.  This more customer-oriented
approach is intended to help both the taxpayer and IRS by minimizing
the need for subsequent enforcement actions. 

SSA provides an additional illustration of the need for agencies to
focus their efforts on the full range of expected results.  We have
found that for its disability programs--the Disability Insurance (DI)
program and the Supplemental Security Income (SSI) program--SSA has
emphasized improving processes for quickly determining eligibility
and moving the eligible claimants onto the disability rolls. 
Although progress in this area is vitally important to improving the
well-being of eligible individuals and their families, SSA has not
put the emphasis on the equally important need to help individuals
return to work and move off of the disability rolls. 

The Social Security Act calls for rehabilitating benefit applicants
to the maximum extent possible.  Further, helping individuals return
to work is especially appropriate now when each day seems to bring
fresh reports of technological and medical advances leading to new
opportunities for persons with disabilities to return to work. 

Advances in the management of disabilities, such as computer-aided
prosthetic devices that return some functioning to the physically
impaired, have helped reduce the severity of the functional loss
caused by some disabilities.  Electronic communications and assisting
technologies, such as synthetic voice systems, standing wheelchairs,
and modified automobiles and vans, have also given people with
certain types of disabilities more independence and potential to
work.  Moreover, society's awareness of the important contributions
that people with disabilities can make in the workplace has grown in
recent years.  This awareness is reflected in part by the enactment
of the Americans With Disabilities Act, which has among its core
principles the premise that many people with disabilities can work. 

Despite the technological, medical, and social advances, not more
than 1 in 500 DI beneficiaries and few SSI beneficiaries have left
SSA's disability rolls to return to work.  SSA has recognized the
need to expand its efforts to place greater priority on helping
individuals return to work and has efforts under way in this regard. 
However, additional steps, such as providing return-to-work
assistance earlier in the eligibility process, are needed to
strengthen SSA's efforts. 

VA is one of a large number of agencies that, in response to emerging
citizen needs and new opportunities, is making major changes in how
it defines its role, the results it wants to achieve, and the
performance measures it will use to gauge progress in achieving those
results.  Over the past 3 years, VA has introduced initiatives to
fundamentally change the way it manages its approximately $18 billion
health care system.  In particular, VA is shifting the way it
delivers health care services from an episodic, predominantly
inpatient-based model to a system of primary, outpatient, and
preventive care.  However, as VA makes this difficult and important
change in how it defines its role, it must develop, implement, and
use more results-oriented performance measures that focus on the
health status of veterans as the overall indicators of its
effectiveness. 

Traditionally, VA defined its success and measured its progress based
on health care delivery measures, such as the number of hospital beds
in use, the number of patients served, and the number of patients
receiving certain diagnostic tests.  Although these measures can
provide useful information for managing VA's programs, they provide
little perspective on the relationships between VA's services and the
health and well-being of veterans--the key result that veterans and
their families care about and an overriding focus of the VA reform
efforts. 


--------------------
\7 GAO/T-GGD-97-43, Feb.  12, 1997 and Managing for Results:  Steps
for Strengthening Federal Management (GAO/T-GGD/AIMD-95-158, May 9,
1995). 


      ALIGNING ORGANIZATIONS AND
      PROGRAMS IN RESPONSE TO
      CURRENT AND EMERGING DEMANDS
-------------------------------------------------------- Chapter 1:1.2

Our work has frequently found that ineffective and outmoded
organizational and program structures have undermined agencies'
effectiveness.\8 Moreover, agencies have been slow in responding to
changes in stakeholders' expectations; technological developments;
and social, political, and demographic trends.  The organizational
challenges that agencies such as the Department of Energy (DOE), the
Department of Agriculture (USDA) and the Department of Defense (DOD)
confront range from the need for clearer lines of authority and
accountability to streamlining organizational structures in response
to changing circumstances.  Although each agency must craft a
specific organizational solution in response to its own needs and
situation, these agencies share a challenge common to all federal
agencies as they seek to become more performance-based--the ongoing
need to ensure that organizational structures and program approaches
are in place to efficiently support the accomplishment of
mission-related goals. 

In a series of reports starting in 1981, we found that DOE's
organizational structure has neither clear lines of authority nor
clear definitions of roles and responsibilities.  DOE's organization
includes 12 headquarters program offices; 10 major field offices,
with many smaller offices located near DOE's facilities; and over 50
major facilities owned by the government and operated by DOE's
contractors.  Contractors receive policy guidance from different
program offices but are managed and evaluated by field offices that
are not accountable to the program offices. 

A more effective organization of its offices and facilities could
assist DOE in obtaining the performance and accountability it needs
from its contractors.  For example, in 1997, we found that weaknesses
in DOE's organizational structure prevented adequate control over
leaks of tritium (a radioactive element) into groundwater from a
research reactor at the Brookhaven National Laboratory on Long
Island, New York.  These leaks went undetected for many years and
then remained uncorrected for several more years because the
contractor assigned a low priority to them, despite public concern
and local environmental regulations requiring corrective action. 

We found that DOE's organizational structure prevented effective
accountability over the operation of the Department's on-site field
office--the office with the most immediate responsibility for
ensuring the laboratory's compliance with environmental, safety, and
health requirements.  The on-site office was part of a chain of
command with no explicit responsibilities for environmental, safety,
and health issues, and it did not report directly to either of two
other offices with such responsibilities.  While DOE eventually
terminated the contract, its ineffective organizational structure
contributed to prolonged delays in addressing health and safety
issues and a loss of public trust. 

USDA also is challenged by the need to improve its effectiveness by
means of a more efficient organizational structure.  In USDA's
situation, streamlining and consolidating its offices have been the
driving forces behind its continuing effort to implement an ambitious
restructuring of its outmoded field structure.  The USDA field
structure, created in the 1930s, was based on placing an office in
nearly all of the nation's rural counties to provide a range of
services to farmers and rural communities.  But the number of farmers
living in rural America has declined, and by the early 1990s, the
significant changes in the farming sector had rendered USDA's field
structure obsolete and inefficient. 

Directed by the Federal Crop Insurance Reform and Department of
Agriculture Reorganization Act of 1994, USDA has reduced the number
of county office locations by more than 1,000--from 3,760 to about
2,700, as of March 1998.  Nonetheless, USDA's field structure
continues to represent a major investment for the Department, with
the costs of operating the USDA local county offices now at almost $1
billion annually.  As USDA continues to seek opportunities to
streamline and modernize its field structure, the reduced costs to
the government that could result from further streamlining need to be
carefully weighed against any resulting changes in the quality of
services to the farmers who participate in farm programs. 

Similar to USDA, as we enter the next century, DOD also faces an
external reality that has fundamentally changed from the one it
confronted just a few short years ago.  The end of the Cold War has
provided DOD with the opportunity to reduce the size and cost of its
infrastructure and thereby free up resources for other priorities,
such as modernizing its forces and maintaining high levels of
military readiness.  The Secretary of Defense's November 1997 Defense
Reform Initiative Report noted that DOD continued to be weighed down
by facilities that are too extensive for its needs, more expensive
than it can afford, and detrimental to the efficiency and
effectiveness of the nation's armed forces.  As discussed in
Performance and Accountability Series:  Major Management Challenges
and Program Risks:  Department of Defense, in February 1997, we
identified defense infrastructure as a high-risk area, and it remains
on our high-risk list. 

We have identified numerous areas in which DOD's infrastructure can
be eliminated, streamlined, or reengineered to be made more
efficient.  The Secretary's report also provided specific
initiatives, including privatizing military housing and utility
systems, demolishing excess buildings, consolidating and
regionalizing many defense support agencies, and requesting
legislative authority to conduct two additional base realignment and
closure rounds.  However, DOD has found that infrastructure
reductions are difficult because of service parochialism, a cultural
resistance to change, and public concern about the effects and
impartiality of decisions. 

Moreover, while the defense reform initiatives are steps in the right
direction and have brought high-level attention to the need for
infrastructure reductions, collectively they do not provide a
comprehensive long-range plan for a facilities infrastructure that is
affordable, appropriate, and sustainable for DOD in the post-Cold War
world.  We have cited the need for such a plan but have noted that
DOD's past plans did not include long-term comprehensive strategies
for facilities' revitalization, replacement, and maintenance and
lacked some of the basic elements of performance-based
management--ties to measurable goals to be accomplished over
specified time frames and links to funding. 

Improved infrastructure planning can help DOD's components and
programs to develop results-oriented goals and performance measures
that are linked to and support DOD-wide goals.  Faced with a limited
budget, DOD's infrastructure inefficiencies, if not addressed, will
consume money that could be made available to meet other defense
priorities, such as force modernization and readiness needs. 


--------------------
\8 Managing for Results:  Status of the Government Performance and
Results Act (GAO/T-GGD-95-193, June 27, 1995) and Government
Management Issues (GAO/OCG-93-3TR, Dec.  1992). 


      RATIONALIZING CROSSCUTTING
      FEDERAL PROGRAM EFFORTS
-------------------------------------------------------- Chapter 1:1.3

Virtually all of the results that the federal government strives to
achieve require the concerted and coordinated efforts of two or more
agencies.  This shared responsibility is an outgrowth of several
factors, including the piecemeal evolution of the federal government
and the complexity of public issues requiring several agencies to
contribute differing perspectives, expertise, and resources to
address these issues.  Our work looking at these responsibilities has
repeatedly shown that mission fragmentation and program overlap are
widespread in the federal government and that crosscutting federal
program efforts are not well-coordinated.\9

As was shown above in table 1, our work identifying fragmentation and
overlap has involved over 30 program areas across the federal
government and covered nearly a dozen federal mission areas. 

In program area after program area, we have found that unfocused and
uncoordinated crosscutting programs waste scarce funds, confuse and
frustrate taxpayers and other program customers, and limit overall
program effectiveness.  Crosscutting programs in food safety,
combating terrorism, and federal land management are but three
examples of the many crosscutting areas where better coordination
among federal agencies, perhaps leading to more rationalized program
approaches, are clearly needed. 

The fragmented federal approach to ensure the safety and quality of
the nation's food--at the cost of over $1 billion a year--is
inefficient and hinders the government's efforts to effectively
protect consumers from unsafe food.  Estimates of foodborne illness
range widely, from 6.5 million to 81 million cases annually, and
cause between 500 to 9,100 related deaths each year.  Also, estimates
of the cost of medical treatment and productivity losses associated
with these illnesses and deaths range from $6.6 billion to $37.1
billion. 

The current system to ensure food safety suffers from inconsistent
oversight, poor coordination, and inefficient allocation of
resources.  As many as 12 different federal agencies administer over
35 different laws overseeing food safety.  To underscore the
fragmentation, subtle differences in food products dictate which
agency regulates a product.  For example, USDA is responsible for
inspecting food plants that produce open-faced meat sandwiches and
pizzas with a meat topping, whereas the Department of Health and
Human Services' (HHS) Food and Drug Administration is responsible for
inspecting food plants that produce traditional meat sandwiches and
nonmeat pizzas.  We have recommended that the highly fragmented
federal food safety structure needs to be replaced with a uniform,
risk-based inspection system under a single food agency. 

