Status of Open Recommendations: Improving Operations of Federal
Departments and Agencies (Chapter Report, 02/10/99, GAO/OP-99-1).
GAO reported on the conclusions and recommendations resulting from its
audits and other reviews of federal departments and agencies. GAO
provided summary information on the status of all recommendations that
have not been fully implemented in the areas of national security,
international affairs, community and economic development, natural
resources, human resources, justice, general government, and financial
and information management for use in congressional review of budget
requests.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: OP-99-1
TITLE: Status of Open Recommendations: Improving Operations of
Federal Departments and Agencies
DATE: 02/10/99
SUBJECT: Information resources management
Health care programs
National defense operations
Defense contingency planning
Financial management
Public administration
International relations
Tax administration
Natural resources
Law enforcement
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Cover
================================================================ COVER
Annual Report to the Chairmen and Ranking Minority Members, Senate
and House Committee on Appropriations
February 1999
STATUS OF OPEN RECOMMENDATIONS -
IMPROVING OPERATIONS OF FEDERAL
DEPARTMENTS AND AGENCIES
GAO/OP-99-1
Abbreviations
=============================================================== ABBREV
ADP - automatic data processing
AFDC - Aid to Families With Dependent Children
AID - Agency for International Development
AIDS - acquired immunodeficiency syndrome
APHIS - Animal and Plant Health Inspection Service
AOUSC - Administrative Office of the U.S. Courts
ASCI - Accelerated Strategic Computer Initiative
ATF - Bureau of Alcohol, Tobacco, and Fire Arms
BIF - Bank Insurance Fund
BOP - Bureau of Prisons
CBO - Congressional Budget Office
CBSX - Continuing Balance System-Expanded
CDC - Centers for Disease Control
CFO - Chief Financial Officer
CIO - Chief Information Officer
COPS - Office of Community Oriented Policing Services
CPA - certified public accountant
CTR - cooperative threat reduction
D.C. - District of Columbia
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
DOI - Department of the Interior
DOL - Department of Labor
DOT - Department of Transportation
EEOC - Equal Employment Opportunity Commission
EIC - Earned Income Credit
EPA - Environmental Protection Agency
EZ/EC - Empowerment Zone/Enterprise Community
FAA - Federal Aviation Administration
FAR - Federal Acquisition Regulation
FASAB - Financial Accounting Standards Advisory Board
FBI - Federal Bureau of Investigation
FCC - Federal Communications Commission
FDA - Food and Drug Administration
FDIC - Federal Deposit Insurance Corporation
FEMA - Federal Emergency Management Agency
FHA - Federal Housing Administration
FHWA - Federal Highway Administration
FinCEN - Financial Crimes Enforcement Network
FNS - Food and Nutrition Service
FPI - Federal Prison Industries
FRA - Federal Railroad Administration
FRF - Federal Savings and Loan Insurance Resolution Fund
FSA - Farm Service Agency
FSIS - Food Safety and Inspection Service
FTA - Federal Transit Administration
GAO - General Accounting Office
GNMA - Government National Mortgage Association
GPO - Goverment Printing Office
GPRA - Government Performance and Results Act
GSA - General Services Administration
HACCP - Hazard Analysis and Critical Central Point
HCFA - Health Care Financing Administration
HIV - human immunodeficiency virus
HIV/AIDS - human immunodeficiency virus/acquired immunodeficiency
syndrome
HHS - Department of Health and Human Services
HMO - health maintenance organization
HUD - Department of Housing and Urban Development
IAEA - International Atomic Energy Agency
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
NRC - Nuclear Regulatory Commission
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 - Plan for Achieving Self-Support
PTO - Patent and Trademark Office
RDT&E - Research, Development, Test and Evaluation
SAIF - Savings Association Insurance Fund
SAMSA - Substance Abuse and Mental Health Services Administration
SBA - Small Business Administration
SBIC - Small Business Investment Company
SEC - Securities and Exchange Commission
SES - Senior Executive Service
SRO - self-regulating organization
SSA - Social Security Administration
SSI - Supplemental Security Income
STARS - Standard Accounting and Reporting System
TANF - Temporary Assistance for Needy Families
TVA - Tennessee Valley Authority
USDA - United States Department of Agriculture
USEC - United States Enrichment Corporation
USPS - United States Postal Service
USTF - Uniformed Services Treatment Facilities
VA - Department of Veterans Affairs
WIC - Women, Infants, and Children
Letter
=============================================================== LETTER
B-205879
February 10, 1999
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 C.W. Bill Young
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's) audits,
evaluations, and other review work in federal departments and
agencies. To encourage prompt, responsive actions on our
recommendations, we systematically follow-up 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 during appropriations and oversight hearings. We are
also sending copies to the Chairs and Ranking Minority Members of all
House and Senate committees and subcommittees to inform them of our
open recommendations.
David M. Walker
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 of all open recommendations. This information
should help congressional and agency leaders prepare for upcoming
appropriations and oversight activities and stimulate further actions
to achieve 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 in appendix I of this
publication.
The name and telephone number of the GAO manager to contact for
information or assistance about a product is included. 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 202/512-6061.
This report along with the complete database on open recommendations
is also available on the INTERNET. For information on how to access
this and other 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 J. Rodrigues, 202/512-4841
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:1.1
During fiscal year 1998, we reviewed weapons and space programs to
determine whether systems (1) are being acquired effectively and
efficiently, based on requirements of the national security strategy
and national space policy and (2) could benefit from adopting best
management practices from the commercial marketplace. We also
reviewed these programs to determine whether the Department of
Defense (DOD) and the National Aeronautics and Space Administration
(NASA) had selected the lowest risk and least costly acquisition
strategies consistent with the need for the planned system or
modification. Our reviews included systems such as the F/A-18E/F and
F-22 aircraft, the theater missile defense program, the evolved
expendable launch vehicle, and the space station. We also reviewed
plans to automate the battlefield of the future. We also assisted
the authorizing and appropriating committees of both the House and
Senate by examining DOD's fiscal year 1999 budget and prior years'
budgets and identifying opportunities to reduce and rescind DOD's
procurement and research, development, testing and evaluation (RDT&E)
requests by about $6.3 billion.
We provided Congress with information to assist in its oversight
responsibility on many occasions. For example, we testified that DOD
could improve the outcomes of the weapons acquisition process--that
is, acquire systems better, cheaper, and faster--if the incentives
were changed to encourage and reward program managers for applying
best commercial practices. We also testified on the military
sensitivity of foreign launches of commercial communications
satellites and on the recent shift in export licensing jurisdiction
from the State Department to the Commerce Department. In addition,
our testimony on the competitive effects of mergers and acquisitions
in the defense industry identified approaches DOD can take to ensure
the benefits of competition in a more concentrated industry.
Fiscal year 1998 saw the culmination of several years of GAO work on
specific weapons systems in terms of actions taken by DOD and the
Congress. For example, six GAO products on concurrency and risk in
the F-22 program were important influences on DOD actions to decrease
concurrency, which included reducing the number of initial production
aircraft from eight to six annually--resulting in measurable savings
of about $1.7 billion. Likewise, we questioned the need for and the
affordability of the Navy's F/A-18E/F aircraft in a series of
reports, testimonies, and briefings to Members of Congress and their
staffs between June 1996 and March 1998. These questions contributed
to a decision to reduce the planned procurement almost in half, for a
total program savings of almost $22 billion, or a savings of just
over $1 billion for fiscal years 1998 and 1999.
During the year, our best practices work resulted in reports on
reducing unneeded RDT&E infrastructure, transitioning programs from
development to production, and improving supplier relationships. In
terms of infrastructure, DOD has estimated that 35 percent of its
laboratory facilities and over 50 percent of selected test and
evaluation centers are unneeded; but its initiatives to reduce
capacity, as well as those of other government agencies, have
achieved little success. By contrast, the domestic corporations and
foreign government organizations GAO examined substantially reduced
their research and development infrastructure. In analyzing this
disparity, corporate and foreign government personnel identified
critical elements in their success that are generally lacking in
federal agency efforts.
The best practices work on weapons acquisitions contributed to a
greater understanding of the root causes of problems that have been
noted year after year in our individual weapons reviews. Important
among these are the incentives that force overly optimistic decisions
early in the acquisition process. Our review of the transition of
programs from development to production identified commercial
practices that, conversely, force knowledge-based decisions at
critical junctures. We continue to find that culture also plays a
large role. DOD agreed with recommendations in this report and also
in our report on managing supplier relationships and is incorporating
changes in its training programs and electronic reference system for
the acquisition workforce.
Our work on the defense industry showed that DOD estimated net
savings of over $3 billion from restructurings after seven business
combinations. We also reported that tracing these savings into
contracts was extremely difficult given other factors that affect a
contractor's operations and costs. However, we were able to trace
hundreds of millions of dollars of savings in contractors' costs of
operations, which benefited DOD because contract costs were lower
than they would have been if the restructuring activities had not
occurred.
HIGH-RISK AREAS
-------------------------------------------------------- Chapter 1:1.2
Defense Acquisitions is responsible for three areas that have been
designated as high risk--Defense Weapon Systems Acquisition, Defense
Contract Management, and NASA Contract Management.
DEFENSE WEAPON SYSTEMS
ACQUISITION
------------------------------------------------------ Chapter 1:1.2.1
In fiscal year 1998, we reported that despite DOD's past and current
efforts to reform its acquisition system, wasteful practices still
add billions of dollars to defense acquisition costs. Many new
weapon systems cost more and do less than anticipated and schedules
are often delayed because key decisionmakers do not have adequate
information when needed, rush to commit programs to available funding
streams before completing adequate testing, or have not put in place
appropriate risk management strategies.
Several reports provided illustrations of these problems. For
example, we reported that the Army is awarding both hardware and
software contracts for various battlefield automation systems despite
ongoing and significant software problems, lengthy delays in
completion of testing programs, or significant schedule risks because
of fielding deadlines set by senior officials. Likewise, we reported
on the significant technical challenges in making an airborne laser
capable of destroying a missile during its boost phase--challenges
that will not be resolved for several years. Consequently, we
concluded it is too early to predict whether an airborne laser
program will evolve into a viable missile defense system.
DEFENSE CONTRACT
MANAGEMENT
------------------------------------------------------ Chapter 1:1.2.2
Over the past few years, several broad-based changes have been made
to DOD contracting processes to improve the way DOD relates to its
contractors and the rules governing their relationships. And the
changes are by no means complete. Acquisition reform, with its
emphasis on widespread reengineering of fundamental processes,
continues to receive attention at the highest levels in DOD.
DOD faces a number of areas where risks appear particularly acute.
The need for DOD to achieve effective control over its payment
process remains an imperative. If it does not, DOD continues to risk
erroneously paying contractors millions of dollars and perpetuating
other financial management and accounting control problems. We, and
the DOD Inspector General, have also found that DOD needs to
strengthen the quality of its analyses for commercial purchases.
Because DOD has not formulated good procurement and management
strategies for commercial parts in the acquisition reform
environment, it is paying higher prices for commercial spare parts
than necessary. And, there are numerous cases in which limited
analysis of commercially offered prices resulted in significantly
higher prices than previously paid. DOD's implementation of health
care management programs, particularly the TRICARE Program, further
illustrates DOD's difficulty in managing contracts. DOD has incurred
added costs, the program was significantly delayed, and change orders
have not been processed in a timely manner.
DOD has actions underway to address each of these problems. Whether
DOD can successfully solve them remains to be seen.
NASA CONTRACT MANAGEMENT
------------------------------------------------------ Chapter 1:1.2.3
NASA spends about $12 billion annually, largely for contractual goods
and services. In 1990, when we began to review the adequacy of
NASA's contract management process, we found that the agency lacked
systems and processes to oversee procurement activities and the
ability to routinely produce accurate and reliable management
information. As a result, NASA was placed on GAO's high-risk list.
In fiscal year 1998, we again reviewed the agency's procurement and
financial management processes. We found that NASA has delayed
implementation of its integrated financial management system and has
not implemented its procurement metrics initiative. Furthermore,
while it has made progress in evaluating its field centers'
procurement activities based on international quality standards, NASA
has not issued formal requirements for evaluations at the centers.
We concluded that it is premature to remove NASA contract management
from the high-risk list.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:1.3
Our work on best practices concluded that there were several actions
DOD could take to improve outcomes for weapon acquisition programs.
To improve the transition from development to production, we
recommended that DOD (1) take steps to ensure that sound standards
for the timing and quality of production-related knowledge are
applied to individual weapon systems and used as a basis for
assessing production risks and for making tradeoffs, (2) redefine the
point for launching programs as the point at which technology
development ends and product development begins, and (3) send the
signals that create incentives for acquisition managers to identify
unknowns and ameliorate their risks early in development. To improve
supplier relationships on acquisition programs, we recommended that
DOD (1) develop a policy that promotes productive supplier
relationships and emphasizes the importance of suppliers in improving
program outcomes and (2) communicate this policy throughout the
acquisition workforce and the defense industry through training and
other means. We also recommended specific steps DOD should take to
ensure that weapon system program managers provide leadership and
incentives for optimizing supplier relations on their programs.
(GAO/NSIAD-98-56, GAO/NSIAD-98-87)
Our work on the New Attack Submarine resulted in a recommendation
that DOD assess the impact on ship survivability of reducing the
capabilities of various subsystems. This recommendation is a theme
of our weapons acquisition work. In major acquisitions, it is
important for decisionmakers to have as complete information as
possible in trading off threat assessments, system capability, and
developmental risks. We have observed previous instances where
backfits were needed to bring early production models up to required
performance levels. The types of analyses we recommended, based on
survivability modeling, would allow changes in development schedules
and funding profiles at a much lower cost than if problems were
identified later. (GAO/NSIAD-98-87)
With regard to the Army's program to automate information exchange at
the battle command, brigade, and below levels, we recommended that
this top priority program be moved to category I--projected to
require in excess of $355 million (fiscal year 1996 constant dollars)
in development or procurement of more than $2.1 billion (fiscal year
1996 constant dollars)-- management to increase top-level oversight
of its costs and risk. (GAO/NSIAD-98-140)
Our work on the services' efforts to reduce risk in the development
of the AIM-9X missile system led to concerns about subsequent
discovery of technical and operational problems because of plans to
start low-rate initial production about 1 year before completing
development flight testing and before operational testing of
production-representative missiles. It also led to concerns about
development of a helmet-mounted cuing system under a separate program
although pilots need both the missile and the cuing system to prevail
in combat. Consequently, we recommended that DOD revise AIM-9X
acquisition strategy to allow for enough operational testing of the
missile and helmet, using production-representative items, to
demonstrate that the missile can meet minimum performance
requirements before low-rate production begins. (GAO/NSIAD-98-45)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
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's managers face many challenges as they strive to improve
business operations by streamlining operations, reducing
infrastructures, improving management of remaining facilities, and
enhancing effectiveness and efficiency of the defense supply chain.
Our overall strategy for the Defense Management Issue Area is to
identify innovative, efficient, and cost-effective approaches for
improving DOD's management and reducing costs. It focuses on the
implementation and effectiveness of DOD's cost-reduction initiatives
that relate to support infrastructure activities. It places special
emphasis on logistics functions such as maintenance of depots;
purchase, storage, and disposal of inventory parts and supplies; and
transportation. Our work encourages the reengineering and
streamlining of operations through new processes, best management
practices, and privatization or outsourcing of activities where
appropriate.
Logistics-related business and infrastructure activities consume a
major share of DOD's budget. DOD recognizes the need to cut these
costs and is seeking reductions to help fund a planned $20 billion
increase in its weapon systems procurement budget. Actions to
achieve reductions include privatization, acquisition reform,
technology insertion, organizational streamlining and consolidation,
management process reengineering, base and facility closures,
personnel reductions, inventory reductions, and private sector use of
DOD facilities.
Key areas we focused on in fiscal year 1998 included transition of
former bases to civilian use, potential for future base-closure
legislation, depot maintenance, inventory purchases and storage,
property disposal, and transportation of material and personal items.
We also addressed environmental costs and programs and problems
associated with the disposal of the chemical weapons stockpile.
HIGH-RISK AREAS
-------------------------------------------------------- Chapter 1:2.2
GAO's Defense Management Issue Area is the point of contact for the
following two high-risk areas: Defense Inventory Management and
Defense Infrastructure.
DEFENSE INVENTORY
MANAGEMENT
------------------------------------------------------ Chapter 1:2.2.1
DOD manages inventories with a reported value of about $65 billion.
It also purchases at least $8 billion of new inventory annually to
support its weapon systems and equipment. DOD has had longstanding
problems in achieving economic and efficient inventory practices.
While working to correct them, it has not yet succeeded in developing
the management tools needed to solve these problems on a long-term
basis. In the near term, DOD needs to emphasize the efficient
operation of its existing inventory systems. In the long term, DOD
must establish goals, objectives, and milestones for changing its
culture and adopting new management tools and practices. Further,
DOD must continue to explore other alternatives such as using
business-case analyses to identify opportunities for outsourcing
logistics functions and for implementing best management practices.
DEFENSE INFRASTRUCTURE
------------------------------------------------------ Chapter 1:2.2.2
Over the past 7 to 10 years, DOD has taken actions to reduce its
operations and support costs; however, billions of dollars continue
to be wasted annually on inefficient and unneeded activities. In
recent years, DOD has substantially downsized its force structure,
yet it has not achieved commensurate reductions in operations and
support costs. Progress in reducing the cost of excess
infrastructure activities is critical to maintaining high levels of
military capabilities and in providing increased funding for weapon
systems modernization. Reductions of this nature are difficult and
painful because achieving significant cost savings requires up-front
investments, closure of installations, and elimination of military
and civilian jobs.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:2.3
To achieve management improvements, increase operations efficiencies,
and produce dollar savings, DOD needs to take action on the following
key recommendations.
The Secretary of Defense should direct that the defense
transportation reengineering efforts simultaneously address process
and organizational structure improvements. Specifically, the
reengineering efforts should confront, at a minimum:
-- the need for separate traffic management component command
headquarters staff;
-- the consolidation of separate field subordinate command traffic
management staff; and
-- the elimination of all remaining duplicative field-based
subordinate command support staff. (GAO/NSIAD-96-60)
Whether or not Congress authorizes future Base Realignment and
Closure rounds, DOD needs to improve its periodic updating and
reporting of savings projected from prior Base Realignment and
Closure decisions. This information is needed to strengthen DOD's
budgeting process and ensure that correct assumptions are being made
regarding expected reductions in base operating costs. Accordingly,
the Secretary of Defense should provide guidance to ensure that its
components have and follow a clear and consistent process for
updating savings estimates associated with prior Base Realignment and
Closure decisions. (GAO/NSIAD-97-151)
If Congress authorizes future Base Realignment and Closure rounds,
the Secretary of Defense should:
-- work with the Task Force on Defense Reform and the National
Defense Panel to address, in advance of any future Base
Realignment and Closure round, the important organizational and
policy issues in the various cross-service areas discussed to
facilitate the process of making further infrastructure
reductions;
-- convene a DOD joint working group, as soon as practical, to
develop policy guidance, improve Base Realignment and Closure
processes and decision-making tools, and ensure greater
consistency among the services' processes; and
-- ensure full audit access to all parts of DOD's Base Realignment
and Closure process. (GAO/NSIAD-97-151)
If Congress considers legislation for future Base Realignment and
Closure rounds, it may wish:
-- to model it on the 1990 Base Realignment and Closure legislation
as a starting point;
-- to pass such legislation early to allow the lead time needed for
DOD and the Commission to organize their processes; and
-- to consider the relationship between new Base Realignment and
Closure authority and section 277 of the National Defense
Authorization Act for Fiscal Year 1996 pertaining to
laboratories and test and evaluation facilities.
(GAO/NSIAD-97-151)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
INTERNATIONAL RELATIONS AND
TRADE ISSUE AREA (BUDGET
FUNCTION 150)
---------------------------------------------------------- Chapter 1:3
GAO Contact: Benjamin F. Nelson, 202/512-4128
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:3.1
Given the changes that are taking place throughout the world, the
Congress is continuing to rethink the U.S. role in international
affairs, including the level of resources devoted to and the
effectiveness of current programs in advancing U.S. economic,
security, and political interests. Our work focuses on the
relevancy, priority, and effectiveness of international affairs
activities to contribute to the congressional debate on key issues of
current national concern, such as the Dayton Peace Accords and
developments in the Balkans. We have conducted assessments of (1)
how the integration of states and expansion of institutions in
Europe, such as NATO, may affect U.S. interests; (2) how effective
the United States has been in managing the transfer of critical,
defense-related technology to other nations; (3) whether U.S.
participation in the United Nations, World Bank, and International
Monetary Fund has efficiently and effectively served U.S. interests;
(4) how well the government is representing U.S. foreign trade
interests and promoting economic stability; and (5) how the
government is carrying out its overseas roles and missions, including
the broad range of programs designed to enhance U.S. security and
reduce the flow of illegal drugs into the United States. We used the
analytical framework (relevancy, priority, and efficiency)
highlighted in our October 30, 1997 testimony to guide these
assessments.
Our June 1998 report on the implementation of the Dayton Peace
Accords in Bosnia assessed progress toward the Accord's goals of
establishing a unified, democratic government that respects the rule
of law. We reported to the Congress that the goal of a
self-sustaining peace process remains elusive primarily due to the
continued intransigence of Bosnia's political leaders. We also
issued a report concluding that the International Criminal Tribunal
for the former Yugoslavia did not have the capacity to prosecute war
criminals in accordance with rules and procedures established by the
U.N. Security Council. Earlier in the year, during a crucial period
when the future U.S. role in Bosnia was being debated, we briefed
staff from congressional committees and the National Security Council
on our work. Regarding NATO expansion, our assessments showed that
U.S. and other NATO member countries' programs are helping former
Eastern Bloc countries prepare for possible membership in NATO. We
also provided information on NATO expansion cost issues. In October
1997 testimony, we addressed congressional concerns about the impact
of NATO expansion on DOD's budget and noted that the ultimate cost of
this expansion will be contingent on several undetermined factors.
We also reported to Congress how NATO apportions costs among its
members. Our international security work also included an assessment
of trends in conventional military exports to China and information
about the decision to revise export controls on high-performance
computers that could have military or nuclear proliferation
applications.
The Congress continued to rely on our examinations of multilateral
institutions in seeking to determine whether they are advancing U.S.
interests and whether there are opportunities to reduce their costs.
Our reviews examined the rationale, structure, and reform agenda of
these institutions that receive U.S. funding and efforts to
introduce greater accountability and transparency into their
operations. Our review of World Bank operations identified concrete
steps that the Bank could take to improve the transparency of its
public consultations regarding the environmental impact of its
projects. Our assessments of the financial status of the
International Monetary Fund and nature of U.S. financial obligations
to the United Nations contributed to a greater public understanding
of these complicated issues. Our November 1997 review of the U.N.
internal audit function showed that its Office of Internal Oversight
Services is in a position to be operationally independent but that
more changes are needed to enhance future operations. This report is
being used in debates over U.S. arrears and the broader issue of
U.N. reform.
During fiscal year 1998, we continued to be an important source of
objective information and analyses concerning U.S. bilateral
assistance programs. During the year, we issued a series of reports
and testimonies concerning the operations and effectiveness of U.S.
counternarcotics programs. For example, our reports on Caribbean,
Colombian, and Mexican drug control programs continue to show that
despite long-standing efforts and expenditures of billions of
dollars, these efforts have not materially reduced the availability
of drugs in the United States. Our assessments of the U.S. Agency
for International Development's and the U.N.'s response to the human
immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS)
epidemic in the developing world provided important input to the
debate over whether the Congress should provide additional support
for these programs.
Regarding the performance of the U.S. foreign affairs apparatus, our
work at the Department of State identified ways to improve service
and save millions of dollars in potential costs. Our reports on the
Department of State's overseas relocation and housing process
concluded that State could control the growing costs of this function
and provide quality service to employees by reengineering its
processes using best practices. Our review of the Department of
State's program to modernize its antiquated information technology
infrastructure concluded that full implementation of widely accepted
best practices did not appear to be a top management priority.
Without full implementation of key best practices, there is
substantial risk that State's program will not achieve intended
results, will cost more than anticipated, and will take longer to put
in place. Our review of visa processing operations revealed that
processing backlogs continue to be a problem for some posts,
including the one in Sao Paulo, Brazil.
We reported on a variety of international trade issues. For example,
our report on the potential threat posed by agricultural sanitary and
phytosanitary trade barriers described weaknesses in the executive
branch's system for monitoring these barriers and provided insights
on how the executive branch could strengthen its response strategy.
Our report on worker rights in Caribbean Basin nations showed that
although efforts to improve worker rights are continuing in the
region, there is some validity to allegations of worker rights
violations. Our report on the Customs Service's and the Census
Bureau's new, $42 million automated export monitoring system,
concluded that the system was not an effective tool for enforcing
export laws because few exporters used it and because the system was
not linked to other law enforcement systems. In response to our
recommendations, Customs and Census have taken measures to correct
these problems. We also reported and briefed Committee staff on
African trade issues associated with pending legislation and trade
agreements. We outlined the many issues and concerns raised by the
Executive Branch's request for fast track authority to negotiate new
trade agreements and helped the staff prepare for the contentious
debate on this issue.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:3.2
In 1996, we recommended that the Secretary of the Treasury monitor
and periodically report to the Congress measurable indicators of the
World Bank's progress in reforming its operations to improve its
effectiveness. Although the Treasury has developed indicators as we
recommended, it does not plan to report to the Congress on World Bank
reforms based on these indicators until 1999. Our recommendation
will remain open until the Treasury submits its report.
(GAO/NSIAD-96-212)
In 1997, we recommended that the Secretary of Commerce effectively
monitor export trends in controlled items to Hong Kong and China
after Hong Kong's reversion to Chinese sovereignty. Commerce has not
yet provided specifics on what actions it plans or has taken.
(GAO/NSIAD-97-149)
In 1997, we made recommendations to the Secretaries of Agriculture,
State, Defense, and Commerce and to the U.S. Trade Representative on
various issues involving international relations and trade. We
recommended that the U.S. Trade Representative and the Secretary of
Agriculture, in consultation with other agencies, coordinate goals,
objectives, and performance measures for addressing foreign sanitary
and phytosanitary issues to avoid unfairly blocking U.S.
agricultural exports. In response, the U.S. Trade Representative
and the Department of Agriculture formed a senior-level interagency
Steering Group, and the Department of Agriculture formed a management
group to coordinate policy among its multiple agencies. These groups
are developing (1) guidance on how to approach sanitary and
phytosanitary issues and determine priorities for federal efforts,
and (2) goals, objectives, and performance measures for determining
progress. Full implementation of our recommendations will take time
and require continued management attention and commitment.
Therefore, the recommendations will remain open until the agencies
have had time to make more progress. (GAO/NSIAD-98-32)
We recommended that the Secretary of State establish a pilot program
for improving the leasing and furnishing of overseas residences. We
also recommended that if pilot tests confirm cost advantages, the
Secretary should establish a plan to rollout a broad-based
implementation plan. State has asked overseas posts for preliminary
information on housing options before initiating a pilot program.
(GAO/NSIAD-98-128)
We recommended that the Secretary of State act to fully implement the
Department's information technology (IT) planning and investment
process to help ensure that almost $600 million dollars in annual
on-going support and modernization funds are spent in a rational,
planned manner consistent with federal requirements and guidance. In
response, State has (1) reconstituted and reconvened its Information
Resource Management Technical Review Committee, (2) launched plans to
convene an Information Resource Management Configuration Control
Board, (3) developed an Information Resource Management vision paper
in anticipation of preparing a comprehensive information technology
architecture to guide funding decisions, and (4) committed to
preparing a revised "cost model" to update estimated funding needs
and incorporate actual and potential cost savings resulting from the
modernization program. (GAO/NSIAD-98-242)
We recommended that the Secretary of State, working with other
International Atomic Energy Agency member states, request the
Director General to develop a plan for implementing parts of the
Strengthened Safeguards System. Although the State Department
recognizes the value of improved planning, it does not agree with our
recommendation. It believes that a published plan could be used by
some member states to push for the phasing out of existing safeguards
measures before the new measures are proven to be effective and that
a little ambiguity may serve U.S. interests. Although we agree that
it would be unwise to drop existing measures before new measures are
proven effective, a plan is necessary for the International Atomic
Energy Agency and its member states to develop a clearer
understanding of the implementation costs of the new system.
(GAO/NSIAD/RCED-98-184)
See also chapter 2, Improving Resources, Community, and Economic
Development Programs, Energy, Resources, and Science Issue Area.
We recommended that the Secretary of Defense assess and report on the
national security threat and proliferation impact of U.S. exports of
high performance computers to countries of national security and
proliferation concern. DOD said that it had taken national security
issues "into account" in a study conducted three years ago. We
believe such a study is still necessary because DOD did not assess
how countries of concern would use high performance computers to
enhance their military programs. In mid-1998, the House National
Security Committee required that such a study be conducted. We also
recommended that the Secretary of Commerce, with the support of other
agencies in the export licensing community, jointly evaluate and
report on options to safeguard U.S. national security interests that
may be threatened due to the export of computers as the technology
advances in areas of scaleability and clustering. Commerce has not
yet indicated how it will respond to this recommendation.
(GAO/NSIAD-98-196)
MILITARY OPERATIONS AND
CAPABILITIES ISSUE AREA (BUDGET
FUNCTION 050)
---------------------------------------------------------- Chapter 1:4
GAO Contact: Mark E. Gebicke, 202/512-5140
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:4.1
DOD faces unprecedented challenges as it strives to plan and budget
for a broad array of military operations that can range from
humanitarian assistance and peace operations to international
terrorism and high-intensity warfare in geographic hotspots like the
Persian Gulf and the Korean peninsula. To effectively meet these
multiple missions, DOD must maintain a high readiness level and
quality personnel.
Our overall strategy to assist Congress with military operations and
capabilities issues is to: (1) evaluate the accuracy of DOD budget
requests and recommend ways to improve planning for military
operations; (2) assess whether U.S. forces are ready to arrive where
they are needed, on time, with sufficient forces and equipment to
effectively conduct and sustain their assigned missions; and (3)
evaluate the effectiveness of DOD's ability to recruit, train, and
retain a high-quality active, reserve, and civilian workforce, while
maintaining quality of life programs.
In fiscal year 1998, the Congress and DOD took action on a number of
our recommendations related to the three areas listed above. For
example, the House and Senate Committees on Appropriations conferees
reduced DOD's fiscal year 1998 operations and maintenance request by
$199.3 million, based on funds we identified to be in excess of
requirements. Likewise, the conferees reduced DOD's request for
active military pay by $356 million, based on our recommended
reductions.
Our review of DOD's efforts to improve its readiness assessment and
reporting process showed, among other things, that DOD's quarterly
readiness reports to Congress provided only a vague description of
readiness problems and planned remedial actions. We concluded that
in their present form these reports were not effective as a
congressional oversight tool. We recommended that the Secretary of
Defense take steps to better fulfill legislative reporting
requirements by providing supporting data on key readiness
deficiencies and more specific information on planned remedial
actions. Based on our work, DOD's Senior Readiness Oversight Council
has begun to focus more attention on recruiting and retention,
personnel tempo, readiness funding, and aviation readiness. Also,
DOD submitted to Congress a plan for expanding its readiness
reporting, which is scheduled for implementation in fiscal year 1999.
Our assessment of the Army's multibillion-dollar weapon systems
modification program showed that Army officials no longer had the
information they needed to effectively oversee and manage this
program, due to the discontinuation of the centralized database used
to track installation and funding. As a result, Army officials do
not have an adequate overview of the status of equipment
modifications across the force, funding requirements, logistical
support requirements, and information needed for deployment
decisions. Based on our recommendations, the Army is developing a
new information system to improve management and provide better
oversight of the program. Army officials told us that the new
information system will have increased readiness implications and
cost avoidances once the system becomes accessible to all program
managers.
In 1996, the United States and Japan agreed on recommendations for
reducing the impact of U.S. military operations in Okinawa. We
reported that, while the United States expects to encounter few
problems in implementing most of the recommendations, replacing the
Marine Corps Air Station Futenma with a sea-based facility will be a
major challenge. The United States has established requirements that
Japan must meet before Futenma is closed and operations are moved to
the sea-based facility. However, such a facility has never been
built and operated. This report has led to considerable debate over
the advisability of proceeding with such a facility.
During our testimony before the House National Security Committee, we
discussed personnel readiness in the Army's five later-deploying
divisions. These later-deploying divisions, which constitute almost
half of the Army's active combat forces, are expected to deploy in
the event of a second simultaneous major theater war or as
reinforcements to earlier deploying divisions. We testified that, in
the aggregate, the later-deploying divisions had an average of 93
percent of their personnel on board between August 1997 and January
1998. However, the aggregate data did not fully reflect the
shortages of combat troops, technical specialists, and experienced
officers that existed in these divisions. If these divisions had to
deploy for a high-intensity conflict, the Army would fill their ranks
with Individual Ready Reserve soldiers, retired servicemembers and
newly recruited soldiers. Our testimony contributed significantly to
the debate over the readiness of U.S. forces and identified pockets
of readiness problems that, if improved, should bolster military
readiness.
We testified before the Senate Committee on Veterans' Affairs about
DOD's continuing efforts to protect U.S. military forces against
chemical and biological weapons, including its plan to inoculate all
U.S. forces against the biological agent anthrax. Regarding DOD's
anthrax program, we testified that to ensure that millions of active
and reserve members receive the prescribed vaccinations in the proper
time sequence will be a challenge. However, DOD could improve its
prospects for a successful program if it considers lessons learned
from previous immunization programs and from the medical
record-keeping errors in the Gulf War and in Bosnia. The Army has
subsequently developed a detailed implementation plan for inoculating
personnel and for tracking the status of inoculations in medical
records.
Our assessment of DOD's telemedicine projects (the use of
communications technology to help deliver medical care without regard
to the distance that separates the participants) showed that DOD
invested more than the eight other federal departments and
independent agencies involved in telemedicine. We recommended that a
federal strategy be developed to ensure the cost-effective
development and use of telemedicine, and that DOD, since it is a
major federal investor and manages one of the nation's largest health
care systems, should develop and submit to Congress an overarching
telemedicine research and development and operational strategy. In
early fiscal year 1998, DOD submitted to Congress its overall
telemedicine strategy, which contained all four components specified
in our recommendation.
