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United States Government Accountability Office: 
GAO: 

Strategic Plan: 

Serving the Congress and the Nation: 2014–2019: 

GAO-14-1SP: 

Figure 1: Serving the Congress and the Nation: GAO's Strategic Plan 
Framework: 

[Refer to PDF for image: illustration] 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Trends: 

* National Security Threats; 

* Fiscal Sustainability Challenges; 

* Global Interdependency; 

* Science and Technology Trends; 

* Communications Networks and Information Technologies; 

* Shifts in Governance and Government; 

* Demographic and Societal Change. 

Goals & Objectives: 

Goal: Provide Timely, Quality Service to the Congress and the Federal 
Government to: 

1) Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People related to these objectives: 

* Health care needs; 

* Lifelong learning; 

* Challenges facing an aging population; 

* Effective system of justice; 

* Housing finance and viable communities; 

* Stable financial system and consumer protection; 

* Natural resources and the environment; 

* National Infrastructure; 

* Benefits and protections for workers, families, and children. 

2) Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving these objectives: 

* Homeland security; 

* Military capabilities and readiness; 

* Foreign policy and international economic interests. 

Goal: Help Transform the Federal Government to Address National 
Challenges by assessing these objectives: 

* Government's fiscal position and approaches to address current and 
projected fiscal gaps; 

* Federal government audit and internal control standards; 

* Major management challenges and program risks; 

* Fraud, waste, and abuse, and improvements in internal controls. 

Goal: Maximize the Value of GAO by Enabling Quality, Timely Service to 
the Congress and Being a Leading Practices Federal Agency in the areas 
of these objectives: 

* Efficiency, effectiveness, and quality; 

* Diverse workforce and inclusive work environment; 

* Networks, collaborations and partnerships; 

* Human, information, fiscal, technological, and physical resources. 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability. 

Source: GAO. 

[End of Figure 1, GAO's Strategic Plan Framework] 

Table of Contents: 

Abbreviations: 

Letter from the Acting Comptroller General: 

GAO at a Glance: 

Trends Shaping the United States and Its Place in the World: 

Goal 1: Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People: 

Strategic Objective 1.1: Financing and Programs to Serve the Health 
Needs of an Aging and Diverse Population: 

Strategic Objective 1.2: Lifelong Learning to Enhance U.S. 
Competitiveness: 

Strategic Objective 1.3: Benefits and Protections for Workers, 
Families, and Children: 

Strategic Objective 1.4: Supporting the Financial Security and Well-
Being of an Aging Population: 

Strategic Objective 1.5: A Responsive, Fair, and Effective System of 
Justice: 

Strategic Objective 1.6: Housing Finance and Viable Communities: 

Strategic Objective 1.7: A Stable Financial System and Sufficient 
Consumer Protection: 

Strategic Objective 1.8: Responsible Stewardship of Natural Resources 
and the Environment: 

Strategic Objective 1.9: A Viable, Safe, Secure, and Accessible 
National Physical Infrastructure: 

Goal 2: Help the Congress Respond to Changing Security Threats and the 
Challenges of Global Interdependence: 

Strategic Objective 2.1: Protect and Secure the Homeland from Threats 
and Disasters: 

Strategic Objective 2.2: Effectively and Efficiently Utilize Resources 
for Military Capabilities and Readiness: 

Strategic Objective 2.3: Advance and Protect U.S. Foreign Policy and 
International Economic Interests: 

Goal 3: Help Transform the Federal Government to Address National 
Challenges: 

Strategic Objective 3.1: Analyze the Government's Fiscal Condition and 
Opportunities to Strengthen Approaches to Address the Current and 
Projected Fiscal Gaps: 

Strategic Objective 3.2: Support Government Accountability by 
Identifying Fraud, Waste, and Abuse, and Needed Improvements in 
Internal Controls: 

Strategic Objective 3.3: Support Congressional Oversight of 
Crosscutting Issues and Major Management Challenges and Program Risks: 

Strategic Objective 3.4: Establish and Maintain Standards for Auditing 
Federal Government Operations and Standards for Internal Control in 
the Federal Government: 

Goal 4: Maximize the Value of GAO by Enabling Quality, Timely Service 
to the Congress, and by Being a Leading Practices Federal Agency: 

Strategic Objective 4.1: Improve Efficiency and Effectiveness in 
Performing GAO's Mission and Delivering Quality Products and Services 
to the Congress and the American People: 

Strategic Objective 4.2: Maintain and Enhance a Diverse Workforce and 
Inclusive Work Environment through Strategically Targeted Recruiting, 
Hiring, Development, Reward and Retention Programs: 

Strategic Objective 4.3: Expand Networks, Collaborations, and 
Partnerships that Promote Professional Standards and Enhance GAO's 
Knowledge, Agility, and Response Time: 

Strategic Objective 4.4: Be a Responsible Steward of GAO's Human, 
Information, Fiscal, Technological, and Physical Resources: 

List of Figures: 

GAO's Office Locations: 

Figure 1: Map of Terrorist Safe Havens and High Threat Posts in the 
Middle East, Africa and South Asia: 

Figure 2: Top Ten Countries, Military Expenditures (in millions of 
constant 2009 U.S. dollars): 

Figure 3: Map of the Asia-Pacific, Including Selected Current U.S. 
Overseas Presence and Plans: 

Figure 4: Growth in Debt Held by the Public as a Share of GDP: 

Figure 5: Growth in the U.S. Civilian Labor Force Is Projected to Slow: 

Figure 6: Daily Average Number of People Turning 65 Each Year: 

Figure 7: Debt Held by the Public under Two Fiscal Policy Simulations: 

Figure 9: Potential Fiscal Outcomes: Revenues and Composition of 
Spending in the Alternative Simulation: 

Figure 10: Tax Expenditures Approach the Size of Discretionary 
Spending: 

Figure 11: Projected Debt and Fiscal Adjustment Needed in Advanced 
Economies: 

Figure 12: Five-Year Economic Growth Forecast for Select Countries: 

Figure 13: Forecast of Current Account Balances, 2013-2018: 

Figure 14: Share of Banks' Assets Held by the Five Largest Commercial 
Banks in Select Advanced Economies: 

Figure 15: An Example of a Complex Three-Dimensional Nanoscale 
Structure: 

Figure 16: A Titanium Prosthetic Hand Produced Via Additive 
Manufacturing: 

Figure 17: The Anti-Malarial Drug Artemisinin is Derived from This 
Plant, Artemisia Annua (left). Female Mosquito as a Transmission 
Mechanism for Malaria (right: 

Figure 18: U.S. Border Patrol Agent Using a Remote Control to Steer an 
Unmanned Aircraft System: 

Figure 19: Mobile Device Users Accessed the Internet More Frequently 
in 2011: 

Figure 20: Growth in data created, replicated, or consumed in the 
United States: 

Figure 21: Worldwide data growth compared to the United States: 

Figure 22: United States Federalism in Practice: 

Figure 23: Federal Outlays for Grants to State and Local Governments 
and Medicaid, in 2011 Constant Dollars, Fiscal Years 1980 to 2011: 

Figure 24: Federal Contract Obligations 2003 to 2012 (in billions): 

Figure 25: Net International Migration and Natural Increase for the 
United States: 2012 to 2060: 

Figure 26: Foreign-Born Population and as a Percent of Total U.S. 
Population: 

Figure 27: Worldwide Population Is Projected to Grow by a Third by 
2050: 

Figure 28: Labor Force Participation Rates: 

Figure 29: Non-farm Employment, by Industry Sector (1962-2020): 

Figure 30: Mean Household Incomes, by Quintiles and Top 5 Percent 
(1970-2011): 

Figure 31: Growing Disparities in U.S. Men's Life Expectancy Based on 
Income: 

Figure 32: Large Numbers of Baby Boomers Eligible to Retire in Next 5 
Years: 

Figure 33: Total and Per Capita National Health Care Spending, 
Calendar Years 1990, 2000, 2010, and 2020: 

Figure 34: Total Health Care Spending as a Percentage of Gross 
Domestic Product, Calendar Years 1990 through 2017, and Federal Health 
Care Spending As a Percentage of Total Federal Spending, Fiscal Years 
1990 through 2017: 

Figure 35: Change in Employment by Education Level, 2007–2013: 

Figure 36: Nonfarm Employment, 2000–2013: 

Figure 37: Estimated and Actual Outlays for Selected Assistance 
Programs, Fiscal Years 2007-2017: 

Figure 38: Percent of Noninstitutionalized Persons with Limitations in 
Activities of Daily Living by Age Group, 2010: 

Figure 39: Number of Defined Benefit and Defined Contribution Plans, 
1975-2010: 

Figure 40: Personal Saving Rate as a Percentage of Disposable Income, 
1960-2012: 

Figure 41: Violent Crime Rates in the United States, 1992-2011: 

Figure 42: Growth of Federal Prison Population, Fiscal Years 2006-2020: 

Figure 43: National Default and Foreclosure Trends, 1979-2013: 

Figure 44: Trends in the Number of Renter Households with Worst Case 
Housing Needs, 2001-2011: 

Figure 45: Nationwide Annual Sheltered Homeless Population During 2011: 

Figure 46: Federal Financial Regulatory Framework: 

Figure 47: Locations of Unconventional Oil and Gas Reservoirs in the 
United States: 

Figure 48: Potential Pathways for Spread of Antibiotic-Resistant 
Bacteria from Animals to Humans: 

Figure 49: Examples of Private Industry and Government Uses of 
Spectrum: 

Figure 50: Actual and Projected First-Class Mail and Standard Mail 
Volume, Fiscal Years 2000 through 2020: 

Figure 51: Commercial Vehicles Lined Up to Enter the United States at 
Otay Mesa near San Diego, California: 

Figure 52: Diagram of a Checked Baggage Inspection System and Three 
Levels of Screening: 

Figure 53: Remote Controlled Robot Used by Explosive Ordnance Disposal 
Teams to Investigate Possible Explosive Devices Safely: 

Figure 54: DOD's Fiscal Year 2012 Obligations for Contracted Goods and 
Services: 

Figure 55: Boxes of Excess Gear and Equipment in Afghanistan: 

Figure 56: Overview of U.S. International Trade: 

Figure 55: Boxes of Excess Gear and Equipment in Afghanistan: 

Figure 58: Debt Held by the Public under Two Fiscal Policy Simulations: 

Figure 59: State and Local Operating Balance Measure, as a Percentage 
of Gross Domestic Product: 

Figure 60: GAO's Fraud Prevention Framework: 

Figure 61: Number of Defined Benefit and Defined Contribution Plans, 
1985-2007: 

Abbreviations: 

BOP: Bureau of Prisons (federal): 

CBO: Congressional Budget Office: 

CDC: Centers for Disease Control and Prevention: 

Census: U.S. Census Bureau: 

CHIP: Children's Health Insurance Program: 

CMS: Centers for Medicare & Medicaid Services: 

Commerce: Department of Commerce: 

CPSC: Consumer Product Safety Commission: 

CPSIA: Consumer Product Safety Improvement Act: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOJ: Department of Justice: 

EPA: Environmental Protection Agency: 

ESEA: Elementary and Secondary Education Act: 

FBI: Federal Bureau of Investigation: 

FDA: Food and Drug Administration: 

FDIC: Federal Deposit Insurance Corporation: 

FEMA: Federal Emergency Management Agency: 

FHFA: Federal Housing Finance Agency: 

FHA: Federal Housing Administration: 

GDP: gross domestic product: 

GED: General Equivalency Diploma: 

Ginnie Mae: Government National Mortgage Association: 

GPRA: Government Performance and Results Act of 1993: 

GSE: government-sponsored enterprise: 

HI: Medicare's Hospital Insurance: 

HUD: Department of Housing and Urban Development: 

HHS: Department of Health and Human Services: 

HSPD-12: Homeland Security Presidential Directive-12: 

IFPTE: International Federation of Professional and Technical 
Engineers: 

IMF: International Monetary Fund: 

INTOSAI: International Organization of Supreme Audit Institutions: 

IRS: Internal Revenue Service: 

IT: information technology: 

K-12: kindergarten through 12th grade: 

Labor: Department of Labor: 

NASA: National Aeronautics and Space Administration: 

NATO: North Atlantic Treaty Organization: 

NNSA: National Nuclear Security Administration: 

OECD: Organisation for Economic Co-operation and Development: 

OJJDP: Office of Juvenile Justice and Delinquency Prevention: 
Recovery Act: American Recovery and Reinvestment Act of 2009 

PBGC: Pension Benefit Guaranty Corporation: 

pre-K: pre-Kindergarten: 

Pub. L.: Public Law: 

R&D: research and development: 

SBA: Small Business Administration: 

SNAP: Supplemental Nutrition Assistance Program (formerly called the 
Food Stamp Program): 

SSN: Social Security number: 

State: Department of State: 

STEM: Science, Technology, Engineering, and Mathematics: 

TARP: Troubled Asset Relief Program: 

Treasury: Department of the Treasury: 

TSA: Transportation Security Administration: 

UN: United Nations: 

USAID: U.S. Agency for International Development: 

USDA: U.S. Department of Agriculture: 

USPS: U.S. Postal Service: 

VA: Department of Veterans Affairs: 

WIA: Workforce Investment Act: 

[End of Table of Contents] 

Letter from the Comptroller General: 

February 2014: 

I am pleased to present GAO's strategic plan for serving the Congress 
for fiscal years 2014 to 2019. The GPRA Modernization Act of 2010 
modified the delivery date of executive branch strategic plans from 
every 3 to every 4 years. Although as a legislative branch agency we 
are exempt from many laws that apply to executive branch agencies, we 
have chosen to conform to this change to be consistent with the Act. 

This plan describes our proposed goals and strategies for supporting 
the Congress and the nation as the United States undergoes a period of 
significant change, one that entails challenging considerations and 
necessary compromises. 

We have identified seven trends that provide context for our plan: 
[Footnote 1] 

* threats confronting U.S. national security interests; 

* urgent fiscal sustainability and debt challenges; 

* changing dynamics of global interdependence and multilateral 
cooperation; 

* trends in science, technology, engineering, and mathematics; 

* advances in communications networks and information technologies; 

* shifting roles in government and governance; and; 

* demographic and societal changes. 

Since we issued our last plan, we find our nation facing a period of 
great transition, involving both significant perils and unprecedented 
opportunities. We have completed operations in Iraq and are 
transitioning efforts in Afghanistan while shifting our military 
resources and focusing greater attention on Asia and Africa. The 
Middle East region remains unstable, and fragile economic conditions 
and high unemployment in some European Union countries are 
contributing to uncertainty in Europe. Growth forecasts suggest that 
advanced economies will continue to grow at slower rates than 
economies of less-developed countries. 

In response to the global financial crisis, some major advanced 
economies undertook unconventional monetary policies, such as large-
scale asset purchases. While central banks have pursued these policies 
to help economies in the near term, they also give rise to potential 
risks and costs. Phasing out these efforts without destabilizing the 
global economy will be a major management challenge. Country-specific 
approaches to restoring growth, addressing imbalances, and reforming 
financial regulatory systems will influence how the trend toward open 
markets and international integration will evolve, and whether reforms 
to foster global financial stability will be fragmented or harmonized. 
Federal budget projections for the next few years under current U.S. 
law have improved and the U.S. and world economies are expected to 
grow at a faster pace in coming years; however, the recovery remains 
fragile, job creation has been slow, and long-term fiscal challenges 
remain. 

The United States faces a challenge shared by many other countries 
with advanced economies: undertaking unprecedented fiscal efforts to 
stabilize debt ratios at sustainable levels. Long-term fiscal 
simulations by GAO and the Congressional Budget Office (CBO) show the 
federal government continuing on an unsustainable long-term deficit 
and debt path due to spending pressures caused by an aging population 
and growing health care costs. Although the deficit has fallen 
considerably since 2009 to $680 billion at the end of fiscal year 
2013, cumulative debt levels continue to grow. U.S. debt held by the 
public stood at $12.0 trillion or 72 percent of GDP at the end of 
fiscal year 2013—-the largest share of GDP since 1950. Compounding the 
federal government's long-term fiscal outlook are its fiscal exposures 
in such areas as housing finance and pensions (e.g., government-
sponsored enterprises Fannie Mae and Freddie Mac, Department of 
Housing and Urban Development's Federal Housing Administration, and 
the Pension Benefit Guaranty Corporation). If interest rates rise, the 
large amount of debt held by the public that Treasury must roll over 
will become more costly as the U.S. government competes in global 
markets for debt financing. These higher costs could leave fewer 
resources in the years ahead available to support federal programs and 
activities. 

In the upcoming decade, the United States will face demographic 
changes that will have significant fiscal impacts both on the federal 
budget and the economy. The number of baby boomers turning 65 is 
projected to grow from an average of about 7,600 per day in 2011, to 
more than 11,600 per day in 2025, driving spending for major health 
and retirement programs. In the time during and after the 2007-2009 
financial crisis, fertility rates have decreased. Rates of household 
formation have also slowed, accompanied by an increase in young adult 
unemployment and a greater proportion of young adults living with 
their parents. 

There are potential “game-changing” opportunities that could affect 
not only U.S. competitiveness but also that of other countries. Global 
competition will remain fierce as economic growth remains a central 
goal for both developed and developing countries. Rapid developments 
in unconventional and previously unavailable energy sources could 
provide advantages to countries with significant energy supplies and 
alter the position of OPEC nations in the global economy. With the 
sharp rise in production and diversification of energy supplies, the 
United States is becoming less dependent on foreign oil. While this 
could continue to have significant implications for improving the U.S. 
trade balance, there is considerable uncertainty about longer-term 
outcomes due in large part to public health, climate and environmental 
concerns, regulatory issues, and questions about other countries' 
ability to replicate similar energy production. 

Similarly, continued advances in science and technology offer 
revolutionary possibilities for enhanced quality of life and economic 
growth, as well as serious implications for health and safety if they 
are misused. Three major trends include: the continued movement of 
nanotechnology into the manufacturing sector; additive manufacturing 
technologies and processes; and synthetic bioengineered systems. By 
some accounts, the global market of products that incorporate 
nanotechnology is estimated to reach $1 trillion by 2015. 
Nanotechnology's entrance has been compared to the advent of earlier 
technologies that profoundly affected modern societies. Additive 
manufacturing (building products layer by layer in a process sometimes 
called “3D printing”) could dramatically transform the global supply 
chain and its logistics since digitized designs can be sent globally—-
while being produced and delivered locally. 

Facilitated by the expansion of social media, the Internet has 
eliminated the “middle man” in organizations and sectors, and is 
fundamentally changing the ways people across the globe create, 
collaborate, and communicate. The media landscape has been transformed 
as major professional press organizations must now compete with 
growing networks of online organizations and individuals who can 
create and distribute their own content and deliver breaking news and 
information faster than major news outlets. Some media firms are 
becoming data analytics firms that sell information and business and 
consumer intelligence. As the availability and dissemination of data 
has grown exponentially, information-based organizations will confront 
questions about how to manage “big data” and analytics, social media, 
and search tools to provide timely, useful information and even 
anticipatory intelligence. Technology is also enabling organizations, 
seeking greater flexibility, productivity, and cost savings, to move 
their data to the “cloud.” However, this consolidation of data and 
interconnectedness of global systems have increased the risks to 
individuals and businesses from cyber-crime, malicious hacking, and 
identity theft perpetrated by criminals, terrorists, and governments. 

Recent polls of Americans show that while citizen confidence in the 
federal government is at an all-time low, trust in state and local 
governments is greater and in some cases shows signs of rebounding. 
Yet, state and local governments also face near-term difficulties in 
funding current programs, as well as long-term challenges driven by 
health-related costs. Major government activities, such as disaster 
assistance, and significant legislation, such as the Patient 
Protection and Affordable Care Act, transcend and cut across federal, 
state, and local government boundaries. The federal government also 
continues to shift program delivery to state and local governments and 
to the private and nonprofit sectors. These trends pose challenges in 
terms of “following the federal dollar,” minimizing duplication and 
overlap, and evaluating program results. 

GAO stands ready to serve the Congress and the American people as our 
nation undergoes this transformative period. To effectively assist the 
Congress, GAO must not only perform oversight and insight work, it 
must also conduct foresight work to better position itself to identify 
the emerging issues that pose significant risks to our nation and our 
well-being. With a staff level of over 2,800, GAO must work closely 
with our clients and choose priorities carefully. Because high quality 
work is the foundation of our value and credibility, we will safeguard 
it as we continue striving to operate more effectively and 
efficiently. When members of Congress or their staffs change, GAO 
provides institutional memory and the program and technical expertise 
to support the Congress in overseeing the executive branch, evaluating 
spending priorities, and assessing the information provided by outside 
parties. GAO is a unique federal entity that can look across the 
government and follow federal spending internationally and 
domestically across federal, state, and local government levels. In 
this globally connected world, we have the domestic and international 
networks and capabilities to determine what is actually happening on 
the ground and obtain the information policymakers need. 

To make sure GAO's strategic plan accurately reflects the needs of the 
Congress, and of the nation as a whole, we invite comments on a draft 
from Members of Congress and their staff; our Comptroller General's 
Advisory Board as well as other entities, which include 
representatives from the federal Inspector General, state and local 
government audit communities, and academia; and GAO's sister agencies, 
the Congressional Budget Office and the Congressional Research Service. 

The detailed strategic plan that follows provides more information 
about the specific areas of GAO's work we anticipate—including a 
description of our goals and objectives, related performance goals, 
and key efforts. While the vast majority of our engagements are the 
result of congressional mandates or requests, this planning effort 
helps ensure GAO is in tune with the Congress' priorities as it looks 
ahead and is able to respond appropriately. Visit the strategic plan 
portion of our website at [hyperlink, http://www.gao.gov/sp.html] to 
find our annual performance plans and performance and accountability 
reports. Respectively, these documents tie our strategic plan to our 
resources and actual results. 

If you have any questions about our strategic plan, please contact me 
at (202) 512-5500 or dodarog@gao.gov or Helen Hsing, Managing Director 
for Strategic Planning and External Liaison, at (202) 512-2639 or 
hsingh@gao.gov. 

Sincerely yours, 

Signed by: 

Gene L. Dodaro: 
Comptroller General of the United States: 

[End of Letter from the Comptroller General] 

GAO at a Glance: 

About GAO: 

GAO is an independent, nonpartisan professional services agency in the 
legislative branch of the federal government. Commonly known as the 
audit and investigative arm of the Congress or the “congressional 
watchdog,” we examine how taxpayer dollars are spent and advise 
lawmakers and agency heads on ways to make government work better. 

About this Plan: 

As a legislative branch agency, we are exempt from many laws that 
apply to the executive branch agencies. However, we generally hold 
ourselves to the spirit of many of these laws, including the 
Government Performance and Results Act of 1993 (GPRA). This strategic 
plan provides what we consider to be information equivalent to that 
supplied by executive branch agencies in their GPRA-required strategic 
plans. 

GAO History: 

The Budget and Accounting Act of 1921 required the President to issue 
an annual federal budget and established GAO as an independent agency 
to investigate how federal dollars are spent. In the early years, we 
mainly audited vouchers, but after World War II we started to perform 
more comprehensive financial audits that examined the economy and 
efficiency of government operations. By the 1960s, GAO had begun to 
perform the type of work we are noted for today—-program evaluation—-
which examines whether government programs are meeting their 
objectives. 

Agency Head: 

Gene L. Dodaro, Acting Comptroller General of the United States. 

Core Values: 

Our core values of accountability, integrity, and reliability are 
reflected in all of the work we do. 

Accountability describes the nature of GAO's work. GAO helps oversee 
federal programs and operations to enhance the economy, efficiency, 
effectiveness, and credibility of the federal government. 

Integrity describes the high standards GAO sets for conducting its 
work. The agency takes a professional, objective, fact-based, 
nonpartisan, nonideological, fair, and balanced approach to all of its 
activities. 

Reliability describes GAO's goal for how its work is viewed. The 
agency produces high-quality reports, testimony, legal opinions, and 
other services that are timely, accurate, useful, clear, and candid. 

Employees: 

About 3,300, with academic degrees in accounting, law, engineering, 
public and business administration, economics, and the social and 
physical sciences, among other fields. 

Products Issued: 

Over 1,000 products annually, in addition to about 300 to 400 legal 
decisions and opinions. 

Financial Benefits: 

In fiscal year 2009, GAO documented about $43 billion in financial 
benefits—a return of $80 for every dollar we spent. Over the last 4 
fiscal years, our return on the Congress' investment in GAO has ranged 
from $83 in fiscal year 2005 to $114 in fiscal year 2008, a record for 
us. 

Nonfinancial Benefits: 

In fiscal year 2009, GAO documented over 1,300 nonfinancial benefits 
resulting from our recommendations, and 620 of these nonfinancial 
benefits helped to promote sound agency and governmentwide management. 

Offices: 

Washington, D.C. (headquarters), plus 11 field offices. 

Figure: GAO's Office Locations: 

[Refer to PDF for image: illustrated U.S. map] 

Atlanta, Georgia; 
Boston, Massachusetts; 
Chicago, Illinois; 
Dallas, Texas; 
Dayton, Ohio; 
Denver, Colorado; 
Huntsville, Alabama; 
Los Angeles, California; 
Norfolk, Virginia; 
San Francisco, California; 
Seattle, Washington; 
Washington, D.C. 

Source: Map Resources. 

[End of Figure: GAO's Office Locations] 

[End of GAO at a Glance] 

Trends Shaping the United States and Its Place in the World: 

For more than 90 years, GAO has stood at the vanguard of the U.S. 
government's efforts to ensure government accountability and 
effectiveness. Key to this role is foresight and the ability to 
understand evolving trends and evaluate emerging issues. 

This agency continues to monitor and address the nation and 
government's most pressing challenges. For example, in January 2013, 
GAO launched a new online resource-—GAO's “Key Issues” website 
[hyperlink, http://www.gao.gov/key_issues]-—to provide incoming 
Members of Congress and the American people with quick and easy access 
to bodies of GAO work on issues of critical importance to the nation. 

Accordingly, in framing our work over the next several years, GAO's 
strategic plan takes into account trends that are shaping American 
society, the United States' place in the world, and the work of the 
federal government. These trends provide the strategic context for 
GAO's mission, goals, and objectives for serving Congress and the 
American people. 

Based on a review of external literature, discussions with the 
Comptroller General's Advisory Board and leaders of good government 
and accountability organizations, and input from our mission teams, 
GAO has identified seven key trends to watch. Many of these trends 
underscore the global and interconnected nature of the issues, 
opportunities, and challenges that the federal government faces today 
and in the coming years. The seven trends are: 

National Security. Continuing regional and political instability in 
the Middle East, Africa, and South Asia; the potential for further 
proliferation of nuclear, biological, and chemical weapons; evolving 
and growing threats to cyberspace; and shifting dynamics in Asia will 
necessitate a more strategic approach across a wide array of actors, 
including military, diplomatic, intelligence, and law enforcement 
agencies. 

Fiscal Sustainability and Debt Challenges. In the decade ahead, the 
United States and the world will face challenges in ensuring continued 
economic growth and sustainability of government finances. Simulations 
by GAO and others show the federal government to be on an 
unsustainable deficit and debt path. Closing the fiscal gap will 
likely need to touch every part of the budget—entitlement programs, 
other mandatory spending, discretionary spending, and revenue. 

Global Interdependence. Regional and global shifts in economic power, 
extraordinary responses by fiscal and monetary authorities in many 
advanced economies after the financial crisis of 2007, and highly 
interconnected global economies and financial markets will have a 
continuing impact on trade, global competition, multilateral 
cooperation, and human development in the coming years. 

Science and Technology. New technologies and scientific progress can 
improve quality of life, security, and economic growth; they can also 
pose new ethical, legal, and social questions to policymakers. Rapid 
developments in nanotechnology, 3D printing, synthetic biology, the 
energy sector, and unmanned aircraft systems are important emerging 
areas. Further, science, technology, engineering, and mathematics 
education will be a key factor in future U.S. economic competitiveness. 

Communications Networks and Information Technologies. Today 
individuals can rapidly form large, powerful networks and 
interconnections through social media and other online platforms with 
“always-on” mobile technologies. This affects not only how people work 
and interact, but also how they think and what they expect from their 
government. In the next few years, understanding and managing the 
implications related to “big data,” privacy, and a more mobile and 
connected society will be crucial. 

Governance and Government. Governments in general, and the federal 
government in particular, face an increasing number of large, complex, 
and high-risk challenges that cut across multiple countries, levels of 
government, agencies, and sectors. The federal government will need to 
improve its capacity to anticipate crises and mitigate risk. Given 
these challenges, the federal government will need to examine how it 
works with state and local governments and third parties; finances its 
operations; and manages evolving technologies to engage with citizens. 

Demographic and Societal Changes. Significant demographic shifts are 
under way that affect society and the economy, both domestically and 
around the world. Declining birth rates, shifting immigration 
patterns, declining labor force participation, and an aging population 
will have important implications for our nation's future economic 
performance and the federal budget. 

Our strategic goals and objectives reflect how we plan to respond to 
the shifting realities described in these seven trends. Based on the 
uncertainties associated with these trends, the overall 2014-2019 
strategic plan is based on the premise that GAO will need to continue 
to be agile to meet demands arising from the complex and 
interconnected challenges our nation faces—today and tomorrow. 

Threats Confronting U.S. National Security Interests: 

As the United States approaches the end of over a decade of military 
operations in Iraq and Afghanistan, the nation faces a complex and 
uncertain national security environment. This environment presents 
opportunities but also poses several challenges and threats, including 
international conflicts and regional instability; the potential for 
further proliferation of nuclear, biological, and chemical weapons; 
and the growing threat of cyber attacks on the nation's critical 
infrastructure. Given the nation's fiscal constraints, the national 
security agencies will need to find affordable ways to address these 
challenges and threats and capitalize on opportunities. 

Continuing Regional and Political Instability in the Middle East, 
Africa, and South Asia: 

Ungoverned areas, ongoing conflicts, and political and security 
transitions in the Middle East, Africa, and South Asia may increase 
domestic and international risks from both state and non-state actors. 
According to the Office of the Director of National Intelligence and 
State Department documents, regional instability has led to broader 
instability by expanding the areas in which terrorists can operate and 
provoking refugee and other humanitarian crises in the Middle East, 
Africa, and South Asia.[Footnote 2] 

As shown in figure 1, ongoing conflicts and instability in several 
areas could continue to increase risks to U.S. interests. First, 
according to the Intelligence Community's 2013 Worldwide Threat 
Assessment, they may continue to provide a fertile environment for 
terrorists to establish safe havens, leaving U.S. national interests 
and the homeland vulnerable to attack. For example, the assessment 
states that Syria's prolonged civil war has allowed al Qaeda 
affiliates to establish a significant presence in Syria, and 
substantially strengthen inside Iraq, thereby, emerging as among the 
most capable terrorist groups.[Footnote 3 Further, according to the 
State Department's Country Reports on Terrorism 2012, violent 
extremists in some countries—such as Yemen, Somalia, Sudan, Mali, and 
the tribal regions of Pakistan—have taken advantage of ungoverned 
areas to organize, plan, raise funds, recruit, train, and operate in 
relative security to direct attacks against the United States and its 
allies and partners.[Footnote 4 For example, in September 2013, 
members of Somalia's al Shabab jihadist movement, an affiliate of al 
Qaeda, attacked a mall in neighboring Kenya, resulting in more than 60 
civilian deaths. 

Figure 1: Map of Terrorist Safe Havens and High Threat Posts in the 
Middle East, Africa and South Asia: 

[Refer to PDF for image: illustrated map] 

Terrorist Safe Havens: 
Afghanistan; 
Algeria; 
Iraq; 
Lebanon; 
Libya; 
Mali; 
Mauritania; 
Niger; 
Pakistan; 
Somalia; 
Yemen. 

Source: U.S. Department of State; Map Resources (map). 

[End of figure] 

In addition, ongoing political and security transitions may present 
opportunities for political reform but could also threaten or result 
in setbacks to U.S. interests in key locations. For example, the Arab 
Awakening in the Middle East and North Africa, which began in Tunisia 
and Egypt in 2011, may continue to contribute to unsettling and 
unpredictable changes in security and governance as regimes change, 
sectarian and ethnic tensions rise, and civil wars ensue or threaten 
to ensue. The planned drawdown of U.S. and other NATO forces in 
Afghanistan may also lead to increased security risks for U.S. 
military and civilian personnel who remain to continue assistance 
efforts. To address these uncertain transitions throughout the world 
and their related security threats, the State Department will be 
required to continuously monitor and direct resources toward U.S. 
diplomatic missions in high threat locations, many of which are 
located in or near terrorist safe havens or state sponsors of 
terrorism. Moreover, according to the U.S. Director of National 
Intelligence, transnational organized crime networks may continue to 
threaten U.S. interests by supporting drug trafficking and the 
operations of terrorist organizations.[Footnote 5] 

Continuing Proliferation of Weapons of Mass Destruction—Nuclear, 
Biological, and Chemical Weapons 

While citing the need to maintain the strategic nuclear deterrence 
capabilities against existing nuclear powers such as Russia and China, 
DOD's most recent Nuclear Posture Review Report states that nuclear 
threats from other nation-states is a pressing danger.[Footnote 6] For 
example, the DOD report states that attempting to reverse the nuclear 
ambitions of North Korea and Iran through a stronger non-proliferation 
regime is one element of the U.S. approach to preventing nuclear 
proliferation and nuclear terrorism. The report also states that the 
development of nuclear weapons by North Korea and Iran would upset 
regional balances of power and increase the risk of regional 
conflicts. The Intelligence Community's 2013 Worldwide Threat 
Assessment also states that North Korea has exported ballistic 
missiles and associated materials to several countries, including Iran 
and Syria. If Iran and North Korea continue to disregard global non-
proliferation norms, then neighboring countries might feel pressured 
to consider developing nuclear operations—-thereby leading to greater 
proliferation, according to 
DOD's Nuclear Posture Review Report. The DOD report states that, as a 
result, a key priority is expanding international efforts to rebuild 
and strengthen the global nuclear non-proliferation regime. 

The proliferation of nuclear, biological, and chemical weapons has the 
potential to magnify the threats posed by other regional states and 
nonstate actors, such as terrorists. According to the 2012 national 
security strategy document Sustaining U.S. Global Leadership: 
Priorities for 21st Century Defense, regional state actors who acquire 
weapons of mass destruction have more freedom of action to challenge 
U.S. interests. The strategy also states that terrorist access to even 
simple nuclear devices poses the prospect of devastating consequences 
for the United States. According to the International Atomic Energy 
Agency, from 1993 to 2011, there have been thousands of confirmed 
incidents of illicit trafficking in nuclear and radiological materials. 

Since the terrorist attacks of 9/11, the United States has made 
significant investments in aviation, maritime, and border-security 
capabilities and on information-sharing and civil response for 
homeland defense; it will continue to enhance preparedness. Abroad, 
counter-proliferation activities, as well as the war on terrorism, 
have cost billions as the United States sought to garner support for 
enforcing nonproliferation treaties, helped secure nuclear materials 
and warheads in Russia, installed detection equipment in other 
countries, implemented visa security programs, and embarked on a 
campaign to put relentless pressure on al Qaeda and its affiliates. 
Going forward, the U.S. government will need to find an affordable way 
to balance its nuclear posture and counter-proliferation goals against 
other critical national security missions, given the nation's fiscal 
constraints. 

Because the United States' nuclear arsenal is aging, according to the 
Nuclear Posture Review, the United States is also embarking on an 
ambitious, long-term plan to modernize the nuclear stockpile and its 
associated research and production infrastructure, and to replace the 
submarine, aircraft, and intercontinental-range missiles that are 
capable of delivering nuclear weapons to their targets. GAO's work has 
shown that successful execution of this plan will require DOD and the 
Department of Energy to work together to evaluate risks and trade-offs 
and determine the most cost-effective mix of weapons and platforms for 
the future. DOD has not had to replace its nuclear weapons platforms 
during the past few decades. In 2013, GAO reported that DOD plans on 
modernizing the nuclear delivery system at a cost of at least $118.5 
billion between fiscal years 2013 and 2022 in an era of stagnant or 
declining defense budgets.[Footnote 7] GAO also reported that the 
Energy Department plans to spend about $188 billion between fiscal 
years 2012 and 2031 to modernize nuclear weapons systems and their 
associated infrastructure and scientific and engineering capabilities. 
[Footnote 8] 

Evolving Cyberspace Threats: 

Threats to cyberspace are also evolving and growing. As GAO testified 
in 2013, persistent advanced cyber threats-—where adversaries possess 
sophisticated levels of expertise and significant resources to pursue 
their objectives repeatedly over an extended period of time—-pose 
increasing risks.[Footnote 9] The Director of National Intelligence 
has also warned of the increasing globalization of cyber attacks, 
including those carried out by foreign militaries or international 
organized crime. The Intelligence Community's 2013 Worldwide Threat 
Assessment stated that there is a remote but increasing risk of a 
cyber-attack on U.S. critical infrastructure during the next two years 
that could result in long-term, wide-scale disruption of services, 
such as a regional power outage. 

In addition, the threat assessment stated that foreign intelligence 
and security services have repeatedly penetrated numerous computer 
networks of the U.S. government, business, academic, and private 
sector entities, eroding U.S. economic and national security. 
Compounding the national security challenge, cyberspace is also 
increasingly important for conducting U.S. military operations and 
projecting U.S. forces globally. According to a DOD 2012 joint concept 
of operations, cyberspace provides the information infrastructure upon 
which the command and control of practically all military operations 
depend.[Footnote 10] Because of this dependency, the concept predicts 
that cyberspace will become a high-priority area for both state and 
nonstate adversaries. 

GAO has designated federal information security as a high-risk area 
since 1997. Because of the importance of cybersecurity to our nation's 
well-being, in 2003 GAO expanded this high-risk area to include cyber 
critical infrastructure.[Footnote 11] The threats associated with 
cyberspace require collective and concerted action that spans the 
whole of the U.S. government, in collaboration with the private 
sector. These threats touch on the missions of all departments—
including Defense, Homeland Security, and State—such as diplomacy, 
intelligence collection and analysis, counter-terrorism, homeland 
security, and defense. The U.S. government will also need to invest in 
new capabilities and enhance others, such as sharing information and 
developing a cyber analysis and warning capability. 

Changing Economic and Military Trends in Asia: 

A major trend which is changing the world is the growing economic and 
military strength of countries in Asia, China in particular. As 
countries in Asia become more prosperous, some are also becoming more 
militarily capable. For example, DOD's 2013 Annual Report on China 
shows that China's decades-long economic growth continues to 
facilitate Chinese military modernization and expansion of its 
interests abroad.[Footnote 12] A 2012 study by the State Department 
found that China's military expenditures ranked second in the world 
after those of the United States, with India and South Korea ranking 
9th and 10th among the top ten countries.[Footnote 13] (See figure 2.) 
DOD also stated in its 2013 annual report on China that it is 
difficult to estimate actual Chinese military expenses; China's 
reported military budget omits several major categories of 
expenditures, such as procurement of foreign weapons and equipment; 
therefore, according to the report, China's actual military budget is 
likely many billions of dollars higher than the reported budget. 

Figure 2: Top Ten Countries, Military Expenditures (in millions of 
constant 2009 U.S. dollars): 

[Refer to PDF for image: horizontal bar graph] 

Worldwide: $1,600,000; 
United States: $757,000; 
China: $125,000; 
United Kingdom: $58,200; 
Russia: $56,500; 
France: $44,600; 
Japan: $41,400; 
Germany: $39,200; 
Saudi Arabia: $38,700; 
India: $32,600; 
South Korea: $24,400. 

Source: GAO compilation of data from the Department of State, World 
Military Expenditures and Arms Transfers, 2012 Edition (Washington, 
D.C.: 2012.) 

Note: 2009 was the most recent year for which final data were 
available. 

[End of figure 2] 

As a result of these dynamics, the U.S. government announced that it 
would raise the region's priority in military planning, foreign 
policy, and economic policy.[Footnote 14] As shown in figure 3, the 
United States has begun and continues to shift its military presence 
to the Asia-Pacific region as it relocates forces, builds new 
facilities and expands DOD's rotational forces. 

Figure 3: Map of the Asia-Pacific, Including Selected Current U.S. 
Overseas Presence and Plans: 

[Refer to PDF for image: illustrated map] 

Australia: Plans to increase rotational U.S. presence to around 1,100 
U.S. forces. 

Guam: Currently about 6,000 U.S. forces. 

Japan: Currently about 51,200 U.S. forces. 

The Philippines: Increased expansion of rotational U.S. forces under 
discussion. 

Singapore: Plans to increase rotational U.S. presence. 

South Korea: Currently about 28,500 U.S. forces. 

Source: GAO. 

[End of figure 3] 

Managing the U.S.-China relationship in the future will have global 
repercussions. China is a major U.S. trading partner, which 
underscores the interdependency between the two economies. The United 
States seeks to fully integrate China into a rules-based global 
trading system and expand U.S. exporters' and investors' access to 
Chinese markets.[Footnote 15] However, according to DOD's 2013 report 
on China, the country is also developing asymmetric military 
capabilities—-such as cyber weapons-—and anti-access capabilities to 
deny the U.S. military's freedom of movement or action in certain 
areas or regions—-such as anti-satellite weaponry, ship-to-ship 
missiles, and ground-based missiles. These capabilities could pose 
challenges to the United States' military superiority and access to 
the region in keeping with our treaty obligations with Asian 
countries. The fact that China is both partner and competitor 
illustrates the U.S. National Military Strategy's statement that the 
national security environment is increasingly characterized by 
shifting, interest-driven coalitions based on diplomatic, military, 
and economic power, rather than by rigid, security competition between 
opposing blocs. Therefore, the United States will need to employ a 
whole-of-government approach to foreign policy in Asia that employs a 
blend of diplomacy, economic cooperation, development, and defense 
capabilities. 

Escalating Climate-Related Risks: 

Climate risks to environmental and economic systems—including 
agriculture, infrastructure, ecosystems, and human health—present a 
significant issue for the United States' and other nations' national 
security. The United States Global Change Research Program has 
observed that the impacts and costliness of weather disasters are 
expected to increase in significance as what are considered “rare” 
events become more common and intense due to climate change.[Footnote 
16] Among other impacts, climate change could threaten coastal areas 
with rising sea levels, alter agricultural productivity, and increase 
the intensity and frequency of severe weather events such as floods, 
drought, and hurricanes. 

These impacts could pose significant U.S. national security risks. For 
example, the Intelligence Community's 2013 threat assessment states 
that food security has been threatened partly because the world's land 
masses have been affected by weather conditions outside of historical 
norms, while persistent droughts over the last decade have diminished 
flows in the Nile, Tigris-Euphrates, Niger, Amazon, and Mekong river 
basins. The rise in global population and the growing size of the 
world's middle class may exacerbate the effects of climate change if 
they lead to demand for food, water, and energy outstripping supply. 
The resulting competition for scarce resources could lead to 
intrastate and interstate conflicts as well as humanitarian crises, 
potentially resulting in the need for international or U.S. response. 
A CIA-funded report, Climate Extremes: Recent Trends with Implications 
for National Security (2012) observed that reductions in sea ice have 
already triggered fears of a scramble for control of shipping lanes 
and mineral deposits in the Arctic region.[Footnote 17] 

In addition to national security risks, climate change also poses 
fiscal risks to the U.S. government, including the national security 
agencies. For this reason, GAO added limiting the federal government's 
fiscal exposure by better managing climate-related risks to its list 
of high-risk programs and activities.[Footnote 18] According to DOD's 
Fiscal Year 2012 Climate Change Adaptation Roadmap, the department 
will need to adapt its facilities, infrastructure, training and 
testing activities, and military capabilities to address the impacts 
of climate change.[Footnote 19] DOD's operational readiness hinges on 
continued access to land, air, and sea training and test space, all of 
which are subject to the effects of climate change. GAO also found 
that the federal government does not budget for the costs of 
responding to a major disaster and runs the risk of facing a large 
fiscal exposure at any time. As a result, the federal government is 
not well positioned to address the fiscal exposure presented by 
climate change, and will need to develop a government-wide strategic 
approach with strong leadership to manage related risks. 

Growing Fiscal Pressures on National Security Agencies 

The unsustainable long-term fiscal path of the federal government and 
uncertainty over future funding levels are trends that place growing 
pressures on the entire federal budget, including national security 
accounts. The combined budgets for all of the national security 
agencies make up over half of the entire federal budget's 
discretionary spending; therefore, these agencies will likely face 
significant budgetary constraints over the next few years as the 
federal government grapples with reducing the deficit. Over the short-
term, budgetary uncertainty will make annual fiscal planning and 
priority-setting increasingly difficult for the national security 
agencies. Over the long-term, the nation will be challenged to balance 
priorities both across the federal government, including national 
security agencies, and within these agencies as it addresses the 
federal deficit or as federal mandatory spending on programs, like 
Social Security and Medicare, crowds out discretionary spending on 
other federal programs, including national security. 

As the fiscal pressures facing the nation continue, DOD and other 
national security agencies will need to look across threats and 
vulnerabilities. They will then need to make difficult decisions on 
how to reach an affordable balance between investments in current 
missions and investments in new capabilities to meet future 
challenges. The national security agencies also will need to enhance 
the efficiency and management of national security programs in order 
to achieve cost savings and free up resources for emerging higher 
priorities. For example, GAO designated the management of the 
Department of Homeland Security as high risk due to longstanding 
acquisition, information technology, financial management, and human 
capital management challenges, and their effect on the department's 
ability to perform its missions.[Footnote 20] Although the department 
has made some progress, more work remains, and failure to effectively 
address its management and mission risks could have serious 
consequences for U.S. national and economic security. 

GAO has also identified several high-risk areas at DOD including its 
overall approach to business transformation, contracting, financial 
management, information technology, and weapon system acquisition. 
Congress has made legislative changes and DOD has made some recent 
progress to improve how it manages major weapon systems; however, many 
programs continue to fall short of cost and schedule expectations. 
Given current fiscal constraints, DOD must get better returns on its 
weapon system investments and find ways to deliver capability to the 
warfighter for less cost than in the past. For the same reason, DOD 
must effectively prioritize which investments to make, balancing such 
competing demands as large naval vessels versus smaller, shallow-water 
vessels and information networks versus weapons. 

Implications for Government and GAO: 

As the nation approaches the end of a decade of military operations, 
U.S. national security agencies are facing a changing national 
security environment of great complexity and uncertainty. These 
agencies are also facing great budgetary uncertainties as the U.S. 
government grapples with how to address the deficit and debt trends. 

GAO stands ready to assist Congress in assessing the long-term costs 
and trade-offs associated with national security agencies' efforts to 
align national security missions and priorities with available 
resources. For example, GAO can assist congressional oversight of 
Defense and Energy Department programs to modernize the aging nuclear 
weapons complex by assessing these agencies' analyses, key 
assumptions, and cost estimates. Moreover, as DOD makes adjustments to 
the size and composition of its conventional forces, GAO plans to 
assess the services' approaches to maintaining readiness and 
mitigating risks in light of changing threats and limited resources. 
In addition, GAO will build on its previous work assessing U.S. 
programs to promote regional stability, including efforts to minimize 
ungoverned areas in which terrorist groups operate, and to counter the 
proliferation of weapons of mass destruction. Moreover, GAO will 
continue to assess U.S. government efforts to improve the federal, 
state, and local capacity to identify, respond, and recover from 
terrorist attacks or natural disasters. 

GAO also has a useful role to play in identifying opportunities to 
improve the operations and management of national security agencies 
and enhance their efficiency and effectiveness. GAO will continue to 
highlight opportunities for improvement in the U.S. government's 
response to the growing threats related to climate change and 
cyberspace, and make recommendations for improving federal 
preparedness. GAO will also assess the national security agencies' 
major acquisition programs as well as their management and oversight 
of service contracts. In addition, GAO will look for additional or 
emerging areas of fragmentation, overlap, and duplication in U.S. 
national security programs and monitor developments in areas already 
identified such as the overlap in analytical and investigative support 
activities for law enforcement and counterterrorism. 

Additionally, as elaborated under Goal 2, GAO plans related work to: 

* Review U.S. efforts and programs to secure and stabilize regions in 
conflict and assess the extent to which such efforts are coordinated 
among federal agencies in order to achieve unity of effort. 

* Assess the national security agencies' efforts to secure the 
homeland and respond to emerging threats such as the potential use of 
weapons of mass destruction by terrorists. 

* Assess the international effort under the leadership of the United 
States to identify and secure nuclear materials around the world. 

* Assess efforts to strengthen the protection and resilience of the 
nation's critical physical and cyber infrastructure, and address 
cybersecurity issues. 

* Analyze U.S. initiatives and costs to adapt U.S. overseas presence 
and programs in Asia and to modify the U.S. presence and activities in 
other parts of the world. 

* Evaluate the implications of climate-related risks for U.S. national 
security agencies and agencies' plans and programs to address these 
implications. 

* Analyze the extent to which national security agencies have 
developed and implemented efforts to improve business operations and 
enhance efficiency, including approaches to contracting for goods and 
services. 

Fiscal Sustainability and Debt Challenges: 

The global recession of 2008-2009 and the federal government's actions 
to stabilize financial markets and promote economic recovery 
significantly affected the federal government's financial condition. 
Since fiscal year 2007, debt held by the public has more than doubled 
as a share of gross domestic product (GDP) from about 35 percent to 70 
percent at the end of fiscal year 2012. While the deficit has fallen 
considerably since 2009 when it exceeded 10 percent of GDP to $680 
billion or 4.1 percent of GDP in fiscal year 2013, cumulative debt 
held by the public continues to grow. Debt held by the public reached 
$12.0 trillion or 72 percent of GDP at the end of fiscal year 2013—the 
largest as a share of GDP since 1950 (see figure 4). The United States 
is not alone in facing high debt levels. Many advanced countries are 
facing similar challenges and will need to continue to undertake 
unprecedented fiscal efforts to stabilize debt ratios at sustainable 
levels. 

Figure 4: Growth in Debt Held by the Public as a Share of GDP: 

[Refer to PDF for image: line graph] 

Year: 1900; 
Debt held by public as a share of GDP: 7%. 

Year: 1910; 
Debt held by public as a share of GDP: 4%. 

Year: 1920; 
Debt held by public as a share of GDP: 27%. 

Year: 1930; 
Debt held by public as a share of GDP: 16%. 

Year: 1940; 
Debt held by public as a share of GDP: 44%. 

Year: 1945; 
Debt held by public as a share of GDP: 104%. 

Year: 1950; 
Debt held by public as a share of GDP: 78%. 

Year: 1960; 
Debt held by public as a share of GDP: 44%. 

Year: 1970; 
Debt held by public as a share of GDP: 27%. 

Year: 1980; 
Debt held by public as a share of GDP: 25%. 

Year: 1990; 
Debt held by public as a share of GDP: 41%. 

Year: 2000; 
Debt held by public as a share of GDP: 34%. 

Year: 2001; 
Debt held by public as a share of GDP: 31%. 

Year: 2002; 
Debt held by public as a share of GDP: 33%. 

Year: 2003; 
Debt held by public as a share of GDP: 35%. 

Year: 2004; 
Debt held by public as a share of GDP: 36%. 

Year: 2005; 
Debt held by public as a share of GDP: 36%. 

Year: 2006; 
Debt held by public as a share of GDP: 35%. 

Year: 2007; 
Debt held by public as a share of GDP: 35%. 

Year: 2008; 
Debt held by public as a share of GDP: 39%. 

Year: 2009; 
Debt held by public as a share of GDP: 52%. 

Year: 2010; 
Debt held by public as a share of GDP: 61%. 

Year: 2011; 
Debt held by public as a share of GDP: 66%. 

Year: 2012; 
Debt held by public as a share of GDP: 70%. 

Year: 2013; 
Debt held by public as a share of GDP: 72%. 

Source: GAO analysis of Congressional Budget Office, Department of 
Treasury and Bureau of Economic Analysis data. 

[End of figure 4] 

As the effects of the financial crisis and housing bubble fade, the 
U.S. economy is expected to expand at a pace faster than the subdued 
growth experienced since the recession ended in mid-2009. However, in 
the decade ahead, the United States and the world will be faced with 
demographic changes that will pose challenges to ensuring continued 
economic growth and sustainability of government finances. While these 
demographic trends have been known for a long time, they are beginning 
to have significant fiscal consequences on the federal budget and 
economy. As we move into the second half of the decade, CBO projects 
that real GDP growth will average about 1 percent slower than the 
average potential growth rate since 1950 due to slowing of growth in 
the labor force. As shown in figure 5, labor force growth is estimated 
to fall from about 1 percent in recent years to 0.5 percent in the 
future. The reasons for this slowdown are the retirement of the baby 
boomers and an end to the long-standing increase in women's 
participation in the labor force. This slowing of economic growth will 
come just as spending on Social Security, Medicare, and Medicaid will 
begin to accelerate. 

Figure 5: Growth in the U.S. Civilian Labor Force Is Projected to Slow: 

[Refer to PDF for image: line graph] 

Labor force growth (5-year moving average): 

Source: GAO analysis of Social Security and Medicare Boards of 
Trustees data. 

