Status of Open Recommendations: Improving Operations of Federal
Departments and Agencies (Chapter Report, 01/14/95, GAO/OP-95-1).

In fiscal year 1994, GAO made 1,450 recommendations.  More importantly,
about 4,400 GAO recommendations made during the past five years have
been implemented.  This report summarizes the status of all GAO
recommendations that have not been fully implemented and highlights some
of the key ones.  It also includes a set of computer diskettes with
details on all open recommendations.  The diskettes have several menu
options to help users find information easily.

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

 REPORTNUM:  OP-95-1
     TITLE:  Status of Open Recommendations: Improving Operations of 
             Federal Departments and Agencies
      DATE:  01/14/95
   SUBJECT:  Federal agencies
             National defense operations
             Tax administration
             Health care programs
             Public administration
             International relations
             Federal programs
             Financial management
             Agency missions
             Appropriations

             
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Cover
================================================================ COVER


Annual Report to the Chairmen and Ranking Minority Members, House and
Senate Committees on Appropriations

January 1995

STATUS OF OPEN RECOMMENDATIONS -
IMPROVING OPERATIONS OF FEDERAL
DEPARTMENTS AND AGENCIES

GAO/OP-95-1



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

  ACS - Automated Commercial System
  ACWA - Administrative Careers With America
  ADMS - Alcohol, Drug Abuse, and Mental Health Services
  ADP - automatic data processing
  AFDC - Aid to Families With Dependent Children
  AHCPR - Agency for Health Care Policy and Research
  AICPA - American Institute of Certified Public Accountants
  AID - Agency for International Development
  AIF - Army's Industrial Fund
  AOC - Architect of the Capitol
  ATC - air traffic control
  BIA - Bureau of Indian Affairs
  BIF - Bank Insurance Fund
  BIS - Bank for International Settlements
  BLM - Bureau of Land Management
  BOP - Bureau of Prisons
  CBO - Congressional Budget Office
  CCC - Commodity Credit Corporation
  CCDBG - Child Care and Development Block Grant
  CDBG - Community Development Block Grant
  CFO - Chief Financial Officers
  CHAMPUS - Civilian Health and Medical Program of the Uniformed
     Services
  CHCS - Composite Health Care System
  CIM - corporate information management
  COEA - cost and operational effectiveness analysis
  COSO - Committee of Sponsoring Organizations
  CPA - certified public accountant
  CRADA - cooperative research and development agreement
  CRS - Congressional Research Service
  DBOF - Defense Business Operations Fund
  DCAA - Defense Contract Audit Agency
  DFAS - Defense Finance and Accounting Service
  DI - Disability Insurance
  DOD - Department of Defense
  DOE - Department of Energy
  DOT - Department of Transportation
  EDI - Electronic Data Interchange
  EEO - equal employment opportunity
  EEOC - Equal Employment Opportunity Commission
  EPA - Environmental Protection Agency
  ERISA - Employee Retirement Income Security Act
  ESEA - Elementary and Secondary Education Act
  FAA - Federal Aviation Administration
  FAAD - forward area defense
  FASB - Financial Accounting Standards Board
  FBI - Federal Bureau of Investigation
  FCC - Federal Communications Commission
  FDA - Food and Drug Administration
  FDIC - Federal Deposit Insurance Corporation
  FDICIA - Federal Deposit Insurance Corporation Improvement Act
  FEMA - Federal Emergency Management Agency
  FERC - Federal Energy Regulatory Commission
  FFELP - Federal Family Education Loan Program
  FHA - Federal Housing Administration
  FHWA - Federal Highway Administration
  FIA - Financial Integrity Act
  FmHA - Farmers Home Administration
  FRB - Federal Reserve Board
  FTA - Federal Transit Administration
  FTD - federal tax deposit
  FY - fiscal year
  FYDP - future years defense plan
  GAO - General Accounting Office
  GDP - gross domestic product
  GNMA - Government National Mortgage Association
  GPRA - Government Performance and Results Act
  GSA - General Services Administration
  GSE - government-sponsored enterprise
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  HMO - health maintenance organizations
  HPCC - High Performance Computing and Communications
  HRM - human resources management
  HRSA - Health Resources and Services Administration
  HUD - Department of Housing and Urban Development
  IG - Inspector General
  IHS - Indian Health Service
  IME - impartial medical examinations
  INS - Immigration and Naturalization Service
  IRM - information resources management
  IRS - Internal Revenue Service
  ISTEA - Intermodal Surface Transportation Efficiency Act
  JOBS - Job Opportunities and Basic Skills Training Program
  MCCR - medical care cost recovery
  MTS - Medicare Transaction System
  NAC - National Advisory Council on International Monetary and
     Financial Policies
  NAEP - National Assessment of Educational Progress
  NAGB - National Assessment Governing Board
  NASA - National Aeronautics and Space Administration
  NATO - North Atlantic Treaty Organization
  NCIC - National Crime Information Center
  NEH - National Endowment for the Humanities
  NIH - National Institutes of Health
  NOAA - National Oceanic and Atmospheric Administration
  NPR - National Performance Review
  NRC - Nuclear Regulatory Commission
  NSF - National Science Foundation
  OCC - Office of the Controller of the Currency
  OIG - Office of the Inspector General
  OMB - Office of Management and Budget
  ONDCP - Office of National Drug Control Policy
  OPM - Office of Personnel Management
  OSHA - Occupational Safety and Health Administration
  OTS - Office of Thrift Supervision
  OWCP - Office of Workers' Compensation Programs
  PBGC - Pension Benefit Guaranty Corporation
  PME - personnel management evaluation
  PRO - Peer Review Organizations
  QMB - Qualified Medicare Beneficiary
  R&D - research and development
  RSA - Rehabilitation Services Administration
  RTC - Resolution Trust Corporation
  SAIF - Savings Association Insurance Fund
  SBA - Small Business Administration
  SEC - Securities and Exchange Commission
  SES - Senior Executive Service
  SIP - state implementation plan
  SOP - Statement of Position
  SRO - self-regulating organizations
  SSA - Social Security Administration
  SSI - Supplemental Security Income
  SSN - nuclear-powered attack submarine
  STWT - school-to-work transition
  TPCC - Trade Promotion Coordinating Committee
  TSM - Tax Systems Modernization
  UMTA - Urban Mass Transportation Administration
  USDA - United States Department of Agriculture
  VA - Department of Veterans Affairs
  VBA - Veterans Benefits Administration
  WIC - Women, Infants, and Children

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


B-205879

January 30, 1995

The Honorable Robert L.  Livingston
Chairman, Committee on Appropriations
House of Representatives

The Honorable David R.  Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Mark O.  Hatfield
Chairman, Committee on Appropriations
United States Senate

The Honorable Robert C.  Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

This is our annual report on the status of open recommendations
resulting from our audits, evaluations, and other review work in
federal departments and agencies.  To encourage prompt, responsive
actions on our recommendations, we systematically followup on them
and annually report on their status. 

We are sending copies of this report to the Office of Management and
Budget and federal departments and agencies so that they may respond
to inquiries about these issues during appropriations and oversight
hearings.  We are also sending copies to Chairs and Ranking Minority
Members of all House and Senate committees and subcommittees to
better inform them of our open recommendations.


Charles A.  Bowsher
Comptroller General
of the United States


PREFACE
============================================================ Chapter 0

Each year, GAO's work contributes to many legislative and executive
branch actions that result in significant financial savings and other
improvements in government operations.  Some, but not all, are
identified through GAO's system for periodically following up to
determine the status of actions taken on the recommendations made in
its audit and evaluation reports.  In fiscal year 1994, GAO made
1,450 recommendations, but, more importantly, about 4,400 GAO
recommendations made over the past 5 years have been implemented. 

This report includes summary information on the status of all GAO
recommendations that have not been fully implemented and highlights
some of the key ones.  This information should help congressional and
agency leaders prepare for upcoming appropriations and oversight
activities and stimulate further actions to achieve the desired
improvements in government operations. 

In addition to including printed issue area summaries highlighting
the impact of GAO's work and the key open recommendations, this
volume includes a set of computer diskettes with details on all open
recommendations. 

The diskettes have several menu options to help users find
information easily.  For example, a user may search for an open
recommendation by using product numbers, titles, dates, names of
federal entities, congressional committees, as they existed in the
103rd Congress, or any other word or phrase that may appear in the
report.  Instructions for operating the electronic edition have been
enclosed with the disks to the back of the front cover and are also
listed in appendix I of this publication. 

The name and the telephone number of the GAO manager to contact for
information or assistance about a product is included on the
diskettes.  Information or questions not related to a specific
product or recommendation should be referred to GAO's Office of
Congressional Relations on 202/512-4400. 

Copies of complete GAO printed products may be ordered by calling
202/512-6000 or by facsimile at 301/258-4066. 


IMPROVING NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS PROGRAMS
============================================================ Chapter 1


   ACQUISITION, POLICY,
   TECHNOLOGY, AND COMPETITIVENESS
   ISSUE AREA (BUDGET FUNCTION
   050)
---------------------------------------------------------- Chapter 1:1

GAO Contact:  David E.  Cooper, 202/512-4587


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:1.1

With the end of the Cold War, the nation began to reassess the
threats to U.S.  security interests and restructure its military
capabilities.  While the reassessment continues, two key trends have
emerged: 

  -- U.S.  military forces and the defense industrial base that
     supports them have been significantly reduced. 

  -- The economic dimension of national security is commanding
     increased attention. 

These trends have resulted in a wide range of legislative and
executive branch actions--all aimed at preserving a healthy and
efficient defense industrial base and enhancing U.S. 
competitiveness.  Among the more significant actions are efforts to
reform defense acquisition, encourage the use of commercial products
and dual-use technologies, convert defense firms to commercial work,
and promote defense exports. 

We have continued to focus on the major issues related to this
changing relationship.  In our work, we addressed the following
questions:  Is the defense industrial base being restructured to best
serve U.S.  security interests?  Is defense technology being
effectively maintained and protected?  Is the Department of Defense
(DOD) reforming its acquisition process to address longstanding
management problems?  Do DOD contracting policies and practices
ensure the proper spending of public funds? 

In our reports and testimonies, we highlighted areas where DOD's and
defense contractors' controls had not protected against the improper
use of government funds.  As part of a review of DOD's and defense
contractors' efforts to ensure the integrity of the procurement
system, we are examining defense contractors' voluntary disclosure
programs. 

Another area that is becoming increasingly important is defense
contractors' mergers and acquisitions and the potentially significant
costs associated with them.  The pace of consolidations in the U.S. 
defense industry has recently increased sharply and appears likely to
continue.  This dramatic reshaping of the industry involves
extraordinarily complex transactions with potentially significant
cost, benefit, and risk implications for corporate bottom lines,
taxpayers' expenditures, and national security capabilities. 
Therefore, the issues surrounding the allowance of restructuring
costs incident to mergers and acquisitions are important and deserve
careful consideration and deliberation.  We will be giving this area
increased attention. 

With the passage of the Federal Acquisition Streamlining Act of 1994,
the Congress set the stage for improving the way DOD purchases goods
and services.  The success of the reform movement now depends largely
on the effective implementation of the legislative and other reform
initiatives.  Over the next few years, we will be focusing on how
well DOD has converted the legislative requirements into implementing
regulations and the extent to which implementation of reforms has
improved the acquisition process. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:1.2

Sound financial controls are critical to ensuring that DOD
effectively manages its contracts and that taxpayers' funds are
disbursed properly.  A dramatic indicator of the adverse effects of
poor controls over the disbursement process is the dollar value of
payments defense contractors return to the government.  Our work has
shown that during a 6-month period, the Defense Finance and
Accounting Service (DFAS) in Columbus, Ohio--the principal DOD
contract-paying activity--processed $751 million in checks from
defense contractors.  Our examination of $392 million of the $751
million disclosed that about $305 million, or about 78 percent,
represented overpayments by the government.  DFAS-Columbus overpaid
contractors principally because it (1) paid invoices without
considering previous progress payments or (2) made duplicate
payments. 

Underscoring our concern about the amount of overpayments is the fact
that the majority of the overpayments we examined were detected by
contractors, rather than by DFAS through its own controls.  When the
government must rely on contractors rather than its own controls to
detect and collect overpayments, the risk is greater that losses will
result from undetected or unreturned overpayments. 

We recommended that DOD mobilize available DOD contract, financing,
and audit resources to identify, verify, and correct payment
discrepancies identified in contractors' records.  Using contractor
records, DOD can research the payment status of contracts and use
this information, along with government records, as a basis for
further actions to reconcile payment discrepancies. 
(GAO/NSIAD-94-245)

Foreign governments often require or request offsets to reduce the
financial impact of their purchases, obtain valuable technology and
manufacturing know-how, support domestic employment, create or expand
their defense industries, and make using their national funds for
offshore purchases more politically palatable.  Offsets are
industrial and commercial compensations provided to foreign
governments and firms as inducements or conditions for the purchase
of military goods and services.  They are considered an important
competitive tool for U.S.  contractors, particularly when selling to
countries making purchases with their national funds and when foreign
competition is involved. 

Offsets are not now prohibited and are being required and requested
by recipients of funds from the Foreign Military Financing Program. 
Because of the impacts on U.S.  business and other factors, we
questioned whether the United States should provide funding through
the Foreign Military Financing Program and also allow offsets.  We
recommended that the Congress amend the Foreign Assistance Act and
the Arms Export Control Act to prohibit the use of Foreign Military
Financing grants to pay for or request, require, obtain, or provide
offsets in connection with the sales of U.S.  military goods and
services.  (GAO/NSIAD-94-127)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      ACQUISITION, POLICY,
      TECHNOLOGY, AND
      COMPETITIVENESS
-------------------------------------------------------- Chapter 1:1.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:1.3.1

Air Force Procurement:  Current Plans May Provide More Ground-Attack
Capability Than Needed (GAO/NSIAD-92-137)

AV-8B Program:  Aircraft Sales to Foreign Government to Fund Radar
Procurement (GAO/NSIAD-93-24)

Contractor Overhead Costs:  Money Saving Reviews Are Not Being Done
As Directed (GAO/NSIAD-94-205)

Contract Pricing:  DCAA's Audit Coverage Lowered by Lack of
Subcontract Information (GAO/NSIAD-92-173)

Contract Pricing:  DOD Management of Contractors With High-Risk
Cost-Estimating Systems (GAO/NSIAD-94-153)

Contract Pricing:  Economy and Efficiency Audits Can Help Reduce
Overhead Costs (GAO/NSIAD-92-16)

Contract Pricing:  Unallowable Costs Charged to Defense Contracts
(GAO/NSIAD-93-79)

Defense Communications:  Defense's Program to Improve
Telecommunications Management Is at Risk (GAO/IMTEC-93-15)

Defense Contracting:  Implementation of the Pilot Mentor-Protege
Program (GAO/NSIAD-94-101)

Defense Contracting:  Interim Report on Mentor-Protege Program for
Small Disadvantaged Firms (GAO/NSIAD-92-135)

Defense Industrial Base:  An Overview of an Emerging Issue
(GAO/NSIAD-93-68)

Defense Production Act:  Foreign Involvement and Materials
Qualification in the Title III Program (GAO/NSIAD-94-74)

DOD Procurement:  Overpayments and Underpayments at Selected
Contractors Show Major Problem (GAO/NSIAD-94-245)

Energy Management:  Inadequate DOE Monitoring of Contractors'
Acquisitions From Affiliates (GAO/RCED-94-83)

Export Controls:  License Screening and Compliance Procedures Need
Strengthening (GAO/NSIAD-94-178)

Federal Research:  Lessons Learned From SEMATECH (GAO/RCED-92-283)

Foreign Technology:  Collection and Dissemination of Japanese
Information Can Be Improved (GAO/NSIAD-93-251)

High Performance Computing:  Advanced Research Projects Agency Should
Do More to Foster Program Goals (GAO/IMTEC-93-24)

International Air and Trade Shows:  DOD Increased Participation, but
Its Policies Are Not Well-Defined (GAO/NSIAD-93-96)

International Procurement:  NATO Allies' Implementation of Reciprocal
Defense Agreements (GAO/NSIAD-92-126)

Medicare:  Better Guidance Is Needed To Preclude Inappropriate
General and Administrative Charges (GAO/NSIAD-94-13)

Military Coproduction:  U.S.  Management of Programs Worldwide
(GAO/NSIAD-89-117)

Military Exports:  Concerns Over Offsets Generated With U.S.  Foreign
Military Financing Program Funds (GAO/NSIAD-94-127)

Minority Contracting:  DOD's Reporting Does Not Address Legislative
Goal (GAO/NSIAD-93-167)

NASA Aeronautics:  Impact of Technology Transfer Activities Is
Uncertain (GAO/NSIAD-93-137)

Overhead Costs:  Costs Charged by McDonnell Douglas Aerospace's Space
Station Division (GAO/NSIAD-94-150)

Technology Transfer:  Barriers Limit Royalty Sharing's Effectiveness
(GAO/RCED-93-6)

Technology Transfer:  Federal Efforts to Enhance the Competitiveness
of Small Manufacturers (GAO/RCED-92-30)

Test and Evaluation:  DOD Has Been Slow in Improving Testing of
Software-Intensive Systems (GAO/NSIAD-93-198)

Test and Evaluation:  Little Progress in Consolidating DOD Major Test
Range Capabilities (GAO/NSIAD-93-64)

Unallowable Costs and Penalties (GAO/NSIAD-94-204R)

University Research:  Controlling Inappropriate Access to Federally
Funded Research Results (GAO/RCED-92-104)

U.S.-Israel Arrow/Aces Program:  Cost, Technical, Proliferation, and
Management Concerns (GAO/NSIAD-93-254)


   DEFENSE AND NASA MANAGEMENT
   ISSUE AREA (BUDGET FUNCTIONS
   050 AND 250)
---------------------------------------------------------- Chapter 1:2

GAO Contact:  Donna M.  Heivilin, 202/512-8412


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:2.1

Significant challenges face the Department of Defense (DOD) and the
National Aeronautics and Space Administration (NASA) as they chart a
course for their agencies in the post-Cold War era with decreasing
budgets. 

Though DOD has recognized the need to reengineer and streamline its
operations, it continues to have difficulty implementing effective
and efficient programs.  Changes in DOD's management practices,
procedures, and cultures are necessary to overcome longstanding
problems.  In addition, as DOD closes and realigns military bases as
part of its efforts to downsize and restructure its forces and reduce
defense spending, it will need to increase spending in other areas,
for example, for environmental cleanups at bases and the destruction
of chemical weapons.  A key to providing management leadership during
this period of enormous change is convincing managers that they must
discard old ways of doing business and adopt practices that are more
proactive and less costly but that meet the readiness and capability
needs of U.S.  fighting forces. 

NASA also faces a major restructuring of its programs and activities. 
The overcommitment of the agency's past budgets created funding
uncertainty and the need to restructure some of its largest programs. 
The primary management challenge facing NASA today is to develop and
implement improved management and financial controls.  With such
controls in place, NASA could achieve a realistic balance between its
programs within a constrained budget and at the same time increase
its attention to emerging areas of emphasis, such as advanced
technology development, aeronautical research and development, and
technology transfers. 

Key areas we focused on in fiscal year 1994 included reducing the
defense infrastructure and excess inventory; identifying
opportunities to save money and achieve management efficiencies
through new processes; quantifying the unfunded liabilities facing
DOD, such as environmental cleanups; and improving NASA's program
management and its oversight of procurement activities and
contractors. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:2.2

To achieve management improvements, operational efficiencies, and
dollar savings, DOD and NASA need to take action on the following key
recommendations. 

We recommended several actions to improve the implementation of DOD's
processes for selecting bases for closure and realignment, including
taking advantage of cross-service opportunities that could result in
a more efficient realignment of support facilities and additional
cost savings.  (GAO/NSIAD-93-173)

On the basis of our review of DOD's progress in reducing its
inventory, we recommended that DOD make better use of training to
help change its inventory management culture.  We also recommended
that DOD adopt the commercial practice of using prime vendors to
provide needed clothing and textiles quickly.  (GAO/NSIAD-94-193 and
GAO/NSIAD-94-64)

We recommended also that, to achieve economies, DOD develop sound
management strategies for improving the oversight of the construction
and capital improvement investments in its morale, welfare, and
recreation program.  We recommended also changes to DOD's
transportation management and processes that would reduce costs and
improve service.  (GAO/NSIAD-94-120 and GAO/NSIAD-94-26)

In addition, we recommended pilot programs and projects to
demonstrate the applicability of commercial practices in two
areas--military industrial centers and food distribution.  Such
actions could improve management and reduce costs by eliminating
unnecessary processes and functions.  (GAO/NSIAD-93-110 and
GAO/NSIAD-93-155)

We recommended that, to improve DOD's management of the high-cost
environmental cleanups and destruction of chemical weapons, DOD
revise its system for designating high-priority sites, improve the
operations of plants designed to destroy chemical munitions, upgrade
underground storage tanks to avoid costly cleanups, and obtain better
data on the amount of funds paid to DOD contractors for cleanups. 
(GAO/NSIAD-94-133, GAO/NSIAD-93-50, GAO/NSIAD-93-77, and
GAO/NSIAD-92-117)

We recommended that NASA take a series of actions designed to reduce
the amount of equipment provided to contractors; improve contractors'
compliance with requirements on the acquisition and the use of
government property, as well as reporting requirements; and regain
proper control over the equipment-lending practices of one of its
largest contractors.  (GAO/NSIAD-94-191 and GAO/NSIAD-93-116)

We recommended that, to further improve NASA's management of
procurement activities, some of the procurement improvement
initiatives under way throughout the agency be enhanced to, among
other things, provide more consistent ways to measure progress toward
meeting goals and ensure adequate implementation of minimum training
requirements.  We recommended also a series of actions to improve
NASA's planning, monitoring, and use of both preaward and postaward
audits of its contractors' systems and costs.  (GAO/NSIAD-94-179)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  DEFENSE
      AND NASA MANAGEMENT
-------------------------------------------------------- Chapter 1:2.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:2.3.1

Chemical Weapons Destruction:  Issues Affecting Program Cost,
Schedule, and Performance (GAO/NSIAD-93-50)

Chemical Weapon Stockpile:  Army's Emergency Preparedness Program Has
Been Slow to Achieve Results (GAO/NSIAD-94-91)

Commercial Practices:  DOD Could Save Millions by Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155)

Commercial Practices:  Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64)

Commercial Practices:  Opportunities Exist to Enhance DOD's Sales of
Surplus Aircraft Parts (GAO/NSIAD-94-189)

Defense Inventory:  DOD Actions Needed to Ensure Benefits From Supply
Depot Consolidation Efforts (GAO/NSIAD-92-136)

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26)

Defense Transportation:  Ineffective Oversight Contributes to Freight
Losses (GAO/NSIAD-92-96)

DOD Food Inventory:  Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110)

Environmental Cleanup:  Better Data Needed for Radioactively
Contaminated Defense Sites (GAO/NSIAD-94-168)

Environmental Cleanup:  Inconsistent Sharing Arrangements May
Increase Defense Costs (GAO/NSIAD-94-231)

Environmental Cleanup:  Observations on Consistency of Reimbursements
to DOD Contractors (GAO/NSIAD-93-77)

Environmental Cleanup:  Too Many High Priority Sites Impede DOD's
Program (GAO/NSIAD-94-133)

Environmental Compliance:  DOD Needs to Better Identify and Monitor
Equipment Containing Polychlorinated Biphenyls (GAO/NSIAD-94-243)

Financial Management:  NASA's Financial Reports Are Based on
Unreliable Data (GAO/AFMD-93-3)

Government Printing:  Legal and Regulatory Framework Is Outdated for
New Technological Environment (GAO/NSIAD-94-157)

Hazardous Materials:  Upgrading of Underground Storage Tanks Can Be
Improved to Avoid Costly Cleanups (GAO/NSIAD-92-117)

Hazardous Waste:  Management Problems Continue at Overseas Military
Bases (GAO/NSIAD-91-231)

Information Security:  Disposition and Use of Classified Documents by
Presidential Appointees (GAO/NSIAD-90-195)

Inventory Management:  Handheld Missiles Are Vulnerable to Theft and
Undetected Losses (GAO/NSIAD-94-100)

Military Bases:  Analysis of DOD's Recommendations and Selection
Process for Closures and Realignments (GAO/NSIAD-93-173)

Military Small Arms Parts:  Poor Controls Invite Widespread Theft
(GAO/T-NSIAD-94-79)

Morale, Welfare, and Recreation:  Declining Funds Require DOD to Take
Action (GAO/NSIAD-94-120)

NASA Aeronautics:  Impact of Technology Transfer Activities Is
Uncertain (GAO/NSIAD-93-137)

NASA Procurement:  Challenges Remain in Implementing Improvement
Reforms (GAO/NSIAD-94-179)

NASA Property:  Improving Management of Government Equipment Provided
to Contractors (GAO/NSIAD-93-191)

NASA Property:  Poor Lending Practices and Controls at the Jet
Propulsion Laboratory (GAO/NSIAD-94-116)

Natural Resources:  Defense and Interior Can Better Manage Land
Withdrawn for Military Use (GAO/NSIAD-94-87)

Navy Inventory:  Better Controls Needed Over Planned Program
Requirements (GAO/NSIAD-93-151)

Organizational Culture:  Use of Training to Help Change DOD Inventory
Management Culture (GAO/NSIAD-94-193)

Ozone-Depleting Chemicals:  Increased Priority Needed If DOD Is to
Eliminate Their Use (GAO/NSIAD-92-21)

Personnel Security:  Efforts by DOD and DOE to Eliminate Duplicative
Background Investigations (GAO/RCED-93-23)

Property Disposal:  DOD Is Handling Large Amounts of Excess Property
in Europe (GAO/NSIAD-93-195)

Security Clearances:  Due Process for Denials and Revocations by
Defense, Energy, and State (GAO/NSIAD-92-99)

Small Arms Parts:  Poor Controls Invite Widespread Theft
(GAO/NSIAD-94-21)

Technology Development:  Future Use of NASA's Large Format Camera Is
Uncertain (GAO/NSIAD-90-142)

The U.S.  Nuclear Triad:  GAO's Evaluation of the Strategic
Modernization Program (GAO/T-PEMD-93-5)


   INTERNATIONAL AFFAIRS ISSUE
   AREA (BUDGET FUNCTION 150)
---------------------------------------------------------- Chapter 1:3

GAO Contact:  Joseph E.  Kelley, 202/512-4128


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:3.1

U.S.  national security and foreign affairs policies and objectives
have come under increased scrutiny in recognition of the changing
world order and the corresponding need to reassess U.S.  military,
political, and economic interests.  Federal budget constraints have
further reinforced the need to reexamine foreign policy objectives,
program priorities, and management performance.  Policy and program
shifts are under way to (1) downsize U.S.  military forces, (2) place
greater emphasis on strengthening U.S.  economic security, (3)
promote democracy around the world, (4) address worldwide arms
control and proliferation concerns, and (5) restructure U.S.  foreign
assistance programs. 

Much of our work in 1994 continued to concentrate on changes needed
to redirect and better manage foreign affairs and bilateral
assistance programs and priorities and provide increased oversight of
expenditures of international organizations to which the United
States is a major contributor.  Our work has had a significant impact
on the management of major aspects of the U.S.  government's foreign
policy and economic assistance organizations. 

We completed several reviews to determine whether arms control and
nonproliferation programs were achieving their objectives.  For
example, we examined implementation of the Cooperative Threat
Reduction Program, a priority U.S.  effort to help the former Soviet
Union dismantle weapons of mass destruction; arms control and
nonproliferation initiatives relating to conventional forces in
Europe; chemical weapons agreements with Russia; and licensing
procedures for dual-use nuclear exports.  We found implementation
weaknesses in each and made recommendations to the agencies and the
Congress to bring about improvements.  The Cooperative Threat
Reduction Program, which could amount to $3.5 billion, suffers from
poor long-range planning and a lack of project prioritization.  As a
result of our work, the Congress directed the Department of Defense
(DOD) to develop a long-range plan and prioritize projects so that
the Congress would have better information for making budget
decisions and for assessing the program's progress. 

Regarding controls over nuclear exports, we found that the U.S. 
government had approved a significant number of dual-use nuclear
licenses to 36 countries identified as posing concerns about
potential proliferation.  We also found weaknesses in U.S.  agencies'
reviews of these licenses and in methods used to detect or deter
diversions of dual-use items. 

Our reports and the determination that these problems were areas of
high risk led the State Department to improve its management of
overseas real properties.  State's Office of Foreign Buildings
Operations has added trained staff, improved its monitoring and
operating procedures, and increased its maintenance capabilities. 
Although more needs to be done, management of government properties
worth over $12 billion is much better than it was 5 years ago.  In
addition, partly as a result of our work, State sought and obtained
authority to establish and collect tourist visa fees.  As of June
1994, State had collected $600,000; it expects to collect $6 million
for fiscal year 1994 and $50 million to $60 million in fiscal year
1995.  These fees will augment consular affairs resources to pay for
improved visa-processing facilities. 

Our continuing examinations of U.S.  bilateral assistance programs
have identified management weaknesses and served as a basis for
improved congressional oversight and greater public accountability. 
For example, during our review of the foreign-military-financing
program, which provides billions of dollars in grants to foreign
countries to purchase U.S.  military items, we found a number of
management and control weaknesses that make the program vulnerable to
abuse.  In addition, our work on U.S.  counternarcotics programs in
Central and South America has shown that overseas law enforcement
efforts have had limited demonstrative impact and suffer from
management weaknesses.  For Colombia, which has the largest U.S. 
counternarcotics programs, the Department of State and DOD developed
a mission plan and created an interagency committee to improve human
rights oversight of the country's response to abuse and end-use
monitoring of U.S.  narcotics aid to ensure that it is used as
intended and not used to commit human rights violations. 

The Agency for International Development has acted on our
recommendation to set a strategic direction for the U.S.  foreign aid
program and develop a supporting planning process that articulates
policy direction and ensures accountability for results.  A major
step has been the establishment of a work force-planning office,
which has developed an automated work force information system.  The
agency will use this system in its fiscal year 1996 budgeting
process.  Our work has also led to stronger accountability procedures
for donor contributions to the World Food Program.  Further, our
review of the Peace Corps's health care system for volunteers serving
overseas revealed that the system was inadequate to ensure an
appropriate level of care for volunteers.  In response, the Peace
Corps made numerous improvements in its health care delivery system
and commissioned an independent organization to evaluate its
procedures. 

Similarly, our work on United Nation organizations has led to needed
improvements in their management--a key U.S.  government objective. 
Our recent assessment of the United Nations Educational, Scientific,
and Cultural Organization formed the basis for resumed U.S. 
participation in that organization.  At the request of the Senate
Foreign Relations and House Foreign Affairs Committees, we conducted
a comprehensive study of peacekeeping issues and completed a report
on lessons learned in peacekeeping.  On March 14, 1994, the United
Nations Secretary General announced peacekeeping reforms that
recognized several of the lessons learned and, on May 3, 1994, the
President of the Security Council issued a statement that included
reforms in many of the areas we had cited. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:3.2

We made several recommendations to the Departments of Commerce,
Energy, State, and DOD and to the Arms Control and Disarmament Agency
to improve their review of dual-use nuclear licenses and strengthen
methods used to deter or detect diversions of such items for
unauthorized uses.  (GAO/NSIAD-94-119)

In several reviews of the Department of State's management of its
overseas posts, we concluded that posts did not have sufficient
management controls to ensure full compliance with applicable
regulations and minimize their vulnerability to fraud, waste, and
abuse.  We recommended that posts adopt a more proactive approach to
identifying opportunities for management improvement and cost
reductions.  (GAO/NSIAD-93-88)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INTERNATIONAL AFFAIRS
-------------------------------------------------------- Chapter 1:3.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:3.3.1

Drug Control:  Communications Network Funding and Requirements
Uncertain (GAO/NSIAD-92-29)

Drug Control:  Inadequate Guidance Results in Duplicate Intelligence
Production Efforts (GAO/NSIAD-92-153)

Financial Management:  Inadequate Accounting and System Project
Controls at AID (GAO/AFMD-93-19)

Financial Management:  Serious Deficiencies in State's Financial
Systems Require Sustained Attention (GAO/AFMD-93-9)

Nuclear Nonproliferation:  Better Controls Needed Over
Weapons-Related Information and Technology (GAO/RCED-89-116)

Nuclear Nonproliferation:  DOE Needs Better Controls to Identify
Contractors Having Foreign Interests (GAO/RCED-91-83)

Radon Testing in Federal Buildings Needs Improvement and HUD's Radon
Policy Needs Strengthening (GAO/T-RCED-91-48)


   INTERNATIONAL TRADE, FINANCE,
   AND COMPETITIVENESS ISSUE AREA
   (BUDGET FUNCTION 150)
---------------------------------------------------------- Chapter 1:4

GAO Contact:  Allan I.  Mendelowitz, 202/512-4812


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:4.1

The strength of the U.S.  economy in the new global marketplace is
the dominant theme of domestic and international economic policy. 
Defined as the U.S.  "competitiveness," the core concern is that the
federal and subfederal governments can help sustain a high and rising
standard of living for U.S.  citizens.  Though the economy showed
signs of improvement this past year, concerns remain that U.S.  firms
are not competing well enough in international markets and that the
overall standard of living of many Americans is not improving,
despite improvements in worker productivity and despite the fact that
new jobs are being created.  We have looked at these issues in three
ways: 

  -- Reviewing multilateral and bilateral agreements and relations,
     such as the North American Free Trade Agreement and the Uruguay
     Round Agreement of the General Agreement on Tariffs and Trade,
     looking at their effects on U.S.  businesses and workers and
     reviewing the effects of foreign policies, such as protection of
     intellectual property rights. 

  -- Evaluating programs aimed at helping U.S.  businesses better
     participate in global markets, such as export promotion
     programs. 

  -- Looking at U.S.  programs (such as business assistance
     programs), policies, and procedures to see how they affect
     overall economic development and standards of living and
     comparative business and market practices. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:4.2

In January 1992, we reported that federal export promotion programs
lacked organization and funding cohesiveness.  As a result, the
federal government did not have reasonable assurance that its export
promotion resources, which totaled $2.7 billion in fiscal year 1991,
were being used most effectively.  We recommended that the Secretary
of Commerce, as chair of the 19-member Interagency Trade Promotion
Coordinating Committee (TPCC), work with other member agencies and
the Office of Management and Budget Director to (1) develop a
governmentwide strategic plan for carrying out federal export
promotion programs and (2) ensure that the budget requests for these
programs were consistent with their relative strategic importance. 
While a strategic plan has been created, budget priorities based on
relative program import have not yet been established. 
(GAO/NSIAD-92-49)

In September 1992, we assessed the Small Business Administration's
(SBA) export promotions designed to encourage U.S.  companies to sell
goods and services abroad.  We found that SBA had devoted little
money to export promotion relative both to governmentwide spending
and to SBA's own budget.  Therefore, SBA had not consistently
emphasized export promotion.  SBA disagreed with our conclusions, so
we believe that the Congress might wish to require that SBA more
fully identify which export-related needs of small businesses it
could best meet and work with the TPCC to refocus, if necessary, its
export promotion efforts.  We also believed that the Congress might
wish to consider requiring that TPCC's strategic plan clearly define
a role for SBA.  (GAO/GGD-92-77)

In December 1992, we examined program costs of the Commodity Credit
Corporation's (CCC) Export Credit and Intermediate Credit Guarantee
Programs in the U.S.  Department of Agriculture (USDA).  We estimated
that, as of June 30, 1992, CCC had cumulative program costs of about
$6.5 billion, or about 48 percent of their total cost of $13.5
billion, if they were terminated.  Past operations of the programs
had incurred high costs because CCC had provided a large amount of
guarantees to high-risk countries, such as Iraq and the former Soviet
Union.  Because the additional costs of increasing loan guarantee
exposure to current participants or adding new participants would be
high and because program officials could not give us estimates of
meaningful benefits that would accrue from increased expenditures, we
believe that the Congress might wish to consider whether to limit
future program cost increases.  (GAO/GGD-93-45)

In October 1993, we reported on our examination of how the National
Advisory Council on International Monetary and Financial Policies
(NAC) had advised USDA on its agricultural export guarantee programs
for Iraq.  We concluded that (1) NAC's voting procedures and use of
approval letters had left no publicly available record of dissent on
issues raised by NAC; (2) while USDA had represented NAC review as a
financial analysis, it could not be construed as such; and (3) NAC's
role had been diminished after decisions regarding Iraq and NAC had
not been consulted by the Bush administration before it announced
guarantees to the former Soviet Union.  We recommended that the
Assistant to the President for Economic Policy, as head of staff of
the National Economic Council, evaluate the usefulness of the NAC
review process and generally assess the need for NAC.  We also
recommended that, if NAC were retained, the Secretary of the
Treasury, as its chair, develop a method for conveying NAC views that
would include the full range of concerns raised by its members. 
(GAO/GGD-94-24)

In March 1994, we reported on efforts to increase the international
coordination and quality of bank supervision worldwide.  We found
that, although a committee of the Bank for International Settlements
(BIS) had established recognized standards that had led to improved
bank supervision and regulation, recent banking problems had
demonstrated the need for better adherence to those standards.  The
BIS committee had no legal authority to compel adherence, and few
members wanted to give it more authority.  Therefore, we recommended
that the Chair of the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, and the Chair of the Federal
Deposit Insurance Corporation seek an expanded role for the committee
to ensure better adherence without the imposition of a new legal
framework or interference with the sovereignty of national
regulators.  (GAO/GGD-94-68)

In May 1994, we reported on U.S.  competitors' use of tied aid and
the effects on U.S.  exports.  "Tied aid" is foreign assistance
linked to the purchase of exports from the country extending the
assistance.  We found that the United States, which historically has
opposed trade-distorting tied aid, had negotiated to establish
successively stronger international agreements to restrict it.  It
remained difficult, however, to identify projects receiving
trade-distorting aid from other countries--chiefly capital projects
as opposed to basic human needs aid--in time for U.S.  firms to bid
on them.  In addition, the U.S.  Export-Import Bank maintains a "war
chest" (the equivalent to other countries' tied aid funds).  But the
Bank uses the war chest primarily to police a 1992 international
agreement on the use of tied aid, and it is not available to U.S. 
firms to counter other nations' tied aid activities.  We therefore
recommended that the Secretary of Commerce, as TPCC chair, work with
other TPCC members to ensure that the budget was sufficient for
countering other nations' trade-distorting tied aid when U.S. 
economic interests were adversely affected.  (GAO/GGD-94-81)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INTERNATIONAL TRADE,
      FINANCE, AND COMPETITIVENESS
-------------------------------------------------------- Chapter 1:4.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:4.3.1

Agricultural Loan Guarantees:  National Advisory Council's Critical
Views on Loans to Iraq Withheld (GAO/GGD-94-24)

Border Management:  Dual Management Structure at Entry Ports Should
End (GAO/T-GGD-94-34)

Cargo Preference Requirements:  Objectives Not Significantly Advanced
When Used in U.S.  Food Aid Programs (GAO/GGD-94-215)

Customs Service:  Trade Enforcement Activities Impaired by Management
Problems (GAO/GGD-92-123)

Export Controls:  Issues In Removing Militarily Sensitive Items From
the Munitions List (GAO/NSIAD-93-67)

Export Promotion:  Federal Efforts to Increase Exports of Renewable
Energy Technologies (GAO/GGD-93-29)

Export Promotion:  Federal Programs Lack Organizational and Funding
Cohesiveness (GAO/NSIAD-92-49)

Export Promotion:  Problems in the Small Business Administration's
Programs (GAO/GGD-92-77)

Federal Research:  Lessons Learned From SEMATECH (GAO/RCED-92-283)

Foreign Direct Investment:  Assessment of Commerce's Annual Report
and Data Improvement Efforts (GAO/NSIAD-92-107)

General Agreement on Tariffs and Trade:  Uruguay Round Final Act
Should Produce Overall U.S.  Economic Gains (Volume 1)
(GAO/GGD-94-83A)

International Banking:  Strengthening the Framework for Supervising
International Banks (GAO/GGD-94-68)

International Trade:  Agricultural Trade Offices' Role in Promoting
U.S.  Exports Is Unclear (GAO/NSIAD-92-65)

International Trade:  Changes Needed to Improve Effectiveness of the
Market Promotion Program (GAO/GGD-93-125)

International Trade:  Competitors' Tied Aid Practices Affect U.S. 
Exports (GAO/GGD-94-81)

Loan Guarantees:  Export Credit Guarantee Programs' Costs are High
(GAO/GGD-93-45)

Measuring U.S.-Canada Trade:  Shifting Trade Winds May Threaten
Recent Progress (GAO/GGD-94-4)

Metric Conversion:  Future Progress Depends Upon Private Sector and
Public Support (GAO/RCED-94-23)

Nuclear Nonproliferation:  Better Controls Needed Over
Weapons-Related Information and Technology (GAO/RCED-89-116)

Nuclear Nonproliferation:  DOE Needs Better Controls to Identify
Contractors Having Foreign Interests (GAO/RCED-91-83)

Technology Transfer:  Barriers Limit Royalty Sharing's Effectiveness
(GAO/RCED-93-6)

Technology Transfer:  Improving the Use of Cooperative R&D Agreements
at DOE's Contractor-Operated Laboratories (GAO/RCED-94-91)


   MILITARY OPERATIONS AND
   CAPABILITIES ISSUE AREA (BUDGET
   FUNCTION 050)
---------------------------------------------------------- Chapter 1:5

GAO Contact:  Mark E.  Gebicke, 202/512-5140


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:5.1

The Department of Defense (DOD) faces many personnel and mobilization
issues as it downsizes and pursues new strategies for maintaining the
readiness of its active, reserve, and National Guard forces. 

During fiscal year 1994, we reported on personnel and mobilization
issues that had surfaced during Operations Desert Shield and Desert
Storm, explored efficiencies that DOD might achieve as it downsizes
(including more efficient use of mobility assets), and identified
ways to improve inventory management.  We also continued work related
to gender and racial compositions and students' treatment at the
service academies; assessed the status of war reserve, afloat, and
land prepositioned materials; and evaluated service training
programs, including pilot training. 

As new areas of focus, we examined DOD's systems for capturing data
signaling impending changes in readiness and began to measure trends
in personnel staffing and operational tempo as key readiness
indicators.  We also began to examine DOD's actions to prepare for
joint operations by assessing joint training programs. 

Both DOD and the Congress have taken actions to correct some of the
reported deficiencies and to capitalize on new opportunities for
improved efficiency and effectiveness in military operations.  For
example, to improve inventory management, DOD adopted recommended
procedural changes that should enable it to reduce inventories and
better use commercial sources.  These actions should result in
several hundred million dollars in savings.  DOD, the Office of
Management and Budget, and the administration issued new policies and
regulations concerning government employees' use of DOD's 89th
Military Airlift Wing aircraft. 

DOD also (1) issued additional guidance to the services on its
recycling program to ensure compliance with program requirements and
DOD policies and to curb abuses; (2) initiated a construction program
to improve mobilization by rail from Fort Campbell, Kentucky; (3)
increased its oversight of the service academies and, as a result,
improved its capacity to identify and assess racial and gender
disparities; and (4) decided to lease, sell, or grant to foreign
countries its fast frigates, including eight reserve frigate trainer
ships.  DOD took the latter action in response to our recommendation
that the reserve frigate trainer ship program be canceled because of
its high cost and the changed security threat. 

The Congress has been especially receptive to our recommendations and
has included several provisions directly related to our findings and
recommendations in defense program authorization legislation.  For
example, in fiscal year 1994, the Congress (1) reduced the services'
budget requests by about $600 million on the basis of our annual
review of DOD's operation and maintenance budget requests; (2)
extended DOD's authorization to offer financial incentives for
personnel leaving the government because of downsizing; and (3)
required DOD to reduce its operation and maintenance account by $50
million and to reimburse this account with $30 million from its
morale, welfare, and recreation account.  The Congress took the
latter action as a result of our finding that the services had
overcharged personnel for transit lodging and then inappropriately
diverted these funds to the recreational account. 

In our review of the services' fiscal year 1995 operation and
maintenance budget requests, we identified $4.5 billion of potential
budget reductions.  Although DOD maintained that any reduction to its
operation and maintenance requests would adversely affect the
readiness of the forces, over $2.7 billion of our proposed reductions
related to accounts that do not directly affect force readiness.  For
example, the services included in their budget requests (1) funds for
training that they could not realistically use and were planned for
transfer to base operations; (2) funds that they did not expect to
receive because of anticipated congressional reductions; and (3)
funds for civilian personnel when, in fact, the number of civilian
personnel on board at the time of the budget submission was already
below the planned level for the end of fiscal year 1995.  The
Congress used our work extensively and reduced the services' requests
by over $1.2 billion.  (GAO/NSIAD-94-246BR)

In response to our recommendations, the Congress, through its fiscal
year 1995 defense authorization legislation, has required DOD to take
other actions.  For example, because of our concerns about the
readiness of South Korean forces to meet their ground defense
mission, the Congress is requiring DOD to report on this issue by
January 1995.  Also, because we concluded that DOD had been lax in
overseeing the services' implementation of its medical and physical
fitness programs for reservists, the Congress now requires DOD to
separate military personnel with medical conditions that would
preclude their being assigned worldwide.  This provision should
enhance readiness and improve DOD's flexibility in deploying reserve
military personnel. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:5.2

In September 1994, we recommended that DOD extend the service lives
of the C-5 and C-141 airlifters by (1) using commercial and tanker
aircraft whenever possible for routine scheduled cargo deliveries,
(2) increasing the use of flight simulators for local proficiency
pilot training, and (3) adopting a companion trainer aircraft program
that included using far less expensive aircraft to fulfill some pilot
flying-hour requirements.  A reduction in the amount of flying hours
during which the C-5 and C-141 are used in peacetime would extend the
aircraft's service lives and protect their unique capabilities for
military emergencies.  (GAO/NSIAD-94-222)

As noted above, the Congress has acted to require DOD to separate
reserve military personnel who cannot be deployed on a worldwide
basis because of permanent medical conditions.  But DOD has been less
receptive to our recommendations aimed at improved testing of the
physical fitness of reserve personnel.  DOD needs to act on these
other recommendations to ensure that reserve personnel are physically
fit to perform their military duties.  Gaining assurance that reserve
forces are physically fit is particularly important in view of the
problems DOD faced with nondeployable reserve personnel during the
Gulf War and DOD's increasing reliance on reserve forces for critical
missions.  (GAO/NSIAD-94-36)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  MILITARY
      OPERATIONS AND CAPABILITIES
-------------------------------------------------------- Chapter 1:5.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:5.3.1

Aerial Refueling Initiative:  Cross-Service Analysis Needed to
Determine Best Approach (GAO/NSIAD-93-186)

Air Force Academy:  Gender and Racial Disparities (GAO/NSIAD-93-244)

Air Force Depot Maintenance:  Status of Safety Initiatives
(GAO/NSIAD-94-37)

Air Force Logistics:  Improved Backorder Validation Procedures Will
Save Millions (GAO/NSIAD-94-103)

Air Force Training:  Delaying Pilot Training Could Avert Unnecessary
Costs (GAO/NSIAD-94-38)

Army Housing:  Overcharges for On-Base Lodging Have Not Been Repaid
(GAO/NSIAD-93-188)

Army Inventory:  Changes to Stock Funding Reparables Would Save
Operations and Maintenance Funds (GAO/NSIAD-94-131)

Army Inventory:  More Effective Review of Proposed Inventory Buys
Could Reduce Unneeded Procurement (GAO/NSIAD-94-130)

Army Inventory:  Unfilled War Reserve Requirements Could Be Met With
Items From Other Inventory (GAO/NSIAD-94-207)

Army Maintenance:  Strategy Needed to Integrate Military and Civilian
Personnel Into Wartime Plans (GAO/NSIAD-93-95)

Army Training:  Commanders Lack Guidance and Training for Effective
Use of Simulations (GAO/NSIAD-93-211)

Army Training:  Expenditures for Troop Schools Have Not Been
Justified (GAO/NSIAD-93-172)

Army Training:  Longstanding Control Problems Hinder the CAPSTONE
Program (GAO/NSIAD-92-261)

Contract Maintenance:  Improvements Needed in Air Force Management of
Interim Contractor Support (GAO/NSIAD-92-233)

Department of Defense:  Widespread Abuse in Recycling Program
Increases Funds for Recreation Activities (GAO/NSIAD-94-40)

Household Goods:  Administrative Changes Would Improve DOD's
Do-It-Yourself Moving Program (GAO/NSIAD-94-226)

Household Goods:  Competition Among Commercial Movers Serving DOD Can
Be Improved (GAO/NSIAD-90-50)

Military Aircraft:  Policies on Government Officials' Use of 89th
Military Airlift Wing Aircraft (GAO/NSIAD-92-133)

Navy Housing:  Transient Lodging Operations Need Effective Management
Control (GAO/NSIAD-92-27)

Navy Maintenance:  Improved Labor Estimates Can Reduce Shipyard Costs
(GAO/NSIAD-93-199)

Navy Supply:  Improved Material Management Can Reduce Shipyard Costs
(GAO/NSIAD-94-181)

Operation Desert Shield:  Problems in Deploying by Rail Need
Attention (GAO/NSIAD-93-30)

Operation Desert Storm:  An Assessment of Aerial Refueling
Operational Efficiency (GAO/NSIAD-94-68)

Operation Desert Storm:  Army Not Adequately Prepared to Deal With
Depleted Uranium Contamination (GAO/NSIAD-93-90)

Operation Desert Storm:  Full Army Medical Capability Not Achieved
(GAO/NSIAD-92-175)

Operation Desert Storm:  Limits on the Role and Performance of B-52
Bombers in Conventional Conflicts (GAO/NSIAD-93-138)

Operation Desert Storm:  Questions Remain on Possible Exposure to
Reproductive Toxicants (GAO/PEMD-94-30)

Reserve Forces:  DOD Policies Do Not Ensure That Personnel Meet
Medical and Physical Fitness Standards (GAO/NSIAD-94-36)

Simulation Training:  Management Framework Improved, but Challenges
Remain (GAO/NSIAD-93-122)

Strategic Airlift:  Further Efforts Can Be Taken to Extend Aircraft
Service Life (GAO/NSIAD-94-222)


   NATIONAL SECURITY ANALYSIS
   ISSUE AREA (BUDGET FUNCTION
   050)
---------------------------------------------------------- Chapter 1:6

GAO Contact:  Richard A.  Davis, 202/512-3504


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:6.1

The Department of Defense (DOD) faces many critical issues as the
nation begins to build and support a smaller, yet effective, fighting
force that can respond to post-Cold War national security needs. 
DOD's forces must be restructured in an environment of tight budgets
and new and different threats.  DOD must overcome diverse obstacles
as it seeks the right balance.  Our reports and testimonies have been
used extensively by the Congress in its oversight of budget, force
structure, peacekeeping, modernization, and intelligence issues. 

We helped the Congress evaluate the DOD budget process and the
reasonableness of the future years defense plan (FYDP).  For example,
we examined the major funding assumptions underlying DOD's fiscal
years 1995-1999 FYDP and concluded that a substantial amount of cost
risk associated with the FYDP had resulted in overprogramming in
excess of $150 billion.  In April, we testified on a number of
alternatives to Navy programs that we believe could effectively
protect national security at a significantly lower cost.  These
alternatives include using less costly means to provide an overseas
presence, using existing aircraft and missiles for deep attack, and
changing shipbuilding industrial-base-related decisions.  In
addition, we reviewed the Marine Corps' tank requirements and
determined that the overall military capability would be enhanced if
the Army transferred tanks to the Marine Corps instead of the
National Guard as planned. 

We helped the Congress evaluate DOD's downsizing plans by analyzing
the assumptions underlying force structure decisions and assessing
alternative ways to accomplish missions.  For example, we reviewed
the basis for the planned size and composition of U.S.  military
forces in Europe by the end of fiscal year 1996 and the major
military capabilities that will be affected by force reductions in
Europe.  We concluded that a restructuring of Army forces that
reduced heavy divisions might be appropriate given the changes in
Europe and other considerations.  We also reported to the Congress
that a dedicated force might no longer be needed to fulfill the
continental air defense mission to detect and intercept Soviet
bombers attacking North America. 

Our reviews of peacekeeping issues have contributed to congressional
debates on how these types of operations affect DOD's planned
military operations and resources.  For example, we reported on the
cost of DOD operations in Somalia and reimbursements received from
the United Nations for support provided to that organization and
other nations.  We also reported on the withdrawal of U.S.  troops
from Somalia and equipment left behind for use by the United Nations
and the financial arrangements made to pay for this equipment.  Since
these types of operations can have a major impact on DOD's annual
spending plans, we reported on options for paying for peacekeeping
operations. 

We have provided information to the Congress on modernization of
weapon systems.  For example, we reviewed the development of the
Navy's V-22 tilt-rotor aircraft and concluded that the contractor had
experienced difficulty resolving deficiencies that had affected the
aircraft's operation and safety.  Also, we concluded that the
development schedule and cost would more than double the original
estimate and that performance levels would be less than anticipated. 
In addition, we testified about the Navy's inability to afford some
of its modernization programs and offered more affordable
alternatives for the F-14 upgrades, SSN (nuclear-powered attack
submarine) force structure, and the Tomahawk missile.  We reviewed
DOD's acquisition regulations to determine whether they permitted
classification of the F/A-18E/F program as a major modification
rather than a new program and determined that the regulations allowed
management discretion in these matters. 

Though much of our work in the intelligence arena cannot be discussed
in this report, we have assisted the Congress in its decisionmaking
on intelligence issues.  For example, we identified problems
involving law enforcement agencies' support to the EMERALD
counterdrug program, which led the Congress to restrict funding in
the 1995 Defense Authorization Act until the Secretary of Defense
reported that progress had been made.  In addition, our report on DOD
linguist training is leading to changes in the way linguists are
provided proficiency pay and improvements in linguists' training. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:6.2

We made several recommendations to the Secretary of Defense to
overcome the agency's budgetary and force structure problems. 

We recommended that he direct the Secretary of the Navy to terminate
the MK-48 advanced capability propulsion system upgrade program. 
(GAO/NSIAD-92-191)

We recommended also that the Secretary of Defense not approve the Air
Force's continental air defense plan unless it was modified to (1)
eliminate or sharply reduce the dedicated air defense force and (2)
reassign the air defense mission to active and reserve
general-purpose and training units.  (GAO/NSIAD-94-76)

Furthermore, we recommended that the Secretary of Defense direct the
Special Operations Command and the military services to consistently
use and apply the Joint Publication 3-05 definitions of "items" and
"services" peculiar to special operations.  (GAO/NSIAD-94-105)

Finally, we recommended that, to the extent that future defense plans
permitted a change in the Army's active and reserve force mix, the
Secretary of the Army consider restructuring one or more of the
latest-deploying National Guard combat divisions to provide
additional personnel spaces to (1) round out active divisions at the
battalion and company levels and (2) add reserve support units to the
Army's force.  (GAO/NSIAD-93-80)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  NATIONAL
      SECURITY ANALYSIS
-------------------------------------------------------- Chapter 1:6.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:6.3.1

Air Force Fighters:  More Reliance on Reserves Increases the Need to
Know Their Capabilities (GAO/NSIAD-94-86)

Army Force Structure:  Future Reserve Roles Shaped by New Strategy,
Base Force Mandates, and Gulf War (GAO/NSIAD-93-80)

Army Reserve Forces:  Process for Identifying Units for Inactivation
Could Be Improved (GAO/NSIAD-93-145)

Continental Air Defense:  A Dedicated Force Is No Longer Needed
(GAO/NSIAD-94-76)

DOD Training:  Many DOD Linguists Do Not Meet Minimum Proficiency
Standards (GAO/NSIAD-94-191)

Future Years Defense Program:  Optimistic Estimates Lead to Billions
in Overprogramming (GAO/NSIAD-94-210)

NATO Nuclear Bases:  U.S.  Should Seek Needs Reassessment and
Increased Alliance Contributions (GAO/NSIAD-94-84)

Navy Carrier Battle Groups:  The Structure and Affordability of the
Future Force (GAO/NSIAD-93-74)

Navy Torpedo Program:  MK-48 ADCAP Propulsion System Upgrade Not
Needed (GAO/NSIAD-92-191)

Roles and Functions:  Assessment of the Chairman of the Joint Chiefs
of Staff Report (GAO/NSIAD-93-200)

Special Operations Forces:  Force Structure and Readiness Issues
(GAO/NSIAD-94-105)

U.S.  Corps of Engineers:  Better Management Needed for Mobilization
Support (GAO/NSIAD-93-116)

Warfighting Capability:  Some Army Tanks Should Be Transferred to the
Marine Corps (GAO/NSIAD-94-93)


   SYSTEMS DEVELOPMENT AND
   PRODUCTION ISSUE AREA (BUDGET
   FUNCTION 050)
---------------------------------------------------------- Chapter 1:7

GAO Contact:  Louis J.  Rodrigues, 202/512-4841


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:7.1

The military services' technologically advanced weapon systems have
been viewed as a major factor in the success of the U.S.  armed
forces.  This technological superiority was consistently emphasized
as the strength that the United States needed to meet the numerically
superior Warsaw Pact forces.  The need to maintain this edge even
after the collapse of the Soviet Union and the dissolution of the
Warsaw Pact has been a constant theme of the military services and
the Department of Defense (DOD).  But the long-range cost of
acquiring the advanced systems that the services believe are needed
is staggering--especially as defense budgets continue to shrink.  DOD
is proposing to spend several hundred billion dollars through the
1990s on developing and procuring weapon systems and related items. 