In our report on personnel who leave the military during the first 6
months of enlistment, we made several recommendations that could
reduce attrition and save DOD millions of dollars. The Congress
adopted all but one of GAO's recommendations in the National Defense
Authorization Act for Fiscal Year 1998. The one recommendation not
included in the Act--to move all drug testing of recruits to the
preenlistment stage--had already been implemented by DOD. In our
March 1998 testimonies before both the House and Senate Subcommittees
on Military Personnel, we reported that DOD had taken action on five
of eight recommendations and was forming a joint service working
group to address our other recommendations.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:4.2
Military medical personnel have almost no chance during peacetime to
practice their battlefield trauma care skills. In response to this
concern, the Congress required DOD to implement, and GAO to evaluate,
a demonstration program that would provide trauma care training for
military medical personnel at a civilian center not later than April
1996. Due to the program's delayed start in November 1997, it was
too early to assess its effectiveness. As of March 1, 1998, only
four surgeons had completed their training rotations. We
recommended, among other things, that the Secretary of Defense
expedite efforts to establish an evaluation tool to assist in an
assessment of the feasibility of training military personnel in
civilian trauma centers. (GAO/NSIAD-98-75)
DOD has estimated that over $20 billion and 30 to 40 years would be
required to upgrade or replace existing military family housing. To
improve housing faster and more economically, the Congress, in fiscal
year 1996, approved DOD's Military Housing Privatization Initiative,
which allows private sector financing, ownership, operation, and
maintenance of military housing. In the two years since the Congress
approved the program, no new agreements have been finalized to build
or renovate military housing. We recommended that the Secretary of
Defense direct the services to, among other things, prepare detailed,
integrated housing plans that will describe their plans for
addressing long-standing weaknesses in their housing requirements
determination processes. (GAO/NSIAD-98-178)
Each year the military services recruit hundreds of thousands of new
enlistees, who sign first-term contracts that are typically for 4
years. Many enlistees fail to complete their contracts, which has
been a long-standing and costly problem for the services. Between
fiscal years 1982-93, 31.7 percent of all enlistees did not complete
their first terms. Using fiscal year 1993 cost estimates, we
calculated that the services spent $1.3 billion on the 72,670
enlistees who entered the services in fiscal year 1993 and departed
prematurely. We recommended that the Secretary of Defense direct the
service secretaries to, among other things, continually emphasize to
all officers the cost of first-term attrition, and to use
quality-of-life surveys to collect information on the factors
contributing to first-term separation, and identify quality-of-life
initiatives aimed at reducing first-term attrition.
(GAO/NSIAD-97-39)
DOD sent approximately 2.2 million recruits to basic training between
fiscal years 1987 and 1996. However, over 700,000 of those recruits
failed to complete their initial service obligations, with about
200,000 failing to complete even 90 days of service. Given the
concern in Congress about this matter, we reviewed the services'
processes to screen, select, and train recruiters and to measure and
reward recruiter performance. To enhance the performance of DOD's
approximately 12,000 recruiters and the retention of recruits, we
recommended that the Secretary of Defense direct the services to,
among other things, link recruiter awards more closely to recruits'
successful completion of basic training and develop or procure
personality screening tests that can aid in the selection of high
quality recruiters. (GAO/NSIAD-98-58)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
NATIONAL SECURITY ANALYSIS
ISSUE AREA (BUDGET FUNCTION
050)
---------------------------------------------------------- Chapter 1:5
GAO Contact: Henry L. Hinton, Jr., 202/512-4300
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:5.1
This is our first full year of reporting since DOD reassessed its
strategy and forces as part of the congressionally mandated
Quadrennial Defense Review. DOD views the Quadrennial Defense Review
as a blueprint for a strategy-based, balanced, and affordable program
to meet defense needs from 1997 to 2015. Our reports and testimonies
on DOD's budget, force structure, and strategy implementation have
assisted the Congress to better understand the thoroughness of DOD's
review, as well as the progress it has made in carrying out its
plans. Our work also addresses Presidential Decision Directives 39
(June 1995) and 62 (May 1998), which provide the blueprint for a
national strategy to combat terrorism. Over the past year, we have
expanded our analysis of the Federal Government's efforts to combat
terrorism, and have provided important information to the Congress on
the U.S. Government's policy, strategy, and numerous programs and
initiatives to combat terrorism, including the cost to the government
of funding these initiatives.
BUDGET ANALYSIS
------------------------------------------------------ Chapter 1:5.1.1
Although DOD has reduced military and civilian personnel, force
structure, and facilities, we have reported over the last few years
that DOD has been unable to shift funds from infrastructure to
modernization. This is the fifth straight year that DOD's proposed
program was inverse to its goals of reducing its infrastructure costs
and increasing funds for weapons modernization. DOD acknowledged in
its report on the Quadrennial Defense Review that it has postponed
procurement plans because funds were redirected to pay for
underestimated operating costs and new program demands, and projected
savings from outsourcing and other initiatives had not materialized.
Although DOD's 1999 program, its first since the Quadrennial Defense
Review, made adjustments to the 1998 program to decrease risks, we
reported in July 1998 that we continue to see risks that the 1999
program may not be executable as planned.
Contingency operations, principally those in Bosnia and Southwest
Asia, continue to cost billions of dollars. We reported in February
1998 that budget-quality estimates would not be available until key
decisions were made and that the services were considering ways to
reduce costs now that the Bosnia mission has been extended. We also
provided analysis of the President's request for supplemental funding
for fiscal year 1998 and amended budget for fiscal year 1999 for the
defense appropriations subcommittees. As a result of our May 1996
report on the accuracy of reported costs, the services have improved
their reporting of costs and, hence, funding needs.
FORCE STRUCTURE
------------------------------------------------------ Chapter 1:5.1.2
This year we continued our assessment of Army force structure issues,
as directed by the Fiscal Year 1996 National Defense Authorization
Act. Previously we had criticized the Army for its lack of an
analytical basis for determining its institutional personnel
requirements. Based on our recommendation, the Army agreed to report
this long standing problem as a material weakness under the Federal
Managers' Financial Integrity Act and develop a corrective action
plan with milestones for completion. This year we reported that
while the Army had developed the corrective action plan, two critical
subplans had not been developed--one that implemented a new costing
system and another to develop a new computer based-methodology for
depots and arsenals. Further, we reported that the Army's
institutional redesign efforts had not resulted in a reduction in
major command headquarters, and the dollar and position savings
identified for the effort had been overstated. For example, our
analysis showed that the Army anticipated $1.7 billion in savings
from phase I redesign efforts, but the savings will be at least $405
million less. In response to our previous work assessing how the
Army determined its support force requirements, and the results of
its biennial process for allocating support forces, the Army
implemented several of our recommendations. For example, to take
better advantage of capability that already existed in the force, we
recommended that the Army determine how support units resident within
the eight National Guard divisions could be used to fill some of the
Army's support force requirements. In response, the Army has agreed
to dual mission two National Guard Strategic Reserve Aviation Branch
assault companies against warfighting requirements.
We also assessed force structure requirements for operations other
than war. We reported in April 1998 that the military services had
successfully provided needed capabilities for the Bosnia mission
since its inception. With the decision to extend the Bosnia mission
indefinitely, we reported that the Army and the Air Force, while
filling the vast majority of the ground-based combat support and the
aviation-related requirements, were encountering resourcing
challenges for a small number of capabilities that are primarily in
the reserves and have already been used. These challenges have since
been met, but underscore how the mix of capabilities needed for a
long-term mission like the one in Bosnia may not always match current
force structure.
Last, we examined the force structure issue from the standpoint of
the cost and operational implications if the Air Force were to assign
more B-1 bomber aircraft to the reserve component. During the course
of this work, we developed several options that the Air Force should
consider to reduce overall B-1 operating costs without adversely
affecting day-to-day peacetime training or critical wartime missions
or closing any B-1 operating bases. In commenting on our report, DOD
agreed that the matter should be studied, and committed the Air Force
to conduct a thorough review of the bomber force structure. This
information was then to be incorporated into the upcoming programming
and budgeting guidance.
STRATEGY IMPLEMENTATION
------------------------------------------------------ Chapter 1:5.1.3
In our review of the Quadrennial Defense Review, we reported that the
value of the next review could be enhanced by early preparation and
recommended that the Secretary of Defense assign responsibility for
overall oversight and coordination of DOD preparation efforts. We
also suggested that, if the Congress chooses to establish another
panel of experts to provide an independent review of defense needs,
it may wish to require the panel to complete its work prior to the
next Quadrennial Review. The Senate Armed Services Committee, in the
DOD Authorization bill for fiscal year 1999 (S. 2060, sec. 905),
established a permanent requirement for the Department to conduct a
comprehensive assessment of strategy, force structure, modernization
plans, infrastructure, budget, and other elements each year in which
a President is inaugurated. The Committee also established that the
Secretary of Defense appoint a nonpartisan, independent panel by
January 1 of the year preceding a presidential inauguration to
conduct a similar comprehensive assessment. This panel is to provide
two reports: an interim report by July 1 and a final report by
December 1.
In our review of the personnel cuts recommended in the Quadrennial
Defense Review, we found that service officials believe the majority
of the cuts will not impact the services ability to implement the
national military strategy. The cuts are primarily focused on
reducing personnel associated with infrastructure activities or
combat forces that are not critical to meeting war-fighting
requirements. For example, the Air Force military personnel cuts
will focus primarily on replacing military personnel in
infrastructure functions with less costly civilians or contractors
rather than eliminating functions. Because some aspects of DOD's
plan to reduce personnel will not occur or will be delayed, we
believe it is critical that the Office of the Secretary of Defense
monitor the services' progress in achieving the personnel cuts and
associated savings.
Last, our audit of DOD's accounting of its management headquarters
and headquarters support activities assisted the House National
Security Committee, which cited our work in its reports on the Fiscal
Year 1998 and Fiscal Year 1999 National Defense Authorization Acts.
Our work helped make the case that DOD should revise its headquarters
accounting and reporting system, because DOD's reports to Congress
significantly understated the costs and personnel involved.
COMBATING TERRORISM
------------------------------------------------------ Chapter 1:5.1.4
In recent years, the threat of terrorism has clearly been of
increasing concern, prompting the Administration to issue expanded
U.S. policy, strategy, and guidance on combating terrorism both at
home and abroad. Our work over the past 2 years has highlighted the
need for governmentwide priorities to be set, and for focus,
coordination, and efficiencies in federal agencies' roles, missions,
programs, activities, and spending to combat terrorism. In the past
year, we reported on spending to combat terrorism at several key
federal agencies, noting that the Office of Management and Budget
(OMB) did not perform crosscutting reviews of the many involved
agencies' and offices' proposed programs and budgets to avoid
duplication and gaps in coverage. In the National Defense
Authorization Act for Fiscal Year 1998, the Congress required OMB to
establish a governmentwide reporting mechanism to report expenditures
to combat terrorism, and, in March 1998, OMB submitted its first
annual report to the Congress. In addition, we testified about the
growth in the number of agencies and offices involved in programs and
activities to combat terrorism and the increasing challenges to
coordinate them. We have also performed analyses and evaluations of
interagency counterterrorism preparedness and how DOD and other
agencies are implementing legislation requiring training of local
first responders to better deal with the early hours of terrorist
incidents involving weapons of mass destruction. Our work on DOD's
training program for local first responders highlighted the need to
perform threat and risk assessments to provide local jurisdictions a
sound analytical basis for making decisions about training and
equipment requirements. A provision in the Fiscal Year 1999 Defense
Authorization Act requires that these assessments be incorporated in
the program. We also noted problems with the way in which DOD
selected cities for training and implemented the program without
consideration of existing state and local emergency response
structures and training institutions.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:5.2
In our report assessing Air Force aircraft, we recommended that the
Secretary of Defense, in his efforts to reduce DOD's infrastructure
costs, require the Secretary of the Air Force to develop an
implementation plan to operate the Air Force's fighter force in
larger, more cost-effective squadrons. If the Secretary of Defense
believes that the plan could reduce costs, he should seek
congressional support for it. (GAO/NSIAD-96-82)
After assessing key combat air power missions, we recommended that
the Secretary of Defense conduct comprehensive cross-service
assessments of overall joint close support mission needs, existing
close support systems, and planned enhancements on a routine basis to
determine whether and which proposed enhancements to close support
systems should be funded, and in what quantities and priority. Such
assessments might be made within the context of the joint warfighting
capabilities assessment process although alternative mechanisms might
be explored. (GAO/NSIAD-96-45)
In our report addressing potential efficiencies in operating the B-1
Bomber fleet, we recommended that the Secretary of Defense direct the
Secretary of the Air Force to prepare a plan to place more B-1s in
the reserve component and seek congressional support for the plan.
(GAO/NSIAD-98-64)
To improve the Army's ability to accurately project war-fighting
requirements and allocate the Army's personnel resources, we
recommended that the Secretary of the Army perform analyses to
determine how multiple operations other than war support force
requirements might differ from support force requirements based on
two major regional conflicts and bring any variances to the attention
of the Secretary of Defense so that he can consider them in
developing defense guidance. (GAO/NSIAD-97-66)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
SPECIAL STUDIES AND EVALUATIONS
(BUDGET FUNCTION 090)
---------------------------------------------------------- Chapter 1:6
GAO Contact: Kwaicheung Chan, 202/512-3092
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 1:6.1
Congressional committees continue to raise important questions about
national security and international affairs issues that are best
answered using applied social science research and analytic methods.
In fiscal year 1998, we conducted a broad range of congressionally
requested studies and evaluations that examined (1) the intended and
unintended effects of key programs, policies, and investments, such
as DOD's animal research activities, (2) the reliability and validity
of data and measures used in policy decision-making, such as the
quality of economic and trade data for Southeast Asian countries, and
(3) the conditions and outcomes across different programs and
activities, such as the relationship between quality of life issues
and military retention.
Our work on the effectiveness of government research to address
Persian Gulf War veterans' illnesses generated substantial
congressional and public interest. Since the conclusion of the war
in 1991 more than 100,000 veterans have complained of various
illnesses, however, we found that DOD and the Veterans Administration
(VA) have no effective means to monitor whether these veterans are
any better or worse today than when they first started reporting
their illnesses. In addition, we found that not only have federal
research efforts been delayed but many ongoing studies are unlikely
to provide answers about the causes of Gulf War illnesses. We
testified before the House Government Reform and Oversight Committee
and the House Veterans' Affairs Committee during 1998 on these
findings and results. Our recommendations to improve the monitoring
of veterans' health conditions and to reexamine research priorities
were subsequently adopted into the National Defense Authorization Act
for fiscal year 1998 and the Persian Gulf War Veterans Health Care
and Research Act of 1998.
Congressional concern about the problems associated with Gulf War
illnesses has remained high, resulting in several requests for us to
conduct follow-up studies. One concern raised is whether Gulf War
veterans have a higher risk of developing certain cancers and tumors
because of their exposure to hazards in the Persian Gulf. In
examining this issue, we found that none of the data sources that
provide information on the health characteristics of Gulf War
veterans can be used to reliably estimate the incidence of tumors.
Existing federal and state data systems are generally limited by poor
coverage of the Gulf War veteran population and problems of reporting
accuracy and completeness. As a result it is not known how many
veterans have tumors and whether they have a higher incidence of them
than other veterans. We conducted additional work to determine the
number of tumors among Gulf War veterans by merging data from
different sources. Based on this analysis, we found a much larger
number of cases exist than previously reported in other government
studies of Gulf War veterans. We presented the results of our work
on tumors among Gulf War veterans before the House Government Reform
and Oversight Committee.
The possible exposure of U.S. troops to low levels of chemical
warfare agents in Iraq in the weeks after the Gulf War is suspected
to be one of the contributing factors in the unexplained illnesses
that have plagued many Gulf War veterans. In another report, we
examined the extent to which DOD doctrine addresses exposure to low
levels of chemical warfare agents on the battlefield and the extent
to which existing research addresses the performance and health
effects of exposures to low levels of chemical warfare agents, either
in isolation or combination with other agents and contaminants that
may be present on the battlefield. We found that DOD does not have
an integrated strategy, policy, or doctrine to address low-level
exposures to chemical warfare agents. We also found that research
indicates that low-level exposure to some chemical warfare agents
results in adverse short-term performance and long-term health
effects. Our recommendations that DOD develop an integrated strategy
for addressing force protection issues resulting from low-level
chemical warfare agent exposures were incorporated into the
Conference Report of the DOD Authorization Bill for Fiscal Year 1999.
Our work in other defense areas also provided important information
to congressional decision-makers. We completed a study on the
impacts of federal defense spending and found that existing
government data systems are severely limited in terms of tracking the
distribution and types of spending and employment that occurs at the
state and local level. While the data have some value, particularly
at the aggregate level for the nation, it is important for budget and
policy decision-makers who rely on the data to be alert to data
limitations and exercise discretion when using them. In addition, we
reviewed DOD's operations and organizational structure for overseeing
the operational testing of new weapon systems. We found that the
Office of the Director for Operational Test and Evaluation has
contributed to improved testing of weapons systems. However, several
factors have limited the Office from doing more to ensure that
weapons systems are safe, suitable, and effective when fielded.
These include conflicts with the services regarding oversight
authority, a decline in resources, and an expansion of duties into
areas other than testing.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 1:6.2
We recommended that DOD and VA give greater priority to research on
effective treatments for Gulf War veterans who are ill and set up a
plan for monitoring their clinical progress. The House passed a bill
requiring that VA fund the National Academy of Sciences to conduct a
study to determine an appropriate method for implementing GAO's
recommendations. Although VA subsequently contracted with the
National Academy of Sciences in 1998, they have not yet developed and
implemented a plan to monitor the progress of the Gulf War veterans.
(GAO/NSIAD-97-163)
In order to more effectively evaluate the incidence of tumors and
other Gulf War illnesses over time, we also recommended that the
Secretaries of DOD and VA strengthen existing capabilities to track
the nature and extent of illnesses affecting Gulf War veterans. DOD
and VA are beginning to work on initiatives to enhance the utility of
existing data systems, including the transfer of health information
and the joint development of a computerized patient record system.
In addition, DOD and VA recently funded a few studies to provide
information on illnesses in the future. (GAO/NSIAD-98-89)
To address the lack of doctrine and research on low-level chemical
warfare agent exposures, we recommended that DOD modify its existing
policies to address low-level chemical threats and establish a
research program for determining the effects of exposures to
low-level chemical agents. DOD has not yet indicated how it will
respond to these recommendations. (GAO/NSIAD-98-228)
See Chapter 3, Improving Human Services Programs, Veterans' Affairs
and Military Health Care Issue Area. See also Chapter 5, Financial
and Information Management Programs, Financial Management and
Accountability Issue Areas as well as Information Management Issue
Areas.
IMPROVING RESOURCES, COMMUNITY,
AND ECONOMIC DEVELOPMENT PROGRAMS
============================================================ Chapter 2
ENERGY, RESOURCES, & 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
Under the topics of energy, resources, and science, GAO conducts
evaluations which encompass a broad and diverse group of agencies
with concerns and topics ranging from cleaning up the nuclear weapons
complex--estimated to cost up to $265 billion--to finding better ways
to manage the 650 million acres of land owned by the federal
government, equal to almost one-third of our Nation's total land
surface. Agencies with responsibilities in these areas include the
Department of Energy (DOE) and related agencies, such as the Nuclear
Regulatory Commission (NRC), the Federal Energy Regulatory
Commission, and the Tennessee Valley Authority (TVA). A second
grouping encompasses various land management and natural resource
agencies, including the Department of the Interior (DOI), the Forest
Service within the Department of Agriculture, and the Army Corps of
Engineers. Finally, there's an array of science and
technology-related agencies, including the National Science
Foundation (NSF), the Department of Commerce's National Institute of
Standards and Technology, the Patent and Trademark Office, the
National Oceanic and Atmospheric Administration, and the National
Technical Information Service. Programs and activities within these
agencies account for over $60 billion in gross federal obligations
each year with annual revenues of about $10 billion spanning 10 of
the government's 19 budget functions. But, more importantly, the
activities of these agencies pose significant implications for the
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, as outlined in the section below, 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:
-- implement the Government Performance and Results Act, focusing
on the goals and missions of DOE, NRC, DOI, NSF, and the Forest
Service and holding them more accountable for their performance
and results;
-- enact legislation requiring DOE to use competitive contracting
practices and follow the Federal Acquisition Regulation;
-- reduce DOE's budget request for its privatization cleanup
initiative by $775 million after we questioned the accuracy of
DOE's projected cost savings and the need for some of their
projects;
-- continue its search for an acceptable alternative for disposing
of nuclear waste and in assessing the safety, reliability, and
security of our nation's nuclear arsenal;
-- develop legislation to prevent U.S. funding to the United
Nations from supporting the development of Cuban reactors;
-- deliberate on the U.S./North Korean nuclear reactor agreement;
-- use "carry-over" balances and other means to reduce DOE's,
NRC's, Bureau of Reclamation's, and Commerce's budgets;
-- estimate savings to the federal government if electricity
deregulation legislation is implemented;
-- continue its deliberations on the potential privatization of
DOE's four power marketing administrations;
-- require the Bureau of Indian Affairs to identify Indian tribes
that have relatively higher economic needs and target Tribal
Priority Allocation funds to those tribes;
-- introduce legislation providing for additional funding to
restore historic properties at historically black colleges and
universities after we provided information on the universe of
such properties and the cost to restore them; and
-- enact legislation allowing the Copyright Office to become
self-sustaining through fees, which should ultimately generate
budget savings of more than $10 million a year.
Other recommendations led to administrative actions to improve
government programs. For example, based on our work:
-- DOE developed a more effective approach for identifying
carryover funding balances that exceed the requirements of its
programs and, as a result, has reduced its carryover balances by
$2.3 billion since fiscal year 1995.
-- DOE renegotiated its contracts with the University of California
for managing three national laboratories, giving DOE greater
authority and eliminating many of the non-standard clauses found
in earlier contracts.
-- DOE revised its acquisition guidance to require that contract
performance and expectations be consistent with DOE's strategic
goals and objectives.
-- DOE has realized savings of close to $100 million as a result of
implementing our recommendation to consolidate the purchase of
laboratory analysis associated with cleaning up its nuclear
facilities.
-- The National Park Service embarked on a top-to-bottom revamping
of its construction practices after we disclosed a "$300,000
outhouse" at one of the national parks.
-- The Corps of Engineers has improved its planning and budgeting
systems for maintaining its hydroelectric power plants and
increased their availability to generate electricity and
resultant revenues.
-- The Bureau of Reclamation reduced its funding for an ecosystem
project in California by over $58 million after we pointed out
that not all the money requested for the project was needed.
-- TVA, although originally disagreeing with our assessment of
TVA's financial position, has recently recognized the problems
we highlighted and stated its intention to more directly address
them through various means, such as rate increases and debt
reductions.
-- The Forest Service developed and implemented (1) a
benefit-analysis process for funding research projects carried
out by different Forest Service organizations,and (2) a system
for limiting the amount of support costs that can be used from
the Knutson-Vandenberg Fund.
-- The Bureau of Indian Affairs has taken steps to identify Indian
tribes that have relatively higher economic needs and to target
Tribal Priority Allocation funds to those tribes.
-- The Minerals Management Service developed and implemented a
program to verify reported gas production from offshore leases.
-- The Small Business Administration developed a central database
to provide inter-agency access to information on Small Business
Innovation Research awards being made by 11 Small Business
Innovation Research agencies, reducing the risk of duplicate
funding of similar research.
-- The National Institute of Standards and Technology now requires
applicants for financial assistance under the Advanced
Technology Program to describe what efforts they made to secure
private capital to support their projects before applying for
federal funding.
-- The Patent and Trademark Office (PTO) has begun tracking the
actual time it spends examining patent applications, greatly
enhancing its ability to establish fees commensurate with these
costs.
-- The Copyright Office raised its fees for special copyright
services, adding an additional $1 million a year in revenues.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:1.2
NATIONAL LABORATORIES
------------------------------------------------------ Chapter 2:1.2.1
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, we said, might
include placing the laboratories under the control of different
agencies or creating a separate structure for the sole purpose of
developing a consensus on the laboratories' missions.
DOE's Laboratory Operations Board, created to provide focus and
direction for DOE's laboratories, has developed a strategic plan for
the laboratories and is taking steps to implement 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, and DOE
has many initiatives in process addressing the Galvin Task Force
recommendations. Meanwhile, various bills have been introduced in
the Congress calling for restructuring the laboratories.
(GAO/RCED-95-10)
NUCLEAR REGULATION
------------------------------------------------------ Chapter 2:1.2.2
In May 1994, we recommended that the NRC--in order to ensure the
health and safety of workers and the public--establish acceptable
limits for radioactivity in sludge, ash, and related by-products at
sewage treatment plants that receive radioactive materials from NRC
licensees. NRC has been 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. Among other things, they are conducting a national survey to
assess the extent of radioactive contamination in sludge, ash, and
by-products. They are also developing guidance on radioactive
materials in sewer sludge, ash, and by-products and, once results of
the national survey are available--expected in August 2000--will
determine whether a revision to radiation standards is needed.
(GAO/RCED-94-133)
In another report--in May 1997--we recommended that NRC develop
strategies to more aggressively act on safety deficiencies they
discover in commercial nuclear power plants. To achieve this goal,
we recommended that NRC require inspection reports to fully document
for all plants the status of the licensees' actions to address
identified problems, including timetables for the completion of
corrective actions and how NRC will respond to nonconformance with
planned actions. In response, NRC has reported that it is
strengthening its processes for assessing the effectiveness of a
licensee's corrective action program by focusing on what a licensee
has done as opposed to what it plans to do. In addition, NRC
reported that it plans to provide inspectors with more guidance for
closing out issues identified in inspection reports and is developing
ways to better identify and track licensing commitments and to verify
their implementation. While NRC intends to follow more closely the
corrective actions taken by a licensee, it does not plan to track and
document in the inspection reports the status of corrective actions
for all licensee-identified issues, including how NRC would respond
to nonconformances with planned actions. (GAO/RCED-97-145)
INTERNATIONAL NUCLEAR
TECHNICAL ASSISTANCE
------------------------------------------------------ Chapter 2:1.2.3
In September 1997, we recommended that the Secretary of State direct
the U.S. inter-agency group on technical assistance, in consultation
with the U.S. representative to the International Atomic Energy
Agency (IAEA), to systematically review all proposed technical
assistance projects in countries of concern, as covered by section
307(a) of the Foreign Assistance Act of 1961 and related
appropriations provisions, before the projects are approved by IAEA's
Board of Governors, to determine whether the proposed projects are
consistent with U.S. nuclear nonproliferation and safety goals. If
U.S. officials find that any of the projects are inconsistent with
these goals, we recommended that the U.S. representative to IAEA
make the U.S. objections known to IAEA and monitor the projects in
these countries. We also suggested that the Congress (1) may wish to
require the Secretary of State to periodically report to it on any
inconsistency between IAEA's technical assistance projects and U.S.
nuclear nonproliferation and safety goals, and (2) could explicitly
require the State Department to withhold a proportional share of its
voluntary funds to IAEA that would otherwise go to these countries.
In a June 1998 response to our report, the Department of State
indicated concurrence with our recommendation and reported that it
had reformed an interagency committee which evaluates proposed
technical assistance projects by IAEA member states. In addition,
legislation was passed in the House of Representatives in August 1998
to require the Secretary of State to report on any inconsistency
between IAEA's technical assistance projects and U.S. nuclear
nonproliferation and safety goals. (GAO/RCED-97-192)
PLUTONIUM DISPOSITION
------------------------------------------------------ Chapter 2:1.2.4
Because of uncertainties about Russia's commitment to implement a
long-term program--similar to the U.S. program--to reduce plutonium
stockpiles, we suggested that the Congress may wish to consider
linking DOE's future funding requests for large-scale projects to
design and construct plutonium disposition facilities in the United
States and Russia to progress in negotiating and signing a bilateral
agreement. We also suggested that the Congress may wish to consider
requesting that the Department of State, and other appropriate
agencies, report periodically on efforts to conclude a plutonium
disposition agreement between the United States and Russia. Both the
House and Senate Appropriations Committee reports stipulate that DOE
should not go forward with plutonium disposition efforts with Russia
unless an agreement is signed. DOE believes this is reasonable as
well and plans to continue working with Russia on negotiating and
signing a comprehensive agreement on various aspects pertaining to
plutonium disposition. In addition, DOE plans to report periodically
to the Congress on its progress in reaching such an agreement.
(GAO/RCED-98-46)
NUCLEAR WASTE
------------------------------------------------------ Chapter 2:1.2.5
Based on concerns about the potential risk of both radioactive and
hazardous chemical wastes at the Hanford Site to populations
downstream from the nearby Columbia River, we recommended that the
Secretary of Energy develop a comprehensive vadose zone strategy for
the Site that addresses cleaning up the high-level waste tank farm
and the cribs, ponds, trenches, and other waste sites. Among other
things, we said the strategy should address the importance of
understanding conditions in the vadose zone to ongoing cleanup
activities and future decisions on cleaning up the Hanford Site, such
as deciding whether to retrieve wastes from leaking single-shell
tanks and, if so, how. We also recommended that the Secretary
reevaluate, as soon as better information is available on the
behavior of wastes in the zone, DOE's proposed strategy of removing
additional wastes from the single-shell tank by injecting pressurized
water into the tanks.
In April 1998, DOE issued a three-phased plan for integrated study of
vadose and groundwater zone issues that, among other things,
establishes a site-wide management function responsible for
identifying and coordinating activities that pose a potential impact
to the Site's soil and groundwater and to the Columbia River; and
provides for identifying data gaps; defining needs, goals,
objectives, and near-and long-term priorities. According to DOE,
integration of vadose zone and groundwater activities within the plan
is necessary to understand how pending major cleanup decisions, such
as retrieving waste from tanks, can be most effectively accomplished
with the least possible environmental impact. In addition, based on
experience with injection of pressurized water into waste tanks,
alternative technology demonstration, and additional insights on the
behavior of wastes in the zone, decisions will be made on retrieval
of wastes from single-shell tanks that will allow for final tank
closure. (GAO/RCED-98-80)
EXTERNAL REGULATION OF
DOE FACILITIES
------------------------------------------------------ Chapter 2:1.2.6
Although DOE leadership has recognized since 1993 the need for having
its research and nuclear facilities inspected and licensed by
independent (external) regulators to help ensure safe operations, it
has wavered in its position and still does not have a clear strategy
for accomplishing it. Therefore, we recommended that the Secretary
of Energy (1) clarify the Department's position on the external
regulation of worker and nuclear facility safety at DOE's facilities,
and (2) develop a strategy to implement it that is consistent with
the Department's position. This strategy should include specific
goals, objectives, and milestones and show how the information from
the pilot projects, and other techniques, will meet the strategy's
goals and objectives. (GAO/RCED-98-163)
CONTRACT MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.7
In August 1994, we recommended that DOE, in conjunction with its
University of California contracts for the management of three
national laboratories, ensure that fees paid to contractors for
increased financial risks are cost-effective by developing criteria
for measuring their costs and benefits. DOE is in the process of
finalizing a new fee policy for profit and nonprofit management and
operating contractors and anticipates that it will be completed by
the end of 1998. (GAO/RCED-94-202)
In another report--in December 1996--we recommended that DOE (1)
clearly link management and operating contract goals with its
strategic plan and annual performance goals, (2) include a mandatory
standard clause in all management and operating contracts that gives
DOE the exclusive authority to set contract goals and incentives that
support the strategic plans and missions of the Department, and (3)
adopt federal contract pricing policies, such as those contained in
the Federal Procurement Regulation (FAR). DOE agrees with these
recommendations and is in the process of implementing them.
(GAO/RCED-97-18)
STRATEGIC MANAGEMENT
------------------------------------------------------ Chapter 2:1.2.8
In April 1998, we recommended, among other things, that DOE (1)
review its organizational structure and seek opportunities to better
align the organization with its strategic plan's business lines, (2)
develop specific procedures that state how subordinate strategic and
multiyear plans are to relate to the departmental strategic plan, (3)
work with its various programs to develop integrated management
systems that directly link required budgetary resources to the level
of performance that is identified in the annual performance plans,
and (4) modify the agency's contracting performance goals and fees in
contracts for the start of the fiscal year's work. DOE agrees with
these recommendations and is in the process of developing
implementing procedures. (GAO/RCED-98-94)
NUCLEAR WASTE DISPOSAL
------------------------------------------------------ Chapter 2:1.2.9
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. In July 1996, a federal circuit court of
appeals ruled that DOE was obligated to begin accepting nuclear waste
by January 31, 1998. However, because DOE was not going to be able
to begin accepting the waste by the deadline, the court, in November
1997, directed DOE to begin pursuing contractual remedies. 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)
TECHNOLOGY INVESTMENT
----------------------------------------------------- Chapter 2:1.2.10
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. We said the policy should provide criteria and
flexibility for determining which programs and projects are
appropriate for repayment. DOE officials agree with this
recommendation and DOE is conducting a comprehensive review of its
existing authorities, the experiences of other agencies, and other
matters as a basis for adopting a new policy to accommodate it.
(GAO/RCED-96-141)
SUPERCOMPUTERS
----------------------------------------------------- Chapter 2:1.2.11
In a July 1998 report, we noted that given the number and cost of
DOE's existing supercomputers, the unused capacity that exists, and
future planned acquisitions, it is increasingly important that DOE
better manage the acquisition and use of these systems. We
recommended that the Secretary adopt an approach to information
technology investment and oversight that meets the criteria set out
in the Clinger-Cohen Act. Under such an approach, DOE should adopt a
process for acquiring scientific information technology that (1)
pertains to all Department-funded supercomputers; (2) ensures, prior
to providing funds for the acquisition of any new supercomputers,
that a written justification clearly demonstrates the need, addresses
the benefits of acquiring the subject supercomputer, and allows for
meaningful comparison with alternative investments; and (3) includes
a laboratory-specific analysis of the utilization of existing
supercomputers and an analysis of the potential to share
supercomputers with other sites and/or programs. We further
recommended that the Secretary designate the Department's most
ambitious acquisitions of supercomputer systems--such as those in the
Accelerated Strategic Computer Initiative (ASCI) program--as
strategic systems warranting oversight at the highest departmental
level. (GAO/RCED-98-208)
INTELLECTUAL PROPERTY
FEES
----------------------------------------------------- Chapter 2:1.2.12
In May 1997, we noted in our report to the Senate Committee on the
Judiciary that the Congress may wish to reconsider whether
intellectual property fees should be more closely aligned with the
costs of the services provided by the government. Regarding patent
fees, we suggested considering whether (1) the fee differentials
between large and small businesses should be continued, (2) a larger
proportion of the fees should be tied to the actual examination
process, and (3) applicants requiring more examination time and/or
creating delays in examination should pay larger fees. Regarding
copyright fees, we suggested considering whether the Copyright
Office, like PTO, should be self-sustaining through fees. We
recommended that the Copyright Office itself, also like PTO, raise
fees to account for inflation when given the authority to do so
administratively. Since the issuance of our report, the Congress has
been using our analyses in their deliberations on bills to
restructure PTO, although final action has not yet taken place. The
Copyright Office has indicated that it will raise fees
administratively in the future as we recommended. (GAO/RCED-97-113)
FAIR MARKET VALUE
----------------------------------------------------- Chapter 2:1.2.13
In April 1996, we reported that the Forest Service is not receiving
fair market value for right-of-way fees on Forest Service lands. We
recommended that an appropriate fee system be implemented. Both the
Forest Service and major industry groups representing private
companies that have rights-of-way to operate power lines, pipelines,
and communications lines across Forest Service lands, agree on the
need for a new fee system. The Forest Service is working with the
Bureau of Land Management to develop a common fee system for rights
of way that is more reflective of fair market value and expects to
implement it by fiscal year 1999. (GAO/RCED-96-84)
NATIONAL PARK SERVICE
EMPLOYEE HOUSING
----------------------------------------------------- Chapter 2:1.2.14
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 $300 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. In November
1996, the Congress passed Public Law 104-333 that, among other
things, requires the Park Service to (1) review and revise its
criteria for providing employees housing, and (2) assess the
conditions of, and need for, its employee housing units. The Park
Service is currently reviewing the scope of its employee housing
program and is exploring ways to increase private sector involvement
in helping to address the housing need. (GAO/RCED-94-284)
WETLANDS
----------------------------------------------------- Chapter 2:1.2.15
Over $500 million each year is associated with the efforts of federal
agencies to protect and restore wetlands. However, the consistency
and reliability of the estimates made of the nation's remaining
wetlands acreage and the data reported by the agencies on their
accomplishments are questionable. Despite the efforts of five
interagency task forces established since 1989 to resolve them, these
problems persist. As a result, the progress made toward achieving
the goal of a no net loss of the nation's remaining wetlands, the
administration's new goal of gaining 100,000 acres of wetlands each
year beginning in the year 2005, or the contributions made by the
agencies in achieving these goals cannot be measured.
