Fiscal Year 1997 Budget Estimates for the U.S. General Accounting Office
(Testimony, 06/14/96, GAO/T-OCG-96-6).

GAO discussed its fiscal year (FY) 1997 budget request, focusing on its
legislative oversight responsibilities. GAO noted that: (1) it testified
approximately 250 times on issues such as budget savings, fraud, waste
and abuse, and reengineering during FY 1995; (2) its expertise enables
it to respond to congressional needs; (3) it has been able to fulfill
additional audit responsibilities by taking advantage of modern
technology and improving staff skills; (4) it has implemented federal
downsizing initiatives by enacting separation incentives and early
retirement programs, consolidating issue area staffs, closing regional
offices, and reducing administrative staff; (5) it may not have adequate
resources to carry out some of its mandated responsibilities; (6)
despite budget cuts, its productivity in FY 1995 was 6 percent higher
than in FY 1994; (7) its audit findings have resulted in nearly $120
billion in savings, almost $55 for every dollar appropriated to it; (8)
its emphasis on high-risk programs reduces fraud in federal programs;
(9) it targets spending reductions to reduce the budget deficit; (10)
many of its reports alert Congress to major problems in government
programs and processes; and (11) the federal government needs to invest
more of its resources in better information resources management,
implementing the Chief Financial Officer's Act, and reengineering job
processes.

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

 REPORTNUM:  T-OCG-96-6
     TITLE:  Fiscal Year 1997 Budget Estimates for the U.S. General 
             Accounting Office
      DATE:  06/14/96
   SUBJECT:  Reengineering (management)
             Federal downsizing
             Legislative bodies
             Financial management
             Information resources management
             Future budget projections
             Budget cuts
             Deficit reduction
             Reductions in force
             Audit oversight
IDENTIFIER:  Bank Insurance Fund
             Supplemental Security Income Program
             Medicare Program
             Medicaid Program
             Internet
             DOE Civilian Nuclear Waste Program
             FTA Grant Management Program
             HUD Single Family Mortgage Assignment Program
             BIF
             
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Cover
================================================================ COVER


Before the Subcommittee on Legislative Branch
Committee on Appropriations
U.S.  Senate

For Release
on Delivery
Expected at
10:00 a.m.  EST
Friday
June 14, 1996

FISCAL YEAR 1997 BUDGET ESTIMATES
- U.S.  GENERAL ACCOUNTING OFFICE

Statement of
Charles A.  Bowsher
Comptroller General
of the United States

GAO/T-OCG-96-6

GAO/OCG-96-6T



Abbreviations
=============================================================== ABBREV


============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here today to testify on GAO's fiscal year 1997
budget request. 

This year we celebrate the agency's 75th anniversary.  While GAO's
structure and operations have evolved over the years, its key role in
helping the Congress in its legislative oversight responsibilities
remains unchanged. 

We see our mission as seeking to achieve honest, efficient management
and full accountability throughout government.  To accomplish this
mission, we are prepared to follow the federal dollar wherever it
goes and to evaluate the efficiency and effectiveness of federal
programs. 

During this past year, GAO has again demonstrated its high value to
the Congress and the American taxpayer.  In fiscal year 1995, the
House and Senate asked us to testify nearly 250 times on issues
ranging from budget savings, to fraud, waste and abuse, to proposals
for reengineering the federal government.  GAO's expertise across the
full range of government programs and activities and its extensive
past and ongoing audit and evaluation work have allowed the agency to
respond quickly to changing congressional needs and priorities. 

To meet the challenges of the upcoming year, the Congress will
continue to turn to GAO for accurate information and unbiased
analyses.  GAO is in a unique position to help the Congress as it
strives to cut the deficit and reexamine the objectives and
structures of federal programs and initiatives.  Committees in both
houses have requested that GAO do work vital to their legislative
agendas.  Moreover, new and continuing statutory requirements
necessitate that GAO continue to play a key role in improving
government accountability and management. 

GAO assists the Congress with a staff level of about 3,700 full time
equivalent (FTE) positions for the current fiscal year.  This level
is down from 5,325 employees in 1992 and is GAO's lowest staffing
level since before World War II.  Although agencies audited by GAO
have grown several times over as the federal government has grown in
size and complexity, GAO has been able to fulfill its added
requirements and responsibilities despite fewer staff by continually
working to increase productivity, taking advantage of modern
technology, and improving staff skills and expertise. 