In response to congressional interest in reducing unneeded
expenditures, we have continued our evaluations of the requirements
for and the economy, the efficiency, and the effectiveness of planned
acquisitions of major air; sea; ground; space; missile; electronic
warfare; and command, control, communication, and intelligence
systems.  In addition, to assist the Appropriations and Armed
Services Committees, we have conducted specific budget analyses that
have resulted in $3.4 billion of reductions in the fiscal year 1995
and prior years' procurement and research, development, test, and
evaluation budgets. 

We provided information during congressional deliberations on a
proposal to extend the production capability for the B-2 and
identified over $90 million in program savings that could be achieved
by reducing planned military construction.  The Air Force agreed with
our suggestions and took actions to achieve these savings.  We also
determined that the F-22 aircraft was being developed faster than the
threat justified.  The Congress agreed and reduced the F-22 budget
$163 million.  In addition, we found that DOD could save up to $10.7
billion by buying a mixed fleet of C-17 aircraft and commercial
freighters. 

We have continued our work on military satellite communications and
have expanded our efforts to include other aspects of DOD space
programs.  Our work has resulted in budget reductions of about $100
million in space programs. 

We have also continued our work on missiles, providing information
and recommending improvements in the management of the acquisition of
a number of systems, including the Tri-Service Standoff Attack
Missile, the Theater High Altitude Area Defense System, and the
Advanced Cruise Missile. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:7.2

In August 1993, we reported on the Army's planned procurement of
medium tactical trucks--the 2-1/2-ton and 5-ton payload-class trucks. 
In the original plan, the Army was to replace over 120,000 trucks
over 15 years at a cost of over $17 billion.  We concluded that the
plan to stretch out the procurement over 30 years was not practical. 
We recommended that the Secretary of the Army not proceed with
full-rate production of the medium tactical vehicles until a
reassessment was complete.  The Army is now planning to update its
cost and operational effectiveness analysis (COEA) for the
medium-truck program and perform a full program assessment during
fiscal year 1996.  (GAO/NSIAD-93-232)

From our analysis of the C-17 COEA, we determined that DOD could
achieve significant savings through acquisition of a mixed fleet of
C-17 aircraft and commercial freighters rather than the planned
purchase of 120 C-17s.  We recommended that the Congress not fund
additional C-17s until the Air Force determined how many C-17s it
needed to fulfill militarily unique missions.  (GAO/NSIAD-94-209)

Our work on unmanned aerial vehicles identified significant
performance deficiencies, inadequate testing, and an unwillingness to
defer production decisions.  We recommended that obligational
authority be restricted to prevent the premature expenditure of
funds.  We estimated that adopting this recommendation could save
almost $90 million in the near term and, that if testing indicated
that the program should be canceled, $2 billion could be saved. 
(GAO/NSIAD-94-65)

In our work on battlefield automation, we found that the Army had not
redefined its requirements for its forward area defense (FAAD)
command, control, and intelligence system to reflect changes in the
threat and in the FAAD weapon systems--two of four had been canceled
and one was not to be produced after fiscal year 1995.  We
recommended that the Army defer production until it updated the
requirement and selected the best solution on the basis of a COEA of
the options for satisfying that requirement.  (GAO/NSIAD-94-213)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  SYSTEMS
      DEVELOPMENT AND PRODUCTION
-------------------------------------------------------- Chapter 1:7.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 1:7.3.1

Airlift Requirements:  Commercial Freighters Can Help Meet
Requirements at Greatly Reduced Costs (GAO/NSIAD-94-209)

Antiarmor Weapons Acquisitions:  Assessments Needed to Support
Continued Need and Long-Term Affordability (GAO/NSIAD-93-49)

Army Acquisition:  Medium Truck Program Is Not Practical and Needs
Reassessment (GAO/NSIAD-93-232)

B-2 Bomber:  Assessment of DOD's Response to Mandated Certifications
and Reports (GAO/NSIAD-94-75)

B-2 Bomber:  Cost to Complete 20 Aircraft Is Uncertain
(GAO/NSIAD-94-217)

Battlefield Automation:  Requirements Need to Be Updated Before the
Air Defense System Is Produced (GAO/NSIAD-94-213)

Comanche Helicopter:  Program Needs Reassessment Due to Increased
Unit Cost and Other Factors (GAO/NSIAD-92-204)

Defense Support Program:  Ground Station Upgrades Not Based on
Validated Requirements (GAO/NSIAD-93-148)

Drug Control:  Communications Network Funding and Requirements
Uncertain (GAO/NSIAD-92-29)

Drug Control:  Inadequate Guidance Results in Duplicate Intelligence
Production Efforts (GAO/NSIAD-92-153)

Electronic Warfare:  Laser Warning System Production Should Be
Limited (GAO/NSIAD-93-14)

Military Airlift:  C-17 Settlement Is Not a Good Deal
(GAO/NSIAD-94-141)

Military Satellite Communications:  DOD Needs to Review Requirements
and Strengthen Leasing Practices (GAO/NSIAD-94-48)

Missile Development:  TSSAM Production Should Not Be Started as
Planned (GAO/NSIAD-94-52)

Navy Shipbuilding:  Allegations of Mischarging at Bath Iron Works
(GAO/NSIAD-91-85)

Tactical Aircraft:  F-15 Replacement Is Premature as Currently
Planned (GAO/NSIAD-94-118)

Tactical Intelligence:  Army Needs to Reconsider and Test All-Source
Analysis System Alternative (GAO/NSIAD-94-49)

Trident II:  Reductions to MK-6 Guidance System Inventory Objectives
May Be Possible (GAO/NSIAD-94-192)

Undersea Surveillance:  Navy Continues to Build Ships Designed for
Soviet Threat (GAO/NSIAD-93-53)

Unmanned Aerial Vehicles:  Performance of Short-Range System Still in
Question (GAO/NSIAD-94-65)


IMPROVING RESOURCES, COMMUNITY,
AND ECONOMIC DEVELOPMENT PROGRAMS
============================================================ Chapter 2


   ENERGY AND SCIENCE ISSUE AREA
   (BUDGET FUNCTION 270)
---------------------------------------------------------- Chapter 2:1

GAO Contact:  Victor S.  Rezendes, 202/512-3841


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:1.1

With an annual budget of $18.5 billion and a capital investment of
$30 billion in laboratories, such as Lawrence Livermore and Los
Alamos, originally created and operated to work on the nation's
critical defense mission, the Department of Energy's (DOE) focus has
turned toward new goals--fueling a competitive economy, improving the
environment through waste management and pollution prevention, and
reducing the nuclear danger.  Critical to DOE's success, however,
will be its ability to change its mission and realign its human
resources, as well as to institute better management practices,
including controls over its many contractors, to enable DOE and its
laboratories to operate more efficiently and effectively. 

Our work continued to help the Congress address and propose actions
to deal with these and related issues. 

We consistently recommended ways to improve DOE's management and
oversight of its contractors, which operate DOE's nuclear weapons
complex and other facilities at a cost of over $16 billion a year. 
Our recommendations ranged from identifying better ways to administer
the contractor performance award fee process to reducing the number
of nonstandard contract clauses (which have allowed contractors to
virtually ignore DOE direction).  In June 1993, in response, in part,
to our audit findings, the Secretary of Energy established a Contract
Reform Team to evaluate DOE's contracting practices and formulate
specific proposals for improving them.  As a result, some of the
boldest and most broad-sweeping changes in DOE's history are about to
be approved. 

Also, savings of close to $450 million in fiscal years 1993 and 1994
resulted from our recommendation to improve controls over funds
obligated to major contractors.  Relatedly, we recommended that DOE
eliminate unneeded "prefinancing," funds maintained by contractors to
ensure that operations continued in the event of a funding lapse.  In
response, DOE virtually eliminated the $218 million of prefinancing
funds. 

And, as a result of issues we raised during congressional hearings,
DOE (1) developed and implemented universal cost criteria to prevent
unnecessary outside litigation expenses, (2) developed an agencywide
audit function to ensure that outside legal bills were properly
reviewed and costs reimbursed by DOE were reasonable, and (3)
initiated efforts to consolidate many third-party class action suits
against present and former contractors.  These actions will result in
DOE savings of at least $5 million to $7 million a year, projected to
be tens of millions of dollars over the life of these cases. 

We continued to review the broad range of technical and managerial
issues critical to the successful and safe cleanup of the nuclear
weapons complex.  For example, we recommended that DOE consider
alternatives for preparing mixed-waste treatment plans and compliance
orders required by the Federal Facility Compliance Act.  We also
addressed the issue of protecting the safety and the health of
cleanup workers and of those living near DOE facilities through
reviews of DOE's Environment, Safety, and Health Office. 
Specifically, we recommended improvements in programs for analyzing
data about workers' health and workplace exposures, as well as
overseeing nuclear safety performance at DOE facilities. 

Beginning in 1991, we issued several reports questioning DOE's
priorities in its program for disposing of highly radioactive waste. 
Our work helped elevate questions about the pace and the direction of
the program to the attention of the Congress, the administration, and
the parties interested in program progress and should contribute to
legislative changes expected in the next Congress.  Examples of our
findings include the following: 

  -- Although DOE was spending tens of millions of dollars on efforts
     to begin accepting and storing nuclear waste in 1998, it is
     unlikely that DOE would have a facility available to store waste
     until after the turn of the century.  The funds used for these
     activities could have been more productively used on the
     investigation of the candidate repository site at Yucca
     Mountain, Nevada. 

  -- DOE spent only a small percentage of funds for the program
     directly on the scientific investigation of Yucca Mountain. 
     Most funds allotted to this project were used to develop and
     maintain a large infrastructure of contractors, facilities, and
     equipment. 

Our work also assisted the Congress in other specific ways.  For
example, our testimony contributed to the congressional debate on
several key issues involved in reauthorizing the Energy Policy and
Conservation Act, including (1) readiness and expansion issues
related to the Strategic Petroleum Reserve, (2) the evolving mission
and role of the International Energy Agency, and (3) opportunities to
increase revenue from Naval Petroleum Reserve oil sales.  Our work
also alerted the Congress that the Superconducing Super Collider was
over budget and behind schedule and would cost more than $11 billion. 
The Congress later voted to terminate the project. 

On the science and technology front, our work identifying abuses in
charges for indirect, or overhead, costs by universities involved in
federally sponsored research led to savings totaling about $220
million for fiscal years 1993 and 1994.  In addition, the National
Science Foundation and the National Institutes of Health implemented
our recommendations to better manage potential conflicts of interest
at universities and other organizations carrying out federal
research. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:1.2


         ENERGY PLAN
------------------------------------------------------ Chapter 2:1.2.1

In April 1993, we reported that it was an opportune time for the
Congress to consider strengthening national energy planning.  DOE had
long struggled to develop a comprehensive energy plan but is now
working on such a plan, which will link domestic and international
issues and deal with both energy use and environmental concerns under
the theme of "Sustainable Development." The plan is expected to be
completed by April 1995.  (GAO/RCED-93-29)


         INFORMATION RESOURCES
         MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.2

In September 1992, we recommended that DOE, among other things, more
closely link its information resources management (IRM) planning with
strategic mission planning; give managers more authority to plan for
their information needs on a Department-wide basis; and identify IRM
activities as a material internal control weakness, under the Federal
Managers' Financial Integrity Act, until IRM resources were being
applied efficiently and were applied in accordance with laws,
regulations, and policies.  On the basis of a Contract Reform Team
recommendation, DOE is exploring ways to achieve an integrated
management information system.  (GAO/IMTEC-92-53)


         PENSION FUND PAYMENTS
------------------------------------------------------ Chapter 2:1.2.3

In August 1994, we reported that DOE could not recover unneeded
payments made to the University of California pension plan for
employees at the three national laboratories managed by the
university.  Alternatives, such as plan termination, however, would
allow recovery of surplus pension funds.  We recommended that DOE
evaluate the advantages and the disadvantages for all alternatives
and take action to recover these funds if it were to the government's
advantage.  We recommended also that DOE review ongoing contracts and
revise them as necessary to ensure that DOE approval was needed for
changes to the pension benefits and DOE's contribution was limited to
that needed to maintain an equilibrium between assets and
liabilities.  DOE had not responded to our recommendation as of late
September 1994.  (GAO/RCED-94-201)


         PROPERTY MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.4

In March 1994, we found that more than $12 million in equipment was
missing from DOE's Rocky Flats Plant.  We recommended that DOE take
various actions to improve property management at the plant,
including ensuring that the property-tracking data base was accurate
and complete and that property retirements were proper.  DOE has
begun taking steps to implement the recommendations; additional time
will be required to determine if these steps will be adequate,
however.  (GAO/RCED-94-77)


         HANFORD TANK WASTE
         PROGRAM
------------------------------------------------------ Chapter 2:1.2.5

In March 1993, we recommended that DOE postpone construction of the
Hanford vitrification plant and renegotiate the Tri-Party Agreement
with the state of Washington and the Environmental Protection Agency
(EPA) to establish a more realistic program schedule.  In addition,
we recommended that DOE develop life-cycle cost estimates for the
program and report these to the Congress.  DOE agreed with these
recommendations and, in January 1994, successfully renegotiated a new
Tri-Party Agreement, which, among other things, established a
comprehensive program for managing and disposing of Hanford's high-
and low-level radioactive waste.  DOE also is developing a plan for
life-cycle cost estimates, which are expected to be the basis for
future annual appropriation requests.  (GAO/RCED-93-99)


         CONTRACTOR
         INDEMNIFICATION
------------------------------------------------------ Chapter 2:1.2.6

In July 1993, we recommended that DOE develop a consistent policy for
indemnifying its contractors against liabilities that could arise
from the cleanup of the nation's nuclear weapons complex and that the
policy reflect existing statutory requirements for indemnifying
Superfund cleanup contractors.  DOE concurred in these
recommendations and has taken action.  DOE's Contract Reform Team
report, issued in February 1994, contains action items that will
address these recommendations.  Actions to implement these action
items are to be completed in early 1995.  (GAO/RCED-93-167)


         SAFETY AND HEALTH
         OVERSIGHT
------------------------------------------------------ Chapter 2:1.2.7

In May 1993, we recommended that DOE take various steps to strengthen
a key headquarters program that maintained representatives at DOE
sites to independently monitor field office and contractor
performance in protecting workers' safety and health.  In response,
DOE reinstituted the program's coverage of occupational health,
started hiring actions aimed at doubling the size of the program,
established minimum training requirements for the site
representatives, and greatly increased the amount of time the site
representatives spend observing work practices in DOE facilities. 
DOE has also begun to act on our remaining recommendations, which
call for development of procedures to strengthen the program. 
(GAO/RCED-93-85)


         MIXED-WASTE MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.8

In May 1994, we recommended that DOE consider and implement, if
appropriate, alternative strategies for complying with the Federal
Facility Compliance Act that could improve the likelihood that DOE,
the states, and EPA would complete mixed-waste treatment plans and
enter into compliance orders before the act's October 1995 deadline. 
We recommended that these alternatives include preparing treatment
plans for well-characterized mixed-waste streams and beginning
negotiations on these plans with the states and EPA before preparing
treatment plans for streams that were not well-characterized. 
(GAO/RCED-94-179)


         WORKER HEALTH PROTECTION
------------------------------------------------------ Chapter 2:1.2.9

In December 1993, we recommended that DOE take actions to better
manage its Health Surveillance Program, which is designed to analyze
data about workers' health and workplace exposures in order to
prevent work-related illnesses.  In response, DOE took steps to
correct data collection problems.  DOE is reorganizing the program
and is delaying the development of an implementation plan until the
data collection problems have been implemented.  (GAO/RCED-94-47)


         NUCLEAR SAFETY OVERSIGHT
----------------------------------------------------- Chapter 2:1.2.10

In June 1994, we recommended that DOE take steps to increase the
authority, the independence, and the staffing of its office
responsible for independent oversight of nuclear safety and
enforcement of nuclear safety standards at the Department's
facilities.  DOE agreed with this recommendation.  To date, the
agency has drafted a reorganization plan aimed at maintaining the
independence of this office's oversight functions and has started to
hire more oversight staff.  (GAO/RCED-94-129)


         METRIC CONVERSION
----------------------------------------------------- Chapter 2:1.2.11

In January 1994, we reported that the federal government by itself
could not achieve the goal of metric conversion and that future
progress depended upon private sector and public support.  We
therefore recommended that the Secretary of Commerce, as head of the
lead agency for metric conversion, explore ways for bringing together
the government, the private sector, and the public to discuss the
next steps in decisionmaking about metric conversion.  We recommended
also that, to assist in this effort, the Secretary prepare and
implement a detailed plan for encouraging this broader national
dialogue.  In response, the Department of Commerce has prepared a
draft Metric Conversion Initiative.  The draft plan focuses on
developing closer links between the federal government and three
industry sectors to be used as models in forging links with
additional sectors.  Funding limitations may prevent the
implementation of the whole plan.  (GAO/RCED-94-23)


         TECHNOLOGY TRANSFER
----------------------------------------------------- Chapter 2:1.2.12

In July 1994, we recommended that DOE review its strategy and policy
for entering into a "cooperative R&D [research and development]
agreement" (CRADA) and, in this connection, establish a visiting
committee composed of industry, academic, and government agencies to
study and report on ways to improve the selection and the funding of
CRADAs.  In response, the Secretary of Energy has directed the Energy
Advisory Board to examine DOE's CRADA implementation process and
suggest improvements.  (GAO/RCED-94-91)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  ENERGY AND
      SCIENCE
-------------------------------------------------------- Chapter 2:1.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:1.3.1

Alternative-Fueled Vehicles:  Progress Made in Accelerating Federal
Purchases, but Benefits and Costs Remain Uncertain (GAO/RCED-94-161)

Biotechnology:  Managing the Risks of Field Testing Genetically
Engineered Organisms (GAO/RCED-88-27)

Department of Energy:  Better Information Resources Management Needed
to Accomplish Missions (GAO/IMTEC-92-53)

Department of Energy:  Cleaning Up Inactive Facilities Will Be
Difficult (GAO/RCED-93-149)

Department of Energy:  Management Changes Needed to Expand Use of
Innovative Cleanup Technologies (GAO/RCED-94-205)

Department of Energy:  The Property Management System at the Rocky
Flats Plant Is Inadequate (GAO/RCED-94-77)

DOE Management:  Better Planning Needed to Correct Records Management
Problems (GAO/RCED-92-88)

DOE Management:  Consistent Cleanup Indemnification Policy Is Needed
(GAO/RCED-93-167)

DOE Management:  Contract Provisions Do Not Protect DOE From
Unnecessary Pension Costs (GAO/RCED-94-201)

DOE Management:  Funds for Maintaining Contractors' Operations Could
Be Reduced and Better Controlled (GAO/RCED-94-27)

DOE Management:  Impediments to Environmental Restoration Management
Contracting (GAO/RCED-92-244)

DOE's Property Management (GAO/RCED-94-249R)

Drug Abuse Research:  Federal Funding and Future Needs
(GAO/PEMD-92-5)

Electricity Regulation:  Factors Affecting the Processing of Electric
Power Applications (GAO/RCED-93-168)

Energy Conservation:  Appliance Standards and Labeling Programs Can
Be Improved (GAO/RCED-93-102)

Energy Information:  Department of Energy Security Program Needs
Effective Information Systems (GAO/IMTEC-92-10)

Energy Management:  Additional Uncosted Balances Could Be Used to
Meet Future Budget Needs (GAO/RCED-94-26)

Energy Management:  Controls Over the Livermore Laboratory's Indirect
Costs Are Inadequate (GAO/RCED-94-34)

Energy Management:  Department of Energy's Efforts to Manage Overtime
Costs Have Been Limited (GAO/RCED-94-282)

Energy Management:  Inadequate DOE Monitoring of Contractors'
Acquisitions From Affiliates (GAO/RCED-94-83)

Energy Management:  Modest Reforms Made in University of California
Contracts, but Fees Are Substantially Higher (GAO/RCED-94-202)

Energy Management:  Payments in Lieu of Taxes for DOE Property May
Need to Be Reassessed (GAO/RCED-94-204)

Energy Policy:  Changes Needed to Make National Energy Planning More
Useful (GAO/RCED-93-29)

Federal Research:  Additional Funds for Terminating the Super
Collider Are Not Justified (GAO/RCED-94-153)

Federal Research:  Lessons Learned From SEMATECH (GAO/RCED-92-283)

Financial Management:  Energy's Material Financial Management
Weaknesses Require Corrective Action (GAO/AIMD-93-29)

Foreign Technology:  Collection and Dissemination of Japanese
Information Can Be Improved (GAO/NSIAD-93-251)

Fossil Fuels:  Improvements Needed in DOE's Clean Coal Technology
Program (GAO/RCED-92-17)

Fossil Fuels:  Ways to Strengthen Controls Over Clean Coal Technology
Project Costs (GAO/RCED-93-104)

Geothermal Energy:  Outlook Limited for Some Uses but Promising for
Geothermal Heat Pumps (GAO/RCED-94-84)

Health and Safety:  DOE's Implementation of a Comprehensive Health
Surveillance Program Is Slow (GAO/RCED-94-47)

High Performance Computing:  Advanced Research Projects Agency Should
Do More to Foster Program Goals (GAO/IMTEC-93-24)

Medical Technology:  For Some Cardiac Pacemaker Leads, the Public
Health Risks Are Still High (GAO/PEMD-92-20)

Metric Conversion:  Future Progress Depends Upon Private Sector and
Public Support (GAO/RCED-94-23)

NASA Aeronautics:  Impact of Technology Transfer Activities Is
Uncertain (GAO/NSIAD-93-137)

National Science Foundation:  Better Use of Existing Resources Could
Improve Program Administration (GAO/RCED-94-95)

Natural Gas:  Factors Affecting Approval Times for Construction of
Natural Gas Pipelines (GAO/RCED-92-100)

Natural Gas:  FERC's Compliance and Enforcement Programs Could Be
Further Enhanced (GAO/RCED-93-122)

Naval Petroleum Reserve:  Limited Opportunities Exist to Increase
Revenues From Oil Sales in California (GAO/RCED-94-126)

Nuclear Cleanup:  Completion of Standards and Effectiveness of Land
Use Planning Are Uncertain (GAO/RCED-94-144)

Nuclear Health and Safety:  Consensus on Acceptable Radiation Risk to
the Public Is Lacking (GAO/RCED-94-190)

Nuclear Health and Safety:  More Can Be Done to Better Control
Environmental Restoration Costs (GAO/RCED-92-71)

Nuclear Nonproliferation and Safety:  Challenges Facing the
International Atomic Energy Agency (GAO/NSIAD/RCED-93-284)

Nuclear Nonproliferation:  Better Controls Needed Over
Weapons-Related Information and Technology (GAO/RCED-89-116)

Nuclear Nonproliferation:  Concerns With U.S.  Delays in Accepting
Foreign Research Reactors' Spent Fuel (GAO/RCED-94-119)

Nuclear Nonproliferation:  DOE Needs Better Controls to Identify
Contractors Having Foreign Interests (GAO/RCED-91-83)

Nuclear Regulation:  Action Needed to Control Radioactive
Contamination at Sewage Treatment Plants (GAO/RCED-94-133)

Nuclear Regulation:  Better Criteria and Data Would Help Ensure
Safety of Nuclear Materials (GAO/RCED-93-90)

Nuclear Regulation:  NRC's Decommissioning Procedures and Criteria
Need to Be Strengthened (GAO/RCED-89-119)

Nuclear Safety:  Unresolved Issues Could Impair DOE's Oversight
Effectiveness (GAO/RCED-94-129)

Nuclear Science:  More Planning Needed to Support Future Needs for
Electric Power in Space (GAO/RCED-94-6)

Nuclear Security:  Safeguards and Security Planning at DOE Facilities
Incomplete (GAO/RCED-93-14)

Nuclear Waste:  Changes Needed in DOE User-Fee Assessments to Avoid
Funding Shortfall (GAO/RCED-90-65)

Nuclear Waste:  Hanford Tank Waste Program Needs Cost, Schedule, and
Management Changes (GAO/RCED-93-99)

Nuclear Waste:  Hanford's Well-Drilling Costs Can Be Reduced
(GAO/RCED-93-71)

Nuclear Waste:  Improvements Needed in Monitoring Contaminants in
Hanford Soils (GAO/RCED-92-149)

Nuclear Waste:  Much Effort Needed to Meet Federal Facility
Compliance Act's Requirements (GAO/RCED-94-179)

Nuclear Waste:  Operation of Monitored Retrievable Storage Facility
Is Unlikely by 1998 (GAO/RCED-91-194)

Nuclear Waste:  Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165)

Nuclear Waste:  Yucca Mountain Project Behind Schedule and Facing
Major Scientific Uncertainties (GAO/RCED-93-124)

Nuclear Weapons:  Safety, Technical, and Manpower Issues Slow DOE's
Disassembly Efforts (GAO/RCED-94-9)

Offshore Oil and Gas Resources:  Interior Can Improve Its Management
of Lease Abandonment (GAO/RCED-94-82)

Peer Review:  Reforms Needed to Ensure Fairness in Federal Agency
Grant Selection (GAO/PEMD-94-1)

Personnel Security:  Efforts by DOD and DOE to Eliminate Duplicative
Background Investigations (GAO/RCED-93-23)

Precollege Math and Science Education:  Department of Energy's
Precollege Program Managed Ineffectively (GAO/HEHS-94-208)

Radioactive Waste:  EPA Standards Delayed by Low Priority and
Coordination Problems (GAO/RCED-93-126)

Safety and Health:  Key Independent Oversight Program at DOE Needs
Strengthening (GAO/RCED-93-85)

Technology Development:  Future Use of NASA's Large Format Camera Is
Uncertain (GAO/NSIAD-90-142)

Technology Transfer:  Barriers Limit Royalty Sharing's Effectiveness
(GAO/RCED-93-6)

Technology Transfer:  Federal Efforts to Enhance the Competitiveness
of Small Manufacturers (GAO/RCED-92-30)

Technology Transfer:  Improving the Use of Cooperative R&D Agreements
at DOE's Contractor-Operated Laboratories (GAO/RCED-94-91)

Trans-Alaska Pipeline:  Regulators Have Not Ensured That Government
Requirements Are Being Met (GAO/RCED-91-89)

University Research:  Controlling Inappropriate Access to Federally
Funded Research Results (GAO/RCED-92-104)


   ENVIRONMENTAL PROTECTION ISSUE
   AREA (BUDGET FUNCTION 270)
---------------------------------------------------------- Chapter 2:2

GAO Contact:  Peter G.  Guerrero, 202/512-6111


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:2.1

Environmental regulation significantly affects the nation's economy,
costing upwards of $115 billion annually, and directly touches the
lives of all citizens.  Although the Congress and the public have
traditionally supported strong environmental protection laws, the
rising costs of environmental protection programs to state and local
governments, in the face of dwindling federal financial assistance,
has caused environmental protection programs to be identified as
"unfunded mandates." Industry's compliance costs are also rising. 
But, by far, the largest growth in environmental costs will be for
the federal government itself.  Between fiscal years 1989 and 1995,
the Department of Defense's and the Department of Energy's federal
facilities' cleanup and compliance costs tripled from $2.9 billion to
$8.7 billion and currently exceed the Environmental Protection
Agency's (EPA) entire budget. 

Our work was in the forefront in highlighting the nation's recurring
environmental problems and recommending ways in which the Congress
and EPA could effectively address them.  We continued to recommend
that EPA, to seek a more realistic balance between environmental
expectations and available resources, incorporate strategic planning
to help ensure that its limited resources were targeted to high-risk
environmental and public health problems.  We recommended also that
the agency, so that program success could be better measured, develop
performance indicators based on environmental outcomes rather than
activities taken by the agency.  In addition, we made some
recommendations to address problems in the Superfund contract
management and settlement areas.  Finally, our work over the past
several years stressed to EPA and the Congress the need to adequately
fund programs addressing high risks to the public and to adopt more
cost-effective methods of achieving environmental results through
alternatives and supplements to traditional regulatory approaches,
such as pollutant trading, public disclosure of emissions, and
pollution prevention. 

EPA has started to implement these key recommendations--several of
which will require years to fully put in place--and the agency and
the Congress appear increasingly open to alternatives to traditional
regulatory approaches as the key environmental statutes go through
the reauthorization process. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:2.2


         AIR QUALITY
------------------------------------------------------ Chapter 2:2.2.1

Our work highlighted the visibility problems brought by air pollution
to our national parks and wilderness areas.  A significant amount of
this pollution originates from regional sources for which EPA has not
issued regulations or initiated other control measures.  We
recommended that EPA, to remedy this situation, develop a strategy
for addressing visibility impairment caused by regional sources. 
After our report was issued, EPA announced its intention to issue, in
early 1996, regional haze regulations to protect visibility in
national parks and wilderness areas.  (GAO/T-RCED-94-102)

The Clean Air Act Amendments of 1990 (1) required states to
significantly revise their state implementation plans (SIP), the key
documents setting forth their strategies and schedules for improving
air quality, and (2) established deadlines for the states' submission
and EPA's approval of the revisions.  We found that, despite efforts
by EPA and the Congress to address longstanding problems, delays
continued in the states' submission and EPA's review and approval of
SIPs.  We recommended a number of actions to EPA to address these
delays; EPA agreed with our recommendations and has a number of
initiatives under way to implement them.  (GAO/RCED-93-113)

Given the priorities of federal agencies other than EPA that have
roles in addressing indoor air pollution and the increasing
competition for limited funding, we recommended that the Congress
consider giving these agencies more-specific mandates.  Since our
report, the Congress has considered, but has yet to pass, such
legislation.  (GAO/RCED-92-8)


         WATER QUALITY
------------------------------------------------------ Chapter 2:2.2.2

Several of our reports highlighted serious shortcomings in EPA's
drinking water protection program.  In 1990, we reported that many
water systems, particularly small systems, had violated monitoring
requirements and drinking water standards and that enforcement
actions had done little to stop violators or increase compliance.  In
1992 and 1993, we reported funding shortages at the federal, state,
and other levels to correct these problems and disparities between
EPA's low funding and the high health and environmental risks from
drinking water contamination. 

Because small communities' financial problems are particularly acute,
this year we reported on cost-effective management and technology
alternatives that could be used to improve these communities'
compliance with drinking water regulations.  One option holding
particular promise is the restructuring of systems, such as
consolidating nonviable small systems with viable ones.  We
recommended that EPA, among other things, (1) work with the cognizant
committees of the Congress to develop a detailed funding strategy to
accompany the EPA proposed requirement that states develop viability
programs for small systems and (2) revise drinking water program
requirements to place greater emphasis on developing and implementing
viability programs. 

In response, EPA has (1) worked with the Congress to address funding
for the development of viability programs (such as establishment of
user fees), (2) recommended to the Congress that the Safe Drinking
Water Act be amended to require that viability be a condition of
delegating authority to states for managing drinking water programs,
and (3) agreed to make viability program development a priority
following reauthorization of the act.  The Congress is considering
these issues but has not yet enacted legislation.  (GAO/RCED-94-40)

Also, EPA made limited progress in developing water quality
criteria--the technical information that states consider in adopting
water quality standards and setting pollutant limits in facilities'
discharge permits.  We recommended that EPA, to ensure that it was
focusing its limited resources on the most important elements of
water criteria development, prepare an implementation plan
identifying its top priorities and the bases for them and
establishing a timetable for addressing them.  We recommended also
that EPA regularly solicit input from interested parties when the
implementation plan was being developed and when specific regulatory
actions were being considered.  EPA agreed that it should prepare an
implementation plan setting priorities but wished to have the
Congress direct the agency (through amendments to the Clean Water
Act) to develop such a plan and to require EPA to solicit input from
interested parties.  (GAO/RCED-94-117)


         PESTICIDES AND TOXIC
         SUBSTANCES
------------------------------------------------------ Chapter 2:2.2.3

In 1972, EPA was given the formidable task of reassessing all older
pesticides on the basis of current scientific standards, including
those pertaining to cancer, reproductive disorders, and birth
defects.  Disappointed with EPA's progress, the Congress, in 1988,
provided funds for additional resources and mandated that the
reassessment be essentially completed by 1998.  Our review of the
program disclosed that despite increased progress, EPA might not
complete this process until 2006.  More importantly, EPA did not
assess the high-risk pesticides--those used in high volumes or on
food--and they will continue to be used until a risk assessment is
completed. 

We recommended that the Congress amend the Federal Insecticide,
Fungicide, and Rodenticide Act to require that, except in unusual
circumstances, EPA focus on completing reregistration of the
highest-priority food-use pesticides first.  (GAO/RCED-93-94)

EPA, in the past, assumed low exposure to lawn care pesticides but
now is concerned that they may persist in the environment, resulting
in higher exposure.  We recommended that before reregistering these
pesticides, EPA fully explore the health effects of such exposure. 
Although EPA is reviewing the health effects of lawn care pesticides,
it is using methods developed for assessing health effects of
postapplication exposure to agricultural workers.  These methods may
not be sufficient for assessing direct-contact exposure (e.g.,
children playing, rolling, and lying on lawns).  (GAO/RCED-93-80)

Our work also showed that about one-third of pesticide-tainted
shipments of imported food had ended up on grocery shelves.  We
reported similar findings in 1979 and again in 1986.  We recommended
that the Food and Drug Administration take stronger prevention
actions, including targeting repeat offenders for penalties, applying
more stringent control over suspect shipments, and using its program
resources more effectively.  We recommended that, to better achieve
this, the Congress authorize the agency to pursue civil penalties
against violators.  The Congress has considered, but has not yet
enacted, such legislation.  (GAO/RCED-92-205)

We recently made a number of recommendations to help strengthen EPA's
ability to regulate chemicals.  We asked the Congress to consider,
among other things, (1) allowing the Toxic Substances Control Act to
be used in preference to other laws, when appropriate, and
establishing a framework for taking action that was less burdensome
for EPA; (2) requiring industry to submit additional data on new
chemicals and shifting to industry some of the burden for compiling
data on existing chemicals; and (3) giving states access to
confidential data and limit confidentiality claims. 
(GAO/RCED-94-103)


         HAZARDOUS AND SOLID WASTE
         MANAGEMENT
------------------------------------------------------ Chapter 2:2.2.4

The Congress, in 1976, tried to encourage new markets for recovered
materials by directing federal agencies to purchase items composed of
such materials.  Our work disclosed, however, that the agencies had
made little progress.  Although the President issued an executive
order in 1993 providing additional direction to federal agencies, we
believe that it would be useful for the Congress to clarify agencies'
authority to give products containing recovered materials price
preferences while avoiding unreasonable prices.  (GAO/RCED-93-58)

EPA's 1992 data showed that owners and operators of hazardous waste
treatment, storage, and disposal facilities had begun cleaning up
only 5 percent of the more than 3,400 sites that were potentially
threatening human health and the environment and that EPA had scarce
resources to oversee the cleanup.  EPA began a new cleanup approach,
called stabilization, that more quickly mitigates the threats from
waste facilities.  We recommended that EPA ensure that the agency had
a management information system to capture data to measure the
effectiveness of the new initiative to stabilize contamination at
facilities.  Although EPA now has data management tools in place that
enable it to determine when facilities have become stabilized, the
agency still lacks the means to identify all cases where only some
stabilization actions have been taken.  EPA plans to address this
problem in the future.  (GAO/RCED-93-15)


         HAZARDOUS WASTE CLEANUP
------------------------------------------------------ Chapter 2:2.2.5

Debate over the Superfund program's reauthorization comes at a time
when cost estimates to clean up the nation's hazardous waste problem
are growing at an alarming rate.  The Congressional Budget Office has
projected that ultimately the nation could need $75 billion to clean
up a total of 4,500 Superfund sites.  EPA recovered only a limited
portion of its costs from parties responsible for the problem.  In
part, because of limitations on the interest and indirect costs EPA
can recover, the agency has a low rate of recovery for Superfund
expenditures.  Because of these limitations, EPA, through 1993,
excluded from its recovery efforts about $3.3 billion of its
program-related costs. 

We, therefore, recommended that the Congress encourage cost-recovery
efforts by authorizing EPA to apply market rates to, and accrue
interest on, its expenditures earlier in the process and by requiring
EPA to more broadly define which costs were recoverable.  The
Congress considered but has not yet enacted an amendment to the
reauthorization bill that would implement our recommendations. 
(GAO/T-RCED-94-274)


         INFORMATION RESOURCES
         MANAGEMENT
------------------------------------------------------ Chapter 2:2.2.6

We recommended that, to improve the agency's management of
information, EPA appoint a Chief Information Officer who would report
to the Administrator, have full-time information resources management
(IRM) responsibilities, and could effectively influence IRM
investments at all levels to meet agency goals.  (GAO/AIMD-93-8)

We recommended also that EPA, to strengthen its overall ability to
accomplish its cross-media mission, complete the agency's IRM
strategy and plan and coordinate and budget for cross-media
information resources and activities.  (GAO/IMTEC-92-14)

We recommended further that EPA conform with generally accepted IRM
practices for developing automated systems supporting its Office of
Pesticide programs.  (GAO/IMTEC-93-5)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      ENVIRONMENTAL PROTECTION
-------------------------------------------------------- Chapter 2:2.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:2.3.1

Air Pollution:  Difficulties in Implementing a National Air Permit
Program (GAO/RCED-93-59)

Air Pollution:  Regional Approaches Are Needed to Protect Visibility
in National Parks and Wilderness Areas (GAO/T-RCED-94-102)

Air Pollution:  State Planning Requirements Will Continue to
Challenge EPA and the States (GAO/RCED-93-113)

Air Pollution:  Unresolved Issues May Hamper Success of EPA's
Proposed Emissions Program (GAO/RCED-92-288)

Coast Guard:  Coordination and Planning for National Oil Spill
Response (GAO/RCED-91-212)

Coast Guard:  Program to Inspect Intermodal Containers Carrying
Hazardous Materials Can Be Improved (GAO/RCED-94-139)

Coastal Barriers:  Development Occurring Despite Prohibition Against
Federal Assistance (GAO/RCED-92-115)

Department of Defense:  Widespread Abuse in Recycling Program
Increases Funds for Recreation Activities (GAO/NSIAD-94-40)

Department of Energy:  Cleaning Up Inactive Facilities Will Be
Difficult (GAO/RCED-93-149)

Department of Energy:  Management Changes Needed to Expand Use of
Innovative Cleanup Technologies (GAO/RCED-94-205)

Disinfectants:  EPA Lacks Assurance They Work (GAO/RCED-90-139)

DOE Management:  Consistent Cleanup Indemnification Policy Is Needed
(GAO/RCED-93-167)

DOE Management:  Impediments to Environmental Restoration Management
Contracting (GAO/RCED-92-244)

Drinking Water:  Consumers Often Not Well-informed of Potentially
Serious Violations (GAO/RCED-92-135)

Drinking Water:  Inadequate Regulation of Home Treatment Units Leaves
Consumers at Risk (GAO/RCED-92-34)

Drinking Water:  Key Quality Assurance Program Is Flawed and
Underfunded (GAO/RCED-93-97)

Drinking Water:  Projects That May Damage Sole Source Aquifers Are
Not Always Identified (GAO/RCED-93-4)

Drinking Water:  Safeguards Are Not Preventing Contamination From
Injected Oil and Gas Wastes (GAO/RCED-89-97)

Drinking Water:  Stronger Efforts Essential for Small Communities to
Comply with Standards (GAO/RCED-94-40)

Electricity Regulation:  Factors Affecting the Processing of Electric
Power Applications (GAO/RCED-93-168)

Environmental Cleanup:  Inconsistent Sharing Arrangements May
Increase Defense Costs (GAO/NSIAD-94-231)

Environmental Cleanup:  Observations on Consistency of Reimbursements
to DOD Contractors (GAO/NSIAD-93-77)

Environmental Cleanup:  Too Many High Priority Sites Impede DOD's
Program (GAO/NSIAD-94-133)

Environmental Enforcement:  EPA Cannot Ensure the Accuracy of
Self-Reported Compliance Monitoring Data (GAO/RCED-93-21)

Environmental Enforcement:  EPA Needs a Better Strategy to Manage Its
Cross-Media Information (GAO/IMTEC-92-14)

Environmental Enforcement:  Penalties May Not Recover Economic
Benefits Gained by Violators (GAO/RCED-91-166)

Environmental Protection Agency:  Plans in Limbo for Consolidated
Headquarters Space (GAO/GGD-93-84)

Environmental Protection Agency:  Protecting Human Health and the
Environment Through Improved Management (GAO/RCED-88-101)

Environmental Protection:  EPA's Plans to Improve Longstanding
Information Resources Management Problems (GAO/AIMD-93-8)

Environmental Regulation:  Differences Remain Between EPA and OMB
Over Paperwork Requirements (GAO/RCED-94-254)

EPA Toxic Substances Program:  Longstanding Information Planning
Problems Must Be Addressed (GAO/AIMD-94-25)

Federal Facilities:  Agencies Slow to Define the Scope and Cost of
Hazardous Waste Site Cleanups (GAO/RCED-94-73)

Financial Audit:  EPA's Financial Statements for Fiscal Years 1988
and 1987 (GAO/AFMD-90-20)

Fossil Fuels:  Improvements Needed in DOE's Clean Coal Technology
Program (GAO/RCED-92-17)

Fossil Fuels:  Ways to Strengthen Controls Over Clean Coal Technology
Project Costs (GAO/RCED-93-104)

Hazardous Materials:  Upgrading of Underground Storage Tanks Can Be
Improved to Avoid Costly Cleanups (GAO/NSIAD-92-117)

Hazardous Waste:  Data Management Problems Delay EPA's Assessment of
Minimization Efforts (GAO/RCED-91-131)

Hazardous Waste Exports:  Data Quality and Collection Problems Weaken
EPA Enforcement Activities (GAO/PEMD-93-24)

Hazardous Waste:  Impediments Delay Timely Closing and Cleanup of
Facilities (GAO/RCED-92-84)

Hazardous Waste:  Issues Pertaining to an Incinerator in East
Liverpool, Ohio (GAO/RCED-94-101)

Hazardous Waste:  Management Problems Continue at Overseas Military
Bases (GAO/NSIAD-91-231)

Hazardous Waste:  Much Work Remains to Accelerate Facility Cleanups
(GAO/RCED-93-15)

Hazardous Waste:  U.S.  and Mexican Management of Hazardous Waste
From Maquiladoras Hampered by Lack of Information (GAO/T-RCED-92-22)

Highway Planning:  Agencies Are Attempting to Expedite Environmental
Reviews, but Barriers Remain (GAO/RCED-94-211)

Indoor Air Pollution:  Federal Efforts Are Not Effectively Addressing
a Growing Problem (GAO/RCED-92-8)

International Environment:  Improved Procedures Needed for
Environmental Assessments of U.S.  Actions Abroad (GAO/RCED-94-55)

International Environment:  Strengthening the Implementation of
Environmental Agreements (GAO/RCED-92-188)

Lawn Care Pesticides:  Reregistration Falls Further Behind and
Exposure Effects Are Uncertain (GAO/RCED-93-80)

Lead-Based Paint Poisoning:  Children in Public Housing Are Not
Adequately Protected (GAO/RCED-93-138)

Lead-Based Paint Poisoning:  Children in Section 8 Tenant-Based
Housing Are Not Adequately Protected (GAO/RCED-94-137)

Medical Waste Regulation:  Health and Environmental Risks Need to Be
Fully Assessed (GAO/RCED-90-86)

Natural Resources Restoration:  Use of Exxon Valdez Oil Spill
Settlement Funds (GAO/RCED-93-206BR)

Nonagricultural Pesticides:  Risks and Regulation (GAO/RCED-86-97)

Nuclear Health and Safety:  More Can Be Done to Better Control
Environmental Restoration Costs (GAO/RCED-92-71)

Nuclear Regulation:  Action Needed to Control Radioactive
Contamination at Sewage Treatment Plants (GAO/RCED-94-133)

Nuclear Waste:  Changes Needed in DOE User-Fee Assessments to Avoid
Funding Shortfall (GAO/RCED-90-65)

Nuclear Waste:  Improvements Needed in Monitoring Contaminants in
Hanford Soils (GAO/RCED-92-149)

Nuclear Waste:  Much Effort Needed to Meet Federal Facility
Compliance Act's Requirements (GAO/RCED-94-179)

Nuclear Waste:  Operation of Monitored Retrievable Storage Facility
Is Unlikely by 1998 (GAO/RCED-91-194)

Nuclear Waste:  Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165)

Ozone-Depleting Chemicals:  Increased Priority Needed If DOD Is to
Eliminate Their Use (GAO/NSIAD-92-21)

Peer Review:  EPA Needs Implementation Procedures and Additional
Controls (GAO/RCED-94-89)

Pesticide Monitoring:  FDA's Automated Import Information System Is
Incomplete (GAO/RCED-92-42)

Pesticides:  A Comparative Study of Industrialized Nations'
Regulatory Systems (GAO/PEMD-93-17)

Pesticides:  Adulterated Imported Foods Are Reaching U.S.  Grocery
Shelves (GAO/RCED-92-205)

Pesticides:  EPA's Formidable Task to Assess and Regulate Their Risks
(GAO/RCED-86-125)

Pesticides:  Food Consumption Data of Little Value to Estimate Some
Exposures (GAO/RCED-91-125)

Pesticides:  Information Systems Improvements Essential for EPA's
Reregistration Efforts (GAO/IMTEC-93-5)

Pesticides:  Issues Concerning Pesticides Used in the Great Lakes
Watershed (GAO/RCED-93-128)

Pesticides:  Limited Testing Finds Few Exported Unregistered
Pesticide Violations on Imported Food (GAO/RCED-94-1)

Pesticides:  Need to Enhance FDA's Ability to Protect the Public From
Illegal Residues (GAO/RCED-87-7)

Pesticides on Farms:  Limited Capability Exists to Monitor
Occupational Illnesses and Injuries (GAO/PEMD-94-6)

Pesticides:  Pesticide Reregistration May Not Be Completed Until 2006
(GAO/RCED-93-94)

Pollution Prevention:  EPA Should Reexamine the Objectives and
Sustainability of State Programs (GAO/PEMD-94-8)

Radioactive Waste:  EPA Standards Delayed by Low Priority and
Coordination Problems (GAO/RCED-93-126)

Radon Testing in Federal Buildings Needs Improvement and HUD's Radon
Policy Needs Strengthening (GAO/T-RCED-91-48)

Solid Waste:  Federal Program to Buy Products With Recovered
Materials Proceeds Slowly (GAO/RCED-93-58)

Superfund:  Cleanups Nearing Completion Indicate Future Challenges
(GAO/RCED-93-188)

Superfund:  EPA Cost Estimates Are Not Reliable or Timely
(GAO/AFMD-92-40)

Superfund:  EPA Has Opportunities to Increase Recoveries of Costs
(GAO/RCED-94-196)

Superfund:  EPA's Community Relations Efforts Could Be More Effective
(GAO/RCED-94-156)

Superfund:  Further EPA Management Action Is Needed to Reduce Legal
Expenses (GAO/RCED-94-90)

Superfund:  Improved Reviews and Guidance Could Reduce
Inconsistencies in Risk Assessments (GAO/RCED-94-220)

Superfund:  Problems With the Completeness and Consistency of Site
Cleanup Plans (GAO/RCED-92-138)

Superfund:  Reauthorization and Prioritization Issues
(GAO/T-RCED-94-274)

Superfund:  Status, Cost, and Timeliness of Hazardous Waste Site
Cleanups (GAO/RCED-94-256)

Sustainable Agriculture:  Program Management Accomplishments and
Opportunities (GAO/RCED-92-233)

Toxic Chemicals:  EPA's Toxic Release Inventory Is Useful but Can Be
Improved (GAO/RCED-91-121)

Toxic Substances Control Act:  Legislative Changes Could Make the Act
More Effective (GAO/RCED-94-103)

Toxic Substances:  EPA Needs More Reliable Source Reduction Data and
Progress Measures (GAO/RCED-94-93)

Toxic Substances:  Status of EPA's Efforts to Develop Lead Hazard
Standards (GAO/RCED-94-114)

Water Pollution:  EPA Needs to Set Priorities for Water Quality
Criteria Issues (GAO/RCED-94-117)

Water Pollution:  Pollutant Trading Could Reduce Compliance Costs If
Uncertainties Are Resolved (GAO/RCED-92-153)

Water Pollution:  Poor Quality Assurance and Limited Pollutant
Coverage Undermine EPA's Control of Toxic Substances (GAO/PEMD-94-9)

Water Pollution:  State Revolving Funds Insufficient to Meet
Wastewater Treatment Needs (GAO/RCED-92-35)

Wetlands:  The Corps of Engineers' Administration of the Section 404
Program (GAO/RCED-88-110)

Workplace Accommodation:  EPA's Alternative Workspace Process
Requires Greater Managerial Oversight (GAO/GGD-92-53)


   FOOD AND AGRICULTURE ISSUE AREA
   (BUDGET FUNCTION 350)
---------------------------------------------------------- Chapter 2:3

GAO Contact:  John W.  Harman, 202/512-5138


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:3.1

With the third largest civilian agency budget in the federal
government, the U.S.  Department of Agriculture (USDA) affects the
lives of all Americans and millions of people around the world.  USDA
oversees a food and agriculture sector of major importance to the
nation's economy, accounting for 17 percent of the gross national
product, 20 million jobs, and 10 percent of export dollars.  To carry
out its missions in 1993, USDA spent about $63 billion.  USDA
controlled assets of about $140 billion and employed about 130,000
employees in about 15,000 locations worldwide. 

In 1994, congressional committees used our work extensively and,
partly on the basis of our recommendations, USDA made a number of
program changes that resulted in more effective use of federal food
and agriculture funds. 


         USDA MANAGEMENT
------------------------------------------------------ Chapter 2:3.1.1

One of our major efforts over the past 4 years was participating in
the ongoing congressional and administration efforts to reinvent
government.  Our management review of USDA and followup work
contributed to helping the administration frame the debate for
reforming, streamlining, and reinventing USDA and, more specifically,
to the Secretary's proposals to create a single farm service agency
and significantly reduce the field office structure.  Our work
contributed to the Congress enacting legislation to restructure USDA. 


         FARM PROGRAMS
------------------------------------------------------ Chapter 2:3.1.2

Our analyses of farm program flexibility provisions adopted in the
1990 farm bill contributed to a $1 billion annual savings.  Our work
contributed to the Congress eliminating price supports for wool,
mohair, and honey, which will save taxpayers over $200 million a
year.  Our analysis of the Farmers Home Administration's (FmHA) farm
loan programs warned the Congress that billions of federal dollars
were at risk if current lending practices continued.  As a result of
our analyses of the crop insurance and disaster assistance programs,
improvements were made to both programs, which will save taxpayers
about $100 million annually.  Our work also contributed to recent
congressional action to integrate both programs, which will save $1.3
billion over the next 2 years. 


         AGRICULTURE MARKETS
------------------------------------------------------ Chapter 2:3.1.3

Analyses of milk-pricing mechanisms, the livestock markets, and the
safety and the quality of agriculture products and food resulted in
proposed legislation and agency actions to improve the overall equity
of the markets and attention to the need to reform the fragmented
food inspection system.  Our analyses of the federal food safety
inspection system found that it was inconsistent, inefficient, and
ineffective.  We advised the Congress that after nearly a century of
piecemeal fixes, a major restructuring--a uniform, risk-based
system--of the fragmented inspection system was needed. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:3.2


         PROBLEMS WITH USDA'S
         STRUCTURES, SYSTEMS, AND
         MISSION
------------------------------------------------------ Chapter 2:3.2.1

The 1994 USDA is largely the product of 1930s programs, structures,
and management systems.  It is an organizational behemoth that is
ill-suited to confronting today's issues.  A fundamental reevaluation
and wholesale revamping is in order.  The starting point in this
reinvention process is consensus agreement on USDA's primary mission. 

In a series of reports on USDA management, we noted structural
problems that, if addressed, could lead to greater efficiency,
effectiveness, and cost savings.  A key issue is the independence of
the major component agencies of USDA, each established in response to
a separate legislative mandate.  Because these agencies have
historically established their own information, financial, and human
resources management systems to address legislative mandates,
efficiencies have not been achieved Department-wide.  With these
systems, the Department is data rich but information poor, making it
difficult for the Secretary to make informed decisions.  Furthermore,
weaknesses in financial management systems and internal and
accounting controls substantially increase the risk of mismanagement,
fraud, waste, and abuse in Department programs. 

Nowhere is the struggle to get a handle on the structural and
management systems problems more apparent than in the operations of
USDA's farm service agencies' field offices.  Multiple agencies
operate independent field offices all over the country, often right
next door to each other.  Weaknesses in information
systems--different and incompatible hardware, software,
telecommunications, and data bases--are important obstacles to any
reform of the farm service agencies. 

We made a number of recommendations specific to Departmental
structures and strategies that would result in needed improvement. 
We also recommended that farm agencies' field structure be given a
major overhaul; management of cross-cutting agricultural issues be
improved; management systems--financial, information, and human
resources--be strengthened; and USDA be revitalized to meet new
challenges and increased responsibilities in nutrition, international
trade, and resource conservation issues. 

Recent progress toward streamlining the USDA field structure is very
encouraging, and cost savings should be significant.  In October
1994, the Congress enacted legislation to restructure USDA.  On
December 6, 1994, Secretary Mike Espy announced the closing of over
1,100 field offices and the consolidation of the remaining field
offices into a single farm service agency.  The Secretary plans to
restructure USDA around 6 key missions, thereby reducing the number
of agencies from 43 to 29. 

Even with this restructuring and field office realignment, the
fundamental problem remains:  How to revitalize USDA so that it is
efficient and effective into the 21st century.  To achieve this goal,
a thorough review of USDA's mission is necessary.  The Congress and
the administration need to develop a statement on USDA's mission. 
Once developed, the statement must be continually updated to address
changing conditions and the Secretary will need to develop measurable
Departmental goals.  (GAO/RCED-91-49, GAO/RCED-91-41, and
GAO/RCED-91-9)


         CHALLENGES FACING USDA IN
         SHIFTING FARM PROGRAMS
         TOWARD MORE MARKET
         ORIENTATION
------------------------------------------------------ Chapter 2:3.2.2

USDA's commodity programs need to move toward a global market
orientation.  Our work focused on revamping the agricultural farm,
export, and market development programs to help make them more
competitive in the global marketplace.  Our analyses of farm program
flexibility provisions adopted in the 1990 farm bill contributed to
$900 million savings in 1992 and $1.25 billion a year in fiscal years
1993-1995. 