[End of figure 5] 

Declining labor force growth will leave fewer workers available to 
support the growing number of retirees. In particular, the number of 
baby boomers turning 65 is projected to grow steadily from an average 
of about 7,600 per day in 2011 to more than 11,600 per day in 2025, 
driving spending for the major health and retirement programs and 
putting greater pressure on the rest of the federal budget (see figure 
6). These demographic trends (discussed in greater detail in the 
demographics trend paper) have significant implications for the long-
term sustainability and flexibility of the government's fiscal 
position. 

Figure 6: Daily Average Number of People Turning 65 Each Year: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: 5,500. 

Year: 2001: 5,500. 

Year: 2002: 5,500. 

Year: 2003: 5,800. 

Year: 2004: 5,800. 

Year: 2005: 6,000. 

Year: 2006: 6,200. 

Year: 2007: 6,700. 

Year: 2008: 7,200. 

Year: 2009: 7,200. 

Year: 2010: 7,200. 

Baby boomers begin turning 65. 

Year: 2011: 7,600. 

Year: 2012: 9,100. 

Year: 2013: 9,200. 

Year: 2014: 9,100. 

Year: 2015: 9,400. 

Year: 2016: 9,400. 

Year: 2017: 9,700. 

Year: 2018: 10,000. 

Year: 2019: 10,200. 

Year: 2020: 10,700. 

Year: 2021: 10,700. 

Year: 2022: 11,000. 

Year: 2023: 11,200. 

Year: 2024: 11,200. 

Year: 2025: 11,600. 

Year: 2026: 11,400. 

Year: 2027: 11,400. 

Year: 2028: 11,300. 

Year: 2029: 11,400. 

Source: GAO analysis of U.S. Census Bureau data. 

[End of figure 6] 

Declining labor force growth will leave fewer workers available to 
support the growing number of retirees. In particular, the number of 
baby boomers turning 65 is projected to grow steadily from an average 
of about 7,600 per day in 2011 to more than 11,600 per day in 2025, 
driving spending for the major health and retirement programs and 
putting greater pressure on the rest of the federal budget (see figure 
6). These demographic trends (discussed in greater detail in the 
demographics trend paper) have significant implications for the long-
term sustainability and flexibility of the government's fiscal 
position. 

Long-term fiscal simulations by GAO, the CBO, and others all show the 
federal government to be on an unsustainable deficit and debt path due 
to spending pressures caused by growth in health care costs and an 
aging population. In GAO's Baseline Extended and Alternative 
simulations, which cover a range of plausible assumptions, debt held 
by the public continues to grow as a share of GDP in the coming 
decades (see figure 7). Rising debt in both simulations is driven by a 
fundamental imbalance between revenue and spending, which, on the 
spending side is driven by the aging of the population and rising 
health care costs. For the first few decades this spending is driven 
largely by the aging of the population, while the longer-term outlook 
depends more heavily on assumptions about growth in the cost of caring 
for each beneficiary. As shown in figure 8, health care spending per 
person over the last 50 years has been growing faster than GDP per 
person, meaning that an ever-growing share of the nation's income is 
being spent on health care, crowding out spending on other goods and 
services. While health care cost growth has slowed in recent years, it 
remains unclear to what degree this represents a temporary event 
related to the recent recession or a larger change to the U.S. health 
care system resulting from increased efficiency and coordination that 
may have a more lasting effect. 

Figure 7: Debt Held by the Public under Two Fiscal Policy Simulations: 

[Refer to PDF for image: multiple line graph] 

Percentage of GDP: 

Historical high: 109% in 1946. 

Fiscal year: 2000; 
Baseline extended: 34.72%; 
Alternative: 34.72%. 

Fiscal year: 2001; 
Baseline extended: 32.46%; 
Alternative: 32.46%. 

Fiscal year: 2002; 
Baseline extended: 33.58%; 
Alternative: 33.58%. 

Fiscal year: 2003; 
Baseline extended: 35.64%; 
Alternative: 35.64%. 

Fiscal year: 2004; 
Baseline extended: 36.76%; 
Alternative: 36.76%. 

Fiscal year: 2005; 
Baseline extended: 36.9%; 
Alternative: 36.9%. 

Fiscal year: 2006; 
Baseline extended: 36.51%; 
Alternative: 36.51%. 

Fiscal year: 2007; 
Baseline extended: 36.25%; 
Alternative: 36.25%. 

Fiscal year: 2008; 
Baseline extended: 40.32%; 
Alternative: 40.32%. 

Fiscal year: 2009; 
Baseline extended: 53.52%; 
Alternative: 53.52%. 

Fiscal year: 2010; 
Baseline extended: 62.8%; 
Alternative: 62.8%. 

Fiscal year: 2011; 
Baseline extended: 67.72%; 
Alternative: 67.72%. 

Fiscal year: 2012; 
Baseline extended: 72.8%; 
Alternative: 72.8%. 

Fiscal year: 2013; 
Baseline extended: 76.1%; 
Alternative: 78.6%. 

Fiscal year: 2014; 
Baseline extended: 76.6%; 
Alternative: 82.4%. 

Fiscal year: 2015; 
Baseline extended: 73.8%; 
Alternative: 82.8%. 

Fiscal year: 2016; 
Baseline extended: 70.8%; 
Alternative: 82.8%. 

Fiscal year: 2017; 
Baseline extended: 67.9%; 
Alternative: 82.9%. 

Fiscal year: 2018; 
Baseline extended: 65.2%; 
Alternative: 83.2%. 

Fiscal year: 2019; 
Baseline extended: 63.2%; 
Alternative: 84.4%. 

Fiscal year: 2020; 
Baseline extended: 61.4%; 
Alternative: 85.9%. 

Fiscal year: 2021; 
Baseline extended: 59.8%; 
Alternative: 87.7%. 

Fiscal year: 2022; 
Baseline extended: 58.5%; 
Alternative: 89.9%. 

Fiscal year: 2023; 
Baseline extended: 57.8%; 
Alternative: 93.1%. 

Fiscal year: 2024; 
Baseline extended: 57.5%; 
Alternative: 97.4%. 

Fiscal year: 2025; 
Baseline extended: 57.8%; 
Alternative: 102.6%. 

Fiscal year: 2026; 
Baseline extended: 58.2%; 
Alternative: 108.4%. 

Fiscal year: 2027; 
Baseline extended: 59%; 
Alternative: 114.5%. 

Fiscal year: 2028; 
Baseline extended: 60%; 
Alternative: 121.2%. 

Fiscal year: 2029; 
Baseline extended: 61.2%; 
Alternative: 128.5%. 

Fiscal year: 2030; 
Baseline extended: 62.6%; 
Alternative: 136.2%. 

Fiscal year: 2031; 
Baseline extended: 64.2%; 
Alternative: 144.4%. 

Fiscal year: 2032; 
Baseline extended: 66%; 
Alternative: 152.9%. 

Fiscal year: 2033; 
Baseline extended: 67.8%; 
Alternative: 161.6%. 

Fiscal year: 2034; 
Baseline extended: 69.8%; 
Alternative: 170.5%. 

Fiscal year: 2035; 
Baseline extended: 71.9%; 
Alternative: 179.7%. 

Fiscal year: 2036; 
Baseline extended: 74.2%; 
Alternative: 189.1%. 

Fiscal year: 2037; 
Baseline extended: 76.6%; 
Alternative: 198.8%. 

Fiscal year: 2038; 
Baseline extended: 79.1%. 

Fiscal year: 2039; 
Baseline extended: 81.7%. 

Fiscal year: 2040; 
Baseline extended: 84.4%. 

Fiscal year: 2041; 
Baseline extended: 87.1%. 

Fiscal year: 2042; 
Baseline extended: 89.9%. 

Fiscal year: 2043; 
Baseline extended: 92.7%. 

Fiscal year: 2044; 
Baseline extended: 95.7%. 

Fiscal year: 2045; 
Baseline extended: 98.7%. 

Fiscal year: 2046; 
Baseline extended: 101.9%. 

Fiscal year: 2047; 
Baseline extended: 105.3%. 

Fiscal year: 2048; 
Baseline extended: 108.6%. 

Fiscal year: 2049; 
Baseline extended: 112.1%. 

Fiscal year: 2050; 
Baseline extended: 115.6%. 

Fiscal year: 2051; 
Baseline extended: 119.1%. 

Fiscal year: 2052; 
Baseline extended: 122.8%. 

Fiscal year: 2053; 
Baseline extended: 126.5%. 

Fiscal year: 2054; 
Baseline extended: 130.2%. 

Fiscal year: 2055; 
Baseline extended: 134%. 

Fiscal year: 2056; 
Baseline extended: 138%. 

Fiscal year: 2057; 
Baseline extended: 142.1%. 

Fiscal year: 2058; 
Baseline extended: 146.2%. 

Fiscal year: 2059; 
Baseline extended: 150.4%. 

Fiscal year: 2060; 
Baseline extended: 154.7%. 

Source: GAO. 

[End of figure 7] 

Figure 8: Cumulative Growth in Real Health Care Spending per Capita 
and Real GDP per Capita: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1960; 
Annual growth rate of 2.1%: 0.7%; 
Annual growth rate of 4.6%: 4.3%. 

Fiscal year: 1963; 
Annual growth rate of 2.1%: 8.1%; 
Annual growth rate of 4.6%: 16.9%. 

Fiscal year: 1966; 
Annual growth rate of 2.1%: 25.1%; 
Annual growth rate of 4.6%: 41.4%. 

Fiscal year: 1969; 
Annual growth rate of 2.1%: 34.6%; 
Annual growth rate of 4.6%: 74.2%. 

Fiscal year: 1972; 
Annual growth rate of 2.1%: 42.0%; 
Annual growth rate of 4.6%: 105.7%. 

Fiscal year: 1975; 
Annual growth rate of 2.1%: 45.7%; 
Annual growth rate of 4.6%: 128.8%. 

Fiscal year: 1978; 
Annual growth rate of 2.1%: 65.1%; 
Annual growth rate of 4.6%: 170.9%. 

Fiscal year: 1981; 
Annual growth rate of 2.1%: 68.8%; 
Annual growth rate of 4.6%: 208.6%. 

Fiscal year: 1984; 
Annual growth rate of 2.1%: 80.8%; 
Annual growth rate of 4.6%: 260.0%. 

Fiscal year: 1987; 
Annual growth rate of 2.1%: 95.3%; 
Annual growth rate of 4.6%: 312.2%. 

Fiscal year: 1990; 
Annual growth rate of 2.1%: 107.8%; 
Annual growth rate of 4.6%: 399.5%. 

Fiscal year: 1993; 
Annual growth rate of 2.1%: 113.0%; 
Annual growth rate of 4.6%: 466.7%. 

Fiscal year: 1996; 
Annual growth rate of 2.1%: 128.7%; 
Annual growth rate of 4.6%: 507.8%. 

Fiscal year: 1999; 
Annual growth rate of 2.1%: 153.0%; 
Annual growth rate of 4.6%: 569.8%. 

Fiscal year: 2002; 
Annual growth rate of 2.1%: 163.6%; 
Annual growth rate of 4.6%: 681.0%. 

Fiscal year: 2005; 
Annual growth rate of 2.1%: 181.4%; 
Annual growth rate of 4.6%: 771.5%. 

Fiscal year: 2008; 
Annual growth rate of 2.1%: 184.7%; 
Annual growth rate of 4.6%: 823.2%. 

Fiscal year: 2011; 
Annual growth rate of 2.1%: 181.2%; 
Annual growth rate of 4.6%: 869.9%. 

Source: GAO analysis of data from the Centers for Medicare & Medicaid 
Services, Office of the Actuary, and the Bureau of Economic Analysis. 

[End of figure 8] 

Without programmatic changes, spending on Social Security, Medicare, 
Medicaid, and interest on the federal debt will account for an ever-
growing share of the economy and put greater pressure on the rest of 
the federal budget. For example, under GAO's Alternative simulation, 
which assumes historical trends and policy preferences continue, 
interest costs on the growing debt plus spending on Social Security, 
Medicare, and Medicaid could absorb all federal revenue in 2030 (see 
figure 9). When “all other spending”-—or what many think of as 
“government,” such as national defense, homeland security, highways 
and mass transit, and smaller entitlement programs-—is included, 
deficits approach 12 percent of GDP. 

Figure 9: Potential Fiscal Outcomes: Revenues and Composition of 
Spending in the Alternative Simulation: 

[Refer to PDF for image: combined stacked vertical bar and line graph] 

Fiscal year: 
Net interest: 
Social Security: 
Medicare, Medicaid, CHIP, and exchange subsidies: 
All other spending: 

Source: GAO. 

[End of figure 9] 

Closing the fiscal gap will likely need to touch every part of the 
budget—entitlement programs, other mandatory spending, discretionary 
spending, and revenue. Tax expenditures[Footnote 21]-—sometimes 
referred to as “spending through the tax code”-—also merit scrutiny. 
The revenue the federal government forgoes from tax expenditures 
reduces the tax base and requires higher tax rates to raise any given 
amount of revenue. In recent years, tax expenditures have approached 
the size of federal discretionary spending (see figure 10). However, 
tax expenditures do not compete with other priorities in the annual 
appropriations process, and many are not subject to congressional 
reauthorization. Instead, many tax expenditures operate like mandatory 
spending, such as Medicare, with eligibility rules and formulas that 
provide benefits to those who are eligible and wish to participate. 

Figure 10: Tax Expenditures Approach the Size of Discretionary 
Spending: 

[Refer to PDF for image: multiple line graph] 

Dollars in billions (in 2012 dollars): 

Source: GAO analysis of Treasury estimates and OMB historical data. 

Note: Summing tax expenditure estimates is a useful gauge of size but 
does not take into account possible interactions among individual tax 
expenditures. 

[End of figure 10] 

Strains on the budget are not being felt solely at the federal level. 
State and local governments also face near-term challenges in funding 
current programs, as well as long-term challenges driven by health-
related costs. Medicaid will continue to be a key component of the 
sector's health-related costs. State and local budgets are also under 
stress because of sluggish growth in tax revenue. The reliance of 
state and local budgets on income, sales, and property tax receipts 
means that if unemployment remains high, consumer spending is 
sluggish, or property values are slow to recover, state and local 
budgets will likely experience prolonged strain. Future pension 
liabilities could also affect the sector's long-term fiscal position. 
While most large state and local government pension plans have assets 
sufficient to cover benefit payments over the coming decade, plans 
face challenges over the long term due to the gap between assets and 
liabilities. Underfunding, unfunded benefit increases, and investment 
losses during the economic downturn have led to steady increases in 
the actuarially required contribution levels needed to sustain pension 
plans. At the same time, state and local governments face challenges 
funding liabilities for other public employee benefits (which are 
primarily retiree health benefits). State and federal policymakers 
will need to work closely in the coming years to close state budget 
gaps in a sustainable way. 

Significant action to change the federal government's long-term fiscal 
path must be taken soon to minimize the risk that eventual policy 
changes will be disruptive to individuals and the economy. Across the 
globe, progress in reducing budget deficits in major world economies 
and a gradually improving fiscal environment have lowered short-term 
fiscal risks. However, the global economic outlook remains subdued and 
many countries face a lengthy, difficult, and uncertain path to fiscal 
sustainability. While many countries are now close to achieving 
primary surpluses that will allow them to stabilize their debt ratios, 
it is only a first step. High debt—even if stable—retards potential 
growth, constrains the scope for future discretionary policy, and 
leaves economies exposed to further market shocks. Although sharp 
increases in public debt have not led to high interest rates in most 
countries including the United States, lower rates are unlikely to 
persist indefinitely, in part because they reflect relaxed monetary 
conditions that cannot continue forever. As the economy strengthens, 
and interest rates rise, the large amount of the debt held by the 
public that Treasury must roll over becomes more costly. Treasury is 
currently taking steps to increase the average maturity of its 
outstanding debt securities, not in response to any one interest rate 
environment, but consistent with its goal of funding the government at 
the lowest cost over time. 

Compounding the federal government's long-term fiscal sustainability 
challenges are the aftereffects of the economic downturn and financial 
crisis in the form of increased long-term fiscal exposures of the 
federal government. These include federal support for large 
institutions, such as Fannie Mae and Freddie Mac, and the expansion or 
increased exposure of federal housing, insurance, and guarantee 
programs— such as the Department of Housing and Urban Development's 
(HUD) Federal Housing Administration (FHA), the Pension Benefit 
Guaranty Corporation (PBGC), and federal flood and crop insurance. The 
possibility of substantial increases in fiscal exposure associated 
with these programs and others will make oversight critical in the 
coming years to ensure that the government effectively understands and 
manages its risks. For example: 

* Several initiatives undertaken during the last 4 years by the Board 
of Governors of the Federal Reserve System to stabilize the financial 
markets have led to a significant change in the composition and size 
of reported securities on the Federal Reserve's balance sheet. Total 
assets of the Federal Reserve have increased from about $870 billion 
at the end of fiscal year 2007 to more than $3.7 trillion at the end 
of fiscal year 2013. The value of these assets, which include treasury 
securities and mortgage backed securities guaranteed by Fannie Mae, 
Freddie Mac, and the Government National Mortgage Association, are 
subject to interest rate risk and may decline or increase depending on 
interest rate changes. In addition, the securities acquired by the 
Federal Reserve have also been of longer maturity. This increase in 
the duration of the Federal Reserve's portfolio and its increase in 
size could result in unusually large financial gains and losses from 
market fluctuations potentially reducing future payments of Federal 
Reserve earnings to the federal government.[Footnote 22] 

* The FHA reported that its liabilities exceeded its assets by about 
$15 billion as of September 30, 2012, and that the capital ratio for 
its Mutual Mortgage Insurance Fund fell below zero during the fiscal 
year. In addition, the ultimate roles of Fannie Mae and Freddie Mac in 
the mortgage market may further affect FHA's financial condition. 

* The federal government reported that PBGC liabilities exceeded its 
assets by about $36 billion as of September 30, 2013. PBGC is subject 
to further losses if plan terminations that are reasonably possible 
occur. As a consequence, PBGC could be forced to seek federal 
assistance, dramatically cut benefit payments to participants, or 
raise premiums significantly to meet its benefit commitments. 

* The U.S. Postal Service (USPS) continues to face a deteriorating 
financial situation with a net loss of $5 billion for fiscal year 2013 
raising its total net deficiency to nearly $40 billion. 

* GAO's High Risk List includes some of the issues discussed above 
such as the USPS, FHA, and the PBGC insurance program. It also 
includes a discussion of the potential impacts of climate change and 
the associated financial risks for the federal government, which owns 
extensive infrastructure, insures private property through federal 
flood and crop insurance programs, provides technical assistance to 
state and local governments, and provides emergency aid in response to 
natural disasters. Every two years, GAO provides Congress with an 
update on its High Risk series, which highlights federal entities and 
program areas that are at risk due to their vulnerabilities to fraud, 
waste, abuse, and mismanagement, or are most in need of broad reform. 

Implications for Government and GAO: 

In the coming years, the audit and accountability demands for 
government in such a strained fiscal environment are likely to be 
significant. Concerns about debt levels—-as well as revenue that 
cannot keep pace with increased spending obligations—-could seriously 
affect agency budgets and operations. Understanding the challenges of 
controlling health care spending and identifying opportunities to 
address drivers of health care cost growth, such as technological 
change, while maintaining or improving quality will be paramount to 
addressing the long-term fiscal challenge. Government agencies will 
need to be prepared to confront the capacity issues that may arise if 
there are continuing demands for more government services alongside 
smaller budgets and more limited operational resources. Agencies will 
have to become more efficient and effective at delivering services, 
achieving productivity gains, and taking a risk-based approach to 
managing and allocating scarce resources. As part of this effort, 
agencies need to look for opportunities to minimize duplication, 
overlap, and fragmentation, re-order priorities, determine how and in 
what areas to make tradeoffs, and evaluate the immediate and long-term 
effects of these decisions. 

Helping the Congress and the federal government better understand and 
manage these challenges will require that GAO take a crosscutting 
approach in its work that incorporates the full and complex array of 
economic and social factors involved. GAO stands ready to continue 
assisting the Congress by identifying opportunities to reduce spending 
and narrow the gap between taxes owed and taxes collected. Ultimately, 
addressing the fiscal challenges of the future will require examining 
the entire range of federal activities as well as the structure of the 
tax system and the level of revenue generated. All types of federal 
spending—-that is, for both discretionary and entitlement programs-—
and tax expenditures will need to be re-examined. In the future, the 
federal government will need to make tough choices in setting 
priorities and linking resources to results. 

Specifically, GAO plans to: 

* Identify elements to help address the nation's fiscal challenges, 
including retirement, health, and disability program reforms; 
opportunities to reduce spending; tax reform; and reducing the gap 
between taxes owed and collected. This is done in part by analyzing 
the effectiveness of programs (spending, credit, and tax expenditures). 

* Perform financial statement audits, including of the Internal 
Revenue Service, FDIC, the Securities and Exchange Commission, and the 
Federal Housing Finance Agency that oversees Fannie Mae and Freddie 
Mac. 

* Conduct long-term fiscal simulations and analyses of federal 
deficits, federal debt levels, and the state and local sectors. 

* Recommend solutions to reduce the risk of waste, fraud, and abuse 
and improper payments. 

* Assess and recommend ways to reduce overlap and duplication among 
federal programs and agencies. 

Changing Dynamics of Global Interdependence and Multilateral 
Cooperation: 

The global recession of 2008-2009 and the federal government's Shifts 
in Power and Global Competitiveness: 

While the world economy has generally stabilized from the recent 
financial crisis, long-standing debt issues in advanced countries may 
delay full recovery. The financial crisis-induced recessions in 
advanced economies have contributed to already strained government 
finances and long-term debt problems. Although the U.S. economic 
recovery appears to be strengthening, job creation has been slow and 
uncertainty persists regarding the long-term U.S. fiscal challenges. 

To cope with fiscal imbalances, some advanced economies, including the 
United States, have taken austerity measures. According to the IMF, 
many countries will need to run sizable primary budget surpluses over 
the next six years to bring the public debt down to sustainable levels 
(see figure 11). Austerity programs, while beneficial for economies in 
the long run, can deepen and prolong recessions, with contractionary 
effects on the economy and the job market. As a result, government 
resources available to conduct defense and diplomacy and to support 
international development are likely to be more limited in the years 
ahead. In addition, the simultaneous reduction in private and public 
debt in several key countries and regions of the world will constrain 
domestic consumption and import demand needed to stimulate aggregate 
production. Moreover, continuing fiscal problems in some European 
Union countries are contributing to political instability. As a 
result, the outcome of recent attempts to coordinate fiscal policy in 
the European Union remains uncertain. Forecasters typically assume 
that advanced economies will not have trouble financing their deficits 
and debt, yet changing investor sentiment still threatens stability in 
Europe, with potentially severe consequences for many economies within 
and outside the region. 

The financial crisis that began in 2007 prompted extraordinary 
responses by fiscal and monetary authorities in many advanced 
economies. While these policies are generally viewed as having helped 
advanced economies recover, by offsetting declines in other sources of 
international liquidity, the monetary policies also entail potential 
risks to financial stability. For example, years of low interest rates 
increase risks of financial bubbles as investors seek higher yields 
and impose significant risk throughout the economy if interest rates 
were to rise rapidly. Further, although concerns have been focused 
more on the threat of deflation, concerns have also been raised about 
the potential longer term inflationary consequences of expansionary 
monetary policies. The future of free trade and open markets will 
depend critically on whether countries continue to use fiscal and 
monetary policy to pursue domestic objectives without attempting to 
gain competitive advantage by weakening currencies. For example, 
recent policies in some Asian countries have contributed to the 
weakening of their currencies against the dollar, which could hurt US 
firms that compete with relatively cheaper Asian imports and impact 
Trans-Pacific Partnership trade negotiations. 

Figure 11: Projected Debt and Fiscal Adjustment Needed in Advanced 
Economies: 

[Refer to PDF for image: vertical bar graph] 

Country: France; 
Projected government debt (percentage of GDP): 94%; 
Fiscal adjustment needed (percentage of GDP): 2.4%. 

Country: Belgium; 
Projected government debt (percentage of GDP): 100%; 
Fiscal adjustment needed (percentage of GDP): 2.6%. 

Country: Italy; 
Projected government debt (percentage of GDP): 131%; 
Fiscal adjustment needed (percentage of GDP): 1.3%. 

Country: Portugal; 
Projected government debt (percentage of GDP): 124%; 
Fiscal adjustment needed (percentage of GDP): 4.7%. 

Country: United Kingdom; 
Projected government debt (percentage of GDP): 97%; 
Fiscal adjustment needed (percentage of GDP): 5.4%. 

Country: Greece; 
Projected government debt (percentage of GDP): 176%; 
Fiscal adjustment needed (percentage of GDP): 2.4%. 

Country: Spain; 
Projected government debt (percentage of GDP): 98%; 
Fiscal adjustment needed (percentage of GDP): 4.7%. 

Country: Ireland; 
Projected government debt (percentage of GDP): 120%; 
Fiscal adjustment needed (percentage of GDP): 6.2%. 

Country: United States; 
Projected government debt (percentage of GDP): 109%; 
Fiscal adjustment needed (percentage of GDP): 6.2%. 

Country: Japan; 
Projected government debt (percentage of GDP): 245%; 
Fiscal adjustment needed (percentage of GDP): 16.1%. 

Source: IMF staff estimates and projections. 

Note: Counties included in this graphic represent the advanced 
countries with the 10 largest adjustment needs according to IMF 
estimates and projections. 

[End of figure 11] 

At the same time, emerging and developing economies continue to grow 
in size and importance. For example, in 2012 the combined output of 
Brazil, China, and India was slightly larger than the combined GDP of 
several major industrial powers—the United States, United Kingdom, and 
Canada. Additionally, growth forecasts suggest that less-developed 
countries will continue to grow at faster rates than advanced 
countries (see figure 12). Moreover, the U.S. Bureau of the Census 
projects that by 2025, 60 percent of the world population will live in 
Asia, with 35 percent of that number in China and India. As a result 
of simultaneous growth in both output and population in emerging and 
developing economies, forecasters predict that average per capita GDP 
will be a little less than $14,000 per year in Brazil, Russia, India, 
China, and South Africa (BRICS) during 2013-2018. For the same period, 
forecasters predict that average per capita GDP in the United States, 
European Union, and Japan will be close to $45,000 per year. However, 
it is important to note that many developing and emerging countries 
face slowdowns or have not undertaken the reforms necessary to fully 
emerge as advanced economies. Importantly, financial markets, 
essential for the efficient allocation of capital, remain 
underdeveloped in these countries. 

Figure 12: Five-Year Economic Growth Forecast for Select Countries: 

[Refer to PDF for image: horizontal bar graph] 

Forecast real GDP growth 2014-2018 (average annual percentage change): 

CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey, and South Africa): 
Vietnam: 6.2%; 
Indonesia: 6.1%; 
Turkey: 4.8%; 
Colombia: 4.3%; 
South Africa: 4.2%; 
Egypt: 4.1%. 

G7: 
United States: 2.5%; 
Canada: 2.3%; 
United Kingdom: 1.9%; 
France: 1.4%; 
Germany: 1.4%; 
Japan: 1.4%; 
Italy: 0.9%. 

BRICs (Brazil, Russia, India, and China): 
China: 6.7%; 
India: 6.3%; 
Russia: 3.6%; 
Brazil: 3.1%. 

Other emerging markets: 
Nigeria: 6.8%; 
South Korea: 4%; 
Mexico: 3.7%. 

Source: GAO analysis of Economist Intelligence Unit data. 

Note: Real GDP growth for all countries is the average percent change, 
2014-2018. 

[End of figure 12] 

Emerging and developing economies have forged a growing role in global 
economic policies and priorities. For example, Brazil, Russia, India, 
and China agreed to establish a development bank in 2013 to focus on 
infrastructure and development in emerging markets and announced an 
intention to create a currency stabilization fund aimed at defending 
their local currencies. They have widened the focus of their 
cooperation over the years to encompass topical global issues ranging 
from international terrorism, climate change, and food and energy 
security, to the international economic and financial environment. 
Moreover, the new leader of the World Trade Organization is from 
Brazil, the first full-term appointment of a Latin American leader in 
that role. The U.S and other advanced countries will need to adjust to 
accommodate a larger number of nations and regional powers in global 
decision making and economic governance. 

Trade volumes between less-developed countries have increased 
significantly. Imports among developing and emerging countries were 
more than 50 percent of their total imports in 2011. In contrast, 
trade among developing and emerging economies was about 15 percent of 
their total imports in 1960. Despite regional trade integration, 
emerging Asia continues to rely heavily on exports to advanced 
economies as the collapse in global demand in 2008-2009 and 2011-2012 
illustrated. Generally, emerging and developing economies have pursued 
policies of export-led growth, which has enabled them to accumulate 
foreign currency and debt instruments of advanced economies. Given the 
role of the U.S. dollar as the key reserve currency, the bulk of these 
holdings are in U.S. dollars and U.S. sovereign debt. Key developing 
and emerging economies such as China are projected to continue to run 
significant current account surpluses in 2013-2018 while the United 
States runs large deficits (see figure 13). As a result, China and 
other key developing economies are expected to add to their 
accumulated stocks of foreign exchange reserves, currently held in 
more than 40 sovereign wealth funds, 10 with assets of $100 billion to 
$627 billion. 

Figure 13: Forecast of Current Account Balances, 2013-2018: 

[Refer to PDF for image: multiple line graph] 

Dollars in billions: 

Year: 2013; 
United States: -$451.458; 
European Union: $253.113; 
China: $224. 

Year: 2014; 
United States: -$489.182; 
European Union: $290.528; 
China: $259, 

Year: 2015; 
United States: -$524.548; 
European Union: $327.062; 
China: $317. 

Year: 2016; 
United States: -$563.502; 
European Union: $352.21; 
China: $390. 

Year: 2017; 
United States: -$605.698; 
European Union: $384.488; 
China: $463. 

Year: 2018; 
United States: -$638.939; 
European Union: $414.462; 
China: $559. 

Source: International Monetary Fund, Word Economic Outlook Database, 
October 2013. 

[End of figure 13] 

Important to these shifts in economic power are energy developments 
that have had a positive effect on the U.S. economy and may alter 
global competitiveness. Recent technological advances have resulted in 
a boom in the production of oil and gas, which have affected 
international energy markets and may have more significant 
implications in the future. The rapid developments in unconventional 
energy sources could provide advantages to countries that possess 
significant natural gas supplies, and change the position of OPEC 
nations in the global economy. U.S. natural gas and oil production has 
increased in recent years, driven largely by the commercialization of 
horizontal drilling and hydraulic fracturing technologies that 
facilitate drilling in shale rock. In its most recent Annual Energy 
Outlook, the U.S. Energy Information Administration suggests that U.S. 
production is likely to increase through 2040. The International 
Energy Agency has forecast that the United States could become the 
world's largest oil producer by 2020 and could be energy self-
sufficient by 2035. The United States is becoming less dependent on 
foreign oil; in 2012-2013 the energy trade deficit has already 
narrowed. Traditional energy suppliers, such as Russia, Venezuela, and 
nations in the Middle East and Africa, could experience reductions in 
wealth and influence, particularly those that have not successfully 
diversified their economies. However, there is considerable 
uncertainty in forecasts of the unconventional production of oil and 
gas, largely due to public health and environmental concerns, 
regulatory issues, and questions about the scalability of shale gas 
and the ability of other countries to replicate the shale exploitation 
in North America. Recent IMF simulations suggest that the 
macroeconomic benefits for the United States may be modest. 

Global Threats and Cooperation: 

Combating existing and emerging global threats will require 
multilateral cooperation to ensure sustained effectiveness. At various 
multilateral and bilateral regulatory forums such as the G20, the 
Financial Stability Board, and the World Trade Organization, countries 
continue the work of developing global regulatory principles and 
standards. For example, in 2007, the world financial system 
experienced the worst shock since the Great Depression. As a result, 
regulatory reforms aimed at preventing another major financial crisis 
will continue to drive priorities for financial regulation at the 
national and international levels. Over the past decade, financial 
institutions have extended their global reach, resulting in benefits 
from diversification and enhanced competition—-but also increasing the 
potential for negative spillovers, as the recent crisis exemplified. 
Since the onset of the financial crisis, banks have grown bigger in 
many major advanced economies, even as the financial sector shrunk. 
The share of total bank assets held by the five largest global banks 
(the five-bank asset concentration ratio) highlights concerns about 
institutions that are too important to fail (see figure 14). In light 
of these concerns, addressing the systemic risk posed by large and 
interconnected financial institutions will be a priority. 

Figure 14: Share of Banks' Assets Held by the Five Largest Commercial 
Banks in Select Advanced Economies: 

[Refer to PDF for image: vertical bar graph] 

Country: Denmark; 
2006: 87%; 
2011: 91%. 

Country: Finland; 
2006: 100%; 
2011: 99%. 

Country: Germany; 
2006: 84%; 
2011: 86%. 

Country: Greece; 
2006: 81%; 
2011: 94%. 

Country: Ireland; 
2006: 81%; 
2011: 91%. 

Country: Italy; 
2006: 49%; 
2011: 72%. 

Country: Japan; 
2006: 50%; 
2011: 59%. 

Country: Sweden; 
2006: 98%; 
2011: 97%. 

Country: United Kingdom; 
2006: 66%; 
2011: 77%. 

Country: United States; 
2006: 42%; 
2011: 47%. 

Source: World Bank Global Financial Development Database. 

Note: Percentages reflect the five-bank concentration ratio for each 
country in 2006 and 2011. As a measure of concentration these 
estimates may overestimate concentration in countries in which other 
types of institutions undertake bank-like activity. 

[End of figure 14] 

A new global financial architecture is taking shape, but post-crisis 
regulations at the national level are developing at different speeds 
within countries. Unresolved issues related to the financial crisis 
have contributed to fragile recoveries, with economies growing below 
potential. Efforts to introduce international financial regulatory 
reforms are intended to restrain the riskiest activities, but such 
reforms may have effects on GDP growth. Countries have agreed on 
international principles and made progress on implementing reforms 
designed to make the financial system safer. However, reforms are 
being implemented differently within countries, which creates 
opportunities for financial institutions to move activity to regions 
with looser regulatory standards and could result in conflicts between 
home- and host-country regulators. Monitoring efforts to ensure 
financial regulation consistency are limited. In addition, there is 
little prospect for providing regulatory oversight of financial 
institutions or effectively dealing with failing institutions across 
national borders, despite the interconnected nature of the global 
financial system. These difficulties in implementing regulations 
consistently across countries raise the risks of an unlevel regulatory 
playing field emerging that could undermine financial and economic 
stability. 

Vulnerabilities to financial crimes and money laundering, among other 
activities, will continue to be exposed. Global financial markets have 
created new opportunities for investors, businesses and consumers, but 
illicit networks are also empowered by interconnectedness. The ability 
to shift locations in response to the increasingly borderless economy 
allows bad actors to exploit political, legal, and regulatory 
differences across countries and move operations to safe havens for 
illicit activity and exploit vulnerabilities across the globe. As 
such, transnational criminal networks and other perpetrators of 
financial crime will continue to exploit outdated or weak anti-money 
laundering controls and other gaps, compromise the integrity of the 
world's financial system and pose a significant international threat. 
The intersection of money laundering and terrorist financing implies 
that these illicit flows can further contribute to conflict and 
instability. Moreover, global security threats posed by hostile 
nations also necessitate cooperation in imposing trade and financial 
sanctions in countries such as Iran and North Korea. 

Similarly, increased trade integration and industry interdependence 
present economic opportunities but also raise risks, which cannot be 
tackled by a single country. Global supply chain risks as well as 
other threats such as climate change and its environmental impacts can 
be controlled or influenced by collective action. Continued 
harmonization in international standards for medical products and 
consumer goods is crucial to ensuring medical product and food safety 
in the United States. 

Addressing Human Development Challenges: 

Income inequality, constrained local capacity, and poor governance 
remain key factors limiting human development. Growth in emerging and 
developing countries continues to be uneven between and within 
emerging and developing countries. Labor mobility and migration 
presents opportunities for citizens from emerging and developing 
countries. Alongside increased labor productivity, urbanization, 
strengthened trade links, and foreign direct investment, mobility has 
been an important factor contributing to the decline in global 
poverty. However, without sufficient safeguards, global mobility can 
also increase vulnerabilities to human trafficking and labor 
exploitation. 

According to the World Bank, since 2000, half a billion fewer people 
have been living below an international poverty line of $1.25 a day, 
the fastest reduction in poverty in human history. In addition, the 
number people considered middle class—earning between $10 dollars and 
$100 per day—has grown significantly. Currently there are roughly 1.2 
billion people earning less than $1.25 a day and this group accounts 
for only 1 percent of world consumption, while the billion richest 
consume 72 percent. Efforts to end extreme poverty and promote shared 
prosperity will dominate the development agenda. For example, in 
setting the post-2015 development agenda, the UN High Level Panel and 
the World Bank have identified the eradication of extreme poverty by 
2030 as a central development target. Countries and international 
organizations will continue to work to combat internal corruption as a 
key element of the effort to alleviate poverty. Job creation, 
establishing good governance and accountable public institutions, food 
security and good nutrition, universal access to water and sanitation, 
sustainable management of natural resource assets, and rule of law are 
among the many issues developing countries will need to address to 
further economic development. Countries and international 
organizations will continue to work to combat internal corruption as a 
key element of the effort to alleviate poverty. 

Implications for Government and GAO: 

GAO proposes to build on past work that allows it to flexibly respond 
to issues affected by these trends. As the world continues to grapple 
with harnessing the benefits of, and mitigating the challenges 
associated with, interdependence, key policy initiatives will require 
difficult choices and coordination with international partners. GAO 
can help evaluate how federal agencies work across borders and adapt 
to international challenges. For example, GAO will continue to review 
the effectiveness of U.S. trade and development programs aimed at 
global health issues, global disease surveillance, food security, 
climate change related assistance, and humanitarian aid. Moreover, GAO 
can assess efforts to identify more efficient cost effective 
approaches to world poverty alleviation and proposed reforms of 
international organizations such as the United Nations and IMF. 
Furthermore, new public diplomacy efforts represent evaluation 
opportunities for GAO, as well as oversight and accountability of 
various forms of funding. Given the ongoing threat of protectionism, 
GAO will continue its efforts to assess programs designed to promote 
U.S. exports and develop foreign markets for U.S. products and examine 
issues related to free trade agreements. 

In addition, GAO will continue to conduct work in the areas of 
nonproliferation, counterterrorism, foreign affairs management and 
international security. GAO plans to continue its work examining the 
progress and efficacy of international financial regulatory reforms 
and general efforts to produce a more stable financial system, 
including work examining systemically important financial 
institutions. GAO will also assist in efforts to understand the 
threats posed by illicit actors and thwart criminal attempts to 
exploit vulnerabilities across the global financial system, including 
commercial tax evasion, corruption, fraud, and money laundering. In 
addition, GAO will continue its efforts to evaluate U.S. government 
activities in the areas of terrorist financing and economic sanctions. 

GAO also stands ready to analyze, among other things: 

* U.S. government activities to advance and protect U.S. foreign 
policy and international economic interests; 

* U.S. government efforts to improve standards of imported foods and 
medical products; 

* recent developments in energy markets and environmental regulations; 

* national fiscal and monetary policies aimed at resolving the 
sovereign debt crisis in the U.S. and global economies; 

* global supply chains risk for U.S. companies; and; 

* global efforts to improve regulation of financial institutions and 
markets and counter threats to the financial position of the United 
States, including the dollar as the reserve currency. 

Science and Technology Trends: 

Science and technology (S&T) trends will continue to profoundly affect 
the nation's quality of life, security, and economic growth. These 
trends point to concurrent technological revolutions with significant 
performance increases such as incredibly strong, lightweight 
materials, economic grid-scale energy storage systems, and customized, 
targeted advanced medical treatments, among many others. Thus, S&T 
will remain central to the prevailing issues of our day: economic 
competitiveness; energy sustainability, independence and related 
environmental impacts; biotechnology and medical advances; space and 
Earth exploration; and national and homeland security capabilities. 
[Footnote 23] S&T advances can also raise complex ethical and 
regulatory issues, such as those associated with synthetic 
bioengineered systems or the domestic use of unmanned aircraft 
systems, among others. 

In today's globalized, technologically advancing economy, enhancing 
competitiveness is a central goal for developed and developing nations 
alike.[Footnote 24] Competitiveness is also tied to innovation--the 
translation of ideas or inventions into goods or services that create 
value. This value creation is increasingly derived from intellectual 
capital inputs of knowledge and design (for example, the value 
creation associated with smartphones and tablet computing). Thus, the 
innovation and manufacture of scientifically and technologically 
intensive products such as tablet computers, smartphones, biomedical 
systems, and robotics, among many others, often represent an 
increasing share of national gross domestic product (GDP). 

Key S&T trends include (1) the continued movement of nanotechnology 
into the manufacturing sector, (2) additive manufacturing technologies 
and processes (for example, 3D printing), and (3) synthetic 
bioengineered systems. Key considerations of the federal government in 
the advancement of these and other trends include science, technology, 
engineering, and mathematics education; energy and the natural 
resources nexus; and the growing use of unmanned aircraft systems. The 
above emergent and emerging S&T trends can have ethical, legal, or 
social dimensions that raise key challenges for the federal government. 

Nanotechnology and Manufacturing: Nanoscale S&T results in the 
invention of material technologies that are exponentially faster, 
stronger, and more economical than materials used in previous 
millennia, such as bronze, iron, aluminum, and silicon.[Footnote 25] 
Specifically, today's refinements of nanoengineered systems achieve 
greatly improved efficiencies or performance in computation, 
communication, sensing, and other physical processes. Examples include 
the revitalization of infrastructure (for example, nano-enabled 
concrete for building bridges with life spans of a century or more); 
the customizing and targeting of cancer vaccines and drug delivery 
systems for substantially improved treatment outcomes; and dramatic 
improvements in renewable energy systems such as hybrid or fully 
electric vehicles and photovoltaic solar panels. 

The global market for nanomaterials and nano-enabled products appears 
to be growing fast. According to one set of estimates, the global 
nanomaterials market in 2010 was expected to reach about $1.3 billion, 
but the market for nano-enabled products was expected to be much 
larger-—estimated to be more than $300 billion in 2010. 

Nanotechnology's entrance into manufacturing has been compared to the 
advent of earlier technologies that profoundly affected modern 
societies, such as plastics, semiconductors, and even electricity. 
Figure 15 shows an example of a complex, three-dimensional nanoscale 
structure. Among the key challenges for the government with respect to 
nanotechnology are the potential health and safety risks of 
nanoparticles-—particles so small that they can easily be inhaled or 
simply pass through the natural skin barrier. 

Figure 15: An Example of a Complex Three-Dimensional Nanoscale 
Structure: 

[Refer to PDF for image: illustration] 

Source: Aalto University. 

[End of figure 15] 

Additive Manufacturing: Additive manufacturing, or 3D printing 
technologies, build products layer by layer (that is, additively) 
rather than beginning with a larger bulk material and using 
conventional machine tools and methods to subtract from it. An example 
of a disruptive innovation, this technology uses a computer-based 
three-dimensional model of an object created by software or a physical 
scan of an existing object.[Footnote 26] To build the object, the 
additive manufacturing tool “prints” layer by layer to create the 
resulting product in three dimensions. Similar to inkjet printing 
technology, materials such as metals and plastics can be mixed and 
chemically hardened to achieve intended structures and physical 
properties for the resulting object, at times in ways that could not 
be replicated using conventional methods. Figure 16 shows an 
additively manufactured titanium prosthetic hand. 

Figure 16: A Titanium Prosthetic Hand Produced Via Additive 
Manufacturing: 

[Refer to PDF for image: illustration] 

Source: Aalto University. 

[End of figure 15] 

Although additive approaches do not currently compete economically 
with traditional methods of meeting large-scale demand, their key 
advantages include highly customized production capabilities, 
dramatically reduced cycle times for design and initial prototyping, 
more efficient use of raw materials and reduced waste streams, and 
smaller energy and carbon footprints. Moreover, the change they 
represent holds the potential to dramatically simplify global supply 
chains and logistics since digitized designs can be sent all over the 
world from local production and delivery points at a fraction of the 
cost of current, more centralized paradigms. 

One area in which such systems are already helping to dramatically 
improve the quality of life covers biomedical and dental applications. 
For example, replacement bones and tissues have been printed and are 
already being used by patients ranging from injured war veterans to 
children needing customized body parts to overcome disabling 
conditions. Key challenges such disruptive innovations present to the 
U.S. federal government include managing and protecting intellectual 
property as well as regulating international traffic in weapons-for 
example, additive manufacturing technology has already made it 
possible to produce functional firearms additively from plastic 
material alone. 

Synthetic Biology: In synthetically bioengineered systems, new 
biological parts, devices, and systems are purposefully designed or 
redesigned and constructed from existing natural ones. The more recent 
advances in biotechnology have enabled scientists to make new 
sequences of deoxyribonucleic acid (DNA) from scratch. By combining 
these advances with the principles of modern engineering, scientists 
can now use computers and laboratory chemicals to design or redesign 
organisms to do new things or enhance those they do now—such as 
support biofuels production or help derive advanced medical drugs. For 
example, some start-up companies are designing specialized bacteria to 
do difficult jobs like detecting pathogens in food processing plants 
or producing automotive ethanol from carbon dioxide (CO2), wastewater, 
and sunlight. Moreover, scientists and engineers are now able to 
reliably combine various pieces of genetic code to produce a range of 
new capabilities, from advanced cancer treatments to organisms 
designed to consume toxic chemicals in water or soil. One recent major 
milestone of synthetic biology was the production of the anti-malarial 
drug called artemisinin—-a drug normally derived from a plant and thus 
subject to natural growth cycles—-through synthetic processes in a 
lab.[Footnote 27] Figure 17 shows a female mosquito and the naturally 
occurring plant Artemesia annua, from which anti-malarial treatments 
have been derived. Meanwhile, based on its potential to be used in 
both beneficial and nefarious ways, the advent of synthetic biology 
research and practice has raised significant ethical, legal, social, 
environmental, and homeland and national security implications which 
will require thoughtful, balanced, and holistic consideration by the 
federal government as this field continues to evolve. 

Figure 17: The Anti-Malarial Drug Artemisinin is Derived from This 
Plant, Artemisia Annua (left). Female Mosquito as a Transmission 
Mechanism for Malaria (right): 

[Refer to PDF for image: 2 photographs] 

Source: USDA (left photograph); CDC (right photograph]. 

[End of figure 17] 

Science, Technology, Engineering, and Mathematics Education: A 
critical consideration for moving U.S. economic competitiveness 
forward is the teaching of science, technology, engineering, and 
mathematics (STEM) from grade school through professional schools. GAO 
has found that the United States has historically promoted advances in 
STEM through public and private sector investments of about $284 
billion annually. Given STEM's potential, the federal government and 
the nation's other key centers of research will need to work together 
to ensure that the STEM workforce is sufficiently skilled, that there 
are enough well-equipped R&D facilities, and that STEM-related 
information can be appropriately transferred while protecting 
intellectual property rights. 

Education plays a crucial role in achieving each of these goals. With 
the rise of the digital age, economists have noted that a highly 
educated and skilled workforce is critical not only to individual 
opportunity but also to the overall success of the nation's economy. 
Even with the continued deployment of robotic and autonomous systems 
in manufacturing and industry, a STEM-trained workforce could still 
help increase per capita productivity and efficiency by using easily-
trained and -programmed robots that work alongside humans doing light 
manufacturing and packaging tasks, among many other things. 
Nevertheless, whether the United States trains skilled workers 
domestically or attracts expertise from abroad, an increasingly 
globalized economy means increasing competition from highly skilled 
workforces abroad. 

Energy and the Natural Resources Nexus: Advances in the energy sector 
have raised new challenges for the federal government as it considers 
the implications of such advancements on the environment. For example, 
technological improvements have allowed the efficient and economical 
extraction of oil and natural gas from unconventional onshore 
reservoirs such as shale, tight sandstone, and coal bed methane 
formations, resulting in dramatic changes in global energy markets. 
Specifically, advances in horizontal drilling techniques combined with 
hydraulic fracturing (pumping water, sand, and chemicals into wells to 
fracture underground rock formations and allow oil or gas to flow) 
have increased the domestic development of oil and natural gas from 
these unconventional reservoirs. The increase in such development 
means that even as the United States becomes a net energy exporter of 
carbon-based sources, concerns about the potential effects on the 
environment and public health, including the nature, rate, and extent 
of changes to the global climate system, will nevertheless remain. 

Similarly, in the context of a changing global climate system and 
resource stresses, awareness of the water-energy-food-climate nexus is 
rising. This interdependence links freshwater resources throughout the 
energy life cycle-from extraction to the generation and delivery of 
electricity—with food production, safety, and security. Freshwater 
resource management is increasingly important because of greater 
population stress, periods of extended drought in parts of the United 
States, and threats to ecological biodiversity.[Footnote 28] 

The design of advanced carbon management and mitigation systems to 
reduce carbon emission loading for both oceans and the atmosphere will 
remain important. This includes the continued development of carbon 
capture technologies to mitigate atmospheric CO2 loading at the point 
of emission, climate remediation technologies to lower the overall 
amount of CO2 in the atmosphere, and the safe storage and disposal of 
the resulting waste streams.[Footnote 29] Moreover, to better 
understand and assess the risks of changes in the global climate 
system, research continues in the maintenance of observation 
satellites and the development of vastly more capable Earth system 
computer models. This will enable scientists and policymakers alike to 
better understand climate dynamics and sensitivities and to determine 
risk in the short and long terms. 

Unmanned Aircraft Systems: Another important development in S&T is the 
emergence and increased use of unmanned aircraft systems (UAS)—-
sometimes commonly referred to as “drones.” UAS are generally 
recognized as key technical platforms, as the U.S. Department of 
Defense has used them in Afghanistan, Pakistan, and elsewhere. 
Domestically, too, such systems are increasingly being considered and 
deployed for operational support by homeland security and other law 
enforcement agencies as well as the Department of Homeland Security's 
Customs and Border Protection agency, the Federal Bureau of 
Investigation, and an array of local law enforcement entities on the 
northern and southern borders of the United States. 

Additionally, the Congress has set September 30, 2015, as the deadline 
by which the Federal Aviation Administration's UAS integration plan 
will provide for the integration of civil UAS into U.S. airspace. The 
technical capabilities of these systems continue to evolve rapidly 
under limited federal, state, and local laws governing their safe and 
legal use. Further, as governments, private sector actors, and 
individuals take an interest in deploying drone technologies, 
observers cite real or perceived threats to privacy and individual 
civil liberties. As such, technologies such as UAS will likely require 
simultaneous consideration of ethical, legal, and social issues beyond 
their stated technical capabilities alone. Figure 18 shows a U.S. 
Border Patrol agent using a remote control to steer an unmanned 
aircraft system. 

Figure 18: U.S. Border Patrol Agent Using a Remote Control to Steer an 
Unmanned Aircraft System: 

[Refer to PDF for image: photograph] 

Source: CBP/DHS. 

[End of figure 18] 

Implications for Government and GAO: 

The dramatic advancements in these areas and others hold both 
significant promise and risk. They are disruptive by nature to the 
status quo of a broad array of federal missions and will require a 
more agile, flexible, and responsive government to manage both 
benefits and risks. Regulation, intellectual property protection, and 
environmental, health, and safety frameworks (among others) may 
require wholesale revision, updating, and implementation, even as such 
advances promise significant improvement in the efficiency, cost, and 
performance of various government agencies, departments, and 
operations. Accomplishing such transformations will be essential if 
the United States is to maintain not only the overall well-being of 
its citizens but also its position as the preeminent innovation 
economy on the global stage. To assist the Congress, GAO intends to 
expand its knowledge of and expertise in S&T trends, including the 
complex and controversial issues that may arise because of them. To 
support the increasing number and sophistication of congressional 
requests with S&T dimensions, GAO will need to continue to: 

* strengthen its networks in the scientific and technical communities; 

* support and participate in advisory boards, Comptroller General 
forums, and panels or workshops convened in partnership with the U.S. 
National Academies; and; 

* collaborate with other national and international institutions 
dedicated to science and technology development. 

As S&T continues to provide new opportunities and challenges to the 
nation and the Congress, GAO will continuously adapt its capabilities 
to help meet them. For 2014 through 2019, GAO's portfolio of S&T 
assessments could encompass a wide range of topics, including: 

* assessing the management and results of the federal investment in 
science and technology and the effectiveness of efforts to: 
- transform and expand energy and agriculture, 
- enhance U.S. homeland security, 
- support national competitiveness in a globalized economy, and, 
- manage and protect intellectual property; 

* reviewing federal STEM education efforts, including student and 
teacher evaluations, compensation programs, and the extent to which 
they shape the workforce to compete and succeed in high-technology and 
manufacturing domains; and; 

* conducting technology assessments and specialized studies of a wide 
range of science and technology issues, such as nanotechnology, 
additive manufacturing systems, synthetic bioengineered systems, 
advanced nuclear reactors, and freshwater resource technologies, among 
others. 

Advances in Communications Networks and Information Technologies: 

Information and communications technologies are critical to the daily 
operations and interactions of society, business, and government. 
Access to affordable broadband communications is increasingly viewed 
as vital to long-term economic growth and improved quality of life. 
The Internet has changed the way people communicate, gather and 
disseminate information, and conduct business. The result has been a 
workforce and society that are no longer defined by physical 
proximity. Today, video conferencing and content sharing solutions are 
widely available that facilitate business meetings and project 
collaboration among colleagues and business partners in multiple 
locations around the country or world just as easily as they once did 
in an office environment. Telework is increasingly being used to 
promote more effective and efficient operations and to allow for a 
more flexible human capital approach. 