To ensure improvements to such data, we recommended that the
Secretary of the Department of Agriculture and the Secretary of the
Department of the Interior, in consultation with the Chairman of the
White House's Interagency Wetlands Working Group, develop and
implement a strategy for ensuring that all actions contained in the
Clean Water Action Plan relating to wetlands data are adopted
governmentwide. Such actions, we said, should include, in addition
to the ongoing effort to develop a single set of accurate, reliable
figures on the status of trends of the nation's wetlands, the
development of consistent, understandable definitions and reporting
standards that are used by all federal agencies in reporting their
wetlands-related activities and the changes to wetlands that result
from such activities. (GAO/RCED-98-150).
FEDERAL WATER SUBSIDIES
----------------------------------------------------- Chapter 2:1.2.16
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 DOI'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. The Bureau of Reclamation has taken
various actions to implement these recommendations and the Army Corps
of Engineers is coordinating with the Bureau to take others.
(GAO/RCED-94-35)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
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
In response to various laws over the years addressing environmental
and human health threats, the Environmental Protection Agency (EPA)
has established a comprehensive set of regulations aimed largely at
controlling the most obvious risks, such as pollution from large
industries. This system of setting national environmental standards;
issuing permits for discharges to the air, land, and water;
monitoring compliance with the permits; and taking enforcement
action, if necessary, has been the means for the nation to make
substantial improvements in the environment. However, the system is
costly and some important limitations have become increasingly clear.
The nation spent $122 billion in 1994 (the government's last national
estimate) to comply with environmental regulations and standards, and
regulatory requirements that are not sufficiently flexible can impose
additional costs with only incremental levels of return. In
addition, controls that are overly prescriptive can discourage
technological innovation that could help lower these costs.
Furthermore, a system focused largely on "end-of-pipe" pollution is
not effective in addressing a number of emerging issues, such as
nonpoint source pollution (polluted runoff), stratospheric ozone
depletion, and global climate change. The prescriptive approach has
also at times strained EPA's working relationship with the states,
who generally implement national environmental programs. At a time
of high public expectations for environmental protection and
continuing concerns about the costs and the economic impact of
government regulations, EPA must operate its programs in an efficient
and effective manner, address the limitations in the current
regulatory system, and prepare to manage new risks as they emerge.
During the past year, we have assisted the Congress and EPA by
providing information on these challenges and assessing EPA's efforts
to meet them. For example, we
-- reported how certain requirements of the Resource Conservation
and Recovery Act can have negative effects on hazardous waste
cleanups by unnecessarily increasing cleanup costs and
completion times,
-- testified on EPA's and the states' roles and efforts to
"reinvent" environmental regulation through innovative methods
aimed at achieving "the very best protection of public health
and the environment at the least cost,"
-- identified ways to improve the clarity and credibility of the
economic analyses performed to support regulatory
decision-making,
-- analyzed the pace and costs of cleanup of hazardous waste sites
under the Superfund program,
-- reported on EPA's and the states' efforts to focus enforcement
programs on achieving environmental results,
-- analyzed the administration's global climate change proposal in
support of the Kyoto Protocol, an international agreement to
reduce greenhouse gas emissions, and
-- provided our observations on the major management issues facing
EPA and how the agency can improve its strategic and annual
performance plans, cornerstones of its efforts to effectively
direct its resources and assess its performance in carrying out
its mission.
Furthermore, the work we have performed in past years has influenced
the Congress and EPA to take actions during fiscal year 1998 that
will result in financial benefits and program improvements. For
example, the following occurred as a result of our work:
-- The Congress stipulated that $650 million of the Superfund
program's appropriations for fiscal year 1998 depended upon
reauthorization of the program because of issues we raised about
EPA's estimate of its funding needs and management of the
program. Reauthorization did not occur.
-- EPA took several actions to improve public communications in the
Superfund and Safe Drinking Water programs, which should enable
citizens to be better informed and more involved in
environmental decisions affecting them.
-- EPA improved management and oversight of its initiatives to
"reinvent" environmental regulation by establishing a management
process to oversee development and implementation of reinvention
across the agency and to improve how it sets and communicates
its reinvention priorities.
-- EPA issued a directive and a plan to enhance the role of states
in the Superfund program.
-- EPA improved its use of peer review to enhance the quality,
credibility, and acceptability of the scientific and technical
products that may ultimately form the basis of regulations and
other key agency decisions.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:2.2
Although the Congress and EPA have taken many actions in response to
our work, some important recommendations remain and warrant priority
attention for implementation.
AIR QUALITY
------------------------------------------------------ Chapter 2:2.2.1
The Clean Air Act Amendments of 1990 required EPA to issue a series
of regulations--many with ambitious milestones--to address some of
the more serious air pollution problems facing the nation. Since
1971, a series of executive orders and OMB directives have required
EPA and other federal agencies to consider the benefits and costs
associated with individual regulations. We found that EPA needed to
improve the presentation and clarity of the information contained in
these regulatory impact analyses to enhance their value to both
agency decisionmakers and the Congress in assessing the benefits and
costs of proposed regulations. For example, many of the regulatory
impact analyses that we reviewed did not clearly identify key
economic assumptions, the rationale for using these assumptions, the
degree of uncertainty associated with both the data and the
assumptions used, or the alternatives considered. EPA is addressing
these needed improvements in new guidance on preparing economic
analyses. The agency anticipates issuing the guidance document in
early fiscal year 1999. (GAO/RCED-97-38)
HAZARDOUS WASTE
MANAGEMENT
------------------------------------------------------ Chapter 2:2.2.2
EPA's Superfund program began in 1980 as a relatively short-term
project to clean up abandoned hazardous waste sites. At that time,
the country's hazardous waste problems were thought to be limited.
Since then, thousands of waste sites have been discovered, and
cleaning them up has proved to be far more complicated and costly
than anticipated. Recent estimates show that cleaning up these sites
could amount to over $300 billion in federal costs and many billions
more in private expenditures. Under the Superfund law, EPA can
compel the private parties responsible for contamination at hazardous
waste sites to clean them up, or it can conduct the cleanup and
demand reimbursement of its costs from the responsible parties. To
pay for its cleanups, EPA draws on a legislatively established trust
fund that has been primarily financed by a tax on crude oil and
certain chemicals and by an environmental tax on corporations. (In
December 1995, the authority to collect these taxes expired.
However, the trust fund still has an unappropriated balance and is
continuing to be used to finance the Superfund program.) Federal
agencies generally use their annual appropriations to finance cleanup
of the facilities under their jurisdiction.
Given the large number of hazardous waste sites to be cleaned up and
the tremendous costs involved, we recommended that the Congress
consider amending the Superfund legislation to underscore the
importance of ranking hazardous waste sites so that resources are
targeted to cleaning up the worst sites first. We also suggested
that the Congress encourage efforts to recover cleanup costs from
responsible parties by requiring EPA to define more broadly which
indirect costs are recoverable. We have also recommended that EPA
expedite the issuance of a regulation that would more broadly define
recoverable indirect costs. (GAO/T-RCED-94-274, GAO/RCED-94-196)
Although one reauthorization bill would have required EPA to place
more emphasis on considering the relative risk of sites when setting
cleanup priorities, the bill did not pass and reauthorization of the
Superfund program is still being debated. EPA has created a panel
that uses criteria, including health and environmental risks, to
score and rank sites for cleanup during the next fiscal year. Other
federal agencies have also made progress in developing processes to
rank their sites for funding. However, not all the agencies have
completed inventories of their sites and consistently implemented
their ranking processes. In implementing new accounting standards,
EPA is changing how it defines its indirect costs and may adopt a new
indirect cost rate that would result in the agency charging more of
its costs to responsible parties. However, EPA's office responsible
for Superfund cost recovery has not yet decided if it will use the
new rate in negotiating the recovery of costs from responsible
parties.
EPA relies heavily on contracts and assistance agreements to
accomplish the work of the Superfund program. When EPA awards a
contract or enters into an assistance agreement, it obligates federal
funds to cover the cost of the planned work. As work progresses
according to work orders for individual contracts or work plans for
assistance agreements, the agency makes payments and liquidates its
obligations. In April 1997, we reported that EPA had $249 million in
unspent obligated funds available for deobligation on Superfund
contract work orders and assistance agreements completed prior to
calendar year 1997. In response to our report, EPA began a
systematic process to identify funds available for deobligation by
using automated data files. Using this new process, the agency
recovered or had detailed plans to recover all of the funds we
identified as available for recovery. In July 1998, we recommended
that EPA recover unspent obligated funds faster by modifying its
analysis of completed contracts to include a separate analysis in
December in addition to June of each calendar year. EPA officials
disagreed with our recommendation, stating that very little would be
gained with an additional review in December. We have retained our
recommendation because a significant number of contracts typically
expire in September of each year. For example, an additional review
in December 1997 would have identified $115 million for recovery in
fiscal year 1998. (GAO/RCED-98-232)
TOXIC SUBSTANCES
------------------------------------------------------ Chapter 2:2.2.3
To obtain a better understanding of the risks posed by chemicals, EPA
is planning to develop a Chemical Use Inventory. Debate on this
effort has focused on certain key issues, such as the chemicals to be
included. Although EPA had not made final plans, the agency
considered collecting data on up to 12,000 chemicals. Because our
past work has shown that EPA does not have the resources to
effectively compile and analyze data on such a large number of
chemicals, we recommended that EPA begin its inventory with a smaller
number of chemicals--such as those suspected of presenting the
greatest risk to human health and the environment--and then expand
the inventory as appropriate. EPA is taking our recommendation into
account as it develops its proposal to establish an inventory. The
agency anticipates publishing the proposal in the Federal Register
during the second quarter of fiscal year 1999. (GAO/RCED-95-165)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
FOOD AND AGRICULTURE ISSUE AREA
(BUDGET FUNCTION 350)
---------------------------------------------------------- Chapter 2:3
GAO Contact: Lawrence J. Dyckman, 202/512-5138
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 2:3.1
GAO conducts evaluations and audits which assess the domestic food
and agriculture programs at the Department of Agriculture (USDA), the
third largest civilian agency with a budget of about $55 billion.
USDA, and the food and agriculture industry it supports, is a vital
part of the lives of millions of Americans. Approximately two-thirds
of USDA's budget, or about $36 billion, is spent on federal food and
nutrition assistance programs for needy citizens. Each year,
American agriculture accounts for about 13.5 percent of the gross
domestic product and for about 9 percent of all exports. In
addition, about 23 million Americans have jobs related to the food
and agriculture economy.
Approximately 100,000 USDA employees are responsible for implementing
programs that support the productivity and profitability of farming
and ranching, protect the natural environment, respond to land use
issues, ensure food safety, improve the well-being of rural America,
promote domestic marketing and the export of food and farm products,
conduct biotechnology and other agricultural research, provide
nutritional guidance, and provide food assistance to those Americans
who need it. These activities are carried out under USDA's seven
mission areas: Farm and Foreign Agricultural Services; Rural
Development; Research, Education, and Economics; Natural Resources
and Environment; Food, Nutrition, and Consumer Services; Food Safety;
and Marketing and Regulatory Programs.
In 1998, USDA continued to implement many of the changes mandated by
Congress in 1994 and 1996, which reflect a body of work produced by
the Food and Agriculture Issue Area, particularly in the farm
commodity program, farm credit, and food safety areas. Specifically,
USDA moved forward in implementing the provisions of the 1996 Farm
Bill, which, among other things, pushed farm assistance programs to a
more market-oriented approach and strengthened the integrity of the
farm lending programs. USDA also continued to implement the
provisions of Hazard Analysis and Critical Control Point (HACCP),
which fundamentally changes the approach to food safety inspections.
Additionally, USDA's Food Stamp Program has changed significantly as
a result of major changes to federal welfare programs. While these
program changes are occurring, USDA continues to undergo the most
massive streamlining efforts in its history.
During 1998, we have also assisted the Congress and USDA in assessing
USDA's implementation of these changes. For example, we
-- reported that the federal government's piecemeal approach to
food safety is not an effective means of assuring the safety of
the nation's food supply and reiterated the need to establish a
uniform, risk-based inspection system under a single food safety
agency to fully achieve an effective food safety system;
-- identified hundreds of millions of dollars in the federal food
safety budget that could be better spent if USDA applied
risk-based principles to its meat and poultry inspections;
-- testified on major weaknesses in the nation's imported food
safety system that allows unsafe food to enter U.S. commerce;
-- evaluated USDA's progress in implementing its massive
reorganization and the provisions of the 1996 Farm Bill
including the impacts these changes are having on federal
services to farmers;
-- identified millions of dollars in overpayments to food stamp
households who included deceased individuals as well as other
ineligible individuals in their households;
-- highlighted serious weaknesses in the Forest Service's
multimillion dollar contracting efforts and recommended a series
of actions to decrease the agency's vulnerability to fraud,
waste, and abuse; and
-- testified on international and interstate cigarette smuggling as
part of the congressional debate on the proposed National
Tobacco Settlement.
Furthermore, during 1998, a number of our prior recommendations have
been implemented by USDA. For example, as a result of our work, USDA
-- lowered its commissions paid to private insurance companies for
selling federal crop insurance which will save the federal
government $27 million dollars in fiscal years 1998 and 1999.
-- reduced underwriting profits paid to private insurance companies
which results in a savings of $72 million annually.
-- improved oversight of its multimillion dollar rural Empowerment
Zones (EZ) and Enterprise Communities (EC) program, which will
allow it to better assure that the program is accomplishing its
legislative purposes.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:3.2
FOOD SAFETY
------------------------------------------------------ Chapter 2:3.2.1
Our past work has been instrumental in the implementation of the new
HACCP 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 HACCP regulations. In
addition, however, we identified some shortcomings in the federal
food safety program that still need solutions beyond a HACCP-based
food inspection program. Specifically, we identified the need for
Congress to (1) create a uniform set of food safety laws that are
administered by a single food safety agency, (2) provide that agency
with the flexibility to target its inspection resources to the most
serious food safety risks, and (3) consider extending the Food Safety
and Inspection Service's (FSIS) discretionary inspection authority
and requiring FSIS to implement a discretionary inspection program
for meat and poultry processors. In response to these
recommendations, Congress continues to urge the Administration to
proceed with the development of a single-food safety agency.
Furthermore, in August 1998, the President issued an executive order
establishing an executive council to oversee federal safety
activities. Finally, congressional and agency officials have stated
that discretionary inspection authority will be considered once the
new HACCP regulations have been fully implemented and evaluated.
(GAO/RCED-92-152, GAO/RCED-94-192, GAO/RCED-94-110)
Most recently, in 1998, we reported that federal agencies cannot
ensure that the growing volume of imported foods is safe for
consumers. Given its lack of authority to require equivalency in
foreign food safety systems, FDA relies primarily on port-of-entry
inspections and tests to ensure the safety of imported foods.
Because port-of-entry inspection and testing has been widely
discredited as an effective means of ensuring safety, FDA cannot
realistically ensure that unsafe foods are kept out of U.S.
commerce. To strengthen FDA's ability to ensure the safety of
imported foods, we recommended, among other things, that the Congress
require all food eligible for importation to the United States, not
just meat and poultry, be produced under equivalent food safety
systems. Congress is considering what, if any, legislative action it
will take to correct this problem. (GAO/RCED-98-103)
FOREIGN PESTS AND
DISEASES
------------------------------------------------------ Chapter 2:3.2.2
Foreign pests and diseases entering the United States cost an
estimated $41 billion annually in lost production and expenses for
prevention and control. USDA's Animal and Plant Health Inspection
Service (APHIS) is responsible for minimizing the risks of
infestation and disease and protecting the health of U.S.
agriculture. On the basis of our review, we recommended several
actions to better ensure that APHIS identifies harmful pests and
diseases through the inspections it conducts. APHIS agreed with
problems noted in our report and has begun implementing actions to
address our recommendations. (GAO/RCED-97-102)
FOOD ASSISTANCE
------------------------------------------------------ Chapter 2:3.2.3
USDA spends about two-thirds of its budget, or about $36 billion in
fiscal year 1998, on 15 separate food assistance programs. Our
reviews of two of these programs, the Food Stamp Program--about $22
billion in food benefits in fiscal year 1996--and the Special
Supplemental Nutrition Program for Women, Infants, and Children
(WIC)--about $2.7 billion in food benefits in fiscal year 1996--have
identified potential areas of fraud, waste, and abuse and
opportunities to reduce program costs.
Our most recent reviews of the Food Stamp Program identified large
numbers of ineligible individuals included in households receiving
food stamp benefits. In one report we identified nearly 26,000
deceased individuals in four states who were included in households
receiving food stamps for the 2-year period 1995 through 1996. These
households improperly collected an estimated $8.5 million in food
stamp benefits. In order to ensure the integrity of the Food Stamp
Program by preventing deceased individuals from being counted as
household members, we recommended that Congress enact legislation to
enable the Social Security Administration (SSA) to disclose all
information from its Death Master File to the states administering
the Food Stamp Program. Legislation has been enacted that would
require the states to enter into arrangements with SSA to share
information in its Death Master File and to use this information to
preclude deceased individuals from being included in households
receiving benefits. In another review, we found that duplicate
participation by members of food stamp households in more than one
state results in millions of dollars of overpayments. To resolve
this problem, we recommended that the Food and Nutrition Service
(FNS), within USDA, consider establishing a central system to help
ensure that individuals participating in the Food Stamp Program are
not being improperly included as household members in more than one
state concurrently. As part of this effort, FNS should conduct a
feasibility study to identify options and provide a cost-benefit
estimate for each option. FNS agreed to conduct this feasibility
study. (GAO/RCED-98-53, GAO/RCED-98-228)
Based on our review of the states' implementation of the WIC program,
we recommended that FNS work with the states to identify and
implement cost containment initiatives, including policy and
regulatory and legislative revisions, to reduce or eliminate the
obstacles that may discourage such initiatives. We also recommended
that FNS take the necessary steps to ensure that the state agencies
are requiring WIC participants to provide evidence that they reside
in the states where they receive WIC benefits and to provide
identification when their eligibility is certified and when they
receive food or food vouchers. USDA has begun implementing actions
to address our recommendations. (GAO/RCED-97-225)
FARM PROGRAMS
------------------------------------------------------ Chapter 2:3.2.4
The Federal Agriculture Improvement and Reform Act of 1996
significantly changed many of USDA farm programs. This act promotes
the transition of the agriculture sector from programs funded by
government subsidies to ones that are more market oriented. Based on
our review of USDA's efficiency in delivering program services to
farmers under the revamped farm programs, we recommended that USDA
study the costs and benefits of using alternative delivery methods to
deliver services to farmers more efficiently thereby reducing federal
expenditures. USDA generally agreed with the intent of this
recommendation and is in the process of preparing a summary of
actions it plans or has already taken in response to this
recommendation. (GAO/RCED-98-98)
Through its farm credit programs, USDA provides loans and loan
guarantees to financially troubled farmers. In 1994, responsibility
for the farm credit programs was transferred within USDA to the Farm
Service Agency (FSA), which was newly formed from several USDA
activities. The potential for conflicts of interest in this program
increased by adding individuals to the consolidated FSA agency who
had not been previously subject to conflict of interest restrictions
on farm loans. We reported that as of March 1997, FSA had identified
1,767 cases in which its employees or county committee members had
loans or relationships with borrowers that required action to avoid
conflicts of interest. Based on this review, we recommended that FSA
clarify its policy and guidance defining situations constituting
potential conflicts of interest and actions that are needed for
addressing such cases. FSA is in the process of amending its
personnel handbook for federal employees to clarify requirements for
avoiding conflicts of interest. (GAO/RCED-97-104)
FOREST SERVICE
PROCUREMENT PRACTICES
------------------------------------------------------ Chapter 2:3.2.5
The Forest Service, within USDA, awarded $443 million on 6,475
contract actions in fiscal year 1996 for a wide variety of goods and
services, such as building construction, tree planting, research
studies, and aircraft and helicopters for suppressing fires. Our
review of the Forest Service's contracting practices revealed that
the Forest Service is highly vulnerable to fraud, waste, and abuse
because it does not have an effective system of internal controls for
its contracting activities. To address these weaknesses, we
recommended several actions to improve the agency's compliance with
the Federal Managers Financial Integrity Act and GAO's standards for
internal control. In response to these recommendations, the Forest
Service has committed to developing an internal control plan, which
addresses needed improvements in the areas of contract file
documentation, routine supervisory review of contracting activities,
and contract management information. The Forest Service also plans
to ensure contracting officers' representatives are trained and
certified in accordance with USDA policy. They also plan to develop
a system to periodically monitor and assess compliance with internal
control standards. (GAO/RCED-98-88)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
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
More than 300 federal programs and activities, scattered among 28
agencies, are aimed at providing decent, affordable housing and
healthy, vibrant communities. Created in 1965, the Department of
Housing and Urban Development (HUD), including the Federal Housing
Administration (FHA), is the principal federal agency responsible for
about 240 of these programs and activities. Other key agencies with
housing or community development programs include the Department of
Veterans Affairs (VA), the Rural Housing Service, the Small Business
Administration (SBA), and the Federal Emergency Management Agency
(FEMA).
The Congress continues to deliberate how the federal government
should address the housing needs of its citizens--including first
time homebuyers, families with low income, the elderly, persons with
disabilities, and the homeless. Our work has significantly added to
congressional debate and decision-making on the future of housing and
community development at the federal and state levels. Highlights of
some of our work and the actions that the Congress, HUD, and its
agencies have taken as a result are described below.
-- Our work on HUD's financial management of its Section 8 assisted
housing programs identified substantial weaknesses in HUD's
oversight of and budgeting for the project-based and
tenant-based programs. We found nearly $11 billion of excess
unexpended budget authority, much of which the Congress has
since rescinded. In our 1998 budget reviews, we found flaws in
HUD's budget process that led HUD to significantly overestimate
program needs. HUD has already implemented our recommendations.
-- We reported that HUD could improve its administration of the
Performance Funding System, which provides $2.8 billion in
subsidies each year to public housing agencies. Among other
things, we found that the subsidies are not sufficient to
adequately supplement some housing agencies' budgets. In
recently enacted legislation--Public law 105-276, section 519,
Congress created two new funds--the Capital Fund and the
Operating Fund-- for providing subsidies to public housing
agencies. Under this new authority, HUD must develop a formula
for determining the amount of assistance to be provided to
public housing agencies.
-- Our work on HUD's HOPE VI Program (a program to help revitalize
severely distressed public housing) provided the Congress with
critical information that the federal government's 5-year, $3
billion investment is beginning to produce results; and pointed
out barriers that delay or prevent improvements. To ensure that
federal expenditures are producing results, we recommended that
HUD develop performance measures for the community and support
services at HOPE VI sites. HUD is developing such performance
measures.
-- HUD is improving its oversight procedures of real estate asset
management contractors, as a result of the substantial problems
we reported. These contractors are responsible for maintaining
and safeguarding HUD's inventory of foreclosed single family
properties--about 55,000 properties per year. We found that the
oversight weaknesses had contributed to poor conditions at some
properties.
-- HUD is implementing recommendations we made for improving its
administration of FHA's Risk Sharing Demonstration Programs,
which are designed to expand the production of rental housing
affordable to lower income families.
-- Based on our recommendation, HUD has increased its
communications with its field offices and housing agencies and
has attempted to clarify its role in welfare reform. This
action is critical because public housing agencies and HUD field
offices lack information needed to help residents move from
welfare to work.
-- Our report on Native American homeownership opportunities on
trust lands provided the Congress with evidence that few Native
Americans have purchased homes on trust lands by using private,
conventional financing. This report will assist congressional
decisionmakers when expanding housing opportunities for Native
Americans because it pinpoints the barriers to private mortgage
financing.
-- As a result of our limited work on FHA home loan appraisals, HUD
announced several reforms designed to protect FHA home buyers
against bad appraisals and removed seven FHA appraisers from
FHA's roster of approved appraisers.
-- In response to our report that identified weaknesses in HUD's
management and oversight of its home improvement loan program,
HUD plans to: ensure that information on the types of loans
made is accurate; increase the number of claims subject to an
underwriting review; and, monitor and target lenders for review.
-- In line with our recommendations, FEMA established new policy
guidance concerning its use of an expedited process for
providing temporary housing assistance to disaster victims.
This guidance will help ensure equitable treatment of disaster
victims and provide for temporary housing assistance when
warranted.
The work we have performed in past years has also resulted in program
improvements during 1998. Examples of these improvements are shown
below.
-- The Congress terminated funding for HUD's Low-Income Housing
Preservation Program. Continuing the program would have cost
about $2 billion over the next several years.
-- HUD has taken steps to improve the accuracy of its public
housing management assessment program by, among other things,
establishing a national real estate assessment center that will
evaluate housing agency performance based on independent
information, relying less on information provided by the housing
agencies.
-- HUD instituted a system to track annual progress reports
submitted by Housing Opportunities for Persons With AIDS Program
grantees. As a result, HUD can determine if the agency has
complete fund use data and better assess the program's overall
accomplishments. HUD has also reviewed the formula used to
distribute program funds, per our recommendation.
-- HUD strengthened its credit subsidy estimates for its Nursing
Home Program, which will enable HUD to better measure the
outcomes of this program.
-- HUD reestablished a requirement that its field offices review a
specific percentage of completed FHA single-family home
appraisals, which will provide some assurance that appraisals
comply with statutory, regulatory, and administrative
requirements and will help monitor the quality of appraisers.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 2:4.2
LOW-INCOME HOUSING
------------------------------------------------------ Chapter 2:4.2.1
In an April 1998 report, we recommended that the Secretary of HUD
direct the Commissioner of the Federal Housing Administration to
explore the feasibility of amending current program regulations to
authorize the reinsurance demonstration program's use with 18-year
balloon mortgages and with loan pools. By allowing wider program
use, the program would encourage greater production of affordable
rental housing. We also recommended that HUD correct current flaws
in information systems used to support and monitor both the
reinsurance and credit enhancement demonstration programs. HUD needs
better data to accurately evaluate the overall performance of
individual projects and to ensure that its risk-sharing partners are
complying with the demonstration programs' procedures and
regulations. HUD plans, but has not begun, to take corrective
action. (GAO/RCED-98-117)
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. HUD's
2020 Management Reform Plan contains a strategy to address the very
poor physical conditions at properties supported by HUD's
project-based assistance. Under its reform plan, HUD has created a
Department-wide Real Estate Assessment Center, which is responsible
for reviewing projects' physical inspection results and financial
performance data to identify problem properties early. Several
regional Multifamily Hubs and Program Centers have also been created
to provide improved asset management. Finally, an Enforcement Center
with field offices has been established to take remedial action of
noncompliance persists. If HUD's strategy is successfully
implemented, it would meet the intent of our recommendations.
However, since HUD has only recently taken these new initiatives, it
is premature for us to assess their effectiveness.
(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. Legislation authorizing HUD to merge the two
rental assistance programs was enacted as part of Public Law 105-276,
section 545. (GAO/RCED-89-20)
WELFARE REFORM
------------------------------------------------------ Chapter 2:4.2.2
Because many of the people that HUD serves depend on federal cash
assistance for some or all of their income, welfare reforms are
likely to affect HUD's programs. HUD's role in welfare reform is
driven, in part, by the large numbers of tenants who currently
receive welfare benefits whose incomes will decline if they do not
find jobs or other sources of income within the time limits now
placed on federal assistance. HUD's own financial status depends, to
some extent, on these tenants' success in replacing welfare benefits
with earnings. In our June 1998 report, we made several
recommendations to HUD that we believe are critical in assisting
public housing authorities in their efforts to help residents move
from welfare to work. Per our recommendation, HUD has increased its
communications with its field offices and housing agencies and has
attempted to clarify its role in welfare reform. However, HUD has
yet to fully implement our recommendation to (1) provide technical
assistance and data on tenants' characteristics along with guidance
that would help housing agencies manage their units and determine the
potential impact of welfare reform, and (2) develop a comprehensive
strategy to help link field office and housing agency staff with
federal, state and local welfare reform efforts. (GAO/RCED-98-148)
LEAD-BASED PAINT HAZARDS
------------------------------------------------------ Chapter 2:4.2.3
The risk of poisoning from lead-based paint continues to threaten the
lives of 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, we issued a report that found (1) public
housing authorities were not complying with emergency abatement or
relocation regulations for children with elevated blood lead levels
and (2) HUD was not complying with 1988 legislative requirements
aimed at abating lead-based paint hazards from public housing nor
ensuring that public housing authorities were complying with its
testing, abatement, and notification requirements. In the June 7,
1996, Federal Register, HUD published a proposed rule covering
notification, evaluation, and reduction of lead-based paint in
federally-owned and assisted housing. However, HUD has not yet
finalized the regulations and thus, the regulations have not yet been
sent to OMB for approval. (GAO/RCED-93-138)
TELECOMMUNICATIONS
------------------------------------------------------ Chapter 2:4.2.4
The Telecommunications Act of 1996, among other things, extended
universal service support to schools and libraries. The general
purpose of the program is to improve the access of schools and
libraries to modern telecommunications services. To administer the
program, the Federal Communications Commission (FCC) directed the
establishment of the Schools and Libraries Corporation. As a start
up operation, the Corporation developed operating procedures and
internal controls to implement FCC's orders guiding the program.
Since January 1998, the Corporation has received over 32,000
applications from schools and libraries requesting funding for up to
$2.5 billion in discounts on telecommunications, Internet access and
internal connection services. In July 1998, we recommended that the
FCC Chairman direct the Corporation to complete specific actions to
strengthen weaknesses we found in the Corporation's internal controls
before issuing any funding commitment letters to schools and
libraries. In addition, we recommended the Chairman direct the
development of goals, measures, and performance targets for the
program that are consistent with the requirements of the Results Act.
On July 16, 1998, the FCC Chairman directed the Corporation to adopt
all of our recommendations. As of December 1998, the Corporation had
implemented most of our recommendations and had begun to issue
commitment letters to schools and libraries. (GAO/T-RCED-98-243)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
TRANSPORTATION 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 safely meet the needs of the traveling public.
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 AND COAST GUARD
ISSUES
------------------------------------------------------ Chapter 2:5.1.1
During 1998, FAA implemented two of our key recommendations dealing
with aviation infrastructure and aviation safety. FAA
-- finalized an integrated Global Positioning System augmentation
plan that includes a schedule, cost estimates and the
probability of meeting them; and
-- formed a national certification team to assist its district
offices in reviewing the safety of new airlines during their
first year of operation and to focus inspections on airlines
that experience elevated rates of safety-related problems.
Also, based on our recommendations, the Congress took actions that
resulted in $181 million in measurable savings. Specifically, the
Congress
-- reduced FAA's facilities and equipment funding by nearly $97
million; and
-- terminated the Coast Guard's Vessel Traffic System program,
resulting in a two-year savings of nearly $84 million.
Finally, we saw action taken on a number of other recommendations
that will benefit consumers, improve government efficiency, and make
air travel safer. During fiscal year 1998,
-- to remove some barriers to competition that new entrant and
other airlines face, DOT granted authority to Chicago's O'Hare
and New York's La Guardia airports to create 31 landing/takeoff
spaces, known as slots, for airlines to serve small and
medium-sized communities that were experiencing a decline in air
service;
-- to improve aviation security, the FAA, in conjunction with the
Federal Bureau of Investigation (FBI), began developing security
threat information and plans to conduct joint threat assessments
at 31 major airports designated as high-risk; and
-- to better address its impending funding shortfall, the Coast
Guard began quantifying the anticipated cost savings from its
actions to reduce its future funding needs and implemented
procedures to ensure that appropriated staffing funds for
acquisition, construction, and improvement projects are used in
accordance with annual appropriations acts.
SURFACE TRANSPORTATION
AND OTHER ISSUES
------------------------------------------------------ Chapter 2:5.1.2
DOT took action on one of our key recommendations concerning Boston's
$11 billion Central Artery/Tunnel project--one of the largest, most
complex, and most expensive highway construction projects ever
undertaken. In July, 1997, we questioned whether the project's
finance plan would be sufficient to meet its financing needs.
Subsequently, the State of Massachusetts provided its updated
financing plans and a contingency funding plan to complete the
project if less than the expected federal dollars were directed to
the project.
We also had significant legislative impact. On September 30, 1997,
when the existing surface transportation authorizing legislation, the
Intermodal Surface Transportation Efficiency Act of 1991, expired,
the Congress had not reached agreement on reauthorizing legislation.
Based on our analysis of the adverse impact that a lack of
authorization would have on states' surface transportation programs,
the Congress passed short-term legislation that provided additional
funding and added flexibility for states' use of existing funds.
Also, as a result of our recommendations on the impact of the North
American Free Trade Agreement, DOT now requires border states to use
performance-based criteria as part of their grant requests for
funding to improve the safety of commercial vehicles entering the
United States from Mexico.
Finally, in response to our recommendations, DOT made a number of
significant changes on its Draft Strategic Plan, which was required
by the Government Performance and Results Act of 1993.
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.