A reevaluation of USDA's support programs in several areas is needed
because current subsidies provide incentives to serve relatively
rigid government objectives rather than leverage flexible sector
development of new products, services, and markets.  Our analysis
also shows that flex acres have generally had a positive impact on
farmers' operations and are projected to reduce government spending. 
We recommended that the Congress reauthorize or expand the flex acres
provisions in the 1995 farm bill.  Although the Congress has made
progress in eliminating some subsidy payments, changes are still
needed to address our recommendations on the rice, dairy, sugar, and
peanut programs.  The rice program continues to be costly for the
government and for rice buyers.  Between 1986 and 1992, rice program
support costs averaged $863 million annually.  We recommended that
the Congress consider ways to move rice producers toward greater
market orientation and reduce their dependency on government support. 
The Congress could, among other things, lower the target price and
reduce export assistance.  To give producers time to adjust to these
changes, the Congress could, for example, phase out payments over a
number of years.  (GAO/RCED-94-88)

In addition, the dairy industry is not taking full advantage of what
could be an expanding international market.  The federal price
support programs are partly the reason why U.S.  dairy products do
not meet global market needs and their costs exceed world prices.  We
recommended the development of a long-range dairy policy that better
recognized the importance of dairy exports for the continued
viability of the U.S.  dairy industry.  (GAO/RCED-94-19)

We recommended also that the Congress consider legislation that would
move the sugar industry toward a more open market.  As part of this
transition, the market price for sugar should be lowered.  To
facilitate this process, the Congress could gradually lower the loan
rate for sugar and direct USDA to adjust import quotas accordingly. 
(GAO/RCED-94-84)

Finally, economic studies and our analysis show that the peanut
program added $314 million to $513 million each year to consumers'
costs of buying peanuts.  At the same time, USDA spends tens of
millions of dollars each year to run the peanut program, make
mandatory payments to producers, and cover the high cost of peanut
products it buys under various food assistance programs.  Finally,
the program, by boosting the volume of U.S.  peanuts available for
export, may be lowering prices paid for peanuts abroad.  GAO has
recommended that the Congress restructure the peanut support program
to make it more responsive to market forces.  The Congress should
provide for a period of transition to allow producers to make
adjustments to their investment decisions.  (GAO/RCED-93-18)


         PROBLEMS FACING THE
         FARMERS HOME
         ADMINISTRATION
------------------------------------------------------ Chapter 2:3.2.3

FmHA\1 is not adequately protecting the multibillion-dollar federal
investment in farmer loan programs.  In April 1992, we reported that,
as of September 1990, more than two-thirds of the outstanding $19.5
billion direct loan portfolio was at risk because it was held by
delinquent borrowers or borrowers whose debts had been restructured
in response to past repayment difficulties.  This high level of risk
existed even though FmHA had forgiven $4.5 billion in direct loan
debt during 1989 and 1990.  By June 1992, FmHA had forgiven an
additional $3.1 billion in direct loan obligations.  As these large
loan losses have accumulated, FmHA has evolved into a continuous
source of subsidized credit for nearly half of its borrowers. 
Ironically, the financial condition of some of these borrowers has
actually deteriorated because of repeated loan servicing, which has
increased their debt and reduced their equity.  As we reported in
February 1994, problems with FmHA's portfolio and losses have
continued. 

A number of factors have contributed to FmHA's problems.  Although
some of these factors, such as the decline of the agricultural
economy, are beyond the immediate control of either the Congress or
FmHA, two are not.  First, lending officials in FmHA's field offices
often fail to follow agency standards for making loans, servicing
loans, and managing property.  For example, FmHA requires that a
borrower's existing debts be verified during the approval process for
direct loans.  During the first three quarters of fiscal year 1992,
however, FmHA internal reviews showed that debts had not been
verified for 20 percent of the loans sampled. 

Second, certain FmHA or congressionally authorized loan-making,
loan-servicing, and property management policies themselves increase
the agency's vulnerability to loss.  More specifically: 

  -- Borrowers who have defaulted on past loans are free to obtain
     new loans. 

  -- Under a congressionally directed policy, borrowers may obtain
     new FmHA direct loans for operating expenses without
     demonstrating the ability to repay their existing debts. 

  -- Private lenders may use guaranteed loans to refinance existing
     customers' debts, thereby shifting to the federal government
     most of the risk of their loans to financially stressed
     borrowers. 

  -- The servicing policies of the Agricultural Credit Act of 1987
     run counter to principles of sound financial management.  The
     act allows debt write-down for borrowers whose loans are
     restructured and debt write-off for those whose loans do not
     qualify for restructuring.  These policies have cost taxpayers
     billions of dollars over the last several years and provide
     incentives for farmers to default intentionally on their loans
     in order to qualify for debt reduction. 

  -- Legislation requiring FmHA to sell acquired properties at fixed
     prices, rather than to the highest bidder, and to a selected
     group of potential purchasers, often the previous owners, has
     limited FmHA's return on these properties and increased its
     holding costs. 

We made numerous recommendations to the Congress and the Secretary of
Agriculture aimed at (1) improving compliance with loan standards and
(2) strengthening policies and program design for direct loans,
guaranteed loans, and acquired farm property. 

More broadly, we recommended that the Congress clarify FmHA's role
and mission, noting that FmHA's attempts to operate simultaneously as
a fiscally prudent lender and as a temporary assistance agency were
not working.  (GAO/RCED-93-28 and GAO/RCED-92-86)


--------------------
\1 Within USDA, farm loans have been historically administered by
FmHA.  In October 1994, the responsibility was transferred to the
newly created Consolidated Farm Service Agency. 


         PROBLEMS FACING THE
         FEDERAL FOOD SAFETY
         SYSTEM
------------------------------------------------------ Chapter 2:3.2.4

The federal system to ensure the safety and the quality of the
nation's food--at an annual cost of $1 billion a year--is inefficient
and outdated and does not adequately protect the consumer against
food-borne illness.  The food safety inspection system suffers from
overlapping and duplicative inspections, poor coordination,
inefficient allocation of resources, and outdated inspection
procedures.  As many as 12 different agencies administering over 35
different laws oversee food safety inspection. 

The federal meat and poultry inspection system follows procedures
that are no longer appropriate for today's food safety risks.  The
system relies on inspectors' sense of sight, smell, and touch to
ensure wholesome products, but inspectors cannot see, smell, or feel
microbial pathogens, which are widely regarded as the principal risk
associated with meat and poultry.  We recommended modernizing
inspection procedures and tying resource allocations to health risks,
including development of preventative systems that provide specific
microbial testing standards.  (GAO/RCED-94-110, GAO/RCED-93-142, and
GAO/RCED-92-152)

The federal programs in place to ensure that foods are not
contaminated with unsafe chemicals also need fundamental changes. 
Longstanding structural weaknesses continue to limit federal
agencies' ability to reduce the risk of unsafe chemicals in food. 
Many of these problems are the result of the very laws and
regulations that support the food safety system.  (GAO/RCED-94-192
and GAO/RCED-94-158)

The effectiveness, the efficiency, and the uniformity in the federal
food safety system could be improved by creating a single food safety
agency to administer a uniform set of food safety laws based on the
principle that the objective of an inspection system is to protect
the public from the most serious health risks, both microbial and
chemical, associated with food-borne hazards.  In 1994, we testified
on the need for such an independent agency and the limitations of
housing a food safety agency at USDA or the Food and Drug
Administration.  (GAO/RCED-94-192, GAO/RCED-94-158, GAO/RCED-94-110,
GAO/RCED-93-142, and GAO/RCED-92-152)


         PROBLEMS FACING RURAL
         AMERICA
------------------------------------------------------ Chapter 2:3.2.5

Billions of federal dollars are spent every year for rural America,
but these funds are not addressing the problems of rural areas in a
coherent, responsive manner. 

Our work in this area identified several basic problems in the
federal approach to rural America.  First, many rural federal
assistance programs target agriculture, which is no longer the
principal economic base of most rural communities.  Second, many
federal programs that could benefit rural communities do not because
they require coordination of expertise and resources, which are often
not available in rural communities.  Third, federal programs do not
adequately distinguish between communities of different population
densities.  And finally, federal programs focus on process rather
than effectiveness--they tend to measure effectiveness by numbers
served or dollars spent rather than achievement of program goals. 
This does not contribute to an efficient use of resources. 

Many factors influence a rural area's economic success or failure and
no single factor or combination can guarantee success, but effective
local leadership and long-range planning are critical in solving an
area's economic problems.  In addition, the web of federal programs,
policies, and regulations that accompanies federal funding makes the
delivery of assistance inefficient.  We recommended that the Congress
consider (1) developing both short- and long-term strategies to
improve federal assistance programs to rural areas and (2)
establishing a permanent interagency executive committee to oversee
and provide better delivery mechanisms for federal programs and
services.  (GAO/RCED-94-165 and GAO/RCED-92-197)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  FOOD AND
      AGRICULTURE
-------------------------------------------------------- Chapter 2:3.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:3.3.1

Agriculture Payments:  Effectiveness of Efforts to Reduce Farm
Payments Has Been Limited (GAO/RCED-92-2)

Biotechnology:  Managing the Risks of Field Testing Genetically
Engineered Organisms (GAO/RCED-88-27)

Commodity Programs:  Flex Acres Enhance Farm Operations and Market
Orientation (GAO/RCED-94-76)

Commodity Programs:  Should Farmers Grow Income-Supported Crops on
Federal Land?  (GAO/RCED-92-54)

Dairy Industry:  Potential for and Barriers to Market Development
(GAO/RCED-94-19)

Disaster Assistance:  Problems in Administering Agriculture Payments
(GAO/T-RCED-94-187)

Early Intervention:  Federal Investments Like WIC Can Produce Savings
(GAO/HRD-92-18)

Farmers Home Administration:  Billions of Dollars in Farm Loans Are
at Risk (GAO/RCED-92-86)

Farmers Home Administration:  Final Resolution of Farm Loan or
Servicing Appeals (GAO/RCED-93-28)

FDA Regulations:  Sustained Management Attention Needed to Improve
Timely Issuance (GAO/HRD-92-35)

Federal Dairy Programs:  Insights Into Their Past Provide
Perspectives on Their Future (GAO/RCED-90-88)

Food Nutrition:  Better Guidance Needed to Improve Reliability of
USDA's Food Composition Data (GAO/RCED-94-30)

Food Safety and Quality:  FDA Needs Stronger Controls Over the
Approval Process for New Animal Drugs (GAO/RCED-92-63)

Food Safety and Quality:  FDA Strategy Needed to Address Animal Drug
Residues in Milk (GAO/RCED-92-209)

Food Safety and Quality:  Innovative Strategies May Be Needed to
Regulate New Food Technologies (GAO/RCED-93-142)

Food Safety and Quality:  Uniform, Risk-based Inspection System
Needed to Ensure Safe Food Supply (GAO/RCED-92-152)

Food Safety and Quality:  USDA Improves Inspection Program for
Canadian Meat, but Some Concerns Remain (GAO/RCED-92-250)

Food Safety:  Building a Scientific, Risk-Based Meat and Poultry
Inspection System (GAO/T-RCED-93-22)

Food Safety:  Changes Needed to Minimize Unsafe Chemicals in Food
(GAO/RCED-94-192)

Food Safety:  Risk-Based Inspections and Microbial Monitoring Needed
for Meat and Poultry (GAO/RCED-94-110)

Food Safety:  USDA's Role Under the National Residue Program Should
Be Reevaluated (GAO/RCED-94-158)

Forest Service Needs to Improve Efforts to Protect the Government's
Financial Interests and Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-42)

International Trade:  Agricultural Trade Offices' Role in Promoting
U.S.  Exports Is Unclear (GAO/NSIAD-92-65)

Peanut Program:  Changes Are Needed to Make the Program Responsive to
Market Forces (GAO/RCED-93-18)

Pesticides:  A Comparative Study of Industrialized Nations'
Regulatory Systems (GAO/PEMD-93-17)

Pesticides:  Adulterated Imported Foods Are Reaching U.S.  Grocery
Shelves (GAO/RCED-92-205)

Pesticides:  Food Consumption Data of Little Value to Estimate Some
Exposures (GAO/RCED-91-125)

Pesticides:  Issues Concerning Pesticides Used in the Great Lakes
Watershed (GAO/RCED-93-128)

Pesticides:  Limited Testing Finds Few Exported Unregistered
Pesticide Violations on Imported Food (GAO/RCED-94-1)

Pesticides:  Need to Enhance FDA's Ability to Protect the Public From
Illegal Residues (GAO/RCED-87-7)

Pesticides on Farms:  Limited Capability Exists to Monitor
Occupational Illnesses and Injuries (GAO/PEMD-94-6)

Pesticides:  Pesticide Reregistration May Not Be Completed Until 2006
(GAO/RCED-93-94)

Rangeland Management:  BLM Efforts to Prevent Unauthorized Livestock
Grazing Need Strengthening (GAO/RCED-91-17)

Rice Program:  Government Support Needs to Be Reassessed
(GAO/RCED-94-88)

Rural Development Administration:  Patterns of Use in the Business
and Industry Loan Guarantee Program (GAO/RCED-92-197)

Rural Development:  Patchwork of Federal Programs Needs to Be
Reappraised (GAO/RCED-94-165)

Social Security:  Need for Better Coordination of Food Stamp Services
for Social Security Clients (GAO/HRD-92-92)

Soil and Wetlands Conservation:  Soil Conservation Service Making
Good Progress but Cultural Issues Need Attention (GAO/RCED-94-241)

Sugar Program:  Changing Domestic and International Conditions
Require Program Changes (GAO/RCED-93-84)

Sustainable Agriculture:  Program Management Accomplishments and
Opportunities (GAO/RCED-92-233)

Truck Transport:  Little Is Known About Hauling Garbage and Food in
the Same Vehicles (GAO/RCED-90-161)

USDA Restructuring:  Refocus Info Share Program on Business Processes
Rather Than Technology (GAO/AIMD-94-156)

U.S.  Department of Agriculture:  Farm Agencies' Field Structure
Needs Major Overhaul (GAO/RCED-91-9)

U.S.  Department of Agriculture:  Improving Management of
Cross-Cutting Agricultural Issues (GAO/RCED-91-41)

U.S.  Department of Agriculture:  Interim Report on Ways to Enhance
Management (GAO/RCED-90-19)

U.S.  Department of Agriculture:  Need for Improved Work Force
Planning (GAO/RCED-90-97)

U.S.  Department of Agriculture:  Strengthening Management Systems to
Support Secretarial Goals (GAO/RCED-91-49)


   HOUSING AND COMMUNITY
   DEVELOPMENT ISSUE AREA (BUDGET
   FUNCTIONS 370 AND 450)
---------------------------------------------------------- Chapter 2:4

GAO Contact:  Judy A.  England-Joseph, 202/512-7631


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:4.1

Adequate affordable housing is a basic need of every American. 
Similarly, healthy, vibrant communities are the cornerstones of the
nation's economic growth and social stability.  Budget constraints at
all levels of government, fragmented delivery systems, as well as a
host of seemingly intractable social problems make the goals of
providing decent, affordable housing and maintaining vital
communities increasingly more difficult to achieve. 

Various federal programs and agencies are involved in meeting housing
and community development needs.  For example, housing programs
operated by the Department of Housing and Urban Development (HUD),
the Department of Veterans Affairs (VA), and the Farmers Home
Administration (FmHA) combined to provide over $560 billion in credit
guarantees and insurance in FY 1993.  Two government-sponsored
enterprises (Freddie Mac and Fannie Mae) contribute by purchasing
conventional, as well as some HUD mortgages and packaging them as
guaranteed securities.  These organizations held over $1.3 trillion
in securitized mortgages at the end of FY 1993.  About $4 billion in
Community Development Block Grants (CDBG) are distributed annually to
virtually every state and city, and the Small Business
Administration's (SBA) $26 billion loan portfolio provides capital to
the nation's small businesses. 


         MORTGAGE ASSISTANCE
------------------------------------------------------ Chapter 2:4.1.1

We reviewed various issues concerning federal agencies' efforts to
help low- and moderate-income individuals and families obtain housing
through direct, insured, and guaranteed loans.  This included work on
programs operated by HUD, VA, and FmHA. 

In the multifamily area, we continued work on impediments to
disposition of properties owned by HUD.  Because of these
impediments, HUD became the landlord for a huge and growing inventory
of properties--a role HUD was not adequately staffed to carry out. 
Our work contributed to development of new legislation that should
increase HUD's flexibility in disposing of HUD-owned properties.  The
Congressional Budget Office has estimated that the new legislation
will result in $410 million in savings from more rapid HUD
multifamily property disposition. 

We also reported on problems that had led to a shortage of mortgage
financing for affordable multifamily housing, including (1) changes
in federal policies and regulations on housing subsidies, taxation,
and banking; (2) the poor performance of multifamily mortgages
purchased or insured by major financial institutions; and (3) the
lack of a reliable data base on the performance of affordable
multifamily housing loans.  The Federal Housing Administration (FHA)
acted on our recommendation to enter into new risk-sharing
arrangements with public and private financial institutions as a way
to increase the availability of capital for multifamily mortgages. 

In the single-family mortgage insurance area, we testified that FHA's
insurance fund had made a substantial financial improvement recently. 
Legislative and other program changes helped restore its financial
health, but favorable prevailing and forecasted economic conditions
were primarily responsible for this improvement.  We also reported on
FHA borrowers' incomes, races, ages, and the locations of their homes
over a 20-year period.  We also provided key subcommittee staff
advice on a proposed risk-sharing program, data and analysis on FHA's
loan limits, and explanations of the impact of several loan-to-value
changes during congressional deliberations on the reauthorization of
the Housing and Community Development Act.  Past work in the
single-family mortgage area contributed to actions taken during the
past year that resulted in a $456 million reduction in VA's budget
for excess housing subsidies and the imprisonment of a real estate
developer, who was also ordered to pay $500,000 in restitution. 

We testified twice on FmHA's single-family direct loan program.  We
reported that centralizing FmHA's servicing activities presented an
opportunity to demonstrate how reengineering a government process in
a more businesslike way could improve service while cutting costs. 
We also reported that, because of a FmHA regulatory prohibition
against refinancing single-family loans, FmHA customers had to pay
higher rates than available to households in the private sector. 
FmHA has since agreed that it misinterpreted the legislation and
plans to draft a new regulation which, under specified circumstances,
will allow existing borrowers' note rates to be lowered. 


         LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.1.2

Our work on low-income housing covered such issues as how to (1)
improve living conditions in federally assisted properties, (2)
protect children who live in section 8 tenant-based housing against
lead-based paint poisoning, and (3) formulate more-effective policies
on federal homelessness assistance. 

As part of our work on improving the effectiveness of rental
assistance programs, we testified on deplorable conditions in rental
properties receiving hundreds of thousands of dollars annually in
federal subsidies.  We discussed reasons for these conditions,
including inadequate management information systems, longstanding
problems in loan servicing, and certain legislative constraints.  We
also made recommendations aimed at addressing the poor conditions
under which some families receiving assistance were living. 

In addition, we reported on the effects of determining rent subsidy
payments using smaller market areas.  Such a change, we determined,
would help assistance payments better reflect typically prevailing
rent levels, but it might not be advantageous for various reasons. 

We testified on a number of issues in housing and community
development reauthorization legislation being considered by the House
of Representatives.  We discussed, among other things, actions that
reduced the potential for defaults in three government-sponsored loan
programs--HUD's insured multifamily loans, HUD-guaranteed CDBG loans,
and FmHA's rural housing loans.  We also discussed the benefits of
merging HUD section 8 voucher and certificate programs but noted
several key issues that could affect implementation of such a merger. 

We continued our series of reports on lead-based paint hazards in
federally assisted housing by reporting that visual inspections of
section 8 tenant-based housing did not always identify lead hazards
but that more rigorous testing was costly and could drive some
landlords out of the program.  Also, the section 8 tenant-based homes
of children with elevated blood lead levels were not being tested,
though required, and communication between local health agencies that
tested children and housing agencies that inspected residences needed
to be improved. 

During the past year, we began to focus more closely on the nation's
public housing and the efforts HUD could (and is) taking to "turn
public housing around." For example, we testified that housing
agencies needed greater flexibility in what they could do to rid
themselves of their most chronically vacant and deteriorated
buildings.  We reported that, in some cases, HUD was providing
excessive subsidies and modernization funding to these buildings and
that regulatory gridlock blocked housing agencies' ability to
effectively deal with replacing or eliminating this obsolete housing. 
As a result of our work, legislation was proposed in the House that
would grant housing agencies relief from the most restrictive
regulations under certain circumstances. 

We made a major addition to our body of work on assisting the
homeless by comprehensively assessing the impact that federal
McKinney Act programs had had in Baltimore, San Antonio, Seattle, and
St.  Louis.  We identified what difference these programs had made in
the cities' overall efforts to assist the homeless, identified
problems the cities had experienced, and explored how the McKinney
programs could better fill future service gaps anticipated in the
cities' local strategies.  Drawing on our work in these cities and
the results of other national research studies, we identified key
issues the Congress would have to face in formulating a more
effective policy on federal homelessness assistance. 

In response to our earlier report on barriers to using federally held
foreclosed housing properties to assist the homeless, HUD proposed,
and the Congress enacted, legislation that set clear policy for HUD
on making multifamily properties available to homeless assistance
organizations.  This policy should make more multifamily properties
available and help fill a need we had identified in our national
survey of nonprofit homelessness assistance organizations. 


         COMMUNITY DEVELOPMENT
------------------------------------------------------ Chapter 2:4.1.3

Our community development work encompassed three types of federal
help to strengthen and rebuild communities--(1) financial and other
assistance to small business, (2) economic development, and (3)
assistance to aid communities and individuals devastated by natural
disasters. 

In the small business area, we reported on three SBA efforts.  First,
we reported on the eligibility of firms receiving financial support
from Specialized Small Business Investment Companies.  This program
aims to assist firms owned by socially or economically disadvantaged
individuals.  We reported that investment companies had not
adequately established the eligibility of firms receiving financial
support.  In response, SBA revised program regulations, clarifying
information that needed to be collected on assisted firms.  Second,
we identified continuing problems with SBA's minority business
development program.  Efforts to improve program management
information were again delayed as SBA reevaluated requirements in
light of its redesigned minority enterprise development program. 
Finally, we reported on the success of a pilot program in providing
increased access by small businesses to surety bonds.  This review
provided a basis for reauthorizing the program. 

In the economic development area, as mandated by the Housing and
Community Development Act of 1992 (Public Law 102-550), we studied
several issues related to the use of CDBG funds for economic
development activities.  We concluded that HUD had not fully
addressed impediments to using CDBG funds for economic development,
especially in the area of job retention activities.  Guidance that
HUD is preparing should help grantees meet key requirements, and data
that HUD has begun to collect should be useful in assessing the
seriousness of defaults on loans to for-profit businesses from CDBG
funds.  We recommended that grantees be encouraged to establish and
meet job quality goals for CDBG funds.  Also, we recommended possible
indicators that communities might use to assess overall effectiveness
of their economic development activities, including job elements (the
number and the type of jobs, the cost of creating them, and the
targeted population); any increase in the community's tax base; the
amount of public and private funds leveraged; the level of defaults;
the creation of essential services and facilities; and the types and
the sizes of assisted businesses. 

We also reported on the availability, the affordability, and the
accessibility of property insurance for homeowners and small
businesses in urban areas.  Although substantial amounts of homeowner
property insurance data are collected from insurance companies by
statistical agents to help states regulate insurance rates, the data
are not useful for determining availability and affordability in
urban neighborhoods and no data are currently collected to analyze
accessibility issues.  Also, no data exist to analyze the
availability, the affordability, or the accessibility of property
insurance for small businesses in urban areas.  Our report identified
the types of data that would be useful for making these assessments. 

The occurrence of several large disasters since 1989--including
Hurricanes Hugo, Andrew, and Iniki and the Loma Prieta and Northridge
Earthquakes--has led to unprecedented increases in the cost of
federal disaster assistance.  Both the House of Representatives and
the Senate established special task forces to deal with disaster
assistance.  We briefed both task forces and issued a report to the
House task force summarizing our key findings and recommendations
over the past several years on a broad array of federal disaster
assistance programs.  Our work for the Senate task force--a
cooperative effort involving the Congressional Research Service and
the Congressional Budget Office--was expected to be completed by late
fiscal year 1994. 

Following our 1993 report on the nation's capability for dealing with
catastrophes, the Federal Emergency Management Agency (FEMA) took a
number of corrective actions and legislative reforms are proceeding. 
FEMA established a Response and Recovery Directorate dedicated to
helping state and local governments prepare for, respond to, and
recover from all disasters.  In addition, FEMA (1) took steps to
improve its ability to perform comprehensive damage and needs
assessments, (2) expanded the readiness capabilities of agency strike
teams, (3) enhanced states' flexibility in using FEMA grant funds,
and (4) revised its Disaster Relief Fund budget requests to show
estimated future costs of past disasters.  We recently commented on
legislation that would help implement other recommendations, such as
clarifying the statutory authority of federal agencies to prepare for
disasters when there was warning. 

Also, in the area of disaster assistance, we reported that the
financial resources of FEMA's Flood Insurance Program might not be
sufficient to meet future expected losses.  We suggested that, in
reforming the program, the Congress, when considering elimination of
subsidized rates, consider also (1) the effect of the potential
cancellation of flood insurance policies and (2) the financial impact
on other disaster assistance programs of expanding or strengthening
the mandatory purchase requirement in the Flood Insurance Program. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:4.2

We recommended that the HUD Secretary, to determine whether requiring
more rigorous inspection and testing for lead-based paint hazards in
section 8 tenant-based housing was practicable and whether such
requirements were likely to affect landlords' participation in the
section 8 program, conduct a demonstration program that would
estimate testing costs, assess landlords' responses, and recommend to
the Congress whether HUD's regulations should be changed to reflect
the demonstration program's findings.  We recommended also that the
Secretary require property owners and public housing authorities to
take several actions that would better ensure that children in
section 8 tenant-based housing were protected from further exposure
to lead-based paint hazards.  Finally, we recommended that the
Congress amend the Lead-Based Paint Poisoning Prevention Act to
resolve uncertainties about the act's applicability to section 8
tenant-based housing.  (GAO/RCED-94-137)

In an earlier report, we recommended that the HUD Secretary, to
protect children living in public housing from the hazards of
lead-based paint, (1) expedite efforts to issue a comprehensive and
workable plan to abate lead-based paint hazards in public housing;
(2) revise regulations to ensure that tenants were notified, other
units were tested, and abatement actions were taken in buildings
where a child had elevated lead blood levels; and (3) develop
procedures to ensure that the public housing authorities notified
tenants of lead-based paint test results.  (GAO/RCED-93-138)

In a June 1993 report, we stated that because the Government National
Mortgage Association's (GNMA) staffing needs were tied to HUD's
personnel ceilings, the agency might not be able to focus on areas of
risk and exposure to the extent it should and might experience
difficulties in responding to future management challenges.  GNMA is
a secondary mortgage market organization in HUD that guarantees
securities backed by pools of mortgage loans insured by HUD's FHA or
guaranteed by VA.  We recommended that the HUD Secretary and the
Office of Management and Budget Director, to ensure that GNMA had the
flexibility to manage its growing workload, respond to changing
markets, and create new products, work together to consider GNMA's
staffing needs and provide for them without regard to personnel
limitations imposed on HUD.  (GAO/RCED-93-100)\2

We recommended also that HUD, because of the deplorable conditions we
had found in various federally assisted properties, (1) promptly
identify all section 8 tenant-based properties with severe physical
problems and offer affected tenants temporary assistance to relocate
to safe and decent housing, (2) systematically notify owners of the
problems, and (3) take appropriate enforcement actions in cases in
which owners did not bring their properties into compliance with
housing quality standards.  We recommended further that HUD, to the
extent that budgetary or legislative constraints prevented HUD from
addressing these conditions, give the Congress an assessment of the
resources and the legislative changes the Department needed. 
(GAO/T-RCED-94-273)

In an October 1993 report, we stated that a national data base on the
performance of affordable multifamily housing loans was needed to
better ensure an adequate flow of capital to affordable multifamily
housing properties.  The Housing and Community Development Act of
1992 authorized the establishment of a task force to create such a
data base.  We recommended that the Congress reauthorize and
appropriate funds for this task force.  Further, we recommended that
the Secretary of Housing and Urban Development and the Chairman of
the Federal Housing Finance Board, in their capacity as cochairs of
the task force, direct the task force to develop policies and
procedures relating to (1) access to the data, (2) definition of
items to be included in the data base, (3) underwriting standards to
be applied, and (4) the way in which data base should be financed in
the long term.  (GAO/RCED-94-3)


--------------------
\2 See chapter 5 of this report for additional recommendations
related to GNMA and federal credit. 


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  HOUSING
      AND COMMUNITY DEVELOPMENT
-------------------------------------------------------- Chapter 2:4.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:4.3.1

Community Development:  Block Grant Economic Development Activities
Reflect Local Priorities (GAO/RCED-94-108)

Disaster Assistance:  Federal, State, and Local Responses to Natural
Disasters Need Improvement (GAO/RCED-91-43)

Disaster Assistance:  Problems in Administering Agriculture Payments
(GAO/T-RCED-94-187)

Disaster Management:  Recent Disasters Demonstrate the Need to
Improve the Nation's Response Strategy (GAO/T-RCED-93-4)

Disaster Management:  Recent Disasters Demonstrate the Need to
Improve the Nation's Response Strategy (GAO/T-RCED-93-20)

Disaster Relief Fund:  Actions Still Needed to Prevent Recurrence of
Funding Shortfall (GAO/RCED-93-60)

Export Promotion:  Problems in the Small Business Administration's
Programs (GAO/GGD-92-77)

Farmers Home Administration:  Billions of Dollars in Farm Loans Are
at Risk (GAO/RCED-92-86)

Federally Assisted Housing:  Condition of Some Properties Receiving
Section 8 Project-Based Assistance Is Below Housing Quality Standards
(GAO/T-RCED-94-273)

Government National Mortgage Association:  Greater Staffing
Flexibility Needed to Improve Management (GAO/RCED-93-100)

Homelessness:  Access to McKinney Act Programs Improved but Better
Oversight Needed (GAO/RCED-91-29)

Homelessness:  Action Needed to Make Federal Surplus Property Program
More Effective (GAO/RCED-91-33)

Homelessness:  Federal Personal Property Donations Provide Limited
Benefit to the Homeless (GAO/RCED-91-108)

Homelessness:  Information on and Barriers to Assistance Programs
Providing Foreclosed Property (GAO/RCED-93-182)

Homelessness:  McKinney Act Programs Provide Assistance but Are Not
Designed to Be the Solution (GAO/RCED-94-37)

Housing Finance:  Expanding Capital for Affordable Multifamily
Housing (GAO/RCED-94-3)

Housing Programs:  VA Can Reduce Its Guaranteed Home Loan Foreclosure
Costs (GAO/RCED-89-58)

Lead-Based Paint Poisoning:  Children in Public Housing Are Not
Adequately Protected (GAO/RCED-93-138)

Lead-Based Paint Poisoning:  Children in Section 8 Tenant-Based
Housing Are Not Adequately Protected (GAO/RCED-94-137)

Lead-Based Paint Poisoning:  Children Not Fully Protected When
Federal Agencies Sell Homes to Public (GAO/RCED-93-38)

Public and Assisted Housing:  Linking Housing and Supportive Services
to Promote Self-Sufficiency (GAO/RCED-92-142BR)

Public Housing:  Housing Persons With Mental Disabilities With the
Elderly (GAO/RCED-92-81)

Radon Testing in Federal Buildings Needs Improvement and HUD's Radon
Policy Needs Strengthening (GAO/T-RCED-91-48)

Rental Housing:  Housing Vouchers Cost More Than Certificates but
Offer Added Benefits (GAO/RCED-89-20)

Rural Development Administration:  Patterns of Use in the Business
and Industry Loan Guarantee Program (GAO/RCED-92-197)

Small Business:  Problems Continue With SBA's Minority Business
Development Program (GAO/RCED-93-145)

Technology Transfer:  Federal Efforts to Enhance the Competitiveness
of Small Manufacturers (GAO/RCED-92-30)

Urban Poor:  Tenant Income Misreporting Deprives Other Families of
HUD-Subsidized Housing (GAO/HRD-92-60)


   NATURAL RESOURCES MANAGEMENT
   ISSUE AREA (BUDGET FUNCTION
   300)
---------------------------------------------------------- Chapter 2:5

GAO Contact:  James Duffus III, 202/512-7756


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:5.1

Natural resources on federal lands are second only to tax receipts in
generating revenues for the federal government, totaling almost $7
billion in fiscal year 1993.  Fiscal year 1994 budget authorities for
the three agencies primarily responsible for managing and protecting
these resources--the Department of the Interior, the Department of
Agriculture's Forest Service, and the U.S.  Army Corps of
Engineers--more than doubled the revenues generated the year before,
about $16 billion. 

Our work over the last several years identified (1) the declining
ecological condition of the resources generating these revenues; (2)
the growing state of disrepair of the existing infrastructure, valued
at over $200 billion, constructed to make use of these resources; and
(3) the inability of the agencies responsible for managing and
protecting these resources to sustain the long-term productivity of
the land.  At the same time, agency staff are being asked to assume
increasing responsibilities and to perform more duties.  Budgetary
constraints will challenge these agencies as never before to find
better ways to address these problems with fewer resources. 

The Congress and the administration will have to make difficult
decisions about how the federal government can best fulfill its
stewardship responsibilities.  These include finding new sources of
funding for the agencies responsible for managing natural resources
or finding ways for them to operate more efficiently, making further
cutbacks in the agencies' services for maintaining facilities and
lands and developing new approaches for protecting individual natural
resources and sustaining their long-term productivity. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:5.2


         HARDROCK MINING ON
         FEDERAL LANDS
------------------------------------------------------ Chapter 2:5.2.1

In March 1989, we recommended that the Congress eliminate the law's
patenting provision allowing valuable federal lands to pass into
private ownership or, should the Congress decide not to eliminate
this provision, amend the law to require that the federal government
obtain fair market value for the land patented.  Efforts to reform
the mining law in the 103rd Congress were not successful. 
(GAO/RCED-89-72)


         BELOW-COST TIMBER SALES
------------------------------------------------------ Chapter 2:5.2.2

In April 1991 testimony, we stated that the federal government was
not recovering timber sale preparation and administration expenses,
resulting in below-cost timber sales, and recommended that the Forest
Service do so.  We made three additional recommendations.  The Forest
Service is still considering our recommendations in developing a
below-cost policy scheduled for implementation in 1995. 
(GAO/T-RCED-91-42)


         OBTAINING FAIR MARKET
         VALUE
------------------------------------------------------ Chapter 2:5.2.3

In four products issued between April 1993 and July 1994, we stated
that the federal government was not receiving fair market value for
the use of its lands as ski areas and communication sites and
recommended, among other things, that the Secretaries of Agriculture
and the Interior obtain fair market value for such uses.  We also
pointed out that if fair market value was to be obtained for the use
of the communication sites on federal lands, the Congress should
consider not renewing the current limits on fee increases.  The
Congress has removed the limits on communication site fee increases,
and the Departments of Agriculture and the Interior plan to implement
a new fee system for communication sites by January 1995, which will
reflect fair market value.  In addition, the Forest Service plans to
have a new ski fee system, which will reflect fair market value in
place for the 1996-1997 ski season.  (GAO/RCED-93-107 and
GAO/RCED-94-248)


         FEDERAL WATER SUBSIDIES
------------------------------------------------------ Chapter 2:5.2.4

The 1992 Omnibus Water Bill raised irrigation rates in the Central
Valley Project in California's Central Valley Basin.  In an April
1994 report on the impact of higher irrigation rates on Central
Valley Project farmers, we stated that if irrigators paid full-cost
rates for water, federal revenues could be significantly enhanced. 
We pointed out that whether irrigation rates should be increased
beyond current requirements was a decision for the Congress.  We
listed several factors for the Congress to consider should it decide
to pursue the issue of further increasing irrigation rates, such as
(1) to what extent could farmers absorb increased irrigation costs,
(2) how farmers and local economies might be adversely affected, (3)
how much increased revenue to the U.S.  Treasury could be generated,
(4) how able farmers were to mitigate the effects of price increases,
(5) what environmental and water supply benefits would result from
higher irrigation rates, (6) what the impacts of future water supply
reductions would be, and (7) whether the increases should apply to
already renewed contracts.  Other options, such as water markets in
which rights to use water are bought and sold, may achieve similar
benefits but would affect farmers differently.  (GAO/RCED-94-8)


         FEDERAL WATER TRANSFERS
------------------------------------------------------ Chapter 2:5.2.5

The beneficial and adverse impacts of water markets were addressed in
our May 1994 report on the usefulness and the feasibility of allowing
water provided from federal water projects to be resold on the market
in the western states.  We concluded that water markets could be an
effective tool for using water more efficiently and improving
environmental quality.  We cautioned, however, that water transfers
could cause a variety of adverse economic, social, and environmental
impacts on third parties and that existing laws and procedures might
not fully protect the third parties from these impacts. 

We recommended that the Department of the Interior and the Corps of
Engineers clarify guidance on approving water transfers to more
clearly outline the requirements that must be met, including how the
federal laws and environmental requirements must be satisfied, how
the rates for transferred water would be determined, and whether
contracts must be amended.  Ultimately, whether to encourage more
widespread voluntary market transfers of federally provided water as
a way to address water supply and environmental problems and to
promote economically efficient water use is a policy decision for the
Congress.  The Department of the Interior and the Corps of Engineers
generally concurred in the findings and recommendations but did not
indicate that they would take action in the near future to clarify
the current requirements for improving water transfers. 
(GAO/RCED-94-35)


         ECOSYSTEM MANAGEMENT
------------------------------------------------------ Chapter 2:5.2.6

In our August 1994 report and September 1994 testimony on federal
initiatives to implement ecosystem management governmentwide, we
recommended that the Director of the White House Office on
Environmental Policy develop a strategy clarifying the policy goal
for ecosystem management, take practical steps clearly identifying
what must be done and which agencies and parties must be involved,
and identify barriers to implementing ecosystem management and
options for overcoming them.  We also recommended that progress in
implementing the strategy be reported as part of the yearly budget
and appropriations process.  The White House Office on Environmental
Policy and the primary federal land management agencies--the Forest
Service and Interior's National Park Service, the Bureau of Land
Management, and the Fish and Wildlife Service--generally agreed with
the recommendations.  (GAO/RCED-94-111)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  NATURAL
      RESOURCES MANAGEMENT
-------------------------------------------------------- Chapter 2:5.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:5.3.1

Bureau of Reclamation:  Central Valley Project Cost Allocation
Overdue and New Method Needed (GAO/RCED-92-74)

Bureau of Reclamation:  Unauthorized Recreation Facilities at Two
Reclamation Projects (GAO/RCED-93-115)

Coastal Barriers:  Development Occurring Despite Prohibition Against
Federal Assistance (GAO/RCED-92-115)

Department of the Interior:  Transfer of the Presidio From the Army
to the National Park Service (GAO/RCED-94-61)

Ecosystem Management:  Additional Actions Needed to Adequately Test a
Promising Approach (GAO/RCED-94-111)

Endangered Species:  Factors Associated With Delayed Listing
Decisions (GAO/RCED-93-152)

Federal Land Management:  The Mining Law of 1872 Needs Revision
(GAO/RCED-89-72)

Federal Land Management:  Unauthorized Activities Occurring on
Hardrock Mining Claims (GAO/RCED-90-111)

Federal Lands:  Fees for Communications Sites Are Below Fair Market
Value (GAO/RCED-94-248)

Federal Lands:  Improvements Needed in Managing Short-Term
Concessioners (GAO/RCED-93-177)

Federal Timber Sales:  Process for Appraising Timber Offered for Sale
Needs to Be Improved (GAO/RCED-90-135)

Financial Management:  BIA Has Made Limited Progress in Reconciling
Trust Accounts and Developing a Strategic Plan (GAO/AFMD-92-38)

Financial Management:  Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds
(GAO/AIMD-94-185)

Financial Management:  Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements
(GAO/T-AIMD-94-99)

Fisheries Management:  Administration of the Sport Fish Restoration
Program (GAO/RCED-94-4)

Forest Service:  Little Assurance That Fair Market Value Fees Are
Collected From Ski Areas (GAO/RCED-93-107)

Forest Service:  Management of Reforestation Program Has Improved,
But Problems Continue (GAO/RCED-94-257)

Forest Service Needs to Improve Efforts to Protect the Government's
Financial Interests and Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-42)

Forest Service Timber Sales Program:  Questionable Need for Contract
Term Extensions and Status of Efforts to Reduce Costs
(GAO/T-RCED-92-58)

Mineral Resources:  Federal Coal-Leasing Program Needs Strengthening
(GAO/RCED-94-10)

Mineral Resources:  Federal Helium Purity Should Be Maintained
(GAO/RCED-92-44)

Mineral Resources:  Meeting Federal Needs for Helium (GAO/RCED-93-1)

Mineral Revenues:  Progress Has Been Slow in Verifying Offshore Oil
and Gas Production (GAO/RCED-90-193)

National Park Service:  Activities Outside Park Borders Have Caused
Damage to Resources and Will Likely Cause More (GAO/RCED-94-59)

National Park Service:  Condition of and Need for Employee Housing
(GAO/RCED-93-192)

National Park Service:  Reexamination of Employee Housing Program Is
Needed (GAO/RCED-94-284)

National Park Service:  Scope and Cost of America's Industrial
Heritage Project Need to Be Defined (GAO/RCED-93-134)

Natural Resources:  Defense and Interior Can Better Manage Land
Withdrawn for Military Use (GAO/NSIAD-94-87)

Natural Resources Restoration:  Use of Exxon Valdez Oil Spill
Settlement Funds (GAO/RCED-93-206BR)

Offshore Oil and Gas Resources:  Interior Can Improve Its Management
of Lease Abandonment (GAO/RCED-94-82)

Rangeland Management:  BLM Efforts to Prevent Unauthorized Livestock
Grazing Need Strengthening (GAO/RCED-91-17)

Rangeland Management:  BLM's Hot Desert Grazing Program Merits
Reconsideration (GAO/RCED-92-12)

Rangeland Management:  BLM's Range Improvement Project Data Base Is
Incomplete and Inaccurate (GAO/RCED-93-92)

Rangeland Management:  Improvements Needed in Federal Wild Horse
Program (GAO/RCED-90-110)

Rangeland Management:  Interior's Monitoring Has Fallen Short of
Agency Requirements (GAO/RCED-92-51)

Research Fleet Modernization:  NOAA Needs to Consider Alternatives to
the Acquisition of New Vessels (GAO/RCED-94-170)

Timber Sale Contract Defaults:  Forest Service Needs to Strengthen
Its Performance Bond and Contract Provisions (GAO/RCED-94-5)

Trans-Alaska Pipeline:  Regulators Have Not Ensured That Government
Requirements Are Being Met (GAO/RCED-91-89)

U.S.  Forest Service:  Independence Still Lacking in Law Enforcement
Organization (GAO/T-OSI-94-1)

Water Markets:  Increasing Federal Revenues Through Water Transfers
(GAO/RCED-94-164)

Water Resources:  Federal Efforts to Monitor and Coordinate Responses
to Drought (GAO/RCED-93-117)

Water Subsidies:  Impact of Higher Irrigation Rates on Central Valley
Project Farmers (GAO/RCED-94-8)

Water Transfers:  More Efficient Water Use Possible, If Problems Are
Addressed (GAO/RCED-94-35)

Weather Forecasting:  Systems Architecture Needed for National
Weather Service Modernization (GAO/AIMD-94-28)

Wetlands:  The Corps of Engineers' Administration of the Section 404
Program (GAO/RCED-88-110)

Wilderness Preservation:  Problems in Some National Forests Should Be
Addressed (GAO/RCED-89-202)

Wildlife Management:  Problems Being Experienced With Current
Monitoring Approach (GAO/RCED-91-123)

Wildlife Protection:  Enforcement of Federal Laws Could Be
Strengthened (GAO/RCED-91-44)


   TRANSPORTATION AND
   TELECOMMUNICATIONS ISSUE AREA
   (BUDGET FUNCTION 400)
---------------------------------------------------------- Chapter 2:6

GAO Contact:  Kenneth M.  Mead, 202/512-2834


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:6.1

The transportation sector is a key component in the administration's
and the Congress's efforts to improve the economy; maintain and
enhance U.S.  competitiveness in the global marketplace; and serve
the growing needs of businesses, industries, and the American public. 
Comprising diverse elements ranging from air, land, water, and mass
transit to pipeline and marine safety; employing about 10 percent of
America's work force; and involving about $1 trillion (17 percent) of
the nation's gross domestic product, the transportation sector
provides facilities and services and carries out activities that
touch everyone's life. 

In trying to meet these goals, the world's finest transportation
system faces many challenges and tradeoffs.  Among the challenges are
reducing the enormous societal and economic costs of
transportation-related fatalities, injuries, and property damage;
restoring the obsolete and deteriorated portions of the
transportation infrastructure; relieving the increasingly congested
aviation, highway, and waterway systems; meeting the increasing
demands for more and better public transit and rail service; using
public resources more efficiently; and increasing reliance on private
resources.  Chief among the tradeoffs are the investment choices
among the various transportation modes because investments in the
modes today affect the way people and goods are transported tomorrow,
which, in turn, affects how people live their lives, conduct
business, and protect the environment. 

In the telecommunications sector, which has many parallels to
transportation, experts forecast tumultuous changes over the next 4
to 5 years.  The key issues in the industry boil down essentially to
issues of consumer access at reasonable prices in an environment
where service delivery could be controlled by a few large firms. 
Further, telecommunications is fast becoming a viable proxy for
business travel.  In fact, some European countries--recognizing the
similarities to transportation issues and the potential that
telecommunications has for relieving congestion--have combined
transportation and telecommunications under one ministry. 
Congressional concern is focusing on the appropriate government
regulatory role and increasing competition. 

As detailed below, our work, which has included an increasing
emphasis on the transportation sector's international and intermodal
aspects, has influenced the Congress and the Department of
Transportation (DOT) and its agencies to take many actions to improve
transportation safety and the efficiency and the effectiveness of
transportation policies and programs. 


         AVIATION SAFETY
------------------------------------------------------ Chapter 2:6.1.1

Over the next several years, the Federal Aviation Administration
(FAA) will face major challenges on how to deal with the effects of a
downsized work force, corporatization proposals, and increased
globalization of the aviation industry, all within the context of
continuing to maintain a high level of safety in the U.S.  air
transport system.  Our recommendations have been designed to help FAA
and congressional decisionmakers cope with these challenges. 

For example, in response to our recommendations, FAA (1) issued
guidelines to airlines to implement self-audit and voluntary
disclosure programs, which supplement the limited corps of FAA
inspectors that cannot police every aspect of the industry all the
time; (2) finalized a working agreement with the European Joint
Aviation Authority to help avoid unnecessary duplication and more
effectively use its certification work force; (3) agreed to provide
security clearances to airport security coordinators at the nation's
high-threat airports; (4) established a system to monitor its
harmonization work program and has concluded technical agreements for
48 of the 79 key regulatory differences identified in the program;
and (5) promulgated new deicing regulations for commuter aircraft. 
In addition, FAA and the State Department implemented procedures to
facilitate FAA's efforts to address regulatory violations committed
by foreign carriers that fly into the United States. 


         AIR TRAFFIC CONTROL
         MODERNIZATION
------------------------------------------------------ Chapter 2:6.1.2

FAA is at a critical juncture in its air traffic control (ATC)
modernization program because (1) new ATC systems are about to be
installed; (2) the automation plan for ATC facilities is undergoing
radical restructuring; and (3) new, costly major acquisitions (e.g.,
the wide-area augmentation system for satellite navigation) are in
the earliest phases.  Our work over the past couple of years focused
on reviewing mission needs analyses that FAA was conducting as the
starting point for modernization projects and FAA's effectiveness in
considering alternative systems to allow aircraft to conduct
precision approaches to airports.  Of particular note, we recommended
further analysis of alternatives for precision landings.  As a result
of FAA's subsequent review, the agency terminated the Microwave
Landing System Project, saving taxpayers about $1 billion over the
next decade.  FAA plans, instead, to use satellite navigation to
provide precision landing services. 

In line with our other recommendations, FAA reviewed requirements for
latter segments of the Advanced Automation System, increased its
scrutiny of mission need statements for new projects, issued improved
guidance for mission need statements, incorporated measurable goals
in its Capital Investment Plan, and issued a new policy to ensure
that projects funded via Letters of Intent met statutory
requirements.  Additionally, on the basis of our analysis, the
Congress reduced FAA's fiscal year 1994 Facilities and Equipment
appropriation by $209 million. 


         SURFACE SAFETY
------------------------------------------------------ Chapter 2:6.1.3

Although the number of people who die in transportation accidents is
lower than it's been for 30 years, 40,000 people still die on the
nation's highways each year and nearly $15 billion is spent annually
on health care related to traffic accidents.  As a result of our work
in this important area, (1) the Federal Highway Administration (FHWA)
initiated a special study to determine accident rates of longer
combination vehicles and improved motor carrier safety by requiring
the loss of a commercial driver's license for not correcting serious
out-of-service violations and initiating an action plan to improve
the timeliness of its motor carrier compliance reviews, (2) the
National Highway Traffic Safety Administration improved data
collection and methodology for estimating the cost of motor vehicle
safety and fuel economy and improved its control over gray market
vehicles to ensure that they met basic U.S.  safety requirements, (3)
DOT increased staffing in the Office of Intermodalism and directed it
to outreach to industry and state and local governments, (4) Amtrak
established minimum safety standards for its passenger cars to ensure
that unsafe cars were not placed in service, and (5) the Research and
Special Programs Administration required that new or replacement
pipelines be capable of using internal inspection devices (smart
pigs) and classified many more materials as hazardous when
transported in bulk.  Further, the Congress decided, on the basis of
our work, that the railroad hours-of-service requirements did not
need any revisions. 


         SURFACE INFRASTRUCTURE
------------------------------------------------------ Chapter 2:6.1.4

Highway demonstration projects number over 1,000 and account for
billions of dollars.  A number of such projects have stalled in early
development phases, leading to growing congressional and
administration interest in rescinding inactive projects.  But we
pointed out in testimony that FHWA lacked a system to do this. 
Subsequently, DOT improved its demonstration-project-tracking system. 
Also, supplemental appropriation legislation rescinded 21 projects,
thereby saving $32.2 million. 

In line with other recommendations, FHWA improved guidance and
oversight for equipment rental rates and began disseminating
bridge-related seismic information and research to states.  The
Federal Transit Administration improved federal management of
employee transit benefit programs. 


         COMPETITION, ECONOMIC,
         AND REGULATORY ANALYSIS
------------------------------------------------------ Chapter 2:6.1.5

International travel is becoming increasingly important to U.S. 
airlines and now accounts for more than one-fourth of U.S.  carrier
revenues.  Therefore, our aviation focus shifted to largely
international issues, including the impacts of code-sharing and
marketing alliances and the competitive problems faced by U.S.  air
cargo airlines.  The National Commission to Ensure a Strong
Competitive Airline Industry adopted our recommendation to liberalize
the rules governing foreign investment in U.S.  airlines but
restricts such liberalization to airlines from nations offering our
airlines equivalent opportunities.  Our testimony before the National
Commission to Ensure a Strong Competitive Airline Industry was a key
factor in the formulation of a number of Commission recommendations
that rejected reregulation but called for actions to protect
competition and maximize traveler welfare (e.g., Montreal Protocols)
and for reissuance of Fly Rights, DOT's airline passenger consumer
rights publication.  Additionally, DOT is revisiting the High Density
Rule at O'Hare International Airport in Chicago. 

Our rail work shifted to the economic and financial questions facing
Amtrak.  In testimony, we highlighted Amtrak's serious financial
condition and difficult decisions regarding passenger rail future
that must be made.  Additionally, we recommended that the Federal
Railroad Administration target limited federal funds for high-speed
rail on a relatively few routes to gain maximum impact.  The
Administration now agrees and will focus resources on a few promising
routes. 

Our report on trucking undercharges influenced the provisions of the
Negotiated Rates Act of 1993 to settle undercharge claims.  Our
report on highway user fees will be the impetus for a new highway
cost allocation study and might change how roads are paid for.  Our
work on charter buses indicated that the rules protecting private
operators from subsidized competition from transit operators were
largely working but that better communication could help public
operators identify areas of opportunity.  The Federal Transit
Administration is planning to include, in seminars for transit
operators, guidance on how to file for exemptions.  The
Administration also, in developing guidance to implement set-asides
for intercity bus assistance, specified eligible items. 

Finally, our testimony on the Interstate Commerce Commission was
highly influential in the congressional decision to eliminate motor
carrier regulations.  We testified that, while truck rate and entry
rulings were no longer needed in a deregulated environment, rail
responsibilities continued to be important especially to captive
shippers. 


         COAST GUARD
------------------------------------------------------ Chapter 2:6.1.6

This relatively small agency has various important missions to
fulfill.  Over the next few years, the increasing numbers and sizes
of foreign-flagged vessels visiting U.S.  ports, including a new
fleet of 2,600 passenger "mega" cruise ships, will strain the
existing Coast Guard inspection work force.  Also, enforcement of the
Oil Pollution Act of 1990, with comprehensive provisions covering oil
spill contingency planning, requirements for double-hull
construction, and crew proficiency standards, represents a major
Coast Guard resource commitment that must be met in addition to the
agency's other missions. 

Our work has been targeted to identifying more efficient ways of
using Coast Guard resources and fulfilling its mission.  Because of
this work, the Coast Guard (1) developed a better process to justify
closing small boat stations; (2) improved its management of research
and development activities, resulting in a $2.5 million cut in the
research and development budget in 1994; (3) improved its management
of appropriated funds used for morale, welfare, and recreation
activities; and (4) improved its accounting for acquisition staff
funding, resulting in a reduction of $4 million from its fiscal year
1994 budget. 

Regarding safety, in response to our work, the Coast Guard (1)
improved its inspection program to detect unsafe tankers, (2)
improved its inspections of waterfront facilities, and (3) took
actions needed to improve cruise ship safety.  Regarding pollution
prevention and response, the Coast Guard (1) improved its oil spill
cost recovery procedures and (2) developed an inventory of abandoned
barges so that it could be used to help prevent pollution. 


         FINANCIAL SYSTEMS
------------------------------------------------------ Chapter 2:6.1.7

In response to our report on the progress made with the Departmental
Accounting and Financial Information System, DOT included in its
financial systems improvement plans a strategy to address
shortcomings in the system in its Chief Financial Officer and
Information Resources Management Plans and agreed to report to the
Congress on the progress made in improving its financial system.  In
June 1993, DOT implemented the system Department-wide. 


         TELECOMMUNICATIONS
------------------------------------------------------ Chapter 2:6.1.8

The Federal Communications Commission, in response to our work, hired
10 additional auditors for its Common Carrier Bureau, which addresses
telephone company cost allocations.  The Commission anticipates a
rapid expansion of telecommunications-based services, many of which
will be provided by regulated telephone companies. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:6.2

Despite the many actions and initiatives taken by the Congress, DOT,
and its agencies in response to our recommendations, some important
recommendations remain open and warrant priority attention. 