   FY 1997 BUDGET REQUEST
---------------------------------------------------------- Chapter 0:1

GAO is committed to being a model government agency of the
future--smaller and at the same time achieving greater efficiencies
through effectively using technology and modern management
principles.  Last year, the Congress directed a 25- percent reduction
in resources for the agency over a 2-year period.  In order to comply
with this directive, we continue to implement initiatives to further
reduce our resource level for fiscal year 1997.  We have conducted a
separation incentive program and an early retirement program,
consolidated some of our issue areas at headquarters, closed several
regional offices, and implemented a reduction-in-force of our
administrative and support staff.  We are also in the process of
privatizing our supply function, and we have looked for other
opportunities to use contract assistance.  These actions will enable
us to fully implement the directed 25-percent reduction from our
fiscal year 1995 level in fiscal year 1997, and will result in a
staff level of 3,500--a reduction of over 30 percent from our fiscal
year 1992 level. 

However, one problem has emerged.  There is a risk that GAO will not
have adequate resources to do its job in some key areas--
particularly in financial accounting and information systems
management.  It is important that the agency have sufficient
resources to carry out its Chief Financial Officers Act
responsibilities and to support congressional efforts to reform the
federal government's financial management systems.  Staff skilled in
these critical areas have left GAO in disproportionate numbers. 
Although we have reassigned remaining staff to the extent possible, a
shortage of expertise in these disciplines remains.  This problem is
exacerbated because we do not have the funds necessary to acquire
this expertise from other sources.  Also, our program audit areas
have suffered losses in key expertise and will require attention at
some point. 

Therefore, I am hopeful that the committee will consider providing us
with some additional resources that will help us address this issue. 
I am sensitive to last year's commitment to reduce GAO's budget by 25
percent.  I am also sensitive to the fact that the Committee wants to
achieve that objective without seriously damaging GAO's ability to
perform its core mission.  Given our experience to date, I am
concerned that further reductions, without taking steps to balance
expertise, will adversely effect our ability to perform mission
critical work. 


   GAO'S WORKLOAD AND
   ACCOMPLISHMENTS
---------------------------------------------------------- Chapter 0:2

During this past year, GAO has maintained its productivity at high
levels as the following chart illustrates.  We produced 1,322 audit
and evaluation products that cut across the full range of government
programs and activities.  These consisted of 910 reports to the
Congress and agency officials, 166 formal congressional briefings,
and 246 congressional testimonies.  The productivity level for fiscal
year 1995 represents a 6- percent increase over that for fiscal year
1994. 



   (See figure in printed
   edition.)

Moreover, when GAO's downsizing efforts are considered and its
productivity calculated on the basis of output per 100 staff years
spent, the product volume for fiscal year 1995 represents a
12-percent increase over that for fiscal year 1994. 

We also reduced the duration of jobs and their cost in order to
handle a workload that has become larger and more technically and
analytically complex.  The chart below illustrates that in the key
dimensions of job length and job cost, GAO's performance improved in
1995, thus providing better service to the Congress. 



   (See figure in printed
   edition.)

The chart shows reductions in both the average and the median
duration and cost of GAO's jobs between fiscal years 1993 and 1995. 
The median is the more important indicator since it is more
representative of the time and the cost of a typical assignment.  As
the chart shows, GAO's median assignment duration dropped from 8.7
months in fiscal year 1994 to 6.3 months in fiscal year 1995, or over
27 percent.  Similarly, the cost of a typical assignment during this
period dropped 29 percent, providing the Congress with more
cost-effective products and services. 


   GAO AS A RESOURCE FOR
   CONGRESSIONAL USE
---------------------------------------------------------- Chapter 0:3

We produce reports that address issues of national importance and
contribute to congressional oversight and debate.  Many of GAO's
recommendations and audit findings result in or contribute to
improvements in the effectiveness and the efficiency of government
operations and services and have provided information and analyses on
some of the most pressing and controversial matters faced by the
Congress.  As shown in the next chart, GAO documented nearly 200 of
these accomplishments in each of the past several years, and more
than 200 in 1995. 



   (See figure in printed
   edition.)