While rationalization and consolidation appear to be solutions for
the problems confronting food safety agencies, better coordination is
the initial step in improving the effectiveness of efforts to
safeguard the nation from terrorist attacks.  Over 40 agencies,
bureaus, and offices--at a cost of nearly $7 billion for unclassified
programs during fiscal year 1997--implement numerous programs
designed to prevent and deter terrorism, respond to terrorist threats
and incidents, and manage the consequences of terrorist acts. 
Because of the large scope of federal efforts to combat terrorism, no
single agency can effectively undertake the entire effort.  In
response to this situation, the President recently issued Decision
Directives that established the roles and responsibilities of many
agencies involved in combating terrorism and created a position at
the National Security Council to coordinate such programs. 

The Presidential Decision Directives represent an important step in
improving program coordination and thereby strengthening federal
efforts to combat terrorism.  However, our prior work has shown that
better coordinating such programs will entail a substantial effort. 
For example, we reported in December 1997 that governmentwide
priorities for combating terrorism had not been established and
funding requirements had not been validated based on an analytically
sound assessment of the threat and risk of a terrorist attack.  There
was therefore no reasonable assurance that

  -- agencies' requests were funded through a coordinated and focused
     approach to implement national policy and strategy,

  -- the highest priority requirements were being met,

  -- terrorism-related activities and capabilities were not
     unnecessarily duplicative or redundant, and

  -- funding gaps or misallocations had not occurred. 

Programs to manage federal lands provide another illustration of the
need for improved coordination in an important crosscutting program
area.  The federal government owns about 30 percent (about 650
million acres) of the nation's total surface area.  Four federal
agencies--the Forest Service in USDA and the Park Service, Bureau of
Land Management, and Fish and Wildlife Service in the Department of
the Interior--manage about 95 percent of these lands for a variety of
uses.  The central coordination challenge confronting these agencies
is to reconcile the administrative boundaries and jurisdictions with
the boundaries of natural systems, both in planning how best to
manage use of these lands and in assessing the cumulative impact of
federal and nonfederal activities on the environment. 

Federal land management agencies are authorized by laws such as the
National Forest Management Act to plan primarily along administrative
boundaries, such as those defining forests, parks, resource areas,
and wildlife refuges.  Conversely, environmental laws and regulations
require the agencies to analyze environmental issues and concerns
along the boundaries of natural systems, such as watersheds,
airsheds, soils, and vegetative and animal communities. 

Federal land management plans have often considered effects only on
those portions of natural systems that exist within the boundaries of
the administrative units covered by the plans.  However, the
boundaries of administrative units and natural systems are frequently
different.  For example, a widely recognized boundary of the Greater
Yellowstone ecosystem encompasses all or part of seven national
forests, two national parks, and three national wildlife
refuges--most of which are covered by different plans. 


--------------------
\9 Managing for Results:  Using the Results Act to Address Mission
Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug.  29, 1997). 


      CREATING PERFORMANCE-BASED
      INTERGOVERNMENTAL
      PARTNERSHIPS
-------------------------------------------------------- Chapter 1:1.4

As part of the performance-based approach to management and
accountability that is being implemented at the federal level,
agencies are working with their state partners to instill similar
approaches in the management of intergovernmental programs.  Under
these efforts, the federal government and the states seek agreement
on the results to be achieved, focus accountability within the
intergovernmental system on those agreed-upon results, and provide
states with the flexibility needed to achieve the results.\10

These partnerships can be particularly important today when services
traditionally provided by the federal government are increasingly
being provided by state and local governments along with the federal
government.  The Environmental Protection Agency (EPA) and HHS are
two agencies that have such partnership efforts under way. 

EPA relies on the states to implement most of its programs.  However,
our prior reviews have documented long-standing problems in the
relationship between EPA and the states, which has often been
characterized by fundamental disagreements over such issues as EPA's
and state environmental agencies' respective roles, priorities among
state environmental programs, and the degree of federal oversight
needed.  These disagreements have made environmental programs more
difficult to implement. 

In response, EPA and the states are pursuing a new initiative, called
the National Environmental Performance Partnership System, that is
designed to address many of these concerns.  The initiative includes
increasing the use of environmental goals and measures, conducting
state assessments of environmental and program performance, and
negotiating performance partnership agreements between EPA and
individual states. 

Under the initiative, states with strong environmental programs are
to have more leeway in setting environmental priorities, designing
new strategies, and managing their own programs, while EPA
concentrates its oversight and technical assistance on weaker
programs.  The performance partnerships are intended to provide a
means for EPA and a state to agree on the environmental problems that
will receive priority attention by the state and for how the state's
progress in achieving clearly defined program results will be
assessed.  Thirty-three states had entered into some form of
performance partnership agreement with EPA as of July 1998. 

HHS is another agency that is making progress in working with state
governments to develop results-oriented goals and performance
measures to serve as a basis for program management and
accountability.  For example, the Office of Child Support Enforcement
and the states worked together to develop national goals for the
child support enforcement program.  Similarly, the Maternal and Child
Health Block Grant Program collaborated with its state partners to
develop a set of core performance measures that have now become the
basis for awarding and monitoring grants under the program.  In
addition, the Substance Abuse and Mental Health Services
Administration has been working with states to develop outcome
indicators for substance abuse and mental health services.  Also, the
Centers for Disease Control and Prevention, through categorical grant
programs to states, are developing health status indicators, uniform
data sets, and public health surveillance systems. 

Partnership agreements centered on results-oriented goals and
performance measures can be an effective vehicle for achieving
results while providing states with needed flexibility.  However, our
work has shown that in some cases the federal government must do a
better job of fulfilling its responsibilities in intergovernmental
efforts.  For example, nursing homes that receive federal payments
through Medicare and Medicaid--which in 1997 totaled $28
billion--must comply with certain federal requirements.  As required
by statute, HHS' Health Care Financing Administration (HCFA)
delegated to states the responsibility to inspect nursing homes and
certify that they meet federal standards. 

However, we have identified problems in the enforcement of these
standards.  In analyzing recent inspection and complaint information
in California, we found that nearly one in three nursing homes was
cited by state inspectors for providing care that created serious or
potentially life-threatening problems.  Although state inspectors
identified serious deficiencies, HCFA's enforcement policies were
ineffective and did not ensure that the deficiencies were corrected
and stayed corrected. 

This is a national problem--one in nine nursing homes in the United
States was cited in its last two inspections for conditions that
harmed residents or put residents in immediate jeopardy.  Until
recently, HCFA had taken a lenient stance toward enforcing compliance
with federal standards and had encouraged states to grant almost all
noncompliant homes a grace period to correct deficiencies without
penalty, regardless of past performance. 

HCFA is developing plans to improve state inspection practices,
revise its oversight of state inspection agencies and strengthen
enforcement actions against poorly performing homes.  It also plans
to disseminate information to consumers and providers about homes'
performance records and best practices for certain common care
problems. 


--------------------
\10 Block Grants:  Issues in Designing Accountability Provisions
(GAO/AIMD-95-226, Sept.  1, 1995). 


      DEVELOPING THE CAPABILITY TO
      GATHER AND USE PROGRAM
      PERFORMANCE INFORMATION TO
      MAKE DECISIONS
-------------------------------------------------------- Chapter 1:1.5

A federal environment that focuses on results relies on new types of
information that are different from those that have traditionally
been collected by federal agencies.  Obtaining credible
results-oriented performance information is essential for accurately
assessing agencies' progress in achieving goals and, in cases where
sufficient progress is not being made, for identifying opportunities
for improvement.  In recognition of the importance of high quality
performance information, the Results Act requires that agencies'
annual performance plans describe the means that will be used to
verify and validate performance data.  The challenge confronting
federal agencies is to obtain timely and reliable results-oriented
performance information and to ensure that program evaluations are
undertaken that allow for the informed use of that information. 

Federal agencies often depend on the state and local agencies they
are working with to provide the performance information that
indicates whether results are being achieved.  For example, state
water quality reports required by the Clean Water Act are a key
source of information for measuring progress in cleaning up the
nation's lakes, rivers, and streams.  However, EPA has found that the
wealth of environmental data EPA and states collect are often
difficult to compile in a meaningful way. 

Inconsistencies in water quality assessments that are due to states
using methodologies that differ make it difficult for EPA to
aggregate the data.  Therefore, using information from various
sources presents a challenge when attempting to conclusively
determine whether the quality of rivers, lakes, and streams is
getting better or worse over time.  Absent this information, it has
been difficult for EPA to set priorities, evaluate the success of its
programs and activities, and report on its accomplishments in a
credible and informed way. 

HHS also needs comparable and reliable data from the states to
implement many of its programs, including implementing welfare reform
as required by the Personal Responsibility and Work Opportunity Act
of 1996 and subsequent legislation.  These reforms require HHS to
give the states program flexibility while maintaining adequate
oversight.  However, the data from the states, where available, are
often incomplete or inconsistent.  For example, HHS will use data
provided by the states to ensure that the states are meeting new
welfare reform requirements, such as the 5-year time limit for
recipients to obtain welfare benefits.  The state information on the
length of time an individual has received welfare is often
unavailable or inconsistent, making it difficult for HHS to enforce
federal benefit limits. 

Program evaluations assist decisionmakers by telling them whether a
program is or is not contributing to results and why.  However, our
work has shown that many agencies are not well-positioned to
undertake the program evaluations that will be critical to assessing
performance and identifying improvement opportunities.\11 For
example, INS had no planned evaluation of the effectiveness of its
strategy to deter illegal entry along the southwest border even
though billions of dollars have been spent in response to concerns
about the numbers of illegal aliens entering the United States. 

INS lacked vital information on several outcomes that its border
patrol strategy was expected to achieve.  For example, there were no
data to indicate whether illegal aliens have been deterred from
entering the United States, whether there had been a decrease in
attempted reentries by those who had previously been apprehended, and
whether the strategy had reduced border violence.  Our work has shown
that INS had an incomplete picture of the effects of increased border
control and did not know whether the investment was producing the
intended results.  In response to our report, INS has contracted with
independent research firms for an evaluation. 

Similarly, the Department of Labor lacks accurate and reliable
information needed to effectively assess whether many of its programs
are producing their intended results and to determine whether its
resources are being used effectively.  Some of Labor's
responsibilities are fragmented or duplicated, either within the
Department or by activities in other federal departments. 

Therefore, obtaining overall information on the impact of the entire
federal effort is particularly difficult.  For example, even though
the Congress enacted legislation to consolidate aspects of the
nation's employment training system, separate programs that are
focused on the same population, each with its own outcome and
performance data, remain in Labor and other departments.  Information
on the performance of the collective federal effort is not available. 