         EXPECTATIONS FOR THE
         NATIONAL HIGHWAY SYSTEM
------------------------------------------------------ Chapter 2:6.2.1

We recommended in testimony that FHWA develop performance
expectations and measures in conjunction with the major goals of the
National Highway System to ensure that progress could be assessed. 
This is particularly critical in areas such as pavement condition and
the extent of congestion.  (GAO/T-RCED-94-136)


         HIGHWAY USER FEES
------------------------------------------------------ Chapter 2:6.2.2

In a report on highway user fees, we recommended that FHWA conduct a
formal cost allocation study to determine whether all highway users
were paying their fair share of federal highway costs and to ensure
that FHWA and the Congress had up-to-date information when making
decisions affecting federal highway user fees.  We recommended that
FHWA obtain appropriate input from the affected parties and use, to
the extent possible, the data being developed by the Strategic
Highway Research Program on the relationship between axle loads and
pavement damage.  (GAO/RCED-94-181)


         HIGHWAY QUALITY
         IMPROVEMENTS
------------------------------------------------------ Chapter 2:6.2.3

GAO recommended, in a report on highway quality improvements, that
FHWA, to help protect the nation's highway infrastructure, work with
states to develop performance standards and expectations, including
specific time frames for corrective action that depend on the
severity and safety impact of maintenance problems.  GAO also
recommended that FHWA issue guidance to states on factors to be
considered as part of life-cycle cost analysis, such as setting
priorities for projects over multiyear periods; establishing
acceptable value ranges, particularly for social and other
nontraditional costs like pollution, congestion, and fuel usage; and
refining maintenance costs and salvage values.  (GAO/RCED-94-198)


         MASS TRANSIT GRANTS
------------------------------------------------------ Chapter 2:6.2.4

In a series of five reports, we recommended several improvements in
the Federal Transit Administration's oversight of mass transit
grants.  The reports documented inadequacies in oversight; serious
deficiencies in grantees' financial, technical, procurement,
inventory, and other management controls; noncompliance with federal
requirements; and improper expenditures of grant funds.  The
Administration plans to implement most of our recommendations, which
if properly executed, should help better safeguard transit funds from
risk of fraud, waste, abuse, and mismanagement.  These efforts have
not been completed, however, and the Administration will have to be
persistent to ensure that it does not lose momentum. 
(GAO/RCED-91-107, GAO/RCED-92-7, GAO/RCED-92-38, GAO/RCED-92-53, and
GAO/RCED-93-8)


         TRACK SAFETY INSPECTIONS
------------------------------------------------------ Chapter 2:6.2.5

In reporting on the Federal Railroad Administration's Track Safety
Inspection Program, we recommended that the Administration provide
guidance to track inspectors on options available when excepted track
deficiencies constituted an imminent threat of derailment or another
safety hazard.  Such action would strengthen the current regulations
governing the excepted track provision and improve safety on excepted
track.  (GAO/RCED-94-56)


         NEW AVIATION SECURITY
         TECHNOLOGY
------------------------------------------------------ Chapter 2:6.2.6

We recommended that FAA, to facilitate the introduction of new
explosive detection equipment, develop a plan, with industry, that
provides a strategy for implementing new detection technology during
the next decade.  This plan should include important milestones and
identify roles; cost estimates for the purchase, the operation, and
the maintenance of explosive detection systems; and FAA and industry
resources.  (GAO/RCED-94-142)


         ADVANCED AUTOMATION
         SYSTEM
------------------------------------------------------ Chapter 2:6.2.7

In testimony on FAA's Advanced Automation System, we recommended that
FAA submit a report to the Congress before the administration
proposed its fiscal year 1996 budget for FAA describing a
comprehensive automation plan, including time frames, funding levels,
and all interim and long-term actions necessary to satisfy user needs
and FAA air traffic control and management requirements. 
(GAO/T-RCED-94-188)


         AIRPORT IMPROVEMENT
         PROGRAM
------------------------------------------------------ Chapter 2:6.2.8

In a series of reports on this program, we recommended options for
improving the targeting of Military Assistance Program funds within
the national airport system, reducing the number of eligible reliever
airports or further reducing the set-aside for reliever airports upon
receipt of information from FAA regarding the need for such airports,
and steps to ensure that letters of intent were used in accordance
with congressional direction.  (GAO/RCED-94-100, GAO/RCED-94-209, and
GAO/RCED-94-226)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      TRANSPORTATION AND
      TELECOMMUNICATIONS
-------------------------------------------------------- Chapter 2:6.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 2:6.3.1

Advanced Automation System:  Implications of Problems and Recent
Changes (GAO/T-RCED-94-188)

Air Traffic Control:  FAA Can Better Forecast and Prevent Equipment
Failures (GAO/RCED-91-179)

Air Traffic Control:  Status of FAA's Plans to Close and Contract Out
Low-Activity Towers (GAO/RCED-94-265)

Aircraft Certification:  Limited Progress on Developing International
Design Standards (GAO/RCED-92-179)

Aircraft Certification:  New FAA Approach Needed to Meet Challenges
of Advanced Technology (GAO/RCED-93-155)

Aircraft Maintenance:  FAA Needs to Follow Through on Plans to Ensure
the Safety of Aging Aircraft (GAO/RCED-93-91)

Airline Competition:  Impact of Changing Foreign Investment and
Control Limits on U.S.  Airlines (GAO/RCED-93-7)

Airport Improvement Program:  Better Management Needed for Funds
Provided Under Letters of Intent (GAO/RCED-94-100)

Airport Improvement Program:  Reliever Airport Set-Aside Funds Could
Be Redirected (GAO/RCED-94-226)

Airport Improvement Program:  The Military Airport Program Has Not
Achieved Intended Impact (GAO/RCED-94-209)

Amtrak Safety:  Amtrak Should Implement Minimum Safety Standards for
Passenger Cars (GAO/RCED-93-196)

Amtrak Training:  Improvements Needed for Employees Who Inspect and
Maintain Rail Equipment (GAO/RCED-93-68)

Aviation Insurance:  Federal Insurance Program Needs Improvements to
Ensure Success (GAO/RCED-94-151)

Aviation Research:  FAA Could Enhance Its Program to Meet Current and
Future Challenges (GAO/RCED-92-180)

Aviation Safety:  FAA and the State Department Can Better Manage
Foreign Enforcement Cases (GAO/RCED-94-87)

Aviation Safety:  FAA Can Better Prepare General Aviation Pilots for
Mountain Flying Risks (GAO/RCED-94-15)

Aviation Safety:  Increased Oversight of Foreign Carriers Needed
(GAO/RCED-93-42)

Aviation Safety:  Problems Persist in FAA's Inspection Program
(GAO/RCED-92-14)

Aviation Safety:  Progress Limited With Self-Audit and Safety
Violation Reporting Programs (GAO/RCED-92-85)

Aviation Safety:  Unresolved Issues Involving U.S.-Registered
Aircraft (GAO/RCED-93-135)

Aviation Security:  Additional Actions Needed to Meet Domestic and
International Challenges (GAO/RCED-94-38)

Aviation Security:  Development of New Security Technology Has Not
Met Expectations (GAO/RCED-94-142)

Coast Guard:  Acquisition Program Staff Were Funded Improperly
(GAO/RCED-93-123)

Coast Guard:  Additional Actions Needed to Improve Cruise Ship Safety
(GAO/RCED-93-103)

Coast Guard:  Coordination and Planning for National Oil Spill
Response (GAO/RCED-91-212)

Coast Guard:  Management of the Research, Development, Test and
Evaluation Program Needs Strengthening (GAO/RCED-93-157)

Coast Guard:  Program to Inspect Intermodal Containers Carrying
Hazardous Materials Can Be Improved (GAO/RCED-94-139)

Coast Guard:  Reorganization Unlikely to Increase Resources or
Overall Effectiveness (GAO/RCED-90-132)

Computer Reservation Systems:  Action Needed to Better Monitor the
CRS Industry and Eliminate CRS Biases (GAO/RCED-92-130)

Defense Transportation:  Ineffective Oversight Contributes to Freight
Losses (GAO/NSIAD-92-96)

Department of Transportation:  University Research Activities Need
Greater Oversight (GAO/RCED-94-175)

Employee Drug Testing:  Opportunities Exist to Lower Drug-Testing
Program Costs (GAO/GGD-93-13)

FAA Budget:  Key Issues Need to Be Addressed (GAO/T-RCED-92-51)

FAA Information Resources:  Agency Needs to Correct Widespread
Deficiencies (GAO/IMTEC-91-43)

Global Positioning Technology:  Opportunities for Greater Federal
Agency Joint Development and Use (GAO/RCED-94-280)

Government Civilian Aircraft:  Central Management Reforms Are
Encouraging but Require Extensive Oversight (GAO/GGD-89-86)

Gray Market Vehicle Program:  Extension Warranted, But Improvements
in Vehicle Identification Are Needed (GAO/RCED-94-22)

Highway Contracting:  Disadvantaged Business Eligibility Guidance and
Oversight Are Ineffective (GAO/RCED-92-148)

Highway Contracting:  Disadvantaged Business Program Meets Contract
Goal, But Refinements Are Needed (GAO/RCED-94-168)

Highway Infrastructure:  Quality Improvements Would Safeguard
Billions of Dollars Already Invested (GAO/RCED-94-198)

Highway Planning:  Agencies Are Attempting to Expedite Environmental
Reviews, But Barriers Remain (GAO/RCED-94-211)

Highway Safety:  Safety Belt Use Laws Save Lives and Reduce Costs to
Society (GAO/RCED-92-106)

Highway User Fees:  Updated Data Needed to Determine Whether All
Users Pay Their Fair Share (GAO/RCED-94-181)

Longer Combination Trucks:  Driver Controls and Equipment Inspection
Should Be Improved (GAO/RCED-94-21)

Longer Combination Trucks:  Potential Infrastructure Impacts,
Productivity Benefits, and Safety Concerns (GAO/RCED-94-106)

Mass Transit:  Federal Participation in Transit Benefit Programs
(GAO/RCED-93-163)

Mass Transit Grants:  If Properly Implemented, FTA Initiatives Should
Improve Oversight (GAO/RCED-93-8)

Mass Transit Grants:  Improved Management Could Reduce Misuse of
Funds in UMTA's Region IX (GAO/RCED-92-7)

Mass Transit Grants:  Noncompliance and Misspent Funds by Two
Grantees in UMTA's New York Region (GAO/RCED-92-38)

Mass Transit Grants:  Risk of Misspent and Ineffectively Used Funds
in FTA's Chicago Region (GAO/RCED-92-53)

Mass Transit Grants:  Scarce Federal Funds Misused in UMTA's
Philadelphia Region (GAO/RCED-91-107)

Mass Transit Grants:  UMTA Needs to Improve Procurement Monitoring at
Local Transit Authority (GAO/RCED-89-94)

Mass Transit:  Needs Projections Could Better Reflect Future Costs
(GAO/RCED-93-61)

Motor Vehicle Regulations:  Regulatory Cost Estimates Could Be
Improved (GAO/RCED-92-110)

Motor Vehicle Safety:  Key Issues Confronting the National Advanced
Driving Simulator (GAO/RCED-92-195)

National Highway System:  Refinements Would Strengthen the System
(GAO/T-RCED-94-136)

Oil Spill Prevention:  Progress Made in Developing Alaska
Demonstration Programs (GAO/RCED-93-178)

Railroad Safety:  Continued Emphasis Needed for an Effective Track
Safety Inspection Program (GAO/RCED-94-56)

Research Fleet Modernization:  NOAA Needs to Consider Alternatives to
the Acquisition of New Vessels (GAO/RCED-94-170)

Telecommunications:  FCC Procedures Delay Release of Decision
Documents (GAO/RCED-94-242)

Traffic Congestion:  Activities to Reduce Travel Demand and Air
Pollution Are Not Widely Implemented (GAO/PEMD-93-2)

Trans-Alaska Pipeline:  Regulators Have Not Ensured That Government
Requirements Are Being Met (GAO/RCED-91-89)

Transportation Infrastructure:  Benefits of Traffic Control Signal
Systems Are Not Being Fully Realized (GAO/RCED-94-105)

Transportation Infrastructure:  Better Tools Needed for Making
Decisions on Using ISTEA Funds Flexibly (GAO/RCED-94-25)

Transportation Infrastructure:  Oversight of Rental Rates for Highway
Construction Equipment Is Inadequate (GAO/RCED-93-86)

Transportation Infrastructure:  The Nation's Highway Bridges Remain
at Risk From Earthquakes (GAO/RCED-92-59)

Transportation Infrastructure:  Urban Transportation Planning Can
Better Address Modal Trade-offs (GAO/RCED-92-112)

Truck Transport:  Little Is Known About Hauling Garbage and Food in
the Same Vehicles (GAO/RCED-90-161)


IMPROVING HUMAN RESOURCES PROGRAMS
============================================================ Chapter 3


   EDUCATION AND EMPLOYMENT ISSUE
   AREA (BUDGET FUNCTION 500)
---------------------------------------------------------- Chapter 3:1

GAO Contact:  Linda G.  Morra, 202/512-7014


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:1.1

For the United States to remain competitive in the increasingly
global economy, it must continue to cultivate a highly trained,
competent, and dedicated work force.  While legislation has been
passed that should provide much-needed improvement, many challenges
still lie ahead for the Departments of Education and Labor, which
manage our educational and employment systems.  The Education
Department must accommodate the increasingly poor and diverse
population that has difficulty adjusting to and succeeding in the
nation's current educational system.  Additionally, with the growing
awareness and tension brought about by international competition, the
Labor Department must continue to examine the effectiveness of its
multiple employment and training programs, as well as encourage the
proper application of government regulations to best balance worker
protection and economic growth. 

To help the Departments focus their efforts, our work has
concentrated on the major challenges facing the nation's education
and training programs.  We participated in the formulation of two
pieces of landmark legislation--the Goals 2000 Educate America Act
and the School-to-Work Opportunities Act of 1994.  Additionally, we
have been directly involved in the debates on how to reform
elementary and secondary education, federal student financial aid for
higher education, and the employment and training system.  Examples
follow of our key contributions in education reform, higher
education, work force skills and jobs, and workplace quality. 


         EDUCATION REFORM
------------------------------------------------------ Chapter 3:1.1.1

Our work in elementary and secondary education has supported much
congressional activity and legislation.  Our reports and testimonies
on the demographic characteristics of preschool and school-age
children increased awareness among congressional decisionmakers and
administration officials of the growing rates of poverty, increasing
needs, and dramatic shifts in the locations of at-risk children
during the 1980s.  This work also helped to set the stage for the
enactment of the Improving America's Schools Act of 1994, which
reauthorized title I of the Elementary and Secondary Education Act
(ESEA).  The Rural Caucus of the House of Representatives, as well as
House committees, used our work on the demographics of rural
school-age children to determine the effects of proposed chapter 1
formula changes.  The additional analyses we performed on the
legislation were the basis for a proposed amendment to better target
title I funds, as well as a lengthy debate on the Senate floor.  Our
report on student turnover in schools also resulted in a proposed
amendment to ESEA for a new demonstration program to develop
approaches that schools could use to assist children who change
schools frequently.  Finally, our report on preschool demographics
and work on Head Start participation rates were used to launch Head
Start reauthorization and expansion hearings. 

Our testimony and report on systemwide education reform were
instrumental in gaining support for the Goals 2000 Educate America
Act, passed in April 1994.  This law represents landmark legislation,
as it calls for high educational standards for all students, while
still maintaining flexibility within the context of state goals. 
Additionally, the results of our work on state and district
regulatory flexibility were used extensively in formulating the act's
provision to give flexibility to schools and districts. 

Our work on bilingual education highlighted the problems of school
districts that have students with 20 to 50 different languages spoken
at home yet do not have the trained staff and resources to
successfully deal with this challenge.  Furthermore, our testimony on
the inclusion of children with disabilities in classrooms with
nondisabled children may result in legislation to regulate the
inclusion of children with certain disabilities. 

Our report on comprehensive school-to-work transition (STWT)
strategies supported the enactment of the landmark School-to-Work
Opportunities Act of 1994.  The legislation identified ways the
federal government could support such strategies, for example,
collecting and disseminating information on lessons learned in state
and local jurisdictions that initiate STWT efforts, as well as in
other countries, and making it easier for state and local officials
to use existing targeted grants in STWT efforts.  Also, our work on
occupational skill standards highlighted the importance of business
participation in developing such standards and influenced provisions
in skill standards legislation that give an increased role for
business. 


         HIGHER EDUCATION
------------------------------------------------------ Chapter 3:1.1.2

Our work in this area furthered our goal of ensuring access to
quality higher education while containing costs for both students and
the federal government.  On the basis of our recommendations, the
Congress made cost-reduction revisions to the Federal Family
Education Loan Program portion of the Higher Education Act concerning
cost-sharing by lenders and guaranty agencies for defaulted loan
claims, loan transfer fees paid for loans purchased by secondary
market lenders, elimination of minimum loan interest rate payments to
secondary market lenders, and loan origination fees for certain
borrowers. 


         WORK FORCE SKILLS AND
         JOBS
------------------------------------------------------ Chapter 3:1.1.3

Our work on how well workers acquire the skills they need to be fully
employed in the mainstream work force has continued to demonstrate
the need for a national employment training strategy.  Our reports
and testimonies on the 154 employment and training programs have made
the overlapping nature of these programs a prominent and
much-discussed issue.  Moreover, our work has provided a foundation
for overhauling and streamlining the structure of employment training
programs.  Presently, over 13 legislative proposals are pending
before the Congress to overhaul this system.  Such overhaul could
reduce the number of programs and achieve potential administrative
savings.  Finally, our report on the North America Free Trade Act
bridge program identified problems, now being addressed by the Labor
Department, with the program's ability to help dislocated workers
reenter the work force. 


         WORKPLACE QUALITY
------------------------------------------------------ Chapter 3:1.1.4

In our efforts to help the Congress and the administration determine
the appropriate federal role in ensuring safe, healthy, and equitable
workplaces, we released a major study of workplace regulations.  This
report explored the impact of a body of legislation on both employers
and workers who generally called for more cooperation between
business and government as agencies pursued their regulatory
missions.  Additionally, our equal employment opportunity work
elevated discussion from a narrow review of the Equal Employment
Opportunity Commission's resources to a broader discussion of
overhauling of the federal structures for ensuring equal employment
opportunity. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:1.2


         EDUCATION DEPARTMENT
         MANAGEMENT
------------------------------------------------------ Chapter 3:1.2.1

In our report on the Education Department's longstanding management
problems, we recommended a multiphased approach to addressing them. 
We recommended that the Secretary of Education articulate a strategic
management vision for the Department and adopt a strategic management
process for setting goals and priorities, such as the National
Education Goals; measuring progress toward these goals; and ensuring
accountability for attaining them.  We recommended also that the
Department continue to build on its initial steps taken over the last
several years to enhance management by (1) implementing a
Department-wide strategic management process; (2) identifying good
management practices and supporting their adoption in other
appropriate parts of the Department; (3) rewarding managers for good
leadership; (4) filling technical and policymaking leadership
positions with persons having appropriate skills; and (5) creating
strategic information, financial, and human resources management
plans that were integrated with the Department's overall strategic
management process. 

The Secretary's Reinvention Coordinating Council has been meeting
weekly to establish a framework to implement such initiatives as the
National Goals legislation.  The Department has also responded to
some of our recommendations and has begun to implement a strategic
planning process by producing a Department-wide strategic management
plan, refine its financial management strategic plan, and redesign
its core financial management systems.  The Department has also hired
more persons with appropriate skills to fill technical and
policymaking leadership positions.  (GAO/HRD-93-47)


         EDUCATION REFORM
------------------------------------------------------ Chapter 3:1.2.2

In our report on student turnover in schools, we recommended that the
Department of Education determine the feasibility of using electronic
student record systems instead of its current system.  The Department
agreed that the present system had outlived its usefulness.  It said
that it was considering broader and more cost-effective mechanisms
for transmitting educational and health records on mobile children. 
(GAO/HEHS-94-45)


         OCCUPATIONAL SAFETY AND
         HEALTH
------------------------------------------------------ Chapter 3:1.2.3

In our report on the Occupational Safety and Health Administration's
(OSHA) policies and procedures for confirming abatement of hazards,
we recommended that OSHA improve its ability to detect employers that
failed to correct safety and health hazards found during inspections. 
The Secretary of Labor and the Office of Management and Budget have
approved OSHA's draft regulation to make this improvement.  Labor
expects this regulation to be issued in the second quarter of 1995. 
(GAO/HRD-91-35)

In our report assessing the federal-state approach for enforcing
OSHA's policies, we recommended that OSHA carry out a number of
activities to improve its oversight of state programs, including (1)
emphasizing measures of program outcome and evaluations, (2) revising
the state program-monitoring and evaluation approach, and (3)
obtaining worksite-specific injury and illness data from employers. 
OSHA agreed with our recommendations; has implemented some; and has a
number of efforts under way that should result in implementation of a
performance management system, by March 1995, that will be used to
assess the agency's effectiveness.  (GAO/HEHS-94-10)


         EMPLOYMENT DISCRIMINATION
------------------------------------------------------ Chapter 3:1.2.4

In our report discussing how registered representatives fared in
discrimination disputes, we recommended that the Securities and
Exchange Commission (SEC) direct self-regulating organizations (SROs)
to use existing information systems to track the numbers, the types,
and the outcomes of discrimination cases filed at, and arbitrated by,
their arbitration departments.  We also recommended that all
arbitrators be required to disclose criminal convictions in their
arbitrator profiles and that SROs assess and maintain information on
arbitrators' expertise and use this information when selecting
arbitrators to serve on panels.  Finally, we recommended that SEC
include files involving discrimination complaints when selecting
arbitration case files to review during inspections.  SEC generally
agreed with our recommendations but, to date, has taken no specific
action to implement them.  Additionally, in 1994, bills were proposed
in both the Senate and the House that would prevent employers from
having mandatory arbitration policies.  (GAO/HEHS-94-17)


         STUDENT ACHIEVEMENT
         STANDARDS
------------------------------------------------------ Chapter 3:1.2.5

After reviewing standards set to interpret students' performance on
the National Assessment of Educational Progress (NAEP), we found many
technical flaws that made the results of doubtful validity.  We
recommended that the new standards be withdrawn by the NAEP governing
board, that they not be used in reporting NAEP results, and that the
governing board take a number of specific steps to ensure that it
does not adopt technically unsound policies or approve technically
flawed results.  (GAO/PEMD-93-12)


         VOCATIONAL REHABILITATION
------------------------------------------------------ Chapter 3:1.2.6

Our 8-year followup evaluation, using unique computer-matched wage
and service data, showed only modest long-term outcomes of the
state-federal program that provides services to help persons with
disabilities to become more independent and become employed and
integrated into the community.  We also found unexplained disparities
in the extent of services provided to clients of different races.  We
recommended that the Secretary of Education find out why these
disparities existed; strengthen evaluation in a number of ways; and
take steps to establish the National Commission on Rehabilitation
Services, authorized in 1992, to review the programs in depth before
the next reauthorization.  (GAO/PEMD-93-19)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  EDUCATION
      AND EMPLOYMENT
-------------------------------------------------------- Chapter 3:1.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 3:1.3.1

Apprenticeship Training:  Administration, Use, and Equal Opportunity
(GAO/HRD-92-43)

Chapter 1 Accountability:  Greater Focus on Program Goals Needed
(GAO/HRD-93-69)

Department of Education:  Longstanding Management Problems Hamper
Reforms (GAO/HRD-93-47)

Dislocated Workers:  Improvements Needed in Trade Adjustment
Assistance Certification Process (GAO/HRD-93-36)

Dislocated Workers:  Worker Adjustment And Retraining Notification
Act Not Meeting Its Goals (GAO/HRD-93-18)

Education Issues (GAO/OCG-93-18TR)

Education Reform:  School-Based Management Results in Changes in
Instruction and Budgeting (GAO/HEHS-94-135)

Educational Achievement Standards:  NAGB's Approach Yields Misleading
Interpretations (GAO/PEMD-93-12)

EEOC's Expanding Workload:  Increases in Age Discrimination and Other
Charges Call for New Approach (GAO/HEHS-94-32)

Elementary School Children:  Many Change Schools Frequently, Harming
Their Education (GAO/HEHS-94-45)

Employment Discrimination:  How Registered Representatives Fare in
Discrimination Disputes (GAO/HEHS-94-17)

Employment Service:  Improved Leadership Needed for Better
Performance (GAO/HRD-91-88)

Federal Prisons:  Inmate and Staff Views on Education and Work
Training Programs (GAO/GGD-93-33)

Financial Audit:  Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131)

Financial Audit:  Guaranteed Student Loan Program's Internal Controls
and Structure Need Improvement (GAO/AFMD-93-20)

Financial Management:  Education's Student Loan Program Controls Over
Lenders Need Improvement (GAO/AIMD-93-33)

Foreign Farm Workers in U.S.:  Department of Labor Action Needed to
Protect Florida Sugar Cane Workers (GAO/HRD-92-95)

Impact Aid:  Most School Construction Requests Are Unfunded and
Outdated (GAO/HRD-90-90)

Minimum Wages and Overtime Pay:  Change in Statute of Limitations
Would Better Protect Employees (GAO/HRD-92-144)

National Labor Relations Board:  Action Needed to Improve
Case-Processing Time at Headquarters (GAO/HRD-91-29)

Occupational Safety and Health:  Assuring Accuracy in Employer Injury
and Illness Records (GAO/HRD-89-23)

Occupational Safety and Health:  Changes Needed in the Combined
Federal-State Approach (GAO/HEHS-94-10)

Occupational Safety and Health:  OSHA Policy Changes Needed to
Confirm That Employers Abate Serious Hazards (GAO/HRD-91-35)

Occupational Safety and Health:  Penalties for Violations Are Well
Below Maximum Allowable Penalties (GAO/HRD-92-48)

Occupational Safety and Health:  Worksite Safety and Health Programs
Show Promise (GAO/HRD-92-68)

Precollege Math and Science Education:  Department of Energy's
Precollege Program Managed Ineffectively (GAO/HEHS-94-208)

Regulatory Flexibility in Schools:  What Happens When Schools Are
Allowed to Change the Rules?  (GAO/HEHS-94-102)

Remedial Education:  Modifying Chapter 1 Formula Would Target More
Funds to Those Most in Need (GAO/HRD-92-16)

School-Linked Human Services:  A Comprehensive Strategy for Aiding
Students at Risk of School Failure (GAO/HRD-94-21)

Targeted Jobs Tax Credit:  Employer Actions to Recruit, Hire, and
Retain Eligible Workers Vary (GAO/HRD-91-33)

Vocational Education:  Opportunity to Prepare for the Future
(GAO/HRD-89-55)

Vocational Rehabilitation:  Evidence for Federal Program's
Effectiveness Is Mixed (GAO/PEMD-93-19)

Within-School Discrimination:  Inadequate Title VI Enforcement by the
Office for Civil Rights (GAO/HRD-91-85)


   FEDERAL HEALTH PROGRAMS--DIRECT
   DELIVERY ISSUE AREA (BUDGET
   FUNCTION 550)
---------------------------------------------------------- Chapter 3:2

GAO Contact:  David P.  Baine, 202/512-7101


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:2.1

The Department of Defense (DOD) and the Department of Veterans
Affairs (VA) operate two of the largest centrally managed health care
systems in the world, spending more than $25 billion annually through
about 500 facilities and a network of private providers (e.g., DOD's
CHAMPUS [Civilian Health and Medical Program of the Uniformed
Services] Program).  In addition, the Health Care Financing
Administration is administering the multibillion-dollar Medicare and
Medicaid programs, which finance health care provided to the
nations's elderly, disabled, and economically disadvantaged. 

Rising health care costs and substantial budget deficits have
prompted major congressional concerns about whether these agencies
are delivering quality health care to their beneficiaries as
efficiently and cost-effectively as possible.  Further, the lack of
health insurance for many Americans has prompted proposals for health
care reform, and our work enables us to advise the Congress as it
considers formulation of a revised national health care system.  The
downsizing of military forces and the potential transfer of
beneficiaries from DOD systems to VA systems has also prompted a
concern about the structure of DOD and VA health delivery and VA's
benefits systems. 

Our objectives in this issue area are to (1) ensure that VA and DOD
health care systems and VA benefits programs are operating
effectively and efficiently; (2) identify and assess opportunities
for restructuring VA and DOD health care delivery and VA benefits
systems to enhance access to health care; (3) evaluate DOD's
experience in implementing a large managed health care system to
provide input into the nation's health care reform initiatives; and
(4) improve the quality of health care processes in VA, DOD,
Medicare, Medicaid, and Public Health Service programs. 


         DOD PROGRAMS
------------------------------------------------------ Chapter 3:2.1.1

Fiscal year 1994 was a year of work on issues of structure and reform
of the military health care system.  Our work focused on evaluating
the implementation of DOD's managed care plans across the country and
the implications of that new system for medical staffing, health care
contracting, and alternative health care delivery systems.  DOD is
implementing our recommendations in these areas, which will result in
a contracting process that is more accountable and fair and medical
staffing determined by requirements, rather than an arbitrary floor. 
We continue to review DOD's move toward managed care through its
TRICARE plan and raised concerns about the cost-effectiveness of that
delivery method versus that of other options.  In addition, DOD is
working to develop a uniform health benefits package for its
beneficiaries nationwide and has received legislative authority to
impose enrollment fees for beneficiaries' health care services, a
recommendation we have made in the past. 

We followed the progress of DOD's comprehensive study of the military
medical care system.  This study, known as the Section 733 study, was
mandated by the Congress in the fiscal years 1992-1993 Defense
Authorization Act.  The act required DOD to define its requirements
for medical readiness and evaluate the cost-effectiveness of
peacetime delivery of health care to its beneficiaries.  The study
was released in the spring of 1994, and we are evaluating its
accuracy and usefulness to the Congress.  We expect that this work
will provide important guidance to the Congress on the future
direction of military managed health care efforts. 


         VA PROGRAMS
------------------------------------------------------ Chapter 3:2.1.2

We are continuing a comprehensive effort to address the restructuring
of federal health care delivery systems and beneficiary eligibility
reforms.  We are also continuing work to improve VA's implementation
of veterans' compensation and pension programs. 

Our work on restructuring health care provided a better understanding
of, and federal options for, a system of universal access to quality
health care.  As part of this effort, we testified three times on the
problems VA would likely face in competing under national health
reforms.  We stated that provisions in the proposed Health Security
Act to make VA competitive in a managed care environment would create
significant risks.  For example, expanded entitlement to free care
could add billions of dollars to VA appropriations if all veterans
entitled to free care sought to enroll in VA health plans.  On the
other hand, if capacity in VA health plans were limited, veterans
with service-connected disabilities could be denied health care
benefits while high-income veterans with no service-connected
disabilities were enrolled in VA health plans. 

Further, problems in setting accurate and competitive premiums for VA
care could lead to cutbacks in the availability of VA services, such
as long-term psychiatric care or treatment for spinal cord injuries
and post-traumatic-stress disorder.  In this connection, we related
our findings of the perceptions held by veterans about the role for
VA under health reform.  Excessive waiting times, poor customer
service, and unequal care were among the concerns that VA needs to
address if it is to be competitive in a reformed health care system. 
We also provided the Congress with a section-by-section analysis of
the veterans' health care provisions of the administration's proposed
Health Security Act. 

Our report on VA tuberculosis controls at its medical centers
reported that lax infection-control practices and inadequate
isolation rooms were problems associated with the outbreak of the
disease at the East Orange Medical Center.  Medical center staff did
not consistently use appropriate procedures for isolation of
suspected or known tuberculosis patients.  But, through policy and
procedural changes and interim control measures, the East Orange
Center demonstrated that it could be a successful model in sharing
the importance of strict observance of infection-control procedures
and requirements to minimize the risk of tuberculosis for both
patients and employees. 

VA took steps to increase tuberculosis awareness and promote the need
for systemwide planning to address both clinical and construction
deficiencies at its facilities.  In our view, continued management of
infection-control practices is needed, together with timely and
accurate data on the number and trends in tuberculosis cases and
employee test results. 

We reported that veterans with nonurgent conditions were too often
experiencing service delays when seeking care at VA emergency and
screening clinics.  VA headquarters did not provide (1) guidance on
how facilities should measure veterans' waiting times and (2)
performance goals to compare timeliness of services and assess the
need for further improvements.  Veterans' waiting times could be
significantly reduced at some facilities if VA top management helped
facility management implement the best practices in place at other
facilities. 

We reported that current VA practices and procedures made it
difficult to ensure that the financing of medical care cost recovery
activities conformed to applicable laws.  Some medical care cost
recovery activities remain inadequately defined, such as those for
overhead and medical record coding.  Also, the method for allocating
personnel costs for both medical care cost recovery and
noncost-recovery activities was inadequate.  Without better
definitions of cost recovery activities and a reasonable method for
allocating personnel costs between different activities, some cost
recovery expenses may continue to be improperly charged to the
medical care appropriation. 

Our work has led to important changes and identification of key
issues that will improve veterans' compensation and pensions
programs.  We assessed the degree of satisfaction among VA customers
through a national survey of 1,400 persons who had recently applied
for VA nonmedical benefits.  We found that the time VA took to
process claims was by far the greatest source of applicants'
dissatisfaction.  Although VA had established timeliness goals,
customers might still remain dissatisfied because they believed that
processing should be completed in less time than the goals call for. 

Communication with VA was another major concern for applicants--40
percent of those who had visited VA offices reported that they had
not gotten the information they needed.  Many customers were
dissatisfied, whether the communication was by mail or phone or in
person. 

The need to resubmit claims to VA also caused concern for many
claimants.  Civilian documents, such as marriage certificates, were
resubmitted most often.  Resubmission costs applicants time and money
and can increase VA's workload and processing time. 

We examined how veterans' benefits provided by the United States
compared with those provided by certain other countries.  We found
that the United States offered benefits specifically for disabled
veterans and their survivors in more program areas than any of the
five other countries studied.  There are major differences, however,
in the types of benefits offered, the eligibility requirements used
to qualify for the benefits, and the methods used to compute the
benefits.  Where they do not have special programs for disabled
veterans, the foreign countries provide some of the benefits the U.S. 
provides through programs that serve the general population as well. 
Countries differ in the extent to which a veteran's disability must
be service connected for the veteran to receive benefits.  Most
foreign countries require that a disability be closely related to the
performance of military duty to qualify for disability benefits; no
such link is required in the United States. 

The downsizing of the military has created a large surge in the
number of service members leaving the armed services each year.  We
reviewed the DOD transition assistance program and found that many
separatees and their spouses were not getting timely transition
services, though required by law.  This happened because the program
had not received adequate support from DOD, military service
headquarters, and individual military unit commanders.  As a result,
(1) officials responsible for providing transition services did not
know who was separating, (2) separating service members were not
being provided information translating their military experience and
training into marketable civilian skills, (3) members either were not
being provided individual preseparation counseling or were not
receiving it in a timely manner, and (4) many service members and
their spouses did not have the opportunity to attend transition
seminars and employment assistance centers. 


         QUALITY OF CARE PROVIDED
         TO FEDERAL BENEFICIARIES
------------------------------------------------------ Chapter 3:2.1.3

We reported that, despite the good faith efforts of VA program staff,
the capacity of VA's programs to serve homeless veterans was far
short of the demand.  VA services, such as those for substance abuse,
mental health, and housing problems, are not available in many
localities in the United States.  Under law, each VA medical center
must assess homeless veterans' needs, determine the availability of
VA and other services in the area, and encourage development of plans
to address these needs.  These assessments have not yet been done. 

Because high-risk patients (e.g., patients who are a danger to
themselves or others) leaving treatment settings without staff
authorization is a significant problem at many VA medical centers, VA
needs to improve these centers' assessment and monitoring procedures. 
Early in a patient's hospital stay, VA must identify those who are
high risk and have the potential to leave early.  These patients must
be closely monitored either through direct staff observation or
electronic detection devices or both.  VA must also ensure that the
search policies of each of its medical centers fully comply with its
new search directive and are being complied with.  Further, upon
termination of an unsuccessful search, VA medical centers can do more
than they are now doing to locate unaccounted-for high risk patients. 
This could be done by (1) disseminating information on the patient to
service organizations and other VA offices and (2) annotating missing
patients' names in VA's computerized payment and medical records for
activation if any inquiries are made about their accounts. 

We reported that prison inmates with special needs, including women,
psychiatric patients, and patients with chronic illnesses, were not
receiving the health care they needed at three Bureau of Prisons
(BOP) facilities visited.  This was happening because there were not
enough physician and nursing staff to perform required clinical and
related tasks.  BOP does not have the capacity to provide appropriate
medical and psychiatric care at these facilities because it has been
unable to recruit and retain qualified health care staff.  Quality
assurance programs, which rely on staff support for effective
implementation, are also adversely affected.  In addition, physician
assistants, who are relied on to provide a significant amount of
primary care to patients, are not as well trained or supervised as
they should be.  Thus, patients are, and will continue to be, at risk
of receiving poor care. 

We reported that in many Indian Health Service (IHS) areas, the
provision of health care had been hampered by IHS' difficulty in
recruiting and retaining qualified health care professionals,
especially physicians.  The recruitment and the retention of
physicians in the Aberdeen, South Dakota, area is hampered by a
number of factors, including relatively low pay; inadequate housing
for medical personnel on the reservations; remoteness of the
reservations; cultural differences between the physicians and their
patients; and a general lack of amenities, such as shopping and
dining, that are found in urban areas.  IHS' Aberdeen area has a
higher vacancy rate for physicians than all but one other IHS area. 
The vacancy rate has been particularly high, over 31 percent, at the
Pine Ridge hospital.  IHS is examining the benefits of using a
physician pay structure similar to that used by VA. 

We conducted an extensive literature search and interviewed over 30
health care experts in our study of health care performance measures
and the way in which they should be developed so that quality of care
"report card" comparisons could be made of various health care plans. 
We found that report cards could be a useful tool to educate
stakeholders about the health care provided by a health plan.  Most
experts believe that publishing the results of cost and quality
indicators, as well as other descriptive information comparing the
performance of competing health plans, is a positive step toward
preserving the quality, while lowering the cost of health care. 
However, experts disagree about the type and the amount of
information to be published in a report card because the data sources
and indicators used may not be reliable or valid.  Furthermore, the
report cards being developed may not reflect the needs of some users,
and few cost estimates for publishing report cards are available. 

We reported that millions of dollars in loans had been made to
students attending foreign medical schools that might not have met
U.S.  standards.  The comparability of foreign schools to schools in
the United States was not ensured before their participation in the
student loan program was authorized.  This happened because (1)
federal standards for assessing foreign medical schools were not
adequate to ensure that these schools were comparable to U.S. 
schools, particularly in the area of clinical training of foreign
medical students; (2) little had been done to enforce the few
standards that were in place; and (3) existing procedures did not
ensure that students attending unapproved schools were excluded from
receiving loans. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:2.2

In July 1989, we reported that an estimated 19 percent of veterans
receiving compensation benefits had disabilities resulting from
diseases that had probably been neither caused nor aggravated by
military service.  Many of these diseases, which are related to
heredity or lifestyle, resulted in benefits estimated at $1.7 billion
in 1986.  We recommended that the Congress consider whether these
diseases should be compensated as service-connected disabilities. 
The Congress has not yet taken action.  (GAO/HRD-89-60)

In March 1992, we reported that three VA-administered life insurance
programs had sufficient excess funds to pay their own administrative
costs.  This would save an estimated $27 million annually in
appropriated funds.  We recommended that the Congress amend 38 U.S.C. 
1982 to require that these administrative costs be paid from excess
interest income.  The Congress has not yet initiated action. 
(GAO/HRD-92-42)

In September 1992, we reported that VA's vocational rehabilitation
program did not emphasize finding jobs for veterans, that VA did not
know why most veterans had dropped out of the program, and that
standards for measuring services to veterans needed to be improved. 

We recommended that VA (1) meet legislative requirements related to
finding and maintaining suitable employment for disabled veterans,
(2) work with the Department of Labor to effectively provide job
placement services, (3) determine why veterans were dropping out and
take action to increase the number of veterans completing the
program, and (4) establish a realistic performance measurement
system.  VA agreed with the recommendations and has initiated action. 
(GAO/HRD-92-100)

We recommended that VA use private health care only when the needed
services were not available at VA facilities or veterans' geographic
inaccessibility made it more economical to use private care. 
(GAO/HRD-92-109)

In our report on the quality of care provided by some VA psychiatric
hospitals, we recommended that each hospital director be held
responsible for making certain that quality-of-care problems were
identified and resolved.  We recommended also that VA define the term
"treatment goal," provide guidance on how such goals should be
evaluated, and ensure that program reviews were conducted to evaluate
the attainment of these goals.  (GAO/HRD-92-17)

In our report on variabilities in VA's outpatient care eligibility
and rationing decisions, we recommended that VA develop better
guidance to medical centers so that clinicians might achieve
more-consistent application of statutory eligibility requirements or
propose to the Congress alternative eligibility criteria that
produced greater consistency of eligibility determinations. 
(GAO/HRD-93-106)

In our report on HealthPASS, we recommended that the Secretary of
Health and Human Services (1) require that the Pennsylvania
Department of Public Welfare arrange to share the names of HealthPASS
members with the Women, Infants, and Children's Program and (2)
direct the state of Pennsylvania to include in its contract with the
Healthcare Management Association a requirement to query nationwide
information banks to improve the identification of potentially
problematic physicians in the HealthPASS Program.  (GAO/HRD-93-67)

In our testimony on DOD's managed health care initiatives, we
recommended that DOD adopt a uniform set of health care benefits and
cost-sharing requirements within individual categories of
beneficiaries and implement organization and budgeting systems that
provide managers the appropriate incentives to manage beneficiaries'
care.  We recommended also that, as DOD continued to contract for
health care services, it (1) carefully determine when contracting
would and would not be appropriate, (2) carefully determine the size
of its procurements to ensure sufficient competition, and (3) take
appropriate safeguards to ensure high quality and accessible care so
as to protect beneficiaries and the government against poor
contractor performance.  (GAO/T-HRD-93-21)

In our report on restructuring the VA ambulatory care system, we
recommended that VA restructure its ambulatory care system to improve
timeliness of services by (1) establishing telephone assistance
networks at each facility, (2) allowing veterans to schedule
appointments at general medicine or primary care clinics, (3)
requiring all facilities to develop treatment-monitoring systems that
ensure that all veterans referred to specialty clinics would be
transferred to general medicine or primary care clinics soon after
their conditions were stabilized, and (4) establishing
Department-wide performance goals for timely service delivery. 
(GAO/HRD-94-4)

In our report on the Medical Care Cost Recovery (MCCR) Fund, we
recommended that VA examine medical centers' internal accounting and
administrative controls and initiate appropriate action to ensure
that all medical care cost recovery activities were correctly
identified and charged to the MCCR Fund.  (GAO/HRD-94-2)

Our report on the results of the national survey of VA customer
satisfaction contained recommendations for VA to (1) set long-term
goals to meet customer expectations for processing times and prepare
a plan describing the incremental steps necessary to meet them, (2)
provide applicants realistic estimates about how long it would take
to complete their claims, and (3) develop data on applicants denied
services so that VA could ensure that this segment of its customers
got the best service possible.  (GAO/HEHS-94-179)

In our report on the demand for services to homeless veterans, we
recommended that VA initiate, without delay, the assessments required
under section 107 of Public Law 102-405 and establish a firm date for
completing the assessment and submitting the results to the Senate
and House Committees on Veterans' Affairs.  (GAO/HEHS-94-98)

In our report on improving the monitoring of high-risk patients, we
recommended that VA emphasize to medical center management and staff
the importance of identifying and closely monitoring high-risk
patients with a propensity to leave treatment areas or facilities
without staff knowledge or permission.  We also recommended that VA
require medical centers from which patients had left and were
unaccounted for to disseminate information on these patients to other
facilities and veterans' organizations in the area.  (GAO/HRD-94-27)

In our report on prison inmates' access to health care, we
recommended that BOP be required to (1) prepare a needs assessment of
the medical services its inmate population required and determine
what medical services it could efficiently and effectively provide
in-house, (2) determine the most cost-effective approaches to
providing appropriate health care to current and future inmate
populations, (3) revise its hiring standards for physician assistants
to conform to current community standards of training and
certification, and (4) reemphasize to the wardens of medical referral
centers the importance of taking corrective action on identified
quality assurance problems.  (GAO/HEHS-94-36)

In our report on inappropriate loans made to U.S.  nationals
attending foreign medical schools, we made a number of
recommendations designed to improve federal standards and processes
for assessing foreign medical schools.  We recommended that, once
this was done, federal information on schools' quality be shared with
state medical boards.  Further, any schools failing to provide the
needed information should be disqualified from participating in the
student loan program.  (GAO/HEHS-94-28)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  FEDERAL
      HEALTH PROGRAMS--DIRECT
      DELIVERY
-------------------------------------------------------- Chapter 3:2.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 3:2.3.1

Bureau of Prisons Health Care:  Inmates' Access to Health Care Is
Limited by Lack of Clinical Staff (GAO/HEHS-94-36)

Composite Health Care System:  Outpatient Capability Is Nearly Ready
for Worldwide Deployment (GAO/IMTEC-93-11)

Defense Health Care:  Additional Improvements Needed in CHAMPUS's
Mental Health Program (GAO/HRD-93-34)

Defense Health Care:  CHAMPUS Mental Health Demonstration Project in
Virginia (GAO/HRD-93-53)

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10)

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21)

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24)

Defense Health Care:  Physical Exams and Dental Care Following the
Persian Gulf War (GAO/HRD-93-5)

DOD Health Care:  Further Testing and Evaluation of Case-Managed Home
Health Care Is Needed (GAO/HRD-93-59)

Federal Health Benefits Program:  Stronger Controls Needed to Reduce
Administrative Costs (GAO/GGD-92-37)

Homelessness:  Demand for Services to Homeless Veterans Exceeds VA
Program Capacity (GAO/HEHS-94-98)

Long-Term-Care Case Management:  State Experiences and Implications
for Federal Policy (GAO/HRD-93-52)

Maternal and Child Health:  Block Grant Funds Should Be Distributed
More Equitably (GAO/HRD-92-5)

Medicaid:  HealthPASS:  An Evaluation of a Managed Care Program for
Certain Philadelphia Recipients (GAO/HRD-93-67)

Medical ADP Systems:  Automated Medical Records Hold Promise to
Improve Patient Care (GAO/IMTEC-91-5)

Medical ADP Systems:  Defense's Tools and Methodology for Managing
CHCS Performance Need Strengthening (GAO/AIMD-94-61)

Military Downsizing:  Persons Returning to Civilian Life Need More
Help From DOD (GAO/HEHS-94-39)

Pesticides:  Need to Enhance FDA's Ability to Protect the Public From
Illegal Residues (GAO/RCED-87-7)

Psychiatric Fraud and Abuse:  Increased Scrutiny of Hospital Stays Is
Needed for Federal Health Programs (GAO/HRD-93-92)

Student Loans:  Millions Loaned Inappropriately to U.S.  Nationals at
Foreign Medical Schools (GAO/HEHS-94-28)

VA Benefits:  Law Allows Compensation for Disabilities Unrelated to
Military Service (GAO/HRD-89-60)

VA Health Care:  Actions Needed to Control Major Construction Costs
(GAO/HRD-93-75)

VA Health Care:  Copayment Exemption Procedures Should Be Improved
(GAO/HRD-92-77)

VA Health Care:  Inadequate Controls Over Scarce Medical Specialist
Contracts (GAO/HRD-92-114)

VA Health Care:  Medical Care Cost Recovery Activities Improperly
Funded (GAO/HRD-94-2)

VA Health Care:  Medical Centers Are Not Correcting Identified
Quality Assurance Problems (GAO/HRD-93-20)

VA Health Care:  Modernizing VA's Mail-Service Pharmacies Should Save
Millions of Dollars (GAO/HRD-92-30)

VA Health Care:  Offsetting Long-Term Care Costs by Adopting State
Copayment Practices (GAO/HRD-92-96)

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68)

VA Health Care:  Problems in Implementing Locality Pay for Nurses Not
Fully Addressed (GAO/HRD-93-54)

VA Health Care:  Restructuring Ambulatory Care System Would Improve
Services to Veterans (GAO/HRD-94-4)

VA Health Care:  Role of the Chief of Nursing Service Should Be
Elevated (GAO/HRD-92-74)

VA Health Care:  Telephone Service Should Be More Accessible to
Patients (GAO/HRD-91-110)

VA Health Care:  The Quality of Care Provided by Some VA Psychiatric
Hospitals Is Inadequate (GAO/HRD-92-17)

VA Health Care:  Use of Private Providers Should Be Better Controlled
(GAO/HRD-92-109)

VA Health Care:  VA Medical Centers Need to Improve Monitoring of
High-Risk Patients (GAO/HRD-94-27)

VA Health Care:  VA Plans Will Delay Establishment of Hawaii Medical
Center (GAO/HRD-92-41)

VA Health Care:  Variabilities in Outpatient Care Eligibility and
Rationing Decisions (GAO/HRD-93-106)

VA Health Care:  Verifying Veterans' Reported Income Could Generate
Millions in Copayment Revenues (GAO/HRD-92-159)

VA Life Insurance:  Administrative Costs for Three Programs Should Be
Paid From Excess Funds (GAO/HRD-92-42)

Veterans Benefits:  Acquisition of Information Resources for
Modernization Is Premature (GAO/IMTEC-93-6)

Veterans' Benefits:  Lack of Timeliness, Poor Communication Cause
Customer Dissatisfaction (GAO/HEHS-94-179)

Veterans' Compensation:  Premature Closing of VA Office in the
Philippines Could Be Costly (GAO/HRD-93-96)

Vocational Rehabilitation:  Better VA Management Needed to Help
Disabled Veterans Find Jobs (GAO/HRD-92-100)


   INCOME SECURITY ISSUE AREA
   (BUDGET FUNCTIONS 600, 650, AND
   700)
---------------------------------------------------------- Chapter 3:3

GAO Contact:  Jane L.  Ross, 202/512-7230


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:3.1

Income security programs affect all Americans at some time.  Their
purpose, in part, is to help people become self-sufficient and to
support those unable to support themselves.  The programs (1) provide
cash aid to the elderly, the disabled, and the poor; (2) serve as
conduits for funding in-kind assistance for such needy populations as
the homeless, refugees, runaway youth, and abused children; and (3)
provide oversight for the private pension system.  Income security
expenditures make up about 40 percent of all federal spending. 

Our work provided information and recommendations directed at (1)
determining what the government is doing and what the government
could do to prevent dependency and increase self-sufficiency, (2)
helping to redesign disability programs to better reflect the
changing view of the disabled in society, (3) ensuring adequate
retirement benefits in a changing economy, (4) ensuring adequate home
and community-based long-term care services at a reasonable cost, (5)
ascertaining how government services could be delivered effectively,
and (6) determining the adequacy of government efforts to ensure
efficient spending of public funds. 

For example, our evaluations and analyses of long-term care, pension,
and key welfare reform issues have contributed and are expected to
continue to contribute to the health, welfare, and pension reform
debates.  In addition, our reviews of the Social Security
Administration's (SSA) activities helped the Congress during
deliberations leading to the passage of the Social Security
Independence and Program Improvements Act of 1994 (Public Law
103-296, dated Aug.  15, 1994).  We also assisted in drafting the
Local Partnership Act provisions of the Violent Crime Control and Law
Enforcement Act of 1994 (Public Law 103-322, dated Sept.  13, 1994)
governing the allocation of crime prevention grants to local
governments throughout the country. 

Further, prior reports disclosed serious weaknesses in the Pension
Benefit Guaranty Corporation's (PBGC) premium billing and collection
systems and recommended various corrective measures.  In response,
PBGC changed its collection procedures and collected more than $44
million in additional premiums, penalties, and interest. 

As a result of our continuing work in the use of SSA's death
information, legislation was enacted that will cause states to share
previously restricted information, leading to a savings of $19.5
million. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:3.2


         CHILD SUPPORT ENFORCEMENT
------------------------------------------------------ Chapter 3:3.2.1

In June 1992, we reported that states had done little to help defray
the costs of providing child support enforcement services to clients
who did not receive Aid to Families With Dependent Children (AFDC)
benefits.  With the broad discretion available to them, most states
have implemented minimal-fee policies.  In 1990, about 3.5 percent of
the $644 million in administrative costs for non-AFDC clients was
recovered by the states through fees.  We recommended that the
Congress amend title IV-D of the Social Security Act to require
states to recover more of these costs.  Congressional actions have
not been initiated because the Congress is waiting to discuss and
debate the administration's proposals for welfare and child support
reforms.  (GAO/HRD-92-91)


         FOSTER CARE
------------------------------------------------------ Chapter 3:3.2.2

In August 1992, we reported that child abuse prevention programs had
been shown to be effective.  Although few in number, evaluations of
these programs indicate that they had reduced the incidence of abuse
in high-risk families and the cost of long-range problems associated
with abuse.  While the federal government provides billions of
dollars annually to states for foster care and other assistance for
children who have already been abused, it provides relatively little
funding for prevention.  We recommended that, to give states
incentives to implement and sustain child abuse prevention programs,
the Congress amend title IV-F of the Social Security Act to reimburse
states, at foster care matching rates, for the cost of implementing
prevention programs.  The reimbursements would be provided to states
that demonstrated that the programs, by reducing child abuse and
related foster care placements, were paying for themselves.  The
Congress has taken some action to make limited funds available for
possible use in child abuse prevention but has not specifically
addressed our recommendation.  (GAO/HRD-92-99)


         CHILD CARE
------------------------------------------------------ Chapter 3:3.2.3

In November 1992, we reported that states were struggling to enforce
their child care standards and promote quality in various child care
settings.  While legislation establishing the Child Care and
Development Block Grant (CCDBG) had been recently enacted and
provided some money to states for quality improvement activities,
including enforcement, Department of Health and Human Services (HHS)
regulations further restricted the amount to be used for these
activities.  Given this, state officials were not optimistic about
CCDBG's impact on their quality improvement and enforcement efforts,
especially if state budget constraints continued and heavy caseloads
became heavier as new providers, paid with CCDBG funds, entered the
market.  We recommended that HHS assess whether the quantity of child
care services under CCDBG would exceed the states' capacity to ensure
that those services met an acceptable level of care and, if so,
modify its regulations restricting the use of CCDBG's quality
improvement money.  In May 1994, HHS regulations proposed for CCDBG's
that allowed states greater flexibility in the amount of money they
used for quality improvement activities.  Final comments were due in
July 1994.  As of November 1994, HHS had not published its final
regulations.  (GAO/HRD-93-13)


         RETIREES' BENEFITS
------------------------------------------------------ Chapter 3:3.2.4

We evaluated the readability of forms used by retirees who had chosen
not to select survivor benefits for their spouses.  In December 1989
and in December 1991, we recommended that the Internal Revenue
Service (IRS) develop model language to be used by pension plans to
clarify the implications of options available to retirees and their
spouses.  Once implemented, this recommendation could lead to an
increase in the number of elderly widowed spouses receiving income
from the private pension system.  In response to our recommendations,
IRS published an announcement for public notice and comment on a
proposal to develop model language.  (GAO/HRD-92-31)


         SOCIAL SECURITY
------------------------------------------------------ Chapter 3:3.2.5

In March 1987, we reported on management problems that SSA must
address to ensure high-quality services.  Our report contained
numerous recommendations.  While some are closed, those still open
address (1) improving the long-term operational plan, (2) reexamining
resources and priorities of existing automatic data-processing
systems, (3) improving various aspects of the management information
system, and (4) establishing performance standards and measurements. 
(GAO/HRD-87-39)

In July 1991, we provided information to the Congress on debt
management practices at SSA, the Railroad Retirement Board, the
Office of Personnel Management, and the Department of Veterans
Affairs (VA).  We recommended that SSA (1) assign central
responsibility for debt management to the Deputy Commissioner for
Finance, Assessment, and Management and (2) accelerate completion of
the management information system needed to support effective debt
management.  We also recommended that the Director, Office of
Management and Budget, direct the Secretary of Veterans Affairs to
assess interest and administrative costs on overpayments, as required
by the Veterans Rehabilitation and Education Amendments of 1980. 
(GAO/HRD-91-46)

In September 1992, we reported on SSA and IRS efforts to reconcile
billions of dollars in differences in the amounts of social security
wages separately reported to the agencies.  These differences are
important because they affect the funding of the social security
trust funds.  We advised the Congress, to resolve questions about how
much revenue should be credited to the trust funds each year, to
amend the Social Security Act to credit revenues on the basis of
social security taxes collected.  The Congress has yet to act on this
recommendation.  (GAO/HRD-92-81)

In May 1994, we estimated that about 250,000 drug addicts and
alcoholics were receiving disability payments under SSA's Disability
Insurance (DI) and Supplemental Security Income (SSI) programs at an
annual cost of about $1.4 billion.  We also found that while certain
addicts receiving SSI benefits (about 80,000) were required by law to
obtain treatment and have representative payees as a condition of
receiving benefits, many other addicts were receiving SSI benefits
without meeting such conditions.  Similarly, none of the addicts
receiving DI benefits were required by law to attend treatment or
have representative payees.  We made a number of recommendations to
the Congress and SSA to strengthen controls over these payments.  The
Congress enacted legislation in August 1994 that fully addressed our
recommendations.  SSA has initiated plans that respond to our report
and the August 1994 legislation.  (GAO/HEHS-94-128)

In June 1994, we also reported that SSA was mandated by law to
periodically review the continued eligibility of DI beneficiaries. 
But, because of the lack of funding, SSA has not fully carried out
this mandate and many ineligible beneficiaries continue to receive
benefits at a significant cost to the DI trust fund.  For example,
according to SSA, because it did not perform all required continuing
disability reviews during fiscal years 1990-1993, the trust fund will
incur extra costs of $1.4 billion through fiscal year 1997.  The lack
of funding has been exacerbated because disability claims have
significantly increased in the 1990s.  We made several
recommendations to enhance the review process.  SSA is taking
initiatives to implement our recommendations.  (GAO/HEHS-94-118)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  INCOME
      SECURITY
-------------------------------------------------------- Chapter 3:3.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 3:3.3.1

Board and Care Homes:  Elderly at Risk From Mishandled Medications
(GAO/HRD-92-45)

Child Abuse:  Prevention Programs Need Greater Emphasis
(GAO/HRD-92-99)

Child Care:  States Face Difficulties Enforcing Standards and
Promoting Quality (GAO/HRD-93-13)

Child Support Enforcement:  Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91)

Debt Management:  More Aggressive Actions Needed to Reduce Billions
in Overpayments (GAO/HRD-91-46)

Employee Benefits:  Improved Plan Reporting and CPA Audits Can
Increase Protection Under ERISA (GAO/AFMD-92-14)

Employee Benefits:  States Need Labor's Help Regulating Multiple
Employer Welfare Arrangements (GAO/HRD-92-40)

Families on Welfare:  Focus on Teenage Mothers Could Enhance Welfare
Reform Efforts (GAO/HEHS-94-112)

Financial Audit:  Department of Veterans Affairs Financial Statements
for Fiscal Years 1989 and 1988 (GAO/AFMD-91-6)

Financial Audit:  Pension Benefit Guaranty Corporation's 1993 and
1992 Financial Statements (GAO/AIMD-94-109)

Financial Audit:  System and Control Problems Further Weaken the
Pension Benefit Guaranty Fund (GAO/AFMD-92-1)

Financial Audit:  Veterans Administration's Financial Statements for
Fiscal Years 1987 and 1986 (GAO/AFMD-89-23)

Foreign Farm Workers in U.S.:  Department of Labor Action Needed to
Protect Florida Sugar Cane Workers (GAO/HRD-92-95)

Foster Care:  Federal Policy on Title IV-E Share of Training Costs
(GAO/HRD-94-7)

Homelessness:  Access to McKinney Act Programs Improved but Better
Oversight Needed (GAO/RCED-91-29)

Homelessness:  Action Needed to Make Federal Surplus Property Program
More Effective (GAO/RCED-91-33)

Homelessness:  Demand for Services to Homeless Veterans Exceeds VA
Program Capacity (GAO/HEHS-94-98)

Homelessness:  Federal Personal Property Donations Provide Limited
Benefit to the Homeless (GAO/RCED-91-108)

Housing Programs:  VA Can Reduce Its Guaranteed Home Loan Foreclosure
Costs (GAO/RCED-89-58)

Immigration Reform:  Verifying the Status of Aliens Applying for
Federal Benefits (GAO/HRD-88-7)

Military Downsizing:  Persons Returning to Civilian Life Need More
Help from DOD (GAO/HEHS-94-39)

The New Earned Income Credit Form Is Complex and May Not Be Needed
(GAO/T-GGD-91-68)

Older Americans Act:  Funding Formula Could Better Reflect State
Needs (GAO/HEHS-94-41)

Older Americans Act:  More Federal Action Needed on Public/Private
Elder Care Partnerships (GAO/HRD-92-94)

Older Americans Act:  Title III Funds Not Distributed According to
Statute (GAO/HEHS-94-37)

Pension Plans:  Stronger Labor ERISA Enforcement Should Better
Protect Plan Participants (GAO/HEHS-94-157)

Private Pensions:  Protections for Retirees' Insurance Annuities Can
Be Strengthened (GAO/HRD-93-29)

Private Pensions:  Spousal Consent Forms Hard to Read and Lack
Important Information (GAO/HRD-90-20)

Quality Assurance Independence (GAO/HEHS-94-151R)

Rental Housing:  Housing Vouchers Cost More Than Certificates But
Offer Added Benefits (GAO/RCED-89-20)

Social Security Administration:  Stable Leadership and Better
Management Needed To Improve Effectiveness (GAO/HRD-87-39)

Social Security Disability:  SSA Needs to Improve Continuing
Disability Review Program (GAO/HRD-93-109)

Social Security Disability:  SSA Quality Assurance Improvements Can
Produce More Accurate Payments (GAO/HEHS-94-107)

Social Security:  Increasing Number of Disability Claims and
Deteriorating Service (GAO/HRD-94-11)

Social Security:  IRS Tax Identity Data Can Help Improve SSA Earnings
Records (GAO/HRD-93-42)

Social Security:  Major Changes Needed for Disability Benefits for
Addicts (GAO/HEHS-94-128)

Social Security:  Measure of Telephone Service Accuracy Can Be
Improved (GAO/HRD-91-69)

Social Security:  Most Social Security Death Information Accurate But
Improvements Possible (GAO/HEHS-94-211)

Social Security:  Need for Better Coordination of Food Stamp Services
for Social Security Clients (GAO/HRD-92-92)

Social Security:  New Continuing Disability Review Process Could Be
Enhanced (GAO/HEHS-94-118)

Social Security:  Racial Difference in Disability Decisions Warrants
Further Investigation (GAO/HRD-92-56)

Social Security:  Reconciliation Improved SSA Earnings Records, But
Efforts Were Incomplete (GAO/HRD-92-81)

Social Security:  Reporting and Processing of Death Information
Should Be Improved (GAO/HRD-92-88)

Social Security:  Sustained Effort Needed to Improve Management and
Prepare for the Future (GAO/HRD-94-22)

Social Security:  Trust Funds Can Be More Accurately Funded
(GAO/HEHS-94-48)

Urban Poor:  Tenant Income Misreporting Deprives Other Families of
HUD-Subsidized Housing (GAO/HRD-92-60)

VA Benefits:  Law Allows Compensation for Disabilities Unrelated to
Military Service (GAO/HRD-89-60)

VA Life Insurance:  Administrative Costs for Three Programs Should Be
Paid From Excess Funds (GAO/HRD-92-42)

Veterans' Compensation:  Premature Closing of VA Office in the
Philippines Could Be Costly (GAO/HRD-93-96)

Vocational Rehabilitation:  Better VA Management Needed to Help
Disabled Veterans Find Jobs (GAO/HRD-92-100)

Vocational Rehabilitation:  VA Needs to Emphasize Serving Veterans
With Serious Employment Handicaps (GAO/HRD-92-133)

Welfare Benefits:  States Need Social Security's Death Data to Avoid
Payment Error or Fraud (GAO/HRD-91-73)

Welfare Eligibility:  Programs Treat Indian Tribal Trust Fund
Payments Inconsistently (GAO/HRD-88-38)

Welfare to Work:  JOBS Participation Rate Data Unreliable for
Assessing States' Performance (GAO/HRD-93-73)


   MEDICARE AND MEDICAID ISSUE
   AREA (BUDGET FUNCTION 570)
---------------------------------------------------------- Chapter 3:4

GAO Contact:  Sarah F.  Jaggar, 202/512-7119


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:4.1

As health care financier and insurer, the federal government serves
over 35 million elderly and disabled under Medicare, an estimated 36
million poor under Medicaid, and 9 million active and retired federal
employees and their families under the Federal Employees Health
Benefits Program.  The government's primary programs for financing
health care, Medicare and Medicaid, have a federal spending total
estimated at over $255 billion in fiscal year 1995; an additional $73
billion in state and local funds is expected to be spent on Medicaid. 

