Year 2000 Computing Crisis: Additional Work Remains to Ensure Delivery of
Critical Services (Testimony, 04/13/99, GAO/T-AIMD-99-143).

Pursuant to a congressional request, GAO discussed federal agencies'
progress in addressing the year 2000 computing challenge and outlined
actions needed to ensure a smooth conversion to the next century,
focusing on the: (1) status of the federal government's remediation of
its mission-critical systems; (2) remaining challenges facing the
government in ensuring the continuity of business operations, namely
end-to-end testing and business continuity and contingency planning; (3)
Office of Management and Budget's (OMB) efforts to identify the
government's high-impact programs; and (4) readiness of state systems
that are essential to the delivery of federal human services programs.

GAO noted that: (1) addressing the year 2000 problem is a tremendous
challenge for the federal government; (2) to meet this challenge and
monitor individual agency efforts, OMB directed the major departments
and agencies to submit quarterly reports on their progress, beginning on
May 15, 1997; (3) these reports contain information on where agencies
stand with respect to the assessment, renovation, validation, and
implementation of mission-critical systems, as well as other management
information; (4) the federal government's most recent reports show
improvement in addressing the year 2000 problem; (5) while much work
remains, the federal government has significantly increased the
percentage of mission-critical systems that are reported to be year 2000
compliant; (6) in particular, while the federal government did not meet
its goal of having all mission-critical systems compliant by March 1999,
92 percent of these systems were reported to have met this goal; (7)
while this progress is notable, 11 agencies did not meet OMB's deadline
for all of their mission-critical systems; (8) to ensure that their
mission-critical systems can reliably exchange data with other systems
and that they are protected from errors that can be introduced by
external systems, agencies must perform end-to-end testing of their
critical core business processess; (9) OMB and the President's Council
on Year 2000 Conversion announced that one of the key priorities that
federal agencies will be pursuing during the rest of 1999 will be
cooperative efforts regarding end-to-end testing to demonstrate the year
2000 readiness of federal programs with states and other partners
critical to the administration of those programs; (10) OMB called on
federal agencies to identify and report on the high-level core business
functions that are to be addressed in their business continuity and
contingency plans in their February 1999 quarterly reports; (11)
accordingly, in their February 1999 reports, almost all agencies listed
their high-level core business functions; (12) OMB issued a memorandum
to federal agencies designating lead agencies for the government's 42
high-impact programs; (13) OMB directed the lead agencies to provide a
schedule and milestones of key activities in their year 2000 plans by
April 15; (14) in January 1999, OMB implemented a requirement that
federal oversight agencies include the status of selected state human
services systems in their quarterly reports; and (15) specifically, OMB
requested that the agencies describe actions to help ensure that
federally supported, state-run programs will be able to provide services
and benefits.

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

 REPORTNUM:  T-AIMD-99-143
     TITLE:  Year 2000 Computing Crisis: Additional Work Remains to
	     Ensure Delivery of Critical Services
      DATE:  04/13/99
   SUBJECT:  Y2K
	     Systems conversions
	     Information systems
	     Computer software verification and validation
	     Strategic information systems planning
	     Systems compatibility
	     Computer software
	     State-administered programs
	     Data integrity
	     Intergovernmental relations
IDENTIFIER:  Medicaid Program
	     HHS Temporary Assistance for Needy Families Program
	     Y2K
	     Food Stamp Program

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AI99143T.book GAO United States General Accounting Office

Testimony Before the Subcommittee on Government Management,
Information and Technology, Committee on Government

Reform, and the Subcommittee on Technology, Committee on Science,
House of Representatives

For Release on Delivery Expected at 1 p. m. Tuesday, April 13,
1999

YEAR 2000 COMPUTING CRISIS

Additional Work Remains to Ensure Delivery of Critical Services

Statement of Joel C. Willemssen Director, Civil Agencies
Information Systems Accounting and Information Management Division

GAO/T-AIMD-99-143

  GAO/T-AIMD-99-143

Page 1 GAO/T-AIMD-99-143

Mr. Chairman, Ms. Chairwoman, and Members of the Subcommittees: I
am pleased to appear today to discuss progress being made in
addressing the Year 2000 computing challenge and to outline
actions needed to ensure a smooth conversion to the next century.
The federal government-- with its

widespread dependence on large- scale, complex computer systems to
deliver vital public services and carry out its massive
operations-- faces an especially enormous and difficult task.
Unless adequately confronted, Year 2000 computing problems could
lead to serious disruptions in key federal operations, ranging
from national defense to benefits payments to air traffic
management.

