Congressional Oversight: Challenges for the 21st Century (Testimony,
07/20/2000, GAO/T-OCG-00-11).

Pursuant to a congressional request, GAO discussed the importance of
congressional oversight and the challenges that face the 21st century.

GAO noted that: (1) future fiscal challenges call for prudent
stewardship of the national government to ensure delivery of the
services that Americans need versus what they want, and considering what
the government can collectively afford; (2) this affordability issue is
critical and complex given the current budget surpluses and the
approaching demographic tidal wave; (3) consideration should be given to
providing enough fiscal flexibility so future generations can make some
of their own choices regarding government roles and resources; (4)
government performance and accountability need to be enhanced in order
to get the most out of available resources and forge effective
approaches to both the newly emerging and long-standing problems facing
the nation; (5) legislation enacted in the 1990s has provided a
statutory framework to help resolve long-standing management problems
that undermined the federal government's effectiveness and efficiency
and to provide greater accountability for results; (6) the reforms that
have been adopted have profound implications for what the government
does, how it is organized, and how it performs; (7) nevertheless, these
statutory reforms which focused on performance, financial, and
information technology management did not encompass all areas of
government management; (8) human capital issues are the missing link in
the management and accountability framework; (9) to meet the challenges
of the 21st century, the federal government will need to: (a) implement
modern management practices for more efficient and effective delivery of
government services; (b) possess the effective management approaches and
tools needed to develop and maintain high-performing organizations; and
(c) implement the human capital practices needed to support a focus on
performance-based management; (10) to improve oversight, a bicameral and
non-partisan oversight agenda should be forged that will meet the needs
of Congress, capitalize on GAO's extensive skills and knowledge, and
protect the public's interests; (11) this approach will build on the
management reforms of the 1990s that facilitate better management of the
workloads of Congress, GAO, and federal agencies; and (12) it will also
enable three tracks of oversight: (a) looking at programs and efforts
that involve multiple agencies and cross committee jurisdictions; (b)
examining, across government, various functions that are critical to
high-performing organizations; and (c) overseeing the management and
effectiveness of individual agencies.

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

 REPORTNUM:  T-OCG-00-11
     TITLE:  Congressional Oversight: Challenges for the 21st Century
      DATE:  07/20/2000
   SUBJECT:  Productivity in government
	     Performance measures
	     Agency missions
	     Strategic planning
	     Interagency relations
	     Accountability
	     Congressional oversight
	     Information resources management
	     Financial management
	     Human resources utilization
IDENTIFIER:  Social Security Program
	     Medicare Program
	     SBA 7(a) Loan Program
	     SBA 8(a) Program

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GAO/T-OCG-00-11

Mr. Chairman, Senator Kerry, and Members of the Committee:

I appreciate the opportunity to testify before this Committee today to
discuss the importance of Congressional oversight and our role in assisting
you with this task. Let me commend you, Mr. Chairman, for taking on the
important, but not always glamorous, task of serious oversight. Major
review--both of existing laws and programs-and their implementation-and of
agency management is hard work, but it can yield important outcomes.
Reviewing existing programs to determine whether they can work better and to
determine how an agency can perform its mission more economically,
efficiently, and effectively is critical to maximizing the government's
performance and assuring its accountability to the Congress and the American
people. So that you can spend much of today's session hearing our findings
about SBA, I will not go into great detail on some of the general points
that I want to make regarding oversight. I have elaborated on all of these
in previous statements.

As I have noted before, we stand at an important crossroads. The cold war
has ended, and we won. In addition, after nearly 30 years of budget
deficits, the combination of hard choices and remarkable economic growth has
led to a budget surplus. We appear-at least for the foreseeable future-to
have slain the deficit dragon. At the beginning of the year, the Office of
Management and Budget (OMB) and the Congressional Budget Office (CBO) showed
both unified and on-budget surpluses over the next 10 years, and mid-year
updates have only increased these surplus estimates --> [Author:G] . While
this is good news, it does not mean that making hard choices is a thing of
the past. Even if the budget surplus continues, it does not signal the end
of fiscal challenges. Rather, these surpluses provide an opportunity to look
beyond the 1-, 3-, or 5-year budget horizon of recent deficit debates and to
focus on the longer term challenges as we move into the 21st century.