Our primary objective in reviewing these programs is to find ways to
reduce costs without adversely affecting beneficiary access to
quality care.  Other important objectives are to (1) assess the
processes used to control and identify fraud, abuse, and
mismanagement in the programs; (2) evaluate quality-of-care assurance
systems; and (3) review issues related to beneficiary access to care. 

Throughout the 1980s, the Congress looked to Medicare for deficit
reduction opportunities and billions of dollars in monetary savings
were achieved.  Medicaid became a means of expanding health care
services for those too poor to obtain them, particularly pregnant
women and children.  But the 1990s are presenting new challenges to
these programs and health care in general.  Health care costs have
skyrocketed, and the nation's uninsured and underinsured populations
continue to grow.  New approaches for delivering health care services
to millions of Americans are being tried.  Our work continues to
support many of the Medicare and Medicaid program initiatives and
legislative changes undertaken by the Congress. 


         WASTE AND ABUSE
------------------------------------------------------ Chapter 3:4.1.1

In the past year, we issued several reports discussing limitations in
Medicare's efforts to protect program dollars from waste and abuse. 
The Health Care Financing Administration (HCFA), the agency that
oversees Medicare, has not compiled sufficient information on its
contractors' payment safeguards to systematically identify where
important controls may be needed.  In addition, the agency has not
always provided adequate guidance to contractors on such matters as
the methods they should use to detect potentially fraudulent,
erroneous, or inappropriate claims. 

We recommended various actions, to ensure that HCFA contractors
improved their reviews of paid claims, that would require HCFA to
assume a more proactive role in managing the program.  These included
HCFA's (1) expanding guidance and technical assistance for
contractors' development of data analysis methods; (2) addressing
longstanding legal and administrative problems that constrain
contractors' authority to act against abusive providers; and (3)
establishing better measures of contractor performance in the area of
program safeguards. 


         MONETARY BENEFITS
------------------------------------------------------ Chapter 3:4.1.2

We continued to monitor Medicare contractor efforts to recover
duplicate payments from providers and private insurers.  Our previous
work identified ways that HCFA, through its Medicare contractors,
could recover several hundred million dollars in duplicate payments. 
So far, hospital and other providers have refunded over $650 million
in outstanding credit balances. 

Medicare contractors were continuing to recover payments for services
that had been determined to be the responsibility of private
insurers.  Backlogs of duplicate payments were reduced from over $1
billion to about $78 million.  HCFA estimated that about $300 million
had been recovered from private health insurers.  Our most recent
report and testimony commented on legislation requiring HCFA to
establish a data bank containing information on workers, spouses, and
dependents covered by employer health groups.  Our work showed that
the data bank would not measurably strengthen the existing process
for ensuring that private health insurers paid before Medicare and
Medicaid.  On the basis of our work, HCFA proposed an 18-month delay
in implementation of the data bank requirements. 


         IMPACT ON PROGRAM
         BENEFICIARIES
------------------------------------------------------ Chapter 3:4.1.3

We continued to monitor programs directly affecting Medicare and
Medicaid beneficiaries.  One report stated that an estimated 1.8
million senior citizens were not enrolled in the Qualified Medicare
Beneficiary (QMB) program, which allows Medicaid to pay premiums,
deductibles, and coinsurance for certain Medicare beneficiaries. 
Many reasons were cited for the program's failure to enroll eligible
Medicare beneficiaries, including a perceived welfare stigma attached
to the program, a complicated application process, and the belief
that the benefit was not worth much in monetary terms.  Also, a small
percentage of QMBs and regular Medicaid beneficiaries do not qualify
for free Medicare inpatient services--but could if states paid their
premiums.  We recommended that the Congress authorize a demonstration
project that would permit the Social Security Administration to
enroll Medicare-eligible beneficiaries in the program and require
automatic buy-in for all QMB and regular Medicaid beneficiaries. 

In another report, we estimated that about 3 million elderly Medicare
beneficiaries paid about $1.8 billion in 1991 for supplemental
insurance policies (Medigap) that probably involved duplicate
coverage.  Many of these people had coverage through
employer-sponsored plans and did not need to purchase Medigap
policies.  Although retirees with employer-sponsored coverage do not,
as a rule, need to purchase Medigap policies, employer-sponsored
insurance is not secure.  Many employers offering retiree health
plans are increasing cost-sharing, tightening eligibility
requirements, or possibly terminating plans.  While Medigap insurance
may be appropriate in these circumstances, federal requirements
provide, in effect, a one-time "open season" for people to purchase
Medigap insurance, regardless of health status.  We recommended two
options to alleviate this problem--(1) that the Congress change the
federal Medigap law to guarantee an open season for retirees whose
employer-sponsored plans had been terminated or substantially changed
or (2) that the Congress require a periodic open season for all
Medicare beneficiaries. 

A recent report on the Medicaid program showed that many low-income
persons had never completed the application process mainly because
applicants had failed to provide the needed documentation to verify
their eligibility or had not appeared for eligibility interviews. 
Because hospitals desperately need a payment source to cover the care
of uninsured patients, many states rely on outside help to enroll
patients in Medicaid.  Lessons learned from these experiences could
help in dealing with the increased administrative burdens of expanded
coverage under future health care reform. 


         FINANCIAL AND MANAGEMENT
         MATTERS
------------------------------------------------------ Chapter 3:4.1.4

Work in the Medicaid program showed that Michigan, Texas, and
Tennessee had used several financing approaches to maximize federal
Medicaid contributions without effectively committing their share of
matching funds.  In some cases, payments to health care facilities
exceeded the cost of the services provided.  Under these approaches,
health care facilities that received increased Medicaid payments from
the states, in turn, paid the states almost as much as they had
received.  Consequently, the states realized increased revenue that
was used to reduce their state Medicaid contributions, fund other
health care needs, and supplement general revenue funding.  We
recommended that the Congress develop legislation to minimize the
likelihood that states could develop illusory financing mechanisms
whereby providers returned Medicaid payments to the states, thus
effectively reducing the states' share of Medicaid funding. 

We also issued a report on HCFA's contracting authority for
processing Medicare claims.  Such contracts are awarded without
competition, renewed annually, and funded on a cost-reimbursement
basis.  Periodically, the Congress has directed HCFA to experiment
with other types of contracts to help reduce administrative costs. 
The Congress is considering a legislative proposal requiring HCFA to
study the feasibility of making the contracting process more
competitive.  Although HCFA contracts with the BlueCross and
BlueShield Association for the administration of 41 Medicare
contractors, it has not evaluated the Association's performance since
1989.  We therefore recommended that HCFA develop criteria and
evaluate the Association's role as a prime contractor to ensure that
Medicare contractors abide by all contract provisions. 

In another report, we examined HCFA's methodology for setting payment
rates to health maintenance organizations (HMOs) under the Medicare
Risk Contract Program, a program expected to allow the government to
share in managed-care-generated cost savings.  Currently, rates are
set on the basis of the average local fee-for-service costs for
Medicare beneficiaries.  Because beneficiaries enrolling in HMOs
under the Risk Contract Program tend to be healthier on average, even
rates paid to HMOs that are risk adjusted on the basis of age, sex,
and institutional status tend to exceed the cost of care by
substantial amounts.  Consequently, program savings have not been
realized.  We therefore recommended that the HCFA Administrator take
action to identify better risk adjustment methods and explore payment
methods that did not rely on fee-for-service rates. 

Other reports issued during the year addressed (1) federal financing
of graduate medical education of primary care and nonprimary care
physicians, (2) federal and state antitrust actions concerning the
health care industry and antitrust enforcement under Maryland's
hospital all payer system, (3) changes in best prices for outpatient
drugs purchased by HMOs and hospitals, and (4) financial problems and
management weaknesses of BlueCross and BlueShield plans. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:4.2


         EXCESSIVE MEDICARE
         PAYMENTS FOR COSTLY
         TECHNOLOGY
------------------------------------------------------ Chapter 3:4.2.1

We recommended that HCFA (1) survey the technical component costs
incurred by facilities providing radiology services and revise the
fee schedule to more accurately reflect the costs incurred and (2)
periodically adjust technical component payments to reflect changing
costs, with annual payment reviews for procedures using high-cost
technologies.  This would save Medicare a significant amount of money
and, even though costs per scan would decrease, providers would still
realize profits because there would be fewer machines and utilization
would rise.  (GAO/HRD-92-59)


         SPECIAL PAYMENTS TO
         TEACHING HOSPITALS
------------------------------------------------------ Chapter 3:4.2.2

We reported that the extra payments to Medicare teaching hospitals
were too high and recommended that the Congress reduce the percentage
of add-on payments that teaching hospitals received.  About $1
billion could be saved annually.  (GAO/HRD-89-33)


         MEDICAID ENROLLMENT IN
         THE DISTRICT OF COLUMBIA
------------------------------------------------------ Chapter 3:4.2.3

We recommended that the Mayor of the District of Columbia establish a
demonstration or a pilot project focusing on the enrollment of
Medicaid-eligible persons at hospitals.  The project could (1)
identify and describe the eligible patients having the most
difficulty getting enrolled, (2) identify their assistance needs, and
(3) test methods of providing these patients with needed assistance
through outstationing of eligibility workers and other means. 
(GAO/HRD-93-28)


         FINANCING STATE MEDICAID
         PROGRAMS
------------------------------------------------------ Chapter 3:4.2.4

We recommended that the Congress enact legislation to minimize the
likelihood that states could develop illusory financing mechanisms
whereby providers returned Medicaid payments to the states, thus
effectively reducing the states' share of Medicaid funding.  The
legislation should prohibit Medicaid payments that exceed costs to
any government-owned facility.  (GAO/HEHS-94-133)


         HEALTH INSURANCE FOR THE
         ELDERLY
------------------------------------------------------ Chapter 3:4.2.5

One-third of retirees get supplemental insurance from their former
employers.  If a Medicare beneficiary's plan is subsequently modified
or discontinued by the employer and the person desires to obtain a
different supplemental policy, the beneficiary will not be eligible
for the 6-month open enrollment period provided for persons who are
newly enrolled in Medicare part B.  Thus, obtaining an alternative
Medigap policy may not be possible.  We recommended that, for this
reason, the Congress amend the law to provide a mechanism for
retirees to obtain Medigap insurance when these circumstances
occurred.  (GAO/HEHS-94-185)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  MEDICARE
      AND MEDICAID
-------------------------------------------------------- Chapter 3:4.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 3:4.3.1

District of Columbia:  Barriers to Medicaid Enrollment Contribute to
Hospital Uncompensated Care (GAO/HRD-93-28)

Health Insurance for the Elderly:  Owning Duplicate Policies Is
Costly and Unnecessary (GAO/HEHS-94-185)

Health Reform:  Purchasing Cooperatives Have an Increasing Role in
Providing Access to Insurance (GAO/T-HEHS-94-196)

Long-Term-Care Case Management:  State Experiences and Implications
for Federal Policy (GAO/HRD-93-52)

Medicaid Drug Fraud:  Federal Leadership Needed to Reduce Program
Vulnerabilities (GAO/HRD-93-118)

Medicaid:  Ensuring that Noncustodial Parents Provide Health
Insurance Can Save Costs (GAO/HRD-92-80)

Medicaid:  HealthPASS:  An Evaluation of a Managed Care Program for
Certain Philadelphia Recipients (GAO/HRD-93-67)

Medicaid:  States Use Illusory Approaches to Shift Program Costs to
Federal Government (GAO/HEHS-94-133)

Medicare and Medicaid:  Many Eligible People Not Enrolled in
Qualified Medicare Beneficiary Program (GAO/HEHS-94-52)

Medicare:  Changes to HMO Rate Setting Method Are Needed to Reduce
Program Costs (GAO/HEHS-94-119)

Medicare:  Excessive Payments Support the Proliferation of Costly
Technology (GAO/HRD-92-59)

Medicare:  Experience Shows Ways to Improve Oversight of Health
Maintenance Organizations (GAO/HRD-88-73)

Medicare:  Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67)

Medicare:  Greater Investment in Claims Review Would Save Millions
(GAO/HEHS-94-35)

Medicare:  HCFA Should Improve Internal Controls Over Part B Advance
Payments (GAO/HRD-91-81)

Medicare:  HCFA's Contracting Authority for Processing Medicare
Claims (GAO/HEHS-94-171)

Medicare:  Inadequate Review of Claims Payments Limits Ability to
Control Spending (GAO/HEHS-94-42)

Medicare:  Indirect Medicare Education Payments Are Too High
(GAO/HRD-89-33)

Medicare/Medicaid:  Data Bank Unlikely to Increase Collections From
Other Insurers (GAO/HEHS-94-147)

Medicare:  New Claims Processing System Benefits and Acquisition
Risks (GAO/HEHS/AIMD-94-79)

Medicare:  One Scheme Illustrates Vulnerabilities to Fraud
(GAO/HRD-92-76)

Medicare:  Over $1 Billion Should Be Recovered From Primary Health
Insurers (GAO/HRD-92-52)

Medicare:  Payments for Clinical Laboratory Test Services Are Too
High (GAO/HRD-91-59)

Medicare Physician Payment:  Geographic Adjusters Appropriate But
Could Be Improved With New Data (GAO/HRD-93-93)

Medicare:  PRO Review Does Not Assure Quality of Care Provided by
Risk HMOs (GAO/HRD-91-48)

Medicare:  Variations in Payments to Anesthesiologists Linked to
Anesthesia Time (GAO/HRD-91-43)

Screening Mammography:  Higher Medicare Payments Could Increase Costs
Without Increasing Use (GAO/HRD-93-50)


   NATIONAL AND PUBLIC HEALTH
   ISSUE AREA (BUDGET FUNCTION
   550)
---------------------------------------------------------- Chapter 3:5

GAO Contact:  Sarah F.  Jaggar, 202/512-7119


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:5.1

Among the federal government's functions in supporting public health
are research funds, support for educating and training health
professionals, and surveillance of contagious diseases; overseeing
food and drugs; providing block grants to states for mental health
services, drug and alcohol programs, and maternal and child health
services; and providing health care services to underserved areas and
population groups. 

The Public Health Service, through its numerous agencies, carries out
most of these tasks. 


         HEALTH CARE REFORM
------------------------------------------------------ Chapter 3:5.1.1

Our work has made a significant contribution to the debate on health
care reform as it relates to the organization and the availability of
private health insurance.  We issued reports examining the experience
of existing health-insurance-purchasing alliances, a key component of
managed competition reform proposals.  We also examined difficulties
related to establishing geographic boundaries for proposed alliance
regions.  Our review of four major health reform bills indicated the
potential for administrative cost savings as many current insurance
functions would have been transferred to purchasing alliances or a
public single payer.  We also examined the rapid growth of managed
health care plans among private employers and noted the difficulties
in attributing cost savings to these plans. 

Our health care reform work also highlighted issues of access to
care.  By examining health care in Hawaii, we were able to discuss
the implications for national reform of mandating employers to
provide health coverage.  We also questioned whether federal funds
for health professionals' education under titles VII and VIII had
achieved improved access to health care among underserved
populations.  Our interim report on school-linked health services
assisted the Senate Committee on Labor and Human Resources in
unanimously adopting a section supporting school-based clinics in its
markup of a major health reform bill. 

We have also continued to support congressional oversight of the
Public Health Service.  Our review of the activities of the eight
Public Health Service agencies did not find areas of duplication and
supported the appropriateness of the Center for Disease Control's
activities in chronic diseases; intentional injury; and funding of
services, such as cancer screening.  We also examined the Food and
Drug Administration's regulation of dietary supplements. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:5.2

In our July 1994 report, we found that, over the past decade, the
supply of nearly all health professions had increased faster than the
population.  For most health professions, however, data are not
available to demonstrate whether this increase has meant more access
to care for people in rural and underserved areas.  Data are
inconclusive to support Department of Health and Human Services'
premise that further increases in minority recruitment will improve
access to health care for underserved populations.  While almost $2
billion has been provided for 30 title VII and title VIII programs in
the last 10 years, evaluations have not shown that these programs
have significantly effected changes in the supply distribution and in
minority representation of health professionals. 

We recommended that the Congress or the Secretary of Health and Human
Services establish (1) specific national goals for title VII and
title VIII programs, (2) common outcome measures and reporting
requirements for each goal, (3) restrictions limiting the use of
funds to activities whose results can be measured against these goals
and reported, and (4) criteria for allocating funding among
professions on the basis of relative need in meeting national goals. 
(GAO/HEHS-94-164)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  NATIONAL
      AND PUBLIC HEALTH
-------------------------------------------------------- Chapter 3:5.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 3:5.3.1

Access to Health Care:  States Respond to Growing Crisis
(GAO/HRD-92-70)

ADMS Block Grant:  Drug Treatment Services Could Be Improved by New
Accountability Program (GAO/HRD-92-27)

Biotechnology:  Managing the Risks of Field Testing Genetically
Engineered Organisms (GAO/RCED-88-27)

Board and Care Homes:  Elderly at Risk From Mishandled Medications
(GAO/HRD-92-45)

Breastfeeding:  WIC's Efforts to Promote Breastfeeding Have Increased
(GAO/HRD-94-13)

Child Abuse:  Prevention Programs Need Greater Emphasis
(GAO/HRD-92-99)

Childhood Immunization:  Opportunities to Improve Immunization Rates
at Lower Cost (GAO/HRD-93-41)

Drug Abuse Research:  Federal Funding and Future Needs
(GAO/PEMD-92-5)

Early Intervention:  Federal Investments Like WIC Can Produce Savings
(GAO/HRD-92-18)

FDA Regulations:  Sustained Management Attention Needed to Improve
Timely Issuance (GAO/HRD-92-35)

FDA User Fees:  Current Measures Not Sufficient for Evaluating Effect
on Public Health (GAO/PEMD-94-26)

Federal Formula Programs:  Outdated Population Data Used to Allocate
Most Funds (GAO/HRD-90-145)

Food Safety and Quality:  FDA Strategy Needed to Address Animal Drug
Residues in Milk (GAO/RCED-92-209)

Food Safety and Quality:  Uniform, Risk-based Inspection System
Needed to Ensure Safe Food Supply (GAO/RCED-92-152)

Food Safety:  Building a Scientific, Risk-Based Meat and Poultry
Inspection System (GAO/T-RCED-93-22)

Health Information Systems:  National Practitioner Data Bank
Continues to Experience Problems (GAO/IMTEC-93-1)

Health Professions Education:  Role of Title VII/VIII Programs in
Improving Access to Care Is Unclear (GAO/HEHS-94-164)

Long-Term Care Case Management:  State Experiences and Implications
for Federal Policy (GAO/HRD-93-52)

Long-Term Care Insurance:  Risks to Consumers Should Be Reduced
(GAO/HRD-92-14)

Maternal and Child Health:  Block Grant Funds Should Be Distributed
More Equitably (GAO/HRD-92-5)

Medical Technology:  For Some Cardiac Pacemaker Leads, the Public
Health Risks Are Still High (GAO/PEMD-92-20)

Medical Waste Regulation:  Health and Environmental Risks Need to Be
Fully Assessed (GAO/RCED-90-86)

Methadone Maintenance:  Some Treatment Programs Are Not Effective;
Greater Federal Oversight Needed (GAO/HRD-90-104)

Occupational Safety and Health:  OSHA Action Needed to Improve
Compliance With Hazard Communication Standard (GAO/HRD-92-8)

Pesticides:  Need to Enhance FDA's Ability to Protect the Public From
Illegal Residues (GAO/RCED-87-7)

Public Health Service:  Evaluation Set-Aside Has Not Realized Its
Potential to Inform the Congress (GAO/PEMD-93-13)

Public Housing:  Housing Persons With Mental Disabilities With the
Elderly (GAO/RCED-92-81)

Residential Care:  Some High-Risk Youth Benefit, But More Study
Needed (GAO/HEHS-94-56)

State Health Care Reform:  Federal Requirements Influence State
Reforms (GAO/T-HRD-92-55)

Truck Transport:  Little Is Known About Hauling Garbage and Food in
the Same Vehicles (GAO/RCED-90-161)


IMPROVING JUSTICE AND GENERAL
GOVERNMENT PROGRAMS
============================================================ Chapter 4


   ADMINISTRATION OF JUSTICE ISSUE
   AREA (BUDGET FUNCTION 750)
---------------------------------------------------------- Chapter 4:1

GAO Contact:  Norman Rabkin, 202/512-8777


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:1.1

The administration of justice issue area encompasses a wide range of
federal activities, including (1) civil and criminal law enforcement,
in such areas as money laundering, firearms licensing, and drug
abuse; (2) litigative and judicial activities, such as sentencing
reform; (3) correctional activities; and (4) immigration control and
criminal justice assistance. 


         FEDERAL LAW ENFORCEMENT
         ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.1

The National Crime Information Center (NCIC) is the nation's most
extensive criminal justice information system and is maintained by
the Federal Bureau of Investigation (FBI).  We reported that NCIC was
vulnerable to insider misuse by persons with authorized access
because of (1) the system's inherent risk and (2) the control
limitations in some state criminal justice information systems
through which users access NCIC.  We recommended that the FBI and the
NCIC Advisory Policy Board reevaluate the security specifications for
the system and, as a minimum, amend the policy to endorse and
encourage state and local law enforcement agencies that use NCIC to
enhance their security features.  In response to our recommendation,
the FBI and the Board issued correspondence to state and local NCIC
users, emphasizing the continual need to enhance security in the area
of user accountability. 

In regard to federal efforts to combat money laundering, we reported
and subsequently testified that 30 to 40 percent of the Currency
Transaction Reports (IRS Form 4789) filed by financial institutions
reflected routine deposit activity by large, well-established retail
businesses and were of little or no value to law enforcement. 
Because of the large volume of reports filed annually--almost 9
million in calendar year 1992--eliminating routine reports would not
only reduce government and industry costs but also enhance the
usefulness of the reports filed by better ensuring they are more
relevant to law enforcement purposes.  The information we developed
was incorporated in the Money Laundering Suppression Act of 1994,
which contains several provisions to substantially reduce the number
of reports filed. 

We also reported on an emerging threat to antimoney-laundering
efforts--currency smuggling.  Although the exact amount cannot be
determined, law enforcement authorities estimate that an extensive
amount of U.S.  currency, perhaps as much as several billion dollars,
is taken out of the country each year without being reported.  Once
the funds are deposited in a foreign financial institution, they are
much more difficult to trace and can be spent or transferred back to
the United States with less risk of exposure.  During our review, the
Customs Service increased its oversight of and emphasis on efforts to
interdict unreported currency leaving the country. 

In the area of drug control, we reviewed selected aspects of the
Office of National Drug Control Policy (ONDCP) and concluded that
there was a continuing need for a central planning agency to provide
leadership and coordination for the nation's drug control efforts. 
We also found, however, that ONDCP lacked adequate performance
indicators and other information to evaluate which components of the
strategies were working, which were not, or how any particular
component directly contributed to the overall goal of reducing drug
use.  We recommended that the Congress reauthorize ONDCP for an
additional finite period of time and direct ONDCP to develop
additional measures to (1) assess progress in reducing drug use and
(2) evaluate the contributions made by major components of antidrug
efforts. 

The Congress acted upon our recommendations with legislation
reauthorizing ONDCP until September 30, 1997, and requiring that each
year's national drug control strategy include an evaluation of the
effectiveness of federal drug control efforts during the preceding
year. 


         FEDERAL LITIGATIVE AND
         JUDICIAL ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.2

As the federal judiciary has expanded, its need for sophisticated
information management systems has also grown.  During fiscal years
1990 through 1993, the judiciary spent more that $400 million on
automation.  Our testimony on the Judiciary Automation Fund pointed
out that the judiciary's long-range automation plan was not linked to
a strategic plan that provided a clear vision of the judiciary's
mission, goals, and objectives and identified several key areas of
needed improvement. 

We completed a comprehensive, nationwide review of the federal
government's Judicial Security Program, which should result in major
improvements in the management of the program by the three
responsible agencies--the Administrative Office of the U.S.  Courts,
the General Services Administration, and the U.S.  Marshals Service. 
We found that although the environment in which the federal judiciary
operated was becoming increasingly more dangerous, key aspects of the
comprehensive on-site Judicial Security Program recommended in 1982
by the Attorney General's Task Force on Court Security had not been
implemented.  In addition, off-site security was not being
systematically addressed as part of the comprehensive program.  We
made a number of recommendations to the three agencies designed to
ensure that the comprehensive risk-based security program envisioned
by the 1982 task force and a 1987 memorandum of understanding is
implemented fully and consistently in all judicial districts and that
off-site security risks and needs are systematically assessed. 


         FEDERAL CORRECTIONAL
         ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.3

Prison incarceration is not the only sanction available to punish
those who violate federal law.  Intermediate sanctions are more
severe than simple probation but less severe than a prison sentence. 
Examples of intermediate sanctions include home confinement and boot
camps.  Our report on federal intermediate sanctions provided the
Congress with detailed cost information for each type of federal
criminal sanction available, the eligibility criteria for each
sanction, how many of those eligible received which type of sanction,
and the cost of and limitations on expanding the use of each
sanction. 


         ASSET FORFEITURE
------------------------------------------------------ Chapter 4:1.1.4

Our report calling for improved guidance for use of forfeited assets
recommended that the Departments of Justice and the Treasury develop
mutually agreeable guidelines to ensure that assets shared with state
and local law enforcement agencies are used in accordance with
program goals.  In addition, we recommended that both agencies
jointly develop policies and procedures for federal oversight. 
Justice and Treasury have since revised their asset-sharing
guidelines to ensure that shared assets are used properly.  The
guidelines also include an annual audit and certification requirement
for state and local agencies that receive sharing proceeds. 


         CUSTOMS SERVICE
------------------------------------------------------ Chapter 4:1.1.5

In the area of user fees, we recommended that Customs, the Corps of
Engineers, and the Census Bureau be permitted reimbursement for the
costs associated with collecting the Harbor Maintenance Fee and that
the agencies provide a justification of costs before expenses are
reimbursed.  The Customs Modernization Act authorizes the agencies to
seek reimbursement for costs associated with collecting the fee. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:1.2


         FEDERAL LAW ENFORCEMENT
------------------------------------------------------ Chapter 4:1.2.1

In our testimony on misuse of criminal justice information in NCIC,
we identified sufficient examples of misuse to warrant recommending
that the Congress enact legislation with strong criminal sanctions
for such misuse.  The Congress has not as yet initiated such
legislative action.  But such action may be considered sometime in FY
1995.  The FBI, the NCIC Advisory Policy Board, and state and local
law enforcement agencies that use NCIC continue to support, as a
deterrent to further misuse, enactment of legislation containing
criminal sanctions for misusing NCIC.  (GAO/T-GGD-93-41)

In our report on drug use measurement, we recommended that the
Secretary of Health and Human Services (HHS) (1) develop or improve
supplementary data sources to more appropriately determine heroin and
cocaine prevalence patterns and trends; (2) design and conduct a
systematic program for the study of drug use prevalence rates among
underrepresented high-risk groups; and (3) give high priority to
validating self-reports of the use of illicit drugs, focusing
particularly on objective techniques, such as hair testing.  Action
is in process for recommendations (2) and (3) above.  HHS' Public
Health Service has begun to conduct studies of drug use prevalence
rates among various hard-to-reach populations, and HHS' National
Institute on Drug Abuse has begun to investigate methods to improve
the validity of self-reported data, including the use of objective
techniques. 

In addition, we recommended that the National Institute of Justice
Director (1) review the practicality of improving the
drug-use-forecasting design and (2) give priority to creating a
drug-use-forecasting arrestee data base that could be generalized to
booked arrestees in the geographic areas surveyed.  (GAO/PEMD-93-18)

Greater involvement by law enforcement at the state level in
addressing money laundering would help reduce the profitability of
crime.  We recommended that the Congress, to assist the states in
this regard and to allow access by any federal law enforcement
agency, amend the disclosure provisions of the Internal Revenue Code
to give the Secretary of Treasury permanent authority to disclose
information reported on Internal Revenue Service Form 8300, Report of
Cash Payments Over $10,000 in a Trade or Business.  (GAO/GGD-93-1)


         FEDERAL LITIGATIVE AND
         JUDICIAL ACTIVITIES
------------------------------------------------------ Chapter 4:1.2.2

In our testimony on reauthorization of the Judiciary Automation Fund,
we recommended that the Congress direct the judiciary to (1) develop
a strategic business plan identifying the judiciary's key missions
and goals, (2) implement a long-range automation plan based on that
strategic plan, and (3) establish effective audit oversight of court
automation efforts.  (GAO/T-GGD/AIMD-94-176)


         IMMIGRATION CONTROL
------------------------------------------------------ Chapter 4:1.2.3

In our general management report on the Immigration and
Naturalization Service (INS), we recommended that the INS
Commissioner set priorities within the framework of the overall INS
mission and reorganize the agency's field structure.  We also made
recommendations to reduce the overlap and the duplication in the
enforcement program, improve allocation of resources in the
examination and inspection programs, and strengthen the financial and
information management programs.  INS has taken steps to address some
of these recommendations, particularly in the financial management
area.  (GAO/GGD-91-28)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      ADMINISTRATION OF JUSTICE
-------------------------------------------------------- Chapter 4:1.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:1.3.1

Asset Forfeiture:  Noncash Property Should Be Consolidated Under the
Marshals Service (GGD-91-97)

Bank and Thrift Criminal Fraud:  The Federal Commitment Could Be
Broadened (GAO/GGD-93-48)

Bank and Thrift Failures:  FDIC and RTC Could Do More to Pursue
Professional Liability Claims (GAO/T-GGD-92-42)

Bankruptcy Administration:  Justification Lacking for Continuing Two
Parallel Programs (GAO/GGD-92-133)

Child Abuse:  Prevention Programs Need Greater Emphasis
(GAO/HRD-92-99)

Civil Debt Collection:  Justice's Private Counsel Pilot Program
Should Be Expanded (GAO/GGD-94-195)

Customs Service and INS:  Dual Management Structure for Border
Inspections Should Be Ended (GAO/GGD-93-111)

Customs Service:  1911 Act Governing Overtime Is Outdated
(GAO/GGD-91-96)

Customs Service:  Trade Enforcement Activities Impaired by Management
Problems (GAO/GGD-92-123)

Document Security:  Justice Can Improve Its Controls Over Classified
and Sensitive Documents (GAO/GGD-93-134)

Drug Control:  Communications Network Funding and Requirements
Uncertain (GAO/NSIAD-92-29)

Drug Control:  Inadequate Guidance Results in Duplicate Intelligence
Production Efforts (GAO/NSIAD-92-153)

Drug Control:  Reauthorization of the Office of National Drug Control
Policy (GAO/GGD-93-144)

Drug Control:  Treatment Alternatives Program for Drug Offenders
Needs Stronger Emphasis (GAO/GGD-93-61)

Drug Use Measurement:  Strengths, Limitations, and Recommendations
for Improvement (GAO/PEMD-93-18)

EEO at Justice:  Progress Made but Underrepresentation Remains
Widespread (GAO/GGD-91-8)

Federal Judicial Security:  Comprehensive Risk-Based Program Should
Be Fully Implemented (GAO/GGD-94-112)

Federal Judiciary:  How the Judicial Conference Assesses the Need for
More Judges (GAO/GGD-93-31)

Federal Prisons:  Inmate and Staff Views on Education and Work
Training Programs (GAO/GGD-93-33)

Illegal Aliens:  Despite Data Limitations, Current Methods Provide
Better Population Estimates (GAO/PEMD-93-25)

Immigration Management:  Strong Leadership and Management Reforms
Needed to Address Serious Problems (GAO/GGD-91-28)

Immigration Reform:  Verifying the Status of Aliens Applying for
Federal Benefits (GAO/HRD-88-7)

Information Management:  Immigration and Naturalization Service Lacks
Ready Access to Essential Data (GAO/IMTEC-90-75)

INS User Fees:  INS Working to Improve Management of User Fee
Accounts (GAO/GGD-94-101)

Judiciary Automation Fund:  Reauthorization Should Be Linked to
Better Planning and Reporting (GAO/T-GGD/AIMD-94-176)

Justice Automation:  Tighter Computer Security Needed
(GAO/IMTEC-90-69)

Money Laundering:  State Efforts To Fight It Are Increasing But More
Federal Help Is Needed (GAO/GGD-93-1)

National Crime Information Center:  Legislation Needed to Deter
Misuse of Criminal Justice Information (GAO/T-GGD-93-41)

National Fine Center:  Expectations High, But Development Behind
Schedule (GAO/GGD-93-95)

Office of Justice Programs:  Discretionary Grants Reauthorization
(GAO/GGD-93-23)

Prison Inmates:  Better Plans Needed Before Felons Are Released
(GAO/GGD-93-92)

Sentencing Guidelines:  Central Questions Remain Unanswered
(GAO/GGD-92-93)

Tax Administration:  IRS' Management of Seized Assets
(GAO/T-GGD-92-65)

U.S.  Attorneys:  Better Models Can Reduce Resource Disparities Among
Offices (GAO/GGD-91-39)

U.S.  Customs Service:  Limitations in Collecting Harbor Maintenance
Fees (GAO/GGD-92-25)

War on Drugs:  Federal Assistance to State and Local Drug Enforcement
(GAO/GGD-93-86)


   FEDERAL HUMAN RESOURCES
   MANAGEMENT ISSUE AREA (BUDGET
   FUNCTION 800)
---------------------------------------------------------- Chapter 4:2

GAO Contact:  Nancy R.  Kingsbury, 202/512-5074


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:2.1

Each year, the federal government spends about $115 billion in pay
and benefits for the 2.1 million civilian employees who constitute
its work force.  Recruiting, hiring, and managing a quality work
force is the foundation of effective governance.  In recent years,
our recommendations on these issues have resulted in several
significant actions. 


         ARCHITECT OF THE CAPITOL
------------------------------------------------------ Chapter 4:2.1.1

Our April 1994 report identified serious deficiencies in the
personnel system of the Architect of the Capitol (AOC).  Among other
things, AOC did not have an equal employment opportunity program with
affirmative action features, its hiring and promotion policies were
not defined, and supervisors were not required to provide employees
with performance appraisals.  These and other shortcomings
contributed to a demoralized and distrustful working environment.  We
recommended that the Architect develop and implement a detailed plan
to revise AOC's personnel system and that congressional committees
monitor the development and the implementation of the plan.  As a
result of our work, the Congress passed the Architect of the Capitol
Human Resource Act, which mandates that the Architect develop and
implement a plan for improvement under congressional oversight. 


         WORKERS' COMPENSATION
         PROGRAMS
------------------------------------------------------ Chapter 4:2.1.2

In February 1992, we recommended that the Department of Labor's
Office of Workers' Compensation Programs (OWCP) act in coordination
with the Rehabilitation Services Administration (RSA) to explore the
feasibility of making greater use of state vocational rehabilitation
agencies in providing more-cost-effective rehabilitation services to
federal employees suffering job-related injuries.  In April 1993,
OWCP and RSA developed a model agreement to guide their staffs in
renewing relationships for providing these services to injured
federal workers.  As of September 1, 1994, eight states had signed
these agreements with OWCP. 

In February 1994, we reported that OWCP did not appear to be
selecting physicians who were predisposed against supporting federal
workers' claims for compensation benefits.  We recommended, however,
that OWCP revise its procedures to (1) more clearly define its
methods for selecting physicians to conduct impartial medical
examinations (IME) when its Physician Directory System could not be
used and (2) better document the reasons for using alternative
selection methods when the usual selection methods were not followed. 
In March 1994, OWCP issued revised procedures to address these
concerns, further ensuring the unbiased selection of IME physicians
and reducing the potential for perception of bias. 


         EMPLOYEE DRUG TESTING
------------------------------------------------------ Chapter 4:2.1.3

Our 1992 report on federal employee drug testing noted several
opportunities to lower the costs of drug-testing programs.  We
recommended that the Department of Health and Human Services (HHS),
among other things, reduce its requirements pertaining to the quality
assurance programs of drug-testing laboratories.  On June 9, 1994,
HHS incorporated our recommendation and revised its guidelines for
federal workplace drug-testing programs. 


         MEASURING COSTS OF
         SERVICE CONTRACTORS
------------------------------------------------------ Chapter 4:2.1.4

Our March 1994 report on measuring the costs of using service
contractors versus using federal employees noted that cost
comparisons could help ensure that agencies acquired needed services
in the most cost-effective manner.  Office of Management and Budget
(OMB) regulations do not require agencies to conduct cost comparisons
for professional services, such as advisory and assistance services. 
Consequently, it is not generally known whether it costs less to
contract out for these services than it would for government
employees to do the work.  We recommended that OMB extend its cost
comparison requirement for commercial activities to cover advisory
and assistance services.  OMB is considering extending this
requirement as part of an overall revision to parts of its
procurement guidance.  In addition, the Congress incorporated a
provision in the Federal Work Force Restructuring Act of 1994 that
activities affected by agency downsizing not be contracted out except
when a cost comparison showed contracting to be advantageous to the
government. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:2.2

If the goals envisioned by the National Performance Review (NPR) are
to be realized, substantial improvements will need to be made in
federal human resources management (HRM).  As part of this process,
we have made numerous recommendations to the Office of Personnel
Management (OPM) and other agencies to improve the quality of the
federal work force.  Following are some areas where we believe that
further action or monitoring is needed to adequately respond to our
recommendations. 


         EQUAL EMPLOYMENT
         OPPORTUNITY
------------------------------------------------------ Chapter 4:2.2.1

Data on the genders, races, and national origins of applicants for
federal employment--known as applicant flow data--are not adequately
collected.  During the early 1980s, OPM and the Equal Employment
Opportunity Commission (EEOC) required agencies to collect the data
using an OPM form.  Authority to use the form expired, however, and
OPM and EEOC no longer require agencies to collect applicant flow
data.  In our October 1991 testimony, we recommended that OPM, in
cooperation with EEOC, examine options for collecting and analyzing
applicant flow data and take prompt appropriate action.  While OPM
has asked EEOC to help share the cost of a new system to collect
applicant flow data, EEOC has declined, citing funding shortfalls. 
OPM has said that it will not proceed in developing a new system
without EEOC and OMB support.  (GAO/T-GGD-92-2)


         HIRING ENTRY-LEVEL
         EMPLOYEES
------------------------------------------------------ Chapter 4:2.2.2

In March 1994, we issued a report on Administrative Careers With
America (ACWA), the federal government's examining and hiring system
for entry-level employees.  The Subcommittee on the Civil Service,
House Committee on Post Office and Civil Service, was concerned about
the apparently low use of ACWA.  We confirmed that ACWA was used much
less frequently than other hiring methods and found that, compared
with other hiring methods, ACWA was not timely, was inflexible, and
did not allow managers to meet affirmative action goals.  ACWA also
did not inform thousands of job applicants of their chances of being
hired on the basis of their ACWA test scores.  Although OPM had
previously planned to redesign much of the examination process, it
intended to retain ACWA for high-use occupations.  Our report
provided statistics showing that, although the number of ACWA hires
in high-use occupations was large, the vast majority of all hiring
for these occupations was done through methods other than ACWA.  The
report also demonstrated that the agencies filling vacancies in these
occupations were particularly dissatisfied with ACWA.  We recommended
that OPM include high-use occupations in its plans to redesign ACWA. 
OPM agreed and is planning to redesign ACWA for all occupations,
pending approval from the plaintiffs in the consent decree that led
to the establishment of ACWA.  (GAO/GGD-94-103)


         PERSONNEL MANAGEMENT
         EVALUATIONS
------------------------------------------------------ Chapter 4:2.2.3

As discussed in our December 1992 report, OPM was not providing
sufficient oversight of the federal personnel system to ensure
compliance with laws, rules, and regulations.  We found that varying
degrees of personnel management evaluation (PME) activity existed
among 35 of the largest federal agencies and that OPM had not issued
standards by which to adequately judge quality.  (GAO/GGD-93-24)

Acting on the NPR's recommendation for OPM to identify agency HRM
accountability standards supporting merit, diversity, and equity, OPM
has established "The Good Government Framework" to help agencies
ensure that their existing HRM accountability and monitoring systems
are consonant with Merit System Principles (5 U.S.C.  2301).  OPM
said that it is working closely with agencies to refine this
framework and is developing several training modules to assist
agencies in its use.  OPM is encouraging agencies to include PME,
internal controls, ongoing HRM systems assessment, and Inspector
General (IG) reviews in these efforts.  OPM said that it will monitor
agency success in using "The Good Government Framework" to improve
internal accountability. 


         PRESIDENTIAL TRANSITION
         CONVERSIONS AND
         APPOINTMENTS
------------------------------------------------------ Chapter 4:2.2.4

In our May 1994 report, we noted that OPM had a policy of suspending
the processing of career Senior Executive Service (SES) appointments
(except in emergencies) when an agency head had announced his or her
departure.  The purpose of this policy is to ensure that the
succeeding agency head has the greatest possible flexibility in
executive resource decisions. 

During the 1992 presidential transition, OPM followed this policy and
suspended SES processing at five agencies where the agency heads had
resigned or specifically announced their resignations.  OPM did not
suspend SES processing at other agencies, however, because neither
the White House nor the transition team had requested such
suspensions.  We believe that to preserve the greatest possible
flexibility for new agency heads following a presidential transition,
OPM should routinely suspend processing of all career SES
appointments during such transition periods. 

We also noted several instances in which noncompetitive appointments
had been made pursuant to the Ramspeck Act under circumstances that
did not appear to further the purpose of the act.  We believe that
the Congress may wish to amend the act and provide additional
guidance on its use.  (GAO/GGD-94-66)


         PERFORMANCE MANAGEMENT
------------------------------------------------------ Chapter 4:2.2.5

Although federal agencies are diverse and have different missions,
they are required to use the same general performance management
system.  A general framework for federal performance management
systems seems appropriate.  Agencies believe, however, that, within
this framework, they should be able to tailor specific elements to
reflect such factors as their missions, organizational structures,
and the ways their work is done.  The lack of sufficient flexibility
for agencies to design their own performance management systems has
created problems in managing and improving employee performance.  As
recommended in our February 1993 report, the Congress should give
agencies the flexibility needed to tailor performance management
systems to their own work environments.  Legislation giving agencies
increased flexibility is expected to be introduced by the
administration later this year as part of the NPR initiative. 
(GAO/GGD-93-57)


         HEALTH BENEFITS
------------------------------------------------------ Chapter 4:2.2.6

In July 1991, we reported on the need for stronger controls to
prevent fraud and abuse in the Federal Employees Health Benefits
Program.  Our report contained several recommendations with which OPM
agreed.  OPM's IG, however, has not been able to obtain the resources
needed to achieve our recommended goal of a 3- to 5-year audit cycle
for fee-for-service plans.  (GAO/GGD-91-95)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  FEDERAL
      HUMAN RESOURCES MANAGEMENT
-------------------------------------------------------- Chapter 4:2.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:2.3.1

AID Management:  EEO Issues and Protected Group Underrepresentation
Require Management Attention (GAO/NSIAD-93-13)

Aircraft Certification:  New FAA Approach Needed to Meet Challenges
of Advanced Technology (GAO/RCED-93-155)

Amtrak Training:  Improvements Needed for Employees Who Inspect and
Maintain Rail Equipment (GAO/RCED-93-68)

Apprenticeship Training:  Administration, Use, and Equal Opportunity
(GAO/HRD-92-43)

Army Maintenance:  Strategy Needed to Integrate Military and Civilian
Personnel Into Wartime Plans (GAO/NSIAD-93-95)

Aviation Safety:  Problems Persist in FAA's Inspection Program
(GAO/RCED-92-14)

Coast Guard:  Acquisition Program Staff Were Funded Improperly
(GAO/RCED-93-123)

Customs Service and INS:  Dual Management Structure for Border
Inspections Should Be Ended (GAO/GGD-93-111)

Customs Service:  1911 Act Governing Overtime Is Outdated
(GAO/GGD-91-96)

Customs Service:  Trade Enforcement Activities Impaired by Management
Problems (GAO/GGD-92-123)

Department of Education:  Longstanding Management Problems Hamper
Reforms (GAO/HRD-93-47)

DOE Management:  Impediments to Environmental Restoration Management
Contracting (GAO/RCED-92-244)

EEO at Justice:  Progress Made but Underrepresentation Remains
Widespread (GAO/GGD-91-8)

Employee Drug Testing:  Opportunities Exist to Lower Drug-Testing
Program Costs (GAO/GGD-93-13)

Export Promotion:  Federal Programs Lack Organizational and Funding
Cohesiveness (GAO/NSIAD-92-49)

FAA Budget:  Key Issues Need to Be Addressed (GAO/T-RCED-92-51)

Federal Affirmative Action:  Better EEOC Guidance and Agency Analysis
of Underrepresentation Needed (GAO/GGD-91-86)

Federal Affirmative Employment:  Better Guidance Needed for Small
Agencies (GAO/GGD-94-71)

Federal Affirmative Employment:  Status of Women and Minority
Representation in the Federal Work Force (GAO/T-GGD-92-2)

Federal Contractor Hiring:  Effect of Veteran Hiring Legislation Is
Unknown (GAO/GGD-94-6)

Federal Employment:  Displaced Federal Workers Can Be Helped by
Expanding Existing Programs (GAO/GGD-92-86)

Federal Health Benefits Program:  Stronger Controls Needed to Reduce
Administrative Costs (GAO/GGD-92-37)

Federal Hiring:  Does Veterans' Preference Need Updating? 
(GAO/GGD-92-52)

Federal Hiring:  Testing for Entry-Level Administrative Positions
Falls Short of Expectations (GAO/GGD-94-103)

Federal Judiciary:  How the Judicial Conference Assesses the Need for
More Judges (GAO/GGD-93-31)

Federal Labor Relations:  A Program in Need of Reform
(GAO/GGD-91-101)

Federal Lobbying:  Federal Regulation of Lobbying Act of 1946 Is
Ineffective (GAO/T-GGD-91-56)

Federal Lobbying:  Lobbying the Executive Branch (GAO/T-GGD-91-70)

Federal Performance Management:  Agencies Need Greater Flexibility in
Designing Their Systems (GAO/GGD-93-57)

Federal Personnel Management:  OPM Reliance on Agency Oversight of
Personnel System Not Fully Justified (GAO/GGD-93-24)

Federal Work Force:  Inappropriate Use of Experts and Consultants at
Selected Civilian Agencies (GAO/GGD-91-99)

Financial Audit:  IRS Significantly Overstated Its Accounts
Receivable Balance (GAO/AFMD-93-42)

Financial Disclosure:  Implementation of Statute Governing Judicial
Branch Personnel (GAO/GGD-93-85)

Financial Management:  Immediate Actions Needed to Improve Army
Financial Operations and Controls (GAO/AFMD-92-82)

Financial Management:  Serious Deficiencies in State's Financial
Systems Require Sustained Attention (GAO/AFMD-93-9)

Food Aid:  Management Improvements Are Needed to Achieve Program
Objectives (GAO/NSIAD-93-168)

Foreign Assistance:  AID's Private-Sector Assistance Program at a
Crossroads (GAO/NSIAD-93-55)

Fraud and Abuse:  Stronger Controls Needed in Federal Employees
Health Benefits Program (GAO/GGD-91-95)

General Services Administration:  Actions Needed to Improve
Protection Against Fraud, Waste, and Mismanagement (GAO/GGD-92-98)

General Services Administration:  Sustained Attention Required to
Improve Performance (GAO/GGD-90-14)

Government Contractors:  Measuring Costs of Service Contractors
Versus Federal Employees (GAO/GGD-94-95)

Government National Mortgage Association:  Greater Staffing
Flexibility Needed to Improve Management (GAO/RCED-93-100)

Legislative Employment:  Operations of the Office of Fair Employment
Practices Could Be Improved (GAO/GGD-94-36)

Management of VA:  Improved Human Resource Planning Needed to Achieve
Strategic Goals (GAO/HRD-93-10)

Managing IRS:  Actions Needed to Assure Quality Service in the Future
(GAO/GGD-89-1)

Mass Transit:  Federal Participation in Transit Benefit Programs
(GAO/RCED-93-163)

Military Aircraft:  Policies on Government Officials' Use of 89th
Military Airlift Wing Aircraft (GAO/NSIAD-92-133)

National Labor Relations Board:  Action Needed to Improve
Case-Processing Time at Headquarters (GAO/HRD-91-29)

National Science Foundation:  Better Guidance on Employee Book
Writing Could Help Avoid Ethics Problems (GAO/GGD-93-8)

Nuclear Security:  Safeguards and Security Planning at DOE Facilities
Incomplete (GAO/RCED-93-14)

Personnel Practices:  Presidential Transition Conversions and
Appointments:  Changes Needed (GAO/GGD-94-66)

Personnel Practices:  Schedule C and Other Details to the Executive
Office of the President (GAO/GGD-93-14)

Personnel Security:  Efforts by DOD and DOE to Eliminate Duplicative
Background Investigations (GAO/RCED-93-23)

Safety and Health:  Key Independent Oversight Program at DOE Needs
Strengthening (GAO/RCED-93-85)

Security Clearances:  Due Process for Denials and Revocations by
Defense, Energy, and State (GAO/NSIAD-92-99)

Social Security Administration:  Stable Leadership and Better
Management Needed To Improve Effectiveness (GAO/HRD-87-39)

State Department:  Management Weaknesses at the U.S.  Embassies in
Panama, Barbados, and Grenada (GAO/NSIAD-93-190)

State Department:  Management Weaknesses at the U.S.  Embassy in
Mexico City, Mexico (GAO/NSIAD-93-88)

Tax Administration:  Better Training Needed for IRS' New Telephone
Assistors (GAO/GGD-91-83)

Tax Administration:  Improved Staffing of IRS' Collection Function
Would Increase Productivity (GAO/GGD-93-97)

Tax Administration:  IRS Can Improve Controls Over Electronic Filing
Fraud (GAO/GGD-93-27)

Tax Administration:  IRS Should Expand Financial Disclosure
Requirements (GAO/GGD-92-117)

Thrift Failures:  Actions Needed to Stabilize RTC's Professional
Liability Program (GAO/GGD-93-105)

UNESCO:  Status of Improvements in Management Personnel, Financial,
and Budgeting Practices (GAO/NSIAD-92-172)

University Research:  Controlling Inappropriate Access to Federally
Funded Research Results (GAO/RCED-92-104)

U.S.  Attorneys:  Better Models Can Reduce Resource Disparities Among
Offices (GAO/GGD-91-39)

U.S.  Department of Agriculture:  Need for Improved Work Force
Planning (GAO/RCED-90-97)

U.S.  Department of Agriculture:  Strengthening Management Systems to
Support Secretarial Goals (GAO/RCED-91-49)

VA Health Care:  Problems in Implementing Locality Pay for Nurses Not
Fully Addressed (GAO/HRD-93-54)

VA Health Care:  Role of the Chief of Nursing Service Should Be
Elevated (GAO/HRD-92-74)

Vocational Rehabilitation:  Better VA Management Needed to Help
Disabled Veterans Find Jobs (GAO/HRD-92-100)

Whistleblower Protection:  Agencies' Implementation of the
Whistleblower Statutes Has Been Mixed (GAO/GGD-93-66)

Whistleblower Protection:  Determining Whether Reprisal Occurred
Remains Difficult (GAO/GGD-93-3)

The White House:  Travel Office Operations (GAO/GGD-94-132)

Workplace Accommodation:  EPA's Alternative Workspace Process
Requires Greater Managerial Oversight (GAO/GGD-92-53)


   FEDERAL MANAGEMENT ISSUE AREA
   (BUDGET FUNCTION 800)
---------------------------------------------------------- Chapter 4:3

GAO Contact:  William M.  Hunt, 202/512-8676


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:3.1

The Government Performance and Results Act (GPRA), the National
Performance Review (NPR), the passage of the Government Management
Reform Act, and the increasing interest in quality management and
process reengineering within federal agencies are all part of the
growing consensus that government must fundamentally change the way
it manages.  The experiences of federal agencies, state governments,
and foreign countries that are leaders in public management show that
the central features of these various management reform
initiatives--strategic planning, performance measurement, and
alignment of management systems and organizational structures to
support mission-related outcomes--can serve as powerful tools for
managers and other decisionmakers to use to make government results
oriented. 

