Status of Open Recommendations: Improving Operations of Federal
Departments and Agencies (Chapter Report, 01/16/96, GAO/OP-96-1).
Each year, GAO's work contributes to many legislative and executive
branch actions that yield 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 GAO reports.
About three out of four recommendations made during the past five years
have been implemented. This report highlights the impact of GAO's work
on various issue areas and summarizes key open recommendations. 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-96-1
TITLE: Status of Open Recommendations: Improving Operations of
Federal Departments and Agencies
DATE: 01/16/96
SUBJECT: National defense operations
International relations
Natural resources
Economic development
Public administration
Information resources management
Law enforcement
Tax administration
Financial management
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Cover
================================================================ COVER
Annual Report to the Chairmen and Ranking Minority Members, House and
Senate Committees on Appropriations
January 1996
STATUS OF OPEN RECOMMENDATIONS -
IMPROVING OPERATIONS OF FEDERAL
DEPARTMENTS AND AGENCIES
GAO/OP-96-1
Abbreviations
=============================================================== ABBREV
ACS - Automated Commercial System
AFDC - Aid to Families With Dependent Children
AHCPR - Agency for Health Care Policy and Research
AID - Agency for International Development
AOUSC - Administrative Office of the United States Courts
ATC - air traffic control
BIA - Bureau of Indian Affairs
BIF - Bank Insurance Fund
BLM - Bureau of Land Management
CBO - Congressional Budget Office
CDR - Continuing Disability Review
CERCLA - Comprehensive Environmental Response, Compensation, and
Liability Act
CFO - Chief Financial Officer
CHCS - Composite Health Care System
CRADA - cooperative research and development agreement
CRS - Congressional Research Service
DBOF - Defense Business Operating Fund
DFAS - Defense Finance and Accounting Service
DI - Disability Insurance
DOD - Department of Defense
DOE - Department of Energy
DOJ - Department of Justice
DOT - Department of Transportation
EEOC - Equal Employment Opportunity Commission
EPA - Environmental Protection Agency
ERISA - Employee Retirement Income Security Act
FAA - Federal Aviation Administration
FACNET - Federal Acquisition Computer Network
FAS - Foreign Agricultural Service
FASB - Financial Accounting Standards Board
FCC - Federal Communications Commission
FDA - Food and Drug Administration
FDIC - Federal Deposit Insurance Corporation
FEMA - Federal Emergency Management Agency
FHA - Federal Housing Administration
FHWA - Federal Highway Administration
FSA - Farm Service Agency
FTA - Federal Transit Administration
FYDP - future years defense program
GAO - General Accounting Office
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 organization
HRM - human resources management
HUD - Department of Housing and Urban Development
IG - Inspector General
IHS - Indian Health Service
INS - Immigration and Naturalization Service
IRM - information resources management
IRS - Internal Revenue Service
IT - information technology
JOBS - Job Opportunities and Basic Skills Training Program
MTS - Medicare Transaction System
NASA - National Aeronautics and Space Administration
NASD - National Association of Securities Dealers
NATO - North Atlantic Treaty Organization
NEH - National Endowment for the Humanities
NHTSA - National Highway Traffic Safety Administration
NIH - National Institutes of Health
NIST - National Institute of Standards and Technology
NOAA - National Oceanic and Atmospheric Administration
NPR - National Performance Review
NPR-1 - Naval Petroleum Reserve in Elk Hills, California
NRC - Nuclear Regulatory Commission
NRCS - Natural Resources Conservation Service
NSF - National Science Foundation
NSLDS - National Student Loan Data System
NWS - National Weather Service
OIG - Office of the Inspector General
OMB - Office of Management and Budget
OPM - Office of Personnel Management
OSHA - Occupational Safety and Health Administration
PBGC - Pension Benefit Guaranty Corporation
PMAs - power marketing administrations
PME - personnel management evaluation
RCRA - Resource Conservation and Recovery Act
RHCDS - Rural Housing and Community Development Services
RTC - Resolution Trust Corporation
SAIF - Savings Association Insurance Fund
SBA - Small Business Administration
SEC - Securities and Exchange Commission
SIM - strategic information management
SRO - self-regulating organization
SSA - Social Security Administration
SSI - Supplemental Security Income
TSCA - Toxic Substance and Control Act
TSM - Tax Systems Modernization
TVA - Tennessee Valley Authority
USDA - United States Department of Agriculture
USEC - United States Enrichment Corporation
VA - Department of Veterans Affairs
VBA - Veterans Benefits Administration
Letter
=============================================================== LETTER
B-205879
January 16, 1996
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
The Honorable Robert L. Livingston
Chairman, Committee on Appropriations
House of Representative
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives
This is our annual report on the status of open recommendations
resulting from the General Accounting Office's (GAO) 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 GAO's 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 audits and evaluation reports. About 3 out of 4 recommendations
made over the past 5 years have been implemented.
This report includes issue area summaries highlighting the impact of
GAO's work and associated key open recommendations. It also includes
a set of computer diskettes with details on all open recommendations.
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.
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, or any other word or
phrase that may appear in the report. Instructions for operating the
electronic edition have been enclosed with the disks inside the front
cover and are listed in appendix I of this publication.
The name and 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.
For information on how to access GAO reports on the INTERNET, send an
e-mail message with "info" in the body to:
[email protected]
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
Each year, the Department of Defense (DOD) spends about $118 billion
on goods--ranging from military weapons to computers to everyday
commodities--and a wide array of services. New budgetary realities
are accelerating demands for fundamental changes in DOD's acquisition
system as a prerequisite to making it a more efficient purchaser.
A number of initiatives are underway in DOD to make it a "world class
buyer." For example, efforts are underway to downsize the acquisition
workforce, streamline and simplify the regulations governing defense
acquisition, reengineer oversight and management systems and
processes, reduce or eliminate nonvalue-added regulatory
requirements, and employ best practices in the development and
production of major weapon systems. All of these efforts are aimed
at maintaining a technologically superior military capability at an
affordable price.
During fiscal year 1995, we continued to focus our evaluations on
DOD's efforts to improve its acquisition process. In our reports and
testimony, we highlighted the high cost of DOD's unnecessary reliance
on military specifications and standards in acquiring new weapon
systems. We also reviewed DOD's efforts to implement the Federal
Acquisition Streamlining Act of 1994 and expressed concern about the
lack of a well-defined architecture and overall strategy for
implementing the Federal Acquisition Computer Network (FACNET).
Finally, we examined the Army's purchase of a new training
helicopter, which the Army cited as an early example of success in
streamlining its acquisition system.
Another outcome of recent defense budget reductions is the
acceleration of defense industry mergers and acquisitions. DOD is
paying a large share of the costs of restructuring activities with
the expectation that it will ultimately recoup benefits exceeding
those costs. In addition, the declining industrial and technology
base is increasing congressional concerns that costly weapon systems
must be built to sustain pockets of industrial base production and
technology capabilities.
In our reports and testimony, we highlighted issues related to (1)
DOD's efforts to ensure that the critical technology and production
capabilities needed for both short- and long-term national security
will be available, (2) the continuing mergers and acquisitions in the
defense industry, and (3) the government's infrastructure for and
management of defense-related science and technology, particularly
Federally Funded Research and Development Centers.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:1.2
Our work has shown that DOD overpaid contractors millions of dollars.
Sound financial controls are critical to ensuring that DOD
effectively manages contracts and that taxpayers' funds are disbursed
properly. We reported 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 returned by contractors 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. The majority of these overpayments
were detected by the contractors rather than the government.
Subsequently, we examined the records of a group of large and small
defense contractors to identify both overpayments and underpayments.
We found that 374 business units representing 82 large defense
contractors and 57 small contractors reported about $232 million in
outstanding overpayments and about $626 million in underpayments.
These contractors generally followed up to collect underpayments but
did not always return overpayments unless instructed to do so.
Unfortunately, DFAS cannot readily detect payment discrepancies
because of significant errors in its automated payment records.
Thus, incorrect payments are likely to continue. Further, DFAS has
not aggressively pursued the recovery of overpayments reported by the
contractor or identified through contract reconciliation. We
estimate that delays in collecting $84 million in overpayment cost
the government about $10.6 million in interest.
We recommended that DOD mobilize available DOD contract, financing,
and audit resources to identify, verify, and correct payment
discrepancies identified in contractors' records. DOD told us that
various actions were underway or planned to reduce payment
discrepancies and to use contractor records to facilitate
reconciliations. (GAO/NSIAD-94-245 and GAO/NSIAD-96-8)
Our work has also shown that unclear lines of jurisdiction among
federal agencies responsible for stealth-related commodities and
technology may lead to the inappropriate export of militarily
sensitive stealth items. Stealth technology greatly improves the
effectiveness of military weapons and forces and, as such, is highly
sensitive for national security reasons. Some stealth-related
materials and processes also have civilian applications, making it
difficult for the United States to control exports and further
dissemination of the commodities and to retain leadership in stealth
technology. Thus, we recommended that the Secretary of State, with
the concurrence of the Secretary of Defense and in consultation with
the Secretary of Commerce, clarify the licensing jurisdiction for all
stealth-related commodities and technologies. We also recommended
that the Secretary of Commerce revise licensing referral procedures
on all stealth-related items on the Commerce Control List to ensure
that Commerce refers all applications for the export of
stealth-related commodities and technology to DOD and State for
review unless the Secretaries of Defense and State determine their
review is unnecessary. (GAO/NSIAD-95-140)
DEFENSE AND NASA MANAGEMENT
ISSUE AREA (BUDGET FUNCTIONS
050 AND 250)
---------------------------------------------------------- Chapter 1:2
GAO Contact: David R. Warren, 202/512-8412
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:2.1
Defense and National Aeronautics and Space Administration (NASA)
managers face many challenges as they strive to streamline
operations, control high cost programs, reduce infrastructure costs,
and accomplish their missions in a constrained fiscal environment.
Our overall strategy for Defense Management and NASA issues is to
identify innovative, efficient, and cost-effective approaches for
managing DOD and NASA operations as well as opportunities for
reducing infrastructure costs. Our work focuses on identifying
opportunities for reengineering and streamlining Defense and NASA
operations through new processes and best management practices and,
where appropriate, privatization of functions and activities. Our
goal is to identify opportunities to save money, achieve management
efficiencies, and improve results.
Although DOD recognizes the need to reengineer and streamline its
operations and infrastructure, cultural changes are needed to
overcome long-standing problems and to decrease costs, particularly
in the areas of inventory management and installation support
activities. For example, infrastructure costs accounted for $160
billion (59 percent) of DOD's fiscal year 1994 budget. DOD
anticipates that savings and efficiencies will be achieved as a
result of the base closure process and that additional infrastructure
savings and efficiencies could be achieved through further
consolidation of functions. Our work has shown that best practices
in the private sector often serve as excellent models for change.
NASA's budget continues its downward trend. In such an environment,
NASA needs to make its projects affordable by identifying and
implementing more efficient management practices, developing a more
efficient infrastructure, improving its oversight of contractors, and
entering into domestic and international arrangements that allow for
the sharing of development costs and risks with others. NASA also
needs to make its research results more relevant and available to
other sectors of the U.S. economy.
Key areas we focused on in fiscal year 1995 included assessing DOD's
base closure and realignment process, the transition of former bases
to civilian use, depot maintenance workloads, inventory management,
and opportunities to save money and achieve management efficiencies
by implementing best management practices. We also addressed
unfunded liabilities facing DOD, including environmental cleanup
costs at bases being closed and the disposal of the chemical weapons
stockpile. Regarding NASA, we focused on issues dealing with the
affordability and cost, schedule, and performance of major programs
such as the space station, shuttle, and Earth Observing System.
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.
To ensure that DOD's medical prime vendor programs are more
consistently and aggressively applied, we recommended a number of
actions to enhance the partnership between DOD medical facilities and
the prime vendors, further reduce inventory layers in the DOD system,
and bring military medical facilities closer to the levels of success
achieved by progressive private sector hospitals. The recommended
actions included integrating the vendor into day-to-day supply
operations and using the vendor's expertise to improve inventory
management operations. (GAO/NSIAD-93-173)
To help resolve environmental cleanup issues at military bases that
are being closed and realigned, we recommended that DOD (1) develop
an environmental program cost estimate that reflects the total
financial impact of realignment and closure actions, (2) limit the
approval of sites for high priority cleanup, and (3) develop
standards for assessing the program's progress. (GAO/NSIAD-95-70)
On the basis of our analysis of DOD's 1995 military base closure and
realignment process and recommendations, we made a number of
recommendations to improve future rounds, including identifying and
making policy decisions that would result in further reductions in
infrastructure prior to beginning the process. (GAO/NSIAD-95-133)
MILITARY OPERATIONS AND
CAPABILITIES ISSUE AREA (BUDGET
FUNCTION 050)
---------------------------------------------------------- Chapter 1:3
GAO Contact: Mark E. Gebicke, 202/512-5140
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:3.1
During fiscal year 1995, we (1) reviewed DOD's proposed fiscal year
1996 funding for operations and maintenance to identify potential
budget reductions; (2) assessed several key military capabilities,
including U.S. and South Korean capabilities to defend Korea, DOD
capabilities to detect and clear unexploded ordnance, and the
capabilities of medical forces; (3) reviewed several DOD programs
aimed at ensuring retention of a quality force, including those
related to recruiting, housing, movement of household goods, and
equal opportunity; and (4) evaluated several aspects of DOD's
readiness to engage in military operations. We provided the Congress
with a major analysis of readiness indicators and trends from a cross
section of military units from all the services. We also reported on
the readiness of National Guard combat troops, changes in personnel
staffing over the course of the drawdown, DOD budgeting for operating
tempo and depot maintenance, and DOD joint training activities.
DOD has acted on many of our recommendations to improve readiness.
For example, DOD will now require the services to separate reserve
personnel who repeatedly fail either mission-specific or general
fitness tests and has instituted more controls to ensure the
integrity of physical fitness test results. In response to our
report on readiness indicators, DOD is tracking data on a subset of
the indicators we identified and is assessing the usefulness of this
data in predicting future readiness. Based on the readiness
deficiencies we noted in the Army National Guard, DOD took several
remedial actions to ensure the reasonableness of training goals,
clarify the role of active Army advisers, and develop premobilization
training strategies for mechanized and light infantry forces.
DOD also acted on our recommendations to improve efficiency in
military operations. For example, it reduced the number of flying
hours during which the C-5 and C-141 airlifters are used in peacetime
and agreed to study our other suggested ways to extend these
aircrafts' service lives. Based on our analysis of claims related to
the movement of household goods, DOD has shifted substantial claims
costs from the government to the commercial carriers. This change
will provide carriers an increased incentive to improve their service
and save DOD millions of dollars annually.
In the inventory management area, DOD directed the Army to reevaluate
its inventory levels in light of our findings that (1) installation
supply subsystems could readily fill the need for items also stocked
by resident divisions and (2) divisions retain inventories of items
that are rarely demanded by customers. Savings from reduced
inventories should exceed $100 million. Based on our finding that
the services were basing inventory levels on excessive leadtimes, DOD
reduced the Defense Business Operating Fund (DBOF) purchase authority
of the Army, Air Force, and Defense Logistics Agency by $966.8
million. Given this reduction, these entities will be forced to
reduce acquisition leadtime as we recommended and thereby reduce
their inventory levels.
The Congress has reduced the services' and DOD's fiscal year 1995
operations and maintenance budget requests by over $1 billion.
Almost $900 million of this reduction related to specific issues
identified during our annual review. These suggested reductions were
based on work that identified potential savings in the areas of
inventory management, civilian personnel, and funding related to the
defense facilities turned over to host governments overseas. Based
in part on our work, the Congress also mandated that DOD prepare a
report on the readiness of combined U.S.-South Korean forces. This
report describes U.S. and South Korean actions to improve the
combined forces' ground warfighting capabilities.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:3.2
In January 1995, we reported many inefficiencies in DOD's recruiting
program and concluded that additional funding might not improve the
quality of personnel recruited. For example, we found that 50
percent of all recruiting offices accounted for only about 13.5
percent of all new recruits. We also found that recruiting
challenges were overstated in that DOD had met its recruiting goals
over the course of the drawdown, recruit quality had actually
increased, and the recruiting pool was expected to grow steadily
through the year 2000. We recommended that rather than increase
funding for recruiting, DOD (1) develop a more cost-effective mix of
recruiters and advertising, (2) streamline its recruiting bureaucracy
by eliminating management layers, (3) encourage consolidation of
recruiting offices, and (4) close unproductive recruiting offices.
Adopting our recommendations would lower costs and improve efficiency
without jeopardizing the effectiveness of the recruiting program.
(GAO/NSIAD-95-22)
Substantial savings and other operational benefits could accrue if
DOD were to identify and replace military support positions with
civilians. In our October 1994 report, we showed major differences
among the services in the percentage of positions in specific support
fields that were filled by civilians. Our analysis showed that
civilians could be used for up to 147,000 military positions DOD-wide
at an estimated savings of $2 billion--the savings that would result
if a comparable number of military positions were removed from the
force. In a mandated report to the Congress, DOD reported on an
occupational analysis of its workforce and concluded, as we did, that
civilians could be used for many positions. However, DOD does not
plan to make such conversions until the drawdown is completed on the
grounds that it would be counterproductive to increase civilian
positions while the total workforce continues to decline. Our
position is that the sooner these identified positions can be
converted, the sooner these savings can be realized.
(GAO/NSIAD-95-5)
NATIONAL SECURITY ANALYSIS
ISSUE AREA (BUDGET FUNCTION
050)
---------------------------------------------------------- Chapter 1:4
GAO Contact: Richard A. Davis, 202/512-3504
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:4.1
DOD faces many critical issues in implementing the nation's national
security policy with a smaller fighting force to respond to post-Cold
War national security needs. DOD's forces must be maintained in a
high state of readiness and capability and be modernized in an
environment of tight budgets and concern over balancing the budget.
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 assisted the Congress in its efforts to evaluate DOD's budget and
the reasonableness of the future years defense program (FYDP). For
example, we testified on the major funding assumptions underlying
DOD's fiscal years 1995-99 FYDP. We stated that the FYDP contained a
substantial amount of cost risk, with potential overprogramming
exceeding $150 billion. We also reported on the level of spending in
the FYDP on programs not directly related to defense--about $13
billion to $15 billion. We subsequently reviewed the fiscal years
1996-2001 FYDP and reported that it was considerably different from
the previous FYDP in that the total defense program increased by
about $12.6 billion in the four common years of both plans and that
there was a considerable shift from procurement to other accounts.
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 examined
the key assumptions underlying DOD's bottom-up review of the nation's
defense needs to determine whether they reasonably supported DOD's
conclusion that the projected force, with capability improvements,
can execute the stated military strategy. We reported that DOD had
not fully analyzed key bottom-up review assumptions about the
availability of forces, supporting capabilities, and enhancements to
those capabilities that it concluded were necessary for executing the
strategy. We further reported that some of DOD's assumptions were
questionable. We also reported on options for augmenting wartime
support capability by using Army National Guard divisions.
Our reviews of peacekeeping issues have increased congressional
information on how these types of operations affect DOD's military
operations and resources. For example, we reported that peace
operations have heavily stressed some U.S. military capabilities,
including certain Army support forces and specialized Air Force
aircraft. We further reported that extended participation in
multiple and/or large-scale peace operations could impede the
services' timely response to major regional conflicts. Since peace
operations can have a major impact on DOD's annual spending plans, we
reported on the cost of peace operations in fiscal years 1994 and
1995 and the adequacy of funding in fiscal year 1994 to cover
reported costs. To assist the new Congress we also summarized our
past and ongoing work in a report on U.S. and United Nations
activities in support of peace operations.
We have provided information to the Congress on the modernization of
weapons systems. For example, we testified and reported on the
Navy's shipbuilding programs and the planned F-14 upgrade. We
concluded that the Navy could defer planned construction of a new
aircraft carrier without adversely affecting its force structure
objectives. We also reported that there were alternatives for a more
affordable attack submarine force structure and testified that
building the Seawolf submarine was unnecessary. We also reported
that the planned F-14 upgrade was not justified. The Congress
subsequently reduced the program by $400 million.
We have assisted the Congress in its decision-making on intelligence
issues. For example, we reported on efforts to reorganize defense
intelligence and support military operations and on signal
intelligence matters.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:4.2
We made several recommendations to DOD to overcome its budgetary and
force structure problems. We recommended that the Secretary of the
Army consider the merits of 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. We subsequently recommended the Army identify other ways to
more productively use the National Guard to support the active Army.
(GAO/NSIAD-93-80 and GAO/NSIAD-95-80)
We also made several recommendations to the Secretary of Defense to
seek consolidation of North Atlantic Treaty Organization (NATO)
nuclear bases and storage sites and to obtain greater host nation
support from the NATO allies. (GAO/NSIAD-94-84)
SYSTEMS DEVELOPMENT AND
PRODUCTION ISSUE AREA (BUDGET
FUNCTION 050)
---------------------------------------------------------- Chapter 1:5
GAO Contact: Louis J. Rodrigues, 202/512-4841
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:5.1
The U.S. armed forces' technologically advanced weapon systems have
been seen as a major factor in U.S. military success. Our
technological superiority was emphasized as the strength we needed to
meet the numerically superior Warsaw Pact. 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 services and DOD.
However, the long-range cost of acquiring the advanced systems that
the services see as needed is staggering--especially as defense
budgets shrink.
In response to congressional interest in reducing unneeded
expenditures, we continued in fiscal year 1995 to evaluate
requirements for and the economy, efficiency and 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 Senate and House
Appropriations Committees, the Senate Armed Services Committee, and
the House National Security Committee, we conducted specific budget
analyses that identified about $2.4 billion in potential
reductions/rescissions and restrictions in the fiscal year 1996 and
prior year procurement and research, development, test, and
evaluation budgets. We also identified about $125 million in
potential reductions in the ammunition budget.
We continued our work in support of congressional deliberations on
the B-2, F-22, C-17, and B-1B aircraft. For example, we identified
$48.7 million in specific reductions in the C-17 budget for initial
spare parts and found that as much as $10 billion could be saved by
buying a mixed fleet of C-17s and commercial freighters.
Our work on DOD space programs has resulted in recommendations for
changes that could reduce program costs by about $3 billion.
Our sea systems work has contributed to the restructuring and
combining of the National and International Surface Ship Torpedo
Defense Programs and a planned reduction in program expenditures of
about $1.4 billion.
During our work on unmanned aerial vehicles, we found that DOD plans
to proceed to production before adequately testing a new system. We
recommended that the Secretary of Defense change the maneuver
system's acquisition strategy to ensure that sufficient operational
testing will have been done before low-rate production is initiated.
This testing should demonstrate that the system can achieve its
primary mission and meet performance and suitability requirements.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:5.2
In August 1993, we reported on the Army's procurement of medium
tactical trucks--the 2.5-ton and 5-ton payload classes. The original
procurement plan called for replacing about 120,000 trucks over 15
years at a cost of over $17 billion. Because the plan to stretch out
the procurement over 30 years was not practical, we recommended that
the Secretary of the Army not proceed to full-rate production until a
reassessment of the plan was complete. The Army now plans to do a
full program assessment during fiscal year 1996. We subsequently
found that the Army planned to increase the number of vehicles
authorized for low-rate initial production. We recommended that the
Army cancel plans to modify the contract and delay the planned
production increase until the system has successfully completed
operational testing. (GAO/NSIAD-93-232 and GAO/NSIAD-95-77R)
Our analysis of the C-17 program showed that significant savings were
possible through the acquisition of a mixture of C-17s and commercial
freighters instead of 120 C-17s. We recommended that the Secretary
of Defense establish specific cost, schedule, and performance
criteria to evaluate improvements in the contractor's performance to
help make an informed decision whether to continue the program. We
also recommended in a subsequent report that the Congress not support
the C-17 program beyond the minimum number needed to fulfill unique
military requirements. (GAO/NSIAD-94-141 and GAO/NSIAD-95-26)
During our review of the Advanced Field Artillery System, we found
that the Army plans to proceed to the next stage in development, even
though it had not corrected identified problems. The system uses a
technology that cannot currently meet its required rate of fire. We
recommended that the Army continue the concurrent development of the
unicharge gun until the liquid propellant gun technology has been
successfully demonstrated in live-fire tests and postpone the
artillery system integration until it makes a decision whether to
proceed with the liquid propellant or unicharge gun.
(GAO/NSIAD-95-25)
In our work on the F-22 aircraft, we found that the program involves
a high degree of concurrency despite the degree of inherent technical
risk. The F-22 will enter production well before commencement of
initial operational test and evaluation. We recommended that the Air
Force reduce the degree of concurrency and limit low-rate initial
production to six to eight aircraft a year. (GAO/NSIAD-95-59)
INFORMATION RESOURCES
MANAGEMENT - NATIONAL SECURITY
AND INTERNATIONAL AFFAIRS ISSUE
AREA (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 1:6
GAO Contact: Jack Brock, 202/512-6240
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:6.1
The effective and efficient use of information resources is essential
to the agencies that we audit--DOD, NASA, the State Department, and
USAID. These agencies spend about $40 billion annually--75 percent
of the federal government's expenditures for computers and
software--for everything from automated business and financial
systems, to computer systems embedded in space and weapons platforms.
This investment in technology is critical if these agencies are to
(1) streamline operations and downsize, (2) strengthen financial
accountability and control, and (3) maintain world leadership in
space and weapons technology. However, the benefits available
through the effective use of technology are not being achieved.
Automated systems are not being effectively implemented, technology
dollars are not being wisely spent, and the military components are
still working more independently than need be. This not only
increases costs, but undermines the ability of these agencies to
effectively and efficiently accomplish their missions.
Over the past year, our work has heightened the awareness of the
Congress and agency management to the severity of the problems they
face. Our accomplishments include the following.
-- Using our prior DBOF work as a basis, the National Defense
Authorization Act for Fiscal Year 1995 directed the Secretary of
Defense to submit to the congressional defense committees a
report on the progress made in implementing the September 1993
DBOF Improvement Plan. In March 1995, we reported that after 3
years of effort, DOD continued to have problems in effectively
operating the $77 billion entity and little progress had been
made in resolving the long-standing problems that hinder the
operations of DBOF. Specifically, we found that DOD has not (1)
developed a process to ensure that DBOF's policies are
consistently implemented, (2) improved the accuracy and
reliability of DBOF's systems, (3) improved the accuracy of
DBOF's monthly financial reports, (4) adequately managed DBOF's
cash, and (5) developed performance measures and goals. Acting
upon the results of our work, the Congress reduced Defense's
fiscal year 1995 budget request by approximately $200 million.
-- Our work on DOD disbursements has helped the Congress better
understand the magnitude of DOD's lack of adequate financial
controls over its disbursement operations. For years, DOD had
successfully downplayed the seriousness of its disbursing
problems until our work disclosed that the Department could not
adequately account for and report on over $25 billion of
payments it had made to contractors. After we identified the
seriousness of the problem, the Congress enacted legislation to
strengthen controls over DOD's payments to contractors. In
addition, DOD has numerous initiatives underway and planned to
address our findings, conclusions, and recommendations. When
fully implemented, these initiatives will significantly improve
financial management within DOD.
-- Our DBOF, disbursement, and reengineering work were key
ingredients of the testimonies presented to the Senate on DOD's
efforts to reform its financial management operations. The
successful implementation of these reform efforts will play a
critical role in making sure that every possible defense dollar
goes toward maintaining the readiness of the fighting force
while reducing the costs of DOD's support operations. The
results of our DOD financial management work were highlighted in
several congressional committee reports on DOD's fiscal year
1996 budget process.
-- Our work at the State Department resulted in significant
improvements in the agency's information resources management
(IRM) operations. For example, consistent with our
recommendation, State has established an executive level board
of senior officials to review proposed information technology
investments. State is also initiating a departmentwide planning
process to better integrate the IRM planning and budgeting
functions.
-- Our reviews of DOD and governmentwide telecommunications issues
were highly influential in improving two major programs. For
example, our work on the Defense Information Systems Network
contributed to DOD taking steps to reassess and to adequately
identify its requirements. Further, our testimony on planning
for the Post-FTS 2000 acquisition identified 8 key issues that
the General Services Administration (GSA) needs to address
before the final requests for proposals are released. These
issues were widely endorsed by industry and government officials
as central to the success of this multibillion dollar program.
-- DOD's continuing difficulties in managing automated information
systems were the impetus for our review of its management
controls and performance measures. We evaluated DOD's report to
the Congress, which discussed DOD's new performance measures.
Our review disclosed that the measures were inadequate because
they did not effectively measure the benefits, or outcomes of
modernizing, operating, and maintaining the systems. As a
result, the committee directed DOD to reevaluate the reported
performance measures and to develop acceptable, precise
performance measures to effectively measure the benefits, in
terms of dollars and contribution to mission performance, of
implementing migration systems, establishing data standards, and
improving processes.
-- DOD continues to have great difficulty in managing the
development, acquisition, and support of computers and software
embedded in weapons systems. The effectiveness with which DOD
manages its $20+ billion annual investment in software often
determines the success or failure of today's major weapons
acquisition programs. Our work this year on the C-17 aircraft,
the B-1B Bomber, and the Comanche helicopter continued to
chronicle the software problems plaguing these programs and
helped focus congressional and top-Defense management attention
on this important, but often neglected area. In order to
leverage our resources, we will continue to work with DOD, the
Software Engineering Institute, the Software Program Managers
Network, and others to help improve software acquisition
management practices. We expect these improved practices to
increase software quality and reduce costs in future
acquisitions.
-- Our 1994 report on the Navy's TAC-4 computer procurement
identified opportunities to significantly improve the
acquisition. In following up our report this year, we noted
that the contract was awarded in January 1995 at significantly
less cost than originally projected. Our overall work on the
TAC-4 procurement resulted in increased competition, improved
contract administration, and a cost avoidance of more than $900
million over the 6-year life of the contract.
-- Our recent work on DOD's Depot Maintenance Standard System
resulted in adjustments to DOD's migration systems strategy to
take advantage of commercial off-the-shelf technology and cut
implementation time frames for this important readiness-related
program. We are currently working with DOD to evaluate plans
for expanding the Automated Systems Demonstration project at
Warner-Robbins Air Force Base to other high priority areas in
materiel management and transportation, thereby gaining
near-term benefits and return on investment in military
readiness areas.
-- Our review of DOD's administrative travel processes concluded
that DOD was spending about 30 percent of each travel dollar on
administrative expenses while well-run organizations spent less
than 6 percent. We concluded that DOD's travel processes could
be reengineered with a resulting savings of several hundred
million dollars per year with increased levels of service for
the traveler. DOD now has 30 pilot projects to test new ways of
administering travel and expects to have new processes in place
over the next 2 years.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:6.2
One of the benefits DOD cited in the establishment of DBOF was that
the central management of cash at the Office of Secretary of Defense
(Comptroller) level would result in a reduction in the amount of cash
needed for day-to-day operations. However, on February 1, 1995, the
management of cash and related Antideficiency Act limitations was
returned to the military service and Defense component level. This
change is a major departure from the benefits of a single cash
balance and could result in DBOF cash requirements increasing. We
recommended that DOD reverse its decision. The House National
Security Committee has proposed legislation requiring that the
management of DBOF cash be returned to the Office of the Secretary of
Defense. (GAO/AIMD-95-80)
INTERNATIONAL AFFAIRS ISSUE
AREA (BUDGET FUNCTION 150)
---------------------------------------------------------- Chapter 1:7
GAO Contact: Benjamin Nelson, 202/512-4128
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:7.1
U.S. national security and foreign affairs policies and objectives
continue to come under scrutiny in recognition of continuing global
change and the corresponding need to reassess the extent to which
military, political, and economic activities serve U.S. interests.
Federal budget constraints have further reinforced the need to
reexamine the foreign affairs infrastructure, program priorities, and
management performance. In fiscal year 1995, our work focused on
foreign affairs management, the efficiency and effectiveness of
bilateral assistance programs, and expenditures of international
organizations to which the United States is a major contributor.
To assist the Congress in its oversight responsibilities and have a
significant impact on major aspects of the U.S. government's foreign
policy and economic assistance organizations, we completed
comprehensive assessments of U.S. arms control efforts, assistance
to the former Soviet Union, U.S. involvement in various peacekeeping
operations, and U.S. antinarcotics programs. We also completed work
to identify cost savings opportunities in the Department of State's
overseas operations. In addition, we examined some of the key
programs and activities of the U.S. Agency for International
Development (USAID).