--------------------
\11 Program Evaluation:  Agencies Challenged by New Demand for
Information on Program Results (GAO/GGD-98-53, Apr.  24, 1998) and
Performance Measurement and Evaluation:  Definitions and
Relationships (GAO/GGD-98-26, Apr.  1998). 


      OPPORTUNITIES EXIST TO
      BETTER USE THE RESULTS ACT
      TO ADOPT A RESULTS
      ORIENTATION
-------------------------------------------------------- Chapter 1:1.6

The reports on individual agencies that are part of the performance
and accountability series discuss, as appropriate, how the Results
Act can be or is being used to help address the management challenges
facing each individual agency.  These reports show how agencies'
strategic plans and annual performance planning efforts have the
potential to provide useful information on the results to be
achieved.  From a governmentwide perspective, however, we
consistently have found that agencies' initial strategic plans and
fiscal year 1999 annual performance plans were not as useful as they
could be for agency and congressional decisionmakers.\12

In the case of the fiscal year 1999 annual performance plans, we
identified five major opportunities to improve the usefulness of
subsequent plans and made specific suggestions to the Office of
Management and Budget (OMB) and the Congress on how they could take
advantage of these opportunities.  These opportunities were centered
on many of the previously discussed governmentwide challenges, such
as the need for more results-oriented goals and performance measures
and better coordination of crosscutting program efforts. 

With regard to the coordination of crosscutting programs, for
example, most agencies' plans listed other agencies with which they
shared the same or similar results, but the substantive work of
coordination was not yet evident.  Few of the annual plans showed
evidence that crosscutting programs had developed complementary
goals; mutually reinforcing strategies; and where appropriate, common
performance measures.  Based on the initial progress that some
agencies have made, the usefulness of plans would be enhanced if all
agencies more consistently identified the results-oriented annual
performance goals that involve other federal agencies and set
intermediate goals to clarify agency-specific contributions to the
shared results. 

We also found that the value of the annual performance plans increase
as they more fully include goals that address mission-critical
management issues, such as those on our high-risk list and others
identified in our performance and accountability series reports.  In
our assessments of agencies' fiscal year 1999 plans, we found that
agencies, contrary to OMB guidance, were not consistently setting
goals to address management challenges that are mission-critical or
could impede the agencies' ability to meet their programmatic goals. 
Precise and measurable goals for resolving management challenges are
important to ensure that the agencies have the institutional capacity
to achieve their more results-oriented programmatic goals. 

Consistently including goals in individual agency plans to address
mission-critical management issues would also facilitate the
integration of governmentwide and agency performance planning
processes.  Under the Results Act, OMB is to prepare a governmentwide
annual performance plan.  The first such plan was prepared for fiscal
year 1999. 

That governmentwide annual performance plan contains a clear
recognition that better management is key to improving performance. 
One of the more important and valuable reflections of that
recognition is a listing of the administration's priority management
objectives.  We found that the clarity and effectiveness of OMB's
discussion of these objectives could be improved by a more integrated
and focused discussion of the strategies associated with the
objectives.\13 In this regard, augmenting agency performance plans to
show that agencies, where appropriate, are positioned to address
governmentwide priority management objectives, such as the production
of timely and reliable financial data throughout the year to help
manage operations, would make the plans more useful. 

The more useful annual plans for decisionmakers also discussed how
the agencies' programs and strategies would lead to the achievement
of results.  The listings of current programs and initiatives, which
often were included in agencies' plans, are useful in providing an
understanding of what agencies do.  Presentations that explain how
programs and initiatives achieve goals will help the Congress assess
the degree to which strategies are appropriate and reasonable in
relation to the goals to be achieved. 

Over the longer term, discussions of how different governing tools
(for example, intergovernmental partnerships, performance-based
contracts, financial grants and credits, and direct service provision
by the federal government) can be used in achieving goals could
further enhance the value of the plans and allow for appropriate
considerations of best practices from the public and private sectors
in service and program delivery.  Such discussions also could assist
in the development of a base of governmentwide information on the
strengths and weaknesses of various tools in addressing differing
public policy issues. 

The annual performance plans prepared under the Results Act provide
the agencies with an opportunity to articulate how they will ensure
that they have the timely and reliable results-oriented performance
information they need to confidently make decisions.  Performance
plans can help do this by including a discussion of the means
agencies will use to verify and validate performance information. 
Means such as audits, program evaluations, independent external
reviews, and internal controls will help provide confidence that
performance data are of sufficient quality to support decisionmaking. 

Especially in an environment where the federal government influences
but does not fully determine results, program evaluations can provide
vital information about the distinguishable contributions made
through federal efforts and ways to better leverage those efforts. 
The more useful fiscal year 1999 annual performance plans showed that
some agencies were making a serious effort to use program evaluations
to better inform decisionmaking. 


--------------------
\12 Managing for Results:  Agencies' Annual Performance Plans Can
Help Address Strategic Planning Challenges (GAO/GGD-98-44, Jan.  30,
1998) and Managing for Results:  An Agenda to Improve the Usefulness
of Agencies' Annual Performance Plans (GAO/GGD/AIMD-98-228, Sept.  8,
1998), respectively. 

\13 For a discussion of this section of the governmentwide plan, see
The Results Act:  Assessment of the Governmentwide Performance Plan
for Fiscal Year 1999 (GAO/AIMD/GGD-98-159, Sept.  8, 1998), pp.  9
and 18-ff. 


   EFFECTIVELY USING INFORMATION
   TECHNOLOGY TO ACHIEVE PROGRAM
   RESULTS
---------------------------------------------------------- Chapter 1:2



   (See figure in printed
   edition.)

The federal government is increasingly dependent on information
technology (IT) to improve its performance and meet mission goals. 
The government's $1.6 trillion annual budget is heavily dependent on
computer systems and networks to implement a vast array of programs
supporting national defense, revenue collection, and social benefits. 
We have issued several hundred reports during this decade that
document (1) billions of dollars in wasted IT expenditures for
computer systems that failed to deliver expected results, (2) poorly
defined management processes that fostered suboptimal solutions to
agency business needs, and (3) the need for greater response to the
Year 2000 problem and computer security issues that threaten the
integrity of agency operations.  To the extent the nearly $27 billion
in planned annual obligations for computer technology and information
systems can be spent more wisely, federal programs will operate more
efficiently with less cost. 

To ensure that IT dollars are directed toward prudent investments
designed to achieve cost savings, increase productivity, and improve
the timeliness and quality of service delivery, agencies need to
successfully deploy modern IT management practices that ensure that
IT investments support mission-related goals and are integrated
within the agencies' strategic plans.  Our research of leading
private and public sector organizations identified specific
management practices used to achieve such benefits.\14

To help achieve similar benefits across all government functions and
programs, the Congress passed the PRA and the Clinger-Cohen Act of
1996.  This information technology legislation builds on the best
practices of leading public and private organizations by requiring
agencies to better link their information technology planning and
investment decisions to program missions and goals.  Just as
technology is most effective when it supports defined business needs
and objectives, the PRA and Clinger-Cohen Act will be more powerful
if they can be integrated with the objectives of broader
governmentwide management reforms. 

The Clinger-Cohen Act contains critical provisions requiring federal
agencies to use investment and capital planning processes to manage
their information management and technology portfolios.  Further, it
requires that agencies modernize inefficient administrative and
mission-related work processes before making significant technology
investments to support them. 

To assist in implementation, we have worked with OMB to design new,
more effective governmentwide guidance, including a joint guide
published in 1995 that established a select, control, and evaluate
decisionmaking framework.\15 We also have issued comprehensive
evaluation guidance on IT investment decisionmaking and business
process reengineering, and we have provided expertise in constructing
OMB's new governmentwide guidance on capital program planning.\16 All
of these efforts are intended to enhance the implementation pace and
rigor of the IT management reforms by providing agencies with
examples and common approaches of effective management practices. 

Creating and maintaining momentum for implementing these reforms is
critical to improving the federal government's lackluster track
record in managing its enormous portfolio of information technology
initiatives.\17 Although the Congress passed the Clinger-Cohen Act in
1996, it is still in the early stages of implementation in most
federal agencies.  Yet, constructive changes are occurring.  Federal
policies and guidance are being updated and revamped to be in concert
with the new legislative requirements, and several agencies are
taking positive actions to revise IT management approaches. 

Progress, although mixed, is being made on several fronts. 
Governmentwide guidance in areas such as IT capital planning and
investment, information architectures, and strategic planning was
updated and refined during 1997 and 1998 to assist with agency
implementation.\18 Toward this end, we have worked with the Congress,
the executive branch, and the federal Chief Information Officers
(CIO) Council in preparing guidance on IT investment management, IT
performance management, information security practices, and Year 2000
program and project management that has been widely accepted and
adopted throughout government. 

Additionally, the federal CIO Council has been instrumental in
developing recommendations for policies and standards that are
closely aligned with legislative requirements.  Over the last 2
years, the


Council has focused on six strategic areas

  -- Year 2000 conversion problems;

  -- capital planning and investment processes;

  -- information security practices and policies;

  -- skills and competencies to develop, maintain, manage, and use IT
     programs, projects, and systems;

  -- federal information architecture and interoperability issues;
     and

  -- outreach programs with federal organizations, industry, the
     Congress, and the public. 

These are appropriate priorities for the Council and coincide with
issues we have raised in our high-risk updates and recommendations
formulated in conjunction with specific audit work.  They also
parallel concerns that have been raised by the Congress about federal
IT management. 

Furthermore, there is evidence to suggest that agencies are
responding with concerted actions to effectively address critical IT
management shortcomings.  For example, in response to our reviews,
the Federal Aviation Administration (FAA) is developing a complete
air traffic control systems architecture, establishing defined
cost-estimating processes, improving its software acquisition
capability, and has committed to hiring a CIO who reports directly to
FAA's Administrator.\19

Similarly, after years of huge IT investments with only marginal
results, the IRS has taken noteworthy steps to strengthen its IT
management capabilities.  For instance, it has hired a CIO and
created an investment review board to make joint decisions about IT
investments, produced the first two levels of a four level
modernization blueprint for the Congress, and selected a prime
systems modernization integration contractor to overhaul its systems
over the next 10 to 15 years.\20 We are seeing similar patterns of
increased management attention and concerted efforts to address past
IT shortcomings at other high-risk agencies, such as the National
Weather Service and DOD. 

Nevertheless, IT management reforms are still in their nascent stages
in most federal agencies.  Indeed, most agencies are preoccupied with
resolving their Year 2000 problems.  As noted in our High-Risk
Series:  An Update report, agencies that fail to successfully correct
this problem run the very real risk of complete loss or serious
degradation of key business processes.  Agencies also share a common
risk with poor information security.  We reported that major agencies
have serious computer security weaknesses that put agency operations
at risk.\21

Agencies also continue to struggle to implement the management
processes required by the Clinger-Cohen Act and the PRA.  Our recent
reviews show that numerous agencies continue to be challenged by

  -- weaknesses with IT investment selection and control processes,
     including (1) a lack of clarity concerning how IT investments
     are being or will be used to improve performance or help achieve
     specific agency goals and (2) incomplete data upon which to base
     informed decisions;

  -- slow progress in designing and implementing IT architectures
     before proceeding with massive systems modernization efforts;

  -- immature software development, cost estimation, and acquisition
     practices; and

  -- the need to build effective CIO leadership and organizations. 