In December 1993, we reported that we generally agreed with most of
NPR's 384 recommendations and believed that their successful
implementation could make an important contribution in addressing the
federal government's management and programmatic problems.  In
September 1994, we issued a preliminary assessment of NPR's progress
in implementing its recommendations.  We found that, although there
had been a great deal of activity directed at implementing NPR's
recommendations, the administration still had a long way to go on the
majority of them.  In December 1994, we issued a detailed assessment
of NPR's progress over its first year.  We also are undertaking a
review of selected "reinvention labs" that agencies have formed as
part of NPR. 

We have also continued to make progress in providing agencies with
information and analysis as they implement GPRA.  We have sought to
show agencies how GPRA provides a framework for making them more
effective and should not be seen as merely another in a growing
number of externally imposed reporting requirements unrelated to
their missions.  We are frequently called upon by agencies to provide
guidance and briefings on GPRA.  Agencies have requested information
on GPRA and its relationship to the Chief Financial Officers Act and
the ways in which those acts, combined with other management
improvement initiatives, such as quality management and NPR, can
fundamentally change the focus of federal management and
accountability.  Moreover, several agencies are using aspects of our
evaluation methodology for assessing GPRA as guidance for
implementing the act.  As required by GPRA, we are also working
closely with the Office of Personnel Management as it seeks to
provide training to federal managers on GPRA and its essential
components. 

We are also developing a body of work aimed at showing how various
management tools, such as quality management, process reengineering,
performance measurement, and activity-based costing can be used by
managers to improve organizational effectiveness.  As the first part
of that effort, we have issued a report providing examples from the
public and private sectors on innovative ways to improve service
delivery. 

Faced with the need to become more results oriented, governments at
all levels--national, state, and city--now realize that traditional
government programs and service delivery mechanisms may not be the
best way to meet the growing demand for an increased number of and
more cost-effective services.  Increasingly, these governments are
exploring the use of alternative public-private mixes (such as
contracting out, privatization, and public-private partnerships of
various kinds) for delivering needed services.  Thus, while certain
functions are inherently governmental, the lines between the public
and private sector are becoming blurred. 

We are developing a body of work that will identify and evaluate the
public-private alternatives that can be used to deliver services and
provide a framework for the Congress and the agencies to use in
choosing among the alternatives.  As part of this effort, we have
issued a report on the extent of contracting out for real property
management services in the General Services Administration, as well
as a report on how the increased use of competition has helped reform
the real property organizations in four industrialized countries. 
Also, we have been requested to do a review of cities that have
turned around their management to identify "best practices" that
could be applied to the District of Columbia. 

We also have begun a body of work in the regulatory arena.  At the
request of several Members of the Congress, we initiated a review of
the cumulative impact of regulations on businesses.  In April 1994,
we reported on agencies' compliance with the Regulatory Flexibility
Act, which was designed to reduce federal agencies' regulatory burden
on small businesses and small governments.  Small Business
Administration (SBA) reports indicated that agencies' compliance with
the act varied, with some agencies repeatedly ignoring its
requirements. 

We also have continued to make progress in helping to improve the
accuracy, the reliability, and the timeliness of the nation's major
statistical data series.  For example, the Congress continued to rely
heavily on GAO for information on and assessments of the Census
Bureau's progress in planning the 2000 census.  Over the last 2
years, much of our work on the Decennial Census was focused on the
Bureau's preparations for the 1995 test census.  For example, we
warned in March 1993 congressional testimony that a lack of progress
in redesigning the 2000 census jeopardized the prospects of
fundamental reform.  In testimony 3 months later, we reported that
the Bureau had altered its decisionmaking efforts and appeared to be
getting back on track.  More recently, we have continued to monitor
and report on the Bureau's efforts to streamline the census
questionnaire, develop a methodology for sampling census
nonrespondents, work more cooperatively with the Postal Service to
develop the address list, and consider other opportunities for
reform.  At the request of the Congress, we also are looking at
series of management issues at the Census Bureau. 

We have continued our efforts to contribute to improvements in the
quality of federal economic statistics.  For example, we have issued
a report on measuring U.S.  and Canadian trade and a report on the
agricultural and economic censuses.  We are developing additional
reports that will address critical issues related to economic
statistics, such as how employment data are used in policymaking. 

Over the last decade, our detailed management reviews of Cabinet
departments and major independent agencies consistently have shown
that departments and agencies need to develop outcome-oriented
strategic plans and clearly articulated goals and objectives. 
Departments and agencies need also better financial and information
management systems to give managers the outcome information they need
to improve their organizations' effectiveness.  These general
management reviews of departments and agencies are discussed as
appropriate in issue area sections dealing with those agencies. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:3.2

Our September 1993 report raised concerns that the federal
Judiciary's planning process did not produce results that were
sufficiently reliable to form the basis for congressional
authorization and funding of new construction and renovation projects
for court space.  We found that the Judiciary could save
approximately $112 million annually, or $1.1 billion in constant
dollars over a 10-year period, if the errors in its planning process
were corrected.  The Judiciary has been making good progress in
implementing our recommendations.  For example, the Administrative
Office of the United States Courts is updating the long-range plans
for the judicial districts.  The Office intends to update all plans
within 2 years of the original completion date of each plan. 
(GAO/GGD-93-132)

Our April 1994 report on the Regulatory Flexibility Act recommended a
number of actions, such as clarifying SBA's authority and
responsibility, that the Congress could undertake to strengthen the
implementation of the act.  We recommended also that the Office of
Management and Budget (OMB) consult with SBA to establish procedures
that OMB could use to determine federal agencies' compliance with the
act.  These procedures should be incorporated into OMB processes for
reviewing regulations before they are published for notice and
comment and before they are published in final.  Action on these
recommendations has not been taken.  (GAO/GGD-94-105)

We did a joint review with the Canadian Auditor General's Office
looking at issues in measuring U.S.-Canada trade.  We recommended
that the Secretary of Commence instruct the Census Bureau Director
and that the Secretary of the Treasury instruct the Commissioner of
Customs to form an interagency task force to study how U.S.-Canada
merchandise trade data should be collected in the future trade
environment.  We also recommended that the study be expanded to
include Mexico with the passage of the North American Free Trade
Agreement.  Finally, we recommended that the Secretaries work with
their Canadian counterparts to form a bilateral task force to address
these issues.  The initial steps to address our recommendations are
being taken with the Census Bureau and the Customs Service commitment
to form a task force to study U.S.-Canada trade measurement issues. 
(GAO/GGD-94-4)

Our 1992 report summarizing the lessons learned from the 1990
Decennial Census and discussing the need for fundamental census
reform suggested that the Congress maintain vigilant oversight over
census planning issues throughout the 1990s.  We suggested that the
Congress hold a continuing series of oversight hearings to assess the
Bureau's progress in making the changes necessary for a more
cost-effective census in 2000.  Our report continues to be used by
congressional oversight committees to develop and implement long-term
oversight agendas for the Decennial Census.  (GAO/GGD-92-94)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  FEDERAL
      MANAGEMENT
-------------------------------------------------------- Chapter 4:3.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:3.3.1

Customs Service and INS:  Dual Management Structure for Border
Inspections Should Be Ended (GAO/GGD-93-111)

Customs Service:  Trade Enforcement Activities Impaired by Management
Problems (GAO/GGD-92-123)

Department of Education:  Longstanding Management Problems Hamper
Reforms (GAO/HRD-93-47)

Department of Energy:  Better Information Resources Management Needed
to Accomplish Missions (GAO/IMTEC-92-53)

DOE Management:  Better Planning Needed to Correct Records Management
Problems (GAO/RCED-92-88)

Energy Policy:  Changes Needed to Make National Energy Planning More
Useful (GAO/RCED-93-29)

Environmental Protection Agency:  Protecting Human Health and the
Environment Through Improved Management (GAO/RCED-88-101)

Federal Personnel Management:  OPM Reliance on Agency Oversight of
Personnel System Not Fully Justified (GAO/GGD-93-24)

General Services Administration:  Sustained Attention Required to
Improve Performance (GAO/GGD-90-14)

Government Civilian Aircraft:  Central Management Reforms Are
Encouraging but Require Extensive Oversight (GAO/GGD-89-86)

Immigration Management:  Strong Leadership and Management Reforms
Needed to Address Serious Problems (GAO/GGD-91-28)

Information Management:  Immigration and Naturalization Service Lacks
Ready Access to Essential Data (GAO/IMTEC-90-75)

Management of VA:  Improved Human Resource Planning Needed to Achieve
Strategic Goals (GAO/HRD-93-10)

Managing IRS:  Actions Needed to Assure Quality Service in the Future
(GAO/GGD-89-1)

Paperwork Reduction:  Agency Responses to Recent Court Decisions
(GAO/PEMD-93-5)

Resolution Trust Corporation:  Loan Portfolio Pricing and Sales
Process Could Be Improved (GAO/GGD-93-116)

Social Security Administration:  Stable Leadership and Better
Management Needed To Improve Effectiveness (GAO/HRD-87-39)

Thrift Failures:  Actions Needed to Stabilize RTC's Professional
Liability Program (GAO/GGD-93-105)

U.S.  Department of Agriculture:  Farm Agencies' Field Structure
Needs Major Overhaul (GAO/RCED-91-9)

U.S.  Department of Agriculture:  Improving Management of
Cross-Cutting Agricultural Issues (GAO/RCED-91-41)

U.S.  Department of Agriculture:  Interim Report on Ways to Enhance
Management (GAO/RCED-90-19)

U.S.  Department of Agriculture:  Need for Improved Work Force
Planning (GAO/RCED-90-97)

U.S.  Department of Agriculture:  Strengthening Management Systems to
Support Secretarial Goals (GAO/RCED-91-49)


   FINANCIAL INSTITUTIONS AND
   MARKETS ISSUE AREA (BUDGET
   FUNCTION 800)
---------------------------------------------------------- Chapter 4:4

GAO Contact:  James L.  Bothwell, 202/512-8678


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:4.1

The pace of change in the financial markets continues to accelerate. 
New domestic and international developments are affecting how U.S. 
markets function, as well as the perception of how fairly they treat
customers.  Our work delves into these and other issues to provide
information, analyses, and recommendations to the Congress and
regulators on financial services industry change, reform, regulation,
and oversight.  We analyze (1) various emerging issues and segments
of the financial services sector and gaps in regulatory coverage, (2)
regulatory practices to see if they work as intended, and (3) the
continued appropriateness of federal policies governing financial
institutions and markets. 

Our work has improved the operation of the financial system as a
whole and individual components of it.  Our primary mission--work on
safety and soundness issues--helps protect the taxpayer from the need
to rescue one or more financial institutions or sectors.  Our work
also has an investor and customer focus to make sure that consumers
of financial services get what they pay for.  Our work on agency
operations led to improvements in their effectiveness. 

Our work on over-the-counter derivatives market has provided the
framework for debating the complex issue.  Our report suggested that
linkages between major U.S.  dealers, especially bank dealers,
represented a potential threat to the financial system if one or more
major dealers were to fail or withdraw from the market.  The report
also identified major gaps in the regulatory structure. 

Our work identified failed regulatory practices.  Our report on
insider lending cited Federal Deposit Insurance Corporation (FDIC)
evidence of substantial insider problems at failed banks, along with
indications of similar problems in open and healthy banks.  These
problems appear to be related to management breakdowns and inadequate
oversight by boards of directors.  Even when examiners discovered
insider problems, they often did not adequately communicate these
findings to management and boards.  FDIC sent our executive summary
to all its examiners with instructions to implement our
recommendations in their next examinations. 

Our work identified the need for major reform.  Our report on the
Federal Home Loan Bank System recommended reforming the System.  We
expressed concerns about its capital structure and the mixture of
voluntary and mandatory members.  We also expressed substantial
concern about whether the Federal Housing Finance Board could act as
an arm's-length regulator and recommended a single regulator for all
three housing-related government-sponsored enterprises (GSEs).  This
report is forming the basis for a legislative proposal that will be
submitted to the next Congress. 

These reports and our other work have strengthened necessary
regulation of the financial services industry and produced a stronger
financial system. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:4.2


         FINANCIAL INSTITUTION
         REFORMS
------------------------------------------------------ Chapter 4:4.2.1

In our report on credit unions, we recommended some 50 regulatory and
legislative actions to ensure the soundness of the industry,
including changes to (1) maintain safe and sound insurance
operations, (2) upgrade the regulation and the supervision of credit
unions, and (3) clarify the "common bond" characteristic
distinguishing credit unions from banks and thrifts.  The National
Credit Union Administration has issued regulations to address many of
the recommendations and is exploring solutions to others; the
Congress, however, has not yet acted.  (GAO/GGD-91-85)

Our report on the Federal Home Loan Bank System recommended reforming
its capital structure and its mixture of voluntary and mandatory
members and cost-saving reforms as well as recommended a single
regulator for all three housing-related GSEs.  The administration is
working on a legislative plan to address our recommendations. 
(GAO/GGD-94-38)

Our report on the Farm Credit System's ability to repay federal
assistance found that the System was in a financial position to
permit the Congress to eliminate several accounting and regulatory
exemptions used by the System.  We made recommendations in this vein
to the Congress and the regulator that would improve the System's
financial disclosure statements.  We also recommended that the System
repay start-up advances made to the insurance fund.  (GAO/GGD-94-39)

Our report on insider lending noted substantial insider problems at
failed banks, along with indications of similar problems in open and
healthy banks.  We recommended that bank examiners analyze
information such as call reports, insurance policies, loans to
insiders, and other bank-specific data to determine whether insider
lending was harming the banks.  The bank regulators are implementing
our recommendations.  (GAO/GGD-94-88)

Our report on FDIC failed bank resolutions recommended improvements
in documentation of marketing strategy rationale and pointed out the
need for the FDIC board to review the rationale for least-cost
resolution decisions.  FDIC is developing a strategy to comply with
our recommendations.  (GAO/GGD-94-107)

Our report on bank and thrift alternatives to real estate appraisals
recommended that regulators establish minimum qualifications and
standards of independence for persons performing alternatives to real
estate appraisals.  We recommended also that content standards be
established for these alternative evaluations.  An interagency group
is working to address our recommendations.  (GAO/GGD-94-144)


         SECURITIES
------------------------------------------------------ Chapter 4:4.2.2

Our report on investment advisers showed that regulatory oversight of
advisers was very weak.  We recommended that the Congress clarify its
regulatory intent for the investment advisers' program by either
strengthening it to meet some minimal standard or repealing
requirements for federal regulation of advisers.  Legislation to
strengthen the program has been introduced during past sessions of
the Congress.  (GAO/GGD-90-83 and GAO/T-GGD-92-46)

Our testimony on market fragmentation recommended that SEC
periodically monitor the effects of such fragmentation.  SEC is
considering this recommendation.  (GAO/T-GGD-93-35)

Our over-the-counter derivatives market report identified the actions
needed to ensure that this rapidly growing segment of the financial
market did not become a source of systemic risk.  We made several
recommendations calling for congressional action to address the
weaknesses and the gaps we had identified that were impeding the
regulatory process.  Additionally, we made several recommendations to
the regulators involved with regulating the over-the-counter
derivatives market that addressed the weaknesses and gaps under their
control.  Regulators have not yet implemented our recommendations. 
(GAO/GGD-94-133)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  FINANCIAL
      INSTITUTIONS AND MARKETS
-------------------------------------------------------- Chapter 4:4.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:4.3.1

American Stock Exchange:  More Changes Needed in Screening Emerging
Companies for the Marketplace (GAO/GGD-94-72)

Asset Management System:  Liquidation of Failed Bank Assets Not
Adequately Supported by FDIC System (GAO/IMTEC-93-8)

Bank and Thrift Criminal Fraud:  The Federal Commitment Could Be
Broadened (GAO/GGD-93-48)

Bank and Thrift Failures:  FDIC and RTC Could Do More to Pursue
Professional Liability Claims (GAO/T-GGD-92-42)

Bank and Thrift Regulation:  Better Guidance Is Needed for Real
Estate Evaluations (GAO/GGD-94-144)

Bank and Thrift Regulation:  Improvements Needed In Examination
Quality and Regulatory Structure (GAO/AFMD-93-15)

Bank Examination Quality:  FRB Examinations and Inspections Do Not
Fully Assess Bank Safety and Soundness (GAO/AFMD-93-13)

Bank Examination Quality:  OCC Examinations Do Not Fully Assess Bank
Safety and Soundness (GAO/AFMD-93-14)

Bank Insider Activities:  Insider Problems and Violations Indicate
Broader Management Deficiencies (GAO/GGD-94-88)

Bank Regulation:  Regulatory Impediments to Small Business Lending
Should Be Removed (GAO/GGD-93-121)

Credit Unions:  Reforms for Ensuring Future Soundness (GAO/GGD-91-85)

Customs Service and INS:  Dual Management Structure for Border
Inspections Should Be Ended (GAO/GGD-93-111)

Disaster Assistance:  Federal, State, and Local Responses to Natural
Disasters Need Improvement (GAO/RCED-91-43)

Farm Credit System:  Farm Credit Administration Effectively Addresses
Identified Problems (GAO/GGD-94-14)

Farm Credit System:  Repayment of Federal Assistance and Competitive
Position (GAO/GGD-94-39)

Federal Home Loan Bank System:  Reforms Needed to Promote Its Safety,
Soundness, and Effectiveness (GAO/GGD-94-38)

Federal Reserve System Audits:  Restrictions on GAO's Access
(GAO/T-GGD-94-44)

Financial Audit:  Federal Deposit Insurance Corporation's Internal
Controls as of December 31, 1992 (GAO/AIMD-94-35)

Financial Audit:  Federal Deposit Insurance Corporation's 1993 and
1992 Financial Statements (GAO/AIMD-94-135)

Financial Audit:  Resolution Trust Corporation's 1993 and 1992
Financial Statements (GAO/AIMD-94-148)

Financial Derivatives:  Actions Needed to Protect the Financial
System (GAO/GGD-94-133)

Funding Foreign Bank Examinations (GAO/GGD-93-35R)

Government Sponsored Enterprises:  Freddie Mac's and Fannie Mae's
Accounting for Costs of Foreclosed Property (GAO/AIMD-94-75)

Investment Advisers:  Current Level of Oversight Puts Investors at
Risk (GAO/GGD-90-83)

1992 Bank Resolutions:  FDIC Chose Methods Determined Least Costly,
but Needs to Improve Process (GAO/GGD-94-107)

1992 Thrift Resolutions:  RTC Policies and Practices Did Not Fully
Comply With Least-Cost Provisions (GAO/GGD-94-110)

Resolution Trust Corporation:  Analysis of Selected Asset Sales and
Financial Data (GAO/GGD-94-37)

Resolution Trust Corporation:  Asset Pooling and Marketing Practices
Add Millions to Contract Costs (GAO/GGD-93-2)

Resolution Trust Corporation:  Better Analyses Needed Before
Terminating Asset Management Contracts (GAO/GGD-94-147)

Resolution Trust Corporation:  Ineffective Management of HomeFed Bank
Environmental Services Contracting (GAO/GGD-94-62)

Resolution Trust Corporation:  Loan Portfolio Pricing and Sales
Process Could Be Improved (GAO/GGD-93-116)

Resolution Trust Corporation:  Oversight of SAMDA Property Management
Contractors Needs Improvement (GAO/GGD-94-5)

Securities Enforcement:  Improvements Needed in SEC Controls Over
Disgorgement Cases (GAO/GGD-94-188)

Securities Firms:  Assessing the Need to Regulate Additional
Financial Activities (GAO/GGD-92-70)

Securities Investor Protection:  The Regulatory Framework Has
Minimized SIPC's Losses (GAO/GGD-92-109)

Securities Markets:  Actions Needed to Better Protect Investors
Against Unscrupulous Brokers (GAO/GGD-94-208)

Securities Markets:  SEC Actions Needed to Address Market
Fragmentation Issues (GAO/T-GGD-93-35)

Thrift Failures:  Actions Needed to Stabilize RTC's Professional
Liability Program (GAO/GGD-93-105)

Unemployment Insurance:  Trust Fund Reserves Inadequate
(GAO/HRD-88-55)

U.S.  Credit Card Industry:  Competitive Developments Need to Be
Closely Monitored (GAO/GGD-94-23)

U.S.  Government Securities:  More Transaction Information and
Investor Protection Measures Are Needed (GAO/GGD-90-114)


   GOVERNMENT BUSINESS OPERATIONS
   ISSUE AREA (BUDGET FUNCTION
   800)
---------------------------------------------------------- Chapter 4:5

GAO Contact:  J.  William Gadsby, 202/512-8387


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:5.1

Our work in this area focuses primarily on three of the government's
largest business entities--the General Services Administration (GSA),
the Resolution Trust Corporation (RTC), and the U.S.  Postal Service. 
Collectively, these three government-business entities have a
combined annual operating budget of about $60 billion, and their
activities have far-reaching implications for federal agencies and
the public.  Through them, the federal government owns or controls
assets worth hundreds of billions of dollars and provides goods and
services to federal agencies that directly affect mission
accomplishment.  This area also encompasses responsibilities for many
other federal entities, such as the Smithsonian Institution, the
National Archives, parts of the Department of the Treasury, and the
D.C.  Government. 

Our work has continued to directly influence GSA, the Clinton
administration, and the Congress so as to change the way GSA does
business.  In recommending an end to GSA's monopoly, separation of
its governmentwide policymaking and service delivery
responsibilities, and the creation of new asset management
enterprises, the Vice President's National Performance Review (NPR)
echoed concerns expressed in our December 1992 transition series
report on general services issues.  In response, GSA's top management
is trying to make fundamental changes in the way GSA does business. 
The changes GSA is considering appear responsive to the concerns we
and NPR expressed.  The actual implementation of these reforms,
however, will require reexamination of existing congressional
funding, budgetary, and authorization processes that could impede
their effectiveness as well as GSA's ability to compete successfully
for agencies' business in an agency-choice setting. 

RTC has made significant progress during the last year in addressing
open recommendations.  Both the RTC Completion Act of 1993 and
Secretary Bentsen's Management Reform Initiatives mandated that RTC
correct problems identified by auditors.  A key action of RTC was to
implement cost controls that resulted in savings of about $30 million
in fiscal year 1993 and strengthened its oversight of contractor
activities. 

At the Postal Service, adversarial labor relations, the impact of
electronic communication on letter mail, limited effects of
automation, and postal meter fraud were all among the topics reported
on.  Our labor relations report includes numerous recommendations for
dealing with the longstanding problems of supervisor, union, and
employee relations on the workroom floor.  In addition, we testified
that Congress would need to act on issues related to the threat that
E-mail, fax, and other information technologies posed for financial
viability of the Postal Service.  We continued to emphasize the need
for the Service to make work force adjustments if it was to reap the
promised benefits of bar-coding mail.  Further, as part of a broad
survey of the Postal Service's efforts to protect its $50 billion in
revenue annually, we emphasized the need to address the widespread
vulnerability of current postage meters to abuse and fraud. 

In the procurement area, GSA has acknowledged that improvements are
needed and has corrective actions under way in several areas.  GSA is
piloting a number of changes in its Multiple Awards Program, has
efforts under way to improve its supply procurement and defaulted
vendors' claims assessment and collection practices, is working to
enhance its oversight of agencies' purchases and management of
automatic data processing and telecommunications, and is exploring
major changes in its supply depot operations. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:5.2


         GENERAL SERVICES
         ADMINISTRATION
------------------------------------------------------ Chapter 4:5.2.1

The Congress has supplemented Federal Buildings Fund revenues through
appropriations and borrowing and eliminated most restrictions on rent
payments to GSA by federal agencies.  GSA used these funds to
construct several new federal buildings and courthouses and has
actions under way to develop a 5-year capital plan to guide
decisionmaking and to take the lead in demonstrating the benefits of
capital budgeting.  But continuing funding limitations and budget
scorekeeping rules that are biased in favor of operating leases
impede cost-effective federal housing and asset management decisions
and GSA's efforts to increase federal ownership of space and reduce
dependence on costly leased space.  (GAO/GGD-90-11)

GSA has identified buildings that need major repairs and renovations
and has improved its management controls to better ensure that these
needs are properly tracked and addressed.  Also, GSA has prepared a
5-year building capital plan, but it has not yet been approved by the
Office of Management and Budget or been used by GSA to support its
annual capital spending proposals to the Congress or to promote
better, more-informed decisionmaking.  As mentioned earlier, GSA has
efforts under way to develop a acceptable 5-year capital plan and has
increased its spending on building repairs and renovations to
compensate for earlier neglect and prevent further deterioration and
obsolescence.  These actions need to be sustained and fully
implemented.  (GAO/GGD-91-57)

GSA has acknowledged the potential for increasing direct delivery of
supplies and has developed an approach to test the recommendations in
the marketplace.  GSA also established an interagency committee of
senior supply management personnel to aid in assessing and improving
GSA's supply operations.  GSA plans to use this committee to help it
increase direct delivery and improve its supply distribution
activities and expects to fully implement our recommendations by July
1995.  (GAO/GGD-93-32)


         RESOLUTION TRUST
         CORPORATION
------------------------------------------------------ Chapter 4:5.2.2

In July 1993, we recommended that RTC better ensure that contractors
met RTC fitness and integrity requirements by requiring background
checks for major legal contractors that contract with RTC.  This
requirement would be consistent with the fitness and integrity
requirement for major business contractors.  Procedures have been
developed for conducting the recommended background checks of major
legal contractors, and staff have been trained to conduct these
checks.  However, implementation of the procedures has been delayed
until the new General Counsel reviews and approves them. 
(GAO/GGD-93-127)

In November 1993, we recommended that the Secretary of the Treasury,
in consultation with the Federal Deposit Insurance Corporation
(FDIC), the Office of Thrift Supervision (OTS), and RTC,
systematically assess the effectiveness of their approaches to
preserving minority-owned financial institutions.  FDIC and OTS have
begun interviewing executives of minority banks and thrifts to obtain
their views on efforts to preserve their institutions.  As of
February 1994, the results of these surveys were not yet available. 
(GAO/GGD-94-1)


         U.S.  POSTAL SERVICE
------------------------------------------------------ Chapter 4:5.2.3

The Postal Reorganization Act of 1970 established criteria for
setting postal rates at a time when the Postal Service had less
competition than it faces now.  Since passage of the act, the Postal
Service's competitive position has eroded, especially in the parcel
post and overnight mail markets.  We recommended that, because of the
Postal Service's increasingly competitive environment and the need
for greater pricing flexibility, the Congress reexamine the criteria
used in setting postal rates to determine whether the criteria were
still valid in light of changing marketplace realities.  We also said
that, if the Congress intended that the Postal Service compete in the
parcel post and express mail markets, it should consider a policy of
granting discounts to customers on the basis of their mail volumes. 
No action has been taken on our recommendations.  (GAO/GGD-92-49)

A key consideration in passage of the Postal Reorganization Act of
1970 was the need to improve the pay and the working conditions of
postal employees.  While pay has improved, we reported that employee
problems persisted on the workroom floor of the U.S.  Postal Service. 
The problems have not been addressed because postal management and
labor unions have been unable to agree on solutions.  We recommended
that, given the severity and the persistence of the problems, the
Service and the unions develop within 2 years a long-term (at least a
10-year agreement) framework agreement for addressing the volatile
relations between supervisors and employees in processing plants and
post offices across the country.  Toward that end, our report
enumerated the principles and the values to be pursued by the parties
and contained seven key recommendations to the Service and union
leaders, as well as the Congress, for fundamentally changing the
manner in which both postal management and unions were dealing with
employees.  Our report was issued in September 1994, just as new
labor contracts were being negotiated.  We expect our recommendations
to be considered in these negotiations; however, changing the Postal
Service's organizational culture will take many years and we intend
to track progress.  (GAO/GGD-94-201)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  GOVERNMENT
      BUSINESS OPERATIONS
-------------------------------------------------------- Chapter 4:5.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:5.3.1

Commission on Civil Rights:  Commissioners' Travel Activities
(GAO/GGD-94-130)

Decennial Census:  1990 Results Show Need for Fundamental Reform
(GAO/GGD-92-94)

Disinfectants:  EPA Lacks Assurance They Work (GAO/RCED-90-139)

Environmental Protection Agency:  Plans in Limbo for Consolidated
Headquarters Space (GAO/GGD-93-84)

Farm Credit System:  Costs for Office Space, Equipment, and Furniture
Compared to GSA's Costs (GAO/GGD-94-57)

Federal Buildings:  Actions Needed to Prevent Further Deterioration
and Obsolescence (GAO/GGD-91-57)

Federal Buildings:  Many Are Threatened by Earthquakes, But Limited
Action Has Been Taken (GAO/GGD-92-62)

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/GGD-93-132)

Federal Lobbying:  Lobbying the Executive Branch (GAO/T-GGD-91-70)

Federal Office Space:  Increased Ownership Would Result in
Significant Savings (GAO/GGD-90-11)

Foreign Direct Investment:  Assessment of Commerce's Annual Report
and Data Improvement Efforts (GAO/NSIAD-92-107)

General Services Administration:  Actions Needed to Improve
Protection Against Fraud, Waste, and Mismanagement (GAO/GGD-92-98)

General Services Administration:  Actions Needed to Stop Buying
Supplies From Poor-Performing Vendors (GAO/GGD-93-34)

General Services Administration:  Better Data and Oversight Needed to
Improve Construction Management (GAO/GGD-94-145)

General Services Administration:  Distribution Center Modernization
Was Mismanaged (GAO/GGD-92-71)

General Services Administration:  Increased Direct Delivery of
Supplies Could Save Millions (GAO/GGD-93-32)

General Services Administration:  Sustained Attention Required to
Improve Performance (GAO/GGD-90-14)

Government Civilian Aircraft:  Central Management Reforms Are
Encouraging but Require Extensive Oversight (GAO/GGD-89-86)

Minority-Owned Financial Institutions:  Status of Federal Efforts to
Preserve Minority Ownership (GAO/GGD-94-1)

Multiple Award Schedule Contracting:  Changes Needed in Negotiation
Objectives and Data Requirements (GAO/GGD-93-123)

National Archives:  A More Systematic Customer Focus Needed
(GAO/GGD-94-3)

One-Dollar Coin:  Reintroduction Could Save Millions If Properly
Managed (GAO/GGD-93-56)

Postal Service:  Planned Benefits of Iowa Automated Mail Facility Not
Realized (GAO/GGD-94-78)

Postal Service:  Service Impact of South Dakota Mail Facility Not
Fully Recognized (GAO/GGD-93-62)

Resolution Trust Corporation:  Affordable Housing Disposition Program
Achieving Mixed Results (GAO/GGD-94-202)

Resolution Trust Corporation:  Better Analyses Needed Before
Terminating Asset Management Contracts (GAO/GGD-94-147)

Resolution Trust Corporation:  Analysis of Selected Asset Sales and
Financial Data (GAO/GGD-94-37)

Resolution Trust Corporation:  Asset Pooling and Marketing Practices
Add Millions to Contract Costs (GAO/GGD-93-2)

Resolution Trust Corporation:  Better Assurance Needed That
Contractors Meet Fitness and Integrity Standards (GAO/GGD-93-127)

Resolution Trust Corporation:  Loan Portfolio Pricing and Sales
Process Could Be Improved (GAO/GGD-93-116)

Resolution Trust Corporation:  Oversight of SAMDA Property Management
Contractors Needs Improvement (GAO/GGD-94-5)

Resolution Trust Corporation:  Recommendations Addressed to Oversee
and Account for Cash Flow Mortgages (GAO/GGD-94-179)

Supply Contract Terminations:  GSA Is Missing Opportunities to
Recover Costs From Vendor Default (GAO/GGD-94-137)

U.S.  Postal Service:  Labor-Management Problems Persist on the
Workroom Floor (Volume I) (GAO/GGD-94-201A)

U.S.  Postal Service:  Pricing Postal Services in a Competitive
Environment (GAO/GGD-92-49)

Welfare Benefits:  States Need Social Security's Death Data to Avoid
Payment Error or Fraud (GAO/HRD-91-73)


   TAX POLICY AND ADMINISTRATION
   ISSUE AREA (BUDGET FUNCTION
   800)
---------------------------------------------------------- Chapter 4:6

GAO Contact:  Jennie S.  Stathis, 202/512-5407


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:6.1

Commencing in 1994, about $7.8 billion in increased tax revenues are
expected to be made over the next 5 years as a result of statutory
changes to tax expenditures and filing requirements which we had
addressed in earlier reports.  About $3.8 billion of this amount is
to be realized by restricting the use of section 936 tax credits,
thus reducing federal revenues foregone while preserving an adequate
stimulus for job creation in the United States possessions.  About
$2.5 billion is expected to be collected from requiring the
amortization of certain intangible assets over a specified period. 
And about $1.5 billion is expected as a result of increased
compliance stemming from submitting newly required information
returns on forgiven debts, modifying the taxation of diesel fuel, by
collecting taxes earlier in the distribution system. 

The amounts of these increased revenues represent only part of the
impact of our work.  Because of actions taken on our recommendations,
the nation's tax collection system is operating more efficiently and
effectively while imposing less of a burden on taxpayers.  Our work
has promoted long-term improvement projects (i.e., helping the
Internal Revenue Service [IRS] manage for change given the potential
benefits from increased automation and systems redesign contemplated
under the Tax Systems Modernization [TSM] concept) and incremental
short-term operational changes (e.g., identifying improved methods
for dealing with noncompliance, such as overstated deductions of
certain businesses).  Concomitantly, our recommendations have
addressed taxpayer concerns (e.g., ensuring the tax system is
responsive, fair, and efficient and not overly intrusive or
burdensome) as well as the need for the government to collect what is
legally owed in taxes and to maximize the social benefits expected to
be gained through tax preferences. 

Also, as a result of our work, better information should be available
to support deliberations on future tax policy and administration
changes.  In part, this will result from our convincing IRS not to
abandon its best tool for assessing taxpayer compliance until a
proven replacement has been developed and providing independent
assessments to the Congress on the status and funding of TSM efforts. 
Other recommendations advancing the interests of informed
decisionmaking include those targeted at specific tax expenditures
(e.g., tax exempt bonds) and at specific compliance efforts, such as
audits of large corporations. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:6.2


         COMPLIANCE
------------------------------------------------------ Chapter 4:6.2.1

Sole proprietorships, which account for about 13 percent of
individual taxpayers, are responsible for about 40 percent of the
taxable income earned by individuals but not reported for tax
purposes.  Yet, IRS' enforcement strategy does not provide a detailed
operating plan for dealing with this noncompliance area.  Moreover,
IRS does not expect to develop the information systems needed to
identify causes of the noncompliance and better target resources
until the turn of the century.  In the interim, we have recommended
ways for IRS to better use available compliance data to identify
possible causes of noncompliance and develop a more comprehensive
sole proprietorship compliance program.  (GAO/GGD-94-175)

Annually, about two-thirds of all additional tax assessments
recommended as a result of IRS audits are attributable to the
nation's 1,700 largest corporations.  Although audits of these
corporations consume about 20 percent of IRS' examination resources,
IRS tracks neither actual collections from these audits nor the
compliance rates of these corporations.  We recommended a number of
steps, given that only about $1 of every $5 of recommended tax
assessments was actually being collected from these corporations, to
help IRS ensure that it carried out its mission of collecting the
proper amount of tax at the least cost--IRS should (1) centralize
control over resources devoted to audits of large corporations, (2)
increase revenue agent knowledge of the specific industries they
audit, (3) begin tracking collection rates as a common measure across
the agency, (4) analyze recurring tax disputes and propose
legislative changes for minimizing such recurrence, and (5) test ways
to measure compliance.  (GAO/GGD-94-70)

IRS audits had indicated that individuals, in recent years, had
overstated their real estate deductions by an estimated $1.5 billion,
resulting in nearly $700 million in federal income tax losses.  We
recommended that, to improve voluntary compliance, IRS work with
local governments to revise real estate bills that had led to
erroneous tax deductions and share data on taxpayers' real estate
payments.  (GAO/GGD-93-43)

In October 1992, we reported on what states were doing to combat
money laundering.  We noted that the Internal Revenue Code required
persons engaged in a trade or a business who had received cash
payments of over $10,000 to file reports with IRS but that these
reports were not available to state law enforcement agencies.  We
recommended that the Congress amend the disclosure laws to allow
states access to these reports.  (GAO/GGD-93-1)


         TAX SYSTEMS MODERNIZATION
------------------------------------------------------ Chapter 4:6.2.2

Available compliance data indicate that overstated deductions of
small businesses are a significant noncompliance area--about $40
billion annually.  Our review work showed that it was technically
feasible for IRS to use computer-matching techniques and available
information returns to identify a portion of this noncompliance.  We
recommended that IRS implement such matching techniques where tests
showed that it would be cost-effective.  We also recommended that IRS
take actions to expand computer matching as part of its TSM effort. 
(GAO/GGD-93-133)

IRS is planning major organizational and operational changes to take
advantage of new technology to be provided through TSM.  We
recommended that IRS, because these changes will have a major effect
on IRS' work force, (1) assess existing work force knowledge, skills,
and abilities; (2) identify specific staffing requirements for
modernization projects that would significantly affect human
resources; and (3) develop detailed retraining and redeployment plans
to deal with gaps between staffing requirements and existing work
force knowledge, skills, and abilities.  (GAO/GGD-94-159)

Electronic filing reduces the time it takes to issue a refund to a
taxpayer--on average, from 5 weeks for taxpayers who file paper
returns to 2 weeks for those who file electronically.  Because this
speed leaves IRS little time to investigate and stop refunds and IRS'
computer screens are inadequate, the program is particularly
vulnerable to fraud.  We recommended additional controls to help
prevent fraudulent electronic returns from being filed and better
detect fraudulent returns that had been filed.  (GAO/GGD-93-27)


         ACCOUNTS RECEIVABLE
         COLLECTION
------------------------------------------------------ Chapter 4:6.2.3

IRS is losing the potential to collect hundreds of millions of
dollars of overdue taxes because of shortcomings in its processes for
determining which accounts are currently collectible and which are
not.  We recommended that IRS (1) establish guidelines for
determining taxpayers' ability to pay to include, for example,
requiring minimum payments from taxpayers with incomes exceeding
specified levels; (2) strengthen oversight of the ability-to-pay
determination process; and (3) modify criteria for reactivating cases
previously classified as currently not collectible.  (GAO/GGD-94-2)

We reviewed IRS' Offer in Compromise Program, which affords taxpayers
the opportunity to settle tax debts for less than the amount owed. 
While IRS was pleased with the program's results, it had not
demonstrated that the program's objectives of increased collections
and improved compliance would be met.  We recommended that IRS
develop the indicators necessary to evaluate the program as a
collection and compliance tool.  (GAO/GGD-94-47)

We studied private sector and state collection techniques to
determine whether IRS could improve its collection of delinquent
taxes.  We recommended that IRS restructure its collection program to
support earlier telephone contact with delinquent taxpayers, develop
detailed information on delinquent taxpayers for customized
collection procedures, test the use of private collection companies,
and identify ways to increase cooperation with state governments. 
(GAO/GGD-93-67)

While IRS' delinquent taxpayer workload has continued to grow,
productivity of collection staff has varied at different field
locations and IRS does not use marginal productivity measurements to
adjust staff levels among those locations.  We recommended that IRS
develop a plan to ensure that collection staff would be allocated to
maximize the assessment and collection of taxes.  (GAO/GGD-93-97)


         TAX SIMPLIFICATION
------------------------------------------------------ Chapter 4:6.2.4

In September 1993, we reported that the earned income tax credit had
been the source of more taxpayer mistakes than any other individual
income tax provision.  We recommended the elimination of a complex
schedule that did not add to IRS' compliance effort.  We also
recommended that IRS expand its efforts to notify low-income workers
about the tax credit and make adjustments to procedures designed to
ensure that all taxpayers would be treated equitably. 
(GAO/GGD-93-145)

Our work showed that the rules for claiming dependent exemptions were
too complex and too burdensome for many taxpayers to comply.  We
recommended that the Congress simplify the rules by substituting a
residency test similar to that used in the Earned Income Tax Credit
Program.  We recommended also that IRS resolve operational problems
in its computer-matching program, thereby enabling IRS to
cost-effectively implement a 100-percent computer-matching program to
identify erroneous dependent claims.  (GAO/GGD-93-60)

Tax simplification, in part, involves efforts to make IRS
correspondence easier for taxpayers to understand and act on.  We
have recommended that IRS modify its correspondence practices to (1)
clearly advise taxpayers whether their tax problems could be quickly
handled over the telephone, (2) advise taxpayers of the disposition
of their inquiries, (3) make certain system improvements, and (4)
monitor timeliness and taxpayer satisfaction with IRS correspondence. 
(GAO/GGD-94-118)


         MANAGEMENT OF IRS
------------------------------------------------------ Chapter 4:6.2.5

In a July 1994 report, we concluded that IRS needed regional offices,
although the offices were not currently operating in a way that
provided the most value to internal customers.  We recommended that
IRS rethink the role of regional offices and (1) remove regional
offices from the chain of command in those situations where span of
control was not an issue and (2) ensure that reviews done by regional
offices would not duplicate those done by other offices and would
help to solve problems.  (GAO/GGD-94-160)

Successful implementation of IRS' one-stop service initiative is
crucial to IRS' plans for improving customer service (e.g., reduce
taxpayer burden in terms of additional time and frustration
associated with making numerous contacts with IRS to resolve a single
problem).  In August 1994, we concluded that a flawed measurement
process had led IRS to overstate its progress in providing one-stop
service and recommended that a different measurement system be
adopted.  (GAO/GGD-94-131)

The federal tax deposit (FTD) system collects payment and tax data
separately, thereby creating problems in matching the accounting
information on tax returns to payment data on FTD coupons.  The
Department of the Treasury is automating the FTD process.  We
recommended that these automation efforts be monitored to ensure that
the new automated system would collect the appropriate accounting
data together with the taxpayer payment data.  (GAO/AFMD-93-40)

In March 1993, we reported that taxpayer identity data that IRS
routinely collected each year to process tax returns could help the
Social Security Administration (SSA) identify the correct accounts
for crediting workers' social security taxes.  We recommended that
IRS and SSA jointly evaluate the extent to which taxpayer data could
be used to better match workers' earnings to correct social security
accounts.  (GAO/HRD-93-42)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  TAX POLICY
      AND ADMINISTRATION
-------------------------------------------------------- Chapter 4:6.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 4:6.3.1

Collecting Back Taxes:  IRS Phone Operations Must Do Better
(GAO/IMTEC-91-39)

Earned Income Tax Credit:  Advance Payment Option Is Not Widely Known
or Understood by the Public (GAO/GGD-92-26)

Federal Tax Deposit System:  IRS Can Improve the Federal Tax Deposit
System (GAO/AFMD-93-40)

Financial Audit:  IRS Significantly Overstated Its Accounts
Receivable Balance (GAO/AFMD-93-42)

Internal Revenue Service:  Changes Needed in the Role of Regional
Offices (GAO/GGD-94-160)

IRS Information Systems:  Weaknesses Increase Risk of Fraud and
Impair Reliability of Management Information (GAO/AIMD-93-34)

Managing IRS:  Actions Needed to Assure Quality Service in the Future
(GAO/GGD-89-1)

The New Earned Income Credit Form Is Complex and May Not Be Needed
(GAO/T-GGD-91-68)

Targeted Jobs Tax Credit:  Employer Actions to Recruit, Hire, and
Retain Eligible Workers Vary (GAO/HRD-91-33)

Tax Administration:  Approaches for Improving Independent Contractor
Compliance (GAO/GGD-92-108)

Tax Administration:  Benefits of a Corporate Document Matching
Program Exceed the Costs (GAO/GGD-91-118)

Tax Administration:  Better Measures Needed to Assess Progress of
IRS' One-Stop Service (GAO/GGD-94-131)

Tax Administration:  Better Training Needed for IRS' New Telephone
Assistors (GAO/GGD-91-83)

Tax Administration:  Changes Needed to Cope With Growth in Offer in
Compromise Program (GAO/GGD-94-47)

Tax Administration:  Compliance Measures and Audits of Large
Corporations Need Improvement (GAO/GGD-94-70)

Tax Administration:  Computer Matching Could Identify Overstated
Business Deductions (GAO/GGD-93-133)

Tax Administration:  Congress Needs More Information on Compliance
Initiative Results (GAO/GGD-92-118)

Tax Administration:  Efforts to Prevent, Identify, and Collect
Employment Tax Delinquencies (GAO/GGD-91-94)

Tax Administration:  Erroneous Dependent and Filing Status Claims
(GAO/GGD-93-60)

Tax Administration:  Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130)

Tax Administration:  Federal Contractor Tax Delinquencies and Status
of the 1992 Tax Return Filing Season (GAO/T-GGD-92-23)

Tax Administration:  Improved Staffing of IRS' Collection Function
Would Increase Productivity (GAO/GGD-93-97)

Tax Administration:  Increased Fraud and Poor Taxpayer Access to IRS
Cloud 1993 Filing Season (GAO/GGD-94-65)

Tax Administration:  Information Returns Can Improve Reporting of
Forgiven Debts (GAO/GGD-93-42)

Tax Administration:  IRS Can Better Pursue Noncompliant Sole
Proprietors (GAO/GGD-94-175)

Tax Administration:  IRS Can Do More to Collect Taxes Labelled
"Currently Not Collectible" (GAO/GGD-94-2)

Tax Administration:  IRS Can Improve Controls Over Electronic Filing
Fraud (GAO/GGD-93-27)

Tax Administration:  IRS Can Improve Its Program to Find Taxpayers
Who Underreport Their Income (GAO/GGD-91-49)

Tax Administration:  IRS Experience Using Undercover Operations'
Proceeds to Offset Operational Expenses (GAO/GGD-91-106)

Tax Administration:  IRS' Implementation of the 1988 Taxpayer Bill of
Rights (GAO/GGD-92-23)

Tax Administration:  IRS' Management of Seized Assets
(GAO/T-GGD-92-65)

Tax Administration:  IRS' 1992 Filing Season Was Successful But Not
Without Problems (GAO/GGD-92-132)

Tax Administration:  IRS' Plans to Measure Tax Compliance Can Be
Improved (GAO/GGD-93-52)

Tax Administration:  IRS Preparer Penalty Data Inaccurate and
Misleading (GAO/GGD-90-92)

Tax Administration:  IRS Should Expand Financial Disclosure
Requirements (GAO/GGD-92-117)

Tax Administration:  IRS' System Used in Prioritizing Taxpayer
Delinquencies Can Be Improved (GAO/GGD-92-6)

Tax Administration:  IRS Undercover Operations Management Oversight
Should Be Strengthened (GAO/GGD-92-79)

Tax Administration:  More Improvement Needed in IRS Correspondence
(GAO/GGD-94-118)

Tax Administration:  Negligence and Substantial Understatement
Penalties Poorly Administered (GAO/GGD-91-91)

Tax Administration:  New Delinquent Tax Collection Methods for IRS
(GAO/GGD-93-67)

Tax Administration:  Opportunities to Further Improve IRS' Business
Review Process (GAO/GGD-92-125)

Tax Administration:  Opportunities to Increase Revenue Before
Expiration of the Statutory Collection Period (GAO/GGD-91-89)

Tax Administration:  Opportunities to Increase the Use of Electronic
Filing (GAO/GGD-93-40)

Tax Administration:  Overstated Real Estate Tax Deductions Need to Be
Reduced (GAO/GGD-93-43)

Tax Administration:  Standards Adhered to in Issuing Revenue Ruling
90-27 (GAO/GGD-92-15)

Tax Administration:  Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67)

Tax Policy:  Allocation of Taxes Within the Life Insurance Industry
(GAO/GGD-90-19)

Tax Policy and Administration:  Improvements for More Effective
Tax-Exempt Bond Oversight (GAO/GGD-93-104)

Tax Policy:  Earned Income Tax Credit:  Design and Administration
Could Be Improved (GAO/GGD-93-145)

Tax Policy:  Summary of GAO Work Related to Expiring Tax Provisions
(GAO/T-GGD-92-11)

Tax Policy:  Tax Expenditures Deserve More Scrutiny
(GAO/GGD/AIMD-94-122)

Tax Policy:  Tax Treatment of Life Insurance and Annuity Accrued
Interest (GAO/GGD-90-31)

Tax Systems Modernization:  Automated Underreporter Project Shows
Need for Human Resource Planning (GAO/GGD-94-159)


FINANCIAL AND INFORMATION
MANAGEMENT AND EVALUATION PROGRAMS
============================================================ Chapter 5


   BUDGET ISSUE AREA (BUDGET
   FUNCTION 990)
---------------------------------------------------------- Chapter 5:1

GAO Contact:  Paul L.  Posner, 202/512-9573


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:1.1

The federal budget deficit remains a central factor in the nation's
economic future.  Despite recent reductions in the deficit, the
long-term outlook is not encouraging.  The deficit is expected to
increase again before the end of the decade and remain a persistent
problem in the foreseeable future.  As a result, the budget continues
to be a focal point for many current policy debates. 

Our work (1) provides the Congress with deficit reduction analysis
and reduction options and strategies, (2) recommends improvements in
the budget presentation and choices provided by the budget and the
budget process, (3) highlights the choices between consumption and
investment spending and provides decisionmakers with criteria and
analyses to aid in the selection of effective investments, (4)
assesses the impacts of budget rules and incentives on management,
and (5) examines the impact of proposed changes on managerial
efficiency and congressional oversight. 


         DEFICIT REDUCTION
------------------------------------------------------ Chapter 5:1.1.1

Deficit reduction is essential to our nation's long-term economic
growth.  Although the fiscal year 1994 deficit is projected to be the
lowest in 5 years, the annual deficit will still add about $200
billion to the nation's debt.  The national debt held by the public
is approximately $3.4 trillion, about 51 percent of the gross
domestic product (GDP).  Absent additional policy changes, the
deficit is expected to increase in fiscal year 1996 and to continue
growing into the next decade.  As we have previously reported,
failure to make difficult choices about what the federal government
should do and how those activities will be financed will result in
increasingly larger deficits and eventually lead to a steady erosion
of economic growth. 

Our long-term projections of the deficit and its impact on economic
growth and productivity have been used by the public, private policy
organizations, and the Congress to provide perspective on recent
economic experiences and on the administration's economic plan. 

Our report on the budgetary implications of selected GAO work,
prepared with the active support of about 20 GAO issue areas and the
cooperation of the Congressional Budget Office (CBO) and staff from
the Joint Committee on Taxation, provided the Congress with over 50
options for possible budget savings or revenue gains.  Our report on
the executive order reducing administrative expenses warned of the
difficulties associated with the use of across-the-board
administrative cost cuts as a means of deficit reduction.  We
provided the Congress with an analysis of the implementation issues
associated with congressional proposals to cap mandatory spending. 
Our work on the long-term deficit outlook and on state
balanced-budget requirements contributed to both sides of the
balanced budget amendment debate.  We informed the Congress of the
concept of GDP budgeting and illustrated the utility and the limits
of using allocation of the GDP in budget policy deliberations. 

Our work on deficit reduction includes an analysis of deficit
reduction strategies used in other countries and their implications
for U.S.  deficit reduction.  We are beginning a joint project with
the Office of the Chief Economist to update our projections of the
long-term impact of the deficit on the economy.  We also plan to
issue a second report on deficit reduction options and strategies and
update a previous report on accounts with spending authority and
permanent appropriations. 


         IMPROVING BUDGETARY
         CHOICES
------------------------------------------------------ Chapter 5:1.1.2

The budget structure greatly influences decisions made.  This makes
highlighting and providing needed information about critical budget
choices very important.  In addition, better information about the
costs of federal programs and a greater ability to link budgeting to
accounting data could enhance the quality of budget decisions. 

Our work on incorporating an investment component into the federal
budget was used as the basis for analysis of investment in the fiscal
year 1995 Budget of the United States Government.  Our work on credit
reform (1) cautioned that using present-value-based estimated savings
could create an incentive for overly optimistic savings estimates,
(2) assessed coverage and compliance issues under the Credit Reform
Act, and (3) discussed the inconsistent budgetary treatment of credit
programs with negative subsidies.  We worked closely with the Federal
Accounting Standards Advisory Board to develop a governmentwide
approach for recognizing liabilities and unmet needs for financial
statement purposes.  Our annual "lookback" report alerted the
Congress to factors that had led to differences between budget
estimates and actual results.  A report issued with the General
Government Division on tax expenditures discussed ways to promote
greater budget attention to, and accountability for, these tax
programs. 

Our current work on improving budgetary choices will examine the
applicability of accrual concepts in budgeting for federal insurance
programs.  As part of our ongoing effort to identify problems in
budget planning, we will prepare our annual "lookback" report.  We
also plan to examine the budgetary treatment of the acquisition of
government capital, such as information systems, which provide future
benefits to the government as an operating entity. 


         INVESTMENT
------------------------------------------------------ Chapter 5:1.1.3

Our work on the economic impact of the deficit identified the need to
refocus the budget structure to promote a shift in the composition of
federal spending from consumption to investment programs.  Our
investment work provided criteria and analysis to help decisionmakers
select effective investments.  For example, we issued a framework to
help the Congress choose effective federal investments.  Our work on
restructuring the way budget data are presented has helped the
Congress look at investment as a share of the budget.  As mentioned
above, the Office of Management and Budget (OMB) used the framework
and definitions in our report on incorporating an investment
component into the federal budget as the basis for analyzing
investments in the fiscal year 1995 budget. 

Our future work on federal investment will include an assessment of
how economic criteria are used to make decisions and to evaluate the
results of investment proposals. 


         BUDGET ISSUES IN THE
         REINVENTING GOVERNMENT
         AGENDA
------------------------------------------------------ Chapter 5:1.1.4

The reinventing government agenda--the conceptual driver of the Vice
President's National Performance Review (NPR) as well as recent
performance measures legislation--has focused new attention on the
impact of budget rules and incentives on agency management and
program delivery.  Our testimony on biennial budgeting noted that the
Congress routinely provided multiyear funding and that a biennial
appropriations process is not necessary to provide multiyear funds. 
Our work on analyzing franchise fund proposals resulted in major
modifications in the proposed NPR legislation on working capital
funds.  Our work on the uses and the limitations of performance
measurement and budgeting and the implications of state experiences
highlighted the need for fundamental change, especially in the area
of better cost accounting systems to support performance budgeting at
the federal level. 