Consequently, in February 1997, we designated the Year 2000
computing problem as a high- risk area. Our purpose was to
stimulate greater attention to assessing the government's exposure
to Year 2000 risks and to strengthen planning for achieving Year
2000 compliance for mission- critical systems. Fortunately, the
past 2 years have witnessed marked improvement in preparedness as
the government has revised and intensified its approach to this
problem.

Today, I will discuss the status of the federal government's
remediation of its mission- critical systems. In addition, I will
lay out some of the remaining challenges facing the government in
ensuring the continuity of

business operations, namely end- to- end testing and business
continuity and contingency planning, and the Office of Management
and Budget's (OMB) efforts to identify the government's high-
impact programs. Finally, I will discuss the readiness of state
systems that are essential to the delivery of federal human
services programs.

Improvements Made But Much Work Remains

Addressing the Year 2000 problem is a tremendous challenge for the
federal government. To meet this challenge and monitor individual
agency efforts, OMB directed the major departments and agencies to
submit quarterly reports on their progress, beginning May 15,
1997. These reports contain information on where agencies stand
with respect to the assessment, renovation, validation, and
implementation of mission- critical systems, as well as other
management information on items such as business

continuity and contingency plans and costs. The federal
government's most recent reports show improvement in addressing
the Year 2000 problem. While much work remains, the federal
government has significantly increased the percentage of mission-
critical

Page 2 GAO/T-AIMD-99-143

systems that are reported to be Year 2000 compliant, as figure 1
illustrates. In particular, while the federal government did not
meet its goal of having all mission- critical systems compliant by
March 1999, 92 percent of these systems were reported to have met
this goal.

Figure 1: Mission- Critical Systems Reported Year 2000 Compliant,
May 1997- March 1999

Source: May 1997 through February 1999 data are from the OMB
quarterly reports. The March 1999 data are from the President's
Council on Year 2000 Conversion and OMB.

While this progress is notable, 11 agencies did not meet OMB's
deadline for all of their mission- critical systems. 1 Some of the
systems that were not yet compliant support vital government
functions. For example, many of the

Federal Aviation Administration's (FAA) systems were not compliant
as of the March deadline. As we testified last month, several of
these systems provide critical functions, ranging from
communications to radar

1 The 11 agencies were the Departments of Agriculture, Commerce,
Defense, Energy, Health and Human Services, Justice, State,
Transportation, and the Treasury and the National Aeronautics and
Space Administration and the U. S. Agency for International
Development.

Page 3 GAO/T-AIMD-99-143

processing to weather surveillance. 2 Among other systems that did
not meet the March 1999 deadline are those operated by Health Care
Financing Administration (HCFA) contractors. As we testified in
February 1999, these systems are critical to processing Medicare
claims. 3 Additionally, not all systems have undergone an
independent verification and validation process. For example, the
Environmental Protection Agency and the Department of the Interior
reported that 57 and 3 of their systems, respectively, deemed
compliant were still undergoing

independent verification and validation. In some cases,
independent verification and validation of compliant systems have
found serious problems. For example, as we testified before you
this February, 4 none of HCFA's 54 external mission- critical
systems reported by the Department of Health and Human Services as
compliant as of December 31, 1998, was Year 2000 ready, based on
serious qualifications identified by the independent verification
and validation contractor. Other examples have been cited in
agency quarterly reports.

 In February 1999, the Department of Commerce reclassified a
system from compliant to noncompliant because an independent
verification and validation contractor had concerns about some of
the commercialoff- the- shelf software used in the system and
wanted to review additional test data.  In February 1999, the
Environmental Protection Agency reported that its independent
third- party review process found a Year 2000 error in a

system that was later repaired, tested, and returned to
production.  In November 1998, the Department of Health and Human
Services

reported that it removed four Indian Health Service systems from
compliant status because an independent verification and
validation contractor found that their data exchanges were not
compliant.