--------------------
\14 Executive Guide:  Improving Mission Performance Through Strategic
Information Management and Technology (GAO/AIMD-94-115, May 1994) and
Information Technology:  Best Practices Can Improve Performance and
Produce Results (GAO/T-AIMD-96-46, Feb.  26, 1996). 

\15 Evaluating Information Technology Investments:  A Practical
Guide, Version 1.0, Nov.  1995 (Executive Office of the President,
Office of Management and Budget, Office of Information and Regulatory
Affairs, Information Policy and Technology Branch). 

\16 Assessing Risks and Returns:  A Guide for Evaluating Federal
Agencies' IT Investment Decision-making, Version 1 (GAO/AIMD-10.1.13,
Feb.  1997); Business Process Reengineering Assessment Guide, Version
3 (GAO/AIMD-10.1.15, Apr.  1997); Capital Programming Guide, Version
1.0 (Executive Office of the President, Office of Management and
Budget, July 1997); and OMB Circular A-11 Revised, Part 3, Planning,
Budgeting, and Acquisition of Capital Assets, June 23, 1997. 

\17 Information Management Reform:  Effective Implementation is
Essential for Improving Federal Performance (GAO/T-AIMD-96-132, July
17, 1996). 

\18 OMB Memorandum M-97-02, Funding Information Systems
Investments, Oct.  25, 1996; OMB Circular A-130 Revised, Management
of Federal Information Resources, Feb.  8, 1996; OMB Circular A-11
Revised, Part 3, Planning, Budgeting, and Acquisition of Capital
Assets, June 25, 1997; OMB Memorandum M-97-16, Information
Technology Architectures," June 18, 1997. 

\19 See GAO/HR-99-1, Jan.  1999. 

\20 See GAO/HR-99-1, Jan.  1999. 

\21 Information Security:  Serious Weaknesses Place Critical Federal
Operations and Assets at Risk (GAO/AIMD-98-92, Sept.  23, 1998). 


      STRENGTHENING IT INVESTMENT
      AND CONTROL PROCESSES
-------------------------------------------------------- Chapter 1:2.1

Effective IT investment management processes--a cornerstone of the
Clinger-Cohen Act reforms--are of key concern.  These processes are
essential for implementing performance-based management in that they
can demonstrate how technology is being used to support better
informed management decisions, increase the efficiency and
effectiveness of government operations, and--ultimately--provide more
cost-effective delivery of government services to the public. 

Progress has been made in addressing some of the fundamental elements
of IT investment management as demonstrated by the widespread
creation of IT investment review boards and the development of more
robust procedures for making IT project choices.  But many of our
reviews have pinpointed critical flaws, such as a lack of discipline
in ensuring complete, up-to-date cost, benefit, and risk data on
projects and a focus on justifying new proposals rather than
controlling and evaluating the entire portfolio of IT investments
being undertaken by the agency.  Moreover, our reviews of strategic
plans and annual performance plans of the 24 departments and agencies
covered by the CFO Act generally have noted weak linkages between the
mission goals and planned or ongoing information technology
initiatives that are essential to the achievement of those goals.\22

We have previously reported on several of these problems in
individual agency reviews.  For example, at HCFA, our review of the
proposed Medicare Transaction System (MTS) found an absence of
cost-benefit analyses and inadequate involvement of senior level
officials in monitoring major decisions made at critical project
milestone dates.\23

Moreover, we noted that HCFA had not adequately reviewed, revised,
and improved mission-related and administrative processes before
making significant investments in MTS.  These weaknesses led to the
termination and subsequent reassessment of the project after cost
estimates had soared nearly 7-fold over 5 years, from $151 million in
1992 to about $1 billion in 1997. 

Similarly, our analyses of IT investment management processes at DOD
and VA also have discovered the absence of cost, benefit, and risk
data that are essential for managers and executives to use in
reaching decisions about proposed IT investments or assessing the
return on investment for completed projects.\24 With the size of the
investment portfolios involved--nearly $1 billion in the fiscal year
1999 budget request at VA and some $18 billion expected to be spent
between 1995 and 2000 for systems migration at DOD--better cost and
performance data to make informed choices are a necessity. 

At the Department of Housing and Urban Development (HUD), we recently
reported that investment selection decisions about its Financial
Systems Integration initiative--an estimated $371 million project
designed to provide managers timely and accurate information--have
not been based on current, complete cost and benefit data.  As such,
expected costs remain uncertain.  In addition, HUD's investment
management processes were incomplete and little attention was paid to
comparing the expected versus actual project cost, schedule, benefit,
and risk data or performing critical post-implementation reviews of
completed projects.\25

As agencies continue to implement and refine their IT investment
decisionmaking approaches, it is imperative that they first focus on
establishing complete investment processes that factor in effective
control and evaluation mechanisms for significant dollars dedicated
to ongoing IT investment projects.  Second, steps must be taken to
ensure that IT projects are tightly linked to business cases and
monitored in terms of their contribution to improvement in program
results.  And third, actions must be instigated for improving
veracity of cost and benefit data so that informed management
decisions can be made. 


--------------------
\22 Managing for Results:  Critical Issues for Improving Federal
Agencies Strategic Plans (GAO/GGD-97-180, Sept.  16, 1997) and
GAO/GGD-98-44, Jan.  30, 1998. 

\23 Medicare Transaction System:  Serious Managerial and Technical
Weaknesses Threaten Modernization (GAO/T-AIMD-97-91, May 16, 1997). 

\24 Defense IRM:  Poor Implementation of Management Controls Has Put
Migration Strategy at Risk (GAO/AIMD-98-5, Oct.  20, 1997) and VA
Information Technology:  Improvements Needed to Implement Legislative
Reforms (GAO/AIMD-98-154, July 7, 1998). 

\25 HUD Information Systems:  Improved Management Practices Needed to
Control Integration Cost and Schedule (GAO/AIMD-99-25, Dec.  18,
1998). 


      IMPLEMENTING IT
      ARCHITECTURES
-------------------------------------------------------- Chapter 1:2.2

Another area of continuing concern is the implementation of IT
architectures.  As underscored by the Clinger-Cohen Act and executive
branch guidance, complete and enforceable systems architectures are
essential foundations on which the interoperability and coordination
of related business processes and systems are built.  These
construction plans systematically detail the full breadth and depth
of an organization's mission-based mode of operations in logical and
technical terms.  Without these blueprints to guide and constrain
large scale systems development activities, there is no systematic
way to preclude either inconsistent systems design or development
decisions or the resulting suboptimal performance and added cost
associated with incompatible systems. 

In general, we have found that agencies have embarked upon massive
modernization projects without defined information architectures in
place.  This often results in the proliferation of nonintegrated
systems that leads to problems in systems interface and data
exchange, confusion for users, and delays in program operations. 

For example, at FAA, we have raised concerns about the lack of
complete systems architecture to guide over $25 billion appropriated
to modernize its aging air traffic control system from fiscal year
1981 through fiscal year 1998 and an additional $17 billion needed
for fiscal years 1999 through 2004.  Without the benefit of this
overall systems blueprint to guide the program, FAA has experienced
higher costs to develop, integrate, and maintain hardware and
software that is essential to air traffic control modernization.\26

We have consistently raised questions at the National Weather Service
about the lack of a comprehensive architecture to guide the $4.5
billion estimated in fiscal year 1997 to modernize its systems used
to observe weather, improve weather forecasts and predictions, and
achieve higher productivity.\27 Again, this has resulted in higher
costs and protracted delays in integrating the array of complex
systems essential for improving forecasting operations and
capabilities. 

At the Customs Service, an incomplete systems architecture has
hindered its ability to effectively manage the development of its
Automated Commercial Environment (ACE) system.  At the end of fiscal
year 1998, Customs reported that it had spent $62.1 million on ACE,
with an estimated total cost of $1.05 billion to develop, operate,
and maintain ACE between 1994 and 2008.  Yet, we have reported that
Customs does not have a thorough understanding of its agencywide
functional and information needs.  Consequently, there is not
adequate assurance that Customs' information systems will optimally
support Customs' ability to (1) fully collect and accurately account
for billions of dollars in annual federal revenue and (2) allow for
the expeditious movement of legal goods and passengers across the
nation's borders.\28

Finally, at the Department of Education, the lack of a sound,
integrated information systems architecture for managing the
Department's array of information systems used to support student
financial aid programs has contributed to problems in data exchanges,
questionable data accuracy, and unnecessary redundancy across
systems.  In fiscal year 1998, the Department expected to spend some
$320.5 million on contracts used to maintain these systems.\29

These previous reviews highlight the need for agencies to consult and
implement existing guidance on approaches for developing information
architectures issued by GAO, OMB, and the federal CIO Council.\30 As
noted in our own guidance to agencies, serious attention should be
focused on defining complete architectural frameworks both in (1)
logical terms, such as defining business functions and associated
information flows and interrelationships, and (2) technical or
physical terms, such as specifying hardware, software, data,
communications, security, and performance characteristics.  This is
an essential prerequisite to large, complex systems development
activities involving multiple systems. 


--------------------
\26 Air Traffic Control:  Status of FAA's Modernization Program
(GAO/RCED-99-25, Dec.  3, 1998). 

\27 Weather Service Modernization:  Risks Remain That Full Systems
Potential Will Not Be Achieved (GAO/T-AIMD-97-85, Apr.  24, 1997). 

\28 Customs Service Modernization:  ACE Poses Risks and Challenges
(GAO/T-AIMD-97-96, May 15, 1997) and Customs Service Modernization: 
Architecture Must Be Complete and Enforced to Effectively Build and
Maintain Systems (GAO/AIMD-98-70, May 5, 1998). 

\29 Department of Education:  Multiple, Nonintegrated Systems Hamper
Management of Student Financial Aid Programs (GAO/T-HEHS/AIMD-97-132,
May 15, 1997). 

\30 Strategic Information Planning:  Framework for Designing and
Developing System Architectures (GAO/IMTEC-92-51, June 1992); OMB
Memorandum M-97-16, Information Technology Architectures, June 18,
1997; and Federal Enterprise Architecture Conceptual Framework,
Developed by the Federal Conceptual Model Subgroup for the Chief
Information Officers' Council, Aug.  1998. 


      DEVELOPING AND ACQUIRING
      SOFTWARE
-------------------------------------------------------- Chapter 1:2.3

We also see continued challenges for agencies in putting in place
disciplined systems development practices, particularly as they
relate to developing and acquiring software.  Software development
has been identified by many experts as one of the riskiest and most
costly aspects of systems development.  Without disciplined
approaches to software development capability, agencies can easily
fall prey to ad hoc and chaotic processes that subject projects to
continuing risks of cost overruns, poor quality software, and lengthy
scheduling delays. 