FEES FOR REGISTERING AND
CERTIFYING AIRCRAFT
------------------------------------------------------ Chapter 2:5.2.1
A potential option for dealing with limited FAA resources is to
increase existing fees 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. 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 has been processing a Notice of Proposed
Rulemaking to increase aircraft registration fees. DOT has been
modifying the proposed rule to include provisions of the Federal
Aviation Administration Drug Enforcement Assistance Act, which also
deal with fees associated with aircraft registration. Because of the
substantial changes required, DOT anticipates publishing a
Supplemental Notice of Proposed Rulemaking. (GAO/RCED-93-135}
FAA'S WIDE AREA
AUGMENTATION SYSTEM
------------------------------------------------------ Chapter 2:5.2.2
As a part of FAA's multi-billion dollar modernization effort, the
agency plans to field a network of ground stations and geostationary
satellites which would use DOD's Global Positioning System to locate
and track aircraft. FAA expects that this network, known as the Wide
Area Augmentation System, will permit the agency to phase out
existing ground-based navigation aids and achieve considerable
savings. However, we found that a high degree of uncertainty exists
in FAA's ability to meet its implementation milestones and find a
vendor to field a system of geostationary satellites by FAA's target
date of October, 2001. Additionally, we found that if small
increments of passenger time savings were considered in FAA's
benefit-cost analysis for its Wide Area Augmentation System, the
projected benefits would exceed costs, but not to the extent that FAA
officials had originally reported. In April, 1998, we recommended
that the Secretary of Transportation direct the FAA Administrator to
report to the Congress on (1) the range of milestones for initial and
full Wide Area Augmentation System operations and the probabilities
of meeting them; (2) the agency's detailed strategy for leasing
geostationary satellites, and (3) an updated benefit-cost analysis,
including a comparison with alternative investments and the impact of
small increments of passenger time savings on the analysis. FAA has
initiated work to respond to these recommendations and expects to
complete the work in mid 1999. (GAO/RCED-98-79)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
IMPROVING HUMAN SERVICES PROGRAMS
============================================================ Chapter 3
EDUCATION AND EMPLOYMENT ISSUE
AREA (BUDGET FUNCTION 500)
---------------------------------------------------------- Chapter 3:1
GAO Contact: Carlotta C. Joyner, 202/512-7002
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:1.1
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 on elementary and secondary education issues has been used
to improve students' access to appropriate education nationwide as
well as within the District of Columbia (D.C.) public schools, for
which the Congress has special oversight responsibility. Development
of Individual Education Programs for children with disabilities is a
crucial, statutorily required part of ensuring that they receive
appropriate educational and other services. We reported, however,
that the deadline (July 1, 1998) Education had set for updating all
students' Individual Education Programs for them to be in compliance
with the 1997 amendments to the Individuals with Disabilities
Education Act was so difficult for school districts to meet that they
were concerned about the quality of the Individual Education
Programs' process. Based in part on our work, Education changed its
position. The Department requires only that Individual Education
Programs developed on or after that date must meet the new standards;
Individual Education Programs developed before that time need no
longer be revised before July 1.
We also provided information to Congress identifying problems faced
by new charter schools getting access to federal funds because they
lack the historical enrollment data often required by program
applications. In response, Education's 1998 appropriations bill
directed Education to issue guidance that clarified the options
available to states and school districts in the distribution of
federal funds to new charter schools. Within D.C., our work led to
better assurance that only students eligible to attend school do so
and that the reported school enrollment is accurate--improvements
that can help avoid overpayment of federal funds to the schools.
D.C. Public Schools implemented a policy to clarify, document, and
enforce residency verification requirements for students and their
parents. Under this policy, nonresident students would be identified
and allowed to enroll only if they paid tuition. D.C. also, as we
recommended, provided for an independent audit of student enrollment.
Our resources for work in higher education have been focused
primarily on the multi-billion dollar federal student financial aid
programs--one of the high-risk areas that GAO has identified as being
vulnerable to waste, fraud, abuse, and mismanagement. Although some
progress has been made (see discussion below), problems continue to
develop in Education's management of these programs. Our work during
this year led to correction of one new set of problems that was
interfering with timely and accurate consolidation of multiple
student loans into a single loan so that borrowers could more easily
pay off their loans and avoid defaulting on them. The Department's
actions should prevent such problems as identifying which loans a
borrower has and the correct amount of the loans.
The focus of our work in the area of workforce skills and jobs has
been on identifying 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. Our multi-year program of work on the multiple employment
training programs funded by the federal government identified many
problems associated with this fragmented, overlapping system. The
Workforce Investment Act of 1998--major legislation to overhaul and
streamline the nation's federally funded employment training
system--implements many actions we had recommended. These include
restructuring multiple programs into three block grants (adult
training, youth training, and dislocated worker assistance), which
eliminates many separate funding streams and set-asides;
standardizing definitions; and establishing common performance
measures. In addition, all states and localities are now required to
establish one-stop career centers to facilitate job seekers' and
employers' access to services. The Act also requires that Job Corps
participants be assigned to the closest center, which--we pointed
out--will allow the center to better link training to local labor
market needs and increase the prospects of participants getting jobs.
With respect to worker protection, our work has focused on the
maintenance of workplace protections for employees while minimizing
the regulatory compliance burden on employers. Two agencies within
Labor--the Occupational Safety and Health Administration (OSHA) and
the Employment Standards Administration's Wage and Hour
Division--took important actions in response to our recommendations.
OSHA improved in three areas. First, OSHA changed its approach in
assessing the effectiveness of state-operated programs (which operate
in lieu of OSHA if OSHA approves them to do so). It now emphasizes
program outcomes and evaluation in its reviews rather than focusing
primarily on what the states are doing and how they are doing it.
Second, OSHA has also encouraged states to enter into voluntary
performance agreements that define objective performance goals that
could be used as an alternative to routine monitoring by OSHA.
Third, OSHA also made a significant improvement in protecting the
safety of workers at construction sites. We had recommended that
OSHA revise its policies so that, if the hazard would still be
present in a new location, construction employers had to correct the
condition, equipment, or procedure that created the hazard found in
an inspection instead of just moving the unsafe equipment to another
location or closing the site as a way to abate the hazard. OSHA
issued directives that not only documented general procedures
employers must follow to abate hazards but also specifically
implemented these two recommendations.
In addition, OSHA improved its Integrated Management Information
System, a publicly accessible database that tracks OSHA inspection
activity, to correct a problem we identified. We reported that its
Integrated Management Information System may contain inaccurate
information on the results of certain types of inspections and
recommended that OSHA immediately review the adequacy of this
database. OSHA reviewed the past 3 years' data and clarified its
procedures regarding the use of this information. Our work also
played a major role in the Wage and Hour Division's efforts to
improve the wage data used to determine prevailing wage rates under
the Davis-Bacon Act. In response to our recommendation, the Wage and
Hour Division implemented a process to verify, through telephone
calls and on-site visits, the accuracy of the wage data employers
submit.
Another agency, the Consumer Product Safety Commission, is taking
actions that will affect not only workers but all consumers. Our
recommendations would improve the commission's ability to collect
data on potential product hazards, analyze this information, and
manage ongoing agency projects to reduce consumer product hazards.
The commission developed a new database to better manage its projects
and improved its cost-benefit analysis procedures.
Finally, we reviewed several drafts and the final strategic plans as
well as the fiscal year 1999 annual performance plans produced by the
Departments of Education and Labor. We provided Congress our overall
assessments of these plans and suggested areas where the plans could
be improved. Both departments have used our suggestions in revising
their plans. For example, Labor has revised its strategic goals to
be more mission focused and improved the discussion of its
coordination activities and use of program evaluations.
HIGH-RISK AREA
-------------------------------------------------------- Chapter 3:1.2
We have designated student financial aid as a high-risk area. Our
latest high-risk series report summarizes and updates both our
continuing concerns about the Department of Education's
vulnerabilities in managing and overseeing the student aid programs
as well as progress in strengthening the program's fiscal and
management control systems. Although the Department of Education has
shown a commitment to improving its management of the student aid
programs, the financial risk to U.S. taxpayers remains substantial.
The major student aid programs--the Federal Family Education Loan
Program, Federal Direct Loan Program, and Pell Grants program--employ
complex and cumbersome processes with many participants, as they
provide over $43 billion of aid for postsecondary education students.
The addition of the Federal Direct Loan Program made the management
of the student aid programs an even greater challenge for the
Department. Also, to maximize access to aid funds, the Higher
Education Act placed nearly all the financial risk of loan defaults
(which totals over $3.3 billion in 1997) on the federal government.
Management shortcomings are another major problem. Reviews by us,
congressional committees, and the Department's Inspector General have
shown that the Department (1) did not adequately oversee schools that
participate in the programs; (2) relied too heavily on managing each
title IV program through separate administrative structures, with
poor or little communication among programs; (3) used inadequate
management information systems that contained unreliable data; and
(4) did not have sufficient and reliable student loan data to
determine the liability associated with outstanding loan guarantees.
The Department has generally been responsive to addressing problems
in its student aid programs, and many of those actions appear to be
achieving some results. For example, annual collections on defaulted
loans have increased over the 5 years ending in fiscal year 1996,
from $1 billion to $2.8 billion, although they totaled only $2
billion in 1997. The Department is also continuing a major
reengineering effort that it expects will resolve problems with data
reliability and communication among programs in the next several
years. It is envisioned as a student-based, integrated data system
through which all management and control functions will be conducted.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:1.3
DEPARTMENT OF EDUCATION
MANAGEMENT
------------------------------------------------------ Chapter 3:1.3.1
In our 1992 transition series report, 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
continuing the redesign of its core financial management systems.
However, during 1998, the Department has had to focus much of its
management information systems resources on solving the Year 2000
problem--the inability of many computer programs to correctly process
dates after January 1, 2000. Although the Department has made
progress in implementing our recommendation, even without the need to
refocus resources on the year 2000 problem, its initiatives are long
term efforts that will require more time to complete
(GAO/OCG-93-18TR).
HEAD START
------------------------------------------------------ Chapter 3:1.3.2
In our April 1997 report on research studies of the impact of the
current Head Start program, we reported that although research has
been conducted, it does not provide information on whether today's
Head Start is making a positive difference in the lives of
participants. While we acknowledged the difficulties of conducting
impact studies of programs such as Head Start, we concluded that
research could be done that would allow the Congress and the
Department of Health and Human Services (HHS) to know with more
certainty whether the $4 billion annual investment in Head Start is
making a difference. We recommended that the HHS secretary include
in HHS' research plan an assessment of the impact of Head Start
programs. The Department has begun action to improve its approach to
conducting impact studies such as we recommended; however, their
actions to date are insufficient. In a June 1998 report we also
recommended that the Department should develop and implement a plan
for assessing individual Head Start grantee's performance based on
outcomes, such as their ability to show improvement in children's
cognitive skills, literacy, and gross motor skills. (GAO/HEHS-97-59,
GAO/HEHS-98-186)
U.S. COMMISSION ON CIVIL
RIGHTS
------------------------------------------------------ Chapter 3:1.3.3
We recommended that the U.S. Commission on Civil Rights develop and
document policies and procedures that (1) assign responsibility for
management functions to the staff director and other Commission
officials; and (2) provide mechanisms for holding them accountable
for properly managing the Commission's day-to-day operations. We
specified that this effort should include establishing a management
information system for commissioners and staff to use to plan
projects and track progress using the best information available on
projects' expected and actual costs, timeframes, staffing levels and
completion dates. The Commission is in the process of implementing
our recommendations. For example, a management information system
that will track the status of projects and the resources committed to
them is nearing completion. (GAO/HEHS-97-125)
JOB CORPS
------------------------------------------------------ Chapter 3:1.3.4
In a series of reports and testimonies on the $1 billion Job Corps
program for severely disadvantaged youth we identified a number of
issues that need to be addressed. We recommended that Labor improve
the guidance provided to its outreach contractors to better focus on
those youth most appropriate for Job Corps' intensive services. We
recommended that Labor improve the measures it uses to assess the
performance of its placement contractors. In addition, in July 1998,
we testified that 2 of Job Corps' performance measures are misleading
and overstate the program's success. We noted that Labor and the
Congress need meaningful and accurate information if they are to
effectively manage and oversee the Job Corps program.
(GAO/HEHS-98-1, GAO/T-HEHS-98-218)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
VETERANS' AFFAIRS AND MILITARY
HEALTH CARE ISSUE AREA (BUDGET
FUNCTIONS 050, 550, 700, 753)
---------------------------------------------------------- Chapter 3:2
GAO Contact: Stephen P. Backhus, 202/512-7101
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:2.1
GAO conducts evaluations of health care provided directly to over 34
million military beneficiaries and veterans by DOD and VA through
their $32 billion systems of hospitals, clinics, and managed care
contracts. We also evaluate VA nonhealth benefits, such as
disability compensation and vocational rehabilitation, provided to
over 3 million veterans at an annual cost of about $18 billion.
The high costs of health care and budget constraints underscore
congressional concerns about whether VA and DOD 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 prompt related
concerns about the structure of their health delivery systems and
VA's benefits systems. Our recent work on these and related matters
resulted in DOD savings of more than $180 million and VA savings
exceeding $273 million.
For VA and DOD programs, our objectives are to (1) identify
opportunities to improve management and accountability of health care
systems; (2) assess structural reforms intended to better accomplish
their missions; (3) evaluate implementation of and lessons learned
from managed care strategies; and (4) determine whether the unique
health care needs of special populations, such as those with
high-cost, chronic conditions, are effectively served.
DOD PROGRAMS
------------------------------------------------------ Chapter 3:2.1.1
In fiscal year 1998, we continued to focus on the reform and
restructuring of the military health care system, particularly
TRICARE, DOD's managed care program being phased in across the
country since 1995. To supplement beneficiary satisfaction
information on TRICARE access, DOD now collects data on appointment
timeliness at military treatment facilities, as we recommended.
Moreover, DOD is developing survey instruments to obtain feedback
from beneficiaries about their inpatient and outpatient care and to
track complaints.
DOD is also acting on our recommendations to manage its health care
system more efficiently. For instance, DOD developed a methodology
to more accurately portray TRICARE's full costs by estimating the
costs associated with contract modifications, which it included in
its fiscal year 1999 budget. DOD also improved procedures for
modifying contracts to better ensure their necessity and to
streamline processing. With its contractors, DOD has also
accelerated resource sharing efforts to minimize the costs of
delivering health care. In addition, in collaboration with the Army,
Navy, and Air Force, DOD is developing guidance for sizing their
graduate medical education programs to determine whether and at which
sites reductions could be made.
Our comprehensive review of DOD's pharmacy benefit resulted in
legislation aimed at better controlling costs and improving
effectiveness by using best business practices and changing existing
methods for contracting and distributing medical supplies and
services. In response to our recommendation, the Congress directed
DOD to implement a demonstration program of a DOD-wide pharmacy
benefit for Medicare-eligible retirees. Moreover, DOD is taking
action to invest in a computerized drug utilization review system
that would help prevent adverse drug interactions and save millions
of dollars by reducing unnecessary utilization.
VA PROGRAMS
------------------------------------------------------ Chapter 3:2.1.2
In our work last year, we examined the challenges VA faces in running
its hospitals, increasing the efficiency of and access to its health
care system in a managed care environment, and maintaining its
service to special populations, including Persian Gulf War veterans
and millions of veterans with chronic health care needs.
Our extensive analysis and comparison of the evolution of VA and
community hospitals in the 20th century, including factors
contributing to declining demand and the extent of excess capacity,
provided a valuable tool for helping VA develop and refine its
strategic initiatives to improve efficiency and provide seamless
health care services for veterans. Illustrating the principles of
this work, we reported that VA could reduce expenditures, improve
access to care, and still meet its medical education, training, and
research missions by operating three hospitals instead of four in
Chicago. As we recommended, VA issued a guidebook prescribing a
public process for integrating facilities, and we reported on the
successful use of this process in central Alabama. We continue to
examine other ways in which VA could operate its hospital system more
cost-effectively.
Our reports on implementation of the Veterans Equitable Resource
Allocation system indicate that the major reorganization from four
large health care regions to 22 Veterans Integrated Service Networks
shows promise for correcting long-standing regional funding
imbalances that have impeded equity of access for veterans in
different locations. We continue to find, however, that monitoring
and oversight need to be improved to realize the Veterans Equitable
Resource Allocation system's potential. For instance, based on our
work, VA is establishing a rate to reimburse the networks for
single-visit patients, whose costs vary from the current basic and
special rates. Additional monitoring and more refined data
collection could lead to additional improvements.
Our work on programs for special populations has assisted the
Congress in overseeing VA's key role in providing health care for
these veterans. For instance, the Congress authorized a $5 million
grant program to test new approaches for treating Persian Gulf War
veterans with undiagnosed illnesses. To correct deficiencies we
noted in the claims adjudication process, VA is doing a better job of
informing veterans and helping them obtain the evidence needed to
support claims for undiagnosed illnesses. The Congress also extended
expiring authority for the spouses and children of Persian Gulf
veterans to get medical examinations through VA for health problems
potentially related to the Gulf War. We also testified that VA needs
to collect better data to demonstrate that it is maintaining service
for veterans with costly chronic conditions, such as spinal cord
injury and serious mental illness. As a result, the Congress created
job performance standards for VA employees responsible for allocating
and managing resources for specialized treatment and rehabilitative
programs. VA also implemented our recommendations to improve general
and gender-specific health care services for women veterans, and the
Congress extended VA's authority to counsel and treat veterans for
sexual trauma.
In fiscal year 1998, we also examined VA's strategic planning
efforts. Based on our work, VA made substantive changes in its
strategic plan and fiscal year 1999 performance plan, clarifying
goals and objectives and emphasizing results rather than process.
This should provide a more meaningful framework for Congressional
oversight.
We are continuing to monitor VA's efforts to improve its adjudication
and processing of disability claims, a subject of continuing concern
to the Congress. VA is making progress in developing a new quality
assurance system, but our ongoing review indicates that more needs to
be done.
In relation to our work on burial benefits and the National Cemetery
System, VA completed a document that outlines how it plans to address
veterans' long-term burial demand through the year 2010, when the
need for burial services will be the greatest, and is also planning a
national survey in the year 2000 of veterans' burial preferences, as
we recommended. We also suggested options for addressing problems
that arose over the perceived unfairness of the waiver process for
burial at Arlington National Cemetery, which is operated by the
Department of the Army.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:2.2
DOD
------------------------------------------------------ Chapter 3:2.2.1
We recommended that DOD determine whether resource sharing between
TRICARE support contractors and military treatment facilities would
still work under its new revised contracts, but also seek effective
alternatives to resource sharing. Moreover, DOD should apply the
lessons of resource sharing, such as the need for clear policies and
incentives, as it plans and implements the next wave of military
treatment facility and contract management initiatives. We are also
concerned about the high volume of TRICARE contract modifications
that have not been settled, although DOD has begun to improve its
management and processing in this area. The importance of
controlling overall costs requires DOD to persevere in its efforts to
fix this process. (GAO/HEHS-97-141)
DOD has experienced significant problems managing its pharmacy
benefit because it has tended not to view its military treatment
facility, contractor retail, and mail-order pharmacy programs as
integral parts of a single system. To fully apply best business
practices to save millions of dollars and improve patient outcomes,
we recommended that DOD conduct a top-to-bottom redesign of its
prescription drug benefit across the programs, which it plans to do.
To respond to our recommendations, DOD needs to follow through with
actions including--but not limited to--establishing a uniform,
incentive-based formulary; electronic billing and claims processing;
mandatory third-party billing for military treatment facility
prescriptions provided to beneficiaries with other health insurance;
and routine application of practices such as prior authorization.
(GAO/HEHS-98-176)
VA
------------------------------------------------------ Chapter 3:2.2.2
Difficulties in working with VA's data cast doubt on whether VA can
perform timely and effective oversight to monitor progress under its
Veterans Equitable Resource Allocation system. VA needs more uniform
and timely reporting of changes in access to health care, including
the number and eligibility priority of patients served, waiting times
for care, and patient satisfaction for specific services. In
addition, we recommended that VA establish criteria for networks to
use in more equitably allocating resources to facilities and monitor
any resultant improvements in equity of access. (GAO/HEHS-98-226)
In our work on health care for Persian Gulf War veterans, we
recommended that VA develop and uniformly implement a process focused
on integration of diagnostic services, treatment and evaluation of
effectiveness, and periodic reevaluation of those veterans with
undiagnosed illnesses. This should result in better coordination and
management of care for these veterans. (GAO/HEHS-98-197)
VA has deferred action on several items that would improve its
administration of disability and pension benefits, pending completion
of its Business Process Reengineering project. As part of this
project, VA plans to modernize its computer system, which should
position it to save millions of dollars in overpayments and improve
claims processing, including analyzing information on denied claims.
(GAO/HRD-92-88, GAO/HEHS-95-25, GAO/HEHS-94-179)
See Chapter 1, Improving National Security and International Affairs
Programs, Special Studies and Evaluations. See also Chapter 5,
Financial and Information Management Programs, Financial Management
and Accountability Issue Areas as well as Information Management
Issue Areas.
HEALTH FINANCING AND SYSTEMS
ISSUE AREA (BUDGET FUNCTION
550)
---------------------------------------------------------- Chapter 3:3
GAO Contact: William J. Scanlon, 202/512-7114
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:3.1
Our work on the nation's public and private health insurance programs
encompasses some of the most important and expensive issues facing
the country. Medicare and Medicaid are the primary insurers for more
than 70 million people, and on their behalf the federal government
will spend an estimated $338 billion in fiscal year 1999, with the
states contributing an additional $74 billion to Medicaid. Although
no longer facing imminent depletion, the Medicare Hospital Insurance
Trust Fund is expected to face longer term problems when the aging
baby boom generation begins turning 65 in 2010. Similarly,
Medicaid--as the principal public insurer of long-term care--will
also face increased costs as the number of those over 85
substantially increases.
Notably, the Health Care Financing Administration (HCFA), which
administers Medicare and Medicaid, accounts for about two-thirds of
the HHS budget. There is significant interplay between federal
programs, such as Medicare and Medicaid, and the private insurance
market: that is, changes to public programs and laws affect private
payers' provision of health insurance, while private sector
innovations have led to public program transformations. Major
legislation enacted by the 104th and 105th Congresses will have
implications for public and private payers of health care for years
to come.
MEDICARE
------------------------------------------------------ Chapter 3:3.1.1
For Medicare, the Balanced Budget Act of 1997 represented landmark
legislation and with the Health Insurance Portability and
Accountability Act of 1996, incorporated more than a decade of GAO's
recommendations aimed at improving Medicare payment safeguards as
well as payment and pricing methods. In the spirit of these reforms,
HCFA acted this year on several of our recommendations, and together
these actions are expected to produce several billion dollars in
savings over the next few years. For example:
-- In 1997, we issued two reports on Medicare's pricing of home
oxygen showing that Medicare paid over a third more than the
Veterans Administration for oxygen provided to beneficiaries in
their homes. As a direct result of this work, the Congress
included provisions in the Balanced Budget Act of 1997 for
reducing home oxygen prices incrementally. The Congressional
Budget Office estimates that the reductions will save $6.6
billion in Medicare expenditures between 1998 and 2007.
-- For many years GAO has taken the position that the Medicare
indirect medical education teaching adjustment was too high.
The Balanced Budget Act of 1997 provided that this adjustment
factor be gradually reduced through fiscal year 2001, with $5.6
billion in estimated savings over 5 years.
-- In 1995, we reported on providers' exploitation of regulatory
ambiguities to overcharge Medicare for rehabilitation therapy
provided to residents in skilled nursing facilities. By 1998,
consistent with a recommendation in our 1995 report,
HCFA-proposed salary equivalency guidelines for physical,
speech, and occupational therapists were finalized. HCFA
estimates that, in 1998 and 1999, the salary guidelines will
result in $240 million of savings in Medicare payments for
rehabilitation therapy services.
Beyond realizing these savings, we testified this year on the
challenges HCFA faces in implementing the Balanced Budget Act of 1997
provisions in the coming years, particularly those associated with
developing several separate prospective payment systems and
conducting the Medicare+Choice program. We also reported on such
hotly debated health care issues as payments made to physicians at
teaching hospitals, the government's use of the False Claims Act to
penalize health care providers who bill Medicare inappropriately, and
changes to Medicare fee schedule payments for physician practice
expenses.
We have been especially active this year in the debate on paying for
Medicare's $17-billion home health benefit. During a 4-month
moratorium on admitting agencies to Medicare that were newly seeking
to serve the program's beneficiaries, HCFA strengthened numerous
procedures designed to screen out unqualified providers. One such
procedure--a requirement under the Balanced Budget Act of 1997 for
all home health agencies to obtain a surety bond--remains
controversial, and the Congress asked GAO specifically to assess the
mechanics of implementing this requirement before having HCFA
promulgate a regulation.
At the request of the Congress, we also quickly reported on the
highly contentious "interim payment system," so called because it
serves as a transition from the existing cost-based reimbursement
method to a new prospective payment system to be designed for home
health services. The Congress sought our information before
considering what action, if any, it would take in response to strong
industry concerns over the interim system's new cost controls. In
congressional testimony, we have also advised on certain features of
the future prospective payment system for home health services and
will continue to do additional in-depth work in this area.
LONG-TERM CARE, MEDICAID
------------------------------------------------------ Chapter 3:3.1.2
In the area of long-term care--for which Medicaid is the primary
public payer--we testified and reported on serious quality of care
problems in California nursing homes. Our findings on homes with
repeated violations involving harm to residents had nationwide
implications and prompted immediate action by the Administration as
well as hearings by the Senate Special Committee on Aging. This and
other testimony on the long-term care needs of the baby boom
generation and the physically fragile, low-income seniors eligible
for both Medicare and Medicaid have built a foundation for continued
work on the role of financing in quality nursing home care and the
financing of chronic care for the elderly and individuals with
disabilities. We are continuing to assess aspects of managed care
for Medicaid beneficiaries, focusing on access to services for people
with severe mental illness. In 1998 we also reported on welfare
reform's effect on the enrollment and continued coverage of Medicaid
beneficiaries and have work underway to determine the effect on
Medicaid of the newly created State Children's Health Insurance
Program.
PRIVATE HEALTH INSURANCE
------------------------------------------------------ Chapter 3:3.1.3
The enactment of Health Insurance Portability and Accountability Act
of 1996 and the Balanced Budget Act expanded our examination of
private sector coverage issues. Our prior work on uninsured children
contributed to the public debate that led to the creation of the
State Children's Health Insurance Program. We also reported and
testified on the near elderly--those aged 55 to 64--who are not yet
eligible for Medicare but who, following retirement, may no longer be
covered for insurance through their employer. In addition, we
examined the implementation of the Health Insurance Portability and
Accountability Act's access, portability, and renewability standards,
noting that despite important new provisions, significant
affordability issues remain unresolved. We also reported on the
long-debated issue of consumers' ability to seek recourse against
managed care organizations and other consumer protection issues
affected by provisions in the Employee Retirement Income Security Act
of 1974.
HCFA MANAGEMENT
------------------------------------------------------ Chapter 3:3.1.4
Because the recent statutory reforms related to Medicare, Medicaid,
and private insurance are many and complex, the Congress is
increasingly concerned about HCFA's ability to manage their
implementation effectively. In addition to developing and monitoring
Medicare's individual prospective payment systems for skilled nursing
facilities, home health agencies, and rehabilitation hospitals, HCFA
must oversee the implementation of the new State Children's Health
Insurance Programs and serve as de facto insurance commissioner for
those states that have not implemented the Health Insurance
Portability and Accountability Act's private insurance provisions.
In 1998, our testimony on HCFA's capacity to carry out its new and
existing Medicare functions generated keen interest by the agency
itself. HCFA's Administrator asked us to assess again the agency's
performance of its many Medicare payer and purchaser functions as
well as its Medicaid and private insurance oversight
responsibilities.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:3.2
SAFEGUARDING PAYMENTS FOR
MEDICARE'S HOME HEALTH
BENEFIT
------------------------------------------------------ Chapter 3:3.2.1
Until recently, Medicare outlays for home health care--services
provided to beneficiaries who are homebound and need skilled
care--had been growing in the 1990s on average by more than 30
percent a year. We reported that the increase was largely due to
increased usage that had followed a change in service coverage
guidelines. It also coincided with a deterioration in program
controls.
In one study, we tested 80 high-dollar claims for home health
services that Medicare had paid. Subsequently, Medicare's
claims-processing contractor, after examining each claim, denied more
than $135,000 in charges for 46 of the claims. While productive,
these claims reviews are expensive. Thus, we proposed that, to help
finance Medicare's follow-up audits of claims, HCFA assess the home
health agencies found to be abusive billers for the cost of
performing the follow-up audit work. The home health agency could
choose whether to have a review based on the universe of its claims
for a particular period or on a statistically valid sample. HCFA
would estimate the costs and withhold some percentage of the home
health agency's current Medicare payments, unless the agency
negotiated an alternative payment method, to ensure that the audit
costs (as well as any assessed overpayment) could be recovered from
the agency. The monies assessed for the audit costs could be
earmarked for HCFA's payment safeguard activities. Because this
approach would require authorizing legislation (under current law,
monies recovered are returned to the general Treasury), we asked that
the Congress consider legislation directing HCFA to carry out this
approach as a pilot demonstration. (GAO/HEHS-97-108)
CONTROLS TO KEEP MEDICARE
FROM PAYING TWICE FOR
MEDICAL SUPPLIES
------------------------------------------------------ Chapter 3:3.2.2
Medicare law divides coverage for health care services into two
parts: part A covers services and supplies provided largely by
hospitals and other institutions, whereas part B covers services and
supplies provided largely by physicians and other noninstitutional
providers. Often coverage for a service or supply could reasonably
be billed either under part A or part B. In fiscal year 1994,
Medicare was billed over $6.8 billion for medical supplies, including
surgical dressings. In a review of Medicare's payments for surgical
dressings, we reported, among several findings, that many Medicare
contractors lacked the internal controls that would reliably identify
suspicious medical supply claims before payment. As a result, we
recommended, among other things, that the HHS Secretary direct HCFA's
Administrator to establish procedures to prevent duplicate payments
when providers have billed parts A and B both for the same medical
supply. HCFA is not likely to address the program's exposure to the
problem of duplicate payments until it completes its year 2000
computer initiatives. (GAO/HEHS-95-171).
DISSEMINATING
USER-FRIENDLY CONSUMER
INFORMATION ON
MEDICARE+CHOICE PLANS
------------------------------------------------------ Chapter 3:3.2.3
In 1996, we reported that HCFA did not provide Medicare beneficiaries
any of the comparative consumer guides that the federal government
and many employer-based health insurance programs routinely
distribute to their employees and retirees. We noted, however, that
HCFA amasses volumes of information that could be packaged and
distributed to help consumers choose among Medicare health
maintenance organizations (HMO). We made several recommendations to
address this issue, which the Congress embodied in the Balanced
Budget Act. In addition, HCFA has begun to address others. For
example, HCFA has produced benefit and cost comparison charts of
Medicare options in each market area; however, it has not distributed
voluntary disenrollment rates or rates of inquiries and complaints
against Medicare HMOs.
As for dissimilarities in the marketing materials produced by the
health plans themselves, we recommended that HCFA require the plans
to produce key aspects of these materials using standard formats and
terminology. Currently, the materials are produced in widely
different formats and contain various definitions for similar
benefits, making beneficiaries' efforts to compare benefits and
premiums across plans difficult, if not impossible. This
dissimilarity also unduly burdens HCFA, as reviewer of a new plan's
marketing materials for compliance with Medicare standards. HCFA
officials have agreed to implement this recommendation but have not
yet taken significant action to do so. (GAO/HEHS-97-23)
ENFORCING FEDERAL CARE
REQUIREMENTS TO PROTECT
NURSING HOMES RESIDENTS
------------------------------------------------------ Chapter 3:3.2.4
Nursing homes play an important role in the health care system of the
United States, and the federal government paid the homes nearly $28
billion for services under Medicare and Medicaid in 1997. We
reported that despite a federal and state oversight infrastructure
currently in place, some California nursing homes have not been
sufficiently monitored to guarantee the safety and welfare of their
residents. Federal and state surveyors sometimes missed problems
that could have affected the safety and health of nursing home
residents. Even when such problems were identified, enforcement
actions did not ensure that the problems were corrected and did not
recur. Some of the key problems in the California homes indicated
systemic problems nationwide.
As a result, we made several recommendations for revising federal
guidance, which included reducing the predictability of surveyors'
visits and requiring surveyors to conduct all reviews of problem
homes with recurring serious violations on site. HCFA took immediate
steps to address these recommendations. We also recommended:
-- revising federal survey procedures to instruct surveyors to take
stratified random samples of resident cases and review
sufficient numbers and types of resident cases so that surveyors
can better detect problems and assess their prevalence; and
-- eliminating the grace period for homes cited for repeated
serious violations and impose sanctions promptly, as permitted
under existing regulations.
HCFA has developed a timeline, ending April 30, 1999, for fully
implementing all of our recommendations. (GAO/HEHS-98-202)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
HEALTH SERVICES QUALITY AND
PUBLIC HEALTH ISSUE AREA
(BUDGET FUNCTIONS 550, 570)
---------------------------------------------------------- Chapter 3:4
GAO Contact: Bernice Steinhardt, 202/512-7119
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:4.1
GAO conducts evaluations focused on federal efforts to ensure
individuals' access to high quality care in a changing health care
environment and on measuring the outcomes and effectiveness of
federally funded programs, research, and regulatory activities.
Within HHS, this focus leads to the eight major Public Health Service
agencies--including the Food and Drug Administration (FDA), the
National Institutes of Health (NIH), the Health Resources and
Services Administration, the Substance Abuse and Mental Health
Services Administration, and the Centers for Disease Control and
Prevention. Collectively, Public Health Service agencies represent a
substantial public investment, with a total fiscal year 1998 budget
of $25 billion, or 60 percent of the department's discretionary
budget. Further, products regulated by federal public health
agencies, including drugs and medical devices, account for one-fifth
of all consumer spending in the U.S., or one trillion dollars
annually.
Our work on health services quality and public health issues
generally includes these issues:
-- Determining whether the public health agencies are ensuring the
public's health and safety efficiently and effectively,
-- Identifying opportunities for improving the quality of health
care under fee-for-service and managed care payment
arrangements,
-- Identifying opportunities for improving the nation's access to
health care, and
-- Assessing the implications of emerging health care technologies.
ACCESS TO HEALTH CARE
------------------------------------------------------ Chapter 3:4.1.1
Residents of some areas in the United States have difficulties
accessing health care services because of a shortage of health care
providers in their communities. The National Health Service Corps is
the federal government's main program for placing physicians and
other health care providers in locations with identified shortages of
health professionals. The National Health Service Corps includes a
scholarship program for students who agree to serve in shortage areas
after their health professions training is completed, and a loan
repayment program that repays a set amount of educational loan debt
for each year of service in a shortage area. We found the loan
repayment program costs the federal government less than the
scholarship program for a year of promised service, while also
showing a higher rate of retention after providers complete their
service obligation and a lower rate of breach of contract.
We also identified problems with allocating National Health Service
Corps' providers to areas requesting them. We recommended that the
Secretary of HHS take several actions to better target limited
resources, including (1) using the loan repayment program to the
maximum extent allowed by law, (2) expanding technical assistance and
other efforts to address potential barriers to accessing this
program, and (3) modifying placement criteria to, among other things,
count non-physician providers and National Health Service Corps
providers currently in service. In response to our recommendations,
HHS has used the loan repayment program to the maximum extent allowed
by law, taken steps to provide technical assistance through a
contract and by working with state agencies, and initiated measures
to count both non-physician providers and National Health Service
Corps physicians as providers currently in service when making
National Health Service Corps provider placements.
SAFETY ISSUES RELATED TO
BLOOD AND TISSUE BANKING
------------------------------------------------------ Chapter 3:4.1.2
FDA has responsibility for overseeing the safety of biological
products, including blood for transfusion and human tissues for
transplant. In two separate reports, we reviewed safety issues
related to these products and made recommendations for improvement.