Mobile devices are becoming the primary means by which individuals are 
accessing the Internet. While Census data show that in 2011, the usage 
of desktop and laptop computers are still the most common devices to 
access the Internet, those with mobile devices are more frequent 
users. As seen in figure 19, in the overall U.S. population 15 years 
and older that access the Internet and in individual age groups, those 
who use mobile devices are most likely to use them to access the 
Internet daily than those with desktops. In all age groups, those with 
tablets or ebooks are most likely to use them on a daily basis 
followed by users of cellular or smartphones. The near ubiquity of 
wireless networking in the United States, in combination with the 
increasing power and functionality of mobile devices, has led to 
increasing societal demands to be connected to the Internet at all 
times and to be able to communicate using text, voice, and video at 
almost any time and in any place. 

Figure 19: Mobile Device Users Accessed the Internet More Frequently 
in 2011: 

[Refer to PDF for image: vertical bar graph] 

Source: GAO analysis of Census Bureau data. 

[End of figure 19] 

Further contributing to the increased usage of the Internet is the 
constant development and implementation of new applications and 
content. Many initial efforts to conduct business electronically 
focused on simplifying and automating what were formerly paper-based 
processes. Electronic government efforts have led to wider and quicker 
access to government information and facilitated efforts by members of 
the public to interact with their governments. The use of applications 
such as health information technology and online education are 
becoming more prevalent. 

Now, new business processes and applications are being enabled by the 
Internet and developments in information and communications 
technologies. In some cases, such as smart power grids, once separate 
proprietary networks are being migrated to use the Internet. In 
others, such as the “Internet of Things”, in which everyday objects 
like appliances, manufacturing equipment, or medical devices are 
connected to the Internet, networking is finding its way into areas 
where none previously existed. Through the use of networked sensors 
and controls, the “Internet of Things” will be able to allow for 
remote monitoring and control of property and systems. For example, 
home networking solutions are already available that allow the control 
of lights, appliances, and door locks from any Internet-connected 
device. Businesses are beginning to use such techniques to monitor and 
control all aspects of their production and manufacturing processes. 
Further, the massive growth in the use of smartphones and tablet 
computers has led to new mobile applications that utilize the new 
platforms and allow businesses to continue to reach current and 
potential customers. 

Social networking is profoundly changing how people communicate and 
build relationships. Individuals or groups who were previously 
isolated can rapidly form large, powerful networks and 
interconnections by combining the use of social media platforms with “
always-on” mobile technologies. Social networking facilitates the 
building of online communities where individuals with common interests 
work together to create, learn, solve problems, or make decisions. In 
an instant, individuals can create and share information with a large 
number of people. Social networking sites are becoming one of the 
primary means of societal interaction. Businesses are using social 
networks to reach out to customers as well as to carry out business 
operations, and social networks have even shown their potential for 
influencing markets. 

Politically, the use of social networking and immediate communications 
has empowered individuals to connect with others with unprecedented 
speed and ease, thereby raising awareness of issues of local, 
national, and global concern. In some cases, individuals are using 
social networking as an additional means to communicate with 
governments to encourage them to address issues that are important to 
citizens or are constraining human development. In other cases, 
individuals are using social networking to quickly organize themselves 
to take political action. For example, the use of online media and 
social networking sites helped to enable the recent mass mobilizations 
of protests and demonstrations in the Middle East and North Africa. 

While government and businesses historically provided the entire 
information and communication technology infrastructure for their 
operations and workforce, today they are adapting to an environment 
where workers are using their own devices—-ranging from traditional 
personal computers and laptops to tablet computers and smartphones. 
Further, instead of buying and maintaining their own infrastructure, 
government and businesses are turning to service providers that use 
cloud computing and network virtualization techniques to offer a range 
of information and communications services. These range from software 
as a service, such as the use of Web-based electronic mail, to 
infrastructure as a service, where hardware platforms and networks are 
made available for customers to host their software solutions. 
Acquiring information and communications functionality as a service 
allows government and business to focus on their core mission 
functions by limiting their involvement in the complexities of 
provisioning, operating, and maintaining their own infrastructure. 
Further, being able to acquire more computing or networking capacity 
on demand allows for more flexible and efficient incorporation of 
technology into their daily operations. 

The increased usage of information and communications technologies has 
led to vast increases in the amount of data being stored and available 
online. Today, almost all forms of communication are stored as digital 
data. What were once discrete ways to communicate—-telephone, 
television, and data—-have been converging to use the Internet, among 
other means. The differences between phone companies, cable companies, 
and internet service providers are no longer distinct. Today, using 
computers and the Internet to have voice and video conversations or to 
view television programs or movies is becoming common. According to 
IDC, in 2012, 898 exabytes-—each exabyte is the equivalent of 1 
billion gigabytes-—of data were created, replicated, or consumed in 
the United States. IDC projects that amount to double about every 3 
years (see figure 20).[Footnote 30] While the United States has been 
one of the leaders in driving Internet growth, IDC projects worldwide 
data to grow at a more rapid pace, and U.S. data will gradually become 
less of a factor in worldwide data growth (see figure 21). 

Figure 20: Growth in data created, replicated, or consumed in the 
United States: 

[Refer to PDF for image: line graph] 

Year: 2009; 
Exabytes: 310. 

Year: 2010; 
Exabytes: 512. 

Year: 2011; 
Exabytes: 699. 

Year: 2012; 
Exabytes: 898. 

Year: 2013; 
Exabytes: 1,166. 

Year: 2014; 
Exabytes: 1,542. 

Year: 2015; 
Exabytes: 1,960. 

Year: 2016; 
Exabytes: 2,491. 

Year: 2017; 
Exabytes: 3,148. 

Year: 2018; 
Exabytes: 3,998. 

Year: 2019; 
Exabytes: 5,124. 

Year: 2020; 
Exabytes: 6,617. 

Source: GAO analysis of EMC-IDC Digital Universe Study. 

[End of figure 20] 

Figure 21: Worldwide data growth compared to the United States: 

[Refer to PDF for image: multiple line graph] 

Year: 2009; 
Exabytes: 
World: 797; 
United States: 310. 

Year: 2010; 
Exabytes: 
World: 1,227; 
United States: 512. 

Year: 2011; 
Exabytes: 
World: 1,851; 
United States: 699. 

Year: 2012; 
Exabytes: 
World: 2,838; 
United States: 898. 

Year: 2013; 
Exabytes: 
World: 4,206; 
United States: 1,166. 

Year: 2014; 
Exabytes: 
World: 6,123; 
United States: 1,542. 

Year: 2015; 
Exabytes: 
World: 8,591; 
United States: 1,960. 

Year: 2016; 
Exabytes: 
World: 10,869; 
United States: 2,491. 

Year: 2017; 
Exabytes: 
World: 15,937; 
United States: 3,148. 

Year: 2018; 
Exabytes: 
World: 21,615; 
United States: 3,998. 

Year: 2019; 
Exabytes: 
World: 29,352; 
United States: 5,124. 

Year: 2020; 
Exabytes: 
World: 40,026; 
United States: 6,617. 

Source: GAO analysis of EMC-IDC Digital Universe Study. 

[End of figure 21] 

Individuals are increasingly being defined by the data that is 
collected about them. In some cases, individuals are placing more data 
about themselves online through social networking sites. In other 
cases, through the course of providing services to their customers, 
businesses are collecting vast amounts of transactional data about 
them. For instance, mobile telephone service providers collect data 
about the locations of mobile phones so that they can provide basic 
services and deliver voice and data traffic to the intended devices. 
Further, to allow for emergency response through enhanced 911 
services, mobile phones are required to provide location information. 
Telephone service providers also collect key information about voice 
calls, such as the phone number called, the date and time of the call, 
and the duration of the call. Internet service providers and webpage 
owners collect data about who visits webpages. Several webpage owners 
even use readily available tools to determine what other websites 
their users are visiting. 

The amount of individual data being collected has focused attention on 
providing adequate privacy protections and ensuring that individuals 
are adequately informed about data collection and protection 
practices. The volume of data breaches being reported particularly 
indicates the need for business and government to place greater 
emphasis on their data protection practices to ensure the privacy of 
personally identifiable information. 

Further, the increasing reliance on information and communications 
technologies has increased the potential consequences of a successful 
cyber attack. In the 2013 assessment of threats facing the United 
States, the Director of National Intelligence identified cyber attacks 
as the top concern. Particular concern has been raised about the risks 
to the nation from a potential cyber attack that could disrupt the 
functioning of our critical infrastructure, such as our financial 
markets or the electrical grid. Cyber espionage that targets sensitive 
and proprietary business and government information has the potential 
to threaten our economic and national security. Society's increasing 
reliance on mobile devices to access the Internet also highlights the 
need to better secure such devices. For example, a broad range of 
threats and vulnerabilities increase the risks to the proper 
functioning of these devices and the confidentiality of any data 
stored on the devices. 

Implications for Government and GAO: 

The growth in the use of information and communications technologies 
has affected not only how people work and interact, but also how they 
think and what they expect from their government. Understanding and 
managing the implications of a more mobile connected society and 
massive data collection will be crucial for the government. A more 
mobile and geographically distributed workforce could allow for 
certain efficiencies, but it will be important to ensure that the 
necessary tools are in place to facilitate work group collaboration 
and communications to maintain or improve the performance of 
government operations. While the large amounts of data now available 
can provide immense opportunities for improving government decision 
making and operations, understanding and managing the cybersecurity 
and privacy implications of the storage and use of this data will be 
vital. As society, business, and the government become more reliant on 
the Internet to carry out mission critical functions, securing such 
systems becomes more vital to ensuring our economic and national 
security. 

* To fully leverage the use of diverse and complex “big data” sets, 
new data analytical methods are needed to identify key trends and 
anomalies to better understand causality of events and better enable 
predictions to improve government decision making. In particular, new 
tools are needed to analyze and develop meaningful information for 
audits and investigations to prevent and detect fraud, waste, and 
abuse in government programs. 

* The government needs to adapt to the public's growing use of mobile 
devices and social networking and develop new ways to interact with 
the public to carry out key government services. For instance, the 
government could use social networking to disseminate key information 
such as weather warnings and evacuation instructions. The public's use 
of social networking could also provide a means for the government to 
enhance its situational awareness of emerging events, such as natural 
disasters, pandemics, and social unrest. 

* As threats to systems supporting critical infrastructure and federal 
information systems continue to evolve and grow, the government will 
need to focus increasing resources to ensure that these systems are 
secure. The movement towards shared services and cloud computing is 
further changing the dynamics of cybersecurity. The government's 
ability to handle the increasingly complex cybersecurity challenges 
from nation states and certain nonstate actors will be critical, 
particularly when dealing with threats to national security. 

* As more data and information are made available online, ensuring the 
privacy of personal and proprietary data and addressing the risks of 
identity theft will become increasingly challenging. 

GAO is well prepared to support the Congress in understanding the 
implications of the rapid growth of networking and information 
technologies and in overseeing their use in the federal government. In 
its High Risk List, GAO has highlighted the need to better manage and 
protect information and communications systems that support the 
federal government and the nation's critical infrastructure. GAO plans 
to perform work in the following areas: 

* Continue to examine government-wide approaches and individual agency 
programs to secure federal systems and the effectiveness of public-
private partnerships to protect critical infrastructure. Continue to 
assess the government's ability to protect the privacy of individuals' 
personal information and other data that the federal government and 
the private sector collect and store. In particular, GAO will examine 
the effects on privacy of massive data collection and storage. 

* Examine the use and potential benefits of analyzing massive data 
sets to detect fraud, waste, and abuse and to improve the efficiency 
and effectiveness of programs and operations. 

The increasing volume of users, applications, and data is straining 
the current information and communications technology infrastructure. 
In this area, GAO plans to perform the following work: 

* Continue to review government programs to enhance the networking 
infrastructure to support future demands. In particular, GAO will 
assess efforts to efficiently broaden the availability of broadband 
access throughout the country, and specifically to underserved 
communities. 

* Continue to review the government's spectrum management policies and 
the challenges it faces in making more efficient use of spectrum to 
accommodate increasing demands from emerging telecommunications 
technologies and services. 

* Examine the progress of efforts to move toward shared services and 
cloud computing models for networking and information technology 
services within the federal government and the effects on the 
efficiency and effectiveness of program operations. 

Shifting Roles in Governance and Government: 

Governance in the 21st century poses a series of evolving challenges 
to policymakers and governments alike. The United States must operate 
in an increasingly interconnected and complex world that is 
characterized by the free flow of capital, goods, services, people, 
and information, as well as intricate monetary, fiscal, and economic 
systems. If important national policy initiatives—such as protecting 
the security of citizens, reforming national tax laws, modernizing 
outdated financial regulatory systems, and assuring public safety in 
the areas of medical products, food, and consumer goods—are to be 
effective, they must account for local and global risks, deep 
interconnections, complex supply chains, and unintended consequences. 
Further, the government's fiscal exposures now cut across multiple 
geographic boundaries, government programs, levels of government, and 
sectors. Hence, the management of fiscal risks is becoming at once 
more important and more difficult. 

Exercising foresight and strategic planning in this environment will 
be essential and requires rethinking the role of government, 
governmental missions, and programs. New collaborations, networks, and 
partnerships across global and domestic boundaries will be vital to 
achieving national policy objectives. 

Policymakers at all levels are striving to enable growth, attract 
investment, and create jobs in a domestic economy that faces 
substantial headwinds. Economic challenges facing policy makers also 
include increased demands for government services, such as greater 
dependency on the social safety net by individuals, including the 
young; growing income inequality; a labor force that is not growing 
fast enough to replace those retiring; and an expanding demographic of 
elderly citizens in need of expensive health care and social services. 

At the national level, the federal government faces the challenge of 
scaling back the fiscal stimulus, managing its public debt, and 
diversifying an economy that is highly dependent on the housing and 
financial sectors. In addition, many government entities face flat or 
decreasing budgets for the foreseeable future. Meeting citizen 
expectations may become difficult, thereby raising concerns about the 
basic capacity of government to deliver missions, programs, and 
services. Moreover, to implement public policy initiatives and 
programs, the federal government is increasingly reliant on both third 
parties and on state and local governments, which themselves are 
constrained and face serious long-term fiscal challenges. 

Citizens' faith in the federal government is, according to recent 
polls, at historic lows. To restore public confidence, the federal 
government must find new approaches to communicate and interact with 
an increasingly diverse citizenry and global community, operate with 
greater efficiency, embrace innovation, and recruit and retain those 
with the skills and talent to help solve the complex problems facing 
government. Finding the revenues to finance the federal government 
will require adapting a long-standing system to new global economic 
realities, in addition to reimagining the tools government uses to 
achieve public policy objectives. 

Complex Issues Require Foresight and Planning: 

Governments in general, and the federal government in particular, face 
an increasing number of large, complex, and high-risk challenges that 
cut across multiple countries, levels of government, agencies, and 
sectors. Some of these issues are known and longstanding; others give 
little time to react, where failure can have grave or unintended 
consequences. For example, preventing or responding to terrorist 
attacks, natural disasters, pandemics, and financial crises—-as well 
as coordinating efforts on economic development, food safety, health 
care reform, and education policy-—require close coordination across 
local, state, national, and even international levels of government. 

The federal government will need to improve its capacity to anticipate 
crises and mitigate risk. To do so, policymakers and program 
administrators must work across the government enterprise and hone and 
adapt management tools—such as foresight, strategic planning, risk 
management, and performance measurement systems—in order to better 
manage uncertainty, tailor policies, prioritize responses, and 
allocate scarce resources in the coming years. 

Analysis and evaluations based on foresight can provide a way for 
policymakers and administrators to prepare for future events, consider 
scenarios, analyze potential implications, imagine alternatives, ask 
the unasked questions, and ultimately reduce risks and take advantage 
of opportunities. The financial crisis of 2008 illustrates the 
enormous cost to governments—fiscally, politically, and socially—-when 
regulatory breakdowns occur and warning signs are ignored. 

Governments must continually identify high-risk areas that can create 
significant fiscal exposures or are vulnerable to fraud, waste, abuse, 
and mismanagement. Governments will also need to systematically 
integrate the identification and management of risk into their 
strategic and program planning. Further, leaders must establish a 
vision to align their organizations' financial assets, human capital 
resources, and performance measures to achieve sustainable results in 
a dynamic external environment. 

The Government Performance and Results Modernization Act of 2010 
seeks, among other things, to promote longer range planning by 
requiring departments and agencies to develop and issue strategic 
plans. It also aims to instill a more coordinated and crosscutting 
perspective to federal performance by requiring the administration to 
select a set of cross-agency priority goals. The GPRA Modernization 
Act also requires federal agencies, in setting their own goals, to 
identify other entities that are involved in achieving those goals. 

The goals of the GPRA Modernization Act are a step in the right 
direction, but GAO's work indicates that, given the complexities of 
many of the issues facing government, more needs to be done by OMB to 
identify crosscutting issues across government for planning purposes. 
Further, there are still weaknesses in performance management 
information and its usefulness for congressional and agency 
decisionmaking. 

The performance planning and reporting framework put into place by the 
GPRA Modernization Act provides important tools that can help the 
Congress and the executive branch clarify desired outcomes, address 
program performance spanning multiple organizations, and facilitate 
future actions to reduce fragmentation, overlap, and duplication. 
However, realizing the intent of the GPRA Modernization Act for 
assessing government performance and improvement and for reducing 
fragmentation, overlap, and duplication will require sustained 
oversight of implementation. 

GAO's work on overlap, duplication, and fragmentation highlights the 
governance challenges policy makers and decision makers face in 
overseeing programs across government, allocating resources, measuring 
program performance, and evaluating the achievement of national 
objectives. GAO has issued three annual reports that identify 162 
areas where opportunities exist for executive branch agencies and 
Congress to reduce fragmentation, overlap, and duplication among 
federal programs or achieve other cost savings and enhanced revenue 
collection. Collectively, the reports identify opportunities for 
greater efficiency and effectiveness within all 15 cabinet-level 
executive departments and at least 17 other federal entities. 

Within these 162 areas, GAO suggested approximately 380 actions that 
executive branch agencies or Congress could take to address the 
identified issues. The executive branch and Congress have made some 
progress in addressing the identified issues, but additional work 
remains. Fully addressing the identified issues could save the 
government tens of billions of dollars annually. 

Identifying, preventing, and addressing fragmentation, overlap, and 
duplication within the federal government is challenging. These are 
difficult issues to address because they may require agencies and 
Congress to re-examine within and across various mission areas the 
fundamental structure, operation, funding, and performance of a number 
of long-standing federal programs or activities with entrenched 
constituencies. 

Shifts to State and Local Governments and Third Parties: 

The federal government uses a wide range of public policy tools to 
accomplish its missions. These tools include federal grants to state 
and local government; contracts; tax expenditures, loans and 
guarantees; public-private partnerships; regulations; information and 
education; and direct service delivery. The use of three of these 
tools in particular—-grants to state and local governments, 
contracting, and tax expenditures (discussed in greater detail in the 
Fiscal Sustainability and Debt challenge paper)-—demonstrates how the 
budgets, functions, and points of service of many government programs 
increasingly devolve to third parties. As a result, tailored 
approaches may be required to ensure government achieves its goals 
while assuring effective oversight and accountability. 

As figure 22 suggests, the process of distributing federal assistance 
through intergovernmental grants is complicated and involves many 
different parties, both public and private, with different 
organizational structures, sizes, and missions. These partners' 
capacities—-that is, their ability to maintain and effectively manage 
the resources needed to implement the grants—-can materially affect 
the overall success of federal grant programs. Federal outlays for 
grants to state and local governments increased from $91 billion in 
fiscal year 1980 (about $221 billion in 2011 constant dollars) to more 
than $606 billion in fiscal year 2011; the amount going to Medicaid 
has also increased during this time (figure 23). While the past three 
decades have witnessed dramatic growth in federal grants to state and 
local governments in absolute dollar terms, the same is not true when 
one considers these grant outlays as a proportion of total federal 
spending. 

Figure 22: United States Federalism in Practice: 

[Refer to PDF for image: illustration] 

Series of networked circles: 

50 States: Many state and quasi-governmental agencies. 

Nonprofit Sector: Approximately 33,000 human service NPs with federal 
contracts. 

Federal: 14 executive departments & about 200 agencies & sub-agencies. 

Many Local: 3,031 counties; 19,519 municipalities; 16,360 townships; 
12,880 school districts; 38,266 special districts[A]. 

For-profit Sector: federal and state/local contractors. 

In 2012, there were 90,056 local governments in the United States. 

[A] Examples of special districts include mosquito abatement 
districts, utility districts, water and sewer districts, transit 
authorities, etc. 

Sources: GAO graphic based on U.S. Census Bureau, Government 
Organization Summary Report 2012 (Released Sept. 26, 2013), U.S. 
Government Manual: 2009-10; and Urban Institute's National Study of 
Nonprofit-Government Contracting Survey Results (2009 Data). 

[End of figure 22] 

Grant outlays to state and local governments as a percentage of total 
federal outlays in fiscal year 2011 were at a roughly comparable level 
to what they were more than 30 years earlier (16.8 percent versus 15.5 
percent). However, during this period, the proportion of federal grant 
outlays to state and local governments dedicated to Medicaid more than 
tripled, rising from 2.4 percent of all federal outlays in 1980 to 7.6 
percent in 2011. Medicaid spending has increased by 4.3 percent 
annually, with about 70 percent of the growth due to increasing 
Medicaid enrollment. The increase in outlays for Medicaid and other 
health-related grant programs was offset by an approximately 
equivalent decrease in the share of outlays for other grants to state 
and local governments. 

Figure 23: Federal Outlays for Grants to State and Local Governments 
and Medicaid, in 2011 Constant Dollars, Fiscal Years 1980 to 2011: 

[Refer to PDF for image: stacked line graph] 

Dollars in billions: 

Fiscal year: 1980; 
Federal grant outlays to state and local governments: $220.621; 
Medicaid federal grant outlays: $33.695. 

Fiscal year: 1981; 
Federal grant outlays to state and local governments: $208.126; 
Medicaid federal grant outlays: $36.993. 

Fiscal year: 1982; 
Federal grant outlays to state and local governments: $181.275; 
Medicaid federal grant outlays: $35.77. 

Fiscal year: 1983; 
Federal grant outlays to state and local governments: $182.136; 
Medicaid federal grant outlays: $37.403. 

Fiscal year: 1984; 
Federal grant outlays to state and local governments: $185.327; 
Medicaid federal grant outlays: $38.111. 

Fiscal year: 1985; 
Federal grant outlays to state and local governments: $194.798; 
Medicaid federal grant outlays: $41.692. 

Fiscal year: 1986; 
Federal grant outlays to state and local governments: $202.035; 
Medicaid federal grant outlays: $44.955. 

Fiscal year: 1987; 
Federal grant outlays to state and local governments: $189.901; 
Medicaid federal grant outlays: $48.062. 

Fiscal year: 1988; 
Federal grant outlays to state and local governments: $195.782; 
Medicaid federal grant outlays: $51.706. 

Fiscal year: 1989; 
Federal grant outlays to state and local governments: $199.224; 
Medicaid federal grant outlays: $56.541. 

Fiscal year: 1990; 
Federal grant outlays to state and local governments: $213.282; 
Medicaid federal grant outlays: $64.781. 

Fiscal year: 1991; 
Federal grant outlays to state and local governments: $234.626; 
Medicaid federal grant outlays: $79.768. 

Fiscal year: 1992; 
Federal grant outlays to state and local governments: $263.512; 
Medicaid federal grant outlays: $100.375. 

Fiscal year: 1993; 
Federal grant outlays to state and local governments: $280.326; 
Medicaid federal grant outlays: $109.711. 

Fiscal year: 1994; 
Federal grant outlays to state and local governments: $298.62; 
Medicaid federal grant outlays: $116.322. 

Fiscal year: 1995; 
Federal grant outlays to state and local governments: $312.401; 
Medicaid federal grant outlays: $123.674. 

Fiscal year: 1996; 
Federal grant outlays to state and local governments: $310.326; 
Medicaid federal grant outlays: $125.31. 

Fiscal year: 1997; 
Federal grant outlays to state and local governments: $313.229; 
Medicaid federal grant outlays: $127.817. 

Fiscal year: 1998; 
Federal grant outlays to state and local governments: $325.096; 
Medicaid federal grant outlays: $133.714. 

Fiscal year: 1999; 
Federal grant outlays to state and local governments: $349.202; 
Medicaid federal grant outlays: $140.838. 

Fiscal year: 2000; 
Federal grant outlays to state and local governments: $365.428; 
Medicaid federal grant outlays: $150.736. 

Fiscal year: 2001; 
Federal grant outlays to state and local governments: $397.799; 
Medicaid federal grant outlays: $161.639. 

Fiscal year: 2002; 
Federal grant outlays to state and local governments: $433.54; 
Medicaid federal grant outlays: $181.392. 

Fiscal year: 2003; 
Federal grant outlays to state and local governments: $467.78; 
Medicaid federal grant outlays: $193.599. 

Fiscal year: 2004; 
Federal grant outlays to state and local governments: $478.491; 
Medicaid federal grant outlays: $206.926. 

Fiscal year: 2005; 
Federal grant outlays to state and local governments: $486.753; 
Medicaid federal grant outlays: $206.656. 

Fiscal year: 2006; 
Federal grant outlays to state and local governments: $477.446; 
Medicaid federal grant outlays: $198.661. 

Fiscal year: 2007; 
Federal grant outlays to state and local governments: $474.09; 
Medicaid federal grant outlays: $203.636. 

Fiscal year: 2008; 
Federal grant outlays to state and local governments: $481.63; 
Medicaid federal grant outlays: $210.295. 

Fiscal year: 2009; 
Federal grant outlays to state and local governments: $553.684; 
Medicaid federal grant outlays: $258.244. 

Fiscal year: 2010; 
Federal grant outlays to state and local governments: $620.386; 
Medicaid federal grant outlays: $278.149. 

Fiscal year: 2011; 
Federal grant outlays to state and local governments: $606.766; 
Medicaid federal grant outlays: $274.964. 

Source: GAO analysis of OMB data. 

[End of figure 23] 

The federal government also makes substantial use of contractors to 
acquire a vast array of products and services. Over the last 10 years, 
total federal procurement spending has ranged from $318 billion in 
fiscal year 2003 to $517 billion in fiscal year 2012 (figure 24). 
Federal agencies' heavy reliance on contractors to accomplish the work 
required to meet their missions is a result of several factors, 
including: (1) requirements for specialized expertise that is more 
readily available from the private sector, (2) the need to supplement 
a declining federal workforce, and (3) demands for increased 
flexibility in times of severe budget constraints. 

Figure 24: Federal Contract Obligations 2003 to 2012 (in billions): 

[Refer to PDF for image: vertical bar graph] 

Fiscal year 2003: $318.1; 
Fiscal year 2004: $346.1; 
Fiscal year 2005: $391.3; 
Fiscal year 2006: $432; 
Fiscal year 2007: $469.3; 
Fiscal year 2008: $541.1; 
Fiscal year 2009: $540.1; 
Fiscal year 2010: $540.1; 
Fiscal year 2011: $539.4; 
Fiscal year 2012: $517.5. 

Source: GAO analysis of Federal Procurement Data System. 

[End of figure 24] 

Although using contractors can help agencies address these issues, the 
increased use of contractors also presents challenges. Agencies must 
have mechanisms in place to ensure they contract with the most capable 
and cost-effective companies. Agencies must also provide proper 
oversight of contractor performance to ensure that required goods and 
services are delivered on time and within budget. Finally, agencies 
must retain control over the most critical (that is, “inherently 
governmental”) work of the government. 

GAO has found that major agencies, such as the Department of Defense 
and the Department of Homeland Security, have contracted out work 
closely associated with inherently governmental functions, without 
fully addressing the risk of possible loss of visibility and control 
of essential governmental functions. 

Further, if nonprofit and private-sector organizations falter due to 
financial constraints, then the public sector's reliance on their 
assistance in achieving policy objectives may need to be addressed. As 
the public, private, and nonprofit sectors continue to become more 
interdependent, it will be paramount to have effective, accountable, 
and transparent partnerships and collaborations. 

Financing Government in a Changing Globalized Economy: 

The resources needed to fund government can be raised primarily by 
taxing or borrowing. Both of these strategies affect the economy. 
Taxes alter the decisions people and businesses make about how much to 
work, save, and invest. Government borrowing absorbs savings otherwise 
available for private investment and postpones the need to tax or 
reduce spending. 

In the near term, governments at all levels will continue to face a 
host of challenges and a shifting environment when it comes to revenue 
collection. Certain consequences of the financial crisis and 
recession—-higher rates of unemployment, reduced spending, and loss in 
property values—-continue to put pressure on traditional sources of 
revenue for federal, state, and local governments. Some local 
governments have even filed for bankruptcy, as they found their 
revenues no longer covered their expenses and debt service 
obligations. Another challenge is the tax gap-—the difference between 
taxes owed and taxes paid on time-—which has persisted over time and 
is dispersed across many types of taxes and taxpayers. The federal tax 
gap was most recently estimated to be $385 billion for tax year 2006 
(after IRS collection efforts and late payments). Finding strategies 
to reduce the tax gap would improve revenue collection. 

More fundamentally, dissatisfaction with the federal tax system has 
fueled a debate about the comprehensive nature of tax reform due to 
concerns about the system's economic incentives, fairness, and 
complexity. The debate includes questions like whether taxes should be 
based on income or consumption; whether the rate structure should be 
flatter or more progressive; and, the extent to which tax expenditures 
should be employed to determine economic or social policy. The debate 
also recognizes the trend away from organizing businesses as 
corporations, and considers how different types of businesses should 
be taxed. Decisions about tax reform will be made in an increasingly 
global environment-—an environment where goods, investment capital, 
and even labor move across political boundaries in response to 
economic incentives, including tax incentives. Greater globalization 
and interdependence of markets and economies mean that governments 
will need to adapt their tax and revenue systems accordingly. 

Technology: A Disruptor and Facilitator of Governance and Governments: 

The communications and technology trends discussed earlier are also 
affecting governance and how governments and citizens interact. 
[Footnote 31] For example, social media and greater Internet 
connectivity have eliminated the “middle man” in organizations and 
sectors, allowing citizens and consumers to directly communicate with 
and influence businesses, governments, and policymakers. These changes 
are further altering the way governments disseminate information to 
and interact with their citizens. Domestically, citizens are using 
online networks and social media platforms to take part in political 
debates and contact policymakers directly. U.S.-based social media 
firms have amassed a global user base that, in some cases, eclipses 
the population of many countries. In some cases, foreign users of 
social media tools have organized protests in their countries and 
connected with their fellow citizens to demand reform or even new 
governments. 

Mobile and near 24-7 Internet connectivity combined with the rise of 
social networks have disrupted and transformed the media sector, which 
plays an important role in a vibrant democratic system. Some media 
firms have been unable to adapt and have responded by selling assets 
or going out of business. Major press organizations must now compete 
with networks of online organizations and individuals who, in many 
cases, can create and distribute their own news content and 
information faster than professional news outlets can. Other media 
firms have changed their business models and transformed themselves 
into data analytics firms that sell repurposed public and proprietary 
data to the government. 

Just as technology has disrupted the media and other sectors, it has 
the potential to influence the ways the federal government has 
traditionally assured transparency, accountability, and public 
reporting. For example, there was a profound shift in how the public 
participates in accountability efforts when, in response to a mandate 
in the Recovery Act, the Recovery and Accountability Transparency 
Board (RATB) created a public website that provided citizens with 
contemporary information on the distribution and recipients of 
stimulus funding across the nation. The RATB further developed an 
online and interactive platform through which the public could report 
any suspected fraud, waste, and abuse in the expenditure of Recovery 
Act funds. 

The arrival of these technology-driven approaches that combine public 
engagement with crowdsourcing shows a potential future of real-time 
accountability reporting which leverages the online participation of 
networks of citizens to report on fraud, waste, and abuse. This is a 
fundamental shift from previous approaches where citizen engagement in 
accountability efforts was limited simply to correspondence or 
telephone hotline calls. 

These developments are part of a broader trend with enormous 
potential, whereby governments can constructively engage with their 
citizens through technology and online tools to achieve outcomes that 
would not have otherwise been possible. Citizens will increasingly 
demand new online tools not only for the accountability of government 
programs and spending, but also for how government programs and 
services are actually delivered. Online interaction and e-commerce is 
now commonplace in the private sector—-and citizens will consequently 
expect their local, state, and federal governments to provide 
efficient online service delivery as well. Online service delivery 
will be essential to reducing response times to citizens, saving 
money, and in some cases, enhancing revenue. 

However, this shift to digital service delivery will require both new 
technology infrastructure and new categories of government jobs. 
Realizing the full potential of this shift will be challenging. It 
requires essential technology infrastructure investment during a time 
of constrained budgets. Moreover, rather than solely focusing on 
replacing today's workforce, human capital offices will have to re-
think hiring and workforce planning to create the job positions that 
are needed to transform today's government and maintain the government 
of tomorrow. 

Implications For Government and GAO: 

The shifting roles of government and its relationships with other 
sectors are affecting the scope and nature of GAO's work. GAO's work 
on reforming financial markets and institutions helps to inform the 
Congress and policymakers on the complexities of regulating these 
entities in a globally interconnected and competitive world, as well 
as assisting in congressional oversight of regulatory reform 
initiatives. Similarly, GAO's cross-border work on regulating the 
safety of medical products, food, and consumer products helps the 
Congress monitor and oversee regulatory efforts in these areas that 
span multiple agencies, countries, and levels of government. The 
growing cost of the Medicaid program suggests an ongoing need to 
examine federal, state, and local government financing as well as to 
better oversee payment policies and program integrity. Building on 
GAO's work on recent global-health-related events and their 
implications for preparedness, GAO seeks to provide additional lessons 
for federal, state, and local governments to enhance their 
preparedness for future events. 

GAO's recent work also places new emphasis on monitoring the adequacy 
of supply and the causes of price volatility of commodities such as 
energy and food. Further, GAO's audit work on international 
peacekeeping, disaster assistance, and public diplomacy has prepared 
us to advise policymakers on what works best, as well as the 
challenges of tracking and ensuring accountability of funds that flow 
through governmental and nongovernmental organizations and across 
international borders. 

While many GAO engagements examine the governance challenges a 
specific agency faces, three GAO-wide initiatives offer government-
wide perspectives on the progress needed to respond effectively to 
21st century governance challenges: (1) the High Risk program; (2) the 
annual reports on overlap, duplication, and fragmentation; and (3) 
implementation of the Government Performance and Results Act 
Modernization Act of 2010. 

The High Risk work documents the challenges of managing in a complex 
governance environment. GAO began the High Risk program in 1990 and 
initially focused on bringing attention to government operations that 
had greater vulnerabilities to waste, fraud, abuse, and mismanagement. 
Those issues remain a central focus of the High Risk program today. 
However, in recognition that many of the high risk issues GAO was 
finding were the product of an inability to adjust to a changing 
environment or poor working relationships across organizational 
boundaries, especially with third parties such as contractors, GAO 
expanded its focus several years ago to also include critical areas 
needing transformation to address economy, efficiency, and 
effectiveness challenges. The High Risk program will continue to 
identify risks and help resolve serious weaknesses in areas that 
involve substantial resources and provide critical services to the 
public. 

Moving forward, GAO plans to identify additional opportunities from 
across the government to reduce fragmentation, overlap, duplication 
and achieve other cost savings and revenue enhancements. GAO also 
plans to report on the progress Congress and executive branch agencies 
have made in addressing the issues previously identified in GAO's work 
in this area. 

In the coming years, GAO will also continue to monitor the executive 
branch's progress in implementing and leveraging the GPRA 
Modernization Act's provisions to address broad governance challenges. 

Overall, GAO is finding that fundamental improvements in the 
performance of 21st century government requires a focus on governance—
that is, assessing and improving connections across organizations, 
levels of government, sectors, and policy tools. In practice, this has 
several important implications for where GAO's work will focus, such 
as: 

* Reviewing government's ability to manage for results, such as the 
extent to which agencies have an appropriate crosscutting or “whole of 
government” perspective to their intended results, as well as using 
innovative approaches to better achieve results. 

* Evaluating collaborative mechanisms, such as ways to ensure that 
agencies effectively coordinate their efforts across levels of 
government and with other sectors. 

* Examining the interplay of the range of public policy tools that are 
being used to achieve results to ensure that they are effective and 
mutually reinforcing. 

* Exploring opportunities to use web and social media technologies to 
improve government transparency and public reporting to foster greater 
public participation and civic engagement. 

Assessing government's capacity to respond to governance challenges 
such as agencies' risk management programs, to ensure those agencies 
systematically integrate the identification and management of risk 
into strategic and program planning. 

Demographic and Societal Changes: 

Significant demographic shifts are under way that affect society and 
the economy both domestically and around the world. As in most other 
developed countries, U.S. population growth is slowing due to 
declining birth rates. Immigration from developing countries is 
becoming the main source of U.S. population growth, bringing greater 
ethnic diversity to our society. Meanwhile, similar to Europe and 
Latin America, U.S. labor force participation rates are declining for 
both men and women-—which could be due, in part, to the recession and 
slow recovery, or could be signaling a new long-term trend. Also, as 
in many countries throughout the world, the U.S. population is aging. 
Between 1970 and 2030, the proportion of the U.S. population age 65 or 
older is expected to double. 

These trends will have important implications for our nation's future 
economic performance and the basic fabric of American society, posing 
challenges to federal programs such as Social Security and Medicare, 
and public policies in areas such as health care, education, and 
income support—-all with major effects on the federal budget. 

U.S. Population Growth Is Slowing: 

While the U.S. population grew 54 percent between 1970 and 2013, it is 
expected to grow by less than half that amount—about 26 percent— 
between 2013 and 2050, and immigration is projected to overtake 
fertility as the major driver of future growth (see figure 25). 
Worldwide, population growth is also beginning to slow but, according 
to UN projections, is still projected to grow at a faster rate than in 
the United States—about 33 percent between 2013 and 2050. 

Figure 25: Net International Migration and Natural Increase for the 
United States: 2012 to 2060: 

[Refer to PDF for image: multiple line graph] 

Number in millions: 

Year: 2012; 
Net international migration: 0.725; 
Natural increase (births minus deaths): 1.688. 

Year: 2015; 
Net international migration: 0.794; 
Natural increase (births minus deaths): 1.677. 

Year: 2020; 
Net international migration: 0.909; 
Natural increase (births minus deaths): 1.612. 

Year: 2025; 
Net international migration: 1.024; 
Natural increase (births minus deaths): 1.453. 

Year: 2030; 
Net international migration: 1.139; 
Natural increase (births minus deaths): 1.225. 

Year: 2035; 
Net international migration: 1.156; 
Natural increase (births minus deaths): 1.002. 

Year: 2040; 
Net international migration: 1.174; 
Natural increase (births minus deaths): 0.848. 

Year: 2045; 
Net international migration: 1.191; 
Natural increase (births minus deaths): 0.778. 

Year: 2050; 
Net international migration: 1.204; 
Natural increase (births minus deaths): 0.781. 

Year: 2055; 
Net international migration: 1.212; 
Natural increase (births minus deaths): 0.825. 

Year: 2060; 
Net international migration: 1.215; 
Natural increase (births minus deaths): 0.891. 

Net international migration is projected to overtake natural increase 
as the driver of population growth in 2032 in the middle series. This 
occurs in 2028 in the high series and 2039 in the low series. 

Source: U.S. Census Bureau, 2012 National Population Projections. 

[End of figure 25] 

* Lower fertility. Fertility's role in population growth has decreased 
as household composition and women's educational attainment have 
changed. Since 2007, the U.S. total fertility rate—-the expected 
number of children that a typical woman will have during her lifetime—-
has been declining to below replacement level (that is, the rate at 
which population growth would remain stable). The total fertility rate 
in 2012 (preliminary) was lower than any year since 1987, and 
according to Census Bureau projections, is expected to stay below 
replacement level through 2060, at which point only the Hispanic 
fertility rate will be large enough to support replacement. 

The overall decrease in fertility can be explained by the changes in 
birth rates among certain age groups. First, over the last two 
decades, the birth rate for teenagers has decreased by more than 50 
percent. Second, although most children in the United States are born 
to women in their 20s, the birth rate for women ages 20-24 has 
decreased by about 27 percent. The birth rate for women ages 30-34 has 
increased by about 22 percent, reflecting women's rising education and 
the fact that women with more education tend to wait longer before 
having children. However, this age group tends to have fewer children 
compared with the 25-29 age group. Consequently, as more women wait to 
have children, there are fewer overall births. 

* Immigration. Immigration is projected to become the main driver of 
U.S. population growth during the first half of this century. 
Specifically, between 2027 and 2038, international migration is 
projected to surpass natural population growth (births minus deaths) 
as the main source of population growth, according to the U.S. Census 
Bureau (see figure 25). Since the 1970's, our nation's foreign born 
population has been growing, both in number and as a share of the 
total population. In 1970, 4.7 percent of the population was foreign 
born, but by 2010, the share of foreign born had increased to 12.9 
percent, similar to the rates experienced during the late 19th and 
early 20th centuries (see figure 26). Between one in five and one in 
seven U.S. residents will be foreign-born in 2050, according to 
projections by the Pew Research Center. 

Figure 26: Foreign-Born Population and as a Percent of Total U.S. 
Population: 

[Refer to PDF for image: vertical bar graph] 

Year: 1850 
Foreign born percentage of U.S. population: 9.7%; 
Numbers: 
Europe: 2 million; 
Latin America: 0; 
Asia: 0; 
Other: 0.2 million; 
Total: 2.2 million. 

Year: 1860; 
Foreign born percentage of U.S. population: 13.2%; 
Numbers: 
Europe: 3.8 million; 
Latin America: 0; 
Asia: 0; 
Other: 0.3 million; 
Total: 4.1 million. 

Year: 1870; 
Foreign born percentage of U.S. population: 14.4%; 
Numbers: 
Europe: 4.9 million; 
Latin America: 0.1 million; 
Asia: 0.1 million; 
Other: 0.5 million; 
Total: 5.6 million. 

Year: 1880; 
Foreign born percentage of U.S. population: 13.3%; 
Numbers: 
Europe: 5.8 million; 
Latin America: 0.1 million; 
Asia: 0.1 million; 
Other: 0.7 million; 
Total: 6.7 million. 

Year: 1890; 
Foreign born percentage of U.S. population: 14.8%; 
Numbers: 
Europe: 8 million; 
Latin America: 0.1 million; 
Asia: 0.1 million; 
Other: 1 million; 
Total: 9.2 million. 

Year: 1900; 
Foreign born percentage of U.S. population: 13.6%; 
Numbers: 
Europe: 8.9 million; 
Latin America: 0.1 million; 
Asia: 0.1 million; 
Other: 1.2 million; 
Total: 10.3 million; 

Year: 1910; 
Foreign born percentage of U.S. population: 14.7%; 
Numbers: 
Europe: 11.8 million; 
Latin America: 0.3 million; 
Asia: 0.2 million; 
Other: 1.2 million; 
Total: 13.5 million. 

Year: 1920; 
Foreign born percentage of U.S. population: 13.2%; 
Numbers: 
Europe: 11.9 million; 
Latin America: 0.6 million; 
Asia: 0.2 million; 
Other: 1.2 million; 
Total: 13.9 million. 

Year: 1930; 
Foreign born percentage of U.S. population: 11.6%; 
Numbers: 
Europe: 11.8 million; 
Latin America: 0.8 million; 
Asia: 0.3 million; 
Other: 1.4 million; 
Total: 14.2 million. 

Year: 1960; 
Foreign born percentage of U.S. population: 5.4%; 
Numbers: 
Europe: 7.3 million; 
Latin America: 0.9 million; 
Asia: 0.5 million; 
Other: 1.1 million; 
Total: 9.7 million. 

Year: 1970; 
Foreign born percentage of U.S. population: 4.7%; 
Numbers: 
Europe: 55.7 million; 
Latin America: 1.8 million; 
Asia: 0.8 million; 
Other: 1.2 million; 
Total: 9.6 million. 

Year: 1980; 
Foreign born percentage of U.S. population: 6.2%; 
Numbers: 
Europe: 5.1 million; 
Latin America: 4.4 million; 
Asia: 2.5 million; 
Other: 2 million; 
Total: 14.1 million. 

Year: 1990; 
Foreign born percentage of U.S. population: 7.9%; 
Numbers: 
Europe: 4.4 million; 
Latin America: 8.4 million; 
Asia: 5 million; 
Other: 2 million; 
Total: 19.8 million. 

Year: 2000: 
Foreign born percentage of U.S. population: 11.1%; 
Numbers: 
Europe: 4.9 million; 
Latin America: 16.1 million; 
Asia: 8.2 million; 
Other: 1.9 million; 
Total: 31.1 million. 

Year: 2010; 
Foreign born percentage of U.S. population: 12.9%; 
Numbers: 
Europe: 4.8 million; 
Latin America: 21.2 million; 
Asia: 11.3 million; 
Other: 2.6 million; 
Total: 40.0 million. 

Source: GAO analysis of U.S. Census Bureau data. 

Notes: The term foreign born refers to anyone who is not a U.S. 
citizen at birth. This includes naturalized citizens, lawful permanent 
residents, temporary migrants (such as foreign students), humanitarian 
migrants (such as refugees), and undocumented migrants. 

The region category “Latin America” includes Mexico, Other Central 
America, South America, and the Caribbean. Other Central America 
includes the countries of Belize, Costa Rica, El Salvador, Guatemala, 
Honduras, Nicaragua, and Panama. 

[End of figure 26] 

Immigration is having a large impact on the ethnic composition of the 
U.S. population, as well. Through the 1960s, the vast majority of 
immigrants came from Europe, but today the majority of immigrants are 
coming from Latin America and Asia (see figure 26). The U.S. Census 
projects that by 2050, Hispanics will comprise nearly one-third of the 
population. 

* More significant population growth worldwide. World population is 
projected to continue to grow significantly in the years ahead, from 
about 7.2 billion in 2013 to more than 9.6 billion by 2050, according 
to the UN (see figure 27). Developing countries such as India, 
Indonesia, and many high-fertility countries in Africa, will add most 
of the 2.4 billion people. Developed regions as a whole, in contrast, 
are projected to grow only as a result of net international migration 
from developing countries. 

Figure 27: Worldwide Population Is Projected to Grow by a Third by 
2050: 

[Refer to PDF for image: horizontal bar graph] 

Total worldwide population: 3.3 billion; 
Younger than 60: 92%: 
- Children age 14 or younger: 38%; 
- Age 15 to 59: 54%; 
Age 60 or older: 8%. 

Total worldwide population: 7.2 billion; 
Younger than 60: 88%; 
- Children age 14 or younger: 26%; 
- Age 15 to 59: 62%; 
Age 60 or older: 12%. 

Total worldwide population: 9.6 billion; 
Younger than 60: 79
- Children age 14 or younger: 21%; 
- Age 15 to 59: 58%; 
Age 60 or older: 21%. 

Source: GAO presentation of United Nations data. 

[End of figure 27] 

Labor Force Participation Is Declining: 

Changes in labor force participation rates and the composition of the 
labor force reflect a variety of underlying trends in the U.S. labor 
market. 

* Worker characteristics: Prior to 2000, the overall labor force 
participation rate increased steadily from about 59 percent in 1950 to 
about 67 percent in 2000 (see figure 28). The decline in participation 
rates for men over this period was more than made up by the increase 
in women's participation rates. Much of the increase in women's 
participation has been due to the increase in paid work among mothers. 
An analysis of Census data shows that the number of hours worked in a 
typical two-parent family increased nearly 26 percent between 1975 and 
2009, mostly due to the increase in work of mothers outside the home. 
Also, the increase in women's labor force participation has been 
accompanied by an increase in their educational attainment. Since 
1980, college enrollment for women has outpaced that of men and now 
exceeds that of men in 4-year programs. By 2020, women are projected 
to account for nearly 60 percent of total undergraduate enrollment, 
which may signal further increases in women's labor force 
participation in the future. 

Figure 28: Labor Force Participation Rates: 

[Refer to PDF for image: 2 multiple line graphs] 

Workforce participation by gender: 

Year: 1950; 
All workers: 59.2%; 
Men: 86.4%; 
Women: 33.9%. 

Year: 1955; 
All workers: 59.3%; 
Men: 85.4%; 
Women: 35.7%. 

Year: 1960; 
All workers: 59.4%; 
Men: 83.3%; 
Women: 37.7%. 

Year: 1965; 
All workers: 58.9%; 
Men: 80.7%; 
Women: 39.3%. 

Year: 1970; 
All workers: 60.4%; 
Men: 79.7%; 
Women: 43.3%. 

Year: 1975; 
All workers: 61.2%; 
Men: 77.9%; 
Women: 46.3%. 

Year: 1980; 
All workers: 63.8%; 
Men: 77.4%; 
Women: 51.5%. 

Year: 1985; 
All workers: 64.8%; 
Men: 76.3%; 
Women: 54.5%. 

Year: 1990; 
All workers: 66.5%; 
Men: 76.4%; 
Women: 57.5%. 

Year: 1995; 
All workers: 66.6%; 
Men: 75%; 
Women: 58.9%. 

Year: 2000; 
All workers: 67.1%; 
Men: 74.8%; 
Women: 59.9%. 

Year: 2005; 
All workers: 66%; 
Men: 73.3%; 
Women: 59.3%. 

Year: 2010; 
All workers: 64.7%; 
Men: 71.2%; 
Women: 58.6%. 

Year: 2012; 
All workers: 63.7%; 
Men: 70.2%; 
Women: 57.7%. 

Projected: 

Year: 2020; 
All workers: 62.5%; 
Men: 68.2%; 
Women: 57.1%. 

Workforce participation by age: 

Year: 1950; 
16 to 24: 59.9%; 
25 to 54: 65.7%; 
55 to 64: 56.7%; 
65 and older: 26.7%; 
All workers: 52.3%. 

Year: 1955; 
16 to 24: 56.1%; 
25 to 54: 67.6%; 
55 to 64: 59.5%; 
65 and older: 24.1%; 
All workers: 51.8%. 

Year: 1960; 
16 to 24: 56.4%; 
25 to 54: 68.9%; 
55 to 64: 60.9%; 
65 and older: 20.8%; 
All workers: 51.8%. 

Year: 1965; 
16 to 24: 55.8%; 
25 to 54: 69.9%; 
55 to 64: 61.9%; 
65 and older: 17.8%; 
All workers: 51.4%. 

Year: 1970; 
16 to 24: 59.8%; 
25 to 54: 72%; 
55 to 64: 61.8%; 
65 and older: 17%; 
All workers: 52.7%. 

Year: 1975; 
16 to 24: 64.6%; 
25 to 54: 74.1%; 
55 to 64: 57.2%; 
65 and older: 13.7%; 
All workers: 52.4%. 

Year: 1980; 
16 to 24: 68.1%; 
25 to 54: 78.6%; 
55 to 64: 55.7%; 
65 and older: 12.5%; 
All workers: 53.7%. 

Year: 1985; 
16 to 24: 68.3%; 
25 to 54: 81.5%; 
55 to 64: 54.2%; 
65 and older: 10.8%; 
All workers: 53.7%. 

Year: 1990; 
16 to 24: 67.3%; 
25 to 54: 83.5%; 
55 to 64: 55.9%; 
65 and older: 11.8%; 
All workers: 54.6%. 

Year: 1995; 
16 to 24: 66.3%; 
25 to 54: 83.5%; 
55 to 64: 57.2%; 
65 and older: 12.1%; 
All workers: 54.8%. 

Year: 2000; 
16 to 24: 65.8%; 
25 to 54: 84%; 
55 to 64: 59.2%; 
65 and older: 12.9%; 
All workers: 55.5%. 

Year 2005: 
16 to 24: 60.8%; 
25 to 54: 82.8%; 
55 to 64: 62.9%; 
65 and older: 15.1%; 
All workers: 55.4%. 

Year: 2010: 
16 to 24: 55.2%; 
25 to 54: 82.2%; 
55 to 64: 64.9%; 
65 and older: 17.4%; 
All workers: 54.9%. 

Year: 2011; 
16 to 24: 55%; 
25 to 54: 81.6%; 
55 to 64: 64.3%; 
65 and older: 17.9%; 
All workers: 54.7%. 

Year: 2012; 
16 to 24: 54.9%; 
25 to 54: 81.4%; 
55 to 64: 64.5%; 
65 and older: 18.5%; 
All workers: 54.8%. 

Projected: 

Year: 2020; 
16 to 24: 48.21%; 
25 to 54: 81.3%; 
55 to 64: 68.8%; 
65 and older: 22.6%; 
All workers: 55.2%. 

Source: GAO analysis of U.S. Bureau of Labor Statistics data. 