Our reviews at FAA and the Veterans Benefits Administration (VBA)
have discussed how the ad hoc, sometimes chaotic nature of software
acquisition capabilities put these agencies at tremendous risk of not
delivering new software capabilities on time and within budget.  For
example, at FAA, we reported that the agency's processes for
acquiring software for its complex air traffic control systems
modernization initiatives were ad hoc and nonrepeatable across
projects and significantly contributed to FAA's frequent failures to
deliver promised system capabilities on time and within budget.\31

At VBA, we reported that the agency was operating with immature
software development capability.  We also noted that VBA had
inadequate software engineering process improvement training for key
software development personnel and managers.  VBA had not validated
contractor certification of its software development maturity
level.\32

To address these kinds of deficiencies, agencies need to put in place
rigorous software development improvement plans and processes,
patterning them for example after Carnegie Mellon's Software
Engineering Institute's software evaluation methodology.\33 In
addition, as we have recommended to several agencies where we have
conducted software development capability reviews, agencies should
take steps to have periodic independent assessments made of their
existing software development and acquisition capabilities and
specific improvement plans initiated.  And lastly, agency executives
should ensure that the planned IT investment scope and pace is
commensurate with the organization's capability to deliver or oversee
high quality software products and services. 


--------------------
\31 Air Traffic Control:  Immature Software Acquisition Processes
Increase FAA System Acquisition Risks (GAO/AIMD-97-47, Mar.  21,
1997). 

\32 Veterans Benefits Modernization:  VBA Has Begun to Address
Software Development Weaknesses But Work Remains (GAO/AIMD-97-154,
Sept.  15, 1997). 

\33 The Software Engineering Institute is a nationally recognized,
federally funded research and development center established at
Carnegie Mellon University in Pittsburgh, Pennsylvania, to address
software development issues. 


      BUILDING THE CIO
      ORGANIZATIONAL CAPACITY TO
      ACHIEVE LASTING IT REFORMS
-------------------------------------------------------- Chapter 1:2.4

The PRA and the Clinger-Cohen Act clearly require that agency heads
and their executive management teams must be involved in, and held
accountable for, investments in information technology.  In a
resounding fashion, the global Year 2000 date conversion crisis has
reminded executives of the essential role that information systems
and technology now play in running and managing their organizations. 

The information technology reforms now required by the Congress will
be difficult for agencies to achieve without effective CIO leadership
in place to ensure that IT investment decisions are directly
integrated into the agencies' strategic and program plans.  The
Clinger-Cohen Act established federal CIOs throughout government and
envisioned their role to be much more than that of a senior
technology manager.  The CIO is responsible for working with senior
managers to ensure that information management is designed to achieve
strategic performance goals; promote improvements in work processes;
implement an integrated information technology architecture; and
strengthen IT knowledge, skills, and capabilities. 

Getting the right people into CIO positions can make a real
difference in the pace of the implementation and the quality of
technology management improvements.  The escalating demands of
rapidly evolving technologies and the formidable tasks associated
with the position--including managing Year 2000 date conversion
efforts, computer security, systems architecture management, and
software acquisition and development--require the full-time attention
of a CIO. 

Success in dealing with these issues will also depend heavily upon
the skills and performance of the entire CIO organization within
departments and agencies.  A great deal of executive management
attention needs to be focused on putting in place disciplined
technology management processes for designing and implementing
systems architectures, information security procedures, investment
decisionmaking processes, and software development and acquisition. 
Without these capabilities in place, CIO organizations will be
handicapped in their ability to deliver high quality, cost-effective
results that support mission needs. 


   ESTABLISHING FINANCIAL
   MANAGEMENT CAPABILITIES THAT
   EFFECTIVELY SUPPORT
   DECISIONMAKING AND
   ACCOUNTABILITY
---------------------------------------------------------- Chapter 1:3



   (See figure in printed
   edition.)

Federal decisionmakers must have reliable, timely performance and
financial information to ensure adequate accountability, manage for
results, and make well-informed judgments.  Unfortunately, such
information has historically not been routinely available across
government.  The combination of reforms ushered in by the Results Act
and the CFO legislation, however, will, if successfully implemented,
systematically fill this void and generate the necessary foundation
to effectively run a results-oriented government. 

The requirements for performance measurement information under the
Results Act, in conjunction with the mandate to produce reliable,
meaningful financial data under the CFO Act, are introducing
unprecedented changes in management and financial accountability for
our national government.  To promote the necessary framework for
accountability, the CFO Act also set expectations for agencies to
develop and deploy more modern financial management systems; to
routinely produce sound cost and operating performance information;
and to design results-oriented reports on the government's financial
condition by integrating, budget, accounting, and program
information. 


      PRODUCING RELIABLE FINANCIAL
      REPORTS
-------------------------------------------------------- Chapter 1:3.1

The challenge of developing financial reports that are specifically
tailored to meet decisionmakers' needs based on consistent accounting
standards is being met in part by the Federal Accounting Standards
Advisory Board (FASAB).\34 FASAB has assembled a new set of
accounting concepts and standards\35 to underpin the form and content
of individual agency financial statements under the CFO Act as well
as the consolidated financial statements for the U.S.  government. 
FASAB's financial reporting objectives require reporting on (1)
budgetary integrity, (2) operating performance, (3) stewardship, and
(4) controls.  Through this new reporting model, decisionmakers and
the public now annually receive for all major departments and
agencies audited financial reports that are to

  -- present a top-level overview discussion of trends in financial
     performance and commentary on performance results that are
     consistent with goals and measures used under the Results Act;

  -- detail the uses of budgetary resources, obligations incurred,
     outlays, and the balance of budgetary resources available;

  -- show the net cost of operations and programs that enables users
     to relate costs to outputs and results;

  -- report operating assets available for use in providing goods,
     services, and benefits and all liabilities incurred, with
     special displays of those that would require future funding by
     the Congress; and finally

  -- reflect the nation's assets and investments for which there is a
     federal stewardship responsibility, such as national forests. 

The challenge will be to fully meet these reporting objectives. 
Toward that end, there has been progress, with all 24 CFO Act
agencies preparing annual financial statements beginning with fiscal
year 1996, and 11 of these agencies receiving unqualified audit
opinions for fiscal year 1997--up from 6 for fiscal year 1996.  At
the same time, there are major obstacles to overcome, both at the
agency level and in preparing reliable, consolidated financial
statements for the U.S.  government. 

The most serious challenges are framed by the results of our
first-ever audit of those financial statements, for fiscal year
1997.\36 In summary, significant, widespread financial system
weaknesses, problems with fundamental recordkeeping, incomplete
documentation, and weak internal controls, including computer
controls, prevented the government from accurately reporting a large
portion of its assets, liabilities, and costs.  These deficiencies
not only affect the reliability of financial statements, but also
undermine the ability to accurately measure the full cost and
financial performance of programs and to effectively safeguard
federal assets and manage operations. 

Material financial management deficiencies at DOD, with its vast
worldwide operations and long history of poor financial management,
represent the single largest obstacle to improving the reliability of
the government's consolidated financial statements.\37 No major part
of DOD has been able to pass the test of an independent financial
statement audit because of pervasive weaknesses in DOD's financial
operations and systems, which led us, in 1995, to put DOD financial
management on our high-risk list--a situation that continues today. 

Other agencies face difficult challenges as well, as they work to
improve financial management and fully attain the goals of the CFO
Act.  For example, the Forest Service continues to be plagued by
serious shortcomings that resulted in significant reporting errors in
its financial statements, a lack of policies and procedures to
adequately safeguard assets, and an inability to accurately track
revenues and costs.  Due to the severity of the problems, the Forest
Service did not prepare financial statements for fiscal year 1996,
but chose instead to focus on resolving these problems.  However, the
Inspector General issued a disclaimer of opinion on the Forest
Service's most recent financial statements, those for fiscal year
1997, citing major weaknesses in the agency's accounting and
financial reporting, and this year the Forest Service's financial
management was added to our high-risk list. 

Likewise, FAA's financial management was added to our high-risk list
this year.  FAA's continuing serious problems in accounting for
property, plant, and equipment and inventory and related property,
which were the principal reasons the Inspector General issued a
disclaimer of opinion on the agency's fiscal year 1997 financial
statements, affect FAA's ability to properly manage these assets and
may result in operating inefficiencies and the inability to make
prudent business decisions and safeguard assets.  Theft could go
undetected and funds could be spent to acquire equipment already on
hand. 

HCFA also faces major financial management challenges.  The fiscal
year 1997 financial statement audit again reported HCFA's inadequate
oversight of the Medicare program as a material weakness--one that
hampers HCFA's fiduciary responsibilities.  For example, HCFA had not
developed its own process for estimating the national error rate for
fee-for-service payments.  For fiscal year 1997, the HHS Inspector
General estimated that about 11 percent of all Medicare
fee-for-service payments for claims, or about $20 billion, did not
comply with Medicare laws and regulations. 

Financial management has been designated one of OMB's priority
management objectives, with a goal of producing performance and cost
information in a timely, informative, and accurate way, consistent
with federal accounting standards.  To help accomplish this goal, a
May 26, 1998, Presidential memorandum required agency heads to
develop plans for resolving the problems that have been identified. 
Further, House Resolution 447, passed on June 9, 1998, underscored
congressional expectations for timely resolution of the problems. 

Considerable effort is now being exerted to address the problems, and
several agencies, such as SSA, have made good progress toward
achieving financial management reform goals.  With a concerted
effort, the federal government as a whole can continue to make
progress toward generating reliable financial information on a
regular basis.  Annual audited financial statements are essential to
sustaining and measuring the effectiveness of the improvements now
under way. 

While audited financial statements are essential to identifying any
serious financial management problems that might exist, helping
ensure accountability, and providing an annual public scorecard on
accountability, an unqualified audit opinion, while certainly
important, is not an end in itself.  The CFO Act is focused on
providing accurate, timely, and relevant financial information needed
for management decisionmaking and accountability, on a systematic
basis, throughout the year.  Efforts to obtain reliable year-end data
that are not backed up by fundamental improvements in underlying
financial management systems and operations that enable the routine
production of accurate, timely, and relevant data to support ongoing
program management and accountability will not achieve the intended
results of the CFO Act over the long-term. 

For example, after several years of concerted effort by IRS and GAO,
for fiscal year 1997 we were for the first time able to conclude that
IRS' custodial financial statements, covering over $1.6 trillion in
tax revenue, were reliable.\38 Prior to fiscal year 1997, weaknesses
in IRS' internal controls and financial management systems prevented
it from producing reliable year-end financial information.  Our
ability to conclude that the fiscal year 1997 custodial financial
statements were reliable was a mark of progress.  However, this was
accomplished only after extensive use of ad hoc programming by IRS to
extract data from its systems, followed by numerous adjustments to
these data totaling tens of billions of dollars to produce final
financial statements.  IRS' controls and systems remain plagued by
weaknesses that affect its ability, among other things, to report
reliable financial information throughout the year, and IRS'
financial management remains a high-risk area. 