We issued several reports on assistance to the former Soviet Union
successor states to promote economic change and development and the
destruction of weapons of mass destruction. Our review of assistance
to the successor states resulted in the first comprehensive inventory
of U.S. government programs, thereby enabling the Congress to
understand the full magnitude of the programs of 23 agencies as it
considers the level of future support. Similarly, our assessment of
the multibillion dollar weapons destruction program for the former
Soviet Union led to improved planning by DOD, strengthened
congressional oversight, and resulted in a significant reduction in
funds appropriated for this program.
Our work on United Nations peacekeeping documented the many problems
encountered in missions in Cambodia, Bosnia, Somalia, Haiti, and
elsewhere; detailed U.S. costs of some of these operations; and
showed that the existing cost-sharing formula results in the United
States paying a large share of multilateral peacekeeping costs. We
facilitated discussions between the State Department and DOD on ways
to better coordinate the military and humanitarian components of
peacekeeping. Our reports and briefings contributed to the
congressional debate over U.S. participation in these operations.
Additionally, the United Nations has taken steps to improve its
logistics operations and internal coordination based on the lessons
learned that we identified.
From our examination of U.S. bilateral assistance, we identified
programs that are not achieving their intended objectives as well as
significant management weaknesses. An example of one of these
programs is USAID's Housing Guarantee Program, a key component of the
overall foreign aid program. During a fundamental assessment of the
program, we found that it was not achieving the desired outcomes and
was costing the United States millions of dollars, with a potential
unfunded liability of more than $1 billion.
In our report on the U.S. military presence in Honduras, we
identified obsolete missions and excessive military resources. We
questioned whether the U.S. military presence in Honduras was needed
and recommended that DOD reduce the U.S. military presence to levels
necessary to support antidrug activities. The Department accordingly
reduced the level of military personnel and equipment and revised its
mission to meet post-Cold War needs. These actions will result in
savings of several million dollars.
Our report on overseas diplomatic presence provided comprehensive,
accurate, and previously unavailable data on staff levels and costs.
The report has become a reference document and is being used by the
President's Management Council as it looks for ways to streamline
government operations overseas.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:7.2
We recommended that the Congress terminate AID's Housing Guaranty
Program. We also recommended that if the Congress chose not to
terminate the program, the AID Administrator take action to minimize
the program's financial impact on the U.S. budget deficit by (1)
withholding future loan disbursements from borrowers that have
repeatedly rescheduled debt repayments and (2) increasing program
revenues by revising the fee structure. (GAO/NSIAD-95-108)
We recommended that the State Department develop a fully integrated,
objective, quantifiable staffing methodology to help ensure a sound
basis for allocating personnel resources in line with U.S. interests
overseas. (GAO/NSIAD-94-228)
We recommended that the Departments of Treasury and State sell
certain properties in Tokyo and that State prepare a plan identifying
how other properties can be used to meet the Embassy's current and
future needs. (GAO/NSIAD-95-73)
INTERNATIONAL TRADE, FINANCE,
AND COMPETITIVENESS ISSUE AREA
(BUDGET FUNCTION 150)
---------------------------------------------------------- Chapter 1:8
GAO Contact: Benjamin Nelson, 202/512-4128
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:8.1
The strength of the U.S. economy in the new global marketplace is
the dominant theme of domestic and international economic policy.
The major concern over how government affects the U.S. economy
through its policies and programs is centered on the impact on the
standard of living for U.S. citizens. Though the economy showed
signs of improvement this past year, concerns remain that the trade
deficit continues to be large and that the overall standard of living
of many Americans is not improving, despite improvements in worker
productivity and the creation of a number of new jobs. In fiscal
year 1995, we continued to look at these issues in three ways:
-- Reviewed multilateral and bilateral agreements and relations
such as dispute resolution under the U.S.-Canada Free Trade
Agreement, the U.S.-European Union Large Civil Aircraft
Agreement, and the U.S.-China agreements on improving market
access and protecting intellectual property rights.
-- Assessed how the government is organized to manage international
trade policies, programs, and activities and evaluated
programs--for example, export promotion programs--aimed at
helping U.S. businesses better participate in global markets.
-- Evaluated U.S. programs' (such as the manufacturing extension
programs) policies and procedures to see how they affect overall
economic development and standards of living.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:8.2
In January 1992, we reported that U.S. government export promotion
programs lacked organization and funding cohesiveness. As a result,
the 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, work with other member agencies and the
Office of Management and Budget (OMB) to (1) develop a governmentwide
strategic plan for carrying out federal export promotion programs and
(2) ensure 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. The plan was largely a list of
recommendations. It did not establish truly governmentwide
priorities or reallocate funds among government agencies in
accordance with these priorities. (GAO/NSIAD-92-49)
In July 1993, we identified changes needed to improve the
effectiveness of the Market Promotion Program at the U.S. Department
of Agriculture (USDA). To ensure that program funds are used more
effectively, we recommended that the Secretary of Agriculture direct
the Administrator of USDA's Foreign Agricultural Service (FAS) to (1)
require that program funds be used to increase expenditures for
foreign market development activities over those that would take
place without the program's support; (2) develop criteria on the
maximum length of time commercial firms can continue to receive
program funds for a particular market; (3) define the conditions
under which foreign firms would be allowed to participate in the
program to ensure that U.S. firms are not adversely affected; (4)
establish criteria and procedures for the allocation of program funds
to small and new-to-export firms; and (5) require that program
applicants submit, and that FAS periodically evaluate the accuracy
of, support for statements regarding the U.S content of brand-name
products to be promoted with program funds and the extent of the
brand-name products' U.S. processing. FAS has revised Market
Promotion Program regulations in response to the majority of our
recommendations. However, insufficient time has passed to determine
whether these regulatory changes are being implemented in a way that
responds to the substance of our recommendations. (GAO/GGD-93-125)
In December 1992, we examined the costs of the Commodity Credit
Corporation's export credit and intermediate credit guarantee
programs in USDA. We estimated that as of June 30, 1992, the
Corporation had cumulative program costs of about $6.5 billion, or
about 48 percent of its total outstanding guarantees, and accounts
receivable of $13.5 billion if they were terminated. Past operations
of the programs had incurred high costs because the Corporation had
provided a large amount of guarantees to high-risk countries such as
Iraq and the former Soviet Union. (GAO/GGD-93-45)
In a February 1995 related report on the Export Credit Guarantee
Program, we addressed the creditworthiness of former Soviet Union
successor states. We found that most, if not all, of the successor
states were not very creditworthy and that all should be considered
at least high risk from a creditworthiness perspective. We suggested
that if the Congress concludes that the creditworthiness of Russia or
other successor states is too risky for the United States to provide
additional export credit guarantees, and if it concludes that
continued agricultural exports to the successor states serve
important U.S. economic and national security interests, it may wish
to consider authorizing additional foreign aid to finance the sale of
food. Such aid could then be weighed against other priorities for
U.S. foreign economic assistance. To reduce further exposure of the
export credit guarantee portfolio to default, we suggested that the
Congress may wish to consider limiting the total amount of guarantees
that can be issued each year to high-risk countries and the amount
that can be provided to any single high-risk country. In addition,
we suggested that the Congress may wish to consider (1) amending the
statutory provision that precludes the Commodity Credit Corporation
from charging a fee in excess of 1 percent of the amount of the
credit guarantee and (2) requiring the Corporation to include
risk-based charges as part of its overall fee for export credit
guarantees. Such fees could help offset the cost of potential
defaults to taxpayers and equalize the value of the guarantees across
all client countries. (GAO/GGD-95-60)
In a September 1994 report, we concluded that the objectives of cargo
preference requirements were not being significantly advanced when
used in U.S. food aid programs. We suggested that if the Congress
continues to support cargo preference for food aid programs and is
willing to devote resources to that end, it may wish to consider a
more efficient alternative for achieving its objectives. For
example, the subsidy program, which offsets ship operating costs,
could be used to support crewed ships that the Department of Defense
finds militarily useful and could successfully compete for U.S.
foreign commercial cargos. We also suggested that if the Congress
decides to continue to apply cargo preference to food aid programs,
it may wish to consider giving U.S. shipowners incentives to invest
in more efficient ships to reduce food aid transportation costs.
(GAO/GGD-94-215)
We recommended that the Secretary of Transportation instruct the
Administrator of the Maritime Administration to promote the
efficiency of ships that carry food aid preference cargos. One way
this could be done is by calculating guideline rates based on average
operating costs for all similarly sized ships instead of actual
operating costs for each individual ship. Such a change should
reduce food aid transportation costs. We also recommended that the
Secretary of Agriculture and the Administrator of AID take the
following steps because of their potential to reduce food aid
transportation costs: (1) experiment with the use of contract terms
that are more consistent with those used for similar commercial
cargos to determine whether their use would reduce food aid
transportation costs and (2) encourage recipient countries to space
their food aid shipments more evenly throughout the year.
In June 1995, we reported that competing goals and requirements
hinder Public Law 480 title I food aid program results. We concluded
that the size and importance of the program have declined and that,
as structured, the program does not significantly advance economic or
market development objectives of the 1990 Food, Agriculture,
Conservation and Trade Act (P.L.101-624). Thus, we suggested that if
the Congress wants to continue to support these objectives and devote
resources to achieving them, it may want to consider alternative
approaches to doing so. Among the alternatives available to the
Congress are (1) refocusing the program on more specific economic
and/or market development objectives by eliminating some of the
multiple and competing requirements; (2) restructuring the program to
concentrate on a single objective, such as market development; (3)
eliminating the program and transferring its resources to existing
programs with compatible purposes; and (4) eliminating the program
and replacing it with a new program or programs unencumbered with a
history of competing objectives and outdated program requirements.
(GAO/GGD-95-68)
In September 1995 we reported that FAS could benefit from better
strategic planning. We recommended that the Secretary of Agriculture
direct the FAS Administrator to (1) ensure that the strategic plan
under development, the revised long-term agricultural trade strategy,
and country marketing plans better reflect criteria described in our
report, including differentiation among priorities and appropriate
measures for gauging progress and ensuring accountability; (2) devise
and implement a strategy to better ensure that decisions on locations
of overseas offices involve the consideration of systemic and local
circumstances and include an assessment of the cost-effectiveness of
the locations; (3) reevaluate FAS workforce capacity needs for both
the foreign service cadre and other workforce components and reassess
the policy that foreign service officers spend an average of only 50
percent of their careers in overseas posts; and (4) ensure that the
commodity reporting system contributes to FAS strategic priorities;
that is, reports meet the needs of external and internal users and do
not unnecessarily duplicate information available from other sources.
FAS officials generally agreed with the substance of our
recommendations and are beginning to address them. (GAO/GGD-95-225)
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
About 2 years ago, the Department of Energy (DOE) and an array of
science and technology-related agencies, including the National
Science Foundation (NSF) and Commerce's National Institute of
Standards and Technology (NIST)--with budgets totaling about $30
billion--embarked on a new and ambitious agenda to open their
scientific laboratories and form partnerships with industry to fuel a
more competitive economy; improve the environment by cleaning up and
finding better ways to store and dispose of nuclear and other
hazardous wastes; and reduce the nuclear dangers in a still risky and
chaotic world. However, questions and concerns about the role of
government in these and other activities, as well as of government's
ability to efficiently and effectively manage them, soon made these
agencies a special target of scrutiny by a Congress with a new
mandate to reduce the budget deficit and sell or privatize various
government activities. This focus, coupled with new disclosures
about the costs of cleaning up the nuclear weapons complex--recently
estimated at $230 billion; the rising debt obligations of the
Tennessee Valley Authority (TVA) and the power marketing
administrations (PMAs), now close to $50 billion; and DOE's $100
billion system of national laboratories lacking a clear mission, led
to requests for information and analysis to help the Congress come to
grips with these and related issues.
We responded to the requests. For example, we helped the Congress
consider how to restructure DOE, as well as to frame the debate for
the broader restructuring of government. Our report calling for a
reevaluation of DOE presented a systematic framework for evaluating
alternative ways to implement each of DOE's missions and suggested
that the restructuring of DOE be a part of a broader, governmentwide
restructuring effort. In our report on the national laboratories, we
also recommended that before the Congress could begin the process of
eliminating unnecessary or duplicative facilities, it needed first to
define what it wanted the national laboratories to accomplish. Our
work contributed to DOE's initiation of one of the most sweeping
strategic realignment in DOE's history.
We have also contributed to the ongoing debate over the future of
various government activities. Options under consideration include
selling the entity to the private sector, contracting for the
service, or forming a government corporation to provide the service.
For example:
-- Our report and testimony supported management changes at the
Naval Petroleum Reserve in Elk Hills, California (NPR-1),
including options for selling it or forming a government
corporation to operate it. We also recommended ways to enhance
its profitability and complement the management changes being
considered, such as by making final decisions on ownership
shares between Chevron and the U.S. government and by
eliminating the requirement that DOE operate this field to
increase the recovery of oil to the maximum as opposed to
increasing profits to the maximum. In addition, we pointed out
that in the event of a sale, the government was more likely to
receive fair market value if it established a minimum asking
price. During testimony, we also questioned the rationale for
the government's involvement in what would otherwise be the
operation of a commercial oil and gas field. Subsequently, both
the House and Senate included a provision in the 1996 Defense
Authorization Act to sell NPR-1, as well as language to make
ownership shares final, eliminate the requirement to increase
the recovery of oil to the maximum, and establish a minimum
asking price before the asset is sold.
-- Our recent report on the privatization plan for the United
States Enrichment Corporation (USEC) provides the Congress with
information it will need during debates on whether to privatize,
including the impact such privatization would have on the
Treasury. We stated that because USEC's privatization may set a
precedent for future privatization, it needs to be accomplished
in a manner that will set the standard for ensuring that
taxpayers' interests are protected. Moreover, because of the
national security implications and the financial complexity of
the sale--and to fully protect taxpayers' interests--we
recommended that the Congress require the President to approve
the final sale agreement and require the Secretary of the
Treasury, not USEC and its board of directors, to lead the
privatization process, including determining the sales price.
-- We are currently looking at the operating and financial
conditions of PMAs. This work is intended to serve as a
backdrop for congressional deliberations on various bills that
have been introduced in the Congress to privatize the PMAs and
TVA, as well as to transform the Bonneville Power Administration
into a government corporation.
In a related matter, we recently issued a report that alerted the
Congress about the precarious financial position of TVA. We pointed
out that because TVA is $26 billion in debt and has invested $14
billion in nonproducing nuclear assets that have not been included in
its electricity rates (called "deferred assets"), the agency has far
more financing costs and deferred assets than its likely competitors
have, thus giving it little flexibility to meet competitive
challenges. We reported that if TVA cannot compete effectively and
improve its financial condition, its long-term viability will be
threatened and the federal government will be at risk for some
portion of its debt. Although TVA has taken various actions and
announced plans to reduce its costs and limit its debt, our report
noted that these actions may not be sufficient over the long term and
highlighted several options to reduce the risks to taxpayers and help
prepare TVA to compete in the electricity market.
In connection with nuclear issues:
-- Our work on the $6 billion a year cleanup program at DOE's
nuclear weapons complex has continued to influence decisions
both in the Congress and at DOE. For example, we issued a
report calling for a national risk-based system for setting
priorities for cleaning up the nuclear weapons complex. In
addition, we issued a report that pointed out the difficulties
of coordinating cleanup activities under two different
environmental laws--the Resource Conservation and Recovery Act
of 1976, as amended (RCRA), and the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(CERCLA). This report was used by the Congress in deliberations
over amending CERCLA and also led to our testimony on the need
for a risk-based national prioritization system for the cleanup
program.
-- Our work over the past several years on DOE's management of its
program for disposing of highly radioactive waste from
commercial nuclear power plants has also contributed to
legislative proposals and to the ongoing debate over how to
restructure the program and has spurred DOE efforts to more
efficiently manage the program. For example, we found that DOE
was spending tens of millions of dollars on efforts to begin
accepting and storing nuclear waste beginning in 1998 that had
little chance of success. At the same time, the Department was
spending relatively few of its funds directly on the real
centerpiece of the disposal program itself--the scientific
investigation of Yucca Mountain, Nevada, as a candidate site for
a geologic repository. More recently, we found that DOE has not
achieved its objective of consolidating work on the repository
project to reduce support costs, despite its intention to hire a
contractor to accomplish that objective.
-- In connection with international nuclear safety, our recent
testimony on Cuba's nuclear reactors provided the Congress with
first-hand information on the condition of the potentially
dangerous reactors being built 150 miles off our shores. In
addition, we issued a report on U.S. assistance to upgrade the
Czech nuclear reactor which was widely cited during
congressional deliberations on whether to approve further
assistance. Our nonproliferation work has also contributed to
congressional debate. For example, our report on DOE's nuclear
tracking system pointed out the limitations of that system and
increased congressional oversight. And our recently issued and
forthcoming reports on the agreement between the U.S. and the
European Atomic Energy Community on the peaceful uses of atomic
energy will provide the Congress with information it needs in
considering whether to renew the agreement.
We have also contributed in other specific ways to the Congress's
effort to reduce the budget deficit through our annual "budget
scrubs." For example:
-- Over the past 3 years, we have identified carryover funding
balances, totaling almost $1 billion, that DOE did not need for
numerous projects. For example, in our fiscal year 1995 review,
we found that the contractor at DOE's Hanford Site was holding
over $50 million in uncosted funds for a tank facility that
would never be built. Moreover, DOE had requested an additional
$31 million for this project in its fiscal year 1996 budget
request.
-- At NIST, our evaluations of the Advanced Technology Program were
instrumental in congressional appropriations proposals to
eliminate the program, a fiscal year 1996 budget savings of $491
million.
-- After we pointed out that DOE was experiencing problems in
obtaining suitable sites and adequate private-sector financing
for the Clean Coal Technology Program, the Congress reduced
funding for this program by $200 million.
-- In another case, our assistance in providing information on the
Nuclear Regulatory Commission's (NRC) budget contributed to the
Appropriations Committee reducing NRC's budget by 10 percent
($50 million).
In our March 1995 report on addressing the deficit, we offered 13
options related to the energy and science area for savings or
additional revenues totaling over $3 billion in fiscal year 1996
alone. Many of these options are being actively pursued during the
current budget proceedings.
In the energy supply area, we have completed a body of work on
federal efforts to make the natural gas pipeline industry more
competitive. This work has been useful to the Congress in
considering whether to roll back the regulatory structure for this
industry. In addition, our work on alternative motor fuels,
including a recent report addressing DOE's efforts to develop
advanced batteries for use in electric vehicles, identified the many
uncertainties about the costs and environmental and energy security
benefits of alternative fuels. Our input has contributed to ongoing
debate at both the federal and state levels about the use of such
fuels.
Our work in the science and technology area contributed to the
following results:
-- Funding for the purchase of the NSF's $120 million arctic
research vessel was halted until NSF determines the need for it,
given scientific and budgetary considerations.
-- NSF and the National Institutes of Health (NIH) implemented our
recommendations to better manage potential conflicts of interest
at universities and other organizations carrying out federal
research.
-- The Small Business Administration (SBA) is implementing the
recommendations included in our report on the Small Business
Innovation Research program to reduce the likelihood that
companies will receive duplicate funding for research proposals
from multiple federal agencies in the future.
-- The Office of Science and Technology Policy has been asked to
reduce indirect costs for federally funded research at
universities by 10 percent and to ensure more uniform
accounting.
-- DOE has simplified its process for entering into cooperative
research and development agreements (CRADA) with industry and
also initiated a follow-up system to monitor their outcomes.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:1.2
NUCLEAR WEAPONS COMPLEX
CLEANUP
------------------------------------------------------ Chapter 2:1.2.1
In March 1995, we recommended that in order to enable DOE to target
its limited resources on cleaning up the sites that represent the
greatest risks, the Secretary of Energy should (1) set national
priorities for cleaning up the Department's contaminated sites using
data gathered during DOE's ongoing risk evaluation as a starting
point and (2) initiate discussions with regulators to renegotiate
milestones that no longer reflect national priorities. Faced with
severe budget reductions, DOE is attempting to use risk evaluations
to a greater extent in its cleanup decision-making. At this point,
however, it is too early to determine to what extent national
risk-based priorities will be set. In addition, DOE has begun
renegotiating cleanup agreements that better reflect budget realities
and technical capabilities. (GAO/RCED-95-1)
NATIONAL LABORATORIES
------------------------------------------------------ Chapter 2:1.2.2
In January 1995, we recommended that the Secretary of Energy evaluate
alternatives for managing DOE's national laboratories that more fully
support the achievement of clear and coordinated missions. If DOE is
unable to refocus the laboratories' missions and develop a management
approach consistent with these new missions, we suggested that the
Congress may wish to consider alternatives to the present
DOE-laboratory relationship. Such alternatives, we said, might
include placing the laboratories under the control of different
agencies or creating a separate structure for the sole purpose of
developing a consensus on the laboratories' missions. DOE has
created a Laboratory Operations Board to develop a strategic vision
for the national labs as well as an action plan to implement most of
the recommendations made by an outside task force. Many of the task
force's recommendations address issues raised in our report.
Meanwhile, members of the House of Representatives have introduced
four separate bills that call for restructuring the laboratories.
(GAO/RCED-95-10)
NUCLEAR CLEANUP
------------------------------------------------------ Chapter 2:1.2.3
In August 1994, we suggested that the Congress consider amending the
CERCLA to provide more specific direction about incorporating future
land uses when determining cleanup levels and selecting remedial
actions. The Congress is considering revisions to CERCLA, as it is
scheduled for reauthorization. (GAO/RCED-94-144)
NUCLEAR HEALTH AND SAFETY
------------------------------------------------------ Chapter 2:1.2.4
To better unify federal radiation protection policy, we recommended
in September 1994 that the Environmental Protection Agency (EPA), in
cooperation with NRC, pursue interagency consensus on preferred
radiation dose and risk calculation methods and radiation protection
strategies, as well as on how much radiation risk to the public is
acceptable. Although interagency cooperation is taking place, EPA
and NRC have only begun to address the need for interagency consensus
on acceptable radiation risk. (GAO/RCED-94-190)
NUCLEAR SAFETY OVERSIGHT
------------------------------------------------------ Chapter 2:1.2.5
In June 1994, we recommended that DOE take steps to increase the
authority, independence, and staffing of its office responsible for
independent oversight of nuclear safety and enforcement of nuclear
safety standards at the Department's facilities. To separate its
oversight activities from its assistance activities, the
Environmental, Safety, and Health Office, in a December 1994
reorganization, placed its oversight functions in a separate office
and has begun developing procedures aimed at ensuring its
independence. However, the nuclear safety enforcement and
investigations staff, whose responsibilities include investigating
potential violations of nuclear safety regulations, remains within a
suboffice responsible for assisting DOE's facilities in improving
nuclear safety. DOE officials told us they are currently
reevaluating the organizational placement of this staff.
(GAO/RCED-94-129)
CONTRACTING FOR
LABORATORY ANALYSES
------------------------------------------------------ Chapter 2:1.2.6
To realize the cost savings inherent in centrally procured laboratory
analyses and to eliminate other related inefficiencies resulting from
decentralized procurement, in May 1995 we recommended that DOE
centralize its procurement of commonly used laboratory analyses for
environmental contaminants in the cleanup of its nuclear facilities.
In doing so, we said the Department should also identify and
eliminate contracted resources that will no longer be needed under a
centralized procurement system. In a July 1995 interim response, DOE
agreed that it should centralize its procurement of these analyses,
at least at the field office level. It is studying EPA's centralized
procurement approach for similar services to determine the best
practices applicable to DOE. In its response, DOE did not address
the second recommendation. (GAO/RCED-95-118)
SAFETY OF NUCLEAR
MATERIALS
------------------------------------------------------ Chapter 2:1.2.7
In April 1993, we recommended that NRC establish specific criteria
and procedures for suspending or revoking an agreement-state program.
The purpose was to eliminate the inconsistent way in which NRC was
evaluating the effectiveness of its two nuclear materials programs in
achieving the goal of adequately protecting the public from
radiation. In June, 1995, NRC approved a Final Statement of
Principles and Policy for the agreement-state program and requested
submittal of implementing procedures for NRC's final approval by
September 30, 1996. (GAO/RCED-93-90)
NUCLEAR REGULATION
------------------------------------------------------ Chapter 2:1.2.8
In May 1994, we recommended that NRC determine what actions may be
needed to better control the spread of radioactivity-contaminated
sludge, ash, and related by-products from sewage treatment plants
that receive radioactive materials from NRC's licensees. NRC is
working with EPA and sewerage consortia to develop a national
approach to ensuring the protection of treatment workers and the
public. NRC addressed various rulemaking options in June 1995 and
plans to use the results that EPA obtains in its upcoming sewage
sludge survey--slated for 1997-1998--in considering the need for any
rulemaking. (GAO/RCED-94-133)
CONTRACT MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.9
In August 1994, we recommended that DOE, in contracting with the
University of California for the management of three national
laboratories, (1) propose contract modifications where there is not a
sound basis for deviating from standard contract clauses, (2) require
advance DOE approval for University-sponsored research projects at
the laboratories, and (3) ensure that fees paid to contractors for
increased financial risks are cost-effective by developing criteria
for measuring their costs and benefits. DOE is reviewing the
nonstandard clauses in the University's contracts to identify changes
needed, but it plans no action until the current contracts expire in
2 years. DOE also negotiated a change in the contracts, effective
May 1995, that requires the University to provide information to DOE
on any projects not requiring DOE's approval that the University
sponsors at the laboratories. Utilizing performance-based
provisions, DOE is modifying management and operating contracts for
both profit and nonprofit contractors. For example, the recently
renewed contract with the nonprofit contractor operating the Argonne
National Laboratory provides for an award fee tied to specific
performance measures. DOE has not yet evaluated the effectiveness of
the use of performance-based contracts. (GAO/RCED-94-202)
NUCLEAR WASTE DISPOSAL
----------------------------------------------------- Chapter 2:1.2.10
In September 1991, we recommended that DOE plan for the increasing
likelihood that it might not be able to accept utilities' nuclear
waste for storage or disposal as planned to begin in 1998. We also
suggested that the Congress explore whether additional legislation is
desirable to address the likelihood that DOE will be unable to begin
accepting the waste by that year. Recently, DOE sought the views of
affected parties on, among other things, whether DOE has an
obligation to begin accepting nuclear waste in 1998. Subsequently,
DOE concluded that it does not have such an obligation in the absence
of a federal storage or disposal facility. At the same time, the
Congress has been considering legislative proposals that would, among
other things, authorize and require DOE to store utilities' nuclear
waste at a federal facility until DOE completes a facility for
permanent disposal of the waste. (GAO/RCED-91-194)
NAVAL PETROLEUM RESERVE
----------------------------------------------------- Chapter 2:1.2.11
In January 1995, we suggested that to enhance the profitability of
the NPR-1, the Congress should consider amending the Naval Petroleum
Reserve Production Act of 1976 to, among other things, (1) eliminate
the requirement that the fields be operated to increase the recovery
of oil to the maximum, as opposed to increasing profits to the
maximum, and (2) require that ownership shares between the U.S.
government and Chevron be made final. We pointed out that these
actions were desirable whether NPR-1 is sold or is operated as a
government corporation. Since then, the 1996 Defense Authorization
Act has been approved by the Senate and the House conferees with a
provision to sell the reserve. The act also includes language to
make ownership shares final and eliminate the recovery requirement.
(GAO/RCED-95-65)
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 upward of $115 billion annually. It also directly touches
the lives of all citizens. Although the Congress and the American
public have traditionally supported strong environmental protection
laws, the rising costs of these environmental protection programs to
state and local governments, in the face of dwindling federal
financial assistance, has caused some environmental 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. In fiscal years 1989
through 1995, DOD's and DOE's facilities' cleanup and compliance
costs tripled from $2.9 billion to $8.7 billion, and currently they
exceed EPA's entire budget. While concerns have been raised about
the costs of these programs in relation to their benefits, there is
growing support for rethinking the nation's fundamental approach to
environmental regulation.
Our work has been in the forefront, highlighting our nation's
recurring environmental problems and recommending ways in which the
Congress and EPA can effectively address those concerns. In an
effort to seek a more realistic balance between environmental
expectations and available resources, we have continued to recommend
that EPA incorporate strategic planning to help ensure that its
limited resources are targeted to high-risk environmental and public
health problems. For example, we reported that EPA's priorities for
taking cleanup actions in the Superfund program were not set in
accordance with the environmental risks posed by those sites. Other
factors, such as the time a site spent in the queue, were more
important, even though the agency has information available to rank
sites for cleanup. To better measure program success, we recommended
that the agency develop performance indicators that are based on
environmental outcomes rather than on activities taken by the agency.
Finally, our work over the past several years has stressed the need
to adequately fund those programs that address 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 pollution taxes, 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. Also, EPA 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
The Clean Air Act Amendments of 1990 established ambitious milestones
for protecting and enhancing the quality of the nation's air. A key
step in meeting these milestones--translating the act's statutory
mandates into workable rules and regulations--requires EPA to develop
and issue rules at an unprecedented rate. At the time of the act's
passage, EPA's rulemaking process averaged more than 3 years, and
some rules took as many as 9 years to complete. To expedite its
clean air rulemaking, EPA has made a number of changes to its
internal review process. However, despite these efforts, EPA
acknowledges that it has missed over 60 percent of the statutory
deadlines imposed by the 1990 act. Exacerbating this situation is
the fact that the agency does not have a system for identifying
problems in its rulemaking process or assessing the effectiveness of
its streamlining initiatives. We recommended that EPA implement a
tracking system that would yield key information to monitor and
evaluate the agency's clean air rulemaking process. In response, EPA
has modified several of its existing information systems to allow
manual tracking of the time and resources allocated to the agency's
rulemakings. As a long-term solution, the agency plans to develop a
new resource management system that will track implementation
progress and resource demands for rulemaking and other activities.
EPA expects the system to be in place by the end of fiscal year 1997.
(GAO/RCED-95-70)
SAFE DRINKING WATER
------------------------------------------------------ Chapter 2:2.2.2
Several of our reports highlighted serious shortcomings in EPA's
drinking water protection program. In 1992, we reported that
operators of public drinking water systems often do not issue, in a
timely manner, required notices to their customers each time their
water system fails to meet one of the drinking water standards for
regulated contaminants. Untimely notification occurred even in cases
when contamination may pose a serious potential health risk. We
recommended that EPA work with the states to help operators to
increase the issuance of required public notices. In 1995, EPA
issued a report that identified this issue as a priority and held a
public meeting to solicit comments on how to improve public
notification. Any further actions are on hold pending the
availability of resources. (GAO/RCED-92-135)
In 1993, we reported that periodic inspection, or sanitary surveys,
of public water systems--a key means of ensuring the quality of
drinking water--are often deficient in how they are conducted,
documented, and/or interpreted. Furthermore, we reported that many
of the 200 surveys that we reviewed showed recurring problems with
water systems' equipment and management, particularly among small
systems. To improve the effectiveness of these surveys, we
recommended that EPA work with the states to establish minimum
requirements governing the frequency of the surveys and the manner in
which they should be conducted and documented. EPA is planning to
publish additional guidance on these surveys. (GAO/RCED-93-97)
Because small communities' financial problems are particularly acute,
in 1994 we reported on cost-effective management and technology
alternatives that could be used to improve these communities'
compliance with the drinking water regulations. We found one option
that holds particular promise: the restructuring of systems, such as
consolidating nonviable small systems with viable ones. Among other
things, we recommended that EPA (1) work with the cognizant
committees of 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
priorities to place greater emphasis on developing and implementing
viability programs.
Since our report, EPA has (1) worked with the Congress to address
funding for the development of viability programs (such as the
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 top priority following the reauthorization of the act. The
Congress is currently considering these issues but has yet to enact
legislation. (GAO/RCED-94-40)
CLEAN WATER
------------------------------------------------------ Chapter 2:2.2.3
In 1992, we reported that a tremendous gap exists between the need
for wastewater treatment facilities and the resources available in
the State Water Pollution Control Revolving Fund Program to meet
those needs. States estimate that the state revolving funds will
meet only a small percentage of their needs and will pose particular
problems for small communities. As a result, we recommended that EPA
develop a long-term strategy to help state and local governments
close this gap, particularly for small communities. EPA is
considering options to address the needs for small communities. In
addition, the Congress is currently considering this issue.
(GAO/RCED-92-35)
In 1994, we also found that EPA has 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. To ensure that
the agency is focusing its limited resources on the most important
elements of water criteria development, we recommended that EPA
prepare an implementation plan that identifies its top priorities and
the bases for them and that establishes a timetable for addressing
these activities. We also recommended that EPA regularly solicit
input from interested parties when the implementation plan is being
developed and when specific regulatory actions are being considered.