Let me also direct your attention to the next set of charts that
shows that in fiscal year 1995 alone, GAO identified financial
benefits that totaled nearly $16 billion--a return of more than $35
for every dollar appropriated for GAO.  The companion chart documents
a steady upward trend in our measurable benefits in the preceding
three 5-year periods.  Between 1991 and 1995, financial benefits that
either were directly attributable to or significantly influenced by
our work totaled nearly $120 billion, or about $55 for every dollar
appropriated for GAO.  Given the importance of reducing the budget
deficit, we keep financial benefits at the forefront of our work. 



   (See figure in printed
   edition.)

I would like to discuss our work from this past year as well as the
focus of our current and future work within the framework of our
strategic plan entitled, Following the Federal Dollar, which
identifies our five highest priority issues according to
congressional expectations. 


      PROMOTING A MORE EFFICIENT
      AND COST-EFFECTIVE
      GOVERNMENT
-------------------------------------------------------- Chapter 0:3.1

GAO is in a unique position to help the Congress as it strives to
reexamine the objectives and structures of federal programs and
initiatives to cut the deficit.  Committees in both houses have
requested that GAO do work vital to their legislative agendas. 
Moreover, new and continuing statutory requirements necessitate that
GAO continue to play a key role in improving government
accountability and management.  We are committed not only to making
government cost less, but also to making it operate more efficiently
and effectively.  Although downsizing is one way to move toward this
goal, it must be carefully planned and implemented--a process that
demands the kind of objective and comprehensive information GAO is
uniquely equipped to gather and analyze.  We have, for example,
studied defense force structure in light of decisions to reduce the
size of the U.S.  armed forces, tracked the results of previous
downsizing efforts at the Social Security Administration and other
agencies, and studied downsizing approaches taken by private
organizations. 

We have several audits and evaluations either under way or
contemplated for the coming months that could yield significant
savings for the federal government.  For example, GAO will be
identifying "best practices" to help streamline defense acquisition,
procurement, finance, inventory management, maintenance and repair,
and transportation; identifying more cost-effective ways to clean up
the nation's nuclear weapons complex; and evaluating proposals to
achieve major reorganizations of the Federal Aviation Administration
and Amtrak. 


      EXPOSING FRAUD, WASTE,
      ABUSE, AND MISMANAGEMENT
-------------------------------------------------------- Chapter 0:3.2

After the scandal at the Department of Housing and Urban Development
in the late 1980s and the "Ill Wind" scandal at the Department of
Defense, we began a widely publicized effort to identify and monitor
programs at risk for fraud, waste, abuse, or mismanagement.  Through
scores of studies and two special series of "high risk" reports--the
most recent of which appeared in February 1995--we have highlighted
areas in which major improvements are needed to protect the
taxpayers' interests. 

Priority work includes assessing payment practices under Medicare, in
which losses could run into the billions annually; minimizing
defaults in federal loan programs, such as student assistance and the
Farmers Home Administration, in which loss exposure runs into the
billions of dollars; and monitoring defense programs in which
billions of dollars have been spent on unneeded inventory and
millions of dollars have been incorrectly paid to defense
contractors. 

Our emphasis on high-risk programs is paying off.  The most recent
high-risk reports confirmed that progress had been made in attacking
the root causes of problems at 15 of the 18 programs we had
identified through fiscal year 1994.  Five of the 18 programs-- the
Bank Insurance Fund, the Resolution Trust Corporation, the Pension
Benefit Guaranty Corporation, the State Department's management of
overseas property, and the Federal Transit Administration's grant
management program--are now on sound enough footing that we have
removed their high-risk designations.  In fiscal year 1995, we
designated seven new high-risk areas, in hopes that increased focus
afforded these areas will yield progress among them as well.  The
areas included monitoring multi-billion dollar information technology
initiatives at the Internal Revenue Service and the Federal Aviation
Administration as well as assessing improvements needed in the
Defense Department's financial management. 


      TARGETING SPENDING
      REDUCTIONS TO REDUCE THE
      DEFICIT
-------------------------------------------------------- Chapter 0:3.3

As the Congress works to balance the federal budget, one of its major
challenges will be to cut federal spending over the next 6 years by a
total of $1 trillion or more.  Every year, we work with the
congressional appropriations committees to find potential savings in
the administration's proposed budget; generally identifying savings
in the billions of dollars. 

We also work with the budget and authorizing committees to find
opportunities to save money by modifying, limiting, or abolishing
entire programs. 