[End of figure 28] 

However, since 2000, aggregate labor force participation rates have 
fallen by more than 3 percentage points, with men's labor force 
participation continuing its long-term decline and a reversal in the 
trend in women's participation. The recent decline has coincided with 
the recent economic downturn, but may be indicative of a new long-term 
trend of declining or flattening participation. Also, although 
participation rates overall have been declining, the trends among 
those at the beginning and end of the working age spectrum are 
somewhat different. The participation rate for older workers continues 
to grow, even during the recent recession (see figure 28), while the 
participation rate for younger workers continues to decline—-due, in 
part, to the rising number of youth staying in school longer. 

Finally, labor force participation rates also are affected by the 
influx of immigrants to the United States, to the extent that those 
immigrating are of working age and their work status differs from non-
immigrants. However, their effect is likely small, as immigration is 
projected to have only a small (but positive) effect on the share of 
the population that is of working age. More significantly, even under 
the Census Bureau's highest estimate of net international migration, 
the working-age population is projected to fall from 63 percent in 
2012 to 57 percent by 2060. 

* Changes in industries, wages, and income disparity. As the 
composition of the labor force has changed, the long-term shift from 
manufacturing to service-producing industries has continued (see 
figure 29). Overall, the U.S. labor market has also experienced wage 
stagnation, with real wages remaining near 1970s levels, and the 
disparity between the mean household income of the highest group 
compared with others has increased markedly (see figure 30). 

Figure 29: Non-farm Employment, by Industry Sector (1962-2020): 

[Refer to PDF for image: multiple line graph] 

Number of workers in millions: 

Year: 1962; 
Service providing (private sector): 27.45; 
Service providing (public sector): 9; 
Manufacturing: 15.5; 
Mining and construction: 3.71. 

Year: 1965; 
Service providing (private sector): 30.09; 
Service providing (public sector): 10.19; 
Manufacturing: 16.62; 
Mining and construction: 3.98. 

Year: 1970; 
Service providing (private sector): 36.14; 
Service providing (public sector): 12.69; 
Manufacturing: 17.85; 
Mining and construction: 4.33. 

Year: 1975; 
Service providing (private sector): 40.93; 
Service providing (public sector): 14.82; 
Manufacturing: 16.91; 
Mining and construction: 4.41. 

Year: 1980; 
Service providing (private sector): 49.89; 
Service providing (public sector): 16.38; 
Manufacturing: 18.73; 
Mining and construction: 5.53. 

Year: 1985; 
Service providing (private sector): 57.39; 
Service providing (public sector): 16.53; 
Manufacturing: 17.82; 
Mining and construction: 5.77. 

Year: 1990; 
Service providing (private sector): 67.35; 
Service providing (public sector): 18.42; 
Manufacturing: 17.7; 
Mining and construction: 6.03. 

Year: 1995; 
Service providing (private sector): 74.71; 
Service providing (public sector): 19.43; 
Manufacturing: 17.24; 
Mining and construction: 5.92. 

Year: 2000; 
Service providing (private sector): 86.35; 
Service providing (public sector): 20.79; 
Manufacturing: 17.26; 
Mining and construction: 7.39. 

Year: 2005; 
Service providing (private sector): 89.71; 
Service providing (public sector): 21.8; 
Manufacturing: 14.23; 
Mining and construction: 7.96. 

Year: 2010; 
Service providing (private sector): 89.63; 
Service providing (public sector): 22.49; 
Manufacturing: 11.53; 
Mining and construction: 6.22. 

Year: 2012; 
Service providing (private sector): 93.71; 
Service providing (public sector): 21.93; 
Manufacturing: 11.99; 
Mining and construction: 6.4. 

Projected: 

Year: 2020; 
Service providing (private sector): 106.93; 
Service providing (public sector): 23.75; 
Manufacturing: 11.45; 
Mining and construction: 8.05. 

Source: GAO analysis of U.S. Bureau of Labor Statistics data. 

[End of figure 29] 

Figure 30: Mean Household Incomes, by Quintiles and Top 5 Percent 
(1970-2011): 

[Refer to PDF for image: multiple line graph] 

Year: 1970; 
Top 5 percent: $172,030; 
Highest quintile: $112,080; 
Fourth quintile: $63,310; 
Third quintile: $44,914; 
Second quintile: $27,892; 
Lowest quintile: $10,297. 

Year: 1975; 
Top 5 percent: $173,489; 
Highest quintile: $114,324; 
Fourth quintile: $64,752; 
Third quintile: $44,562; 
Second quintile: $27,161; 
Lowest quintile: $11,057. 

Year: 1980; 
Top 5 percent: $180,571; 
Highest quintile: $120,834; 
Fourth quintile: $67,770; 
Third quintile: $46,000; 
Second quintile: $27,877; 
Lowest quintile: $11,201. 

Year: 1985; 
Top 5 percent: $204,029; 
Highest quintile: $132,266; 
Fourth quintile: $70,808; 
Third quintile: $47,073; 
Second quintile: $28,360; 
Lowest quintile: $11,191. 

Year: 1990; 
Top 5 percent: $231,470; 
Highest quintile: $145,360; 
Fourth quintile: $74,903; 
Third quintile: $49,680; 
Second quintile: $30,077; 
Lowest quintile: $11,954. 

Year: 1995; 
Top 5 percent: $276,708; 
Highest quintile: $160,330; 
Fourth quintile: $76,829; 
Third quintile: $49,979; 
Second quintile: $29,890; 
Lowest quintile: $12,229. 

Year: 2000; 
Top 5 percent: $329,647; 
Highest quintile: $185,810; 
Fourth quintile: $85,746; 
Third quintile: $55,158; 
Second quintile: $33,123; 
Lowest quintile: $13,266. 

Year: 2005; 
Top 5 percent: $323,912; 
Highest quintile: $183,852; 
Fourth quintile: $83,900; 
Third quintile: $53,342; 
Second quintile: $31,517; 
Lowest quintile: $12,275. 

Year: 2010; 
Top 5 percent: $296,260; 
Highest quintile: $174,734; 
Fourth quintile: $81,365; 
Third quintile: $50,718; 
Second quintile: $29,432; 
Lowest quintile: $11,341. 

Year: 2011; 
Top 5 percent: $311,444; 
Highest quintile: $178,020; 
Fourth quintile: $80,080; 
Third quintile: $49,842; 
Second quintile: $29,204; 
Lowest quintile: $11,239. 

Source: GAO analysis of U.S. Census data (Current Population Survey, 
1970 to 2011 Annual Social and Economic Supplements). 

Note: Income in 2011 CPI-U-RS adjusted dollars. 

[End of figure 30] 

* Similar employment rates throughout the developed world. The 
demographic changes that have affected the U.S. labor market are not 
unlike the trends in many other developed countries. For example, at 
about 64 percent, the labor force participation rate in the United 
States is similar to the rate in the European Union and Latin America. 
In contrast, the rate is generally higher in East Asia and the Pacific 
(where it is over 70 percent), and lower in the Middle East and North 
Africa (where it is below 50 percent). 

The Population Is Aging: 

The proportion of older adults in the United States is rising and will 
continue to grow significantly in the future. This growth slowed 
somewhat during the 1990s because of the relatively small number of 
babies born during the Great Depression of the late 1920s and early 
1930s. But the proportion of the U.S. population over age 65 will 
increase significantly, from less than 10 percent in 1970 to nearly 20 
percent in 2030, reflecting long-term decreases in fertility and 
increases in life expectancy, as well as the aging of the “baby boom” 
generation. The growing contingent of older adults is noteworthy, as 
those in the oldest ages often require additional care giving and 
support. Similar trends in aging are apparent in many other countries 
around the world, as well. 

* Growing proportion of older adults. The median age in the U.S. has 
risen steadily over the last 40 years, from 28.1 in 1970 to 37.2 years 
in 2010. Today, more than 1 in 8 (or 13.7 percent), of the population 
is an older adult, age 65 or over, but by 2030, it will be about 1 in 
5. 

Key factors causing the growing proportion of the population to be 
older are decreasing fertility and increasing life expectancy. As 
noted earlier, U.S. fertility rates have fallen significantly, with 
decreases among all major racial and ethnic groups since 1990. In 
addition, rising living standards have led to considerable increases 
in longevity. For example, among those age 65 in 1950, men could 
expect to live an additional 12.8 years, to age 77, and women could 
expect to live an additional 15.0 years, to age 80. But in 2010, the 
average life expectancy at age 65 had been extended by another 3.7 
years for men, to age 81, and by another 4.1 years for women, to age 
84. 

Although life expectancy has been increasing across all income groups, 
the more significant gains are primarily among those with higher 
incomes. As illustrated in figure 31 below, the gap in life expectancy 
between higher and lower income groups for men age 65 has increased 
dramatically since the 1970s. 

Figure 31: Growing Disparities in U.S. Men's Life Expectancy Based on 
Income: 

[Refer to PDF for image: multiple line graph] 

Additional years of life expectancy (after age 65): 

Year: 1977; 
Top half of earnings distribution: 15.5; 
Bottom half of earnings distribution: 14.8. 

Year: 1982; 
Top half of earnings distribution: 16.5; 
Bottom half of earnings distribution: 15. 

Year: 1987; 
Top half of earnings distribution: 17.5; 
Bottom half of earnings distribution: 15.3. 

Year: 1992; 
Top half of earnings distribution: 18.5; 
Bottom half of earnings distribution: 15.5. 

Year: 1997; 
Top half of earnings distribution: 19.6; 
Bottom half of earnings distribution: 15.7. 

Year: 2002; 
Top half of earnings distribution: 20.6; 
Bottom half of earnings distribution: 16. 

Year: 2006; 
Top half of earnings distribution: 21.5; 
Bottom half of earnings distribution: 16.1. 

Source: GAO presentation of data from SSA Office of Research, 
Evaluation, and Statistics, (Waldron, 2007). 

Note: Between 1977 and 2006, the number of men age 65 increased from 
811,707 to 1,077,812. For each year depicted, half would be in the top 
half of the earnings distribution, and half would be in the bottom 
half. 

[End of figure 31] 

* Rising tide of retiring “baby boomers.” As members of the baby-boom 
generation enter retirement and stop working, they no longer help fuel 
the labor force and economic growth, or contribute to Social Security, 
through their employment. The first baby boomers began receiving 
Social Security retirement benefits in 2008, and growing numbers will 
be reaching age 65 in coming years (see figure 32). Meanwhile, the 
number of workers supporting each Social Security beneficiary 
continues to fall at a rapid pace. Despite the growing number of older 
adults working longer, the ratio of worker to beneficiary is expected 
to drop from 3.2 in 2008 to 2.5 in 2020 and to 2.2 by 2030, signifying 
important implications for future program funding. 

Figure 32: Large Numbers of Baby Boomers Eligible to Retire in Next 5 
Years: 

[Refer to PDF for image: vertical bar graph] 

Year: 2000: 5,500. 

Year: 2001: 5,500. 

Year: 2002: 5,500. 

Year: 2003: 5,800. 

Year: 2004: 5,800. 

Year: 2005: 6,000. 

Year: 2006: 6,200. 

Year: 2007: 6,700. 

Year: 2008: 7,200. 

Year: 2009: 7,200. 

Year: 2010: 7,200. 

Baby boomers begin turning 65. 

Year: 2011: 7,600. 

Year: 2012: 9,100. 

Year: 2013: 9,200. 

Year: 2014: 9,100. 

Year: 2015: 9,400. 

Year: 2016: 9,400. 

Year: 2017: 9,700. 

Year: 2018: 10,000. 

Year: 2019: 10,200. 

Year: 2020: 10,700. 

Year: 2021: 10,700. 

Year: 2022: 11,000. 

Year: 2023: 11,200. 

Year: 2024: 11,200. 

Year: 2025: 11,600. 

Year: 2026: 11,400. 

Year: 2027: 11,400. 

Year: 2028: 11,300. 

Year: 2029: 11,400. 

Source: GAO analysis of U.S. Census Bureau data. 

[End of figure] 

* Aging population a global phenomenon. It is important to note that 
the United States is not alone. The same trends leading to our 
nation's aging population are also affecting many other countries 
around the world. Declining fertility and increasing life expectancy 
have led to a sustained increase in the average age of the population 
in much of the advanced industrialized world as well as in rapidly 
developing nations, including such countries as South Korea and China. 

Implications for Government and GAO: 

U.S. demographic developments will have important implications for 
economic growth and for government programs aimed at ensuring the 
necessary income maintenance and care of the elderly while investing 
in the well-being, education, and training of our youth and prime-age 
workforce. For example, changes in household and population 
composition—-including smaller, two-parent working families and 
growing numbers of foreign-born U.S. residents-—could have effects on 
the labor market and the economy, and on the types of government 
services needed to help fuel growth. Without an adequate renewed focus 
on productivity enhancing investment (e.g., education, job training, 
research and development), declining labor force participation could 
have an adverse impact on future economic growth and income equality. 
In addition, the importance of assistance programs for older adults—-
such as Social Security, Medicare, and Medicaid (which provides the 
largest source of long-term care in this country)-–will continue to 
grow, along with their continued associated financial stress on the 
federal budget. Given the important influences demographic 
developments have on the budgets and long-run fiscal implications for 
all levels of government, and on a wide range of federal programs, GAO 
will continue its efforts to assess these impacts and explore ways to 
enhance the federal government's ability to prepare and address the 
challenges that lie ahead. In particular, GAO's work will focus on 
efforts to: 

* Support health care financing and reform efforts through analyses of 
Medicare, Medicaid, and other health programs. 

* Assess policy and administrative challenges to improving school 
readiness and K-12 education, and greater access, affordability, and 
completion of postsecondary education. 

* Identify ways to improve programs that facilitate job opportunities 
for workers including veterans, and enhance their skills for in-demand 
occupations. 

* Identify opportunities to improve programs that provide social 
services and economic and nutrition assistance to individuals, 
families, and children. 

* Explore ways to improve federal community and economic development 
assistance and its impact on communities. 

* Assess the policy and administrative challenges to providing Social 
Security and other benefits for older adults in retirement, as well as 
programs helping them to maintain their independence and stay in the 
workforce longer. 

GAO's work will also help identify gaps in the federal statistical 
system, as this system is a major contributor to the data needed for 
timely and relevant analyses to react to these changing trends. 

[End of Trends Shaping the United States and Its Place in the
World] 

Goal 1: 

Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People: 

In keeping with GAO's mission to support the Congress in carrying out 
its constitutional responsibilities, GAO's first strategic goal 
focuses on the need to “promote the general welfare and secure the 
blessings of liberty” for U.S. citizens now and in the future. The 
nation's ability to successfully meet these and other goals depends, 
in part, on how the federal government addresses current and future 
challenges associated with health, education, changing populations, 
developing communities, financial systems, emerging criminal 
activities, increasing stress placed on our nation's natural 
resources, and deteriorating physical infrastructure. These challenges 
raise the costs of continuing the supports as designed and are 
compounded by continued budgetary constraint. In light of these 
circumstances and the evolving needs of affected vulnerable 
populations, it is more essential than ever for the Congress and the 
federal government to: 

* accurately identify, prioritize, and target the nation's greatest 
needs; 

* efficiently and effectively manage federal resources; 

* explore and assess other approaches for providing benefits and 
protections in a cost-effective manner; and; 

* effectively balance demands of competing objectives to ensure 
decisions made today do not compromise future needs. 

Key to achieving these goals is the talent, creativity, and dedication 
of GAO's multidisciplinary workforce. To maximize staff effectiveness 
and efficiency while ensuring client and customer satisfaction, GAO 
must focus its hiring and retention programs to address succession 
planning and critical skill gaps and increase its overall staff 
capacity, continually optimize its processes, leverage technology to 
enhance efficiency, and ensure effective governance and resource 
utilization. GAO's fourth strategic goal—the only internally focused 
goal—embraces the spirit of continuous and focused improvement in 
order to sustain high-quality, timely, reliable, and constructive 
service to the Congress. 

To address current and emerging challenges to the well-being and 
financial security of families, businesses, state and local 
governments, and other key sectors of the nation's economy and 
society, GAO has established nine strategic objectives: 

1.1: Financing and Programs to Serve the Health Needs of an Aging and 
Diverse Population. 

1.2: Lifelong Learning to Enhance U.S. Competitiveness. 

1.3: Benefits and Protections for Workers, Families, and Children. 

1.4: Supporting the Financial Security and Well-Being of an Aging 
Population. 

1.5: A Responsive, Fair, and Effective System of Justice. 

1.6: Housing Finance and Viable Communities. 

1.7: A Stable Financial System and Sufficient Consumer Protection. 

1.8: Responsible Stewardship of Natural Resources and the Environment. 

1.9: A Viable, Safe, Secure, and Accessible National Physical 
Infrastructure. 

Strategic Objective 1.1: 

Financing and Programs to Serve the Health Needs of an Aging and 
Diverse Population: 

Figure: Objective 1.1 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess trends and issues affecting the health care system; 
* Assess trends, costs, and issues in public and private health
insurance coverage and reforms; 
* Evaluate Medicare reform, financing and expenditures, operations, and 
program integrity; 
* Evaluate Medicaid financing and expenditures, oversight, and program 
integrity; 
* Assess state and federal efforts to provide health care for vulnerable
populations; 
* Assess actions and options for improving VA's and DOD's health care 
services; 
* Evaluate the effectiveness of federal programs to prevent, prepare 
for, and respond to public health emergencies. 

[End of figure] 

Against the backdrop of continued spending growth, fundamental changes 
are under way in the structure and financing of health care. Although 
health care cost growth has moderated recently, by 2020, total health 
care spending in the United States is expected to reach more than $3.6 
trillion, or $11,003 per capita, adjusted to 2010 dollars. (See figure 
33.) Consequently, the health care sector is projected to continue to 
increase as a share of GDP-—from about 13 percent in 1990 to about 18 
percent in 2017. Growth in health care costs affects Medicare and 
Medicaid and creates federal budgetary pressures, because health care 
spending was $916 billion in 2010—-almost 27 percent of all federal 
spending-—and is expected to grow to over 30 percent by 2017. (See 
figure 34.) The Patient Protection and Affordable Care Act of 2010 
(PPACA) (Pub. L. No. 111-148) is intended to increase access to health 
care services by providing federal funds to states that choose to 
expand their Medicaid programs; establishing exchanges where 
individuals can access private insurance and certain lower-income 
individuals can receive federal subsidies for this coverage. These 
changes are likely to lead to increases in the number of individuals 
enrolled in private health plans and Medicaid and decreases in the 
number of the uninsured, although the size of these changes is 
uncertain. The federal government and states face significant 
challenges as they strive to implement PPACA—providing access to 
affordable insurance covering high-quality care for an aging and 
diverse population. The federal government also faces continuing 
challenges managing federal health care programs: Medicare for the 
aged and certain disabled individuals; public health programs; and 
health care services for other populations, such as veterans and 
military service members. 

Figure 33: Total and Per Capita National Health Care Spending, 
Calendar Years 1990, 2000, 2010, and 2020: 

[Refer to PDF for image: 2 vertical bar graphs] 

Total spending: 
Year: 1990: $1.11 trillion; 
Year: 2000: $1.72 trillion; 
Year: 2010: $2.60 trillion; 
Year: 2020 (projected): $3.64 trillion. 

Per capita spending: 
Year: 1990: $4,383; 
Year: 2000: $6,103; 
Year: 2010: $8,417; 
Year: 2020 (projected): $11,003. 

Source: GAO analysis of Centers for Medicare and Medicaid Services 
data. 

Note: The percentages for 1990, 2000, and 2010 are based on nominal 
dollar amounts; the percentage for 2017 is projected. 

[End of figure 33] 

Figure 34: Total Health Care Spending as a Percentage of Gross 
Domestic Product, Calendar Years 1990 through 2017, and Federal Health 
Care Spending As a Percentage of Total Federal Spending, Fiscal Years 
1990 through 2017: 

[Refer to PDF for image: 2 vertical bar graphs] 

GDP: 
Year: 1990; 
Percentage of GDP spent on health care: 12.5%; 
Year: 2000; 
Percentage of GDP spent on health care: 13.8%; 
Year: 2010; 
Percentage of GDP spent on health care: 17.9%; 
Year: 2017 (projected); 
Percentage of GDP spent on health care: 18.4%. 

Federal outlays: 
Year: 1990; 
Percentage of total federal outlays for health care programs: 14.4%; 
Year: 2000; 
Percentage of total federal outlays for health care programs: 21.7%; 
Year: 2010; 
Percentage of total federal outlays for health care programs: 26.5%; 
Year: 2017 (projected); 
Percentage of total federal outlays for health care programs: 30.3%. 

Source: GAO analysis of Centers for Medicare & Medicaid Services and 
Office of Management and Budget data. 

Note: The percentages for 1990, 2000, and 2010 are based on nominal 
dollar amounts; the percentage for 2017 is projected. 

[End of figure 34] 

Health Care Restructuring Initiatives: Federal, state, and private 
entities all have initiatives under way to promote access to high-
quality health care services more efficiently by restructuring the 
organization of and payment for health care. For example, some payers 
are experimenting with provider payment systems that move away from 
fee-for-service toward global payments, which cover all services an 
individual needs, or a particular subset of services. Medicare, some 
private sector organizations, and state Medicaid agencies are 
experimenting with accountable care organizations that are designed to 
hold teams of providers responsible for all of a patient's care, 
thereby promoting care coordination and consideration of the likely 
costs and benefits of health care services provided to each patient. 
Both private insurers and Medicare are experimenting with methods for 
tying provider compensation to the quality and efficiency of care. How 
well these and other initiatives will work and their effects on health 
care expenditures are still unclear, making it critical for GAO to 
monitor and evaluate these changes and their effect on federal, state, 
and consumer health care spending and outcomes. 

Access to health insurance: Recent federal health care reform efforts 
intended to address the continuing decline of private health insurance 
coverage and the increasing numbers of uninsured are just beginning to 
take effect. PPACA has provisions affecting private and public 
coverage—notably, by establishing standards for private health 
insurance; requiring that most individuals obtain affordable health 
insurance or potentially pay a penalty; establishing new health 
insurance exchanges intended to provide consumers with access to 
private health insurance; and providing tax credits and cost-sharing 
subsidies to make this coverage more affordable; and expanding 
Medicaid coverage. Such reforms have begun to and will likely further 
expand access to health insurance coverage for some individuals, but 
will need to be carefully monitored to ensure effective oversight, as 
well as to determine their cost implications and effects on those 
already covered. Further, implementing these reforms requires complex 
new federal programs, intergovernmental relations, and data systems, 
and will require increased federal oversight, including assessing 
federal capacity and ability to effectively implement new enrollment 
systems, oversee state and private entities responsible for key 
functions, and ensure data privacy and security. 

Medicare: Medicare's projected spending growth will continue to put 
pressure on the federal government and highlights the need to focus on 
changes to improve Medicare's financing and management. Medicare now 
finances health care for an estimated 50.7 million Americans who are 
age 65 or older or have disabilities, with total expenditures of $574 
billion in 2012. Medicare spending is expected to rise to $955 billion 
by 2020. As the population ages and spending for medical care grows, 
changes to Medicare will be necessary to stem this rapid growth and 
ensure the program's long-term sustainability. Medicare's payment 
methods must be modified to encourage greater efficiency in the 
delivery of care, while improving care quality and preserving 
equitable access to appropriate care. The Secretary of HHS has the 
authority to test innovative payment and service delivery models in 
Medicare, as well as in Medicaid, and the Children's Health Insurance 
Program (CHIP). Ensuring that promising new models are adequately 
evaluated and successful ones expanded will be important to both 
controlling program costs and improving health care outcomes. Further, 
GAO has designated Medicare as a high-risk program that is vulnerable 
to waste, fraud, abuse, and mismanagement. In 2012, HHS reported 
improper payments for Medicare estimated to be greater than $44 
billion, which makes improvements in management of this program, 
including reducing improper payments, an urgent priority. 

Medicaid: Medicaid's growth in spending also calls for increased 
federal oversight to ensure its financial and operational integrity. 
This federal-state program covered acute health care and long-term-
care services for about 70 million low income people in fiscal year 
2011 through more than 50 distinct state-based programs. The aging 
population and the recession have increased pressure on the program, 
for which federal expenditures are projected to rise from over $248 
billion in fiscal year 2012 to over $449 billion in fiscal year 2020. 
The increased federal expenditures are partially due to states' 
Medicaid expansions under PPACA, for which the federal government will 
initially pay 100 percent of the costs; these expansions are estimated 
by CBO to increase enrollment by about 8 million people in 2014, 
growing to 12 million people in 2022. GAO has designated Medicaid as a 
high-risk program, in part because its decentralized state-
administered structure makes federal oversight extremely challenging. 
The Centers for Medicare & Medicaid Services (CMS) provides oversight 
at the federal level, but the states administer their respective 
programs' day-to-day operations. GAO's previous work has shown that 
continued attention is needed to Medicaid's fiscal oversight and 
prevention of improper payments. Additional federal oversight of this 
large and fast-growing program will help address these concerns. 

Health care for vulnerable populations: Federal and state governments 
are implementing programs that serve the complex health care needs of 
vulnerable populations. Strengthened federal oversight is essential to 
ensure that these programs effectively and efficiently provide access 
to high-quality and coordinated care. For example, beneficiaries 
dually eligible for both Medicare and Medicaid are generally poorer, 
are more likely to have extensive health care needs, and use more 
medications and other health care services than other Medicare 
beneficiaries. In 2010, spending exceeded $300 billion to provide 
health care for about 9.9 million dually-eligible beneficiaries. The 
federal government has new initiatives intended to improve care 
coordination for dually-eligible beneficiaries, increase their access 
to care, and reduce spending, but the effectiveness of these 
initiatives will not be clear for some time. In addition, the federal 
government and states provide funding through Medicaid for services 
provided to numerous other individuals in vulnerable populations, such 
as those needing home and community-based services and long-term care. 
In addition, other federal funding helps support health care for other 
vulnerable populations, such as those residing in medically 
underserved areas, or those living with mental health and certain 
other conditions. Strengthened federal oversight of such programs is 
essential to ensure the effective and efficient provision of health 
care for vulnerable populations. 

Health care for veterans, military servicemembers, retirees, and their 
dependents: The Departments of Veterans Affairs (VA) and Defense (DOD) 
face challenges to improve two of the largest U.S. health care systems 
to better meet the needs of veterans, servicemembers, military 
retirees, and their dependents. In fiscal year 2013, VA is expected to 
spend about $53 billion and DOD about $49 billion to provide health 
care to approximately 16 million eligible beneficiaries. Both systems 
face challenges to improve and adapt infrastructure and services in an 
era of growing demand for health care and increasing fiscal pressures. 
These departments also must meet the needs of servicemembers returning 
from Iraq and Afghanistan as they transition from DOD's to VA's health 
care system. As a result of the influx of new veteran enrollees due in 
part to the return of veterans from combat and downsizing of the 
military, VA faces difficult decisions about how best to allocate and 
use its resources efficiently. DOD faces pressures to adapt its health 
care structure because of expanded benefits and an evolving 
marketplace, characterized by rising costs and beneficiaries' concerns 
about access. Because aspects of VA's and DOD's health care delivery 
systems are potentially complementary, integrating aspects of their 
operations could increase their overall efficiency and effectiveness. 

Public health and response to public health emergencies: The federal 
government faces numerous challenges to effectively promote the 
public's health and respond to public health emergencies. Production 
of pharmaceuticals and other medical products has increasingly moved 
overseas, challenging the Food and Drug Administration's (FDA) ability 
to oversee the quality of pharmaceuticals and other medical products 
marketed in the United States. GAO has designated oversight of medical 
products as a high-risk area. Ongoing shortages of many drugs critical 
for medical care contribute to continuing concerns. Further, recent 
public health threats—-whether natural or manmade-—have heightened 
concern about federal efforts to respond quickly and effectively. 
Emerging infectious diseases and antibiotic-resistant pathogens 
require timely and effective surveillance and prompt action by the 
Centers for Disease Control and Prevention, and effective coordination 
with other public health agencies at international, federal, state, 
and local levels. The use of anthrax as a weapon raised concerns about 
the nation's preparedness for biological terrorism attacks, while 
disasters such as Hurricanes Katrina and Sandy have highlighted the 
need to plan effectively for catastrophic events that can disable a 
regional health care system. 

The demands on the federal government to meet Americans' health care 
needs are growing in volume and complexity, as challenges to 
overseeing federal health programs escalate. GAO's forthcoming work on 
health coverage options, federal health programs' financing and 
management, steps taken to ensure access to and quality of care, and 
steps taken to protect public health can help federal leaders make 
more informed and strategic decisions in reconciling these competing 
demands. To support efforts by the Congress and the federal government 
to address the nation's health care needs in the 21st century, GAO has 
established the following performance goals and key efforts: 

Performance Goal 1.1.1: 
Assess trends and issues affecting the health care system: 

Key Efforts: 

* Assess the development and effects of use of integrated delivery 
systems, such as accountable care organizations. 

* Examine the effects of consolidation on the health care system. 

* Analyze trends in the availability, transparency, and usefulness of 
information about the prices of health care services. 

* Evaluate public and private efforts to ensure and encourage health 
care quality while containing costs. 

* Examine the use of health information technology and its effects on 
the quality and costs of care. 

* Examine efforts to address health care challenges, such as the 
adequacy of the health care workforce or provision of long-term care 
services. 

Performance Goal 1.1.2: 
Assess trends, costs, and issues in public and private health 
insurance coverage and reforms: 

Key Efforts: 

* Analyze implementation of federal health care reforms, including 
PPACA, to identify (1) challenges for federal and state agencies and 
(2) the range of effects on health insurance. 

* Evaluate trends in and the distribution of health insurance 
coverage, including long-term care insurance, and employer sponsorship 
of private health insurance for employees and retirees, such as the 
Federal Employee Health Benefits Program. 

* Analyze the coverage, costs, and affordability of products available 
to consumers in the individual and small-group insurance markets and 
operation of the health insurance exchanges. 

* Assess the impact of agencies' efforts to achieve compliance with 
federal and state health insurance standards and implement new 
programs and data systems intended to expand access to insurance 
coverage while ensuring eligibility and data security standards are 
met. 

Performance Goal 1.1.3: 
Evaluate Medicare reform, financing and expenditures, operations, and 
program integrity: 

Key Efforts: 

* Evaluate CMS's management of Medicare, including its implementation 
of legislative reforms and its service to providers and beneficiaries. 

* Assess the effects of Medicare coverage and payments on program 
expenditures, quality of health care services, and beneficiaries' 
access to services and their out-of-pocket costs. 

* Examine CMS's safeguards and program control over payments, and 
beneficiaries' access to and quality of health care services, 
including its efforts to reduce improper payments. 

* Analyze Medicare's financial condition and the potential effects of 
financing or structural reforms on future expenditures. 

* Analyze CMS's efforts to disseminate information to help consumers 
make more informed health care choices, such as on hospital pricing 
and facility quality indicators. 

Performance Goal 1.1.4:
Evaluate Medicaid financing and expenditures, oversight, and program 
integrity: 

Key Efforts: 

* Evaluate CMS's oversight of state financing arrangements and state 
and federal expenditures for Medicaid. 

* Examine state Medicaid payments and CMS's oversight of payments, 
including the payments to Medicaid managed care plans, supplemental 
payments, and other payment and cost-related issues. 

* Evaluate CMS's and states' efforts to ensure program integrity, 
including safeguards to prevent or detect and address improper payments 

Performance Goal 1.1.5: 
Assess state and federal efforts to provide health care for vulnerable 
populations: 

Key Efforts: 

* Analyze public and private payment and strategies to provide access 
to or to coordinate care for vulnerable populations, such as 
beneficiaries dually eligible for Medicare and Medicaid. 

* Assess management and oversight of federal agencies or programs 
other than Medicaid and Medicare that provide or fund health care to 
vulnerable populations, such as Federally Qualified Health Centers. 

* Review federal requirements and standards and their use in ensuring 
access to and quality of care for vulnerable populations, such as 
elderly and disabled beneficiaries needing long-term care, and 
providers' compliance with these requirements and standards. 

* Evaluate the effectiveness of programs to provide prevention, 
treatment, and other services related to mental health conditions, 
including substance abuse. 

Performance Goal 1.1.6: 
Assess actions and options for improving VA's and DOD's health care 
services: 

Key Efforts: 

* Evaluate VA's and DOD's efforts to individually and jointly deliver 
health care services, and assess implications of changes to health 
benefits and health care delivery systems. 

* Review implementation of VA resource allocation and budget 
formulation and execution practices. 

* Assess vulnerability of VA's and DOD's health care systems to 
duplication, fraud, waste, abuse, and mismanagement. 

* Examine access to and quality and efficiency of care for VA and DOD 
beneficiaries. 

* Evaluate systems to manage VA and DOD health care operations, such 
as acquisitions, human resources, financial management, and 
information technology systems. 

Performance Goal 1.1.7: 
Evaluate the effectiveness of federal programs to promote and ensure 
public health and prevent and respond to public health emergencies: 

Key Efforts: 

* Assess the regulatory structure for ensuring the safety and efficacy 
of medical devices, drugs, and other medical products and therapies. 

* Evaluate efficiency and effectiveness of public health agency 
programs and operations. 

* Assess the effectiveness of federal programs to ensure federal, 
state, and local governments' preparedness for a public health 
emergency. 

* Evaluate the development and acquisition of countermeasures for 
biodefense. 

* Evaluate preparedness of federal agencies to detect and counter 
emerging threats to the nation's health. 

[End of Strategic Objective 1.1] 

Strategic Objective 1.2: 
Lifelong Learning to Enhance U.S. Competitiveness: 

Figure: Objective 1.2 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess policy and administrative challenges to improving school 
readiness and K-12 education to better prepare youths for college and 
the workforce; 
* Identify opportunities to improve programs that provide postsecondary 
education and federal student aid; 
* Identify ways to improve programs that facilitate job opportunities 
for workers, including veterans, and enhance their skills for 
occupations in demand. 

[End of figure] 

Ensuring access to quality lifelong learning opportunities is central 
to enhancing U.S. competitiveness in the global economy. There are, 
however, several challenges to ensuring that access. First, many 
students do not receive quality early learning and primary education 
(K-12) opportunities, resulting too frequently in high school 
graduates being unprepared for college or the workplace. One national 
assessment shows that only 35 percent of American 8th grade students 
are proficient in mathematics. 

At the same time, as federal student loan debt surpasses $1 trillion, 
those who enroll in college will have to contend with the rising costs 
of attendance. Moreover, the federal government has invested sizable 
amounts in workforce training programs to help workers gain the skills 
needed to secure employment in the 21st century. However, the 
workforce system continues to struggle matching available workers with 
workforce needs. 

Further, while unemployment remains relatively high overall, those 
with low levels of education have faced an even worse employment 
outlook in recent years (see figure 35). Looking forward, as both 
demographics and the economy continue to change, the United States 
will need to address these challenges to remain at the forefront of 
the global economy. 

Figure 35: Change in Employment by Education Level, 2007–2013: 

[Refer to PDF for image: multiple line graph] 

Percentage change: 

2007: 

December: 
Less than a High School Diploma: 0; 
High School Graduates, No College: 0; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 0. 

2008: 

January: 
Less than a High School Diploma: 1; 
High School Graduates, No College: -1; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 0. 

February: 
Less than a High School Diploma: 0; 
High School Graduates, No College: -1; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 2. 

March: 
Less than a High School Diploma: -1; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 2. 

April: 
Less than a High School Diploma: -1; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 1; 
Bachelor's degree and higher: 1. 

May: 
Less than a High School Diploma: -1; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 1; 
Bachelor's degree and higher: 0. 

June: 
Less than a High School Diploma: -2; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 1; 
Bachelor's degree and higher: 1. 

July: 
Less than a High School Diploma: -3; 
High School Graduates, No College: -1; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 1. 

August: 
Less than a High School Diploma: -3; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 1. 

September: 
Less than a High School Diploma: -4; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 1. 

October: 
Less than a High School Diploma: -2; 
High School Graduates, No College: -2; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 1. 

November: 
Less than a High School Diploma: -4; 
High School Graduates, No College: -3; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 0. 

December: 
Less than a High School Diploma: -5; 
High School Graduates, No College: -3; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 0. 

2009: 

January: 
Less than a High School Diploma: -6; 
High School Graduates, No College: -3; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: -1. 

February: 
Less than a High School Diploma: -7; 
High School Graduates, No College: -5; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: -1. 

March: 
Less than a High School Diploma: -7; 
High School Graduates, No College: -5; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: -1. 

April: 
Less than a High School Diploma: -9; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: -1. 

May: 
Less than a High School Diploma: -9; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: -1. 

June: 
Less than a High School Diploma: -8; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: -1. 

July: 
Less than a High School Diploma: -8; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

August: 
Less than a High School Diploma: -8; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

September: 
Less than a High School Diploma: -8; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

October: 
Less than a High School Diploma: -10; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 1. 

November: 
Less than a High School Diploma: -10; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

December: 
Less than a High School Diploma: -10; 
High School Graduates, No College: -9; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

2010: 

January: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

February: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

March: 
Less than a High School Diploma: -10; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

April: 
Less than a High School Diploma: -9; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 0. 

May: 
Less than a High School Diploma: -9; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 0. 

June: 
Less than a High School Diploma: -8; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 1. 

July: 
Less than a High School Diploma: -9; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 1. 

August: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -6; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 0. 

September: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 2. 

October: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: 1. 

November: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 1. 

December: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -7; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 1. 

2011: 

January: 
Less than a High School Diploma: -14; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 2. 

February: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 2. 

March: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

April: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

May: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

June: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 3. 

July: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -4; 
Bachelor's degree and higher: 3. 

August: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

September: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

October: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

November: 
Less than a High School Diploma: -10; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -3; 
Bachelor's degree and higher: 3. 

December: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -9; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: 4. 

2012: 

January: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 4. 

February: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 5. 

March: 
Less than a High School Diploma: -11; 
High School Graduates, No College: -9; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 6. 

April: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: 6. 

May: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -2; 
Bachelor's degree and higher: 6. 

June: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 5. 

July: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -8; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 5. 

August: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 7. 

September: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 7. 

October: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 7. 

November: 
Less than a High School Diploma: -14; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 8. 

December: 
Less than a High School Diploma: -13; 
High School Graduates, No College: -8; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 8. 

2013: 

January: 
Less than a High School Diploma: -14; 
High School Graduates, No College: -9; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 8. 

February: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -10; 
Some College or Associate Degree: -1; 
Bachelor's degree and higher: 9. 

March: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 9. 

April: 
Less than a High School Diploma: -14; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 9. 

May: 
Less than a High School Diploma: -12; 
High School Graduates, No College: -9; 
Some College or Associate Degree: 0; 
Bachelor's degree and higher: 9. 

Source: Bureau of Labor Statistics. 

[End of figure 35] 

Educating children: With large numbers of youth either dropping out of 
school or graduating unprepared for college or the workforce, the 
federal government has focused on making early childhood and K-12 
education a seamless and academically rigorous experience. For 
example, the administration has worked to enhance the quality of early 
education through multiple initiatives, including changes to the Child 
Care and Development Fund. The administration's new pre-kindergarten 
initiative is also designed to help states improve early learning and, 
ultimately, school readiness. 

As for K-12 education, after years of distributing funding primarily 
through formula grants with only small gains in student performance, 
federal policymakers have begun using competitive grant programs to 
generate change in states. For example, selected states have begun 
major reforms, such as adopting academic standards aligned with 
college and workplace requirements, as a result of $4 billion in Race 
to the Top grants. However, GAO has identified significant 
implementation challenges that the federal government must address, 
such as a lack of oversight and limited capacity to implement reforms 
at all levels of government. It will be essential for the federal 
government to address these obstacles and evaluate program outcomes. 
Additionally, the federal government must ensure that formula grant 
programs, such as Title I and Individuals with Disabilities Education 
Act-—which provide funding for the education of low-income and 
disabled students—-are improving student performance. In particular, 
federal programs must improve performance in science, technology, 
engineering and mathematics: critical subjects for success in a global 
economy. 

Postsecondary education: Education beyond high school is correlated 
with higher earnings and employment levels, with the greatest benefits 
accruing to college graduates. Accordingly, the federal government 
provides billions of dollars each year to help students and their 
families cover the cost of postsecondary education through programs 
administered by the Departments of Education, Defense, and Veterans 
Affairs. The federal government also supports postsecondary access 
through tax expenditures—including tax credits, deductions, 
exemptions, and tax-preferred savings programs—that reduce federal tax 
liabilities for millions of tax filers annually. 

Yet, despite an increase in the number of students pursuing 
postsecondary education over the last decade, graduation rates have 
not changed significantly and the United States is being outpaced 
internationally in the share of 25– to 34-year-olds with an associate 
degree or higher. In addition, college affordability presents greater 
challenges: state support has declined while tuition, fees, and 
student loan debt have all risen. Given the federal government's 
current fiscal constraints, it will be important to: (1) strengthen 
coordination and oversight of federal programs and policies that 
support postsecondary education access, affordability, and completion; 
and (2) safeguard these funds to meet the needs of future students, 
including returning veterans. 

Employment and training: Long-term unemployment and the changing needs 
of employers underscore the importance of federally-funded employment 
and training programs. Concerns remain about the pace of job creation, 
especially among groups hit hard by the recession (see figure 36). In 
addition, over the next few years, hundreds of thousands of 
servicemembers are expected to transition to civilian life, some of 
whom may face multiple challenges to obtaining employment. Concerns 
have also been raised about potential mismatches between job seekers' 
skills and those sought by employers. The largest source of federal 
funding-—providing almost $3 billion in fiscal year 2013-—to address 
such issues, the Workforce Investment Act (WIA), has been awaiting 
reauthorization since 2003. 

Key questions have been raised about the federal investment in 
workforce development, including: (1) how well the system identifies 
current and future occupations in demand; (2) the effectiveness of 
employment services and the role of training as one of those services 
in a constrained budget environment; and (3) how to align programs and 
services to provide a clear path to employment for different targeted 
groups without creating unnecessary overlap or duplication. Answers to 
these questions will be an important part of ensuring the prudent use 
of federal funds for employment and training. 

Figure 36: Nonfarm Employment, 2000–2013: 

[Refer to PDF for image: line graph] 

Year: 2000: 
Nonfarm employment (in millions): 130.869. 

2001-2002: Recession. 

Year: 2001: 
Nonfarm employment (in millions): 132.548. 

Year: 2002: 
Nonfarm employment (in millions): 130.68. 

Year: 2003: 
Nonfarm employment (in millions): 130.38. 

Year: 2004: 
Nonfarm employment (in millions): 130.512. 

Year: 2005: 
Nonfarm employment (in millions): 132.502. 

Year: 2006: 
Nonfarm employment (in millions): 135.13. 

Year: 2007: 
Nonfarm employment (in millions): 137.161. 

2008-2009: Recession. 

2008-2010: 25 month employment downturn: 8.7 million jobs lost. 

34 months for 62% net employment loss to be recovered: 5.4 million
jobs recovered. 

None of the previous five employment downturns were as long
in length, had as large a decline in jobs, or were followed by a
recovery that required as many months. 

Year: 2008: 
Nonfarm employment (in millions): 138.056. 

Year: 2009: 
Nonfarm employment (in millions): 133.631. 

Year: 2010: 
Nonfarm employment (in millions): 129.36. 

Year: 2011: 
Nonfarm employment (in millions): 130.464. 

Year: 2012: 
Nonfarm employment (in millions): 132.809. 

Year: 2013: 
Nonfarm employment (in millions): 134.839. 

Source: Bureau of Labor Statistics. 

[End of figure 36] 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 1.2.1: 
Assess policy and administrative challenges to improving school 
readiness and K-12 education to better prepare youths for college and 
the workforce: 

Key Efforts: 

* Evaluate the cost, coordination, potential overlap, and availability 
of child care, early childhood education, and K-12 programs. 

* Assess efforts to improve disadvantaged populations' academic 
outcomes. 

* Evaluate federal efforts to oversee and manage education 
initiatives, particularly in science, technology, engineering, and 
mathematics. 

Performance Goal 1.2.2: 
Identify opportunities to improve programs that provide postsecondary 
education and federal student aid: 

Key Efforts: 

* Evaluate how well programs and policies designed to promote 
postsecondary education access, affordability, and completion achieve 
their goals. 

* Assess efforts to strengthen accountability for student outcomes. 

* Evaluate oversight and management of postsecondary education and 
financial assistance programs. 

Performance Goal 1.2.3: 
Identify ways to improve programs that facilitate job opportunities 
for workers, including veterans, and enhance their skills for 
occupations in demands: 

Key Efforts: 

* Evaluate how employment and training programs are responding to 
changing economic and budgetary conditions to better assist job 
seekers, including veterans. 

* Evaluate federal efforts to oversee and manage employment and 
training programs and identify potential overlaps. 

* Evaluate efforts to oversee employment and training providers and 
efforts to coordinate service delivery. 

[End of Strategic Objective 1.2] 

Strategic Objective 1.3: 
Benefits and Protections for Workers, Families, and Children: 

Figure: Objective 1.3 Performance Goals: 

[Refer to PDF for image: illustration] 

* Identify opportunities to improve programs that provide social 
services and economic and nutrition assistance to individuals, 
families, and children. 

* Assess the effectiveness of strategies and safeguards to protect 
workers as well as individuals' identities. 

* Identify ways to improve federal policies and support for people, 
including veterans, with disabilities. 

[End of figure] 

Through a wide range of programs, the federal government, often 
through states, plays a crucial role in promoting and supporting 
employment among those able to work, aiding those unable to provide 
for themselves, and protecting vulnerable populations. In fiscal year 
2013, the federal government invested about $500 billion in programs 
that form the foundation for the nation's social safety net, such as 
programs offering food assistance and disability benefits. Yet the 
growing federal deficit, the economic downturn, and changing workforce 
demographics—-driven heavily by the aging of baby boomers-—contribute 
to an increasing demand for supports and benefits. This increased 
demand challenges customary federal approaches. The federal government 
should explore and assess other approaches for providing benefits and 
protections in a cost-effective manner while promoting program 
integrity. 

Assistance programs: The severe economic downturn led to a significant 
expansion of assistance programs during the recession and sustained 
high levels during the recovery. These programs continue to provide 
needed benefits, such as financial or food assistance, or protection 
against abuse and neglect for vulnerable groups, such as children and 
older adults. For example, figure 37 shows rising outlays for food and 
nutrition assistance programs, driven mainly by the Supplemental 
Nutrition Assistance Program (SNAP). Further, the state and local 
government sector continues to face near-term and long-term fiscal 
challenges as they face an increasing gap between receipts and 
expenditures in the coming years, raising questions about the capacity 
of state-administered assistance programs to deliver benefits and 
services to target populations, as well as account for the billions of 
dollars in benefits that are incorrectly paid through social programs 
each year. It will be important for GAO to examine federal and state 
efforts to deliver benefits and services that appropriately balance 
program integrity with benefit access and that promote cost-effective 
approaches to achieving program goals. 

Figure 37: Estimated and Actual Outlays for Selected Assistance 
Programs, Fiscal Years 2007-2017: 

[Refer to PDF for image: multiple line graph] 

Dollars in billions: 

Fiscal year: 2007; 
Food & nutrition: $54.5; 
Unemployment compensation: $35.1; 
Aid for low-income and vulnerable populations: $47.3. 

Fiscal year: 2009; 
Food & nutrition: $79.1; 
Unemployment compensation: $122.5; 
Aid for low-income and vulnerable populations: $61. 

Fiscal year: 2011; 
Food & nutrition: $103.2; 
Unemployment compensation: $120.6; 
Aid for low-income and vulnerable populations: $54.2. 

Fiscal year: 2013; 
Food & nutrition: $112.2; 
Unemployment compensation: $82.6; 
Aid for low-income and vulnerable populations: $50.6. 

Fiscal year: 2015; 
Food & nutrition: $102.4; 
Unemployment compensation: $51.1; 
Aid for low-income and vulnerable populations: $52.9. 

Fiscal year: 2017; 
Food & nutrition: $101.6; 
Unemployment compensation: $48.3; 
Aid for low-income and vulnerable populations: $53.9. 

Source: GAO analysis of Office of Management and Budget and Department 
of Health and Human Services data. 

Note: Outlays are estimated beginning in fiscal year 2013. 

[End of figure 37] 

Worker protections: Efforts to ensure worker safety and fair 
employment practices will continue to be important as long as 
employers need to increase productivity in an increasingly competitive 
global economy. For those who are already working, the government 
faces challenges protecting safety and health, wages, collective 
bargaining rights, and equal employment opportunities, as well as 
sensitive personal information such as Social Security numbers (SSN). 

Factors affecting these efforts include (1) changes in today's work 
arrangements, such as the increasing use of telework, temporary 
workers, and independent contractors; (2) employers' needs for foreign 
workers when a sufficient number of U.S. workers cannot be found to do 
the work required; and (3) the SSN's centrality as an identifier in 
vital transactions such as obtaining a driver's license. 

With these factors in mind, GAO will continue to assess federal and, 
where applicable, state efforts to (1) ensure compliance with worker 
protection laws; (2) guarantee the timely and legal processing of visa 
applications and the adequacy of wages and housing provided to guest 
workers; and (3) safeguard SSNs and prevent their improper use. 

Disability programs: In fiscal year 2013, the Social Security 
Administration and Department of Veterans Affairs will collectively 
provide an estimated $257 billion in cash disability benefits to about 
19.7 million beneficiaries. Recently, a challenging job market has 
fueled program growth and, in a fiscally strained environment, these 
programs struggle to provide decisions and to update eligibility 
criteria to align with modern concepts of disability. With 2.2 million 
servicemembers deployed for Operation Enduring Freedom and Operation 
Iraqi Freedom by December 2012, veteran disability programs have been 
strained, and some of these veterans may need support transitioning 
into their communities. 

GAO's 2013 High Risk update noted that federal disability programs 
represent a patchwork of policies and programs without a unified 
strategy or set of national goals and do not always fully incorporate 
medical and technological advances. For example, GAO recently 
identified 45 programs that provide employment supports for 
individuals with disabilities in a fragmented and, in some cases, 
overlapping manner. GAO will continue to assess efforts to better 
position disability programs to provide meaningful and timely support 
for individuals with disabilities. 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 1.3.1: 
Identify opportunities to improve programs that provide social 
services and economic and nutrition assistance to individuals, 
families, and children: 

Key Efforts: 

* Determine whether social, economic, and nutrition programs achieve 
their goals and appropriately direct resources. 

* Assess federal and state oversight and management of social services 
and economic and nutrition assistance programs to ensure program 
integrity. 

* Analyze issues related to cost-effective service delivery, effects 
on special populations, and interactions among programs. 

Performance Goal 1.3.2: 
Assess the effectiveness of strategies and safeguards to protect 
workers as well as individuals' identities: 

Key Efforts: 

* Assess federal and state efforts to ensure safety, health, and other 
protections for workers. 

* Evaluate federal and state efforts to promote workplace quality 
through direct intervention and cooperative approaches. 

* Assess efforts to appropriately use and safeguard SSNs. 

Performance Goal 1.3.3: 
Identify ways to improve federal policies and support for people, 
including veterans, with disabilities: 

Key Efforts: 

* Assess the management, operations, and program integrity of federal 
disability programs and whether they follow best practices. 

* Assess DOD and VA services to servicemembers and veterans with 
disabilities, including services supporting the transition to civilian 
life. 

* Assess efforts to modernize and coordinate federal policies and 
programs that provide support and services to people with disabilities. 

[End of Strategic Objective 1.3] 

Strategic Objective 1.4: 
Supporting the Financial Security and Well-Being of an Aging 
Population: 

Figure: Objective 1.4 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess the policy and administrative challenges to financing 
government benefits for older adults; 
* Assess policies and administration of programs that could enable 
older adults to maintain their independence and ties to the community; 
* Assess the adequacy and effectiveness of private and public employer-
sponsored retirement plans in providing security to older adults; 
* Assess individuals' opportunities and strategies to help improve 
their employment options, security, and preparedness for retirement as 
older adults. 

[End of figure] 

Ensuring that older adults are able to enjoy a secure retirement has 
traditionally been a shared responsibility of government, employers, 
and individuals themselves. However, various trends are now converging 
that make fulfilling this responsibility increasingly difficult. With 
longer life spans and the aging of the baby boom generation, the 
current support structure may not be able to meet expanding needs. By 
2030, nearly 20 percent of the people in the United States will be 65 
or older, compared with less than 10 percent in 1970. Social Security 
faces future shortfalls, which could result in tax increases, benefit 
reductions, or both. Despite the growing need for community-based 
services to help older adults remain independent, federal funding for 
such services is likely to remain flat, at best, given current fiscal 
pressures. Meanwhile, employer-provided retirement plans have been 
shifting more responsibility and risk to individuals for ensuring 
adequate savings. As a result, many individuals may have to work 
longer and save more to provide for themselves in retirement. These 
trends are unlikely to abate in the near future. Policymakers will 
need to consider new ways to bolster the efforts of government, 
employers, and individuals to support the financial security and well-
being of an aging population. 

Social Security benefits: Social Security benefits are the foundation 
of a secure retirement for most older adults in this country. Yet, 
particularly as the baby boom generation retires, the program faces 
financial challenges that must be addressed to avoid future tax 
increases or benefit reductions. Although the Social Security trust 
funds are not expected to be depleted until sometime after 2030, the 
program has been paying out more than it takes in since 2010. The 
Social Security Administration (SSA) projects that its deficit will 
average about $75 billion between 2013 and 2018, and then rise steeply 
after that. Policymakers will need to take steps to ensure the long-
term solvency of the program without eroding participants' retirement 
security, particularly for low income workers and other vulnerable 
populations. In addition, SSA will need to develop a comprehensive 
plan for how it will deliver quality and accurate service while 
managing growing work demands with a constrained budget. 