EPA agrees that it should prepare an implementation plan that sets
priorities but wishes 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 2:2.2.4
In 1986 and 1994, we reported on the inconsistent regulation of
carcinogenic pesticides for food use stemming from federal law that
allows some food uses of carcinogenic pesticides and prohibits others
(commonly referred to as the "Delaney dilemma"). These varying legal
requirements result in EPA's using different standards for regulating
the same foods depending on whether they are processed or
unprocessed. We identified several alternatives for the Congress to
consider in amending the relevant food safety laws whose provisions
result in this inconsistent treatment of carcinogenic food-use
pesticides. The Congress has considered this issue but has not yet
enacted legislation. (GAO/RCED-86-125 and GAO/RCED-94-57).
In 1972, EPA was given the formidable task to reassess 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, in 1988 the Congress
provided funds for additional resources and mandated that the
reassessment be essentially completed by 1998. Our review of the
program disclosed that, despite some recent progress, EPA may not
complete this process until 2006. More importantly, the progress of
reregistration to date has not always focused on those pesticides
that present the highest risk to public health and the environment.
We recommended that the Congress amend the Federal Insecticide,
Fungicide, and Rodenticide Act to require that, except in unusual
circumstances, EPA focus its efforts on completing reregistration of
the highest-priority food-use pesticides first. (GAO/RCED-93-94)
Our work also showed that about one-third of pesticide-tainted
shipments of imported food ended up on grocery shelves. We
recommended that FDA take stronger prevention actions, including
targeting repeat offenders for penalties, applying more-stringent
control over suspect shipments, and using its program resources more
effectively. To better achieve these goals, we recommended that the
Congress authorize the agency to impose civil administrative
penalties on violators. (GAO/RCED-92-205)
We recently made a number of recommendations to help strengthen EPA's
ability to regulate toxic chemicals. Under the Toxic Substances
Control Act (TSCA), EPA can limit the manufacture, distribution, and
use of toxic chemicals. However, the legal standards for taking
action and the burden of proof placed on EPA by the act make it
difficult for the agency to use this authority. EPA has reviewed the
risks of only 2 percent of some 62,000 chemicals and must use
cumbersome procedures to acquire test data. New chemicals are
marketed without EPA's having sufficient data to fully assess the
potential risks. EPA also believes that industry has made excessive
claims of confidential business information for data submitted under
TSCA. Among other things, we asked the Congress to consider
improving EPA's ability to conduct chemical reviews by requiring
industry to submit additional data on new chemicals and by shifting
to industry some of the burden of compiling data on existing
chemicals. In addition, to supplement TSCA's slow
chemical-by-chemical approach, we recommended that the Congress may
wish to consider establishing overall goals for reductions in the use
of toxic chemicals and provide EPA with tools, such as market-based
incentives, to achieve these goals. (GAO/RCED-94-103)
HAZARDOUS AND SOLID WASTE
MANAGEMENT
------------------------------------------------------ Chapter 2:2.2.5
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 has
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 occurred. EPA plans to address this
problem in the future. (GAO/RCED-93-15)
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
(CBO) has projected that ultimately the nation could need $75 billion
to clean up a total of 4,500 nonfederal Superfund sites. We found
that EPA has 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, we found that through 1993, EPA had excluded from its
recovery efforts about $3.3 billion of its program-related costs.
Accordingly, we 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 are recoverable.
(GAO/T-RCED-94-274)
We also recommended that EPA expedite the issuance of its proposed
rule that would broaden the definition of indirect costs that it
could recover and increase the program costs that it seeks to
recover. Some of the excluded indirect costs include the costs for
research and development and for the preliminary work to assess
whether a site should be included in the Superfund program. EPA is
currently revising its proposed rulemaking. Due to the numerous
public comments the proposed rule received, agency officials are
considering whether to repropose the rulemaking; therefore, they were
unable to estimate a final issuance date. (GAO/RCED-94-196)
STATE/FEDERAL RELATIONS
-------------------------------------------------------- Chapter 2:2.3
Most federal environmental programs are designed to be administered
at state and local levels. Accordingly, once a state demonstrates
that it is capable of implementing an environmental program, EPA
authorizes the state to implement the program. After such
authorization, EPA regions, with guidance from headquarters, continue
to set goals for the states, provide them with financial assistance,
and monitor their performance in meeting grant and program
requirements.
Most states authorized to manage federal environmental programs have
been unable to meet some of the requirements to implement these
programs. Many states have had difficulty in performing key
functions, such as monitoring environmental quality, issuing permits,
and enforcing compliance. As a result, states have become
increasingly reluctant to accept additional responsibilities
associated with recent environmental laws. Resource limitations have
been identified as a major factor in the states' reluctance. Federal
funding has not kept pace with these new requirements, and the states
have been unable to make up the funding difference. We recommended
that EPA work with states to identify how each state's limited funds
can be most efficiently allocated within each program to address the
state's highest environmental priorities and to take steps to
increase the agency's flexibility in dealing with states to achieve
improvements in environmental quality. We also recommended actions
that EPA could take to strengthen its working relationships with
states. EPA has a number of initiatives under way to improve its
communication with the states and bring greater flexibility in its
oversight of state activities. (GAO/RCED-95-64)
FOOD AND AGRICULTURE ISSUE AREA
(BUDGET FUNCTION 350)
---------------------------------------------------------- Chapter 2:3
GAO Contact: Robert Robinson, 202/512-5138
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:3.1
USDA is the third largest civilian agency in the federal government
with a budget of over $60 billion. Because the U.S. food and
agriculture sector accounts for 17 percent of the gross domestic
product and 20 million jobs and because U.S. agricultural products
account for 10 percent of U.S. export dollars, USDA's programs
affect the lives of all Americans and millions of people around the
world. USDA manages a variety of programs designed to support farm
income, develop markets, boost farm production and exports, ensure
food safety, and provide consumers with food information and
assistance. USDA's outlays for fiscal year 1996, by major policy
area, include: (1) $40.6 billion in food and nutrition assistance
programs, (2) $14 billion in farm and marketing programs, (3) $3
billion in rural development assistance, (4) $1.8 billion in
research, education, and economics activities, and (5) $500 million
in food safety.
In 1995, congressional committees made extensive use of our work, and
as a result of a number of program changes, federal food and
agriculture funds were used more effectively.
USDA'S REORGANIZATION
------------------------------------------------------ Chapter 2:3.1.1
Our management reviews of USDA and subsequent follow-up work
contributed to the development and passage of the Department of
Agriculture Reorganization Act of 1994. The act mandates that USDA
reduce its staff and consolidate and streamline its operations. As a
result, USDA has established six major mission areas; reduced the
number of agencies from 43 to 29; closed or consolidated about 1,166
field offices; established Field Office Service Centers in about
2,500 locations which collocate the Farm Service Agency (FSA) and
Natural Resources Conservation Service (NRCS) to provide farmers with
one-stop service. FSA administers programs from the former
Agricultural Stabilization and Conservation Service and the Farmers
Home Administration; NRCS administers programs from the former Soil
Conservation Service. These changes are expected to reduce federal
employment by about 13,200 staff years and save taxpayers $4.1
billion in personnel and other costs over 5 years.
FARM PROGRAMS
------------------------------------------------------ Chapter 2:3.1.2
Our past reviews of farm programs have contributed to the
congressional decisions to eliminate the price support programs for
wool and mohair, and to limit payments under the honey program, that
are expected to save tax payers over $200 million a year. Changes to
other commodity programs are also being considered as part of the
debate surrounding the 1995 Farm Bill. Our reviews of the outdated
federal dairy pricing systems contributed to legislation being
proposed that will completely revamp the system and possibly
eliminate it. Our analysis of USDA's farm loan programs alerted the
Congress that billions of federal dollars are at risk if current
lending practices continue. As a result, the Congress is currently
considering legislation that would change some of these practices,
such as prohibiting new loans to borrowers who caused USDA to incur
losses on previous loans. Finally, in part as a result of our
analyses of the crop insurance and disaster assistance programs, the
Congress enacted legislation in October 1994 integrating both
programs and requiring improved internal controls. This reform
legislation is expected to save taxpayers over $350 million.
FOOD SAFETY
------------------------------------------------------ Chapter 2:3.1.3
Our analyses of the federal food safety inspection system have found
that the current system could better protect consumers against
microbial contamination, which is the greatest food safety hazard.
Our principal recommendation--to move to a scientific, risk-based
approach--has been influential in spurring federal agencies to
develop new inspection regulations that will require a more
scientific approach to food safety.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:3.2
SHIFTING FARM PROGRAMS
TOWARD A GREATER MARKET
ORIENTATION
------------------------------------------------------ Chapter 2:3.2.1
We believe USDA's commodity programs need to move toward a more
global market orientation. Our work has focused on revamping the
agricultural farm, export, and market development programs to help
make them more competitive in the global marketplace. As the
Congress debates the 1995 Farm Bill, various proposals are being
considered that are consistent with our recommendations and propose
to move the agricultural sector toward a greater market orientation.
(GAO/RCED-92-2 and GAO/RCED-92-54)
A reevaluation of USDA's support programs is needed in several areas
because current subsidies provide incentives to address government
objectives rather than increase the flexibility of the agricultural
sector. Our analysis also shows that flexible farming provisions,
such as "flex acres," have generally had a positive impact on
farmers' operations and are projected to reduce government spending.
We recommended that the Congress consider reauthorizing or expanding
the flex acres provisions in the 1995 Farm Bill. Although the
Congress has eliminated some subsidy payments, our work indicates
additional changes are needed on the cotton, rice, dairy, sugar, and
peanut programs. (GAO/RCED-94-76)
Our review of the cotton program found that government expenditures
for the cotton program totaled $12 billion between 1986 and 1993, an
average of $1.5 billion per year. Government costs remained high
during this 8-year period despite the legislative reforms of 1985 and
1990 designed to reduce costs and increase the U.S. share of the
world cotton market. The new cotton program provisions did not
expand U.S.cotton exports when world prices were low. We recommended
that because the severe economic conditions and many of the
motivations that led to the cotton program in the 1930s no longer
exist, the Congress may wish to consider reducing or phasing out
payments or outlays over a number of years, perhaps over the life of
the next farm bill. The Congress is currently considering the costs
and benefits of commodity programs, including cotton, in its drafting
of the 1995 Farm Bill. (GAO/RCED-95-107)
On the rice program, we found that the program continues to be costly
for the government and for rice buyers. In 1986 through 1992, rice
program support costs averaged $863 million annually. We recommended
that the Congress consider ways to move rice producers toward a
greater market orientation and reduce their dependency on government
support. Among other things, the Congress could lower the target
price and reduce export assistance. While the Congress has not yet
taken action on the rice program, it may do so in the 1995 Farm Bill.
(GAO/RCED-94-88)
Similarly, on the dairy program we found that 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 have recommended the development of a
long-range dairy policy that better recognizes the importance of
dairy exports for the continued viability of the U.S. dairy
industry. As part of its deliberations on the 1995 Farm Bill, the
Congress is considering a number of options to revamp the dairy
program that are consistent with our recommendations.
(GAO/RCED-90-88 and GAO/RCED-94-19)
For the sugar program, we recommended 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. We recommended that the Congress gradually lower
the loan rate for sugar and direct USDA to adjust import quotas
accordingly. Changes to the sugar program are also being considered
during the 1995 Farm Bill debate. (GAO/RCED-93-84)
Finally, for the peanut program, economic studies and our analysis
show that the peanut program adds between $314 and $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. The peanut program is one of the commodity programs being
considered for change as part of the 1995 Farm Bill.
(GAO/RCED-93-18)
PROBLEMS FACING USDA'S
FARM LOAN PROGRAMS
------------------------------------------------------ Chapter 2:3.2.2
USDA's farm loan programs are not adequately protecting the
multimillion-dollar federal investment in farmers. This year, we
reported that in fiscal year 1989 through June 30, 1995, USDA made
$448 million in new direct and guaranteed loans to borrowers for whom
the agency had previously incurred losses. As of March 31, 1995, 42
percent of these borrowers were delinquent on their new loans. We
found numerous examples of borrowers with poor repayment histories
who were subsequently unable to repay new loans made to them. For
example, one borrower received a guaranteed loan for $80,000 in 1991
after receiving about $317,000 in direct debt loan relief in 1989; by
1993, this borrower was delinquent on the new guaranteed loan.
A number of factors have contributed to these problems. Although
some of these factors--such as the decline of the agricultural
economy--are beyond the immediate control of either the Congress or
USDA, two are not. First, lending officials in USDA's field offices
often fail to follow the agency's own standards for making loans,
servicing loans, and managing property. Second, certain
USDA-authorized or congressionally authorized loan-making,
loan-servicing, and property management policies themselves increase
the agency's vulnerability to loss. For example, borrowers who have
defaulted on past loans may obtain new loans, and under a
congressionally directed policy, borrowers can obtain new USDA direct
loans for operating expenses without demonstrating the ability to
repay their existing debt.
We have made numerous recommendations to the Congress and the
Secretary of Agriculture that are aimed at (1) improving compliance
with loan standards and (2) strengthening policies and program design
for direct loans, guaranteed loans, and acquired farm property. The
agency generally agrees with most of the report's recommendations for
the need to tighten controls over loan making and loan servicing.
USDA has begun to implement some of these recommendations but has not
yet completed action on any of them. For example, the agency is in
the process of developing regulations that would require loan
classifications to be updated every 2 years and borrowers to be
assessed for "graduation" (refinancing mortgages through private
lenders) annually. The Congress is also considering legislation that
will make some of the other changes we have suggested. More broadly,
we have suggested that the Congress clarify USDA's role and mission,
noting that USDA's attempts to operate simultaneously as a fiscally
prudent lender and as a temporary assistance agency have not worked.
(GAO/RCED-95-11, GAO/RCED-95-9, and GAO/RCED-92-86)
PROBLEMS FACING THE
FEDERAL FOOD SAFETY
SYSTEM
------------------------------------------------------ Chapter 2:3.2.3
The federal system to ensure the safety and quality of the nation's
food--at an annual cost of $1 billion a year--is inefficient and
outdated. 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. (GAO/RCED-92-152)
The federal meat and poultry inspection system follows procedures
that are no longer appropriate for today's food safety risks. The
system relies on the inspector's sense of sight, smell, and touch to
ensure wholesome product. However, inspectors cannot see, smell, or
feel microbial pathogens, which are widely regarded as the principal
risk associated with meat and poultry. We have recommended the need
to modernize inspection procedures and tie resource allocation to
health risks, including the development of preventative systems that
provide specific microbial testing standards. (GAO/RCED-94-110)
The federal programs in place to ensure that foods are not
contaminated with unsafe chemicals also need fundamental changes.
Structural weaknesses of a long-standing nature continue to limit the
ability of federal agencies to reduce the risk of unsafe chemicals in
food. Many of these problems are the result of the very laws and
regulations that undergird the food safety system. We believe that
improved effectiveness, efficiency, and uniformity in the federal
food safety system could be realized by creating a single food safety
agency to administer a uniform set of food safety laws that are 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. (GAO/RCED-92-209
and GAO/RCED-94-192)
Currently USDA has several initiatives under way to strengthen the
meat and poultry inspection system and develop improved methods to
detect and control microbial contamination. At the same time, there
has also been extensive congressional interest in (1) the need to
improve the meat and poultry inspection system; (2) the adequacy of
USDA's and the Food Safety Inspection Service's actions to strengthen
inspections; (3) the adequacy of Department and agency management;
and (4) the adequacy of current food inspection laws. However, it is
too early to tell when these improvements will be completed or
whether the Congress will move toward the creation of a single food
safety agency. (GAO/RCED-T-93-22, GAO/RCED-94-192, GAO/RCED-94-110,
GAO/RCED-T-93-22, GAO/RCED-92-209, and GAO/RCED-92-152)
PROBLEMS FACING RURAL
AMERICA
------------------------------------------------------ Chapter 2:3.2.4
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 the area of rural
development identified several basic problems in the federal approach
to rural America. First, many of the 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 among communities of different population
densities. Finally, federal programs focus on process rather than
effectiveness--they tend to measure effectiveness by numbers served
or dollars spent rather than by the achievement of program goals.
This process orientation hinders rural areas from using resources
efficiently.
Our analysis of which factors influence a rural area's economic
success or failure found that many factors are responsible and that
no single factor or combination of factors can guarantee success.
However, effective local leadership and long-range planning are
critical factors in successfully finding solutions to an area's
economic problems. In addition, the web of federal programs,
policies, and regulations that accompany federal funding make the
delivery of assistance inefficient. We recommended that the Congress
consider (1) developing both a short- and long-term strategy 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. The Congress is currently considering changes to the 1995
Farm Bill that may have an impact on and include rural development
programs. (GAO/RCED-94-165)
HOUSING AND COMMUNITY
DEVELOPMENT ISSUE AREA (BUDGET
FUNCTIONS 370 AND 450)
---------------------------------------------------------- Chapter 2:4
GAO Contact: Judy England-Joseph, 202/512-7631
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:4.1
The federal government has established over $1 trillion worth of
financial services and operates more than 300 programs that are aimed
at providing decent, affordable housing and healthy communities. The
agencies primarily responsible for these programs include the
Department of Housing and Urban Development (HUD) and its Federal
Housing Administration (FHA); the Department of Veterans Affairs
(VA); the Rural Housing and Community Development Services (RHCDS);
SBA; and the Federal Emergency Management Agency (FEMA).
After decades of costly housing and community development assistance
and with future budget needs of over $100 billion, the Congress and
the administration are considering options to abolish or streamline
HUD. To address congressional concerns, in December 1994, HUD
announced its latest attempt to overhaul and streamline an agency
that has long been plagued with scandals of mismanagement and poor
service. At the same time, alternative approaches to community
revitalization are being discussed. As detailed below, this issue
area's work has significantly contributed to congressional debate and
decision-making on the future of housing and community development at
the federal and state levels. As a result of our work, HUD and the
aforementioned agencies have taken action to improve the efficiency
and effectiveness of housing and community development policies and
programs.
MORTGAGE ASSISTANCE
------------------------------------------------------ Chapter 2:4.1.1
We reviewed various issues of federal agencies' efforts to help low-
and moderate-income individuals and families obtain housing through
direct, insured, and guaranteed loans. The review included work on
programs operated by HUD and RHCDS. Some of the work we undertook on
FHA focused on the future of FHA and how to restructure both its
multifamily and single-family programs. Specifically, we provided
several briefings to Members of Congress and/or their staffs on (1)
housing and community development program operations and issues
facing HUD, (2) assessments of proposals to restructure FHA, and (3)
questions that should be asked about FHA's mission when considering
restructuring FHA. These briefings contributed to the House and
Senate Banking Committees' inquiries to HUD on its restructuring
proposal.
In the multifamily area, we testified before subcommittees of the
House and Senate authorizing committees on HUD's "mark-to-market"
proposal for restructuring its multifamily housing portfolio. We
also issued reports that should lead to improvements in the way HUD
manages its $45 billion insured multifamily loan portfolio. For
example, in response to our recommendation, HUD agreed to make
improvements in the method it uses to estimate its multifamily loan
loss reserve. These improvements should result in more accurate
estimates of loan loss reserves. Also, in responding to our draft
report on HUD's multifamily rent-restriction program, HUD agreed to
implement proposed recommendations aimed at clarifying
rent-restriction program requirements and compliance procedures.
Also, HUD has begun to take actions to address problems that we found
in a recently issued report on HUD's multifamily nursing home
program. These include initiating actions to refine its credit
subsidy estimate for the program and to better monitor the program's
financial performance.
In the single-family mortgage insurance area, we reported that the
economic net worth of FHA's $300 billion program has improved
significantly. However, whether the program can maintain this
improvement will depend on many economic and program-related factors
that will affect the financial health of the program in the future.
We noted that if the Congress wants the limit on the size of
mortgages that can be purchased by Fannie Mae (Federal National
Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage
Corporation) to follow the long-term pattern of growth in average
home prices, then the Congress needs to make legislative changes. We
also reported on the losses incurred by HUD on properties it
acquired, managed, and sold; the number of such properties; and the
length of time they remained in HUD's inventory. This information
should be useful to the Congress during its debate on the future of
FHA and on the possibility of developing public-private partnerships
for purposes such as disposing of acquired single-family housing.
Past work on RHCDS single-family direct loan programs contributed to
RHCDS' decision to centralize the servicing of its direct loans. The
Congressional Budget Office estimates about $171 million in total
outlay savings for fiscal years 1999 and 2000 as a result of the
reduced need for local staff to service loans.
LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.1.2
Our work on low-income housing issues supported congressional
decision-making through analyses of (1) major public and assisted
housing reform proposals, (2) HUD's efforts to turn around distressed
public housing, and (3) ways to improve the Federal Home Loan Bank
System's Affordable Housing Program.
This year we testified before the Congress on problems with HUD's
public housing and multifamily rental housing programs and on
proposals to fundamentally restructure those programs. We discussed
(1) the reasons why HUD's programs too often deliver high-cost,
low-quality rental housing for lower-income households; (2) HUD's
proposals to remedy these problems; and (3) basic policy,
programmatic, and budget issues that need to be resolved before
deciding on an approach to totally restructure HUD's rental
assistance programs. During the congressional hearing process, we
worked closely with subcommittee offices analyzing the implications
of specific reform proposals.
We reported on the cost-effectiveness of HUD's proposal to replace
billions of dollars of annual public housing subsidies with housing
vouchers for those currently living in public housing. Our report
raised a number of major policy issues concerning the
cost-effectiveness of using vouchers for public housing that were not
addressed by the HUD proposal. For example, our report called into
question the advisability of (1) spending millions of dollars to
rehabilitate certain public housing properties rather than having
these costs financed through property rents and (2) substituting
vouchers for public housing properties in situations where public
housing is less expensive to rehabilitate and operate. This
message--that property-by-property reviews should be performed to
determine the most cost-effective local approach--has been
incorporated into proposed legislation in both the House and the
Senate.
We continued last year's efforts to focus more closely on efforts
that HUD could and is taking to "turn public housing around." For
example, before a Senate appropriations subcommittee we testified
that linking $1.4 billion in supplemental funding for distressed
public housing developments to improvements in the public housing
agencies' management would help to conserve funding and better ensure
the productive use of these funds.
We also concentrated efforts on addressing problems created by about
a dozen large "troubled" public housing agencies that have, over the
past decade, received billions of dollars in subsidies but too often
offer squalid living conditions for families that they assist. Our
work with the Congress contributed to a landmark provision in
proposed housing reform legislation establishing a mechanism to
dismantle the worst public housing agencies when conditions warrant.
In addition, our audit work and testimonies on HUD's takeover of the
Chicago Housing Authority helped the Congress understand how the
problems in Chicago's public housing would be addressed. Chicago's
problems will require many years to overcome. However, during the
first 3 months of the HUD takeover, we found that the Department did
not have a long-term plan for improving the housing agency's
performance. Such a plan is essential to gaining the trust and
cooperation necessary to make concrete progress. HUD is now working
on a long-range plan.
Finally, our comprehensive review of the Federal Home Loan Bank
System's Affordable Housing Program concluded that while the program
serves a diverse group of beneficiaries and is a key resource in the
development of affordable housing, opportunities exist for improving
it. Specifically, the report highlighted the need to ensure that all
program subsidies are passed through to the intended beneficiary and
recommended that the reporting and monitoring responsibilities of all
program participants be better defined and integrated, as well as
better coordinated with the efforts of other housing agencies. The
Federal Housing Finance Board has agreed to address our findings and
recommendations.
COMMUNITY DEVELOPMENT
------------------------------------------------------ Chapter 2:4.1.3
Our community development work examined three areas through which
billions of federal dollars are spent to strengthen and rebuild
communities--(1) financial and other assistance to small business,
(2) community-driven comprehensive efforts to revitalize
neighborhoods, and (3) assistance to aid communities and individuals
devastated by natural disasters.
In the small business area, we reported on problems within the Small
Business Investment Companies Program and the Specialized Small
Business Investment Companies Program. These two programs aim to
provide small entrepreneurial businesses with financing and
management assistance as well as provide the equity and long-term
debt capital needed for growth, modernization, and expansion. Our
reports pointed out that SBA's delay in liquidating firms has
resulted in losses totaling millions of dollars, that SBA's
management of the program was deficient, and that financially healthy
firms were benefiting from a special program that cost SBA millions
of dollars. We recommended that SBA's Administrator correct
liquidation and management problems.
We also testified twice on the problems that SBA continues to
experience with its minority business development program. Among
other things, contract dollars continue to be concentrated in a few
firms, thus limiting the business development opportunities available
to many firms. Also, firms nearing the end of their program term are
still dependent on program contracts, raising doubts about the firms'
probability to succeed in the commercial marketplace upon leaving the
program. Our survey of 12,000 small construction firms provided, for
the first time, comprehensive statistical data on the experiences of
and obstacles faced by such firms in obtaining surety bonds.
Our work on comprehensive efforts to revitalize neighborhoods focused
on lessons learned from community-driven local efforts that address
housing, economic, and social service needs in a strategic way and on
the impact of federal programs on these efforts. We found that
community development experts and practitioners in the communities we
studied believed that a comprehensive approach has benefited the
communities and holds promise for long-term results because it
provides for multiple services and makes them more accessible to
community residents. Our report noted that the federal government
assists distressed urban communities and their residents through a
complex system involving at least 12 federal departments and agencies
that administer hundreds of programs in the areas of housing,
economic development, and social services. We reported that this
proliferation of federal programs and the lack of coordination among
agencies imposes a burden on local organizations that attempt to
piece together programs to serve their communities. In related work,
we found that the federal government operates 342 programs that could
be considered to relate to economic development. The results of our
work were used by members of the House to (1) illustrate the need to
streamline federal programs and (2) support legislation that would
give local governments increased regulatory flexibility.
To assist the Senate's Bipartisan Task Force on Funding Disaster
Relief, we compiled a comprehensive funding history of federal
disaster-related spending. This effort revealed federal obligations
of nearly $120 billion (in constant 1993 dollars) between fiscal
years 1977 and 1993, including both grants and loans. The data also
showed an increasing trend in federal disaster spending and in the
number of presidentially declared disasters. At the task force's
request, we coordinated our efforts with those of CBO and the
Congressional Research Service (CRS), enabling the task force to
produce a comprehensive primer for future congressional debate on
federal disaster assistance issues.
FEDERAL MANAGEMENT
------------------------------------------------------ Chapter 2:4.1.4
In January 1995, we reported on the fundamental deficiencies that led
us to designate HUD as a high-risk area especially vulnerable to
waste, fraud, abuse, and mismanagement. We also reported on the
actions HUD had taken or initiated to correct the deficiencies and
further actions that are needed.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:4.2
HOUSING FINANCE
------------------------------------------------------ Chapter 2:4.2.1
In a June 1995 report, we recommended to the Board of Directors of
the Federal Housing Finance Board that any revised regulations for
the Affordable Housing Program clearly define and integrate the
monitoring and reporting responsibilities of the projects' sponsors,
the members, and the Federal Home Loan Banks. Such action would help
ensure that the Federal Home Loan Banks continue to meet their
statutory and regulatory obligations under this program.
(GAO/RCED-95-82)
LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.2.2
In July 1994 testimony, we said that we had found deplorable
conditions in various low income tenant-based properties and
recommended that the Secretary of HUD (1) promptly identify all
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 against owners not bringing their
properties into compliance with housing quality standards. We
recommended further that HUD provide the Congress with an assessment
of the resources and the legislative changes the Department needed to
overcome any budgetary or legislative constraints that prevented HUD
from addressing these conditions. (GAO/RCED-94-273)
In a February 1989 report, we recommended that the Congress establish
one low-income rental assistance subsidy program that would provide a
unified approach to delivering housing assistance, equalize the
benefits to program recipients, and quiet the debate over which
program is preferable. In doing so, the Congress would need to
evaluate the merits and drawbacks of several features that
distinguish vouchers from certificates and adopt those features that
best satisfy the programs' legislative intent of providing decent,
safe, and affordable rental housing. (GAO/RCED-89-20)
LEAD-BASED PAINT HAZARDS
------------------------------------------------------ Chapter 2:4.2.3
The risk of poisoning from lead-based paint continues to threaten
young children living in low-income housing that was constructed
before the sale of such paint was banned in 1978. Exposure to lead,
even at low levels, may cause serious health, learning, and
behavioral problems in children--especially those under the age of 7.
We issued three reports with a number of recommendations to the
Secretary of HUD to revise the regulations concerning lead-based
paint. The Secretary plans to implement most of our recommendations,
which, if properly executed, would protect children living in public
housing from the hazards of lead-based paint. (GAO/RCED-93-38;
GAO/RCED-93-138; GAO/RCED-94-137)
SBA'S MINORITY BUSINESS
DEVELOPMENT PROGRAM
------------------------------------------------------ Chapter 2:4.2.4
In a September 1993 report on SBA's 8(a) business development
program, we recommended that the Administrator, SBA, should direct
the Associate Administrator of the Office of Minority Small Business
and Capital Ownership Development to (1) implement the
recommendations from our January 1992 report that related to
implementing the 8(a) application-tracking system and determining the
full extent of financial assistance provided to 8(a) firms; (2)
complete and analyze users' requirements for the 8(a) program's
management information system, document the system's design, and
complete the system's implementation plan; and (3) direct SBA field
offices to annually review each approved business plan, as required
by the Business Opportunity Development Reform Act of 1988. Such
actions would improve the 8(a) program's administration and achieve
its objective of developing small businesses owned by socially and
economically disadvantaged individuals. (GAO/RCED-93-145)
DISASTER ASSISTANCE
------------------------------------------------------ Chapter 2:4.2.5
Although severe disasters involve significant costs paid over a
number of fiscal years, FEMA's budget submission to the Congress does
not indicate the extent to which the balance of the Disaster Relief
Fund at the beginning of the year will be needed to pay for the costs
of disasters that have occurred in previous years. Because the
Congress could use this information in its appropriations
deliberations, we recommended that the Director of FEMA expand the
information included in the budget proposal to show estimated future
costs for disasters that occurred in previous years but for which
recovery was not complete. (GAO/RCED-93-60)
We recommended that the Director of FEMA use the authority that
exists under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act as one step in providing an aggressive federal
response to catastrophies. This response should include actively
advising state and local officials of identified needs and the
federal resources available to address them. (GAO/T-RCED-93-4)
In an earlier report, we recommended that the Director of FEMA
request state and local emergency management agencies to incorporate
recovery activities into their emergency plans and help provide
appropriate training to state and local disaster management
personnel. Such action is necessary because we found that when state
and local governments are fully engaged in developing disaster plans
and in conducting exercises, they are better able to respond to the
demands of natural disasters. (GAO/RCED-91-43)
NATURAL RESOURCES MANAGEMENT
ISSUE AREA (BUDGET FUNCTION
300)
---------------------------------------------------------- Chapter 2:5
GAO Contact: Barry T. Hill, 202/512-9775
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:5.1
Together, the Department of the Interior and its bureaus, USDA's
Forest Service, the Army Corps of Engineers, and the National Marine
Fisheries Service and other oceanic programs within the Department of
Commerce's National Oceanic and Atmospheric Administration (NOAA) are
responsible for about 650 million acres, or about 30 percent, of the
nation's total surface area; another 1.4 billion acres of ocean
floor; and an infrastructure of buildings, roads, dams, and other
facilities valued at about $200 billion. These assets generated
about $6.7 billion in revenues in fiscal year 1994.
Our work over the last several years has shown that federal land
management is at a crossroads. For example, while the number of
units in the national park system continues to grow, the overall
level of visitor services is deteriorating, and the dollar amount of
the maintenance backlog has jumped from $1.9 billion in 1988 to over
$4 billion today. Moreover, most park managers lack sufficient data
to determine the overall condition and trends of their parks' natural
resources.
Budgetary constraints will require the Congress and the
administration to make difficult choices about how federal lands and
natural resources are funded and managed. Among these choices are
(1) finding new revenue sources to supplement or replace yearly
appropriations, (2) finding ways for the agencies to operate more
efficiently, (3) limiting or reducing the lands and resources to be
managed or the functions and programs to be performed, or (4)
reducing the level of services and standards for maintaining
facilities and lands. Many of our key open recommendations are
intended to help focus the debate on these difficult choices.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:5.2
OBTAINING FAIR MARKET
VALUE
------------------------------------------------------ Chapter 2:5.2.1
We have reported that fees for communication sites on federal lands
are below fair market value and that the Forest Service has little
assurance that it is collecting fair market value fees from ski area
operators.