For example, we are looking at ways to reduce the deficit in the $160
billion Medicare program.  We have identified savings that can be
realized by better targeting federal payments to medically
underserved areas.  We have recommended changes to the collection of
payments for those instances in which the government pays first but
should pay second, for Medicare patients who have other health
insurance coverage.  And we have identified problems with the payment
rates for reimbursements to risk-contract HMOs that provide services
to Medicare beneficiaries. 

Due to continuing rapid inflation in health care costs, major changes
are underway in the delivery of health services--most notably the
emergence of managed care, which holds promise for better cost
control in the future.  We have worked to identify ways for the
Medicare and Medicaid systems to more effectively use managed care's
potential, such as better rate setting mechanisms for Medicare HMOs
to avoid overpayments and better oversight of managed care systems to
protect beneficiaries from inappropriate denial of care and federal
dollars from payment abuses. 

We have under way a number of reviews at the Social Security
Administration to identify opportunities for program savings. 
Several reviews target fraud, waste, and abuse in SSA's Supplemental
Security Income Program, which pays $25 billion in benefits each
year.  We are also reviewing SSA's strategy for conducting continuing
disability reviews to identify whether process improvements would
allow the agency to more effectively terminate benefits for
individuals who no longer qualify to receive them. 

In October 1995, we issued a report raising concerns with HUD's
mortgage assignment program, which was created in 1959 to help
mortgagors who have defaulted on HUD-insured loans avoid foreclosure
and retain their homes by providing them with financial relief. 
However, this program has not reduced FHA's foreclosure losses;
instead, losses have exceeded those that would have been incurred if
loans had gone immediately to foreclosure without assignment.  We
have identified several options that are available to the Congress to
reduce the losses incurred by this program. 

We also have under way, or else soon will begin, other efforts to
identify ways to reduce federal expenditures.  These efforts include
reviewing the need for such Department of Energy programs as the
civilian nuclear waste program, the power marketing administrations,
and the Strategic Petroleum Reserve; and identifying discretionary
programs at the Department of Health and Human Services that are
ineffective or whose overhead expenses run too high.  To help the
Congress address the deficit, GAO has also recently reported over 120
options for budgetary savings on the basis of its audit and
evaluation work, and many of these options were included in the House
report on the fiscal year 1996 budget resolution. 


      IDENTIFYING TRENDS WITH
      FISCAL, BUDGETARY, OR
      OVERSIGHT CONSEQUENCES FOR
      THE GOVERNMENT
-------------------------------------------------------- Chapter 0:3.4

Numerous GAO reports have alerted the Congress and other policymakers
to crises in the making--from an outdated federal food inspection
system to the crumbling financial condition of the District of
Columbia, from cost overruns in major weapons systems to the
deterioration of nuclear weapons facilities.  We believe that one of
our priorities must always be to identify trends that could lead to
major problems for the government.  For example, the financial
services industry is growing larger and more complex while the
regulatory structure to protect investors and depositors has many
gaps.  Although health care costs continue to grow at a rate faster
than inflation and the delivery of health care services is rapidly
changing, the implications of these changes for the financially
pressed Medicare and Medicaid systems are unclear.  Lastly, the
Department of Energy's program to store and dispose of spent
radioactive fuel from civilian nuclear power plants may be reaching a
crisis.  GAO is committed to helping the Congress face the challenge
of deciding how to deal with this growing problem.  And, while the
1993 amendments to the Social Security Act reestablished the fiscal
soundness of the Social Security retirement program, workforce and
retirement trends over the coming decades will put new pressures on
the program.  Projections show the program beginning to run annual
deficits about the year 2013.  Options for addressing this problem
need to be acted upon in the near term in order to assure a stable
retirement future for millions of Americans. 


      IMPROVING ACCOUNTABILITY
      THROUGH FINANCIAL AND
      INFORMATION MANAGEMENT
-------------------------------------------------------- Chapter 0:3.5

For more than a decade, GAO has reported to the Congress that federal
agencies were lacking even minimally acceptable accounting and
financial management systems.  Tens of billions of dollars could not
be accounted for, agency books could not be balanced, and widespread
mismanagement was wasting billions of dollars every year. 
Recognizing the need for better financial management in the federal
government, the Congress passed, on a bipartisan basis, the Chief
Financial Officers Act (CFO) of 1990.  This law requires major
federal departments and agencies to prepare financial statements and
to undergo annual financial audits. 