2 Year 2000 Computing Crisis: FAA Is Making Progress But Important
Challenges Remain (GAO/ TAIMD/ RCED- 99- 118, March 15, 1999). 3
Year 2000 Computing Crisis: Medicare and the Delivery of Health
Services Are at Risk (GAO/ T- AIMD99-

89, February 24, 1999) and Year 2000 Computing Crisis: Readiness
Status of the Department of Health and Human Services (GAO/T-AIMD-
99-92, February 26, 1999).

4 GAO/T-AIMD-99-92, February 26, 1999.

Page 4 GAO/T-AIMD-99-143

Much Work Remains to Ensure Continuity of Federal Operations

Achieving individual system compliance, although important, does
not necessarily ensure that a business function will continue to
operate through the change of century-- the ultimate goal of Year
2000 efforts. Key actions, such as end- to- end testing and
business continuity and contingency planning, are vital to
ensuring that this goal is met. Further, OMB has recently taken
action on our April 1998 recommendation to set governmentwide
priorities and has identified the government's high- impact

programs. 5 This is an excellent step toward ensuring the
continuing delivery of vital services. End- to- End Testing To
ensure that their mission- critical systems can reliably exchange
data with other systems and that they are protected from errors
that can be

introduced by external systems, agencies must perform end- to- end
testing of their critical core business processes. The purpose of
end- to- end testing is to verify that a defined set of
interrelated systems, which collectively support an organizational
core business area or function, will work as intended in an
operational environment. In the case of the year 2000, many

systems in the end- to- end chain will have been modified or
replaced. As a result, the scope and complexity of testing-- and
its importance-- are dramatically increased, as is the difficulty
of isolating, identifying, and

correcting problems. Consequently, agencies must work early and
continually with their data exchange partners to plan and execute
effective end- to- end tests (our Year 2000 testing guide sets
forth a structured approach to testing, including end- to- end
testing). 6 In January 1999, we testified that with the time
available for end- to- end testing diminishing, OMB should
consider, for the government's most critical functions, setting
target dates, and having agencies report against them, for the
development of end- to- end test plans, the establishment of test
schedules, and the completion of the tests. 7 On March 31, OMB and

the Chair of the President's Council on Year 2000 Conversion
announced that one of the key priorities that federal agencies
will be pursuing during the rest of 1999 will be cooperative
efforts regarding end- to- end testing to 5 Year 2000 Computing
Crisis: Potential for Widespread Disruption Call for Strong
Leadership and Partnerships (GAO/AIMD-98-85, April 30, 1998). 6
Year 2000 Computing Crisis: A Testing Guide (GAO/ AIMD- 10.1.21,
November 1998).

7 Year 2000 Computing Crisis: Readiness Improving, But Much Work
Remains to Avoid Major Disruptions (GAO/T-AIMD-99-50, January 20,
1999).

Page 5 GAO/T-AIMD-99-143

demonstrate the Year 2000 readiness of federal programs with
states and other partners critical to the administration of those
programs.

We are also encouraged by some agencies' recent actions. For
example, we testified this March, that the Department of Defense's
Principal Staff Assistants are planning to conduct end- to- end
tests to ensure that systems that collectively support core
business areas can interoperate as intended in a Year 2000
environment. 8 Further, our March 1999 testimony 9 found that FAA
had addressed our prior concerns with the lack of detail in its
draft end- to- end test program plan and had developed a detailed
end- to- end

testing strategy and plans. 10 Business Continuity and Contingency
Plans

Business continuity and contingency plans are essential. Without
such plans, when unpredicted failures occur, agencies will not
have well- defined responses and may not have enough time to
develop and test alternatives.

Federal agencies depend on data provided by their business
partners as well as on services provided by the public
infrastructure (e. g., power, water, transportation, and voice and
data telecommunications). One weak link anywhere in the chain of
critical dependencies can cause major disruptions to business
operations. Given these interdependencies, it is imperative that
contingency plans be developed for all critical core business
processes and supporting systems, regardless of whether these

systems are owned by the agency. Accordingly, in April 1998, we
recommended that the Council require agencies to develop
contingency plans for all critical core business processes. 11

OMB has clarified its contingency plan instructions and, along
with the Chief Information Officers Council, has adopted our
business continuity and contingency planning guide. 12 In
particular, on January 26, 1999, OMB

called on federal agencies to identify and report on the high-
level core 8 Year 2000 Computing Crisis: Defense Has Made
Progress, But Additional Management Controls Are Needed (GAO/T-
AIMD-99-101, March 2, 1999). 9 GAO/ T- AIMD/ RCED- 99- 118, March
15, 1999. 10 FAA Systems: Serious Challenges Remain in Resolving
Year 2000 and Computer Security Problems (GAO/T-AIMD-98-251,
August 6, 1998).