We recommended that USDA and Interior implement a fee system that
ensures that fair market value is obtained for the use of their
communications sites and that the Forest Service or the Congress
develop a ski fee system that will ensure that the government
receives fees based on fair market value. Both the Forest Service
and Interior's Bureau of Land Management (BLM) plan to implement new
communication fee systems in 1996. In addition, the Forest Service
has proposed a new system that determines ski fees on the basis of
site-specific appraisals. Conversely, bills introduced in both the
Senate and the House in the 104th Congress would not ensure that the
government receives ski fees based on fair market value.
(GAO/RCED-94-248 and GAO/RCED-93-107)
REDUCING FEDERAL WATER
SUBSIDIES
------------------------------------------------------ Chapter 2:5.2.2
Water transfers, in which rights to use water are bought and sold,
are seen by many resource economists as a mechanism for reallocating
scarce water to new users by allowing those who place the highest
economic value on the water to purchase it. At the same time, such
transactions may allow Interior's Bureau of Reclamation to share in
the profits, thereby reducing the costs to the government of
providing the subsidized water. In a May 1994 report, we (1)
identified several matters for the Congress to consider if it decides
to further encourage water transfers and (2) recommended several
actions that the Secretaries of the Army and the Interior could take
to clarify guidance on approving transfers to more clearly outline
the requirements that must be met. (GAO/RCED-94-35)
In a September 1994 report, we (1) recommended that the Bureau
examine ways in which federal revenues may be increased while
retaining incentives for transfers and (2) identified a matter for
the Congress to consider that would allow the Bureau greater
flexibility in recovering the costs of federal water projects.
Interior has directed the Bureau to adopt the recommendations in both
our May 1994 and September 1994 reports. The Army intends to issue
guidelines on the basis of the Bureau's policies, procedures, and
requirements adopted in response to the recommendations in our May
1994 report. (GAO/RCED-94-164)
As we pointed out in our May 1994 report on water transfers, another
option for improving efficiency and encouraging conservation is
increasing the water rates paid by federal water users. In an April
1994 report on the impact of higher irrigation rates on farmers in
the Central Valley Project in California, we stated that if
irrigators paid full-cost rates for water, federal revenues would be
significantly increased. We also listed several factors that the
Congress may wish to consider if it decides to pursue the issue of
increasing irrigation rates. The Congress has not acted on this
issue to date. (GAO/RCED-94-8)
BELOW-COST TIMBER SALES
------------------------------------------------------ Chapter 2:5.2.3
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 recover these expenses. We also made three additional
recommendations for protecting the federal government's financial
interests. The Chief of the Forest Service is scheduled to make his
recommendations for below-cost timber sales to the Under Secretary of
Agriculture early in 1996. (GAO/T-RCED-91-42)
NATIONAL PARK SERVICE
EMPLOYEE HOUSING
------------------------------------------------------ Chapter 2:5.2.4
While the Park Service has a long-standing tradition of providing
housing to some of its employees, the backlog of housing repair,
rehabilitation, and replacement needs, currently estimated at more
than $500 million, and a tight federal budget dictate that the Park
Service examine options to deal with its housing needs. In an August
1994 report, we made recommendations that, if implemented, would (1)
better define the Park Service's housing needs and identify
opportunities for reducing its inventory and (2) obtain nonfederal
funds to help the Park Service meet its housing needs. The Park
Service has assessed its housing needs at 44 park units and plans
similar assessments at other units. In addition, the Park Service is
currently exploring ways to increase private sector involvement at
eight units and has drafted legislation that would allow it to lease
land to developers to construct employee housing. (GAO/RCED-94-284)
MANAGING SHORT-TERM
CONCESSIONERS
------------------------------------------------------ Chapter 2:5.2.5
Nationwide, there are about 6,000 short-term agreements (of 5 years
or less) under which concessioners provide goods and services to
recreational users of federal lands. In a September 1993 report, we
recommended that the Secretaries of the Interior and Agriculture
require the heads of the four agencies with short-term concessioner
agreements (Interior's National Park Service, Fish and Wildlife
Service, and BLM and USDA's Forest Service) to develop and present to
the Congress a policy to achieve greater consistency in the
management of concession operations. We also recommended that the
Secretary of the Interior require the Park Service to reevaluate its
use of commercial-use licenses in lieu of permits used by other
federal agencies to manage similar activities on their lands. Both
Interior and Agriculture have deferred to the Congress, and several
bills have been introduced to reform concession management in the
federal land management agencies. One of the bills would provide for
consistent management of concessioners across the agencies.
(GAO/RCED-93-177)
OIL AND GAS LEASING
------------------------------------------------------ Chapter 2:5.2.6
The Mineral Leasing Act of 1920, as amended, limits the federal
acreage that one party may control in any one state to 246,080 acres,
reflecting congressional concern about the potential for monopolistic
control of federal oil and gas resources. In a December 1994 report,
we recommended three actions that Interior's BLM could take to better
ensure that oil and gas lessees do not exceed the acreage limitation.
BLM is in the process of implementing the recommendations with an
anticipated completion date of late in 1996. (GAO/RCED-95-56)
The federal government receives royalties from offshore oil and gas
leases on the basis of the volume and price of the oil and gas
production sold and the royalty rate. Therefore, it is essential
that these elements be verified and that inspections be conducted to
help ensure accurate determination of oil and gas royalties. In an
August 1990 report, we concluded that Interior's Minerals Management
Service had been slow in verifying offshore oil and gas production
and recommended that the agency move quickly to implement an ongoing
production verification program. While a task force designed a
functional and operable verification system and submitted a report to
the agency's Director in 1992, the Service does not have a specific
target date for issuing implementing regulations. (GAO/RCED-90-193)
TRANSPORTATION AND
TELECOMMUNICATIONS ISSUE AREA
(BUDGET FUNCTION 400)
---------------------------------------------------------- Chapter 2:6
GAO Contact: John H. Anderson Jr., 202/512-2834
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:6.1
The transportation sector is a key component in improving the
nation's economy; maintaining and enhancing U.S. competitiveness in
the global marketplace; and serving the growing needs of businesses,
industries, and the American public. To meet these goals, the
world's finest transportation system faces many challenges and
trade-offs. Among the challenges are reducing the enormous societal
and economic costs of transportation-related fatalities, injuries,
and property damage; restoring obsolete and deteriorated portions of
the transportation infrastructure; relieving 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.
The telecommunications sector faces tumultuous changes over the next
4 to 5 years. The key issues center around (1) consumer access at
reasonable prices in an environment where the types of firms
delivering services are changing and (2) the appropriate regulatory
role of government in an increasingly competitive industry.
As detailed below, our work, which has included an increasing
emphasis on budget- and organization-related issues, has influenced
the Congress, the Department of Transportation (DOT) and its
agencies, and the Federal Communications Commission (FCC) to take
many actions to improve transportation safety and the efficiency and
the effectiveness of transportation and telecommunications policies
and programs.
AVIATION SAFETY
------------------------------------------------------ Chapter 2:6.1.1
Over the next several years, the Federal Aviation Agency (FAA) faces
major challenges on how to deal with the effects of a downsized
workforce and a growing aviation industry within the context of
continuing to maintain a high level of safety in the U.S. air
transport system. In 1995, FAA also challenged itself and the
aviation industry to achieve zero aviation accidents. Our
recommendations have been designed to help FAA and congressional
decision makers address these challenges.
In response to our recommendations, FAA has (1) begun deploying a
nationwide risk-assessment system for assessing airline risk and for
targeting its limited inspection resources, (2) taken steps to
improve the technical training of its aircraft certification
inspectors, (3) issued guidelines for overseeing the work of FAA's
designated engineering representatives, (4) revised its regulations
to provide incentives for pilots to obtain specialized training
before flying in designated mountainous areas, (5) begun collecting
detailed information on the airlines' compliance with airworthiness
directives for the aging aircraft fleet, and (6) implemented a system
to ensure that foreign corporations that register aircraft in the
United States comply with FAA's requirements.
AIR TRAFFIC CONTROL
MODERNIZATION
------------------------------------------------------ Chapter 2:6.1.2
FAA is at a critical crossroads in its air traffic control (ATC)
modernization program--new ATC systems are being installed and
automation equipment is still being acquired. At the same time,
significant organizational changes are being considered. This past
year, our work focused on the various options for FAA reform,
including the ATC Corporation's proposals and continuing to monitor
the status of FAA's acquisition of ATC systems.
In testimony on FAA's Advanced Automation System, we recommended that
FAA submit a report to the Congress, before the administration
proposes its fiscal year 1996 budget, that describes a comprehensive
automation plan--including time frames, funding levels, and all
interim and long-term actions necessary to satisfy users' needs and
FAA's air traffic control and management requirements. In 1994, FAA
submitted a comprehensive report to the Congress as recommended.
Additionally, our analysis contributed to the congressional decision
to reduce FAA's fiscal year 1995 Facilities and Equipment
appropriation by $136 million and to rescind an additional $35
million. Finally, as we recommended, FAA developed a policy for
scheduling the disbursement of Airport Improvement Program funds
beyond the program's authorization period under a letter of intent.
SURFACE SAFETY
------------------------------------------------------ Chapter 2:6.1.3
For the past 30 years, motor vehicle crashes have caused over 40,000
deaths and 3 million injuries annually. Each year over $15 billion
is spent on health care as a result of these traffic accidents. Our
work in this important area contributed to the following actions:
(1) the National Highway Traffic Safety Administration (NHTSA) has
required that trucks, vans, and sport vehicles have all of the same
major safety features as passenger cars; (2) NHTSA took various
actions to ensure that imported gray market automobiles (i.e.,
automobiles manufactured to the standards of another country) have
the same safety standards as other cars sold in the United States;
(3) the Federal Highway Administration (FHWA) improved truck accident
data by helping states adopt uniform accident reporting procedures
that identify truck configurations, such as longer combination
vehicles; (4) Amtrak established a task force that examined
comprehensive, long-term reform of Amtrak's mission and provided
recommendations for congressional deliberations; and (5) Amtrak
instituted new training requirements and provided this training to
employees who maintain track signals and repair passenger cars.
SURFACE INFRASTRUCTURE
------------------------------------------------------ Chapter 2:6.1.4
In 1990, we identified the Federal Transit Administration's (FTA)
grant management as a high-risk area and subsequently made numerous
recommendations on how FTA could enhance its oversight and
enforcement practices to better protect the billions of dollars being
invested by the federal government in the nation's transit systems.
Over the last few years, FTA has implemented a number of the
recommendations and other initiatives, resulting in substantial
improvements to its process to oversee its $4.6 billion grant
management program. As a result, we have removed FTA's high-risk
designation.
In line with other recommendations, FHWA issued guidance to state and
local governments on operations plans for traffic management systems
and began assessing approaches for a new highway-cost-allocation
study.
COMPETITION, ECONOMICS,
AND REGULATORY ANALYSIS
------------------------------------------------------ Chapter 2:6.1.5
We continued to focus our efforts in the aviation area on
international issues as this is where U.S. carriers project most
growth through the end of the century. We reported on the impact of
code sharing and marketing alliances and noted that DOT lacked the
necessary information to judge the economic and competitive impacts
from approving such agreements. DOT agreed with our findings and is
now improving its data collection.
In testimony before congressional committees, we highlighted Amtrak's
serious financial problems and the difficult decisions on the future
of passenger rail that must be made. Amtrak has adopted a strategy
and business plan to stem its losses and to achieve solvency. We are
currently monitoring Amtrak's progress in fulfilling its plan.
Finally, our testimony on the Interstate Commerce Commission
described potential savings from alternative restructuring options
for continuing activities. This information is helping the Congress
as it considers this issue.
COAST GUARD
------------------------------------------------------ Chapter 2:6.1.6
Over the next few years, 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 Coast Guard's
existing inspection workforce. 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
commitment of Coast Guard resources that must be met in addition to
the agency's other missions. Our work has been targeted to
identifying safer and more efficient ways of using the Coast Guard's
resources and fulfilling its mission. As a result of our
recommendations, the Coast Guard has improved its inspections of
intermodal containers carrying hazardous materials, and DOT has
implemented uniform rules for the prevention of alcohol misuse for
the commercial transportation industries. Additionally, in order to
reduce water pollution caused by spills from pipelines, DOT acted on
our recommendations and directed the Research and Special Programs
Administration to establish a program to prevent spills from
pipelines and document the locations of pipelines.
TELECOMMUNICATIONS
------------------------------------------------------ Chapter 2:6.1.7
FCC, in response to our work, adopted (1) rules giving preference to
firms that are not current cellular telephone providers through the
use of auctions to award more than 2,000 Personal Communications
Services licenses and (2) written procedures to maintain voting
records, document approval when significant changes occur, and
release FCC's decisions publicly. Furthermore, in response to our
report, the cellular telephone industry established a mechanism for
funding research on the safety of cellular telephones and has defined
a role for federal agencies' in the research program to enhance the
credibility and usefulness of the results to federal regulators.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:6.2
EXPECTATIONS FOR THE
NATIONAL HIGHWAY SYSTEM
------------------------------------------------------ Chapter 2:6.2.1
We recommended that FHWA develop performance expectations and
measures in conjunction with the major goals of the National Highway
System to ensure that progress can be assessed. This is particularly
critical in areas such as pavement condition and the extent of
congestion. However, DOT did not concur with this recommendation and
plans no action. (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
are paying their fair share of federal highway costs and to ensure
that FHWA and Congress have up-to-date information when making future
decisions affecting federal highway user fees. We recommended that
FHWA obtain appropriate input from the affected parties and utilize,
to the extent possible, the data currently being developed by the
Strategic Highway Research Program on the relationship between axle
loads and pavement damage. FHWA concurred and has begun to work on a
cost allocation study. (GAO/RCED-94-181)
HIGHWAY QUALITY
IMPROVEMENTS
------------------------------------------------------ Chapter 2:6.2.3
To help protect the nation's highway infrastructure, we recommended
that FHWA 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. We 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. FHWA is reviewing the
states' Interstate highway maintenance programs. At the completion
of this review, FHWA plans to reassess the type of information that
should be provided to the states. FHWA plans to issue a final policy
statement on life-cycle cost analysis by the end of 1995.
(GAO/RCED-94-198)
TRACK SAFETY INSPECTIONS
------------------------------------------------------ Chapter 2:6.2.4
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 constitute 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. DOT agreed to issue revised guidance to its inspectors once
the Federal Railroad Administration finalizes the new Track Safety
Standards. It is not clear whether DOT still intends to address our
recommendation in the new guidance. (GAO/RCED-94-56)
NEW AVIATION SECURITY
TECHNOLOGY
------------------------------------------------------ Chapter 2:6.2.5
To facilitate the introduction of new equipment to detect explosives,
we recommended that FAA develop a plan, with industry, that provides
a strategy for using new detection technology during the next decade.
This plan should include important milestones and identify roles;
cost estimates for the purchase, operation, and maintenance of
explosive detection systems; and FAA and industry resources. FAA has
begun developing a strategic plan for explosive detection technology
and has contracted with the Volpe Transportation Center to develop
cost estimates. The first edition of the plan is to be published in
mid-1996. (GAO/RCED-94-142)
AIRPORT IMPROVEMENT
PROGRAM
------------------------------------------------------ Chapter 2:6.2.6
In reports on the Airport Improvement Program, we recommended options
for improving the targeting of Military Assistance Program funds
within the national airport system and reducing the number of
eligible reliever airports or further reducing the set-aside for
reliever airports upon receipt of information from FAA on the need
for such airports. FAA has not completed its review of the reliever
airport concept. The Congress changed from 12 to 15 the number of
airports the Secretary of Transportation could designate to
participate in the Military Assistance Program and has limited future
participation to airports with more than 20,000 hours of annual
delays. Additionally, the Congress is considering whether to cut or
reallocate funding for the set-aside as part of the Airport
Improvement Program reauthorization. (GAO/RCED-94-209;
GAO/RCED-94-226)
GLOBAL POSITIONING SYSTEM
------------------------------------------------------ Chapter 2:6.2.7
In May 1995, we recommended that FAA prepare a comprehensive plan for
augmenting the Global Positioning System and making the transition to
it and to update this plan regularly. The plan should include, among
other things, the schedule and cost estimates for developing and
implementing the wide and local area augmentation systems as well as
information on the probability that FAA will meet these estimates.
(GAO/RCED-95-26)
INFORMATION RESOURCES
MANAGEMENT - RESOURCES,
COMMUNITY, AND ECONOMIC
DEVELOPMENT ISSUE AREA (BUDGET
FUNCTION 990)
---------------------------------------------------------- Chapter 2:7
GAO Contact: Jack Brock, 202/512-6253
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:7.1
The information resources management/resources, community and
economic development issue area addresses IRM activities at the key
agencies covered by GAO's Resources, Community, and Economic
Development Division--USDA, Commerce, DOE, HUD, Interior, DOT, and
EPA. These IRM activities support over $160 billion in annual
program expenditures, and they are indispensable to these agencies'
ability to deliver critical government services, such as safe air
travel and loan portfolio oversight valued at over $1 trillion.
Our work has assisted the Congress and helped these agencies improve
operations, save money, and address the myriad of difficulties
associated with managing highly complex, mission-critical, and
technologically advanced information resources. Our accomplishments
include the following:
-- At DOT, our work contributed to FAA's decision to cancel and
redirect billion dollar components of its air traffic control
modernization program. Also, our work on FAA's system for
identifying and targeting airline and aircraft safety risks and
inspections was instrumental in advancing this effort and better
ensuring its success. In addition, we were at the forefront in
identifying critical technical challenges facing the information
superhighway that need to be addressed.
-- Our work helped convince USDA to halt and redirect the
Department's Info Share Program, a $2.6 billion effort to
modernize and reinvent USDA's farm service and rural development
agencies. Other work at USDA yielded an additional $214 million
in measurable benefits by identifying unnecessary computer
purchases and opportunities to save tens of millions of dollars
in telecommunications costs.
-- Our testimony and reports on the National Weather Service's
(NWS) $4.5 billion modernization program has led the Commerce
Department to agree to develop a system architecture that should
more cost effectively guide the evolution of the modernization's
many systems. Further, our work has contributed to improvements
in developing and operating key weather observing systems that
are vital to providing accurate and timely weather forecasts and
warnings, and has produced $12 million in measurable benefits in
acquiring additional Next Generation Radars.
-- At EPA, we convinced agency leadership to involve program
managers in information technology investment decisions, which
should help minimize poorly focused system development projects.
-- At HUD, we uncovered critical root causes of HUD's long-standing
IRM problems and persuaded HUD's leadership to begin
implementing many of the best IRM practices underpinning the
success of leading public and private sector organizations.
-- In response to our work, DOE and its contractors are working to
resolve software development problems with a new system to track
nuclear materials worldwide and improve security of computerized
sensitive data.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:7.2
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, our report on USDA's Info Share Program, a
$2.6 billion effort to modernize and reinvent the USDA's farm service
and rural development agencies, stated 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. Although USDA has taken actions to address our
recommendations, some actions are not fully responsive. As a result,
we are closely monitoring Info Share to ensure that sound business
process reengineering principles and practices are not compromised.
(GAO/AIMD-94-156)
Also at USDA, we reported that USDA's efforts to consolidate and
optimize telecommunication services had not acted on all savings
opportunities, and, as a result, millions of dollars were being
wasted each year. We therefore recommended that the Secretary act
upon these opportunities, where practical and cost-effective. USDA
has not yet responded to our report. (GAO/AIMD-95-97)
Our report on the NWS' modernization program noted that NWS lacked an
overall systems architecture or "blueprint" to guide the development
and evolution of the modernization's many and diverse components. As
a result, we recommended that a systems architecture be developed and
implemented. NWS agreed with the recommendation and plans to
complete the systems architecture in fiscal year 1997. We are
monitoring NWS' progress on this architecture. (GAO/AIMD-94-28)
At EPA, we recommended that the Administrator advance the agency's
overall ability to accomplish its cross-media mission by
strengthening its development activities on key systems. EPA is in
the process of making these improvements. (GAO/IMTEC-92-14)
We also recommended that EPA conform with generally accepted IRM
practices for developing automated systems supporting its Office of
Pesticide Programs. While EPA has taken some steps to implement this
recommendation, more remains to be done. We plan to monitor EPA's
progress. (GAO/AIMD-93-5)
Further, we recommended that the Administrator improve the ability of
EPA's Office of Prevention, Pesticides, and Toxic Substances to
collect, disseminate, and use toxic substances data by requiring the
office to develop a strategic IRM plan, evaluating alternative
systems architectures for the office, and selecting a target
architecture to guide the development and evolution of office
systems. EPA is in the process of implementing these
recommendations. (GAO/AIMD-94-25)
Our report on HUD's IRM program found numerous long-standing
problems. We recommended several actions to address them, such as,
-- establishing strategic business and IRM planning processes and
developing and maintaining up-to-date plans and a systems
architecture that are clearly linked to each other;
-- establishing a data management program to support integrated
departmentwide 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 store, process,
transmit, or use sensitive or privacy data.
HUD is addressing these recommendations. (GAO/AIMD-94-34)
IMPROVING HUMAN RESOURCE PROGRAMS
============================================================ Chapter 3
EDUCATION AND EMPLOYMENT ISSUE
AREA (BUDGET FUNCTION 500)
---------------------------------------------------------- Chapter 3:1
GAO Contact: Carlotta Joyner, 202/512-7014
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:1.1
The education and employment issue area focuses its work on the
federal investment in human capital and the federal government's role
in assuring basic workplace protections. The nation's ability to
compete in the international marketplace and maintain its standard of
living and its way of life depends on the quality of the nation's
investment in educating its children and training its workers for
tomorrow's jobs. The Departments of Education and Labor are the
federal agencies with primary responsibility for overseeing this
investment. Through programs administered by these departments, the
federal government--working with state and local governments--invests
about $66 billion to promote access to quality education and to
advance opportunities for profitable employment under safe and
healthful living conditions.
Our work has played a prominent role in alerting the Congress to
important issues and providing specific recommendations that have
become the foundation for congressional action. Our work on
overlapping employment and training programs brought this issue to
the fore and provided a foundation for overhauling and streamlining
the federal structure of employment training programs. With regard
to workplace quality, our report on workplace regulations influenced
proposed legislation to reform the Occupational Safety and Health
Administration's (OSHA) enforcement activities. Our work on the
financing of higher education identified ways in which the federal
government can minimize student loan defaults and led the Congress to
revise the Federal Family Education Loan Program such that lenders
and guaranty agencies will share in the cost of defaulted loan
claims. Our work on early childhood education programs and teacher
preparation programs contributed to the development of House Budget
Committee proposals to streamline these programs.
Issue area work also included a look at the lessons learned from the
1980s experience with block grants. We pointed out that states
effectively handled the transition from categorical programs to block
grants where they had experience administering the program and
emphasized the importance of the appropriate handling of program
accountability. Our report was widely cited in the Congress and was
used by major state groups such as the National Governors'
Association and the National Conference of State Legislatures to plan
for the possibility of new block grants on a larger scale than in the
past.
Highlights of our contributions in education reform, higher
education, work force skills and jobs, and workplace quality follow.
EDUCATION REFORM
------------------------------------------------------ Chapter 3:1.1.1
Our work in elementary and secondary education identified ways to
improve existing federal programs to better serve the nation's
children. For example, we addressed the need to better target
federal education program resources to meet the needs of poor
children; and we examined the inadequacy of school facilities in some
school districts. In both cases, our work contributed to shaping the
legislation that reauthorized the Elementary and Secondary Education
Act of 1965. Our report on early childhood programs helped focus the
debates on both the Goals 2000 legislation and welfare reform.
Our work on school facilities also contributed to increased federal
support for education infrastructure, including technology and
laboratory sciences. Recommendations from our report on student
turnover led to provisions in the Improving America's Schools Act of
1994 that promote systemic state and local planning to better
coordinate federally funded educational services for all eligible
children, explicitly including migrant children. Our work on
multiple teacher preparation programs was used in streamlining
efforts to reduce the deficit. In addition, our work on the need for
more comprehensive school-to-work transition strategies supported
enactment of the School-to-Work Opportunities Act of 1994.
HIGHER EDUCATION
------------------------------------------------------ Chapter 3:1.1.2
In our work on higher education financing we identified ways to
contain government costs for postsecondary education. Our work
contributed to changes in the Higher Education Act of 1965, as
amended, by supporting provisions that (1) require secondary market
lenders to pay a loan transfer fee when purchasing loans, (2) limit
the use of minimum loan interest rate payments to secondary market
lenders, and (3) revise loan origination fees for certain borrowers.
Our work contributed to the Congressional decision to reduce the
interest subsidy the government pays to lenders holding consolidated
student loans. Finally, as a result of our work on how grants and
loans affect low-income students' ability to stay in college, the
Congress is re-evaluating the use of grants and loans in providing
financial assistance.
WORKFORCE SKILLS AND JOBS
------------------------------------------------------ Chapter 3:1.1.3
Our work on federal job training programs pointed out the overlap,
duplication, and inefficiencies resulting from about $20 billion
being appropriated for 163 employment training programs spread across
15 departments. This report contributed to the bipartisan consensus
that reform is needed and helped lead to the passage of a major
consolidation bill in the House and expected action on a similar bill
in the Senate. The focus of both these bills is to consolidate and
use block grants for federal job training programs. Our recent work
on the Job Corps, the nation's most intensive youth job training
program, was used extensively by the Senate in its floor debate about
turning turning the program over to the states.
WORKPLACE QUALITY
------------------------------------------------------ Chapter 3:1.1.4
Workplace quality refers to the maintenance of basic workplace
protections for employees. Recent congressional efforts at reform
were influenced by our report on the framework of federal workplace
regulation. We noted that the employers and union representatives we
interviewed generally supported the goals of workplace regulation but
had serious concerns about how some agencies carry out their
regulatory missions. To address these concerns, they suggested the
need for agencies to adopt a more service-oriented approach to
fulfill their missions in a more cooperative and cost-effective
manner. In response to our work, several agencies in the Department
of Labor have adopted alternative regulatory strategies and
cooperative approaches to enforcing health and safety regulations.
In another instance, our report on sweatshops in the U.S. garment
industry showed that coordination of enforcement efforts across state
and federal agencies has been poor, permitting growth of safety and
health violations in the garment industry. Our work has contributed
to efforts at the federal, state, and local levels to better
coordinate the enforcement of labor laws in the garment industry.
The Secretary of Labor has also met with some of the nation's largest
retailers to discuss their role in preventing worker abuse. These
retailers have committed themselves to the first ever, nationwide
education and outreach campaign designed to improve garment industry
compliance with labor laws. In addition, our work on restructuring
the Equal Employment Opportunity Commission (EEOC) contributed to
administrative changes within the EEOC that have streamlined its
enforcement process. The report also contributed to the debate on
legislatively revamping the enforcement of federal civil rights laws.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:1.2
STUDENT FINANCIAL AID
------------------------------------------------------ Chapter 3:1.2.1
In our report on the Department of Education's use of student
financial aid data to identify inappropriately awarded loans and
grants, we recommended that the Secretary of Education act to improve
the accuracy and completeness of student financial aid data. In
particular, we recommended that the Department continue to (1) screen
data entered into the National Student Loan Data System (NSLDS) to
ensure consistency in format and (2) test the accuracy and validity
of data in NSLDS. We also recommended that the Secretary analyze
student aid data more closely to identify patterns of noncompliance
with federal requirements and take appropriate corrective actions.
The Department says it is continuing to screen data entered into
NSLDS. The Department has also begun to address these
recommendations through plans to enhance NSLDS by (1) developing
selection factors that better target schools for program reviews, (2)
developing management reports to compare NSLDS data with data
submitted by guaranty agencies, and (3) requiring guaranty agencies
to update NSLDS with the identity of students who have made
satisfactory arrangements for loan repayment. In addition, the
Department plans to develop an integrated student financial
assistance delivery system to replace existing discrete
program-specific systems. (GAO/HEHS-95-89)
In our report on Department of Education sanctions against schools
whose student loan default rates exceed statutory limitations, we
recommended that the Congress grant the Secretary of Education
authority to take actions to better protect the government's
interest. First, we recommended that the Congress authorize the
Secretary to require reimbursement for the cost of defaulted loans if
a school appeals elimination of their Federal Family Education Loan
Program eligibility and loses the appeal. Second, we recommended
that the Congress authorize the Secretary to require schools filing
an appeal to post a performance bond as a condition of filing the
appeal but also give the Secretary discretion in determining under
what circumstances a bond would be required of schools. In a July
1995 hearing before the Permanent Subcommittee on Investigations,
Senate Committee on Governmental Affairs, the Assistant Secretary for
Postsecondary Education testified that the Department planned to
propose amendments to the Higher Education Act of 1965, as amended,
to effect the recommended actions. (GAO/HEHS-95-99)
In our report on restructuring student financial aid to reduce the
drop-out rate among low-income college students, we recommended that
the Congress direct the Department of Education to conduct a pilot
program of frontloading federal grants at a limited number of 4-year
schools. We recommended that the pilot enable an assessment of
potential benefits and costs and a decision regarding the approach's
broader applicability. The Congress may consider such action when it
reviews the current authorizing legislation. (GAO/HEHS-95-48)
EMPLOYMENT DISCRIMINATION
------------------------------------------------------ Chapter 3:1.2.2
We reported on how registered representatives fared in discrimination
disputes and made several recommendations to the Securities and
Exchange Commission (SEC). Specifically, we recommended that SEC
direct self-regulating organizations (SRO) to (1) use existing
information systems to track information about discrimination cases,
(2) establish written criteria for excluding from SRO arbitrator
pools industry arbitrators who have histories of disciplinary actions
or regulatory infractions, (3) require all arbitrators to disclose
criminal convictions on their arbitrator profiles, and (4) assess and
maintain information on arbitrators' expertise and use this
information when selecting arbitrators to serve on panels. We also
recommended that SEC (1) establish a formal cycle for inspecting SRO
arbitration programs, (2) follow up vigorously on the implementation
of its recommendations, and (3) include discrimination complaints
among those case files it selects to review during inspections. SEC
officials indicate that they are in the process of responding to some
of these recommendations. (GAO/HEHS-94-17)
OCCUPATIONAL SAFETY AND
HEALTH
------------------------------------------------------ Chapter 3:1.2.3
In our report on OSHA's policies and procedures for confirming
abatement of hazards, we recommended that the Secretary of Labor
direct OSHA to promulgate a regulation requiring employers to submit
detailed evidence of corrective actions they have taken to abate
hazards. We also recommended that the Secretary direct OSHA to
revise its policies such that (1) citations to employers at
construction work sites require correcting the condition, equipment,
or procedure that created the hazard; and (2) abatement cannot be
achieved solely by moving to another location if the cited condition,
equipment, or procedure would be likely to create a hazard at the new
location. In response to these recommendations, OSHA officials say
they are currently conducting an extensive review of the agency's
enforcement policies and procedures, including an assessment of its
abatement inspection and data collection procedures. OSHA officials
have proposed regulations on abatement verification that will require
employers to certify to OSHA that the abatement of worksite hazards
cited during an inspection have been completed. OSHA officials
report that further actions on these recommendations will be guided
by congressional concern for creating a more cooperative working
environment and joint enforcement efforts with OSHA, employers, and
employees. (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, such as (l)
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 has completed action on revising the state program-monitoring
and evaluation approach by requiring states, in March 1994, to
conduct internal audits and establishing more effective procedures to
obtain state corrective action on significant program issues. OSHA
also implemented, in March 1995, new activity measures incorporating
absolute criteria and national goals where appropriate. OSHA is
still in the process of developing additional ways to measure its
effectiveness through outcome measures by seeking performance
agreements through pilot efforts with interested states. These pilot
efforts are to be completed by 1996. (GAO/HEHS-94-10)
EEOC'S EXPANDING WORKLOAD
------------------------------------------------------ Chapter 3:1.2.4
To address increases in EEOC's workload, we recommended that the
Congress convene a commission of experts to develop legislative and
administrative procedures that would enable EEOC to better carry out
its mission within the context of an overall federal strategy for
enforcing federal employment nondiscrimination laws. Congressional
committees responsible for EEOC are expected to examine EEOC's
workload problems and potential strategies for overcoming those
problems sometime in 1996. (GAO/HEHS-94-32)
HEALTH CARE DELIVERY AND
QUALITY ISSUE AREA (BUDGET
FUNCTION 550)
---------------------------------------------------------- Chapter 3:2
GAO Contact: David P. Baine, 202/512-7201
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:2.1
Health care that is financed or provided directly by the federal
government affects millions of people and costs billions of dollars.
DOD and VA operate two of the largest, centrally managed health care
systems in the world, spending about $30 billion annually through
some 500 facilities and a network of private providers. In addition,
the Department of Health and Human Services' (HHS) Health Care
Financing Administration (HCFA) administers the multibillion-dollar
Medicare and Medicaid programs which finance the health care provided
to the nations's elderly, disabled, and economically disadvantaged.