While the U.S. blood supply is safer today than at any time in
recent history, we reported that FDA can strengthen the safety of the
blood supply in some areas. For example, unlicensed
facilities--those that do not sell or exchange blood products across
state lines--are not required to report errors and accidents;
confirmatory tests to identify those donors who were truly infected
with a virus (and not those who just had a false-positive screening
test result) were not always performed, so that donors to be deferred
from future donations could be appropriately notified and counseled;
recipients of blood from a donor who subsequently tested positive for
a virus were not always notified so that they could seek testing and
treatment, if needed; guidance documents that the agency used to
quickly disseminate its expectations for best practices to the
industry were often ambiguous and subject to misinterpretation; and
FDA inspections of blood facilities appeared inconsistent in focus,
scope, and documentation.
In response to our recommendations, FDA has proposed a rule to
require unlicensed blood facilities to report all errors and
accidents, has issued guidance to require confirmatory testing for
hepatitis C, has issued guidance to blood establishments directing
them to notify recipients of blood products from donors who tested
positive for hepatitis C, and has published "Good Guidance Practices"
to clarify the appropriate uses of guidance documents. In addition,
the agency has established a cadre of specialized investigators with
the goals of improving consistency, timeliness, and quality in
inspections of blood facilities.
Approximately 600,000 Americans receive human tissue transplants each
year. Recipients include burn victims, the visually impaired, and
persons living with cancer and heart defects. With respect to human
tissue banking, we found that FDA was just beginning to exercise its
authority to improve tissue-banking safeguards in the growing field
of tissue-based therapy. We identified several safety problems,
including the lack of a registry of tissue facilities to allow for
inspection by the FDA or dissemination to tissue banks of information
related to public health emergencies. In response to our
recommendation, FDA has proposed a rule requiring all human tissue
banking facilities to register with the agency.
HOSPITAL CONSTRUCTION
------------------------------------------------------ Chapter 3:4.1.3
FHA's Hospital Mortgage Insurance Program insures loans to finance
hospital renovation and construction. Its mortgage insurance
protects lenders against losses they might incur if hospitals fail to
make their mortgage payments. However, we found that the lack of
portfolio geographic diversification and the large individual unpaid
loan balances in New York pose a risk to the program. A single
default of a large loan could lead to insurance claims that could
significantly burden the program, since FHA does not limit the number
of projects in a particular state nor does it cap individual loan
amounts it insures as a means of controlling risks to the program.
A 1992 HUD report stated that the concentration of FHA-insured
projects in a single state and large loan amounts are major
controllable risks to the program that should be avoided or
minimized. To minimize potential financial losses from future
projects, we recommended that the Secretary of HUD pursue
risk-sharing arrangements in which a private or public entity would
share in potential financial losses from hospital defaults on future
FHA-insured projects after a thorough evaluation of the benefits and
drawbacks of risk-sharing ventures. FHA is in the process of
revising draft regulations for risk-sharing of mortgage insurance to
finance the new construction or rehabilitation of or improvements to
hospitals.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:4.2
HEALTH PROFESSIONAL
SHORTAGE AREAS
------------------------------------------------------ Chapter 3:4.2.1
A growing number of programs for alleviating access problems use the
health professional shortage areas and Medically Underserved Areas
designations to determine who can receive federal assistance. In
1995, we reported that these designation systems do not effectively
identify areas with primary care shortages or help target federal
resources to benefit those who are underserved. As a result, there
is little assurance that the $1 billion spent annually on programs
using these designations is used where most needed. We found
widespread data and methodology problems that severely limit the
systems' ability to pinpoint the extent of need in underserved areas.
In addition, the systems often do not provide the information needed
to decide which programs are best suited to the area's particular
need.
In order to better match federal program resources with needy
communities, and to eliminate funding where there is not a
demonstrated need for federal assistance, we recommended that the
Congress (1) remove legislative requirements for health professional
shortage areas or Medically Underserved Areas designations as a
condition of participation in federal programs, (2) direct the
Secretary of HHS to develop and use program-specific criteria to
match the program strategy with the type of access barrier, and (3)
direct the Secretary to suspend funding for one program, the Medicare
Incentive Payment program, until HHS can ensure that the program's
funding is better targeted. In September 1998, acknowledging the
flaws we brought to the Department's attention, HHS proposed changes
that would address a number of the problems we identified, including
revising the requirements for counting health professionals and for
providing more timely updates of shortage designations.
(GAO/HEHS-95-200)
HEALTH PROFESSIONS
EDUCATION
------------------------------------------------------ Chapter 3:4.2.2
During the past decade, the supply of nearly all health professionals
has increased faster than has the population. For most health
professions, however, data are unavailable to show whether this
increased supply has translated into more access to care in rural and
underserved areas. Specifically, regarding minority recruitment,
although the number of minority health professionals is increasing,
data are inconclusive about whether further increases will improve
access to health care for underserved populations. Although nearly
$2 billion has been provided to 30 programs under title VII and VIII
of the Public Health Service Act during the last 10 years, HHS has
not gathered the information necessary to evaluate whether these
programs have had a significant effect on changes in the national
supply, distribution, and minority representation of health
professionals, or their impact on access to care.
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 goals, outcome measures and reporting
requirements. We recommended that Congress establish, or direct the
Secretary of HHS to establish, more specific goals, outcome measures,
and funding criteria. Our work was used as the basis for proposed
legislation (currently under consideration) for reauthorizing the
programs. (GAO/HEHS-94-164)
MAMMOGRAPHY QUALITY
STANDARDS
------------------------------------------------------ Chapter 3:4.2.3
Quality mammography services are a key tool in the early detection of
breast cancer, significantly increasing the possibility of survival
for the estimated 180,000 women who are diagnosed with this
devastating disease each year. The Mammography Quality Standards Act
of 1992 was enacted in response to the growing incidence of breast
cancer and its associated mortality rates. The Act established
minimum national quality standards for the nation's approximately
10,000 mammography facilities, as well as an accreditation and
inspection program to help ensure that these standards are met. In
October 1997 and in subsequent testimony, we reported that the Act
had a positive impact on improving the quality of mammography
services. During congressional hearings on reauthorizing the Act, we
recommended that Congress consider these positive impacts in its
deliberations; legislation to reauthorize the Act is pending in the
Senate. (GAO/HEHS-96-17, GAO/HEHS-97-25)
INSPECTIONS OF FOREIGN
PHARMACEUTICAL PLANTS
------------------------------------------------------ Chapter 3:4.2.4
According to FDA, as much as 80 percent of the bulk pharmaceutical
chemicals used by U.S. manufacturers to produce prescription drugs
are imported. Moreover, the number of finished drug products
manufactured abroad for the U.S. market is increasing. FDA inspects
foreign manufacturers to help ensure that pharmaceutical products
entering the United States are safe, pure, and high in quality. Over
the last 10 years, two FDA evaluations have identified serious
problems with its foreign inspection program. While FDA has taken
several actions to address these problems, we found indications that
certain aspects of the program still need improvement. FDA continues
to experience problems in ensuring that inspection reports are
submitted in a timely manner, and that necessary enforcement actions
are promptly initiated to prevent contaminated and adulterated
pharmaceutical products from entering the United States. Moreover,
in some instances, FDA is not conducting reinspections to verify the
corrective actions that foreign manufacturers have promised to take
to resolve serious manufacturing deficiencies.
While FDA has implemented a risk-based inspection strategy aimed at
increasing the frequency of routine inspections, foreign inspections
continue to be driven by new drug applications, and FDA acknowledges
that it may never inspect most foreign manufacturers exporting
pharmaceuticals to the United States. We recommended that FDA's
inspection strategy include, at a minimum, timely follow-up
inspections of all foreign manufacturers that have promised to
correct serious manufacturing deficiencies and periodic inspections
of all foreign manufacturers, not just high-risk manufacturers.
(GAO/HEHS-98-21)
MEDICAL DEVICE TRACKING
------------------------------------------------------ Chapter 3:4.2.5
FDA is responsible for reviewing, approving, and monitoring medical
devices to ensure that they are safe and effective for human use.
Among the more than 65,000 different types of medical devices on the
market today are those that FDA characterizes as critical-- such as
heart valves, pacemakers, and other permanently implantable
devices--because they are used to support life. The Safe Medical
Devices Act of 1990 requires manufacturers of certain critical
devices to establish and maintain systems capable of tracking devices
through the manufacturing and distribution networks to patients so
that in the event of a device failure, manufacturers and FDA can
expeditiously conduct recalls and patient notifications. FDA ensures
compliance with the tracking requirements through good manufacturing
practice inspections of device manufacturers' facilities. FDA also
oversees manufacturers' efforts to recall problem medical devices to
ensure that unsafe and ineffective medical devices are promptly
removed from the market.
We found several weaknesses in FDA's approach for determining whether
device manufacturers are operating tracking systems capable of
quickly locating and removing defective devices from the market and
notifying patients who use them, which threatens the agency's ability
to adequately protect the public. We made recommendations to the FDA
Commissioner to improve the agency's ability to monitor manufacturer
compliance with the medical device tracking regulation and conduct
recalls of tracked devices in a timely manner. FDA has several
actions underway to address our recommendations, among them are steps
to complete and close all outstanding recalls initiated from 1994
through 1996, and to update its recall database with current
information on the status of all recalls. (GAO/HEHS-98-211)
EMERGING DRUG PROBLEMS
------------------------------------------------------ Chapter 3:4.2.6
In the mid-1980s, when crack cocaine use in the U.S. was reported to
have reached epidemic proportions, Congress raised questions about
the public health agencies' ability to detect and respond to the
problem. In response to these concerns, new drug detection
mechanisms were added and new agencies were created at the federal
level, including the Substance Abuse and Mental Health Services
Administration and the Office of National Drug Control Policy.
Despite these changes, we found that concerns still remain about the
adequacy of the nation's drug detection systems and the lack of a
strategy for determining when and how to best respond to changes in
patterns of drug use. We recommended that the Director of the Office
of National Drug Control Policy implement changes that would further
improve the accuracy and usefulness of systems for analyzing and
disseminating information; and develop a defined strategy for
determining the timing, magnitude, and nature of actions needed to
appropriately respond to potential drug crises or epidemics. In
response, the Office reports that its Data Subcommittee has begun
identifying and supporting several improvements to the federal drug
data system and has inventoried existing data. The Office is
considering developing a strategy for appropriately responding to
potential drug crises. (GAO/HEHS-98-130)
METHADONE MAINTENANCE
------------------------------------------------------ Chapter 3:4.2.7
Methadone maintenance is the most commonly used treatment for heroin
addiction. Many methadone programs are established by private
not-for-profit organizations, while others are private for-profit or
public programs. In looking at a number of different programs, we
found wide variation among program policies with respect to urine
testing, dismissing patients, counselor staffing levels, and
methadone dosage levels. For example, in the 24 programs we visited,
average methadone dosage levels ranged from 21 to 67 milligrams.
Nearly one-half of the programs we visited did not successfully
provide the full benefits of methadone maintenance. We recommended
that the Secretary of HHS direct FDA or the National Institute on
Drug Abuse to monitor and assess methadone maintenance programs. The
National Institute on Drug Abuse is testing the feasibility and
utility of implementing a performance evaluation system for narcotic
addiction treatment programs and anticipates issuing a report in
January 1999. (GAO/HRD-90-104)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
INCOME SECURITY ISSUE AREA
(BUDGET FUNCTIONS 600, 650)
---------------------------------------------------------- Chapter 3:5
GAO Contact: Cynthia M. Fagnoni, 202/512-7215
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 3:5.1
Millions of Americans rely on income security programs for support.
Programs designed to assist our most vulnerable citizens, such as
Social Security, Disability Insurance, Supplemental Security Income,
and foster care, have been and will be the subject of increased
scrutiny. The Social Security and disability programs, in
particular, face continued financial pressures and are the subject of
considerable public debate. Moreover, congressional concern about
the effect of major legislative changes in the principal welfare
program for families and children--Temporary Assistance for Needy
Families--will continue.
Our work provided information and recommendations directed at (1)
ensuring that public funds for income security programs are spent
efficiently and protected from fraud and abuse, (2) improving SSA's
service to the public with constrained resources, (3) evaluating the
adequacy of Social Security and public and private pension systems
for future retirees, (4) redesigning the nation's disability programs
to ensure the validity of the needs determination process and to
encourage work, (5) monitoring implementation of the 1996 welfare
reform legislation, and (6) assessing government efforts to protect
children's welfare.
Areas of major emphasis in 1998 have included Social Security reform,
the management of the Supplemental Security Income program, and
evaluations of the Temporary Assistance for Needy Families program.
SOCIAL SECURITY REFORM
------------------------------------------------------ Chapter 3:5.1.1
Our nation's aging population is placing serious pressure on Social
Security and other forms of retirement income. Without a change in
current policies, the Old-Age and Survivor's Trust Fund assets will
be insufficient to pay all benefits by 2032. Because Social Security
affects so many Americans and their planning for the long-term
future, the President and the Congress are considering approaches to
reforming the program's financing. We have completed work that
provides information on the potential impacts of different reform
choices. For example, we issued a report identifying and discussing
the issues and relationships among the various sources of retirement
income in the United States, reported and testified on the potential
effects of financing reform on women, and testified three times on
the elements to consider in evaluating possible changes to Social
Security.
MANAGEMENT OF THE
SUPPLEMENTAL SECURITY
INCOME PROGRAM
------------------------------------------------------ Chapter 3:5.1.2
Over the years, our work has shown that the Supplemental Security
Income program has experienced several long-standing problems that
have affected SSA's ability to protect the financial integrity of the
program and provide effective management direction. We recently
completed a review to look at the underlying causes of these
long-standing problems and found that to a great extent, SSA's
inability to address its most significant Supplemental Security
Income problems is attributable to two underlying causes: an
organizational culture or value system that places a greater priority
on processing and paying claims than on controlling program
expenditures, and a management approach characterized by SSA's
reluctance to fulfill its policy development and planning role in
advance of major program crises. We made several recommendations to
the SSA Commissioner, which, if implemented, should result in a
change in SSA's organizational culture and enhance the financial
integrity of the Supplemental Security Income program, as well as
facilitate a change in SSA's management approach and improve the
Supplemental Security Income program direction.
EVALUATIONS OF TEMPORARY
ASSISTANCE FOR NEEDY
FAMILIES
------------------------------------------------------ Chapter 3:5.1.3
In one of the most significant federal policy changes of the last 30
years, the Temporary Assistance for Needy Families program is being
implemented across the nation, passing responsibility for welfare
program design and funding levels from the federal government to the
states. In 1998 we issued a report on welfare reform implementation
in seven states. We found that states are (1) moving away from a
welfare system focused on entitlement to assistance to one that
emphasizes finding employment as quickly as possible and becoming
more self-sufficient, and (2) enhancing support services for
recipients. While welfare dependence has decreased, we noted that it
is too early to draw definitive conclusions about the success of
states' programs. Moreover, little is known about program impacts,
such as the effect the programs have had on the well-being of
children and families.
RESULTS
------------------------------------------------------ Chapter 3:5.1.4
Many of our recommendations have been implemented and, thus, our 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, based on our work
related to SSA's disability programs, SSA decided to increase the
number of continuing disability reviews in the Disability Insurance
and Supplemental Security Income programs. The reviews resulted in
savings of $446 million in 1996 and $957 million in 1997 by removing
from the rolls persons who had become ineligible. In addition,
influenced by continuing GAO work on such continuing disability
reviews, the Congress enacted legislation that further increased the
number of such reviews. These changes, combined with the fact that
SSA has changed its estimates of savings for each termination and the
costs of each disability review, resulted in savings in 1996 and 1997
of $1.52 billion.
Our work also resulted in better protection for retirees who receive
pension plan benefits in the form of insurance annuities. We had
recommended that the Pension Benefit Guaranty Corporation require
plan administrators, who are terminating their plans and purchasing
annuities, to provide participants with detailed information about
the state guarantees that apply to these annuities. As a result of
that recommendation, the Corporation promulgated a regulation to
require that administrators of terminating plans provide participants
with general information on state guarantee coverage of annuities and
instructions on how to contact the applicable state guaranty
association offices.
Our work has also resulted in several actions taken to improve agency
operations. For example, we had recommended that the Secretary of
HHS direct the Office of Child Support Enforcement to develop its own
long-term strategies in support of the national program's goals and
prioritize its own roles and responsibilities. In response to our
recommendation, the office began to strengthen the linkage between
its own roles and responsibilities and national goals contained in
the strategic plan by focusing its oversight and technical assistance
on strengthening and improving child support enforcement in the eight
states with the largest child support enforcement caseloads. These
actions put the Office of Child Support Enforcement in a better
position to foster improved program results.
HHS also acted on recommendations we made to improve child protective
services. Based on our recommendations, HHS developed new strategies
for disseminating and delivering the results of local efforts on
child protective services reforms. In addition, HHS took several
actions in response to our recommendation that it develop specific
techniques to promote community-based approaches to child protective
services.
SSA has taken action on two of our recommendations related to better
service the public via its 800 number. For example, it established
additional performance measures to more fully assess the promptness
and completeness of its 800-number service and took steps to expand
its automated services.
In response to our recommendation that SSA acquire information
systems based on a thorough analysis of mission, needs, costs, and
benefits, SSA began work on an accountability methodology and has
recently incorporated this methodology into its fiscal year 1999
budget cycle. This new process requires SSA to clarify how proposed
initiatives conform to its core mission and priorities, as well as
assess the costs, benefits and risks of alternatives.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 3:5.2
SOCIAL SECURITY
------------------------------------------------------ Chapter 3:5.2.1
In April 1998, we reported that SSA needed to upgrade the payment
controls it uses for administering certain benefit reduction
provisions. The Social Security Act requires SSA to reduce benefits
payable to persons who also receive a pension from non-covered
employment. However, we found that SSA did not have sufficient ways
to verify, in a timely or complete manner, whether beneficiaries are
receiving pensions earned through non-covered employment. The
absence of such verifications had resulted in overpayments between
1978 and 1995 that we estimated to have ranged from $160 to $355
million.
We recommended that SSA (1) make better use of available information
on pensions being paid to federal retirees to verify that proper
reductions are made and (2) work with the Internal Revenue Service
(IRS) to revise the reporting of pension income for tax purposes so
that persons receiving pensions from non-covered employment can be
identified and the accuracy of its benefit payments can be verified.
SSA agreed with our recommendations and advised us that it will
establish a post-eligibility matching program for federal retirees by
early 1999. It has also been working with IRS to revise the
reporting of pension income. IRS has advised SSA, however, that it
needs a technical amendment to the Tax Code to implement our
recommendation and is seeking such an amendment. SSA has stated that
it will keep abreast of IRS efforts. (GAO/HEHS-98-76)
DISABILITY PROGRAMS
------------------------------------------------------ Chapter 3:5.2.2
SSA's Plan for Achieving Self-Support (PASS) program was established
in 1972 as a Supplemental Security Income work incentive program to
help Supplemental Security Income and Disability Insurance recipients
achieve self-support, 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. We
found that, among other things, the impact of the program on
employment is unknown because SSA lacks basic data on program
participation and outcomes. We recommended that SSA gather
additional management data on program participation and impact and
use these data to evaluate the impact of program participation on
employment. SSA has experienced many technical problems establishing
such a database and does not consider the data to be reliable. SSA
officials, however, are continuing efforts to obtain customized
software that would provide needed data for managing the PASS
program. In addition, we recommended that the Congress consider
legislation to eliminate Disability Income beneficiary eligibility
for Supplemental Security Income benefits through the use of the PASS
program. While SSA has proposed such legislation, no action has been
taken to date. (GAO/HEHS-96-51)
In April 1996, we reported that weaknesses in the design and
implementation of Disability Insurance and Supplemental Security
Income 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 more accurately identify and expand
beneficiaries' work capacities and (2) better implementing existing
return-to-work mechanisms.
Similarly, in July 1996, we reported return-to-work strategies and
practices employed by the private sector in the United States and by
social insurance programs in Germany and Sweden may hold the
potential for improving federal disability programs by helping people
with disabilities return to productive activity in the workplace and
at the same time reduce program costs. We recommended that, in line
with placing greater emphasis on return to work, SSA should develop a
comprehensive return-to-work strategy that integrates, as
appropriate, earlier intervention, earlier identification and
provision of necessary return-to-work assistance for applicants and
beneficiaries, and changes in the structure of cash and medical
benefits. In both reports, we also recommended that SSA identify
legislation needed to implement the recommended program changes.
SSA noted that it is currently placing a high priority on return to
work, citing its expansion of the pool of vocational rehabilitation
providers, training of state vocational rehabilitation agencies in
SSA disability program work incentives and reimbursement procedures,
forthcoming contracts with state agencies to research ways to improve
service integration for beneficiaries attempting to return to work,
and its proposed "tickets to independence" (vouchers for vocational
rehabilitation) as a new demonstration to attempt to improve
return-to-work outcomes. In addition, SSA has affirmed its interest
in determining whether return-to-work practices of other systems
could help improve the return-to-work rate in its disability
programs.
These steps indicate that SSA has placed greater priority on return
to work as it moves to expand the pool of vocational rehabilitation
providers beyond state vocational rehabilitation agencies and give
providers greater incentive to employ beneficiaries. However, these
efforts would have greater impact if (1) cash and medical benefits
were structured to give beneficiaries greater impetus to use
vocational rehabilitation services and attempt work and (2)
return-to-work assistance was provided earlier in the decisionmaking
process. Finally, SSA emphasized that efforts to improve the
return-to-work rate in its disability programs can be fruitful only
if all parties affecting federal disability policy are involved.
While we agree that all relevant parties must be involved, we believe
that, as the primary manager of the disability programs and the
entity with fiduciary responsibility for the trust funds, SSA must
take the lead in forging the partnerships and cooperation needed to
redesign federal disability programs. (GAO/HEHS-96-62,
GAO/HEHS-96-133)
In August 1996, we reported that for many years, SSA has lacked an
effective program to detect Supplemental Security Income recipients
in county and local jails. It has relied primarily on (1) recipients
or their representative payees to voluntarily report incarceration
and (2) redetermination. Neither of these mechanisms has been
completely effective; as a result, SSA has erroneously paid millions
of dollars to thousands of prisoners in county and local jails.
While SSA had initiated action to obtain better information on
Supplemental Security Income recipients currently in jail, it had not
attempted to develop information on similar recipients who may have
been incarcerated and received payments in prior years. We
recommended that SSA obtain information on former prisoners from
county and local facilities and identify and attempt to recover any
erroneous payments. SSA has initiated a pilot project to determine
the feasibility and cost benefit of implementing our recommendations.
(GAO/HEHS-96-152)
In June 1997, we reported that although benefits paid to persons
receiving Supplemental Security Income must be reduced when they
enter nursing homes covered by Medicaid, SSA is not always notified
of the change and full benefits continue to be paid. These
overpayments may exceed approximately $100 million annually. We
recommended that SSA electronically obtain nursing home admissions
data directly from states. In lieu of obtaining nursing home
admissions directly from states, in the fall of 1998, SSA will begin
semiannual computer matching with data from HCFA's Resident
Assessment Instrument System. However, SSA's plans for semiannual
matching fall short of the objectives of our recommendation to obtain
state data as soon as possible to prevent overpayments or detect them
sooner. We believe SSA should obtain the Resident Assessment
Instrument System data monthly to further reduce overpayments.
We further recommended that SSA determine the reliability of state
data for implementing an automated computer interface to
automatically adjust the benefits of Supplemental Security Income
recipients admitted to nursing homes. SSA plans to assess the
reliability of HCFA's Resident Assessment Instrument System data to
determine whether it can be used for automatic benefit reductions.
Based on this assessment and advice from its General Counsel, SSA
will determine by the end of 1999 whether to initiate a study on the
feasibility of automatically reducing benefits for Supplemental
Security Income recipients in nursing homes. (GAO/HEHS-97-62)
We reported in March 1998 that approximately 40 percent of the
overpayments that SSA identified in fiscal year 1996 were caused by
Supplemental Security Income clients either not reporting or
underreporting their earnings and financial accounts. Specifically,
about $380 million in overpayments resulted from the nondisclosure of
earnings, and about $268 million resulted from the nondisclosure of
financial accounts. Many of these overpayments could be prevented if
SSA were able to obtain more current and comprehensive information
than it does now. Two new data bases managed by SSA for the Office
of Child Support Enforcement contain more up-to-date earnings
information. SSA plans to use one of these data bases in computer
matches to more quickly and efficiently detect the undisclosed
earnings of recipients already on the rolls. The agency is also in
the beginning stages of providing its field offices with direct
access to these data bases. Such access would prevent overpayments
by allowing field staff to check during the application process for
earnings that applicants neglected to report.
Both of these actions are steps toward implementing our
recommendation that SSA develop computerized interfaces necessary to
access the Office of Child Support Enforcement's data bases to detect
undisclosed earnings during initial and subsequent determinations of
eligibility. SSA may also be able to obtain more up-to-date
information on the financial accounts of Supplemental Security Income
clients from financial institutions by accessing the nationwide
telecommunication network, which links all financial institutions.
Accordingly, we also recommended that SSA study the feasibility of
obtaining computerized information from financial institutions to
detect financial accounts that Supplemental Security Income clients
do not report during the application process and during subsequent
determinations of eligibility. SSA has submitted a legislative
proposal to Congress that would facilitate its acquiring financial
account information and has drafted an implementation plan for
obtaining computerized information on the bank accounts of
recipients. (GAO/HEHS-98-75)
In May 1998, we reported that SSA was not assessing children's
eligibility for Supplemental Security Income disability benefits
against a uniform standard of severity. Welfare reform, enacted in
August 1996, defined childhood disability as an impairment that
results in "marked and severe functional limitations," which SSA
regulations, in turn, defined as an impairment that meets or
medically or functionally equals one of its medical listings. Under
the regulation to be considered "marked and severe," an impairment
must generally result in "two marked or one extreme" functional
limitation.
SSA identified 28 listings which are set below the "two marked or one
extreme" threshold, and these listings are used to adjudicate cases
as well as the listings set at the "two marked or one extreme"
threshold. We recommended that SSA act immediately to update and
modify its medical listings to incorporate advances in medicine and
science and to reflect a uniform standard of severity. SSA agreed
that it should periodically update its medical listings and is
developing a schedule to do so. It estimates that it would take
several years to complete the update, which it describes as a complex
task requiring significant research and analysis to ensure that the
update reflects state-of-the-art medical practice. SSA has not taken
a position on whether the updated listings should or would reflect a
uniform severity standard. (GAO/HEHS-98-123)
CHILD SUPPORT ENFORCEMENT
------------------------------------------------------ Chapter 3:5.2.3
In June 1992, we reported on the opportunity to defray the burgeoning
federal and state non-Aid to Families with Dependent Children costs
in the child support program by charging a minimum percentage fee on
collections. Non-Aid to Families with Dependent Children
administrative costs increased from $644 million in 1990 to $1.7
billion in 1996, while recovered costs remained stagnant at about $37
million in 1996. Key congressional staff believe that the concept of
charging fees for child support services provided to families not
receiving Temporary Assistance for Needy Families, which replaced the
Aid to Families with Dependent Children program, continues to have
merit. (GAO/HRD-92-91)
See also Chapter 5, Financial and Information Management Programs,
Financial Management and Accountability Issue Areas as well as
Information Management Issue Areas.
IMPROVING JUSTICE AND GENERAL
GOVERNMENT PROGRAMS
============================================================ Chapter 4
ADMINISTRATION OF JUSTICE ISSUE
AREA (BUDGET FUNCTION 750)
---------------------------------------------------------- Chapter 4:1
GAO Contact: Norman J. Rabkin, 202/512-8777
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:1.1
Americans continue to rank crime and the fear of crime among their
top national concerns. We provide analysis and information on, and
recommendations for improvements to, federal criminal justice
programs. Included among the issues we assess are (1) law
enforcement; (2) grant programs supporting criminal justice research
and evaluation and assisting states and localities in meeting their
public safety needs; (3) immigration; and (4) litigative and judicial
activities.
LAW ENFORCEMENT
------------------------------------------------------ Chapter 4:1.1.1
Money laundering provides the fuel for drug dealers, terrorists, arms
dealers, and other criminals to operate and expand their activities.
In 1990, the Financial Crimes Enforcement Network (FinCEN) was
established in the Department of the Treasury to combat money
laundering. Most federal investigators using FinCEN's services have
found them useful in their investigations. However, we found that
many investigators in federal field offices were not aware of the
products and services that FinCEN offered. In response to our work,
FinCEN updated its Internet site to include product and service
information and offer viewers the opportunity to send comments and
questions via electronic mail.
Criminal organizations and syndicates often launder large amounts of
cash. Under the Internal Revenue Code any person engaged in a trade
or business who receives more than $10,000 in cash in one transaction
or a series of related transactions must file an information return
to the Internal Revenue Service (IRS). We recommended to Congress
that certain temporary disclosure provisions of the Code--which give
the Secretary of the Treasury authority to disclose information
provided in these returns for use by law enforcement agencies
investigating money laundering--be made permanent. Subsequently,
Congress passed legislation permitting IRS to disclose this
information on a permanent basis and to allow law enforcement and
regulatory agencies access to it. IRS has initiated a process for
providing agencies access to the information.
The Bank Secrecy Act and its implementing regulations, in general,
require financial institutions to maintain certain records and to
file certain reports that are useful in criminal, tax, or regulatory
investigations, such as money laundering cases. Since 1994 FinCEN
has been responsible for assessing civil penalties for violations of
the act and, since then, the time it has taken to process these
penalties has grown significantly. Lengthy processing times can
lessen the credibility and deterrent effects of the act and, in some
cases, the statute of limitations could expire. In response to our
recommendation, FinCEN revised its procedures to establish strict
timelines for processing civil penalty referrals and incorporated
increased oversight of the process.
Due to the high volume of cargo entering the U.S., the Customs
Service faces a major challenge in effectively carrying out its drug
interdiction and trade enforcement missions while facilitating the
flow of persons and cargo. To address this challenge, Customs has
initiated and encouraged ports of entry to use several programs to
identify and separate "low-risk" cargo shipments from those with
apparently a higher smuggling risk. However, we identified internal
control weaknesses in these programs at the ports we visited.
Furthermore, we found that a program to designate low-risk shipments
and target high-risk shipments had not proven itself effective. We
recommended, among other things, that Customs (1) strengthen its
internal controls with regard to its risk assessments, and (2)
suspend its program to identify low-risk shipments and target
high-risk shipments until more complete and comprehensive data is
available for making these assessments. Customs agreed and said it
will issue national criteria and guidance to strengthen its risk
assessment internal controls and it will suspend its targeting
program until more reliable information is available for classifying
low-risk importations.
We also reported on, among other things, how Customs assesses the
need for inspection personnel and allocates such personnel at ports
of entry along the Southwest border. Of Customs 301 ports
nationwide, 24 are located along the Southwest border. About 28
percent of Customs' inspectors and 62 percent of its canine
enforcement officers are located at these ports. However, we found
that Customs does not have an agencywide process for annually
determining its need for inspection personnel and for allocating
these personnel among the ports of entry nationwide. We recommended
that Customs establish a systematic process to ensure, to the extent
possible, that inspection personnel are properly aligned with
Custom's goals, objectives, and strategies and that the process
include conducting annual assessments to determine appropriate
staffing levels for processing cargo at ports of entry. Customs
indicated that it has already begun implementing this recommendation.
GRANT PROGRAMS
------------------------------------------------------ Chapter 4:1.1.2
The Public Safety Partnership and Community Policing Act of 1994,
established what Justice Department officials described as the
largest grant program ever administered by the Department. The act
authorized $8.8 billion in grants to be used from fiscal year 1995 to
fiscal year 2000 to enhance public safety, including the addition of
100,000 officer positions to the streets of communities nationwide.
The Attorney General established the Office of Community Oriented
Policing Services (COPS) to administer the grants. We looked at
several issues related to the program's design, operation, and
management. We found that during the first two and a half years of
the program, monitoring of the program by the COPS Office was
inconsistent. Over $2.6 billion in grants was awarded during this
time. As a result of our work, the COPS Office began taking steps to
enhance its monitoring activities and subsequently a new division was
created dedicated exclusively to grant monitoring.
IMMIGRATION
------------------------------------------------------ Chapter 4:1.1.3
Illegal immigration has been a long-standing problem. The Illegal
Immigration Reform and Immigrant Responsibility Act of 1996 included
provisions establishing an expedited removal process for dealing with
aliens who attempt to enter the U.S. by engaging in fraud or
misrepresentation or who arrive with fraudulent, improper, or no
documents (e.g., visa or passport). Under this expedited removal
process Immigration and Naturalization Service (INS) officers,
instead of immigration judges, are authorized to formally order
violating aliens removed from the country. Aliens found subject to
expedited removal and who express a fear of being persecuted or
tortured if they are returned to their home country are to be
provided an interview to establish whether their fear is credible.
If the interview establishes a credible fear, the alien is referred
to an immigration judge who determines whether the alien should be
granted asylum. We reviewed the implementation of the Act at five
INS offices, including the implementation and results of the process
for making credible fear determinations and provided information on
the results of the process over the first 7 months that the process
was in place. Our reported information was used in the debate over
the expedited removal process.
In addition to the considerable public attention and national focus
illegal immigration has received in recent years, concerns were also
raised that some aliens who applied for and became citizens may have
been improperly naturalized. To judge if this had occurred, INS
reviewed case files of 16,858 aliens after receiving criminal history
records from the Federal Bureau of Investigation which indicated a
felony arrest or conviction of a serious crime by those naturalized
between August 31, 1995 and September 30, 1996. The Executive Office
of Immigration Review was to provide quality assurance that INS'
judgments were unbiased by reviewing a sample of cases evaluated by
INS. As a result of its review, INS is examining the potential
citizenship revocation of 6,323 aliens--cases that INS adjudicators
judged as requiring further action or presumptively ineligible.
However, INS did not plan to review 72 cases that the Executive
Office of Immigration Review believed may have involved improper
naturalization decisions. As a result of our discussions with INS,
these additional cases have been included by INS for revocation
review.
The number of applications received by INS has been growing and there
are indications that some INS field offices are faster than others at
processing applications. In fiscal year 1996, INS received almost
5.4 million new applications and completed processing about 5.6
million applications. A backlog of applications to be processed had
increased to about 2.5 times the backlog that existed in fiscal year
1989. We found that statistically significant differences existed in
production rates for five predominant types of applications processed
by INS district offices and three predominant types of applications
processed by INS service centers. INS suggested, among other
reasons, that these differences may be due to the way field units
reported the data that was used to calculate production rates and
processing times and the varying experience level and degrees of
specialization of district office and service center adjudications
officers. As a result of our findings, INS, among other things, was
streamlining and revising the reports district offices and service
centers submit to headquarters and has begun training to promote
consistency and the accuracy of the data submitted.