--------------------
\34 FASAB was created by the Secretary of the Treasury, the Director
of OMB, and the Comptroller General in October 1990 to consider and
recommend federal accounting standards.  Treasury, OMB, and GAO then
decide whether to adopt the recommended standards; if they do, the
standards are published by OMB and GAO and become effective. 

\35 FASAB, Overview of Federal Accounting Concepts and Standards (as
of Sept.  30, 1996):  Reporting Relevant Financial Information,
Report Number 1, Dec.  31, 1996. 

\36 Financial Audit:  1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, Mar.  31, 1998). 

\37 Department of Defense:  Financial Audits Highlight Continuing
Challenges to Correct Serious Financial Management Problems
(GAO/T-AIMD/NSIAD-98-158, Apr.  16, 1998). 

\38 Internal Revenue Service:  Remaining Challenges to Achieve
Lasting Financial Improvements (GAO/T-AIMD/GGD-98-139, Apr.  15,
1998) and Financial Audit:  Examination of IRS' Fiscal Year 1997
Custodial Financial Statements (GAO/AIMD-98-77, Feb.  26, 1998). 


      ENSURING THAT FEDERAL
      MANAGEMENT FINANCIAL SYSTEMS
      CAN PERFORM TO STANDARDS
-------------------------------------------------------- Chapter 1:3.2

Serious systems problems limit the reliability, usefulness, and
timeliness of financial information needed to effectively manage
federal programs and operations.  For some agencies, the preparation
of financial statements requires considerable reliance on ad hoc
programming and analysis of data produced by inadequate financial
management systems that are not integrated or reconciled, and that
often require significant audit adjustments.  Thus, the overarching
challenge in generating timely, reliable data throughout the year is
overhauling financial and related management information systems. 
This overhaul has as its core objective the ability to (1) integrate
financial, budget, and program information; (2) provide information
for decisionmaking both throughout the year and at year-end; and (3)
provide cost information that can be related to programs and
operations under the Results Act. 

Fiscal year 1997 ushered in the new requirements of the 1996 Federal
Financial Management Improvement Act (FFMIA), which is focused on
ensuring greater attention to making much needed improvements in
underlying systems.  This act requires that agency financial
management systems comply with (1) federal systems requirements,\39
(2) federal accounting standards, and (3) the U.S.  Government
Standard General Ledger at the transaction level.  For fiscal year
1997, 20 of the 24 CFO Act agencies' financial management systems
were found by auditors to be in substantial noncompliance with
FFMIA's requirements.\40 The four agencies in compliance were DOE,
the National Aeronautics and Space Administration, the General
Services Administration, and the National Science Foundation. 

Agencies are challenged to improve their critical existing financial
systems applications, which are not designed to fully meet current
accounting standards and financial system requirements.  These
systems will need to be replaced or significantly upgraded in the
next 5 years.  At the end of fiscal year 1997, agencies identified
809 financial management system applications that fall into this
category, representing 72 percent of the applications in operation at
the time.  Therefore, it will take time and concerted effort to raise
federal financial management systems to the level of quality and
reliability envisioned in FFMIA.  In addition, agencies face the Year
2000 computing challenge of ensuring that their current systems
function properly at the turn of the century.  This task is
appropriately taking priority and will likely sidetrack temporarily
longer term system modernizations.\41


--------------------
\39 The financial management systems requirements have been developed
by the Joint Financial Management Improvement Program (JFMIP), which
is a joint and cooperative undertaking of the Department of the
Treasury, OMB, GAO, and the Office of Personnel Management. 

\40 Financial Management:  Federal Financial Management Improvement
Act Results for Fiscal Year 1997 (GAO/AIMD-98-268, Sept.  30, 1998). 

\41 Year 2000 Computing Crisis:  Actions Must Be Taken Now to Address
Slow Pace of Federal Progress (GAO/AIMD-98-205, June 10, 1998). 


      DEVELOPING COST ACCOUNTING
      SYSTEMS AND ACCOUNTABILITY
      REPORTS
-------------------------------------------------------- Chapter 1:3.3

Cost accounting also remains a key challenge in providing
accountability and supporting the Results Act.  Along with the new
financial reporting model, new cost accounting standards became
effective in fiscal year 1998.\42 These standards require agencies to
develop measures of the full costs of carrying out a mission,
producing products, or delivering services.  Thus, decisionmakers are
to have information on the costs of all resources used to allow for a
comparison of the costs of various programs and activities and their
performance outputs and results.  Developing the necessary approach
to gather and analyze needed program and activity-level cost
information will be a substantial undertaking; while there is a broad
recognition of the importance of doing so, for the most part,
agencies have just begun this effort. 

Finally, as authorized by the 1994 Government Management Reform Act,
OMB is piloting accountability reports that provide a single overview
of federal agencies' performance.  For fiscal year 1997, 12 agencies
prepared accountability reports, and 18 are expected to do so for
fiscal year 1998.  By seeking to consolidate and integrate the
separate reporting requirements of the Results Act, the CFO Act, and
other specified acts, the accountability reports are to show the
degree to which an agency met its goals, at what cost, and whether
the agency was well run.  SSA, which has received an unqualified
opinion on its financial statements for fiscal years 1994 to 1998,
has been a leader in accountability reporting.  Its fiscal year 1998
accountability report, published on November 20, 1998 (less than 2
months after the close of the fiscal year), includes, among other
things,

  -- the audited financial statements and the auditor's report;

  -- a 10-year summary of financial highlights;

  -- SSA's performance goals and results and its Results Act report;
     and

  -- a discussion of the major issues facing SSA, including the
     status of efforts to address the Year 2000 compliance issue. 

Accountability reports that present an agency's financial condition
and the results of its operations in an integrated way hold great
promise for enhancing the usefulness of performance information. 
Such reports and independent audits will help correct the problem of
the lack of complete and reliable information that has been a source
of concern for congressional and agency decisionmakers for decades. 
If effectively implemented, accountability reports that include
information on the full cost and results of carrying out federal
activities could greatly aid decisionmaking for our national
government. 


--------------------
\42 Statement of Federal Financial Accounting Standards No.  4: 
"Managerial Cost Accounting Standards," issued July 1995, to be
effective October 1, 1997. 


   BUILDING, MAINTAINING, AND
   MARSHALING THE HUMAN CAPITAL
   NEEDED TO ACHIEVE RESULTS
---------------------------------------------------------- Chapter 1:4



   (See figure in printed
   edition.)

Leading performance-based organizations understand that effectively
managing the organization's employees--or human capital--is essential
to achieving results.  People are an organization's most important
asset, especially within service-providing organizations.  Only when
the right employees are on board and are provided the training,
tools, structures, incentives, and accountability to work effectively
is organizational success possible.  Thus, human capital planning
must be an integral part of an organization's strategic and program
planning; human capital itself should be thought of not as a cost to
be minimized but as a strategic asset to be enhanced.  The
challenge--and opportunity--confronting federal agencies as they seek
to become more performance-based is to ensure that their human
capital policies and practices are aligned with the particular
agency's program goals and strategies.\43

Human capital will become an increasingly prominent issue for the
federal government as agencies implement the performance-based
management agenda established by the Congress in the 1990s.  Whereas
financial management, information technology management, and
results-oriented goal-setting and performance measurement have all
been the subject of major reform legislation this decade, no
consensus has emerged on the fundamental structural or policy changes
that may be needed to better align the federal government's human
capital approaches with the new performance-based framework for
management and accountability.  Human capital reforms (for example,
changes to the civil service system) will be necessary in order to
fully realize the benefits which can be gained through a well-defined
performance-based management and accountability framework.  In that
regard, we will work with the Congress to develop a body of work that
helps to define the guiding principles and best practices for federal
human capital issues. 


--------------------
\43 Performance Management:  Aligning Employee Performance With
Agency Goals at Six Results Act Pilots (GAO/GGD-98-162, Sept.  4,
1998) and Transforming the Civil Service:  Building the Workforce of
the Future (GAO/GGD-96-35, Dec.  26, 1995). 


      ADOPTING A STRATEGIC
      APPROACH TO HUMAN CAPITAL
      PLANNING
-------------------------------------------------------- Chapter 1:4.1

Strategic human capital planning has traditionally been a weak link
in federal agency management and has not consistently been part of
agencies' strategic and programmatic approaches to accomplishing
their missions.  For example, HUD initiated its 2020 Management
Reform Plan to, among other things, correct several management
deficiencies.  While it has made progress, having the right number of
staff with the proper skills remains a challenge for HUD.  One of
HUD's 2020 Management Reform Plan's goals was to reduce staffing from
about 10,500 to 7,500 by 2002.  However, we found that HUD's target
levels were not based on a systematic analysis of how many staff it
needed to carry out a given responsibility or function. 

This weakness in HUD's human capital planning is particularly
troubling because, in the past, not having enough staff with the
necessary skills has limited HUD's ability to perform essential
functions, such as monitoring multibillion dollar federal programs. 
As discussed in detail in Performance and Accountability Series: 
Major Management Challenges and Program Risks:  The Department of
Housing and Urban Development, HUD's human capital problems, together
with its other management deficiencies, place the integrity and
accountability of HUD's programs at risk. 

A strategic approach to human capital directly integrates decisions
about the results the organization is striving to achieve.  It also
takes into account an organization's human capital needs, the way the
capital will be obtained, the cost of obtaining it, and the way human
capital will be used. 


      ACQUIRING AND DEVELOPING
      STAFF WITH THE SKILLS TO
      MEET CRITICAL NEEDS
-------------------------------------------------------- Chapter 1:4.2

Given the rapid pace of social and technological change, in addition
to the shifts in strategies agencies adopt to achieve their missions,
agencies are continually faced with the challenge of attracting,
retaining, and motivating appropriately skilled staff.  Skills gaps
in critical mission areas undermine agencies' effectiveness and
efforts to address high-risk areas. 

For example, the lack of staff with the requisite technical skills
has limited the effectiveness of DOE's self-regulation and
contributed to the environmental problems at many of DOE's
facilities.  The Defense Nuclear Facilities Safety Board has
repeatedly stated in its annual reports to the Congress that the lack
of appropriate technical expertise in DOE is a significant problem. 
As we have reported since 1991, managers throughout DOE have told us
that the lack of skilled staff in program and contracting oversight
positions is one of the most fundamental challenges for the
Department.  In March 1997, we reported that DOE did not assign
enough staff with the proper technical capability to oversee the
early stages of a project at the Fernald site in Ohio, resulting in
major cleanup problems that could have been avoided. 