VA also spends about $18 billion annually in compensation for
disabilities and other nonhealth benefits.
Rising health care costs and substantial budget deficits have
prompted major congressional concerns about whether these agencies
are delivering quality health care and other benefits to their
beneficiaries as efficiently and cost-effectively as possible. 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) help 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 better accomplish their missions, (3) evaluate DOD's
experience in implementing a large managed health care system, and
(4) improve the quality of health care processes in DOD, VA,
Medicare/Medicaid, and Public Health Service programs.
DOD PROGRAMS
------------------------------------------------------ Chapter 3:2.1.1
In fiscal year 1995, we continued to focus on issues related to the
reform and restructuring of the military health care system. We
concentrated on DOD's implementation of TRICARE, its nationwide
managed health care program, and the implications of that new system
for beneficiary access to care, health care contracting, and cost
containment. DOD is implementing several of our past recommendations
thus making the contracting process more efficient and fair and the
benefit package more uniform across beneficiary categories. In
addition, the new benefit structure contains an enrollment premium
for some beneficiaries, a cost-control measure we have recommended in
the past. Despite these improvements, we continue to be concerned
about the lengthy contracting process and many contract disputes that
have arisen during the implementation of TRICARE, about remaining
inequities in the benefit structure and about the program's ultimate
potential to control costs to the degree projected by DOD.
For the new Congress, we issued a report summarizing our work in the
area of military health care restructuring which described the past
problems in the system and DOD's efforts to improve its program. It
also set out the issues that will be important to the future of DOD
health care and our work in that area. The report was commended by
congressional staff and DOD officials as a valuable primer on the
military health care system.
In addition to DOD's managed care efforts, we reviewed DOD's resource
sharing activities with VA medical facilities and overseas medical
care for military beneficiaries. DOD has implemented our
recommendation to formalize guidance to its medical facilities on VA
sharing, which will spur the initiation of agreements that produce
government cost savings for both DOD and VA health programs. In our
review of overseas medical care we found that access to military
medical facilities for many remaining beneficiaries had decreased due
to military downsizing in Europe. During the course of our review,
DOD implemented several actions to alleviate the concerns of most
beneficiaries.
VA HEALTH CARE PROGRAMS
------------------------------------------------------ Chapter 3:2.1.2
We are continuing to assess VA's efforts to restructure its health
care system, including eligibility for VA health care. As part of
this effort, we testified about challenges facing the VA health care
system, such as declining inpatient workload, and about a framework
for evaluating efforts to redefine eligibility for VA health care.
In the testimonies and related reports, we suggested options for
restructuring the VA health care system, including consolidating
hospital services, retargeting VA resources toward the special care
needs of veterans, expanding care for nonveterans, recovering VA
costs for providing nursing home care, and expanding the use of
private nursing homes.
With respect to eligibility reform, we pointed out that all of the
eligibility reform proposals would likely increase workload and
create pressures on the Congress to increase VA's health care
appropriation. The testimonies will be expanded and issued as part
of a series of reports summarizing the major issues facing the VA
health care system.
As part of our examination of the efficiency and cost-effectiveness
of VA approaches, we worked closely with the Congress in assessing
the potential effects of the Congressional Budget Resolution on VA
health care. We noted that VA had overestimated the potential
effects of a budget freeze in terms of the number of facilities that
would have to be closed and the workload and staffing reductions that
would occur. We also provided detailed information on planned
construction projects that was instrumental in sustaining efforts to
limit VA health care construction.
Our work on the Albuquerque Medical Center's pricing practices for
lithotripsy services provided to nonveterans also identified
significant opportunities for more cost-effective use of resources.
We found significant weaknesses in VA pricing, which resulted in the
center's not recovering the full cost of services provided. In
response to our recommendations, VA has directed the Albuquerque
center to recalculate the price of services and has issued guidance
to all centers on the appropriate methods for pricing specialized
medical services in order to fully recover costs.
VA NONHEALTH BENEFITS
PROGRAMS
------------------------------------------------------ Chapter 3:2.1.3
Our work on VA's claims and appeals processing has focused attention
on key problems, and our recommendations are critical to the success
of ongoing improvement efforts. We reported that although VA had
undertaken many actions designed to "reinvent" the claims process, VA
had not put into place an evaluation system adequate to assess the
impact of its initiatives. VA had little information about what
regional offices were doing, what success they were having, or what
approaches had the potential for the most improvement. Headquarters
also lacked an effective system for disseminating information about
regional experiences--both successful and unsuccessful--so that
regions could learn from each other. In an organization where
regional offices are given substantial latitude, headquarters will be
hard pressed to ensure improvements over time without meaningful
information to interpret regional office outcome data.
We also reported that although changes were under way in appeals
processing, problems were likely to continue. Several VA
organizations are involved in appeals processing, and we found that
they were not working together effectively in processing appeals.
For example, members of the Board of Veterans' Appeals were
interpreting VA's legal responsibilities differently than officials
of the Veterans Benefits Administration (VBA), which is responsible
for initial processing of claims and appeals. Without a clear,
agencywide interpretation of VA's responsibilities, the Board will
continue to reverse regional decisions or return cases to the regions
for reconsideration, increasing workloads throughout VA.
Additionally, lack of an agencywide interpretation of
responsibilities prevents VA from determining whether it has
sufficient resources to meet those responsibilities or whether some
new solutions may be needed. The nature of the problems and of their
possible solutions suggests one way to ensure intraagency problems
are identified and resolved is to appoint a focal point at the
Department level.
In response to a congressional mandate, we provided information on
alternative approaches to providing benefits to survivors of veterans
who had been receiving disability compensation. Our analysis showed
that most of the alternatives would dramatically reduce benefits to
all recipients or substantially increase federal outlays. However,
one alternative--basing benefits on the level of the veteran's basic
disability compensation--had more merit. It would, without
increasing program costs, increase benefits for about two-thirds of
the recipients while decreasing them for about one-third. This
alternative would also ensure that, when veterans die, VA support to
their spouses would change proportionately. Currently, support to
spouses of the most severely disabled is reduced substantially,
compared with veteran's disability compensation, while support to the
spouses of the least disabled may increase as much as ninefold over
the veteran's compensation amount.
Though limited in scope, our survey of 125 veterans who had expressed
concerns about their health after they returned from the Persian Gulf
helped ensure improvements in VA and DOD outreach programs. Many of
those we surveyed were unaware of services available to Persian Gulf
veterans despite a variety of efforts by DOD and VA to publicize
them. As a result of issues we raised, both VA and DOD plan to
increase their outreach efforts. VA will send information to more
veterans, and DOD plans to develop information to send directly to
reserve units, rather than rely on public communication channels as
it has done in the past.
On the basis of our work documenting hundreds of millions of dollars
in compensation and pension overpayments to veterans and their
survivors, VA agreed to make changes which, if implemented, have
potential dollar savings of over $50 million annually. The specific
changes VA makes will, as we recommended, represent a shift in focus
from detecting overpayments after they occur and then trying to
collect them to preventing the overpayments.
Our work also made a significant contribution to congressional
consideration of whether to revise legislation so that military
retirees could receive retirement pay and VA disability compensation
pay concurrently. Our analysis showed that the change, if
implemented, would add billions of dollars to federal expenditures.
QUALITY OF HEALTH CARE
PROVIDED TO FEDERAL
BENEFICIARIES
------------------------------------------------------ Chapter 3:2.1.4
Our work on the quality of care provided to patients in VA medical
centers led VA to agree to make some changes that will benefit
patients in all medical centers and to specific actions, already
accomplished, to improve care in one medical center. Our report on
VA's physician peer review process showed that VA medical centers are
not fully (1) documenting the actions, if any, taken against
physicians who have been identified as providing questionable care
and (2) reporting physicians involved in malpractice cases and other
adverse actions to the National Practitioner Data Bank as required.
We recommended corrective actions, and VA is now considering how best
to address them. Our work on needles and other pointed-object
injuries in VA medical centers indicated that the number of injuries
may be understated. Further, we found that VA's efforts to acquire
safer needles as well as other pointed instruments or devices needed
improvement. We made several recommendations to correct these
problems, and VA is implementing them. Correspondence sent to the
Medical Center Director in Brockton, Massachusetts, discusses the
center's detoxification and rehabilitation services and the actions
they took, during our review, to improve them. The report was
distributed to every substance abuse program director in VA, and it
was used extensively by program personnel as an educational tool.
In addition to our work in VA, we completed a review of the Indian
Health Service's (IHS) credentialling process for temporary
physicians and testified on enhancing health care quality assurance
for Medicare beneficiaries. In the IHS report, we recommended that
IHS take several actions to help ensure that physicians with adverse
actions taken against their state license(s) are identified before
they are allowed to treat patients in IHS facilities. IHS
immediately implemented each of these recommendations.
In other testimony, we described what HCFA is doing and plans to do,
as a prudent purchaser, to ensure that Medicare providers furnish
quality care in both fee-for-service and managed care delivery
systems. We concluded that the enhancements HCFA is making are
consistent with the direction in which the private sector is moving
and with the consensus of the health care experts we had interviewed.
But we described HCFA as facing significant challenges, especially in
light of HCFA's past problems in enforcing its quality assurance
regulations.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:2.2
DOD
------------------------------------------------------ Chapter 3:2.2.1
Because of problems remaining in DOD's TRICARE procurement, we
recommended that DOD weigh alternative approaches for the next
procurement round, determine whether solicitation requirements can be
simplified, and establish general qualification requirements for
individuals who evaluate the contract bids. We also recommended that
DOD not reduce the scheduled transition period (from award date to
health care delivery) even if there have been delays in awarding
contracts. (GAO/HEHS-95-142)
VA
------------------------------------------------------ Chapter 3:2.2.2
VA has a goal of providing nursing home care to 16 percent of
veterans needing such care, yet it recovers, through veteran cost
sharing, less than one-tenth of one percent of its approximately $1.5
billion in annual costs for providing this care. We recommended that
the Congress consider authorizing VA to (1) adopt the copayment
practices used by state veterans homes (which recover from 4 to 43
percent of their operating costs through veteran copayments) and (2)
establish an estate recovery program patterned after those operated
by increasing numbers of state Medicaid programs. (GAO/HRD-92-96 and
GAO/HRD-93-68)
In light of current efforts to reduce the budget deficit while
improving health services, we recommended that VA, in concert with
veterans service organizations and other federal and state agencies
with jurisdiction over health benefits programs, (1) identify and
evaluate options to better target VA resources to meet the health
care needs of veterans and (2) develop legislative proposals to
restructure the veterans health benefits program. (GAO/HEHS-95-39)
VA has created networks to plan and coordinate the provision of
medical services among nearby medical centers. In December 1994, we
reported that VA had not taken advantage of the opportunities in the
Chesapeake Network to reexamine its construction planning to better
coordinate new projects or to ensure that they help meet the needs of
veterans across the entire Network. We recommended that, before
requesting funding for any future construction projects in a network,
VA require completion of a plan for meeting the future medical care
needs of veterans in that network area. Such a plan should include
networkwide assessments of need, assessment of construction
alternatives, and priorities among the proposed construction
projects. (GAO/HEHS-95-6)
VA has developed plans to build a 470-bed hospital and a 120-bed
nursing home in Brevard County, Florida, and to convert the former
Orlando Naval Hospital into a nursing home and outpatient clinic. On
the basis of our analysis of how prudent and economical these actions
would be, we recommended that the Congress not approve VA's request
for funds to construct a medical center in Brevard County, Florida,
and instead direct VA to develop lower cost alternatives to meet
service delivery goals. (GAO/HEHS-95-192)
Although VA agreed with our recommendations about focusing on
preventing overpayments in compensation and benefits claims, it has
not yet taken action to implement them. (GAO/HEHS-95-88)
We recommended that VA revise the criteria its medical centers use to
report VA practitioners involved in adverse actions to the National
Practitioner Data Bank so that the criteria are more consistent with
those used in the private sector. (GAO/HEHS-95-121)
NATIONAL AND PUBLIC HEALTH
ISSUE AREAS (BUDGET FUNCTIONS
550 AND 570)
---------------------------------------------------------- Chapter 3:3
GAO Contact: Sarah F. Jaggar, 202/512-7119
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:3.1
As health care financier and insurer, the federal government serves
38 million elderly and disabled under Medicare, over 37 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--will cost an estimated $286 billion in
fiscal year 1996 with an additional $70 billion in state and local
funds expected for 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 processes
used to control and identify fraud, abuse, and mismanagement in the
programs; (2) evaluate new payment approaches to curb Medicare
spending growth; and (3) identify opportunities for improving health
care while ensuring accountability for performance.
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 elsewhere, 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 or being considered by
the Congress.
WASTE AND ABUSE
------------------------------------------------------ Chapter 3:3.1.1
We have issued several reports discussing improvements needed to curb
inappropriate Medicare payments. One study found widespread examples
of overcharges to Medicare for therapy services delivered to nursing
home patients. Extraordinary markups on therapy services have
resulted from providers exploiting regulatory ambiguity and
weaknesses in Medicare's payment rules. We recommended that the HCFA
Administrator (1) set explicit limits to ensure that Medicare pays no
more for therapy services than would any prudent purchaser and (2)
strengthen certification requirements to better ensure that those
entities billing Medicare are accountable for the services provided
to beneficiaries. (GAO/HEHS-95-23)
We found similar problems affecting a wider range of Medicare
services and supplies. Medicare often pays more than the current
market price for medical services, resulting in potentially billions
of dollars of unnecessary payments. Consequently, we suggested that
the Congress (1) enact legislation to allow Medicare to participate
more fully in the competitive marketplace--for example, by setting
maximum prices based on market surveys; and (2) consider options for
granting relief for funding declines in Medicare's
anti-fraud-and-abuse activities. (GAO/HEHS-95-210)
MONETARY BENEFITS
------------------------------------------------------ Chapter 3:3.1.2
We analyzed 1.3 million imaging services in Florida and determined
that physicians with a financial interest in imaging facilities (a
practice known as "self-referral") ordered more, and more costly,
imaging services for their patients than did other physicians. In
response to our study and those of other researchers, the Congress
included provisions in the Omnibus Budget Reconciliation Act of 1993
to extend the ban on Medicare self-referrals, which previously
included only clinical laboratory services, to Medicaid and to 10
other health services, including diagnostic imaging. CBO estimated
that beginning in fiscal year 1995 the ban on self-referral will save
Medicare $350 million and Medicaid $37 million over 4 years.
Although the 1993 act's provisions became effective on January 1,
1995, HCFA has not yet finalized regulations implementing the
legislation. Our report summarized the results of our two studies on
physician referrals for imaging services and recommended that HCFA
develop procedures and policy guidance for Medicare contractors to
ensure compliance with the self-referral ban and to identify
overutilization of imaging services. (GAO/HEHS-95-2)
In May 1994, we recommended that the Congress delay implementation of
the Medicare/Medicaid data bank until its potential
cost-effectiveness and other benefits to Medicare and Medicaid
programs can be clearly demonstrated. The Congress has delayed
implementation until October 1996, but we testified this year that
further delay is warranted to save up to $3O million a year in
Medicare administrative costs and prevent unnecessary administrative
burden on the private sector. (GAO/HEHS-94-147)
FINANCIAL AND MANAGEMENT
MATTERS
------------------------------------------------------ Chapter 3:3.1.3
Our work in the Medicaid area focused on issues affecting the federal
government's financial liability for the program. States are seeking
to cut their own costs by obtaining waivers from federal Medicaid
rules that can limit the use of managed care. We have two major
concerns about granting such waivers. First, our study of several
states' approved waivers suggests that under certain conditions, the
federal share of Medicaid outlays could grow beyond what it would
have without the waivers for the following reasons: (1) the
administration is allowing states to apply the federal share of
Medicaid savings from managed care to finance coverage of additional
populations; (2) the administration's method for determining budget
neutrality may allow states access to more federal funding than they
would have received without the waiver; and (3) the Congress may find
it difficult to scale back the waiver demonstrations if they prove
more costly than forecast. Second, because federal restrictions on
the use of managed care reflect concerns for quality, the lifting of
these restrictions under the waiver authority could undermine the
government's ability to protect against the potential for managed
care organizations to earn profits by underserving beneficiaries.
Our work suggests that the process of granting waivers may merit
greater congressional scrutiny and that increased oversight of
managed care systems is required. (GAO/HEHS-95-122 and
GAO/T-HEHS-95-129)
We also examined Medicaid's matching formula, which calculates for
each state's Medicaid program the respective shares of federal and
state funding. We found that the formula, with its reliance on per
capita income as a measure of state wealth, has not significantly
reduced wide differences in states' Medicaid programs or the tax
burdens to support them. Large disparities persist in coverage of
population groups and types of services as well as in the burdens
states' taxpayers bear in financing state programs. Our work
suggests that modifying the formula--to include poverty rates, total
taxable resources, geographic adjustors of health care cost
differences, and a reduced minimum federal match--could enhance the
ability of federal payments to narrow program disparities.
(GAO/T-HEHS-95-226)
Other reports issued during the year addressed (1) the need to
encourage primary care training through medical education curriculum
and financing strategies, (2) access to services and funding formulas
under the Ryan White CARE Act, (3) prescription drug prices, and the
fact that the elderly still receive potentially harmful drugs, and
(4) insurers' compliance with federal minimum loss ratio standards
from 1988 to 1993.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:3.2
HEALTH CARE SHORTAGE
AREAS
------------------------------------------------------ Chapter 3:3.2.1
In fiscal year 1994 the federal government spent about $1 billion on
programs to alleviate health care access problems in rural areas and
inner-city neighborhoods. HHS uses two main systems for identifying
such locations--the Health Professional Shortage Area and the
Medically Underserved Area designations. We reported that these
designation systems do not effectively identify areas with primary
care shortages or help target federal resources to benefit those who
are underserved. To assist underserved populations in accessing
federal program resources most appropriate for their needs, and to
enable HHS to target its resources more specifically, we recommended
that the Congress remove legislative requirements for shortage
designations as a condition of participation in federal programs. We
recommended that the Congress direct HHS to incorporate the necessary
screening requirements into the conditions of participation for each
program.
We also questioned the need for the Medicare Incentive Payment
program, established in 1987, which provides a 10-percent increase in
Medicare payments to providers serving beneficiaries in underserved
areas. Our report disclosed that the program's extra payments of
about $100 million in 1994 were not targeted only to areas where
Medicare beneficiaries lack access to physician services.
Accordingly, we recommended that the Congress suspend the program
until it could be better targeted to improving access to primary care
for Medicare beneficiaries. (GAO/HEHS-95-200)
EXCESSIVE PAYMENTS FOR
MEDICAL SUPPLIES
------------------------------------------------------ Chapter 3:3.2.2
HCFA has acted to prevent Medicare suppliers from shopping for
Medicare contractors with the weakest controls and the highest
payment rates by consolidating durable medical equipment and medical
supply claims processing at four regional carriers. However,
unwarranted Medicare expenditures persist. Some contractors have
inadequate internal controls to identify suspicious medical supply
claims before payment and lack of competitive pricing for
reimbursement. As a result, hundreds of millions of dollars are
lost. Medicare payment rates for surgical dressings are high
compared with wholesale and many retail prices. For example,
Medicare pays $2.32 for a pad of gauze that is available at wholesale
for 19 cents and that another government agency purchases for 4
cents. HCFA needs the legislative authority to set payments at more
favorable rates. We also recommended that HCFA require that bills
submitted to intermediaries itemize supplies. (GAO/HEHS-95-171)
COLLECTIONS FROM OTHER
INSURERS
------------------------------------------------------ Chapter 3:3.2.3
Some beneficiaries have private health insurance that should pay
their claims ahead of Medicare. Our work showed that, as a result of
a recent court decision that invalidated Medicare collection
procedures, Medicare could lose hundreds of millions of dollars a
year in recoveries from insurers. In our testimony before
authorizing committees, we pointed out that legislation is needed to
strengthen Medicare's ability to collect from insurers.
(GAO/HEHS-94-147, GAO/T-HEHS-95-92, and GAO/HEHS-95-101R)
HEALTH PROFESSION
EDUCATION
------------------------------------------------------ Chapter 3:3.2.4
Over the past decade, the supply of nearly all health professionals
has increased faster than the population at large. For most health
professions, however, data are not available to demonstrate whether
this increased supply has translated into more access to care in
rural and underserved areas. Health profession education programs
are funded under titles VII and VIII of the Public Health Service
Act. The effectiveness of these programs will remain difficult to
measure as long as they are authorized to support a broad range of
health care objectives without common outcome measures, goals, and
reporting requirements. The Congress should establish, or direct the
Secretary of HHS to establish more specific goals, outcome measures,
and funding criteria. (GAO/HEHS-94-164)
MEDICARE HMO OVERSIGHT
------------------------------------------------------ Chapter 3:3.2.5
Although HCFA has instituted several promising improvements, its
process for monitoring and enforcing Medicare health maintenance
organization (HMO) performance standards continues to suffer because
its quality assurance reviews are not comprehensive, enforcement
actions are weak, and the appeal process is slow. We recommended
that HHS develop more consumer-oriented oversight of the Medicare HMO
program, including (1) routinely publishing comparative data on HMOs'
performance and on known deficiencies and (2) assigning sufficient,
trained staff to monitor quality assurance to verify the
effectiveness of HMOs' practices. (GAO/HEHS-95-155)
EXCESSIVE MEDICARE
PAYMENTS FOR COSTLY
TECHNOLOGY
------------------------------------------------------ Chapter 3:3.2.6
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 and annually review payments for procedures using high-cost
technologies. Medicare would save 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 rates would rise. (GAO/HRD-92-59)
SPECIAL PAYMENTS TO
TEACHING HOSPITALS
------------------------------------------------------ Chapter 3:3.2.7
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 receive. About $1 billion
could be saved annually. (GAO/HRD-89-33)
HEALTH INSURANCE FOR THE
ELDERLY
------------------------------------------------------ Chapter 3:3.2.8
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. Since obtaining alternative
Medigap coverage may not be possible, we recommended Congress amend
the law to provide a mechanism for retirees to obtain Medigap
insurance when these circumstances occur. (GAO/HEHS-94-185)
INCOME SECURITY ISSUE AREA
(BUDGET FUNCTIONS 600, 650, AND
700)
---------------------------------------------------------- Chapter 3:4
GAO Contact: Jane L. Ross, 202/512-7215
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:4.1
Income security programs operating through the Social Security
Administration (SSA), HHS, and the Department of Labor account for
nearly 40 percent of all federal spending. Millions of Americans
rely on programs like Social Security, Disability Insurance (DI),
Supplemental Security Income (SSI), Aid to Families With Dependent
Children (AFDC), and various block grants for financial support and
services, such as child care. In addition, Americans are dependent
on the Department of Labor to oversee private pension plans, an
important source of income for millions of retired workers.
Our work provided information and recommendations directed at (1)
ensuring that public assistance program funds are spent efficiently
and protected from fraud and abuse, (2) improving SSA's
administrative efficiency and service to the public, (3) evaluating
Social Security, state and local government, and private retirement
benefits, (4) redesigning the nation's disability programs to provide
disabled people with greater opportunities to work, (5) monitoring
federal and state efforts to move welfare recipients from welfare to
work and to reduce dependence on welfare; and (6) assessing
government efforts to preserve families and protect vulnerable
children.
Our work has contributed significantly to legislative and executive
actions that will result in financial savings as well as improvements
in program efficiency and cost effectiveness. Examples follow.
With regard to disability programs, we pointed out the need to
increase continuing disability reviews (CDR) in the SSI program. As
a result, in August 1994 the Congress mandated that SSA conduct at
least 100,000 SSI CDRs in each of fiscal years 1996 through 1998.
This increase in CDRs should result in cost reductions of $382
million over those years.
We examined the practice of providing drug addicts and alcoholics
with SSI and DI benefits and found that payments to these recipients
warranted greater control. Based in part on our recommendations, the
Congress passed legislation in August 1994 that expanded the
treatment and representative payee requirements for certain DI
beneficiaries and required that SSA (1) give preference to
organizational payees for addicts and (2) study the feasibility and
cost of mandating payees for all addicts receiving DI or SSI
benefits.
Our work on the Pension Benefit Guaranty Corporations's (PBGC)
deficit and pension plan funding problems led to a new law that
should generate revenues of $963 million over the next 5 years,
eliminate PBGC's deficit within 10 years, and reduce plan
underfunding by two-thirds in the next 15 years.
We addressed the need for reform of federal disability programs, thus
contributing to increased congressional oversight. Proposed
legislation targets benefits toward children with more severe
impairments by improving the eligibility process for children on SSI.
Finally, we contributed to the congressional debate on welfare reform
by recommending steps that HHS could take to strengthen child support
enforcement and by identifying improvements needed in the training
program designed to help move welfare recipients into the workforce.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:4.2
CHILD SUPPORT ENFORCEMENT
------------------------------------------------------ Chapter 3:4.2.1
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 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. The
Congress has not enacted legislation related to this recommendation.
(GAO/HRD-92-91)
RETIREE BENEFITS
------------------------------------------------------ Chapter 3:4.2.2
We evaluated the readability of forms used by retirees who had chosen
not to select survivor benefits for their spouses. In December 1989
and 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
solicited comments on possible model language and revisions to the
requirements. The comments received raised a number of concerns and
IRS concluded that this project should be incorporated into a broader
IRS initiative to simplify and clarify notice requirements and
related issues in the pension area. The goal of this effort is to
improve communications to participants and their spouses while
reducing the overall burden on them and employers. In addition, IRS
has issued proposed and temporary regulations providing significantly
greater flexibility in the timing of notice requirements.
(GAO/HRD-90-20 and GAO/HRD-92-31)
SOCIAL SECURITY
------------------------------------------------------ Chapter 3:4.2.3
In July 1993, we reported that SSA had not met the legal requirements
for conducting CDRs, which ensure that people receiving disability
benefits are still eligible for those benefits. We found there were
significant operational problems because of unprecedented increases
in initial claims for social security benefits. To process these
claims, SSA had shifted resources away from conducting CDRs. In
fact, SSA had conducted only about half of the required CDRs,
resulting in the payment of over a billion dollars to beneficiaries
who had improved enough to return to work. We recommended that the
Commissioner of Social Security continue to examine ways to increase
the number of CDRs. While SSA has increased the number of CDRs, it
has not increased them to a level that would fully respond to our
recommendation. SSA officials are, however, seeking legislation
which would provide special funding for CDRs. (GAO/HRD-93-109)
In November 1993, we reported that over the last several years, SSA's
disability programs had experienced unprecedented growth in the
number of claims filed, resulting in large numbers of pending claims
and high claim-processing times. Although SSA undertook numerous
short-term initiatives to reduce the backlog, these initiatives
resulted in a relatively small reduction in the number of pending
claims and in processing times. We recommended that the Secretary of
Health and Human Services develop plans to reduce the backlog of SSA
disability benefit claims and ensure the performance of CDRs. SSA
has initiated action on both of these recommendations.
(GAO/HRD-94-11)
In May 1994, we estimated that about 250,000 drug addicts and
alcoholics were receiving disability payments under SSA's DI and 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 actions that
respond to our recommendations. (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.
However, 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
CDRs during fiscal years 1990 through 1993, the trust fund will incur
extra costs of $1.4 billion through fiscal year 1997. The effects of
funding constraints have been exacerbated because disability claims
have significantly increased in the 1990s. We made several
recommendations to enhance the review process. SSA is taking actions
to implement our recommendations. (GAO/HEHS-94-118)
In March 1995, we reported that the number of children receiving SSI
benefits had nearly tripled over the last 5 years from 300,000 to
almost 900,000 and that benefit payments exceeded $4 billion
annually. We found that changes in regulations governing childhood
eligibility for SSI had had a significant impact on the growth and
composition of childhood disability rolls. In particular, awards had
been made to more than 200,000 children who did not meet SSA's
listing of impairments but qualified for benefits based on the less
restrictive individualized functional assessment process mandated by
the Supreme Court in Sullivan v. Zebley. These awards accounted for
about $1 billion a year in benefit payments. Given the widespread
concern about the growth in the SSI program for children and in light
of our findings about the subjective nature of the process, the
Congress should clarify eligibility determinations for children with
disabilities. As of December 1995, legislation is pending in both
the House and the Senate to eliminate individualized functional
assessments as criteria for determining children's eligibility for
disability benefits. (GAO/HEHS-95-66)
In October 1993, we reported that while SSA had made progress in
solving its management problems, opportunities existed for SSA to
continue to improve. We made several recommendations, among them
that SSA complete the implementation of a strategic management
process to guide planning, implementation, and evaluation of
long-term strategic initiatives. Further, to gain better managerial
and technical control over SSA computer modernization efforts, SSA
should take the actions needed to fully integrate SSA databases.
Although SSA is revising its strategic plan, and a tracking and
monitoring system is being developed to monitor the implementation of
SSA's strategic initiatives, SSA has not implemented an integrated
client database. (GAO/HRD-94-22)
WELFARE BENEFITS
------------------------------------------------------ Chapter 3:4.2.4
In June 1995, we reported that increasing states' recovery efforts
and extending effective federal recovery provisions to one or more
programs could help recover hundreds of millions of dollars in
benefit overpayments in the AFDC, Food Stamp, and Medicaid programs.
We recommended that the Congress amend the Food Stamp Act of 1977 to
authorize states to offset current recipients' benefits, without
their consent, to recover overpayments caused by agency error. Such
a provision is included in the Senate's welfare reform bill, which,
as of December 1995, is being debated by the Congress. We also
recommended that the Congress extend the authority for states to
intercept federal income tax refunds to include the recovery of AFDC
and Medicaid overpayments. Again, the Senate's welfare reform bill
has been amended to allow states this authority to recover
outstanding AFDC overpayments. (GAO/HEHS-95-111)
INFORMATION RESOURCES
MANAGEMENT - HEALTH, EDUCATION,
AND HUMAN SERVICES DIVISION
ISSUE AREA (BUDGET FUNCTION
990)
---------------------------------------------------------- Chapter 3:5
GAO Contact: Patricia Taylor, 202/512-6252
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:5.1
This issue area focuses on information systems 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. Over 100 million benefit payments are
made nationally to recipients each month. Human resource programs
will significantly increase federal spending through the end of the
century, accounting for well over 65 percent of the $2 trillion in
federal outlays.
Automated systems are critical to delivering benefits to the public.
Automated systems are essential if government, at all levels, is to
effectively and efficiently manage these programs. Based on
published GAO reports and estimates, systems 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 the 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 Congress's initiatives
to streamline government to be more efficient and reform our nation's
health, welfare, and social security 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. Because the
federal government has not placed much emphasis on developing
effective mechanisms to detect fraud and abuse, we also see vast
opportunities to save millions of dollars by putting in effective
antifraud mechanisms. We have issued reports covering federal health
care program systems at DOD, VA, HHS; national health care systems;
welfare programs systems at the federal and state levels; and earned
benefits programs systems at SSA, VBA, and PBGC.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:5.2
HHS
------------------------------------------------------ Chapter 3:5.2.1
In June 1994, we reported on HHS actions to implement national and
state systems to help manage child welfare services and made several
recommendations to the department to help it work with the states in
developing the new systems. These recommendations included (1)
determining the functional capabilities of a comprehensive statewide
automated child welfare information system and (2) working with
states, vendors, and information systems experts to provide a model
of that system to the states to aid their system development efforts.
HHS has issued functional requirements for both the national and
state systems, and we will continue to monitor its ongoing
development of the model system. (GAO/AIMD-94-37)
Also, in June 1994, we reported on the automated systems of HHS' Job
Opportunities and Basic Skills Training Program and found that these
systems focused on providing information for reporting purposes, not
on the program's employment objectives. Our recommendations included
that HHS work with appropriate state agencies to determine how
technology could best be used to achieve the overall objectives of
the program and incorporate these features into the system guidance
for use by the states. HHS has convened a federal/state work group
to help design a prototype case management and a self-reporting
system that focuses on helping the participant become employed and
self-sufficient. We will continue to monitor HHS progress in
developing this prototype. (GAO/AIMD-94-44)
HCFA
------------------------------------------------------ Chapter 3:5.2.2
In August 1994, we reported that pharmacies' use of automated
prospective drug utilization review systems to review Medicaid
prescriptions before they are filled could (1) significantly improve
patient safety by helping to prevent adverse medical reactions due to
inappropriate drug therapy and (2) potentially save the Medicaid
program hundreds of millions of dollars annually in unnecessary drug
and hospitalization costs. States are not required to use these
systems, and about a third of them believed the systems were too
costly to acquire and operate and may not provide tangible benefits.