11 GAO/AIMD-98-85, April 30, 1998. 12 Year 2000 Computing Crisis:
Business Continuity and Contingency Planning (GAO/ AIMD- 10.1.19,
August 1998).

Page 6 GAO/T-AIMD-99-143

business functions that are to be addressed in their business
continuity and contingency plans as well as to provide key
milestones for development and testing of business continuity and
contingency plans in their February

1999 quarterly reports. Accordingly, in their February 1999
reports, almost all agencies listed their high- level core
business functions. Indeed, major departments and agencies listed
over 400 core business functions. For example, the Department of
Veterans Affairs classified its core business functions into two
critical areas: benefits delivery (six business lines supported
this area) and health care.

Our review of the 24 major departments' and agencies' February
1999 quarterly reports found that business continuity and
contingency planning was generally well underway. However, we also
found cases in which agencies (1) were in the early stages of
business continuity and contingency planning, (2) did not indicate
when they planned to complete and/ or test their plan, (3) did not
intend to complete their plans until after

April 1999, or (4) did not intend to finish testing the plans
until after September 1999. In January 1999, we testified before
you that OMB could consider setting a target date, such as April
30, 1999, for the completion of business continuity and
contingency plans, and require agencies to report on their
progress against this milestone. 13 This would encourage agencies
to expeditiously develop and finalize their plans and would
provide the President's Council on Year 2000 Conversion and OMB
with more complete information on agencies' status on this
critical issue. To provide assurance that agencies' business
continuity and contingency plans will work if they are needed, we
also suggested that OMB may want to consider requiring

agencies to test their business continuity strategy and set a
target date, such as September 30, 1999, for the completion of
this validation.

On March 31, OMB and the Chair of the President's Council on Year
2000 Conversion announced that completing and testing business
continuity and contingency plans as insurance against disruptions
to federal service delivery and operations from Year 2000- related
failures will be one of the key priorities that federal agencies
will be pursuing through the rest of 1999. OMB also announced that
it planned to ask agencies to submit their business continuity and
contingency plans in June. In addition to this action, we would
encourage OMB to implement the suggestion that we

made in our January 20 testimony and establish a target date for
the validation of these business continuity and contingency plans.

13 GAO/T-AIMD-99-50, January 20, 1999.

Page 7 GAO/T-AIMD-99-143

Recent OMB Action Could Help Ensure Business Continuity of High-
Impact

Programs While individual agencies have been identifying and
remediating missioncritical

systems, the government's future actions need to be focused on its
high- priority programs and ensuring the continuity of these
programs, including the continuity of federal programs that are
administered by states. Accordingly, governmentwide priorities
need to be based on such criteria as the potential for adverse
health and safety effects, adverse

financial effects on American citizens, detrimental effects on
national security, and adverse economic consequences. In April
1998, we recommended that the President's Council on Year 2000
Conversion

establish governmentwide priorities and ensure that agencies set
agencywide priorities. 14 On March 26, 1999, OMB implemented our
recommendation by issuing a memorandum to federal agencies
designating lead agencies for the government's 42 high- impact
programs (e. g., food stamps, Medicare, and

federal electric power generation and delivery); the attachment
contains a list of these programs and lead agencies. For each
program, the lead agency was charged with identifying to OMB the
partners integral to program delivery; taking a leadership role in
convening those partners; assuring that each partner has an
adequate Year 2000 plan and, if not, helping each partner without
one; and developing a plan to ensure that the program will operate
effectively. According to OMB, such a plan might include testing
data exchanges across partners, developing complementary

business continuity and contingency plans, sharing key information
on readiness with other partners and the public, and taking other
steps necessary to ensure that the program will work. OMB directed
the lead agencies to provide a schedule and milestones of key
activities in the plan

by April 15. OMB also asked agencies to provide monthly progress
reports. States' Systems' Readiness Essential to the Delivery of
Federal Human Services Programs

OMB's March 1999 memorandum identifies several high- impact
stateadministered programs, such as Food Stamps, Medicaid, and
Temporary Assistance for Needy Families, in which both the federal
government and the states have a huge vested interest, both
financial and social. Reports by us and the federal lead agencies
have indicated the need for the lead federal agency to work
together with the states to ensure that programs vital to so many
individuals can continue through the change of century. 14
GAO/AIMD-98-85, April 30, 1998.