Maintaining independence: The ability to function independently 
declines significantly with age. As the elderly population grows, so 
will the demand for supports that can allow older adults to age in 
place, including nutrition services and assistance with daily 
activities such as bathing and dressing (see figure 38). Maintaining 
their independence and ties to the community as they age is not only 
the preference of most older adults, but also the goal of federal 
policies that promote these services and supports as an alternative to 
facility-based long term care. The Older Americans Act provides funds 
for developing a comprehensive, coordinated, and cost effective system 
of home and community-based services for older adults. Since 2005, 
funding under the act has helped support a national network of public 
and private entities working to build more aging-friendly communities 
through planning, coordination, and program development. As the 
population continues to age, congressional oversight will be needed to 
monitor federal efforts and gauge the appropriate level of federal 
involvement in this area. 

Figure 38: Percent of Noninstitutionalized Persons with Limitations in 
Activities of Daily Living by Age Group, 2010: 

[Refer to PDF for image: vertical bar graph] 

Bathing/showering: 
Ages 65-74: 6%; 
Ages 75-84: 11%; 
Ages 85 and over: 24%. 

Dressing: 
Ages 65-74: 5%; 
Ages 75-84: 7%; 
Ages 85 and over: 15%. 

Eating: 
Ages 65-74: 2%; 
Ages 75-84: 3%; 
Ages 85 and over: 6%. 

Getting in/out of bed/chairs: 
Ages 65-74: 8%; 
Ages 75-84: 13%; 
Ages 85 and over: 21%. 

Walking: 
Ages 65-74: 17%; 
Ages 75-84: 28%; 
Ages 85 and over: 46%. 

Using toilet: 
Ages 65-74: 3%; 
Ages 75-84: 5%; 
Ages 85 and over: 11%. 

Sources: U.S. Department of Health and Human Services (based on data 
from U.S. Census Bureau's American Community Survey; Centers for 
Medicare and Medicaid Services' Medicare Current Beneficiary Survey; 
National Center for Health Statistics, including the NCHS Health Data 
Interactive data warehouse). 

[End of figure 38] 

Employer-sponsored retirement plans: Despite significant tax 
subsidies, only about half of the private sector workforce 
participates in a retirement plan. Further, a decreasing number of 
employers are offering traditional defined benefit plans (see figure 
39), and many are underfunded. With 401(k) plans now dominant, 
participants bear greater risks for choices about contributions, 
investments, and savings that can have significant consequences for 
their retirements. Meanwhile, the Pension Benefit Guaranty Corporation 
(PBGC), which insures defined benefit plans, has had a net accumulated 
deficit since 2002 and so has remained on GAO's list of high-risk 
programs. At the end of fiscal year 2013, its deficit had grown to 
more than $35 billion and PBGC estimated its loss exposure for 
underfunded plans at nearly $329 billion. The federal government and 
many state and local governments, as employers, also face financial 
challenges in providing adequate retirement benefits to their 
employees, especially for those not covered by Social Security. These 
challenges may require policymakers to consider other ways to ensure 
adequate income for retired Americans. 

Figure 39: Number of Defined Benefit and Defined Contribution Plans, 
1975-2010: 

[Refer to PDF for image: vertical bar graph] 

Year: 1975; 
Defined benefit plans: 103,000; 
Defined contribution plans: 208,000. 

Year: 1980; 
Defined benefit plans: 148,000; 
Defined contribution plans: 341,000. 

Year: 1985; 
Defined benefit plans: 170,000; 
Defined contribution plans: 462,000. 

Year: 1990; 
Defined benefit plans: 113,000; 
Defined contribution plans: 599,000. 

Year: 1995; 
Defined benefit plans: 69,000; 
Defined contribution plans: 624,000. 

Year: 2000; 
Defined benefit plans: 49,000; 
Defined contribution plans: 687,000. 

Year: 2005; 
Defined benefit plans: 48,000; 
Defined contribution plans: 631,000. 

Year: 2010; 
Defined benefit plans: 47,000; 
Defined contribution plans: 654,000. 

Source: GAO analysis of U.S. Department of Labor data. 

[End of figure 39] 

To improve the effectiveness of private employer-sponsored retirement 
plans, the federal government and plan sponsors will need to work 
together to take action in the following areas: 

* Oversight and transparency: Provide clearer guidance and oversight 
of 401(k) plans to keep fees reasonable and help participants make 
good choices. 

* Coverage and participation: Explore ways to increase participation 
in retirement plans and promote designs that reflect more of the 
advantages of traditional defined benefit pensions. 

* PBGC's risk: Develop strategies to address PBGC's financial 
challenges. 

To improve the effectiveness of public sector retirement plans, 
government entities at all levels will need to develop strategies to 
manage the funding of their employees' pensions while facing other 
budgetary challenges. 

Preparing for a secure retirement: As responsibility for preparing for 
a secure retirement shifts increasingly to the individual, efforts 
will be needed to help older adults: 

* Work longer: According to projections from the Bureau of Labor 
Statistics, labor force participation among those age 65 and older is 
expected to rise to 22.6 percent by 2020, but laid-off older workers 
typically experience longer periods of joblessness and reemployment at 
lower wages. Government programs and employers need to address the 
labor market challenges posed by an aging population, while 
encouraging continued work. 

* Save more: To maintain one's standard of living in retirement, many 
individuals will need to supplement their Social Security and employer-
sponsored benefits with personal savings; however, the personal 
savings rate has been declining since the early 1980s (see figure 40). 
Fostering increased retirement savings among lower-income workers is 
particularly challenging. Many individuals are reported to have 
difficulty even with basic financial concepts, yet they face 
increasingly complex financial decisions to plan for a secure 
retirement. 

* Avoid financial exploitation: Illegal or improper use of older 
adults' funds, property or assets has been estimated to cost the 
elderly as much as $3 billion annually. The federal government needs 
to strengthen programs to prevent, detect, and respond to elder 
financial exploitation. 

Figure 40: Personal Saving Rate as a Percentage of Disposable Income, 
1960-2012: 

[Refer to PDF for image: line graph] 

Year: 1960; 
Percentage: 7.2. 

Year: 1961; 
Percentage: 8.4. 

Year: 1962; 
Percentage: 8.3. 

Year: 1963; 
Percentage: 7.8. 

Year: 1964; 
Percentage: 8.8. 

Year: 1965; 
Percentage: 8.6. 

Year: 1966; 
Percentage: 8.2. 

Year: 1967; 
Percentage: 9.4. 

Year: 1968; 
Percentage: 8.4. 

Year: 1969; 
Percentage: 7.8. 

Year: 1970; 
Percentage: 9.4. 

Year: 1971; 
Percentage: 10. 

Year: 1972; 
Percentage: 8.9. 

Year: 1973; 
Percentage: 10.5. 

Year: 1974; 
Percentage: 10.7. 

Year: 1975; 
Percentage: 10.6. 

Year: 1976; 
Percentage: 9.4. 

Year: 1977; 
Percentage: 8.7. 

Year: 1978; 
Percentage: 8.9. 

Year: 1979; 
Percentage: 8.8. 

Year: 1980; 
Percentage: 9.8. 

Year: 1981; 
Percentage: 10.6. 

Year: 1982; 
Percentage: 10.9. 

Year: 1983; 
Percentage: 8.7. 

Year: 1984; 
Percentage: 10.2. 

Year: 1985; 
Percentage: 8.2. 

Year: 1986; 
Percentage: 7.6. 

Year: 1987; 
Percentage: 6.5. 

Year: 1988; 
Percentage: 6.9. 

Year: 1989; 
Percentage: 6.6. 

Year: 1990; 
Percentage: 6.5. 

Year: 1991; 
Percentage: 7. 

Year: 1992; 
Percentage: 7.3. 

Year: 1993; 
Percentage: 5.8. 

Year: 1994; 
Percentage: 5.2. 

Year: 1995; 
Percentage: 5.2. 

Year: 1996; 
Percentage: 4.9. 

Year: 1997; 
Percentage: 4.6. 

Year: 1998; 
Percentage: 5.3. 

Year: 1999; 
Percentage: 3.1. 

Year: 2000; 
Percentage: 2.9. 

Year: 2001; 
Percentage: 2.7. 

Year: 2002; 
Percentage: 3.5. 

Year: 2003; 
Percentage: 3.5. 

Year: 2004; 
Percentage: 3.6. 

Year: 2005; 
Percentage: 1.5. 

Year: 2006; 
Percentage: 2.6. 

Year: 2007; 
Percentage: 2.4. 

Year: 2008; 
Percentage: 5.4. 

Year: 2009; 
Percentage: 4.7. 

Year: 2010; 
Percentage: 5.1. 

Year: 2011; 
Percentage: 4.2. 

Year: 2012; 
Percentage: 4.1. 

Source: Bureau of Economic Analysis data. 

[End of figure 40] 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 1.4.1: 
Assess the policy and administrative challenges to financing 
government benefits for older adults: 

Key Efforts: 

* Analyze policies to ensure Social Security's financial stability and 
continued effectiveness as the foundation of retirement income. 

* Explore the experiences of other national pension systems for 
lessons learned and insights that can inform the U.S. policy debate. 

* Assess challenges facing the Social Security Administration in 
providing customer service and ensuring program integrity. 

Performance Goal 1.4.2:
Assess policies and administration of programs that could enable older 
adults to maintain their independence and ties to the community: 

Key Efforts: 

* Examine federal efforts to develop a comprehensive system of home 
and community-based services to enable older adults to age in place. 

* Examine federal efforts to work with state units and area agencies 
on aging to establish and sustain various models of aging-friendly 
communities. 

* Examine the availability, accessibility, and use of home and 
community-based services by older adults in contrast to facility-based 
long-term care. 

Performance Goal 1.4.3: 
Assess the adequacy and effectiveness of private and public employer-
sponsored retirement plans in providing security to older adults: 

Key Efforts: 

* Examine efforts to improve the information and oversight of 401(k) 
plans and address challenges related to investment options, risks, and 
services. 

* Explore international experiences with regulating account-based 
plans, implementing universal pension coverage, and enhancing employer-
based retirement income that could inform U.S. policy. 

* Examine the nature and causes of PBGC's financial shortfall and 
efforts to develop a strategy for meeting its long-term funding 
obligations. 

* Assess the challenges facing federal, state, and local governments 
in funding and managing the public retirement plans of their employees. 

Performance Goal 1.4.4: 
Assess individuals' opportunities and strategies to help improve their 
employment options, security, and preparedness for retirement as older 
adults: 

Key Efforts: 

* Identify domestic and international strategies to extend older 
workers' labor force participation, such as phased retirement, and 
address barriers limiting their employment. 

* Examine new ways to foster increased contributions to tax-deferred 
retirement savings vehicles such as individual retirement accounts and 
annuity contracts. 

* Examine the effectiveness of policies to improve financial literacy 
and preparation for a secure retirement. 

* Explore strategies to combat elder financial exploitation and 
enhance collaboration between federal fiduciary programs and 
guardianship programs in the states. 

[End of Strategic Objective 1.4] 

Strategic Objective 1.5: 
A Responsive, Fair, and Effective System of Justice: 

Figure: Objective 1.5 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess federal efforts to prevent, deter, investigate, and prosecute 
terrorism, violent crime, and cybercrime; 
* Assess federal efforts to protect vulnerable populations and ensure 
justice for all; 
* Review the federal government's efforts to confine, rehabilitate, 
and monitor the release of convicted offenders; 
* Evaluate federal efforts to assist communities with ensuring a fair 
and effective criminal justice system through federal grants. 

[End of figure] 

The 2013 Boston Marathon bombing and Navy Yard shooting demonstrate 
that the American people continue to face threats on their own soil 
from terrorist acts and mass shootings. At the same time, new types of 
crime-—for example, rising abuse of prescription drugs and criminals' 
growing use of the Internet, such as for financial fraud and child 
pornography—-challenge law enforcement's approaches and resources. The 
Department of Justice (DOJ) is responsible for investigating and 
prosecuting terrorist acts and traditional crimes, and incarcerating 
guilty individuals. DOJ and the federal judiciary are also responsible 
for ensuring that all parties in the criminal justice system, 
including victims and defendants, are treated fairly and afforded 
their rights. 

Given the breadth of its mission and the constrained fiscal 
environment-—including a 5 percent budget decrease in 2013 as a result 
of sequestration-—DOJ will likely face significant trade-offs when 
determining how to allocate its resources. Through its work, GAO will 
continue to inform the Congress of how well DOJ enforces federal 
criminal laws and manages its tradeoffs and resulting impacts; where 
it can eliminate inefficiencies and overlap; and how it can better 
educate state, local, and tribal law enforcement on ways to use 
federal grant funds most effectively. 

Prevention of terrorist threats, violent crime, and gun violence: 
According to the National Consortium for the Study of Terrorism, 210 
violent extremists are known to have radicalized in North America from 
1989 through 2011 to the point of supporting violence. To address this 
problem, DOJ is partnering with other federal, state, local, and 
international law enforcement entities, sharing intelligence and 
information with them, as well as investigating increasing numbers of 
tips and leads to identify and prevent incidents. DOJ has also stated 
that in its efforts to combat such threats, it will be important to 
preserve the privacy and civil liberties of all persons. 

Violent crime has decreased by about 51 percent since 1992, but it 
continues to pose harm to communities (see figure 41). DOJ has several 
efforts to address violent crime, including gang prevention 
strategies; strategies to combat trafficking and the use of illegal 
drugs, as well as diversion of prescription drugs; and plans to help 
prevent gun violence. 

Figure 41: Violent Crime Rates in the United States, 1992-2011: 

[Refer to PDF for image: multiple line graph] 

Crime rate per 100,000 people: 

Year: 1992; 
Total violent crime rate: 757.7; 
Aggravated assault rate: 441.9; 
Robbery rate: 263.7; 
Forcible rape rate: 42.8; 
Murder and nonnegligent manslaughter rate: 9.3. 

Year: 1993; 
Total violent crime rate: 747.1; 
Aggravated assault rate: 440.5; 
Robbery rate: 256; 
Forcible rape rate: 41.1; 
Murder and nonnegligent manslaughter rate: 9.5. 

Year: 1994; 
Total violent crime rate: 713.6; 
Aggravated assault rate: 427.6; 
Robbery rate: 237.8; 
Forcible rape rate: 39.3; 
Murder and nonnegligent manslaughter rate: 9. 

Year: 1995; 
Total violent crime rate: 684.5; 
Aggravated assault rate: 418.3; 
Robbery rate: 220.9; 
Forcible rape rate: 37.1; 
Murder and nonnegligent manslaughter rate: 8.2. 

Year: 1996; 
Total violent crime rate: 636.6; 
Aggravated assault rate: 391; 
Robbery rate: 201.9; 
Forcible rape rate: 36.3; 
Murder and nonnegligent manslaughter rate: 7.4. 

Year: 1997; 
Total violent crime rate: 611; 
Aggravated assault rate: 382.1; 
Robbery rate: 186.2; 
Forcible rape rate: 35.9; 
Murder and nonnegligent manslaughter rate: 6.8. 

Year: 1998; 
Total violent crime rate: 567.6; 
Aggravated assault rate: 361.4; 
Robbery rate: 165.5; 
Forcible rape rate: 34.5; 
Murder and nonnegligent manslaughter rate: 6.3. 

Year: 1999; 
Total violent crime rate: 523; 
Aggravated assault rate: 334.3; 
Robbery rate: 150.1; 
Forcible rape rate: 32.8; 
Murder and nonnegligent manslaughter rate: 5.7. 

Year: 2000; 
Total violent crime rate: 506.5; 
Aggravated assault rate: 324; 
Robbery rate: 145; 
Forcible rape rate: 32; 
Murder and nonnegligent manslaughter rate: 5.5. 

Year: 2001; 
Total violent crime rate: 504.5; 
Aggravated assault rate: 318.6; 
Robbery rate: 148.5; 
Forcible rape rate: 31.8; 
Murder and nonnegligent manslaughter rate: 5.6. 

Year: 2002; 
Total violent crime rate: 494.4; 
Aggravated assault rate: 309.5; 
Robbery rate: 146.1; 
Forcible rape rate: 33.1; 
Murder and nonnegligent manslaughter rate: 5.6. 

Year: 2003; 
Total violent crime rate: 475.8; 
Aggravated assault rate: 295.4; 
Robbery rate: 142.5; 
Forcible rape rate: 32.3; 
Murder and nonnegligent manslaughter rate: 5.7. 

Year: 2004; 
Total violent crime rate: 463.2; 
Aggravated assault rate: 288.6; 
Robbery rate: 136.7; 
Forcible rape rate: 32.4; 
Murder and nonnegligent manslaughter rate: 5.5. 

Year: 2005; 
Total violent crime rate: 469; 
Aggravated assault rate: 290.8; 
Robbery rate: 140.8; 
Forcible rape rate: 31.8; 
Murder and nonnegligent manslaughter rate: 5.6. 

Year: 2006; 
Total violent crime rate: 479.3; 
Aggravated assault rate: 292; 
Robbery rate: 150; 
Forcible rape rate: 31.6; 
Murder and nonnegligent manslaughter rate: 5.8. 

Year: 2007; 
Total violent crime rate: 471.8; 
Aggravated assault rate: 287.2; 
Robbery rate: 148.3; 
Forcible rape rate: 30.6; 
Murder and nonnegligent manslaughter rate: 5.7. 

Year: 2008; 
Total violent crime rate: 458.6; 
Aggravated assault rate: 277.5; 
Robbery rate: 145.9; 
Forcible rape rate: 29.8; 
Murder and nonnegligent manslaughter rate: 5.4. 

Year: 2009; 
Total violent crime rate: 431.9; 
Aggravated assault rate: 264.7; 
Robbery rate: 133.1; 
Forcible rape rate: 29.1; 
Murder and nonnegligent manslaughter rate: 5. 

Year: 2010; 
Total violent crime rate: 404.5; 
Aggravated assault rate: 252.8; 
Robbery rate: 119.3; 
Forcible rape rate: 27.7; 
Murder and nonnegligent manslaughter rate: 4.8. 

Year: 2011; 
Total violent crime rate: 386.3; 
Aggravated assault rate: 241.1; 
Robbery rate: 113.7; 
Forcible rape rate: 26.8; 
Murder and nonnegligent manslaughter rate: 4.7. 

Source: FBI Uniform Crime Reporting Program. 

[End of figure 41] 

FBI Uniform Crime Report data for 2010 show that firearms were used in 
68 percent of murders committed. As the nation debates how to balance 
Second Amendment rights to bear arms with the fact that criminals, 
including mass shooters, have been able to access firearms, DOJ's FBI 
and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) play 
important roles in keeping firearms out of the wrong hands. The FBI 
conducts background checks and ATF establishes regulations for 
firearms dealers to help ensure that persons with a criminal history 
are not able to purchase firearms. 

To address terrorism and other crimes, DOJ will need to ensure that 
its law enforcement components coordinate, collaborate, and eliminate 
inefficient overlap, as well as work with state, local, and tribal law 
enforcement agencies. For example, states play a critical role in 
providing FBI with the data it needs for background checks, including 
mental health and drug abuse records, but still have gaps to fill, as 
GAO's work has demonstrated. 

Drug Control: The rate of illicit drug use among Americans aged 12 or 
older in 2012 was the highest that it has been in the past decade, 
according to the National Survey on Drug Use and Health. Abuse of 
illicit drugs results in significant public safety, public health, and 
economic consequences for the United States. For example, a DOJ study 
estimated that the economic impact of illicit drug use, including the 
costs of crime and health care, was more than $193 billion in 2007. As 
GAO's work has demonstrated, addressing this problem will require 
federal agencies to assess how to best use limited resources to 
control the supply of and demand for illicit drugs and effectively 
coordinate federal, state, and local efforts. For example, the Office 
of National Drug Control Policy will need to continue to identify ways 
to increase coordination across the 76 federal programs that provided 
drug abuse prevention and treatment services in fiscal year 2011. In 
addition, the Drug Enforcement Administration and other agencies will 
need to ensure that they collaborate and assess program results to 
address such issues as prescription drug diversion and the nexus 
between drug trafficking and terrorism. 

Combating cyber crime: Americans' reliance on computers and mobile 
devices for daily communications and routine tasks, such as online 
banking and shopping, has increased the risk of cyber crimes—such as 
identity theft, organized retail crime, and charity and emergency-
benefit fraud. In 2012, the Internet Crime Complaint Center (IC3)-—
which is a joint venture among the FBI, the Bureau of Justice 
Assistance, and the National White Collar Crime Center—-received 
289,874 complaints from individuals who reported being victims of 
cyber crime. Nearly 40 percent of these individuals reported facing 
financial losses totaling more than $525 million. One estimate 
indicates that cyber crimes can affect as much as 17 percent of the 
online population in some countries, compared to 5 percent for more 
traditional crimes such as burglary and car thefts. To position itself 
to address these trends, DOJ will need to continue to develop the 
technical expertise to prevent, detect, investigate, and prosecute 
cyber crime—such as conducting digital forensic examinations of 
electronic devices and accurately interpreting the results as evidence. 

Protecting vulnerable populations: Congress has passed several laws to 
protect vulnerable populations and help ensure public safety. For 
example, the PROTECT Act of 2003 and the Adam Walsh Act of 2006 aim to 
protect children from sexual exploitation and the general public from 
the threat posed by persons convicted of a sex offense. Studies 
estimate that 1 of every 5 girls and 1 of every 7 to 10 boys are 
sexually abused, and that arrests for online child pornography rose 
from about 2,100 to 5,300 (150 percent) between 2006 and 2010. Other 
laws, for example, aim to protect the elderly from abuse and women 
from violence. DOJ has important responsibilities, in conjunction with 
states, localities, and tribes, to enforce these laws as well as 
ensure that the country's most vulnerable populations are protected. 
GAO's work has identified ways that DOJ can provide states, 
localities, and tribes with guidance, training, funds, and other 
support to help DOJ enforce these laws. 

Federal inmate population: The United States faces difficult decisions 
in managing a growing and increasingly costly federal inmate 
population that now accounts for about a quarter of the entire DOJ 
budget. DOJ's Federal Bureau of Prisons (BOP) faces significant 
challenges in effectively managing this prison population within an 
overcrowded and increasingly aging prison system. The federal prison 
population grew by 50 percent from 2000 to 2012, and additional growth 
is projected (see figure 42). BOP's annual budget has grown by 81 
percent during this same time period. BOP facilities were operating at 
39 percent over capacity at the end of 2011 and overcrowding is 
expected to continue. 

Figure 42: Growth of Federal Prison Population, Fiscal Years 2006-2020: 

[Refer to PDF for image: line graph] 

Actual: 

Fiscal year: 2006; 
Inmate population: 192,584. 

Fiscal year: 2007; 
Inmate population: 200,02. 

Fiscal year: 2008; 
Inmate population: 201,668. 

Fiscal year: 2009; 
Inmate population: 208,759. 

Fiscal year: 2010; 
Inmate population: 210,227. 

Fiscal year: 2011; 
Inmate population: 217,768. 

Fiscal year: 2012; 
Inmate population: 218,687. 

Projected: 

Fiscal year: 2013; 
Inmate population: 220,887. 

Fiscal year: 2014; 
Inmate population: 224,087. 

Fiscal year: 2015; 
Inmate population: 227,287. 

Fiscal year: 2016; 
Inmate population: 230,406. 

Fiscal year: 2017; 
Inmate population: 233,525. 

Fiscal year: 2018; 
Inmate population: 236,644. 

Fiscal year: 2019; 
Inmate population: 239,763. 

Fiscal year: 2020; 
Inmate population: 242,882. 

Source: GAO analysis of U.S. Department of Justice data and 
projections. 

[End of figure 42] 

Addressing overcrowding will require DOJ to carefully assess and 
balance several competing demands, including maintaining its aging 
facilities, meeting current inmate medical needs, and enhancing 
programs to reduce the rate at which former inmates return to prison 
(recidivism). Options for addressing overcrowding include (1) reducing 
the size of the projected inmate population by reforming sentencing 
laws, allowing alternatives to incarceration, or providing BOP greater 
sentencing flexibility; (2) increasing capacity in the federal system 
by constructing new prisons, contracting for additional private 
capacity, or adding additional staff; or (3) taking some combination 
of both approaches. 

Grant funding: DOJ plays a critical role in equipping states and 
localities to address crime by providing federal grant dollars for 
prevention, intervention, and enforcement programs. From fiscal years 
2005 through 2012, approximately $33 billion has been appropriated to 
support crime prevention, law enforcement, and crime victim services 
through more than 200 federal financial assistance programs that DOJ 
manages. In July 2012, GAO found that DOJ's grant programs overlap 
across 10 justice areas contributing to the risk of unnecessarily 
duplicative grant awards for the same or similar purposes. As states 
and localities are increasingly concerned about their ability to fund 
and sustain programs to fight traditional crime, the effectiveness and 
efficiency of federal law enforcement grant programs will become 
increasingly important. GAO's work has also shown that DOJ needs to 
enhance its coordination across grant programs with similar goals and 
grantees. DOJ generally lacks visibility over the extent to which its 
grant programs overlap and thus is not positioned to minimize the risk 
of potential unnecessary duplication before making grant awards. This 
lack of visibility also hinders the Department's ability to better 
target its limited grant funding resources—especially important in an 
era of limited fiscal resources. 

GAO's prior and future work on the federal system of justice can help 
federal decision makers address this increasingly complex strategic 
environment. To support efforts by Congress and the federal government 
to ensure a responsive, fair, and effective system of justice, GAO has 
established the following performance goals and key efforts: 

Performance Goal 1.5.1: 
Assess federal efforts to prevent, deter, investigate, and prosecute 
terrorism, violent crime, and cyber crime: 

Key Efforts: 

* Assess DOJ's efforts to address terrorism, including efforts to 
collaborate and share information with other law enforcement and 
intelligence agencies. 

* Assess DOJ's efforts to assist communities with addressing violent 
crime, particularly crime that involves the use of firearms. 

* Assess the effectiveness of federal efforts to control the supply 
and demand for illicit drugs and the diversion of legal drugs for 
illicit purposes. 

* Assess DOJ's efforts to combat emerging crimes such as cyber crime, 
including building the technical expertise to effectively investigate 
and prosecute these types of crimes. 

Performance Goal 1.5.2: 
Assess federal efforts to protect vulnerable populations and ensure 
justice for all: 

Key Efforts: 

* Assess DOJ's efforts to implement and enforce laws that are intended 
to protect vulnerable populations, such as children, the elderly, and 
victims of human trafficking and exploitation, as well as provide 
training, technical assistance, and other support to state and local 
jurisdictions who also implement and enforce these laws. 

* Evaluate the judiciary's efforts to manage and resolve its growing 
and evolving workload, including through mediation and other trial 
alternatives. 

* Evaluate progress in addressing challenges facing the nation's 
election system, including ensuring accurate voter registration lists 
and ballot access for all eligible voters. 

Performance Goal 1.5.3: 
Review the federal government's efforts to confine, rehabilitate, and 
monitor the release of convicted offenders: 

Key Efforts: 

* Assess DOJ's efforts to safely and effectively manage a growing 
federal prison population. 

* Evaluate DOJ programs and activities to rehabilitate convicted 
offenders. 

* Review federal efforts to monitor convicted offenders after release. 

Performance Goal 1.5.4: 
Evaluate federal efforts to assist communities with ensuring a fair 
and effective criminal justice system through federal grants: 

Key Efforts: 

* Evaluate the extent to which DOJ has sufficient controls in place to 
monitor grant recipients' use of funds. 

* Assess DOJ's efforts to provide training and technical assistance to 
grant recipients. 

* Review DOJ's efforts to evaluate the impact that its grant funding 
has had on improving a particular aspect of the criminal justice 
system and the extent to which DOJ requires recipients to conduct 
independent evaluations. 

* Assess DOJ's efforts to share the information it collects on 
effective programs within and among its components. 

[End of Strategic Objective 1.5] 

Strategic Objective 1.6: 
Housing Finance and Viable Communities: 

Figure: Objective 1.6 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess how the federal government can balance supporting 
homeownership and managing financial risk while reforming the federal 
role in housing finance; 
* Track the progress of federal programs that support affordable rental 
housing, including how they manage the condition of assisted 
properties and improve the well-being of special populations; 
* Assess the effectiveness of federal initiatives to assist small and 
minority-owned businesses; 
* Assess federal homeless assistance efforts and their impact on both 
homeless individuals and families; 
* Monitor federal community and economic development assistance and its 
impact on communities 

[End of figure] 

The economic and social well-being of communities is vital to the
nation's overall growth and prosperity. Adverse economic conditions—-
including high unemployment, large numbers of foreclosed and abandoned 
properties, and tight mortgage and small business lending markets—-
will continue to threaten the long-term viability of communities 
nationwide. For example, despite improvements in the housing market, 
millions of homeowners owe more than their home is worth. Further, the 
availability of affordable rental housing is limited. These conditions 
could further stress communities with historically higher levels of 
poverty, homelessness, and disinvestment. Promoting economic stability 
and development in communities is complex, involving the combined 
efforts of federal, state, and local governments, as well as financial 
institutions, businesses, and nonprofit organizations. The impact of 
the 2007-2009 financial crisis has made these efforts even more 
complicated. The federal government, in particular, will face 
significant challenges, including budgetary constraints and major 
decisions about the future federal role in housing finance. Therefore, 
GAO has designated modernizing the U.S. financial regulatory system 
and the federal role in housing finance as a high-risk area. 

Homeownership: The federal government supports homeownership through 
finance programs, incentives, and requirements administered by the 
Departments of the Treasury (Treasury), Housing and Urban Development 
(HUD), Veterans Affairs (VA), and Agriculture (USDA). However, 
declining home prices and rising foreclosures were important factors 
in the 2007-2009 financial crisis (see figure 43) and have severely 
stressed federal single-family housing programs. For example, capital 
reserves for mortgage insurance provided by HUD's Federal Housing 
Administration (FHA) fell below the statutory minimum in 2009 and have 
not recovered, prompting debate about enhancing FHA's long-term 
viability. In addition, government-sponsored enterprises Fannie Mae 
and Freddie Mac (the enterprises) are major participants in the home 
mortgage market. The enterprises were placed under federal 
conservatorship in September 2008, underscoring the risks they posed 
to financial markets and the need to revise their long-term 
structures. Under the conservatorship, Fannie Mae and Freddie Mac have 
received more than $187 billion from Treasury to maintain positive net 
worth. They did not require funds from Treasury for 2012 or the first 
two quarters of 2013 because they ended each quarter with positive net 
worth. Through the second quarter of 2013, the enterprises had paid 
$131.6 billion in dividends on the $187 billion received from 
Treasury. Although various proposals to resolve the future role of the 
enterprises have been issued, no definitive actions have been taken 
yet. Further, provisions in the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act) are designed to reform 
mortgage underwriting and securitization practices. Regulations to 
implement mortgage reforms in the Dodd-Frank Act are taking effect. A 
key challenge in implementing the reforms will be balancing the goal 
of protecting borrowers from unsustainable mortgage products with the 
goal of maintaining broad access to mortgage credit. 

Figure 43: National Default and Foreclosure Trends, 1979-2013: 

[Refer to PDF for image: multiple line graph] 

Year: 1979; 
Starts: 0.17%; 
Inventory: 0.31%; 
Defaults: 0.47%. 

Year: 1980; [Period of economic recession] 
Starts: 0.14%; 
Inventory: 0.32%; 
Defaults: 0.54%. 

Year: 1981; 
Starts: 0.18%; 
Inventory: 0.44%; 
Defaults: 0.66%. 

Year: 1982; [Period of economic recession] 
Starts: 0.22%; 
Inventory: 0.53%; 
Defaults: 0.72%. 

Year: 1983; 
Starts: 0.22%; 
Inventory: 0.71%; 
Defaults: 0.86%. 

Year: 1984; 
Starts: 0.2%; 
Inventory: 0.68%; 
Defaults: 0.89%. 

Year: 1985; 
Starts: 0.25%; 
Inventory: 0.79%; 
Defaults: 0.98%. 

Year: 1986; 
Starts: 0.25%; 
Inventory: 0.87%; 
Defaults: 1.01%. 

Year: 1987; 
Starts: 0.28%; 
Inventory: 1.09%; 
Defaults: 1.04%. 

Year: 1988; 
Starts: 0.29%; 
Inventory: 1.07%; 
Defaults: 0.89%. 

Year: 1989; 
Starts: 0.31%; 
Inventory: 0.95%; 
Defaults: 0.83%. 

Year: 1990; 
Starts: 0.33%; 
Inventory: 0.97%; 
Defaults: 0.7%. 

Year: 1991; [Period of economic recession] 
Starts: 0.33%; 
Inventory: 0.97%; 
Defaults: 0.78%. 

Year: 1992; 
Starts: 0.34%; 
Inventory: 1.04%; 
Defaults: 0.8%. 

Year: 1993; 
Starts: 0.32%; 
Inventory: 1%; 
Defaults: 0.77%. 

Year: 1994; 
Starts: 0.31%; 
Inventory: 0.94%; 
Defaults: 0.75%. 

Year: 1995; 
Starts: 0.32%; 
Inventory: 0.86%; 
Defaults: 0.7%. 

Year: 1996; 
Starts: 0.37%; 
Inventory: 0.95%; 
Defaults: 0.68%. 

Year: 1997; 
Starts: 0.36%; 
Inventory: 1.08%; 
Defaults: 0.55%. 

Year: 1998; 
Starts: 0.37%; 
Inventory: 1.17%; 
Defaults: 0.6%. 

Year: 1999; 
Starts: 0.36%; 
Inventory: 1.22%; 
Defaults: 0.6%. 

Year: 2000; 
Starts: 0.36%; 
Inventory: 1.17%; 
Defaults: 0.55%. 

Year: 2001; [Period of economic recession] 
Starts: 0.4%; 
Inventory: 1.24%; 
Defaults: 0.66%. 

Year: 2002; [Period of economic recession] 
Starts: 0.45%; 
Inventory: 1.51%; 
Defaults: 0.8%. 

Year: 2003; 
Starts: 0.41%; 
Inventory: 1.43%; 
Defaults: 0.83%. 

Year: 2004; 
Starts: 0.46%; 
Inventory: 1.29%; 
Defaults: 0.85%. 

Year: 2005; 
Starts: 0.42%; 
Inventory: 1.08%; 
Defaults: 0.81%. 

Year: 2006; 
Starts: 0.42%; 
Inventory: 0.98%; 
Defaults: 0.95%. 

Year: 2007; 
Starts: 0.59%; 
Inventory: 1.28%; 
Defaults: 0.95%. 

Year: 2008; [Period of economic recession] 
Starts: 1.01%; 
Inventory: 2.47%; 
Defaults: 1.56%. 

Year: 2009; [Period of economic recession] 
Starts: 1.37%; 
Inventory: 3.85%; 
Defaults: 3.39%. 

Year: 2010; 
Starts: 1.23%; 
Inventory: 4.63%; 
Defaults: 4.91%. 

Year: 2011; 
Starts: 1.08%; 
Inventory: 4.52%; 
Defaults: 3.58%. 

Year: 2012; 
Starts: 0.96%; 
Inventory: 4.39%; 
Defaults: 3.05%. 

Year: 2013; 
Starts: 0.7%; 
Inventory: 3.55%; 
Defaults: 2.84%. 

Source: GAO analysis of Mortgage Bankers Association data, National 
Bureau of Economic Research. 

[End of figure 43] 

Rental housing: The availability of decent, safe, and affordable 
rental housing can also affect community stability. HUD, USDA, and 
Treasury spend around $40 billion annually in outlays and tax 
expenditures on numerous programs to help rental households with lower 
incomes reside in decent, safe, and affordable housing. Over the 
years, HUD has made progress in addressing long-standing management 
weaknesses. However, in recent years, legislative and administrative 
actions have changed HUD's biggest programs-—Section 8 and public 
housing—-in ways that may call for different oversight approaches. 
Also, the stock of housing built with the assistance of federal funds 
and tax incentives is aging, and HUD and other agencies will need to 
consider strategies for ensuring that these properties remain in good 
physical and financial condition. Furthermore, some owners may decide 
to stop participating in these programs, raising concerns about the 
availability of housing that is affordable to low-income and special-
needs households, including the elderly and veterans. 

Over the coming years, the federal government faces numerous 
challenges. For example, renter households experiencing “worst case 
housing needs”—that is, unassisted households with extremely low 
incomes who either pay more than half of their income in rent, live in 
substandard housing, or both—have been on the rise. Specifically, 
households with worst case housing needs numbered nearly 8.5 million 
in 2011 (see figure 44)—the highest level in a decade. Much of that 
increase resulted from new households entering the rental market and 
declining household incomes following the economic downturn that 
started in 2007. 

Figure 44: Trends in the Number of Renter Households with Worst Case 
Housing Needs, 2001-2011: 

[Refer to PDF for image: line graph] 

Year: 2001; 
Renter households: 5.0 million. 

Year: 2003; 
Renter households: 5.2 million. 

Year: 2005; 
Renter households: 6.0 million. 

Year: 2007; 
Renter households: 5.9 million. 

Year: 2009; 
Renter households: 7.1 million. 

Year: 2011; 
Renter households: 8.5 million. 

Source: HUD. 

[End of figure 44] 

Homelessness: The nation's communities continue to be affected by the 
complex and multifaceted problem of homelessness. According to HUD's 
most recent national estimates, roughly 1.5 million people stayed in 
homeless shelters or used transitional housing in 2011 (see figure 
45). From 2007 through 2011, the number of homeless individuals in 
shelters decreased by 11.7 percent, but the number of homeless persons 
in families in shelters increased 13.5 percent. Increasing attention 
has been paid to the issue of homelessness, in part because the 
economic downturn placed more individuals and households at risk for 
homelessness. According to HUD, increases in family homelessness 
occurred in the wake of the recession. Families in economic distress 
are at particular risk of becoming homeless because they can be hard 
to accommodate given their size and the financial costs incurred by 
the hosts. 

Three federal agencies—-HUD, HHS, and VA-—are responsible for the 
majority of federal homelessness programs. HUD is the primary agency 
that provides housing, while HHS and VA operate programs providing 
supportive services such as healthcare. These agencies and others 
obligated roughly $2.8 billion in fiscal year 2010 for homelessness 
programs. Federal agencies must provide enough oversight to ensure 
that programs meet their goals and comply with federal requirements, 
and at the same time consider governmental resource constraints and 
operate programs efficiently and effectively. 

Figure 45: Nationwide Annual Sheltered Homeless Population During 2011: 

[Refer to PDF for image: pie-chart] 

Individuals: 984,469; 65%; 
People in families: 537,414; 35%; 
Total: 1,521,883. 

Source: HUD's Annual Homeless Assessment Report to Congress, November 
2012. 

[End of figure 45] 

Economic and Community Development: The federal government administers 
numerous programs that support economic development. For example, the 
Departments of Agriculture (USDA), Commerce (Commerce), and Housing 
and Urban Development (HUD) and the U.S. Small Business Administration 
(SBA) administer 52 economic development programs that provide 
assistance to entrepreneurs. According to agency officials, these 
programs, which typically fund other activities in addition to 
supporting entrepreneurs, spent an estimated $2 billion on economic 
development efforts in fiscal year 2011. Also, HUD's Community 
Development Block Grant program is the federal government's principal 
community development program. In fiscal year 2012, Congress provided 
approximately $3 billion for the program to fund housing, economic 
development, neighborhood revitalization, and other community 
development activities. 

The efficiency and effectiveness of economic and community development 
programs are, however, unclear. Overlap and fragmentation exist among 
the 52 economic development programs that support entrepreneurs, and 
data on outcomes that are necessary to assess program effectiveness 
are limited. Moreover, the issue of how best to deliver aid is 
complicated by the need to balance the goals of the federal government 
and those of state and local governments and nonprofit organizations, 
which administer a large share of federal dollars for economic and 
community development. 

Small business: Small businesses, which employ more than half the 
nation's workforce, are crucial to economic growth in many 
communities. Small businesses are also vulnerable during economic 
downturns, particularly when these businesses may face challenges in 
accessing credit. The SBA-—the nation's single largest financial 
backer of small businesses-—guarantees over $60 billion of business 
loans and provides management and technical assistance to around 1 
million small business owners annually. SBA also has oversight 
responsibility for federal contracting goals for small and minority-
owned businesses. In addition, many of SBA's programs are intended to 
assist small businesses that are underserved. SBA has faced challenges 
in overseeing its numerous programs to fulfill its mission to aid, 
counsel, assist, and protect the interests of small businesses, 
including ensuring that only eligible businesses obtain assistance 
from programs that target specific populations. 

GAO's work can help inform the Congress in reforming programs and 
policies that support homeownership, as well as strengthening the 
management and oversight of the programs that promote affordable 
rental housing. It can also help Congress in its efforts to support 
economic and community development, and small and minority-owned 
businesses. GAO has established the following performance goals and 
key efforts: 

Performance Goal 1.6.1: 
Assess how the federal government can balance supporting homeownership 
and managing financial risk while reforming the federal role in 
housing finance: 

Key Efforts: 

* Evaluate the effectiveness of federal efforts to support and sustain 
homeownership. 

* Evaluate options for enhancing the long-term financial viability of 
federal housing programs, including those administered by FHA. 

* Assess actions to reduce overlap, duplication, and fragmentation in 
federal efforts that support homeownership. 

* Assess actions to reduce the activities of Fannie Mae and Freddie 
Mac and the implications of such actions for the role of private 
sector mortgage providers. 

* Evaluate the implications of Dodd-Frank Act mortgage reforms for 
current and prospective homeowners. 

Performance Goal 1.6.2: 
Track the progress of federal programs that support affordable rental 
housing, including how they manage the condition of assisted 
properties and improve the well-being of special populations: 

Key Efforts: 

* Monitor federal agencies' efforts to ensure that federally assisted 
rental housing is effectively managed and in good physical and 
financial condition and to encourage property owners to continue to 
participate in federal programs. 

* Evaluate federal performance in overseeing housing agencies, 
property owners, and contractors responsible for administering federal 
housing assistance, as well as monitoring initiatives to reform and 
modernize the provision of rental assistance. 

* Evaluate the effectiveness of federal housing programs in meeting 
the housing and supportive service needs of special populations, such 
as the elderly, persons with disabilities, and veterans. 

* Assess federal efforts to reduce overlap, duplication, and 
fragmentation in federal housing programs that support affordable 
rental housing. 

Performance Goal 1.6.3: 
Assess federal homeless assistance efforts and their effects on both 
homeless individuals and families: 

Key Efforts: 

* Evaluate the effectiveness of federal programs in meeting the 
housing and supportive service needs of the homeless. 

* Evaluate the extent of program coordination among the various 
federal agencies that provide homeless assistance. 

* Assess efforts to ensure homeless programs meet goals and comply 
with requirements. 

Performance Goal 1.6.4: 
Monitor federal community and economic development assistance and its 
effect on communities: 

Key Efforts: 

* Evaluate the extent of federal program coordination in targeted 
communities. 

* Assess the effect of development initiatives on communities. 

* Evaluate federal agencies' efforts to ensure that development 
programs effectively serve their intended purposes, meet their goals, 
and comply with requirements. 

Performance Goal 1.6.5: 
Assess the effectiveness of federal initiatives to assist small and 
minority-owned businesses: 

Key Efforts: 

* Assess the effect of federal contracting policies and practices on 
small businesses and determine what oversight SBA provides to ensure 
that the programs serve eligible small businesses as intended. 

* Assess SBA's actions to improve its internal control and fraud 
prevention measures, use of information technology, and management of 
human capital. 

* Monitor SBA's initiatives to make its programs more efficient, 
effective, and helpful to small businesses, especially to those 
businesses least able to access credit markets. 

* Assess the effectiveness of SBA's programs to achieve the agency's 
mission of meeting the needs of small businesses. 

[End of Strategic Objective 1.6] 

Strategic Objective 1.7: 
A Stable Financial System and Sufficient Consumer Protection: 

Figure: Objective 1.7 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess the ability of the financial services industry and its 
regulators to maintain a stable, competitive, and efficient financial 
system in the face of significant market and regulatory shifts; 
* Assess federal oversight of consumer protection laws and regulations 
for financial services and products and manufactured items. 

[End of figure] 

GAO designated reform of the financial regulatory system as a high-
risk area in early 2009, in response to the deficiencies in financial 
regulation that the 2007-2009 financial crisis revealed. Major changes 
to regulatory policy and practice made in response to the crisis have 
been ongoing. In the United States, the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Dodd-Frank Act) provides a broad range of 
reforms to strengthen oversight of financial services firms, minimize 
future bailouts of financial firms, and protect consumers. 
Internationally, the Basel III accord introduced new measures to 
strengthen the oversight and risk management of the banking industry. 
A variety of challenges have affected regulators' progress in fully 
implementing the Dodd-Frank Act's reforms, including the number and 
complexity of the issues and the need for coordination domestically 
and internationally. 

Regulatory system: The Dodd-Frank Act eliminated the Office of Thrift 
Supervision and consolidated certain consumer protection 
responsibilities in the Bureau of Consumer Financial Protection, 
commonly known as the Consumer Financial Protection Bureau (CFPB). To 
address the lack of a single regulator tasked with monitoring and 
assessing the risks that activities of large and globally 
interconnected financial conglomerates posed across the financial 
system, the act also created the Financial Stability Oversight 
Council. The primary purposes of the council are to identify risks to 
the financial stability of the United States, promote market 
discipline, and respond to emerging threats to system stability. In 
addition, the act requires or authorizes various federal agencies to 
issue hundreds of regulations to implement its reforms. To adapt to 
this new regulatory framework (see figure 46), financial regulators 
must make significant changes to how they implement their regulatory 
and supervisory roles. They will need to finish their required 
rulemaking and then demonstrate that they have the ability and the 
will to use these new tools to enhance financial system stability. 

Figure 46: Federal Financial Regulatory Framework: 

[Refer to PDF for image: concentric circles] 

Center circle: 
Federal financial regulators and organizations; 

Surrounding center circle: 
Prudential bank regulators; 
Securities and derivatives regulators; 
Coordinating forums; 
Other regulators of financial activities. 

Outer circle: 
Office of the Comptroller of the Currency; 
Federal Deposit Insurance Corporation; 
National Credit Union Administration; 
Board of Governors of the Federal Reserve System; 
Securities and Exchange Commission; 
Commodities Futures Trading Commission; 
Federal Housing Finance Agency; 
Consumer Financial Protection Bureau; 
Financial Stability Oversight Council; 
Federal Financial Institutions Examinations Council; 
President's Working Group on Capital Markets. 

Source: The Congressional Research Service (CRS). 

[End of figure 46] 

Financial products and services: Dramatic transformations in the 
financial services sector, including consolidation and securitization, 
have generated both benefits and costs for consumers. While consumers 
enjoy more choices in financial products and services and in some 
cases lower costs, they also face more complex products with risks 
that are difficult to understand. Numerous studies published in recent 
years have shown that most adults have not mastered basic economic 
concepts, such as the risks associated with investment choices. Poor 
financial literacy can reduce consumers' economic well-being and 
security. Moreover, GAO and federal regulators previously have noted 
the lack of adequate disclosure requirements for financial services 
and products. For example, available disclosures for subprime and 
other risky mortgage products did not provide borrowers with easily 
comprehensible information on the risks associated with such 
mortgages. Sustained regulatory attention to and requirements for 
adequate disclosures on financial services and products will be 
important for protecting consumers, whether individuals or retail 
investors. 

Consumer products: Increasingly, consumer products (such as household 
appliances and electronics) have components that were manufactured in 
many countries. The changes in manufacturing practices and the growing 
volume of consumer products imported to the United States have 
strained the resources of the Consumer Product Safety Commission 
(CPSC) and challenged it to find new ways to ensure the safety of 
these products. In 2011, consumer products worth nearly $3.8 billion 
entered U.S. ports daily. About four of five consumer product recalls 
involved imported products, making the safety of such imports a 
critical focus of the agency. Furthermore, CPSC has faced challenges 
in targeting unsafe products coming into the ports. To address this 
issue, CPSC began piloting a new approach to targeting and identifying 
unsafe consumer products at 15 major U.S. ports (of the 327 U.S. 
ports). The piloted approach evaluates products entering the United 
States based on a predetermined set of rules (i.e., to target specific 
hazardous products or importers) intended to identify imports with the 
highest risks to consumers. CPSC has also faced significant public 
scrutiny about its ability to properly assess risks related to 
consumer products and take appropriate and timely action. CPSC's 
strategic goals for properly identifying and addressing risks 
emphasize working with other federal and state agencies and 
international counterparts. This cooperation is important to the 
Commission's effectiveness due to the large volume of imported 
products that enter the United States each year. 

GAO's work in the next 3-5 years can help Congress monitor the 
functioning of the new financial regulatory structure to help ensure 
that the financial system is safe and sound and that regulators 
provide effective consumer protections in financial and manufactured 
products. To support efforts by Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 1.7.1: 
Assess the ability of the financial services industry and its 
regulators to maintain a stable, competitive, and efficient financial 
system in the face of significant market and regulatory shifts: 

Key Efforts: 

* Evaluate whether changes in the overall regulatory structure and the 
role of existing and any newly-created financial regulatory agencies 
address the gaps in oversight, changes in market practices or 
structures, and financial institution ownership and organizational 
structures. 

* Assess how regulators are overseeing (1) financial firms that are 
increasingly global and manage multiple business lines and (2) types 
of risk across regulated and unregulated entities to promote financial 
stability nationally and globally. 

* Assess how well regulators respond to new products, market 
participants, and emerging threats, and their effects on safety, 
soundness, and competition in the financial services industry. 

* Assess the effectiveness of regulatory programs and policies in 
deterring the use of financial institutions and products to commit 
financial crimes. 

* Assess how well new and existing regulators manage their operations 
and make effective use of technology and human capital. 

Performance Goal 1.7.2: 
Assess federal oversight of consumer protection laws and regulations 
for financial services and products and manufactured items: 

Key Efforts: 

* Determine whether financial regulators and institutions promote the 
financial literacy of consumers and investors, including providing 
information on how to manage their finances, with an emphasis on 
preparing to meet their retirement and other goals, using credit 
responsibly, and assessing and understanding risks. 

* Assess whether current regulatory efforts, policies, and 
requirements are adequate to ensure that investors and consumers are 
sufficiently informed of the costs and risks of traditional and 
innovative financial products and services. 

* Assess financial regulators' oversight and enforcement of consumer 
protection laws, such as the fair lending laws and securities investor 
disclosure requirements, and their efforts to detect and punish 
violators and deter other illegal activity. 

* Assess the development and implementation of potential new 
regulatory structures and organizations to monitor and enforce 
compliance with consumer protection laws. 

* Assess consumer protections related to manufactured products and 
CPSC's efforts to better ensure the safety of key imported and 
domestically-produced manufactured items. 

[End of Strategic Objective 1.7] 

Strategic Objective 1.8: 
Responsible Stewardship of Natural Resources and the Environment: 

Figure: Objective 1.8 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess the nation's ability to ensure safe, reliable, 
environmentally sound, and affordable energy for current and future 
generations; 
* Assess federal strategies for sustainably managing our nation's land 
and water resources and programs for Native communities; 
* Assess environmental protection strategies and programs; 
* Assess efforts to reduce threats posed by nuclear wastes generated by 
federal and commercial activities and to clean up legacy hazardous 
waste from federal facilities; 
* Assess federal programs' ability to ensure a plentiful and safe food 
supply, assist farmers in managing their risks, and minimize 
agricultural environmental damage. 

[End of figure] 

Responsible stewardship of natural resources and the environment 
encompasses some of the nation's most challenging issues. Balancing 
the demands of often-competing objectives—-economic growth for today 
versus protection of natural resources and the environment for the 
future—-will entail difficult decisions affecting fundamental human 
needs, such as air, food, and water. Moreover, many of these decisions 
are linked; for example, our choices about how we produce food and use 
energy affect our climate and alter the land and water Americans 
depend on for survival. As a result of our choices, many of the 
nation's natural resources and the systems associated with their use 
are under widespread and increasing stress. The increasing 
globalization of natural resource issues adds another layer of 
complexity, and addressing transboundary issues such as climate change 
will be increasingly important. GAO's work on natural resources in the 
coming 3 to 5 years will include a focus on these key concerns. 

Energy: Energy is critical to our economy but resuming and sustaining 
economic growth raises difficult questions when some of the engines of 
that growth—-factories, automobiles, fertilizers, and electricity-
generating plants-—can adversely affect air and water quality, pose 
safety concerns, and potentially change the climate. For decades, 
businesses and consumers have been able to depend on plentiful, 
inexpensive energy to maintain the nation's global competitiveness and 
way of life. Although the United States accounts for about 4.5 percent 
of the world's population, it consumes about 19 percent of the primary 
energy produced worldwide. Energy demand has nearly tripled in the 
past 60 years. Energy security, volatile prices, and the impacts of 
energy use on climate and the environment have driven interest in 
reducing demand, promoting energy-efficiency, ensuring a safe supply 
of energy, and shifting supplies toward renewable energy sources and 
unconventional domestic sources of oil and gas, such as shale, tight 
sandstone, and coalbed methane (see figure 47). Such a shift could 
have far-reaching effects on land and water use, trade and 
transportation patterns, national security, and energy prices. At the 
same time, the nation's extensive energy infrastructure, which 
includes hundreds of thousands of miles of transmission lines and 
pipelines, is showing signs of strain and may require new investment 
to update and secure. 