HCFA shares our view on the value of automated prospective drug
utilization review systems and is taking steps to gather information
on their costs and benefits to share with the states. We are also
continuing work to better quantify the potential benefits of these
systems. (GAO/AIMD-94-130)
During 1994, we reported on HCFA's Medicare Transaction System and
found that HCFA's top management had not been involved in the
planning, the acquisition, and the management of the project; 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.
(GAO/HEHS/AIMD-94-79)
In May 1995, we reported that, based on a test in which four
commercial firms reprocessed samples of over 200,000 paid Medicare
claims, commercial systems to detect code manipulation, one type of
billing abuse, could have reduced Medicare government and beneficiary
costs by an estimated $640 million in 1994. We recommended that the
Secretary of HHS direct the Administrator of HCFA, to require
Medicare contractors to use a commercial system to detect code
manipulation when processing Medicare claims for physician services
and supplies. (GAO/AIMD-95-135)
HCFA agreed to evaluate commercial systems to determine whether they
are appropriate for the Medicare program. However, in October 1995,
we issued a letter expressing concerns about HCFA's approach. Based
on our review of the methodology, we reported HCFA's approach to
analyzing the benefits of commercial technology has two serious
shortcomings that will tend to understate cost reductions. First,
HCFA is limiting its evaluation to determining whether Medicare
contractors complied with existing, less comprehensive Medicare
payment controls. This approach will tend to understate the
potential reductions because the conclusions and estimates included
in our report were predicated on HCFA's implementing both the
stronger controls and improved technology embodied in commercial
systems. Second, HCFA's approach postpones analysis of other
monetary benefits that were identified by commercial firms but not
included in our cost reduction estimate and other benefits that,
while not easily measurable, are real. These include tracking
patterns of billing abuse over time and regular and timely system
updates. We have been meeting with HCFA officials to address these
issues and the opportunity to use commercial technology.
(GAO/AIMD-95-234R)
PUBLIC HEALTH SERVICE
------------------------------------------------------ Chapter 3:5.2.3
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 needed to further
explore ways to use automated medical records to provide data for
outcomes research. AHCPR has completed two studies and has a third
study underway. It has also joined with the National Library of
Medicine to provide grants to develop test beds for developing common
medical terminology. However, according to an AHCPR official, more
work needs to be done before automated medical records can be used to
more effectively and efficiently provide data for outcomes research.
(GAO/IMTEC-91-5)
DOD
------------------------------------------------------ Chapter 3:5.2.4
In July 1994, we reported on the tools and the methodology DOD used
to manage the performance of its Composite Health Care System (CHCS).
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.
Since our report, DOD has obtained performance measurement and
analysis tools for the two operating systems under which CHCS runs
and has modified its approach to managing the system's performance by
(1) updating its performance management plan, (2) enhancing its
system sizing algorithms, and (3) developing performance simulation
models for each CHCS hardware configuration. (GAO/AIMD-94-61)
VA
------------------------------------------------------ Chapter 3:5.2.5
Since 1991, VBA's modernization project has received continued
scrutiny by us as well as the OMB and GSA. In 1995, VBA took
positive steps to direct its modernization toward fulfilling our
recommendations. In September, 1995 VBA began an effort to analyze
current business processes and set measurable goals for improved
service to veterans. VBA is in the early stages in these efforts.
(GAO/IMTEC-93-6)
SSA
------------------------------------------------------ Chapter 3:5.2.6
In 1994, we reported that SSA had requested over $1 billion for its
intelligent workstation/local area network initiative, but that this
initiative was not driven by plans that identify how and where SSA
can best use technology to adequately handle increasing workloads and
improve service to the public. We recommended that SSA (1)
accelerate its planning and business process reengineering efforts
and (2) estimate and annually report the total cost and benefits of
process and system changes. In response, SSA initiated several
actions. First, it has developed a general business plan which
outlines how SSA will meet its growing workload and improved service
delivery goals. Second, SSA initiated a large-scale reengineering of
its inefficient disability determination process. SSA has identified
and is beginning to implement a new disability process which is to be
completed in 2001. Third, SSA plans to conduct a set of pilot
studies at selected SSA and state disability processing offices to
assess the ability of its new information system to support the new
disability process. Further, SSA is developing information on the
costs and benefits of the intelligent work station/local area network
as part of its planning for the fiscal year 1997 budget process. We
plan to continue to monitor SSA's efforts. (GAO/AIMD-94-143)
PBGC
------------------------------------------------------ Chapter 3:5.2.7
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 oversee the development of the new
system and hired a contractor to perform day-to-day operations of the
system when it becomes operational. PBGC expects to implement the
premium accounting system in October 1995. We plan to monitor the
implementation and effectiveness of the premium accounting system.
(GAO/IMTEC-92-74)
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 covers a wide range of
federal activities, including (1) civil and criminal law enforcement
in such areas as money laundering, debt collection, and firearms
licensing; (2) litigative and judicial activities, such as the cost
of providing court-appointed attorneys and juvenile justice
processes; (3) correctional activities; (4) immigration control; and
(5) Customs revenue collection and enforcement.
CIVIL AND CRIMINAL LAW
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.1.1
The Department of Justice (DOJ) is the government's debt collector of
last resort. In the 1980s, the Attorney General was authorized to
initiate a pilot program whereby at least 4 private counsel firms
would be hired in up to 15 jurisdictions to augment the resources of
local U.S. Attorneys Offices in litigating and collecting nontax
delinquent civil debts. In 1986, we were mandated by P.L. 99-578 to
evaluate these pilot programs. The second of our reports evaluating
the program was issued this year. We found that private counsel
firms in the pilot were cost effective, collecting $9.2 million at a
cost of $2.4 million. Further, private counsel firms worked cases
and collected debt that the U.S. Attorneys Offices might not have
addressed because of their workloads. Because the civil debt
collection workload fluctuated and the U.S. Attorneys Offices had
heavy workloads, contracting for some of this work seemed to be a
reasonable approach. We suggested that the Congress consider
allowing the Attorney General to contract with private counsel firms
on an as-needed basis in all jurisdictions, not just those in the
pilot. The information we provided was used in the congressional
consideration of the expansion of the program. However, the Congress
has not yet made its final decsion on these matters.
In relation to money laundering, we have affirmed that actions under
way by Treasury are needed to improve suspicious transaction
reporting and facilitate the use of the information by federal and
state law enforcement personnel are needed. We noted, however, that
IRS does not have agencywide policies or procedures for managing
suspicious transaction reports. IRS indicated that it was moving
toward national guidelines to ensure consistency in the evaluation
and processing of these reports while maintaining maximum flexibility
in the use of its Criminal Investigation Division resources.
LITIGATIVE AND JUDICIAL
------------------------------------------------------ Chapter 4:1.1.2
In response to a congressional mandate, we issued a series of reports
this year related to juvenile justice issues. Two of these reports
dealt with critical issues in relation to the treatment of juveniles
in judicial systems that are striving to ensure juveniles' rights
while stemming the rise of juvenile crime. Our report on juveniles
processed in criminal courts, rather than juvenile courts, provided
comprehensive data on both incidence rates and case outcomes. In
relation to representation of juveniles in juvenile court, we
reported that representation rates varied widely across the states we
reviewed and also in relation to offense categories. Both of these
reports are likely to be useful in the debate about the future role
of the Office of Juvenile Justice and Delinquency Prevention during
its reauthorization hearings.
Our recent work related to court-appointed attorneys showed that the
cost for the Administrative Office of the United States Courts'
(AOUSC) Defender Services program doubled from fiscal years 1990 to
1993. Further, the costs of the Death Penalty Resource Centers
tripled during that period. AOUSC cited a variety of reasons for the
escalating costs of Defenders Services, including more
multiple-defendant cases, more defendants applying for and receiving
services, and more complex cases because of changes in federal
sentencing guidelines and the institution of mandatory minimum
statutes, which result in more work for attorneys on each case.
However, data were not available to determine the impact of these and
other factors on the overall increase in costs. AOUSC indicated that
our findings will assist the Judiciary in its ongoing efforts to
increase the type, quality, and consistency of data being collected
in relation to Defenders Services. In response to our work, AOUSC
has initiated a number of specific efforts to improve data collection
and analysis and to Defender Service' contain costs.
CUSTOMS REVENUE AND
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.1.3
The U.S. Customs Service uses unit prices of imports as entered by
filers (importers or brokers) in its Automated Commercial System
(ACS) to screen transactions for errors and to look for signs of
illegal activity. The data also form the foundation for some trade
statistics. Our study found errors in 45 of the 80 transactions we
examined. The errors in our sample were caused by misclassification
of the product (for example, classifying spare parts for a facsimile
machine as a facsimile machine itself) or entering the correct
commodity but the wrong quantity or total value. To improve the
accuracy of the data entered by ACS filers, we recommended that the
Commissioner of Customs determine the feasibility of adding narrower
unit value ranges to ACS that would allow filers to identify and
correct more errors at the point of data entry. Customs agreed with
our recommendation and, in its ongoing redesign of ACS, is adding
narrower unit value ranges.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:1.2
CIVIL AND CRIMINAL LAW
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.2.1
In a 1991 report on DOJ's and Customs' asset forfeiture programs, we
recommended consolidating the management and disposition of all
noncash seized properties. We estimated that program administration
costs could be reduced 11 percent by such a consolidation, and could
also reduce contractor costs because of economies of scale. In our
1995 Asset Forfeiture Programs High Risk report, we noted that the
Marshals Service and Customs had completed a 1-year small scale pilot
consolidation project whereby the Marshals Service managed and
disposed of Customs' real property and Customs managed and disposed
of vessels for the Marshals Service at four districts. However, no
cost analysis or evaluation of the effectiveness of the project was
done, and there are currently no plans for consolidation of asset
management and disposition functions. We still believe that
consolidation of the asset management and disposition functions makes
sense. (GAO/HR-95-7)
Our report on DOJ and AOUSC's efforts to centralize criminal debt
accounting and reporting with the National Fine Center identified
critical challenges that need to be addressed before almost $5
billion in existing criminal debt can be centralized for efficient
collection. Specifically, we emphasized that AOUSC needs to
determine how it intends to increase user access to National Fine
Center account information and improve management reporting. We
recommended that the Director of AOUSC work with DOJ to finalize a
reconciliation strategy to include time frames and resources for
reconciling existing criminal debt accounts at judicial districts and
entering the reconciled information into the National Fine Center
system. We also recommended that the Director of AOUSC and the
Director of DOJ's Executive Office of United States Attorneys work
together to develop and implement a methodology for determining the
collectibility of all criminal debt. (GAO/AIMD-95-76 and
GAO/T-AIMD-95-215)
CUSTOMS MANAGEMENT
------------------------------------------------------ Chapter 4:1.2.2
In our 1992 report on management of the Customs Service, we reported
that Customs had major weaknesses in (1) mission planning; (2)
financial, information, and human resource management; and (3) its
organizational structure. In our 1995 follow-up report, we noted
that Customs has an assortment of plans and a broad reorganization
under way that are intended to correct identified management
weaknesses. However, many of these efforts are in the early stages
of development and will require continuing support from Customs' top
and mid-level management to ensure that they are properly
implemented. (GAO/GGD-95-73)
IMMIGRATION CONTROL
------------------------------------------------------ Chapter 4:1.2.3
We reported that the Immigration and Naturalization Service's (INS)
Law Enforcement Support Center pilot program is limited in its
ability to provide participating local law enforcement agencies with
the information that would identify as aliens individuals they arrest
for aggrevated felonies. INS' name-based alien information systems
inherently limit the capability to conclusively identify aliens.
Until INS successfully implements a system that identifies
individuals based on biometric information, such as a fingerprint,
Law Enforcement Support Center's identification capability will
continue to be limited. We also reported serious problems with the
quality of the criminal alien data in two INS databases. We
recommended that the Attorney General direct the Commissioner of INS
to take several actions before deciding whether to expand the pilot
program nationwide. These actions include assessing whether the
information generated by Law Enforcement Support Center's electronic
searches justifies the expense and level of resources required to
expand and maintain a nationwide system, and whether any other
alternative would be more effective and efficient. We also
recommended that the Attorney General direct the INS Commissioner to
develop procedures that would ensure the reliability of the two data
bases in which we found reliability problems. (GAO/AIMD-95-147)
FEDERAL MANAGEMENT AND
WORKFORCE ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:2
GAO Contact: L. Nye Stevens, 202/512-8676
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:2.1
The Federal Management and Workforce issue area is GAO's central
focal point for a wide and growing range of critical issues on
federal management, civil service, and government information policy.
Our responsibilities range from reviewing the National Performance
Review (NPR), the Government Performance and Results Act (GPRA),
regulatory reform, reorganizing and downsizing the federal
establishment, and reexamining the civil service and its multibillion
dollar federal pay and benefit systems, to an examination of the
Consumer Price Index, reform of the decennial census, and
improvements in the publication and distribution of federal
documents. Many of these issues have come to the forefront of both
congressional and administration agendas.
NATIONAL PERFORMANCE
REVIEW (NPR)
------------------------------------------------------ Chapter 4:2.1.1
In December 1994, we reported that at least some action had been
taken to implement 93 percent of NPR's September 1993
recommendations, although only 4 percent of the recommendations had
been fully implemented. We also said NPR needed to sharpen its focus
and bind the recommendations into a more coherent framework that
could permit the government reform effort to take root and flourish.
We testified in May 1995 that, although the focus of the reform
effort had shifted from how government operates to what government
should do, our observations were still relevant--the need for the
Congress and the administration to work together, the need for
sustained leadership and attention to agencies' capacities, and the
need to move to a results-oriented framework. We are also collecting
information on each of the nearly 200 reinvention labs throughout the
government in order to determine their focus and how they operate.
GOVERNMENT PERFORMANCE
AND RESULTS ACT (GPRA)
------------------------------------------------------ Chapter 4:2.1.2
We continued to provide the Congress and agencies with critical
information and perspective to ensure the successful implementation
of GPRA, which made performance measurement the touchstone of
government operations. For example, we issued widely-used reports on
the lessons that federal agencies can learn from the experiences of
leading states and foreign governments in implementing GPRA and
related management reforms. We also reported on how leading public
and private organizations set ambitious goals to improve performance.
We further contributed to congressional oversight through two
congressional testimonies on the status of federal performance
measurement and GPRA implementation efforts. Finally, as required by
GPRA, we continued to support the Office of Personnel Management's
(OPM) GPRA training program.
REGULATORY REFORM
------------------------------------------------------ Chapter 4:2.1.3
We have also continued to develop a body of work on regulatory
issues. In one study being conducted for several Members of
Congress, we are attempting to describe the regulatory burden on
individual businesses from all federal agencies, focusing on those
regulations the businesses believe to be most burdensome. We also
testified in March 1995 on agencies' compliance with the Regulatory
Flexibility Act, which was designed to reduce federal agencies'
regulatory burden on small businesses and small governments. SBA and
OMB took some steps we recommended to improve administration of the
act. In July 1995, we testified on how the Congress could assess the
administration's regulatory reform initiatives. We suggested that
the Congress focus its efforts on the administration's underlying
goals--a reduced burden and a focus on outcomes--rather than
analyzing each initiative. However, we also noted that measurement
of the regulatory burden and a clear statement of regulatory intent
are difficult to accomplish.
REORGANIZATION AND
DOWNSIZING
------------------------------------------------------ Chapter 4:2.1.4
At the request of the Congress, we examined issues related to
reorganizing the federal government and identified a series of key
principles that should be considered with any reorganization. We
testified before the Congress on the legislative framework that it
has enacted to improve federal management and the critical next steps
that need to be taken to successfully implement that framework. We
also issued a report on a recent proposal to create additional
government corporations. We testified twice on proposals to abolish
the Department of Commerce and move its essential functions elsewhere
in the federal government.
As the largest workforce downsizing since World War II loomed over
the federal establishment, we contributed to congressional
decisionmaking by analyzing key aspects of the downsizing process.
Our report on the downsizing strategies followed by major nonfederal
employers provided a set of lessons learned that could be used to
help guide federal agencies through their own staff reductions.
Following this report, we commented in three separate testimonies on
the administration's management of the workforce reductions, the
degree to which the President's fiscal year 1996 budget complied with
the downsizing targets set in the Federal Workforce Restructuring Act
of 1994, and the ways in which federal agencies had implemented the
buyout authority. This body of work provided congressional
decisionmakers with critical analysis concerning the progress of this
historic downsizing effort.
At the request of the Congress, we examined how major American cities
have responded to financial crises by downsizing their operations.
The result of that work was used by the Congress as critical
information to create the District of Columbia Financial
Responsibility and Management Assistance Authority.
The debate on what functions to privatize and how to privatize them
became an important issue this year, to which we contributed with two
testimonies on OPM's proposal to privatize its investigations unit.
Our testimony contributed to congressional direction requiring OPM to
provide additional analysis of their proposal and mandating that we
evaluate the results of that analysis. We also testified on the
privatization efforts of leading cities and states and their
implications for the District of Columbia.
REEXAMINING THE CIVIL
SERVICE
------------------------------------------------------ Chapter 4:2.1.5
Against the backdrop of insistent calls for civil service reform, in
April 1995 we convened a symposium of human resources management
(HRM) practitioners and experts from leading private sector
organizations, state and local governments, academia, and the
governments of other nations. The theme of the symposium was
"Transforming the Civil Service: Building the Workforce of the
Future." The symposium identified some of the most successful cutting
edge HRM strategies and discussed their implications for and
applicability to the civil service. This work will provide a
foundation for our assistance to the Congress in its examination of
civil service reform in the coming year.
We also addressed issues relating to a wide range of other federal
employment laws and practices during the year. For example, the
change of leadership in the House and Senate contributed to a number
of requests for analysis of the use of the Ramspeck Act to provide
appointments in the executive branch for congressional employees.
Our work in this area resulted in two testimonies that were useful to
the congressional debate on whether to repeal the Ramspeck Act. In
the area of equal employment opportunity, we issued a report on the
progress of federal agencies in improving representation of women and
minorities in their workforces, pointing out shortcomings in the
analysis required to address barriers to full representation.
Our work on sexual harassment issues at IHS and NIH contributed to
changes in how IHS reports incidents of sexual harassment and the
promise of action by NIH to improve its processing of sexual
harassment cases. In the area of government ethics, the Judicial
Conference of the United States took action on our recommendations
for improving the timeliness and effectiveness of the judicial
branch's financial disclosure program. Finally, in part in response
to concerns we expressed in reports, testimony, and briefings of
congressional staff, at the beginning of the fiscal year, the
Congress enacted the Federal Employees Family Friendly Leave Act of
1994. This law incorporated our suggestions for bringing the federal
government closer to leading private sector organizations by becoming
a more "family friendly" employer in its rules governing sick leave.
FEDERAL STATISTICAL AND
INFORMATION POLICY
------------------------------------------------------ Chapter 4:2.1.6
We continue to provide the Congress with information 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.
We continued our efforts to contribute to improvements in the
quality, reliability, timeliness, and usefulness of the nation's
leading economic statistics. For example, we issued reports on how
measurement problems with national economic statistics can affect
budget and economic policy-making and efforts to improve the quality
of those statistics. More directly, we reported on issues associated
with adjusting for geographic cost-of-living differences when
measuring the amount of poverty. Finally, we reported on the degree
to which federal statistical agencies are adhering to accepted
guidelines for the organization and operations of statistical
agencies and coordinating their budgets to ensure the best use of
scarce resources.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:2.2
We have made a number of recommendations to improve the federal civil
service system, government statistics, and agency management
practices. Further action or monitoring is needed in the following
areas.
CENSUS REFORM
------------------------------------------------------ Chapter 4:2.2.1
We reported in 1992 that the basic design of the decennial census had
exhausted its potential for counting the population accurately and
cost-effectively. The key to a successful reform effort is vigorous
congressional oversight. The Census Bureau has proposed changes
consistent with our recommendations--for example, sampling instead of
100-percent follow-up for citizens not responding to the mailed
questionnaires--but there are still critical decisions, with
cost-savings consequences of more than $1 billion, to be made that
depend on congressional agreement. (GAO/GGD-92-94)
PERSONNEL MANAGEMENT
EVALUATIONS
------------------------------------------------------ Chapter 4:2.2.2
In a December 1992 report on oversight of the personnel system, we
recommended that OPM strengthen personnel management evaluation (PME)
programs in agencies by issuing regulations requiring agencies to
establish and implement PME programs and follow OPM standards;
publishing program and operational PME standards; and providing
guidance to agencies on the relationships that should exist among
agency PME programs, personnel programs, and internal control
programs required under the Federal Managers' Financial Integrity
Act. Although OPM previously has said it was unconvinced that
regulation in this area would accomplish the desired results, it
recently said it does not discount the possibility of issuing
regulations, although it continues to believe efforts to regulate
would be problematic. Our report also recommended that, if OPM
maintains that regulations are unnecessary, the Congress should
consider whether it wants to legislate in this area. (GAO/GGD-93-24)
MEASURING COSTS OF
SERVICE CONTRACTORS
------------------------------------------------------ Chapter 4:2.2.3
Our March 1994 report on measuring the cost of service contractors
versus federal employees recommended that the Congress explore with
OMB the best way to reconcile the objective of downsizing the
government with the objective of providing agencies flexibility to
accomplish their work in the most cost-effective manner. The
Congress has held hearings on the issue and plans further work.
(GAO/GGD-94-95)
SUNDAY PREMIUM PAY
------------------------------------------------------ Chapter 4:2.2.4
Our May 1995 report on the payment of Sunday premium pay found that
employees who take leave when they are scheduled to work on Sunday
receive millions of dollars in Sunday premium pay. We recommended
that the Congress consider requiring that employees actually work on
Sunday to receive Sunday premium pay. (GAO/GGD-95-144)
CONTINUATION OF PAY
------------------------------------------------------ Chapter 4:2.2.5
In a June 1995 report we recommended that the Congress amend the
Federal Employees' Compensation Act to preclude employees from
receiving double recoveries and help reduce the government's costs of
employees' work-related injuries caused by third parties. We
recommended that the Congress expressly provide for refunds of
amounts paid by agencies as "continuation of pay" when employees
receive recoveries from third parties, and that certain amounts
refunded by third parties be credited to injured employees' agencies.
(GAO/GGD-95-135)
FEDERAL HIRING
------------------------------------------------------ Chapter 4:2.2.6
Our June 1995 report on reconciling managerial hiring flexibility
with the legal requirement of providing preference for veterans
recommended that OPM, under its demonstration project authority,
actively recruit agencies to carry out projects to test improved
methods of implementing veterans' preference. On the basis of
evaluations of these demonstration projects, OPM, in conjunction with
affected parties such as veterans' groups and labor unions, may then
be in a position to propose statutory changes to the hiring process.
(GAO/GGD-95-102)
SEXUAL HARASSMENT AND
DISCRIMINATION
------------------------------------------------------ Chapter 4:2.2.7
In a September 1995 report on the handling of sexual harassment and
sex discrimination matters at NIH, we recommended that the Secretary
of HHS and the Director of NIH take steps to decrease the time it
takes to process and resolve sexual harassment and sex discrimination
complaints at NIH. We also recommended that the Director of NIH take
additional steps to provide guidance for and monitoring of the
agency's Equal Employment Opportunity program. (GAO/GGD-95-192)
VEHICLE FLEET MANAGEMENT
------------------------------------------------------ Chapter 4:2.2.8
We reported in December 1994 that the federal government's vehicle
fleet, with more than 375,000 cars and light trucks, could be managed
more effectively if cost comparisons were made and certain private
sector practices considered. OMB has not yet taken action on our
recommendations because it is still awaiting the results of the GSA's
review of its lines of business. (GAO/GGD-95-18)
FINANCIAL INSTITUTIONS AND
MARKETS ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:3
GAO Contact: James L. Bothwell, 202/512-8678
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:3.1
Financial institutions and markets continue to change at a rapid
rate. Banks and thrifts, which used to be clearly distinct
institutions, perform increasingly similar functions. In an attempt
to increase profits and maintain a customer base, banks are
increasingly taking on new lines of business--such as mutual funds
and securities underwriting--that make them look more like securities
firms. The products offered by banks, securities firms, and
insurance companies look more and more similar. As markets become
more global, foreign and domestic institutions perform similar
functions and interact with savers and investors in similar ways.
Our work delves into the implications of these changes for the
industry, its customers, and its regulators. We examine these and
related issues to provide information, analyses, and recommendations
to the Congress and regulators on change, reform, regulation, and
oversight of the financial services industry. 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/customer focus to help ensure that
financial-services-industry customers get what they pay for. Our
work on agency operations led to improvements in their effectiveness.
Our work on the over-the-counter derivatives market has provided the
framework for debating the complex issue. Our report suggested that
linkages among 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. The FDIC sent our report's
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 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 (GSE). This
report is forming the basis for a legislative proposal that will be
submitted to the Congress.
These reports have strengthened necessary regulation of financial
services industries and produced a stronger financial system and a
strengthened regulatory structure to protect the public.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:3.2
FINANCIAL INSTITUTION
REFORMS
------------------------------------------------------ Chapter 4:3.2.1
In our report on credit unions, we recommended some 50 regulatory and
legislative actions to ensure the future soundness of the industry,
including changes to (1) maintain safe and sound insurance
operations, (2) upgrade the regulation and supervision of credit
unions, and (3) clarify the "common bond" characteristic
distinguishing credit unions from banks and thrifts. Our 1994
testimony on Corporate Credit Unions noted eight key recommendations
in our 1991 report that had not been adequately addressed by the
National Credit Union Administration. The National Credit Union
Administration has issued regulations to address many of the
recommendations and is currently exploring solutions to others; the
Congress, however, has not yet acted. (GAO/GGD-91-85, GAO/GGD-95-15)
Our report on the Federal Home Loan Bank System recommended reforming
its capital structure, its mixture of voluntary and mandatory
members, and potential cost-saving reforms, as well as recommending a
single regulator for all three housing-related GSEs. The
administration and the Congress are 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 now in a financial position to
permit the Congress to eliminate several accounting and regulatory
exemptions currently used by the System. We made recommendations in
this vein to the Congress and the regulators 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 bank examiners analyze information,
such as call reports, insurance policies, loans to insiders and other
bank specific data to determine whether insider lending is harming
the bank. The bank regulators are in the process of implementing our
recommendations. (GAO/GGD-94-88)
Our report on bank and thrift alternatives to real estate appraisals
recommended that regulators establish minimum qualifications and
standards of independence for individuals performing alternatives to
real estate appraisals. We also recommended that content standards
be established for these alternative evaluations. An interagency
group is working to address our recommendations. (GAO/GGD-94-144)
SECURITIES
------------------------------------------------------ Chapter 4:3.2.2
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 does not become a source of systemic risk. We made several
recommendations calling for congressional action to address the
weaknesses and gaps we identified that are impeding the regulatory
process. Additionally, we made several recommendations to the
regulators involved with regulating the over-the-counter derivatives
market that address the weaknesses and gaps within their control.
Regulators have not yet implemented our recommendations.
(GAO/GGD-94-133)
GOVERNMENT BUSINESS OPERATIONS
ISSUE AREA (BUDGET FUNCTION
800)
---------------------------------------------------------- Chapter 4:4
GAO Contact: William Gadsby, 202/512-8387
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:4.1
Our work focuses on three of the government's largest business
entities: GSA, the Resolution Trust Corporation (RTC), and the U.S.
Postal Service. Their combined annual operating budget is about $60
billion, and their activities have far-reaching implications for
federal agencies and the general 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. We also review operations of
other entities, such as the Smithsonian Institution, the Library of
Congress, and the National Archives.
Given high congressional interest in RTC's final year, we have
continued to emphasize (1) asset management and disposition in
liquidating failed savings and loan institutions, and (2) the
transition of RTC's activities and assets to FDIC in December 1995.
All our recommendations have been closed: RTC implemented 112 of
122, or 92 percent, of those we have made since its inception.
Results have included better program operations, stronger management
and financial internal controls, lower contracting costs, and greater
asset sales proceeds. In addition, excess funds held by property
managers and subsidiaries of failed thrifts are now in
interest-bearing accounts. During the past 5 fiscal years, these
program management corrective actions have yielded RTC about $400
million. This year we testified on transition planning efforts and
transition issues needing resolution in order to transfer RTC
activities and assets to FDIC.
In response to our recommendations, those of NPR, and the President's
recent initiative to reduce the size and costs of government, GSA
accelerated and broadened its reforms and identified ways to save
money in support-services areas. GSA committed to (1) continue
streamlining its functions; (2) establish an agencywide Office of
Policy, Planning, and Leadership to better carry out governmentwide
policy and oversight; and (3) identify the most cost-effective method
of ownership, management, and operations for its mission-support
responsibilities or business lines. GSA has developed and is now
using a federal operations review model to analyze its 16 major
business lines, and is considering options, including privatization
and outsourcing. At the request of several congressional committees,
we are monitoring GSA's reinvention efforts and assessing the
reasonableness and validity of GSA's methodology, assumptions, and
benchmarking cost comparisons with private industry for its 16
federal operations review model business line analyses.
Key efforts at the U.S. Postal Service have focused on persistent
problems as well as fundamental issues concerning its future. These
problems include poor labor-management relations, low employee
morale, general employee dissatisfaction with working conditions, and
a culture of autocratic management resulting in substandard mail
delivery and customer satisfaction scores and $200 million spent on
processing employee grievances. To survive, the Service will have to
transform its culture to solve these enduring problems while
creatively responding to new challenges in revenue protection,
automation, and competition. In reports and testimony, we have
underscored the major issues facing the Service: (1) how competition
will affect Postal revenue, costs, and rates, as well as the federal
government's role in mail delivery; (2) the private sector's ability
to take responsibility for delivering domestic mail; and (3) how such
a change would affect the nation and the economy.
We continued to handle a wide range of congressional requests
concerning many different agencies and issues. For example, we
prepared two testimonies on our earlier work for the House and Senate
Banking Committees concerning possible savings from reintroducing the
dollar coin, and one testimony on the costs of the First Lady's
Health Care Task Force. Our work also resulted in (1) improved
internal controls of employee travel at the Commission on Civil
Rights, and (2) the disclosure of bid protest settlements to make the
federal procurement process more visible and accountable.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:4.2
GENERAL SERVICES
ADMINISTRATION
------------------------------------------------------ Chapter 4:4.2.1
The Congress has supplemented Federal Buildings Fund revenues and
eliminated most restrictions on rent payments to GSA by federal
agencies. GSA used these funds to construct several new federal
buildings/courthouses and is developing a 5-year capital plan to
guide decisions and lead in showing the benefits of capital
budgeting. However, funding limitations, federal budget constraints,
scorekeeping rules, and other factors still impede sound federal
housing and asset management decisions. (GAO/GGD-90-11)
GSA is addressing our recommendations as part of its ongoing
reinvention efforts. It is working internally, with federal
agencies, and the commercial real estate community to explore new
ways of handling leasing. It has already acted to simplify and
streamline its leasing and pilot alternative options. As part of its
reinvention efforts, GSA is considering privatization and
outsourcing. GSA expects to complete its analysis and propose
reforms early in fiscal year 1996. (GAO/GGD-95-48)
U.S. POSTAL SERVICE
------------------------------------------------------ Chapter 4:4.2.2
The Postal Service, unions, and management associations should
develop a long-term agreement (at least 10 years) to change the
workplace climate in processing and delivery. The agreement should
provide incentives to encourage teamwork and make employees more
responsible and accountable for work results.
The parties should test these new approaches at pilot sites and
evaluate their effect on employee and customer satisfaction. The
agreement should provide for the following principles and values:
-- structure the work to give employees greater responsibility and
accountability for results by clearly defining the composition
and structure of work teams and the measurements of team
success;
-- provide incentives to encourage all employees to share in the
tasks necessary for success and that allow work units and
employees to be recognized and rewarded mainly for corporate and
unit performance;
-- train employees and hold them accountable for working as members
of work teams, focusing on customer service and joint
participation in continually improving unit operations;
-- select and train supervisors to be facilitator/counselors who
will have the skills, experience, and interest to treat
employees respectfully, motivate them, recognize and reward them
for good work, promote teamwork, and deal effectively with poor
performers; and finally,
-- counsel, train, and, if necessary, remove supervisors and
employees who show a lack of commitment to work-unit goals,
values, and principles. (GAO/GGD-94-201A and B)
If the Congress wants the Postal Service to keep or gain business
customers in parcel post and Express Mail, it should consider
reexamining the provisions of section 403(c) of the Postal
Reorganization Act. The Congress should determine if volume
discounting by the Postal Service, in which all customers would be
given the same volume discounts, would in fact result in undue or
unreasonable discrimination among mailers and undue or unreasonable
preference to a mailer, since private carriers commonly use this
pricing strategy.