I have testified before on the importance of preparing for the demographic
tidal wave facing both the United States and much of the industrialized
world. Social Security and Medicare are only the most obvious fiscal time
bombs we face. Bills will also come due for a variety of other commitments
and contingencies.

Facing long-term fiscal challenges is not our only obligation. Freed of the
constraints of the cold war and chronic deficits, we move into the 21st
Century with a golden opportunity-and a fiduciary obligation-to review the
legacy of existing activities and programs with an eye toward weeding out or
reforming those programs to free up resources that can address emerging
needs --> [Author:G] . We now have an opportunity and obligation to take a
comprehensive look at what government should do and how government should do
business. Future fiscal challenges call for prudent stewardship of our
national government to ensure delivery of the services that Americans need
versus what they want, and considering what we can collectively afford. This
affordability issue is critical and complex given our current budget
surpluses and the approaching demographic tidal wave. We may be able to
afford certain actions or activities today, but we may not be able to
tomorrow. In addition, consideration should be given to providing enough
fiscal flexibility so future generations can make some of their own choices
regarding government roles and resources.

The advent of budget surpluses does not lessen the need for more efficient
and effective government and will continue to require difficult choices.
Government performance and accountability need to be enhanced in order to
get the most out of available resources and forge effective approaches to
both the newly emerging and long-standing problems facing the nation.
Legislation enacted in the 1990s has provided a statutory framework to help
resolve long-standing management problems that undermined the federal
government's effectiveness and efficiency and to provide greater
accountability for results. The reforms that have been adopted have profound
implications for what the government does, how it is organized, and how it
performs. Nevertheless, these statutory reforms which focused on
performance, financial, and information technology management did not
encompass all areas of government management. Human capital issues are the
missing link in the management and accountability framework. To meet the
challenges of the 21st Century, the federal government will need to
implement modern management practices for more efficient and effective
delivery of government services; possess the effective management approaches
and tools needed to develop and maintain high-performing organizations; and
implement the human capital practices needed to support a focus on
performance-based management.

We need to re-look at how GAO and the Congress do business in connection
with oversight. We should forge a bicameral and non-partisan oversight
agenda that will meet the needs of the Congress, capitalize on GAO's
extensive skills and knowledge, and protect the public's interests. This
approach will build on the management reforms of the 1990s that facilitate
better management of the workloads of the Congress, GAO and federal
agencies. It will also enable three tracks of oversight:

   * Looking at programs and efforts that involve multiple agencies and
     cross committee jurisdictions;
   * Examining, across government, various functions that are critical to
     high-performing organizations (e.g. strategic planning, Information
     Technology (IT), financial management, and human capital matters); and
   * Overseeing the management and effectiveness of individual agencies.

A strategic oversight plan could facilitate balancing these different
oversight tracks. Individual committees are well suited to address
performance and other issues affecting individual agencies or programs as
you are doing today. It may be more difficult under the current
Congressional structure, however, to tackle federal mission areas that cut
across agencies and committees. As part of our support to Congress, our
approach will be one of constructive engagement in which we will work
closely, in a nonpartisan and non-ideological manner with the House and
Senate Committees on Appropriations, Authorization, Budget, and Oversight
(as well as select committees) to get broad coverage on programs and issues.

Oversight of Crosscutting Programs and Efforts That Involve Multiple
Agencies

I have noted previously --> [Author:G] that many mission areas-from
low-income housing assistance to food safety to counterterrorism to economic
development-are addressed by a wide range of mandatory and discretionary
spending programs, tax expenditures, and regulatory approaches. Virtually
all of the results that the government strives to achieve require the
concerted and coordinated efforts of two or more agencies. Yet our work has
repeatedly shown that mission fragmentation and overlap in the federal
government are widespread. In addition, many federal programs were designed
years ago to meet the needs and demands as determined at that time. It is
important to periodically reexamine whether current programs and activities
remain relevant, appropriate and effective. Unfocused and uncoordinated
programs waste taxpayer dollars, confuse and frustrate program customers,
and limit the effectiveness of federal efforts.