LITIGATIVE AND JUDICIAL
ACTIVITIES
------------------------------------------------------ Chapter 4:1.1.4
We were asked to evaluate the Credit Research Center's report on
personal bankruptcies. That report addressed a major public policy
issue--the amount of income that those who file for personal
bankruptcy have available to pay their debts. We examined the
report's research methodology and formula for estimating the income
that debtors have available to pay debts. Depending on the chapter
of the bankruptcy code under which individuals filed, debtors either
seek discharge of all eligible dischargeable debts or submit a
repayment plan for paying all or a portion of their debts. While
overall, the Center's report represented a useful first step in
analyzing the ability of debtors to pay their debts, our evaluation
found five areas of concern that could affect interpretation of the
report's conclusions. Among our findings were (1) the report's
assumptions about the information debtors provide at the time of
filing bankruptcy regarding their income, expenses, and debts and the
stability of their income over a 5-year period were not validated;
(2) payments on nonhousing debts that debtors stated they intended to
voluntarily repay were not included in debtors' expenses in
determining the net income debtors had available to pay nonpriority,
nonhousing debts; and (3) a scientific, random sampling methodology
was not used to select the 13 locations or the bankruptcy petitions
used in the analysis.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:1.2
LAW ENFORCEMENT
------------------------------------------------------ Chapter 4:1.2.1
In our report on the Counterdrug Technology Assessment Center, in the
Office of National Drug Control Policy, we reported on the Center's
coordination efforts. These efforts include the coordination with
counterdrug research and development agencies at the federal, state,
and local levels. These efforts also include identifying both
technology needs and projects for Center funding, as well as
prioritizing these needs. We reported that the Center's coordination
could be more effectively carried out. We therefore recommended that
the Director, Office of National Drug Control Policy, direct the
Chief Scientist to work with the Science and Technology Committee to
improve coordination. Specifically, the Committee with
representatives from 21 law enforcement and demand reduction agencies
and bureaus, should ensure that it
-- meets regularly to exchange information on technology needs for
drug supply and demand,
-- recommends to the Chief Scientist the selection and funding of
the highest priority projects, and
-- ascertains that projects selected for Center funding have
transitional/acquisition plans.
The Office of National Drug Control Policy generally agreed with our
findings and conclusions. The Office is taking action, although none
are fully implemented as yet, on all of our recommendations.
(GAO/GGD-98-28)
IMMIGRATION
------------------------------------------------------ Chapter 4:1.2.2
In our report on criminal aliens, we recommended that the
Commissioner of INS establish a nationwide data system. This system
would include the universe of foreign-born inmates reported to INS by
the Bureau of Prisons (BOP) and state departments of corrections. It
should be used to track the status, according to the Institutional
Hearing Program, of each inmate. We also recommended that the
Commissioner establish controls to ensure that aliens serving time
for aggravated felonies are identified from among the universe of
foreign-born inmates, placed into deportation proceedings, and taken
into custody on release. In addition, we recommended that the
Commissioner develop a workload analysis model to identify
-- Program resources needed to achieve overall Program goals, and
-- the portion of those goals that would be achievable with
alternate levels of funding.
We also recommended that the Commissioner (1) use the alternate
levels of funding to support Program funding requests, (2) identify
the causes of attrition among immigration agents, and (3) takes steps
to ensure that staffing is adequate to achieve Program goals. We
recommended that INS establish and effectively communicate a clear
policy on the role of special agents. We also recommended that INS
use a workload analysis model to set Program goals for district
directors with Program responsibilities. In addition, we recommended
that INS document any actions taken to correct problems that prevent
Program goals from being met. (GAO/T-GGD-154)
In our report on INS management, we recommended that the INS
Commissioner provide written guidance in two areas, with the first
directed to all INS managers: (1) the responsibilities and authority
of the Executive Associate Commissioner for Field Operations in
relation to those of the Executive Associate Commissioner for
Programs and (2) the appropriate coordination and communication
methods and channels between offices. We also recommended that the
Commissioner establish milestones for the issuance of manuals or
parts of manuals if the parts can stand alone. Finally, we
recommended that the Commissioner incorporate into INS' current
evaluation the reorganization issues raised in this report; thus,
these issues can be addressed as INS attempts to fully achieve the
goals of the reorganization. The reorganization issues include
determining whether staffing levels need to be adjusted so that the
Office of Programs, the Office of Field Operations, and regional
offices can fulfill their prescribed roles. These issues also
include developing a strategy and schedule for periodically
evaluating the new deployment planning process. Such evaluation will
help to ensure that the process is compatible with INS' overall
planning. It also provides managers with the information needed to
adequately plan for resource needs and decisions. (GAO/GGD-97-132)
In our report on the Justice Department's Southwest border strategy,
we recommended that the Attorney General develop and implement a plan
for a formal, cost-effective, comprehensive, systematic evaluation of
the strategy to deter illegal entry across the Southwest border.
This plan should describe (1) the indicators that would be required
for the evaluation, (2) the data that needs to be collected, (3)
mechanisms for collecting the data, (4) controls intended to ensure
accuracy of the data collected, (5) expected relationships among the
indicators, and (6) procedures for analyzing the data.
(GAO/GGD-98-21)
In our report on INS user fees, we recommended that the Attorney
General establish policies and procedures for (1) accounting for
Executive Office of Immigration Review fee revenues INS collects; and
(2) making these funds available to Executive Office of Immigration
Review, as appropriate. INS agreed with our findings and
recommendations and plans to meet with the Executive Office to
address these costs and how INS will reimburse them.
(GAO/GGD-94-101)
LITIGATIVE AND JUDICIAL
ACTIVITIES
------------------------------------------------------ Chapter 4:1.2.3
In our report on how the Judicial Conference assesses the need for
more judges, we recommended that the Conference and the Federal
Judicial Center should move to develop a better work-load measure for
the courts of appeals. (GAO/GGD-93-31)
See also chapter 5, Financial and Information Management Programs,
Financial Management and Accountability as well as Information
Management Issue Areas.
FEDERAL MANAGEMENT AND
WORKFORCE ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:2
GAO Contact: L. Nye Stevens, 202/512-8676
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:2.1
We conduct evaluations focused on cross-cutting management,
workforce, regulatory, and statistical issues. These include
government performance measurement and goals, restructuring and
downsizing, regulatory reform, privatization, oversight of the civil
service, human resource management, and the quality, reliability, and
dissemination of census and other social and economic statistical
data. Principal agencies involved with such issues include the
Office of Management and Budget, Office of Personnel Management,
Merit Systems Protection Board, Office of Special Counsel, Federal
Labor Relations Authority, Office of Government Ethics, Department of
Commerce, Federal Trade Commission, Government Printing Office,
Bureau of Labor Statistics, Library of Congress, and the National
Archives. However, managerial, regulatory, personnel, and
statistical issues often involve other agencies as well.
In fiscal year 1998, we supported Congress' oversight of initiatives
intended to ensure proper government accountability to its citizens.
We issued our summary assessment of the September 30, 1997 strategic
plans that agencies submitted under the Government Performance and
Results Act. That report highlighted the progress agencies had made
since they developed their draft plans and outlined key strategic
planning issues that continued to need agency and congressional
attention. At the request of the congressional leadership, we also
issued a guide to facilitate the congressional use of agencies'
fiscal year 1999 annual performance plans. We evaluated those plans
and issued a summary assessment that identified an agenda for
improving the usefulness of annual plans.
Our testimony on the Federal Advisory Committee Act contributed to
legislation that redefined the Act's coverage of certain federally
chartered organizations. We estimate that the change saved $33
million that would have been spent by these organizations to comply
with the Act. We also contributed substantially to congressional
oversight of the Government Printing Office (GPO). As mandated by
the Legislative Appropriations Act of Fiscal Year 1998 (P.L.
105-55), GAO contracted for a management audit of the GPO. The May
1998 report included numerous recommendations for improving GPO's
management and operations. The Appropriations Committees directed
the Public Printer to implement the recommendations of the management
audit as appropriate and report periodically on actions taken to
implement them.
We also continued to assist Congress as it deliberated on a wide
variety of federal personnel management issues. For instance, our
earlier work on Sunday premium pay culminated in a $33 million
savings in fiscal year 1998 as Congress passed governmentwide
legislation prohibiting the payment of Sunday premium pay to
employees who use leave on their scheduled Sunday workdays.
Similarly, our past work on federal downsizing resulted in an
estimated savings of $22 million in fiscal year 1998 as agencies
followed our guidance on choosing the most cost-effective approach to
downsizing.
In the regulatory arena, we identified a number of issues in need of
congressional attention. For example, in several reports and
testimonies on the Paperwork Reduction Act, we pointed out that the
governmentwide burden-reduction goals are not being met and that
OMB's Office of Information and Regulatory Affairs had not fully
implemented its responsibilities under the Act. In January 1998, we
reported that the recently enacted Unfunded Mandates Reform Act had
little effect on federal agencies' rulemaking actions.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:2.2
In October 1997, we recommended that the Consumer Price Index
expenditure weights be updated more frequently than at the current
rate of approximately every 10 years. This would change the
proportionate emphasis given to the items in the market basket of
goods and services used as the basis of the Consumer Price Index to
more accurately reflect current consumer expenditure patterns, and
thus enhance the overall accuracy of the index. The Bureau of Labor
Statistics has generally agreed with this recommendation and has
undertaken research to determine the optimal frequency for updating
expenditure weights. (GAO/GGD/OCE-98-2)
We have noted that it was not always clear whether a proposed
regulation would have a significant impact on a substantial number of
small entities. As a result, it was not clear whether requirements
of the Regulatory Flexibility Act and the advocacy review panel
requirements of the Small Business Regulatory Enforcement Fairness
Act of 1996 applied to a proposed rule. We therefore recommended
that Congress consider (1) providing the Small Business
Administration or some other entity with interpretative authority,
and (2) requiring some other entity to establish criteria to define
key phrases in the statutes. (GAO/GGD-94-105, GAO/GGD-98-36)
Our February 1998 report on the experiences major federal credit
programs have had in measuring the results of their activities
recommended several steps to improve the availability of measures
that would allow comparison of results across these programs.
(GAO/GGD-98-41)
In reviewing the fiscal year 1997 buyout programs of six agencies, we
found that they had been better managed than was generally the case
governmentwide during the 1994 and 1995 non-defense buyout window.
However, we also concluded that opportunities for still further
savings might have been identified if OMB had required agencies not
only to estimate the savings generated by buyouts, but to compare
them to estimated savings produced by alternative separation
strategies, such as reductions-in-force. To achieve the full
potential savings consistent with other organizational objectives, we
recommended that the Director of OMB require all agencies to include
in any future requests for buyouts information comparing the costs
and savings of buyouts versus other separation strategies for the
separation year and a reasonable number of subsequent years for which
accurate assumptions and estimates could be made. (GAO/GGD-97-124)
In the area of equal employment opportunity, our recommendations
addressed guidance that the Equal Employment Opportunity Commission
provides to federal agencies for affirmative employment planning.
According to the Commission, it has made substantial revisions to its
proposed management directive and continues to discuss these changes
with the Department of Justice. Once these discussions are complete
and the proposed management directive is approved within the
Commission, the directive will be sent to external agencies for
comment. (GAO/GGD-91-86, GAO/T-GGD-92-2, GAO/GGD-94-71)
Our summary assessment of agencies' fiscal year 1999 annual
performance plans developed under the Results Act provided a
framework to improve the usefulness of future versions of those
plans. We recommended that OMB develop and implement a concrete
agenda aimed at substantially improving the usefulness of the
agencies' plans for congressional and executive branch
decisionmaking. We identified five key opportunities that could
serve as core elements of the improvement effort. We also suggested
that the OMB Director work with Congress and the agencies to identify
specific program areas that could be used as best practices in the
implementation of the Results Act. (GAO/GGD/AIMD-98-228)
And our June 1998 report documented that hundreds of federal advisory
committees were established or continued without required supporting
information or without independent assessment of the continuing need
for the committees by the General Services Administration (GSA).
Further, the potential improvements recommended by 13 of 17
presidential advisory committees were at risk because GSA did not
ensure that follow-up reports were issued to Congress. We
recommended that GSA fully carry out its Federal Advisory Committee
Act responsibilities in a timely and accurate manner.
(GAO/GGD-98-124)
See also chapter 5, Financial and Information Management Programs,
Financial Management and Accountability as well as Information
Management Issue Areas.
FINANCIAL INSTITUTIONS AND
MARKETS ISSUE AREA (BUDGET
FUNCTION 800)
---------------------------------------------------------- Chapter 4:3
GAO Contact: Thomas J. McCool, 202/512-8678
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:3.1
Supervision of the financial services industry is taking place in a
period of rapid change as formerly clear and distinct industry
definitions become less relevant. 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 consolidation of financial institutions
from different segments of the industry is resulting in large
financial service conglomerates that offer a range of financial
services beyond the mission of any one regulator. As markets become
more global, foreign and domestic institutions perform similar
functions and interact with savers and investors in similar ways.
Our work involving financial institutions and markets explores the
implications of these changes for Congress and the regulators, as
well as for the industry and its customers.
We examine these issues to provide information, analyses, and
recommendations to Congress and regulators on changes in and
oversight of the financial services industry. We analyze: 1) how
effectively regulators oversee financial institutions to ensure the
integrity of the financial system; 2) how effective regulatory
policies and procedures are in ensuring competition among financial
services providers; 3) what federal regulators are doing to measure
the effectiveness of their policies and programs; 4) whether
regulators ensure that customers and businesses have open and
nondiscriminatory access to financial services and that consumers are
protected against fraud; and, 5) the ability of financial regulators
to effectively respond to the increasing predominance of
conglomerates, the continuing global interdependence of financial
markets, and advances in information technology and financial
innovation.
Our work has improved the operation of the financial system as a
whole and individual components of it. One primary mission--working
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 and that
associated agency operations improve their effectiveness.
We have conducted a series of assignments on the oversight provided
to housing government-sponsored enterprises and reported on
weaknesses in the safety and soundness and mission compliance
oversight provided to the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie
Mac), and the Federal Home Loan Bank System. This body of work has
led to our conclusion that the three housing regulators who supervise
these government-sponsored enterprises should be merged creating a
single housing government-sponsored enterprise regulator that could
more effectively oversee the safety and soundness and mission
compliance oversight of these enterprises. These reports helped to
spur an ongoing debate in this Congress on how to reform the system.
Our work on over-the-counter derivatives market has provided the
framework for debating the complex issue. We 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. We also identified major
gaps in the regulatory structure.
Regarding technology issues, we have helped to alert Congress to the
need for the Securities and Exchange Commission to improve its
monitoring and reporting of the securities industry's progress in
achieving year 2000 compliance. We have also reported on the
projected growth in on-line banking systems and the considerable
challenges banks are facing in implementing and maintaining secure
and dependable on-line banking services to their customers. Other
technology work has included a comprehensive assessment of the
effects of the Small Order Execution System on the operation of the
Nasdaq Stock Market. This work has identified the need to ensure
that the planned design of a new electronic trading system provides
for fair access to the market while ensuring immediate, automatic
execution of investors' orders at the best possible prices.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:3.2
FINANCIAL INSTITUTION
REFORMS
------------------------------------------------------ Chapter 4:3.2.1
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. In a separate report we
recommended that the Federal Housing Finance Board improve its
oversight of System banks. Both reports recommended a single
regulator for all three housing-related government-sponsored
enterprises. The Administration and Congress have been working on a
legislative plan to address our recommendations. (GAO/GGD-94-38,
GAO/GGD-98-203)
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 Home Mortgage Disclosure Act data. In
addition, we suggested that 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)
We found the Office of Federal Housing Enterprise Oversight lacked
risk-based capital standards and a stress test model. We recommended
that--until that office had completed work on these critical safety
and soundness tools for overseeing Fannie Mae and Freddie Mac--the
Office of Federal Housing Enterprise Oversight periodically report
its progress to Congress. (GAO/GGD-98-6, GAO/T-GGD-98-25)
Our report assessing HUD's mission oversight of Fannie Mae and
Freddie Mac found the need for improvement in several areas. To
strengthen HUD's oversight of these housing enterprises we
recommended HUD 1) develop a better understanding of whether the
housing goals are enhancing housing affordability and opportunities
for targeted groups as intended by Congress and 2) coordinate with
the Office of Federal Housing Enterprise Oversight on reviews of
enterprise compliance data. We also suggested that HUD determine the
cost of overseeing the enterprises and develop a legislative package
for Congress that would require the enterprises to pay HUD's
oversight expenses. To insure nonmortgage investments are consistent
with the purposes expressed in their charters, we recommended, in
this report as well as another, that HUD closely monitor the
enterprises' use of nonmortgage investments. (GAO/GGD-98-173,
GAO/T-GGD-98-177, GAO/GGD-98-48)
Our testimony and report on modernizing the U.S. bank structure made
suggestions that incorporate many of the practices we found in
foreign bank regulatory systems. We noted that consolidation of
agencies responsible for oversight was one logical step in
modernization. We recommended that the Federal Reserve System and
Treasury be part of the oversight structure in any financial
modernization effort. Congress is considering these proposals as
part of proposed financial services modernization legislation.
(GAO/GGD-97-23, GAO/T-GGD-97-117)
SECURITIES
------------------------------------------------------ Chapter 4:3.2.2
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 implemented several of our recommendations, but
others remain to be implemented. (GAO/GGD-94-133)
Over-the-counter derivative sales practices continue to need
oversight. We recommended that regulators monitor the development of
this market and, if necessary, introduce specific federal sales
practice requirements. We also recommended that regulators assist
the industry in determining the degree to which derivative dealers
are responsible for disclosing the risks in derivatives they are
selling to those wishing to purchase them (end-users). We believe
that regulators should ensure enforcement of the sales practice
provision of the Framework for Voluntary Oversight developed by the
major derivative dealers. (GAO/GGD-98-5)
We reported that the Commodity Futures Trading Commission needs to
develop formal training plans for its Division of Enforcement
personnel. We also recommended that the Division of Enforcement
expand its procedures manual to include all of the major polices and
procedures applicable to its investigative and litigation processes.
(GAO/GGD-98-193)
We examined the Small Order Execution System and its effects on the
Nasdaq Stock Market. This system was developed to allow small orders
placed through it to be automatically executed against Nasdaq market
makers at the best bid or ask price displayed on the Nasdaq system.
Nasdaq is in the process of developing a system to replace the Small
Order Execution System. We recommended that the Securities and
Exchange Commission ensure that the new system correct trading
advantages the Small Order Execution System provides some users,
while maintaining the ability to automatically execute small orders
at the best possible price. (GAO/GGD-98-194)
See also chapter 5, Financial and Information Management Programs,
Financial Management and Accountability as well as Information
Management Issue Areas.
GOVERNMENT BUSINESS OPERATIONS
ISSUE AREA (BUDGET FUNCTION
800)
---------------------------------------------------------- Chapter 4:4
GAO Contact: Bernard L. Ungar, 202/512-4232
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:4.1
We conduct audits and evaluations focused on civilian agency business
activities, including asset management (typically facilities) and the
procurement of goods and services. We focus predominantly on the
government's two largest business entities--the General Services
Administration (GSA), which influences the management of assets
valued at nearly $500 billion, controls or oversees over $60 billion
in annual government spending, and in 1999, through its various
business lines will generate nearly $13 billion in revenue; and the
United States Postal Service (USPS), which has revenue of more than
$58 billion annually. In 1998, our work has also involved the
Kennedy Center for the Performing Arts, Federal Prison Industries
(FPI), the Treasury, Bureau of Engraving and Printing, Agriculture,
Forest Service, Administrative Office of the U.S. Courts, Federal
Communications Commission, the Architect of the Capitol, and the
District of Columbia government.
FACILITIES MANAGEMENT
ISSUES
------------------------------------------------------ Chapter 4:4.1.1
To help Congress evaluate the operations of the Federal Buildings
Fund, we verified, to the extent possible, the overestimation of its
rental revenue for fiscal years 1996, 1997, and 1998; determined
whether the actions taken by GSA appeared to address the
overestimation problem and recommended additional actions that GSA
should take. In addition, we assessed the budgetary impact of the
overestimation on projects and programs in the Federal Buildings
Fund. We noted that it was not clear how many, if any, of the
proposed new construction or modernization projects would have been
included in the President's budget or funded by Congress in fiscal
year 1998 had it not been for the overestimation problem. However,
to the extent the overestimation problem resulted in lack of funding
for new projects and these proposed projects are funded in the
future, the government could experience cost changes. Delays in
basic repair and alteration work could also result in additional
future cost to the extent prices for these services increase in the
future and to the extent delays cause further deterioration of the
assets.
We also assisted Congress in its efforts to evaluate the need for
specific facility acquisitions. We issued two reports on the
acquisition of the Portals II building in Washington, D.C. for the
Federal Communications Commission and delays in the commission's move
into the new facility. We reported on GSA's acquisition of a new
facility for the consolidation of Agriculture's natural resources
research activities into a single facility in Fort Collins, Colorado.
We also evaluated and testified on GSA's upgrading of security of
federal buildings under its operations in response to the bombing in
Oklahoma City.
PROCUREMENT
------------------------------------------------------ Chapter 4:4.1.2
In response to a provision of the 1997 Emergency Supplemental
Appropriations Act and numerous congressional requests, we provided
an assessment of (1) the optimum circumstances for the procurement of
distinctive currency paper, (2) the effectiveness of the Bureau of
Engraving and Printing's efforts to encourage competition in the
procurement of currency paper, (3) the fairness and reasonableness of
prices paid for currency paper by the bureau and the quality of the
paper purchased, and (4) the potential for disruption to the U.S.
currency paper supply from the Bureau of Engraving and Printing's
reliance on a single source. In our report we included matters for
congressional consideration and recommendations to the Secretary of
the Treasury. Also, we assisted Congress in the procurement area by
evaluating FPI's performance in providing goods and services to
federal agencies. We issued reports addressing pricing, timeliness,
and customer satisfaction in which we made a number of
recommendations aimed at improving FPI's performance.
POSTAL SERVICE
------------------------------------------------------ Chapter 4:4.1.3
Our postal work has continued to make substantial contributions to
the Congress' ongoing postal reform deliberations and oversight
hearings on the Postal Service. Our report on labor-management
relations received broad media coverage, as well as a hearing by the
Chairman of the House Subcommittee on Postal Service that brought
together representatives from the Postal Service, the employee
unions, management associations, and a mediator from the Federal
Mediation and Conciliation Service to discuss how to improve progress
in labor-management relations. We also reported on issues related to
concerns about whether the Postal Service has an unfair advantage due
to its government status over private competitors in providing
international parcel delivery services.
MANAGEMENT IMPROVEMENT
------------------------------------------------------ Chapter 4:4.1.4
At the request of the House leadership, we provided our observations
on GSA's and the Postal Service's strategic plans and fiscal year
1999 annual performance plans which they were required to prepare by
the Government Performance and Results Act of 1993. In each
instance, we made recommendations to improve the plans which the
agencies agreed to implement.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:4.2
COURTHOUSE CONSTRUCTION
------------------------------------------------------ Chapter 4:4.2.1
The Congress, the Judiciary, and GSA have embarked on a $10 billion
courthouse construction initiative. In response to various
criticisms about inadequate management and oversight, GSA established
a courthouse management group to develop a more disciplined approach
that would reduce costs 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 that 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. GSA and the Judiciary still need to
establish specific measures for assessing the progress of actions
they have taken and evaluating their overall effectiveness.
(GAO/T-GGD-96-19)
In our report on courtroom usage, we recommended that the
Administrative Office of the U.S. Courts, the Federal Judicial
Center, and the Judicial Conference of the U.S. should design and
implement cost-effective research to fully examine the courtroom
usage issue to form a better basis for determining the number and
type of courtrooms needed, as well as whether each district judge
needed a dedicated courtroom. The Administrative Office of the U.S.
Courts has deferred action on the recommendations until it assesses
the implementation of the new Judicial Conference policies related to
courtroom sharing among some senior judges and circuit councils
considering more closely the existing courtrooms before planning to
add new courtrooms. It believes this effort will provide information
relatively quickly and on a broad scale. This approach, however,
does not consider active judges sharing courtrooms. (GAO/GGD-97-39)
PROCUREMENT ISSUES
------------------------------------------------------ Chapter 4:4.2.2
FPI needs to institutionalize internally an assessment of overall
customer satisfaction with the services it provides and to use this
assessment to measure and improve its performance. We recommended
the Director, Bureau of Prisons, should direct FPI's Chief Operating
Officer to: (1) examine available approaches to collect and use
customer satisfaction data to determine the most cost-effective
approaches for FPI; (2) develop a plan for collecting customer
satisfaction data that would allow for supportable conclusions about
federal customers' views on timeliness, prices, and quality; (3)
develop a timetable for implementing the plan; and (4) set
performance goals for the levels of customer satisfaction that FPI
wants to attain and measure results against these goals.
(GAO/GGD-98-50)
POSTAL ISSUES
------------------------------------------------------ Chapter 4:4.2.3
USPS, unions, and management associations should develop a long-term
framework agreement to change the workplace climate in mail
processing and delivery functions. The agreement should provide for
the following principles and values: (l) 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 facilitators/ 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 participated in
a national summit on October 29, 1997, and agreed to continue meeting
quarterly to discuss postal labor relations and initiatives to be
jointly undertaken to improve workplace relationships. We believe
these meetings are a positive step toward reaching agreement on
overall objectives and approaches for improving the workroom climate,
but that more specific actions are needed to determine whether these
discussions result in meaningful improvements. (GAO/GGD-94-201A)
USER FEES
------------------------------------------------------ Chapter 4:4.2.4
In our report on agency compliance with user fee review requirements,
we recommended that the Director, OMB, clarify the user fee reporting
instructions by specifying how agencies should report the results of
their user fee reviews and address the issues of compliance with the
biennial review requirements, including the requirements regarding
statutorily set fees and agencies' consideration of potential new
user fees. OMB noted in its July 1998 revision of OMB Circular A-11
the requirement for the biennial review of user charges for agency
programs and stated that agencies should ensure that estimates are
developed in accordance with the full cost recovery policy set forth
in OMB Circular A-25. While the July 1998 revision to OMB Circular
A-11 does emphasize the biennial review requirement and full cost
recovery, it does not address how agencies should report the results
of the biennial review. (GAO/GGD-98-161)
See also chapter 5, Financial and Information Management Programs,
Financial Management and Accountability as well as Information
Management Issue Areas.
TAX POLICY AND ADMINISTRATION
ISSUE AREA (BUDGET FUNCTION
800)
---------------------------------------------------------- Chapter 4:5
GAO Contact: James R. White, 202/512-9110
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 4:5.1
We conduct evaluations of tax policy and administration to provide
the Congress, the executive branch, and the public with timely,
accurate, and objective analyses and information to improve the
operation and administration of our nation's tax system. This
entails the revenue side of the budget--the estimated $1.6 trillion
in tax receipts that finance the federal government's operations and
the over $545 billion in tax expenditures that promote numerous
social and economic objectives--as well as the federal agency
responsible for tax administration, the Internal Revenue Service
(IRS).
The federal government has realized over $3.5 billion in savings over
the last 2 years as a result of statutory and administrative changes
we recommended. Of that total, (1) $2.1 billion comes from a
reduction in IRS' Tax Systems Modernization program budget that
resulted from IRS' establishment and use of explicit decision
criteria when planning and evaluating its technology investments, (2)
$1.1 billion comes from a phaseout of the Section 936 tax credit in
U.S. possessions, (3) $175 million comes from a reduction in IRS'
fiscal year 1998 budget submission for a multi-year capital
account--the Information Technology Investments Account, and (4) $131
million comes from a reduction in IRS' fiscal year 1998 budget
submission for systems development.
These savings represent only one aspect of the impact of our work.
Our reports and testimonies have recommended ways to improve the
efficiency and effectiveness of the tax system by addressing such
subjects as collecting delinquent taxes and identifying unreported
income, responding to taxpayers' inquiries and reducing the burden of
complying with the tax laws, modernizing IRS to achieve greater
productivity and better management of its operations, and revising
IRS' performance measures for compliance and enforcement activities.
Because of our recommendations in these subjects, IRS has (1) taken
steps to deny tax refunds and credits on returns with missing or
incorrect social security numbers; (2) modified its management and
information systems to include information on tax assessments for
business partners' tax returns and on changes in the allocation of
profits and losses among partners; (3) contracted with a commercial
reporting service to provide information on long-term Original Issue
Discount bond issuances that were not reported to IRS and were not
included in IRS' Publication 1212; (4) developed and published
detailed instructions on how to use its Telephone Routing Interactive
System and improved the system's interactive menus and scripts; (5)
increased its efforts to answer telephone inquiries during the filing
season to 16 hours a day, six days a week, in 1998 and plans to take
telephone inquires 24 hours a day, seven days a week, in 1999; (6)
utilized a voice message system to record complex tax questions so
that knowledgeable assistors can contact the taxpayers within 2 days
of the initial calls; (7) developed a new form for requesting
innocent spouse relief and revised its publications to better inform
taxpayers about the criteria and procedures for requesting innocent
spouse relief; (8) centralized the processing of innocent spouse
relief claims and is training its Examination and Collections staff
and telephone assistors in the criteria and procedures for obtaining
innocent spouse relief; (9) established Cooperative Strategy Working
Groups to manage, monitor, and track all research projects; (10)
developed computer-based training to meet research training needs and
to measure training effectiveness; (11) designated its Compliance
Research Information System as the primary analytical tool for
conducting research; (12) established Compliance Planning councils in
all districts to oversee the districts' compliance programs; and (13)
revised the way it measures the accessibility of its telephone
service. IRS is implementing a nationwide call router center in
Atlanta, Georgia, to receive and route telephone inquiries to
available assistors on a real-time basis.
HIGH-RISK AREAS
-------------------------------------------------------- Chapter 4:5.2
In February 1997, we reported on certain high-risk areas throughout
the government. At IRS, the areas included the management and
collection of billions of tax dollars in accounts receivable as well
as significant levels of tax filing fraud.
TAX REVENUE IN ACCOUNTS
RECEIVABLE
------------------------------------------------------ Chapter 4:5.2.1
Since many taxpayers are either unable or unwilling to pay their
taxes when due, IRS has accumulated accounts receivable estimated to
be in the tens of billions of dollars. For years, IRS' efforts to
collect these delinquent taxes have been seriously hampered,
primarily, by outdated equipment and processes, old accounts that are
difficult to collect, incomplete taxpayer information for targeting
collection efforts, and the absence of a comprehensive strategy and
detailed plan to address the systemic nature of the underlying
problems.
IRS has attempted to deal with these problems, in part, by correcting
errors in the accounting records of tax receivables, developing more
information on the makeup of the inventory of tax debts, developing
research systems to identify characteristics of delinquent taxpayers
and appropriate collection techniques, attempting earlier telephone
contact with delinquent taxpayers, revising the format of bills sent
to taxpayers, and automating many of the collection processes
performed by collection employees in field offices. However, IRS
still needs a comprehensive strategy, involving all aspects of its
operations, that sets collection priorities, modernizes outdated
equipment and processes, and establishes goals, timetables, and a
system to measure progress.
FILING FRAUD
------------------------------------------------------ Chapter 4:5.2.2
Since our high-risk series was issued, IRS has released a report on
the results of its study of earned income credit (EIC) claims on tax
year 1994 individual tax returns. That study showed that of the
$17.2 billion in EIC claims on returns filed in tax year 1994, 25.8
percent was erroneously claimed. Our evaluation of IRS' study
methodology concluded that IRS' estimate was reasonably accurate and
representative of EIC claimants filing between January 15 and April
21, 1995. With new enforcement tools provided by Congress and an
increase in funding specifically designated for EIC-related
activities, IRS began implementing in fiscal year 1998 a plan that,
over a 5-year period, calls for attacking EIC noncompliance through
expanded customer service, strengthened enforcement, and enhanced
research. Many parts of that initiative are targeted at the primary
sources of EIC noncompliance identified in IRS' tax year 1994 study.
We reviewed IRS' efforts for tax year 1997. Although most of the
efforts had not progressed far enough for us to make any judgment
about their effectiveness, we identified several implementation
issues that could diminish the compliance initiative's impact.
(GAO/GGD-98-150)
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 4:5.3
ACCOUNTS RECEIVABLE
COLLECTION
------------------------------------------------------ Chapter 4:5.3.1
We studied private sector and state collection techniques to
determine whether IRS could improve its collection of delinquent
taxes. We recommended, among other things, 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, and identify ways to increase cooperation with state
governments. (GAO/GGD-93-67)
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, the program
has not demonstrated that its objectives of increased collections and
improved compliance will be met. We recommended that IRS develop the
indicators necessary to evaluate the Offer-in-Compromise Program as a
collection and compliance tool. IRS is studying the program and
plans to make modifications, including the development of performance
indicators. (GAO/GGD-94-47)
TAXPAYER COMPLIANCE
------------------------------------------------------ Chapter 4:5.3.2
The Low-Income Housing Tax Credit is the largest federal program to
fund the development and rehabilitation of rental housing for
low-income households. Under the program, states allocate federal
tax credits as an incentive to the private sector to develop these
projects. The annual cost of the credits could be as much as $3
billion. IRS is responsible for ensuring that taxpayers take no more
credits than allowed and that the states allocate no more credit that
they are authorized to allocate. We recommended that IRS (1)
establish clear requirements to ensure independent verification of
sources and uses of funds submitted to states by developers that form
the basis of decisions about the value of tax credits granted
low-income housing projects; (2) require that states report
sufficient information about monitoring inspections or reviews,
including the number and types of inspections made so that IRS can
determine whether states have complied with their monitoring plans;
(3) require that states' monitoring plans include specific steps that
will provide information to permit IRS to more efficiently ensure
that the Internal Revenue Code's habitability requirements are met;
and (4) explore alternative ways to obtain better information to
verify that states' allocations do not exceed tax credit
authorizations and to evaluate taxpayers' and housing projects'
compliance with the requirements of the Code. IRS is taking steps to
address these recommendations. (GAO/GGD-97-55)
Sole proprietors, who account for about 13 percent of individual
taxpayers, are responsible for an estimated 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, for example, to extend withholding and information
reporting requirements to cover independent contractors. We
testified annually from 1992 to 1996 concerning these issues. Since
January 1995, at least four legislative proposals for clarifying the
rules have been submitted. (GAO/GGD-92-108)
As of 1994, about two-thirds of all additional tax assessments
recommended as a result of IRS' audits were attributable to the
nation's 1,700 largest corporations. Although audits of these large
corporations consumed about 20 percent of IRS' Examination resources,
IRS collected only about $1 out of every $5 in recommended tax
assessments. We recommended that IRS attempt to ensure collection of
the proper amount of tax by (1) providing more authority over budget
and staffing allocations in the field to the National Office
executive who manages the audit program and (2) analyzing the
recurring tax disputes and proposing legislative changes for
minimizing such recurrence. IRS is taking steps to address these
recommendations. (GAO/GGD-94-70)
IRS also has an audit program that deals with tax returns filed by
about 45,000 other large corporations. Between 1988 and 1994, IRS
invested additional time in doing these audits but recommended fewer
additional taxes per hour invested. Since IRS had only been
collecting about $1 of every $4 in additional taxes recommended
during these audits, the results raised concerns about the
productivity of such audits. Our recommendations strove to improve
that productivity. For example, we recommended that IRS develop more
specific criteria to guide the selection of tax returns and tax
issues on those returns with high audit potential. (GAO/GGD-97-62)
Through negative withholding, low-paid wage earners may receive a
pro-rated portion 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 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 taxpayer
reporting, but we believe that IRS needs to do more to identify and
deal with those who do not file correct returns. (GAO/GGD-92-26)
Concerns about continued overall 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 the current estimated level of 87
percent, and IRS believes its new compliance research approach will
uncover ways to help meet this goal. We recommended that IRS take
steps to ensure that reliable compliance data is available when
needed. (GAO/GGD-96-109)
Available compliance data indicate that overstated deductions by
small businesses are a significant noncompliance area--about $40
billion annually. We 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' monitoring and administration of the filing
compliance of U.S. citizens residing abroad. In that regard, we
made several recommendations aimed that increasing and improving the
data that could be used to enhance IRS' ability to monitor the filing
compliance of these taxpayers. We also suggested ways for IRS to
educate this group as to their filing requirements. (GAO/GGD-98-106)
TAXPAYER SERVICE
------------------------------------------------------ Chapter 4:5.3.3
IRS plans to serve more taxpayers by telephone, primarily through the
use of its Telephone Routing Interactive System. The interactive
system is designed to allow taxpayers with certain questions to
obtain the information or service they need without speaking to a
representative, thereby allowing customer service representatives to
assist taxpayers with more complex, time-consuming questions.
