Status of Open Recommendations: Improving Operations of Federal
Departments and Agencies (Chapter Report, 01/24/97, GAO/OP-97-1).
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 70 percent of the recommendations made during the past five years
have been implemented. This report highlights the impact of GAO's work
on various issues and summarizes key open recommendations as of 9/30/96.
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-97-1
TITLE: Status of Open Recommendations: Improving Operations of
Federal Departments and Agencies
DATE: 01/24/97
SUBJECT: Tax administration
Information resources management
National defense operations
International relations
Financial management
Public administration
Health care programs
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Cover
================================================================ COVER
Annual Report to the Chairmen and Ranking Minority Members, Senate
and House Committees on Appropriations
January 1997
STATUS OF OPEN RECOMMENDATIONS -
IMPROVING OPERATIONS OF FEDERAL
DEPARTMENTS AND AGENCIES
GAO/OP-97-1
Abbreviations
=============================================================== ABBREV
ADP - automatic data processing
AFDC - Aid to Families With Dependent Children
AID - Agency for International Development
AOUSC - Administrative Office of the U.S. Courts
ATF - Bureau of Alcohol, Tobacco, and Fire Arms
BIF - Bank Insurance Fund
CBO - Congressional Budget Office
CDC - Centers for Disease Control
CDR - continuing disability reviews
CFO - Chief Financial Officers
CIO - Chief Information Officer
CPA - certified public accountant
CTR - cooperative threat reduction
DEA - Drug Enforcement Agency
DFAS - Defense Finance and Accounting Service
DI - Disability Insurance
DLA - Defense Logistics Agency
DOD - Department of Defense
DOE - Department of Energy
DOL - Department of Labor
DOT - Department of Transportation
EEOC - Equal Employment Opportunity Commission
EPA - Environmental Protection Agency
FAA - Federal Aviation Administration
FASAB - Financial Accounting Standards Advisory Board
FBI - Federal Bureau of Investigation
FDA - Food and Drug Administration
FDIC - Federal Deposit Insurance Corporation
FEMA - Federal Emergency Management Agency
FHA - Federal Housing Administration
FHWA - Federal Highway Administration
FRA - Federal Railroad Administration
FRF - Federal Savings and Loan Insurance Resolution Fund
FTA - Federal Transit Administration
GAO - General Accounting Office
GNMA - Government National Mortgage Association
GPRA - Government Performance and Results Act
GSA - General Services Administration
HCFA - Health Care Financing Administration
HHS - Department of Health and Human Services
HMO - health maintenance organizations
HUD - Department of Housing and Urban Development
IG - Inspector General
INS - Immigration and Naturalization Service
IRM - information resources management
IRS - Internal Revenue Service
IT - Information Technology
JOBS - Job Opportunities and Basic Skills Training Program
JTPA - Job Training Partnership Act
MRI - magnetic resonance imaging
NASA - National Aeronautics and Space Administration
NHSC - National Health Service Corporation
NHTSA - National Highway Traffic Safety Administration
NIH - National Institutes of Health
NPR - National Performance Review
NSF - National Science Foundation
NSLDS - National Student Loan Data System
OBRA - Omnibus Budget Reconciliation Act of 1993
OCC - Office of the Controller of the Currency
OCSE - Office of Child Support Enforcement
OIG - Office of the Inspector General
OMB - Office of Management and Budget
OPM - Office of Personnel Management
OSHA - Occupational Safety and Health Administration
PASS - self-supporting program
RTC - Resolution Trust Corporation
SAIF - Savings Association Insurance Fund
SAMSA - Substance Abuse and Mental Health Services Administration
SBA - Small Business Administration
SEC - Securities and Exchange Commission
SES - Senior Executive Service
SRO - self-regulating organizations
SSA - Social Security Administration
SSI - Supplemental Security Income
STARS - Standard Accounting and Reporting System
TSM - Tax Systems Modernization
TVA - Tennessee Valley Authority
USDA - United States Department of Agriculture
USPS - United States Postal Service
USTF - Uniformed Services Treatment Facilities
VA - Department of Veterans Affairs
Letter
=============================================================== LETTER
B-205879
January 24, 1997
The Honorable Ted Stevens
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 Representatives
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 our open recommendations.
James F. Hinchman
Acting Comptroller General
of the United States
PREFACE
============================================================ Chapter 0
Each year, GAO's work contributes to many legislative and executive
branch actions that result in significant financial savings and other
improvements in government operations. Some, but not all, are
identified through GAO's system for periodically following up to
determine the status of actions taken on the recommendations made in
its audit and evaluation reports. About 70 percent of the
recommendations made over the past 5 years have been implemented.
This report includes summaries highlighting the impact of GAO's work
and associated key open recommendations--those recommendations which
have not been fully implemented. 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 diskettes and are also
in appendix I of this publication.
The name and the telephone number of the GAO manager to contact for
information or assistance about a product is included in 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, visit
GAO's World Wide Web Home Page at:
http://www.gao.gov
IMPROVING NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS PROGRAMS
============================================================ Chapter 1
DEFENSE ACQUISITIONS ISSUE AREA
(BUDGET FUNCTION 050)
---------------------------------------------------------- Chapter 1:1
GAO Contact: Louis Rodrigues, 202/512-4841
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:1.1
The Department of Defense's (DOD) planned acquisitions and
modernization of weapon systems will require a significant investment
over the next several years and will have to be done under the
pressure of reduced budgets. DOD and defense industries have
undertaken efforts to streamline and simplify acquisition processes
with the goal to reduce acquisition costs and at the same time ensure
technological leadership and a strong, competitive industrial and
technology base. Similar efforts are underway for National
Aeronautics and Space Administration programs.
During fiscal year 1996, we evaluated the development and production
of individual systems and their associated budgets to determine the
extent to which the systems are needed in the current environment and
are being acquired efficiently and effectively. We evaluated the
degree to which acquisition reforms are being implemented and are
contributing to reduced costs while enhancing U.S. competitiveness
and technological leadership. We also began a series of jobs to
determine best acquisition practices and have reviewed several
aspects of the acquisition infrastructure. In addition, to assist
the Senate and House Appropriations Committees, the Senate Armed
Services Committee, and the House National Security Committee, we did
specific budget analyses that identified about $3.7 billion in
potential reductions and rescissions in the fiscal year 1997 and
prior-year budgets for procurement and for research, development,
test, and evaluation.
We continued our reviews of major weapon systems such as the B-2,
F/A-18E/F, C-17, and F-22 aircraft and unmanned aerial vehicles. We
also continued our work on DOD's development of space systems.
On many occasions, we provided the Congress with information on these
reviews to assist in its oversight of these programs. For example,
we identified $22 million in specific reductions in the C-17 budget
for initial spare parts, and we found that DOD could reduce its
planned C-17 purchase and still meet airlift needs. With this
reduction, DOD could reduce costs as much as $7.5 billion.
During our work on unmanned aerial vehicles, we found that the Hunter
system had poor system reliability and performance problems and did
not meet performance requirements. As a result of our findings, DOD
cancelled the Hunter system and reduced costs by $1 billion. Also,
as a result of our work on space systems, the Congress restricted DOD
from procuring additional Titan IV launch vehicles, which resulted in
cost reductions of $2 billion.
Our work on the federal acquisition infrastructure resulted in a
recommendation to reduce the number of personnel involved in
acquisition functions by 25 percent over 5 years. When implemented,
this reduction will reduce the workforce associated with DOD's
acquisition organizations by approximately 90,000 and provide
cumulative cost reductions of $5.5 billion over 5 years.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:1.2
In August 1994, we reported that nine contractors had unresolved
payment discrepancies totaling about $118 million--$30.3 million in
overpayments and $87.7 million in underpayments. These overpayments
and underpayments result in significant unnecessary costs to the
government. Overpayments increase the government's interest costs
because funds are needlessly disbursed, and underpayments increase
costs because of the interest to be paid on overdue amounts. We
recommended that DOD make available contract, financing, and audit
resources to identify, verify, and correct payment discrepancies
identified in contractors' records. (GAO/NSIAD-94-245)
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)
Our work on the F/A-18E/F program showed that (1) the operational
deficiencies in the F/A-18C/Ds the Navy cited in justifying the
F/A-18E/F either have not materialized as projected or could be
corrected with nonstructural changes to the C/D and (2) the next
generation fighter aircraft's--Joint Strike Fighter--operational
capabilities were projected to be equal or superior to the F/A-18E/F
at a lower unit cost. We recommended DOD fully examine the
alternatives to the E/F program. (GAO/NSIAD-96-98)
In March 1996, we reported that the inconsistent selection of a
particular instrument (e.g., cooperative agreements or other
transactions) and treatment of specific clauses could increase
confusion for government and industry users and could hinder their
effective use to support or acquire research. We recommended DOD
ensure that its revised guidance on the use of cooperative agreements
and other transactions promote increased consistency among DOD
components on the selection and structure of these instruments.
(GAO/NSIAD-96-11)
See also chapter 5, Financial and Information Management Programs,
Defense Financial Audit Issue Area.
DEFENSE MANAGEMENT ISSUE AREA
(BUDGET FUNCTION 050)
---------------------------------------------------------- Chapter 1:2
GAO Contact: David R. Warren, 202/512-8412
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:2.1
DOD managers face many challenges as they strive to streamline
operations, control cost growth in high interest programs, manage
existing infrastructures, and accomplish their missions.
Our overall strategy for Defense Management issues is to identify
innovative, efficient, and cost-effective approaches to improve DOD
management and reduce infrastructure costs. We focus on encouraging
the reengineering and streamlining of Defense operations through new
processes and best management practices and, where appropriate, the
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, it must make cultural changes to
overcome long-standing problems and to decrease costs, particularly
in the areas of inventory management and installation support
activities. Infrastructure costs accounted for $160 billion (59
percent) of DOD's fiscal year 1994 budget. However, DOD anticipates
that it will achieve savings and efficiencies through the base
closure process and that additional infrastructure savings and
efficiencies could be achieved through the further consolidation of
functions. Our work has shown that best practices in the private
sector often serve as excellent models for change.
In fiscal year 1996, we assessed the transition of former military
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 DOD's unfunded liabilities, including environmental cleanup
costs at bases being closed and the disposal of the chemical weapons
stockpile.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:2.2
To achieve management improvements, operational efficiencies, and
dollar savings, DOD needs to take action on the following key
recommendations.
As part of our best practices work, we recommended that the Navy,
working with the Defense Logistics Agency (DLA), develop a
demonstration project to determine the extent to which the Navy could
apply best practices to its logistics operations, using the specific
practices highlighted in our report. We recommended that the
practices be tested in an integrated manner to maximize the
interrelationship that many of these practices have with one another,
to quantify the costs and benefits, and to serve as a means to
identify and alleviate barriers or obstacles that may inhibit their
expansion. (GAO/NSIAD-96-156)
To build on Air Force reengineering efforts and achieve major
logistics system improvements, we recommended that top-level DOD
managers support and lead Air Force reengineering efforts to ensure
success. (GAO/NSIAD-96-5)
To enhance its reengineering efforts, we recommended that the Air
Force incorporate additional leading-edge logistics concepts into the
Lean Logistics Program, report on its strategy to adopt these leading
practices, and expand the reengineering program Air Force-wide. We
recommended that the Secretary of Defense use our report to set forth
actions and milestones to alleviate any barriers or obstacles,
provide the appropriate resources, and ensure collaboration between
the Air Force and other DOD components. We recommended that once
these steps are taken, the Air Force institutionalize a reengineering
effort that is consistent with successful private sector
reengineering efforts. (GAO/NSIAD-96-5)
We recommended that the Secretary of Defense direct that defense
transportation reengineering efforts simultaneously address process
and organizational structure improvements. (GAO/NSIAD-96-60)
See also chapter 5, Financial and Information Management Programs,
Defense Financial Audit Issue Area.
INTERNATIONAL RELATIONS AND
TRADE ISSUE AREA (BUDGET
FUNCTION 150)
---------------------------------------------------------- Chapter 1:3
GAO Contact: Benjamin Nelson, 202/512-4128
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:3.1
Managing foreign policy interests efficiently at a time of overall
discretionary spending reductions continues to be a dominant theme of
our work. Global change and federal budget constraints required
reassessments of the extent to which foreign affairs agencies,
policies, and programs serve U.S. security, political, economic, and
other interests. To assist the Congress in its oversight
responsibilities and make a significant impact on major international
relations and trade issues, we conducted extensive work on the
structure, functions, and size of the U.S. government and
international organizations that receive U.S. funding. We also
reviewed the progress and costs of U.S. programs and activities in
selected regions around the world and the management and
effectiveness of policies and programs targeting key U.S.
objectives.
We conducted several extensive reviews at the foreign affairs
agencies and suggested cost reduction options that could be
considered if funding is reduced. We pointed out that the U.S.
Information Agency has undertaken significant reforms to accommodate
reduced appropriations but could make additional cuts and continue to
protect U.S. interests, if fiscal conditions require. For example,
the agency could reduce its overseas presence and activities, the
size of exchange programs, and the scope of international
broadcasting. Some of these activities may no longer retain the
importance they had when they were first funded decades ago. We
reported that the State Department had done relatively little to
implement reforms and was not prepared to cope with potential funding
reductions. Given the likely decline in discretionary spending in
the federal budget and the various proposals for reductions in
State's budget, we concluded that State needed to (1) plan how it
could become a smaller, more efficient, and less expensive
organization and (2) conduct a fundamental rethinking of functions,
locations, and practices to determine what is essential and
affordable to support U.S. interests. In addition, we reported that
State could generate millions of dollars of proceeds by selling
unneeded real estate at its overseas locations. We have identified
several management tools that could help State adjust to today's
fiscal conditions. At the Agency for International Development
(AID), we examined reform efforts and analyzed current and planned
uses of operating expenses to assist congressional deliberations on
funding.
In the multilateral arena, we examined the World Bank's role in
enhancing the flow of international private investment capital to
developing countries, the extent to which Bank projects achieved
their developmental objectives, the Bank's progress in reforming its
operations to improve effectiveness, and the extent to which the Bank
supported U.S. foreign policy goals. This study provided critical
information to help the policy debate and assist the Congress in
deciding to what extent continued U.S. participation in the World
Bank serves U.S. interests. We also assessed U.S. involvement in
many other international organizations and U.S. participation in
multilateral peacekeeping efforts in Bosnia, Cambodia, Haiti, and
elsewhere. This work has been useful to Congress in its oversight,
helping form the basis for hearings on the situation in Bosnia and a
resolution regarding human rights in Cambodia.
In the trade area, we reviewed U.S. programs to advance U.S.
interests through export promotion and better market access. We
reported that the interagency Trade Promotion Coordinating Committee
had made some progress in its efforts to coordinate federal export
promotion and financing activities, establish governmentwide export
promotion priorities, and develop a unified export promotion budget.
We suggested ways to strengthen the Coordinating Committee's most
visible output--a nationwide network of export assistance centers to
provide one-stop services to exporters. We also provided to the
Congress critical information and analyses on foreign trade practices
and multilateral trade agreements that affect U.S. businesses'
ability to compete in world markets. For example, we reported on the
potential ability of foreign State trading enterprises to enjoy
unfair advantages in competition with U.S. firms. We also monitored
the many issues associated with implementation of the World Trade
Organization to ensure that the economic gains expected by the United
States were being achieved in agricultural, service, and other areas.
We proposed to the Congress various actions to improve its oversight
and increase the transparency of actions taken by the U.S. Committee
for the Implementation of Textile Agreements in administering the
U.S. textile program. We also reviewed the nature and extent of
counterfeiting of U.S. currency abroad. This review served as a
basis for hearings on U.S. enforcement efforts. Finally, we
evaluated the 1994-95 Mexican financial crisis, including its
origins, the advice U.S. government and International Monetary Fund
officials provided to Mexico, the multilateral financial assistance
provided to Mexico, and Mexico's initial recovery efforts.
In the arms control area, we examined efforts to reduce the threat
from weapons of mass destruction through the dismantling of nuclear
weapons in the former Soviet Union, better international
accountability for nuclear materials, and effective export controls.
Acting on a suggestion in our 1995 report on DOD's Cooperative Threat
Reduction (CTR) Program, the Congress cut funding by $31 million
because of the questionable need for the full amount requested by the
executive branch. The Congress and DOD also acted on our 1994
recommendation concerning the need for a long-range CTR planning
process. DOD agreed to our 1996 recommendations that should further
improve CTR planning and prevent DOD from obligating funds for
constructing a multimillion-dollar chemical weapon destruction plant
in Russia until costs are better defined. DOD has also agreed to our
recommendations that should improve the quality of DOD's annual CTR
audit report to Congress. Using our 1996 report, the Congress passed
legislation designed to strengthen nuclear material control systems
in Russia, counter the smuggling of nuclear materials, and establish
response teams to deal with terrorist attacks involving weapons of
mass destruction.
In the international drug control area, we issued a series of reports
and testimonies on the nature of the drug threat to the United
States, the U.S. international drug control strategy and programs
designed to address this threat, the adequacy of drug sources' and
transit nations' drug control efforts, and major obstacles that
prevent effective implementation of U.S. programs.
We reported on U.S. efforts to control heroin coming from Southeast
Asia, U.S. interdiction activities in the Caribbean, and U.S.
counternarcotics programs in Mexico. Our work provided critical
assistance to congressional committees that were attempting to
determine the overall effectiveness of the U.S. international drug
control strategy. Our products assisted the Congress in returning
the U.S. overall drug control policy to the forefront of debate, and
they received extensive media coverage.
We provided detailed information on U.S. programs in the former
Soviet Union, including our observations on the effectiveness of
assistance projects. As a result of our recommendations, the Agency
for International Development plans to (1) focus future projects on
the achievement of systemic Russian government reforms, (2) obtain
more support for projects from the Russian government, and (3)
improve project implementation in Russia by stationing contractors
there.
We also responded to requests of congressional committees and members
with information and observations on a wide range of issues,
including U.S. broadcasts to Cuba, travel by executive branch
officials, controls over funds provided for the benefit of the
Palestinian Authority, and food supplies in Sub-Saharan Africa.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:3.2
In 1994, we recommended that the State Department develop a fully
integrated, objective, quantifiable methodology to help ensure a
sound basis for allocating personnel in line with U.S. interests
overseas. State hopes to have sufficiently developed such a
methodology for use in formulating its budget submission for fiscal
year 1998. Because stationing staff overseas is costly, State must
be able to ensure that it stations no more staff than are needed at
each of its 252 overseas posts. The budget austerity State faces
reenforces the importance of implementing this recommendation.
(GAO/NSIAD-94-228)
In 1996, we recommended that the Secretary of State take a number of
actions to better identify unneeded properties, sell or otherwise
dispose of these properties, and ensure optimal use of the sale
proceeds. For example, we recommended that the Secretary establish
an independent panel to make recommendations regarding the sale of
excess real estate to reduce the current inventory of property.
Actions have not been taken on these recommendations. However,
consistent with our recommendation, the Senate Appropriations
Committee has directed State to establish an advisory board on real
property management to review properties proposed for sale and submit
its recommendations to the Under Secretary for Management.
(GAO/NSIAD-96-36)
In 1995, we recommended that the Congress terminate the Agency for
International Development's Housing Guaranty Program. The Congress
included language to terminate the program in its 1996 foreign
assistance authorization legislation, but the President vetoed the
bill. (GAO/NSIAD-95-108)
In 1996, we recommended that the Director, Office of National Drug
Control Policy, develop a regional action plan focused on the
Caribbean transit zone for cocaine coming to the United States. This
plan should determine resources and staffing needed and delineate a
comprehensive strategy to improve host nation capabilities and
commitment to counternarcotics interdiction. The Office of National
Drug Control Policy is considering our recommendation as part of an
ongoing evaluation of the entire drug control strategy.
(GAO/NSIAD-96-119)
MILITARY OPERATIONS AND
CAPABILITIES ISSUE AREA (BUDGET
FUNCTION 050)
---------------------------------------------------------- Chapter 1:4
GAO Contact: Mark Gebicke, 202/512-5140
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:4.1
During fiscal year 1996, we completed several reviews on military
operational budget issues, identifying areas where program savings
were possible or improved management practices were needed. We also
provided important trend data regarding the readiness of U.S.
military forces, pointing out some continuing limitations in the
data; highlighted areas where improvements in operational
capabilities were needed; and continued to examine personnel
management issues related to DOD's downsizing.
During our review of DOD's operations and maintenance budget
requests, we found that proposed uses of the requested funding might
not always reflect how funds received are obligated. For example, we
found that the Army has historically requested more funds than it
obligates for its combat forces and often obligated more for
infrastructure and management activities than it requested. We
identified similar trends in Air Force operations and maintenance
funding. In two reviews of the services' budgeting for spare and
repair parts, we found weaknesses in the services' policies and
procedures for determining requirements and budgets for spare parts.
These weaknesses were leading to erroneous estimates of inventory
requirements, causing budget requests to be overstated. For example,
we found that the Air Force and Navy budgeted $132 million more than
needed for aviation spare parts. During our review of retention
bonuses paid to service members, we found that DOD needed to be more
involved in directing and overseeing (1) retention bonuses, to
minimize their award to soldiers in skill areas already having high
retention rates, and (2) separation incentives, to minimize their
award to soldiers in the same skill areas as those being awarded
retention bonuses.
We identified significant funding and other problems associated with
DOD's management of its ammunition stockpile--problems that if left
unattended will get worse. The ammunition stockpile is worth about
$80 billion; about $31 billion is excess--including $22 billion that
was still usable. Much of the ammunition exceeds the services' needs
in varying quantities, some over 50 times their stated needs. While
there are shortages of some specific ammunition types, overall the
services generally have enough ammunition to meet their wartime and
peacetime requirements. The services could share their excess
ammunition, avoiding $19 million in ammunition purchases annually.
The condition of some ammunition is unknown because of delays in
inspections and testing, which are important to ensure that war
reserve items are usable, and properly classified as to condition and
safety. At the same time, the volume of stockpiled ammunition
awaiting disposal continues to grow due to an inability to meet
existing demands for disposal.
In our examination of readiness indicator data developed by the
military services from January 1990 to March 1995, we found that the
percentage of military units with the ability to undertake all or
major portions of their assigned missions remained generally stable
during that time. However, readiness declined below service goals in
20 percent of the units we examined; drops in five of these units
were for fairly short periods of time due to participation in
contingency operations. In remaining units, readiness reductions
were caused primarily by personnel or equipment shortages and
difficulty in obtaining training in certain occupations. An update
of that data for selected units for the period April 1995 to March
1996 found an improvement of 12 percent over the prior period, with
92 percent of the units meeting service goals for readiness.
A separate report, dealing with the increased frequency of personnel
being deployed for contingency operations in recent years, noted that
the services' traditional readiness reporting data does not capture
all of the factors DOD considers critical to a comprehensive
readiness analysis, such as operating tempo and personnel morale.
DOD lacks adequate guidance and definitions associated with
deployments to accurately and consistently track and measure the
extent of increased deployments on individuals or the impact on
readiness. A clear policy is needed to guide management of
frequently deployed units.
During our work examining chemical and biological defense issues, we
found that units designated for early deployment today continue to
face many of the same problems experienced by U.S. forces during the
Gulf War. DOD activities undertaken since the war are improving the
readiness of U.S. forces to operate in a chemically or biologically
contaminated environment. However, equipment, training, and medical
shortcomings persist and require greater emphasis to reduce the
potential for needless casualties and a degradation of US.
war-fighting capability.
The Gulf War highlighted major weaknesses in the Navy's capability to
detect and disarm enemy mines. Critical areas in the Navy's mine
countermeasures capabilities remain unmet, and the Navy is pursuing
several different projects to address these areas. However, it has
not established clear priorities among all of its mine warfare
programs to sustain the development and procurement of its most
needed systems. Consequently, the Navy has experienced delays in
delivering new systems to provide necessary capabilities. A
long-range plan is needed to identify the gaps and limitations in the
Navy's mine countermeasures capabilities and establish priorities
among the competing projects and programs, including those in
research and development.
We have maintained a focus on DOD's personnel reductions during its
downsizing. As the downsizing has progressed, some concerns have
been registered about the impact of civilian downsizing on mission
accomplishment and readiness. During our 1996 review of civilian
downsizing, we found that while the downsizing had some impact on
operations, such as the amount of time it takes to accomplish some
work, it had not adversely affected military readiness at the
installations we visited. However, some concerns were voiced that
future civilian reductions could adversely affect military readiness
if the process is not managed carefully.
The Office of the Secretary of Defense and the military services
continue to have differences of opinion about wartime medical
personnel requirements, and their respective studies produce
conflicting requirements. Further study to resolve the issue has
been delayed due to lack of agreement over study assumptions.
Meanwhile, absent any change in requirements, overall DOD active duty
end strengths are expected to decline by twice the rate of decline in
medical forces from fiscal year 1987 to fiscal year 1999.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:4.2
We reported in October 1994 that substantial savings and other
operational benefits could accrue if DOD were to identify and replace
military support positions with civilians. We identified major
differences among the services in the percentage of positions in
specific support fields that were filled by civilians. 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 downsizing is completed on the grounds that it
would be counterproductive to increase civilian positions while the
total workforce continues to decline. We believe that our
recommendation remains valid and should be acted upon by DOD. We are
nearing completion of additional work that identifies several
thousand officer positions in the Army, Navy, and Air Force that
civilians may be able to fill at lower cost and potentially greater
long-term productivity because of less frequent personnel rotations
involving civilian personnel. (GAO/NSIAD-95-5)
We made several recommendations to the Secretary of Defense to
address the weaknesses we identified in 1996 in the chemical and
biological defense area. Among them was a recommendation that the
Secretary reevaluate the priority and emphasis given to this area
throughout DOD. Also included was a recommendation that the
Secretary consider modifying the services' readiness reporting
requirements so that unit reports would more directly capture the
units' chemical and biological readiness status and more accurately
reflect shortcomings in their abilities to meet existing chemical and
biological training standards. (GAO/NSIAD-96-103)
We have also made several recommendations to the Secretary of Defense
to address the need for more complete data on the impact of frequent
deployments on personnel and units. Among them was a recommendation
that the Secretary identify key indicators to provide the best
measures of deployments' impact on personnel readiness. Also
included was a recommendation that the Secretary of Defense issue
regulations to guide the services' management of personnel tempo by
defining minimum data that each service must collect and maintain on
the subject. (GAO/NSIAD-96-105)
See also chapter 5, Financial and Information Management Programs,
Defense Financial Audit Issue Area.
NATIONAL SECURITY ANALYSIS
ISSUE AREA (BUDGET FUNCTION
050)
---------------------------------------------------------- Chapter 1:5
GAO Contact: Richard A. Davis, 202/512-3504
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:5.1
DOD faces difficult policy, programmatic, and budgetary decisions as
it seeks to support the national security strategy in a world
characterized by diverse and changing threats. To meet this
challenge, DOD must maintain its forces in a high state of readiness
and capability and must continue to modernize in a time of tight
budgets and shrinking military end strength. Our reports and
testimonies have been used extensively by the Congress in its
oversight of budget, force structure, modernization, peacekeeping,
and intelligence issues.