The Congress should reexamine the act's rate-making criteria and
consider amending the criteria to state that (1) in allocating
institutional costs, demand factors, including elasticities of
demand, are to be weighted to take into account the need to maintain
the long-term viability of the Postal Service as a nationwide
full-service provider of postal services; and (2) such use of demand
factors will not be inconsistent with the rate criterion requiring
the establishment of an equitable rate schedule as long as each mail
class recovers the direct and indirect costs attributable to that
service and contributes to institutional costs. (GAO-GGD-92-49)
TREASURY ISSUES
------------------------------------------------------ Chapter 4:4.2.3
Our 1993 report on the dollar coin recommended that the Congress
eliminate the paper dollar and replace it with a well-designed coin.
(GAO-GGD-93-56)
TAX POLICY AND ADMINISTRATION
ISSUE AREA (BUDGET FUNCTION
800)
---------------------------------------------------------- Chapter 4:5
GAO Contact: Lynda Willis, 202/512-5407
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:5.1
For 1995, the federal treasury will realize over $2.3 billion in
increased tax revenues as a result of statutory and administrative
changes consistent with our recent reports. About $900 million of
the increase relates to statutory changes curtailing the use of
section 936 tax credits--credits that we had identified as benefiting
certain industries. Also, about $800 million relates to statutory
changes for collecting diesel fuel excise taxes earlier in the
distribution system, about $500 million to changes in the
amortization of certain intangible assets, and about $100 million to
increased compliance stemming from newly required information returns
on forgiven debts. In addition, as we recommended, IRS revised its
10 service centers' procedures for handling large tax payments.
Tests at 1 of its 10 service centers resulted in additional interest
earnings of $.6 million.
These increased tax revenues represent only one aspect of the impact
of our work. As a result of actions taken on our recommendations,
the nation's tax collection system is operating in a more efficient
and effective manner. For example, in response to our
recommendations, IRS is taking steps to improve its delinquent-debt
collection program. Chief among these steps is an early intervention
program whereby certain delinquent taxpayers will receive fewer
written notices; instead, they will be contacted by telephone much
earlier in the collection process. Moreover, in response to our
recommendations concerning opportunities presented by the planned
introduction of new technologies, IRS continues to rethink the way it
does business. As part of that rethinking, IRS has announced the
closing of 3 regional offices and the consolidation of many of its
district offices. In related matters, we briefed key congressional
committees on the uncertainty of deliverables in IRS' planned
multiyear multibillion-dollar computer modernization program. These
briefings helped prompt short-term budget savings ($340 million in
reduced modernization funding for fiscal year 1995 and an additional
$300 million in proposed reductions for fiscal year 1996) and, for
the long-term, changes in IRS' modernization planning that should
assure more effective use of systems development funding.
Concomitantly, our work has had a taxpayer focus, i.e., ensuring the
tax system is responsive, fair, and not overly intrusive or
burdensome. For example, in response to our recommendations, IRS has
(1) started outreach efforts to help identify what individual
taxpayers find most confusing, and what IRS can best do about it; (2)
clarified its instructions on real estate deductions; (3) developed
guidelines to help its staff make uniform determinations regarding
individuals' ability to pay delinquent taxes; and (4) expanded
taxpayer access by extending telephone service hours beyond the
8-hour workday and 5-day work week.
Also, as a result of our work, better information should be available
to support deliberations on future tax policy and administration
changes. Our report on international transfer pricing showed the
difficulties IRS has had in administering section 482 of the Internal
Revenue Code and the continuing pattern of nonpayment of corporate
taxes. In each year from 1987 through 1991, over 70 percent of
foreign-controlled corporations and about 60 percent of
U.S.-controlled corporations paid no federal income tax. In a
companion report, we described one state's approach to dealing with
the taxation of multinational enterprises and the kinds of issues
that would have to be considered before adopting a similar system at
the federal level. In another report, we described the workings of
the corporate alternative minimum tax and its impact on corporate tax
liability. Also during the year, we testified at 14 congressional
hearings, discussing ways to deal with such seemingly intractable tax
administration issues as simplifying the definitions of employee and
independent contractor, minimizing noncompliance as a feature of tax
reform, reducing the size of IRS' accounts receivable, and improving
the administrability of the Earned Income Tax Credit.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:5.2
COMPLIANCE
------------------------------------------------------ Chapter 4:5.2.1
Sole proprietors, who 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. Much of
this noncompliance is attributable to sole proprietors who operate as
independent contractors, e.g., self-employed individuals who provide
services to others. Given the persistently high levels of
noncompliance over the years, we have recommended that IRS adopt a
more comprehensive and coordinated compliance program. We also
recommended that the Congress consider compliance-enhancing
legislation, i.e., extending withholding and information reporting
requirements to cover independent contractors. (GAO/GGD-94-175 and
GAO/GGD-92-108)
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 large
corporations consume about 20 percent of IRS' examination resources,
IRS neither tracks actual collections from these audits nor the
compliance rates of these corporations. Given that our analysis
indicated that only about $1 of every $5 of recommended tax
assessments is actually collected from these large corporations, we
recommended a number of steps to help IRS ensure it meets its mission
of collecting the proper amount of tax at the least cost: (1) IRS
should increase revenue agent knowledge of the specific industries
they audit; (2) IRS should begin tracking collection rates as a
common performance measure across the agency; and (3) IRS should
analyze recurring tax disputes and propose legislative changes for
minimizing such recurrence. (GAO/GGD-94-70)
Treasury and DOJ estimates of federal motor fuel excise tax evasion
have ranged from about $250 million to $1 billion a year. In our May
1992 report, we found that, by moving the excise tax collection point
to reduce the number of liable firms, the potential for tax evasion
could be reduced. In 1993, such a statutory change was made for
diesel fuel but not for gasoline. (GAO/GGD-92-67)
Through negative withholding, low-paid wage earners may receive a
proration of the Earned Income Tax Credit during the tax year. Such
an advance payment of the tax credit presents a potential compliance
problem because the credit is paid before IRS can ensure that the
wage earners are eligible. Ensuring compliance becomes more
problematic if the affected wage earners do not report the advance
payment on their tax returns or do not file tax returns. We
recommended ways for dealing with these situations. (GAO/GGD-92-26)
TAX SYSTEMS MODERNIZATION
------------------------------------------------------ Chapter 4:5.2.2
Available compliance data indicate that overstated deductions by
small businesses are a significant noncompliance area--about $40
billion annually. Our work has shown that it is 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 show it would
be cost-effective. We also recommended that IRS consider actions
that could be taken to expand the computer matching as part of its
Tax Systems Modernization (TSM) effort. (GAO/GGD-93-133)
Electronic filing reduces the time it takes to issue refunds.
Because this speed leaves IRS with little time to investigate and
stop a refund, the program is particularly vulnerable to fraud. We
recommended additional controls to help prevent fraudulent electronic
returns from being filed and to better detect fraudulent returns that
have been filed. IRS implemented several controls in 1995, but
further efforts are needed to improve its computerized screening
criteria. (GAO/GGD-93-27)
ACCOUNTS RECEIVABLE
COLLECTION
------------------------------------------------------ Chapter 4:5.2.3
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) strengthen oversight of the
ability-to-pay determination process and (2) modify criteria for
reactivating cases previously classified as currently not
collectible. We have also recommended that IRS develop information
on the characteristics of the accounts written off to determine
whether additional cost-effective collection measures can be
developed and applied. (GAO/GGD-94-2 and GAO/GGD-91-89)
We reviewed IRS' Offer in Compromise Program, which affords taxpayers
the opportunity to settle tax debts for less than the amount owed.
While IRS is pleased with the results of the program, it has not
demonstrated that the program's objectives of increased collections
and improved compliance will be met. We recommended that IRS develop
the indicators necessary to evaluate the Offer in Compromise Program
as a collection and compliance tool. (GAO/GGD-94-47)
We studied private sector and state collection techniques to
determine whether IRS could make changes to improve its collection of
delinquent taxes. We recommended that IRS restructure its collection
program to use collection staff in earlier, more productive phases of
the collection cycle; 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 4:5.2.4
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 that IRS expand its efforts to
notify low-income workers about the tax credit and clarify
instructions on information reporting requirements. This followed
our earlier recommendation to eliminate a complex schedule that did
not add to IRS' compliance effort. (GAO/GGD-93-145 and
GAO/T-GGD-91-68)
Our work has shown that the rules for claiming dependent exemptions
were too complex and too burdensome for many taxpayers. We
recommended that the Congress simplify the rules by substituting a
residency test similar to that used for the Earned Income Tax Credit.
(GAO/GGD-93-60)
Businesses, in order to determine their tax liabilities (e.g.,
employer portion of Social Security taxes) and take the appropriate
steps to meet the requirements of other laws, need to be able to
readily distinguish between workers who are "employees" and those who
are "independent contractors." But, the IRS rules for classifying
workers are unclear and subject to conflicting
interpretations--putting employers at risk of large penalties and
retroactive tax assessments. We have recommended congressional
intervention to help clarify the rules. (GAO/GGD-92-108)
We reviewed certain aspects of life insurance company taxation--the
deferral of taxes on "inside buildup" and the determination of
taxable earnings of mutual life insurance companies (section 809).
We found that "inside buildup" is accrued income that could be taxed
and that section 809 did not follow a pattern normally associated
with income taxes. We suggested that the Congress may wish to
reconsider continuation of these tax practices. (GAO/GGD-90-19 and
GAO/GGD-90-31)
Tax simplification also involves efforts to make IRS correspondence
easier for taxpayers to understand and act on. In this regard, we
have recommended that IRS modify its correspondence practices to (1)
ensure that taxpayers' questions do not go unanswered, (2) clearly
advise taxpayers whether their tax problems could be quickly handled
over the telephone, (3) make certain system improvements, and (4)
monitor taxpayer satisfaction with IRS correspondence.
(GAO/GGD-94-118)
MANAGEMENT OF IRS
------------------------------------------------------ Chapter 4:5.2.5
IRS has a wide range of controls, processes, and oversight offices
designed to govern how its employees interact with taxpayers. While
this system of controls has many elements designed to protect
taxpayers from abuse, breakdowns have occurred. To strengthen
controls, we recommended that the Commissioner (1) ensure that the
information systems being developed under TSM include the capability
to minimize unauthorized access to taxpayer information, (2) ensure
cash receipts are reconciled more frequently, and (3) better inform
taxpayers about their responsibility and potential liability for
trust fund recovery penalties. We also recommended that the Congress
enable IRS to share tax information among taxpayers potentially
subject to trust fund recovery penalties. (GAO/GGD-95-14)
A cornerstone of IRS' strategic management system is the annual
business review. These reviews are used to assess agency
accomplishments in support of IRS' Strategic Business Plan. However,
these annual reviews do not make bottom-line assessments of the
progress being made in implementing long-term strategies (such as
Compliance 2000) or achieving long-term objectives (such as reducing
taxpayer burden), as we have recommended. IRS management needs this
information to determine whether the agency is moving in the right
direction and what, if any, adjustments might be needed.
(GAO/GGD-92-125)
Knowing how much it costs to carry out programs and activities is
indispensable for planning and decision-making. For example, IRS
management needs information to compare what it costs to run IRS at
various times and at locations doing similar work. To strengthen
IRS' financial management, we recommended that IRS develop a
comprehensive cost accounting system, one that accounts for all IRS
costs and identifies them with the organizational components and
functions to which they relate. (GAO/GGD-89-1)
TAXPAYER SERVICE
------------------------------------------------------ Chapter 4:5.2.6
Successful implementation of IRS' one-stop service initiative is
crucial to IRS' plans for improving customer service, e.g., reducing
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. This followed an earlier recommendation aimed at improving
taxpayer access to IRS. We recommended that IRS develop a reliable
measure of toll free telephone accessibility so that it can make
appropriate decisions on making services available. (GAO/GGD-94-131
and GGD-92-132)
Providing taxpayers with easily understood tax guidance (notices,
forms, and publications) can have a major impact on promoting
voluntary compliance. Our December 1994 reports showed that IRS did
not have a systematic way to determine what individual taxpayers
specifically find confusing and, with respect to the notices sent to
taxpayers, no quick and easy method to revise them. We recommended
steps to address these problems. (GAO/GGD-95-34 and GAO/GGD-95-6)
Taxpayers have entered into installment agreements with IRS to pay
off billions of dollars in past-due tax debts. According to the
terms of those agreements, the taxpayers continue to accrue interest
and penalty charges on the unpaid debt balance. However, contrary to
private industry practice, which is governed by truth-in-lending
laws, IRS does not tell taxpayers the total estimated costs of the
installment agreements, including interest and penalty accruals, nor
the amount of time required to liquidate the debt. We have
recommended that such reporting be made. (GAO/GGD-95-137)
Through Taxpayer Bill of Rights legislation, Congress has made a
number of positive changes in the way IRS is to relate to taxpayers.
Our review showed that IRS was generally successful in implementing
those changes; however, we noted two areas that could benefit from
statutory clarification. We suggested that the Congress may wish to
consider legislation (1) authorizing IRS to withdraw a notice of lien
when in the interests of the government and taxpayer and (2)
specifying the amount of time taxpayers have to correct erroneous
levy actions. (GAO/GGD-92-23)
INFORMATION RESOURCES
MANAGEMENT - GENERAL GOVERNMENT
DIVISION ISSUE AREA (BUDGET
FUNCTION 990)
---------------------------------------------------------- Chapter 4:6
GAO Contact: Jack Brock, 202/512-6240
Rona Stillman, 202/512-6400
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:6.1
Increasingly, the public is demanding that the government provide
more services at less cost. To meet this challenge, government
officials must increasingly rely on information technology systems to
sustain and improve such vital functions as enforcing the law,
collecting taxes and criminal debts, and protecting the public's
investment in financial markets.
Our work covered agencies that are involved in the areas of TSM as
well as the administration of justice and financial institutions and
markets. The following examples show how we are assisting these
agencies in managing their information resources and in effectively
using technology to improve their operations.
TAX SYSTEM MODERNIZATION
------------------------------------------------------ Chapter 4:6.1.1
At IRS, processes established in the 1960s are being used to annually
collect and account for over $1 trillion in revenue. Introducing
information technology into this environment and attempting to
improve that technology have been expensive and have yielded marginal
benefits.
Our 1995 comprehensive examination of IRS' TSM found that IRS had
made progress through many actions initiated to improve the
management of information systems; enhance its software development
capability; and better define, perform, and manage TSM's technical
activities. Nevertheless, both IRS' efforts to modernize tax
processing and the government's investment in those efforts--which
could total more than $8 billion--are at serious risk due to
remaining pervasive management and technical weaknesses that impede
modernization efforts. We reported that IRS does not have a
comprehensive, cost-effective business strategy to reduce paper
submissions. Furthermore, IRS has not yet fully developed and put in
place the requisite management, software development, and technical
infrastructures necessary to successfully implement an ambitious
world-class modernization effort like TSM.
Promptly addressing TSM's many unresolved management and technical
issues is crucial to mitigating risks and better positioning IRS to
achieve a successful information systems modernization. First, IRS'
business strategy will not maximize electronic filings because it
primarily targets taxpayers who use a third party to prepare and/or
transmit simple returns, are willing to pay a fee to file their
returns electronically, and are expecting refunds. Focusing on this
limited taxpaying population overlooks most taxpayers, including
those who prepare their own tax returns using personal computers,
have more complicated returns, owe tax balances, and/or are not
willing to pay a fee to a third party to file a return
electronically. Without a strategy that also targets these
taxpayers, IRS will not meet its electronic filing goals or realize
its paperless tax processing vision. In addition, if taxpayers file
more paper returns in the future than IRS expects, this will place
added stress on IRS' paper-based systems. In addition, IRS does not
have in place the management and technical infrastructure needed to
realize TSM objectives.
To its credit, IRS has (1) developed several types of plans to carry
out its current and future operations, (2) drafted criteria to review
TSM projects, (3) assessed its software development capability and
initiated projects to improve its ability to effectively develop
software, and (4) started to develop an integrated systems
architecture and made progress in defining its security requirements
and identifying data weaknesses in current systems. Despite
activities such as these, more remains to be done.
ADMINISTRATION OF JUSTICE
------------------------------------------------------ Chapter 4:6.1.2
Pursuant to the Criminal Fine Improvements Act of 1987, AOUSC and DOJ
have initiated action to centralize criminal debt accounting and
reporting within the National Fine Center. Our report and follow-on
testimony identified critical challenges that need to be addressed
before almost $5 billion in existing criminal debt can be centralized
for more effective collection. Specifically, we emphasized that
AOUSC needs to determine how it intends to proceed beyond phase I of
the project. Further, AOUSC and DOJ need to work together to ensure
that the National Fine Center has complete and reliable data for all
94 judicial districts.
In a joint effort with the General Government Division, we worked
with the Congress to ensure that improved automation management was
part of its consideration to reauthorize AOUSC's Judiciary Automation
Fund. This fund provided in excess of $400 million over the past 5
years to improve automation in federal courts. We recommended that
the Fund be reauthorized for less than the 5 years the judiciary had
requested. During this period, the judiciary would have the
opportunity to assess the effectiveness of its ongoing efforts and
report to the Congress on progress made in its automation program.
The Congress passed legislation to reauthorize the Fund for 3 years
and included language in the reauthorization act requiring AOUSC to
implement our recommendations.
In recent testimony, we informed the Congress of challenges facing
the U.S. Customs Service during it implementation of the National
Customs Automation Program, which is to be achieved primarily through
the redesign of its ACS--projected to cost about $100 million through
fiscal year 1999. Customs is beginning to work on these challenges,
which include (1) meeting with customers to discuss modernization
plans and automation needs, (2) determining how information
technology will support the key components of its redesigned
operations, and (3) developing performance measures that will be used
to assess results.
FINANCIAL INSTITUTIONS
AND MARKETS
------------------------------------------------------ Chapter 4:6.1.3
The National Association of Securities Dealers' (NASD) automated
quotation and trading system--commonly called NASDAQ--has experienced
several system outages, disrupting trading to millions of people. We
reviewed the nature and causes of three outages that occurred in July
and August 1994. Through our work at NASD and its federal
regulator--SEC--we determined that stronger system controls and
oversight were needed to prevent future outages. We also highlighted
that SEC had a shortage of staff with critical computer skills and
needed to strengthen its ability to oversee the rapid growth of
automation in the securities industry. As a result of our work, NASD
has begun to (1) strengthen software testing and (2) correct
weaknesses by revising its disaster recovery plan, improving
facilities, and strengthening its internal audit function. SEC
recently hired two computer specialists to augment its market
automation oversight and conducted several technical inspections to
monitor NASD's implementation of corrective actions.
Through our joint work with GAO's General Government Division, we
informed the Congress and the Thrift Depositor Protection Oversight
Board about the state of RTC's information technology and its
potential effect on RTC's continuing operations and transfer of
activities to the FDIC. We reported that RTC's information systems
remain critical to its efforts to manage and sell failed thrift
assets and to FDIC's task of assuming responsibility for any
remaining RTC operations after December 31, 1995. In the past, we
found that RTC's information systems contained inaccurate and
incomplete data. RTC is making progress in improving the quality of
data in its systems. However, as it reduces staffing levels, RTC may
have fewer resources to ensure that data errors are corrected. The
quality of RTC's data will affect FDIC when it assumes responsibility
for those assets that remain to be sold.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:6.2
We are working with agency officials to implement the key open
recommendations stated below.
TAX SYSTEM MODERNIZATION
------------------------------------------------------ Chapter 4:6.2.1
In a July 1995 report to the IRS Commissioner, we recommended that
IRS' electronic filing business strategy focus on a wider population
of taxpayers, including all taxpayers for whom electronic filing will
be most cost-beneficial.
In addition, we recommended improvements to IRS' strategic
information management, software development capability, and
technical activities. First, we recommended that the Commissioner
take immediate action to improve IRS' strategic information
management by implementing a process for selecting, prioritizing,
controlling, and evaluating the progress and performance of all major
information systems investments, both new and ongoing, including
explicit decision criteria. Using the best available information,
IRS needs to develop quantifiable decision criteria that consider
such factors as cost, mission benefits, and technical risk. IRS
should have reviewed all planned and ongoing systems by June 30,
1995, to develop system costs for fiscal year 1996 using these
criteria. Through this review, IRS will provide the Congress with
insight, based on consistently applied and well defined factors,
which can be used to gauge IRS' priorities and rationalization for
TSM projects.
Next, we recommended that the Commissioner (1) immediately require
IRS' future software development contractors to have Capability
Maturity Model level 2 maturity and (2) by December 31, 1995, take
measures to improve IRS' software development capability. The
specific measures recommended are intended to move IRS to capability
level 2 and include implementing consistent procedures for software
requirements management, quality assurance, configuration management,
and project planning and tracking.
In addition, we recommended that the Commissioner take several
specific actions by December 31, 1995, to improve key system
development technical activities. These included (1) completing an
integrated systems architecture and security and data architectures,
(2) institutionalizing formal configuration management for all new
systems development projects and upgrades and developing a plan to
bring ongoing projects under formal configuration management, and (3)
developing security concept of operations, disaster recovery, and
contingency plans.
Finally, we recommended that the IRS Commissioner assign the
Associate Commissioner responsibility for managing and controlling
all systems development activities, including the research and
development division's systems development efforts.
The time frames we recommended coincide with congressional
deliberations on IRS' fiscal year 1996 and the fiscal year 1997
budget cycle. Meeting these time frames was considered necessary to
give the Congress a sound basis for funding investments in IRS'
systems modernization projects. (GAO/AIMD-95-156)
ADMINISTRATION OF JUSTICE
------------------------------------------------------ Chapter 4:6.2.2
Our report and follow-on testimony on AOUSC's efforts to centralize
criminal debt accounting and reporting within the National Fine
Center highlighted several actions that should be taken to reduce the
risks to this project. We recommended that AOUSC (1) fully define a
strategy for addressing additional actions needed to enable the
National Fine Center system to meet its users' needs and (2) work
with DOJ to finalize a strategy for reconciling existing criminal
debt accounts at the 94 judicial districts and entering these data
into the National Fine Center system. AOUSC generally agreed with
our findings and recommendations and has begun to address these
issues. We also recommended that the Director of AOUSC and the
Director of DOJ's Executive Office for U.S. Attorneys work together
to develop and implement a methodology for determining the
collectibility of all criminal debt. Both entities agreed to address
this issue. (GAO/AIMD-95-76 and GAO/T-AIMD-95-215)
In related testimony on the reauthorization of AOUSC's automation
fund, we made several recommendations to improve the controls and
management of this fund. AOUSC is addressing these recommendations,
which will help provide for more effective use of the judiciary's
automation resources. (GAO/T-GGD/AIMD-94-176)
Our recent report on INS' pilot recommended that before INS decides
to expand the center's activities nationwide, it should determine if
information generated by the center is worth the related expense and
resources. We also recommended that INS develop procedures to ensure
that two related databases are complete and accurate. Further, we
recommended that the action taken in response to these procedures
should be independently verified to ensure that data reliability is
improved. We will continue to work with INS to implement these
recommendations. (GAO/AIMD-95-147)
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 need to reduce the federal budget deficit has driven public
debate in 1995. Although the Congress is charting a course leading
to a balanced budget by fiscal year 2002, the long-term outlook
remains challenging. For instance, even if growth in health care
costs is moderated by the policies proposed today, the population's
aging ensures that health care costs will continue to rise and fiscal
pressures will continue. As a result, the budget will continue to be
a focal point of public policy in the years to come.
Our work (1) provides the Congress with deficit reduction analysis
and reduction options and strategies, (2) recommends improvements in
the structure and presentation of the budget to assist in budget
choices, and recommends improvements in 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, (5) examines the impact of
proposed changes on managerial efficiency and congressional
oversight, and (6) provides the Congress--through the budget--with
information on fragmentation and overlap in agency and budget
functions.
DEFICIT REDUCTION
------------------------------------------------------ Chapter 5:1.1.1
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 the administration's economic plan. This
year we updated our 1992 report on our simulations of the long-term
economic impacts of the deficit. We tracked the economic
implications of three possible fiscal paths through the year 2025,
highlighting how some types of early action on the deficit, including
early action on health--a principal driver of future spending--might
affect the long-term deficit outlook.
For the second straight year we produced a report on the budgetary
implications of selected GAO work. The report, prepared with the
active support of approximately 20 GAO issue areas and the
cooperation of CBO and staff from the Joint Committee on Taxation,
provided the Congress with over 120 options for possible budget
savings or revenue gains. Many of these options were cited and used
in House and Senate budget deliberations.
We also reported on the deficit reduction experiences of six other
nations. In our report, Deficit Reduction: Experiences of Other
Nations (GAO/AIMD-95-30), we reviewed the deficit reduction
experiences of Australia, Canada, Germany, Japan, Mexico, and the
United Kingdom. We identified the elements prompting these
governments to engage in fiscal austerity policies, the budget
actions they took, and how they achieved political agreement to take
these actions. The experiences of the case study countries show that
significant structural improvements in fiscal policy are possible in
modern democracies, although such progress appears difficult to
sustain. Despite obvious cultural, political, and economic
differences, we believe that elements of other nations' experiences
may be of interest to the United States as it addresses this common
challenge.
IMPROVING BUDGETARY
CHOICES
------------------------------------------------------ Chapter 5:1.1.2
Because budget structure greatly influences decision-making,
highlighting and providing needed information about critical budget
choices is 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 look-back report, Budget Issues: Fiscal Year 1994 Budget
Estimates and Actual Results, the fourth such report, showed that the
deficit's sharp drop from estimated levels resulted primarily from
better-than-expected economic performance and its effect on interest
costs. Although these results do not suggest large estimation
issues, they underscore the sensitivity of budget outlays and
receipts to changes in economic conditions. The report also observed
that over the 4 years of the series, net revolving fund outlays have
proven consistently difficult to estimate accurately.
In addition to these reports, we provided written correspondence to
the Congress on a proposal to remove transportation trust funds from
the budget. We reiterated our support for a unified budget and also
relayed our ideas on how to provide greater transparency to budget
totals so that trust fund surpluses are not used to "mask" the true
size of the deficit. We also issued a report that laid out the
extent to which revenues are earmarked in the federal budget.
In another study, we examined the usefulness and applicability of
depreciation in federal budgeting for spending on transportation
infrastructure, research and development, and human capital. We
found that according to research, depreciation in budgeting is
inappropriate. Congressional staff considered our results in
developing current capital budgeting proposals that, unlike previous
proposals, exclude depreciation on investments.
GOVERNMENT RESTRUCTURING
AND THE FEDERAL ROLE
------------------------------------------------------ Chapter 5:1.1.3
The Congress has shown strong interest in a range of government
reform initiatives, including privatization, consolidating government
programs and agencies, and giving states new authority to run
entitlement programs by converting Medicaid and AFDC from open-ended
entitlements to block grants.
In testimony on federal program consolidation, we discussed general
issues important to these efforts, such as budget savings and
accountability. We also identified examples of consolidation
opportunities identified in GAO work, mostly drawn from our report on
options to reduce the deficit. In our report on block grant
implementation, we stressed the need for the Congress to build
accountability provisions into newly proposed block grants. We noted
that well designed accountability provisions, such as comparable data
reporting and maintenance of effort requirements, will help clarify
the financial and programmatic relationship between the federal
government and the states and could be important in sustaining the
block grant approach as these programs mature.
We issued several reports this year examining the federal
government's budget function and subfunction classifications,
offering perspectives on the relationship between areas of national
need and federal organizational and staffing patterns. Collectively,
these reports provide a governmentwide perspective not only on who is
doing what, but also on how the federal government addresses its
various missions. These reports illustrate widespread duplication in
the missions of departments and agencies, and offer a road map for
government restructuring initiatives.
We have also provided the Congress with information on privatization
policies and processes in foreign governments. Our current work in
this area highlights issues central to divestiture such as valuation,
budgetary display, treatment of obligations incurred prior to sale,
and the overall process in which divestitures are undertaken.
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 involving technical corrections to the
act to clarify certain areas and allow more precise implementation.
While the Congress included some changes to the Budget Enforcement
Act in the Omnibus Reconciliation Act of 1993 it 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 but that GNMA had not fully complied
with the act's requirements. We recommended that the OMB Director
require GNMA to budget for guarantees using the issuance dates of the
guarantees to determine whether their costs 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. We also
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 program showing,
for each cross-subsidy, the size, cost, and 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.
The same report examined FDIC's and RTC's fair housing program. 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 through 1995 for the FHA'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 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
are obligated or loan guarantees are committed, might delay or reduce
program expenditures 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 and use 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.
To solve this problem, we recommended that 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. The Congress has not yet addressed our recommendation.
(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 long-term
growth trends in these programs until issues of underlying
eligibility and benefit formulas, which drive spending, are
addressed. We discussed, as a matter for congressional
consideration, an alternative process under which the Congress would
reduce spending by periodically setting spending targets, assessing
mandatory spending, and voting on whether and how to change mandatory
programs.
The Congress did not consider overall budget process reform
legislation this past year. Once again, however, the House is
considering proposals for a mandatory spending cap and discussing a
look-back mechanism in connection with Medicare cost growth, but no
action has been taken as of this date. (GAO/AIMD-94-155)
TAX EXPENDITURES
------------------------------------------------------ Chapter 5:1.2.4
In a joint effort with the General Government Division's 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. Our 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 to 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
address tax expenditure efforts in the broader context of the
allocation of federal resources, it could consider further
integrating those efforts 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. First, 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 presentations 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.
Second, we 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.
Third, we recommended that OMB, working with the Treasury, design and
test a basic structure for tax expenditure performance reviews before
developing the governmentwide framework the 1993 GPRA requires by May
1997. OMB has not yet developed 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 the 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 the 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 GPRA. The Treasury Department is
deferring to OMB on this recommendation. (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 audit work continues to demonstrate the importance
of reliable financial information and effective systems in
strengthening accountability and improving control over the federal
government's financial resources and program activities. The
preparation and audit of accurate and useful financial statements
depends upon the quality, usefulness, and availability of the
financial information on which they are based and ultimately the
adequacy of the underlying systems and related internal controls.
Overall, progress is being made. But remaining problems are
difficult, and much remains to be accomplished to successfully
implement the Chief Financial Officers (CFO) Act--especially to
improve the quality of information and systems, which remain in
serious disrepair today.
CHIEF FINANCIAL OFFICERS
ACT OF 1990
------------------------------------------------------ Chapter 5:2.1.1
The CFO Act establishes a solid foundation for greatly needed,
comprehensive reform of federal financial management. Since its
enactment in 1990, coupled with the Government Management and Reform
Act of 1994, financial statement preparation and audit coverage have
more than doubled and, for fiscal year 1994, reached 67 percent of
the government's gross budget authority. However, only a few of the
24 CFO Act agencies have received unqualified audit opinions on
financial statements for their entire operations. Within the next 2
years, audit coverage is expected to increase to 98 percent of the
government's gross budget authority, as executive branch agencies
work toward producing the agencywide financial statements now
required by law and subjecting these statements to audit.
The process of preparing and auditing annual financial statements
continues to strengthen the reliability of financial information.
The process also provides a more complete view of agencies' financial
conditions, highlights control weaknesses and high-risk areas that
need to be resolved, and identifies actual and potential savings.
But major improvements continue to be 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 component level, agencywide, and governmentwide financial
statements. Though agencies have made some progress in these areas,
substantive and lasting improvement will depend on prompt action
needed to implement our recommendations and to meet the requirements
of the CFO Act. To meet the CFO Act's ultimate goals of providing
reliable, useful financial information, CFOs must overcome serious
financial management, reporting, and system weaknesses and the
Inspectors General (IG) must better position themselves to perform
required financial audits.
We will continue to work with OMB and with agency CFOs and IGs to
develop a strategy for preparing and auditing both agency level and
the first-ever consolidated executive branch financial statements.