DOD is another department that has experienced difficulties in
finding and retaining staff with the technical training it needs.  To
achieve the wide-ranging reforms necessary to address its
long-standing financial management deficiencies, DOD must upgrade the
skills of its financial personnel.  DOD's vast financial operations
involve a cadre of about 32,000 financial management personnel.  Our
survey of over 1,400 key DOD financial managers--individuals often
serving in comptroller, deputy comptroller, or budget officer
positions--showed that over half (53 percent) had received no
financial or accounting-related training during 1995 and 1996.  DOD
is relying on these personnel to lead its efforts to produce reliable
financial data.  This will require DOD's financial managers to follow
recently developed, and more comprehensive, accounting standards and
federal financial management systems requirements and to implement
these reforms throughout a large and complex organization with
acknowledged serious financial deficiencies. 


      CREATING A
      PERFORMANCE-ORIENTED
      ORGANIZATIONAL CULTURE
-------------------------------------------------------- Chapter 1:4.3

Moving successfully to a more performance-based approach to
management requires that organizations align their human capital
policies and practices with their missions and goals.  New ways of
thinking must be adopted about the goals to be achieved; the
organizational arrangements, program strategies, and partnerships
needed to achieve those goals; and how progress will be measured. 
Likewise, performance management approaches are needed that align
employee incentive and accountability mechanisms with the goals of
the organization. 

A key to redirecting employee performance toward organizational goals
is to establish a performance-oriented culture in which employees
understand the importance of and the connection between their
performance and the organization's success.  One step management must
take in creating a culture of performance is to inform staff at all
levels of the organization's intentions and involve them in the
process of designing and implementing change. 

The failure to constructively involve staff in an organization's
efforts to become more performance-based means running the risk that
the changes will be more difficult and protracted than necessary. 
For example, in the fall of 1997, the Nuclear Regulatory Commission's
(NRC) Office of Inspector General surveyed NRC staff to obtain their
views on the agency's safety culture.  In its June 1998 report, the
Inspector General noted that the staff had a strong commitment to
protecting public health and safety but expressed high levels of
uncertainty and confusion about the new directions in regulatory
practices and challenges facing the agency. 

The employees said that, in their view, they spend too much time on
paperwork that may not contribute to the safety mission of the
organization.  Employees who are confused about the direction their
agency is taking will not be able to effectively focus on results or
make as full a contribution as they might otherwise.  Therefore, as
the Inspector General concluded, improved management leadership and
communication are needed to effectively involve employees in
achieving results. 

As shown in the relevant performance and accountability series
reports, we have identified additional agencies, such as DOD and FAA,
where problems in organizational culture have hampered effectiveness
and plagued improvement efforts.  For example, we have found that
FAA's organizational culture has been an underlying cause of
acquisition problems with the agency's multibillion dollar
modernization program that, over the past 17 years, has experienced
cost overruns, schedule delays, and significant performance
shortfalls.  We have found that FAA employees have acted in ways that
did not reflect a strong enough commitment to mission focus,
accountability, coordination, and adaptability. 


      PROTECTING MERIT PRINCIPLES
-------------------------------------------------------- Chapter 1:4.4

As federal agencies give new emphasis to designing and implementing
human capital approaches aimed at enhancing their performance, they
must also recognize that certain statutorily established merit
principles and other national goals, such as veterans' preference,
must continue to be upheld.  The balance between performance
considerations and merit requirements is one with which the civil
service continues to struggle.  The Office of Personnel Management's
(OPM) strategic mission statement acknowledges the agency's dual role
in designing policies to help agencies align their human capital
approaches with their missions and in overseeing "governmentwide
implementation of those policies" so that the agencies will uphold
the merit principles and veterans' preference.  OPM's intentions and
initiatives in this area notwithstanding, the civil service continues
to be marked by a tension between federal agencies' needs for
flexibility in managing their human capital and the government's need
to ensure that they continue to adhere to what OPM calls "national
values embodied by law."


   IMPROVING PERFORMANCE AND
   STRENGTHENING ACCOUNTABILITY
   ACROSS THE FEDERAL GOVERNMENT
---------------------------------------------------------- Chapter 1:5



   (See figure in printed
   edition.)

Agencies across the federal government face a series of daunting
challenges as they strive to create performance-based organizations
that are capable of meeting the demands and opportunities of the next
century in a cost effective manner.  While every agency we have
examined has made progress in becoming more performance-based, that
progress is very uneven across agencies.  As the reports that are
included in our performance and accountability series demonstrate, a
great deal of hard and sustained work remains to be done. 

On a governmentwide basis, agencies must ensure that the statutory
framework that the Congress has established is effectively
implemented and, more generally, that the performance-based
principles underpinning that framework become the routine basis for
how the agencies do business.  Top management within agencies must
provide the consistent leadership necessary to direct this change and
to ensure that momentum is maintained.  OMB and other central
management agencies and the Congress can reinforce agencies' efforts
by using program performance and cost information to help guide their
decisions.  They also have key roles in supporting and overseeing
agencies' efforts to become more performance-based. 


      LEADERSHIP IN THE AGENCIES
-------------------------------------------------------- Chapter 1:5.1

The changes in organizational cultures and management systems
necessary for most agencies to become performance-based will take
years to fully implement.  Our work looking at management reform
efforts within the federal government has found that, time and again,
solutions have not been fully implemented to address management
problems, in part because top leadership lacked a strong and
sustained commitment to change. 

Strong, visible, and sustained commitment to change requires setting
a clear and consistent vision of where the organization is going in
its effort to become more performance-based, communicating that
vision throughout the organization, teaching people what their roles
are in accomplishing that vision, and holding people accountable for
fulfilling their roles.  Political appointees and top career
officials must work together to instill a performance-based approach
to management and accountability throughout an agency.  Top career
officials must assume a leadership role--and be accountable--because
the fundamental changes needed will require sustaining improvement
efforts well beyond the usual tenure of political appointees. 


      CENTRAL MANAGEMENT AGENCIES'
      ROLES
-------------------------------------------------------- Chapter 1:5.2

The federal government's central management agencies--OMB in
particular--have pivotal roles to play in guiding and overseeing
agencies' efforts to become more performance-based and, more
importantly, using the agencies' performance, financial, and program
cost information as a basis for decisionmaking.  Over the last
several months, OMB has worked with agencies on their fiscal year
2000 annual performance plans.  These plans were developed under the
Results Act and submitted to OMB as part of agencies' budget
submissions.  According to senior OMB officials, the plans allowed
for much deeper considerations of the performance consequences of
resource decisions than had been possible when developing the
President's budget in the past. 

OMB and the agencies can also use the annual performance planning
process to present agreed-upon goals and strategies for addressing
major management issues.  The agency-specific and crosscutting
priority management objectives that OMB includes in the
governmentwide annual performance plan highlight areas needing the
greatest attention and the executive branch's plans for addressing
those areas.  Many of the areas that we have identified as high-risk
are consistent with areas on OMB's list of priority management
objectives.  For example, Defense Financial Management and
contracting approaches at DOE are on our high-risk list and are among
OMB's priority management objectives. 

OMB also has leadership responsibilities for ensuring that agencies
effectively implement the statutory performance and accountability
framework.  To help meet this responsibility, OMB has used task
forces and interagency councils as a strategy in both developing
policies that are sensitive to implementation concerns and gaining
consensus and consistent follow-through within the executive branch. 

One example of this collaborative approach is the continuing success
of the CFOs and the CFO Council in leading agencies in addressing a
wide range of financial and related management issues.  The CFO
Council, working with OMB, develops an annual financial management
status report and 5-year plan.  The CFO Council also has an active
committee focused on Results Act implementation, with particular
attention to integrating performance goals and information into
budget presentations.  Further, the CFO Council's Human Resources
Committee assists CFOs in improving the recruitment, retention,
performance, and professional development of financial management
personnel.  The Human Resources Committee, in cooperation with JFMIP,
has also defined core competencies for federal personnel who perform
financial management functions.  In addition, this committee has
recognized the importance of establishing a standard for continuing
professional education for all financial management employees. 

OPM, as the federal government's central personnel agency, has a
leading role in ensuring that the appropriate balances are struck
between the flexibilities afforded to agencies to design their own
human capital systems and adherence to governmentwide policies.  OPM
also has a role in assisting agencies in augmenting their human
capital.  For example, as we noted in our earlier discussion of human
capital issues, federal agencies traditionally have done little in
the way of strategic human capital planning, particularly in
identifying what sort of talent they need and strategies for aligning
their workforce capabilities with their missions and goals. 

We have long recommended that OPM (as well as OMB) take a greater
leadership role in this area.  OPM needs to guide agencies toward
more rigorous human capital planning and to identify whether aspects
of federal employment policy need to be modified so that the
government is competitive in hiring and retaining the talented
individuals it needs to accomplish its varied missions. 


      INFORMATION FOR
      CONGRESSIONAL DECISIONMAKING
-------------------------------------------------------- Chapter 1:5.3

In crafting its performance and accountability framework, the
Congress was responding to the fact that congressional and executive
branch decisionmaking had often been hampered by the absence of
information on the costs and results of agencies' programs. 
Results-oriented performance information and audited financial
program and cost information can better inform the full range of
decisions the Congress faces in its budget, appropriation,
authorization, and oversight capacities.  Congressional use of these
sources of information will spur agencies' efforts to implement the
statutory framework by sending the unmistakable message to the
agencies that the Congress remains serious about performance-based
management and accountability. 

We have long advocated that congressional committees of jurisdiction
hold augmented oversight hearings on each of the major agencies at
least once each Congress, and preferably on an annual basis. 
Information on the linkages among plans, programs, budgets, and
performance results that should become available as agencies become
more performance-based, could provide a consistent starting point for
each of these hearings.  As each agency implements the statutory
framework, this information should allow more informed discussions
about issues such as

  -- the progress the agency is making in achieving the goals
     established in its strategic and annual plans;

  -- the degree to which the agency has the best mix of programs,
     initiatives, and other strategies to achieve results;

  -- the progress the agency is making in addressing high-risk areas
     and other major management challenges;

  -- the efforts under way to ensure that the agency has the needed
     human capital and that the agency's human capital strategies are
     linked to strategic and programmatic planning and accountability
     mechanisms; and finally

  -- the status of the agency's efforts to use information technology
     to achieve results. 

Across the federal government, agencies have been making progress
over the last few years in implementing the statutory framework and
making the major management changes that effective implementation of
the framework entails.\44 These efforts have confirmed that
fundamental improvements in performance and management are possible
when an organization undertakes a disciplined approach to
implementing the performance-based management principles that
underpin the Congress' framework.  At the same time, the efforts to
date underscore the nature and scope of the challenges that lie ahead
for most agencies if they are to become fully effective organizations
capable of meeting the demands of the 21st century and providing the
products, services, and results that taxpayers expect. 


--------------------
\44 GAO/AIMD-98-127, Mar.  31, 1998 and GAO/GGD-97-109, June 2, 1997. 


RELATED GAO PRODUCTS
============================================================ Chapter 2


   ADOPTING A RESULTS ORIENTATION
---------------------------------------------------------- Chapter 2:1

Managing for Results:  An Agenda To Improve the Usefulness of
Agencies' Annual Performance Plans (GAO/GGD/AIMD-98-228, Sept.  8,
1998). 