To help the Congress evaluate the defense budget, we analyzed DOD's
Future Years Defense Program and reported that anticipated
infrastructure savings were unlikely to materialize. This conclusion
is critical, since the Secretary of Defense has stated that
infrastructure savings would be used to pay for billions in projected
costs for force modernization initiatives. We also warned the
Congress of potential increases in infrastructure costs from 1997 to
2001 and identified infrastructure activities that could be
consolidated and streamlined to gain more efficiency.
Building on our work from prior years, we suggested less costly ways
to manage the military force structure. For example, we suggested
that the Army use or convert National Guard forces to support units
to meet shortfalls. DOD agreed with our suggestion, and the
Secretary of the Army is taking actions to reduce the shortfall of
support spaces.
We also helped the Congress evaluate DOD's downsizing plans by
analyzing assumptions underlying certain force structure decisions.
For example, we examined the key assumptions underlying DOD's NIMBLE
DANCER war game that assessed the ability of the Bottom-Up Review
force to execute the stated military strategy. We reported that DOD
continues to use many of the same favorable assumptions contained in
guidance implementing the Bottom-up-Review. We further reported
that, although DOD had planned to test the sufficiency of certain key
assumptions, this type of analysis in some cases was not done, and in
other cases its scope was limited.
We assisted the Congress in its efforts to evaluate DOD's
modernization plans, focusing principally on aviation modernization
and affordability issues. In the area of airpower, we reported that
DOD has not sufficiently assessed joint mission requirements and
aggregate capabilities and is therefore not well-positioned to
determine the need for and priority of planned investments.
Consequently, major force structure and planning decisions have been
made without complete analysis of the services' combined requirements
and capabilities. We also reported that DOD's current process for
assessing joint warfighting capabilities has had little impact on
identifying unneeded overlaps and duplication in existing
capabilities or in weighing the relative merits of alternative ways
to recapitalize U.S. airpower forces.
We continued to provide the Congress with first-hand reporting on
U.S. participation in peacekeeping missions. The Congress used this
information to mandate that DOD report its justification for
understating manning requirements for highly deployable support
units. Our work on the costs of contingency operations led DOD to
reduce its reprogramming request for Bosnia and other contingency
operations by more than $130 million.
Finally, our work on the National Intelligence Estimate regarding the
foreign missile threat to the United States contributed to the
congressional debate, and as a result, the Fiscal Year 1997 Defense
Authorization Act established an independent commission to undertake
further evaluation of this crucial topic.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:5.2
A key recommendation stemming from our work on combat airpower
capabilities calls for the Secretary of Defense, along with the
Chairman of the Joint Chiefs of Staff, to develop an assessment
process that yields more comprehensive information in key mission
areas. (GAO/NSIAD-96-177)
In our report dealing with the Air Force's bomber aircraft, we
recommended that the Secretary of Defense consider options to retire
or reduce the B-1B bomber force as part of DOD's ongoing study to
determine the most cost-effective mix of systems needed for deep
attack missions. Reducing the size of DOD's B-1 bomber force could
provide DOD with as much as $5.9 billion in cost reductions over the
next 5 years. (GAO/NSIAD-96-162)
To ensure that planned investments are both fully justified and
affordable, we recommended that the Secretary of Defense (1) direct
the Air Force to develop and use sound criteria when justifying
current inventories and future procurement requirements for backup
aircraft, (2) prioritize funding for combat airpower interdiction
assets to acquire those capabilities that contribute most to meeting
joint operating requirements, and (3) conduct cross-service
assessments to prioritize joint close support mission needs before
making funding decisions on future force enhancements.
(GAO/NSIAD-95-180, GAO/NSIAD-96-72, GAO/NSIAD-96-45)
To improve the use of military personnel, we recommended that the
Army reexamine whether high priority support units should continue to
be staffed in peacetime at less than their fully authorized strength.
We also recommended that the Army consider making greater use of
reserve forces to meet the personnel needs of some Army active force
units. Implementation of these recommendations would provide
additional personnel spaces to round out active divisions and add
more reserve support units to the Army's force. (GAO/NSIAD-95-51,
GAO/NSIAD-93-80)
See also chapter 5, Financial and Information Management Programs,
Defense Financial Audit Issue Area.
SPECIAL STUDIES AND EVALUATIONS
(BUDGET FUNCTION 090)
---------------------------------------------------------- Chapter 1:6
Contact: Kwaicheung Chan, 202/512-3092
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:6.1
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. Our report on
Operation Desert Storm was one such evaluation.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:6.2
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 toxins
we found to be present during the war, and the activities undertaken
to monitor servicemen and servicewomen for reproductive dysfunction
after the war have major shortcomings. Therefore, we recommended
that 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)
IMPROVING RESOURCES, COMMUNITY,
AND ECONOMIC DEVELOPMENT PROGRAMS
============================================================ Chapter 2
ENERGY, RESOURCES AND SCIENCE
ISSUE AREA (BUDGET FUNCTIONS
250, 270, 300)
---------------------------------------------------------- Chapter 2:1
GAO Contact: Victor S. Rezendes, 202/512-3841
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:1.1
This issue area reviews programs of a broad and diverse group of
agencies ranging from the Department of Energy (DOE) and related
agencies, such as the Nuclear Regulatory Commission and the Tennessee
Valley Authority (TVA); to various land management and natural
resources agencies, including the Department of the Interior, the
Forest Service within the Department of Agriculture, the National
Marine Fisheries Service, and the Army Corps of Engineers; and to an
array of science and technology-related agencies, such as the
National Science Foundation, the Department of Commerce's National
Institute of Standards and Technology, Patent and Trademark Office,
and National Oceanic and Atmospheric Administration. Spending
outlays for these agencies total well over $40 billion a year and
generate revenues to the Treasury exceeding $10 billion. But, more
importantly, the activities of these agencies pose significant
implications for our nation's security, environment, and economic
well-being.
Our primary objective is to assist the Congress in examining the role
of government in this broad area of responsibility, with particular
emphasis on finding ways to promote a more efficient and
cost-effective government. Our efforts this past year have gone a
long way in contributing to this objective and many of our key open
recommendations are intended to help focus the debate on some
difficult choices that still need to be made.
Examples of our contributions this past year include helping the
Congress:
-- consider how to restructure the DOE, as well as frame the debate
for the broader restructuring of government,
-- better ensure that the government will receive a fair price in
the planned sales of the U.S. Enrichment Corporation and the
Naval Petroleum Reserves at Elk Hills,
-- deliberate on the potential privatization of DOE's five power
marketing administrations,
-- continue in its search for finding an acceptable alternative for
disposing of nuclear waste,
-- become aware of the construction status and safety implications
of Cuban nuclear reactors as part of its deliberations on the
need for economic sanctions over Cuba,
-- determine the need for aid to the Former Soviet Union based on
our report on the need to improve controls over nuclear
materials,
-- leverage use of "carry-over" balances and find other ways to
reduce DOE's, Nuclear Regulatory Commission's and Commerce's
budgets by over $1.1 billion,
-- introduce legislation implementing our recommendations related
to hardrock mining on federal lands, below-cost timber sales,
and federal water subsidies--which, if enacted, would generate
up to $300 million a year in increased revenues or decreased
spending,
-- consider the implications of borrowing from a federal fund set
up for reforestation to cover the costs of fighting forest
fires, and
-- enact legislation creating greater incentives for federal
scientists to patent their inventions and transfer technology to
the private sector.
Other recommendations led to administrative actions to improve
government programs. For example, based on our work:
-- the Nuclear Regulatory Commission improved its oversight of
nuclear materials,
-- an interagency committee has been formed to reach consensus and
adopt consistent guidance and standards on acceptable levels of
radiation risk to workers and the public,
-- DOE took action to ensure the independence of its environmental,
safety, and health functions at its nuclear facilities,
-- the Forest Service and Bureau of Land Management implemented a
new fee system that ensures a fairer return for use of their
communication sites by private parties.
-- a White House task force identified barriers to governmentwide
implementation of ecosystem management and took specific steps
to address them,
-- the Bureau of Land Management issued new procedures to better
target parties whose oil and gas lease holdings are approaching
or exceeding federal acreage limitations,
-- the Department of Agriculture improved animal damage control
program guidance for protecting livestock from predators, and
-- the National Park Service took aggressive action to correct
erroneous financial information and made significant progress in
its financial reporting.
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 (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
increasingly limited resources, DOE is reevaluating its cleanup
priorities, although a complete reordering based on risk to public
health and safety has not been completed. DOE has, however, begun to
renegotiate agreements with its regulators in the face of new budget
realities. (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 the laboratories that more fully support
the achievement of clear and coordinated missions, including
strengthening the Department's Office of Laboratory Management. 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 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's Laboratory Operations Board has
begun to develop a strategic vision for the national labs as well as
an action plan to implement most of the recommendations made by the
Galvin Task Force, an independent panel created by DOE to recommend
better ways to manage the national labs. Many of the Task Force's
recommendations address issues raised in our report. Meanwhile,
various bills have been introduced in the Congress calling 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
Comprehensive Environmental Response, Compensation, and Liability Act
to provide more specific direction about incorporating future land
uses when determining cleanup levels and selecting remedial actions.
Various bills, which included provisions for land use, were
introduced in the 104th Congress. (GAO/RCED-94-144)
CONTRACTING FOR
LABORATORY ANALYSES
------------------------------------------------------ Chapter 2:1.2.4
To realize 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, the department should also identify and eliminate
contractor resources that will no longer be needed under a
centralized procurement system. In early 1996, the Assistant
Secretary for Environmental Management issued an order directing that
management of laboratory analysis programs at DOE field offices be
consolidated at either one federal or contractor organization. This
action, while a positive step, would result in centralizing
fragmented programs at the field office level rather than more
comprehensively at the department level as we had intended. DOE
officials were not aware of the status of action to centralize
activities at the field level and have yet to determine the savings
to be gained from such centralization. (GAO/RCED-95-118)
SAFETY OF NUCLEAR
MATERIALS
------------------------------------------------------ Chapter 2:1.2.5
In April 1993, we reported that the Nuclear Regulatory Commission
should establish specific criteria and procedures for suspending or
revoking agreements whereby states, rather than the Nuclear
Regulatory Commission, regulate and monitor radioactive materials
within their borders (agreement-state programs). The purpose was to
eliminate the inconsistent way in which the Commission was evaluating
the effectiveness of its two nuclear materials programs in achieving
the goal of adequately protecting the public from radiation. In June
1995, the Commission approved a Final Statement of Principles and
Policy for the agreement-state program and requested submittal of
implementing procedures for final commission approval by late 1996.
(GAO/RCED-93-90)
NUCLEAR REGULATION
------------------------------------------------------ Chapter 2:1.2.6
In May 1994, we reported that the Nuclear Regulatory Commission
should 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 Nuclear Regulatory Commission licensees. The
Commission is working with the Environmental Protection Agency (EPA)
and other interested parties to develop a national approach to
ensuring the protection of treatment workers and the public. EPA
plans to conduct a pilot survey in the fall of 1996 to assess the
extent of the radioactive contamination. The Nuclear Regulatory
Commission and EPA plan to issue draft guidance in 1997 regarding the
acceptable levels of radioactivity in sludge and ash.
(GAO/RCED-94-133)
CONTRACT MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.7
In August 1994, we recommended that DOE, in contracting with the
University of California for the management of three national
laboratories, (1) adopt standard contract clauses where there is not
a sound basis for deviating from them, (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 has reviewed the
non-standard clauses in the contracts with the University of
California and has identified the relevant changes that are needed.
On May 15, 1996, the Secretary of Energy announced a 5-year extension
of the University's management contracts with Lawrence Livermore,
Lawrence Berkeley, and Los Alamos National Laboratories.
Accordingly, DOE is in the process of negotiating changes for the new
contracts. Modifications have also been made to the contracts
requiring that information regarding university-sponsored research be
submitted to DOE for review. DOE is also developing a new fee policy
for profit and nonprofit management and operating contractors which
relates fees to anticipated risk. The new policy is scheduled to be
submitted to the Office of Management and Budget (OMB) for rulemaking
by early 1997. (GAO/RCED-94-202)
NUCLEAR WASTE DISPOSAL
------------------------------------------------------ Chapter 2:1.2.8
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 beginning 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, a federal circuit court of appeals
ruled that DOE is obligated to begin accepting nuclear waste in 1998.
Also, 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)
URANIUM ENRICHMENT
------------------------------------------------------ Chapter 2:1.2.9
In September 1995, we recommended that the Congress require the
Secretary of the Treasury, not the Board of Directors of the United
States Enrichment Corporation, take the lead role on behalf of the
Nation's taxpayers throughout the privatization process for the
Enrichment Corporation. Our September 1995 report also suggested
that the Secretary of Treasury consider options to ensure that the
government obtains a fair price for the corporation if it is
privatized. In April 1996, the Congress passed legislation requiring
the Secretary to lead the privatization process. Corporation
officials told us in August 1996 that the administration is
considering these issues prior to beginning the privatization
process. (GAO/RCED-95-245)
NUCLEAR WEAPONS STOCKPILE
SURVEILLANCE
----------------------------------------------------- Chapter 2:1.2.10
In July 1996, we recommended that the DOE develop contingency plans
at its various facilities for dismantling and testing nuclear weapons
components in the event that a testing facility is shut down for an
extended period of time. In the absence of underground testing, the
stockpile surveillance program, which includes flight tests as well
as testing of weapons components, provides one of the few ways of
ensuring the reliability and safety of weapons in the Nation's
nuclear weapons stockpile. However, if one or more of the testing
facilities is shut down for an extended period of time, the
Department has no plan to carry out these functions. Contingency
plans that delineate where testing functions would be transferred and
how the transfer should proceed would minimize the impact of any
shutdown. (GAO/RCED-96-216)
TECHNOLOGY INVESTMENT
----------------------------------------------------- Chapter 2:1.2.11
In June 1996, we recommended that the Secretary of Energy develop and
implement a Department-wide policy for requiring repayment of the
federal investment in successfully commercialized cost-shared
technologies. The policy should provide criteria and flexibility for
determining which programs and projects are appropriate for
repayment. (GAO/RCED-96-141)
PEER REVIEW OF GRANT
PROPOSALS
----------------------------------------------------- Chapter 2:1.2.12
We examined grant selection in three federal agencies that use peer
review - the National Institutes of Health, the National Science
Foundation (NSF) and the National Endowment for the Humanities. We
found that the rating of grant proposals was related to gender at all
the agencies and to race at the NSF Foundation. 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)
FAIR MARKET VALUE
----------------------------------------------------- Chapter 2:1.2.13
We reported that the Forest Service is not receiving fair market
value for right-of-way fees on Forest Service lands and has little
assurance that it is collecting fair market fees from ski area
operators. We recommended that appropriate fee systems be
implemented in both cases. Both the Forest Service and major
industry groups, representing private companies that have
rights-of-way to operate powerlines, pipelines, and communications
lines across Forest Service lands, agree on the need for a new fee
system. However, a system has not yet been developed. The Forest
Service has proposed a new system charging fees for skiing activities
based on site-specific appraisals. However, bills introduced in both
the House and the Senate would not ensure that the government
receives ski fees based on fair market value. (GAO/RCED-96-84,
GAO/RCED-93-107)
BELOW-COST TIMBER SALES
----------------------------------------------------- Chapter 2:1.2.14
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
recommendations to the Under Secretary of Agriculture early in 1997.
(GAO/T-RCED-91-42)
NATIONAL PARK SERVICE
EMPLOYEE HOUSING
----------------------------------------------------- Chapter 2:1.2.15
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 reviewing the scope of its employee housing program and is
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 housing. (GAO/RCED-94-284)
OIL AND GAS ROYALTIES
----------------------------------------------------- Chapter 2:1.2.16
The federal government receives royalties from offshore oil and gas
leases, calculated using the volume and price of the oil and gas sold
and a royalty rate. It is essential that oil and gas production be
verified to help ensure accurate determination of 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 we recommended that the agency implement an ongoing production
verification program. The Service conducted a pilot program and now
plans to develop regulations for a permanent program, with a target
for issuance of mid-1997. (GAO/RCED-90-193)
OFFSHORE OIL AND GAS
LEASE ABANDONMENTS
----------------------------------------------------- Chapter 2:1.2.17
Interior's Minerals Management Service is responsible for protecting
the federal government from incurring offshore oil and gas lease
abandonment expenses that are the responsibility of the lessee
companies. However, as of March 1993, leases in the Gulf of Mexico
with $4.4 billion in estimated abandonment costs were covered by only
$68 million in bonds posted by the companies. In August 1993, the
Service increased bond amounts but did not set a time limit for
posting the higher bonds. In a May 1994 report we recommended that
the Service set a time limit for obtaining new bond amounts. The
Service is developing regulations to do this, with a target for
issuance of 1997. (GAO/RCED-94-82)
FEDERAL WATER SUBSIDIES
----------------------------------------------------- Chapter 2:1.2.18
Water subsidies, 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 water 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 water 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, 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 the
irrigation rates. The Congress has not acted on this issue to date.
(GAO/RCED-94-8)
ENVIRONMENTAL PROTECTION ISSUE
AREA (BUDGET FUNCTION 300)
---------------------------------------------------------- Chapter 2:2
GAO Contact: Peter F. Guerrero, 202/512-6111
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:2.1
Protecting the environment remains a priority for the nation. This
issue first came to the forefront in the 1970s when the country faced
acute environmental problems, such as seriously polluted waterways,
increasing air pollution levels, and the open dumping and burning of
wastes. Since then, the quality of the nation's air, water, and
other resources has improved, despite increases in both population
and levels of economic activity. These improvements, however, have
imposed high and growing costs.
Annual environmental compliance costs that were $64 billion in 1973
have grown to $119 billion in 1993 and are expected to continue to
increase to almost 3 percent of the nation's Gross Domestic Product.
As a result, there is growing interest in finding more cost-effective
ways to achieve environmental protection. This goal is especially
challenging in light of the remaining unmet environmental protection
needs, many of which will be very costly to remedy.
EPA's role for its first 25 years involved the development of
standards and regulations to be used by states to carry out federal
environmental laws. EPA has historically provided close oversight of
state implementation of these laws to ensure they are properly
carried out. However, as states increased their capacity to enforce
environmental laws, EPA has been accused of not sufficiently
tailoring its oversight, leading to state complaints that they are
being micromanaged by EPA. This situation is further exacerbated as
states and local governments are being asked to bear proportionately
more of the costs associated with these programs. At the same time,
industry has generally recognized that good environmental practices
result in production efficiencies, reduced liabilities, and consumer
approval. The confluence of these events has fostered a call for the
adoption of an incentive- and performance-based approach to
environmental protection to replace what is commonly called "command
and control" regulation. At the same time, the federal government
has emerged as a major polluter in its own right. Liabilities for
cleaning up federal hazardous waste sites could total in the hundreds
of billions of dollars.
Our work has highlighted our nation's recurring environmental
problems and recommended 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. To better measure program
success, we recommended that the agency develop performance
indicators that are based on environmental outcomes rather than
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 the 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 its 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
manually tracking of the time and resources allocated to agency
rulemaking. 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)
CLEAN WATER
------------------------------------------------------ Chapter 2:2.2.2
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. EPA is considering options to address the needs for
small communities. In addition, the Congress is currently
considering this issue but has not yet enacted legislation.
(GAO/RCED-92-35)
In 1992, we also reported that pollutant trading could be an
economical supplement to traditional regulatory programs designed to
address water pollution problems. However, we found that trading had
been limited to date and attributed this largely to the uncertainties
surrounding its legal status under the Clean Water Act. Accordingly,
we suggested the Congress consider amending the act to explicitly
authorize trading. (GAO/RCED-92-153)
TOXIC SUBSTANCES
------------------------------------------------------ Chapter 2:2.2.3
We made a number of recommendations in 1994 to help strengthen EPA's
ability to regulate toxic chemicals. Under the Toxic Substances
Control Act, EPA can limit or prohibit the manufacture, distribution,
and use of toxic chemicals. However, EPA has issued only a few
regulations under the act because the act's legal standards are very
high, and the burden of proof is essentially on EPA. 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 having sufficient data to fully assess
potential risks. EPA also believes that industry has made excessive
claims of confidential business information for data submitted under
the act's provisions. Among other things, we suggested the Congress
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 for compiling data on
existing chemicals. (GAO/RCED-94-103)
HAZARDOUS WASTE
MANAGEMENT
------------------------------------------------------ Chapter 2:2.2.4
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 while the
cleanup of contaminated federal facilities is currently costing about
$4 billion annually. To encourage the efficient and effective use of
limited resources, we suggested the Congress to consider amending the
Superfund legislation to underscore the importance of ranking
nonfederal hazardous waste sites so that funding is targeted to the
worst sites first. Similarly, to facilitate the setting of
risk-based priorities for cleaning up federal hazardous waste sites,
we suggested the Congress to consider amending the Superfund
legislation to require agencies to develop a consistent process for
assessing and ranking the relative risks of hazardous waste sites.
(GAO/T-RCED-94-274, GAO/RCED-96-150)
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. (GAO/RCED-94-196)
STATE/FEDERAL RELATIONS
------------------------------------------------------ Chapter 2:2.2.5
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 states to implement most of the day-to-day
responsibilities. After 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 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 underway to improve its communication with the
states and bring greater flexibility in its oversight of state
activities. (GAO/RCED-95-64)
See also chapter 5, Financial and Information Management Programs,
Information Resources Management Issue Area.
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
United States Department of Agriculture (USDA), the third largest
civilian agency in the federal government, has a budget of about $60
billion. The U.S. agricultural industry is vital to the lives of
all Americans and millions of people worldwide, generating about $1
trillion in economic activity and accounting for 15 percent of the
gross domestic product each year. One in six working Americans has a
job related to the food and agriculture economy, and farm exports
alone generate about a million jobs. USDA manages a variety of
programs designed to assist agricultural producers and rural
communities, develop markets, encourage farm production and exports,
ensure food safety, and provide consumers with food information and
assistance.
In 1996, our work was used extensively in the debates surrounding the
Federal Agricultural Improvement and Reform Act of 1996 (the 1996
farm bill). As a result, landmark changes have been made in USDA
programs. Of particular note are the (1) removal of the link between
federal income support payments and farm prices, (2) changes to farm
loan programs aimed at reducing the government's financial risk, and
(3) establishment of an interagency working group to evaluate federal
rural development efforts. In addition, the President signed new
regulations reforming the federal food safety rules for meat and
poultry in line with our recommendations.
FARM PROGRAMS
------------------------------------------------------ Chapter 2:3.1.1
On April 4, 1996, the President signed into law the 1996 farm bill.
This legislation authorized a major revamping of federal income and
price support programs in a manner consistent with positions we took
in numerous reports. Under this legislation, farmers who have long
depended on government price and income support programs will make
the transition into a more competitive environment in which they will
make business decisions in response to market signals and not
government program mandates. Our specific recommendations that were
followed include reducing the government role in the dairy, rice, and
cotton industries and allowing producers time to make adjustments to
their investments by phasing out the programs over time. CBO
estimates that these farm bill changes will save about $1.3 billion
over the next 7 years.
CREDIT REFORM
------------------------------------------------------ Chapter 2:3.1.2
Title VI of the 1996 farm bill dramatically altered the farm loan
programs' basic lending, servicing, and property management policies,
consistent with recommendations we had made in numerous reports.
Among other things, the farm bill (1) prohibits new loans to
borrowers who were delinquent, (2) limits borrowers who were
delinquent on direct loans to one instance of debt forgiveness, (3)
prohibits new loans to borrowers who defaulted on past loans, (4)
expedites the disposal of farm inventory properties, and (5) requires
borrowers to repay part of the interest due as a condition of having
their loan payment schedules rewritten. CBO has projected savings
from these actions at approximately $69 million over 7 years.
RURAL DEVELOPMENT
------------------------------------------------------ Chapter 2:3.1.3
Our reviews of federal rural development efforts identified the need
to establish an interagency committee to oversee the federal
government's widely dispersed rural development programs and to find
ways to make the programs less burdensome for applicants. The 1996
farm bill directs the Secretary of Agriculture to establish an
interagency working group to, among other things, establish policy
for, coordinate, make recommendations with respect to, and evaluate
the performance of all federal rural development efforts. The bill
also directs the Secretary to develop a streamlined, simplified, and
uniform application process for a number of rural assistance
programs.
FOOD SAFETY
------------------------------------------------------ Chapter 2:3.1.4
In numerous reports and testimonies, we recommended that USDA develop
a mandatory Hazard Analysis and Critical Control Point system for
ensuring the safety of the U.S. meat and poultry supply. We
recommended that such a system should include specific requirements
for microbial testing and guidelines for determining when test
results warrant actions. On July 6, 1996, the President signed new
regulations reforming the federal safety rules for meat and poultry.
These rules, which frequently cite our work, include provisions that
require every slaughter and processing plant to adopt and carry out a
Hazard Analysis and Critical Control Point plan that must be verified
by USDA inspectors. In addition, microbial testing for E. coli
bacteria is required in slaughter plants. USDA estimated that the
implementation of this approach will help reduce the estimated 4,000
deaths and 5 million illnesses that result annually from contaminated
meat and poultry.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:3.2
CONTINUING CONCERNS WITH
THE FOOD SAFETY SYSTEM
------------------------------------------------------ Chapter 2:3.2.1
As stated in the section above, our work has been instrumental in the
implementation of the new Hazard Analysis and Critical Control Point
approach to food safety. This new program may address many of the
problems we identified in our reports, and we will monitor the
progress USDA and FDA make in implementing the regulations. In
addition, however, we identified some shortcomings in the federal
food safety program that need solutions beyond a Hazard Analysis and
Critical Control Point-based food inspection program. Specifically,
we identified the need for the Congress to (1) create a uniform set
of food safety laws that are administered by the current federal food
safety agencies, (2) expand the meat and poultry laws to include
nontraditional meat and poultry products in the food safety system,
and (3) provide the agency with the flexibility to target its
inspection resources to the most serious food safety risks.
(GAO/RCED-92-152, GAO/T-RCED-93-22, GAO/RCED-94-110)
Federal programs designed to ensure that foods are not contaminated
with unsafe chemicals also need improvement. While the FDA has
prepared a comprehensive strategy for monitoring animal drugs in milk
and is in the process of updating its regulations, we will need to
monitor their implementation to ensure that they are meeting the goal
of making the nation's milk supply safer. At a broader level,
structural weaknesses in the federal government's programs for
monitoring chemical residues and environmental contaminants in all
foods still exist.
We believe that a uniform set of food safety laws, with consistent
standards for chemical residues and contaminants in food and
administered by federal agencies with adequate authority to fulfill
their oversight responsibilities, would lead to improved
effectiveness, efficiency, and uniformity in the federal food safety
system. (GAO/RCED-92-209, GAO/RCED-94-192)
CONTINUING CONCERNS WITH
THE PEANUT PROGRAM
------------------------------------------------------ Chapter 2:3.2.2
While the 1996 farm bill addressed many of the concerns we had
identified in our report about the peanut program, several issues
remain unresolved. Specifically, the Congress reduced the quota
support price for peanuts but kept the price above the cost of
producing peanuts and above the world market price. Furthermore, the
Congress did not address the issue of allowing USDA to purchase
peanuts and peanut products for various food assistance programs at
the world market price rather than the higher quota support price.
It is anticipated that the 105th Congress will debate the peanut
program further and may make more changes to the program.