Figure 47: Locations of Unconventional Oil and Gas Reservoirs in the 
United States: 

[Refer to PDF for image: 3 illustrated U.S. maps] 

Maps depict locations of: 
Shale basins; 
Tight sandstone basins; 
Coalbed methane basins. 

Source: U.S. Energy Information Administration. 

Note: The map for tight sandstone basins is based off Energy 
Information Administration data for “tight gas,” which includes both 
tight sandstone and tight carbonate formations. 

[End of figure 47] 

Land and water resources: Management of the nation's land and water 
resources is characterized by the struggle to accommodate competing—-
sometimes incompatible-—demands and the need to balance their use in 
the short term with their preservation over the long term. The 
resources owned and managed by the federal government are vast, 
including over 640 million acres of federal land, or about one 
quarter of the nation's land surface; rights to minerals underlying 
more than 700 million acres of both federal and nonfederal land; 
almost 1.8 billion acres of the Outer Continental Shelf; and fisheries 
as far as 200 miles offshore. 

The debates over oil development on federal lands illustrate the 
challenge of balancing demand for resources today with preservation 
for the future. The nation's land and water resources are also showing 
increasing signs of stress-—more catastrophic wildfires, shrinking 
aquifers, and the destruction of wildlife habitat. At the same time, 
competition for water is growing among various interests, including 
agriculture, communities, and energy providers. Shortages could lead 
to severe economic, environmental, and social consequences. In 
addition, the federal government holds land in trust and administers a 
range of federal programs for Native American tribes and individuals. 

Environment: Protecting the environment and human health has become 
increasingly complex. For example, climate change has been reported to 
pose risks to many environmental and economic systems-—including 
agriculture, infrastructure, ecosystems, and human health-—and 
presents a significant financial risk to the federal government. 
Funding for climate change activities reported by OMB in four 
categories—-technology to reduce emissions, science to better 
understand climate change, international assistance for developing 
countries, and adaptation to respond to actual or expected changes—-
increased from $4.6 billion in 2003 to $8.8 billion in 2010, and is 
organized in a complex, crosscutting system. In February 2013, GAO 
added limiting the federal government's fiscal exposure by better 
managing climate change risks to its High Risk List. 

In addition, although scientific understanding of the effects of toxic 
chemicals has improved, information on the toxicity of many chemicals 
is too limited for the Environmental Protection Agency (EPA) to make 
informed decisions on how best to protect the public. As a result, GAO 
identified EPA's processes for assessing and controlling toxic 
chemicals as a high-risk area in January 2009. Further, according to 
EPA, about 53 percent of the 978,000 miles of rivers and streams that 
have been assessed are too polluted or otherwise degraded to meet 
water quality standards, and the nation faces costly upgrades to aging 
and deteriorating drinking water and wastewater infrastructure. 
Moreover, although nationwide air quality has improved over the past 
few decades, EPA reports that approximately 124 million people live in 
areas that do not meet health-based national air quality standards. 
Significant challenges also remain in cleaning up the country's 
hazardous waste sites—-including more than 1,300 Superfund sites 
nationwide. 

Radioactive and legacy waste: Significant challenges remain in 
managing the country's radioactive waste. Federal efforts to dispose 
of high-level radioactive waste and spent nuclear fuel are in flux, and 
inventories are increasing. The nation's inventory of about 70,000 
metric tons of high-level radioactive waste, mostly generated by the 
nation's nuclear power reactors, is likely to more than double to 
about 153,000 metric tons by 2055. Since there is no long-term 
national storage facility for nuclear waste, the Department of Energy 
(DOE) has been unable to take custody of this waste as required by 
law. As a result, electric utilities have filed a series of lawsuits 
against DOE, which estimates it will pay over $22 billion in damages 
by 2020 and approximately $500 million each year after 2020. 

Moreover, radioactive waste from weapons production still needs to be 
cleaned up at DOE sites in 11 states. DOE estimates needing between 
about $187 billion and $223 billion to complete cleanup activities and 
estimates completing this cleanup sometime between 2060 and 2066. 
While DOE has made improvements recently, environmental cleanup 
contracts and projects managed by DOE's Office of Environmental 
Management remain on GAO's High Risk List. In addition, significant 
challenges remain in carrying out environmental restoration activities 
at sites located on former and active defense installations. More than 
31,600 sites are eligible for cleanup, including the detection and 
disposal of unexploded ordnance, which creates an imminent and 
substantial endangerment to public health or welfare or the 
environment. 

Food and agriculture: Challenges persist in the way the nation 
produces and protects its food supply. Fragmentation in U.S. food 
safety laws—-with 15 agencies administering more than 30 laws—has 
caused inconsistent oversight, ineffective coordination, and 
inefficient use of resources, leading GAO to place the federal 
oversight of food safety on its High Risk List in 2007. Addressing 
this problem is even more pressing because the volume of imported 
foods is increasing; consumers are eating more raw and minimally-
processed foods; and shifting demographics mean that more of the U.S. 
population is, and increasingly will be, susceptible to food-borne 
illnesses. Moreover, diseases that spread between livestock and 
humans, such as influenzas and antibiotic-resistant infections, have 
the potential to seriously compromise people's daily lives (see figure 
48), and given the potential for and the consequences of 
agroterrorism, food security continues to pose serious concerns. 

In addition, while U.S. Department of Agriculture (USDA) programs help 
farmers manage risks of crop production and conserve natural 
resources, the programs' integrity and cost—-about $20 billion 
annually—-are in question. Further, pressures to minimize the 
environmental impact of the more than $400 billion agricultural sector 
are likely to intensify. Finally, USDA also faces major management 
challenges to ensure that its customers and employees are fairly and 
equitably treated. 

Figure 48: Potential Pathways for Spread of Antibiotic-Resistant 
Bacteria from Animals to Humans: 

[Refer to PDF for image: pathways illustration] 

Bacterial population (both resistant and susceptible) in farm animals: 

Antibiotic is given to animal for disease prevention, disease control, 
disease treatment, or growth promotion. 

Antibiotic kills susceptible bacteria; resistant bacteria survive in 
contaminated animals: 
* Resistant bacteria spread to other animals on the farm through 
contact with contaminated animals; 
* Resistant bacteria spread to consumers via contaminated meat 
products; 
* Resistant bacteria spread to farm workers and food processors 
through contact with contaminated animals or meat; 
* Resistant bacteria spread to soil and water from contaminated animal 
waste: 
- Resistant bacteria spread to fish, fruits, and vegetables consumed 
by humans. 

Resistant infection may develop in humans. 

Sources: GAO; Art Explosion (human figures). 

Note: This figure is not intended to represent the full complexity of 
resistance transmission. For example, antibiotic-resistant bacteria 
can also be transferred from humans to animals. 

[End of figure 48] 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 1.8.1: 
Assess the nation's ability to ensure safe, reliable, environmentally 
sound, and affordable energy for current and future generations: 

Key Efforts: 

* Evaluate efforts to ensure the safety, reliability, physical 
security, and affordability of the energy supply and infrastructure. 

* Analyze energy market regulation, competition, and information. 

* Evaluate federal efforts to promote energy-efficiency and 
conservation. 

* Assess energy-related research and development and science. 

* Analyze the impacts of energy production and use on the environment 
and climate. 

* Assess federal energy management practices and efficiencies. 

Performance Goal 1.8.2: 
Assess federal strategies for sustainably managing our nation's land 
and water resources and programs for Native communities: 

Key Efforts: 

* Evaluate federal management and protection of natural resources on 
federal lands and waterways. 

* Evaluate federal management and protection of threatened and 
endangered species. 

* Evaluate federal efforts to manage the sale and use of public 
natural resources. 

* Evaluate federal programs for Native Americans and Alaska Natives. 

* Assess management practices and efficiencies, as well as operational 
and maintenance needs, at federal natural resource agencies. 

Performance Goal 1.8.3: 
Assess environmental protection strategies and programs: 

Key Efforts: 

* Evaluate federal efforts to assess and control toxic substances, a 
GAO-identified high-risk area. 

* Evaluate federal efforts to improve the nation's air quality. 

* Evaluate strategies for cleaning up Superfund and other private-
sector hazardous waste sites and responding to emergency contamination 
releases. 

* Assess actions taken and needed to limit the federal government's 
fiscal exposure by better managing the risks of climate change, a GAO-
identified high-risk area. 

* Evaluate federal efforts and investments to ensure safe drinking 
water and improve the quality of the nation's waters. 

* Assess management practices and efficiencies at EPA. 

Performance Goal 1.8.4: 
Assess efforts to reduce threats posed by nuclear wastes generated by 
federal and commercial activities and to clean up legacy hazardous 
waste from federal facilities: 

Key Efforts: 

* Assess efforts to address the cleanup of legacy and newly-generated 
nuclear wastes from federal activities, including nuclear waste 
technology development. 

* Assess efforts to manage and dispose of federal and commercial 
nuclear waste. 

* Assess efforts to address the cleanup of legacy hazardous waste from 
federal facilities. 

Performance Goal 1.8.5: 
Assess federal programs' ability to ensure a plentiful and safe food 
supply, assist farmers in managing their risks, and minimize 
agricultural environmental damage: 

Key Efforts: 

* Evaluate federal efforts to ensure a safe food supply—a GAO-
identified high-risk area—and guard against agroterrorism and 
infectious disease. 

* Evaluate the federal safety net in helping farmers to manage 
agricultural risks. 

* Evaluate federal efforts to reduce farm program vulnerabilities and 
strengthen program integrity in benefit delivery. 

* Identify the potential environmental impacts of agricultural 
practices. 

* Assess management practices and efficiencies at USDA and other food 
safety agencies. 

[End of Strategic Objective 1.8] 

Strategic Objective 1.9: 
A Viable, Safe, Secure, and Accessible National Physical 
Infrastructure: 

Figure: Objective 1.9 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess federal investments, policies, and programs that support 
transportation infrastructure; 
* Assess federal regulation of transportation safety and efforts to 
fund safety improvements; 
* Evaluate federal policies to improve the mobility of and increased 
access to transportation systems; 
* Assess federal efforts to support and oversee telecommunications in 
the public interest; 
* Assess the U.S. Postal Service's efforts to ensure its viability and 
accomplish its mission;
* Assess federal efforts to manage and secure the government's real 
property portfolio. 

[End of figure] 

The infrastructure of the United States—including transportation, 
telecommunications, the postal system, and federal facilities— helps 
provide a foundation for the nation's economic vitality and quality of 
life. But challenges—such as capacity constraints, deterioration, and 
technological obsolescence—hinder efforts to ensure that this 
infrastructure is viable, efficient, safe, and accessible. In 
addition, resource limitations constrain funding improvements and 
complicate the nation's ability to respond to these challenges. 

Transportation funding: The nation's aviation and surface 
transportation systems are under growing strain, and the cost to 
repair and upgrade them to meet current and future demands, including 
modernizing the air traffic control system, is estimated to cost 
hundreds of billions of dollars. Calls for increased investment come 
at a time when traditional funding sources are under increasing 
stress. Revenues to both the Highway Trust Fund and the Airport and 
Airway Trust Fund have not kept pace with spending. Motor fuel and 
other taxes that support the Highway Trust Fund are expected to 
continue to erode in the years ahead as vehicles become more fuel 
efficient and use alternative fuels, while stagnant airline passenger 
demand has undercut revenues flowing into the Airport and Airway Trust 
fund. 

To avoid a shortfall in the Highway Trust Fund, Congress has 
transferred more than $50 billion in general revenues to the Highway 
Trust Fund since 2008, and in 2012, the Congressional Budget Office 
estimated that $110 billion in additional revenues would be required 
to maintain current spending levels plus inflation through 2022. For 
this and other reasons, funding surface transportation remains on 
GAO's High Risk List. Congress also boosted general revenues for 
Federal Aviation Administration (FAA) activities when Airport and 
Airway Fund revenues declined. 

Transportation accidents: The nation's transportation system is the 
backbone of the economy and affects Americans' daily lives. Yet, 
accidents continue to cause death and injury, despite considerable 
federal investment and oversight of transportation safety. Most 
accidents occur on highways, where more than 32,000 people were killed 
and another 2.2 million were injured in 2011. Some groups are 
particularly vulnerable. Traffic crashes are the leading cause of 
death for 15– to 20-year-olds and motorcyclist fatalities have 
steadily increased in recent years. The federal government provides 
traffic safety grants to states and continues to seek ways to improve 
transportation safety. Accident causes include impaired, distracted, 
or fatigued driving, and accurate data are important to identify 
causes, consequences, and appropriate mitigation measures. 

In addition, hundreds of aviation fatalities occur annually-—the vast 
majority in general aviation. Although the U.S. airspace system is 
arguably among the safest in the world, oversight and data challenges 
remain. For example, FAA does not have comprehensive risk-based data 
in key areas such as airport ramp incidents and general aviation 
flight hours. Sustained attention to data collection and analysis, 
including data-driven, risk-based oversight approaches, is necessary 
to ensure that aviation safety risks are more comprehensively and 
accurately assessed and managed. As part of the FAA's air traffic 
control modernization, new policies and processes to maintain safety 
are being developed for the aviation community. 

Congestion: Transportation congestion continues to worsen, reducing 
efficiency and imposing environmental costs. Additionally, freight 
movements continue to expand with the economy, particularly 
containerized freight moving through ports and onto already-congested 
highway and rail networks. The economic and environmental implications 
of congestion are significant, ranging from wasted fuel and lost time 
to increased costs for businesses as the transportation system grows 
more unreliable. 

To address congestion, policymakers will be challenged to identify 
ways to fund new infrastructure investments and encourage more 
efficient use of existing infrastructure while also addressing 
environmental and energy concerns. Federal policy requires that 
improvements to our transportation infrastructure be made in an 
environmentally-responsible manner; however, this can lengthen 
planning and project lead times and perhaps conflict with the need to 
respond to congestion in a timely way. Improving aviation congestion 
through modernization promises significant benefits, such as reduced 
emissions and mitigated delays, but is also a serious challenge as 
transforming the nation's air traffic control system could cost as 
much as $37 billion in combined government and civilian investment 
through 2030, according to the FAA. 

Telecommunications industry: In 2012, the federal government dedicated 
nearly $9 billion to support the deployment and affordable access to 
telecommunications services, including broadband, through the Federal 
Communications Commission (FCC) and Rural Utilities Service. According 
to FCC, broadband is a foundation for economic growth, job creation, 
global competitiveness, and a better way of life. Yet, GAO's work 
identified management challenges in broadband's federal support 
programs, including a lack of performance goals. 

In addition, private industry and government increasingly rely on 
wireless devices and services to meet consumer demand and fulfill 
critical mission needs, such as national defense (see figure 49). This 
development has led to a significant increase in the demand for radio 
frequency spectrum—the natural resource used to provide wireless 
communications services. Balancing competing industry and government 
demands for a limited amount of spectrum is a challenging and complex 
task. GAO's work can identify causes and consequences of these 
challenges and provide policymakers with recommendations as they 
develop and implement policies supporting telecommunications services 
in the public interest. 

Figure 49: Examples of Private Industry and Government Uses of 
Spectrum: 

[Refer to PDF for image: illustration] 

Depicted: 
Space operations and research; 
Forest Service communications; 
Aeronautical radio navigation; 
Unmanned aerial systems; 
Precision guided munitions; 
Broadcast television and radio; 
Maritime mobile satellite and radio navigation; 
Public safety communications; 
Cellular telephone; 
Wi-Fi; 
Meteorological satellites and aids. 

Source: GAO. 

[End of figure 49] 

U.S. Postal Service (USPS): USPS does not have sufficient revenues to 
cover its expenses and financial obligations. It has also reached its 
$15 billion borrowing limit, thus risking a lack of liquidity. USPS 
continues to face significant decreases in mail volume and revenue as 
online communication and bill payment expand. Mail volume dropped by 
about 52 billion pieces (about 25 percent) and revenue declined by 
about $10 billion from fiscal years 2007 through 2012. USPS projects 
further volume declines for First-Class Mail—its most profitable mail— 
and flat volumes for Standard Mail—its largest volume mail—by fiscal 
year 2020 (see figure 50). Even though USPS's package business has 
been increasing, the growth is not expected to fully offset the 
declines in First-Class Mail revenue. 

When adding USPS's financial condition to the High Risk List in July 
2009, GAO reported that USPS urgently needed to restructure to address 
its current and long-term financial viability. Specifically, USPS 
needs to continue taking action to reduce costs and increase revenues 
so that it can eliminate its net losses, repay its debt, continue 
funding its retirement obligations, and generate capital for 
investments. Also, Congress needs to approve a comprehensive package 
of actions to address constraints that limit USPS's ability to reduce 
costs and improve its financial viability. 

Figure 50: Actual and Projected First-Class Mail and Standard Mail 
Volume, Fiscal Years 2000 through 2020: 

[Refer to PDF for image: multiple line graph] 

Mail volume in billions: 

Fiscal year: 2000; 
First-Class Mail: 103.5; 
Standard Mail: 90.1. 

Fiscal year: 2001; 
First-Class Mail: 103.7; 
Standard Mail: 89.9. 

Fiscal year: 2002; 
First-Class Mail: 102.4; 
Standard Mail: 87.2. 

Fiscal year: 2003; 
First-Class Mail: 99.1; 
Standard Mail: 90.5. 

Fiscal year: 2004; 
First-Class Mail: 97.9; 
Standard Mail: 95.6. 

Fiscal year: 2005; 
First-Class Mail: 98.1; 
Standard Mail: 100.9. 

Fiscal year: 2006; 
First-Class Mail: 97.6; 
Standard Mail: 102.5. 

Fiscal year: 2007; 
First-Class Mail: 95.9; 
Standard Mail: 103.5. 

Fiscal year: 2008; 
First-Class Mail: 91.3; 
Standard Mail: 99.1. 

Fiscal year: 2009; 
First-Class Mail: 83.3; 
Standard Mail: 82.4. 

Fiscal year: 2010; 
First-Class Mail: 78.2; 
Standard Mail: 82.5. 

Fiscal year: 2011; 
First-Class Mail: 73.1; 
Standard Mail: 84.7. 

Fiscal year: 2012; 
First-Class Mail: 69.3; 
Standard Mail: 79.8. 

Fiscal year: 2013; 
First-Class Mail: 64.8; 
Standard Mail: 77. 

Fiscal year: 2014; 
First-Class Mail: 62.4; 
Standard Mail: 78. 

Fiscal year: 2015; 
First-Class Mail: 59.5; 
Standard Mail: 77.1. 

Fiscal year: 2016; 
First-Class Mail: 56.9; 
Standard Mail: 77.6. 

Fiscal year: 2017; 
First-Class Mail: 54.1; 
Standard Mail: 75.5. 

Fiscal year: 2018; 
First-Class Mail: 51.3; 
Standard Mail: 75.2. 

Fiscal year: 2019; 
First-Class Mail: 49; 
Standard Mail: 73.5. 

Fiscal year: 2020; 
First-Class Mail: 46.8; 
Standard Mail: 74.1. 

Source: USPS. 

[End of figure 50] 

Federal real property: The federal government's real property 
portfolio is vast and diverse, and includes hundreds of thousands of 
buildings that are owned and leased by federal agencies. The 
government has faced long-standing challenges managing real property, 
which is a reason this area is on the GAO High Risk List. High-level 
attention to improving real property management has resulted in some 
progress. However, long-standing problems and related challenges 
persist in the following areas: 

* excess and underutilized property, 

* overreliance on leasing where ownership would be more cost-effective, 

* repair and restoration backlogs and deteriorating facilities, 

* unreliable real property data, and, 

* improvements for protecting and securing federal facilities. 

GAO has called for addressing these problems through reassessing 
options; developing well-reasoned strategies; and, in some cases, 
changing the law. 

Regarding federal facility protection, GAO's work continues to show 
that protecting facilities and occupants from terrorist attacks, acts 
of violence, and an increasing number of cyber attacks is an ongoing 
challenge for federal agencies. Conducting effective risk assessments 
and effective oversight of contract guards are necessary components of 
an overall facility protection strategy. 

To support efforts by the Congress and the federal government to 
address infrastructure issues in the areas of aviation and surface 
transportation, telecommunications, postal service, and federal 
facilities, GAO has established the following performance goals and 
key efforts: 

Performance Goal 1.9.1: 
Assess federal investments, policies, and programs that support 
transportation infrastructure: 

Key Efforts: 

* Review the effectiveness of federal investments in aviation and 
surface transportation to determine effectiveness, enhance 
performance, and increase accountability for results. 

* Assess the sustainability of alternative methods for financing 
federal transportation investments 

Performance Goal 1.9.2: 
Assess federal regulation of transportation safety and efforts to fund 
safety improvements: 

Key Efforts: 

* Assess federal oversight of aviation safety. 

* Assess federal oversight of safety efforts and outcomes in highway, 
rail, pipeline, and other surface modes. 

* Review the use of federal grants and other strategies to improve 
safety outcomes. 

Performance Goal 1.9.3: 
Evaluate federal policies to improve the mobility of and increased 
access to transportation systems: 

Key Efforts: 

* Assess efforts to make transportation systems available to the U.S. 
population, including older Americans and those living in rural areas. 

* Assess federal programs for improving the efficiency of freight and 
passenger movement and efforts to reduce congestion in and across 
modes. 

* Assess efforts to mitigate environmental effects of transportation 
systems and balance environmental protection with improved mobility. 

Performance Goal 1.9.4: 
Assess federal efforts to support and oversee telecommunications in 
the public interest: 

Key Efforts: 

* Assess federal efforts to promote affordable access to 
telecommunications services. 

* Assess federal efforts to promote efficient and effective spectrum 
management. 

* Evaluate federal efforts to oversee telecommunications and related 
services. 

Performance Goal 1.9.5: 
Assess the U.S. Postal Service's efforts to ensure its viability and 
accomplish its mission: 

Key Efforts: 

* Assess USPS's business model and plans for restructuring to address 
its financial condition and outlook. 

* Evaluate USPS efforts to improve operational efficiency. 

* Monitor and evaluate the quality and availability of postal services. 

* Evaluate the effectiveness of USPS's pricing strategy and regulation 
of pricing as demand for postal services declines. 

Performance Goal 1.9.6: 
Assess federal efforts to manage and secure the government's real 
property portfolio: 

Key Efforts: 

* Assess the federal government's efforts to strategically and cost-
effectively acquire, manage, and dispose of real property assets. 

* Review federal efforts to protect and secure federal facilities. 

[End of Strategic Objective 1.9] 

[End of Goal 1] 

Goal 2: 

Help the Congress Respond to Changing Security Threats and the 
Challenges of Global Interdependence: 

GAO's second strategic goal is to assist the Congress and executive 
branch agencies in planning for and responding to changing security 
threats and the challenges of global interdependence during a period 
of constrained budgetary resources. Over the next 5 years, threats and 
challenges to national and homeland security are expected to be 
pronounced. The complex and rapidly evolving security environment 
facing the United States includes cyber attacks, terrorist activities, 
and instability in key regions of the world. In addition, the nation's 
communities and infrastructure face threats posed by natural disasters 
and the associated preparation and recovery costs. 

The nation's continuing fiscal imbalances-—ever-increasing trade 
deficits, the dependence on foreign capital inflows to finance U.S. 
spending, and the imbalance between government revenues and spending—-
will affect the entire federal government as difficult decisions are 
made about the nation's security priorities. The nation's security 
agencies-—most prominently, the Departments of Defense (DOD), Homeland 
Security (DHS), and State—-will need to strike an affordable balance 
between spending on current missions and investing in new 
capabilities. These agencies also will need to enhance basic 
management capabilities to meet these threats and challenges. Since 
many of the interrelated conventional and emerging threats facing the 
nation go beyond the authority and scope of any one agency, federal 
agencies also need to enhance their abilities to collaborate, not only 
with each other but also with foreign, state, and local governments 
and nongovernmental partners. 

To provide timely, quality service to the Congress and agencies within 
the federal government to respond to changing security threats and the 
challenges of global interdependence, GAO has established three 
strategic objectives: 

2.1: Protect and Secure the Homeland from Threats and Disasters; 

2.2: Effectively and Efficiently Utilize Resources for Military 
Capabilities and Readiness; 

2.3: Advance and Protect U.S. Foreign Policy Interests and 
International Economic Interests; 

Strategic Objective 2.1: 
Protect and Secure the Homeland from Threats and Disasters: 

Figure: Objective 2.1 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess federal homeland security management, resources, and 
stakeholder coordination; 
* Assess efforts to strengthen border security and address immigration 
enforcement and services issues; 
* Assess efforts to strengthen the sharing of terrorism-related 
information; 
* Assess efforts to strengthen security in all transportation modes; 
* Assess U.S. national emergency preparedness and response 
capabilities; 
* Assess the cost, availability, and management of natural catastrophe 
insurance and disaster loan programs; 
* Assess efforts to strengthen the protection and resiliency of the 
nation's critical physical and cyber infrastructure. 

[End of figure] 

The United States will continue to face dynamic and increasingly 
complex threats to homeland security in the coming years. These 
threats include: 

* terrorists' and transnational criminal organizations' use of 
conventional and asymmetric tactics, such as cyber attacks, to exploit 
vulnerabilities in the nation's critical infrastructure, 
transportation systems, and borders; 

* the radicalization of individuals, both domestically and 
internationally, who have the intent to conduct acts of violence; 

* the increasing costs resulting from natural disasters; and 

* terrorists' potential use of radioactive, chemical, or biological 
agents or explosives to carry out an attack inside the country. 

Terrorist and transnational criminal organizations are likely to 
leverage any security vulnerabilities, and failure to address such 
vulnerabilities would have serious consequences for the physical and 
economic security of the country. Concerns are also growing that 
climate change and other factors may increase the frequency and 
magnitude of natural disasters. In 2013, GAO identified as a high-risk 
area the need to better manage climate change risks to limit the 
federal government's fiscal exposure. 

The federal government must enhance its ability to assess, respond to, 
and recover from a wide range of security threats and natural 
disasters. Federal leadership is critical in addressing security needs 
while also maintaining personal freedoms and privacy and permitting 
the legitimate flow of travel and trade. DHS will need to ensure it 
can protect the country against terrorist threats. This necessitates 
addressing vulnerabilities along the U.S. border and in the nation's 
transportation systems and critical infrastructure, as well as 
challenges in the sharing of terrorism information. In addition, 
federal agencies need to be prepared to help communities prepare for, 
respond to, and recover from natural disasters. 

Managing during a period of constrained budgets: Like most of the 
federal government, DHS faces significant challenges in addressing 
evolving threats within the confines of annual appropriations that are 
likely to be increasingly constrained and limited in growth in real 
terms. It will be critical for DHS to ensure that its resources are 
effectively directed toward the nation's most pressing homeland 
security challenges. In particular, DHS must define an acceptable and 
achievable level of risk to prioritize among its missions and make 
risk-based decisions about investments and resources. DHS also will 
need to further strengthen and integrate its management functions of 
acquisition, financial management, human capital, and information 
technology. 

A strong management foundation is an essential element in supporting 
DHS in implementing its missions. Challenges in this area have been at 
the foundation of a number of the department's operational problems. 
GAO designated DHS management functions as high risk in part because 
progress is needed to mitigate the risks that management weaknesses 
pose to mission accomplishment and the efficient and effective use of 
the department's resources. While DHS has made progress in 
implementing corrective actions across its management functions, it 
has not yet demonstrated sustainable, measurable progress in 
addressing key management challenges. 

Securing U.S. borders: Comprehensive immigration reform-—which 
continues to be considered-—could put significant pressure on DHS to 
fairly and effectively process potentially millions of additional 
applications for immigrant benefits while also transforming its 
application processes. Further, DHS will continue to face obstacles in 
reducing the conditions that encourage employment of undocumented 
aliens and identifying and removing from the country aliens who are 
subject to removal. On U.S. borders, the significant flows of people 
and goods will continue to create challenges in maintaining and 
expanding security measures, including those resulting from any 
proposed immigration reforms. Hundreds of millions of people and 
millions of cargo containers legally enter the United States each year 
(see figure 51). 

Figure 51: Commercial Vehicles Lined Up to Enter the United States at 
Otay Mesa near San Diego, California: 

[Refer to PDF for image: photograph] 

Source: DHS's Customs and Border Protection. 

[End of figure 51] 

However, estimates indicate that hundreds of thousands of people have 
tried to enter the country illegally through and between the nation's 
ports of entry. Other foreign nationals have been legally admitted on 
a temporary basis but then overstayed their authorized periods of 
admission. DHS will need to continue to explore cost-effective ways to 
acquire and use technology, infrastructure, and other resources in its 
border security activities, and may need to modify its investment and 
deployment plans to address evolving border security threats. 

Terrorism-related information-sharing: The April 2013 Boston bombings 
highlighted the changing nature of terrorist threats—-including those 
from radicalized individuals working alone in this country. These 
bombings also emphasized the importance of federal, state, local, 
tribal, international, and private sector collaboration and 
intelligence information-sharing. In a time of constrained resources, 
it is equally important that these partners ensure that they have the 
most efficient and effective intelligence infrastructure and are 
coordinating activities and leveraging resources-—while protecting 
privacy and civil liberties. Because of information-sharing gaps, in 
2004, Congress mandated the creation of an information-sharing 
environment across agencies that defines what information needs to be 
shared, with whom, and how. In 2005, GAO designated terrorism-related 
information-sharing as a high-risk area. GAO found that the federal 
government's leadership structure is committed to enhancing 
information-sharing, and agencies have made progress in identifying 
key information and data, using new technologies and implementing 
standards to make sharing easier, and accounting for progress. While 
progress has occurred, federal agencies continue to face challenges in 
estimating and planning for the resources needed to resolve remaining 
risks or fill gaps, while minimizing overlap, and demonstrating their 
efforts are achieving desired results. 

Protecting the nation's transportation system: Intelligence and recent 
events demonstrate that the transportation network continues to be an 
attractive terrorist target. However, securing the U.S. transportation 
network will continue to be difficult because of its vast size and 
open access points, as well as the need to facilitate the free 
movement of people and goods. DHS has made progress in strengthening 
the multiple layers of security at commercial aviation and seaports, 
such as implementing multiple levels of screening for checked bags 
(see figure 52). While DHS has taken some steps to address challenges 
related to developing, testing, and delivering screening technologies 
to selected aviation security programs, GAO's work has found that 
additional challenges remain. 

Figure 52: Diagram of a Checked Baggage Inspection System and Three 
Levels of Screening: 

[Refer to PDF for image: system illustration] 

A. Unscreened checked baggage travels on conveyor belts leading from 
the point of induction (e.g., ticket check-in counter) to Level 1 
screening. 

B. Level 1: Checked baggage automatically screened by EDS machines for 
explosives. Bags that are not automatically cleared are alarmed. 

C. Level 2: Screeners view EDS generated images for alarmed bags and 
try to clear such alarmed bags through OSR tools. 

D. Level 3: Alarmed bags not cleared by screeners through OSR process 
travel to CBRA for manual inspection using Explosives Trace Detection 
(ETD). 

E. Cleared bags travel to baggage makeup and are then loaded onto 
airplanes. 

Source: DHS's Transportation Security Administration. 

[End of figure 52] 

DHS, however, must continue to adapt security measures to counter 
evolving threats, balance resources across missions, develop and 
deploy new security technologies, and increase its focus on securing 
non-aviation modes of transportation, particularly surface modes of 
transportation. Responsibility for securing all of these 
transportation modes is shared among other federal, state, local, 
international, and private-sector partners, necessitating continual 
DHS coordination with these partners. It is also important that the 
department consider system-wide and multimodal risks, as well as risks 
to intermodal facilities, so terrorists do not move from one mode to 
another they view as less secure. 

Disaster preparedness and response: As the threat of terrorist attacks 
and the severity of natural disasters continue, so will preparedness, 
response, and recovery challenges at the federal, state, and local 
levels. Scientific assessments indicate that climate change is 
expected to result in more volatile weather patterns, with potentially 
more frequent and severe natural disasters, such as hurricanes, 
resulting in increased economic losses and response and recovery 
costs. Other factors, such as the growing population of those over the 
age of 65, evolving biological threats, and aging infrastructure will 
stress disaster preparedness efforts. It will become increasingly 
important for the nation to enhance its ability to assess these 
evolving risks and make appropriate adjustments and investments to 
emergency preparedness and response plans and capabilities. 

Although DHS has developed key national response policies, other 
capabilities need to be developed, including those to identify the 
organizations and resources required to operationalize the response 
and systematically prioritize resources to ensure that federal funds 
are used effectively. The federal government also continues to face 
challenges in developing useful measures to assess preparedness and 
response capabilities. Despite years of effort, DHS's Federal 
Emergency Management Agency (FEMA) has not yet developed objective and 
quantifiable national capability requirements and performance 
measures. As a result, it is unclear what effect federal preparedness 
grants have had on states' capabilities to respond, what capability 
gaps currently exist, and what level of federal resources will be 
needed to close such gaps. 

Disaster recovery: Natural disasters in the United States, such as 
2012's Superstorm Sandy, have also highlighted challenges facing 
federal agencies in ensuring that homeowners and businesses can 
recover from disasters. For example, FEMA's Disaster Relief Fund has 
continually faced financial challenges and required supplemental 
appropriations due to the growing number and costs of major disasters. 
Further, FEMA's National Flood Insurance Program, which GAO designated 
as a high-risk area in 2006, owes the Treasury $24 billion that it 
borrowed to pay for previous losses. In prior work, GAO found that the 
National Flood Insurance Program, as it was then structured, was not 
likely to generate sufficient revenues to repay this amount. 
Legislation passed in 2012 limiting flood program subsidies may 
improve the program's financial stability. 

In addition, the Small Business Administration's (SBA) Disaster Loan 
program provides crucial financial assistance to homeowners and 
businesses affected by disasters. Since the 2005 Gulf Coast hurricanes 
that exposed many of the loan program's deficiencies, SBA has taken 
steps to reform the Disaster Loan Program to be better prepared for 
future large-scale disasters. However, SBA's reforms have not been 
fully tested under the same disaster scenario that occurred in 2005. 

Protecting critical infrastructure: Terrorists, criminals, and others 
will continue to target the nation's physical and cyber assets—-
including vital information technology systems and networks-—to 
disrupt national security, sap economic vitality, and endanger public 
health and safety. In addition, natural disasters have and will likely 
continue to result in widespread damage to physical infrastructure, 
including oil pipelines and refineries, transportation systems, power 
lines, and cell-phone towers. DHS, in partnership with federal and 
nonfederal stakeholders, will face ongoing challenges in meeting its 
responsibilities to protect critical infrastructure, especially since 
the effects of natural, man-made, or technological disasters can 
cascade far beyond the affected infrastructure and the geographic 
location of the incident. 

These federal and nonfederal stakeholders are equally challenged in 
protecting computerized information systems and electronic data. The 
federal government continues to face challenges in effectively 
implementing cybersecurity across agencies and the nation's critical 
infrastructure. These challenges include addressing issues with risk-
based cybersecurity, critical infrastructure standards, cyber 
incidents, and risks to the global information technology supply 
chain. Further, computer systems are vulnerable to those who can 
obtain and manipulate sensitive information, commit fraud, disrupt 
operations, or launch attacks against other computer systems and 
networks if proper management and safeguards are not in place. GAO 
designated federal information security as a government-wide high-risk 
area in 1997, expanding the area in 2003 to include systems supporting 
critical infrastructure. 

GAO's planned work can help federal decision makers assess efforts to 
protect against and respond to threats and other disasters facing the 
nation, and identify, prioritize, and allocate resources and 
investments for homeland security. To support efforts by the Congress 
and federal agencies to address these issues, GAO has established the 
following performance goals and key efforts: 

Performance Goal 2.1.1: 
Assess federal homeland security management, resources, and 
stakeholder coordination: 

Key Efforts: 

* Assess federal efforts to develop and implement homeland-security-
related strategies and plans and to coordinate with homeland security 
partners. 

* Assess DHS's efforts to strengthen its core management functions—-
acquisition, information technology (IT), human capital, and financial 
management. 

* Assess whether DHS is using a risk-based approach to allocate its 
resources and is being an effective steward of those resources. 
* Evaluate DHS and its components' efforts to acquire, manage, and 
efficiently use their assets. 

* Evaluate DHS's efforts to manage science and technology resources 
and assess homeland security technologies to prevent and respond to 
attacks and disasters. 

Performance Goal 2.1.2: 
Assess efforts to strengthen border security and address immigration 
enforcement and services issues: 

Key Efforts: 

* Review agencies' implementation of any future immigration reform 
initiatives. 

* Assess DHS's efforts to efficiently, effectively, and fairly 
adjudicate applications for immigration benefits. 

* Assess DHS's efforts to prevent, detect, and address the unlawful 
movement of people, contraband, and other materials across U.S. 
borders. 

* Evaluate DHS's use of its customs and immigration authorities to 
address security and public threats and vulnerabilities. 

Performance Goal 2.1.3: 
Assess efforts to strengthen the sharing of terrorism-related 
information: 

Key Efforts: 

* Evaluate federal efforts to facilitate the sharing of terrorism-
related information with agencies across all levels of government. 

* Assess whether agencies' information-sharing roles and 
responsibilities have been clearly defined to help ensure 
effectiveness and minimize overlap or duplication. 

* Determine federal, state, local, and tribal agencies' progress in 
sharing terrorism and law enforcement information, including 
technology innovations. 

* Assess how federal, state, local, and tribal agencies balance 
sharing terrorism information with protecting privacy and civil 
liberties. 

Performance Goal 2.1.4:
Assess efforts to strengthen security in all transportation modes: 

Key Efforts: 

* Assess federal government efforts to secure the aviation, surface, 
and maritime transportation sectors while facilitating the legitimate 
flow of people and commerce. 

* Determine progress in allocating security resources across and 
within all transportation modes based on risk. 

* Evaluate the security of integrated transportation networks, across 
modes and among federal, state, local, and private-sector stakeholders. 

Performance Goal 2.1.5: 
Assess U.S. national emergency preparedness and response capabilities: 

Key Efforts: 

* Evaluate whether the federal government provides reasonable 
assistance to establish needed national preparedness capabilities. 

* Assess whether emergency management organizations have the 
capabilities needed to respond to all disasters. 

* Determine whether emergency management officials are effectively 
using federal grants to establish needed capabilities. 

* Assess the extent and quality of DHS's assessments of emergency 
preparedness capabilities. 

Performance Goal 2.1.6: 
Assess the cost, availability, and management of natural catastrophe 
insurance and disaster loan programs: 

Key Efforts: 

* Evaluate FEMA's management of the Disaster Relief Fund. 

* Assess FEMA's management of the National Flood Insurance Program, 
including new legislative requirements. 

* Evaluate the costs and benefits of implementing new or revising 
existing disaster-related insurance programs. 

* Assess efforts to increase private market provision of catastrophic 
insurance coverage. 

* Assess SBA's disaster recovery efforts to provide timely financial 
assistance following large-scale disasters. 

Performance Goal 2.1.7: 
Assess efforts to strengthen the protection and resiliency of the 
nation's critical physical and cyber infrastructure: 

Key Efforts: 

* Assess federal efforts to enhance the resiliency of critical 
national assets, networks, and systems. 

* Review the effectiveness of cybersecurity at federal agencies to 
better ensure the protection of government and personal information. 

* Evaluate federal efforts to enhance the cybersecurity of private-and 
public-sector computer information systems and networks vital to 
operating the nation's critical infrastructure. 

* Assess DHS's efforts to identify and reconcile gaps and overlaps 
between its critical infrastructure protection strategy and the 
regulatory regimes affecting its public- and private-sector partners. 

* Assess federal efforts to identify, manage, and mitigate risks 
associated with interdependencies across the spectrum of critical 
assets, systems, and networks. 

[End of Strategic Objective 2.1] 

Strategic Objective 2.2: 
Effectively and Efficiently Utilize Resources for Military 
Capabilities and Readiness: 

Figure: Objective 2.2 Performance Goals: 

[Refer to PDF for image: illustration] 

* Assess DOD's ability to meet operational demands while preparing for 
the future; 
* Assess DOD's efforts to secure the homeland and respond to emerging 
threats and irregular warfare; 
* Assess DOD's human capital management to ensure a high-quality total 
force; 
* Assess the ability of weapon system acquisition programs and 
processes to achieve desired outcomes; 
* Assess DOD's progress in improving contract management; 
* Assess DOD's progress in improving the maintenance and sustainment of 
weapons systems, inventory management, and other logistics functions 
and activities;
* Assess DOD's management of the defense support infrastructure; 
* Assess efforts of NNSA and DOD to maintain and modernize the nuclear 
security enterprise, nuclear force structure, and associated weapons 
platforms; 
* Assess DOD's efforts to adapt and leverage organizational structures 
and management processes to maximize efficiencies and performance. 

[End of figure] 

In the coming years, DOD will face a security environment of growing 
complexity while also facing serious budget constraints. DOD will 
therefore need to strike a strategic and affordable balance between 
current and future capabilities as it makes difficult trade-off 
decisions among competing priorities. Among those priorities is 
rebuilding readiness after a decade of significant wear and tear on 
military forces and equipment resulting from contingency operations in 
Iraq and Afghanistan, while also preparing for both emerging missions— 
such as cyber operations—and emerging threats—such as cyber attacks on 
U.S. civilian and military networks and infrastructure. Another 
competing priority will be the billions of dollars DOD and DOE plan to 
invest in aging nuclear weapons and infrastructure. Further 
complicating DOD's priority-setting is the increasingly large share of 
the budget absorbed by internal cost drivers such as investments in 
major weapons systems, military health care, troop pay, and military 
retirement benefits. 

To enhance DOD's ability to make resources available for higher 
priority needs, the department has opportunities to find greater 
efficiencies and potentially reduce costs by addressing longstanding 
weaknesses in its business operations. These business operations 
include inventory management, logistics support, and contracting. 
Opportunities also exist for greater efficiencies and reduced costs by 
restructuring DOD's headquarters and command organizations and 
reducing excess and obsolete installations and infrastructure. 

Military readiness and capabilities: For more than a decade, DOD has 
invested considerable resources to support ongoing operations, 
including increasing the availability of personnel and equipment for 
deploying units at the expense of nondeploying units and refocusing 
training on counterinsurgency missions. The department now faces 
the challenge of rebuilding readiness of both the active and reserve 
forces to desired levels for a wider range of missions while 
continuing to modernize capabilities for future threats under 
significant resource constraints. Doing so will require investments in 
existing and new capabilities needed to enhance DOD's ability to 
respond to emerging threats, such as countering weapons of mass 
destruction, defending against ballistic missiles, and operating 
effectively in cyberspace and environments where adversaries have the 
capability to deny U.S. access. 

To balance these needs, DOD may no longer be able to afford its 
current approach to managing readiness. As a result, the department 
will need to fundamentally re-examine several areas, such as 
requirements for equipment, personnel, and training; the nature and 
composition of its forward presence in countries around the world; and 
the mix, size, and organization of its forces. 

Homeland security and emerging threats: As DOD collaborates with other 
federal agencies to defend the homeland against man-made and natural 
catastrophic events, it also must respond to emerging threats from 
state and nonstate adversaries with new warfighting capabilities on 
land and sea, in the air, in space, and in cyberspace. In protecting 
both homeland and national security, the U.S. military will 
increasingly face a wide array of nonconventional threats. For 
example, climate change and the potential impact on the U.S. economy 
and the ability of nations, particularly those at risk already, to 
feed their populations will have implications for U.S. national 
security. 

Further, new technologies represent both new critical capabilities and 
challenges for U.S. military forces. For example, nanotechnology and 
robotics have the potential to be of great use to U.S. forces for 
activities from logistics to intelligence, persistent surveillance, 
and reconnaissance (see figure 53). These same technologies also could 
pose additional force protection challenges if adversaries gain or 
counter these capabilities. 

Figure 53: Remote Controlled Robot Used by Explosive Ordnance Disposal 
Teams to Investigate Possible Explosive Devices Safely: 

[Refer to PDF for image: photograph] 

Source: Defense Video and Imagery Distribution System (DVIDS). 

[End of figure 53] 

Human capital management: As the largest federal agency, DOD plays a 
critical role in managing the federal workforce. In fiscal year 2013, 
the department's workforce consisted of approximately 1.4 million 
active duty servicemembers, 850,000 National Guard and Reserve 
members, and nearly 800,000 civilians in addition to a significant 
number of contractor personnel. In addition to fiscal challenges, a 
wide range of Defense personnel-related issues are expected to remain 
key concerns for DOD and the Congress. These include the drawdown of 
and continued impact of military operations, evolving roles for women, 
and sexual assaults that can jeopardize mission readiness and erode 
unit cohesion. 

DOD also faces increasing costs of military pay, retirement, and 
health care. For example, DOD health care costs for servicemembers and 
beneficiaries have grown significantly, and health care costs 
resulting from injuries, including post-traumatic stress disorder, 
sustained in recent military operations will continue for the 
foreseeable future. Therefore, how DOD plans for and manages its 
workforces, compensates its personnel, cares for them, and addresses 
social issues becomes increasingly important as DOD seeks to maintain 
a high-quality total force capable of meeting a diverse range of 
missions during a period of increased budgetary pressures. 

Major weapon systems acquisition: DOD's ability to successfully adapt 
to budgetary constraints will depend in great measure on its ability 
to better manage weapon systems acquisition, which GAO designated as a 
high-risk area in 1990. Total acquisition cost growth in DOD's fiscal 
year 2012 portfolio of major weapons programs reached nearly $403 
billion over initial estimates. At the program level, too many 
programs are often begun and continued without enough knowledge about 
a system's requirements, technology, and design. Lacking such 
knowledge, managers rely on assumptions that are consistently too 
optimistic, exposing programs to significant and unnecessary risk and, 
ultimately, cost growth and delays. 

Cost overruns lead to fewer resources for other priorities and reduced 
buying power for DOD, and schedule delays mean that warfighters risk 
not getting critical capabilities when they need them. Congress and 
DOD have recently addressed many of these issues through acquisition 
reform legislation and changes to acquisition policy. However, many 
efforts at acquisition reform have been tried in the past without much 
success. Without sustained leadership and consistent implementation of 
these recent reforms, DOD will continue to be challenged in improving 
its weapon system program outcomes. 

DOD contract management: Given DOD's reliance on contractor-provided 
goods and services in support of its missions, management and 
oversight of contracts is critical. In fiscal year 2012, DOD obligated 
approximately $361 billion to contracts for goods and services (see 
figure 54). DOD uses contracts to obtain basic goods and services, 
such as office supplies and base maintenance, and for more complex 
goods and services, such as weapon and IT systems and logistics 
support. Contracts also provide operational support to U.S. forces in 
Afghanistan. 

Figure 54: DOD's Fiscal Year 2012 Obligations for Contracted Goods and 
Services: 

[Refer to PDF for image: 2 pie-charts and associated horizontal bar 
graphs] 

Goods: 
Percentage of DOD obligations Fiscal year 2012: 48.3%; $174.1 billion; 
Obligations, Top five goods: 
Aircraft, fixed wing: $22.1 billion; 
Liquid propellants and fuels, petroleum base: $18.0 billion; 
Aircraft, rotary wing: $10.1 billion; 
Guided missiles: $5.6 billion; 
Airframe structural components: $5.6 billion. 

Services: 
Percentage of DOD obligations Fiscal year 2012: 51.7%; $186.7 billion; 
Support - professional: engineering/technical: $13.7 billion; 
Medical - general health care: $11.2 billion; 
Support - management: logistics support: $9.0 billion; 
Support - professional: other: $7.3 billion; 
IT and telecom - other IT and telecommunications: $6.9 billion. 

Source: GAO analysis of Federal Procurement Data System-Next 
Generation data. 

[End of figure 54] 

At times, the use of ill-suited contracting arrangements, the absence 
of a strategic approach for acquiring services, the lack of effective 
competition, and poor contractor oversight have placed DOD at risk of 
not getting needed goods and services in a timely manner or 
potentially paying more than necessary. As a result, DOD contract 
management has remained on GAO's High Risk List since 1992. DOD has 
recognized these shortcomings and has efforts under way to address 
them, but many efforts remain early in implementation and their 
effectiveness is unproven. Further, under its Better Buying Power 
Initiative, DOD has identified the need to improve the tools and data 
available to its acquisition personnel to help negotiate better 
contract prices as one means of reducing acquisition costs. 

Maintenance and sustainment of weapons systems, inventory management, 
and other logistics functions and activities: DOD spends billions of 
dollars annually on the maintenance and sustainment of weapons 
systems, inventory management, and other logistics functions and 
activities that support the warfighter. The department, however, 
continues to face challenges in its management and oversight of these 
critical functions. For example, GAO's past work has found that DOD's 
unreliable maintenance and sustainment cost estimates for weapons 
systems limits the department's ability to assess, manage, and control 
these systems' life-cycle costs. 

Also, DOD's data show it has billions of dollars worth of on-hand 
excess inventory, categorized for potential reuse or disposal, and 
millions of dollars worth of already-purchased inventory that will 
likely be excess due to changed requirements (see figure 55). 
Moreover, DOD faces challenges to return equipment from Afghanistan, 
such as constrained supply routes and high costs. Improving management 
of DOD's supply chain network, which GAO designated as a high-risk 
area in 1990, and logistics functions and activities can result in 
increased efficiency and improved effectiveness, as well as reducing 
waste and making resources available for other priorities. 

Figure 55: Boxes of Excess Gear and Equipment in Afghanistan: 

[Refer to PDF for image: photograph] 

Source: DVIDS. 

[End of figure 55] 

Defense support infrastructure: DOD has more than 500 major permanent 
installations that comprise more than 300,000 buildings and 200,000 
other structures with a replacement value of approximately $850 
billion. The defense support infrastructure includes other functions 
such as base support, utility systems, and training ranges. DOD has 
privatized aspects of its infrastructure assets, such as housing on 
some bases, to leverage private capital to finance improvements. Since 
designating support infrastructure as a high-risk area in 1997, GAO 
has reported on several challenges DOD faces in reducing excess and 
obsolete infrastructure, including difficulties in achieving expected 
cost savings from the 2005 Base Realignment and Closure. DOD 
recognizes the need for a more efficient and appropriate 
infrastructure. 

GAO will focus its future work on challenges DOD faces in meeting its 
support infrastructure requirements. These challenges include 
rightsizing its infrastructure to reflect expected force reductions 
and realignment, providing reliable and secure utilities, ensuring the 
adequacy of installations and training ranges to support military 
operations, addressing the impact of the environment on military 
operations, and ensuring the adequacy and reliability of business 
systems to support management decision making. 

Nuclear security enterprise, nuclear force structure, and associated 
weapons platforms: The Department of Energy's National Nuclear 
Security Administration (NNSA) is responsible for developing, 
producing, and maintaining nuclear weapons. DOD is responsible for 
identifying military requirements for nuclear weapons and for 
operational employment of these strategic capabilities. The 2010 
Nuclear Posture Review stated that the U.S. policy is to reduce the 
role of U.S. nuclear weapons while sustaining a safe, secure, and 
effective nuclear arsenal. 

Consistent with this policy and to support nuclear weapons reductions 
ratified in 2010 under the New Strategic Arms Reduction Treaty, NNSA 
and DOD are investing hundreds of billions of dollars over the next 
two decades to sustain and modernize nuclear weapons research and 
production infrastructure, refurbish aging weapons, replace aging 
delivery systems and platforms, and modernize nuclear force structure 
and the nuclear command and control system. Meeting these challenges 
will require effective management of human capital and analyses of 
alternatives, as well as procurement, planning, contracting, and 
management systems to ensure efficient and affordable resource 
investment. Since 1990, GAO has identified contract and project 
management at NNSA as areas at high risk for fraud, waste, abuse, and 
mismanagement. 

Organizational structures and management processes: In the past, as 
DOD responded to new missions or threats, it has generally added on 
new management layers instead of seeking efficiencies and challenging 
its existing organizational paradigms. DOD has taken some steps to 
reduce the size of its headquarters in the past 2 years, but the 
department may not have gone far enough to collapse layers of 
organization and management and reassess its requirements for the 
military and civilian employees and contractors. Instead, to address 
budgetary challenges, DOD has generally imposed modest reductions 
across the board to reduce personnel. 

Throughout DOD, there are opportunities to restructure organizations 
and programs and areas for improved efficiencies and effectiveness. 
For example, DOD has taken steps to reform its business operations, 
such as establishing key leadership positions and business-related 
governance structures and continuing to update its strategic 
management plan. However, DOD has not demonstrated that its management 
oversight of reform efforts is producing tangible results in 
addressing longstanding deficiencies in key business areas, such as 
measuring progress on a department-wide basis. Therefore, in 2005, GAO 
added DOD's approach to business transformation to the High Risk List, 
which continues to include several DOD business operations that were 
originally added to the list in 1995, due to their vulnerability to 
waste, fraud, abuse, and mismanagement. 