Page 8 GAO/T-AIMD-99-143

As we reported in November 1998, many systems that support such
human services programs were at risk and much work remained to
ensure continued services. 15 In February 1999, we testified that
while some progress had been achieved, many states' systems have
been reported to be at risk and were not scheduled to become
compliant until the last half of 1999. 16 Further, progress
reports had been based largely on state selfreporting,

which, upon site visits, has occasionally been found to be overly
optimistic. Accordingly, we concluded that given these risks,
business continuity and contingency planning was even more
important in ensuring continuity of program operations and
benefits in the event of systems failures. In January 1999, OMB
implemented a requirement that federal oversight agencies include
the status of selected state human services systems in their
quarterly reports. Specifically, OMB requested that the agencies
describe actions to help ensure that federally supported, state-
run

programs will be able to provide services and benefits. OMB
further asked that agencies report the date when each state's
systems will be Year 2000 compliant. Table 1 summarizes the
information gathered by the Departments of Agriculture, Health and
Human Services, and Labor on how

many state- level organizations are compliant or when in 1999 they
planned to be compliant.

Table 1: Reported State- Level Readiness for Key Federally
Supported Programs a

15 Year 2000 Computing Crisis: Readiness of State Automated
Systems to Support Federal Welfare Programs (GAO/AIMD-99-28,
November 6, 1998). 16 Year 2000 Computing Crisis: Readiness of
State Automated Systems That Support Federal Human Services
Programs (GAO/T-AIMD-99-91, February 24, 1999). Program Compliant
JanuaryMarch AprilJune

JulySeptember OctoberDecember No

report

Food Stamps 15 10 12 8 5 0 Unemployment Insurance 21 6 13 8 1 1
Temporary Assistance for Needy Families 7 3 12 4 2 22 Medicaid--
Integrated Eligibility System 3 1 8 5 1 33 Medicaid-- Management
Information Systems 7 7 14 12 2 9 Child Support 4 6 10 3 2 25

(continued)

Page 9 GAO/T-AIMD-99-143

a According to OMB, the Departments of Agriculture and Health and
Human Services were still collecting information from the states
on the status of the Child Nutrition Program and the Low Income
Home Energy Assistance Program, respectively.

Note: OMB reported the status of 5 programs for 50 state- level
organizations (Food Stamps, Unemployment Insurance, Temporary
Assistance for Needy Families, Child Support, and Women, Infants,
and Children). The status of 2 programs was provided for 51 state-
level organizations

(Medicaid and Child Welfare). The status of Child Care was
provided for 53 state- level organizations. Source: Progress on
Year 2000 Conversion, (OMB, data received February 12, 1999,
issued on March 18, 1999).

This table illustrates the need for federal/ state partnerships to
ensure the continuity of these vital services, since a
considerable number of state- level organizations are not due to
be compliant until the last half of 1999, and the agencies have
not received reports from many states. Such partnerships could
include the coordination of federal and state business continuity
and contingency plans for human resources programs.

One agency that could serve as a model to other federal agencies
in working with state partners is the Social Security
Administration, which relies on states to help process claims
under its disability insurance program. In October 1997, we made
recommendations to the Social Security Administration to improve
its monitoring and oversight of state

disability determination services and to develop contingency plans
that consider the disability claims processing functions within
state disability determination services systems. 17 The Social
Security Administration agreed with these recommendations and, as
we testified this February, has taken several actions. 18 For
example, it established a full- time disability determination
services project team, designating project managers and

coordinators and requesting biweekly status reports. The agency
also obtained from each state disability determination service (1)
a plan specifying the specific milestones, resources, and
schedules for completing Year 2000 conversion tasks and (2)
contingency plans. Such an approach

Program Compliant JanuaryMarch AprilJune

JulySeptember OctoberDecember No

report

Child Care 4 3 8 5 2 31 Child Welfare 6 3 8 5 2 27 Women, Infants,
and Children 24 8 6 6 6 0

17 Social Security Administration: Significant Progress Made in
Year 2000 Effort, But Key Risks Remain (GAO/AIMD-98-6, October 22,
1997). 18 Year 2000 Computing Crisis: Update on the Readiness of
the Social Security Administration (GAO/TAIMD-99-90, February 24,
1999).