(GAO/RCED-93-18)
CONTINUING CONCERNS WITH
THE FARM CREDIT SYSTEM
------------------------------------------------------ Chapter 2:3.2.3
Title VI of the 1996 farm bill revamped the entire farm credit
system. One provision of the title directs the Farm Service Agency
to use guaranteed loans as an interim step in moving direct loan
borrowers to commercial credit without a guarantee. To that end, we
recommended that the Farm Service Agency develop plans to ensure that
county offices (1) update borrowers' loan risk assessments promptly
and (2) evaluate direct loan borrowers annually for potential
graduation to guaranteed loans or commercial credit. The Farm
Services Agency is currently writing regulations that are consistent
with these recommendations and we will monitor their implementation
to ensure that they meet the goal of removing borrowers from the
direct loan program expeditiously. (GAO/RCED-95-9)
See also chapter 5, Financial and Information Management Programs,
Information Resources Management Issue Area.
HOUSING AND COMMUNITY
DEVELOPMENT ISSUE AREA (BUDGET
FUNCTIONS 370, 450)
---------------------------------------------------------- Chapter 2:4
GAO Contact: Judy A. England-Joseph, 202/512-7631
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:4.1
The housing and community development issue area reviews federal
programs involving over $1 trillion dollars--insuring some $500
billion in loans, and guaranteeing more than $500 billion in
outstanding securities for single-family and multifamily housing.
The federal government operates more than 300 programs that are aimed
at providing decent, affordable housing and healthy, vibrant
communities. The Department of Housing and Urban Development (HUD)
is the principal federal agency responsible for programs dealing with
housing and community development. Other agencies with housing or
community development programs include the Federal Housing
Administration (FHA); the Department of Veterans Affairs (VA); the
Rural Housing and Community Development Services; the Small Business
Administration (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 for these agencies'
programs; the Congress and the administration are considering
significant changes in the structure of some of these agencies and
their functions. HUD, long plagued with mismanagement and poor
service, continues its attempts to overhaul and streamline its
operations. 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, HUD and the previously identified
agencies have taken action to improve the efficiency and
effectiveness of housing and community development policies and
programs and saved taxpayers money.
MORTGAGE ASSISTANCE
------------------------------------------------------ Chapter 2:4.1.1
Much of our work in the multifamily mortgage assistance area focused
on helping the Congress evaluate alternatives for improving HUD
programs and activities. In the single-family mortgage insurance
area, our report on the mortgage assignment program resulted in
legislation being enacted that will reduce federal spending by
billions of dollars over a 7-year period. We also reported on the
economic value of FHA's single-family program and on the role of FHA
in providing mortgage credit to home buyers.
In the multifamily area, we continued to evaluate HUD proposals for
reengineering the 8,600 properties that both receive project-based
Section 8 rental assistance subsidies from HUD and have mortgages
insured by the FHA. We also analyzed issues and options for the
Congress to consider in revising HUD's low-income housing
preservation program. In addition, we reported on options for
revising multifamily housing programs administered by the USDA's
rural housing service. As of September 1996, the Congress had either
enacted or was considering legislation in each of these areas.
In the single-family mortgage insurance area, we reported that HUD's
mortgage assignment program has not been very successful helping
borrowers avoid foreclosure in the long run and operates at a high
cost to HUD. Legislation was enacted that eliminated HUD's mortgage
assignment program and provided HUD authority to assist borrowers in
default by other means. CBO estimated that this action reduced
federal spending by $1.2 billion in fiscal year 1996 and $2 billion
in total over a 7-year period.
We also completed work on HUD's management of single-family
properties in its inventory and identified ways to decrease the
agency's management costs. We reported that HUD's Illinois State
Office incurred unnecessary expenses because it continued to pay for
water and sewer services for vacant properties that were held for
months in the inventory before they were sold. Additionally, that
office did not pay property taxes on time, which resulted in HUD
unnecessarily incurring expenses to recover properties lost for
unpaid tax liens. In response to our recommendations, HUD
headquarters issued a directive to all field offices to take specific
actions to avoid the recurrence of these unnecessary management
expenses.
LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.1.2
Our work on low-income housing issues continued to support the
Congress as it tried to formulate, reach consensus on, and pass major
legislation to reform public and assisted housing and significantly
change the way housing assistance is delivered to eligible families.
Through our congressional briefings and testimonies, we raised
programmatic and budget issues highlighting the very difficult
position the Congress and HUD are in as they try to balance the
federal budget and also meet low-income families' growing needs for
shelter. On the basis of our budget work, we recommended that
because of HUD's lack of adequate preparation, the Congress not adopt
costly departmental proposals to award $845 million in bonuses during
fiscal year 1997 to housing and community development program
participants. In line with GAO's recommendation, VA and HUD, and
Independent Agencies Appropriations Act, Fiscal Year 1997 (H.R.
3666) enacted on September 26, 1996, did not appropriate the $845
million.
In testimonies this year on HUD's fiscal year 1997 budget request, we
discussed several critical management and budget issues at HUD.
These issues included significant and longstanding problems in public
housing, the spiraling cost of HUD's long-term contracts to provide
assisted housing, the need for consensus at HUD on reforms in HUD
programs, the inadvisability of implementing a performance bonus
system without adequate preparation, and HUD's progress in addressing
the management deficiencies we described in our February 1995 high
risk report. We concluded that, despite HUD's promise of reform,
reinvention, and transformation aimed at solving the department's
problems, much more remains to be done. HUD is very much an agency
in limbo as few of the proposals in HUD's reinvention blueprint have
been adopted. The Congress considered the issues raised in our
testimonies as it sought to make needed revisions in HUD programs.
In conjunction with our General Government Division, we reported on
our approach for reviewing the administration of the Low-Income
Housing Tax Credit. This credit, administered jointly by the
Internal Revenue Service and the states, was enacted to provide an
incentive for the private sector to develop affordable rental housing
for lower income individuals and families. This report, provided the
Congress with an overview of the federal/state system established for
administering the tax credit. As a result, Congress is better
informed on the history of the program and its utility in producing
affordable housing.
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. The Finance
Board expects to issue final regulations in early 1997.
(GAO/RCED-95-82)
LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.2.2
In a July 1994 testimony, we said that we had found deplorable
conditions in various low income project-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. In
mid-1997, HUD expects to implement the new Section 8 Management
Assessment Program, which could implement our recommendations.
(GAO/T-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. Both the House and Senate have introduced
legislation to merge current programs. Resolution of these
legislative initiatives is not likely to occur until early 1997.
(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.
In 1993 and 1994 we issued two 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 in early 1997, which, if properly executed,
would protect children living in public housing from the hazards of
lead-based paint. (GAO/RCED-93-138, GAO/RCED-94-137)
See also chapter 5, Financial and Information Management Programs,
Information Management Resources Issue Area.
TRANSPORTATION AND
TELECOMMUNICATIONS ISSUE AREA
(BUDGET FUNCTION 400)
---------------------------------------------------------- Chapter 2:5
GAO Contact: John H. Anderson, Jr., 202/512-2834
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:5.1
Transportation issues significantly affect many aspects of our daily
lives. The transportation sector is crucial to maintaining a healthy
economy, as well as ensuring our competitiveness in the world markets
and serving the expanding demands of our businesses and industries,
as well as the American public. Despite the vast federal, state, and
local resources that go to maintain this infrastructure, with the
forecasted dramatic increase in air travel in the next decade and no
slowdown expected in the demand for surface and water transportation,
there is concern about the adequacy of the present infrastructure to
continue to meet the needs of the traveling public safely.
As detailed below, our work has focused on budget, program
management, and safety related issues. It has influenced the
Congress, the Department of Transportation (DOT) and its agencies to
take many actions that should improve transportation safety and the
efficiency and the effectiveness of transportation policies and
programs.
AVIATION SAFETY AND
SECURITY
------------------------------------------------------ Chapter 2:5.1.1
The Federal Aviation Administration (FAA) continues to face the
challenge of dealing 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.
High-profile airline crashes in 1996 have heightened interest and
scrutiny in aviation safety and security issues. Our recommendations
have been designed to help FAA and congressional decisionmakers
address these challenges.
In response to our recommendations, FAA has taken a number of actions
to: (1) recruit certification experts in advanced technologies, (2)
better define the role of and improve the training of its
certification staff, (3) deploy a system that will assess airline
risk and assist FAA management in better utilizing inspector
resources, (4) gather information on the aging aircraft fleet in
order to target inspections, (5) improve its oversight and
inspections of foreign carriers, and (6) improve the efficiency of
the new airline certification process. In a report and series of
testimonies, we highlighted the need for FAA to undertake actions
more quickly to protect the flying public from the threat of
explosives by, first, assessing specific vulnerabilities of airports
and airlines and, then, quickly developing ways to address the
vulnerabilities.
AVIATION INFRASTRUCTURE
------------------------------------------------------ Chapter 2:5.1.2
FAA continues to struggle with its air traffic control modernization
program--new air traffic control systems are being installed and
automation equipment is still being acquired. At the same time,
FAA's dual role as regulator and promoter of aviation has come under
increased scrutiny.
Our work has resulted in savings to the taxpayers. FAA's fiscal year
1996 Facilities and Equipment budget request of $1.9 billion was
reduced by $79.9 million as a direct result of GAO's analysis of
DOT's budget request. Our testimony on concerns regarding the $2.4
billion Initial Sector Suite System component of FAA's Advanced
Automation System led to the suite's replacement, resulting in
reduced funding of $21.7 million in fiscal year 1996 and $43.9
million in fiscal year 1997.
In responding to other recommendations, FAA issued guidelines and
standards for acquiring and upgrading airport access control systems;
improved its acquisition guidance to ensure that program sponsors use
consistent approaches in selecting projects for inclusion in DOT's
budget request; and issued policies clarifying the criteria for
providing grants-in-aid to airports under letters of intent and the
Military Assistance Program. Additionally, consistent with our
recommendation, a Presidential Decision Directive established DOT as
the lead agency for all federal civil Global Positioning System
matters including coordination of civil augmentation systems to
minimize costs and duplication of effort between agencies.
SURFACE SAFETY
------------------------------------------------------ Chapter 2:5.1.3
Each year 40,000 people die on the nation's highways and about 1,200
are killed in railway accidents. The societal costs total in the
hundreds of billions of dollars. Our work has contributed to the
following actions: (1) under contract with the National Highway
Traffic Safety Administration (NHTSA), the American Association of
Motor Vehicle Administrators published and distributed to the states,
a handbook for improving periodic motor vehicle inspection programs;
(2) the Congress, in the Swift Rail Development Act of 1994, directed
the Federal Railroad Administration (FRA) to complete rulemaking
governing passenger car safety by 1999; (3) the Secretary of
Transportation launched a campaign to increase seat belt use by
encouraging states to pass primary enforcement laws; (4) the NHTSA
extended major automobile safety requirements to light trucks and
vans as we had recommended in 1978 and 1990; (5) DOT delayed
expanding commercial truck traffic from Mexico until consultations
are completed between the U.S. and Mexico to improve safety and
security; and (6) FRA required railroads to adopt internal control
procedures to enhance the quality of information pertaining to rail
equipment, accidents and incidents.
SURFACE INFRASTRUCTURE
------------------------------------------------------ Chapter 2:5.1.4
Our analysis of DOT's budget request and other work has resulted in
significant savings to the taxpayer. Based on our work, Congress
reduced DOT's 1996 budget request by (1) $35 million for the
Northeast Corridor Improvement Program, and an additional $10 million
for the next generation high-speed rail system; (2) $128.9 million
for Intelligent Transportation Systems; (3) $300 million for the
Congestion Relief Initiative based on our finding that it was
duplicative of other programs; (4) $30 million for the Pennsylvania
Station Redevelopment Project; and (5) $42 million for Chicago's
Central Area Circulator project. The latter project was subsequently
cancelled which will result in further savings of $148.2 million.
Finally, the Congress eliminated the Interstate Commerce Commission
and created a Surface Transportation Board within DOT following a
model we presented in testimony resulting in savings of $36.6
million.
Our work on the costs and financing of the Central Artery/Tunnel
project in Boston resulted in the Federal Highway Administration
(FHWA) and the state agreeing to GAO's cost estimate of $10.4 billion
and in the FHWA requiring that the state have bonding authority to
cover the project's cost. The FHWA implemented a recommendation that
we consider key to protecting the nation's highway infrastructure.
We had recommended that the 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. In response to these
recommendations, the FHWA published a policy statement on life cycle
cost analysis on September 18, 1996.
In other actions, the Federal Transit Administration (FTA)
implemented several of our recommendations designed to enhance its
bi-annual report to the Congress on the nation's mass transit needs
and the FHWA issued guidance that will provide the framework for
modifications to the National Highway System. Further, following
concerns raised by GAO, Amtrak restructured it operations and
developed a strategic business plan designed to increase revenues and
reduce costs. We continue to monitor Amtrak's progress in meeting
its goal of operating self-sufficiency by the year 2002.
COAST GUARD
------------------------------------------------------ Chapter 2:5.1.5
The Congress is looking closely at Coast Guard missions and functions
to determine if any can be accomplished more efficiently through
reduction, transfer, or privatization. It is also monitoring the
agency's progress in downsizing in a fiscally and organizationally
sound manner. Our work has focused on identifying ways to reduce the
Coast Guard's budget consistent with these goals.
The Coast Guard acted on a variety of our recommendations, such as
reporting annually to the Congress on the progress of demonstration
programs involving local citizens in overseeing the environmental
impact of various oil related activities in Alaska, improved its
performance measurement system to aid in better resource allocation
decisions, improved its enforcement of restrictions on the discharge
of garbage and plastics from ships, took interim actions to improve
management of its cutter inventories, improved its project selection
process for its Research, Development, Training and Equipment
program, and reported on an Anti-Deficiency Act violations to the
Congress and the President.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:5.2
Although many actions and initiatives have been taken by the
Congress, DOT, and its agencies in response to our recommendations,
some important recommendations remain open and warrant priority
attention.
TRACK SAFETY INSPECTIONS
------------------------------------------------------ Chapter 2:5.2.1
In reporting on the Federal Railroad Administration's (FRA) Track
Safety Inspection Program, we recommended that the FRA 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 FRA finalizes the new Track Safety Standards. DOT expects to
issue revised guidance to its inspectors by December 1997.
(GAO/RCED-94-56)
NEW AVIATION SECURITY
TECHNOLOGY
------------------------------------------------------ Chapter 2:5.2.2
To improve aviation security, we recommended that FAA develop a
long-term and comprehensive national strategy that combines new
technology, procedures, and better training for security personnel.
This plan will help focus federal and private sector resources and
provide a road map for federal agencies and the airline industry to
follow. The current aviation security system has numerous
shortcomings that could be exploited by terrorists. Although a White
House Commission on Aviation Safety and Security has recommended a
number of short-term improvements, important questions about how new
initiatives will be implemented and paid for remain unanswered. New
explosives detection technology is not a panacea--a mix of
procedures, new technology, and better training will be needed to
improve security. This is one of the most complex and challenging
issues the aviation community will face over the next decade and
could cost billions of dollars. DOT's plans for implementing this
recommendation may be contained in the White House Commission report
scheduled to be issued in February 1997. (GAO/T-RCED/NSIAD-96-237)
GLOBAL POSITIONING SYSTEM
------------------------------------------------------ Chapter 2:5.2.3
When augmented, the Global Positioning System could provide
substantial safety and efficiency benefits for airlines and other
users of the National Airspace System. One of the main benefits of
the Global Positioning System will be prevention of accidents and the
associated casualties--use of the Global Positioning System receivers
may have prevented the American Airlines crash in Columbia when the
ground-based navigational aids were out of service and the pilot got
lost in mountainous terrain. Additionally, airlines will save
hundreds of millions through more efficient and direct routings and
approaches. Finally, production of the Global Positioning
System-related equipment for aircraft and other transportation modes
is expected to be an $8 billion per year industry. In May 1995, we
recommended that FAA prepare a comprehensive plan for augmenting the
Global Positioning System, transitioning to it, and updating the plan
regularly. The plan should include, among other things, schedule and
cost estimates for developing and implementing the augmentation
systems as well as information on the probability that FAA will meet
these estimates. FAA completed a public version of a the Global
Positioning System Transition Plan in July 1996, and is initiating
work on a the Global Positioning System Transition Plan Library which
is intended to address other users' needs. The Library's completion
is expected in July 1997. (GAO/RCED-95-26)
COAST GUARD'S VESSEL
TRAFFIC SERVICE SYSTEM
------------------------------------------------------ Chapter 2:5.2.4
In reporting on the Coast Guard's planned procurement of a $260
million to $310 million Vessel Traffic Service system that will guide
traffic through busy ports, we recommended that, given the high
development costs for the program and the large number of proposed
sites that show relatively low net benefits from acquiring new Vessel
Traffic Service systems, the Coast Guard determine whether the safety
benefits of the Vessel Traffic Service can be achieved more
inexpensively. The Coast Guard concurred with our recommendation.
In its deliberations on DOT's fiscal year 1997 budget request, the
Congress expressed concern over the expected cost and decided that
the Vessel Traffic Service program, as presently configured, should
be terminated. To that end, the Congress authorized $1 million in
fiscal year 1997 for the Coast Guard to identify minimum user
requirements, user fee options, public/private partnerships, and to
propose a viable new program. (GAO/RCED-96-83)
FEES FOR REGISTERING AND
CERTIFYING AIRCRAFT
------------------------------------------------------ Chapter 2:5.2.5
A potential option for dealing with limited FAA resources, is to
establish new user fees or increase existing ones for the services it
provides, taking into consideration the government's costs, the value
of the services to the user, and the public policy or interest
served. For example, the Congress authorized the collection of $75
million in new user fees during fiscal year 1997 on a trial
basis--the user fee being tested is for "overflights" of U.S.
controlled airspace without taking off from, or landing in, the
United States. In 1993, we reported that FAA is not fully recovering
the cost of processing aircraft registration applications and
estimated, that, by not increasing fees since 1968 to recover costs,
FAA had foregone about $6.5 million in additional revenue. In
accordance with our recommendations, DOT is processing a Notice of
Proposed Rulemaking to increase aircraft registration fees and
expects to issue it in late 1997. In 1996, we recommended that DOT
reevaluate the appropriateness of the Office of the Secretary
increasing its fees and FAA establishing fees for services to certify
new airlines. DOT concurred and indicated that, as part of FAA's
reform efforts, there is a significant focus on financing reform and
funding strategies. (GAO/RCED-96-8, GAO/RCED-93-135}
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 on the nation's
educational efforts--from preschool through higher education
programs--and its efforts to develop skilled workers, link potential
workers with employment, and ensure basic workplace protection. The
quality of life in this country and our ability to compete in the
international marketplace are heavily influenced by the nation's
investment in educational and employment programs. The Departments
of Education and Labor are the federal agencies with primary
responsibility for overseeing this investment. Working with state
and local governments, the federal government invests over $60
billion annually to promote access to quality education and to
advance opportunities for productive employment under safe and
equitable conditions.
Our work has alerted the Congress and executive branch agencies to
important issues and provided recommendations that have become the
foundation for congressional and agency action. Our education
finance work led to substantial improvement in the targeting of
federal educational funds to children most in need because of poverty
or migration, and our work on the condition of school facilities led
to federal funding of school infrastructure. Our higher education
work has identified ways in which the federal government can minimize
student loan defaults and has led to changes in student financial
assistance information management systems.
With respect to workplace quality, our work describing the magnitude,
complexity, and dynamics of current workplace federal regulation, and
the need to consider alternatives, has been a valuable source of
information as the Congress has considered far-reaching changes in
the regulatory strategies for worker protection. Our reports and
testimonies on the need to reform and streamline the current system
of overlapping employment training programs influenced congressional
deliberations that led to House and Senate bills to consolidate such
programs.
Our work on the AmeriCorps national service program has also been
highly influential. Our information on the total resources needed to
field an AmeriCorps participant led to a fiscal year 1996
appropriation for National and Community Service Act programs that
was $70 million less than the previous year's funding and about $400
million less than the amount the administration requested.
Highlights of our contributions in preparatory education (preschool,
elementary, and secondary education), higher education, work force
skills and jobs, and workplace quality follow.
PREPARATORY EDUCATION
------------------------------------------------------ Chapter 3:1.1.1
Our preparatory education work has focused on ways in which the
federal government could be more effective in supporting and
encouraging state and local educational efforts. For example, our
series of reports on school facilities which documented the lack of
necessary infrastructure and technology, was used to support the need
for federal funds to assist states.
We also recommended that the Secretary of Education work with
knowledgeable educators and researchers as well as state, district,
and school officials to develop ways to assess the progress of
children with special needs, such as those with limited English
proficiency and those with disabilities, in achieving high standards.
As a result, the Department is working closely with the National
Research Council to develop ways to include children with
disabilities in new assessments, and the Department is reviewing
procedures used to assess the performance of children with limited
English proficiency.
Our work has also led to improvements in federal program operations.
For example, we recommended that the Secretary of Education continue
to assess the manner in which federal education programs are reviewed
by auditors and, as needed, promote changes in the way the programs
are reviewed so that the review process is more consistent with
schools' attempts to improve. The Department is revamping its
monitoring procedures to include more emphasis on program outcomes.
Also, to help ensure the consistency of the Department of Education
in its investigation deteterminations, we recommended that the
Department develop and issue policy guidance that specifies how the
Department's regional offices should conduct ability-grouping and
tracking investigations. The Department has developed such guidance
and provided it to its regional investigators and the public,
including state and local education agencies.
HIGHER EDUCATION
------------------------------------------------------ Chapter 3:1.1.2
In the higher education arena, our efforts have primarily involved
cost containment and the prevention of fraud and abuse with respect
to federal resources used to ensure that eligible students have
access to quality higher education. Our work has led to cost
reductions of over $900 million in fiscal years 1995 and 1996 and
administrative changes. For example, our testimonies and reports
identifying poor financial and information management of student aid
programs contributed to the Department of Education's implementation
of administrative improvements. In testimonies and a report, we
contributed to the congressional debate about the future of the
direct student loan program by identifying the advantages of a
properly implemented program.
Other reports and testimonies addressed options for college savings
for students and their parents, achieving cost reductions through the
consolidation of similar programs or the elimination of duplicative
ones, and some of the contributing factors and coping strategies
connected with the high cost of college. Although the Department has
made changes based on our recommendations, federal student financial
assistance programs remain vulnerable to fraud, waste, and abuse.
For this reason, we are continuing to examine various aspects of
these programs as part of GAO's special focus on high risk federal
programs that could result in the loss of substantial amounts of
federal resources.
WORK FORCE SKILLS AND
JOBS
------------------------------------------------------ Chapter 3:1.1.3
The focus of this work has been to identify ways in which federal
programs can better assist workers to acquire the skills they need to
become economically self-sufficient and help employers recruit and
hire qualified employees. Both the House and Senate have made
extensive use of our reports and testimonies describing multiple
employment training programs and recommending the consolidation or
elimination of overlapping and duplicative programs. The Senate also
used our report on Job Training Partnership Act (JTPA)
programs--which found that JTPA-sponsored training did not
significantly increase the long term earnings or employment prospects
of participants--to support legislation reforming job training and
reducing funding for JTPA programs. Our work on Job Corps questioned
its effectiveness and has led to congressional interest in examining
various aspects of the program.
The Department of Labor has also taken actions, based on our work, to
improve the Job Corps and the Employment Service. We recommended
that the Department of Labor determine whether the continued use of
national training contractors for Job Corps training programs is cost
effective. In response, Labor has initiated a new system to compare
the performance of national contractors with overall Job Corps center
performance. In addition, the Department will review all Job Corps
course offerings to ensure that they are for occupations with a labor
market demand. With respect to the Employment Service, we
recommended that Labor work with the states to identify and solve
problems affecting program performance, increase technical assistance
as a way of promoting quality, and share information on effective
state and local employment practices. As a result, Labor initiated
the "Employment Service Revitalization Strategy" to increase the
Employment Service's value to its customers.
WORKPLACE QUALITY
------------------------------------------------------ Chapter 3:1.1.4
Our reports and testimonies on workplace quality issues have focused
on the maintenance of basic workplace protection for employees while
minimizing the regulatory compliance burden on employers. For
example, we testified on alternative approaches to improving
workplace protection and on the Occupational Safety and Health
Administration's (OSHA) efforts to better protect workers through
enhanced involvement of business in the regulatory process.
The Congress has used our work in its deliberations about several
different agencies. For example, our work on National Labor
Relations Board staffing trends and management iniatives, was relied
on by the Senate Appropriations Subcommittee in its deliberations on
funding for the Board. Our work on over 1,000 combined Education and
Labor field offices was used by the Congress in its discussions on
how to streamline the federal government.
Our work has also led to numerous agency actions. For example, we
recommended that OSHA develop procedures to obtain worksite-specific
injury and illness data from employers so that OSHA could use the
data to better target inspections and education and training programs
to the most hazardous worksites and make more efficient use of
limited inspection and training resources. As a result, OSHA is
collecting worksite-specific injury and illness data from selected
high hazard employers. In response to our recommendation, Labor has
also improved its procedures to guard against the use of fraudulent
or inaccurate data in the Davis-Bacon wage determination process.
At the Securities and Exchange Commission (SEC), our work on
employment discrimination in the securities industry led to a number
of actions to better ensure equitable resolution of employment
discrimination cases. The SEC now directs self-regulatory
organizations (SRO), such as the New York Stock Exchange, to track
the numbers, types, and outcomes of discrimination cases that are
arbitrated by their arbitration departments, establish written
criteria and standards for excluding persons with significant
disciplinary histories from their arbitration pools, require their
arbitrators to disclose criminal convictions, and use information on
arbitrators' expertise when selecting arbitrators to serve on
arbitration panels. The SEC has also established a schedule for
inspecting SROs, begun to visit SROs at times between on-site
inspection visits to determine whether its recommendations have been
implemented, and issued guidance to its inspectors to specifically
look for arbitrated employment discrimination cases when they select
files to review during their inspections.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:1.2
DEPARTMENT OF EDUCATION
MANAGEMENT
------------------------------------------------------ Chapter 3:1.2.1
In our 1992 transition series report on education issues, we
recommended that the Department of Education have information and
financial management systems that provide needed data and protect the
federal government's financial interests from waste, fraud, and
mismanagement. We recognized that corrective actions would require
new systems and revised regulations, or legislation, or both. The
Department is redesigning its core financial management systems and
it has taken steps to improve its cash management. It has also
established an information management committee to address problems
in data collection and dissemination. Although the Department has
made progress in implementing our recommendation, its initatives are,
by their nature, long term efforts that will require more time to
complete. (GAO/OCG-93-18TR)
STUDENT FINANCIAL AID
------------------------------------------------------ Chapter 3:1.2.2
In our report on the use of student financial aid data, we
recommended that the Department of Education improve the accuracy and
completeness of student financial aid data by doing such things as
continuing to screen data entered into the National Student Loan Data
System (NSLDS) to ensure that they are in a consistent format and
testing the accuracy and validity of data already in NSLDS. We also
recommended that the Department analyze student aid data more closely
to identify patterns of noncompliance with federal requirements and
take appropriate corrective actions. In response, the Department
formed the NSLDS Data Integrity Insurance Group to (1) identify data
anomalies, inconsistencies, and inaccuracies; (2) correct and prevent
data problems; and (3) work toward ensuring data accuracy,
completeness, and timeliness. The group identified several data
inaccuracies that resulted in additional edits being added to NSLDS
and many omissions and inaccuracies in data submitted by schools for
entry into the Department's systems. The Department also formed an
NSLDS team to review alleged instances of loan defaulters receiving
subsequent loans, which they were not eligible to receive because of
their previous defaults. The Department is also working with a
contractor to identify and verify critical data elements in NSLDS.