In the Senate, the Governmental Affairs Committee has been a leader in
looking across government in functional reviews. In addition, the Senate
Budget Committee has been a leader in advocating crosscutting performance
oversight and a re-examination of existing missions that cut across agency
and committee jurisdictions. In seeking to assist these efforts we have
offered a number of suggestions or ideas for congressional consideration
including the creation of a "congressional performance resolution" linked to
the budget resolution and a thematic approach to oversight.

We can assist the Congress in its crosscutting efforts by taking a longer,
broader, more strategic and integrated approach to issues facing the
Congress and the nation. To this end, I am realigning GAO to be consistent
with our strategic plan and the nature of the work involved to better assist
the Congress. The amount of value we add clearly will relate to how we deal
with the increasing complexity of our work. For example, the subject of
nuclear weapons is not just a Department of Energy issue. National security,
public safety, environmental and contracting issues are all associated with
our nuclear weapons complex.

Oversight of Crosscutting Functions Necessary to Develop and Maintain
High-Performing Organizations

In the 1990s Congress and the federal government put in place a statutory
and management framework that provides the foundation for strengthening
government performance and accountability. GPRA required agencies to develop
strategic and annual performance plans and annual performance reports that
tell taxpayers what they are getting for their money. The CFO Act and
related legislation created a structure for more businesslike management and
reporting of the government's finances. The Clinger-Cohen Act and the
Paperwork Reduction Act required agencies to take an orderly, planned
approach to their information technology needs. Figure 1 is a time line of
GPRA requirements and other laws that make up the statutory framework to
improve the performance, management, and accountability of the federal
government, including the CFO Act and the Clinger-Cohen Act.

Figure 1: Time Line for Major Reports

aAlthough required to be submitted by January 31, the governmentwide 5-year
financial management plans are generally issued in June or July.

bGPRA requires agencies' strategic plans to cover a period of at least 5
years forward from the fiscal year in which submitted. They are to be
updated at least every 3 years and are submitted to OMB and Congress.

Source: GAO review of statutes.

Congress has helped focus attention on the need for effective implementation
of this framework through hearings and other communication with agencies,
including consultations to ensure that in strategic planning, agencies'
missions are focused, goals are specific and results-oriented, and
strategies and funding expectations are appropriate and reasonable.
Continued Congressional interest and oversight is important if this
framework is to meet its potential to support and promote more
results-oriented government and assist the decisionmaking processes in both
the Executive Branch and Congress. We will continue to assist this
transition through assessing agencies' progress and identifying
opportunities to strengthen government accountability and performance.

We have seen some progress in agency efforts to manage more economically and
efficiently. However, more needs to be done to achieve real and sustained
improvements to address the nation's challenges. Implementing the management
reforms will help contain costs, provide services that meet the public's
needs, and enhance accountability.

The job in the 21st century is to continue to improve and to translate the
intended reforms into a day-to-day management reality across government.
Becoming high-performing organizations requires a cultural transformation in
government agencies. Hierarchical management approaches will need to yield
to partneurial ones. Process-oriented ways of doing business will need to
yield to results-oriented ones. Siloed organizations-burdened with
overlapping functions, inefficiencies, and turf battles-will need to become
integrated organizations if they expect to make the most of the knowledge,
skills, and abilities of their people. Finally, internally focused agencies
will need to focus externally in order to meet the needs and expectations of
their ultimate clients-the American people.

Our work has consistently shown that many agencies face long-standing and
substantial challenges to further progress. The major challenges that
agencies face in becoming high-performing organizations include:

   * Adopting an effective results orientation,

   * Strengthening financial management and related controls to better
     support decisionmaking and demonstrate accountability,

   * Improving the use of information technology to modernize services and
     achieve results, and
   * Developing and implementing modern human capital practices.

The effective implementation of the statutory framework to improve the
performance, management and accountability of the federal government,
although important, is not an end in itself. Rather, the implementation of
the framework is the means to an end-improved federal performance through
enhanced executive branch and congressional decisionmaking and oversight.
Traditionally, the danger to any management reform is that it can become a
hollow, paper-driven exercise, where management improvement initiatives are
not integrated into day-to-day activities of the organization. Performance
improvements within an agency will not occur just because, for example, the
agency has published a strategic plan or the results of an audit of its
financial statements. Performance improvements occur only when congressional
and executive branch decisionmakers use information resulting from these
reforms to help inform decisions and improve the performance and
accountability of the federal government.