GAO's work can assist the Congress and federal leaders as they seek to 
reconcile competing priorities between existing and future military 
capabilities and missions, and in improving logistics support, 
acquisition, and other defense business operations to make the most of 
the nation's investments in national security. Specifically, GAO has 
established the following performance goals and key efforts: 

Performance Goal 2.2.1: 
Assess DOD's ability to meet operational demands while preparing for 
the future: 

Key Efforts: 

* Assess readiness and training of U.S. forces to accomplish missions. 

* Evaluate plans for transforming active and reserve forces. 

* Review global posture and forward presence plans. 

Performance Goal 2.2.2:
Assess DOD's efforts to secure the homeland and respond to emerging 
threats and irregular warfare: 

Key Efforts: 

* Evaluate DOD's role and collaboration in homeland security. 

* Assess DOD's preparedness for emerging threats and irregular 
warfare, including chemical, biological, radiological, and nuclear 
attacks from nonstate actors. 

* Assess DOD's protection of its forces, critical and cyber 
infrastructure, and assets worldwide. 

* Evaluate DOD's efforts to improve and integrate command, control, 
communications, computers, intelligence, surveillance, and 
reconnaissance. 

Performance Goal 2.2.3: 
Assess DOD's human capital management to ensure a high-quality total 
force: 

Key Efforts: 

* Assess DOD's approaches for determining requirements for and 
managing its military, civilian, and contractor workforces. 

* Assess DOD's management of its financial resources and programs to 
compensate and support personnel. 

* Assess DOD's policies and programs for addressing social and 
behavioral factors. 

* Assess DOD's governance approach and plans for achieving 
efficiencies in providing health care to military personnel and 
beneficiaries. 

Performance Goal 2.2.4: 
Assess the ability of weapon system acquisition programs and processes 
to achieve desired outcomes: 

Key Efforts: 

* Identify ways for DOD to prioritize its investments in weapon 
systems. 

* Assess the performance of and budget requests for weapon programs. 

* Analyze individual weapon programs to ensure that they are ready to 
start development or production. 

* Identify best practices to address the cost, schedule, and 
performance problems that consistently affect weapon programs. 

* Assess DOD's implementation of acquisition reforms. 

Performance Goal 2.2.5: 
Assess DOD's progress in improving contract management: 

Key Efforts: 

* Analyze DOD's efforts to improve competition in the procurement of 
goods and services. 

* Assess the extent to which DOD has improved services acquisition. 

* Evaluate DOD's efforts to improve contractor oversight. 

* Analyze DOD's development and use of tools and data to negotiate 
better prices. 

* Assess the extent to which DOD has identified and implemented 
efforts to improve the planning, management, and oversight of 
operational contracting support. 

Performance Goal 2.2.6: 
Assess DOD's progress in improving the maintenance and sustainment of 
weapons systems, inventory management, and other logistics functions 
and activities: 

Key Efforts: 

* Evaluate DOD's efforts to assess, manage, and control weapons 
systems costs throughout the life cycle of these systems. 

* Evaluate the need and opportunities for improving logistics 
functions and systems. 

* Assess efforts to provide timely support to the warfighter and 
address emerging requirements. 

Performance Goal 2.2.7: 
Assess DOD's management of the defense support infrastructure: 

Key Efforts: 

* Evaluate DOD facilities' management, maintenance, and modernization. 

* Assess DOD's implementation of the disposal of excess infrastructure 
capacities. 

* Evaluate alternative financing initiatives that rely on private-
sector capital. 

Performance Goal 2.2.8: 
Assess efforts of NNSA and DOD to maintain and modernize the nuclear 
security enterprise, nuclear force structure, and associated weapons 
platforms: 

Key Efforts: 

* Assess NNSA's programs and projects to modernize the nuclear 
security enterprise. 

* Evaluate NNSA and DOD efforts to manage the U.S. nuclear weapons 
stockpile, including identifying requirements, refurbishing aging 
systems, and maintaining systems that are safe and reliable. 

* Evaluate NNSA's human capital, procurement, planning, contracting, 
and management systems to ensure efficient resource investment. 

* Assess NNSA's and DOD's implementation of effective and efficient 
security programs to protect nuclear weapons, materials, and 
information. 

* Assess the structure, organizational capabilities, sustainment, and 
modernization of DOD's nuclear forces and the nuclear command, 
control, and communications system. 

Performance Goal 2.2.9: 
Assess DOD's efforts to adapt and leverage organizational structures 
and management processes to maximize efficiencies and performance: 

Key Efforts: 

* Analyze funding and costs of military organizational structures, 
operations, and programs. 

* Assess DOD's efforts and identify alternative approaches to improve 
planning, programming, and budgeting. 

* Evaluate DOD's efforts to provide leadership for the transformation 
of its business operations. 

[End of Strategic Objective 2.2] 

Strategic Objective 2.3: 
Advance and Protect U.S. Foreign Policy and International Economic 
Interests: 

Figure: Objective 2.3 Performance Goals: 

[Refer to PDF for image: illustration] 

* Analyze the implementation and results of U.S. and international 
efforts to counter and address threats to the United States and its 
foreign partners' national security; 
* Analyze the implementation and management of U.S. bilateral and 
multilateral foreign assistance, including development, humanitarian, 
and economic assistance and efforts to promote democracy and human 
rights; 
* Analyze how international trade programs serve U.S. interests and how 
the United States can influence improvements in the world economy; 
* Assess the management and effectiveness of the U.S. diplomatic 
presence and its membership in multilateral organizations; 
* Improve understanding and management of the effects of a global 
supplier base on U.S. national security interests. 

[End of figure] 

U.S. policymakers face the ongoing challenge of advancing and 
protecting the nation's foreign interests while having to react to an 
ever-changing international environment. Fundamental shifts in mission 
are under way as U.S. military involvement in Afghanistan winds down 
and attention turns to building foreign partners' capacity to counter 
terrorist and other transnational threats. 

However, U.S. foreign affairs agencies face a volatile security, 
political, and economic environment as they work to combat global 
disease, reduce poverty, increase global food security, address 
climate change, and stabilize the world economy. Nations such as China 
are exerting rising prominence in regions such as sub-Saharan Africa. 
U.S. trade deficits continue despite some success in increasing U.S. 
exports (see figure 56). 

Figure 56: Overview of U.S. International Trade: 

[Refer to PDF for image: horizontal bar graph; line graph; 2 pie-
charts] 

U.S. net exports 2012: 
Merchandise trade (Dollars in billions): 

Largest deficits countries: 
China: -$315.1; 
Japan: -$76.44; 
Mexico: -$61.64; 
Germany: -$59.91; 
Saudi Arabia: -$37.69; 
Other deficit countries: -$383.9. 

Largest surplus countries: 
Belgium: $11.68; 
Netherlands: $18.37; 
United Arab Emirates: $20.29; 
Australia: $21.6; 
Hong Kong: $32.01; 
Other surplus countries: $98.87. 

Top five U.S. markets in 2012: 
Merchandise trade: 

Imports: 
China: $425.6 billion; 19%; 
Canada: $323.9 billion; 14%; 
Mexico: $277.6 billion; 12%; 
Japan: $146.4 billion; 6%; 
Germany: $108.7 billion; 5%; 
Rest of the world: $993.1 billion; 44%. 

Exports: 
Canada: $292.5 billion; 19%; 
Mexico: $215.9 billion; 14%; 
China: $110.5 billion; 7%; 
Japan: $70.0 billion; 5%; 
United Kingdom: $54.9 billion; 4%; 
Rest of the world: $801.9 billion; 52%. 

Trends for U.S. trade with all countries: 
Merchandise trade (Dollars in billions): 

2008: 
Exports: $1,287; 
Imports: $2,103. 

2009: 
Exports: $1,056; 
Imports: $1,560. 

2010: 
Exports: $1,278; 
Imports: $1,913. 

2011: 
Exports: $1,480; 
Imports: $2,208. 

2012: 
Exports: $1,5456; 
Imports: $2,275. 

Source: GAO analysis of U.S. Department of Commerce data. 

[End of figure 56] 

This volatile environment creates a variety of institutional 
challenges. Multilateral institutions, such as the United Nations, 
face continued questions about their management and effectiveness. In 
the wake of attacks against U.S. personnel and facilities overseas, 
costly adjustments to enhance the security of the U.S. diplomatic 
presence are under way and are critical to the U.S. image and security 
of U.S. citizens abroad. DOD's reliance on a global supplier base to 
develop weapons such as the F-35 carries potential threats such as 
theft, espionage, and tampering of critical technologies. Agencies 
such as the Department of State and the U.S. Agency for International 
Development (USAID) seek to build more integrated approaches, 
international partnerships, and capacity-building abroad, thereby 
elevating the need for strengthening management controls, strategic 
planning, and interagency coordination. 

Countering overseas threats: The United States continues to face a 
diverse and changing set of overseas threats to its national security, 
including transnational threats, destabilizing effects of the Arab 
Spring, and rising military strength of regional powers challenging 
U.S. interests. With the planned withdrawal of most military forces 
from Afghanistan, the United States increasingly confronts dispersed 
transnational terrorist threats, including al Qaeda, its affiliates, 
and others from havens in the Middle East and Africa. Transnational 
proliferation-—North Korean and Iranian nuclear programs, Syrian 
chemical weapons, and Libyan antiaircraft missiles-—continues to 
threaten U.S. interests. Also, transnational narcotics and arms 
trafficking affect regional stability in strategically important areas 
of Asia and Latin America. 

To address these changing and diverse threats, the U.S. government 
established a variety of programs under a whole-of-government 
approach, which involve tens of billions of dollars in spending and 
aim to, among other things, (1) help partner nations build sustainable 
capacity to address security challenges; (2) promote partner support 
for U.S. interests through cooperation on law enforcement, 
counterterrorism, counternarcotics, combating organized crime and arms 
trafficking, countering weapons proliferation and terrorism, 
intelligence and information-sharing, and peacekeeping efforts; and 
(3) strengthen collective security and multinational defense 
arrangements and organizations. 

Bilateral and multilateral foreign assistance: Foreign assistance is 
an important tool not only for improving the standard of living in the 
world's developing nations but also for advancing U.S. interests. 
State, USAID, and other agencies deliver assistance that addresses 
many aspects of development, including economic growth, health and 
education, democracy and rule of law, humanitarian and disaster 
relief, and food security (see figure 57). The U.S. government had 
planned to direct about $29 billion in foreign assistance funding in 
fiscal year 2013, both bilaterally and multilaterally through various 
international organizations and development institutions. 

Figure 57: Boxes of Excess Gear and Equipment in Afghanistan: 

[Refer to PDF for image: 3 lists; vertical bar graph] 

U.S. development assistance, by top recipients and sector: 

Regions receiving the most U.S. development assistance, 2010-11 
average: 
1. Sub-Saharan Africa; 
2. South and Central Asia; 
3. Middle East and North Africa; 
4. Latin America and the Caribbean; 
5. Other Asia and Oceania. 

Countries receiving the most U.S. development assistance, 2010-11 
average: 
1. Afghanistan; 
2. Iraq; 
3. Pakistan; 
4. Democratic Republic of the Congo; 
5. Haiti. 

Sectors receiving the most U.S. development assistance, 2011: 
1. Health and population; 
2. Government and civil society; 
3. Humanitarian aid; 
4. Multisectoral; 
5. Agriculture. 

U.S. development net assistance totals, 2008 through 2012: 

2008: $26.4 billion; 
2009: $28.8 billion; 
2010: $30.4 billion; 
2011: $30.8 billion; 
2012: $30.5 billion. 

Source: (Top) Organisation for Economic Cooperation and Development 
(OECD) official development assistance statistics; (Bottom) OECD 
official development assistance statistics. 

[End of figure 57] 

With constrained budgets, U.S. agencies must focus on how best to meet 
pressing needs. For example, despite major gains the President's 
Emergency Plan for AIDS Relief has made in lowering treatment costs 
and helping expand services to nearly 10 million HIV-infected people, 
about 16 million still lack treatment. With rising food and 
transportation costs, agencies also will need to manage food 
assistance programs more effectively to meet demands in crisis 
environments created by human conflict or natural disasters and 
achieve long-term food security globally. To increase the efficiency 
and impact of its assistance, USAID has launched a major reform 
initiative—USAID Forward—that includes increasing direct partnerships 
with foreign governments and organizations. Establishing robust 
management controls is critical for ensuring accountability over 
foreign assistance funds. This includes obtaining adequate financial 
information to monitor implementation and performance information to 
evaluate results. 

International trade and finance: Restoring global financial health and 
increasing trade to promote prosperity remain critical U.S. foreign 
policy objectives. U.S. trade is rebounding from its 2009 dip, 
reaching $3.8 trillion in 2012. U.S. government efforts to increase 
trade have shifted, including expanded financing of U.S. exports and 
other support for small- and medium-sized exporters. Pursuit of lower 
trade barriers has focused on regional agreements and efforts to build 
multilateral consensus on a more targeted package in World Trade 
Organization negotiations. Challenges include government interventions 
in foreign exchange markets that can undercut U.S. producers in global 
competition, difficulties achieving consensus on how best to balance 
trade with security and other concerns, and the limited capacity of 
trade partners, such as those in Africa, to take advantage of 
favorable access to U.S. markets. U.S. agencies also face challenges 
in collecting duties and determining unfairly traded imports and 
counterfeit goods. 

To address these challenges, the agencies that advance U.S. trade 
interests-—including the Office of the U.S. Trade Representative, the 
Department of Commerce, the Export-Import Bank, and those responsible 
for Customs and Border Protection's revenue and enforcement functions-—
will need to clarify program goals and strategies, enhance 
coordination and communication, and improve efficiency in a 
constrained budget environment. The United States also seeks to assure 
global financial stability. Yet, it remains to be seen whether 
institutions such as the World Bank and the International Monetary 
Fund can effectively mitigate systemic risks like those posed by high 
national indebtedness in the European Union. 

U.S. diplomatic presence and management: The U.S. diplomatic presence 
is critical to advancing U.S. interests in an interconnected world. 
The United States maintains more than 270 diplomatic posts worldwide. 
U.S. agencies are responding to emerging and evolving threats by 
operating in increasingly dangerous locations, as highlighted by the 
attacks in Benghazi, Libya. Protecting U.S. personnel and facilities 
overseas costs more than $1.5 billion annually, and these costs will 
continue to grow. New secure embassy compounds are costly to construct 
and operate, which increases the importance of accurate staff level 
projections. 

State must also coordinate with other agencies, such as DOD and USAID, 
to ensure staffing and operational efficiencies. Efforts to enhance 
passport and visa processes to protect U.S. borders and prevent the 
entry of terrorists, criminals, and illegal immigrants will require 
continuous revision to confront changing threats. Diplomatic readiness 
also requires having the right number of people with the right skills 
in the right places. For example, State must continue to address 
shortfalls in foreign language capabilities and staffing gaps at 
critical overseas posts. Ensuring effective engagement with audiences 
abroad through public diplomacy programs will remain essential to 
enhancing the U.S. image as well. 

Although multilateral organizations—including the United Nations and 
the World Bank—facilitate international cooperation, questions 
continue to arise about their effectiveness and ability to achieve 
goals that reflect U.S. interests. The United States will remain an 
advocate of actions to make them efficient, effective, and 
accountable. In particular, management reform at the United Nations, 
such as in internal oversight and human resources, will merit 
attention. 

Global supplier base: Globalization of the supplier base has changed 
the way the United States obtains technologies and capabilities to 
best serve its national security interests. Domestic firms that 
develop defense products, parts, and weapons and integrate and 
maintain those systems often rely on a supplier network that includes 
foreign firms. DOD has shown a willingness to acquire goods and 
services from foreign suppliers and to partner with foreign allies to 
develop weapon systems such as the F-35 aircraft. 

Drawing from a global supplier network presents opportunities, such as 
the potential to speed innovation and reduce costs, but also carries 
potential for threats to the technological superiority of the United 
States, whose technologies are often targets for theft, espionage, and 
tampering. New approaches to protect U.S. national security interests 
that weigh competing and sometimes conflicting economic and foreign 
policy interests may be required. Because of weaknesses identified in 
federal programs to protect technologies critical to national security 
interests, GAO added this area to its High Risk List in 2007. Further 
insights into the effects of increased reliance on a global defense 
industrial base will provide DOD with the information needed to better 
manage critical technologies and its interactions with that base. 

GAO's work can help Congress and federal agencies ensure that the 
capacities needed to help advance U.S. foreign policy and 
international economic interests abroad are in place. To do so, GAO 
has established the following performance goals and key efforts: 

Performance Goal 2.3.1: 
Analyze the implementation and results of U.S. and international 
efforts to counter and address threats to the United States and its 
foreign partners' national security: 

Key Efforts: 

* Evaluate U.S. and multilateral security assistance and cooperation 
efforts to enhance and build foreign partner capacity and stabilize 
regions in conflict. 

* Evaluate U.S. efforts to address terrorist threats emanating from 
abroad. 

* Evaluate U.S. efforts to counter overseas narcotics trafficking and 
other transnational threats to U.S. interests. 

* Assess the effectiveness of U.S. and international efforts to 
prevent proliferation of sensitive materials and technologies 
associated with nuclear, biological, chemical, radiological, and 
conventional weapons. 

* Assess the management and effectiveness of U.S. and multilateral 
controls over exports of goods and technologies. 

* Evaluate the implementation and impact of U.S. and multilateral 
sanctions on countries of concern. 

Performance Goal 2.3.2: 
Analyze the implementation and management of U.S. bilateral and 
multilateral foreign assistance, including development, humanitarian, 
and economic assistance and efforts to promote democracy and human 
rights: 

Key Efforts: 

* Evaluate U.S. efforts to provide economic development assistance. 

* Examine U.S. efforts to provide key program assistance in areas such 
as health, education, and democracy. 

* Analyze U.S. activities to provide assistance in man-made or natural 
disaster environments. 

* Assess agency performance and financial controls and monitoring. 

Performance Goal 2.3.3: 
Analyze how international trade programs serve U.S. interests and how 
the United States can influence improvements in the world economy: 

Key Efforts: 

* Examine efforts to ensure and increase access to foreign markets and 
sources, including trade agreements and enforcement. 

* Review programs that promote U.S. exports. 

* Evaluate U.S. programs to expand trade and build partner trade 
capacity in support of development. 

* Assess the effectiveness of duty collections, trade remedies against 
injurious or intellectual property right-infringing goods and other 
illicit trade, and other import programs. 

* Analyze emerging trade policy issues and crosscutting trade 
management challenges. 

* Assess the operations of international financial institutions in 
which the United States is a member. 

* Provide insight about international debt, investment, and exchange 
issues. 

* Evaluate U.S. government export financing and investment guarantees. 

Performance Goal 2.3.4: 
Assess the management and effectiveness of the U.S. diplomatic 
presence and its membership in multilateral organizations: 

Key Efforts: 

* Assess U.S. efforts to protect overseas personnel, facilities, and 
interests. 

* Evaluate efforts to achieve the optimal level of U.S. presence 
overseas and to construct secure and appropriately-sized embassy 
facilities where they are most needed. 

* Analyze efforts to reduce duplication and overlap among foreign 
affairs agencies. 

* Assess U.S. efforts to improve passport, visa, and other processes 
to help prevent terrorists, criminals, and illegal immigrants from 
entering the United States. 

* Assess efforts to improve U.S. diplomatic readiness. 

* Evaluate the efficacy of programs to enhance the U.S. image abroad. 

* Assess the efforts of multilateral institutions to modernize and 
reform their management processes. 

Performance Goal 2.3.5: 
Improve understanding and management of the effects of a global 
supplier base on U.S. national security interests: 

Key Efforts: 

* Evaluate the effectiveness of U.S. government programs designed to 
protect critical technologies. 

* Assess DOD's insight into and management of its global supplier base. 

* Evaluate qualitative and quantitative approaches to balance the 
effects of a global supplier base while preserving U.S. economic and 
national security interests. 

[End of Strategic Objective 2.3] 

[End of Goal 2] 

Goal 3: 

Help Transform the Federal Government to Address National Challenges: 

GAO's third strategic goal is to help the federal government transform 
to address national challenges. The evolving nature of the issues and 
risks confronting the federal government are increasingly complex and 
cut across geographic boundaries, programs, levels of government, and 
sectors. Transforming the government by, for example, reforming 
national tax laws; modernizing outdated financial regulatory systems; 
improving acquisition management; and strengthening the performance of 
government programs must consider global and local risks, connections, 
and implications to be effective. Further, this transformation is 
occurring amidst a landscape of fiscal uncertainty. GAO's federal 
simulations show that absent policy changes, the federal government 
faces rapid, unsustainable growth in debt and a growing imbalance 
between revenue and spending. 

Successfully addressing these critical challenges depends on 
government's ability to: 

* work more effectively across silos and traditional boundaries, 

* form new relationships and strengthen existing ones, 

* modernize systems and improve operations, and, 

* find new strategies for allocating limited resources. 

To address the fiscal realities of the next 5 years, the federal 
government must address the long-term fiscal outlook. To create much-
needed flexibility to meet the nation's needs, the government must 
examine all aspects of fiscal policy, existing programs, and tax 
administration for opportunities to reduce fraud, waste, abuse, and 
mismanagement. Moreover, government managers and policymakers need 
clear, timely, realistic assessments of the government's performance 
management, financial condition, and cost of operations. Yet, given 
significant deficiencies in these areas, much work lies ahead to 
strengthen performance management, federal financial management, and 
accountability. 

Government agencies need to address performance and management 
challenges and high-risk issues with better strategic planning and 
crosscutting approaches to provide the public with the demonstrable 
results it reasonably expects. Creating a culture that embraces risk 
management will be critical to successfully navigating rapid change, 
uncertainty, and fiscal strain. Further, increasing interdependence 
means that the federal government must work closely with state and 
local governments, nongovernmental organizations, and the private 
sector-—domestically and internationally-—to achieve results. 
Accordingly, GAO will focus on the government's role in achieving 
results in an increasingly globalized environment and on the 
government's ability to report on, deliver, and account for high, cost-
effective performance. 

To help transform the government and increase its ability to respond 
to major national challenges, GAO has established these four strategic 
objectives: 

3.1: Analyze the Government's Fiscal Position and Opportunities to 
Strengthen Approaches to Address the Current and Projected Fiscal Gaps: 

3.2: Support Government Accountability by Identifying Fraud, Waste, 
and Abuse, and Needed Improvements in Internal Controls: 

3.3: Support Congressional Oversight of Crosscutting Issues and Major 
Management Challenges and Program Risks: 

3.4: Establish and Maintain Standards for Auditing Federal Government 
Operations and Standards for Internal Control in the Federal 
Government: 

Strategic Objective 3.1: 
Analyze the Government's Fiscal Condition and Opportunities to 
Strengthen Approaches to Address the Current and Projected Fiscal Gaps: 

Figure: Objective 3.1 Performance Goals: 

[Refer to PDF for image: illustration] 

* Analyze the implications of commitments, information, processes, and 
controls on the federal short- and long-term budget outlook, debt 
management, and on agencies' budget decisions and operations; 
* Monitor and examine the federal government's response to state and 
local governments' short- and long-term fiscal condition; 
* Assess the reliability of financial information on the government's 
fiscal position and financing sources; 
* Contribute to congressional deliberations on tax policy; 
* Identify specific opportunities to reduce the tax gap by improving 
taxpayer voluntary compliance and IRS's ability to pursue 
noncompliance. 

[End of figure] 

In the near term, annual deficits are expected to continue to decline 
from recent historic highs as the economy recovers and actions taken 
by Congress and the President begin to take effect. Limits on 
discretionary budget authority established by the Budget Control Act 
of 2011 (BCA) mean that discretionary spending as a share of the 
economy is projected to be lower in 2023 than at any point in the last 
50 years. Nevertheless, absent further policy action, the gap between 
revenues and spending will remain, as will historically high levels of 
debt held by the public as a share of gross domestic product (GDP). 
This will limit the federal government's budgetary flexibility to 
address emerging issues and unforeseen challenges. 

On the spending side of the budget, the nation's fiscal outlook in the 
coming years will be shaped largely by demographics and health care 
costs. The oldest members of the baby boom generation are already 
eligible for Social Security and Medicare. A range of other federal 
fiscal exposures—that is, responsibilities, programs, and activities 
that may either obligate the government to future spending or create 
the expectation for future spending—also bind the nation's fiscal 
future. The federal government needs to balance long-term fiscal 
pressures with short-term budgetary constraints that affect agencies' 
abilities to manage now. This will help agencies protect key 
investments that ensure their continued ability to achieve their 
missions. 

Long-term fiscal outlook: GAO's simulations show that the nation's 
long-term fiscal outlook remains unsustainable. By 2028, debt held by 
the public as a percentage of GDP could exceed the historical high of 
more than 100 percent of GDP reached in the aftermath of World War II 
and grow at a steady rate thereafter (see figure 58). Further, a 
variety of fiscal exposures have grown over the past decade and the 
extent of the government's legal obligation has changed due to events 
and trends and the government's response to them. These fiscal 
exposures will require future federal spending and absorb resources 
that could have been available for other activities. 

Understanding the near- and long-term budget implications of policy 
decisions at the time those decisions are made permits more informed 
discussion of both the overall program and any specific program design 
features. To support Congress in its efforts to provide enhanced 
control and oversight over federal resources, GAO's planned work will 
focus on better understanding the sources of fiscal exposures and how 
they are changing. 

Figure 58: Debt Held by the Public under Two Fiscal Policy Simulations: 

[Refer to PDF for image: multiple line graph] 

Debt Held by the Public under Two Fiscal Policy Simulations: 

[Refer to PDF for image: multiple line graph] 

Percent of GDP: 

Historical high: 109% in 1946. 

Fiscal year: 2000; 
Baseline extended: 34.7%; 
Alternative: 34.7%. 

Fiscal year: 2001; 
Baseline extended: 32.5%; 
Alternative: 32.5%. 

Fiscal year: 2002; 
Baseline extended: 33.6%; 
Alternative: 33.6%. 

Fiscal year: 2003; 
Baseline extended: 35.6%; 
Alternative: 35.6%. 

Fiscal year: 2004; 
Baseline extended: 36.8%; 
Alternative: 36.8%. 

Fiscal year: 2005; 
Baseline extended: 36.9%; 
Alternative: 36.9%. 

Fiscal year: 2006; 
Baseline extended: 36.6%; 
Alternative: 36.6%. 

Fiscal year: 2007; 
Baseline extended: 36.3%; 
Alternative: 36.3%. 

Fiscal year: 2008; 
Baseline extended: 40.5%; 
Alternative: 40.5%. 

Fiscal year: 2009; 
Baseline extended: 54.1%; 
Alternative: 54.1%. 

Fiscal year: 2010; 
Baseline extended: 62.9%; 
Alternative: 62.9%. 

Fiscal year: 2011; 
Baseline extended: 67.8%; 
Alternative: 67.8%. 

Fiscal year: 2012; 
Baseline extended: 72.5%; 
Alternative: 72.5%. 

Fiscal year: 2013; 
Baseline extended: 76.3%; 
Alternative: 76.5%. 

Fiscal year: 2014; 
Baseline extended: 77.7%; 
Alternative: 79%. 

Fiscal year: 2015; 
Baseline extended: 76.3%; 
Alternative: 78.9%. 

Fiscal year: 2016; 
Baseline extended: 74.6%; 
Alternative: 78.2%. 

Fiscal year: 2017; 
Baseline extended: 73.4%; 
Alternative: 78%. 

Fiscal year: 2018; 
Baseline extended: 73.1%; 
Alternative: 78.9%. 

Fiscal year: 2019; 
Baseline extended: 73.5%; 
Alternative: 80.5%. 

Fiscal year: 2020; 
Baseline extended: 74.2%; 
Alternative: 82.3%. 

Fiscal year: 2021; 
Baseline extended: 75%; 
Alternative: 84.3%. 

Fiscal year: 2022; 
Baseline extended: 76%; 
Alternative: 86.5%. 

Fiscal year: 2023; 
Baseline extended: 77%; 
Alternative: 88.7%. 

Fiscal year: 2024; 
Baseline extended: 78.2%; 
Alternative: 91.7%. 

Fiscal year: 2025; 
Baseline extended: 80%; 
Alternative: 95.5%. 

Fiscal year: 2026; 
Baseline extended: 82.1%; 
Alternative: 100%. 

Fiscal year: 2027; 
Baseline extended: 84.7%; 
Alternative: 105.3%. 

Fiscal year: 2028; 
Baseline extended: 87.8%; 
Alternative: 111.4%. 

Fiscal year: 2029; 
Baseline extended: 91.1%; 
Alternative: 118.1%. 

Fiscal year: 2030; 
Baseline extended: 94.7%; 
Alternative: 125.3%. 

Fiscal year: 2031; 
Baseline extended: 98.4%; 
Alternative: 132.9%. 

Fiscal year: 2032; 
Baseline extended: 102.3%; 
Alternative: 140.9%. 

Fiscal year: 2033; 
Baseline extended: 106.3%; 
Alternative: 149.2%. 

Fiscal year: 2034; 
Baseline extended: 110.4%; 
Alternative: 157.7%. 

Fiscal year: 2035; 
Baseline extended: 114.7%; 
Alternative: 166.4%. 

Fiscal year: 2036; 
Baseline extended: 119.2%; 
Alternative: 175.5%. 

Fiscal year: 2037; 
Baseline extended: 123.9%; 
Alternative: 184.8%. 

Fiscal year: 2038; 
Baseline extended: 128.6%; 
Alternative: 194.3%. 

Fiscal year: 2039; 
Baseline extended: 133.4%. 

Fiscal year: 2040; 
Baseline extended: 138.4%. 

Fiscal year: 2041; 
Baseline extended: 143.3%. 

Fiscal year: 2042; 
Baseline extended: 148.4%. 

Fiscal year: 2043; 
Baseline extended: 153.5%. 

Fiscal year: 2044; 
Baseline extended: 158.9%. 

Fiscal year: 2045; 
Baseline extended: 164.3%. 

Fiscal year: 2046; 
Baseline extended: 169.9%. 

Fiscal year: 2047; 
Baseline extended: 175.7%. 

Fiscal year: 2048; 
Baseline extended: 181.5%. 

Fiscal year: 2049; 
Baseline extended: 187.5%. 

Fiscal year: 2050; 
Baseline extended: 193.5%. 

Fiscal year: 2051; 
Baseline extended: 199.6%. 

Source: GAO. 

Note: Data are from GAO's Spring 2013 simulations. 

[End of figure 58] 

GAO's simulations also show that, like the federal government, state 
and local governments will continue to face fiscal challenges (see 
figure 59), which will be even more acute during periods of higher 
unemployment, constrained revenue, and increased demands for services. 
These simulations have consistently shown that, absent any policy 
changes, the state and local sectors will face an increasing gap 
between receipts and expenditures in future years. 

Figure 59: State and Local Operating Balance Measure, as a Percentage 
of Gross Domestic Product: 

[Refer to PDF for image: line graph] 

Percent of GDP: 

Year: 2005; 
Operating Balance: 0.006%. 

Year: 2010; 
Operating Balance: -0.5%. 

Year: 2015; 
Operating Balance: -1.5%. 

Year: 2020; 
Operating Balance: -1.3%. 

Year: 2025; 
Operating Balance: -1.5%. 

Year: 2030; 
Operating Balance: -1.9%. 

Year: 2035; 
Operating Balance: -2.2%. 

Year: 2040; 
Operating Balance: -2.5%. 

Year: 2045; 
Operating Balance: -2.9%. 

Year: 2050; 
Operating Balance: -3.2%. 

Year: 2055; 
Operating Balance: -3.5%. 

Year: 2060; 
Operating Balance: -3.9%. 

Source: GAO simulations, updated April 2013. 

Note: Historical data are from the Bureau of Economic Analysis's 
National Income and Product Accounts. Data in 2012 are GAO estimates 
aligned with published data where available. GAO's simulations are 
from 2013 to 2060, using many Congressional Budget Office projections 
and assumptions, particularly those for the next 10 years. 

The operating balance is a measure of the sector's ability to cover 
its current expenditures out of current receipts. The operating 
balance measure is all receipts, excluding funds used for long-term 
investments, minus current expenditures. To develop this measure, GAO 
subtracted funds used to finance longer-term projects-—such as 
investments in buildings and roads-—from receipts, since these funds 
would not be available to cover current expenses. Similarly, GAO 
excludes capital-related expenditures from spending. While most states 
have requirements related to balancing their budgets, deficits might 
arise because of unanticipated events such as a recession. These 
deficits can occur because the planned annual revenues are not 
generated at the expected rate, demand for services exceeds planned 
expenditures, or both, resulting in a near-term or operating deficit. 
States have tapped fiscal reserves to cope with revenue shortfalls 
during recent recessions, as indicated by their reported total 
balances, which are comprised of general fund ending balances and 
amounts in state budget stabilization “rainy day” funds. This figure 
depicts the state and local operating balance only, and does not 
include fiscal reserves or other budget measures used to cope with 
revenue shortfalls. 

[End of figure 59] 

As the administration and Congress work to address fiscal imbalances, 
forward-looking information about the fiscal, economic, and social 
implications of possible changes to long-standing programs and 
policies will be critical. GAO will work to recommend ways federal 
agencies can find opportunities to build a culture for effective risk 
management in critical program areas, including financial regulation, 
health care, defense, and homeland security. 

Financial reporting and debt management: The government's economic 
stimulus and recovery efforts have created unprecedented federal 
financial reporting and debt management challenges. When interest 
rates return to normal levels, federal interest spending could 
increase substantially, absorbing resources that could have been 
available for government programs and reducing flexibility to address 
emerging challenges. Examining how financing needs and financial 
market conditions affect Treasury's debt management decisions and 
options to minimize borrowing costs will be important. Further, 
accurate, timely information about government spending will help 
policymakers assess and manage the country's fiscal condition and 
economic progress in the coming years. GAO's planned work reflects 
significant developments, such as: 

* The estimated trillions of dollars in loans, credit guarantees, and 
other assistance that Treasury, the Federal Reserve, Federal Housing 
Administration, or other government entities have committed to date to 
address the financial crisis. In the near term, oversight is needed to 
ensure that the government's financial responses achieve their 
intended goals. 

* The potential $282 billion funding commitment to Fannie Mae and 
Freddie Mac under agreements between Treasury and the entities. The 
future structures of these two government-sponsored enterprises and 
the roles they will serve in the mortgage market must still be 
determined. Notably, Fannie Mae and Freddie Mac together own or 
guarantee roughly half of U.S. residential mortgage debt. 

* High-risk areas of government operations vulnerable to economic 
weakness. For example, the Pension Benefit Guaranty Corporation's 
(PBGC) pension insurance programs remain exposed to the threat of 
terminations of large underfunded pension plans sponsored by 
financially weak firms, as well as the threat of insolvency of large 
multiemployer pensions plans. The PBGC's deficit at the end of fiscal 
year 2012 stood at $34 billion—a figure that may worsen if the 
economic recovery slows or financial markets weaken. The U.S. Postal 
Service is also facing a deteriorating financial situation as it 
reached its borrowing limit of $15 billion in fiscal year 2012 and 
finished the year with a reported net loss of almost $16 billion. 

* The federal government debt limit and the effects of Treasury's 
actions to avoid exceeding the debt limit. GAO will continue to 
provide information to Congress as it considers ways to better link 
decisions about the debt limit with decisions about spending and 
revenue to avoid potential disruptions to the Treasury market and to 
help inform the fiscal policy debate in a timely way. 

Dealing with longer-term fiscal challenges will also require examining 
the revenue side of the budget. For example, absent changes in tax 
policy, during periods of economic strain and higher unemployment, tax 
revenue will likely decline at the same time that public expenditures 
and demand for public services increase. In the longer term, both the 
amount of revenue to be raised to finance federal expenditures 
(including tax expenditures), and how to raise it, will need to be 
carefully considered. 

Financial information: With the federal government facing serious 
fiscal challenges, the need is greater than ever for timely, accurate, 
and reliable financial information to measure and control costs, 
manage for results, and make fully-informed program and resource 
allocation decisions. Achieving these objectives will require: 

* Transforming federal financial management systems to focus on 
accounting for the full cost of programs and operations; integrating 
program, budget, and financial information; and accounting for 
performance against established metrics. 

* Presenting federal financial information in a form that is useful 
for deliberating on the nation's budget, debt, and long-term fiscal 
challenges. 

* Presenting financial information with a view toward better 
recognizing certain elements of government operations, such as the 
extent of the federal government's social insurance commitments. 

Of particular importance in the coming 5 years is GAO's unique role in 
auditing the U.S. government's annual consolidated financial 
statements, as well as those of the Federal Deposit Insurance 
Corporation's Deposit Insurance Fund, the Securities and Exchange 
Commission, the Internal Revenue Service (IRS), the Schedule of the 
Federal Debt, the Federal Housing Finance Agency (with its 
responsibility for the supervision and oversight of Fannie Mae, 
Freddie Mac, and the 12 federal home loan banks), the Bureau of 
Consumer Financial Protection, and Treasury's Office of Financial 
Stability. GAO will also continue to work with other key federal 
agencies and their auditors to improve internal controls over 
financial reporting, compliance with selected laws and regulations, 
and the usefulness and relevance of overall federal financial 
reporting. 

Tax policy and the economy: In addition to affecting revenue, tax 
policy will profoundly affect the economy as a whole and the decisions 
that individuals and businesses make about working, saving, and 
investing in the coming years. Given the size and complexity of the 
federal tax code, tax reform will continue to be an area of particular 
interest for Congress and the federal government. One form of tax 
reform could involve broadening the current tax base by eliminating 
certain tax expenditures. 

Tax expenditures-—the special tax credits, deductions, deferrals, 
exclusions, and preferential tax rates provided under the tax code 
that either reduce the flow of federal income taxes from individuals 
and corporations or that require higher tax rates on other taxpayers 
to make up for lost revenue-—need particular attention. The number of 
tax expenditures reported by the Treasury has more than doubled since 
1974, and the sum of revenue-loss estimates for tax expenditures was 
nearly $981 billion in 2009. Little is known about the effects of many 
of these provisions. 

Taxpayer compliance: Federal revenues are also reduced to the extent 
that taxpayers do not fully comply with paying their tax liabilities. 
The most recent estimate of the net tax gap-—that is, the gap between 
taxes owed and paid after IRS enforcement and late payments, is $385 
billion. IRS faces pressures to improve its taxpayer service to spur 
voluntary compliance, enforcement efforts to catch noncompliance, and 
collections of tax debts. Significant improvements to compliance will 
also depend on innovative solutions involving external parties, such 
as paid tax return preparers, and legislative changes, such as those 
to simplify the tax code. Enforcing tax laws continues to be included 
in GAO's High Risk List. GAO's work will seek to ensure IRS 
improvement and inform other solutions to shrinking the tax gap. 

To support efforts by Congress and the federal government to address 
these issues, GAO has established the following performance goals and 
key efforts: 

Performance Goal 3.1.1: 
Analyze the implications of commitments, information, processes, and 
controls on the federal short- and long-term budget outlook, debt 
management, and on agencies' budget decisions and operations: 

Key Efforts: 

* Analyze the transparency and the implications of current and 
emerging longer-term fiscal exposures on the federal fiscal outlook. 

* Explore the effects of congressional budget processes and controls—
including information, incentives, and exceptions—on decision making. 

* Assess implications of the information used in agencies' budget 
processes on resource decisions, operations, and accountability. 

* Examine how federal debt and financial market trends affect debt 
management and financing costs. 

Performance Goal 3.1.2: 
Monitor and examine the federal government's response to state and 
local governments' short- and long-term fiscal condition: 

Key Efforts: 

* Examine how federal policies and economic trends affect the short-
and long-term fiscal capacities of states and localities to pursue 
national objectives. 

* Assess how states and localities use federal funds, including how 
states and localities combine various resources to fund initiatives. 

* Monitor fiscally-distressed states and municipalities and their 
potential impacts on, and implications for, federal programs and 
funding. 

Performance Goal 3.1.3: 
Assess the reliability of financial information on the government's 
fiscal position and financing sources: 

Key Efforts: 

* Annually audit the government's consolidated financial statements, 
related internal controls, and legal compliance, and assess challenges 
that cause a disclaimer of opinion. 

* Audit financial statements, related internal controls, and legal 
compliance of various federal entities and components, including those 
with regulatory responsibilities. 

* Annually audit Treasury's revenue collections and federal debt 
activity and related balances. 

* Address opportunities to improve auditing and reporting on federal 
agency and U.S. government consolidated financial operations. 

* Assess whether efforts to improve federal financial management are 
effectively focused on providing useful cost and other financial data. 

Performance Goal 3.1.4: 
Contribute to congressional deliberations on tax policy: 

Key Efforts: 

* Analyze how changes in the tax system affect objectives, such as 
equity, economic efficiency, simplicity, revenue, and administrability. 

* Evaluate oversight of tax expenditures and the effectiveness and 
impact of specific tax expenditures on tax revenue, taxpayers, and the 
economy. 

* Analyze how the tax code affects individual and business decisions, 
such as where to locate and how to structure operations. 

Performance Goal 3.1.5: 
Identify specific opportunities to reduce the tax gap by improving 
taxpayer voluntary compliance and IRS's ability to pursue 
noncompliance: 

Key Efforts: 

* Identify potential improvements to IRS taxpayer service, such as 
easier tax return filing; faster refund processing; and more 
informative telephone, website, and written communications. 

* Identify opportunities to improve IRS's enforcement programs in 
light of a changing U.S. and international economy, evolving 
technology, and the tax gap. 

* Identify opportunities to leverage paid preparers, tax preparation 
software companies, and information return reporters to ensure timely, 
accurate filing of tax returns. 

* Evaluate IRS's efforts to modernize its expenditure plans and its 
information systems. 

* Assess IRS's efforts to improve planning, resource allocations, and 
evaluation of operations, including using research and data to enhance 
compliance programs. 

[End of Strategic Objective 3.1] 

Strategic Objective 3.2: 
Support Government Accountability by Identifying Fraud, Waste, and 
Abuse, and Needed Improvements in Internal Controls: 

Figure: Objective 3.2 Performance Goals: 

[Refer to PDF for image: illustration] 

* Perform forensic audits to identify and address vulnerabilities to 
fraud, waste, and abuse; 
* Provide investigative services and conduct investigations and 
security vulnerability assessments; 
* Process and investigate allegations received through FraudNET; 
* Identify ways to strengthen accountability and internal controls for 
federal programs, assets, and operations. 

[End of figure] 

Evidence suggests that fraud, waste, and abuse cost the federal 
government billions of dollars annually. For example, GAO's work has 
demonstrated that reported improper payments-—estimated at nearly $108 
billion in fiscal year 2012-—are a long-standing and widespread 
problem. Medicare and Medicaid, which together provide health 
insurance for one in four Americans, accounted for about $63.2 billion 
(59 percent) of that amount. GAO's work indicates that, although 
federal agencies have taken steps to improve accountability in 
government programs, instances of fraudulent activity, improper and 
overlapping payments, inadequate documentation, and other indications 
of fraud, waste, and abuse persist across a wide range of federal 
programs and activities. To assist in the prevention and detection of 
these activities, GAO performs forensic audits, internal control 
reviews, and special investigations targeted at highly vulnerable 
federal programs and funding. To do so, GAO uses data mining, covert 
testing, and law enforcement tools including the Financial Crimes and 
Enforcement Network and the National Crime Information Center, among 
others. It is also critical to enhance governmentwide efforts to 
reduce improper payments by (1) identifying and analyzing root causes, 
(2) implementing effective controls for prevention, and (3) enhancing 
detection and recovery. 

GAO's focus on preventive controls and effective fraud prevention 
programs is also integral to other GAO efforts. For example, as 
previously discussed, over the next 5 years, GAO will continue to 
focus on the nation's health care programs and other areas at high 
risk of fraud, waste, and abuse. 

Forensic audits and investigations: GAO's ability to conduct forensic 
audits and investigations of programs across the government uniquely 
positions it to apply knowledge gained of lessons learned and best 
practices across government to other programs and operations. Forensic 
audits are designed to identify ineffective controls and 
vulnerabilities to expose areas of fraud, waste, and abuse and, in 
some cases, matters of security that clearly demonstrate the 
“real-world” effects of broken or inadequate controls. The audits 
highlight these issues to Congress and the public and often result in 
positive change. For example, in recent years, GAO has used forensic 
audits and special investigations to identify government-wide fraud 
and abuse in areas such as Medicare Part D and prescription drugs, the 
Service-Disabled Veteran-Owned Small Business Program, psychotropic 
prescription drugs for foster children, and counterfeit military-grade 
electronic parts. 

Consequences resulting from investigations and security vulnerability 
assessments: An important element of the federal government's ability 
to deter fraud is to have consequences for those who fail to pay their 
tax liabilities or who commit fraud against the federal government. 
Through forensic audits and investigations, GAO has identified 
thousands of cases of potential fraud and abuse and has referred these 
cases to the appropriate law enforcement agencies and others for 
criminal investigation and administrative action. In 2012, GAO 
referred more than 70 cases of potential fraud or other impropriety to 
executive branch agencies, leading to actions such as recoupment of 
improperly received funds and conviction for theft of government 
property. Over the next 5 years, GAO will also continue to use tips 
received through its FraudNet hotline, an Internet-based operation 
that provides a secure means for individuals to confidentially 
communicate their concerns about possible fraud, waste, abuse, 
mismanagement, and criminal activities in federal programs. 

Strengthening accountability and internal controls: GAO's work across 
the government has shown that fraud prevention—including controls that 
prevent the improper and fraudulent disbursement of federal dollars—is 
the most efficient and effective means to minimize fraud, waste, and 
abuse. Once federal dollars have been disbursed fraudulently or 
improperly, the government is likely to recover only a few pennies on 
the dollar. As seen in figure 60, GAO's fraud prevention framework 
provides an overview of how preventive controls help screen out 
ineligible entities, and how monitoring controls and prosecutions can 
help further minimize the extent to which a program is vulnerable to 
fraud. 

Figure 60: GAO's Fraud Prevention Framework: 

[Refer to PDF for image: illustration] 

Potential fraud, waste, and abuse: 
Preventive controls applied; 
Lessened Potential fraud, waste, and abuse; 
Detection and monitoring; 
Lessened Potential fraud; 
Investigations and prosecutions; 
Lessons learned influence future use of preventive controls. 

Source: GAO. 

[End of figure 60] 

Leveraging this framework, GAO will continue to focus its work on 
identifying vulnerabilities in agency preventive controls and 
providing recommendations to strengthen them. Key areas of focus for 
the next 5 years include Medicare, Medicaid, and other federal health 
care programs; other federal entitlement programs and federal 
procurement efforts; food assistance; federal disaster response 
outlays; and housing recovery programs. GAO will continue to 
coordinate and, where appropriate, work closely with auditors, 
investigators, and law enforcement agencies from federal, state, and 
local governments to conduct investigations and develop cases of fraud 
and abuse. GAO will also continue to work with Congress to identify 
programs across the government that are vulnerable to fraud, waste, 
and abuse, including those on GAO's High Risk List, to maintain 
accountability over hundreds of billions of dollars in federal assets 
and program payments. 

To support efforts by Congress and the federal government to address 
these issues, GAO has established the following performance goals and 
key efforts: 

Performance Goal 3.2.1: 
Perform forensic audits to identify and address vulnerabilities to 
fraud, waste, and abuse: 

Key Efforts: 

* Evaluate and investigate Medicare, Medicaid, and other federal 
health care programs. 

* Evaluate and investigate federal disaster response outlays. 

* Evaluate and investigate entitlement programs and federal 
procurement efforts. 

* Evaluate and investigate housing recovery programs, including 
mortgage and refinancing programs. 

* Evaluate and investigate high-dollar programs that are at risk for 
improper payments. 

* Evaluate and investigate fraud, as requested by Congress and the 
Comptroller General. 

* Refer cases of fraud and abuse identified to the relevant federal, 
state, and local law enforcement agencies or other authorities. 

Performance Goal 3.2.2: 
Provide investigative services and conduct investigations and security 
vulnerability assessments: 

Key Efforts: 

* Evaluate and investigate specific allegations of consumer fraud or 
other program mismanagement as requested by Congress and the 
Comptroller General. 

* Perform overt and covert testing of security-related systems and 
controls as requested by Congress and the Comptroller General. 

Performance Goal 3.2.3: 
Process and investigate allegations received through FraudNet: 

Key Efforts: 

* Process and investigate, as appropriate, the more than 1,500 
allegations made annually through FraudNet. 

* Evaluate trends in FraudNet allegations. 

Performance Goal 3.2.4: 
Identify ways to strengthen accountability and internal controls for 
federal programs, assets, and operations: 

Key Efforts: 

* Evaluate management controls over program payments, beneficiaries' 
access, and quality of services in federal health care, housing, 
entitlement, and procurement programs. 

* Assess federal agencies' internal controls to identify opportunities 
to reduce risk of fraud, waste, and abuse. 

* Analyze federal agencies' high-risk and other critical programs to 
identify opportunities to improve accountability for assets and 
operations. 

* Review audit oversight of federal programs, grants, and other funds. 

* Assess agencies' progress in estimating improper payments, 
identifying their root causes, and developing effective preventive and 
detective controls, including an emphasis on recovery audits. 

[End of Strategic Objective 3.2] 

Strategic Objective 3.3: 
Support Congressional Oversight of Crosscutting Issues and Major 
Management Challenges and Program Risks: 

Figure: Objective 3.3 Performance Goals: 

* Highlight high risk federal programs and operations and monitor 
progress of needed management reforms; 
* Assess efforts to improve results-oriented management across the 
government; 
* Analyze and support efforts to develop an agile, skilled workforce, 
which is essential to the operation of high-performing federal 
agencies; 
* Identify ways to improve federal agencies' acquisition of goods and 
services; 
* Assess the management and results of the federal investment in 
science and technology and the effectiveness of efforts to protect 
intellectual property and encourage innovation; 
* Assess the government's planning, implementation, and use of IT to 
improve performance and modernize federal programs and operations; 
* Identify ways to improve the collection, dissemination, and quality 
of federal information; 
* Identify ways to improve the administration and management of grants 
and other types of assistance across all levels of government to 
achieve greater efficiency, effectiveness, accountability, and 
transparency. 

[End of figure] 

As one of the world's largest, most complex entities, the federal 
government is central to effectively and responsibly addressing major 
issues, including public safety and security, job creation, oversight 
of financial markets, and emergency and disaster response. Given the 
public's demand for a more transparent and accountable government, 
federal agencies need to improve performance and focus on effective, 
efficient, and results-oriented management. 

As systems and programs become more complex, government managers and 
policymakers will have to address many issues that transcend 
individual agencies, departments, or offices, including: 

* Increased reliance on complex partnerships to achieve national 
objectives—-often including multiple federal agencies, states and 
localities, domestic and international organizations, private and 
nonprofit contractors, and other entities-—requires agencies to 
measure and manage the collective performance of these efforts. 

* Numerous high-risk areas—such as food safety, oversight of toxic 
chemicals, the Postal Service, and DOD program management— require 
agencies to address issues holistically to ensure effectiveness. 

* Continuing management challenges in human capital management, IT, 
and acquisition and contract management demand a more strategic 
approach. 

* Science and technology innovations can have rapid, far-reaching, and 
even disruptive effects on what government does and how it does it. 

* Individual programs or agencies can have a significant effect in 
other parts of government. For example, Decennial Census data affects 
funding formulas for billions of dollars in federal government 
assistance in areas as diverse as health, highways, education, and 
housing. 

* The growth in both the dollar amount and number of grants for states 
and localities underscores the importance of effective grants 
administration, management, and oversight at all levels. 

High Risk List: GAO's High Risk List continues to be an important tool 
for Congress and policymakers to call attention to the agencies and 
program areas that are vulnerable to fraud, waste, abuse, and 
mismanagement or are most in need of broad reform. GAO's High Risk 
List currently identifies 30 high-risk areas, as shown in table 1. The 
high-risk areas focus on: 

* strengthening the foundations for efficient and effective government; 

* transforming DOD business operations; 

* ensuring public safety and security; 

* managing federal contracting; 

* assessing tax administration efficiency and effectiveness; and; 

* modernizing insurance and benefit programs, including Medicare, 
Medicaid, and the Pension Benefit Guaranty Corporation. 

Finding lasting solutions to issues in these high-risk areas could 
save billions of dollars, improve service to the American public, and 
strengthen public trust in the federal government. GAO will 
persistently monitor and report on progress in the High Risk List 
areas and, as developments dictate, identify new high-risk areas 
warranting attention. 

Managing for results: The evolving nature of the issues, risks, and 
problems that the federal government confronts is growing increasingly 
complex. The federal government has adapted to these changing needs by 
creating new organizations and programs or adding onto existing ones. 
This has resulted in fragmentation and overlap of responsibilities and 
activities throughout government. Some fragmentation and overlap may 
be merited—for example, to have surge capacity to respond to national 
emergencies. However, it can also adversely affect efficiency and 
effectiveness. Congress directed GAO to identify programs and entities 
with duplicative goals and activities and report annually on the 
effects of and ways to reduce that duplication. 