The Results Act:  Assessment of the Governmentwide Performance Plan
for Fiscal Year 1999 (GAO/AIMD/GGD-98-159, Sept.  8, 1998). 

The Results Act:  An Evaluator's Guide to Assessing Agency Annual
Performance Plans, Version 1 (GAO/GGD-10.1.20, Apr.  1998). 

Agencies' Annual Performance Plans Under the Results Act:  An
Assessment Guide to Facilitate Congressional Decisionmaking, Version
1 (GAO/GGD/AIMD-10.1.18, Feb.  1998). 

Managing for Results:  Agencies' Annual Performance Plans Can Help
Address Strategic Planning Challenges (GAO/GGD-98-44, Jan.  30,
1998). 

Managing for Results:  The Statutory Framework for Performance-Based
Management and Accountability (GAO/GGD/AIMD-98-52, Jan.  28, 1998). 

Managing for Results:  Using the Results Act to Address Mission
Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug.  29, 1997). 

The Government Performance and Results Act:  1997 Governmentwide
Implementation Will Be Uneven (GAO/GGD-97-109, June 2, 1997). 

Agencies' Strategic Plans Under GPRA:  Key Questions to Facilitate
Congressional Review, Version 1 (GAO/GGD-10.1.16, May 1997). 

Executive Guide:  Effectively Implementing the Government Performance
and Results Act (GAO/GGD-96-118, June 1996). 


   EFFECTIVELY USING INFORMATION
   TECHNOLOGY TO ACHIEVE PROGRAM
   RESULTS
---------------------------------------------------------- Chapter 2:2

Executive Guide:  Leading Practices in Capital Decision-Making
(GAO/AIMD-99-32, Dec.  1998). 

Year 2000 Computing Crisis:  A Testing Guide (GAO/AIMD-10.1.21, Nov. 
1998). 

Information Security:  Serious Weaknesses Place Critical Federal
Operations and Assets at Risk (GAO/AIMD-98-92, Sept.  23, 1998). 

Year 2000 Computing Crisis:  Business Continuity and Contingency
Planning (GAO/AIMD-10.1.19, Aug.  1998). 

Executive Guide:  Information Security Management--Learning From
Leading Organizations (GAO/AIMD-98-68, May 1998). 

Executive Guide:  Measuring Performance and Demonstrating Results of
Information Technology Investments (GAO/AIMD-98-89, Mar.  1998). 

Chief Information Officers:  Ensuring Strong Leadership and an
Effective Council (GAO/T-AIMD-98-22, Oct.  27, 1997). 

Year 2000 Computing Crisis:  An Assessment Guide (GAO/AIMD-10.1.14,
Sept.  1997). 

Year 2000 Computing Crisis:  Success Depends Upon Strong Management
and Structured Approach (GAO/T-AIMD-97-173, Sept.  25, 1997). 

Paperwork Reduction:  Governmentwide Goals Unlikely to Be Met
(GAO/T-GGD-97-114, June 4, 1997). 

The System Assessment Framework, Version 1.1, A Guide for Reviewing
Information Management and Technology Issues in the Federal
Government (GAO/AIMD-10.1.12, May 1, 1997). 

Business Process Reengineering Assessment Guide (GAO/AIMD-10.1.15,
Apr.  1997). 

High-Risk Areas:  Actions Needed to Solve Pressing Management
Problems (GAO/T-AIMD/GGD-97-60, Mar.  5, 1997). 

Assessing Risks and Returns:  A Guide for Evaluating Federal
Agencies' IT Investment Decisionmaking (GAO/AIMD-10.1.13, Feb. 
1997). 

1997 High-Risk Series, An Overview (GAO/HR-97-1, Feb.  1997). 

1997 High-Risk Series, Information Management and Technology
(GAO/HR-97-9, Feb.  1997). 

Managing Technology:  Best Practices Can Improve Performance and
Produce Results (GAO/T-AIMD-97-38, Jan.  31, 1997). 

Information Technology Investment:  Agencies Can Improve Performance,
Reduce Costs, and Minimize Risks (GAO/AIMD-96-64, Sept.  30, 1996). 

Information Security:  Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, Sept.  24, 1996). 

Information Management Reform:  Effective Implementation is Essential
for Improving Federal Performance (GAO/T-AIMD-96-132, July 17, 1996). 

Information Security:  Computer Hacker Information Available on the
Internet (GAO/T-AIMD-96-108, June 5, 1996). 

Paperwork Reduction:  Burden Reduction Goal Unlikely to Be Met
(GAO/T-GGD/RCED-96-186, June 5, 1996). 

Evaluating Information Technology Investments:  A Practical Guide,
Version 1.0 (Office of Information and Regulatory Affairs,
Information Policy and Technology Branch, Nov.  1995). 

Strategic Information Management (SIM) Self-Assessment Toolkit,
Exposure Draft, Version 1 (Accession Number 153193, Oct.  28, 1994). 

Executive Guide:  Improving Mission Performance Through Strategic
Information Management and Technology (GAO/AIMD-94-115, May 1994). 

Paperwork Reduction Act:  Opportunity to Strengthen Government's
Management of Information and Technology (GAO/T-AIMD/GGD-94-126, May
19, 1994). 

Strategic Information Planning:  Framework for Designing and
Developing System Architectures (GAO/IMTEC-92-51, June 1992). 


   ESTABLISHING FINANCIAL
   MANAGEMENT CAPABILITIES THAT
   EFFECTIVELY SUPPORT
   DECISIONMAKING AND
   ACCOUNTABILITY
---------------------------------------------------------- Chapter 2:3

Forest Service:  Barriers to Financial Accountability Remain
(GAO/AIMD-99-1, Oct.  2, 1998). 

Financial Management:  Federal Financial Management Improvement Act
Results for Fiscal Year 1997 (GAO/AIMD-98-268, Sept.  30, 1998). 

Financial Management:  Training of DOD Financial Managers Could Be
Enhanced (GAO/AIMD-98-126, June 24, 1998). 

Financial Management:  Fostering the Effective Implementation of
Legislative Goals (GAO/T-AIMD-98-215, June 18, 1998). 

Year 2000 Computing Crisis:  Actions Must Be Taken Now to Address
Slow Pace of Federal Progress (GAO/T-AIMD-98-205, June 10, 1998). 

Department of Defense:  Financial Audits Highlight Continuing
Challenges to Correct Serious Financial Management Problems
(GAO/T-AIMD/NSIAD-98-158, Apr.  16, 1998). 

Internal Revenue Service:  Remaining Challenges to Achieve Lasting
Financial Management Improvements (GAO/T-AIMD/GGD-98-139, Apr.  15,
1998). 

Financial Audit:  1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, Mar.  31, 1998). 

Financial Audit:  Examination of IRS' Fiscal Year 1997 Custodial
Financial Statements (GAO/AIMD-98-77, Feb.  26, 1998). 

The Government Performance and Results Act:  1997 Governmentwide
Implementation Will Be Uneven (GAO/GGD-97-109, June 2, 1997). 

Budget and Financial Management:  Progress and Agenda for the Future
(GAO/T-AIMD-96-80, Apr.  23, 1996). 


   BUILDING, MAINTAINING, AND
   MARSHALING THE HUMAN CAPITAL
   NEEDED TO ACHIEVE RESULTS
---------------------------------------------------------- Chapter 2:4

Performance Management:  Aligning Employee Performance With Agency
Goals at Six Results Act Pilots (GAO/GGD-98-162, Sept.  4, 1998). 

The Excepted Service:  A Research Profile (GAO/GGD-97-72, May 1997). 

Transforming the Civil Service:  Building the Workforce of the
Future, Results of a GAO-Sponsored Symposium (GAO/GGD-96-35, Dec. 
26, 1995). 

Civil Service Reform:  Changing Times Demand New Approaches
(GAO/T-GGD-96-31, Oct.  12, 1995). 

Federal Personnel:  Federal/Private Sector Pay Comparisons
(GAO/OCE-95-1, Dec.  14, 1994). 

Federal Employment:  How Government Jobs Are Viewed on Some College
Campuses (GGD-94-95, Mar.  10, 1994). 

Transition Series:  The Public Service (GAO/OGC-93-7TR, Dec.  1992). 

The Changing Workforce:  Demographic Issues Facing the Federal
Government (GAO/GGD-92-38, Mar.  24, 1992). 

Federal Recruiting:  Comparison of Applicants Who Accepted or
Declined Federal Job Offers (GAO/GGD-92-61BR, Mar.  20, 1992). 

Managing Human Resources:  Greater OPM Leadership Needed to Address
Critical Challenges (GAO/GGD-89-19, Jan.  19, 1989). 


PERFORMANCE AND ACCOUNTABILITY
SERIES
============================================================ Chapter 3

Major Management Challenges and Program Risks:  A Governmentwide
Perspective (GAO/OCG-99-1)

Major Management Challenges and Program Risks:  Department of
Agriculture (GAO/OCG-99-2)

Major Management Challenges and Program Risks:  Department of
Commerce (GAO/OCG-99-3)

Major Management Challenges and Program Risks:  Department of Defense
(GAO/OCG-99-4)

Major Management Challenges and Program Risks:  Department of
Education (GAO/OCG-99-5)

Major Management Challenges and Program Risks:  Department of Energy
(GAO/OCG-99-6)

Major Management Challenges and Program Risks:  Department of Health
and Human Services (GAO/OCG-99-7)

Major Management Challenges and Program Risks:  Department of Housing
and Urban Development (GAO/OCG-99-8)

Major Management Challenges and Program Risks:  Department of the
Interior (GAO/OCG-99-9)

Major Management Challenges and Program Risks:  Department of Justice
(GAO/OCG-99-10)

Major Management Challenges and Program Risks:  Department of Labor
(GAO/OCG-99-11)

Major Management Challenges and Program Risks:  Department of State
(GAO/OCG-99-12)

Major Management Challenges and Program Risks:  Department of
Transportation (GAO/OCG-99-13)

Major Management Challenges and Program Risks:  Department of the
Treasury (GAO/OCG-99-14)

Major Management Challenges and Program Risks:  Department of
Veterans Affairs (GAO/OCG-99-15)

Major Management Challenges and Program Risks:  Agency for
International Development (GAO/OCG-99-16)

Major Management Challenges and Program Risks:  Environmental
Protection Agency (GAO/OCG-99-17)

Major Management Challenges and Program Risks:  National Aeronautics
and Space Administration (GAO/OCG-99-18)

Major Management Challenges and Program Risks:  Nuclear Regulatory
Commission (GAO/OCG-99-19)

Major Management Challenges and Program Risks:  Social Security
Administration (GAO/OCG-99-20)

Major Management Challenges and Program Risks:  U.S.  Postal Service
(GAO/OCG-99-21)

High-Risk Series:  An Update (GAO/HR-99-1)






The entire series of 21 performance and accountability reports and
the high-risk series update can be ordered by using the order number
GAO/OCG-99-22SET. 


*** End of document. ***