Adopting an Effective Results Orientation

GPRA has the potential to help Congress and the executive branch ensure that
the federal government provides the results that the American people expect
and deserve. It also has the potential, if properly implemented, to help
improve the public's respect for and confidence in their government.
Substantial efforts have been undertaken and progress clearly made. However,
much of GPRA's potential remains unrealized.

GPRA implementation is at a critical stage for agencies and Congress. In the
almost 3 years since the requirements of GPRA were implemented across the
executive branch, Congress has been provided with a wealth of new and
valuable information on the plans, goals, and strategies of federal
agencies. The Senate Committee on Government Affairs has acted to open an
important dialogue with agencies and to foster increased agency attention to
these areas. August 17, 1999 letters to agencies summarized the key
management issues identified by GAO and the Inspectors General and asked
each agency to indicate how it will address its high-risk areas and major
management challenges. Committee staff held bipartisan meetings with the
agencies to further discuss these issues and needed actions.

The issuance of the first performance reports in March 2000 represents a new
and potentially more substantive stage in the implementation of GPRA. The
performance reports offer the first opportunity to systematically assess the
agencies' actual performance on a governmentwide basis and to consider the
specific steps that can be taken to improve performance and reduce costs.
These annual reports on program performance can also help congressional
committees monitor and select programs for more detailed reviews. The first
performance reports, and thus the completion of the first full planning and
reporting cycle of GPRA implementation, also suggest that it is an
appropriate point to examine how GPRA can be more fully integrated into
executive branch and congressional decisionmaking. In our summary
assessments of the fiscal year 1999 and fiscal year 2000 annual performance
plans, we highlighted a consistent set of areas that we believe have the
greatest potential for improving the usefulness of GPRA to congressional and
executive branch decisionmakers.

For example, much more progress is needed in linking GPRA performance goals
to agency budget presentations, so that the performance consequences of
budget decisions can be clearly understood. Similarly, technology and human
capital planning and decisionmaking are too often not integrated into
considerations of programmatic results. In our assessment of the fiscal year
2000 annual plans, we found that most plans did not sufficiently address how
the agencies will use their human capital to achieve results. In order for
GPRA to be truly effective, agencies must link their performance measurement
and reward systems to the goals and measures included in their strategic and
performance plans.

We have seen that integrating GPRA into agency operations does not come
quickly or easily. It requires dedicated and persistent leadership not only
within agencies but also by OMB and the Congress. Agencies are responsive to
efforts their Congressional overseers see as important. We have made
recommendations in each of the last 2 years intended to help congressional
and executive branch decisionmakers ensure that GPRA is effectively
implemented and used.

Concerted and continuing congressional oversight is key to addressing the
federal government's persistent performance, management, and accountability
problems. One of the lessons drawn from the history of deficit reduction
efforts during the 1990s is that the use of organizing themes can facilitate
oversight and the re-examination of federal agencies and programs. With this
in mind I have recently used four broad themes to discuss the significant
performance problems in federal programs and agencies that our work has
identified. Let me touch on each of these briefly:

Attack activities at risk of fraud, waste, abuse, and mismanagement. Over
the years, our work has shown that federal functions and programs critical
to personal and national security, ranging from Medicare to weapons
acquisition, have been hampered by daunting financial and program management
problems, exposing the federal government to waste and abuse.

Improve the economy and efficiency of federal operations. Effective
congressional oversight can improve federal performance by examining whether
agencies have the best, most cost-effective mix of strategies in place to
meet their goals.

Comprehensively reassess what the federal government does and how it does
it. Many federal programs-their goals, organizations, processes, and
infrastructures-were designed years ago to meet the needs and demands as
determined at that time and within the technological capabilities of that
earlier era. It is important to periodically re-examine these programs and
activities to see whether they remain relevant and appropriate. This
re-examination must include the effectiveness of the tools-such as spending,
loans, tax incentives and/or regulations.