The performance planning and reporting framework created by the 
Government Performance and Results Act of 1993 and significantly 
enhanced by the GPRA Modernization Act of 2010 established a new 
framework for a more crosscutting, integrated approach to improving 
federal performance. To assist Congress, GAO was directed to report on 
the act's initial implementation by June 2013, and will continue 
assessments of how the law is affecting federal performance 
management, including issuing summary reports in 2015 and 2017. 

Table 1: GAO's High-Risk List: 

High-risk area: Strengthening the Foundation for Efficiency and 
Effectiveness: 
* Limiting the Federal Government's Fiscal Exposure by Better Managing 
Climate Change Risks (new); 
* Mitigating Gaps in Weather Satellite Data (new); 
* Management of Federal Oil and Gas Resources; 
* Modernizing the Outdated U.S. Financial Regulatory System; 
* Restructuring U.S. Postal Service to Achieve Sustainable Financial 
Viability; 
* Funding the Nation's Surface Transportation System; 
* Strategic Human Capital Management; 
* Managing Federal Real Property. 

High-risk area: Transforming DOD Program Management: 
* DOD Approach to Business Transformation; 
* DOD Business Systems Modernization; 
* DOD Support Infrastructure Management; 
* DOD Financial Management; 
* DOD Supply Chain Management; 
* DOD Weapons Systems Acquisition. 

High-risk area: Ensuring Public Safety and Security: 
* Strengthening Department of Homeland Security Management Functions; 
* Establishing Effective Mechanisms for Sharing and Managing Terrorism-
Related Information to Protect the Homeland; 
* Protecting the Federal Government's Information Systems and the 
Nation's Cyber Critical Infrastructures; 
* Ensuring the Effective Protection of Technologies Critical to U.S. 
National Security Interests; 
* Revamping Federal Oversight of Food Safety; 
* Protecting Public Health through Enhanced Oversight of Medical 
Products; 
* Transforming EPA's Process for Assessing and Controlling Toxic 
Chemicals;. 

High-risk area: Managing Federal Contracting More Effectively: 
* DOD Contract Management; 
* DOE's Contract Management for the National Nuclear Security 
Administration and Office of Environmental Management; 
* NASA Acquisition Management. 

High-risk area: Assessing the Efficiency and Effectiveness of Tax Law 
Administration: 
* Enforcement of Tax Laws. 

High-risk area: Modernizing and Safeguarding Insurance and Benefit 
Programs: 
* Improving and Modernizing Federal Disability Programs; 
* Pension Benefit Guaranty Corporation Insurance Programs; 
* Medicare Program; 
* Medicaid Program; 
* National Flood Insurance Program. 

Source: GAO. 

[End of Table 1] 

Federal agencies employ a variety of policy tools, such as tax 
expenditures, grants, and regulations, to achieve national objectives. 
As states and localities grapple with major budget pressures, 
effective coordination of and response to a complex array of economic, 
fiscal, and social challenges will be crucial to providing effective, 
efficient service delivery. Building organizational cultures in which 
managers actually use performance information and program evaluation 
in their decision making remains a challenge. Further, federal 
agencies and states are faced with unprecedented levels of data 
sharing and coordination. Collecting data from multiple sources, 
maintaining systems, and developing new tools to use and analyze “big 
data” also presents growing challenges. GAO will work to inform 
congressional oversight with foresight analysis, which can help inform 
policymaking through illuminating the trade-offs and implications of 
change. 

Human capital management: Current budget and long-term fiscal 
pressures, coupled with a potential wave of employee retirements that 
could produce gaps in leadership and institutional knowledge, threaten 
the government's capacity to effectively address many national issues. 
To face these challenges, the Office of Personnel Management and 
agency leaders will need to develop the capacity to satisfy 
administrative, training, and other workforce planning requirements, 
and work collaboratively to make progress on these government-wide 
challenges. GAO will continue to examine the Office of Personnel 
Management's progress in improving the federal hiring process and will 
assess agencies' efforts to strengthen their talent management 
strategies, including the use of available workforce flexibilities, 
development of evidence-based workforce analytics, and targeted use of 
training resources. GAO will evaluate the ability of agencies to 
address critical skills gaps and to integrate their strategic human 
capital planning efforts with their broader organizational strategic 
planning to ensure their workforces have the skills, experience, and 
diversity needed to efficiently execute their mission and program 
goals. 

Acquisition management: Because federal agencies have been depending 
increasingly on contractors to accomplish their missions—-with 
procurement spending totaling more than $500 billion annually—-the 
government urgently needs to improve its acquisition business 
processes and workforce. 

Achieving desired acquisition and contracting outcomes is a challenge 
GAO will continue to monitor, especially at agencies with High Risk 
designations for contracting or management transformation, including 
DOD and DHS. Poorly-defined requirements, ill-suited business 
arrangements, or poorly-structured incentives, as well as inadequate 
oversight of contractor performance, can place the government at risk 
of not getting what it contracted for and paying more than necessary. 

The government needs a fully capable acquisition workforce to ensure 
that it obtains the best value on all contracts, but it still faces 
challenges in developing and maintaining a knowledgeable, skilled, and 
adequately-sized workforce. Further, agencies continue to struggle 
with determining the right mix of, and proper roles and 
responsibilities for, government and contractor employees. Separate 
from its audit function, GAO's authority to resolve government 
contract formation disputes by providing an objective, independent 
forum for resolving bid protests and by recommending actions to 
correct procurement law violations further enhances government 
accountability. 

Science and technology: Science and technology continue to have a 
profound impact on the nation and the lives of individuals, with both 
positive and negative effects on quality of life, national security, 
and economic growth. The United States is the largest single investor 
in research and development worldwide, accounting for nearly one-third 
of the global total. The federal government is a major contributor to 
this work, with approximately $140 billion in annual spending on 
research and development. In addition, the United States has granted 
hundreds of thousands of patents on new innovations in recent years. 

National policies and funding guide many of the activities of the 
nation's science and technology leaders, with broad implications for 
our national competitiveness and technological advancements. At the 
same time, the increased development and use of new technologies 
present Congress with challenges to evaluate their potential and 
assess their effects on security, safety, privacy, and economic 
growth. Congressional oversight of science and technology issues is 
critical to ensuring that the substantial federal investment in 
science and technology is allocated and coordinated effectively among 
the many federal agencies involved; policy implications of current and 
emerging technologies, such as additive manufacturing systems, 
synthetic bioengineered systems, small modular nuclear reactors, and 
freshwater resource technologies, among others, are understood; and 
proper management leads to positive outcomes. 

Information technology: Information technology (IT) systems have the 
potential to reshape government processes by improving performance, 
reducing cost, and enhancing transparency. The government spends more 
than $80 billion annually on IT systems to support virtually all 
government operations and assets. Of this amount, at least $56 billion 
is reportedly spent to operate and maintain such systems. Given 
increasingly austere budgets and the promise of efficiencies that IT 
can provide, additional focus will be needed to ensure effective 
management of IT systems under development as well as those in 
operations and maintenance. This includes ensuring the success of 
ongoing government-wide reform initiatives aimed at lowering the cost 
of IT through the consolidation of hundreds of agency data centers and 
migrating applications to cloud-based solutions and related efforts to 
reduce or eliminate duplicative and overlapping systems. 

The rapid pace of technological change and innovation means that 
government agencies have unprecedented opportunity to use IT to 
enhance government service to citizens, improve performance, and 
reduce costs. These opportunities, however, create significant 
challenges, such as the need to apply a wide range of new, complex 
technologies effectively; interconnect diverse networks and systems 
securely and reliably; and strengthen the technical capacity of 
personnel. 

Information management: Proper management of vital government 
information is essential, yet managing this critical strategic asset 
requires confronting unique and sometimes conflicting demands between 
protecting privacy and ensuring access to government records. With 
greater opportunities to provide access to public records comes a 
growing need to collect, preserve, and successfully manage the growing 
cache of information and knowledge. Further, increasing concerns about 
the extent to which everyday data such as telephone conversations, 
credit card purchases, and Internet interactions are recorded and 
potentially used will likely lead to a continued focus on protecting 
the privacy of individuals' personal information from both federal and 
private sector systems and sources. 

The next 6 years are crucial for the 2020 Decennial Census, as data 
from the enumeration are used to apportion and redistrict Congress, 
help allocate billions of dollars in federal assistance, and inform 
major public and private sector decisions. In light of the nation's 
significant budget challenges, traditional approaches to conducting 
the census may not be fiscally sustainable. The Census Bureau is 
taking steps to become a high-performing organization and is exploring 
ways to control the cost of the 2020 Census while maintaining 
accuracy. Given increased access to information, privacy concerns, and 
limited resources, it is critical to coordinate efforts across federal 
statistical agencies to avoid unnecessary duplication. GAO's review of 
how federal statistical agencies in concert with OMB deal with these 
and other emerging challenges to the U.S. statistical system will help 
provide insights toward improving it. 

Grants management: The use of grants to achieve national objectives 
and address emerging trends-—such as changing demographics and 
changing threats to homeland security—-has grown significantly. In 
fiscal year 2012, grant outlays to state and local governments 
exceeded $544 billion, up from $135 billion in 1990. The growth in 
both the number of grant programs for state and local governments and 
the level of funding for these programs has increased diversity and 
complexity in grants management processes. Substantial variation in 
how grants are administered has further increased their complexity. 

These factors underscore the importance of effective grant 
administration, management, and oversight across all levels of 
government. For example, effective federal oversight and internal 
control are important to provide reasonable assurance to federal 
managers and taxpayers that grants are awarded properly, recipients 
are eligible, and federal grant funds are used as intended and in 
accordance with applicable laws and regulations. At the same time, 
grant-making agencies and recipients need adequate capacity— including 
organizational, human capital, and financial—to manage these programs. 
For example, organizational capacity may include having appropriate 
leadership, management structure, and size to efficiently and 
effectively implement and manage programs. 

To support efforts by Congress and the federal government to address 
these issues, GAO has established the following performance goals and 
key efforts: 

Performance Goal 3.3.1: 
Highlight high-risk federal programs and operations and monitor 
progress of needed management reforms: 

Key Efforts: 

* Update progress in addressing high-risk areas with every new 
Congress and identify areas to be newly-designated as High Risk. 

* Assist congressional and presidential transitions by highlighting 
key challenges and recommendations to improve the performance and 
accountability of the federal government. 

* Monitor the progress of and continuing challenges related to 
government-wide management reform initiatives, including risk 
management. 

Performance Goal 3.3.2: 
Assess efforts to improve results-oriented management across the 
government: 

Key Efforts: 

* Assess and identify opportunities and strategies to reduce or 
eliminate fragmentation, overlap, and duplication in government 
programs and activities. 

* Assess how agencies use various policy tools (e.g. tax expenditures, 
grants, regulations) to achieve results and address challenges in 
measuring performance. 

* Monitor and evaluate agency and OMB efforts to develop and use 
performance information, program evaluation, and government data sets 
to improve performance. 

* Facilitate congressional use of performance information in decision 
making. 

* Evaluate the federal government's efforts to collect, use, and make 
publicly available performance information to increase transparency 
and accountability. 

* Identify and disseminate useful strategies and methodological tools 
for strategic planning, performance measurement, program evaluation, 
and policy analysis. 

* Identify opportunities to improve the coordination, collaboration, 
and governance of domestic and international networks of governmental 
and nongovernmental organizations. 

Performance Goal 3.3.3: 
Analyze and support efforts to develop an agile, skilled workforce 
essential to the operation of high-performing federal agencies: 

Key Efforts: 

* Assess the leadership, management, and delivery of human capital 
products and services needed to efficiently carry out current and 
emerging agency missions. 

* Evaluate efforts to integrate workforce, organizational, and 
strategic planning to ensure agencies have the proper skill mix to 
carry out their missions. 

* Assess the federal government's efforts to attract, develop, and 
retain a workforce that is flexible, motivated, and capable, and 
addresses mission-critical skills gaps. 

* Assess policies and practices designed to enhance individual 
performance and agency outcomes while creating an inclusive 
environment and leveraging diversity. 

Performance Goal 3.3.4: 
Identify ways to improve federal agencies' acquisition of goods and 
services: 

Key Efforts: 

* Suggest ways to improve agencies' acquisition business processes and 
workforce. 

* Analyze agencies' efforts to improve competition in the procurement 
of goods and services. 

* Help improve agencies' knowledge of the supplier base and their 
reliance on contractor support. 

* Maximize quality acquisition outcomes and mitigate risk at major 
agencies, including DOD, DHS, and NASA. 

* Assess the government's use of tools and data to promote sound 
contract pricing and management. 

Performance Goal 3.3.5: 
Assess the management and results of the federal investment in science 
and technology and the effectiveness of efforts to protect 
intellectual property and encourage innovation: 

Key Efforts: 

* Conduct evaluations, including technology assessments, of the status 
and implications of science and technology for public policy and 
congressional decision making. 

* Assess implementation and coordination efforts of federal agencies 
to advance the federal science and research agenda. 

* Evaluate the effect of federal policies and funding on national 
competitiveness and technological advancement. 

Performance Goal 3.3.6: 
Assess the government's planning, implementation, and use of IT to 
improve performance and modernize federal programs and operations: 

Key Efforts: 

* Assess and promote the application and use of IT investment 
management best practices across the government. 

* Promote the adoption of sound enterprise architectures and assess 
government efforts to develop business processes for implementing IT 
systems that optimize mission performance. 

* Review federal agencies' management and effectiveness in carrying 
out systems acquisition, development, and integration—-including 
complex, incremental, and multiyear modernizations. 

* Assess the management of operating and maintaining IT systems, 
including initiatives intended to consolidate data centers and reduce 
duplication and overlap. 

* Review the management of government telecommunications and 
interconnected systems and federal agencies' effectiveness in 
providing secure and reliable Internet connections. 

* Review government progress in attracting, developing, and retaining 
effective IT human capital. 

Note: Key efforts related to computer security, cybersecurity, and 
protecting the nation's critical infrastructure are included under 
performance goal 2.1.7. 

Performance Goal 3.3.7: 
Identify ways to improve the collection, dissemination, and quality of 
federal information: 

Key Efforts: 

* Assess the government's ability to protect the privacy of 
individuals' personal information and other data in an era of rapidly 
evolving technology. 

* Review the government's effectiveness, including progress in using 
electronic technologies to collect, store, preserve, and disseminate 
federal records. 

* Identify ways to improve the management and cost-effectiveness of 
the decennial census. 

* Examine federal efforts to better coordinate and innovate 
alternative methods of data collection and to increase the 
transparency of federal data to the public. 

Performance Goal 3.3.8: 
Identify ways to improve the administration and management of grants 
and other types of assistance across all levels of government to 
achieve greater efficiency, effectiveness, accountability, and 
transparency: 

Key Efforts: 

* Examine efforts to coordinate grant programs that cut across 
federal, state, and local levels of government to achieve efficiencies. 

* Evaluate efforts to collect, use, engage the public in, and make 
available grant spending information to guide decision making and 
increase transparency and accountability. 

* Evaluate federal agencies' grant management policies, administrative 
procedures, and workforce training efforts. 

* Examine grant agencies' efforts to evaluate and strengthen grantees' 
capacities to provide services. 

* Assess federal grant making agencies' design, implementation, and 
oversight of internal controls. 

[End of Strategic Objective 3.3] 

Strategic Objective 3.4: 
Establish and Maintain Standards for Auditing Federal Government 
Operations and Standards for Internal Control in the Federal 
Government: 

Figure: Objective 3.4 Performance Goals: 

[Refer to PDF for image: illustration] 

* Develop and maintain standards for performing independent, high-
quality government audit work that is transparent to the public and 
can enable management to improve government operations and services; 
* Develop and maintain standards for establishing and maintaining 
effective internal controls within the federal government. 

[End of figure] 

Given the current challenges facing governments and their programs, 
the oversight, accountability, and transparency provided through 
auditing are more critical than ever. Government auditing provides 
objective analysis and information that allow government officials to 
make program and agency management decisions that maximize federal, 
state, and local government effectiveness. Depending on their type and 
scope, audits can also provide the public with an independent, 
objective, nonpartisan assessment of the stewardship, performance, or 
cost of government policies, programs, or operations. 

Auditing standards: GAO develops auditing standards that are 
statutorily required to be used in the government environment and 
maintains regular contact with the accountability community both 
within and outside government to help ensure that the needs of users 
of audited information are met. GAO develops and promulgates Generally 
Accepted Government Auditing Standards (GAGAS), commonly referred to 
as the Yellow Book. These standards provide a framework for performing 
high-quality audit work with competence, integrity, objectivity, and 
independence. They provide the foundation for government auditors to 
lead by example in the areas of independence, transparency, 
accountability, and quality through the audit process. Auditing 
standards change to meet the ever-evolving demands of the users of 
audited information. Consequently, GAO's work in the standards area 
includes regular contact with auditors, program and agency management 
at all levels of government, and other standard-setting organizations 
in the U.S. and internationally. 

GAGAS is for use by auditors of government entities and entities that 
receive government awards and audit organizations performing GAGAS 
audits. GAGAS contains requirements and guidance to assist auditors in 
objectively acquiring and evaluating sufficient, appropriate evidence 
and reporting the results. When auditors perform their work in this 
manner and comply with GAGAS in reporting the results, their work can 
lead to improved government management, better decision making and 
oversight, effective and efficient operations, and accountability. 

Internal control standards: A key factor in helping improve 
accountability and minimize operational problems is to implement an 
effective internal control system. Internal control serves as the 
first line of defense in safeguarding assets. An effective internal 
control system helps an entity manage and adapt to shifting 
environments, evolving demands, and new priorities. In short, internal 
control helps federal managers achieve desired results through 
effective stewardship of public resources. 

Section 3512 (c) and (d) of Title 31 of the United States Code 
(commonly known as the Federal Managers' Financial Integrity Act 
[FMFIA]) requires the Comptroller General to issue standards for 
internal control in government. These standards, known as the 
Standards for Internal Control in the Federal Government (Green Book), 
provide the overall framework for establishing and maintaining an 
effective internal control system. 

The Committee of Sponsoring Organizations of the Treadway Commission 
(COSO) updated its internal control guidance with the issuance of the 
revised Internal Control - Integrated Framework. COSO has introduced 
the concept of principles related to the five components of internal 
control. GAO will incorporate into the Green Book, as appropriate, the 
relevant internal control guidance developed by COSO. 

Performance Goal 3.4.1: 
Develop and maintain standards for performing independent, high-
quality government audit work that is transparent to the public and 
can enable management to improve government operations and services: 

Key Efforts: 

* Maintain a technical assistance line to address questions from the 
audit community. 

* Develop interpretations of audit standards to address emerging 
practice issues. 

* Communicate to all stakeholders requirements from the standards. 

* Perform outreach to help ensure consistent application of the 
revised standards. 

* Work closely with the accountability community both inside and 
outside government to help ensure that the needs of users of audited 
information are met. 

Performance Goal 3.4.2: 
Develop and maintain standards for establishing and maintaining 
effective internal controls within the federal government: 

Key Efforts: 

* Develop an internal control standards revision to the Green Book. 

* Create a new Green Book external advisory council to oversee the 
Green Book revision and gain general public acceptance. 

* Communicate through formal outreach to the financial management and 
audit community pending changes to the internal control standards. 

* Harmonize internal control standards with the Committee of 
Sponsoring Organizations and International Organization of Supreme 
Audit Institutions standards and guidance, as appropriate. 

[End of Strategic Objective 3.4] 

[End of Goal 3] 

Goal 4: 

Maximize the Value of GAO by Enabling Quality, Timely Service to the 
Congress, and by Being a Leading Practices Federal Agency: 

GAO is operating in a dynamic, fiscally constrained environment where 
its work covers a broad range of current and emerging challenges and 
risks of national and international concern relevant to the American 
public. To successfully carry out its responsibilities GAO must 
efficiently manage and prioritize its resources and workload to 
support Congress' highest legislative and oversight priorities in a 
timely manner. GAO must focus on areas where there is the greatest 
potential for achieving results, identifying cost savings and revenue 
enhancements, and assisting the Congress in improving government's 
performance. 

Refer to PDF for image: concentric circle illustration of Goal 4] 

Outer circle: 
Meet Statutory Responsibilities; 
Ensure Accountability; 
Improve Government Performance; 
Inner circle: 
Infrastructure Services; 
Engagement Services; 
Oversight, Insight, and Foresight' 
Core: 
Accountability; 
Integrity; 
Reliability. 

Source: GAO. 

[End of figure] 

Key to achieving these goals is the talent, creativity, and dedication 
of GAO's multidisciplinary workforce. To maximize staff effectiveness 
and efficiency while ensuring client and customer satisfaction, GAO 
must focus its hiring and retention programs to address succession 
planning and critical skill gaps and increase its overall staff 
capacity, continually optimize its processes, leverage technology to 
enhance efficiency, and ensure effective governance and resource 
utilization. GAO's fourth strategic goal—-the only internally focused 
goal-—embraces the spirit of continuous and focused improvement in 
order to sustain high-quality, timely, reliable, and constructive 
service to the Congress. 

GAO will continue to focus on improving the efficiency with which it 
conducts mission work and communicates its message. GAO has already 
begun replacing outdated legacy systems, and will continue this effort 
so that all aspects of an engagement are supported by modern, 
integrated information systems. GAO will also modernize its content 
creation and dissemination processes by leveraging technology to 
efficiently manage content; standardize work activities to ensure 
consistent, repeatable outcomes; and provide results in a variety of 
easy-to-access formats in different venues, including multimedia and 
social media platforms to meet the emerging needs of clients and 
customers. In addition, GAO has a number of initiatives underway which 
will strengthen project management on engagements and reduce 
administrative burdens and cumbersome work practices. 

Having a talented, diverse, high-performing, knowledge-based workforce 
is essential to GAO's mission. GAO will address several critical human 
capital management challenges, such as replacing knowledge and 
expertise that has been lost as experienced staff leave the workforce, 
increasing staff levels in a constrained budget environment, and 
fairly implementing workplace practices that help attract and retain 
staff with the needed skills and talents. Since people are GAO's 
primary asset, ensuring that staff are valued, treated fairly, and 
given opportunities to develop to their full potential and maximize 
their contributions to GAO's goals is essential, as is maintaining 
constructive relations with GAO staff, union partners, and employee 
organizations to ensure a productive, inclusive work environment. GAO 
will also place critical importance on improving its internal human 
capital processes, procedures, and personnel to ensure successful 
implementation of GAO's human capital goals. 

In light of the increasingly complex, interdisciplinary, and global 
issues facing the government, GAO also must expand its relationships 
with other entities to promote professional auditing standards and 
audit capacity, as well as enhance its own knowledge, agility, and 
responsiveness. GAO's leadership roles in the professional auditing 
and accounting community will help ensure that U.S. funds, in 
particular, are not subject to waste, fraud, and abuse. In addition, 
GAO seeks to enhance its information-sharing and collaborative efforts 
with other accountability organizations, agencies, and professional 
organizations to tap into their expertise. Partnerships also help GAO 
remain aware of changing governance and management practices, so that 
it can continue to improve its internal operations and implement 
leading practices. 

As the audit and investigative arm of the Congress and the auditor of 
the U.S. government's financial statements, GAO must responsibly 
manage its resources. Even though GAO is not subject to many of the 
laws that apply to the executive branch, GAO endeavors to hold itself 
to the spirit of many of these laws. GAO proactively applies statutory 
and regulatory requirements and other enhancements to its operations 
to ensure that it adheres to the highest standards, follows leading 
practices, and makes the most effective and efficient use of limited 
resources. GAO will also conduct process analyses to improve workflow, 
strengthen internal controls, enhance management oversight, and reduce 
infrastructure costs. GAO will continue to leverage technology to 
improve its business processes, particularly in areas that will 
enhance staff productivity and efficiency, facilitate management 
reporting and decision-making, provide unified communications and 
connectivity, and reduce operational costs. 

For 2014 through 2019, GAO will continue to orient its activities by 
strategic objectives and performance goals which focus on discrete 
areas of product support and business operations. To accomplish GAO's 
goal of enabling quality, timely service to the Congress and being a 
leading practices agency, GAO has established four strategic 
objectives: 

4.1: Improve Efficiency and Effectiveness in Performing GAO's Mission 
and Delivering Quality Products and Services to the Congress and the 
American People; 

4.2: Maintain and Enhance a Diverse Workforce and Inclusive Work 
Environment through Strategically Targeted Recruiting, Hiring, 
Development, Reward and Retention Programs; 

4.3: Expand Networks, Collaborations, and Partnerships That Promote 
Professional Standards and Enhance GAO's Knowledge, Agility, and 
Response Time; 

4.4: Be a Responsible Steward of GAO's Human, Information, Fiscal, 
Technological, and Physical Resources. 

Strategic Objective 4.1: 
Improve Efficiency and Effectiveness in Performing GAO's Mission and 
Delivering Quality Products and Services to the Congress and the 
American People. 

Figure: Objective 4.1 Performance Goals: 

[Refer to PDF for image: illustration] 

* Streamline how GAO manages and conducts engagements by leveraging 
business process re-engineering and information technology; 
* Ensure client satisfaction and efficient and effective working 
relationships with audited entities. 
* Enhance GAO's ability to prioritize work and utilize staff more 
efficiently to ensure GAO responds effectively to the Congress' 
highest priorities. 

[End of figure] 

While GAO's staffing level is the smallest it has been since 1935, its 
work has never been more important. With major fiscal and other 
challenges facing the nation, GAO must work more efficiently to 
support the Congress' highest priorities and provide critical insights 
into opportunities for improved federal performance in a timely 
manner, while operating under resource constraints. 

In fiscal year 2011, GAO identified a new management challenge facing 
the agency—the need to improve the efficiency with which it conducts 
its audits and evaluations. After a year of planning and making minor 
incremental improvements, GAO is now poised to begin implementing a 
series of major process changes that will substantially transform the 
way GAO manages and conducts engagements. While technology plays a 
major role in many of these planned changes, other changes will 
address how GAO structures, staffs, and manages the flow of engagement 
work. 

GAO has developed a process improvement framework and established a 
senior-level governance process to oversee and prioritize these 
efforts. GAO also will use a structured approach to analyze its 
engagement processes to identify further opportunities for improved 
efficiency and will standardize common work processes across the 
agency, while preserving the ability to adjust, as needed, to respond 
to specific client requests. 

GAO will continue to replace outdated legacy data systems with modern, 
integrated, flexible information management systems, as funding 
permits, which will eliminate duplicative data entry and cumbersome, 
inefficient work practices, and significantly improve management 
information. Managers at all levels-—from engagement leaders to the 
Executive Committee—-will be able to easily access and view 
information on engagements and business intelligence analytics will be 
leveraged to support predictive, real-time management. 

To ensure that it is spending its resources on the highest priority 
issues, GAO will integrate its workforce planning and tactical 
planning for mission work processes to ensure the appropriate level of 
resources are devoted to the issues of significant national concern. 
In addition, GAO will clarify roles and responsibilities for staff and 
key stakeholders on engagements to ensure the right people with the 
right skills are involved at the right time, and that staff learn how 
to conduct important aspects of engagements in a repeatable, 
predictable manner. 

GAO will also transform its existing manual, document-based product
production process into an integrated system that automates document
routing and approvals, management, and quality assurance steps and
generates required documentation. The proposed system capability
will also enable GAO to routinely publish content on GAO.gov, the
GAO mobile site, and various social media platforms, as shown in
figure 62. 

Figure 62: Proposed Publishing Workflow: 

[Refer to PDF for image: illustration] 

Products are posted to GAO.gov: 
End-users have access to GAO products through any personal device
and social media platforms. 

Source: GAO. 

[End of figure 62] 

To improve GAO's efficiency and effectiveness in performing the 
agency's mission and delivering quality products and services to the 
Congress and the American people, GAO has established the following 
performance goals and key efforts: 

Performance Goal 4.1.1: 
Streamline how GAO manages and conducts engagements by leveraging 
business process re-engineering and information technology: 

Key Efforts: 

* Apply process analysis and diagnostic measures to identify and 
implement engagement process improvements. 

* Implement new and enhanced “standard and common” practices on 
engagements to maximize our ability to use technology and ensure 
consistent, repeatable outcomes. 

* Implement a unified system to manage engagements and provide a 
decision-oriented reporting capability while reducing administrative 
burden. 

* Strengthen application of project management principles throughout 
the engagement process to increase efficiency and enhance GAO's 
ability to develop predictable schedules. 

* Modernize GAO's content creation and dissemination process by using 
technology to efficiently manage content, facilitate concurrent 
actions, and standardize work steps. 

* Revise GAO's product-line and communication-delivery strategies to 
provide GAO's message more effectively in concise easy-to-access 
formats including various multimedia and social media platforms to 
meet the emerging needs of GAO's clients and customers. 

* Enhance GAO's quality assurance framework to address internal and 
external peer review suggestions as efficiently as possible. 

Performance Goal 4.1.2:
Ensure client satisfaction and efficient and effective working 
relationships with audited entities: 

Key Efforts: 

* Enhance GAO's ability to gain access to records through legislative 
and programmatic efforts. 

* Review and enhance methods for measuring client satisfaction to 
ensure GAO obtains timely, meaningful feedback. 

* Enhance communication and outreach to the client and audited 
agencies to promote effective and productive working relationships. 

Performance Goal 4.1.3:
Enhance GAO's ability to prioritize work and utilize staff more 
efficiently to ensure GAO responds effectively to the Congress' 
highest priorities: 

Key Efforts: 

* Enhance GAO's staffing practices to ensure staff are fully utilized 
and obtain needed developmental opportunities. 

* Clarify stakeholder roles and responsibilities on engagements to 
ensure that the right stakeholders are involved at the appropriate 
time. 

* Develop and implement a process to identify annual priorities which 
implement GAO's strategic plan in light of expected resources and 
Congressional priorities. 

* Monitor, track, and proactively provide input on existing and 
potential legislative mandates to better ensure GAO's resources are 
assigned to the highest priority work. 

[End of Strategic Objective 4.1] 

Strategic Objective 4.2: 
Maintain and Enhance a Diverse Workforce and Inclusive Work 
Environment through Strategically Targeted Recruiting, Hiring, 
Development, Reward and Retention Programs. 

Figure: Objective 4.2 Performance Goals: 

[Refer to PDF for image: illustration] 

* Strengthen recruiting and hiring initiatives to attract and retain a 
diverse workforce; 
* Develop the workforce to meet succession planning and individual 
goals; 
* Promote a workplace culture that is fair and unbiased and that 
values opportunity and inclusiveness; 
* Enhance collaboration with internal employee organizations to ensure 
management and operational outcomes are in sync; 

[End of figure] 

Since fiscal year 2010, GAO's staffing level has declined dramatically 
in response to budget constraints. GAO will continue to experience 
human capital challenges over the next 5 years—the most significant of 
which is maintaining a high-performing diverse workforce. Federal 
employees with the most experience have begun to leave the workforce—
taking with them the institutional knowledge and critical perspectives 
gained over their careers. Also, with a significant number of 
executives and supervisory staff eligible to retire, GAO will continue 
to focus attention on staff development, advancement, and phased 
retirement as a means to achieve succession planning. 

To help address these challenges, GAO will need to devote sufficient 
resources to recruit and hire employees, as well as provide meaningful 
rewards and retention programs to help attract and retain a highly 
skilled and diverse workforce. GAO has developed a multiyear strategy 
to rebuild its staff to the optimal level needed to ensure GAO has the 
depth and broad-based skills needed to contribute to the vast array of 
topics about which the Congress seeks analysis and advice. 

[Refer to PDF for image: photograph of personnel] 

Source: PhotoDisc. 

[End of figure] 

GAO must also provide people with meaningful and targeted 
developmental experiences, training, and coaching for succession 
planning to ensure they feel valued and maximize their contributions 
to GAO's goals. GAO will equip its managers and supervisors with the 
requisite skills and incentives which are essential to develop staff 
effectively. GAO will continue to implement workplace practices that 
meet the needs of an ever-changing workforce in a fair and equitable 
manner by working with its union partners and employee organizations. 

One of GAO's human capital goals is to ensure that all staff are 
assessed fairly for their contributions. GAO will also continue to 
provide a range of workplace and work-life balance programs to enhance 
employee retention, and work with staff to evaluate these programs and 
identify improvements. GAO recognizes the criticality of implementing 
leading practices and leveraging technology to improve the efficiency 
of human capital processes. 

GAO's Human Capital Strategic Plan and its Diversity and Inclusion 
Strategic Plan provide a framework which supports GAO's vision for a 
work environment where all employees are valued, treated fairly, and 
given opportunities to develop to their full potential. Having a 
diverse workforce at all levels is an organizational strength that 
contributes to the achievement of results by bringing a wider variety 
of perspectives and approaches to policy development and 
implementation, strategic planning, problem solving, and decision 
making. 

To maintain and enhance a diverse workforce and inclusive work 
environment through strengthened recruiting and hiring initiatives, 
engaging and developing the workforce, and promoting an unbiased, 
collaborative work environment, GAO will implement the following 
performance goals and key efforts: 

Performance Goal 4.2.1: 
Strengthen recruiting and hiring initiatives to attract and retain a 
diverse workforce: 

Key Efforts: 

* Improve the efficiency and effectiveness of GAO's hiring processes 
by using leading practices and establishing relevant performance 
metrics. 

* Develop annual recruitment and hiring plans that support workforce 
planning and diversity goals and incorporate use of flexibilities and 
incentives to help achieve these goals. 

* Enhance GAO's recruiting and hiring processes to ensure hiring 
authorities and flexibilities facilitate GAO's ability to attract a 
talented, diverse workforce. 

* Use recognition tools, retention incentives, and work-life 
flexibilities to attract, reward and retain staff. 

* Continue evaluation and expansion of GAO's telework program to 
provide additional work-life balance and reduce operational costs, 
while maintaining productivity and work quality. 

Performance Goal 4.2.2: 
Develop the workforce to meet succession planning and individual goals: 

Key Efforts: 

* Promote continuous learning and development of the workforce through 
formal and informal initiatives. 

* Identify and adopt efficient and effective methods for engaging and 
developing the workforce in a virtual environment. 

* Emphasize coaching, mentoring, and feedback training to improve 
performance management practices. 

* Create a well-prepared pipeline for future vacancies through 
continued focus on mentoring, and strengthened knowledge transfer and 
succession planning efforts, including use of phased retirements. 

* Expand efforts to empower GAO employees on important financial 
literacy issues. 

Performance Goal 4.2.3: 
Promote a workplace culture that is fair and unbiased and that values 
opportunity and inclusiveness: ; 

Key Efforts: 

* Provide training and other initiatives to enhance awareness and 
promote an inclusive workplace culture where diversity is valued and 
all employees are treated with respect. 

* Ensure employees are treated fairly and equitably and progress is 
made towards goals in the diversity and inclusion strategic plan 
through continuous review of and adjustments to human capital 
practices and outcomes. 

Performance Goal 4.2.4: 
Promote a workplace culture that is fair and unbiased and that values 
opportunity and inclusiveness: 

Key Efforts: 

* Provide training and other initiatives to enhance awareness and 
promote an inclusive workplace culture where diversity is valued and 
all employees are treated with respect. 

* Ensure employees are treated fairly and equitably and progress is 
made towards goals in the diversity and inclusion strategic plan 
through continuous review of and adjustments to human capital 
practices and outcomes. 

[End of Strategic Objective 4.2] 

Strategic Objective 4.3: 
Expand Networks, Collaborations, and Partnerships that Promote 
Professional Standards and Enhance GAO's Knowledge, Agility, and 
Response Time. 

Figure: Objective 4.3 Performance Goals: 

[Refer to PDF for image: illustration] 

* Enhance professional accounting and auditing standards and 
communicate with the accountability community; 
* Enhance the capacity of the domestic and international accountability 
community to do quality work in auditing programs involving U.S. funds; 
* Enhance information sharing and collaboration with accountability 
organizations, advisory groups, Legislative Branch agencies, and 
professional organizations to expand audit and legal knowledge, 
expertise, and partnerships; 
* Enhance Information Sharing and Collaboration with Other Legislative 
Branch Agencies, Professional Organizations, and Others to Improve 
Internal Operations and Implementation of Leading Practices. 

[End of figure] 

In the face of fiscal constraints and tighter government budgets, 
collaboration and partnership among the auditing and accountability 
community will be essential to meet the calls of citizens and 
taxpayers for greater oversight, efficiency and effectiveness of 
government operations and spending. Increased public scrutiny of 
government in the aftermath of the global financial crisis has further 
underscored the importance of sound professional auditing and 
accounting standards. GAO will continue to be a leader in setting 
these standards and to coordinate with important stakeholders and 
partners to keep them current. Moreover, by leveraging its domestic 
and international partnerships, GAO will continue to build 
collaborative knowledge-sharing and capacity-building networks to 
enhance our ability to do audits, strengthen auditing standards, avoid 
duplication of effort, and share best practices with the wider audit 
and accountability communities. 

[Refer to PDF for image: illustration] 

Source: PhotoDisc. 

[End of figure] 

The U.S. government increasingly confronts large, complex issues 
spanning multiple international and domestic jurisdictional 
boundaries. GAO's collaboration with external organizations creates 
opportunities to address common challenges and leverage available 
resources in a constrained fiscal environment. GAO's collaboration 
with external organizations—-for example, to monitor international 
efforts to modernize and reform global financial regulations or to 
assess multilateral governance issues in a share region like the 
Arctic—-enhances the agency's audit capabilities and helps GAO to 
better respond to major cross-cutting issues. 

Domestic coordination with federal inspectors general and state and 
local auditors—-for example, in tracking the implementation of the 
federal stimulus and health care legislation, or in tracking emergency 
relief aid after natural disasters-—demonstrates the increasing 
importance of coordinating intergovernmental auditing expertise to 
more efficiently and effectively monitor program implementation and 
safeguard taxpayer dollars. To gain additional insight and to enhance 
the agency's auditing capacity, GAO collaborates as appropriate with 
nonprofit and private sector entities and supports knowledge-sharing 
forums that bring together auditors from federal, state, and local 
government. GAO's collaborative networks will allow us to identify 
lessons learned, leading practices, and emerging trends that benefit 
GAO's management teams and inform GAO's audit activities. Moreover, 
they provide a powerful knowledge base for addressing the increasingly 
complex challenges that face all levels of government. 

GAO supports domestic and international audit capacity-building 
initiatives to help assure that billions of dollars of federal money 
spent through state, local and international programs are not subject 
to waste, fraud and abuse. GAO will continue to work to build the 
capacity of domestic and international audit offices that cover 
programs and countries that ultimately receive U.S. funds. GAO will 
expand its outreach to governmental, nonprofit, and international 
organizations to further help ensure that US taxpayer dollars are 
spent efficiently and as intended, domestically and internationally. 

GAO sets U.S. government auditing and accountability standards for 
organizations both formally-—through publication of government and 
internal control standards and federal appropriations law principles—-
and informally, in conducting itself as a model government agency. GAO 
will continue its work to strengthen public sector accounting and 
auditing standards by expanding its collaboration with domestic and 
international standard setting bodies. These efforts are especially 
important amid calls for greater transparency and accountability in 
the aftermath of the financial crisis and renewed focus on government 
spending. GAO will also update professional auditing and 
accountability standards as needed to ensure they are robust in the 
future for the proper and efficient oversight of U.S. government 
spending. 

To expand networks, collaborations, and partnerships that promote 
professional standards and enhance its knowledge, agility, and 
response time, GAO has established the following performance goals and 
key efforts: 

Performance Goal 4.3.1: 
Enhance professional accounting and auditing standards and communicate 
with the accountability community: 

Key Efforts: 

* Strengthen public sector accounting and auditing standards through 
expanded coordination and collaboration with domestic and 
international standards setting organizations. 

* Monitor significant developments in accounting and auditing 
standards by domestic and international standards setting bodies for 
the public, private, and non-profit sectors. 

* Improve audit processes and procedures through enhanced domestic and 
international accountability community knowledge of professional and 
accounting standards and guidelines. 

Performance Goal 4.3.2: 
Enhance the capacity of the domestic and international accountability 
community to do quality work in auditing programs involving U.S. funds: 

Key Efforts: 

* Provide leadership on updating the charters or strategic plans of 
INTOSAI, the National Intergovernmental Audit Forum, and the Regional 
Intergovernmental Audit Forums to support their effective and 
efficient operation. 

* Expand capacity building in the international accountability 
community by advancing and supporting implementation of the INTOSAI 
Donors Funding Initiative and Capacity Building Goal. 

* Enhance GAO's current business model for providing capacity building 
to the domestic audit and accountability community through improved 
efficiency and effectiveness. 

* Develop strategies to respond to increasing requests for capacity 
building assistance from national audit offices in developing and 
emerging countries. 

* Create a Center of Auditing Excellence to provide learning 
opportunities to enhance the capacity of the domestic and 
international accountability community. 

Performance Goal 4.3.3: 
Enhance information sharing and collaboration with accountability 
organizations, advisory groups, Legislative Branch agencies, and 
professional organizations to expand audit and legal knowledge, 
expertise, and partnerships: 

Key Efforts: 

* Expand knowledge of audit approaches, identify emerging issues, 
inform our strategic planning process, and enhance intergovernmental 
information sharing through participation in domestic and 
international forums, task forces, working groups, communities of 
practice, and knowledge-sharing platforms. 

* Pursue collaborations with public, private, and non-profit sector 
organizations to expand GAO's partner network and enhance the 
efficiency and effectiveness of our audit work. 

* Enhance communication and coordination with stakeholders, such as 
inspectors general, to minimize duplication of effort and ensure 
effective and efficient use of resources. 

* Provide leadership on critical international accountability issues 
such as financial modernization and regulatory reform to promote 
dialogue and action. 

* Enhance education and outreach on procurement and appropriations law 
to promote a common understanding of and compliance with legal 
requirements. 

Performance Goal 4.3.4: 
Enhance Information Sharing and Collaboration with Other Legislative 
Branch Agencies, Professional Organizations, and Others to Improve 
Internal Operations and Implementation of Leading Practices: 

Key Efforts: 

* Expand collaboration with other legislative branch agencies to share 
information and expertise on operational issues and leading practices. 

* Enhance participation in government networks to share information 
and expertise on operational issues and leading practices. 

* Expand relationships with professional organizations in the private 
and non-profit sectors to access information on nongovernmental 
leading practices. 

[End of Strategic Objective 4.3] 

Strategic Objective 4.4: 
Be a Responsible Steward of GAO's Human, Information, Fiscal, 
Technological, and Physical Resources. 

Figure: Objective 4.4 Performance Goals: 

[Refer to PDF for image: illustration] 

* Proactively apply statutory and regulatory requirements and other 
enhancements for security, facilities, financial management, and other 
operational areas; 
* Leverage technology and business process reengineering to reduce 
costs, 
increase efficiency and effectiveness, and enable timely decision-
making; 
* Enable a more mobile virtual workforce. 

[End of figure] 

To continue to be a leading-practices agency, it is essential that 
GAO's business operations are efficient and effective and that agency 
systems provide the data needed to inform timely decisions. GAO 
continues to proactively address operational and management 
requirements to ensure excellence and aggressively pursues 
opportunities to improve operational efficiency while maintaining the 
quality of support provided to the Congress. 

GAO will proactively apply statutory and regulatory requirements and 
other enhancements to its operations, as well as the proper internal 
controls, to ensure that it adheres to the highest standards and 
follows leading practices to ensure the most effective and efficient 
use of limited resources. GAO will enhance its guidelines and ensure 
use of leading practices in the areas of safety and security, 
protection of privacy information, facilities management, and energy 
efficiency. 

GAO will continue to leverage technology to improve its business 
processes, particularly in areas that will enhance staff productivity 
and efficiency, facilitate management reporting and decision-making, 
and reduce operational costs. 

GAO will also enhance its information technology capabilities by 
streamlining our infrastructure and shifting to a virtualized, “cloud” 
environment to enable a more mobile, virtual workforce through 
enhanced communications, collaboration, and productivity tools which 
allow staff to work securely and seamlessly from any location using 
any end-user device connected to the GAO network. GAO's target network 
infrastructure for server and desktop virtualization is shown in 
Figure 63. 

Figure 63: Target Network Infrastructure for Server Virtualization
and Virtual Desktop Infrastructure (VDI): 

[Refer to PDF for image: illustration] 

Field Office; 
Telework; 
Remote Audit Site; 
Headquarters; 
In Transit; 
All interact with Internet. 

Internet interaction with: Headquarters: 
VDI; 
Data Center. 

Headquarters interacts with: 
Alternate Computing Facility; 
VDI. 

Source: GAO. 

[End of figure 63] 

To ensure GAO continues to be a responsible steward of the agency's 
human, information, fiscal, technological, and physical resources, GAO 
has established the following performance goals and key efforts: 

Performance Goal 4.4.1: 
Proactively apply statutory and regulatory requirements and other 
enhancements for security, facilities, financial management, and other 
operational areas: 

Key Efforts: 

* Enhance the protection of people and critical assets in headquarters 
and field offices through the use of physical security guidelines and 
leading practices for federal facilities. 

* Strengthen GAO's continuity planning and emergency preparedness 
activities to ensure that GAO effectively anticipates, monitors, and 
responds to emerging threats to our workforce and physical assets. 

* Enhance information security to protect GAO information and systems 
by continuously monitoring for threats, educating staff, and 
implementing protective measures. 

* Improve GAO's privacy program protections over personally 
identifiable information by implementing leading practices and 
training staff. 

* Develop and implement sustainability initiatives that support 
federal environmental goals to increase energy efficiency, reduce 
costs, and help prevent environmental degradation. 

* Enhance GAO's acquisitions program by implementing leading federal 
acquisition practices and expanding GAO's Contracting Officer's 
Representatives (CORs) certification and training program. 

* Revise GAO's internal control program to incorporate statutory and 
regulatory requirements and other operational enhancements implemented 
at GAO to ensure the continued integrity of data and systems. 

Performance Goal 4.4.2: 
Leverage technology and business process reengineering to reduce 
costs, increase efficiency and effectiveness, and enable timely 
decision-making: 

Key Efforts: 

* Streamline our information technology infrastructure and shift to a 
virtualized “cloud” environment to reduce costs, improve system 
performance, and increase data security. 

* Use business process reengineering to improve workflow, strengthen 
controls and enhance system support and project management. 

* Institutionalize a process improvement capability and enhance a 
culture of continuous improvement across the agency. 

* Fully implement a business intelligence solution which integrates 
engagement, human capital and financial data to support analysis, 
management reporting and decision-making. 

* Enhance GAO's financial management systems to integrate data needed 
for management decision-making, and provide information more 
transparently and efficiently using a shared services approach. 

* Leverage technology to improve business operations and processes to 
achieve greater effectiveness and efficiency. 

* Identify additional opportunities to optimize workspace use, improve 
building efficiency, and achieve cost savings while maintaining a 
comfortable work environment. 

* Further efforts to achieve cost savings in GAO's travel program 
through expanded use of noncontract carrier air fares, web-based 
collaboration tools, and videoconferencing technology. 

Performance Goal 4.4.3: 
Enable a more mobile virtual workforce: 

Key Efforts: 

* Provide a unified communications, collaboration, and productivity 
solution that enhances teamwork and collaboration capabilities using 
any end-user device connected to the GAO network. 

* Improve the ability for GAO staff to work remotely securely and 
seamlessly from any location while maintaining quality, productivity, 
and efficiency. 

* Assess the benefits and risks of enhanced telework to inform 
decisions on agencywide implementation, including impact on 
organizational culture and teamwork. 

[End of Strategic Objective 4.4] 

[End of Goal 4] 

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Legal products: 

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Review current job openings, apply online, and learn about GAO's teams 
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Source: GAO. 

[End of section] 

Footnotes: 

[1] The economic recovery and job growth trend discussed in our 
previous plan for fiscal years immediately following the 2007-2009 
recession remains important and is now integrated into our other trend 
papers. 

[2] Clapper, James R., Statement to the Senate Committee on Armed 
Services, Worldwide Threat Assessment of the US Intelligence 
Community, Hearing, April 18, 2013; and State, Country Reports on 
Terrorism 2012: Chapter 5: Terrorist Safe Havens (Update to 7120 
Report), (Washington, D.C.: May 2013). 

[3] 2013 Worldwide Threat Assessment of the US Intelligence Community. 

[4] State, Country Reports on Terrorism 2012: Chapter 5: Terrorist 
Safe Havens (Update to 7120 Report), (Washington, D.C.: May 2013). 

[5] Clapper, James R. Also see the Changing Dynamics of Global 
Interdependence and Multilateral Cooperation Trend on page 26 for a 
further discussion of transnational crime. 

[6] DOD, Nuclear Posture Review Report, (Washington, D.C.: April 2010). 

[7] GAO, ICBM Modernization: Approaches to Basing Options and 
Interoperable Warhead Designs Need Better Planning and 
Synchronization, [hyperlink, http://www.gao.gov/products/GAO-13-831], 
(Washington, D.C.: Sept. 29, 2013). 

[8] GAO, Modernizing the Nuclear Security Enterprise: NNSA's Budget 
Estimates Do Not Fully Align with Plans, [hyperlink, 
http://www.gao.gov/products/GAO-14-45], (Washington, D.C.: Dec. 10, 
2013). 

[9] GAO, Cybersecurity: A Better Defined and Implemented National 
Strategy Is Needed to Address Persistent Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-13-462T], (Washington, D.C.: Mar. 7, 
2013). 

[10] DOD, Joint Operational Access Concept, (Washington, D.C.: Jan. 
17, 2012). 

[11] [hyperlink, http://www.gao.gov/products/GAO-13-283]. 

[12] DOD, Annual Report to Congress: Military and Security 
Developments Involving the People's Republic of China 2013, 
(Washington, D.C.: 2013). 

[13] Department of State, World Military Expenditures and Arms 
Transfers, 2012 Edition, (Washington, D.C.: 2012). 

[14] The White House Office of the Press Secretary, “Remarks By 
President Obama to the Australian Parliament,” (Washington, D.C.; Nov. 
17, 2011) and The White House, Sustaining U.S. Global Leadership: 
Priorities for 21st Century Defense, (Washington, D.C.: January 2012). 

[15] U.S. Department of State, U.S. Relations with China Fact Sheet, 
(Washington, D.C.: Aug. 16, 2013). 

[16] Thomas R. Karl, Jerry M. Melillo, and Thomas C. Peterson, eds. 
Global Climate Change Impacts in the United States (Cambridge 
University Press, 2009). USGCRP coordinates and integrates the 
activities of 13 federal agencies that conduct research on changes in 
the global environment and their implications for society. USGCRP 
began as a presidential initiative in 1989 and was codified in the 
Global Change Research Act of 1990 [Pub. L. No. 101-606, § 103 
(1990)]. USGCRP-participating agencies are the Departments of 
Agriculture, Commerce, Defense, Energy, Interior, Health and Human 
Services, State, and Transportation; U.S. Agency for International 
Development; Environmental Protection Agency; National Aeronautics and 
Space Administration; the National Science Foundation; and the 
Smithsonian Institution. 

[17] Dr. Michael McElroy and Dr. D. James Baker, Climate Extremes: 
Recent Trends with Implications for National Security, (Washington, 
D.C.: October 2012). 

[18] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-13-283], (Washington, D.C.: February 
2013). 

[19] DOD, FY 2012 Climate Change Adaptation Roadmap, (Washington, 
D.C.: 2012). 

[20] [hyperlink, http://www.gao.gov/products/GAO-13-283]. 

[21] Tax expenditures are reductions in a taxpayer's tax liability 
that are the result of special exemptions and exclusions from 
taxation, deductions, credits, deferrals of tax liability, or 
preferential tax rates. 

[22] Under Federal Reserve System policy, excess Federal Reserve Bank 
earnings are paid to the federal government. The federal government 
reported such net earnings of about $82 billion for fiscal year 2012, 
still well above its historical levels. 

[23] See also “Leveraging Advances in Information and Communications 
Technologies,” p. xx. 

[24] GAO defines national competitiveness as the productivity with 
which a nation utilizes its set of institutions, policies, and human, 
capital and natural endowments to produce goods and services, for the 
prosperity of its people. 

[25] Nanoscale science and engineering characterize and manipulate the 
properties and behavior of materials in units equal to 1 billionth of 
a meter--approximately the length of three to six atoms placed side by 
side or the width of a single strand of DNA. A human hair is between 
50,000 and 100,000 nanometers thick. 

[26] A disruptive innovation is an innovation that helps create a new 
market and value network, eventually disrupting an existing market and 
value network (over a few years or decades), thereby displacing an 
earlier technology. 

[27] Malaria remains a threat to the world's population. According to 
the World Health Organization (WHO), in 2010, 219 million cases of 
malaria and an estimated 660,000 malaria-related deaths occurred 
globally. 

[28] Other trends in the energy sector include the potentially 
favorable improvements economically in energy storage systems, such as 
very high energy density batteries for electric vehicles, as well as 
higher performing, lower cost photovoltaic solar power systems that 
augment the electricity production and distribution demands of the 
conventional grid system. 

[29] See, for example, [hyperlink, 
http://www.gao.gov/products/GAO-11-71], [hyperlink, 
http://www.gao.gov/products/GAO-10-675], and [hyperlink, 
http://www.gao.gov/products/GAO-08-1080]. 

[30] IDC Digital Universe Study, sponsored by EMC (Dec. 2012). 

[31] See “Advances in Communications Networks and Information 
Technologies”, page 41. 

[End of footnotes] 

[End of Strategic Plan, 2014-2019]