OTHER FINANCIAL
MANAGEMENT IMPROVEMENTS
------------------------------------------------------ Chapter 5:2.1.2
Our audits at civil agencies over the past several years continue to
result in significant financial management improvements. Over the
past year, we assessed the effectiveness of agency efforts to
implement CFO Act requirements. Through this effort we were able to
work collaboratively with agency management in identifying problems
and potential solutions as agencies position themselves to meet the
audit requirements of the CFO Act over the next several years. We
also have stressed the need for those agencies to make sound
investments immediately to upgrade the qualifications of financial
management staff, fix rudimentary bookkeeping problems, and make
existing financial systems work better. At the same time, agencies
must concentrate on developing performance measures and cost
accounting systems, which are almost universally lacking in the
federal government today, and emphasize integrating budget,
accounting and management data. (GAO/T-AIMD-95-204)
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:2.2
GOVERNMENTWIDE
RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.1
We have continued to press agencies and the administration to improve
credit management and debt collection practices. Agencies have long
had problems in managing credit programs and collecting tax and
nontax debt, and these problems have been highlighted in our reports
and testimonies over many years. During the past year, legislation,
supported by the administration, was introduced by the House
Committee on Government Reform and Oversight to make substantive
improvements in these areas. We support the general thrust of the
proposed bill and testified that many of its provisions are
consistent with recommendations we have made in the past. Such
provisions include (1) expanding and enhancing debt collection tools
available to agencies, (2) strengthening agencies' authority to
offset delinquent debts from federal payments, (3) strengthening
coordination among agencies through increased centralization of
collection activities, and (4) denying loans and loan guarantees to
those delinquent on federal debts. We will assist the Congress as it
considers the pending legislation and continue to work with both the
Congress and administration on efforts to improve credit management
and debt collection procedures. (GAO/T-AIMD-95-235)
AGENCY-SPECIFIC
RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.2
We continue to make many agency-specific recommendations to correct
problems involving fundamental accounting procedures, including
serious internal control and accounting system weaknesses. The
following recommendations deserve priority attention.
Based on our 1993 and 1992 audits of the U.S. Customs Service's
financial statements, we made a number of key recommendations. In
its audit of Customs' 1994 financial statements, Treasury's Office of
Inspector General (OIG) reaffirmed the need for these actions 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. (GAO/AIMD-94-119)
In our report on IRS' 1994 financial statements, we noted that it had
made some progress in responding to the problems identified in our
previous audits. For example, IRS has implemented a new
administrative accounting system to account for its day-to-day
operations. IRS also successfully transferred its payroll processing
to the USDA's National Finance Center and, as a result, properly
accounted for and reported on its $5.1 billion of payroll expenses
for fiscal year 1994. However, IRS had made less progress in
improving accounting for federal revenues. It had completed action
on only 2 of 14 recommendations we made in previous reports
concerning revenue collections. IRS needs to intensify its efforts,
including developing a detailed plan with explicit, measurable goals,
and set a timetable for action, to attain the level of financial
reporting and controls needed to effectively manage its massive
operations and to reliably measure its performance.
(GAO/AIMD-95-141)
On our audits of the District of Columbia, we identified financial
and other management problems that have adversely affected the
economic health of the District. District managers do not have
fundamental financial and other management information to help
control spending and costs, analyze results of operations, or to
estimate budget and cash needs. In part, in response our work, the
Congress established an oversight control board to address budget
deficits and management inefficiencies and help to ensure that our
recommendations for actions targeted at long-term financial, fiscal,
and economic vitality and operational efficiency of the District of
Columbia are effectively implemented. (GAO/T-AIMD-95-176,
GAO/AIMD-95-19, GAO/T-AIMD-95-170)
Our work at the Department of the Interior's Bureau of Indian Affairs
(BIA) showed that some progress has been made in certain areas. This
progress includes strengthened systems staffing and improved policies
and procedures. However, the work also reaffirmed continuing trust
fund management problems and the need for the Secretary to (1)
complete the BIA trust fund reconciliation and certification efforts,
(2) implement trust fund management subsidiary systems, (3) continue
to hire qualified trust fund financial management staff, (4) acquire
investment advisory services, and (5) develop a comprehensive
strategic plan for Indian trust business management.
(GAO/T-AIMD-95-94)
Financial audits of the Federal Family Education Loan Program
continue to identify significant issues related to determining
program costs, effectively monitoring payments to guaranty agencies
and lenders, and ensuring accurate financial reporting. These
weaknesses undermine Education's ability to effectively and
efficiently achieve the program's mission of providing loan access to
all eligible students at a reasonable cost to taxpayers. Education
has made some progress in addressing these issues; however, it needs
to continue to improve controls to ensure that weaknesses are
corrected. Education should also continue to work with guaranty
agencies and lenders to improve the accuracy and reliability of
reported loan data. In addition, improvements over Education's
financial management process continue to be needed to ensure that
financial statements and other management reports are reliable.
(GAO/AIMD-94-131)
HIGH-RISK AND MANAGEMENT
CONTROL ISSUES
------------------------------------------------------ Chapter 5:2.2.3
In our February 1995 High-Risk Series, we provided an update on a
number of critical government operations that we consider to be
highly vulnerable to waste, fraud, abuse, and mismanagement. The
government continues to needlessly lose billions of dollars and miss
huge opportunities to achieve its objectives at less cost and with
better service delivery. These vulnerabilities expose the government
to future losses. Mitigating these losses is especially important as
the government grapples with large budget deficits.
In the latest high-risk series, we were able to report progress in
five areas sufficient to remove their high-risk designation. But
other areas were added to GAO's high-risk list. Our focus in the
near term will be on six broad categories, which collectively affect
almost all of the government's $1.25 trillion in revenue collection
efforts and hundreds of billions of dollars in federal expenditures.
Our management control focus is an integral part of our overall
monitoring of agency efforts to achieve the objective of the CFO Act.
OMB's recently revised Circular A-123 provides a good foundation for
assessing management controls across government, and we will monitor
executive branch efforts to integrate its reporting on management
controls with other management reporting.
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. The condition of the Bank
Insurance Fund (BIF) has greatly improved to the point where BIF has
met its statutorily designated reserve ratio. However, the Savings
Association Insurance Fund (SAIF) continues to be significantly
undercapitalized and the thrift industry is facing a competitive
disadvantage due to a premium disparity between banks and thrifts.
Also, RTC is nearing completion of its responsibilities for resolving
troubled thrifts, but needs to ensure a smooth transition of those
responsibilities to the FDIC.
PBGC's large unfunded deficit and significant exposure from
underfunded pension plans still threatens the insurance program's
long-term viability. However, PBGC anticipates that legislation
passed in December 1994 to strengthen minimum funding standards will
significantly reduce underfunding in the plans that PBGC insures and
improve its financial condition.
Accounting standards continue to be largely based on historical cost
and raise serious questions about their utility in an economy of
rapid changes affecting market values. Accounting standards also
continue to lag behind business practices in significant areas such
as the use of derivatives.
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 continue to focus 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 also continue to focus our work on
evaluating whether generally accepted accounting principles and
auditing standards provide an adequate basis for fairly and
consistently reporting financial condition and operating performance.
FINANCIAL CONDITION,
PERFORMANCE, AND INTERNAL
CONTROLS
------------------------------------------------------ Chapter 5:3.1.1
We have continued to independently assess the reliability of the
financial statements of FDIC's three funds--BIF, SAIF, and the
Federal Savings and Loan Insurance Corporation Resolution Fund, and
the financial statements of 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 1994, we issued unqualified opinions on each corporation's
financial statements. However, our audits continue 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. The progress BIF, RTC, and PBGC have made in improving
internal controls, along with legislation to protect the insurance
funds, provide funding to RTC to complete its mission, and reduce
pension plan underfunding and help PBGC eliminate its deficit, have
resulted in these entities' removal from GAO's "high-risk" list.
Our work concerning the conduct of independent audits of the Federal
Reserve Banks has led the Board of Governors of the Federal Reserve
System to contract for external independent audits of all the banks
to be completed over the next 5 years.
Our study of the likelihood and probable impact of a significant
disparity in premium rates between banks and thrifts has provided
policy alternatives for the Congress to consider to prevent cost
differences that could threaten the viability of thrifts, especially
those that do not meet minimum capital standards. Our reporting and
detailed analysis facilitated timely congressional and administration
acknowledgement of the seriousness of the problem and focused the
policymakers on addressing solutions.
We are working closely with RTC and FDIC management to ensure a
smooth transition of RTC operations into FDIC, including the need for
any contingent funding for uncertain economic and noneconomic factors
that could affect RTC's recoveries from failed thrifts' assets. We
are also working with officials of the Panama Canal Commission and
the administration on proposed legislation, which would provide the
Commission's management flexibility in conducting its operations to
aid in insuring a smooth transition of the canal to the Republic of
Panama in 1999. This legislation would allow the Commission to
operate as a government corporation and to directly contract for
independent audits.
Our work in reviewing examination policies, procedures, and practices
for banks and thrifts resulted in financial institution regulators
taking various actions to improve loan sampling methodologies,
develop internal control review procedures and guidance, and develop
examiners' workpaper and supervisory review requirements. These
actions should enhance examination effectiveness and oversight of
banks and thrifts.
ACCOUNTING AND AUDITING
STANDARDS
------------------------------------------------------ Chapter 5:3.1.2
Our efforts to improve accounting standards focused on issues related
to accounting and disclosures for financial derivatives. We also
focused on the importance of sound internal controls and risk
management policies and procedures for derivatives activities.
With regard to derivative accounting and disclosure issues, the
Financial Accounting Standards Board (FASB) recently issued an
accounting standard pertaining to disclosure requirements for
derivatives. However, the new standard does not establish specific
requirements for reporting of quantitative measures of risks and
exposure as a result of derivatives activities. FASB plans to
reconsider disclosure requirements for derivatives when it completes
development of derivative accounting requirements. FASB does not
have a definite time when the accounting requirements will be
established.
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. In response to our
recommendations, regulators, standard setters, and the financial
services industry have issued guidance to aid management in assessing
the effectiveness of its risk management policies and procedures for
derivatives activities. However, much of this guidance is voluntary
and we are concerned that the widespread growth in the use of
derivatives may continue before generally accepted risk management
practices are adopted.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:3.2
CORPORATIONS' INTERNAL
CONTROL SYSTEMS
------------------------------------------------------ Chapter 5:3.2.1
In our 1994 financial statement audits of PBGC, RTC, and FDIC's three
funds, we found that these corporations continued to make significant
progress in dealing with internal control weaknesses. This progress
contributed to our removal of PBGC, RTC, and BIF from GAO's
"high-risk" list. However, these corporations continue to face
internal control weaknesses in financial systems and internal
controls, which they are currently addressing. We are in agreement
with the planned corrective actions and we will monitor the
corporations' progress. (GAO/AIMD-93-21, GAO/AIMD-94-109,
GAO/AIMD-95-157, GAO/AIMD-94-35, GAO/AIMD-94-135, and
GAO/AIMD-95-102)
BANK AND THRIFT
EXAMINATIONS
------------------------------------------------------ Chapter 5:3.2.2
Our 1993 reports on bank and thrift examinations performed by the
Office of the Controller of the Currency and the Federal Reserve
Board still contain open recommendations concerning sampling
methodologies and internal control reviews. These two regulatory
agencies have actions in process to address our recommendations. 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)
DEFENSE FINANCIAL AUDITS ISSUE
AREA (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:4
GAO Contact: Lisa G. Jacobson, 202/512-9542
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:4.1
The primary objective of our work has been to further the
implementation of the CFO Act within DOD. Our work has concentrated
on assessing the military services' ability to prepare auditable
financial statements so that they can ultimately be incorporated into
the consolidated financial statements for the federal government.
Our overall strategy has included (1) conducting the initial audits
of the three military services' financial reports and statements, (2)
demonstrating the need for financial reform within DOD, and (3)
working with the DOD audit community to develop its ability to
perform financial statement audits mandated by the CFO Act. We have
also focused on the financial and accounting policies, practices,
internal controls, and systems DOD uses to account for, control, and
report on its billions of dollars of inventories, weapons systems,
equipment, and other assets.
Our audits have shown that many DOD financial systems are deficient,
outdated, and inefficient. They can routinely produce neither
relevant, timely, and accurate information on DOD's assets and
liabilities nor verifiable data on the results and costs of DOD's
operations. Nonetheless, our audits have demonstrated that
significant improvements in financial reporting can be achieved with
DOD's present systems. In addition, our audits have illustrated, to
the Congress, DOD, and the public, the critical need for more
effective internal controls and procedures 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'
acknowledgement of the extent and severity of the department's
financial management problems and the obstacles to establishing
adequate departmentwide financial management. The Secretary's
January 1994 annual management report to the President and the
Congress acknowledged that financial management complacency has
permitted pervasive weaknesses to persist in DOD financial management
operations. The report cited several fundamental causes of DOD
financial management problems, including "vertically oriented
disparate organizations, the predominance of physical over financial
controls, and complacency about financial management problems." The
Secretary pointed out that DOD's "financial management problems waste
money that is needed more than ever to sustain sufficient combat
power."
More recently, the Secretary's February 1995 annual management report
reiterated DOD's commitment to resolving its long-standing financial
management problems. The report highlighted the need for financial
management reform and identified the underlying problems making that
reform necessary. The Secretary stated that DOD's financial
management structure was characterized by multiple organizations
having multiple processes. Over time, these processes produced
"business practices that were complex, slow, and error-prone."
Exacerbating the problem are some 250 finance and accounting systems
with different data standards that produce largely incompatible data,
making it difficult to prepare reliable consolidated financial
information.
Such forthright admissions of serious weaknesses places DOD, for the
first time, in a better position to comprehensively and realistically
address and resolve these weaknesses. As mentioned in the
Secretary's February 1995 report, DOD developed a blueprint for
reengineering its business practices to resolve these long-standing
problems. We are currently evaluating this blueprint.
An integral part of our strategy has been to work with the DOD audit
community as it increases its capability to perform the financial
audits required by the CFO Act. Our training, encouragement,
assistance, and oversight have been critical factors in ensuring that
the DOD audit community succeeds in performing these audits. Under
the overall direction of the DOD IG, these organizations have been
devoting substantial efforts and resources, and are developing
uniform approaches to conducting these audits.
In fiscal year 1995, the State Department, AID, and NASA were added
to the Defense Financial Audits issue area, making us responsible for
assessing these agencies' progress toward meeting the CFO Act
requirements. Our limited assessment of these agencies' CFO
organizations and IG audits have shown that weaknesses in accounting
systems and poor accounting for property continue to preclude State
and AID from preparing auditable financial statements and fully
achieving the objectives of the CFO Act. In contrast, NASA has made
financial management improvements and received an unqualified opinion
on its fiscal year 1994 financial statements. However, since NASA's
accounting systems still have numerous manual processes and
applications and, overall, are not integrated, they do not comply
with OMB financial requirements (OMB Circular A-127).
FINANCIAL STATEMENT
AUDITS
------------------------------------------------------ Chapter 5:4.1.1
On completion of our ongoing audit of the Navy's financial
operations, we will have performed financial audits of each of the
three military services. However, because the services' financial
records and systems are deficient and basic internal controls are
lacking, we could not express an opinion on any of the financial
statements. (It should be noted that the Navy has not been required
to prepare financial statements by the CFO Act. Our audit is,
therefore, assessing its overall financial operations and reporting
pursuant to Treasury requirements.)
Our financial audits of the Air Force and Army identified weaknesses
in the basic processes used to develop the financial information
managers need to support effective management, oversight, and
accountability over DOD's extensive inventories of weapons systems,
equipment, and supplies; funds expended; and liabilities incurred.
Our financial audits (1) identified serious problems in DOD's
financial operations, (2) led to some improvements in DOD's ability
to control and account for its assets, (3) prompted DOD to implement
corrective actions to enhance the integrity and reliability of some
financial information, and (4) caused DOD to improve its financial
accounting and reporting. If DOD builds upon these improvements, it
will ultimately be able to better meet not only its own management
information needs but also the reporting objectives of the CFO Act.
In July 1995, we testified that unless DOD makes significantly more
progress toward resolving its monumental financial management
weaknesses, it will be unable to meet the legislative timetable for
preparing auditable fiscal year 1996 financial statements. The
Secretary of Defense and DOD's CFO have forthrightly acknowledged the
magnitude and severity of these problems. However, we pointed out
that DOD will need to intensify its efforts in order to correct its
long-standing, significant financial management problems. These
problems greatly impede DOD's ability to prepare auditable financial
statements. According to DOD officials, the Department is not
expected to be able to prepare auditable financial statements before
the turn of the century.
In May 1995, we testified that DOD's financial management reform
efforts, while representing a formidable challenge, can, if properly
implemented, substantially improve financial management operations.
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 type of Army structures
and facilities. We specifically pointed out that such information is
needed to develop reliable real property maintenance budgets and
provide baseline information for base realignment and closure
decisions.
In December 1993, we reported that the Army's budget execution system
had fundamental weaknesses that limit 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 cooperatively with the Army Audit Agency in its first
audit of the Army's fiscal year 1993 financial statements. As a
result of this effort, the cooperation fostered between GAO and the
Army during our fiscal year 1991 and 1992 audits of the Army's
financial statements was continued and strengthened. The Army Audit
Agency has since completed the fiscal years 1993 and 1994 financial
statement audits of the Army.
We assisted the Air Force Audit Agency in 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 financial audits. The Air
Force Audit Agency has since completed the fiscal years 1993 and 1994
Air Force financial 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 of
such controls breaking 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. As we pointed out in our
May 1995 testimony, we have been critical of DOD's past failure to
acknowledge its fundamental internal control deficiencies in its
Federal Managers' Financial Integrity Act reporting. However, more
recently, we have been encouraged by DOD's more complete and
realistic reporting on its internal control weaknesses.
In April 1994, we testified that weak internal controls over
disbursements 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 also testified that ineffective internal controls
resulted in an estimated $7.8 million in unauthorized payroll
payments to "ghost" soldiers and Army deserters. As of May 1995, DOD
had collected over $5.4 million of this amount.
In addition, in August 1994, we sent a letter to the Director of DFAS
Center-Cleveland and the Assistant Secretary of Navy for Financial
Management pointing out that weak internal controls resulted in a
$163 billion error in property values in the Navy's fiscal year 1993
Treasury Report on Financial Position (SF-220). Further, in May
1995, we reported that weak internal controls increased the risk of
improper payroll payments to Navy civilians.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:4.2
Although DOD has enhanced its ability to more reliably account for
and report on its financial operations and the financial status of
its resources, much more remains to be done. A constant theme of our
reporting has been that it is important for DOD to pursue short-term
and intermediate improvements, as well as long-term system
enhancements. The following are among our 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 has impaired 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 with
Army financial management responsibilities. (GAO/AIMD-94-12)
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 had 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.
(GAO/AFMD-92-82)
NAVY PROGRAMS
------------------------------------------------------ Chapter 5:4.2.2
In May 1995, we reported that because of weak internal controls, the
civilian payroll operations DFAS carried for the Navy were
susceptible to improper payments. Our report recommended that the
Navy and DFAS (1) identify and correct systemic causes of
overpayments, (2) conduct required reconciliations of payroll and
personnel records, and (3) establish a requirement for timely
systematic follow-up of all discrepancies. The report also
recommended that DFAS develop controls that cannot be circumvented to
identify individuals who record or change transactions and records.
(GAO/AIMD-95-73)
In June 1993, we issued a report recommending that the Assistant
Secretary of the Navy for Financial Management correct the $13.6
billion of unmatched disbursements contained in the Standard
Accounting and Reporting system--one of the Navy's major accounting
systems. (GAO/AFMD-93-21)
AUDIT OVERSIGHT AND LIAISON
ISSUE AREA (BUDGET FUNCTION
990)
---------------------------------------------------------- Chapter 5:5
GAO Contact: David L. Clark, 202/512-9489
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:5.1
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, progress toward program goals can be
measured, and managers can make informed decisions. CFOs and IGs
have concluded that the benefits of reviewing internal controls and
the related financial statement audits bring 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 of the federal government is essential to
building reliable systems and providing accountability.
Our work focused on improving accountability through financial audits
and the support that intergovernmental audit organizations can
provide. Our recommendations to improve the effectiveness of the
OIGs and other audit organizations allow them to better plan and
provide resources for these audits in a time of federal downsizing
and major organizational change. In addition, our financial audits
of legislative branch operations and audits mandated by statute
improve the financial management and effectiveness of those offices.
Regarding the OIGs and other audit organizations involved in
intergovernmental auditing, our reviews 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
support of the government's overall control environment, we also
reviewed the oversight of those federal offices that do not have IGs
and the investigative work of other OIGs. In addition, our review of
the efforts of IGs and agency follow-up officials in implementing
audit recommendations prompted OMB to initiate revisions of its audit
follow-up guidance to ensure that agencies act on IG audit
recommendations.
To improve the effectiveness of the audit work performed by other
auditors, we reviewed their work. To improve the usefulness of the
Single Audit Act, we reviewed its implementation. Also, as a result
of our work on the audits of private employee benefit plans, the
Department of Labor is drafting legislation that would encourage
better plan management and better protect the interests of both the
plan participants and the government. We continue to work with
congressional committees on legislation that would increase
responsibilities for auditors to detect and report irregularities
found during their work.
Our financial audits of legislative branch operations and activities,
such as the Library of Congress and selected House and Senate
operations, resulted in a number of improvements in internal controls
and accounting systems. Likewise, our audits mandated by law
included reviews of the financial support provided by the AOUSC for
independent counsels, which resulted in improvements in cost
management. Also, after a mandated review of the independence of
legal counsel available to the IGs, we recommended changes for
improved IG independence.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:5.2
INTERGOVERNMENTAL
AUDITING
------------------------------------------------------ Chapter 5:5.2.1
In our continuing reviews of OIGs, 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
reducing those 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 IGs' resource needs.
(GAO/AIMD-94-39)
For those federal offices that do not have IGs, we reviewed their
arrangements for oversight and obtained information indicating that
audit and investigative oversight is included in their operations.
(GAO/AIMD-95-152FS) After focusing on the investigative support of
the Navy IG, we recommended several changes to better address the
investigative process and coordinate oversight to improve the overall
control environment. (GAO/AIMD-94-128)
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)
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 for determining the entities and programs subject to single
audit, improving the content of single audit reports, and shortening
the time frame to publish and strengthen the impact of the reports.
We also recommended increasing recipient entities' responsibilities
for internal controls over federal funds and improving guidance to
auditors. (GAO/AIMD-94-133 and GAO/AIMD-89-72)
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 directly reporting fraud and serious ERISA violations to the
Department of Labor, and (4) require peer review of plan auditors.
(GAO/AFMD-92-14)
In recent 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
SEC (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)
LEGISLATIVE BRANCH
OPERATIONS
------------------------------------------------------ Chapter 5:5.2.2
In the first-ever attempt to audit the financial operations of the
Library of Congress, we recommended that the Librarian of Congress
develop an overall financial management improvement plan in order to
address weaknesses in financial management operations and the
Library's ability to account for and control its collection of an
estimated 89 million books and other materials. While a plan has
been developed, it has not yet been fully implemented.
(GAO/AFMD-91-13)
MANDATED AUDITS
------------------------------------------------------ Chapter 5:5.2.3
Because there is concern that IGs who use the legal services of
counsels located in their agencies' Offices of General Counsel may
have impaired independence, we recommended that the IGs at the
Treasury Department and FEMA either locate their principal legal
advisors within their offices or implement memorandums of
understanding with their agencies' General Counsels. These
memorandums should contain requirements and conditions similar to
those found in the memorandums of other OIGs that obtain legal
services from their Offices of General Counsel. (GAO/OGC-95-15)
INFORMATION RESOURCES
MANAGEMENT - POLICIES AND
ISSUES AREA (BUDGET FUNCTION
990)
---------------------------------------------------------- Chapter 5:6
GAO Contact: Christopher Hoenig, 202/512-6406
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:6.1
Our work focuses on strategic, enterprise-level issues designed to
increase the control and risk-adjusted return on the government's
annual $26 billion investment in information technology and related
activities. To support this objective, we promote improved
management practices in four areas: strategic information management
(SIM), business process reengineering, information technology (IT)
investment, and data and network management. Our work involves
-- developing and supporting widely applicable standard
methodologies to increase the capability of our evaluators to
engage in these areas,
-- addressing the specific needs of congressional decisionmakers on
IT issues and legislative initiatives,
-- working with the central oversight agencies to institutionalize
the principles of sound information management,
-- working with federal departments and agencies to implement
improved information management practices, and
-- reinforcing agencies' accountability for using technology
investments to reduce the cost of government and improve service
to the American people.
To date, 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
federal agencies and the oversight community. Most notably, we have
helped establish a defined set of strategic information management
practices in our report entitled Executive Guide: Improving Mission
Performance Through Strategic Information Management and Technology.
OMB has incorporated our strategic information 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 also released an exposure
draft of our Strategic Information Management Self-Assessment Toolkit
for agencies to use in assessing the effectiveness of their existing
information management practices.
In fiscal year 1995, our accomplishments included the following:
-- Five federal agencies have completed self-assessments of their
existing information management practices using an exposure
draft of our Strategic Information Management Self-Assessment
Toolkit. In each case, management actions plans, designed to
address weaknesses unveiled by the self-assessments, have been
produced.
-- We have worked with OMB in preparing a governmentwide executive
guide entitled Evaluating Information Technology Investments: A
Practical Guide. The guide is designed to assist agency and OMB
staff in creating and evaluating a portfolio of information
technology investments. The guide is in final clearance stages
and is expected to be issued in November 1995.
-- Numerous other federal, state, and local public agencies have
contacted us to obtain copies of our SIM Self-Assessment
Toolkit. To date, we have distributed over 2,000 copies of the
assessment guide and have been contacted by dozens of federal
agencies who have indicated they are expecting to conduct
assessments.
-- We helped facilitate a nationwide SIM self-assessment involving
over 70 IRS participants using our toolkit. Using the results
from this assessment, IRS issued a comprehensive action plan for
correcting management and technical weaknesses affecting the
success of TSM, including establishing IT investment selection,
control, and evaluation processes, developing IRM performance
measures based on corporate objectives, and defining critical
IRM training and skills needs. These actions, if successfully
implemented, should significantly strengthen the management of
IRS' multibillion dollar TSM initiative.
-- We continue to brief senior executives in industry and
government on the strategic information management approach
outlined in our May 1994 report, Executive Guide: Improving
Mission Performance Through Strategic Information Management.
We have given key addresses at five major governmentwide
conferences this year on our work in business process
reengineering, strategic information management, and IT
investment controls.
-- Our testimonies before the Congress highlighted the huge
opportunities offered by reengineering and modern technology to
reduce federal costs while improving the quality of government
services.
-- We provided the Congress with a governmentwide breakdown of IT
investments and highlighted large, multimillion dollar IT
projects that are at risk of not meeting their cost, schedule,
or performance expectations.
-- In August, we published an exposure draft of our Business
Process Reengineering Assessment Guide. This audit methodology
is a key element in building our capacity to evaluate federal
agencies' use of reengineering to achieve dramatic improvements
in cost and quality by redesigning outmoded work processes with
the aid of information technology.
-- We have helped strengthen the current legislative foundation for
IRM by working with the Senate Governmental Affairs Committee to
get key strategic information management provisions added to the
Paperwork Reduction Act, the primary statute that establishes
governmentwide policy for IRM. These provisions include
changing the focus of the law to (1) applying information
resources to support the accomplishment of agency missions, (2)
managing information systems projects as investments, and (3)
integrating agency planning, budgeting, and evaluation
processes. The amended act was signed into law by the President
on May 22, 1995 (Public Law 104-13).
-- We are also working to strengthen the legislative foundation
related to the acquisition and management of IT by working on
the Information Technology Management Reform Act with the Senate
Governmental Affairs' Subcommittee on Oversight of Government
Management and the District of Columbia. The bill would (1)
establish new management mechanisms for IT investments and
performance measures, (2) require agencies to establish chief
information officers, and (3) repeal the "Brooks Act."
-- We provided suggestions, which were adopted by OMB, for better
integrating information security review requirements prescribed
in OMB's newly revised Circular A-130, Appendix III, "Security
of Federal Automated Information Systems," with financial audit
requirements included in the CFO Act.
-- We developed an exposure draft of our methodology for evaluating
computer-related controls that we expect will serve as a
companion to our Financial Audit Manual and, thus, support our
efforts and those of the IGs to more efficiently perform
financial statement audits.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:6.2
None.
PROGRAM EVALUATION AND
METHODOLOGY ISSUE AREA (BUDGET
FUNCTION 090)
---------------------------------------------------------- Chapter 5:7
GAO Contacts: Kwai-Cheung Chan, 202/512-3092
Mary Hamilton, 202/512-2900
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:7.1
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 agencies'
programs, usually at the request of congressional committees. These
studies generally fall into one of three areas - (1) Program
Effectiveness or Quality, (2) Government Evaluation Capability and
Performance, (3) Methodology Development and Review.
In many evaluation reports, we make recommendations to agency
officials to (1) correct problems identified in existing programs,
(2) identify new methodological approaches which will improve
analytical efforts, (3) improve the quality of information they are
collecting and analyzing, and (4) develop more fully their own
capability to perform high-quality program evaluations. 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 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 5:7.2
NATIONAL AND PUBLIC
HEALTH ISSUES
------------------------------------------------------ Chapter 5:7.2.1
The Congress has established a funding set-aside to assure that the
Public Health Service programs are adequately evaluated. We found
that this effort to develop evaluative information to inform the
Congress has not realized its potential. More work needs to be done
to synthesize evaluation information by program area to effectively
communicate program results. (GAO/PEMD-93-13)
Our evaluation of Medicare denial rates for medical necessities found
significant regional variation, which could not be explained by
random denial patterns. We identified several steps which are
required to achieve consistency and effective oversight of carrier
denials. For effective classification of denials, improvement of the
screening process for claims is required. In order to reduce denied
claims, HHS should identify and eliminate the population of
applicants which consistently submits claims that are denied.
(GAO/PEMD-95-10)
The Centers for Disease Control has established a large program to
distribute vaccines to children; the intent of the program is to
assure immunization of children to serious disease. Our evaluation
of the program found that a reexamination of program goals and the
quality of the program's implementation is needed to assure that
vaccine is being provided to children at need. We concluded that
Congress should consider refocusing the program's goals from
improvement of general immunization rates to achieving higher rates
in "pockets of need" and focus the program on children who are at
greatest risk for delayed immunization. (GAO/PEMD-95-22).
PEER REVIEW OF GRANT
PROPOSALS
------------------------------------------------------ Chapter 5:7.2.2
We examined grant selection in three federal agencies that use peer
review - NIH, 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 the NSF. We also found at
all the agencies that an applicant's track record was related to
scores. Of the recommendations we made, one in particular has not
been addressed: the agencies should increase the monitoring of
discrimination, including tests comparing blind to conventional
reviews, to ensure that gender, race and ethnic discrimination are
not affecting scores provided by peer reviewers. (GAO/PEMD-94-1)
COMPUTER MATCHING
------------------------------------------------------ Chapter 5:7.2.3
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 conducted a comprehensive
evaluation. We found that the cost- benefit analyses being conducted
need improvement. We recommended that OMB expedite the publication
of minimum standard criteria for cost-benefit analyses and specify
which cost and benefit elements must be included. While some actions
have been taken to address the intent of this recommendation, others
have not yet been completed. (GAO/PEMD-94-2)
POLLUTION PREVENTION
------------------------------------------------------ Chapter 5:7.2.4
Our evaluation identified 105 state pollution prevention programs
nationwide and found major differences in how these state programs
are 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 EPA Administrator ensure
that state pollution prevention programs emphasize source reduction;
improve data collection processes such that state programs can be
evaluated; establish criteria within the related grant program for
measuring the success of source reduction efforts undertaken.
Several recommendations have still not been addressed.
(GAO/PEMD-94-8)
WATER POLLUTION: CONTROL
OF TOXIC SUBSTANCES
------------------------------------------------------ Chapter 5:7.2.5
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 attempted to evaluate the risk implications of
uncontrolled pollution cases identified, but the majority of cases
could not be evaluated because the criteria were lacking 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 Toxics 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 USER FEES
------------------------------------------------------ Chapter 5:7.2.6
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 the Food and Drug Administration (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
recommended that FDA include "time to market" in its annual report to
Congress, as well as take other initiatives. FDA has not yet
addressed all our recommendations. (GAO/PEMD-94-26)
OPERATION DESERT STORM
------------------------------------------------------ Chapter 5:7.2.7
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 before, during and
after the war did not identify various potential reproductive toxic
substances we found to be present during the war. Also, 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 VA 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)
QUICK REFERENCE--ELECTRONIC
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============================================================ Chapter I
INTRODUCTION:
---------------------------------------------------------- Chapter I:1
This electronic edition contains the details for GAO's open
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HOW TO INSTALL:
---------------------------------------------------------- Chapter I:2
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2. Type the drive designation of your drive and the word "INSTALL".
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---------------------------------------------------------- Chapter I:3
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---------------------------------------------------------- Chapter I:4
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NOTES ON FIGURE 1
---------------------------------------------------------- Chapter I:5
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---------------------------------------------------------- Chapter I:6
The Main Search Menu includes eight options to help you narrow or
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---------------------------------------------------------- Chapter I:7
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---------------------------------------------------------- Chapter I:8
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---------------------------------------------------------- Chapter I:9
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