(GAO/HEHS-95-89)
OCCUPATIONAL SAFETY AND
HEALTH
------------------------------------------------------ Chapter 3:1.2.3
In our report on the need for changes in the combined and
federal-state approach to occupational safety and health, we
recommended that OSHA emphasize measures of program outcomes and
evaluations of the effectiveness of specific program features as it
assesses both its own activities and those of the state-operated
programs it is statutorily responsible for overseeing. OSHA is in
the process of implementing this recommendation. It is developing a
comprehensive performance measurement system that will focus on
outcomes to measure its own effectiveness. OSHA and state
representatives have discussed the application of this comprehensive
system to OSHA's monitoring of state safety and health programs. In
addition, OSHA is seeking agreement on performance measures with
interested states--performance measure agreements with two states
have been approved and a third one is being negotiated.
(GAO/HEHS-94-10)
In the same report, we recommended that OSHA implement procedures for
ensuring that employers accurately record occupational injuries and
illnesses. OSHA is also in the process of implementing this
recommendation. It has developed changes in its injury and illness
recordkeeping regulations, published a Notice of Proposed Rulemaking
in the Federal Register, and received public comments. OSHA is
conducting a preliminary analysis of the comments in preparation for
beginning work on the final rule. Proposed changes include
simplifying the recordkeeping forms, clarifying definitions,
improving employee involvement, and management certification of the
records. OSHA officials plan to publish the final regulations in
1997. (GAO/HEHS-94-10)
In a report on OSHA's policy with respect to the abatement of serious
hazards, we recommended that OSHA promulgate a regulation requiring
employers to submit detailed evidence of corrective actions that have
been taken to abate hazards. We also recommended that OSHA revise
its policies so that (1) citations to employers at construction
worksites 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.
OSHA has chosen to develop a new abatement verification regulation in
response to both our recommendation that it promulgate a regulation
requiring evidence of corrective action and that it revise its
policies regarding citations and abatements. OSHA published a Notice
of Proposed Rulemaking in the Federal Register and is making
revisions to the proposed regulation based on comments received from
the public. OSHA has not stated when the regulation will be
finalized. (GAO/HRD-91-35)
EEOC'S EXPANDING WORKLOAD
------------------------------------------------------ Chapter 3:1.2.4
To address increases in workload of the Equal Employment Opportunity
Commission (EEOC), 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. Although action is
expected, at the present time, congressional committees responsible
for EEOC have not planned any hearings or legislation to address
EEOC's workload problem. (GAO/HEHS-94-32)
VETERANS' AFFAIRS AND MILITARY
HEALTH CARE ISSUE AREA (BUDGET
FUNCTIONS 050, 550, 700 & 753)
---------------------------------------------------------- Chapter 3:2
GAO Contact: David P. Baine, 202/512-7101
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:2.1
The Veterans' Affairs and Military Health Care issue area is
responsible for GAO's evaluations of health care directly provided by
the federal government as well as nonhealth benefits provided by VA.
Our work on health care delivery focuses primarily on the services
provided to over 34 million veterans and military beneficiaries by VA
and DOD through their $32 billion systems of hospitals, clinics, and
managed care contracts. We also evaluate health care provided by the
Indian Health Service and Bureau of Prisons. For VA nonhealth
benefits, our evaluations address disability compensation, pensions,
vocational rehabilitation, and life insurance. These programs serve
over 3 million veterans at a cost of about $18 billion a year.
Rising health care costs and substantial budget deficits have
prompted major congressional concerns about whether these agencies
are delivering quality health care to their beneficiaries as
efficiently and cost-effectively as possible. The downsizing of the
military forces and the declining but aging veteran population has
also prompted a concern about the structure of DOD and VA health
delivery and VA's benefits systems. Our work has contributed to the
debates and resulted in improvements in the related programs as
follows.
DOD PROGRAMS
------------------------------------------------------ Chapter 3:2.1.1
In fiscal year 1996, we continued to focus on issues related to the
reform and restructuring of the military health care system,
particularly TRICARE, the managed care program DOD began to implement
last year and is continuing to phase-in across the country. Our
examination of TRICARE led to DOD committing to gather the data
necessary to measure the eventual, overall success of the program.
We also studied DOD's use of Uniformed Services Treatment Facilities
(USTFs) to provide care for DOD beneficiaries that resulted in (1)
the establishment of a uniformed benefit for DOD beneficiaries
receiving care at USTFs, (2) a requirement that prevents
double-billing for care provided to Medicare-eligible DOD
beneficiaries, and (3) a reduction in the appropriation level for
USTFs by $50 million.
VA HEALTH CARE PROGRAMS
------------------------------------------------------ Chapter 3:2.1.2
Our work supported congressional efforts to limit growth of VA's
health care appropriation. We provided evidence that VA overstated
the resources it will need to meet the health care needs of veterans
in the mandatory care category because (1) it did not adequately
relflect the declining demand for VA hospital care and (2) much of
the care it provides is discretionary. In addition, we identified
opportunities to reduce VA operating expenses by billions of dollars
in the next 7 years by completing actions on a wide range of
efficiency improvements.
Our work on VA's proposed $211 million construction project at Travis
Air Force Base contributed significantly to congressional debate over
VA's fiscal year 1997 appropriations. We reported that the hospital
is no longer needed and that VA planned to build too much outpatient
capacity. Although the Congress appropriated funds for the project,
it required VA to study alternatives to the project, such as those
described in our report, before spending the funds.
Through testimony, a report, and other assistance, we worked closely
with the Congress in evaluating eligibility reform proposals and
identifying alternative approaches to limit the budgetary impact of
reforms. We reported that VA had underestimated the potential effect
of eligibility expansions on demand for VA care and therefore the
potential cost of reform proposals. Citing our concerns, and those
of CBO, the Congress added a limit on VA health care authorizations
before enacting reform legislation.
With respect to VA efforts to improve the accessibility of VA care,
we worked closely with the Congress to assess the potential effects
of such efforts. As a result of our efforts, VA redirected its
efforts toward improving access for current users rather than
attracting new users.
VA NONHEALTH BENEFITS
PROGRAMS
------------------------------------------------------ Chapter 3:2.1.3
With respect to VA's efforts to streamline its services, our past
work identified significant delays and backlogs in VA's claims
processing. In 1996, we reviewed VA's claims processing information
systems and reported numerous problems including a lack of business
strategy and information resources management plan. In response to
our recommendations and recommendations by others, VA has taken some
actions to reengineer and modernize its claims processing systems but
has not addressed all concerns.
We have also recommended ways VA can better manage the costs of its
services. For example, we recommended that VA establish procedures
that focus on preventing overpayments that include identifying
beneficiaries who will soon become eligible for social security
benefits. VA has adopted our recommended actions and could
potentially reduce costs over $50 million annually.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:2.2
DOD
------------------------------------------------------ Chapter 3:2.2.1
DOD is in the process of improving its TRICARE contracting
procedures, but this process is ongoing and our recommendations in
this area remain open. Also of key importance are our
recommendations that DOD begin gathering certain data on who is using
DOD health care under the TRICARE program, as well as DOD's success
in providing timely access to its beneficiaries. This data will be
critical in the eventual evaluation of TRICARE's overall success.
(GAO/HEHS-95-142, GAO/HEHS-96-128)
VA
------------------------------------------------------ Chapter 3:2.2.2
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 benefits program. (GAO/HEHS-95-39)
VA has struggled for years to develop a method for equitably
allocating resources among its facilities nationwide. The need for
such an allocation system has intensified in recent years as
veterans' demographics shift and its health care delivery undergoes
dramatic changes to adjust to increasingly limited resources. In
February 1996, we recommended that VA take steps to link its resource
allocation process to the strategic planning process so that
allocations are more closely associated with VA's long-range goals,
performance standards, and workload priorities, including exploring
options to help ensure that veterans have consistent access to care
throughout the system. (GAO/HEHS-96-48)
VA hospitals too often serve patients whose care could be more
efficiently provided in alternative settings, such as outpatient
clinics or nursing homes. In July 1996 we testified and reported
that VA facilities could save billions of dollars by reducing
nonacute admissions and days of care in VA hospitals. Toward this
end, we recommended that VA establish an independent, external
preadmission certification program for hospitals. (GAO/HEHS-96-121)
VA, through its Readjustment Counseling Service, operates over 200
community-based facilities, known as Vet Centers, which help certain
veterans make a successful transition from military to civilian life.
In July 1996, we reported that VA lacks the information necessary to
demonstrate that its psychological services are effective. We
recommended that VA direct the Service to develop a systematic
approach for evaluating, on a continuing basis, the effectiveness of
Vet Centers in meeting veterans' psychological needs.
(GAO/HEHS-96-113)
Three VA-administered life insurance programs have and for the
foreseeable future will continue to have sufficient excess funds to
pay their own administrative costs. This would save an estimated $27
million annually in appropriated monies. In order to pay for this,
veterans' annual dividends (which currently range from $274 to $373)
would be reduced by about $10. Insured veterans have no statutory or
contractual right to excess funds. However, because the law now
requires the government to pay the administrative costs, a
legislative change would be required to allow these programs to pay
their own administrative costs. Thus, in March 1992 we recommended
that the Congress amend 38 U.S.C. 1982 to require that the three VA
insurance programs pay administrative costs from excess interest
income. (GAO/HRD-92-42)
VA has a goal of providing nursing home care to 16 percent of
veterans needing such care, yet it recovers, through veterans
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,
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)
Although VA agreed with our recommendations to focus 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)
HEALTH FINANCING SYSTEMS AND
HEALTH SERVICES QUALITY &
PUBLIC HEALTH ISSUE AREAS
(BUDGET FUNCTIONS 550 AND 570)
---------------------------------------------------------- Chapter 3:3
GAO Contacts: William J. Scanlon, 202/512-7114
Bernice Steinhardt, 202/512-7119
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:3.1
Our work on the nation's public and private health insurance
programs, access and quality issues, and public health efforts covers
programs that comprise dominant portions of the federal domestic and
state budgets. In reviewing the Medicare and Medicaid programs--with
projected federal outlays of $318 billion and state and local outlays
of $76 billion in fiscal year 1997--we focused on identifying ways to
reduce costs without harming beneficiaries' access to quality care.
For Medicare, fiscal problems include the projected insolvency of the
Hospital Insurance Trust Fund by the year 2001 and the coming of
entitlement age of the "baby boomers," who will begin retiring about
2010. For Medicaid, despite a recent slow-down in spending growth,
spending pressures--particularly with respect to long-term care--are
not expected to subside. At the same time, we examined the ongoing
transformation of U.S. health care, its effects on local markets and
public health institutions, the heightened attention to information
about health care quality, and the work of public health agencies,
including the Food and Drug Administration (FDA), the National
Institutes of Health (NIH), the Centers for Disease Control and
Prevention (CDC), and the Substance Abuse and Mental Health Services
Administration (SAMSA), which together spend $19 billion annually.
WASTE, FRAUD, ABUSE, AND
PATIENT PROTECTION
------------------------------------------------------ Chapter 3:3.1.1
The nation's health insurers are at risk of considerable financial
loss due to waste, fraud, and abuse. In particular, Medicare's
vulnerability--reviewed in numerous GAO products--stems form several
weaknesses, including antiquated anti-fraud-and-abuse screening
controls that allow improbably high claims to be paid without
adequate review, the absence of specific legislative authority for
Health Care Financing Administration (HCFA) to contract with
organizaitons other than insurance companies to perform
state-of-the-art claims review, and weak controls to check the
validity of providers that are authorized to bill the program. Last
year, the Congress passed the Health Insurance Portability and
Accountability Act of 1996 (P.L. 104-191), popularly known as the
Kassebaum-Kennedy Act. Consistent with issues raised in GAO's body
of health care fraud and abuse work over the past 5 years, the act's
provisions, among other things, (1) increase the funds used to
investigate Medicare fraud and abuse and pursue the recovery of
inappropriate payments, (2) make HCFA's authority explicit to
contract with companies that specialize in utilization review,
provider audit, and other safeguard activities, (3) establish a
national health care fraud data collection program, and (4) specify
health care fraud as a separate criminal offense.
The Department of Health and Human Services (HHS), its Inspector
General, and HCFA have also addressed the various waste and abuse
issues we raised in recent years. For example, Operation Restore
Trust, an antifraud initative involving the HHS Inspector General,
HCFA, and the Department of Justice--among other federal, state, and
local agencies--targets Medicare abuse and misuse in several states,
focusing on home health, nursing homes, and medical equipment and
supplies--areas on which we reported several times recently and made
recommendations. HCFA also has an interagency agreement with the
DOE's Los Alamos National Laboratory to obtain help in developing
antifraud and abuse software for HCFA's use in screening Medicare
claims. The Laboratory's proposal to do this work cites GAO among
others as a source for the need for these fraud and abuse prevention
tools. HCFA has also improved its provider identification system by
establishing a national provider identifier system, addressing
concerns raised in several of our products about fraudulent schemes
involving the manipulation of Medicare's old provider number system.
Several of our reports--in 1988, 1991, 1995, and 1996--also revealed
shortcomings in HCFA's oversight of health maintenance organizaitons
(HMO) enrolling Medicare beneficiaries. More than 10 percent of
Medicare's beneficiary population is enrolled in these managed care
health plans, but HCFA has not adequately enforced HMO compliance
with federal standards or kept beneficiaries apprised of pertinent
information about Medicare HMOs. Several of our reports called for,
among other things, more explicit sanction authority to improve
HCFA's weak enforcement performance. Consistent with this message,
the 1996 Health Insurance Portability and Accountability Act included
provisions giving HCFA a broader range of sanction options to prompt
HMO correction of problems affecting marketing, enrollment, quality
assurance systems, grievance and appeals procedures, and access to
health services. We also reported that HCFA has documented numerous
instances of beneficary confusion over managed care's benefits and
restrictions and of abusive sales proctices by some HMO sales agents.
Despite its awareness of thise problems, however, HCFA does not
provide beneficiaries with any of the comparative consumer guides
that the federal government and other employer-based health insurance
programs routinely distribute to their employees and retirees. As a
result of our recent work on this issue, HCFA accelerated its
timetable committing the agency to provide comparative information on
Medicare HMOs.
We also reported on fraud and abuse problems that affect Medicaid as
well as Medicare and other federal health programs. In particular,
we examined the issue of health care providers who have been removed
from their state Medicaid programs for committing program fraud or
rendering substandard care to beneficiaries. Although, the HHS
Office of Inspector General (OIG) has used its authority to exclude
thousands of providers, from all federal programs, our work suggests
that several weaknesses in the HHS process can leave sanctioned
providers on the rolls of federal health programs for unacceptably
long periods of time. This puts at risk the health and safety of
beneficiaries and compromises the financial integrity of Medicaid,
Medicare, and other federal health programs. In response to this
work, the OIG has redesigned its system for tracking referrals and
has committed additonal resources to ensure the completeness of its
list of excluded providers.
FINANCIAL AND MANAGEMENT
MATTERS
------------------------------------------------------ Chapter 3:3.1.2
In debates over the reform of Medicaid and the design of other
federal programs, a pivotal issue is how federal monies should be
distributed among states and localities. We provided information to
the Congress on alternate specifications of the federal funding
formula for Medicaid. In particular, our technical analysis and
expertise helped the cognizant House and Senate committees develop
formulas to distribute funds under their block grant proposal for
Medicaid. We also provided comprehensive technical analysis and
redesign of the formula grants for the Ryan White CARE Act. Our
efforts and information helped the Congress improve the targeting of
federal funds among the states and cities.
During 1996, we provided information to the Congress concerning the
reform of the FDA. Specifically, we reported on drug and device
approval times and on the status and effectiveness of new drug and
device review agencies and activities in Europe. These reports
helped establish a factual foundation on which proponents of
different approaches could build. As a result, current FDA reform
initiatives better reflect actual experience.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:3.2
SPECIAL PAYMENTS TO
TEACHING HOSPITALS
------------------------------------------------------ Chapter 3:3.2.1
We reported that Medicare's extra payments to 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. Since our report was issued, the CBO and
the Prospective Payment Review Commission also have recommended
similar reductions. Their analyses of recent data continue to show a
reduction is warranted. (GAO-HRD-89-33).
EXCESSIVE MEDICARE
PAYMENTS FOR COSTLY
TECHNOLOGIES
------------------------------------------------------ Chapter 3:3.2.2
Provider costs and Medicare reimbursements for medical procedures
involving new technologies, such as magnetic resonance imaging (MRI),
are often high in order to offset initial expenditures for equipment
and low rates of usage. We reported, however, that HCFA does not
make timely adjustments to the Medicare reimbursement rates as new
medical technologies mature and unit costs decline. Therefore, we
recommended that HCFA (1) survey facility costs and revise the
Medicare fee schedule to more accurately reflect the costs that are
incurred and (2) periodically review and adjust the Medicare
reimbursements for procedures using high-cost, revolving
technologies.
To help bring Medicare payment rates more into line with actual
costs, the Congress has enacted several mandates to reduce rates for
specific procedures and services--including payments for MRI scans.
In addition, HCFA has three rate-reduction projects planned or under
way:
-- a revision of the Medicare Fee Schedule to reflect the actual
cost of staff, equipment, and supplies associated with medical
procedures.
-- a review to identify and correct any excessive Medicare payments
for 100 items of medical equipment and supplies.
-- planning of a demonstration project to evaluate a competitive
bidding process to set Medicare payment levels for some medical
equipment and supplies.
However, none of these projects targets new and expensive
technologies. We continue to believe that significant program
savings would result from an ongoing, systematic process for
evaluating the reasonableness of Medicare payment rates for maturing
medical technologies. (GAO/HRD-92-59)
RAPID SPENDING GROWTH IN
HOME HEALTH CARE
------------------------------------------------------ Chapter 3:3.2.3
Since 1990, Medicare outlays on home health care services--provided
to beneficiaries who are home-bound and need skilled care--have grown
at an average rate of over 30 percent a year. We reported that the
increase in home health outlays is largely due to increased usage
that has accompanied deterioration in program controls. Funding for
review of claims has declined by over a third. In addition, a court
struck down HCFA's interpretation of benefit coverage requirements;
this court ruling in effect widened Medicare coverage of home health.
Consequently, we suggested that the Congress may wish to consider
providing extra resources to strengthen controls against abuse of the
home health benefit. Furthermore, we suggested that the Congress may
wish to consider clarifying the scope of the benefit. At issue is
whether this benefit should continue to be more of a long-term care
benefit or whether it should be limited primarily to post-acute care.
(GAO/HEHS-96-16)
REFERRALS TO IMAGING
FACILITIES
------------------------------------------------------ Chapter 3:3.2.4
In 1993, we reported that physicians with a financial interest in
imaging facilities referred their Medicare patients for more imaging
services than physicians without such investments. As a part of the
Omnibus Budget Reconciliation Act of 1993 (OBRA). The Congress
included Provisions in OBRA restrict physicians from referring their
Medicare and Medicaid patients to facilities in which the referring
physician has a financial stake. In 1995, we recommended that HCFA
develop the procedures needed for Medicare claims processing
contractors to monitor these referrals. Although OBRA restrictions
were effective as of January 1, 1995, HCFA has not issued final
regulations and guidance needed to assure compliance with OBRA.
(GAO/HEHS-95-2)
MEDICARE REIMBURSEMENT
FOR THERAPY IN NURSING
HOMES
------------------------------------------------------ Chapter 3:3.2.5
Nursing home residents receive therapy services (e.g., physical
therapy) from various providers. We reported that Medicare is
vulnerable to overcharges by unscrupulous providers, due in part to
its flawed reimbursement methods, in part to its inadequate screening
of providers. Consequently, we recommended that HCFA set explicit
limits to ensure that Medicare pays no more for therapy services than
would any prudent purchaser. Furthermore, we recommended that
Medicare certification requirements be strengthened so that those
entities billing Medicare would be more accountable for the services
they provide to beneficiaries. (GAO/HEHS-95-23)
EXCESSIVE PAYMENTS FOR
MEDICAL SUPPLIES
------------------------------------------------------ Chapter 3:3.2.6
Medicare reimburses providers of certain medical items and supplies
according to fee schedules that do not reflect substantially lower
market prices. For example, Medicare pays $2.32 for a pad of gauze
that is available at the wholesale level for 19 cents. Excessive
fees invite submission of abusive claims by unscrupulous providers.
Coupled with inadequate review of such claims, these above-market
fees and payment rates lead to Medicare and the taxpayer losing
hundreds of millions of dollars.
Because current law imposes cumbersome administrative requirements
that HCFA must follow when adjusting payment rates, the one time HCFA
made such an adjustment it took three years. In addition, for some
items HCFA lacks authority to adjust payment rates. We recommended
that the Congress give HHS the flexibility to adjust fee schedules
promptly when overpriced services and supplies are identified.
(GAO-HEHS-95-171)
SCREENING MEDICARE CLAIMS
------------------------------------------------------ Chapter 3:3.2.7
Medicare is only supposed to reimburse providers for services that
are medically necessary. We reported that the several dozen Medicare
claims processors often use different automated screens to
distinguish necessary from unnecessary services, based on criteria
developed locally. We also reported that these screens do not target
medical procedures that are overused nationwide. (Up to several
hundred million dollars per year of unnecessary payments are at
stake.) Consequently, we recommended that HCFA act as a
clearinghouse--gathering information on both local medical policies
and screens for procedures that are widely overused, and
disseminating the information to all the claims processors. We also
recommended that HCFA hold the claims processors accountable for
implementing local medical policies and screens for procedures that
are overused nationwide. (GAO-HEHS-96-49)
Our evaluation of Medicare Part B 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)
PRIVATE SECTOR TOOLS FOR
MEDICARE MANAGEMENT OF
UTILIZATION AND PRICE
------------------------------------------------------ Chapter 3:3.2.8
Medicare's vulnerability to making billions of dollars in unnecessary
payments stems from a combination of factors, including price-setting
problems, antiquated anti-fraud-and-abuse controls, and weak controls
to check the legitimacy of providers billing the program. In 1995 we
recommended legislative and administrative changes to allow Medicare
to (1) develop more competitive payment rates, (2) enhance its fraud
and abuse detection efforts by adopting modernized information
systems, and (3) establish more rigorous requirements for granting
authorization to bill the program. (GAO/HEHS-95-210)
COLLECTIONS FROM OTHER
INSURERS
------------------------------------------------------ Chapter 3:3.2.9
Some beneficiaries have private health insurance that should pay
their claims ahead of Medicare. Our work showed that, as a result of
a 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)
HCFA'S CONTRACTING FOR
MEDICARE CLAIMS
PROCESSING
----------------------------------------------------- Chapter 3:3.2.10
Section 1816 of the Social Security Act (42 U.S.C. 1395h) authorizes
HCFA to contract with entities such as insurance companies, then
called fiscal intermediaries, to process Medicare part A claims.
HCFA also has a contract with the Blue Cross and Blue Shield
Association, the national trade association for the independent Blues
plans, which subcontracts with 41 Blues plans to process Medicare
part A claims. HCFA has not evaluated the association's performance
since 1989, even though HCFA from 1990 through 1992 paid the
association over $21 million. In our view, HCFA needs to assess the
association's performance regularly, just as it does for other
contractors, to ensure that the Medicare program is being managed
efficiently. We recommended that the Secretary of HHS direct the
Administrator of HCFA to develop criteria and evaluate the
performance of the Blue Cross and Blue Shield Association in its role
as the part A prime contractor. (GAO/HEHS-94-171)
MEDICARE PAYMENT RATES TO
RISK CONTRACT HMOS
----------------------------------------------------- Chapter 3:3.2.11
Most Medicare beneficiaries who join a HMO belong to a "risk
contract" HMO, which provides them all covered services in exchange
for a flat fee, paid by Medicare. We have reported that Medicare
generally overpays these risk HMOs, because its payment methods do
not correct enough for risk HMO enrollees' tendency to be healthier
and less costly than the average beneficiary. With risk HMO
enrollment at almost 10 percent of beneficiaries and growing rapidly,
these excess payments become substantial. Given the problem's
heightened urgency, we suggested that the Congress might wish to give
HHS the authority to reduce Medicare HMO payment rates in areas where
market data indicate that these rates are too high. (GAO/HEHS-96-21)
MEDICARE HMO OVERSIGHT
----------------------------------------------------- Chapter 3:3.2.12
Beneficiaries' confidence in Medicare managed care depends
significantly on the effectiveness of HCFA oversight. Although HCFA
has instituted several promising improvements, its monitoring and
enforcement of performance standards for Medicare HMOs still falls
short; quality assurance reviews are not comprehensive, enforcement
actions are too often weak, and the appeal process for beneficiaries
is slow. We recommended that HHS develop more consumer-oriented
oversight of the Medicare HMO program, including (a) routinely
publishing comparative data on HMOs' performance and on known
deficiencies and (b) assigning sufficient, trained staff to monitor
and verify the effectiveness of HMOs' quality assurance practices.
(GAO/HEHS-95-155)
SUPPLEMENTAL HEALTH
INSURANCE FOR THE ELDERLY
----------------------------------------------------- Chapter 3:3.2.13
One-third of retirees get supplemental insurance from their former
employers. If an employer subsequently modifies or discontinues a
Medicare beneficiary's plan, and if the person wants to obtain a
different supplemental policy, that beneficiary will not be eligible
for the 6-month open enrollment period provided for persons newly
enrolled in Medicare part B. Because such retirees may not be able
to get the alternative Medigap coverage they seek, we recommended
that the Congress amend the law to provide a mechanism for retirees
to obtain Medigap insurance when these circumstances occur.
(GAO-HEHS-94-185).
HEALTH CARE SHORTAGE
AREAS
----------------------------------------------------- Chapter 3:3.2.14
To better target resources, we recommended that the Secretary of HHS
apportion future National Health Service Corps (NHSC) funding to use
the loan repayment program to the maximum extent allowed by law.
Similarly, the Secretary should assess whether the benefits of the
state loan program, which is less costly, would warrant greater use
of the program. We also recommended that the Congress consider
amending the Public Health Service Act either to direct the Secretary
to use the loan repayment program rather than the scholarship program
to meet future NHSC needs, or to grant the Secretary greater
discretion to allocate larger amounts of NHSC funding through loan
repayment awards than currently allowed. (GAO/HEHS-96-28)
IMMUNIZATION OF CHILDREN
----------------------------------------------------- Chapter 3:3.2.15
CDC has established a large program to distribute vaccines to
children. The intent of the program is to assure immunization of
children from 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 the 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 from delayed
immunization. (GAO/PEMD-95-22).