Redefine the Beneficiaries of Federal Government Programs. Congress
originally defines the intended beneficiaries for any federal program or
service based on certain perceptions of eligibility and/or need. Periodic
oversight can be an effective means to ensure that limited resources remain
properly targeted in light of changing conditions, current program
operations, and overall congressional priorities.

Strengthening Financial Management for Decisionmaking and Accountability

Without timely and accurate information on the full costs of programs, the
government cannot adequately ensure accountability, measure and control
costs, manage for results, nor make timely and fully informed decisions
about allocating limited resources. However, such information has
historically not been routinely available across government.

The CFO Act and related financial management improvement legislation laid
the foundation for the federal government to provide taxpayers, the nation's
leaders, and agency program managers with reliable financial information
through audited financial statements. In addition to requiring annual
audited financial statements, the CFO Act sets expectations for agencies to
build effective financial management organizations and systems and to
routinely produce sound cost and operating performance information
throughout the year. The combination of reforms ushered in by GPRA and the
CFO Act will, if successfully implemented, generate the necessary foundation
to effectively run performance-based organizations. Some progress has been
made by individual agencies in preparing annual financial statements. Of the
24 CFO Act agencies, 6 received an unqualified or "clean" opinion on their
financial statements for fiscal year 1996, 11 for fiscal year 1997, 12 for
fiscal year 1998, and 15 received an unqualified opinion for fiscal year
1999.

Clean audit opinions, however, are not the end game; modern financial
systems and sound internal controls are essential. While clean audit
opinions are essential to providing an annual public scorecard, they do not
guarantee that agencies have the financial systems needed to dependably
produce reliable financial information. Modern systems and sound controls
are essential to reach the end goal of useful, relevant, reliable day-to-day
financial information to support ongoing management and accountability.
Although clean audit opinions can be produced by "heroic efforts", such
efforts are not the solution.

Improving the Use of Information Technology to Achieve Results

Information technology (IT), if leveraged properly, can be an effective tool
for high quality, cost effective government services. Information technology
is at the heart of improving accountability and performance. The government
is heavily dependent on computer systems and networks to implement vital
public services supporting national defense, revenue collections, and social
benefits. To the extent that billions in planned annual obligations for
information technology can be spent more wisely, federal programs will
operate more efficiently and effectively. However, the global expansion of
information technology has resulted in significant new information security
and privacy threats to our information networks and technology
infrastructure. We have discussed these issues in a number of reports.

Many agency efforts to improve IT management are still in the beginning
stages, and it is clear that more needs to be done. At the same time,
agencies are now beginning to address new IT investment needs that were
deferred because of their recent, and appropriate, focus on the Year 2000
conversion problem. As a result, we anticipate that agencies will begin
major modernization programs and large-scale IT projects in the very near
future, making the need for fundamental improvements in the way agencies
manage IT investments even more urgent.

Develop and Implement Modern Human Capital Practices

The government's human capital management is the missing link in the
statutory and management framework that Congress and the executive branch
have established to provide for a more businesslike and results-oriented
federal government. Yet, federal employees are the ones who will make the
principles of performance management work for government. Federal employees
should not be viewed as costs to be cut, but as assets to be valued. Only
when the right employees are on board and provided the training, technology,
structure, incentives and accountability to work effectively is
organizational success possible. Modern strategic human capital management
recognizes that employees are a critical asset for success and that an
organization's human capital policies and practices must be designed,
implemented, and assessed by how well they support the organization's
mission and goals.

Human capital reforms will be necessary to fully benefit from the
performance-based management and accountability framework that Congress has
created. I am optimistic that as the government's understanding of the
importance of people to effective government grows, a new consensus on human
capital will emerge and any needed and appropriate legislative reforms will
be accomplished. However, I am also strongly convinced that we should not
wait for the day when these reforms will arrive. Instead, we can and should
take steps to align our human capital management policies and practices with
modern performance management principles, within the constraints imposed by
current law.