Our work will continue to explore the links between performance
measures and budgeting.  We will review the budget account structure
used to allocate federal resources.  We will continue to be involved
in evaluating budget-related proposals connected to NPR.  We will
also review the nature of performance information provided to the
Congress through the appropriations process and assess how this
information has changed since the enactment of the Government
Performance and Results Act (GPRA).  Finally, we will examine the
impact on agency management of executive branch rules and incentives
for controlling funds and will review congressional techniques for
control, such as rescissions, earmarking, reprogramming, and
transfers. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:1.2


         BUDGET ENFORCEMENT ACT
         COMPLIANCE
------------------------------------------------------ Chapter 5:1.2.1

We are required by law to submit an annual compliance report that
addresses OMB's and CBO's compliance with the Budget Enforcement Act
of 1990.  When we reviewed the reports and presidential orders for
the session of the Congress ended January 3, 1992, we reported that
OMB and CBO had substantially complied with the act; however, we
found several minor instances in which either OMB or CBO or both had
not implemented certain provisions.  We discussed several matters for
congressional consideration for making technical corrections to the
act to clarify certain areas and allow more precise implementation. 
The Congress included some changes to the Budget Enforcement Act in
the Omnibus Reconciliation Act of 1993 but did not address our
specific recommendations.  (GAO/AFMD-92-43)


         FEDERAL CREDIT REFORM
------------------------------------------------------ Chapter 5:1.2.2

In response to a congressional request, we issued a series of reports
examining several highly technical issues related to the
implementation of the Federal Credit Reform Act of 1990.  In our July
1994 report on coverage and compliance issues, we stated that
Government National Mortgage Association (GNMA) guarantees were
covered by the Credit Reform Act and that GNMA had not fully complied
with requirements of the act.  We recommended that the OMB Director
require GNMA to budget for guarantees using the issuance dates of the
guarantees to determine whether the costs of the guarantees should be
included in the financing account or the liquidating account.  OMB is
examining long-term credit reform treatment for GNMA. 

In the same report, we stated that it was appropriate for a credit
program to capture the cost of a closely linked cross-subsidy program
in determining the credit program's total subsidy costs and presented
criteria for defining a "closely linked cross-subsidy program." We
discussed, as a matter for congressional consideration, an amendment
to the act to include the cost of closely linked subsidies in the
cost of credit programs.  For cross-subsidies not meeting the
criteria for being closely linked, we recommended that the OMB
Director include a table in the appendix to the Budget of the United
States Government for the associated credit programs showing, for
each cross-subsidy, the size, the cost, and the effect of the credit
subsidy rate.  OMB has responded favorably to our recommendation, but
a new budget has not been issued since the recommendation was made. 
The Congress has not yet addressed the matter for consideration. 

We also examined the Federal Deposit Insurance Corporation's (FDIC)
and the Resolution Trust Corporation's (RTC) fair housing programs. 
We suggested, as a matter for congressional consideration, amending
the act to exclude from credit reform requirements only those FDIC
and RTC programs whose sole purpose was resolving and disposing of
assets of failed and failing financial institutions. 
(GAO/AIMD-94-57)

In our recently issued report on the treatment of negative subsidies
under credit reform, we examined the budgetary treatment of negative
subsidies (those in which receipts exceed outlays) and examined
whether this treatment could adversely affect program management and
budgeting.  Specifically, we reviewed budget proposals and actions
for fiscal years 1992-1995 for the Federal Housing Administration's
Mutual Mortgage Insurance Fund, the Export-Import Bank, and GNMA. 

We determined that the budgetary treatment of credit programs with
negative subsidies was not consistent with credit reform
requirements.  The act does not explicitly address situations in
which programs have negative subsidies.  Under OMB's reasonable
guidance, appropriations of negative subsidy receipts, unlike
appropriations of general funds, do not make budget authority
available for obligation.  We determined that this disconnect between
appropriations and available budget authority, coupled with the
credit reform requirement that budget authority be available before
direct loans were obligated or loan guarantees were committed, might
cause program expenditures to be delayed or reduced to avoid
violations of the Antideficiency Act.  To avoid this, we recommended
that the Congress appropriate only general funds for all subsidies
and administrative costs of credit programs, using negative subsidy
receipts to reimburse the general fund. 

In the same report, we stated that programs with both positive and
negative subsidy direct loans and loan guarantees, such as the credit
programs of the Export-Import Bank, presented an additional issue. 
The act calls for appropriating amounts equal to estimated net
subsidy costs (the estimated subsidy cost from positive subsidy
direct loans and loan guarantees offset by estimated receipts from
negative subsidy loans and loan guarantees).  With such an
appropriation (or, from another viewpoint, an appropriation equal to
estimated net outlays), an agency would not have sufficient budget
authority to make all subsidized loans. 

We recommended that, to solve this problem, the Congress amend the
act to require the appropriation of an amount equal to the gross
subsidy cost for credit programs with both positive and negative
subsidy components.  Since this report was released at the end of
fiscal year 1994, the Congress has not yet had an opportunity to
address our matters for consideration.  (GAO/AIMD-94-58)


         MANDATORY SPENDING
------------------------------------------------------ Chapter 5:1.2.3

In response to a congressional request, we examined the
implementation issues involved in applying a budgetary spending cap
to mandatory spending programs.  In our July 1994 report, we stated
that, although a spending cap on mandatory programs would achieve
savings, a cap would have little, if any, effect on the longer-term
growth trends in these programs until issues of underlying
eligibility and benefit formulas, which drive spending, were
addressed.  We discussed, as a matter for congressional
consideration, an alternative process, under which the Congress, to
reduce spending, would periodically set spending targets, assess
mandatory spending, and vote on whether and how to change mandatory
programs. 

Our findings were used in the House during the recent debate on
controlling mandatory spending.  The House adopted a procedure
similar in structure, but narrower in scope, to the one outlined in
our report's section on matters for consideration by the Congress. 
The Senate did not consider specific controls on mandatory spending. 
Our report was recently released, and the Congress is likely to
consider this matter again.  (GAO/AIMD-94-155)


         TAX EXPENDITURES
------------------------------------------------------ Chapter 5:1.2.4

In a joint effort with the General Government Division, Tax Policy
and Administration Issue Area, we responded to a congressional
request to examine the growth of tax expenditures and alternatives
for limiting their growth.  The June 1994 report contained a
recommendation to the Congress, matters for congressional
consideration, and recommendations to the OMB Director. 

We recommended that the congressional tax-writing committees explore,
within the existing framework, opportunities to exercise more
scrutiny over indirect "spending" through tax expenditures.  Although
these committees have considered revisions to various existing tax
expenditures over the years that would either eliminate such
expenditures or more narrowly restrict eligibility, no specific
action has been taken on our recommendation. 

In this report, we also stated that should the Congress wish to
consider tax expenditure efforts in the broader context of the
allocation of federal resources, it could also consider further
integrating them into the current budget process.  One option would
be for the Congress to consider whether it wished to seek a specified
level of tax expenditure savings during its annual deliberations on
the congressional budget resolution.  Several proposals for better
controlling tax expenditures have been offered, but no specific
action has been taken on our recommendation. 

In the same report, we made several recommendations to the OMB
Director.  We recommended that the Director, in consultation with the
Secretary of the Treasury, revise the budgetary presentation of tax
expenditure information to highlight the fiscal and other
consequences associated with tax expenditures. 

OMB revised its fiscal year 1995 budget to highlight information
about tax expenditures in two respects--(1) the budget presents
estimated tax expenditures over the 5-year budget window, as well as
estimated expenditures for the current fiscal year and actual
expenditures for the prior fiscal year, and (2) present-value
estimates are reported for tax expenditures involving deferrals and
similar long-term revenue effects.  Although OMB agreed in principle
that the combined presentation of outlays and tax expenditures within
functional areas would be helpful and is exploring the feasibility of
presenting this information on a selective basis, OMB anticipates no
significant additions for the fiscal year 1996 budget.  The Treasury
Department is deferring to OMB on this recommendation. 

We also recommended that, to the extent practical, OMB incorporate
tax expenditures into the annual budget review process.  OMB has
announced its intentions to begin such a process and has initiated
preliminary actions to implement joint reviews of tax expenditures
and related outlay programs as part of its annual budget review. 

We recommended further that OMB, working with Treasury, design and
test a basic structure for tax expenditure performance reviews before
OMB developed a governmentwide framework by May 1997 as required by
the 1993 GPRA.  OMB has not yet taken action on this framework.  We
recommended further that, once the initial determinations were made,
OMB, along with the Treasury, conduct case studies of the proposed
performance review process.  This would enable OMB and Treasury to
gauge how well the proposed framework might function.  In addition,
we recommended that, once tax expenditure performance data were
developed, OMB consult with Treasury in considering how to present
tax expenditure performance information in the budget.  OMB is
scheduled to begin action on the above recommendations according to
the time frames established in the GPRA.  The Treasury Department is
deferring to OMB on the above recommendations.  (GAO/GGD/AIMD-94-122)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  BUDGET
-------------------------------------------------------- Chapter 5:1.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:1.3.1

Budget Issues:  Compliance Report Required by the Budget Enforcement
Act of 1990 (GAO/AFMD-92-43)

Budget Policy:  Issues in Capping Mandatory Spending
(GAO/AIMD-94-155)

Credit Reform:  Appropriation of Negative Subsidy Receipts Raises
Questions (GAO/AIMD-94-58)

Credit Reform:  Case-by-Case Assessment Advisable in Evaluating
Coverage and Compliance (GAO/AIMD-94-57)

Debt Management:  More Aggressive Actions Needed to Reduce Billions
in Overpayments (GAO/HRD-91-46)

Energy Management:  Additional Uncosted Balances Could Be Used to
Meet Future Budget Needs (GAO/RCED-94-26)

Tax Policy:  Tax Expenditures Deserve More Scrutiny
(GAO/GGD/AIMD-94-122)


   CIVIL AUDITS ISSUE AREA (BUDGET
   FUNCTION 990)
---------------------------------------------------------- Chapter 5:2

GAO Contact:  Greg Holloway, 202/512-9510


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:2.1

Our civil agency audits have illustrated the importance of reliable
financial statements and effective systems in strengthening
accountability and improved control over the federal government's
financial resources and program activities.  The preparation and the
audit of accurate and useful financial statements depends upon the
quality, the usefulness, and the availability of the financial
information on which they are based and ultimately the adequacy of
the underlying systems and related internal controls.  The
government's financial systems and internal controls are woefully
inadequate, however.  Even though agencies have spent billions of
dollars to upgrade their financial systems, these efforts have met
with limited success.  Many federal financial systems are weak,
outdated, and inefficient and cannot routinely produce relevant,
timely, and accurate data on the results and the costs of operations. 


         CHIEF FINANCIAL OFFICERS
         ACT OF 1990
------------------------------------------------------ Chapter 5:2.1.1

Since its passage 4 years ago, the Chief Financial Officers (CFO) Act
of 1990 has set the foundation for a sound financial management
structure and for beginning the process of change.  A mechanism for
reform is now in place, which represents a major accomplishment of
our work and our long-term commitment to restore integrity to the
federal government's financial management operations.  The act can
achieve substantive change, but this is just the first step; reform
will require strong leadership, new thinking, and sustained
high-level support and oversight. 

Though much more needs to be done, agencies are beginning to
recognize and fix their extensive financial systems deficiencies,
come to grips with problems in recruiting and retaining financial
personnel, and better understand the benefits of using new types of
useful and relevant financial reports that are backed up by annual
audits.  We have helped agency managers and others become familiar
with the CFO Act's principal features and understand better the
actions needed to successfully implement the act.  We have worked to
foster adoption of appropriate financial reporting and accounting
standards, promote quality financial audits and audit methods, and
develop meaningful performance measures and cost systems. 

CFO Act financial statements audits have been integral to identifying
management inefficiencies and weaknesses and highlighting gaps in
safeguarding the government's assets and possible illegal acts. 
Also, they have identified actual and potential savings of hundreds
of millions of dollars. 

As part of our transition series, our report entitled Financial
Management Issues (GAO/OCG-93-4TR) discussed (1) the widespread
financial management weaknesses existing in government, (2) the role
of the CFO Act in providing a road map for reform, (3) the steps
needed to fully implement this act and make good financial management
a reality, and (4) further necessary actions. 


         OTHER FINANCIAL
         MANAGEMENT IMPROVEMENTS
------------------------------------------------------ Chapter 5:2.1.2

Our civil audits, over the past several years, have resulted in other
significant improvements in federal financial management.  For
example, we have demonstrated, through discussion and analysis of
several agencies' financial operations, the type of information that
will give the Congress and the President greater insight into, and
understanding of, agencies' financial affairs and the type of
information that should be addressed in agency reports and attested
to by the independent auditor. 

These financial audits have also resulted in significant improvements
in the quality of agency financial information and identified serious
problems in agency financial operations.  Most recently, we completed
audits of the Internal Revenue Service's (IRS) and the U.S.  Customs
Service's fiscal year 1993 financial statements, which were done
under the CFO Act's pilot program of agency-level audited financial
statements.  (GAO/AIMD-94-120 and GAO/AIMD-94-119)

These, along with our audit of the Department of Education's Federal
Family Education Loan Program (FFELP), served as a catalyst for the
recently passed Government Management Reform Act, which requires
agencywide and governmentwide audited financial statements. 

Our recommendations that delinquent nontax debt owed to agencies be
collected through the IRS refund offset led the Congress, in 1993, to
make this program mandatory through legislation.  The program is
expected to save the government billions of dollars.  Also, the
Congress passed legislation requiring agencies to report closed-out
debts to IRS as income to the debtors, which we had also recommended. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:2.2

Across government, effective financial management operations and
information are hampered by financial systems that are incompatible;
have been allowed to deteriorate; are out-of-date; and cannot meet
managers' cost, performance measurement, and other financial
information needs.  Agencies face a great challenge in providing
strong financial management, effective internal controls, and sound
fiscal accountability, but the investment will pay for itself many
times over in improved operations and useful information for
decisionmaking. 


         GOVERNMENTWIDE
         RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.1

We have continually pressed agencies and the administration to
improve credit management and debt collection practices.  Our report
on the Office of Management and Budget's (OMB) nine-point credit
management program recommended that the Congress amend the Debt
Collection Act of 1982 to require agencies, where consistent with
program legislation, to use provisions of the act that were then
optional and other credit management techniques.  We continue to
consider strengthened legislation in the credit management area to be
an extremely important element for improving the government's loan
programs, with billions in savings possible.  (GAO/AFMD-90-12)


         AGENCY-SPECIFIC
         RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.2

Over the years, we have made many agency-specific recommendations to
correct problems of fundamental accounting procedures, including
serious internal control and accounting system weaknesses.  The
following recommendations deserve priority attention. 

In our report on the U.S.  Customs Service's fiscal year 1993
financial statements, we recommended several new actions and
reaffirmed numerous key recommendations from our fiscal year 1992
financial statement audit of Customs.  These recommendations included
a number of actions that Customs could take to (1) reasonably ensure
overall compliance with trade laws and to ensure that duties, taxes,
and fees on imports would be properly assessed and collected and
refunds of such amounts would be valid; (2) control, manage, and
report the results of its enforcement efforts, including maintaining
accountability and stewardship over the tons of illegal drugs and
millions of dollars of cash and property seized or used in its
enforcement efforts; and (3) adequately control the use and the
reporting of its operating funds.  In addition, we recommended that
the Commissioner evaluate the technical proficiency and the
experience of existing staff under the CFO to determine specific
staff needs for effectively addressing the agency's financial
management problems.  (GAO/AIMD-94-119)

In our report on IRS' fiscal year 1993 financial statements, we
recommended control procedures, such as reconciliations and
supervisory approval, to ensure that cash and other assets would be
properly managed and accounted for.  We stated that these steps must
be taken before meaningful information could be obtained to help IRS,
Treasury, OMB, and the Congress in making informed decisions. 

We also reaffirmed the recommendations resulting from our audit of
IRS' fiscal year 1992 financial statements regarding controls over
revenue, accounts receivable, property and equipment, management of
operating funds, computer controls, seized assets, and reports
required by the Federal Managers' Financial Integrity Act (FIA).  In
addition, we recommended actions necessary to provide reliable,
complete, timely, and comprehensive information with which to
evaluate the effectiveness of IRS' enforcement and collection
programs; analyze the impact of abatements on the effectiveness of
assessments from IRS' various collection programs; and reconcile
detailed revenue transactions for individual taxpayers to the master
file and general ledger.  (GAO/AIMD-94-120)

We recommended, in our report on IRS' accounts receivable, certain
actions to develop a strategy for distinguishing between assessments
that should be included in the receivables and those that should not,
to include only valid receivables in the balances reported in IRS
financial statements, and to modify IRS' methodology for assessing
the collectibility of its receivables.  (GAO/AFMD-93-42)

In our report on the Department of Education's FFELP financial
statements for fiscal year 1993, we recommended several new actions
and reaffirmed all our fiscal year 1992 recommendations that had not
been completed by the Department. 

We especially emphasized the need for the Department to improve
controls over (1) estimating costs to be incurred on outstanding
guaranteed loans; (2) ensuring that billing reports from guaranty
agencies and lenders were timely and accurate and that guaranty
agencies and lenders reported all default collections and origination
fees, respectively, owed to the Department; (3) preparing accurate
financial statements; and (4) establishing security responsibilities
and oversight for Education's general ledger system.  We emphasized
also the need for the Department to establish necessary internal
controls as it began to implement the new Federal Direct Student Loan
Program.  In addition, we continued to suggest that the Congress
amend the Higher Education Act to require that originating lenders
pay loan origination fees even if the loans were subsequently sold to
other lenders.  (GAO/AIMD-94-131)


         FURTHER ACTIONS NEEDED ON
         KEY OPEN RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.3

Major improvements are needed to restore integrity to the federal
government's financial management operations.  Key elements of
successful federal financial management reform are high-quality
leadership, an effective CFO organizational structure, effective
long-range planning, and preparation of meaningful and auditable
financial statements.  Though agencies have made some progress in
these areas, making substantive and lasting improvements is possible
by taking prompt actions necessary to implement our recommendations
and to meet the CFO Act's requirements. 


         HIGH-RISK AND MANAGEMENT
         CONTROL ISSUES
------------------------------------------------------ Chapter 5:2.2.4

Our high-risk program continued to focus on the identification of,
and progress made in, correcting the root causes of problems in 18
areas we judged especially vulnerable to fraud, waste, abuse, and
mismanagement.  Since we began the program in 1990, we have issued
over 600 reports addressing various aspects of the areas included in
the program.  Many of our recommendations have been implemented, and
notable progress has been made in many of the areas.  We are
considering options for conducting GAO's high-risk program work in
the future and for providing periodic updates on the status of areas
in the program.  The next update is scheduled for 1995. 

Our FIA work continues to focus on evaluating that act's
effectiveness and OMB's guidance for agency use in implementing it. 
We have been monitoring OMB's efforts to revise its Circular A-123,
"Internal Control Systems," a draft of which was circulated for
comment on November 28, 1994. 


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  CIVIL
      AUDITS
-------------------------------------------------------- Chapter 5:2.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:2.3.1

Bureau of Indian Affairs' Efforts to Reconcile and Audit the Indian
Trust Funds (GAO/T-AFMD-91-2)

Cost Accounting:  Department of Energy's Management of Contractor
Pension and Health Benefit Costs (GAO/AFMD-90-13)

Credit Management:  Deteriorating Credit Picture Emphasizes
Importance of OMB's Nine-Point Program (GAO/AFMD-90-12)

Federal Tax Deposit System:  IRS Can Improve the Federal Tax Deposit
System (GAO/AFMD-93-40)

Financial Audit:  Department of Veterans Affairs Financial Statements
for Fiscal Years 1989 and 1988 (GAO/AFMD-91-6)

Financial Audit:  EPA's Financial Statements for Fiscal Years 1988
and 1987 (GAO/AFMD-90-20)

Financial Audit:  Examination of Customs' Fiscal Year 1993 Financial
Statements (GAO/AIMD-94-119)

Financial Audit:  Examination of IRS' Fiscal Year 1993 Financial
Statements (GAO/AIMD-94-120)

Financial Audit:  Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131)

Financial Audit:  Guaranteed Student Loan Program's Internal Controls
and Structure Need Improvement (GAO/AFMD-93-20)

Financial Audit:  IRS Significantly Overstated Its Accounts
Receivable Balance (GAO/AFMD-93-42)

Financial Audit:  Veterans Administration's Financial Statements for
Fiscal Years 1987 and 1986 (GAO/AFMD-89-23)

Financial Management:  Actions Needed to Ensure Effective
Implementation of NASA's Accounting System (GAO/AFMD-91-74)

Financial Management:  BIA Has Made Limited Progress in Reconciling
Trust Accounts and Developing a Strategic Plan (GAO/AFMD-92-38)

Financial Management:  Control Weaknesses Limited Customs' Ability to
Ensure That Duties Were Properly Assessed (GAO/AIMD-94-38)

Financial Management:  Customs' Accountability for Seized Property
and Special Operation Advances Was Weak (GAO/AIMD-94-6)

Financial Management:  Customs' Accounting for Budgetary Resources
Was Inadequate (GAO/AIMD-94-23)

Financial Management:  Customs Did Not Adequately Account For or
Control Its Accounts Receivable (GAO/AIMD-94-5)

Financial Management:  Customs Lacks Adequate Accountability Over Its
Property and Weapons (GAO/AIMD-94-1)

Financial Management:  Customs Needs to Establish Adequate
Accountability and Control Over Its Resources (GAO/AFMD-92-30)

Financial Management:  Education's Student Loan Program Controls Over
Lenders Need Improvement (GAO/AIMD-93-33)

Financial Management:  Energy's Material Financial Management
Weaknesses Require Corrective Action (GAO/AIMD-93-29)

Financial Management:  Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds
(GAO/AIMD-94-185)

Financial Management:  Important IRS Revenue Information Is
Unavailable or Unreliable (GAO/AIMD-94-22)

Financial Management:  IRS Does Not Adequately Manage Its Operating
Funds (GAO/AIMD-94-33)

Financial Management:  IRS Lacks Accountability Over Its ADP
Resources (GAO/AIMD-93-24)

Financial Management:  IRS' Self-Assessment of Its Internal Control
and Accounting Systems Is Inadequate (GAO/AIMD-94-2)

Financial Management:  NASA's Financial Reports Are Based on
Unreliable Data (GAO/AFMD-93-3)

Financial Management:  Serious Deficiencies in State's Financial
Systems Require Sustained Attention (GAO/AFMD-93-9)

Financial Management:  Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements
(GAO/T-AIMD-94-99)

Immigration Management:  Strong Leadership and Management Reforms
Needed to Address Serious Problems (GAO/GGD-91-28)

IRS Information Systems:  Weaknesses Increase Risk of Fraud and
Impair Reliability of Management Information (GAO/AIMD-93-34)

Managing IRS:  Actions Needed to Assure Quality Service in the Future
(GAO/GGD-89-1)

Superfund:  EPA Cost Estimates Are Not Reliable or Timely
(GAO/AFMD-92-40)


   CORPORATE AUDITS ISSUE AREA
   (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:3

GAO Contact:  Robert W.  Gramling, 202/512-9406


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:3.1

Government corporations provide trillions of dollars in guarantees
and insurance in support of the nation's major financial industries,
including banks, savings and loan institutions, credit unions, and
pension plans.  The financial difficulties experienced by the banking
and thrift industries in the last decade demonstrated how rapidly
federal deposit insurance funds can be depleted.  Although the
condition of the Bank Insurance Fund (BIF) has greatly improved, the
Savings Association Insurance Fund (SAIF) is not well-capitalized. 
The Pension Benefit Guaranty Corporation (PBGC) continues to face a
large deficit and significant exposure from underfunded pension plans
that threaten the insurance program's long-term viability.  The
Resolution Trust Corporation (RTC) is nearing completion of its
responsibilities for resolving troubled thrifts but needs to ensure a
smooth transition of those responsibilities to the Federal Deposit
Insurance Corporation (FDIC).  The Panama Canal Commission will
terminate on December 31, 1999, when the Canal is to be turned over
to the Republic of Panama in operating condition and free of liens
and debts. 

To act promptly and minimize the taxpayers' exposure and costs, the
Congress and regulators need reliable and informative financial
reporting that provides early warning of emerging problems. 
Therefore, we have focused our work on ensuring that corporate
entities accurately report their financial condition and performance
and maintain internal control structures that provide accountability
and safeguard assets.  We are also evaluating whether generally
accepted accounting principles and auditing standards provide an
adequate basis for fairly and consistently reporting financial
condition and operating performance. 


         FINANCIAL STATEMENT
         AUDITS
------------------------------------------------------ Chapter 5:3.1.1

We have continued to independently assess the reliability of the
statements of BIF, SAIF, the Federal Savings and Loan Insurance
Corporation's Resolution Fund, PBGC, RTC, and the Panama Canal
Commission.  We have also continued to independently assess these
corporations' control structures and worked closely with them to
improve their internal control systems and operations.  For fiscal
year 1993, we issued unqualified opinions on each corporation's
financial statements; our audits continue, however, to disclose
internal control weaknesses of varying significance that if not
corrected could affect the reliability of future financial reports
and adversely affect their operations.  In general, the corporations
have acted quickly to address the weaknesses we identified, although
some weaknesses involve systems deficiencies that require longer-term
solutions. 

In fiscal year 1993, we provided the Congress with current
assessments of the condition of the corporations and significant
matters that could affect their future financial condition.  We noted
continued improvement in the condition of banking and thrift
institutions that has accelerated BIF's recapitalization and reduced
both BIF's and SAIF's exposure to significant losses from financial
institution failures.  But SAIF is greatly undercapitalized, and
building up its reserves is a slow process that can be affected by
events influencing the savings association industry.  Our financial
audit of RTC provided the Congress with an updated assessment of the
Corporation's funding needs to complete its responsibilities for
resolving failed thrifts and noted that weak controls over contractor
performance, coupled with market risk beyond the Corporation's
control, could affect estimated recoveries from failed thrifts'
assets.  We also continued to report on the exposure faced by PBGC
from underfunded pension plans that threatens to add to the
Corporation's deficit, and we supported legislative action to improve
the funding requirements for defined benefit plans.  We worked with
the Panama Canal Commission to include financial statement disclosure
of the status of its obligations and funding. 

In addition, we also reported that nearly all government corporations
had implemented the requirements of the Chief Financial Officers
(CFO) Act to annually issue a management report that included
financial statements, management's statement on internal controls,
and the auditor's report resulting from the audit of the financial
statements.  We found, however, that the reports were not being
consistently prepared.  We recommended that the Office of Management
and Budget (OMB), to improve the value and the usefulness of the
reports, work with the corporations to establish guidance for
assessing internal controls and reporting on other information useful
in assessing the corporations' operations and performance. 


         ACCOUNTING AND AUDITING
         STANDARDS
------------------------------------------------------ Chapter 5:3.1.2

Our efforts to improve accounting standards focused on issues related
to accounting for impaired assets and accounting and disclosures for
financial derivatives. 

With regard to auditing standards, we continued our efforts to
achieve widespread public reporting on internal controls. 

Our work on impaired assets included a review at the request of the
Senate Banking Committee on Freddie Mac's and Fannie Mae's accounting
for costs of foreclosed property.  This review disclosed that
accounting standards in this area were unclear and potentially
conflicting.  Additional work on impaired assets included our review
of bank and thrift loan loss reserve methodologies.  This review
disclosed inconsistent and potentially inappropriate reserving
practices, which were the result primarily of a lack of definitive
accounting standards and regulatory guidance for establishing loan
loss reserves.  We recommended that the Financial Accounting
Standards Board (FASB) and the bank and thrift regulators develop
more definitive authoritative standards for accounting for loan loss
reserves. 

With regard to derivatives accounting and disclosure issues, we
reported that accounting standards for derivatives, particularly
those used for hedging purposes by end users, were incomplete,
inconsistent, and had not kept pace with business practices.  We also
reported that proposed disclosure standards for derivatives, while an
improvement over existing standards, still needed to be strengthened. 
We made recommendations to FASB on these standards. 

Also, in connection with our work on derivatives, we reported that
strong internal control systems; independent, knowledgeable audit
committees; and public reporting on internal controls were critical
to firms engaged in complex derivatives activities and should play an
important role in ensuring sound financial operations and protecting
shareholder interests of these firms.  We noted, however, that the
FDIC Improvement Act's (FDICIA) corporate governance requirements did
not apply to all major dealers and end users of complex derivative
products.  We encouraged boards of directors that had not already
adopted these types of requirements to do so.  We recommended that
regulators of major over-the-counter derivatives dealers establish
specific corporate governance requirements and that the Securities
and Exchange Commission ensure that its registrants that were major
end users of complex derivative products establish and implement such
requirements. 

Our work with representatives from the Committee of Sponsoring
Organizations (COSO) resulted in an addendum to the COSO framework
for internal control assessments and reporting, which includes
safeguarding of assets as a major area of controls to be evaluated
and reported on in conjunction with assessments of controls over
financial reporting.  We believe that, with this important addendum,
the COSO framework is an effective approach to evaluating and
reporting on internal controls over financial reporting and
safeguarding of assets, including the type of risk-management
controls over derivatives activities.  We recently provided FDIC a
proposed revision to the related FDICIA regulations to incorporate
this addendum, which should now allow for attestation by the
independent accountant on controls over safeguarding of assets. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:3.2


         PENSION BENEFIT GUARANTY
         CORPORATION'S MANAGEMENT
         AND CONTROL SYSTEMS
------------------------------------------------------ Chapter 5:3.2.1

In our audit of PBGC's fiscal year 1993 financial statements, we
found that PBGC continued to progress in dealing with significant
system and internal control weaknesses and in addressing key
recommendations made in our reports on the Corporation's financial
statements.  (GAO/AFMD-92-1 and GAO/AIMD-93-21)

This progress enabled us, for the first time, to express on opinion
on each of PBGC's financial statements.  PBGC, however, continues to
face weaknesses in financial systems and internal controls.  Our
report on the fiscal year 1993 audit made additional recommendations
to address weaknesses in the assessment of contingent liabilities for
the multiemployer fund.  PBGC is addressing these weaknesses and, as
part of the fiscal year 1994 financial statement audit, we will
continue to assess its progress.  (GAO/AIMD-94-109)


         RESOLUTION TRUST
         CORPORATION'S INTERNAL
         CONTROL SYSTEM
------------------------------------------------------ Chapter 5:3.2.2

In conducting our fiscal year 1993 financial statement audit of RTC,
we found that RTC had progressed significantly in addressing the
internal control weaknesses related to safeguarding assets and
financial reporting that we identified in our report on our 1992
audit.  RTC's actions during 1993 fully resolved the one weakness we
had considered material and all the conditions we reported in 1992. 

Our 1993 financial statement audit of RTC disclosed several
additional internal control weaknesses, which we did not consider to
be material, related to general controls over some of RTC's
computerized information systems, posting securitization-related wire
receipts, and reconciliations of receiverships' asset balances to
detailed asset records.  RTC had already begun correcting all these
weaknesses during fiscal years 1993 and 1994.  In our 1993 report, we
reported that the actions, if effectively implemented, should result
in correcting the problems we had identified, and we recommended that
RTC monitor the implementation and the progress of the corrective
actions.  As part of our audit of RTC's 1994 financial statements, we
will assess RTC's success.  (GAO/AIMD-94-148)


         FEDERAL DEPOSIT INSURANCE
         CORPORATION'S INTERNAL
         CONTROL SYSTEM
------------------------------------------------------ Chapter 5:3.2.3

Our fiscal year 1992 financial statement audits of the three funds
administered by FDIC disclosed several internal control weaknesses
affecting FDIC's ability to ensure proper safeguarding of assets and
complete and accurate financial reporting.  Our report on FDIC's
internal controls as of December 31, 1992, recommended that FDIC
improve internal controls for overseeing contracted asset-servicing
entities and for ensuring that estimates of recoveries on assets
acquired in resolving failed institutions were calculated accurately
and consistently.  In our 1993 financial statement audits of the
three funds, we found that FDIC had progressed significantly in
addressing key recommendations from our 1992 report. 
(GAO/AIMD-94-135)

FDIC, however, continues to have weaknesses in controls over
asset-servicing entities and its recovery estimation process for
assets acquired through resolution activity.  Our report on our
fiscal year 1993 audits made additional recommendations to address
weaknesses in asset-servicer oversight and the recovery estimation
process.  Our 1993 report also recommended better enforcement of
policies and procedures to address weaknesses identified in FDIC's
time and attendance reporting process.  FDIC worked to address these
weaknesses in 1994, and we monitored its progress as part of our 1994
financial statement audits.  (GAO/AIMD-94-135)


         REVIEW OF BANK AND THRIFT
         EXAMINATIONS
------------------------------------------------------ Chapter 5:3.2.4

Our review of bank and thrift examinations performed by FDIC, the
Federal Reserve Board, the Office of the Controller of the Currency,
and the Office of Thrift Supervision disclosed that the examinations
had been too limited to fully identify and determine the extent of
deficiencies affecting the safety and the soundness of insured
depository institutions.  In our reports, we made various
recommendations to the regulators to improve the scope and the
quality of the examinations.  These recommendations focused on the
need to take a more proactive approach to the examination of banks
and thrifts, including more emphasis on assessing internal controls,
representative sampling of the loan portfolios, and development of a
sound methodology for assessing the adequacy of loan loss reserves. 

The receptiveness to our recommendations varied among the four
regulatory agencies.  Progress in implementing the recommendations
has also varied with nearly full implementation by one regulator and
substantial rejection of the recommendations by another.  We will
continue to monitor the agencies' progress to assess the
effectiveness of changes in the examination process.  (GAO/AFMD-93-13
and GAO/AFMD-93-14)

In our summary report on the examination review, we recommended that
the Congress determine the appropriateness of the present regulatory
structure.  Since that time, several bills have been introduced and
are still pending that propose changes to the current regulatory
structure.  (GAO/AFMD-93-15)


         FREDDIE MAC'S AND FANNIE
         MAE'S ACCOUNTING FOR
         COSTS OF FORECLOSED
         PROPERTY
------------------------------------------------------ Chapter 5:3.2.5

In our report on Freddie Mac's and Fannie Mae's accounting for costs
of foreclosed property, we recommended that FASB and the American
Institute of Certified Public Accountants (AICPA) address ambiguities
and potential conflicts in the accounting standards in this area. 
These recommendations included the need for AICPA to revise language
in Statement of Position (SOP) 92-3 implying that selling costs were
not permitted to be recognized as part of loan loss reserves, but
rather must be recognized only after foreclosure of the loan.  We
recommended also that FASB and AICPA work together to establish
consistent guidance for recognizing selling costs for all loan types. 
AICPA has already begun revising SOP 92-3, while FASB has agreed to
consider the issue of consistent guidance for selling costs under
consideration as a potential future project.  (GAO/AIMD-94-75)


         GOVERNMENT CORPORATIONS'
         MANAGEMENT REPORTS
------------------------------------------------------ Chapter 5:3.2.6

We recommended that, to improve the usefulness of the CFO Act's audit
and reporting requirements for government corporations and to enhance
the consistency of management reporting to the Congress, OMB work
closely with the heads of government corporations to establish an
appropriate framework for the corporations to prepare the required
management reports.  OMB agreed to provide the corporations both the
guidance it prepares for the executive agencies and technical
assistance as necessary.  (GAO/AIMD-94-73)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  CORPORATE
      AUDITS
-------------------------------------------------------- Chapter 5:3.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:3.3.1

Asset Management System:  Liquidation of Failed Bank Assets Not
Adequately Supported by FDIC System (GAO/IMTEC-93-8)

Bank and Thrift Failures:  FDIC and RTC Could Do More to Pursue
Professional Liability Claims (GAO/T-GGD-92-42)

Bank and Thrift Regulation:  Better Guidance Is Needed for Real
Estate Evaluations (GAO/GGD-94-144)

Bank and Thrift Regulation:  Improvements Needed In Examination
Quality and Regulatory Structure (GAO/AFMD-93-15)

Bank Examination Quality:  FRB Examinations and Inspections Do Not
Fully Assess Bank Safety and Soundness (GAO/AFMD-93-13)

Bank Examination Quality:  OCC Examinations Do Not Fully Assess Bank
Safety and Soundness (GAO/AFMD-93-14)

Bank Insider Activities:  Insider Problems and Violations Indicate
Broader Management Deficiencies (GAO/GGD-94-88)

CPA Audit Quality:  Status of Actions Taken to Improve Auditing and
Financial Reporting of Public Companies (GAO/AFMD-89-38)

Credit Unions:  Reforms for Ensuring Future Soundness (GAO/GGD-91-85)

Employee Benefits:  Improved Plan Reporting and CPA Audits Can
Increase Protection Under ERISA (GAO/AFMD-92-14)

Farm Credit System:  Farm Credit Administration Effectively Addresses
Identified Problems (GAO/GGD-94-14)

Farm Credit System:  Repayment of Federal Assistance and Competitive
Position (GAO/GGD-94-39)

Federal Home Loan Bank System:  Reforms Needed to Promote Its Safety,
Soundness, and Effectiveness (GAO/GGD-94-38)

Federal Reserve System Audits:  Restrictions on GAO's Access
(GAO/T-GGD-94-44)

Financial Audit:  Federal Deposit Insurance Corporation's Internal
Controls as of December 31, 1992 (GAO/AIMD-94-35)

Financial Audit:  Federal Deposit Insurance Corporation's 1993 and
1992 Financial Statements (GAO/AIMD-94-135)

Financial Audit:  Pension Benefit Guaranty Corporation's 1992 and
1991 Financial Statements (GAO/AIMD-93-21)

Financial Audit:  Pension Benefit Guaranty Corporation's 1993 and
1992 Financial Statements (GAO/AIMD-94-109)

Financial Audit:  Resolution Trust Corporation's 1993 and 1992
Financial Statements (GAO/AIMD-94-148)

Financial Audit:  System and Control Problems Further Weaken the
Pension Benefit Guaranty Fund (GAO/AFMD-92-1)

Financial Derivatives:  Actions Needed to Protect the Financial
System (GAO/GGD-94-133)

Government Corporations:  CFO Act Management Reporting Could Be
Enhanced (GAO/AIMD-94-73)

Government-Sponsored Enterprises:  Freddie Mac's and Fannie Mae's
Accounting for Costs of Foreclosed Property (GAO/AIMD-94-75)

1992 Bank Resolutions:  FDIC Chose Methods Determined Least Costly,
But Needs to Improve Process (GAO/GGD-94-107)

1992 Thrift Resolutions:  RTC Policies and Practices Did Not Fully
Comply With Least-Cost Provisions (GAO/GGD-94-110)

Pension Plans:  Stronger Labor ERISA Enforcement Should Better
Protect Plan Participants (GAO/HEHS-94-157)

Premium Accounting System:  Pension Benefit Guaranty Corporation
System Must Be An Ongoing Priority (GAO/IMTEC-92-74)

Private Pensions:  Protections for Retirees' Insurance Annuities Can
Be Strengthened (GAO/HRD-93-29)

Resolution Trust Corporation:  Analysis of Selected Asset Sales and
Financial Data (GAO/GGD-94-37)

Resolution Trust Corporation:  Asset Pooling and Marketing Practices
Add Millions to Contract Costs (GAO/GGD-93-2)

Resolution Trust Corporation:  Better Analyses Needed Before
Terminating Asset Management Contracts (GAO/GGD-94-147)

Resolution Trust Corporation:  Better Assurance Needed That
Contractors Meet Fitness and Integrity Standards (GAO/GGD-93-127)

Resolution Trust Corporation:  Ineffective Management of HomeFed Bank
Environmental Services Contracting (GAO/GGD-94-62)

Resolution Trust Corporation:  Loan Portfolio Pricing and Sales
Process Could Be Improved (GAO/GGD-93-116)

Resolution Trust Corporation:  Oversight of SAMDA Property Management
Contractors Needs Improvement (GAO/GGD-94-5)


   DEFENSE FINANCIAL AUDITS ISSUE
   AREA (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:4

GAO Contact:  David M.  Connor, 202/512-9095


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:4.1

Our work has concentrated on the financial and accounting policies,
practices, internal controls, and systems the Department of Defense
(DOD) uses to account for, control, and report on its billions of
dollars of inventories, weapon systems, equipment, and other assets. 
Our audits have shown that many DOD financial systems are weak,
outdated, and inefficient and cannot routinely produce relevant,
timely, and accurate information on assets controlled by DOD nor
produce the results and the costs of DOD's operations.  Also, our
audits have illustrated to the Congress, DOD, and the public the
critical need for more reliable financial information and effective
controls and systems to strengthen accountability and control over
DOD's multibillion-dollar investment in equipment and inventories. 

In particular, our work was instrumental in gaining DOD officials'
acknowledgment of the extent and the severity of DOD's financial
management problems and the obstacles it faces in bringing adequate
financial management to the Department.  The Secretary's January 1994
annual management report to the President and the Congress
acknowledged that financial management complacency had permitted
pervasive and detrimental weaknesses to exist in DOD financial
management operations.  The report cited several fundamental causes
of DOD financial management problems, including "...vertically
oriented disparate organizations, predominance of physical over
financial controls, and complacency about financial management
problems."

Such a forthright admission of serious weaknesses placed DOD, for the
first time, in a better position to comprehensively and realistically
address the weaknesses.  DOD took the first steps necessary to
correct its fundamental financial management weaknesses.  One of the
major actions DOD took in response to our recommendations was
establishment of a Senior Financial Management Oversight Council to
provide a forum for review and discussion of financial management
improvement issues. 

Also, our training, extensive encouragement, assistance, and
oversight was a critical factor in ensuring the success of the DOD
audit community in performing financial audits mandated by the Chief
Financial Officers (CFO) Act of 1990.  These organizations are
devoting substantial efforts and resources to conducting the audits
required by the CFO Act. 


         FINANCIAL STATEMENT
         AUDITS
------------------------------------------------------ Chapter 5:4.1.1

Our financial statement audits of the Air Force and Army identified
weaknesses in the basic processes used to develop the financial
information managers needed for effective management and oversight,
as well as accountability for DOD's extensive inventories of weapon
systems, equipment, supplies, funds expended, and liabilities
incurred.  Because of this, our financial audits resulted in (1)
identification of serious problems in DOD's financial operations; (2)
improvements in DOD's ability to safeguard its assets; (3) DOD's
implementation of corrective actions that yielded significant
improvements in the integrity and the reliability of agency financial
information; and (4) improvements in financial accounting and
reporting that, if built upon, will ultimately enable DOD to better
meet not only its own management information needs but also the
reporting objectives of the CFO Act.  We testified in April 1994 that
our financial audit work had demonstrated that expanding and making
permanent the requirement for audited financial statements in DOD, as
well as for agencies governmentwide, was critical to ensuring basic
accountability and making available the facts needed to run the
government more efficiently. 

In November 1993, we reported that the Army's system for recording
and reporting real property at installations did not provide complete
and accurate information on the quantity and the type of Army
structures and facilities.  We specifically pointed out the need for
such information in developing real property maintenance budgets and
in providing baseline information needed to make base realignment and
closure decisions. 

In December 1993, we reported that the Army's budget execution system
had fundamental weaknesses that limited the Army's ability to ensure
its compliance with the Antideficiency Act.  The report also pointed
out that inaccurate reporting could cause the Army to underestimate
its future required outlays. 

Also, we worked with the Army Audit Agency in its first audit of the
Army's fiscal year 1993 financial statements.  A significant result
of this effort was to continue and strengthen the cooperation
fostered during our fiscal year 1991 and 1992 audits of the Army's
financial statements. 

With our assistance and oversight, the Air Force Audit Agency
completed its audit of the Air Force's fiscal year 1992 consolidated
financial statements--its first financial statement audit.  In
addition, we reviewed this audit and provided suggestions for
improving future audits. 


         INTERNAL CONTROLS
------------------------------------------------------ Chapter 5:4.1.2

Our reports and testimonies highlighted for both the Congress and DOD
the importance of effective internal controls and the consequences
when they break down.  Our audits focused on identifying whether
DOD's internal controls ensured that its financial management systems
could accurately capture, process, and report on day-to-day
transactions involving billions of dollars. 

In April 1994, we testified that weak internal controls over
disbursements had resulted in millions of dollars in overpayments to
contractors and illegal payments, such as about $3 million in
fraudulent payments to a former Military Sealift Command supply
officer.  We testified also that ineffective internal controls had
resulted in an estimated $7.8 million in unauthorized payroll
payments to "ghost" soldiers and deserters.  Our testimony also
pointed out that, to date, DOD had collected over $1.7 million of
this amount.  Further, in August 1994, we sent a letter to the
Director of Defense Finance and Accounting Service Center--Cleveland
and the Assistant Secretary of the Navy for Financial Management
pointing out that weak internal controls resulted in a $163 billion
error in the Navy's fiscal year 1993 Treasury Report on Financial
Position (SF-220). 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:4.2

Although DOD increased its ability to accurately account for and
report on its financial operations and the financial status of its
resources, much more remains to be done.  It is important for DOD to
pursue short-term and intermediate improvements, as well as long-term
system enhancements.  The following recommendations are among the
most important recommendations that have yet to be fully implemented. 


         ARMY PROGRAMS
------------------------------------------------------ Chapter 5:4.2.1

In December 1993, we reported that the lack of sustained DOD
leadership had impaired the Army's ability to strengthen financial
accountability.  We recommended that the Acting DOD CFO (1) develop
and implement a comprehensive plan, with specific milestones, for
identifying and monitoring improvements in DOD and Army financial
management, including personnel qualifications, organizational
structures, and systems used to carry out Army financial management,
and (2) revise existing policies and procedures to more clearly
delineate the roles of the various DOD and Army organizations
regarding Army financial management responsibilities. 
(GAO/AIMD-94-12)

Our November 1993 report on the Army's Industrial Fund (AIF), now
part of the Defense Business Operations Fund, showed that AIF, which
has annual revenues of nearly $3 billion, had not achieved its goal
of breaking even over time because billing rates had not been set at
levels to recover all costs and because excess direct labor capacity
at depots had increased overhead costs.  The report recommended that
the Secretary of Defense direct the DOD Comptroller to (1) set prices
based on realistic estimates of all the costs that would be incurred
in providing goods and services to AIF customers, (2) adjust prices
only by factors directly related to the costs expected to be
incurred, and (3) request congressional appropriations whenever
accumulated prior-year losses were adversely affecting the operation
of the fund.  (GAO/AIMD-94-16)

In October 1993, we reported that the reliability of weapon system
cost information in the Army's Selected Acquisition Reports to the
Congress and DOD and in Army reports used to support critical cost
decisions was highly questionable.  Our report contained
recommendations for improving how these costs were identified and for
ensuring that the Congress received useful, accurate information on
weapon system costs.  (GAO/AIMD-94-10)

In June 1993, we reported that we could not express an opinion on the
Army's fiscal year 1992 financial statements, in part, because
corrective actions had not been completed on previous recommendations
and the weaknesses we previously reported still existed. 
Specifically, our August 1992 report on the Army's fiscal year 1991
financial management operations and financial reporting contained
recommendations for improving overall financial management by (1)
enhancing internal controls and accountability over assets and
resources, (2) developing reliable financial performance measures,
and (3) improving integration of logistics and financial systems. 
These recommendations were not fully implemented in fiscal year 1992. 
(GAO/AFMD-92-82)


         AIR FORCE PROGRAMS
------------------------------------------------------ Chapter 5:4.2.2

Our November 1992 report on Air Force depot maintenance, a Defense
Business Operations Fund activity, recommended that DOD implement
procedures to more accurately determine costs for billing customers,
improve billing practices, and ensure compliance with Defense
policies regarding Fund operations.  (GAO/AFMD-93-5)


         NAVY PROGRAMS
------------------------------------------------------ Chapter 5:4.2.3

In June 1993, we issued a report recommending that the Assistant
Secretary of the Navy for Financial Management act to correct the
$13.6 billion of unmatched disbursements in the Standard Accounting
and Reporting System, one of the Navy's major accounting systems. 
(GAO/AFMD-93-21)

Our March 1993 report on the Navy's depot maintenance industrial
fund, a Defense Business Operations Fund organization, showed that
the fund had losses totaling over $790 million for fiscal years 1989
through 1991 because it had not recovered all costs incurred in
providing customers with goods and services.  The recommendations
focused on ensuring that (1) prices were based on realistic estimates
of the costs that would be incurred in providing the goods and
services to customers and (2) prices were not adjusted by factors not
directly related to the costs incurred, such as the recovery of prior
year losses.  (GAO/AFMD-93-18)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  DEFENSE
      FINANCIAL AUDITS
-------------------------------------------------------- Chapter 5:4.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:4.3.1

Air Force Depot Maintenance:  Improved Pricing and Financial
Management Practices Needed (GAO/AFMD-93-5)

DOD Procurement:  Overpayments and Underpayments at Selected
Contractors Show Major Problem (GAO/NSIAD-94-245)

Financial Audit:  Air Force Does Not Effectively Account for Billions
of Dollars of Resources (GAO/AFMD-90-23)

Financial Management:  Army Conventional Ammunition Production Not
Effectively Accounted for or Controlled (GAO/AFMD-92-57)

Financial Management:  Army Industrial Fund Did Not Recover Costs
(GAO/AIMD-94-16)

Financial Management:  Army Lacks Accountability and Control Over
Equipment (GAO/AIMD-93-31)

Financial Management:  Army Real Property Accounting and Reporting
Weaknesses Impede Management Decisionmaking (GAO/AIMD-94-9)

Financial Management:  Defense's System for Army Military Payroll Is
Unreliable (GAO/AIMD-93-32)

Financial Management:  Immediate Actions Needed to Improve Army
Financial Operations and Controls (GAO/AFMD-92-82)

Financial Management:  Inadequate Accounting and System Project
Controls at AID (GAO/AFMD-93-19)

Financial Management:  Internal Control Weaknesses Impede Air Force's
Budgeting for Repairable Items (GAO/AFMD-92-47)

Financial Management:  Navy Industrial Fund Has Not Recovered Costs
(GAO/AFMD-93-18)

Financial Management:  Navy Records Contain Billions of Dollars in
Unmatched Disbursements (GAO/AFMD-93-21)

Financial Management:  Poor Internal Control Has Led to Increased
Maintenance Costs and Deterioration of Equipment (GAO/AFMD-93-8)

Financial Management:  Reliability of Weapon System Cost Reports Is
Highly Questionable (GAO/AIMD-94-10)

Financial Management:  Strong Leadership Needed to Improve Army's
Financial Accountability (GAO/AIMD-94-12)

Navy Financial Reports (GAO/AIMD-94-166R)


   INFORMATION RESOURCES
   MANAGEMENT--GENERAL GOVERNMENT
   DIVISION ISSUE AREA (BUDGET
   FUNCTION 990)
---------------------------------------------------------- Chapter 5:5

GAO Contact:  Hazel E.  Edwards, 202/512-6418


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:5.1

Information technology systems are the lifeblood of the federal
government, sustaining vital functions, such as tax collection and
drug interdiction.  Yet, it is increasingly clear that managing the
federal government's information technology is a monumental task
involving complex technologies and billions of dollars.  In many
cases, federal agencies are facing the enormous challenge of
developing or modernizing vital systems to ensure that the public
receives the services it expects and deserves. 

Our work on information technology systems complements the work of
GAO's General Government Division.  Of significance is our work in
the tax policy and administration, administration of justice, and
financial institutions and markets areas. 


         TAX POLICY AND
         ADMINISTRATION
------------------------------------------------------ Chapter 5:5.1.1

Our continuing examination of the Internal Revenue Service's (IRS)
multibillion dollar Tax Systems Modernization (TSM) Program pointed
out inadequacies in IRS' plans for interim projects and highlighted
critical gaps in technical guidelines for TSM.  As a result of our
work, the Congress reduced IRS' fiscal year 1995 TSM request by $339
million and required that IRS satisfy the House and Senate
Appropriations Committees that it was resolving specific program and
project management issues.  In addition, IRS has scaled back its
plans for initiating interim projects and has agreed to develop
technical guidelines or standards for TSM. 

During our testimony at a congressional hearing, we reported that
unresolved IRS systems security weaknesses posed a high risk to
taxpayer data.  Consequently, the Congress pressed the agency to
improve system security, reduce unauthorized browsing of taxpayer
accounts by employees, and increase detection of fraudulent returns. 
Our work in this area has heightened awareness of security to such an
extent that the Congress asked the Office of Management and Budget
and GAO to designate IRS tax-filing fraud as a high-risk area. 


         ADMINISTRATION OF JUSTICE
------------------------------------------------------ Chapter 5:5.1.2

We testified jointly with the General Government Division on the
reauthorization of the Judicial Automation Fund, which has provided
over $350 million over the past 4 years to improve automation in
federal courts.  As a result, the Administrative Office of the United
States Courts agreed to (1) develop a strategic business plan to
which the automation plan would be linked, (2) improve oversight of
court automation efforts, and (3) finalize and implement life cycle
management standards to ensure quality systems design and
implementation. 

Our initial work reviewing the U.S.  Custom Service's redesign of its
Automated Commercial System (ACS)--projected to cost $100 million
over the next 5 years--revealed problems, which we discussed with
Customs staff.  In response to our concerns, Customs (1) altered the
organizational placement of its ACS redesign team to facilitate
better coordination and (2) created an inventory of existing system
problems for use as a monitoring tool to ensure that these problems
would be resolved in the redesign. 

Our testimony on Federal Bureau of Investigation (FBI) wiretapping
capabilities provided timely information (1) confirming the technical
difficulties of wiretaps in today's environment of advanced telephone
technology and services and (2) stating that the cost of modifying
the public telephone network to preserve wiretapping capabilities
could range from hundreds of millions to billions of dollars.  This
work supported legislation to sustain the FBI's ability to perform
its mission. 


         FINANCIAL INSTITUTIONS
         AND MARKETS
------------------------------------------------------ Chapter 5:5.1.3

Our work at the Federal Deposit Insurance Corporation (FDIC) and the
Resolution Trust Corporation (RTC) improved those agencies' use of
information to manage agency functions.  For example, during our
review of FDIC's information systems that support asset disposition,
we found that FDIC had not analyzed its various disposition
strategies to determine which ones could produce the greatest return
for the government.  We met with FDIC managers and discussed how the
analyses could improve asset management.  FDIC management agreed with
our findings and recognized the need to analyze asset information to
assess disposition strategies. 

At RTC, our work on data integrity revealed that 57 percent of the
active loan records in the Central Loan Data Base--with a total book
value of $20 billion--contained one or more errors in the information
describing the loans.  As a result, the agency reduced the error
rate, providing more-accurate information on which to base loan
management decisions. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:5.2

Of the reports containing open recommendations, most of the key
recommendations have been implemented, and action has begun on all
remaining recommendations.  In addition, some of our agency-specific
reports and testimonies often fall into other issue areas. 
Consequently, key recommendations in areas such as tax policy and
financial institutions are covered in the appropriate issue area
sections of this report.  Finally, over the last few years, we have
worked closely with the Congress and IRS to recommend program
management actions that IRS should take to reduce the risk of
spending funds on projects that will not support tax system
modernization. 