HEALTH PROFESSION
EDUCATION
----------------------------------------------------- Chapter 3:3.2.16
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. We recommended that the Congress establish,
or direct the Secretary of HHS to establish more specific goals,
outcome measures, and funding criteria. (GAO/HEHS-94-164)
HOSPITAL CONSTRUCTION
----------------------------------------------------- Chapter 3:3.2.17
HUD's FHA Hospital Mortgage Insurance Program insures loans to
finance the renovation or construction of hospitals that meet certain
criteria. FHA mortgage insurance protects lenders against losses
they might incur if hospitals fail to make their mortgage payments.
As of August 1995, the program covered 100 projects in 18 states and
Puerto Rico, with an unpaid principal loan balance of about $5
billion. More than $4 billion of the insured projects and 9 of the
10 largest loan amounts are concentrated in New York. Given the
risks associated with this concentration, the Congress and HUD may
wish to explore further options--such as limiting risk exposure in a
particular state and capping mortgage insurance amounts--to help
ensure program stability. (GAO/HEHS-96-29)
In addition, flaws in FHA's methodology for estimating loan losses
limit the reliability of its loan loss reserve estimate. Moreover,
while FHA has developed performance measures for some of its major
programs, it lacks performance measures that would help HUD evaluate
the Hospital Mortgage Insurance Program. To improve the reliability
of FHA's loss reserve estimate, enhance compliance with federal
performance measurement requirements, and minimize financial losses
from future projects, we recommended that the Secretary of HUD: (1)
perform a comprehensive analysis of individual loan loss exposure
when default is considered probable and consider recent events, such
as policy changes, that can affect the performance of loans in
estimating loan loss reserves; (2) develop performance measures and
collect data needed to track the performance of the Hospital Mortgage
Insurance Program; and (3) pursue risk-sharing arrangements --where
private and public entities would share in potential financial losses
from hospital defaults on future FHA-insured projects--only after
evaluating the benefits and drawbacks of risk-sharing ventures, and
taking into account the experience of FHA's multifamily housing
programs. (GAO/HEHS-96-29)
FDA USER FEES
----------------------------------------------------- Chapter 3:3.2.18
The Congress passed the Prescription Drug User Fee Act of 1992 to
authorize user fees that would "provide the FDA with sufficient
additional resources to significantly expedite the drug approval
process." A critical question is whether the act has allowed safe and
effective new drugs to become available to patients earlier than they
were available before user fees were collected. The legislation
requires FDA to report to the Congress annually on changes in the
amount of time that drug applications are under review at the agency.
However, reductions in the amount of FDA review time do not
necessarily translate into drugs becoming available to the public
more quickly. Therefore, among other things, we recommended that FDA
include "time to market" in its annual report to the Congress.
(GAO/PEMD-94-26)
INCOME SECURITY ISSUE AREA
(BUDGET FUNCTIONS 600, 650)
---------------------------------------------------------- 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 upon programs like Social Security, Disability Insurance (DI),
Supplemental Security Income (SSI), and various existing and newly
created block grants for financial support and services. In
addition, Americans are dependent on Labor to provide oversight over
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 persons 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.
The work has contributed significantly to legislative and executive
actions that will result in financial savings and improvements in
program efficiency and cost effectiveness. For example, we reported
on the need to reform federal disability programs, contributing to
increased congressional oversight and legislation to target SSI
benefits toward children with more severe impairments. Further, the
Congress acted to remedy problems we highlighted by changing the law
regarding benefits for drug addicts and alcoholics and increasing
funding for Continuing Disability Reviews (CDRs). Legislative
changes and agency actions related to CDRs will result in fiscal year
1996 cost reductions of about $112 million in benefit reductions for
the SSI population, $243 million from reduced DI benefits, and about
$111 million from reduced Medicare benefits. Finally, having shown
that prisoners and other ineligibles regularly receive SSI, we have
recommended ways to keep ineligible applicants from receiving SSI.
Similarly, our work contributed to amending the Food Stamp Act of
1977 to authorize states to offset current recipients' benefits,
without their consent, to recover overpayments caused by agency
error. We also documented millions of dollars in potentially
erroneous payments from various programs made to deceased
beneficiaries nationwide. As a result, OMB now requires that all
agencies regularly use SSA death information to prevent such errors.
Based on our recommendations, Internal Revenue Service (IRS) issued
regulations to require more timely reporting of earnings to help
ensure that workers were not losing social security benefits.
Further, SSA took several actions to clarify wage reporting
instructions and better respond to employers' questions. Finally, we
were influential in HHS' examination of its organizational structure
and reorganization of regional staff to establish clearer lines of
authority and communications within and between the Office of Child
Support Enforcement (OCSE) and the states. These actions should lead
to fewer miscommunications and better working relations between OCSE,
HHS regional staff and state program staff.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:4.2
SOCIAL SECURITY
------------------------------------------------------ Chapter 3:4.2.1
In October 1993, we reported that while SSA had made progress in
solving its management problems, opportunities still 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. SSA
is revising its strategic plan and has in place a tracking and
monitoring system to monitor the progress of key agency initiatives
and the attainment of performance targets and plans to establish a
new methodology to ensure appropriate attention to key agency
initiatives. Further, SSA developed an integrated client database in
April 1995. The agency is currently in the process of refining and
analyzing the functional requirements of the new database before it
is released for agency-wide use. (GAO/HRD-94-22)
DISABILITY PROGRAMS
------------------------------------------------------ Chapter 3:4.2.2
SSA's plan for achieving self-support (PASS) program was established
in 1972 as part of the SSI program to help SSI and DI recipients
return to work, thus reducing or eliminating future benefit costs.
However, very few recipients have left the federal disability rolls
by returning to work. In February 1996, we reported that SSA has
done a poor job implementing and managing the PASS program. Because
SSA has provided insufficient program direction and support to its
field office staff, these staff have difficulties approving and
denying program applications. Further, the impact of the PASS
program on employment is unknown because SSA lacks basic data on PASS
program participation. Finally, a lack of safeguards has left the
PASS program vulnerable to abuse. We recommended that SSA take
several actions to address these deficiencies and SSA is making
progress in responding to these recommendations. For example, the
agency now requires all PASS applications to be approved by specially
trained staff. SSA also issued new operating procedures and revised
the application form. Both actions incorporated some of our
recommendations related to improving PASS program management and
eliminating program abuse. SSA has not, however, taken action to
gather additional management data on PASS program participation and
impact, and thus is unable to use these data to evaluate the impact
of PASS participation on employment. Finally, we recommended that
the Congress consider legislation to eliminate DI beneficiary
eligibility for SSI benefits through use of PASS, and SSA has
proposed such legislation, but the Congress has taken no action on
this. (GAO/HEHS-96-51)
In April 1996, we reported that weaknesses in the design and
implementation of DI and SSI program components have limited SSA's
capacity to identify and assist in expanding beneficiaries'
productive capacities. We noted that eligibility requirements and
the application process encourage people to focus on their
inabilities, not their abilities; work incentives offered by the
programs do not overcome the risk of returning to work for many
beneficiaries, and the complexities of work incentives can make them
difficult to understand and challenging to implement; and
beneficiaries receive little encouragement to use rehabilitation
services, which are relatively inaccessible to beneficiaries seeking
them. We recommended that SSA take immediate action to place greater
priority on return to work, including (1) designing more effective
means to accurately identify and expand beneficiaries' work
capacities and (2) better implementing existing return-to-work
mechanisms. SSA noted that it has undertaken several initiatives to
find new and innovative ways to encourage work among DI and SSI
beneficiaries. However, we believe that these steps, while in the
right direction, do not constitute the fundamental redirection of
goals and practices necessary to move the disability programs to much
greater emphasis on return to work. (GAO/HEHS-96-62)
WELFARE BENEFITS
------------------------------------------------------ Chapter 3:4.2.3
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 more in
benefit overpayments in the Aid to Families With Dependent Children
(AFDC), Food Stamp, and Medicaid programs. We recommended that the
Congress extend the authority authority for states to intercept
federal income tax refunds to include the recovery of AFDC and
Medicaid overpayments. Although a provision allowing states to do
this was included in HR 3734, it was omitted from the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, as
enacted, on primarily procedural grounds. (GAO/HEHS-95-111)
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 community policing, the size and extent of federal
law enforcement, firearms regulatory and criminal enforcement, and
health care fraud; (2) litigative and judicial activities, such as
administrative efforts to review local court processes and juvenile
justice incentive grant programs; (3) correctional activities; (4)
immigration control; and (5) U.S. Customs Service revenue collection
and enforcement.
CIVIL AND CRIMINAL LAW
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.1.1
Federal assistance for community policing amounted to nearly $1.4
billion in fiscal year 1996 to continue the President's campaign to
put 100,000 additional cops on the beat. The Public Safety
Partnership and Community Policing Act of 1994 (Community Policing
Act), Title I of the Violent Crime Control and Law Enforcement Act of
1994, authorizes the Department of Justice to award grants for the
hiring or rehiring of law enforcement officers to participate in
community policing. In a report on community policing, we noted that
the higher the crime rate, the more likely a jurisdiction was to
apply for a grant. The primary reasons jurisdictions that we
contacted chose not to apply for grants were cost related.
Specifically, these jurisdictions expressed uncertainty about being
able to continue officer funding after the grant expired and about
their ability to provide the required 25-percent funding match.
Federal law enforcement authority is dispersed among many federal
agencies. We found that there were at least 32 federal agencies
employing about 41,000 law enforcement investigative personnel in at
least 9 occupational series as of March 31, 1995. The annual salary
costs for these employees totaled about $2.2 billion. We also
reported on the need to eliminate duplication of criminal
investigations among federal agencies.
We reported on the Bureau of Alcohol, Tobacco, and Firearms' (ATF)
(1) use-of-force policies compared to the Drug Enforcement
Administration (DEA) and Federal Bureau of Investigation (FBI); (2)
licensing of firearms dealers; and (3) compliance with legal
restrictions on maintaining firearms licensee data. On average, ATF
arrested 8,000 suspects annually but was involved in less than 10
reported shooting or alleged excessive force incidents annually for
fiscal years 1990 through 1995. In October 1995, Treasury and
Justice issued uniform policies governing the use of deadly force.
ATF's prior policy was generally consistent with Treasury's 1995
policy and with DEA's and FBI's deadly force policies in effect
immediately prior to Justice's 1995 policy. The training provided to
new ATF agents was consistent with that provided new DEA and FBI
agents. Also, ATF's procedures for reporting, investigating, and
reviewing shooting and alleged excessive force incidents were
generally comparable to DEA's and FBI's. Our review of ATF's
investigative files showed that ATF (1) generally complied with its
investigative procedures, (2) found all intentional shootings
justified, (3) found most excessive force allegations
unsubstantiated, and (4) sanctioned agents found to have engaged in
misconduct. Our report provided objective, independent information
on a highly sensitive issue that helped address concerns regarding
ATF's use of force. Subsequently, the House Appropriations Committee
included in its report accompanying the fiscal year 1997 Treasury,
Postal Service, and General Government Appropriations Bill
recommendations calling for (1) the creation of an Office of
Professional Responsibility within Treasury's Office of the
Undersecretary for Enforcement to oversee, among other things,
use-of-force allegations involving Treasury law enforcement agencies
and (2) outside representation on ATF's Shooting Incident Review
Board and Professional Review Board.
We reported that from an April 1993 high point of about 260,700, the
number of licensed firearms dealers had declined about 35 percent as
of September 30, 1995. Factors contributing to the decline included
increased ATF enforcement of existing laws and new legislative
requirements, such as increased licensing fees. However, ATF had no
specific policy to reduce the number of licensees by some targeted
number.
We reported that ATF identified and described for us 14 national data
systems and 4 subsystems that related to firearms and that 5 systems
and 1 subsystem contain data that identify retail purchasers or
possessors of specific firearms. We reviewed two of these
systems--the Out-of-Business (Firearms Licensees) Records System and
Multiple (Handgun) Sales Systems--and determined that they were
designed and operated in compliance with the Gun Control Act of 1968,
as amended, and the annual appropriation rider prohibiting the
consolidation or centralization of data from firearms licensee
records. We also determined, however, that ATF was interpreting the
rider narrowly and, as a result, had not systematically reviewed its
data systems and its information practices to give appropriate effect
to the appropriation rider. Therefore, we recommended that ATF do so
and report the results to the House Appropriations Subcommittee. In
response to a draft of our report, ATF stated that it (1) had adopted
our broader interpretation of the rider, (2) had applied it to a
legal review of the systems we did not review, and (3) was committed
to applying it to any record systems it established in the future.
However, ATF did not determine whether the systems we did not review
were operating in compliance with the law. Based on the preliminary
results of our review of the Out-of Business Records System, the
House Appropriations Committee added a provision to the fiscal year
1997 appropriations bill to prohibit the creation of an
out-of-business records database in which records can be retrieved by
any personal identifier.
With regard to federal fugitive apprehension activities, we reported
that despite the importance that Justice and Treasury law enforcement
agencies place on entering fugitives' data into the National Crime
Information Center's Wanted Person File as immediately as possible
after the arrest warrant has been issued, FBI, ATF, U.S. Marshals
Service, and Customs Service had different time criteria. Moreover,
many of their fugitives, even those classified as dangerous, were
entered onto the File long after their arrests were authorized. We
made several recommendations to improve agencies' policies and
practices relating to the entry of fugitives' data onto the National
Crime Information Center's system. The agencies had made or were in
the process of making improvements.
In reporting on the first full year of implementation of the Brady
Handgun Violence Prevention Act, we determined that (1) almost half
of all denials in 15 jurisdictions were because prospective
purchasers had criminal histories and (2) as of July 1995 denials had
resulted in follow-up enforcement actions against at least seven
persons nationwide. These data were cited during the 1996
presidential campaign and in a case argued before the Supreme Court
in December 1996.
In late 1993, the Attorney General designated health care fraud as
the Department of Justice's number two enforcement priority, second
only to violent crime initiatives. Recently, we reported on ways to
enhance information sharing to support enforcement efforts.
Specifically, we reported that (1) there was no federal immunity
provision to protect persons who report suspected health care fraud
to law enforcement agencies; (2) most states had enacted immunity
laws with varying levels of protection for insurers; and (3) most of
the law enforcement and industry officials we interviewed supported
establishing a database of final adverse actions. These have been
recurring topics in the administration's and the Congress'
consideration of ways to curb health care fraud, which is estimated
to result in financial losses ranging from $30 billion to $100
billion annually.
Enforcement actions resulted in the seized property inventories of
the Departments of Justice and the Treasury growing from $33 million
in 1979 to almost $2 billion in 1994. Our report identified the
historical problems that have plagued management of seized and
forfeited assets. While the agencies have made progress in
addressing some of the problems, others such as maintenance and
disposal of seized property and enhancements to seized property
tracking systems remain. Further, additional policies and procedures
are needed to help ensure adequate accountability and stewardship
over seized property. As a result in part of our high risk report on
asset forfeiture, the Permanent Subcommittee on Investigations
initiated an investigation of some particularly troublesome assets
being held by the Marshalls Service. Our testimony on asset
forfeiture set the stage for their hearing about a casino being held
by the Marshalls Service.
The Congress passed the Anti-Car Theft Act of 1992 in response to
what it considered to be the nation's number one property
crime--automobile theft. The act was designed to reduce automobile
theft by making the selling of stolen cars and parts more difficult.
We provided information on the status of the requirements to (1)
establish a national motor vehicle titling information system, (2)
mark major component parts with identification numbers, and (3)
establish a national stolen passenger motor vehicles and parts
information system. We also identified several issues related to
these provisions that may impede their implementation or influence
their effectiveness.
LITIGATIVE AND JUDICIAL
ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.2
Prior to November 1995, the Administrative Office of the U.S. Courts
(AOUSC) did not require the use of generally accepted government
auditing standards for its nonfinancial reviews of local court
operations. As a result, program reviewers adopted a wide range of
program review approaches: (1) many reviews did not result in
written reports, (2) results were not generally distributed to all
affected parties, and (3) follow-up on written recommendations was
inconsistent. Partly as a result of our report, the AOUSC has begun
to improve its process for reviewing local court operations. AOUSC
has amended its auditing standards to ensure greater independence of
program reviewers and require written reports. It also plans to
conduct training on the new processes and monitor compliance with the
standards.
Title V of the reauthorization of the Juvenile Justice and
Delinquency Prevention Act of 1974 is designed to provide a dedicated
funding source for delinquency prevention and early intervention
programs to local governmental units. The 1992 reauthorization bill
required us to report on the incentive grant program for local
juvenile delinquency prevention. Our report provided data on, among
other things, how these funds are being allocated and spent. Justice
will be using our data in its evaluation of the Title V grants.
Congress used the information we provided in its deliberation on
controlled funding for the program.
CORRECTIONAL ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.3
The Federal Bureau of Prisons has largely implemented our
recommendations for improving its planning and coordination with
probation officers for the release of inmates from the Bureau's
custody. The Bureau has entered into a new memorandum of
understanding with the Judiciary to provide probation officers with
information on inmates 90 days before their scheduled release to
probation officer supervision and has taken steps to ensure that its
list of such inmates is complete and correct.
As we recommended, the Bureau has also enhanced its incentives for
inmates to participate in and complete education and vocational
training programs. Inmates are generally permitted to work half a
day and attend school the remaining half. Inmates eligible for
"premium" pay positions in Federal Prison Industries must either have
a high school diploma, have completed their high school general
equivalency degree, or be making satisfactory progress in their
education classes.
IMMIGRATION CONTROL
------------------------------------------------------ Chapter 4:1.1.4
The Immigration and Naturalization Service (INS) issues border
crossing cards to eligible Mexican citizens who wish to frequently
visit the United States on a temporary basis for business or
pleasure. To obtain a crossing card, applicants must be admissible
as a nonimmigrant. An applicant might be found inadmissible, if, for
example, he or she had a criminal record. Our review showed that
Immigration Service inspectors at the San Ysidro, California, port of
entry and other ports along the southern border were not required to
check crossing card applicants against available criminal history
databases. Indeed, we found evidence of the issuance of a crossing
card to an alien with a criminal history. In response, the
Immigration Service implemented a policy to standardize background
checks performed during the application process.
The Congress is in the process of almost doubling the size of the
Border Patrol. We analyzed the Border Patrol's enforcement
activities nationwide and by location for use by congressional
committees in their deliberations on the appropriate number of Border
Patrol agents to patrol the Southwest Border. Our analysis showed
that the Border Patrol reportedly spent 63 percent of its time
preventing illegal alien entry. The remainder of the time was spent
on illegal-alien apprehension but not necessarily on the border.
Subsequently, the Congress directed INS to redeploy 200 agents from
interior stations to the border. This redeployment will result in a
2-year cost reduction of about $33.6 million.
CUSTOMS REVENUE
COLLECTION AND
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.1.5
In our 1992 report on the management of the Customs Service, we
reported that Customs could not adequately ensure that it was meeting
its responsibilities to combat unfair trade practices or protect the
public from unsafe goods. Moreover, Customs was finding only a small
percentage of the estimated violations in imported cargo, and it did
not have adequate information to assess its effectiveness in
collecting applicable duties or penalizing violators of trade laws.
We also stated that these problems arose because of interrelated
problems and weaknesses in Customs' (1) mission planning, (2)
information and human resource management, and (3) organizational
structure. In all, we made over 20 recommendations to correct the
identified problems and weaknesses.
Since then, Customs has responded with a variety of planning,
organizational, and processing changes that radically altered its
strategies, goals, and objectives. Customs redesigned its
organizational structure, trade enforcement processes, and support
functions and is working toward a complete redesign of its automated
commercial system for enforcing trade and contraband laws, ensuring
trade compliance, and providing services and information to the trade
community, federal agencies, and the American public.
Customs has taken action on most of the recommendations. In some
cases, the action extended far beyond the original recommendations'
scope, as in its trade enforcement system. Customs developed a
totally new system of industry compliance, replacing a
transaction-based violation system with no standard for measuring the
violations it discovered. In some instances, the actions taken
represent significant departures from past practices and have moved
Customs in a new direction toward meeting its future challenges.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:1.2
CIVIL AND CRIMINAL LAW
ENFORCEMENT
------------------------------------------------------ Chapter 4:1.2.1
In our testimony on the misuse of criminal justice information in the
National Crime Information Center, we identified numerous examples of
misuse and recommended that the Congress enact legislation with
strong criminal sanctions for such misuse. The FBI, the Information
Center's Advisory Policy Board, and state and local law enforcement
agencies that use the National Crime Information Center generally
support such legislation as a deterrent to further misuse. While the
Congress had not passed such legislation as of September 1996, the
Senate Judiciary Committee had referred to the Senate floor for
action a bill (referred to as the National Information Infrastructure
Protection Act) that would have amended 18 U.S.C., 1030 to
criminalize the misuse of government computers to obtain information.
(GAO/T-GGD-93-41.)
LITIGATIVE AND JUDICIAL
ACTIVITIES
------------------------------------------------------ Chapter 4:1.2.2
In 1993, we recommended that the federal judiciary develop an
improved measure of the workload of courts of appeals judges. The
judiciary, while acknowledging the need for improvement, has been
unable to agree on a methodology for developing a new workload
measure. Consequently, it has not begun to develop this measure.
The current measure for appellate judges is broad and less precise
than that used for measuring district court judge workload. Some
members of the Congress have questioned whether the current measure
is a sufficient basis for recommending additional appellate
judgeships. (GAO/GGD-93-31.)
ILLEGAL IMMIGRATION
------------------------------------------------------ Chapter 4:1.2.3
We reviewed the Immigration and Naturalization Service's method for
estimating the number of overstays, that is, persons who entered the
United States legally as visitors but did not leave under the terms
of their admission, and found that a key underlying asumption is
questionable and that improved approaches have the potential to
reduce the uncertainty of these estimates. We developed an
alternative method for estimating overstays among foreign visitors
who arrive by air. When we applied our method to sample data we
found that, on average, our estimates were lower than those of the
Immigration and Naturalization Service. We believe that the Service
should develop improved procedures for estimating overstays, using
methods such as those we developed. (GAO/PEMD-95-20)
FEDERAL MANAGEMENT AND
WORKFORCE ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:2
GAO Contact: Nye Stevens, 202-512-8676
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:2.1
The Federal Management and Workforce issue area focuses on the
analysis and evaluation of cross-cutting management, workforce, and
statistical issues. These include government performance goals and
measurement, restructuring and downsizing, regulatory reform,
privatization, oversight of the civil service, human resource
management practices at specific agencies, as well as the quality,
reliability, and distribution of social and economic statistical
data.
The issue area specifically covers the Executive Office of the
President, OMB, Office of Personnel Management, Merit Systems
Protection Board, Office of Special Counsel, Federal Labor Relations
Authority, Office of Government Ethics, the Department of Commerce,
Government Printing Office, Bureau of Labor Statistics, the Library
of Congress, and the National Archives. However, managerial,
personnel, and statistical/information issues bridge into virtually
all other agencies as well.
In 1996, the issue area contributed to congressional oversight of a
broad range of management initiatives as fundamental questions of
government's role in society occupied the congressional agenda. The
Comptroller General enunciated a series of key principles to be
considered in government reorganization, and these were considered in
congressional hearings on dismantlement of the Department of
Commerce, consolidation of the government's decentralized statistical
system, and a proposal to create a Department of Natural Resources.
The issue area also profiled 22 government corporations and 5 other
organizations that were similar to government corporations, comparing
their adherence to 15 federal statutes and other organizational
characteristics.
We continued to build on our leadership role in providing the
Congress and agencies with critical information and perspective to
ensure the successful implementation of the landmark Government
Performance and Results Act (GPRA). More than 50,000 copies have
been distributed of GAO's Executive Guide: Effectively Implementing
the Government Performance and Results Act, which highlights
successful practices of pilot agencies and other organizations making
the transition to results-oriented management. The Executive Guide
is helping guide executive branch GPRA implementation: OMB included
it by reference in guidance on GPRA implementation and the Chief
Financial Officers Council enclosed copies of the guide in its GPRA
training material.
We also contributed in-depth analyses of management initiatives
emerging from the executive branch. We examined the status of 380
action items reported as completed by the Vice President's National
Performance Review (NPR), and confirmed that 277, or 77 percent,
could be verified as completed. Another report detailed the status
and results arising from the NPR's 185 reinvention laboratories.
In the workforce area, persistent calls for a smaller but higher
performing federal workforce continued to focus attention on the need
for rethinking current civil service principles and practices. Three
hearings on the federal employee redress system helped define the
system's problems and pointed to alternative dispute resolution as a
possible means of relieving the strains on the system. Our symposium
on "Transforming the Civil Service: Building the Workforce of the
Future" resulted in a December 1995 report identifying eight human
resource management principles common to leading private and public
sector organizations. Our discussion of these principles received
widespread attention in the human resource management community and
underlay many discussions concerning the kinds of human resouurce
management reforms that may be appropriate in today's
results-oriented environment. Implementation of the GPRA, for
example, may hinge on better aligning agency human resource
management functions with organizational goals--one of the principles
identified in the December 1995 report.
In the midst of the largest federal downsizing since World War II,
the issue area continued to provide the analysis needed to evaluate
alternative approaches to downsizing, and the effects of workforce
reductions to date. Some of these reviews led to potential cost
reductions. For example, $37 million was saved subsequent to our
testimony's finding that the Department of Energy's use of "recycled"
buyouts was unauthorized. We also pointed out that significant
potential cost reductions were available by discontinuing the
expensive, military-like compensation system for the Commissioned
Officer Corps of the Public Health Service in view of our findings
that the Corps' functions were essentially civilian in nature. In
another report we compared federal benefit levels under the Federal
Employees' Compensation Act with states' benefits and identified
areas in which federal benefits were relatively greater. We also
identified issues the Congress might consider in crafting legislation
to change benefits provided for older beneficiaries who had reached
retirement age.
We also contributed to the debate of a proposal to consolidate
statistical agencies. Through a series of reports we explained the
mission and budgets of the major statistical agencies and compared
the United States' and the centralized Canadian statistical systems.
We aided congressional decisionmaking through reports on the housing
and medical care components of the Consumer Price Index and on issues
surrounding the appropriateness of the current official measure of
poverty in the United States.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:2.2
MANAGEMENT ISSUES
------------------------------------------------------ Chapter 4:2.2.1
How best to provide central guidance on, and oversight of, management
issues in the federal government has been a perennial challenge.
Currently, management oversight is collocated with budget oversight
in OMB. In an effort known as OMB 2000, OMB has worked to better
integrate management and budget oversight functions in new Resource
Management Offices. We reported that this effort increased overall
attention to management issues. However, the long term success of
the reorganization is not assured. We recommended that OMB review
specific concerns to promote more effective integration of management
and budget oversight, including (1) the way OMB trains its program
examiners and whether this is adequate given the additional
management responsibilities assigned to these examiners and (2) the
effectiveness of different approaches taken by OMB to coordinate
policy development with Resource Management Offices and to provide
program examiners with access to expertise. (GAO/GGD/AIMD-96-50)
Under the administration's NPR, some 185 "reinvention labs" were
established to test ways that agencies could improve their
performance and customer service by reengineering work processes and
eliminating unnecessary regulations. Although some laboratories had
shown that new approaches can be more effective or efficient, the
real value of the labs will be realized only when the operational
improvements they initiated, tested, and validated achieve wider
adoption. However, most laboratory officials said they had not had
substantial communication with either other labs or with the NPR's
task force. Therefore, we recommended that the Director of OMB
ensure that a clearinghouse of information about the labs be
established. (GAO/GGD-96-69)
In order for congressional and executive branch decisionmakers to
obtain the information they need as they seek to create a government
that is more efficient, effective, and streamlined, the Congress
needs to provide strong and sustained attention to the implementation
of the GPRA. Congressional authorization, appropriation, budget, and
oversight committees all have key interests in ensuring that GPRA is
successful, because once fully implemented, it should provide
valuable data for decisions that each committee must make. The
Congress can demonstrate a strong commitment to GPRA in two ways.