Page 10 GAO/T-AIMD-99-143

could be valuable to other federal agencies in helping ensure the
continued delivery of services.

In addition to the state systems that support federal programs,
another important aspect of the federal government's Year 2000
efforts with the states are data exchanges. For example, the
Social Security Administration exchanges data files with the
states to determine the eligibility of disabled persons for
disability payments and the National Highway Traffic Safety
Administration provides states with information needed for drivers
registration. As part of addressing this issue, the General
Services Administration is collecting information from federal
agencies and the

states on the status of their exchanges through a secured Internet
World Wide Web site. According to an official at the General
Services Administration, 70 percent of federal/ state data
exchanges are Year 2000 compliant. However, this official would
not provide us with supporting documentation for this statement
nor would the General Services Administration allow us access to
its database. Accordingly, we could not verify the status of
federal/ state data exchanges.

In conclusion, it is clear that much progress has been made in
addressing the Year 2000 challenge. It is equally clear, however,
that much additional work remains to ensure the continued delivery
of vital services. The federal government and its partners must
work diligently and cooperatively so that such services are not
disrupted.

Mr. Chairman, Ms. Chairwoman, this concludes my statement. I will
be pleased to respond to any questions that you or other members
of the Subcommittees may have at this time.

Page 11 GAO/T-AIMD-99-143

Attachment

Federal High- Impact Programs and Lead Agencies

Agency Program

Department of Agriculture Child Nutrition Programs Department of
Agriculture Food Safety Inspection Department of Agriculture Food
Stamps Department of Agriculture Special Supplemental Nutrition
Program for Women, Infants, and Children Department of Commerce
Patent and trademark processing Department of Commerce Weather
Service Department of Defense Military Hospitals Department of
Defense Military Retirement Department of Education Student Aid
Department of Energy Federal electric power generation and
delivery Department of Health and Human Services Child Care
Department of Health and Human Services Child Support Enforcement
Department of Health and Human Services Child Welfare Department
of Health and Human Services Disease monitoring and the ability to
issue warnings Department of Health and Human Services Indian
Health Service Department of Health and Human Services Low Income
Home Energy Assistance Program Department of Health and Human
Services Medicaid Department of Health and Human Services Medicare
Department of Health and Human Services Organ Transplants
Department of Health and Human Services Temporary Assistance for
Needy Families Department of Housing and Urban Development Housing
loans (Government National Mortgage Association) Department of
Housing and Urban Development Section 8 Rental Assistance
Department of Housing and Urban Development Public Housing
Department of Housing and Urban Development FHA Mortgage Insurance
Department of Housing and Urban Development Community Development
Block Grants Department of the Interior Bureau of Indians Affairs
programs Department of Justice Federal Prisons Department of
Justice Immigration Department of Labor Unemployment Insurance
Department of State Passport Applications and Processing
Department of Transportation Air Traffic Control system Department
of Transportation Maritime Search and Rescue Department of the
Treasury Cross- border Inspection Services Department of Veterans
Affairs Veterans' Benefits Department of Veterans Affairs
Veterans' Health Care Federal Emergency Management Agency Disaster
Relief Office of Personnel Management Federal Employee Health
Benefits

(continued)

Lett er

Attachment Federal High- Impact Programs and Lead Agencies

Page 12 GAO/T-AIMD-99-143

Agency Program

Office of Personnel Management Federal Employee Life Insurance
Office of Personnel Management Federal Employee Retirement
Benefits Railroad Retirement Board Retired Rail Workers Benefits
Social Security Administration Social Security Benefits U. S.
Postal Service Mail Service

(511750) Lett er

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