We have a major responsibility to monitor agencies' progress under
the CFO act.  This year, the 24 largest federal departments and
agencies are required to produce auditable financial statements. 
Beginning in 1997, we will also have the job of auditing the annual
consolidated financial reports of the U.S.  government, which are
intended to show the Congress and American taxpayers the status of
federal finances.  It is crucial that CFO Act implementation stay on
schedule.  Likewise, GAO must maintain the ability to develop
comprehensive, reliable information that congressional leaders rely
on to reduce spending and ensure accountability among federal
departments and agencies.  Moreover, this information will contribute
to the effective implementation of the Government Performance and
Results Act of 1993, which makes performance measurement a key
element of federal program management. 

We have also put considerable emphasis on the need to improve
information resource management (IRM).  While the federal government
spends about $25 billion each year on computers and information
technology, it ought to be getting far greater value than it has been
for so large an investment.  In 1994, we produced a widely recognized
report on how 11 basic principles drawn from leading public and
private sector organizations could be used in the federal
government's IRM programs.  The Congress has already endorsed many of
these "best practices" in its reauthorization of the Paperwork
Reduction Act. 


   OPERATIONAL IMPROVEMENTS
---------------------------------------------------------- Chapter 0:4

As I mentioned earlier, we have made many operational improvements
over the past several years that have enabled us to maintain our
productivity levels and the high quality of our work even though our
resources have been decreasing.  I'd like to update the Committee on
these efforts. 


      CAPITALIZING ON INFORMATION
      RESOURCES TECHNOLOGY
-------------------------------------------------------- Chapter 0:4.1

Over the past several years, introduction of the latest technology
has helped our staff by giving them ready access to numerous sources
of information that are critical to successfully and efficiently
completing assignments.  This technology has enabled staff to perform
more indepth analyses and has provided for easier, faster, and more
efficient sharing of information.  In addition, the use of local area
networks and the wide area network has greatly enhanced
communications, which is essential to the timely and successful
completion of our work. 

During this past year, GAO has continued its efforts to further
develop its automated information resources to increase staff access
to information.  We have extended our data network to all locations
and installation of the Data Collection and Analysis (DCA)
application is complete.  This application will greatly enhance our
ability to perform our mission effectively with reduced resources. 
We have identified the requirements for connecting our documents
database and CD-ROM research networks to the data network and have
started implementation.  We have upgraded and integrated video
conferencing and voice mail with our operations, and we have begun
publishing GAO products on the Internet through GPO's Wide Area
Information Server.  We are also using the network to efficiently
provide administrative information to agency staff.  This has been
done in the context of modernizing our facilities while removing
asbestos from the GAO building.  This will provide an overall work
environment that maximizes the efficiency with which we do our work. 


      RE-ENGINEERING JOB PROCESSES
-------------------------------------------------------- Chapter 0:4.2

Efficiency gains have also resulted from our quality management
efforts over the past several years.  We have identified and are
making several improvements to our work processes by using this
management approach.  For example, we have made significant progress
in reducing rework and cycle time for jobs and improving on-time
delivery of reports.  We have implemented, on a GAO-wide basis, a
standardized audit and evaluation process that incorporates the best
practices from throughout GAO.  This process incorporates new
technology and automated tools to ensure optimal responsiveness in
every job as well as enhance quality.  In addition, we are finalizing
plans for a cost estimation and costing system that should be
operational later this fiscal year.  This system will enable us to
more accurately assess the estimated and actual costs of jobs.  Our
goal is to reduce the costs of our audit and evaluation jobs and the
time it takes to complete them. 


   CONCLUSION
---------------------------------------------------------- Chapter 0:5

These are challenging times for GAO.  We must continue to find ways
of doing a good job even better--and doing it faster, at less cost,
and with fewer people.  Over the past several years, we have worked
with the Congress to reduce GAO's resources because we recognize that
we need to take our share of the reduction as measures are taken to
balance the federal budget.  Although we have been very successful in
reducing our resource levels while maintaining a high level of
productivity and keeping the quality of our work high, we face a
significant challenge in fiscal year 1997 in continuing to meet our
congressional audit and evaluation workload. 

*** End of document. ***