First, it can ask agencies about the status of efforts to implement
the act, challenges they are encountering, and how those challenges
are being addressed. Second, and more important, the Congress can
use the agency strategic plans and performance information developed
under the act to make decisions and hold agencies accountable for
achieving the goals established in strategic and annual plans.
(GAO/T-GGD-96-79)
WORKFORCE ISSUES
------------------------------------------------------ Chapter 4:2.2.2
In reviewing certain agency appointments of experts and consultants,
we found many to be inappropriate. The primary reason was that the
appointments were made to positions involving full-time or continuous
duties that are the responsibility of career employees. To achieve
better control over the use of experts and consultants, we
recommended the Congress amend 31 U.S.C. 1114(b) to explicitly state
that inspectors general are required to evaluate the progress
agencies make in establishing effective management controls over
appointed experts and consultants. (GAO/GGD-91-99)
Our review of personnel practices during presidential transitions led
to our recommending that to preserve the flexibility of new agency
heads appointed after presidential transitions, the OPM Director
should routinely suspend all SES appointment processing during
transition periods. In line with current OPM policy, in special
circumstances agencies should be able to request Senior Executive
Service (SES) appointment processing during such transitions. OPM
has indicated that because it believes existing controls are
adequate, it does not intend to take action on this recommendation.
We believe such a policy should be adopted. (GAO/GGD-94-66)
In the area of equal employment opportunity, our recommendations
addressed the guidance that the EEOC provides to federal agencies for
affirmative employment planning. According to the Commission, it is
reexamining its proposed guidance in light of a recent U.S. Supreme
Court decision. (GAO/GGD-91-86, GAO/T-GGD-92-2, GAO/GGD-94-71)
CENSUS REFORM
------------------------------------------------------ Chapter 4:2.2.3
We reported in 1992 that the basic design of the decennial census had
exhausted its potential for counting the population accurately and
cost-effectively. We reported also that the key to a successful
reform effort would be through vigorous congressional oversight. We
recommended that the Congress schedule oversight hearings throughout
the decade to ensure that consistent progress is being made in
designing and planning the 2000 census. Oversight hearings have been
held, and with one exception the Bureau's cost-saving initiatives
have received favorable responses. One initiative--whether the
Bureau should sample households not responding to census
questionnaires--lacks consensus among the stakeholders. Consistent
with our recommendation, the Bureau has proposed the use of sampling
instead of a 100-percent follow-up for citizens not responding to the
mailed questionnaires, but the Congress has not yet agreed. If
sampling is to be used in the 2000 census, the extent of sampling
needs to be determined; savings estimates range from $400 million to
$1.1 billion. (GAO/GGD-92-94)
FINANCIAL INSTITUTIONS AND
MARKETS ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:3
GAO Contact: Jean Stromberg, 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--which 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 explores the implications of these changes for the industry,
its customers, and its regulators. We examine these issues to
provide information, analyses, and recommendations to the Congress
and regulators on changes in and oversight of the financial services
industry. We analyze: (1) various emerging issues in the financial
services industry; (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 recent look at the operations of the Federal Reserve suggests
that the Federal Reserve System is facing a number of major
challenges that could affect the nature, size, and distribution of
its activities and resources. We found that the Federal Reserve
needs to become more cost conscious and that it should undertake a
thorough re-examination of its mission, structure, and work processes
to assure that it is operating as efficiently and effectively as
possible.
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 also 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. Even when
examiners discovered insider problems, they often did not adequately
communicate these findings to management and boards. The FDIC sent
our executive summary to all its examiners with instructions to
implement our recommendations in their next examinations.
Our work also identified the need for major reform. In our report on
the Federal Home Loan Bank System, we expressed concerns about its
capital structure and the mixture of voluntary and mandatory members.
We also expressed substantial concern about whether the Federal
Housing Finance Board could act as an arm's-length regulator, and
recommended a single regulator for all three housing-related
Government-sponsored enterprises. This report helped to spur debates
in the Congress on how to reform the Federal Home Loan Bank System.
These reports and our other work 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 which had not been adequately addressed.
(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 recommended a
single regulator for all three housing-related government-sponsored
enterprises. The administration and the Congress have been working
on a legislative plan to address our recommendations.
(GAO/GGD-94-38)
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 reviews of the Community Reinvestment Act and of the Equal Credit
Opportunity Act and the Fair Housing Act concluded that the lending
and regulatory community still face challenges in effectively
implementing these laws. We recommended that the regulators:
develop uniform fair lending examination procedures; adequately train
examiners to review and test for lending discrimination; and use
their full range of resources, including enforcement actions to
ensure accurate, timely data. We further recommended that the
agencies determine what resources and examination techniques were
needed to meet the requirements of the recently revised Community
Reinvestment Act regulations. We also recommended that the Attorney
General provide updated guidance to the bank regulators on the
characteristics of referable "pattern or practice" cases under the
Equal Credit Opportunity and Fair Housing Acts. In addition, we
suggested that the Congress may wish to consider alleviating the
legal risks of self-testing for discrimination done by the lenders.
These recommendations are under consideration by the regulators.
(GAO/GGD-96-23, GAO/GGD-96-145)
Our report on Federal Reserve operations noted a number of areas in
which the Federal Reserve could be more efficient. We recommended
that the Federal Reserve undertake a thorough review of its mission,
structure, and work processes to identify ways to become more
efficient and effective in the future. We suggested that the Federal
Reserve carefully examine the need for its 12 regional banks and its
25 branches. We also recommended that the Federal Reserve develop
criteria for maintaining its surplus rather than the rule of thumb it
has been using. (GAO/GGD-96-128)
SECURITIES
-------------------------------------------------------- Chapter 4:3.3
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 the federal oversight program 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,
GAO/T-GGD-92-46)
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)
Our work on the National Association of Stock Dealers' Hotline
suggested that many investors did not know about the hotline but that
investors would find additional information about broker-dealers
useful in making investment decisions. We recommended that the
National Association of Stock Dealers' Regulation explore ways of
publicizing the hotline to a wider audience and provide hotline
callers with all the relevant disciplinary-related information
available. (GAO/GGD-96-171)
See also chapter 5, Financial and Information Management Programs,
Budget Issue Area and Corporate Audits and Standards Issue Area.
GOVERNMENT BUSINESS OPERATIONS
ISSUES (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 two of the government's largest business
entities: the General Services Administration (GSA) and the United
States Postal Service (USPS). 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 and controls assets worth hundreds
of billions of dollars and provides goods and services to federal
agencies that directly affect mission accomplishment. We are also
responsible for reviewing other entities, such as the Smithsonian
Institution, the Library of Congress, and the Administrative Office
of the U.S. Courts.
The reforms that GSA has made over the last several years appear
responsive to many of the concerns we and the NPR have continued to
express. GSA has reorganized its Public Buildings Service to
separate its policy/oversight and service-provider responsibilities
and help facilitate the delivery of real estate services to federal
agencies. We have continued to emphasize several key obstacles--such
as Federal Buildings Fund shortfalls, budget scorekeeping rules, and
the lack of strategic focus and planning--that impede GSA's and the
Congress' ability to pursue the most cost-effective housing and
asset-management options for meeting federal space needs and managing
existing federal buildings. A key area of work this past year has
involved the design, construction, and use of federal courthouses.
Our work in the courthouse construction area in 1995 yielded $317
million in measurable cost reductions.
Our efforts at the USPS have continued to focus on persistent
problems as well as the prospects that major reform legislation may
place the USPS in a more competitive arena with its private sector
counterparts. The persistent problems include poor labor-management
relations, low employee morale and dissatisfaction with working
conditions, a culture of autocratic management resulting in
substandard mail-delivery and customer-satisfaction scores, an
inability to properly control the receipt of mail and ensure proper
revenue collection as well as reap projected benefits from major
automation investments. In both reports and testimonies, we have
highlighted the major issues facing the USPS: (1) how competition
will affect both the Service's revenues, costs, and rates
(domestically and internationally) and the federal government's role
in mail delivery; (2) how poor controls have resulted in revenue
losses and mismanagement in some major purchases; and (3) how a new
focus is needed in tracking service quality and customer
satisfaction. Our postal work made major contributions to the postal
reform legislation introduced in 1996.
We also handled a wide range of congressional requests covering
diverse agencies and issues. In the nation's currency area, we
reported that it was no longer profitable for the government to
produce and distribute the one-cent coin and provided options for
congressional consideration for the future of the penny. In
addition, we reported that to make commemorative coins profitable,
the Mint should reduce the proliferation of commemorative coins,
institute a profit-sharing arrangement with coin sponsors, and base
the sales levels and prices of the coins on market research. We also
reported that the Smithsonian Institution should take better care of
the nation's aircraft collection by refining the mission of the
National Air and Space Museum, culling the collection to a size that
was affordable, and developing a management plan for aircraft. We
reported that 10 agencies spent a total of $14 million in working for
the President's Task Force on Health Care Reform.
Finally, we contracted with Booz-Allen & Hamilton to perform a
general management review of the Library of Congress. In that review
and testimony, we reported on the Booz-Allen report that said the
Library needed to reassess its mission, improve its management and
operational processes, and better manage its human resources and
revenue opportunities. The library has developed and implemented a
management improvement plan designed to address the Booz-Allen
recommendations. We also reported on governmentwide rates of return
from concessions contracts. We reported that, of the $2.2 billion of
concessions income, agencies that were able to retain the money
earned three times as much as those agencies who had to give the
money to the Treasury, and agencies that used competition in
selecting contractors earned twice as much as agencies that did not
use competition.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:4.2
GENERAL SERVICES
ADMINISTRATION
------------------------------------------------------ Chapter 4:4.2.1
GSA is addressing our recommendations as part of its ongoing
reinvention efforts. It is working internally and with federal
agencies and the commercial real estate community to explore new ways
of handling lease arrangements. 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. (GAO/GGD-95-48)
The Congress, the Judiciary, and GSA have embarked on a $10 billion
courthouse construction initiative. In response to various
criticisms about the inadequate management and oversight, GSA
established a courthouse management group to develop a more
disciplined approach that would reduce cost and provide for better
decisionmaking. This group is working closely with the
Administrative Office of the U.S. Courts--the administrative arm of
the Judiciary--to improve communication and respond to specific
recommendations we made during our testimony for improvement in the
overall management and oversight of courthouse construction. The
group is also establishing a mechanism to monitor and assess the use
of flexible design guidance with a view toward striking a better
balance in the choices made about courthouse designs.
(GAO/T-GGD-96-19)
U.S. POSTAL SERVICE
------------------------------------------------------ Chapter 4:4.2.2
USPS, unions, and management associations should develop a long-term
agreement 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 agreement should provide for the following principles and values:
(1) a work structure to give employees greater responsibility and
accountability for results; (2) incentives to encourage all employees
to share in the tasks necessary for success and to allow for
recognition and reward for corporate and unit performance; (3)
training employees and holding them accountable, with a focus on
customer service; (4) selection and training of supervisors to be
facilitator/counselors who will have the skills, experience, and
interest to treat employees with respect, motivate them, recognize
and reward them, promote teamwork, and deal with poor performers; and
(5) counseling, training, and if necessary, removal of supervisors
and employees who show a lack of commitment to work unit goals,
values, and principles. The Postmaster General and the leaders of
the unions and management associations have agreed to participate in
a national summit and to commit to reaching a framework agreement for
addressing labor-management problems. (GAO/GGD-94-201A&B)
If the Congress wants the USPS 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 USPS, in which
all customers would be given the same volume discounts, would result
in undue or unreasonable discrimination among mailers and undue or
unreasonable preference given to mailers, since private carriers
commonly use this pricing strategy. (GAO/GGD-92-49)
The Congress should reexamine the act's ratemaking criteria and
consider amending the criteria to state that (1) in allocating
institutional costs, demand factors are to be weighted to take into
account the need to maintain the long-term viability of the USPS 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 Congress
eliminate the paper dollar and replace it with a well-designed coin.
Hearings were held in 1995, but no legislation was passed.
(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
The Tax Policy and Administration issue area's mission is to provide
the Congress, the executive branch, and the public with timely,
accurate, and objective analyses and information to improve our
nation's tax system and its administration. Accordingly, this issue
area's responsibility encompasses the revenue side of the budget--the
$1.4 trillion in tax receipts that finance federal government
operations and the $400 billion in tax expenditures used to promote
numerous social and economic objectives--as well as the federal
agency responsible for tax administration--IRS.
The federal treasury will realize over $3.1 billion in increased tax
revenues over 5 years as a result of statutory and administrative
changes we recommended during the last few years. Of that total, (1)
about $1.3 billion comes from IRS doing 100-percent matching of
dependent Social Security Numbers; (2) about $1 billion comes from
IRS increasing controls, resulting in fewer dependents being claimed
on income tax returns; (3) about $600 million comes from changes to
the wealth definition used in the Earned Income Credit program; (4)
about $100 million comes from additional tax collections by IRS
sending reminder notices to delinquent taxpayers; (5) about $70
million comes from reduced costs through the elimination of some
written collection notices; and (6) about $37 million comes from
requiring information returns on forgiven debts to increase voluntary
compliance.
These increased tax revenues represent only one aspect of the impact
of our work. For example, in response to our recommendations, (1)
IRS is getting taxpayer suggestions in designing tax forms,
instructions and publications; (2) the tax code was amended to allow
IRS to withdraw a notice of federal tax lien when it is in the best
interest of the taxpayer and the government; (3) IRS made it easier
for taxpayers to request an installment agreement to pay taxes owed;
(4) IRS has expanded access to electronic filing; (5) IRS has
developed a system for monitoring sole proprietor compliance
projects; (6) IRS, in conjunction with trucking industry groups, has
developed guidance on the kinds of records that truckers should
maintain; (7) IRS has streamlined its organizational structure by
removing regional offices from the chain of command in the returns
processing and forms distribution areas and plans to do the same for
the call sites; (8) IRS has made changes to improve the effectiveness
of the Federal Tax Deposit Alert Program.
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 the income tax treatment of married and
single individuals showed that certain tax provisions could result in
a marriage penalty or marriage bonus depending on the individual
circumstances of the taxpayer. Current IRS tax data are not
available to measure and compare the significance of these penalties
and bonuses. In another report we describe how IRS' efforts to
detect earned income tax credit noncompliance had favorable results
but also produced several problems, such as generating a workload
that far exceeded IRS' capabilities, thereby delaying millions of
refunds. We also provided information on the potential effects of
extending the federal tax code to residents of Puerto Rico. We found
that if the federal tax rules are applied to residents of Puerto
Rico, the residents would owe around $623 million in federal income
tax before taking into account the Earned Income Tax Credit, but with
that credit, Puerto Rican taxpayers would qualify for a total of
about $574 million in credits. We estimate that the net aggregate
federal tax liability after subtracting the credit would be about $49
million. Also during the year, we testified at seven congressional
hearings, discussing tax administration issues such as Tax System
Modernization, classifying workers as employees or independent
contractors, tax system compliance burden, tax delinquencies, and tax
debt collection practices.
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. Since January 1995,
at least 4 legislative proposals for clarifying the rules have been
submitted. We have testified annually since 1992 and last testified
in 1996. (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 that it meets its
mission of collecting the proper amount of tax at the least cost:
(1) IRS should increase revenue agent knowledge of 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. IRS is taking steps to address these
recommendations. (GAO/GGD-94-70)
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 that IRS (1) send to individuals who do not file tax
returns a notice explaining their requirement to file; and (2)
explore ways to identify those individuals who claim the credit in
advance but do not report it, so as to prevent them from receiving
the credit a second time. IRS subsequently took steps directed at
helping persons fill correct tax returns. While these steps should
improve taxpayer reporting, we believe that IRS needs to do more to
identify deal with those who do not file correct returns.
(GAO/GGD-92-26)
At the beginning of fiscal year 1993, IRS had an inventory of about
10 million individual and business nonfilers. IRS estimated that
unpaid taxes on nonfiled individual income tax returns for 1992 alone
totaled more than $10 billion. Concerned about this noncompliance,
IRS began a strategy in fiscal year 1993 to bring nonfilers into the
system and keep them there. IRS' strategy was generally successful
in (1) reducing the size of the nonfiler inventory, (2) eliminating
unproductive cases, and (3) increasing the number of returns secured
from individual nonfilers. However, it is unclear whether voluntary
taxpayer compliance actually improved and whether IRS' enforcement
resources were effectively managed. We identified several areas
where opportunities exist to improve IRS' nonfiler strategy, and
recommended that IRS (1) become more timely in making telephone
contact with nonfilers, (2) use lower graded staff,
paraprofessionals, and administrative staff for more of the nonfiler
work; and (3) consider revising procedures for dealing with nonfilers
who are brought into compliance and then become nonfilers again.
(GAO/GGD-96-72)
Concerns about continued noncompliance levels led IRS to change its
tax compliance philosophy. In addition to the use of enforcement
methods, it is researching ways to improve compliance for entire
market segments--specific groups of taxpayers that share certain
characteristics or behaviors. IRS' goal is to increase total
compliance with the tax laws from an estimated 87 percent to 90
percent by 2001 and believes its new compliance research approach
will uncover ways to help meet this goal. We recommended that IRS
(1) develop support from IRS employees for the new approach and
monitor the success of IRS' developmental effort; (2) ensure that
reliable compliance data will be available when needed; (3) set a
schedule for completion and monitor it; and (4) establish milestones
and monitoring mechanisms for the research effort and for evaluating
the effort. (GAO/GGD-96-109)
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 review work showed that it was technically
feasible for IRS to use computer-matching techniques and available
information returns to identify a portion of this noncompliance. We
recommended that IRS implement such matching techniques where tests
showed that it would be cost-effective. We also recommended that IRS
consider actions that could be taken to expand computer matching as
part of its Tax Systems Modernization effort. (GAO/GGD-93-133)
We reviewed IRS' plans to maximize electronic filing, which is the
cornerstone of IRS' plan to move from the traditional paper-based
return filing. We found that: (1) if electronic filing continued at
the current pace, IRS would fall far short of its goal of 80 million
electronic returns by 2001; (2) IRS was having little success in
broadening the appeal of electronic filing to those taxpayers who
file other more complex returns; and (3) unless IRS can increase
electronic filing, its customer service and paper processing
workloads may overwhelm its planned staffing and alter various
aspects of its modernization efforts. We recommended that the
Commissioner (1) identify those groups of taxpayers who offer the
greatest opportunity to reduce IRS' paper-processing workload and
operating costs if they were to file electronically and develop
strategies that focus IRS resources on eliminating or alleviating
impediments that inhibit those groups from participating in the
program, including the impediment posed by the program's cost; (2)
adopt goals for electronic filing that focus on reducing IRS paper-
processing workload and operating costs; and (3) prepare contingency
plans for the possibility that the electronic filing program will
fall short of expectations. (GAO/GGD-96-12)
ACCOUNTS RECEIVABLE
COLLECTIONS
------------------------------------------------------ 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 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-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 was pleased with the results of the program, it had not
demonstrated that the program's objectives of increased collections
and improved compliance would be met. We recommended that IRS
develop the indicators necessary to evaluate the 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 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
Our work showed 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 in 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. This
situation puts employers at risk of large penalties and retroactive
tax assessments. We recommended congressional intervention to help
clarify the rules. (GAO/T-GGD-96-130, GAO/GGD-92-108)
Tax simplification also involves efforts to make IRS correspondence
easier for taxpayers to understand. In this regard, we recommended
that IRS modify its correspondence practices to (1) make certain
system improvements, and (2) monitor taxpayer satisfaction with IRS
correspondence. (GAO/GGD-94-118)
MANAGEMENT OF IRS
------------------------------------------------------ Chapter 4:5.2.5
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 the organizational components and functions to
which they relate. (GAO/GGD-89-1)
IRS is undergoing a major effort to modernize its information systems
and restructure its organization. This effort involves several
components, one of which IRS calls its "customer-service vision,"
which seeks to improve IRS' interactions with taxpayers and fold
parts of IRS' field structure into 23 customer service centers.
These centers would work primarily by telephone to provide taxpayer
service, distribute forms, collect unpaid taxes, and adjust taxpayer
accounts. They would absorb current IRS telephone operations and try
to convert much of IRS' written correspondence work to the telephone.
However, a lack of clarity in management responsibilities has, to
some extent, hampered IRS in implementing its customer-service plans.
First, because the work units and related resources that are to make
up the new customer service-organization belong to two separate IRS
organizations, we recommended that IRS clarify criteria for assigning
process owners. Second, at lower management levels, we found
instances in which "products" were being developed for use in the
customer-service sites that had no clearly designated process owners;
thus, we recommended that IRS define process owners' roles and
responsibilities. Third, we identified two instances in which IRS
officials had assumed ownership roles for interactive telephone
systems but had not carried out their duties to establish the quality
measures critical to evaluating the systems' performance. Thus, we
recommended that IRS emphasize the need for timely input for quality
measures. (GAO/GGD-96-03)
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., reduce
taxpayer burden in terms of additional time and frustration
associated with making numerous contacts with IRS to resolve a single
problem. In August 1994, we concluded that a flawed measurement
process had led IRS to overstate its progress in providing one-stop
service and recommended that a different measurement system be
adopted. 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,
GAO/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 report 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-95-6)
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, 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 recommended
that such reporting be made. (GAO/GGD-95-137)
Three prototype interactive telephone systems--designed to reduce
correspondence between IRS and taxpayers and to make IRS more
accessible--suffer from too many menu options and other problems.
Resolving these shortcomings is essential if IRS is to achieve its
goal of handling 45 percent of taxpayer calls by using interactive
phone systems. IRS' telephone-routing system requires taxpayers to
remember up to eight menu options, even though the contractor
guidelines called for no more than four, and does not allow taxpayers
to return to the main menu when they make a mistake or want to
resolve other issues. IRS has not done a cost-benefit analysis of
the use of multiple toll-free numbers, which we recommended as a
solution to the problem of too many menu options. Providing
taxpayers with a written, detailed step-by-step description on how to
use the menu options might be another way to make the telephone
systems more user friendly. IRS complied with government security
requirements when developing its first three interactive telephone
systems. However, future interactive systems will allow taxpayers
greater access to tax information, and more-secure features, such as
a personal identification number, may be needed to protect taxpayer
data. (GAO/GGD-96-74)
See also chapter 4, Information Resources Management--Internal
Revenue Service Issue Area and Chapter 5, Financial and Information
Management Programs, Budget Issue Area.
INFORMATION RESOURCES
MANAGEMENT--INTERNAL REVENUE
SERVICE ISSUE AREA (BUDGET
FUNCTION 990)
---------------------------------------------------------- Chapter 4:6
GAO Contact: Rona Stillman, 202/512-6400
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:6.1
New technology provides opportunities for agencies to revamp
labor-intensive processes, enhance services to the public, and keep
pace with other ever-increasing demands. At the IRS, labor-intensive
processes established back in the 1960s are being used to annually
collect and account for over $1 trillion in revenue. IRS' efforts to
modernize its systems have been unsuccessful. In part based on
numerous recommendations we made to improve IRS' ability to
successfully deliver Tax Systems Modernization (TSM), the Congress
has recently cut and restricted spending for IRS' modernization.
Our July 1995 comprehensive examination of IRS' TSM found that IRS
had made some progress through actions initiated to improve the
management of information systems; enhance its software development
capability; and better define, perform, and manage the technical
activities. However, IRS' efforts to modernize tax processing and
the government's investment in modernization were found to be at
serious risk due to pervasive management and technical weaknesses
that impeded modernization efforts. We reported that IRS did not (1)
have a comprehensive, cost-effective business strategy to reduce
paper submissions; (2) fully develop and put in place the requisite
management, software development, and technical infrastructures
necessary to successfully implement an ambitious world-class
modernization effort like TSM; and (3) establish an effective
organizational structure to consistently manage and control the
systems modernization organizationwide.
Because IRS' weaknesses were not yet corrected, we reported that the
Congress should consider limiting TSM spending to only cost-effective
modernization efforts that (1) support ongoing operations and
maintenance; (2) correct IRS' pervasive management and technical
weaknesses; (3) are small, represent low technical risk, and can be
delivered in a relatively short time frame; and (4) involve deploying
already developed systems, but only if these systems have been fully
tested, are not premature given the lack of a completed architecture,
and produce a proven, verifiable business value. In IRS' 1997
appropriations, the Congress reduced TSM spending pending
improvements that reflect our recommendations.
In June 1996, we reported that IRS had initiated a number of new
actions and was making some progress in addressing our July 1995
recommendations to correct its weaknesses. For example, IRS (1) was
preparing a comprehensive strategy to maximize electronic filing; (2)
had created an investment review board to select, control, and
evaluate its information technology investments; (3) had updated its
system engineering process and its systems life cycle methodology,
and was working across various IRS organizations to define
disciplined processes for software requirements management, quality
assurance, configuration management, and project planning and
tracking; and (4) had completed a descriptive overview of an
integrated, three-tier, distributed systems architecture.
However, more remains to be done to respond fully to our
recommendations, as discussed below.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:6.2
In order to fully implement our July 1995 report's recommendations,
IRS needs to (1) complete the development of its comprehensive
business strategy for electronic filing; (2) have a repeatable
process for selecting, controlling, and evaluating its technology
investments, and review all planned and ongoing systems in a single
investment portfolio; (3) complete the development of its procedures
for requirements management, quality assurance, configuration
management, and project planning and tracking; and (4) provide a
schedule for and complete its integrated systems architecture or its
security and data architectures. (GAO/AIMD-95-156)
See also chapter 4, Improving Justice and General Government
Programs, Tax Policy and Administration Issues Area and chapter 5,
Financial and Information Management Programs, Budget Issue Area.
FINANCIAL AND INFORMATION
MANAGEMENT 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 continued to drive
public debate in 1996. Although the Congress is charting a course 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 aging of the population
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, including perspectives on the
long-term outlook for the federal budget, (2) recommends improvements
in the structure and presentation of the budget to assist in budget
choices and recommends improvements in the budget process, (3)
identifies opportunities to improve budgetary cost data using
financial accountability concepts and information, (4) assesses the
impacts of budget rules and incentives on management, and (5)
provides the Congress--through the budget--with information assessing
alternatives for restructuring the federal role and the design of
program subsidies.
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. In
1996, we testified 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. This type of reporting, offering a
long-term outlook, has driven home the point that our current budget
policy is unsustainable, especially in light of our aging population.
This work was a factor in convincing CBO to conduct and publish
similar analyses which has buttressed the case for early and
significant action to respond to growing deficit pressures.
For the third 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 an update of 96 of the 120 spending
reduction and revenue gain options that appeared in our previous
year's report. The Budget Committees used GAO's options to recommend
specific ways to reduce federal spending and stay within the
discretionary spending caps established by the Budget Enforcement
Act. In related work, we also reported on (1) spending programs and
tax benefits available to business and (2) federal subsidy and
related programs that may affect the environment.