Unfortunately, few taxpayers are using the system other than to check
on the status of their refunds (information that can be obtained from
another automated system). Some taxpayers feel that the Telephone
Routing Interactive System offers too many menus to remember or
prevents them from using certain applications. We recommended that
IRS conduct a cost-benefit analysis to determine whether multiple
toll-free numbers would overcome the problem of having to remember
too many menu options. (GAO/GGD-96-74)
We also recommended that IRS re-examine its plans for using
interactive telephone applications. At a minimum, IRS needs to (1)
analyze the services taxpayers need, want, and will use; (2)
determine why taxpayers are not using the existing interactive
applications; (3) reevaluate the costs and benefits of its Telephone
Routing Interactive System; and (4) delay the further development and
implementation of any interactive applications until the
re-examination is completed. (GAO/GGD-98-152)
For years, IRS' plans for improving customer service have included
the implementation of a one-stop service initiative to reduce the
time and frustration associated with making numerous contacts with
IRS to resolve a single problem. In August 1994, we reported that a
flawed measurement process had led IRS to overstate its progress in
providing one-stop service and recommended that a different
measurement system be adopted. (GAO/GGD-94-131)
MANAGEMENT OF IRS
------------------------------------------------------ Chapter 4:5.3.4
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 various 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. Part of this effort involves
improving IRS' interactions with taxpayers by folding parts of its
field structure into customer service centers. These centers would
interact primarily by telephone to provide customer service, take
orders for tax forms, collect unpaid taxes, and adjust taxpayer
accounts. 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 centers belong to two
separate IRS organizations, we recommended that IRS clarify its
criteria for assigning process owners. Second, since we found
instances in which "products" were being developed for use in the
customer service sites that had no clearly designated process owners,
we recommended that IRS define the process owners' roles and
responsibilities. And third, we recommended that IRS emphasize the
need for timely input for the data it needed to evaluate its systems'
performance. (GAO/GGD-96-03)
We reviewed IRS' plans to maximize electronic filing, which is the
cornerstone of IRS' plan to move away from traditional paper-based
return filing. We found that (1) if electronic filing continues at
the current pace, IRS will fall far short of its goal of 80 million
electronic returns by 2001; (2) IRS has had 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. IRS is developing a
strategy that should be finalized by the end of 1998.
(GAO/GGD-96-12)
For years, IRS has sought to develop effective measures to gauge its
performance in collecting federal taxes at the least cost to the
taxpayer and the government. Recently, IRS has attempted to develop
and implement results-oriented performance measures as required by
the Government Performance and Results Act in order to assist in
meeting legislative requirements to improve customer service and
reduce the burden on taxpayers associated with paying their taxes.
In doing so, IRS must measure the elements of burden it can influence
and devise a means to capture the costs taxpayers incur when
preparing and filing their tax returns. We recommended that IRS
develop performance indicators that cover the full range of IRS'
customer service program. (GAO/GGD-98-59)
TAX SIMPLIFICATION
------------------------------------------------------ Chapter 4:5.3.5
Our work showed that the rules for claiming dependent exemptions were
too complex and too burdensome for many taxpayers. We recommended
that Congress simplify the rules by substituting a residency test
similar to that used with the earned income tax credit.
(GAO/GGD-93-60)
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, businesses need to be able to readily
distinguish between workers who are "employees" and those who are
"independent contractors." However, IRS' rules for classifying
workers are unclear and subject to conflicting interpretations. This
situation puts employers at risk of incurring large penalties and
retroactive tax assessments. We recommended that Congress and IRS
work together to clarify the rules. (GAO/GGD-92-108,
GAO/T-GGD-96-130)
See also chapter 5, Financial and Information Management Programs,
Financial Management and Accountability as well as Information
Management Issue Areas.
IMPROVING FINANCIAL AND
INFORMATION MANAGEMENT PROGRAMS
============================================================ Chapter 5
BUDGET ISSUE AREA (BUDGET
FUNCTION 990)
---------------------------------------------------------- Chapter 5:1
GAO Contacts:
Paul L. Posner, 202/512-9573
Susan J. Irving, 202/512-9142
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:1.1
During fiscal year 1998, GAO's work relating to the federal budget
focused on improving the budgetary information available to
policymakers and the public on the government's overall fiscal
position and on the cost and performance implications of budgetary
decisions. In examining federal budgetary structures and processes,
we bring new information from our own audit and evaluation work to
the attention of budget decisionmakers and identify improvements in
executive and legislative budget processes that promise to better
highlight important tradeoffs implicit in budgetary choices.
ASSESSING THE FISCAL
POSITION OF THE FEDERAL
GOVERNMENT
------------------------------------------------------ Chapter 5:1.1.1
We have continued work to help Congress address the difficult
budgetary choices associated with reducing the budget deficit and,
recently, achieving a budget surplus. For the fifth year, we have
provided a compendium of options for achieving budgetary savings
based on GAO's work during the year, identifying approaches to
address performance problems in a budgetary context. The report has
prompted widespread interest in the House and Senate Budget
Committees, who have requested us once again to work with the
Congressional Budget Office to provide savings estimates for our
options. We also worked to facilitate the use of our work by new
oversight task forces convened by the Senate Budget Committee to
review specific program performance issues.
We have continued to provide periodic simulations of the long-term
implications of current fiscal policy for the nation's economic and
budgetary future looking out some 50 years, based on a long-term
economic model we first prepared in 1992. A report and testimony in
early 1998 pointed to substantial fiscal progress made in recent
years, capped by the 1997 Balanced Budget Act, but also revealed the
dimensions of the long term fiscal challenges continuing to face the
nation prompted by escalating health and Social Security costs
associated with the baby boom retirement. The model also helps
decisionmakers understand the consequences of alternative fiscal
policy paths for such outcomes as the nation's capital stock, Gross
Domestic Product per person, public debt and associated interest
costs.
The budget surplus itself has prompted many in Congress to ask new
questions about current budget presentations and policies which we
are addressing in our work. Some have proposed to use the period of
budget surplus as an opportunity to address perennial concerns about
whether the budget numbers adequately reflect the long-term
implications of federal commitments. Our work on federal insurance
programs illustrates that cash reporting of these programs in the
budget often misstates the long-term federal commitment and risks and
we recommended that both Congress and OMB focus more attention on
developing reliable accrual-based numbers estimating the government's
risks. The budget process reform legislation introduced in 1998 by
the co-chairs of the House Process Reform Task Force of the Budget
Committee includes a section prompted by our report to shift
insurance budgets to an accrual basis. Another long-term commitment
receiving increased attention is Social Security. We issued the
first comprehensive report to address the budgetary and economic
implications of investing in the stock market, the surpluses
currently building up within the Social Security program, and the
report highlighted the effects of current and alternative investment
policies on the government's overall fiscal position. The report was
well received in Congress, culminating in testimony before the
Senate's Special Committee on Aging.
Finally, the surplus triggered widespread interest in how changes in
annual government fiscal position affect public debt and the issues
involved in how the Treasury Department is managing the reduction in
debt. We were asked to testify before the Ways and Means Committee
on the overall nature and implications of federal debt for the budget
and the economy. The Senate Budget Committee has asked us to update
a widely-read 1996 primer on the federal debt adding issues raised by
the existence of a budget surplus.
IMPROVING BUDGETARY
CHOICES
------------------------------------------------------ Chapter 5:1.1.2
Although neither the structure of the budget nor the budget process
itself determines the outcome of budget deliberations, each can
influence what the debate is about by highlighting particular types
of tradeoffs and information. Building on a long-standing GAO
presence in budget accounting and presentation issues, the group made
progress in 1998 in strengthening the linkage of budget with
performance and financial accounting information and in helping
policymakers understand the implications of proposed changes in
budget concepts and structures.
Working from the strong foundation established by recent statutory
reforms that require federal agencies to produce audited financial
statements and annual performance plans, we have focussed on the
challenge of integrating these new perspectives and information with
the budget. Recognizing the essential synergy between management
reforms and the budget, we have identified gaps between performance
goals, financial statements and budget accounting and appropriations
perspectives that need to be addressed if the new reforms are to
achieve sustainable changes in both management and resource
allocation practices. We have prepared the guides for both Congress
and evaluators to assess the relevance and usefulness of individual
agency performance plans and their linkage with the budget. We
worked closely with congressional appropriations staff to help them
develop performance-oriented questions for hearings and report
language suggesting the need for stronger linkage of performance
information in agency budget submissions. Our work assessing the
status of budget integration was summarized in a report setting forth
an agenda for improving the agencies's annual performance plans and
in a separate report evaluating the first governmentwide performance
plan prepared by OMB. Beginning with work done in the past several
years, we also continued to identify ways to use the performance
planning and budgeting processes to identify fragmentation and
overlap among government programs and agencies pursuing common or
similar outcomes, culminating in reports on the usefulness of budget
functions as a framework for comparing the efficacy of related
governmental programs and tools.
We have also sought to identify ways to make information in financial
statements and financial audits more relevant to budgeting. Although
the budget is largely based on annual cash flow principles, we have
long felt that resource allocation can be improved by considering
audited accrual-based information derived from financial accounting
disclosing selected assets, liabilities and net costs. We have
helped make the consolidated governmentwide audit report useful to
budget debates. We have, moreover, continued to develop a new set of
reports interpreting the budget relevance of selected agency
financial audit reports for the House Budget Committee at their
request, and are now developing an approach for auditing the numbers
used in the budget itself. We have also explored the use of accrual
concepts for recording selected budgetary transactions, culminating
in a report evaluating the experience with the use of accrual
budgeting for federal credit programs since 1990 and the insurance
report mentioned above. We are now exploring lessons we might learn
from initiatives underway in several nations to adopt full-scale
accrual-based budgets.
Finally, work on budget structures and intergovernmental fiscal
relations have borne fruit in 1998. In testimony before the
President's Commission on Capital Budgeting, members expressed strong
interest in the agenda we have developed over a number of years for
"middle range" reforms for improving agency capital budgeting
practices and for adopting targets or goals for federal "investments"
in infrastructure, human capital and research and development. While
falling short of a full-scale capital budget, these reforms were seen
by many as offering the potential to improve capital budgeting within
the familiar constraints of the unified budget. Parallel work
identifying best practices in capital planning in private business
and state and local governments has been reflected in our exposure
draft which has been leveraged by OMB in its guidance to federal
agencies and in a conference jointly sponsored by us and OMB on best
practices in capital planning and budgeting. Our report on the early
fiscal effects of welfare reform has been hailed by Congressional
requestors and federalism observers for credibly identifying the
fiscal choices states have made in designing their new welfare
programs.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:1.2
FEDERAL CREDIT REFORM
------------------------------------------------------ Chapter 5:1.2.1
We have issued a series of reports examining some 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. Both the fiscal year 1998 and fiscal year 1999 budgets
included some change in budgetary treatment for the GNMA, but the
action taken will not result in full compliance with the Federal
Credit Reform Act. GNMA has hired an advisor and has met with OMB
officials to develop a budget treatment that will comply with credit
reform. (GAO/AIMD-94-57)
In a 1998 report on cost estimation and the quality of re-estimates
we reported that re-estimates were often not done in a timely manner
and component data were incomplete. We recommended that the
Secretaries of Agriculture, Education, Housing and Urban Development,
and Veterans Affairs and the Administrator of the Small Business
Administration improve oversight of credit reform implementation,
including ensuring that estimates are prepared accurately. We also
recommended that the OMB Director work toward identifying ways OMB
could further assist agencies to implement credit reform more rapidly
and accurately. The Secretaries of Agriculture, Education, Housing
and Urban Development all responded that they were taking steps to
examine and deal with weaknesses in implementation. The
Administrator of the Small Business Administration said she believed
that the Small Business Administration was making progress. OMB is
developing a new credit subsidy calculator that is expected to assist
agencies in calculating subsidy components. We remain convinced that
consistent high-level attention to credit reform implementation is
necessary to assure that the estimates can be used for consideration
of any changes in credit programs. (GAO/AIMD-98-14)
BUDGETING FOR FEDERAL
INSURANCE
------------------------------------------------------ Chapter 5:1.2.2
In an examination of the budget treatment of Federal Insurance
programs, we reported that a cash-based treatment in which premiums
are reflected as inflows and expenditures are recorded later when
claim payments are made does not accurately represent either the
impact of the insurance on the economy or the full cost to the
federal government. We recommended that the Congress consider
encouraging the development and subsequent reporting of annual
risk-assumed cost estimates in conjunction with the cash-based
estimates. We also recommended that OMB develop risk-assumed cost
estimation methods and report on these methods. As part of a larger
budget process reform bill, the House Budget Committee included a
revision of the budget treatment for federal insurance based on this
report. OMB has been working with the House Budget Committee task
force on this proposal. (GAO/AIMD-97-16)
YEAR-END SPENDING
------------------------------------------------------ Chapter 5:1.2.3
In a review of agency spending in the fourth-quarter of the fiscal
year ("year-end spending"), we recommended that in order to improve
oversight of agencies' execution of the budget, OMB reemphasize
compliance with OMB Circular A-34's requirement that agencies provide
quarterly data no later than 20 days after the close of a calendar
quarter and that OMB examine quarterly reporting by agencies that
varies significantly from planned or historical rates. We also
recommended that OMB continue its efforts to integrate budget and
accounting reporting at year-end and report periodically on progress
made. OMB indicates that it is taking steps to improve data on
quarterly spending patterns. (GAO/AIMD-98-185)
TEMPORARY ASSISTANCE FOR
NEEDY FAMILIES BLOCK
GRANT RESERVES
------------------------------------------------------ Chapter 5:1.2.4
In a review of early fiscal effects of the welfare reform block grant
(Temporary Assistance for Needy Families--TANF), we found that more
federal and state resources were available for states' low-income
family assistance programs since welfare reform passed in 1996 than
would have been available under the previous system of financing the
welfare programs consolidated in the TANF block grant. We concluded
that states' fiscal planning for any future increases in caseloads
varied widely. We recommended that the Secretary of Health and Human
Services consult with the states and explore options to enhance
information regarding states' plans for their unused TANF balances.
The Department concurred in our recommendation. (GAO/AIMD-98-137)
See chapter 2, Improving Resources, Community, and Economic
Development Programs, Income Security Issue Area. See also chapter
4, Improving Justice and General Government Programs, Financial
Institutions and Markets Issue Area.
FINANCIAL MANAGEMENT AND
ACCOUNTABILITY ISSUE AREAS
(BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:2
GAO Contacts:
Lisa G. Jacobson--DOD, 202/512-9095
Robert W. Gramling--Congressional Entities/Corporations,
202/512-9406
David L. Clark--Audit Oversight and Liaison, 202/512-9489
Gary T. Engel--Treasury, 202/512-3406
Linda M. Calbom--Interior, Energy, Credit Subsidy, 202/512-9508
Gloria Jarmon--Education and District of Columbia, 202-512-4476
Gregory D. Kutz--IRS, 202/512-3406
Robert F. Dacey--Consolidated Audit and Computer Security,
202/512-3317
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:2.1
During 1998, we continued to make significant contributions to
improving the reliability of financial management reporting,
controls, and operations across government by (1) completing our
first-ever audit of the consolidated financial statements of the
federal government and identifying and recommending solutions to
weaknesses that impair agencies' ability to obtain unqualified audit
opinions for the 24 agencies covered by the Chief Financial Officers
(CFO) Act of 1990, (2) assisting the Congress in putting in place and
overseeing efforts to improve financial management across government,
and (3) carrying out Government Corporation financial audits and
providing other financial audit and review assistance to the
Congress.
AUDITING THE U.S.
GOVERNMENT'S CONSOLIDATED
FINANCIAL STATEMENTS
------------------------------------------------------ Chapter 5:2.1.1
On March 31, 1998, the Secretary of the Treasury, in consultation
with the Director of OMB, issued the Consolidated Financial
Statements of the U.S. Government for Fiscal Year 1997. These
government-wide financial statements, the first in our nation's
history, were prepared and issued under provisions of the expanded
CFO Act and included our first audit report as required by the act.
Our report on the consolidated financial statements highlighted the
most serious of many long-standing financial management challenges
facing the federal government. Major problems include agencies'
inability to
-- properly account for and report on billions of dollars of
property, equipment, materials, and supplies;
-- properly estimate the cost of most federal credit programs and
the related loans receivable and loan guarantee liabilities;
-- estimate and report material amounts of environmental and
disposal liabilities and related costs;
-- determine the proper amount of other liabilities, including
post-retirement health benefits for military and federal
civilian employees, veterans' compensation benefits, accounts
payable, and other liabilities;
-- accurately report on major portions of the net costs of
government operations;
-- determine the full extent of improper payments that occur in
major programs and that are estimated to involve billions of
dollars annually;
-- properly account for billions of dollars of basic transactions,
especially those between government entities;
-- ensure that the information in the consolidated financial
statements is consistent with agencies' financial statements;
-- ensure that all disbursements are properly recorded; and
-- effectively reconcile the change in net position reported in the
financial statements with budget results.
We conducted the financial statement audits at the IRS and of the
Schedule of Federal Debt Management by Treasury's Bureau of the
Public Debt, as well as of internal controls over cash receipts and
disbursements. We also worked closely with the Inspectors General of
DOD, SSA, and HHS and reviewed the results of financial audits
performed by the Inspectors General at other agencies. This audit
work has resulted in an identification and analysis of deficiencies
in the government's recordkeeping and control systems and
recommendations to correct them. Our work has led to a number of
material adjustments to the consolidated financial statements, both
in terms of the dollar amounts reported and the classification of
those amounts. For example, in reviewing the proposed allocation of
about $100 billion in pension and other benefits expense contained in
the draft fiscal year 1997 consolidated financial statements, we
worked with Treasury to reallocate about $9 billion in employee
contributions among federal agencies.
A critical component of our financial statement audit work is the
assessment of computer system security controls. We have been at the
forefront in auditing computer security. We developed the Federal
Information System Controls Audit Manual--GAO's methodology for
computer security reviews--which has been widely adopted across the
federal audit community. Our work has identified widespread computer
control weaknesses that, among other serious consequences, are
placing financial information at risk of unauthorized access,
modification, or destruction. For example, in September 1998, we
issued a report entitled: Information Security: Serious Weaknesses
Place Critical Federal Operations and Assets at Risk
(GAO/AIMD-98-92), which summarized numerous computer security
weaknesses throughout the government. We recommended that the
Director of OMB and the Assistant to the President for National
Security Affairs ensure that efforts to address federal information
security are coordinated under a comprehensive strategy. Through our
financial audits and in working with the Inspectors General,
significant information security weaknesses in systems that handle
the government's unclassified information have been reported in each
of the major federal agencies.
ASSISTANCE TO THE
CONGRESS IN IMPLEMENTING
AND OVERSEEING FINANCIAL
MANAGEMENT INFRASTRUCTURE
IMPROVEMENTS
------------------------------------------------------ Chapter 5:2.1.2
The Congress has reacted strongly to the results of our financial
audit report. For example, in April 1998, the Subcommittee on
Government Management, Information and Technology of the House
Committee on Government Reform and Oversight held a series of
oversight hearings on the results of the government-wide financial
statement audit and of the outcome of individual financial audits at
IRS, DOD, SSA, and HCFA. Further, on June 9, 1998, the House of
Representatives unanimously passed a resolution that underscored
congressional demand for quickly resolving outstanding accounting and
reporting problems. The House Resolution, which had the personal
support of the House majority leadership, reemphasized the
deficiencies identified in our report.
The administration also has moved forward to increase attention on
improving government-wide financial management. Financial management
has been designated one of the President's priority management
objectives, with the goal of having performance and cost information
in a timely, informative, and accurate way, consistent with federal
accounting standards. The administration has set goals for
individual agencies, as well as the government as a whole, to
complete audits on time and to gain unqualified opinions. To help
achieve these objectives, the President issued a May 26, 1998,
memorandum to the heads of executive departments and agencies on
actions needed to improve financial management.
In addition to helping the Congress ensure the expanded CFO Act's
requirements are implemented effectively, we have been at the
forefront as a catalyst in assisting and advising the Congress as it
explored the need for financial management improvement legislation in
other areas. For instance, we worked with the Congress to oversee
agencies' efforts to comply with the Federal Financial Management
Improvement Act of 1996. Our audit work has shown that significant
challenges must be overcome if agencies are to put in place the
accounting standards and systems requirements of the Federal
Financial Management Improvement Act. In addition, as part of the
House Committee on Government Reform and Oversight's Subcommittee on
Management, Information and Technology's recent series of hearings on
financial management issues, we participated in exploring options,
including legislative enhancements, to expedite fixing the problems
that hamper effective financial management across government and in
examining the important financial management work of the Inspectors
General under the Inspector General Act of 1978.
The Congress has also taken legislative action stemming from our work
on individual agency financial audits. For example, the Congress
recently put in place statutory requirements for DOD to prepare
biennial financial management improvement plans, to accelerate its
planned timetable for addressing long-standing problems in accurately
and promptly accounting for billions of dollars in disbursements, and
to improve reporting of its multi-billion dollar inventories and
military equipment.
In addition, our analysis for the House Budget Committee of
information in agencies' financial statements and related audit
reports has served to alert the Congress to developing trends that
may have significant fiscal or budgetary implications. For example,
our analysis of the Navy's and the Federal Aviation Administration's
financial statements and related audit reports, which even though
they did not include all required information and were not
verifiable, still provided data that could be used to identify
financial issues of interest to the Congress as well as budget and
program managers. Our analysis highlighted for the Congress how the
deficiencies disclosed in the auditor's reports impaired the
agencies' abilities to efficiently and effectively manage programs
and exposed the agencies to increased risk of waste, fraud, and
misappropriation of funds. Also, our analysis of auditors' reports
on the Forest Service served to alert the Congress to the
inefficiency and waste that resulted from the lack of reliable
accounting and financial data.
OTHER FINANCIAL STATEMENT
AUDITS AND FINANCIAL
MANAGEMENT ASSISTANCE
PROVIDED TO THE CONGRESS
------------------------------------------------------ Chapter 5:2.1.3
Our financial audits of Government Corporations, reviews of the
financial operations of the District of Columbia, and other financial
management assistance have also served to improve the reliability of
financial reports and controls across government. We have continued
to work with Executive Branch agencies, including CFOs and Inspectors
General, to strengthen agencies' financial operations and reporting
and the efficiency and effectiveness of their financial audit
procedures.
GOVERNMENT CORPORATIONS
------------------------------------------------------ Chapter 5:2.1.4
We conducted financial statement audits of the Federal Deposit
Insurance Corporation's (FDIC) three funds (Bank Insurance Fund,
Federal Savings and Loan Insurance Corporation Resolution Fund, and
Savings Association Insurance Fund). These audits included
assessments of the entities' internal control systems over financial
reporting, safeguarding of assets, and compliance with laws and
regulations. In response to issues identified through our audits,
FDIC has improved its process for overseeing contractors that service
assets and make collections on FDIC's behalf, thus providing
assurance that contracted asset services safeguard assets and provide
FDIC with accurate financial reporting information. FDIC also
improved review procedures and quality control in its process for
estimating the recoveries from assets from failed institutions, thus
improving the information used to record key estimates in the
financial statements. In addition, FDIC took actions to improve
weaknesses we identified in its electronic data processing controls,
thereby providing additional assurance that FDIC's data base is
properly restricted and protected from unauthorized access.
DISTRICT OF COLUMBIA
REVIEWS AND OTHER
ASSISTANCE TO THE
CONGRESS
------------------------------------------------------ Chapter 5:2.1.5
At the request of several congressional committees, we conducted
numerous financial management reviews of the District of Columbia
Government. We performed the first financial statements audit of the
District's Highway Trust Fund and identified material internal
control weaknesses in the expenditure and revenue functional areas.
We examined the District's progress in acquiring a new financial
management system and made several recommendations to improve its
financial management systems needs. Further, we issued our report on
the new sports arena project and performed financial analysis
involving the District's largest economic development project, the
proposed new convention center, which was a factor in the Congress'
approval of legislation to move this project to the construction
phase.
We assisted the Congress in obtaining financial audits for the Senate
Restaurants and the Government Printing Office. For these audits, we
contracted with independent public accountants and monitored the
independent public accountant's work for compliance with professional
auditing standards. We also conducted financial statement audits of
several other congressional entities and provided a variety of
financial-related services, such as reconciliations of financial
records and developing internal control procedures to process and
safeguard donations to the U.S. Capitol Police Memorial Fund.
KEY OPEN RECOMMENDATIONS
-------------------------------------------------------- Chapter 5:2.2
DEPARTMENT OF DEFENSE
------------------------------------------------------ Chapter 5:2.2.1
As we testified in April 1998, DOD is struggling to meet the many
challenges brought about by decades of neglect and an inability to
fully institute sound financial management practices. The material
financial management deficiencies identified at DOD, taken together,
represent the single largest obstacle that must be addressed to
achieve an unqualified opinion on the U.S. government's consolidated
financial statements. These deficiencies led us in 1995 to put DOD
financial management on our list of high-risk areas vulnerable to
fraud, abuse, and mismanagement.
No major part of DOD has yet been able to pass the test of an
independent audit. However, the financial audits at DOD have served
to further clarify the scope and magnitude of DOD's problems, and
recommendations to correct them. These problems range from an
inability to properly account for billions of dollars in assets, to
not being able to accurately account for basic transactions.
Collectively, these problems leave DOD highly vulnerable to the loss
of assets and inefficient operations. Such weaknesses also prevent
DOD from generating the type of management information needed to
effectively and efficiently manage its day-to-day operations and
impede its ability to obtain the reliable and timely information
needed to make sound resource decisions. Effectively addressing
these long-standing problems will only be possible with the
sustained, demonstrated commitment of the DOD's top leaders. The
following are among our most important recommendations that have yet
to be fully implemented.
DOD-WIDE PROGRAMS
------------------------------------------------------ Chapter 5:2.2.2
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, DOD 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)
In September 1997, we reported on the need for DOD to expedite plans
to implement a deferred maintenance accounting standard to comply
with the new federal requirement beginning with fiscal year 1998.
Accurate reporting for DOD's deferred maintenance, particularly for
its estimated $590 billion investment in mission assets such as
submarines, ships, aircraft, and combat vehicles is particularly
important. For example, deferred maintenance on mission assets, if
reliably quantified and reported, can be an important performance
indicator of mission asset condition (a key readiness factor).
However, both Army and Navy officials informed us that they were
reluctant to develop procedures to implement the required accounting
standard until DOD issues overall policy guidance. While DOD
officials stated that they have plans underway to develop deferred
maintenance guidance, we reported our concern that these plans may
not be in time to develop service-specific policies and procedures
needed to implement the new federal accounting standard by fiscal
year 1998. We recommended that DOD take action to ensure that
DOD-wide policy is in place as soon as possible so that DOD can
comply with the fiscal year 1998 effective date for the deferred
maintenance standard. DOD has not taken action which will permit it
to meet this requirement for 1998; although DOD continues to state
its intention to develop appropriate policy. (GAO/AIMD-97-159R)
In September 1997, we reported on serious computer-related weaknesses
uncovered during a review of DOD's Military Retirement Trust Fund.
With reported liabilities for fiscal year 1996 of $548 billion, the
Fund is expected to be material to the consolidated governmentwide
financial statements. The data security administration weaknesses
found during the review included inadequate control over access to
information on pension fund participants. Such uncontrolled access
affects other sensitive personal- and career-related information as
well. While the auditors found that compensating controls--largely
dependent on the retention of key employees--were in place, they
cautioned against long-term reliance on such controls. We
recommended a series of actions to address these weaknesses,
including upgrading security to ensure that participants' data is
adequately protected. (GAO/AIMD-97-128)
In November 1997, we reported that DOD has not yet implemented the
federal accounting standard that requires recognizing and reporting
liabilities such as those associated with aircraft disposal, nor has
it provided guidance to the military services in this area. We
reported that the cost of aircraft disposal can be reasonably
estimated and that information on the three major disposal
processes--demilitarization, storage and maintenance, and hazardous
materials removal and disposal--is available to develop cost
estimates. In recognition of the importance of this information, the
Congress passed legislation requiring DOD to develop life-cycle
environmental costs, including demilitarization and disposal costs,
for major defense acquisition programs. We recommended that DOD take
action to ensure the prompt issuance of guidance on the recognition
of a liability for aircraft disposal costs and to include the
estimated aircraft disposal liability in its fiscal year 1997
financial statements. To date, DOD has not provided guidance but has
expressed its intent to do so. (GAO/AIMD-98-9)
In December 1997, we reported that DOD has not yet implemented the
federal accounting standard that requires recognizing and reporting
liabilities such as those associated with ammunition disposal, nor
has it provided guidance to the military services in this area. We
reported that the cost of ammunition disposal can be reasonably
estimated and that the cost information developed in response to
requests from congressional committees can be used as a starting
point. We recommended that DOD take action to ensure the prompt
issuance of guidance on the recognition of a liability for ammunition
disposal costs and to include the estimated ammunition disposal
liability in its fiscal year 1997 financial statements. DOD has
expressed its intent to issue such guidance. (GAO/AIMD-98-32)
In December 1997, we reported that of the $115.6 billion that DOD
reported as inventory, $113.7 billion should have been reported as
operating materials and supplies, or plant, property, and equipment.
At the same time, other items such as repair parts and consumables
were not reported at all. Such misclassification and underreporting
will negatively affect the reliability and usefulness of the military
services' and DOD's financial statements. One reason for these
errors was that DOD's financial statement preparation and accounting
policy guidance misinterpreted, and were inconsistent with, federal
accounting standards. We recommended that the DOD Comptroller take
action to revise its accounting policy guidance to be consistent with
federal standards. (GAO/AIMD-98-16)
In June 1998, we reported that, drawing on lessons learned from our
survey of state government and private sector organizations, training
should receive a strong emphasis as a means of upgrading workforce
knowledge of current financial management, accounting, and reporting
requirements. DOD's financial personnel face the challenge of
leading DOD's efforts to produce reliable financial data (1)
throughout a large and complex DOD organization with acknowledged
difficult financial deficiencies and (2) that build upon the existing
requirements to include recent, more comprehensive accounting
standards and federal financial management systems requirements.
Yet, over half of the key DOD financial managers we surveyed--who all
held leadership positions--had received no financial or accounting
related training during 1995 and 1996. We recommended a number of
actions to upgrade the technical accounting and related knowledge of
DOD financial personnel, including the development and implementation
of a formalized, structured training program for financial management
personnel throughout DOD. (GAO/AIMD-98-126)
ARMY PROGRAMS
------------------------------------------------------ Chapter 5:2.2.3
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. We recommended that the DOD CFO (1)
evaluate and resolve budget execution and disbursement problems, and
(2) implement existing security access policies and automated data
processing contingency plans. (GAO/AIMD-94-12)
In January 1998, we reported on our review of the accuracy of data in
the Army's Continuing Balance System-Expanded (CBSX). The Army uses
CBSX not only for financial reporting, but as its central logistics
system for reporting the types, quantities, and location of
equipment; monitoring the equipment readiness of its warfighting
units; and filling equipment shortages in those units scheduled for
mobilization. We found that the Army does not have an effective
process to ensure that equipment transactions from Army units are
received by CBSX. Over 40 percent of the adjustments to CBSX were
required due to transactions not received by CBSX. The Army's
ongoing efforts to improve CBSX address some of the causes of
adjustments. However, these efforts do not fully address
transactions that were not received by CBSX. Unless its improvement
efforts include processes to ensure that transactions are received by
CBSX, these efforts will not correct the largest cause of CBSX
adjustments. We recommended that the Acting Secretary of the Army
ensure that the specific corrective actions we advanced are taken to
ensure that CBSX provides reliable data. (GAO/AIMD-98-17)
NAVY PROGRAMS
------------------------------------------------------ Chapter 5:2.2.4
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 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 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 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)
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)
DEPARTMENT OF EDUCATION
------------------------------------------------------ Chapter 5:2.2.5
FEDERAL FAMILY EDUCATION
LOAN PROGRAM
------------------------------------------------------ Chapter 5:2.2.6
For the first time, the Department of Education received an
unqualified opinion on its fiscal year 1997 departmentwide financial
statements. Although the Department received an unqualified opinion,
the audit continued to identify internal control material weaknesses
related to determining the Federal Family Education Loan Program's
loan estimates, effectively monitoring payments to Guaranty Agencies
and lenders, and ensuring accurate financial reporting. Because the
Department has begun corrective actions in these areas and has
demonstrated a commitment to resolving financial management problems,
we believe the Department has made progress. However, because
Guaranty Agencies and lenders have a crucial role in the
implementation and ultimate cost of the Federal Family Education Loan
Program, the Department should complete steps underway for improving
oversight of Guaranty Agencies and lenders. In August 1996, the
Department issued revised audit guidance to all Guaranty Agencies
participating in the Federal Family Education Loan Program. This
guidance became retroactively effective for fiscal years on or after
June 30, 1996. In addition, in June 1997, OMB also issued this
guidance in its OMB Circular A-133 compliance supplement which will
be effective for Guaranty Agencies' fiscal years ending on or after
June 30, 1997. Both require auditors of Guaranty Agencies to
specifically audit and report on the integrity of the billings
submitted to the Department. However, to use this guidance as an
effective monitoring tool, the Department needs to receive reports on
audits under this guidance and to perform quality control reviews on
these audits to ensure that the guidance has been implemented
properly. Audit reports under the OMB Circular A-133 compliance
supplement had not been available to the Department until fiscal year
1998. Until this guidance has been fully implemented, audits of
Guaranty Agencies may not provide sufficient information to verify
the integrity of Guaranty Agencies' billings. Furthermore, the
Department needs to continue its plans for (1) establishing and
maintaining subsidiary ledgers for the Federal Family Education Loan
Program, and (2) finalizing reasonability edits and analyzing
variances between the Department's Federal Family Education Loan
Program subsystems and lenders' billing data. (GAO/AIMD-96-22)
DEPARTMENT OF ENERGY
------------------------------------------------------ Chapter 5:2.2.7
Our work at the DOE Power Marketing Administrations demonstrated that
the system for monitoring repayment of the Power Marketing
Administrations' power-related costs does not ensure that the federal
government recovers all the costs that it is entitled to recover. We
recommended ways to improve the monitoring system in order to
maximize the federal government's recovery of costs related to its
involvement in power-related activities. Specifically, GAO
recommended that DOE (1) require independent reviews of the Power
Marketing Administrations' power repayment studies, upon which rates
are based, to ensure that they include all relevant costs, (2)
include the full costs of federal employee pension and postretirement
benefits in rates, (3) incorporate and maintain clear cost recovery
policy guidance that specifically states that the full costs of
federal employee pension and postretirement benefits be included in
rates, (4) establish a process within DOE for tracking and resolving
repayment issues, and (5) revise the order under which it delegates
to the Federal Energy Regulatory Commission authority for reviewing
three of the Power Marketing Administrations' rate proposals to give
the Federal Energy Regulatory Commission more authority to review and
challenge rate proposals. In addition, GAO recommended that the
Federal Energy Regulatory Commission utilize this additional
authority in reviewing rate proposals, including reviewing and
analyzing the results of the independent reviews of the Power
Marketing Administrations' power repayment studies.