Our testimony on the Justice Automation Fund disclosed that the
judiciary's long-range automation plan was not linked to a strategic
plan that provided a clear vision of the judiciary's mission, goals,
and objectives.  Without such a link, there was no assurance that
automation would help meet the judiciary's missions, goals, and
objectives; address high-priority needs; and use scarce resources
effectively.  Nor was there effective audit oversight of automation
in the local courts.  We recommended that the Congress reauthorize
the Fund for less than the 5 years that the judiciary had requested. 
We also recommended that during the reauthorization period, the
judiciary report annually to the Congress on progress in (1)
developing a strategic business plan for the U.S.  courts, (2)
implementing a long-range information resources management plan based
on that strategic plan, and (3) achieving effective audit oversight
of court automation efforts.  Shortly after our testimony, the
Congress passed legislation to reauthorize the Fund for 3 years and
included language in the reauthorization act requiring the U.S. 
courts to implement our recommendations.  U.S.  court officials are
addressing those recommendations.  (GAO/T-GGD/AIMD-94-176)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INFORMATION RESOURCES
      MANAGEMENT--GENERAL
      GOVERNMENT DIVISION
-------------------------------------------------------- Chapter 5:5.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:5.3.1

Asset Management System:  Liquidation of Failed Bank Assets Not
Adequately Supported by FDIC System (GAO/IMTEC-93-8)

Collecting Back Taxes:  IRS Phone Operations Must Do Better
(GAO/IMTEC-91-39)

Debt Management:  More Aggressive Actions Needed to Reduce Billions
in Overpayments (GAO/HRD-91-46)

Environmental Enforcement:  EPA Needs a Better Strategy to Manage Its
Cross-Media Information (GAO/IMTEC-92-14)

FAA Information Resources:  Agency Needs to Correct Widespread
Deficiencies (GAO/IMTEC-91-43)

Illegal Aliens:  Despite Data Limitations, Current Methods Provide
Better Population Estimates (GAO/PEMD-93-25)

Immigration Management:  Strong Leadership and Management Reforms
Needed to Address Serious Problems (GAO/GGD-91-28)

Information Management:  Immigration and Naturalization Service Lacks
Ready Access to Essential Data (GAO/IMTEC-90-75)

Judiciary Automation Fund:  Reauthorization Should Be Linked to
Better Planning and Reporting (GAO/T-GGD/AIMD-94-176)

Justice Automation:  Tighter Computer Security Needed
(GAO/IMTEC-90-69)

Occupational Safety and Health:  Assuring Accuracy in Employer Injury
and Illness Records (GAO/HRD-89-23)

Tax Administration:  Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130)

U.S.  Government Securities:  More Transaction Information and
Investor Protection Measures Are Needed (GAO/GGD-90-114)


   INFORMATION RESOURCES
   MANAGEMENT--HEALTH, EDUCATION,
   AND HUMAN SERVICES DIVISION
   ISSUE AREA (BUDGET FUNCTION
   990)
---------------------------------------------------------- Chapter 5:6

GAO Contact:  Frank W.  Reilly, 202/512-6408


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:6.1

This issue area focuses on information systems needs of federally
funded health and human services programs.  These programs, which are
administered by federal, state, and local government agencies, touch
the lives of nearly every U.S.  citizen, providing benefits in such
areas as medical benefits and assistance, aid to families and
children, social security, veterans benefits, education, and pension
and unemployment insurance.  Each month, over 100 million payments
are made to recipients.  Outlays for these programs were about 55
percent of the almost $1.4 trillion in 1992 federal outlays and are
expected to climb to well over 65 percent of the $2 trillion in
federal outlays expected in the year 2000. 

Automation is critical to delivering these benefits to the public. 
Automated systems are essential if government, at all levels, is to
effectively and efficiently manage these programs and ensure timely
delivery of benefits.  Investments in automation are expected to cost
tens of billions of dollars through the end of the century. 

Our assignments focus on the steps that the federal and state
governments need to take to ensure that current systems are modified
and future systems are developed to adequately support health,
education, and human services programs and become an integral part of
much broader management strategies to improve public service and
reengineer--rather than just automate--inefficient paper-burdened
operations.  As such, our work complements the administration's
initiatives to reinvent government and reform our nation's health
care and welfare systems. 

We see vast opportunities in both federal and state governments for
improving information resources--hardware, software, data, and
people--resulting in billions of dollars in savings.  We have issued
reports covering federal health care program systems at the
Departments of Defense (DOD), Veterans Affairs, and Health and Human
Services (HHS); national health care reform systems; welfare programs
systems at the federal and state levels; and earned benefits programs
systems at the Social Security Administration (SSA), the Veterans
Benefits Administration (VBA), and the Pension Benefit Guaranty
Corporation (PBGC). 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:6.2


         DEPARTMENT OF HEALTH AND
         HUMAN SERVICES
------------------------------------------------------ Chapter 5:6.2.1

In June 1994, we reported on HHS actions to implement national and
state systems for child welfare payments.  Since these systems were
just beginning to be developed, we made several recommendations to
the Department to help it work with state agencies in developing the
new systems.  These recommendations included (1) working with welfare
experts to identify and obtain additional information necessary for
developing federal, state, and local child welfare policy; (2)
determining the functional capabilities of a comprehensive statewide
automated information system and the feasibility of developing a data
dictionary of common elements; (3) establishing an approach to
routinely collect, and disseminate information on, innovative state
and vendor systems; and (4) working with states, vendors, and
information systems experts to determine the key capabilities needed
by a comprehensive automated system and provide a model of this
system to states in order to aid in system development efforts. 
(GAO/AIMD-94-37)

Also, in June 1994, we reported on the automated systems of HHS' Job
Opportunities and Basic Skills Training Program (JOBS) and found that
they did not focus on the program's employment objectives.  We
recommended that HHS (1) work with appropriate state agencies to
determine how technology could best be used to achieve the overall
JOBS program objectives, (2) incorporate these features into the
system guidance for use by states, and (3) continue to work with
states to correct problems with JOBS data and disseminate the data to
other states to improve overall data quality.  (GAO/AIMD-94-44)

Public Health Service:  In 1991, we reviewed how the Public Health
Service's Agency for Health Care Policy and Research (AHCPR) had
explored ways in which automated medical records could be used.  We
found that AHCPR did not have a strategic plan and corresponding
budget to bring about greater use of automated medical records and
that it had not established completion milestones for its research. 
This situation still exists.  Any future health care reform proposals
are likely to require greater use of automated medical information,
which further highlights the continued importance of these
recommendations.  (GAO/IMTEC-91-5)

Health Resources and Services Administration:  In 1993, we reported
that the National Practitioner Data Bank, operated by the Health
Resources and Services Administration (HRSA), was experiencing
several problems.  We made a number of recommendations and HRSA has
been working since then to correct the problems noted.  HRSA,
however, still needs to improve communications with reporting and
querying organizations to encourage them to use social security
numbers to improve the timeliness of query responses.  HRSA also
needs to institute additional safeguards to ensure that its current
hard copy paper system is more accurate from a security perspective
and that its new electronic system to be developed is a secure data
network.  (GAO/IMTEC-93-1)

Health Care Financing Administration:  During 1994, we reported on
the Health Care Financing Administration's (HCFA) Medicare
Transaction System (MTS) and found that HCFA top management had not
been involved in the planning, the acquisition, and the management of
the project; that information resources management (IRM) officials
had not participated in the project; and that because of the problems
found, the agency needed to keep congressional appropriations and
oversight committees apprised of the project's progress, problems,
milestones, and costs as the system was developed and deployed.  HCFA
has agreed to implement our recommendations.  During 1995, we will
report on the progress that has been made on the MTS project. 
(GAO/HEHS/AIMD-94-79)


         DEPARTMENT OF VETERANS
         AFFAIRS
------------------------------------------------------ Chapter 5:6.2.2

Veterans Benefits Administration:  In November 1992, we reported that
VBA's acquisition of information resources for modernization was
premature and that the contract award should be postponed.  In
December 1992, VBA awarded the first of three planned contracts for
the modernization.  In 1993, however, the Office of Management and
Budget negotiated an agreement with the Department to redirect VBA's
modernization effort and establish annual service improvement goals. 
As of the end of the first year of the negotiated agreement, VBA had
not met its first-year service improvement goals and service had
continued to deteriorate.  We plan to continue to monitor VBA's
modernization effort as well as its progress in meeting the goals for
service improvement.  (GAO/IMTEC-93-6)


         DEPARTMENT OF DEFENSE
------------------------------------------------------ Chapter 5:6.2.3

During 1992, we reported on the readiness of DOD's Composite Health
Care System (CHCS) for worldwide deployment.  We recommended that the
Congress not approve CHCS for worldwide deployment until the
Department had completed several actions.  Since our report, DOD, to
improve CHCS, has been working on correcting the problems noted.  But
it has yet to issue a new detailed plan for worldwide deployment that
includes deployment costs and a configuration management strategy. 
We are continuing to monitor DOD's progress in producing this new
deployment plan.  (GAO/IMTEC-93-11)

In July 1994, we reported on the tools and the methodology DOD used
to manage CHCS performance.  We reported that, to provide the
performance management that was warranted in a state-of-the-art
system, such as CHCS, tools must be obtained that could measure
response times and resource utilization, determine the causes of
problems, project workload and system configuration changes, and
reliably measure system reserve capacity.  (GAO/AIMD-94-61)


         PENSION BENEFIT GUARANTY
         CORPORATION
------------------------------------------------------ Chapter 5:6.2.4

In 1992, we reported that PBGC must give priority attention to
developing and operating its premium accounting system, especially in
regard to hiring management and technical support staff.  PBGC
dedicated a senior manager to develop the new system and hired a
contractor to perform its day-to-day operations of the system when it
becomes operational.  Although PBGC has taken steps to obtain some
technical and IRM expertise through contractors, PBGC officials have
stated that strategic information management would still not be
addressed for several years.  Thus, PBGC continues to operate by
addressing short-term needs without addressing the root cause of its
IRM weaknesses.  We plan to continue to monitor the implementation of
the premium accounting system and other IRM activities at PBGC. 
(GAO/IMTEC-92-74)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INFORMATION RESOURCES
      MANAGEMENT--HEALTH,
      EDUCATION, AND HUMAN
      SERVICES DIVISION
-------------------------------------------------------- Chapter 5:6.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:6.3.1

Child Welfare:  HHS Begins to Assume Leadership to Implement National
and State Systems (GAO/AIMD-94-37)

Composite Health Care System:  Outpatient Capability Is Nearly Ready
for Worldwide Deployment (GAO/IMTEC-93-11)

Health Information Systems:  National Practitioner Data Bank
Continues to Experience Problems (GAO/IMTEC-93-1)

Medical ADP Systems:  Automated Medical Records Hold Promise to
Improve Patient Care (GAO/IMTEC-91-5)

Medical ADP Systems:  Defense's Tools and Methodology for Managing
CHCS Performance Need Strengthening (GAO/AIMD-94-61)

Medicare:  New Claims Processing System Benefits and Acquisition
Risks (GAO/HEHS/AIMD-94-79)

Premium Accounting System:  Pension Benefit Guaranty Corporation
System Must Be An Ongoing Priority (GAO/IMTEC-92-74)

Prescription Drugs:  Automated Prospective Review Systems Offer
Significant Potential Benefits for Medicaid (GAO/AIMD-94-130)

Social Security Administration:  Risks Associated With Information
Technology Investment Continue (GAO/AIMD-94-143)

Veterans Benefits:  Acquisition of Information Resources for
Modernization Is Premature (GAO/IMTEC-93-6)

Welfare to Work:  JOBS Automated Systems Do Not Focus on Program's
Employment Objective (GAO/AIMD-94-44)


   INFORMATION RESOURCES
   MANAGEMENT--NATIONAL SECURITY
   AND INTERNATIONAL AFFAIRS
   DIVISION ISSUE AREA (BUDGET
   FUNCTION 990)
---------------------------------------------------------- Chapter 5:7

GAO Contact:  Jack Brock, 202/512-6240


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:7.1

Information resources are essential to the agencies we cover--the
Department of Defense (DOD), the National Aeronautical Space
Administration, the State Department, and the Agency for
International Development (AID).  These agencies annually spend
billions of dollars acquiring and operating computer and
communications systems.  DOD alone accounts for over half of the
federal government's expenditure for computers and software,
including those embedded in weapon, space, and command and control
systems.  These agencies, however, continue to have difficulty in
using technology effectively to accomplish their many diverse
missions. 

Our work has helped these agencies improve operations and financial
management and address the many problems they have encountered in
managing information resources.  Our accomplishments include the
following: 

  -- Because of our work examining DOD's massive corporate
     information management (CIM) initiative to streamline business
     processes and modernize automated systems, DOD made key changes
     that will greatly enhance CIM's chances for success.  In
     response to our recommendations, DOD developed a CIM strategic
     plan and established an Enterprise Integration Executive Board
     and an Enterprise Integration Corporate Management Council to
     more effectively manage CIM.  Several congressional committees
     used this work, coupled with our assistance in analyzing the
     fiscal year 1995 budget, to improve oversight and reduce the
     budget request by over $200 million. 

  -- Our reports and testimonies on DOD's financial management
     operations alerted the Congress that DOD's financial operations
     were in disarray.  For example, our work on the $77 billion
     Defense Business Operations Fund (DBOF) pointed out weaknesses
     in DOD's ability to properly manage DBOF.  Our work was used
     extensively by the defense authorizing committees in the fiscal
     year 1995 budget process and was the basis for legislation.  Our
     disbursement work was used in Senate hearings to highlight the
     need for more effective financial management and Chief Financial
     Officers (CFO) Act implementation.  Our work also resulted in a
     $820 million reduction to DOD's fiscal year 1994 budget request. 

  -- Our review of the Navy's planned $2 billion TAC-4 computer
     procurement resulted in significant improvements to the
     acquisition.  Our work resulted in increased competition, better
     contract administration, and a cost avoidance of over $800
     million. 

  -- DOD continued to have problems developing computer systems
     embedded in its weapon and command and control systems.  Our
     reports on the C-17 and F-22 aircraft programs showed that
     hardware and software development was still not being
     effectively managed and, as a result, continued to cause
     schedule delays, cost overruns, and performance shortfalls.  Our
     report on the Cheyenne Mountain Upgrade noted that the program
     was 8 years behind schedule and nearly $800 million over budget
     and concluded that system requirements could not be met without
     an overall data-processing architecture.  DOD is taking actions
     to address these problems. 

  -- Our work at the international agencies resulted in many changes
     to improve overall accountability and information resources
     management (IRM) operations.  For example, at AID, the CFO is
     taking major steps to (1) improve AID's financial management
     systems, (2) institute a strategic planning process to help
     define AID's mission, and (3) develop an agency business plan
     for AID's IRM program.  At State, the Under Secretary for
     Management is spearheading an agencywide improvement effort to
     implement a new integrated financial management system intended
     to improve overall accountability and solve longstanding
     internal control problems that we identified in prior years. 

  -- Our work was also influential in improving several
     high-technology initiatives.  For example, our work on DOD's
     Electronic Data Interchange (EDI) Program, intended to enable
     paperless business transactions, was used by the Office of
     Management and Budget (OMB) to develop plans for the
     governmentwide electronic acquisition network and by the
     Congress in its major procurement reform legislation.  We also
     presented a GAO-wide seminar on EDI.  Similarly, our work on
     DOD's Continuous Acquisition and Life-Cycle Support initiative
     should bring about dramatic improvements in this program to
     automate the reams of paper technical data needed to support
     today's weapon systems.  Finally, our report on the Advanced
     Research Projects Agency's High Performance Computing and
     Communications (HPCC) Program was highly publicized and
     influential in improving this important "information
     superhighway" initiative. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:7.2

We are working with several congressional committees and agency
officials to implement our key open recommendations.  They cover a
broad cross section of IRM, financial management, and technical
issues.  For example, our report on DOD's telecommunications
infrastructure concluded that additional strategic planning was
needed and that roles and responsibilities for managing
telecommunications resources needed to be more clearly defined.  We
are working with the Defense Information Systems Agency to improve
telecommunications planning and management.  (GAO/IMTEC-93-15)

Our report on DOD's EDI program recommended that the Secretary of
Defense develop a strategic plan, a standard Department-wide approach
for implementing EDI, and communications policies and procedures
needed to support EDI implementation.  We recommended also that the
military services and DOD agencies defer acquisition of EDI products
and services until these plans were complete.  We continue to work
with OMB and DOD to improve the EDI program.  (GAO/AIMD-94-17)

Also, we are working with the Congress and DOD officials to implement
several open recommendations in the financial management area.  For
example, we testified and reported, on the basis of our work on the
Army and Navy industrial fund and Air Force depot maintenance
operations, that DOD's practice of increasing prices to recover prior
losses was inconsistent with a basic DBOF tenet and that prices
should instead reflect the actual cost incurred.  We recommended that
this practice not be allowed and that, instead, prior year losses be
reconciled through the appropriations process.  There is much debate
over the method to be used to recover prior year losses.  We are
working with the House and Senate Authorization and Appropriations
Committees to get DOD to better explain and improve its practices for
DBOF management.  (GAO/AFMD-93-5, GAO/AFMD-93-18, GAO/AIMD-94-16, and
GAO/AIMD-94-132)

Our work on the Advanced Research Projects Agency's HPCC Program
identified weaknesses in the program that could slow technological
progress and prevent the agency from achieving its goals.  We made
recommendations intended to broaden participation in the program and
better facilitate research on high-performance computing.  We are
working with the agency to implement our recommendations. 
(GAO/IMTEC-93-24)

Also, we are working with the State Department and AID to implement
several key open recommendations.  At AID, we recommended that the
CFO match disbursements with appropriate obligations, maintain
accurate system and property records, update systems' documentation,
and develop a strategic IRM plan.  (GAO/AFMD-93-19)

Similarly, our State Department report recommended that the Secretary
develop an agencywide strategic IRM plan and a management structure
to oversee all agency system improvement projects.  We recommended
also deferring contracting for the Integrated Financial Management
System until State determined how the system would solve longstanding
financial management problems and how high-risk areas would be
addressed.  (GAO/AIMD-94-141)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INFORMATION RESOURCES
      MANAGEMENT--NATIONAL
      SECURITY AND INTERNATIONAL
      AFFAIRS DIVISION
-------------------------------------------------------- Chapter 5:7.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:7.3.1

Air Force Depot Maintenance:  Improved Pricing and Financial
Management Practices Needed (GAO/AFMD-93-5)

Defense Communications:  Defense's Program to Improve
Telecommunications Management Is at Risk (GAO/IMTEC-93-15)

Defense IRM:  Business Strategy Needed for Electronic Data
Interchange Program (GAO/AIMD-94-17)

Financial Management:  Army Industrial Fund Did Not Recover Costs
(GAO/AIMD-94-16)

Financial Management:  Inadequate Accounting and System Project
Controls at AID (GAO/AFMD-93-19)

Financial Management:  Navy Industrial Fund Has Not Recovered Costs
(GAO/AFMD-93-18)

Financial Management:  State's Systems Planning Needs to Focus on
Correcting Longstanding Problems (GAO/AIMD-94-141)

High Performance Computing:  Advanced Research Projects Agency Should
Do More to Foster Program Goals (GAO/IMTEC-93-24)

Defense Business Operations Fund:  Improved Pricing Practices and
Financial Reports are Needed to Set Accurate Prices (GAO/AIMD-94-132)


   INFORMATION RESOURCES
   MANAGEMENT--POLICY AND ISSUES
   AREA (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:8

GAO Contact:  Christopher Hoenig, 202/512-6406


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:8.1

Our work continues to show how agencies lack critical information
needed to analyze programmatic issues, improve service levels,
control costs, and measure results.  Information technology projects
frequently are developed late, fail to work as planned, and cost
millions--even hundreds of millions--more than originally expected. 
Fundamental changes are needed in agency information management
practices, or the vast potential for reducing costs and improving
service quality through information technology investments will not
be fully realized. 

In this regard, our work has been instrumental in (1) building and
establishing criteria for strategic information management principles
and practices and (2) transferring knowledge and techniques to the
federal agencies and oversight community.  Our accomplishments to
date include the following: 

  -- We have helped establish the foundation for a defined set of
     strategic information management practices in our report
     entitled Executive Guide:  Improving Mission Performance Through
     Strategic Information Management and Technology.  Over 12,000
     copies have been distributed to date, making it the second most
     requested GAO report in fiscal year 1994. 

  -- We have released an exposure draft of a Strategic Information
     Management Assessment Toolkit for agencies to use in assessing
     the effectiveness of their existing information management
     practices.  Over 110 organizations have requested this toolkit. 
     We have also produced a similar guide for use by GAO evaluators
     that will provide a common structure for evaluating agencies'
     strategic information management results. 

  -- We have given over 120 briefings to senior executives in the
     federal government and been invited to speak at 11
     governmentwide forums on the strategic information management
     practices recommended in the Strategic Information Management
     Assessment Toolkit exposure draft. 

  -- The Office of Management and Budget has incorporated our
     strategic information management practices into its latest
     revision of Circular A-130, "Management of Federal Information
     Resources," which establishes major governmentwide policies for
     managing information technology. 

  -- We have helped strengthen the current legislative foundation by
     working with the Senate Committee on Governmental Affairs to get
     key strategic information management provisions added to the
     Paperwork Reduction Act of 1994, the primary legislative vehicle
     that establishes governmentwide policy for managing information
     technology.  The bill passed the Senate and is awaiting action
     in the House of Representatives. 

  -- We have obtained strong support for our strategic information
     management practices from the Senate Committee on Governmental
     Affairs, 10 Cabinet secretaries, and over 20 other federal
     agency heads.  In addition, the General Services Administration
     has incorporated many of the practices into its proposed
     information resources management (IRM) review guide. 

  -- We have piloted our strategic information management assessment
     approach and toolkit at the Department of Housing and Urban
     Development, which has resulted in development of a Department
     action plan for improvement, including creation of an
     information technology investment review process. 

  -- We have worked jointly with our Accounting and Information
     Management Division's IRM core groups, program divisions, and
     agency officials to identify and initiate pilot audits of
     strategic information practices using our assessment framework
     at the Internal Revenue Service, the Customs Service, the Social
     Security Administration, the Department of Energy, and the
     Health Care Financing Administration. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:8.2

None. 


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INFORMATION RESOURCES
      MANAGEMENT--POLICY AND
      ISSUES AREA
-------------------------------------------------------- Chapter 5:8.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:8.3.1

Computer Matching:  Quality of Decisions and Supporting Analyses
Little Affected by 1988 Act (GAO/PEMD-94-2)

Premium Accounting System:  Pension Benefit Guaranty Corporation
System Must Be An Ongoing Priority (GAO/IMTEC-92-74)


   INFORMATION RESOURCES
   MANAGEMENT--RESOURCES,
   COMMUNITY, AND ECONOMIC
   DEVELOPMENT DIVISION ISSUE AREA
   (BUDGET FUNCTION 998)
---------------------------------------------------------- Chapter 5:9

GAO Contact:  Joel C.  Willemssen, 202/512-6253


      IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:9.1

Information resources are essential to the key agencies covered by
the Resources, Community, and Economic Development Division--the
Departments of Transportation, Agriculture (USDA), Commerce, Housing
and Urban Development (HUD), and Energy and the Environmental
Protection Agency (EPA).  These agencies annually spend billions of
dollars acquiring and operating computer and communications systems
to help achieve critical missions, ranging from ensuring safe air
travel to overseeing loan portfolios. 

Our work helped these agencies improve operations and address the
many problems they encountered in managing their information
resources.  Our accomplishments include the following: 

  -- At the Department of Transportation, the Federal Aviation
     Administration (FAA) canceled its original procurement strategy
     for a major data processing acquisition and instead developed a
     dramatically improved and less costly strategy.  This revised
     strategy led to FAA's awarding a $508 million contract--about $1
     billion less than originally planned.  In addition, FAA
     implemented several important programmatic improvements, such as
     establishing a Chief Information Officer position. 

  -- Our efforts at Agriculture led to several major achievements. 
     For example, (1) USDA canceled an unjustified computer
     acquisition at the Federal Crop Insurance Corporation and (2)
     the General Services Administration withdrew its $2.6 billion
     delegation of procurement authority to USDA for a major
     modernization program for the farm service and rural development
     agencies. 

  -- The Secretary of Commerce agreed to implement our recommendation
     to appoint a single manager to be responsible for developing a
     systems architecture to guide the modernization of the National
     Weather Service. 

  -- Reports and testimonies on EPA's management of its information
     technology alerted the Congress to the magnitude of problems
     with inaccurate and incomplete water quality data.  Our work
     also spurred the agency to begin improving data sharing between
     its various programs to enable comprehensive environmental risk
     assessments. 

  -- Our report on HUD's information resources management (IRM)
     program (1) uncovered several critical causes of HUD's
     longstanding problems and (2) persuaded the Department to embark
     on an agencywide effort to address many of the methods
     articulated in our recent report on the best information
     management practices at leading private and public
     organizations. 

  -- Our review of information resources at the Department of Energy
     exposed serious internal control weaknesses, leading the
     Department to identify IRM deficiencies as a material weakness
     and to develop an action plan to correct them. 


      KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:9.2

We are working with agency officials to implement our key open
recommendations.  These cover a broad cross section of agencies and
IRM issues.  For example, at FAA, our review of the IRM program found
that the agency lacked a strategic IRM plan and that it needed to
raise the level of knowledge of its staff.  In response, FAA
developed a draft strategic plan and a draft training plan.  FAA
expects these plans to be finalized within the next year. 
(GAO/IMTEC-91-43)

Our August 1994 report on the Department of Agriculture's Info Share
program, a $2.6 billion effort to modernize and reinvent the
Department's farm service and rural development agencies, found that
agency managers were not taking the necessary steps to redesign
agency business processes.  Instead, the program was being used as a
vehicle to buy information technology and further automate the
current way of doing business.  We therefore recommended that the
Secretary refocus Info Share to ensure that business process
reengineering was properly planned, conducted, and implemented and
defer the award of planned nationwide contracts.  USDA stated that it
was committed to this refocusing and has begun to address our
recommendations.  (GAO/AIMD-94-156)

Our report on the Automated Weather Interactive Processing
System--the centerpiece of the National Weather Service's
modernization--identified several areas of risk.  Although Commerce
has not yet fully implemented our recommendation to address
outstanding issues on government and contractor responsibilities,
software development, and portability and security requirements, we
plan to continue working with Department officials to ensure that
these issues are resolved.  (GAO/IMTEC-93-12BR)

We are working also with officials to address our key open
recommendation to the Secretary of Commerce on assessing whether the
Patent and Trademark Office's plans for its automated patent system
are justified.  (GAO/AIMD-93-15)

At EPA, we are working with officials to implement several open
IRM-related recommendations.  For example, we recommended that the
Administrator appoint a Chief Information Officer, who would report
to the Administrator, have full-time IRM responsibilities, and could
effectively influence IRM investments at all levels to meet agency
goals.  (GAO/AIMD-93-8)

We also recommended that the EPA Administrator, to strengthen EPA's
overall ability to accomplish its cross-media mission, complete the
agency's IRM strategy and plan, coordinate, and budget for
cross-media information resources and activities.  (GAO/IMTEC-92-14)

Further, we recommended that EPA also conform with generally accepted
IRM practices for developing automated systems supporting its Office
of Pesticide Programs.  (GAO/IMTEC-93-5)

Our report on HUD's IRM program found numerous longstanding problems. 
We recommended several actions to address them, including

  -- establishing strategic business and IRM planning processes and
     developing and maintaining up-to-date plans that would be
     clearly linked to each of the others;

  -- establishing a data management program to support integrated
     Department-wide systems and ensuring that the organization
     responsible for this program had sufficient authority to
     coordinate development of standards for common data; and

  -- eliminating weaknesses in computer security controls over
     automated systems and installations that stored, processed,
     transmitted, or used sensitive or privacy data. 

HUD is addressing these recommendations.  (GAO/AIMD-94-34)

The Department of Energy is working to address key open
recommendations concerning its overall IRM program and its security
program for information resources.  For example, we recommended that
the Secretary obtain staff with appropriate management and technical
skills to implement improved IRM practices.  (GAO/IMTEC-92-53)

In addition, we recommended that the Secretary assign the leadership
responsibility for planning and managing Department-wide information
resources security to a single organization.  (GAO/IMTEC-92-10)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      INFORMATION RESOURCES
      MANAGEMENT--RESOURCES,
      COMMUNITY, AND ECONOMIC
      DEVELOPMENT DIVISION
-------------------------------------------------------- Chapter 5:9.3


         PRODUCT TITLE
------------------------------------------------------ Chapter 5:9.3.1

Department of Energy:  Better Information Resources Management Needed
to Accomplish Missions (GAO/IMTEC-92-53)

Energy Information:  Department of Energy Security Program Needs
Effective Information Systems (GAO/IMTEC-92-10)

Environmental Enforcement:  EPA Needs a Better Strategy to Manage Its
Cross-Media Information (GAO/IMTEC-92-14)

Environmental Protection:  EPA's Plans to Improve Longstanding
Information Resources Management Problems (GAO/AIMD-93-8)

EPA Toxic Substances Program:  Longstanding Information Planning
Problems Must Be Addressed (GAO/AIMD-94-25)

FAA Information Resources:  Agency Needs to Correct Widespread
Deficiencies (GAO/IMTEC-91-43)

HUD Information Resources:  Strategic Focus and Improved Management
Controls Needed (GAO/AIMD-94-34)

Information Resources:  USDA Lacks Data on Major Computer Systems
(GAO/AIMD-94-31)

Patent and Trademark Office:  Key Processes for Managing Automated
Patent System Development Are Weak (GAO/AIMD-93-15)

Pesticides:  Information Systems Improvements Essential for EPA's
Reregistration Efforts (GAO/IMTEC-93-5)

Toxic Substances Control Act:  Legislative Changes Could Make the Act
More Effective (GAO/RCED-94-103)

Toxic Substances:  EPA Needs More Reliable Source Reduction Data and
Progress Measures (GAO/RCED-94-93)

USDA Restructuring:  Refocus Info Share Program on Business Processes
Rather Than Technology (GAO/AIMD-94-156)

Weather Forecasting:  Important Issues on Automated Weather
Processing System Need Resolution (GAO/IMTEC-93-12BR)

Weather Forecasting:  Systems Architecture Needed for National
Weather Service Modernization (GAO/AIMD-94-28)


   LEGISLATIVE REVIEWS AND AUDIT
   OVERSIGHT ISSUE AREA (BUDGET
   FUNCTION 990)
--------------------------------------------------------- Chapter 5:10

GAO Contact:  David L.  Clark, Jr., 202/512-9489


      IMPACT OF GAO'S WORK
------------------------------------------------------- Chapter 5:10.1

Accountability for program results requires that government managers
have financial management systems that provide accurate, reliable,
and timely financial information so that programs can be managed
efficiently and effectively, the extent to which program goals are
achieved can be measured, and government office heads can make
informed decisions.  Chief Financial Officers and Inspectors General
(IG) have concluded that the benefits of reviewing internal controls
and the related financial statement audits bring a much-needed rigor
to financial reporting and highlight where the real problems are.  As
with any well-operated enterprise, the investment in audited
financial statements is essential to building reliable systems and
providing accountability. 

Our work focused on improving the financial management of legislative
branch operations and activities of the Administrative Office of the
United States Courts.  In addition, we reviewed the management of the
Bureau of Indian Affairs' (BIA) trust funds and White House
expenditures to improve their operations and control.  To improve the
effectiveness of the audit work performed by other auditors, we
reviewed their work and reviewed the implementation of the Single
Audit Act to improve the act's usefulness. 

Regarding our legislative branch work, our financial statement audits
of several legislative entities (such as the House and Senate
Sergeants at Arms) and other legislative programs and operations
(such as the Congressional Award Program and the Library of Congress)
resulted in a number of improvements in their internal controls and
accounting systems.  Likewise, our audits of the financial management
support provided by the Administrative Office of the United States
Courts for independent counsels and our reviews of White House
expenditures resulted in improvements in cost management. 

Our reviews of the IGs and other audit organizations resulted in
additional audit coverage, better resource usage, and improved
quality of work, as well as the removal of impairments to IG
independence and authority.  In addition, our audit resolution work
prompted the Office of Management and Budget (OMB) to begin revising
its audit followup guidance to ensure that agencies acted on IG audit
recommendations.  As a result of our work on the audits of private
employee benefit plans, legislation is being drafted by the
Department of Labor that would encourage better plan management and
better protect the interests of plan participants and the government. 
We continue to work with congressional committees on legislation that
would increase responsibilities for detecting and reporting
irregularities. 


      KEY OPEN RECOMMENDATIONS
------------------------------------------------------- Chapter 5:10.2


         LEGISLATIVE BRANCH
         OPERATIONS
----------------------------------------------------- Chapter 5:10.2.1

In the first-ever attempt to audit the financial operations of the
Library of Congress, we found that the Library's financial and
accounting records were in such poor condition that we could not
audit significant account balances.  Because of weaknesses in
financial management operations, the Library's ability to account for
and control its collection of an estimated 89 million books and other
materials was limited.  We recommended that the Librarian of Congress
(1) establish accounting and internal control policies and procedures
to ensure compliance with applicable accounting standards and (2)
develop an overall financial management improvement plan. 
(GAO/AFMD-91-13)


         MANDATED AUDITS
----------------------------------------------------- Chapter 5:10.2.2

The Department of the Interior's Indian trust fund management
problems are longstanding and permeate all facets of the trust fund
management business cycle.  They include the lack of accurate
information, inadequate management of resources, weaknesses in trust
fund management systems and internal controls, and failure to
prudently invest trust funds.  We recommended that BIA reconcile its
trust funds and develop a strategic plan for ensuring proper
management of them.  (GAO/T-AFMD-91-2, GAO/AFMD-92-38, and
GAO/T-AIMD-94-99)


         INTERGOVERNMENTAL
         AUDITING
----------------------------------------------------- Chapter 5:10.2.3

In our continuing reviews of offices of IGs, we concluded that
improvements to the IGs' strategic planning would improve the
implementation of the IG Act at 34 designated federal entities.  We
recommended that these IGs develop strategic plans for a 5-year
period.  The plans should assess their respective entities' risks,
describe the strategies for eliminating the risks, detail the
resources required and available to implement the strategies, and
provide measures to evaluate their progress.  In addition, these
plans should be included in the first semiannual report of each
fiscal year so that entity heads, OMB, and the Congress are informed
of the offices of IGs' resource needs.  (GAO/AIMD-94-39)

Over the years, federal managers have not paid adequate attention to
implementing IG recommendations, which has rendered audit resources
less effective and has resulted in losses in federal programs and
operations.  The audit resolution problems are attributable, in part,
to outdated guidance in OMB Circular A-50, "Audit Followup," on
closing audit recommendations.  We recommended that OMB revise the
circular to require agencies to close audit recommendations and
provide the necessary documentation to verify the closure when (1)
agreed-upon corrective actions had been implemented, (2) alternative
actions had been taken that essentially met the auditors' intent, or
(3) circumstances had changed and the recommendations were no longer
applicable.  (GAO/AFMD-92-16)

Our reviews of the quality of audits by nonfederal auditors have
identified weaknesses in the audits of private employee benefit plans
so serious that the audits' reliability and usefulness were
questionable.  We recommended that the Congress amend the Employee
Retirement Income Security Act (ERISA) to (1) eliminate ERISA's
limited scope audit provision, (2) require reporting on the adequacy
of internal controls by plan administrators and auditors, (3) provide
for direct reporting to the Department of Labor of fraud and serious
ERISA violations, and (4) require peer review of plan auditors. 
(GAO/AFMD-92-14)

During the past several years, well-publicized cases of financial
irregularities in many companies and financial institutions (such as
those in the savings and loan industry) have raised serious questions
about corporate accountability, the effectiveness of corporate
governance and regulation, and the adequacy of audit requirements. 
We have supported congressional efforts to amend banking laws and
securities laws to increase both management's and the auditor's
responsibilities for detecting and reporting irregularities.  We have
recommended that the Securities and Exchange Commission (1) ensure
that managers of public companies publicly report on their
responsibilities for financial statements and internal controls, (2)
require the auditor to review and publicly report on the management
report, and (3) adopt a requirement for public companies to establish
audit committees.  (GAO/AFMD-89-38)

The single audit process is an important oversight tool for the
nearly $200 billion in federal financial assistance provided to state
and local governments each year.  We recommended revising the
criteria to determine the entities and programs subject to single
audit, improving the content of single audit reports, and shortening
the time frame for publishing and strengthening the impact of the
reports.  We recommended also increasing recipient entities'
responsibilities for internal controls over federal funds and
improving guidance to auditors.  (GAO/AIMD-94-133 and GAO/AFMD-89-72)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS: 
      LEGISLATIVE REVIEWS AND
      AUDIT OVERSIGHT
------------------------------------------------------- Chapter 5:10.3


         PRODUCT TITLE
----------------------------------------------------- Chapter 5:10.3.1

Air Force Audit Agency:  Opportunities to Improve Internal Auditing
(GAO/AFMD-90-16)

Application of Laws:  Comments on the Congressional Accountability
Act--S.  2071 (GAO/T-OGC-94-2)

Audit Resolution:  Strengthened Guidance Needed to Ensure Effective
Action (GAO/AFMD-92-16)

Bureau of Indian Affairs' Efforts to Reconcile and Audit the Indian
Trust Funds (GAO/T-AFMD-91-2)

CPA Audit Quality:  Status of Actions Taken to Improve Auditing and
Financial Reporting of Public Companies (GAO/AFMD-89-38)

Employee Benefits:  Improved Plan Reporting and CPA Audits Can
Increase Protection Under ERISA (GAO/AFMD-92-14)

Financial Audit:  First Audit of the Library of Congress Discloses
Significant Problems (GAO/AFMD-91-13)

Financial Management:  BIA Has Made Limited Progress in Reconciling
Trust Accounts and Developing a Strategic Plan (GAO/AFMD-92-38)

Financial Management:  Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements
(GAO/T-AIMD-94-99)

Inspectors General:  Action Needed to Strengthen OIGs at Designated
Federal Entities (GAO/AIMD-94-39)

Navy Inspectors General:  Investigations of Complaints and Inspection
Practices Need Strengthening (GAO/AIMD-94-128)

Single Audit Act:  Single Audit Quality Has Improved but Some
Implementation Problems Remain (GAO/AFMD-89-72)

Single Audit:  Refinements Can Improve Usefulness (GAO/AIMD-94-133)


   PROGRAM EVALUATION AND
   METHODOLOGY ISSUE AREA (BUDGET
   FUNCTION 990)
--------------------------------------------------------- Chapter 5:11

GAO Contacts:  Kwai-Cheung Chan, 202/512-3092, and Robert L.  York,
202/512-5885


      IMPACT OF GAO'S WORK
------------------------------------------------------- Chapter 5:11.1

Congressional committees require evaluative information on federal
government programs and issues, and they look to the congressional
agencies, including GAO, to provide it.  Sound program evaluations
are also valuable tools for better management in government.  To help
improve the quality of evaluative information available to the
Congress and to federal agencies, we evaluate various executive
agencies' programs, usually at the request of congressional
committees.  These studies generally fall into one of four areas--(1)
determining the intended and unintended effects of an existing
program, (2) identifying the potential effects of a proposed program,
(3) assessing the quality of information available, and (4) reviewing
executive branch evaluation functions and studies. 

In many evaluation reports, we make recommendations to agency
officials to (1) correct problems identified in existing programs,
(2) increase their awareness of potential effects of proposed
programs, (3) improve the quality of information they are collecting
and analyzing, and (4) develop more fully their own capability to
perform high-quality program evaluation.  Thus, though these studies
are often used initially by the Congress in its deliberations on
specific programs, they are also intended to bring about improvements
by the agencies as well. 

In some cases, our program evaluations have provided demonstrations
of novel or substantially improved designs and methodologies for
evaluating or measuring the extent of program effectiveness or
answering evaluation questions of general interest.  Thus, the
results of our work have frequently helped others in the evaluation
field perform their work. 


      KEY OPEN RECOMMENDATIONS
------------------------------------------------------- Chapter 5:11.2

Because our program evaluation and methodology studies concern many
different issue areas, some are discussed in related issue area
sections of this publication. 


         TRANSPORTATION:  TRAFFIC
         CONGESTION AND AIR
         QUALITY
----------------------------------------------------- Chapter 5:11.2.1

The Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991
emphasized the link between traffic congestion and urban air
pollution and the need to address both problems jointly through local
planning efforts.  Our 1992 report identified several obstacles to
achieving ISTEA's goals in these areas and recommended that the
Secretary of Transportation report to the Congress midway through the
reauthorization cycle (fiscal year 1995) on its activities to
overcome these obstacles.  We noted in particular the need to perform
and widely disseminate evaluations of the effectiveness of
transportation demand management measures in reducing both congestion
and pollution.  (GAO/PEMD-93-2)


         DEFENSE:  STRATEGIC
         NUCLEAR TRIAD
----------------------------------------------------- Chapter 5:11.2.2

On the basis of our series of eight classified reports on the U.S. 
strategic nuclear triad, we made five specific recommendations to the
Department of Defense (DOD) in our June 10, 1993, unclassified
testimony to the Senate Governmental Affairs Committee.  To date, DOD
has not completed action on three of these recommendations, as
follows:  (1) that additional operational testing of the B-1B bomber
be done to verify essential improvements in reliability and
electronic countermeasures and to remove remaining uncertainties
concerning range performance; (2) that the cost-effectiveness of the
Air Force's proposed life-service extension of the Minuteman III
intercontinental ballistic missile be the subject of additional,
rigorous review; and (3) that the Navy continue flight testing for
the D-5 submarine-launched ballistic missile at an annual rate
sufficient to maintain an understanding of actual missile performance
at a high level of confidence.  (GAO/T-PEMD-93-5)


         NATIONAL AND PUBLIC
         HEALTH ISSUES
----------------------------------------------------- Chapter 5:11.2.3

Our report on the three major sources of information about illegal
drug use showed that the nation lacked good evidence on which to
gauge progress in drug control.  Surveys of households and high
school students do not cover the populations at highest risk and, for
those who are surveyed, self-reports of drug use are questionable. 
We recommended that the Secretary of Health and Human Services make
new efforts to validate the commonly used self-reports and expand
special studies of high-risk groups to fill the gaps in current
surveys.  (GAO/PEMD-93-18)


         VOCATIONAL REHABILITATION
----------------------------------------------------- Chapter 5:11.2.4

Our 8-year followup evaluation, using unique computer-matched wage
and service data, showed that there were only modest long-term
successes of the federal-state program that provided services to help
persons with disabilities become employed and more independent and be
integrated into the community.  We also found unexplained disparities
in the extent of services purchased for clients of different races. 
We recommended that the Secretary of Education find out why these
disparities existed and strengthen evaluation in a number of ways. 
(GAO/PEMD-93-19)


         PEER REVIEW OF GRANT
         PROPOSALS
----------------------------------------------------- Chapter 5:11.2.5

We examined grant selection in three federal agencies that use peer
review--the National Institutes of Health (NIH), the National Science
Foundation (NSF), and the National Endowment for the Humanities
(NEH).  We found that the rating of grant proposals was related to
gender at all the agencies and to race at NSF.  We also found at all
the agencies that an applicant's track record was related to scores. 
Concerning the criteria used to evaluate proposals, the agencies do
little to ensure that reviewers have an accurate and similar
understanding of the criteria and rating scales.  The reviewers of
proposals are not necessarily considering the agencies' formal
criteria consistently.  Finally, we found that unwritten or informal
criteria were used by panels at all three agencies.  We recommended
that the Directors of NIH and NSF and the Chair of NEH increase the
monitoring of discrimination, including conducting tests comparing
blind with conventional reviews, to ensure that gender, race, and
ethnic discrimination are not affecting scores given by peer
reviewers.  (GAO/PEMD-94-1)


         COMPUTER MATCHING
----------------------------------------------------- Chapter 5:11.2.6

Government agencies have conducted computer-matching programs in
recent years in an effort to stem waste, fraud, and abuse in federal
benefit programs.  To provide improved analyses of these programs and
to protect individuals' privacy, the Congress passed the Computer
Matching and Privacy Protection Act of 1988.  Concerned about how
agencies have implemented this act, we identified 71
computer-matching programs at 14 federal agencies involving 447
separate matching agreements.  We reviewed 277 of these agreements. 
We found that the quality of the cost-benefit analyses being
conducted needed improvement.  For example, in 41 percent of the
agreements reviewed, agencies either had not developed any estimates
of costs and benefits or had estimated one but not the other.  We
recommended that the Office of Management and Budget Director (1)
expedite the publication of minimum standard criteria for
cost-benefit analyses and specify which cost and benefit elements
must be included and (2) instruct agencies to establish procedures to
track costs concurrently and measure costs and benefits
retrospectively to determine whether estimated benefits were actually
achieved.  (GAO/PEMD-94-2)


         POLLUTION PREVENTION
----------------------------------------------------- Chapter 5:11.2.7

Our evaluation identified 105 state pollution prevention programs
nationwide and found major differences in how these state programs
operated.  Both regulatory and nonregulatory programs exist.  We
found that many state programs claiming to conduct pollution
prevention activities were inordinately involved in waste recycling,
treatment, and/or disposal.  Many state programs evaluate the
progress of their program activities.  The indicators used to monitor
progress vary greatly, however, and many do not sufficiently document
how well programs are working.  In addition, the methods used invite
respondent bias.  Finally, the data are unsuitable for aggregating
nationally, and they also do not allow the determination of pollution
prevention program effectiveness, even at the state level. 

We recommended, among other things, that the Environmental Protection
Agency (EPA) Administrator ensure that state pollution prevention
programs emphasize source reduction rather than recycling, treatment,
and disposal of waste; improve data collection processes such that
state program efforts can be evaluated; and establish criteria within
the related grant program for measuring the success of source
reduction efforts undertaken.  (GAO/PEMD-94-8)


         WATER POLLUTION:  CONTROL
         OF TOXIC SUBSTANCES
----------------------------------------------------- Chapter 5:11.2.8

EPA implements the control of toxic pollutant discharges into
waterways through seven "core" activities spread across a number of
programs.  We identified 13 types of information required to
analytically support these 7 activities and found that 5 fell short
in implementing the quality assurance steps needed to produce
accurate information.  Also, the current permit process does not
limit the vast majority of toxics being discharged from the nation's
facilities.  Although most of these toxics are "nonpriority"
pollutants, they can and do pose human health and aquatic life risks. 
Finally, we tried to examine the risk implications of uncontrolled
pollution cases identified, but the majority of cases could not be
evaluated because the criteria were lacking by which to assess
whether discharges posed an unacceptable risk.  We recommended that
the EPA Administrator (1) initiate immediate efforts to address the
information quality assurance problems we had identified in the five
toxic control activities and (2) expand the use of the Toxic Release
Inventory data base to identify nonpriority pollutants being
discharged to water that should be considered for control through the
permit process.  (GAO/PEMD-94-9)


         FOOD AND DRUG
         ADMINISTRATION (FDA) USER
         FEES
----------------------------------------------------- Chapter 5:11.2.9

The Congress passed the Prescription Drug User Fee Act of 1992 to
authorize user fees that would "provide the FDA with sufficient
additional resources to significantly expedite the drug approval
process." A critical question is whether the act has allowed safe and
effective new drugs to become available to patients earlier than they
were available before user fees were collected.  The legislation
requires FDA to report to the Congress annually on changes in the
amount of time that drug applications are under review at the agency. 
However, reductions in the amount of "FDA review time" do not
necessarily translate into drugs' becoming available to the public
more quickly.  Therefore, we recommend that FDA include "time to
market" in its annual report to the Congress.  This measure would
answer the question of whether the combined actions of FDA and the
pharmaceutical firms were speeding new drugs to the public or not. 
(GAO/PEMD-94-26)


         OPERATION DESERT STORM
---------------------------------------------------- Chapter 5:11.2.10

Our report addressed the possibility that U.S.  veterans of the
Persian Gulf War may be experiencing reproductive dysfunction as a
result of their service in the war.  Steps taken by DOD before,
during, and after the war did not identify various potential
reproductive toxics we found to be present during the war, and the
activities undertaken to monitor servicemen and servicewomen for
reproductive dysfunction after the war have major shortcomings. 
Therefore, we recommended that (1) the Secretary of Veteran Affairs
use a revised questionnaire to reregister the more than 20,000 Gulf
War veterans who had already responded to an earlier, significantly
less complete questionnaire and (2) the Secretary of Defense
undertake actions to make additional scientific inquiry into possible
causes of the problem, collect additional baseline data to help
identify the existence of potential current and future problems, and
develop procedures to better inform and protect U.S.  servicemen and
servicewomen in the future.  (GAO/PEMD-94-30)


      RELATED PRODUCTS WITH OPEN
      RECOMMENDATIONS:  PROGRAM
      EVALUATION AND METHODOLOGY
------------------------------------------------------- Chapter 5:11.3


         PRODUCT TITLE
----------------------------------------------------- Chapter 5:11.3.1

Computer Matching:  Quality of Decisions and Supporting Analyses
Little Affected by 1988 Act (GAO/PEMD-94-2)

Drug Abuse Research:  Federal Funding and Future Needs
(GAO/PEMD-92-5)

Drug Use Measurement:  Strengths, Limitations, and Recommendations
for Improvement (GAO/PEMD-93-18)

Educational Achievement Standards:  NAGB's Approach Yields Misleading
Interpretations (GAO/PEMD-93-12)

FDA User Fees:  Current Measures Not Sufficient for Evaluating Effect
on Public Health (GAO/PEMD-94-26)

Hazardous Waste Exports:  Data Quality and Collection Problems Weaken
EPA Enforcement Activities (GAO/PEMD-93-24)

Illegal Aliens:  Despite Data Limitations, Current Methods Provide
Better Population Estimates (GAO/PEMD-93-25)

Medical Technology:  For Some Cardiac Pacemaker Leads, the Public
Health Risks Are Still High (GAO/PEMD-92-20)

Operation Desert Storm:  Questions Remain on Possible Exposure to
Reproductive Toxicants (GAO/PEMD-94-30)

Paperwork Reduction:  Agency Responses to Recent Court Decisions
(GAO/PEMD-93-5)

Peer Review:  Reforms Needed to Ensure Fairness in Federal Agency
Grant Selection (GAO/PEMD-94-1)

Pesticides:  A Comparative Study of Industrialized Nations'
Regulatory Systems (GAO/PEMD-93-17)

Pesticides on Farms:  Limited Capability Exists to Monitor
Occupational Illnesses and Injuries (GAO/PEMD-94-6)

Pollution Prevention:  EPA Should Reexamine the Objectives and
Sustainability of State Programs (GAO/PEMD-94-8)

Public Health Service:  Evaluation Set-Aside Has Not Realized Its
Potential to Inform the Congress (GAO/PEMD-93-13)

Traffic Congestion:  Activities to Reduce Travel Demand and Air
Pollution Are Not Widely Implemented (GAO/PEMD-93-2)

The U.S.  Nuclear Triad:  GAO's Evaluation of the Strategic
Modernization Program (GAO/T-PEMD-93-5)

Vocational Rehabilitation:  Evidence for Federal Program's
Effectiveness Is Mixed (GAO/PEMD-93-19)

Water Pollution:  Poor Quality Assurance and Limited Pollutant
Coverage Undermine EPA's Control of Toxic Substances (GAO/PEMD-94-9)


QUICK REFERENCE--ELECTRONIC
EDITION
============================================================ Chapter I


   INTRODUCTION: 
---------------------------------------------------------- Chapter I:1

This electronic edition contains the details for GAO's open
recommendations.  This PC-based software allows you use several text
search and retrieval options to find either summaries of key open
recommendations or the details of open recommendations. 


   HOW TO INSTALL: 
---------------------------------------------------------- Chapter I:2

To load the software on your hard drive (7.5MB required): 

1.  Place program disk 1 in your disk drive. 

2.  Type the drive designation of your drive and the word "INSTALL". 

For example, type "B:INSTALL".  Press . 

3.  Follow the instructions on the screen. 

4.  If you are updating a previous version, the install program will
replace the old files with new ones. 

Notes:  1.  The default subdirectory is \OPENREC.
2.  Disk 2 of 2 is the "LAST" disk. 


   HOW TO START: 
---------------------------------------------------------- Chapter I:3

To run the program: 

1.  Change to the drive and subdirectory where the software has been
loaded. 

Type "C:".  Press .  Type "CD\OPENREC".  Press .  Type
"OR".  Press . 

2.  When the Introductory Menu is displayed, highlight an option to
learn more about this program.  Press . 


   HOW TO SEARCH: 
---------------------------------------------------------- Chapter I:4

You may search for open recommendations by using report number,
title, date, name of a federal entity, congressional committee, name
of GAO's point of contact, or any other word or phrase that may
appear in the report. 

To perform this search, use the numerous options provided on several
search menus.  Most menus have similar options and require the
following general steps: 

1.  Start at the Introductory Menu, highlight "MAIN".  Press . 

2.  At the Main Search Menu, highlight the option to locate the
information you want.  (See Search Options.) Press . 

3.  At the next menu, indicate how much information you want to
extract and where you want the output to go.  (Figure 1 shows the
menu screen.) Press . 

4.  To perform the search, type a word or phrase.  Press . 

The most recent report is listed first. 

5.  To review the open recommendations for a specific report shown on
the list of titles, highlight the "REPORT NUMBER".  Press . 

6.  Use the  and arrow keys to scroll through the open
recommendations and related information. 

7.  When using special lists to narrow a search (see Search Options),
you perform the search (in step 4 above) by displaying the special
list.  Type a word or phrase to get a subset of relevant terms or
type "ALL" to get the entire list of terms.  Press . 



                          Figure 1. Output Menu Options


                                         Screen        Printer       File
---------------------------------------  ------------  ------------  -----------
1. Report: title                         :A            :E            :I

2. Report: title and hit count           :B            :F            :J

3. Report: title and abstract            :C            :G            :K

4. Full information, including           :D            :H            :L
recommendations

\
HELP

MAIN\
OPTION
--------------------------------------------------------------------------------
Note:  Menu provides information in ascending order, with least
detail provided first, most detail in fourth menu option.  However,
full information on a selected report, including recommendations, is
available from all menu options. 

Second, highlight your desired term on the list.  Press . 

8.  To rerun your last search after selecting another output option,
press  without entering new search words. 


   NOTES ON FIGURE 1
---------------------------------------------------------- Chapter I:5

1.  Menu option 2 takes longer but will give you a count of the
reports meeting your search criteria. 

2.  Menu option 4 directly provides the open recommendations and
related information for the most recent report that meets your search
criteria.  Additional reports will follow in the order they were
issued. 

3.  If chosen, output can be sent to the printer at LPT1. 

4.  If chosen, output can be sent as ASCII text to the disk file that
you designate. 


   SEARCH OPTIONS: 
---------------------------------------------------------- Chapter I:6

The Main Search Menu includes six options to help you narrow or
expedite your search. 


         REPORT SUMMARY--OPEN
         SEARCH: 
------------------------------------------------------ Chapter I:6.0.1

Allows you to locate open recommendations using a report number,
title, date, job code, or any other word or phrase that may appear in
the report. 

This includes "!OPTIONS" that provides a way to obtain custom askSam
queries and reports (for those who know the askSam programming
language). 


         ISSUE AREA SUMMARY
         SEARCH: 
------------------------------------------------------ Chapter I:6.0.2

Allows you to identify the impact of GAO's work and key open
recommendations that deserve priority.  You may search using key
words or a table of contents. 


         GAO THESAURUS TERMS
         SEARCH: 
------------------------------------------------------ Chapter I:6.0.3

Allows you to locate open recommendations using terms indexed to
major subjects in GAO reports. 


         CONGRESSIONAL COMMITTEES
         SEARCH: 
------------------------------------------------------ Chapter I:6.0.4

Allows you to locate open recommendations by the congressional
committee or subcommittee having primary interest in or jurisdiction
over subjects discussed in GAO reports. 


         RECOMMENDATION ADDRESSEES
         SEARCH: 
------------------------------------------------------ Chapter I:6.0.5

Allows you to locate open recommendations that were addressed to a
specific executive department, agency, or congressional committee. 


         GAO ISSUE AREAS SEARCH: 
------------------------------------------------------ Chapter I:6.0.6

Allows you to locate open recommendations by GAO's programming issue
areas within its operating divisions. 


   HOW TO REFINE SEARCHES: 
---------------------------------------------------------- Chapter I:7

To refine a search, you can use the following: 

1.  To look for a phrase in the exact order, enclose your search
words in "[]". 

2.  You can use wildcards characters to substitute for a single
character or a group of characters. 

"*" can represent a group of characters.  For example, use "ACCOUNT*"
to get ACCOUNTING, ACCOUNTANT, and ACCOUNTS. 

"?" can represent a single character.  For example, use "F-1?" to get
F-15, F-16, and F-18. 

3.  Combine search words or phrases with connectors--"{and}"; "{or}";
"{not}"--to narrow or broaden a search. 


   HOW TO QUIT: 
---------------------------------------------------------- Chapter I:8

1.  The Escape key (i.e., "Esc") may be used at any time to cancel a
search or backup to a previous menu. 

2.  To quit this program and return to the DOS prompt (at any menu
option), highlight "QUIT".  Press . 


   LOCAL AREA NETWORKS (LAN)<\EC>
---------------------------------------------------------- Chapter I:9

This electronic version is LAN-compatible and can be used by multiple
users simultaneously.  To use this software on a LAN system, the Run
Time EXE (RT.EXE) must be replaced with the Run Time Network EXE
(RTN.EXE) file.  The RTN.EXE is on Disk 2 of 2.  The start-up batch
file will need to be changed from "RT START" to "RTN START".  Also,
the DOS SHARE program must be loaded. 


   HOW TO GET HELP: 
--------------------------------------------------------- Chapter I:10

1.  At the Introductory Menu, highlight "How to use this software". 
Press . 

2.  On any menu screen, highlight "!HELP".  Press . 

3.  Technical support is available from:

Lawson "Rick" Gist, Jr.
Assistant Director
GAO, Office of Policy


Voice (202) 512-4478
Fax (202) 512-4844