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.
In testimony on the budget process, we identified criteria the
Congress might use in looking at the design of or changes in any
budget process, such as building in a long-term perspective;
facilitating a focus on important trade-offs; and developing
enforcement, control, and accountability mechanisms. We also
provided testimony highlighting the trade-offs the Congress may face
if it changes the budget process from an annual to a biennial cycle.
For instance, we concluded that while a shift to biennial
appropriations could save time for agencies, it would also result in
a shift in congressional control and oversight.
In order to help the Congress and other interested researchers cope
with the complexity of the annual federal budget, we published a
compendium of federal budget accounts. The report, Compendium of
Budget Accounts: Fiscal Year 1997, provided a convenient way to sort
through the fiscal structure of the federal government and to
determine the level of budgetary resources--used, estimated, or
requested by fiscal year--for individual accounts. In work related
to understanding the federal budget, we updated our 1987 report on
the inventory of accounts with spending authority and permanent
appropriations (commonly referred to as "backdoor authority"). This
report provided specific information on such accounts and analyzed
the changes in the number and dollar amounts of accounts with
backdoor authority. We found that the use of backdoor authority
continues to be widespread; both use of the authority of accounts
have increased since 1987.
In addition to these reports, we provided correspondence to the
Congress on options for using accrual concepts in the budget for
federal insurance programs. Our work to date continues to support
our previously stated concern that cash-based budget reporting for
federal insurance programs provides incomplete information on the
cost of these programs.
GOVERNMENT RESTRUCTURING
AND THE FEDERAL ROLE
------------------------------------------------------ Chapter 5:1.1.3
The 104th Congress continued to show 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 AFDC from an open-ended
entitlement to a block grant.
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.
Given congressional interest in federal divestitures, and the limited
U.S. government experience in this practice, we provided the
Congress with information on privatization policies and processes in
foreign governments. In one report, we examined the divestiture
experiences of Canada, France, Mexico, New Zealand, and the United
Kingdom. In a second report, we focused on the divestiture
experiences of Argentina. In both reports we examined issues related
to the privatization process, the valuation and preparation of the
assets for sale, and the use of sale proceeds. Despite the different
experiences of each country, the information we found from these
governments may help the United States smooth the transfer of viable
operations from the public to the private sector. The Congress has
been using the information in these reports as it deliberates on ways
to change the budget scoring rules so that they take into account the
long- term budgetary impact of asset sales. The executive branch has
considered forming a centralized office to coordinate federal asset
sale.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:1.2
BUDGET ENFORCEMENT ACT
COMPLIANCE
------------------------------------------------------ Chapter 5:1.2.1
We were required by law to submit an annual compliance report that
addressed 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 ending 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 OBRA, 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. (GAO/AIMD-94-57)
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
has not included supplemental information in the Budget Appendix on
the size and effect of cross-subsidies. The Congress has not yet
addressed the matter for consideration. (GAO/AIMD-94-57)
We also examined the FDIC's and the Resolution Trust Corporation's
(RTC) 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 reasonable guidance, appropriations of
negative subsidy receipts, unlike appropriations of general funds, do
not make budget authority available for obligations. 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 Anti-Deficiency 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.
(GAO/AIMD-94-58)
In the same report, we stated that programs with both positive and
negative subsidy direct loans and loan guarantees, such as the credit
programs on 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.
(GAO/AIMD-94-58).
See also chapter 4, Improving Justice and General Government
Programs, Financial Institutions and Markets Issue Area.
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 in 1996. (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. (GAO/AIMD/GGD-94-122)
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 wanted 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.
(GAO/AIMD/GGD-94-122)
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. (GAO/AIMD/GGD-94-122)
OMB revised its fiscal year 1995 budget to highlight information
about tax expenditures in two respects: (1) the budget presents
estimated tax expenditures over the 5-year budget window, as well as
estimated expenditures for the current fiscal year and actual
expenditures for the prior fiscal year, and (2) present-value
estimates are reported for tax expenditures involving deferrals and
similar long-term revenue effects. Although OMB agreed in principle
that the combined presentation of outlays and tax expenditures within
functional areas would be helpful and is exploring the feasibility of
presenting this information on a selective basis, OMB made no
significant additions for the fiscal year 1997 budget. The
Department of the Treasury is deferring to OMB on this
recommendation. (GAO/AIMD/GGD-94-122)
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.
(GAO/AIMD/GGD-94-122)
Third, we recommended that OMB, working with the Treasury, design and
test a basic structure for tax expenditures performance reviews
before developing the governmentwide framework the 1993 GPRA requires
by May 1997. OMB has not yet developed this framework. We also
recommended 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 to consider 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 Department of the
Treasury is deferring to OMB on this recommendation.
(GAO/AIMD/GGD-94-122)
See also chapter 4, Improving Justice and General Government
Programs, Tax Policy and Administration Issue Area and Information
Resources Management--Internal Revenue Services Issue Area.
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 Reform Act
of 1994, financial statement preparation and audit coverage have
significantly increased. However, most of the 24 CFO Act agencies
have not received unqualified audit opinions on financial statements
for their entire operations. During 1997, audit coverage is expected
to increase to about 99 percent of the government's outlays, as
executive branch agencies work toward producing the agencywide
financial statements now required by law and subjecting these
statements to audit.
Our experience has shown that preparation and audit of annual
financial statements incrementally improves the reliability of
financial information. Also such recurring audits are providing 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. We will continue to work
with OMB and with agency CFOs and IGs to develop a strategy and plan
for preparing and auditing agencywide financial statements, beginning
with fiscal year 1996, and the first-ever consolidated executive
branch financial statements, beginning with fiscal year 1997.
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. 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.
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. In April
1996, the Debt Collection Improvement Act of 1996 was passed, which
should help make substantive improvements in these areas. The Act's
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. CBO estimated that 2-year savings
were $364 million.
In our report on IRS' 1995 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 USDA's National Finance Center and, as a result, properly
accounted for and reported on its $5.3 billion of payroll expenses
for fiscal year 1995.
HIGH-RISK AND MANAGEMENT
CONTROL ISSUES
------------------------------------------------------ Chapter 5:2.1.3
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. During
the past year, our focus has been 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. These efforts have stimulated congressional
oversight touching on all of these matters during 1996.
Our management control focus is an integral part of our overall
monitoring of agency efforts to achieve the objectives of the CFO
Act. OMB's revision to 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. (GAO/HR-95-20SET)
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:2.2
AGENCY-SPECIFIC
RECOMMENDATIONS
------------------------------------------------------ Chapter 5:2.2.1
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. 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.
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.
Based on our 1993 and 1992 audits of the U.S. Customs Service's
financial statements, we identified several weaknesses that limited
Customs' ability to report reliable financial information and
effectively carry out its mission and made a number of
recommendations. In reporting on its audit of Customs' 1995
financial statements, Treasury's OIG noted that Customs had made
substantial progress on several of our recommendations. For example,
Customs improved procedures for identifying and recording liabilities
at year-end. However, several key recommendations had not been
adequately addressed including the need for actions to (1) reasonably
ensure overall compliance with trade laws and 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 cash and property seized or used
in enforcement efforts, (3) adequately control the use and reporting
of its operating funds, and (4) effectively prevent or detect
unauthorized access and modifications to sensitive data and computer
programs. (GAO/AIMD-94-119)
Although IRS improved its administrative accounting, it had made much
less progress in improving accounting for federal revenues. It had
completed action on only 3 of 14 recommendations we made in previous
reports concerning revenue collections. However, efforts are
underway to address the remaining areas. With our assistance, IRS is
developing a detailed plan of interim strategies with explicit,
measurable goals, and a timetable for action, to solve these problems
in the near future. For some areas, IRS will need to make more
sweeping changes to fully address systems problems. In these cases,
longer-term solutions will be required, involving the reprogramming
of software for IRS' antiquated systems and developing new systems.
(GAO/AIMD-96-101, GAO/T-AIMD-96-170)
Our work at the Department of the Interior's Bureau of Indian Affairs
showed continuing trust fund management problems, and the need for
the Secretary to (1) report to the Senate Committee on Indian Affairs
and the House Committee on Resources on the tribes that accept or
dispute their reconciled account balances, and the Secretary's plan
for resolving disputes, (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 continue to identify significant issues related to
determining the Federal Family Education Loan Program's 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)
CORPORATE AUDITS AND STANDARDS
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
The issue area includes a broad segment of largely independent
government agencies referred to as government corporations, federally
sponsored pension plans, and mandated assistance related to
legislative entities. The issue area also includes accounting and
auditing standard setting in both the public and private sectors.
FINANCIAL MANAGEMENT
------------------------------------------------------ Chapter 5:3.1.1
Government corporations conduct a variety of missions that are an
integral part of the nation's economy, such as deposit insurance;
buying and selling mortgages, loans, and other forms of credit for
housing and other national purposes; transportation; and utilities.
Regarding the nation's financial industries, trillions of dollars of
support are provided in the form of guarantees and insurance.
We have focused our efforts on the government corporations with
significant exposure presented by the government's deposit insurance
guarantee. For the past several years, financial institutions have
been reporting record profits. This financial performance
contributed to the health of the various insurance funds administered
by the FDIC as relatively few institution failures occurred over the
past several years. However, the health of the Savings Association
Insurance Fund (SAIF) remained a concern as it continued to be
undercapitalized and the thrift industry was competitively
disadvantaged due to an insurance premium disparity between banks and
thrifts. Our reports and testimonies provided the Congress with
various policy options to build up SAIF's reserves, remove the threat
of a default on bonds issued to help finance the cost of the savings
and loan crisis, and remove the insurance premium disparity. In
1996, the Congress enacted legislation framed around the guidance we
provided that removed the threat of taxpayers having to pay for these
billions of dollars in costs facing the deposit insurance program.
We have independently assessed the reliability of the financial
statements of FDIC's three funds--the Bank Insurance Fund (BIF),
SAIF, and the Federal Savings and Loan Insurance Corporation
Resolution Fund (FRF)--and the financial statements of the Resolution
Trust Corporation (RTC). We have also audited the Panama Canal
Commission's financial statements to assist the Congress in
monitoring the Commission's financial progress in being able to meet
its obligations by the year 2000 when the Canal is turned over to the
Panamian government. For fiscal year 1995, we issued unqualified
opinions on each of the corporation's financial statements.
We have also continued to assess the corporations' control structures
and worked closely with them to improve their internal control
systems and operations. The corporations we audited continued to
address internal control weaknesses we identified, and none had
material weaknesses. However, weaknesses in important areas of
operations, such as electronic data processing operations, and
disposition and estimated recovery value of assets acquired from
failed institutions, still remain.
RTC terminated on December 31, 1995, and transferred its remaining
assets and obligations to FDIC as a component of FRF. In our final
report on RTC's financial statements, we included an analysis of the
total cost of the savings and loan crisis. Our analysis showed the
hundreds of billions of dollars of taxpayer cost to resolve the
crisis. Internal control weaknesses contributed significantly to the
failure of the many savings and loans that are included in the total
cost.
The regulators have taken a number of actions to correct the
weaknesses we identified in their examination policies, procedures,
and practices for banks and thrifts. Specific areas addressed
included loan sampling methodologies, internal control review
procedures, working paper documentation, and supervisory review
requirements. Certain of the regulators are still completing their
new policies and procedures.
Federally sponsored pension plans cover more than 10 million
participants and range in size from the Civil Service Retirement and
Disability Fund with 5.2 million participants to smaller plans, such
as the Tax Court with fewer than 25 participants. As supported by
GAO, the Congress enacted legislation to fully fund the larger plans,
but these plans remain significant government liabilities and a key
component of federal employee benefit oversight by the Congress. In
1996, we compiled a list of the many plans and analyzed their
financial condition to assist the Congress in its continuing
oversight of the federally sponsored pension plans. Also, we are
currently reviewing the adequacy of the accounting and actuarial
reporting requirements for the plans.
As we had previously recommended, we assisted the Library of Congress
in obtaining an audit of its fiscal year 1995 financial statements.
Although the Library made considerable progress in addressing the
weaknesses we reported in our last audit, it was not able to obtain a
"clean opinion" on its financial statements and has a number of
internal control weaknesses, including material weaknesses and the
lack of a comprehensive security plan for its collections.
To assist the Congress in its oversight of federal financial
management, we worked closely this past year with the House Committee
on Government Reform and Oversight to compile a comprehensive list of
laws related to federal financial management. Finally, we worked
with a number of executive agencies to assist them in making their
operations more efficient while also maintaining effective but more
efficient internal controls.
ACCOUNTING AND AUDITING
STANDARDS
------------------------------------------------------ Chapter 5:3.1.2
Accounting and auditing standards provide the foundation for
consistent and reliable financial reporting. As a member of the
Financial Accounting Standards Advisory Board (FASAB), we have
provided leadership in developing the fundamental accounting
standards to facilitate consistent and reliable agency financial
reporting as envisioned by the CFO Act. We also reinstituted the
Government Auditing Standards Advisory Committee to address issues
concerning government auditing standards.
With respect to the private sector, our report on the accounting
profession provided a comprehensive analysis of the major issues
facing the accounting profession. These issues included auditor
independence concerns, auditor responsibilities for detecting fraud
and determining the effectiveness of internal controls, the auditors'
role in providing additional audit-related services, and a financial
reporting model that needs to be expanded to better meet users'
comprehensive needs. Our report noted that the SEC will need to
assume a leadership role in working with the accounting profession to
resolve these major issues that affect public confidence in the
fairness of financial reporting which is critical to the effective
functioning of the nation's securities markets.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:3.2
CORPORATIONS' INTERNAL
CONTROL SYSTEMS
------------------------------------------------------ Chapter 5:3.2.1
In our 1995 financial audits of RTC and FDIC's three funds, we found
that the corporations continued to make progress in addressing
internal control weaknesses identified during our previous financial
audits. However, while much progress has been made, FDIC continues
to face internal control weaknesses relating to asset valuations,
expense allocations, and information systems, as well as internal
control weaknesses relating to the information systems of the now
terminated RTC. FDIC is currently working to address these internal
control issues. We are in agreement with the Corporation's planned
corrective actions and we will continue to monitor its progress.
(GAO/AIMD-94-135, GAO/AIMD-95-102, GAO/AIMD-96-89, GAO/AIMD-95-157,
GAO/AIMD-96-123)
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 are in the process of addressing our recommendations. We
will continue to monitor the agencies' progress to assess the
effectiveness of changes in the examination process.
(GAO/AFMD-93-13, GAO/AFMD-93-14)
See also chapter 4, Improving Justice and General Government
Programs, Financial Institutions and Markets Issue Area.
LIBRARY OF CONGRESS'
INTERNAL CONTROLS AND
COLLECTIONS SECURITY
------------------------------------------------------ Chapter 5:3.2.3
The audit of the Library's fiscal year 1995 financial statements,
conducted by a CPA firm under our direction, found that the Library's
balance sheet was auditable and that the Library had made progress in
improving financial management since our audit of the Library's 1988
financial statements. As we reported in our testimony, the Library
implemented a new financial accounting system, established additional
accounting policies and procedures, and corrected previous
noncompliance with certain laws and regulations. Notwithstanding
this progress, the audit identified a number of significant internal
control and systems weaknesses that must be corrected to ensure the
safeguarding of assets and reliable financial reporting. Further,
the library needs to improve security to safeguard its collections.
The library also needs to conduct a complete risk assessment and
develop a comprehensive security plan. The Library has developed
plans to address these weaknesses. (GAO/T-GGD/AIMD-96-115)
DEFENSE FINANCIAL AUDIT ISSUE
AREA (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:4
GAO Contact: Lisa G. Jacobson 202/512-9542
The serious and longstanding nature of DOD's financial management
problems led us to make it an area of focus under GAO's high-risk
program. Devising effective solutions to these problems is not only
one of the most difficult management challenges facing the federal
government today, but it is also critical to DOD's ability to meet
the objectives of the CFO Act for strengthening federal financial
management.
DOD's extensive financial management problems present difficult
challenges (1) to the department in meeting the requirement for
audited department-level financial statements as required by the CFO
Act beginning in fiscal year 1996, and (2) to the federal government
in meeting its mandate for audited consolidated financial statements
beginning in fiscal year 1997.
Our approach continues to focus on two fronts: (1) working with the
DOD IG and the military services' audit organizations and (2)
identifying the interim corrective actions necessary to significantly
improve DOD's financial management reporting and operations.
Specifically, our strategy has included (1) conducting the initial
audits of the three military services' financial reports and
statements, (2) working with the DOD audit community to develop its
ability to perform financial statement audits mandated by the CFO
Act, and (3) demonstrating the need for financial reform within DOD.
Overall, this strategy will enable us to (1) support the work
necessary to identify root causes and solutions to DOD's financial
management problems, eventually putting us in a position to render an
unqualified opinion on the governmentwide statements, (2) respond to
interests of a number of key committees, including both the House and
Senate Appropriations and oversight committees.
This issue area also encompasses our work at the State Department,
the Agency for International Development (AID), and the National
Aeronautics and Space Administration (NASA) to assess these agencies'
progress toward meeting the CFO Act requirements.
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:4.1
With the completion of our audit of the Navy's financial operations,
we have performed financial audits of each of the three military
services. In each case, however, because financial records and
systems were deficient and basic internal controls were lacking, we
could not express an opinion on any of the military services'
financial statements.
Our financial audits identified fundamental weaknesses in basic
processes and internal controls, and has also illustrated to the
Congress, DOD, and the public that managers need better financial
information for effective oversight and accountability over DOD's
multi-billion investments in weapons systems, equipment, and
supplies; and tens of billions of dollars in funds expended and
liabilities incurred.
Perhaps most importantly, our audit work conducted pursuant to the
CFO Act has been instrumental in gaining DOD officials'
acknowledgement--for the first time--of the extent and severity of
the department's financial management problems and the obstacles to
establishing effective departmentwide financial management. The
Secretary of Defense has publicly acknowledged that financial
management complacency has permitted pervasive weaknesses to persist
in DOD financial management operations that "waste money that is
needed more than ever to sustain sufficient combat power." Such
forthright admissions of serious weaknesses places DOD, for the first
time, in a position to comprehensively and realistically address and
resolve these weaknesses.
In addition, our audits have demonstrated that significant
improvements in the department's financial operations can be achieved
even within DOD's present deficient systems. For example,
-- As a result of our audit work, DOD took action to better ensure
proper matching of obligations with related disbursement
documents for all proposed payments of $5 million dollars or
more before funds are disbursed.
-- As of September 1996, DOD had collected over $7 million of an
estimated $7.8 million in unauthorized payroll payments to
"ghost" soldiers and Army deserters identified by our financial
audit at the Army.
-- On both the Navy and Army financial audits, we identified
significant errors in inventory records at selected
installations. Based on our recommendations, these
installations took actions to improve their inventory accuracy.
-- Defense adopted a statistical sampling procedure for counting
inventory that satisfies both logistical and financial needs
based on our physical inventories completed as part of financial
statement audits.
Our continuing work with the DOD audit community to develop its
ability to perform financial statement audits mandated by the CFO Act
has also been very successful. We assisted the Air Force Audit
Agency and the Army Audit Agency in their audits of their financial
statements for fiscal years 1992 and 1993, respectively. Since then,
both of these audit agencies have completed audits of their agencies'
financial statements for fiscal years 1993 through 1995.
Our limited assessment of the State Department, AID, and NASA's CFO
organizations and inspector general 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 unqualified
opinions on its financial statements.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:4.2
DOD will need to intensify its efforts in order to correct its
long-standing, serious financial management problems. These problems
continue to greatly impede DOD's ability to obtain reliable financial
information needed to support its decisionmaking, as well as its
ability to prepare auditable financial statements. A consistent
theme of our financial audit 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.
DOD-WIDE PROGRAMS
------------------------------------------------------ Chapter 5:4.2.1
In November 1995, we testified that given the serious and pervasive
nature of DOD's financial management problems, and the need for more
immediate progress, the department needs to consider additional steps
to fix its longstanding weaknesses. Specifically, we reported that
to turn the Secretary's "Blueprint" for reforming DOD's financial
management into substantive improvements, DOD needs to take immediate
action to (1) assess the number and skill levels of its financial
management workforce, and (2) establish an outside board of experts
to provide counsel, oversight, and perspective to its reform efforts.
(GAO/T-AIMD-96-1)
ARMY PROGRAMS
------------------------------------------------------ Chapter 5:4.2.2
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)
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 Anti-deficiency Act. The report also pointed
out that inaccurate reporting could cause the Army to underestimate
its future required outlays. In addition, we reported that the lack
of sustained DOD leadership has impaired Army's ability to strengthen
financial accountability. (GAO/AIMD-94-12)
We recommended that the DOD Chief Financial Officer (1) evaluate and
resolve budget execution and disbursement problems, (2) implement
existing security access policies and automated data processing
contingency plans, and (3) 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. (GAO/AIMD-94-12)
NAVY PROGRAMS
------------------------------------------------------ Chapter 5:4.2.3
In March 1996, we issued a report to complete our initial reviews of
each of the military services' financial management operations. In
that report, we expressed our concern that the Navy had not taken
advantage of the 5 years since the passage of the CFO Act or the
experiences of its counterparts in the Army and the Air Force to
address the pervasive and long-standing financial management problems
that hamper the Navy's financial operations. We concluded that the
Navy and Defense Finance and Accounting Service (DFAS) must now play
"catch up" by giving the area a higher priority and sense of urgency
if it is to meet the objectives of the CFO Act. We recommended that
the DOD Comptroller and the Navy's Assistant Secretary for Financial
Management take a number of actions to improve the credibility of the
Navy's financial reports. Our recommendations focused on placing
high priority on implementing basic required financial controls over
Navy accounts and reports, and developing a plan for producing
reliable financial statements that will address (1) staffing issues,
(2) short-term measures to improve data quality in existing financial
systems, (3) strategies for promptly meeting U.S. general ledger
requirements, and (4) offices or positions that will be held
accountable for identified actions. (GAO/AIMD-96-7)
In July 1996, we reported that the Navy's Plant Property accounting
and reporting was unreliable. Specifically, we reported that there
was no assurance that all plant property was reported and we
identified over $24 billion of real property that was reported twice.
We recommended several actions directed at updating requirements,
monitoring compliance, and ensuring that appropriate training is
provided to correct the observed deficiencies. (GAO/AIMD-96-65)
In August 1996, we reported that the Navy did not have adequate
visibility over $5.7 billion in operating materials and supplies.
This lack of visibility increased the risk that millions of dollars
could be spent unnecessarily to purchase items that could be obtained
from excess stock at operating unit-level locations. For example, we
determined that, for the first half of fiscal year 1995, the Navy
will incur unnecessary expenses of approximately $27 million. We
recommended that the Navy take a number of actions directed at
eliminating operating material and supply redistribution centers and
ensuring that asset visibility efforts facilitate complete, reliable
financial reporting of Navy operating materials and supplies.
(GAO/AIMD-96-94)
In September 1996, we reported that our reviews of general controls
at locations processing Navy and Marine Corps data revealed serious
weaknesses that would allow both computer hackers and hundreds of
thousands of legitimate users with valid access privileges to
improperly modify, steal, inappropriately disclose, and destroy
sensitive DOD data. We found deficiencies across the board,
undermining DOD's ability to protect sensitive personnel, payroll,
disbursement, and inventory information maintained in DOD computer
systems. To resolve these deficiencies, we recommended that the
department's chief information officer take a leadership role in
implementing a series of actions directed at establishing,
implementing, and monitoring a comprehensive DOD-wide computer
security management program. (GAO/AIMD-96-144)
In September 1996, we issued a report concerning improvements needed
in the Standard Accounting and Reporting System (STARS) selected to
serve as Navy's system for general fund accounting. We found that
the planned STARS implementation is expected to produce some net cost
savings. However, its implementation plans were hampered by the lack
of a target systems architecture--or blueprint--that would define the
systems' expected functions, features, and attributes, including
interfaces and data flows. To increase the likelihood that the STARS
enhancement project will result in an efficient, effective, and
integrated Navy general fund accounting system, we recommended that
DOD and the Navy expeditiously develop a target STARS architecture
and that action plans reflect specific steps needed to achieve this
architecture, identifying responsible parties, and establishing
realistic milestones. (GAO/AIMD-96-99)
See also chapter 1, National Security and International Affairs
Programs.
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
This issue area focuses on three objectives: (1) making the
intergovernmental auditing process more useful, (2) strengthening the
inspector general concept, and (3) improving the financial
accountability of several federal activities.
The issue area provides guidance and support to the National
Intergovernmental Audit Forum and 10 regional intergovernmental audit
forums. The forums include federal, state, and local government
auditors as well as members of the public accounting profession. The
forums have provided the foundation for the development and
recognition of professional auditing standards for audits of
governmental entities and the means to ensure that those audits help
to ensure accountability over public funds. In that regard, the
forums were an excellent resource in the development of
recommendations we have made to make the single audit process more
useful and in passage of the Single Audit Act Amendments of 1996.
Federal IGs have devoted considerable effort since passage of the IG
Act in 1978 to establish controls to ensure compliance with
professional standards and to measure dollar savings and other
accomplishments from their work. NPR others, however, have begun to
seriously examine the role IGs should play and to demand that IGs
develop more meaningful performance measures for how IGs help improve
the way government operates. In response to our recommendations, IGs
have recently begun establishing their own strategic plans and have
proposed new performance measures.
We perform financial audits of several federal activities, including
independent counsels, commemorative coin recipients, the White House
Travel Office, and certain legislative branch entities. These audits
are typically mandated by law and have resulted in numerous
recommendations and suggestions for improvements in financial
management. For example, based on our work, independent counsels
have corrected serious internal control weaknesses as well as
noncompliance with laws and regulations we found in our first audit
in 1992.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:5.2
The single audit is an important means by which the Congress, federal
oversight officials, and program managers obtain information on
whether the recipients of federal assistance properly account for the
federal funds they receive, maintain adequate internal controls over
those funds, and comply with program requirements. The 12 years of
experience since passage of the Single Audit Act in 1984 have shown
that refinements can be made to strengthen the usefulness of single
audits while at the same time the burden on state and local
governments and nonprofit organizations can be reduced. The Single
Audit Amendments of 1996 and action by OMB earlier this year brought
about a number of the refinements in the single audit process that we
recommended. OMB and others are continuing to work on the additional
refinements we recommended. (GAO/AIMD-94-133)
IGs have implemented our recommendations to develop strategic plans
that assess their respective agencies' 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. Not all IGs, however, have implemented our recommendation
to include their strategic plans in required semiannual reports to
the Congress. Including strategic plans in semiannual reports would
help to ensure that the Congress, OMB, agency heads, and others are
informed of IGs' activities and effectiveness. (GAO/AIMD-94-39)
Audits of employee benefit plans are a key safeguard for protecting
much of the assets held by plans. As of 1988, the last year for
which we have data, an estimated 5.2 million plans covered by the
Employee Retirement Income Security Act of 1974 had assets of about
$1.75 trillion. The Act currently allows plan administrators to
exclude from the scope of the audit investments held by certain
regulated institutions, such as banks and insurance companies. The
Congress has not enacted legislation we recommended to eliminate this
limited scope provision. (GAO/AFMD-92-14)
INFORMATION RESOURCES
MANAGEMENT ISSUE AREAS (BUDGET
FUNCTION 990)
---------------------------------------------------------- Chapter 5:6
GAO Contact: Jack Brock, 202/512-6204
Joel Willemssen, 202/512-6253
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:6.1
As agencies increasingly turn to technology and the information
superhighway to carry out and streamline operations, it has become
critical that they effectively manage their information resources.