(GAO/AIMD-98-164)
DEPARTMENT OF THE
INTERIOR
BUREAU OF INDIAN AFFAIRS
------------------------------------------------------ Chapter 5:2.2.8
Our work at the Department of the Interior's Office of the Special
Trustee for American Indians and its Bureau of Indian Affairs
identified implementation issues related to several proposed
initiatives for improving trust fund management, including the need
for additional coordination and planning for proposed major
information technology investments. We pointed out the need for the
Secretary, in carrying out his trust improvements project, to assure
that (1) major information technology investments comply with legal
and regulatory requirements and (2) detailed planning is done to
ensure that all related business functions and information
requirements are identified. (GAO/T-AIMD-97-138, GAO/AIMD-98-37)
DEPARTMENT OF THE
TREASURY
------------------------------------------------------ Chapter 5:2.2.9
CUSTOMS FINANCIAL
MANAGEMENT
----------------------------------------------------- Chapter 5:2.2.10
Customs continued its efforts to address outstanding weaknesses in
its financial management and internal control systems. For example,
Customs is working on the integration of its accounts receivable
subsidiary ledger as part of the Automated Commercial Environment
system initiative. The prototype version was scheduled for testing
in fiscal year 1999. In November 1996, Customs also began phasing in
its comprehensive financial management and seized property tracking
system--Seized Asset and Case Tracking System. According to Customs,
significant functions within this tracking system will be completed
in fiscal year 1999. In addition, Customs made significant progress
in designing an In-bond Compliance Measurement Program which it plans
to implement nationwide for fiscal year 1999. Follow through on
these ongoing actions is critical to addressing weaknesses in Customs
financial management and removing this area from GAO's high-risk
list. (GAO/AIMD-94-119, GAO/HR-97-30)
INTERNAL REVENUE SERVICE
----------------------------------------------------- Chapter 5:2.2.11
Our work at IRS has identified several areas for improvement that are
needed to better manage, account for, and report tax revenues and
receivables. These include recommendations to (1) identify reporting
information needs, develop related sources of reliable information,
and establish and implement policies and procedures for compiling
this information; (2) monitor implementation of actions to reduce the
errors in calculating and reporting manual interest on taxpayer
accounts, and test the effectiveness of these actions; (3) ensure
that system development efforts provide reliable, complete, timely
and comprehensive information for evaluating the effectiveness of its
enforcement and collection programs; and, (4) establish and implement
procedures to analyze the impact of abatements on the effectiveness
of assessments from IRS' various collection programs.
(GAO/AIMD-94-22, GAO/AIMD-94-120)
CONSOLIDATED AUDIT AND
COMPUTER SECURITY ISSUES
----------------------------------------------------- Chapter 5:2.2.12
In September 1998, we issued a report which summarized numerous
computer security weaknesses throughout the government. We
recommended that the Director of OMB and the Assistant to the
President for National Security Affairs ensure that efforts to
address federal information security are coordinated under a
comprehensive strategy. The objectives of such a strategy are to
encourage agency improvement efforts and measure their effectiveness
through an appropriate level of oversight. These recommendations
have not yet been addressed. (GAO/AIMD-98-92)
For example, while progress has been made, serious weaknesses
continue to exist at five IRS facilities visited during our prior
audit, and we identified several additional weaknesses at those
locations and at a sixth facility. These weaknesses exist primarily
because IRS has not yet fully institutionalized its computer security
management program. These weaknesses affect IRS' ability to control
physical access to its facilities and sensitive computing areas,
control electronic access to sensitive taxpayer data and computer
programs, prevent and/or detect unauthorized changes to taxpayer data
or computer software, and restore essential IRS operations following
an emergency or natural disaster. Until these weaknesses are
mitigated, IRS continues to run the risk of its tax processing
operations being disrupted. Furthermore, sensitive taxpayer data
entrusted to IRS could be disclosed to unauthorized individuals,
improperly used or modified, or destroyed, thereby exposing taxpayers
to loss or damages resulting from identity fraud and other financial
crimes. (GAO/AIMD-99-3)
In September 1998, we issued a report that outlined numerous computer
security problems at VA. We made numerous recommendations to improve
specific aspects of computer security and periodically report on
progress in addressing these weaknesses including identifying
information system security weaknesses as material internal control
weaknesses in the Department's Federal Managers Financial Integrity
Act annual report. These recommendations have not been addressed.
(GAO/AIMD-98-175)
OMB CREDIT SUBSIDY MODEL
----------------------------------------------------- Chapter 5:2.2.13
Our review of OMB's credit subsidy model resulted in the following
recommendations for improving the model's reliability and controls:
(1) revise the model's discounting equations to follow standard
finance theory, (2) implement a structured software development
methodology to ensure the production of quality, reliable software,
(3) improve documentation, (4) enhance the model's printed output to
provide an audit trail showing which data the model used to calculate
the subsidy cost, and (5) provide credit agencies with guidance to
establish logical access controls surrounding use of the model. OMB
has indicated that it plans to take actions consistent with our
recommendations when it develops a new model that is tentatively
expected to be completed in early 1999. (GAO/AIMD-97-145)
CORPORATE AUDITS AND
STANDARDS
----------------------------------------------------- Chapter 5:2.2.14
FDIC'S INTERNAL CONTROLS
----------------------------------------------------- Chapter 5:2.2.15
In our 1997 financial audits of FDIC's three funds, we found that the
corporation 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 estimating recoveries for securities
and other assets valued outside of the standard asset valuation
process. 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-98-204)
AUDIT OVERSIGHT AND
LIAISON
----------------------------------------------------- Chapter 5:2.2.16
Audits of employee benefit plans are a key safeguard for protecting
assets held by plans. As of 1988, the most recent 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 those audits 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 in the act. (GAO/AFMD-92-14)
DISTRICT OF COLUMBIA
----------------------------------------------------- Chapter 5:2.2.17
In our review of the District of Columbia's acquisition and
implementation of a new Financial Management System, we identified
weaknesses in the areas of (1) software acquisition planning, (2)
requirements development and management, (3) project management, (4)
contracting and oversight, (5) evaluation, and (6) acquisition risk
management. Corrections the District makes to these areas can be
applied to future software acquisitions. We recommended that the
District (1) document its decisions and update its planning documents
to ensure that large acquisitions--such as its Financial Management
System--can be effectively managed, (2) develop an organizational
policy for establishing and managing software-related requirements,
and (3) develop written policies for the execution of the software
project, contract tracking and oversight activities for the financial
management system project, managing the evaluation of acquired
software products and software acquisition risk management. The
District's newly hired Chief Technology Officer and the interim CFO
have taken some steps to develop new policies and procedures to
implement our recommendations, but these recommendations have yet to
be fully implemented. (GAO/AIMD-98-88)
Our recent audit of the District of Columbia's Highway Trust Fund for
the 12-month period ended September 30, 1997, showed that the
District had upgraded its internal controls over receipt of fuel tax
revenues. However, some expenditure journal entry transactions were
still being prepared, approved, and validated by the same person
without independent reviews or approvals; tax receipts were not being
deposited promptly; and minimal improvements had been made in the
general controls over the computer system. (GAO/AIMD-98-254)
INFORMATION MANAGEMENT ISSUE
AREAS (BUDGET FUNCTION 990)
---------------------------------------------------------- Chapter 5:3
GAO Contacts:
Jack L. Brock--DOD, 202/512-6240
Joel C. Willemson--Civil Agencies, 202/512-6408
IMPACT OF GAO'S WORK
-------------------------------------------------------- Chapter 5:3.1
Information systems are integral to nearly every aspect of the over
$1.7 trillion in annual federal government operations and
spending--from national defense and air traffic control to revenue
collection and benefit payments. Yet the federal government faces
tremendous challenges in (1) ensuring that these systems will not
fail because of the Year 2000 computing problem, (2) protecting
sensitive data from computer attacks, and (3) harnessing the full
potential of information technology to improve performance, reduce
costs, and enhance responsiveness to the public.
To address these challenges, we have helped increase national
attention this year on the Year 2000 risks facing the government and
the private sector and offered roadmaps to fixing and testing systems
and developing business continuity and contingency plans. We have
continued to assess the agency efforts to protect their information
resources and identified practical, proven ways of strengthening
information security. We have also continued our efforts to uncover
and remedy underlying weaknesses in multibillion dollar problematic
modernization efforts. Our recommended solutions in these areas have
not only contributed to over a billion dollars in taxpayer savings,
they have spurred agencies to expedite and strengthen their Year 2000
and computer security initiatives and to implement more efficient and
effective information technology investment, development, and
acquisition processes.
MITIGATING YEAR 2000
RISKS
------------------------------------------------------ Chapter 5:3.1.1
The public faces a high risk that critical services provided by the
government and the private sector could be severely disrupted by the
Year 2000 computing crisis\1 . Financial transactions could be
delayed, flights grounded, power lost, and national defense affected.
Moreover, because of the complex and intricate nature of the
information infrastructure, a single failure could have adverse
repercussions on public and private enterprises.
In view of its potentially devastating impact, we designated the Year
2000 problem as a high-risk area for the federal government in
February 1997. Since then we have been (1) assessing Year 2000
readiness at selected agencies and specific systems, (2) assessing
governmentwide progress, (3) developing and disseminating Year 2000
guidance, and (4) assessing critical cross-cutting issues. As the
following examples illustrate, this work has helped agencies to make
significant strides in strengthening Year 2000 program management and
spurred actions to strengthen governmentwide and national Year 2000
oversight.
-- In 1998, we testified that federal progress in the Year 2000
arena was slow: government priorities for correcting systems
had not been established, OMB's assessment of federal Year 2000
progress was predominantly based on unverified agency
self-reporting, end-to-end testing of systems across agency
boundaries had not yet been defined or ensured, and business
continuity and contingency planning across government had been
inadequate. Several actions have been taken to implement
recommendations we made to address these weaknesses. For
example, 41 additional agencies�including such critical agencies
as the Postal Service and the Tennessee Valley Authority�were
required, for the first time, to report on their Year 2000
status. Even more important, the Chair of the President's
Council on Year 2000 Conversion recently directed the Council's
sector working groups to perform assessments of their sectors.
The Council plans to use these sector assessments as a basis for
a public report to the President�the first time such an
assessment of our nation's readiness will be available.
-- In February 1998, we testified that the implications of FAA not
meeting the Year 2000 deadline are enormous and could affect
hundreds of thousands of people through customer inconvenience,
increased airline costs, grounded or delayed flights, or
degraded levels of safety. Nonetheless, FAA was severely behind
schedule in completing basic Year 2000 awareness activities,
including issuing a final, overall Year 2000 strategy. FAA
agreed with our recommendations and, in implementing them,
finalized an agencywide plan outlining a strategy for addressing
the issue. The plan outlines the agency's strategies, goals,
and schedules--items that are critical to sound management.
-- In April 1998, we reported that DOD was lagging in its Year 2000
effort because it lacked key management and oversight controls
to enforce good management practices, direct resources, and
establish a complete picture of its Year 2000 progress. This
increased the risk that mission-critical operations would be
severely degraded or disrupted as a result of the Year 2000
problem. In response, DOD agreed with all of our
recommendations calling for stronger management and oversight
controls over its Year 2000 initiative and is in the process of
implementing these recommendations. Thus far, DOD has appointed
a chief executive with responsibility for the program.
-- While we reported that the financial institution regulators have
made good progress in helping to achieve industrywide Year 2000
compliance and remediate their own systems, we also identified
concerns and problems with their efforts. For example, all
regulators were late in initiating their Year 2000 oversight of
institutions and in issuing key guidance on business continuity
and contingency planning, corporate borrowers, and service
providers and software vendors. The regulators were quick to
respond to our recommendations. The National Credit Union
Administration, for instance, implemented a quarterly reporting
process whereby credit unions would communicate the status of
their remediation efforts between examinations, and also hired
additional contractor support to assist with exams of credit
unions and service providers. The Federal Deposit Insurance
Corporation and the Office of Thrift Supervision took immediate
steps to implement our recommendation that they develop
contingency plans for their mission-critical systems and core
business processes.
-- Our work has identified Year 2000 issues that cut across
traditional agency jurisdictions, such as in the areas of data
exchanges, telecommunications, and personnel. In July 1998, for
example, we highlighted the importance of electronic data
exchanges by disclosing the hundreds of thousands of exchanges
used by federal and state agencies to deliver services. At the
time of our review, much work remained to ensure that federal
and state data exchanges will be Year 2000 compliant. In
response to our recommendations to strengthen data exchange
efforts, OMB agreed that it needed to increase its attention to
this area and has taken some actions, particularly related to
federal/state exchanges.
-- Our detailed guidance on key Year 2000 remediation phases and
transcending activities has been widely adopted nationally and
internationally. For example, our first guide, Year 2000
Computing Crisis: An Assessment Guide, which offered a
structured approach for reviewing the adequacy of agency
planning and management of Year 200 programs, is being used by
federal agencies, state and local governments and private sector
organizations to initiate and organize their Year 2000 programs.
In addition, this guide and our second guide, Year 2000
Computing Crisis: Business Continuity and Contingency Planning,
were adopted by OMB and the Chief Information Officers (CIO)
Council as standards for federal agencies to follow. Finally,
our most recent guide, Year 2000 Computing Crisis: A Testing
Guide, which presents a step-by-step framework for managing all
testing activities related to the Year 2000 problem, is being
widely adopted in both the government and private sectors.
In response to the urging of our Executive Council on Information
Management and Technology to expand our Year 2000 scope beyond the
federal government and at the request of the Senate Special Committee
on the Year 2000 Technology Problem, our scope now includes
sector-based reviews (e.g., health, safety and emergency services;
transportation; power and water; and telecommunications). We are
assessing the readiness and risk of each sector and identifying
problem areas that require attention.
--------------------
\1 The Year 2000 problem is rooted in the way dates are recorded and
computed in automated systems. For the past several decades, systems
have typically used two digits to represent the year, such as "97"
representing 1997, in order to conserve on electronic data storage
and reduce operating costs. With this two-digit format, however, the
year 2000 is indistinguishable from 1900, or 2001 from 1901. As a
result of this ambiguity, system or application programs that use
dates to perform calculations, comparisons, or sorting may generate
incorrect results.
STRENGTHENING COMPUTER
SECURITY
------------------------------------------------------ Chapter 5:3.1.2
The risks to the security of our government's computer systems are
significant, and they are growing. The dramatic increase in computer
interconnectivity and the popularity of the Internet, while
facilitating access to information, are factors that also make it
easier for individuals and groups with malicious intentions to
intrude into inadequately protected systems and use such access to
obtain sensitive information, commit fraud, or disrupt operations.
Additionally, the number of individuals with computer skills is
increasing, and intrusion, or "hacking," techniques are readily
available. These risks are exacerbated by the Year 2000 date change,
which has increased the likelihood of system failures.
In September 1996, we reported that a broad array of federal
operations were at risk due to information security weaknesses and
that a common underlying cause was inadequate security program
management. Subsequently, in February 1997, we designated
information security as a new governmentwide high-risk area. Since
then, we have worked with the Congress to pursue a comprehensive
strategy for addressing federal information security problems. This
strategy involves (1) continuing to perform audits at selected
agencies and develop specific recommendations for improvement, (2)
assisting agency Inspectors General in conducting or arranging for
information security, (3) developing methodologies for evaluating
federal agency information security programs, (4) providing technical
training to GAO and IG staff involved in evaluating computer-based
controls, (5) promoting a broader understanding of the practices that
make an information security program successful, and (6) working with
OMB and others to promote more effective central leadership,
oversight, and coordination.
During 1998, for example, we have continued to chronicle significant
information security weaknesses in federal agencies.
-- In May 1998, we reported that weak computer security practices
at FAA jeopardized flight safety. FAA's air traffic control
network is an enormous, complex collection of interrelated
systems, including navigation, surveillance, weather, and
automated information processing and display systems that reside
at, or are associated with, hundreds of facilities. All the
critical areas included in our review--facilities' physical
security, operational systems information security, future
systems modernization security, and management structure and
policy implementation--were ineffective.
-- In May we also reported that the Department of State did not
have a program for comprehensively managing the information
security risks associated with its many sensitive operations.
Specifically, State (l) lacked a central management group to
oversee and coordinate security activities, (2) did not
routinely perform risk assessments, (3) relied on a primary
information security policy document that was outdated and
incomplete, (4) did not adequately ensure that computer users
were fully aware of risks and their responsibilities for
protecting sensitive data, and (5) lacked key controls for
monitoring and evaluating the effectiveness of its security
program.
In September 1998, we reported that general computer weaknesses
placed critical operations of the Department of Veterans Affairs,
such as financial management, healthcare delivery, benefit payments
and life insurance services at risk of misuse and disruption. In
addition, sensitive information contained in VA's systems, including
financial transaction data and personal information on veteran
medical records and benefit payments, was vulnerable to inadvertent
or deliberate misuse, fraudulent use, improper disclosure, or
destruction�possibly occurring without detection.
To help State, FAA, and other agencies better protect their systems,
we studied the security management practices of eight organizations
known for their superior security programs. We found that these
organizations managed their information security risks through a
cycle of risk management activities, and identified 16 specific
practices that supported these risk management principles. This work
has been endorsed by the CIO Council and should provide agencies with
a practical framework for protecting their systems.
Several new governmentwide efforts to improve information security
have been initiated since we reported on the need for more effective
oversight in 1996. For example, in late 1997, the CIO Council
designated information security as one of six priority areas, and
established a security committee. This Committee, in turn, has
developed a preliminary plan for addressing various aspects of the
problem, and established links with other federal entities involved
in security issues. In addition, OMB has continued to monitor
selected agency system-related projects, many of which have
significant security implications. Moreover, in May 1998, the
administration developed and issued Presidential Decision Directive
63 on critical infrastructure protection. This directive provides
for additional central oversight of agency practices by the National
Security Council in the Executive Office of the President and it
specifies several requirements related to evaluating and coordinating
federal agency information security practices.
IMPROVING INFORMATION
TECHNOLOGY INVESTMENTS
------------------------------------------------------ Chapter 5:3.1.3
Despite making a huge investment in information technology, many
government operations are still hampered by inaccurate data and
inadequate systems. Too often, federal information technology
projects have cost too much, produced too little, and failed to
significantly improve mission performance. Yet there is also general
agreement that the government's ability to improve its service and
performance will depend heavily upon how well information technology
can be integrated into fundamental business/mission needs.
Recognizing the urgent need for improvement, the Congress passed
landmark reforms in information technology management, including the
Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of 1996.
The Paperwork Reduction Act emphasizes the need for agencies to
acquire and apply information technology resources to effectively
support the accomplishment of agency missions and the delivery of
services to the public. The Clinger-Cohen Act repeats this theme and
elaborates on requirements for agencies to follow when managing
information technology. By continuing to identify weaknesses
underlying problematic information technology development efforts and
recommend corrective measures that will facilitate implementation of
these reforms, our work has helped to generated millions of dollars
in taxpayer savings and prevent future costly system development
failures. For example:
-- Following our testimony recommending that about $1.1 billion of
IRS' fiscal year 1998 and 1999 information technology-related
budget requests be denied, the Congress funded only $325 million
of the request and later reduced this amount by about another
$20 million, resulting in hundreds of millions of dollars in
savings.
-- After we found that DOD had failed to adhere to its own
decisionmaking and oversight processes in its multi-billion
dollar effort to develop standard information systems for
business operations, the Congress reduced DOD appropriations in
fiscal year 1998 by $110 million. DOD itself began reevaluating
the way it manages and performs acquisition oversight of its
information technology investments.
-- Our reports on the benefits of using automated drug use review
systems in the Medicaid program influenced many states to
install these systems to deny or cancel inappropriate
prescriptions as well as prevent inappropriate drug therapy and
avoid hospitalizations. As a result, the Medicaid program has
saved hundreds of millions of dollars annually.
-- As part of our review of HCFA's Medicare Transaction System, we
found that HCFA had not justified its plans to acquire two
processing sites and a data operations center and therefore
recommended that funding be withheld for these. HCFA
subsequently cancelled its request for proposals for these sites
and saved over $300 million in costs.
-- In response to our recommendation, the Department of the
Interior identified and acted on opportunities to consolidate
and optimize telecommunications services. These actions
resulted in annualized cost avoidance and reductions totaling
about $10.5 million.
-- After we raised concerns that the National Oceanic and
Atmospheric Administration's deferring the development of its
next generation of the Geostationary Operational Environmental
Satellite was risky because it did not take advantage of the
opportunity to (1) design an architecture that would be more
flexible, less costly, and better able to meet user needs and
(2) incorporate advanced technologies, the National Oceanic and
Atmospheric Administration reconsidered its strategy and
initiated a series of activities to accelerate the development
of the program to begin in fiscal year 2000.
-- Because agencies face challenges in improving both financial and
information management, each management area requires full-time
leadership by separate individuals with appropriate talent,
skills, and experience in these two areas. However, at VA we
found that the current Chief Information Officer also functioned
as the Department's Assistant Secretary for Management and Chief
Financial Officer. In response to our recommendation, VA
established a Chief Information Officer position reporting
directly to the Secretary on all information resources issues.
The newly established position should help VA ensure that
information technology issues are addressed promptly and
efficiently.
-- During 1998, we have worked closely with OMB and the CIO
Council's Capital Planning and IT Investment Committee to devise
a new information technology budget format that will help (1)
agencies to link their internal planning, budgeting, and
management of information technology resources and (2) OMB to
provide more effective oversight and review of information
technology and information resources management.
In addition to focusing on improving information technology
management practices, we have continued to advance our work in
examining the pricing and financial management practices of DOD's
working capital funds. In responding to our recommendations, DOD
began billing foreign military sales customers who had previously
been undercharged for foreign military sales' services. The Navy
Ordnance business area revised its pricing and workload forecasting
practices and reduced overhead staff, which resulted in annual
savings of $34 million.
KEY OPEN RECOMMENADATIONS
-------------------------------------------------------- Chapter 5:3.2
MITIGATING YEAR 2000
RISKS
------------------------------------------------------ Chapter 5:3.2.1
In recognition of the fact that not all systems could be fixed in
time and to more effectively oversee the activities of federal
agencies in addressing the Year 2000 computing crisis, we recommended
that the Chairman of the President's Council on Year 2000 Conversion
establish governmentwide priorities, using criteria such as the
potential for adverse health and safety effects, adverse financial
effects on American citizens, detrimental effects on national
security, and adverse economic consequences. (GAO/T-AIMD-98-278)
As of late 1998, however, the Chairman has not established such
governmentwide priorities, preferring to allow individual agencies to
continue with their own designations of mission-critical systems.
However, the Chairman agreed that it may be necessary at a later date
for agencies to further prioritize their systems. We believe such
priority-setting must occur now while there is still time to make
sure that our government's most critical areas are addressed. We
also believe that agencies themselves need to devote more attention
to setting priorities, developing a complete and accurate picture of
Year 2000 progress, ensuring systems are adequately tested, ensuring
the continuity of critical core business processes, and recruiting
and retaining information technology personnel with appropriate
skills for Year 2000-related work. (GAO/T-AIMD-98-278)
STRENGTHENING INFORMATION
SECURITY
------------------------------------------------------ Chapter 5:3.2.2
To strengthen information security across the federal government, we
recommended that the Director of OMB and the Assistant to the
President for National Security Affairs ensure that the various
existing and newly initiated efforts to improve federal information
security are coordinated under a comprehensive strategy. Among other
things, this strategy should (1) ensure that executive agencies are
carrying out the responsibilities outlined in laws and regulations
requiring them to protect the security of their information
resources, (2) clearly delineate the roles of the various federal
organizations with responsibilities related to information security,
(3) identify and rank the most significant information security
issues facing federal agencies, (4) ensure the adequacy of
information technology workforce skills, and (5) provide for
periodically evaluating agency performance from a governmentwide
perspective and acting to address shortfalls. (GAO/AIMD-98-92)
We reported on significant weaknesses in FAA's management of
information security and had a number of recommendations in the areas
of physical security, operational air traffic control systems,
systems under development, and the agency's approach to managing this
critical area. FAA has acknowledged that major improvements are
needed in all areas of its computer security program but has not yet
formulated a plan to strengthen security. (GAO/AIMD-98-155)
See chapter 2, Improving Resources, Community, and Economic
Development Programs, Transportation Issue Area.
In response to our finding that its information systems were
vulnerable to unauthorized access, the Department of State has
developed a security plan and implemented physical security measures.
However, additional actions are needed to (1) strengthen its ability
to react to intrusions and attacks on its information systems and (2)
ensure its central information security unit has the responsibility
and authority needed to facilitate, coordinate, and oversee the
department's information security activities. Additionally, State
should defer the expansion of its Internet usage until known
vulnerabilities are addressed. (GAO/AIMD-98-145)
See chapter 1, Improving National Security and International Affairs
Programs, International Relations and Trade Issue Area.
IMPROVING INFORMATION
TECHNOLOGY INVESTMENTS
------------------------------------------------------ Chapter 5:3.2.3
Implementing the Clinger-Cohen Act of 1996 and the Paperwork
Reduction Act and ensuring that they follow rigorous and disciplined
system engineering principles will not be easy for many agencies
given the weaknesses pervading current decisionmaking and oversight
processes for information technology investments. Nevertheless,
strong actions need to be taken to prevent future system development
efforts from failing.
For example, DOD needs to (1) ensure alternatives and risks are
vigorously examined before investments are made and that these
analyses are reviewed by qualified independent parties, (2) require
post-implementation reviews of information systems which compare
actual costs, benefits, risks and returns against original baseline
estimates, and (3) expedite the definition, coordination, testing,
and implementation of information management performance measures.
(GAO/AIMD-98-5)
See chapter 1, Improving National Security and International Affairs
Programs.
After acknowledging that its $3.4 billion Tax System Modernization
program had failed, the IRS has taken a good first step in developing
a blueprint to direct its future modernization efforts. However, it
still needs to implement our recommendations to ensure that the
blueprint provides sufficient detail and precision for building or
acquiring new systems. For example, it should complete the
definition and implementation of all system lifecycle processes,
including those for ensuring disciplined software development and
acquisition and for validating system lifecycle products. It should
also provide its chief information officer with responsibility for
developing, and implementing, and enforcing system lifecycle
processes and products across IRS as well as budget and
organizational authority over all systems development and maintenance
activities.
See chapter 4, Improving Justice and General Government Programs, Tax
Policy and Administration Issue Area.
The National Weather Service's modernization remains a high risk
area, in part, because the agency has not yet implemented our
recommendation to develop a systems architecture for weather
forecasting and warning subsystems and to use the architecture as a
guide in current subsystems development. Likewise, until the Customs
Service implements our recommendations focused on ensuring its
architecture is complete and enforceable, it will lack adequate
assurance that the standards, products, and services selected will
optimally support its needs across all business areas.
To strengthen FAA's management of its high-risk air traffic control
modernization, we recommended that FAA develop and enforce a complete
systems architecture and implement a management structure for doing
so that is similar to the Chief Information Officers provisions of
the Clinger-Cohen Act. We also recommended that FAA institutionalize
mature software acquisition processes and defined processes for
estimating projects' costs, and implement a managerial cost
accounting capability. FAA has not yet fully implemented these
recommendations.
See chapter 2, Improving Resources, Community, and Economic
Development Programs, Transportation Issue Area.
KEY PRODUCTS
-------------------------------------------------------- Chapter 5:3.3
MITIGATING YEAR 2000
RISKS
------------------------------------------------------ Chapter 5:3.3.1
Medicare Computer Systems: Year 2000 Challenges Put Benefits and
Services in Jeopardy (GAO/AIMD-98-284, September 28, 1998).
Year 2000 Computing Crisis: Compliance Status of Many Biomedical
Equipment Items Still Unknown (GAO/AIMD-98-240, September 18, 1998).
Year 2000 Computing Crisis: Federal Depository Institution
Regulators Are Making Progress, But Challenges Remain
(GAO/T-AIMD-98-305, September 17, 1998).
Year 2000 Computing Crisis: Significant Risks Remain to Department
of Education's Student Financial Aid Systems (GAO/T-AIMD-98-302,
September 17, 1998).
Year 2000 Computing Crisis: Progress Made at Department of Labor,
But Key Systems at Risk (GAO/T-AIMD-98-303, September 17, 1998).
Year 2000 Computing Crisis: State Department Needs To Make
Fundamental Improvements To Its Year 2000 Program (GAO/AIMD-98-162,
August 28, 1998).
Year 2000 Computing Crisis: Progress Made in Compliance of VA
Systems, But Concerns Remain (GAO/AIMD-98-237, August 21, 1998).
FAA Systems: Serious Challenges Remain in Resolving Year 2000 and
Computer Security Problems (GAO/T-AIMD-98-251, August 6, 1998).
Year 2000 Computing Crisis: Business Continuity and Contingency
Planning (GAO/AIMD-10.1.19, August 1998).
Year 2000 Computing Crisis: Actions Needed on Electronic Data
Exchanges (GAO/AIMD-98-124, July 1, 1998).
Year 2000 Computing Crisis: Telecommunications Readiness Critical,
Yet Overall Status Largely Unknown (GAO/T-AIMD-98-212, June 16,
1998).
Year 2000 Computing Crisis: Actions Must Be Taken Now to Address
Slow Pace of Federal Progress (GAO/T-AIMD-98-205, June 10, 1998).
Year 2000 Computing Crisis: A Testing Guide (GAO/AIMD-10.1.21, June
1998, Exposure Draft).
Year 2000 Computing Crisis: USDA Faces Tremendous Challenges in
Ensuring That Vital Public Services Are Not Disrupted
(GAO/T-AIMD-98-167, May 14, 1998).
Year 2000 Computing Crisis: Continuing Risks of Disruption to Social
Security, Medicare, and Treasury Programs (GAO/T-AIMD-98-161, May 7,
1998).
STRENGTHENING INFORMATION
SECURITY
------------------------------------------------------ Chapter 5:3.3.2
Information Security: Serious Weaknesses Place Critical Federal
Operations and Assets at Risk (GAO/AIMD-98-92, September 23, 1998).
Information Systems: VA Computer Control Weaknesses Increase Risk of
Fraud, Misuse and Improper Disclosure (GAO/AIMD-98-175, September 23,
1998).
Information Security: Strengthened Management Needed to Protect
Critical Federal Operations and Assets (GAO/T-AIMD-98-312, September
23, 1998).
FAA Systems: Serious Challenges Remain in Resolving Year 2000 and
Computer Security Problems (GAO/T-AIMD-98-251, August 6, 1998).
Air Traffic Control: Weak Computer Security Practices Jeopardize
Flight Safety (GAO/AIMD-98-155, May 18, 1998).
Computer Security: Pervasive, Serious Weaknesses Jeopardize State
Department Operations (GAO/AIMD-98-145, May 18, 1998).
Executive Guide: Information Security Management: Learning From
Leading Organizations (GAO/AIMD-98-68, May 1998).
IMPROVING INFORMATION
TECHNOLOGY INVESTMENTS
------------------------------------------------------ Chapter 5:3.3.3
USDA Service Centers: Multibillion Dollar Effort to Modernize
Processes and Technology Faces Significant Risks (GAO/AIMD-98-168,
August 31, 1998).
VA Information Technology: Improvements Needed to Implement
Legislative Reform (GAO/AIMD-98-155, July 7, 1998).
USDA Telecommunications: Strong Leadership Needed to Resolve
Management Weaknesses, Achieve Savings (GAO/AIMD-98-131, June 30,
1998).
Customs Service Modernization: Architecture Must Be Complete and
Enforced to Effectively Build and Maintain Systems (GAO/AIMD-98-70,
May 5, 1998).
Social Security Administration: Information Technology Challenges
Facing the Commissioner (GAO/T-AIMD-98-109, March 12, 1998).
Tax Systems Modernization: Blueprint Is a Good Start But Not Yet
Sufficiently Complete to Build or Acquire Systems
(GAO/AIMD/GGD-98-54, February 24, 1998).
Defense IRM: Poor Implementation of Management Controls Has Put
Migration Strategy at Risk (GAO/AIMD-98-5, October 20, 1997).
High-Risk Program: Information on Selected High-Risk Areas
(GAO/HR-97-30, May 16, 1997).
IMPROVING DEFENSE WORKING
CAPITAL FUND OPERATIONS
------------------------------------------------------ Chapter 5:3.3.4
DOD Information Services: Improved Pricing and Financial Management
Practices Needed for Business Area (GAO/AIMD-98-182, September 15,
1998).
Air Force Supply Management: Analysis of Activity Group's Financial
Reports, Prices and Cash Management (GAO/AIMD/NSIAD-98-118, June 8,
1998).
Navy Ordnance: Analysis of Business Area Efforts to Streamline
Operations and Reduce Costs (GAO/AIMD/NSIAD-98-24, October 15, 1997).
STATUS OF OPEN RECOMMENDATIONS: A
USERS QUICK REFERENCE FOR THE
ELECTRONIC EDITION
============================================================ Chapter I
INTRODUCTION
---------------------------------------------------------- Chapter I:1
This electronic edition contains the details for 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
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disk space are required. To load the software on your hard drive:
1. Insert the 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 Information.
Figure 1
(See figure in printed
edition.)
HOW TO SEARCH--REPORT DETAILS
---------------------------------------------------------- Chapter I:4
This option accesses the database containing descriptive information
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recommendations, an abstract, the GAO contact person, addresses,
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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
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Follow the instructions to browse the table you selected, and to
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3. Select and click on one of the three output formats for
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(that you selected and copied in step 2), enclosing the term in "[],"
OR type in a keyword. Press OK.
Figure 2
(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 the options:
Table of Contents
Search Issue Area by 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:8
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Summary Databases may be obtained from the Main Menu's link to
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more information about using this program, click here." Information
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by clicking on the Help option appearing in the Windows menu bar.
Suggestions or comments about this electronic publication should be
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*** End of document. ***