The Oversight Agenda, Agency-Based Oversight and SBA

As I mentioned earlier, the change in our fiscal and security positions
offers a window to take a longer and broader look into the future. In
addition, as the management agenda enacted over the last decade begins to
bear fruit, this is an opportune time for the Congress to think about how to
craft a strategic approach to oversight that best leverages this new
information. Such an approach would permit both individual committees and
the Congress as a whole to set priorities for oversight-and could ensure
systematic coverage of a broad range of agencies and issues over some
reasonable time period. It would also help us help you. Good oversight
support-whether as part of a comprehensive look at a single agency-like
SBA-or a crosscutting look across agencies at mission or function-is
resource-intensive and necessarily competes with other important
congressional requests for our limited resources. A multi-year plan permits
us to program our work in a way that provides the greatest assistance. I
believe it would also help Congressional committees and the Executive
Agencies balance and plan the workload such oversight imposes on them.

Mr. Chairman, let me reprise some important points. Serious oversight is
hard for many reasons. For one thing, it's often not fun. But taking a good
hard look at whether a program or activity still makes sense in the modern
world; looking at how well a program or a tool works to achieve its goals;
asking questions about organization, processes and tools is not easy, fun or
glamorous. And all too often the press stories on this work get it wrong.
Serious oversight means pulling together information from different sources
and asking difficult questions. Acting on the results of that oversight
means making difficult decisions. We at GAO support you and your colleagues
in the belief that difficult as it is, this kind of constructive examination
of what government does, and how, is absolutely critical for this coming
century. I am well aware that there will always be disagreements about the
role of government and about the best approach to meeting a problem.
However, the debate should be carried on using the best information
available. Our role is to help provide you with that kind of information. We
do that in keeping with professional standards and our core values of
accountability, integrity and reliability. We also believe that the most
successful oversight is done on a bipartisan and bicameral basis-without
ignoring policy disagreements. The goal is to end up with a government that
does the important things well.

As you know, we also seek to provide Congress with a broad perspective on a
number of performance issues through our High Risk and Performance and
Accountability Series. Consistent with our beliefs about the importance of
consistency and transparency, in the coming weeks we will be releasing for
comment a document discussing the criteria and process for determining
performance and accountability challenges and high-risks.

As you turn to SBA from this broader discussion of oversight in general let
me note that by assisting the small business sector, SBA fits into a broader
structure of government assistance to economic growth. While SBA's role in
economic development must be viewed in this broader context, it is also
important to look at the agency's programs and operations. I commend this
committee for taking the initiative to look at a single agency by examining
its underlying functions that affect programs and how they operate and
affect the agency's ability to meet its mission. We believe that changes at
SBA make this an appropriate time for increased attention on SBA. These
changes include (1) the ongoing transition of part of SBA's workforce from
loan making and servicing to overseeing the efforts of lenders and other
private sector partners; and (2) the agency's outreach to new markets, such
as smaller businesses located in low- and moderate-income and rural areas.

Our workload at SBA has increased; we have already issued 22 products on SBA
this year. In addition to the work we will testify on today, we have 7
assignments ongoing for this committee. These assignments covering such SBA
programs as 7(a) loans, Small Business Lending Companies, and Women's
Business Centers; as well as such functional areas as financial management,
and budgeting. We also have work underway for other congressional
requesters, including our review of the impact of government procurement
reform on small business for multiple requesters and our review of
information system controls at SBA for the House Committee on Government
Reform and the Senate Committee on Governmental Affairs. Your goal of a
coordinated oversight plan would enable better workload planning for
Congress, the agencies, and GAO.

Pursuant to your request, Mr. Chairman, we are doing additional work at SBA
and will be conveying the results of that work to you over the coming
months. In early 2001, as part of our Performance and Accountability Series,
we will provide an overall report on SBA.

The panel that follows me will provide good examples of both crosscutting
and programmatic work. Stan Czerwinski, who has overall responsibility for
our SBA program work, will discuss the findings from two reports you
requested on SBA's 8(a) program that are being released today. Joel
Willemssen, who has looked across government at information technology
issues, will discuss our report to you on IT at SBA that is also being
released today. Finally, Mike Brostek, who has been on the cutting edge of
GAO's human capital work, will discuss the results of our work on SBA's
human capital management.

Mr. Chairman, I can not overstate my support for you and your colleagues on
both sides of the aisle and in both houses for reinvigorating the
challenging task of serious oversight. This concludes my prepared statement.
I would be pleased to answer any questions you or the other members of the
Committee may have at this time.

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