Our work covering many of the larger federal agencies revealed that
they are not doing enough to ensure that the billions of dollars the
federal government spends annually on new technology acquisition and
development will provide positive returns on investment and support
agency goals and missions. As a result, agencies risk missing out on
the dramatic improvements to operations that new technology can help
achieve. In this light, GAO has been working with congressional
committees and civil and defense agencies to improve controls over
the management processes associated with high risk information
technology investments.
Our work over the past year also revealed that more attention needs
to be focused on protecting government information systems. While
the Internet and other new technologies offer tremendous
opportunities for streamlining operations and improving efficiency,
they also greatly increase the risk of unauthorized access to very
valuable and sensitive information, and disruption of critical
operations.
Over the last few years, our reports and testimony have emphasized
the importance of improving mission performance by adopting strategic
information management "best practices" gleaned from leading public
and private organizations. In 1996, we worked closely with the
Subcommittee on Oversight of Government Management and the District
of Columbia, Senate Committee on Governmental Affairs, to develop the
legislative provisions of the Clinger-Cohen Act of 1996. At our
recommendation, many of the "best practices" principles, which
include appointing a chief information officer and establishing a
capital planning and investment process, were incorporated into the
law. Further, Executive Order 13011 on Federal Information
Technology adopted these practices and provides additional guidance
to agencies on implementation.
DEPARTMENT OF DEFENSE
------------------------------------------------------ Chapter 5:6.1.1
In the spring and fall of 1995, we testified on DOD's plans to
streamline, improve, and reconcile financial systems. Specifically,
DOD needed to develop accurate, auditable financial statements;
eliminate problem disbursements; develop credible cost information
systems; develop effective financial management systems; and build an
effective and accountable management structure. The congressional
authorizing and appropriating committees for DOD have frequently
cited our work on financial management in their reports--most
recently, the report accompanying the DOD fiscal year 1997
appropriations--and used it as a catalyst for improving DOD's
financial management environment.
Using our prior work on DOD's Business Operating Fund as a basis, the
congressional Defense committees have been critical of the fund's
cash management practices, which are symptomatic of long-standing DOD
financial management weaknesses. In April 1996 we reported that (1)
the fund's managers did not have accurate, complete, or timely data
on cash balances, (2) DOD continued to rely on advance billing
customers to generate sufficient cash for the fund's day-to-day
operations, (3) the fund had about $1 billion in outstanding accounts
receivable that were over 120 days old and DOD was unable to collect
over $200 million for work performed because the billing documents
did not identify the specific activities, and (4) monthly reports did
not fully disclose $5.4 billion in adjustments that were made to
accounts receivable and payable balances. We also reported that if
current practices persisted, they could lead to DOD's requiring
excessive amounts of cash to maintain ongoing operations. Acting
upon the results of our work, the Congress reduced DOD's fiscal year
1996 budget request by $140 million.
In early 1995 we reported and testified that DOD processing of
temporary duty travel is a wasteful and burdensome operation. We
indicated that, by reengineering and applying industry best practices
to its travel processing, DOD could potentially save hundreds of
millions of dollars. DOD has recognized this and has a travel
process reengineering initiative underway. In line with our report
recommendations, DOD has provided sustained commitment to the
initiative, supporting its reengineering team with the resources and
authority necessary to carry out its mandate. In anticipation of
savings related to travel reengineering efforts, the Congress reduced
DOD's request for operations and maintenance funds for fiscal year
1996 by $128.5 million.
DOD's unclassified computers and networks are being attacked via the
Internet by unknown and unauthorized individuals. We reviewed and
reported on the frequency of and damage caused by these attacks, as
well as DOD's actions to secure its information systems. DOD itself
has reported that it may have experienced as many as 250,000 attacks
last year, the majority of which were successful. We found that
these attacks often caused considerable damage--information and
software have been stolen, modified, and destroyed--and the potential
for greater harm is very high. In short, these attacks pose a
serious threat to military operations and national security. We
reported that DOD's security practices are not uniform and must be
greatly improved, particularly in the areas of information security
policy, training, and incident-response capability. DOD concurred
with our findings and recommendations and indicated that corrective
actions would be taken. In response to our work, the Congress has
also recognized the need to review the protection of sensitive
government information at other federal agencies.
Our reviews of Defense and governmentwide telecommunications issues
were highly influential in improving two major programs. Our work on
FTS 2000 costs resulted in an immediate cost reductions to the
government when Sprint agreed to reduce its FTS 2000 prices by $86
million over 2 years. Further, by working closely with congressional
staff in assessing GSA's Post-FTS 2000 acquisition strategy, we
helped persuade GSA to adopt a more flexible, shorter term approach
that will enable the government to take advantage of
telecommunications reform and procure more services at lower cost.
In addition, we produced the first governmentwide analysis of what
federal agencies spend on long-distance, local, and other
telecommunications services. That study demonstrated that agencies
need to do a much better job in managing and accounting for
telecommunications costs.
The success or failure of today's major weapons acquisition programs
often depends on the effectiveness with which DOD manages the
development, acquisition, and support of computers and software
embedded in these systems. Despite efforts to improve software
management, DOD still needs to focus more attention on this
important, $20+ billion annual investment area. In one program--the
B-1B bomber-- the computer and software upgrade approach being
pursued would not have enabled the B-1B to meet its requirements,
would have increased computer maintenance costs, and would have
necessitated another costly upgrade in the future. As a result, the
$412 million estimated cost of this upgrade would have been wasted.
We recommended another computer upgrade approach that would meet all
requirements, allow growth for future requirements without another
upgrade, and save about $800 million in software maintenance. DOD
concurred with our recommendations and took corrective action.
Our series of reviews of DOD's actions to improve its logistics
information systems have revealed critical flaws in DOD's migration
system strategy--principally in failing to conduct analyses needed to
assess whether investments are cost-beneficial and in not trying
development efforts to other major DOD initiatives. As a result, DOD
has invested billions of dollars in systems that may not be any
better than the hundreds of "legacy" systems already in place, and it
could waste millions of dollars resolving problems that result from
the lack of developing and implementing a clear and cohesive
investment strategy. Our past work on DOD's Depot Maintenance
Standard System resulted in adjustments to the 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.
Our work with the Defense congressional committees and DOD leadership
has led DOD to establish several management initiatives to improve
controls over and reduce the risks of its information technology
investments. As a result, DOD has initiated efforts to improve (1)
the strategic planning process; (2) integration of its planning,
programming, and budgeting process with its acquisition and oversight
process; (3) the use of performance measures as a management control;
and (4) a management framework to represent more closely a
Department-wide enterprise approach (a true Defense information
infrastructure) rather than the historic "stovepiped" information
technology management framework that followed military service
organizational structures.
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
------------------------------------------------------ Chapter 5:6.1.2
Our work at NASA helped spur the agency to seek greater efficiencies
and effectiveness in the way it manages its information resources.
In response to our recommendation regarding consolidation of its wide
area networks, NASA commissioned an independent committee to develop
recommendations for a more cost-effective approach to consolidation.
NASA will begin implementing the committee's recommendations in
fiscal year 1997. Our assessment of NASA's chief information officer
(CIO)--the first such GAO assessment of an agency CIO--included
recommendations for strengthening the information officer's ability
to achieve greater economies and efficiencies in information
management. NASA officials have indicated they will implement most
of our recommendations.
DEPARTMENT OF COMMERCE,
NATIONAL WEATHER SERVICE
------------------------------------------------------ Chapter 5:6.1.3
Our continuing effort to assess the Department of Commerce's National
Weather Service's $4.5 billion modernization program raised the
awareness of the Congress about the potential for requirements creep
and the need to contain costs. Specifically, our testimony and
report on the Advanced Weather Interactive Processing System
highlighted the potential for the system to include capabilities not
directly tied to improving the National Weather Service's mission
effectiveness. Based in part on our concerns about cost growth, the
Congress capped the total amount that could be spent on the system at
$525 million. Additional reports led to $12 million in cost
reductions in the procurement of NEXRAD radars and improvements in
the National Weather Service's software development processes.
DEPARTMENT OF AGRICULTURE
------------------------------------------------------ Chapter 5:6.1.4
Our work on the InfoShare program helped convince the Congress to
halt and redirect the $2.6 billion effort to modernize and reinvent
USDA's farm service and rural development agencies. This review
found that agency managers were not taking necessary steps to
redesign business processes and that, instead, the program was being
used as a vehicle to buy information technology and further automate
its current way of doing business. This work also resulted in the
Department's linking its business processing reengineering to its
reorganization initiative. Other work at the Department this year
yielded an additional $147 million in measurable benefits by working
closely with committees to limit the use of Commodity Credit
Corporation funding for automatic data processing (ADP) equipment.
We also reported that USDA was wasting millions of dollars each year
by not cost-effectively managing its annual $100 million
telecommunications investment. For example, the Department had
wasted millions of dollars by not acting on all opportunities to
consolidate and optimize telecommunications services. We also
reported that the Department was losing millions of dollars each year
paying for (1) unnecessary telecommunications services, (2) leased
equipment that was not used and service billed but never provided,
(3) commercial carrier services that cost more than three times what
they would under the FTS 2000 programs, and (4) unauthorized collect
calls and other types of telephone fraud and abuse. Our work
prompted the Department to reassess and begin reengineering its
overall telecommunications management operations, and convinced the
Department to report its management of telecommunications as a
material internal control weakness under the Federal Managers'
Financial Integrity Act.
In our review of USDA's actions to correct its financial management
system problems, we reported that many problems will not be resolved
until financial and mixed systems are brought into compliance with
the Department's new financial standards, and that the Department's
CFO has neither the authority nor mechanism to enforce compliance.
Further, the Department's efforts do not address eliminating and/or
consolidating systems that perform similar functions, or
reengineering financial management processes. This work resulted in
the Department's delegating additional authority to the CFO to
oversee all Departmental financial management system activities,
including approving component agency financial management system
design and enhancement projects.
ENVIRONMENTAL PROTECTION
AGENCY
------------------------------------------------------ Chapter 5:6.1.5
Our work on the EPA's nationwide system for managing hazardous waste
convinced the agency to eliminate reporting requirements levied on
the states that dramatically reduced their reporting burden.
DEPARTMENT OF JUSTICE,
ADMINISTRATIVE OFFICE OF
THE US COURTS
------------------------------------------------------ Chapter 5:6.1.6
As a result of our work on the development of the National Fine
Center, a centralized system to account for criminal debt, the
Department of Justice's AOUSC plans to terminate this project and
return about $13 million to the Crime Victims Fund. In addition, our
work contributed to improvements in the Department of Justice's
ability to identify the collectibility of criminal debt and as a
result, Justice has determined that about 68 percent of the
outstanding debt is unlikely to be collected.
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
------------------------------------------------------ Chapter 5:6.1.7
Our 1995 report on Medicare health care fraud noted that (1) Medicare
continues to experience large losses each year due to waste, fraud,
and abuse, and (2) payment controls for Medicare Part B can be
bypassed, are weak, and have important technical limitations. We
recommended that HCFA develop a plan to implement commercially
available antifraud technology, particularly where the need to reduce
fraud is great, such as in South Florida. The agency responded by
stating that it would provide funding for additional Medicare
contractors to acquire anti-fraud computer systems within the next
several months. As a result, three additional Medicare carriers,
including Florida Blue Cross/Blue Shield have acquired the same
anti-fraud technology described in our report.
In 1991 we reviewed how the Public Health Service's Agency for Health
Care Policy and Research had explored ways in which automated medical
records could be used. We found that the agency needed to further
explore ways to use automated medical records to provide data for
outcomes research. In response to our recommendation, the Agency for
Health Care Policy and Research has taken several actions to support
public and private use of automated medical record systems to more
effectively provide for outcomes research. Specifically, it has
completed a series of studies on the availability of automated
medical records data and the usability of such data in addressing
medical effectiveness research questions. It has joined with the
National Library of Medicine to provide grants to address research
areas for the development of computerized medical records. It is
also sponsoring and encouraging public and private industry meetings
that explore ways to increase the use of automated medical record
systems.
In 1994 we reported on the tools and methodology DOD used to manage
the performance of its Composite Health Care System. We reported
that to provide the performance management that was warranted in a
state-of-the-art system such as its Composite Health Care System,
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 the
Composite Health Care System runs, and DOD has modified its approach
to managing the Health Care System's performance by (1) updating its
performance management plan, (2) enhancing its system sizing
algorithms, and (3) developing performance simulation models for the
Health Care System's hardware configuration.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:6.2
OFFICE OF MANAGEMENT AND
BUDGET
------------------------------------------------------ Chapter 5:6.2.1
Our review of the Information Technology (IT) decision processes at
five case-study agencies found that elements of an investment
approach were embedded in some of the agencies' existing
decision-making processes. However, we also found weaknesses that
prevented the agencies from having a complete, institutionalized
process. As a result, we recommended that OMB guide and assist
agencies in establishing and improving their IT investment management
process by requiring agencies to (1) implement IT investment
processes; (2) periodically analyze their entire portfolio of IT
investments; (3) design control and evaluation processes that include
cost, schedule, and quantitative performance measures; and (4) set
minimum quality standards for data used to assess cost, benefits, and
risk decisions. OMB agreed with these recommendations and said it
would be implementing many aspects of them as part of the fiscal year
1998 budget review process of fixed capital assets. (GAO/AIMD-96-64)
Over the past 4 years, we have has issued over 30 reports describing
serious information security problems at major federal agencies. Our
analysis of the most recent of these reports for the 15 largest
federal agencies found that 10 agencies had serious information
security weaknesses. Such weaknesses put billions of dollars of
federal assets at risk of theft, misuse, or loss. In addition,
unauthorized disclosure of sensitive data and disruption of critical
operations could occur. As a result, we recommended that the
director of OMB advocate and promote the Chief Information Officers
Council's adoption of information security as one of its top
priorities, and development of a strategic plan for (1) increasing
awareness of the importance of information security and (2) improving
information security program management governmentwide. OMB agreed
with this recommendation and plans to take action to implement it.
(GAO/AIMD-96-110)
DEPARTMENT OF DEFENSE
------------------------------------------------------ Chapter 5:6.2.2
Our report on computer attacks at DOD highlighted risks to our
national security and the damage that has already been caused. We
identified weaknesses in Defense's information security practices and
recommended that the Department develop a strong information systems
security program. We specifically recommended that DOD develop
departmentwide policies for preventing, detecting, and responding to
attacks; better train users, systems managers, and security
officials; evaluate the sufficiency of its incident- response
capability; and continue developing and using network monitoring and
protection technologies. DOD concurred fully with our findings and
recommendations and indicated that corrective actions would be taken.
(GAO/AIMD-96-84)
Prevalidating all disbursements is important to protecting the
integrity of DOD's disbursement process. However, unless the
threshold is lowered to include all payments, billions of dollars of
disbursement transactions will continue to bypass this important
control. Accordingly, we recommended that DOD develop a plan to meet
this target of matching all disbursements with obligations before
making a payment. DOD agreed and is in the process of developing a
plan that will require the matching of all disbursements with
obligations in the accounting records prior to making a payment.
(GAO/AIMD-96-82)
Our recent work on DOD's logistics system improvement actions for
transportation and material management, and our report summarizing
our reviews of the logistics migration strategy, made a number of
recommendations aimed at improving the management of these major
investments. Specifically, we recommended that DOD develop a
strategic information resources management plan that anchors its use
of information technology resources to priority business objectives.
We also recommended that DOD limit or halt deployment of segments of
its failed migration system strategies until they can be linked with
evolving outsourcing/privatization plans and show a favorable return
on investment. (GAO/AIMD-96-81, GAO/AIMD-96-109, GAO/AIMD-96-128)
See also Defense Financial Audit Issue Area in this chapter, and
chpater 1, Improving National Security and International Affairs
Programs.
DEPARTMENT OF COMMERCE,
NATIONAL WEATHER SERVICE
------------------------------------------------------ Chapter 5:6.2.3
Our report on the National Weather Service's modernization program
noted that the Service 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.
The Service agreed, and plans to complete the systems architecture in
fiscal year 1997. (GAO/AIMD-94-28)
DEPARTMENT OF AGRICULTURE
------------------------------------------------------ Chapter 5:6.2.4
USDA has not been fully responsive to our recommendations to improve
its business process reengineering for the Department's farm service
and rural development agencies. Consequently, the Department is
having difficulty making progress in reengineering its processes. As
a result, we are monitoring InfoShare and working with agency
officials, OMB, and congressional committees to ensure that sound
business process reengineering principles and practices are not
compromised and that USDA does not spend hundreds of millions of
dollars of scarce resources automating the farm service agencies'
current way of doing business and, therefore, not achieve the
objectives of a reinvented USDA. (GAO/AIMD-94-156)
We recommended that the Secretary of Agriculture also take a number
of steps to improve the management and planning of telecommunications
resources. In its May 6, 1996, statement of actions taken on our
recommendations, the Department said it was reporting
telecommunications management as a material internal control weakness
in accordance with OMB Circular A-123. The Department also discussed
many other actions that are currently underway to address our
recommendations. We continue to monitor the Department's activities
to ensure that its actions are fully responsive to our
recommendations. (GAO/AIMD-95-997, GAO/AIMD-95-203, GAO/AIMD-96-59)
To correct its financial management system problems, USDA has taken
steps to provide more authority to its Chief Financial Officer, but
has yet to fully address our other recommendations.
(GAO/AIMD-95-222)
See also chapter 2, Improving Resources, Community, and Economic
Development Programs, Food and Agriculture Issue Area.
ENVIRONMENTAL PROTECTION
AGENCY
------------------------------------------------------ Chapter 5:6.2.5
At EPA, we are working to implement several open recommendations.
For example, we recommended that the Administrator determine what
information is needed to oversee states' implementation of the
Resource Conservation and Recovery Act and develop a cost-effective
solution for meeting these needs. The agency has begun to assess the
information required to manage the Resource Conservation and Recovery
Act program, and is currently defining its strategy for carrying this
out. The agency has also reduced the reporting burden on states by
eliminating 274 nonessential data elements from its reporting
requirements. (GAO/AIMD-95-167)
See also chapter 2, Improving Resources, Community and Economic
Development Programs, Environmental Protection Issue Area.
DEPARTMENT OF COMMERCE,
U.S. CUSTOMS SERVICE
------------------------------------------------------ Chapter 5:6.2.6
Our report on Customs' modernization program noted that the agency
did not perform the requisite analyses before committing to its
organization-wide architecture project entitled CDC-2000. As a
result, we recommended that Customs complete work for defining its
core business processes, and generate business information
requirements for use in performing further analyses for selecting an
organization-wide architecture. Specifically, we recommended that
Customs not resume hardware and software purchases for CDC-2000
unless the requisite analysis identifies it as the optimal processing
approach. (GAO/AIMD-96-57)
See also chapter 4, Improving Justice and General Government
Programs, Administration and Justice Issue Area.
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
------------------------------------------------------ Chapter 5:6.2.7
Our report on HUD's information resources managements (IRM) program
found numerous long-standing problems. We recommended several
actions to address them, including (1) 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 of the others; (2) establishing a strategic information
architecture that is based on strategic business and IRM plans to
govern the development, deployment, and use of IRM resources; and (3)
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)
See also chapter 2, Improving Resources, Community and Economic
Development Programs, Housing and Community Development Issue Area.
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
------------------------------------------------------ Chapter 5:6.2.8
In 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 1994 we reported on the automated systems of HHS' Job
Opportunities and Basic Skills Training Program (JOBS) and found that
these systems focused on providing information for reporting
purposes, but not on the program's employment objectives. We
recommended that HHS work with appropriate state agencies to
determine how technology could best be used to achieve the overall
objectives of this program and incorporate these features into system
guidance for use by the states. HHS has convened a federal/state
work group to help design a prototype case management and
self-reporting system for the JOBS that focuses on helping
participants become employed and self-sufficient. We continue to
monitor HHS' progress in developing this prototype. (GAO/AIMD-94-44)
In 1994 we also 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 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; about a third of them believed the systems were too costly
to acquire and operate and might 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.
(GAO/AIMD-94-130)
During 1994 we also reported on HCFA's Medicare Transaction System
and found that HCFA's executives had not been involved in the
planning, acquisition, or management of the project. In response to
this report and follow-up discussions, HCFA agreed to change to an
incremental development and implementation strategy, and deploy the
system initially at a limited number of sites, enabling HCFA to
identify problems and correct them before further implementation. In
November 1995 we testified that many problems remained, stemming from
HCFA's lack of a disciplined management process. We reported that
Medicare Tracking System design and development was proceeding
despite difficulties in defining requirements, a compressed project
schedule, and lack of reliable information about costs and benefits.
Since that time, HCFA has taken some steps to address these
weaknesses; however, many of the same problems relating to
requirements, schedule, and an adequate cost/benefit analysis remain.
(GAO/T-AIMD-96-12)
In 1995 we reported that commercial software to detect code
manipulation (one type of billing abuse) could have reduced Medicare
government and beneficiary costs by an estimated $640 million in
1994. This information was based on a test in which four commercial
firms reprocessed samples of over 200,000 paid Medicare claims. We
recommended that the Secretary of HHS direct the Administrator of
HCFA to require Medicare contractors to use commercial software to
detect code manipulation when processing Medicare claims for
physician services and supplies. HCFA agreed to evaluate commercial
software to determine whether it is appropriate for the Medicare
program. (GAO/AIMD-95-135)
In 1995 we reported that HCFA continues to experience large losses
each year due to waste, fraud, and abuse, and that existing Medicare
Part B payment safeguard controls can be bypassed, are weak, and have
technical limitations. We recommended that HCFA develop a plan to
implement commercially available antifraud technology for the entire
Medicare program. HCFA responded by providing funding to 3 of 32
Medicare Part B carriers to acquire, for their individual use, the
same antifraud technology described in our report. While this
investment should result in better detection of fraud and abuse at
these carriers' sites, it does not completely respond to our
recommendation, which advocated establishing a plan to implement
commercial antifraud technology nationwide. Given the potential for
substantial savings of program funds and commonly accepted
information resources management best practices that encourage the
use of available off-the-shelf software, we will continue to meet
with officials to assess their approach to enhancing Medicare's fraud
detection capabilities. (GAO/AIMD-95-77)
See also chapter 3, Improving Human Resource Programs, Health
Financing Systems and Health Services Quality and Public Health Issue
Area.
DEPARTMENT OF VETERANS
AFFAIRS
------------------------------------------------------ Chapter 5:6.2.9
Since 1991, VA's modernization project has received continued
scrutiny by us as well as OMB and GSA. In 1995 VA took positive
steps to direct its modernization toward fulfilling our
recommendations. In September it began to analyze current business
processes and set measurable goals for improved service to veterans.
However, it still needs to take aggressive action to effectively
address its serious technical and management weaknesses if
modernization is to succeed. (GAO/IMTEC-93-6)
See also chapter 3, Improving Human Resource Programs, Veterans'
Affairs and Military Health Care Issue Area.
STATUS OF OPEN RECOMMENDATIONS: A
USERS QUICK REFERENCE FOR THE
ELECTRONIC EDITION
============================================================ Chapter I
INTRODUCTION
---------------------------------------------------------- Chapter I:1
This electronic edition contains the details of GAO's open
recommendations using "askSam for Windows" software. The software is
compatible with Microsoft Windows 3.1 or Microsoft Windows 95 and
provides several search and retrieval options to find either
summaries of key open recommendations or detailed information on
products containing open recommendations. Three high-density 3.5
inch installation disks are provided containing all of the software
and data for this electronic edition of the Status of Open
Recommendations report.
HOW TO INSTALL
---------------------------------------------------------- Chapter I:2
The installation program installs the files necessary to run this
software on your hard drive and creates a Windows icon that will
allow you to run the program. At least 8MB of RAM and 8.3MB of hard
disk space are required. To load the software on your hard drive:
1. Insert installation disk labelled "Disk 1" into your floppy
drive.
2. Select the File option from the Windows menu bar, then select the
Run option from the drop-down menu.
3. In the Command Line window, type the drive designation of your
floppy drive, a colon, a backslash, and the word "install". For
example, type "a:\install".
4. Click once on the OK button, then follow the instructions that
appear on the screen.
HOW TO START
---------------------------------------------------------- Chapter I:3
In Windows, double-click on the Open Recommendations icon to start
the program and display the main menu as shown in figure 1. The menu
contains three options: Report Details, Issue Area Summary, and
Background.
Figure 1 Main Menu
(See figure in printed
edition.)
HOW TO SEARCH--REPORT DETAILS
---------------------------------------------------------- Chapter I:4
This option accesses the database containing descriptive information
about each GAO product with open recommendations including the title,
recommendations, an abstract, the GAO contact person, addressees,
requestors, and the product number.
1. Select the Report Details option on the main menu. The Report
Details menu, shown in figure 2, will be displayed.
2. To quickly select a commonly used word, code, or phrase: select
and click on one of five look-up table options listed:
Committees of Interest
Interested Members of Congress
Recommendation Addressees
GAO Issue Area Units
Subject Terms
Follow the instructions to browse the table you selected, and to
select and copy the name, term, or code for your search. Return to
the Report Details menu. (NOTE: You may skip step 2 if you wish to
search on a keyword.)
3. Select and click on one of the three output formats for
displaying or printing the results:
Brief list
Descriptive information
Full information
4. When prompted, depress Shift-Insert to paste the search term
(that you selected and copied in step 2), enclosing the term in "[]",
OR type in a keyword. Press OK.
Figure 2 Report Details Menu
(See figure in printed
edition.)
HOW TO SEARCH--ISSUE AREA
SUMMARY
---------------------------------------------------------- Chapter I:5
This option presents the information contained in the printed copy of
the Status of Open Recommendations--the impact of GAO's work and key
open recommendations, organized by GAO's programming units.
1. Select the Issue Area Summary on the main menu.
2. Select and click on one of three options:
Table of Contents
Preface
Keyword
HOW TO PRINT YOUR SEARCH
RESULTS
---------------------------------------------------------- Chapter I:6
There are two options for printing the results of a search:
-- Select File from the menu bar. Select Print from the drop-down
menu, or
-- Depress Control/P.
EXITING THE PROGRAM
---------------------------------------------------------- Chapter I:7
To exit the program, choose File from the Menu Bar, then choose the
Exit option from the drop-down menu.
HOW TO GET HELP
-------------------------------------------------------- Chapter I:7.1
Detailed information on searching the Report Details and Issue Area
Summary Databases may be obtained from the Main Menu's link to
"Background" and the Report Detail menu's option: "For more
information about using this program, click here". Information on
formulating searches using the askSam query language is available by
clicking on the Help option appearing in the Windows menu bar.
Suggestions or comments about this electronic publication should be
directed to:
Flora H. Milans
Deputy Director
GAO, Office of Policy
Voice (202) 512-6100
Fax (202) 512-4844
E-mail [email protected]
*** End of document. ***