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entitled 'GAO Performance and Accountability Report Fiscal Year 2004' 
which was released on November 15, 2004.

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GAO: 

Performance & Accountability Report: 

Fiscal Year 2004: 

U.S. Government Accountability Office: 

Serving the Congress and the Nation: 

Accountability: 

Integrity: 

Reliability: 

[See PDF for image] - graphic text:

SERVING THE CONGRESS: 

GAO’S 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.

SCOPE OF WORK: 

GAO performs a range of oversight-, insight-, and foresight-related 
engagements, a vast majority of which are conducted in response to 
congressional mandates or requests. GAO’s engagements include 
evaluations of federal programs; performance, financial and management 
audits; policy analyses; legal opinions; bid protest adjudications; 
and investigations. 

CORE VALUES: ACCOUNTABILITY: 

We help the Congress oversee federal programs and operations to ensure 
accountability to the American people. GAO’s analysts, auditors, 
lawyers, economists, information technology specialists, 
investigators, and other multidisciplinary professionals seek to 
enhance the economy, efficiency, effectiveness, and credibility of the 
federal government both in fact and in the eyes of the American 
people.

CORE VALUES: INTEGRITY: 

We set high standards for ourselves in the conduct of GAO’s work. Our 
agency takes a professional, objective, fact-based, nonpartisan, 
nonideological, fair, and balanced approach to all activities. 
Integrity is the foundation of reputation, and GAO’s approach to work 
ensures both.

CORE VALUES: RELIABILITY: 

We at GAO want our work to be viewed by the Congress and the American 
public as reliable. We produce high quality reports, testimony, 
briefings, legal opinions, and other products and services that are 
timely, accurate, useful, clear, and candid.

[End of figure]

Contents:

Abbreviations:

How to Use This Report:

Introduction:

From the Comptroller General:

Financial Reporting Assurance Statements:

About GAO:

Mission:

Organizational Structure:

Strategic Management Process and Structure:

How We Measure Our Performance:

Part I: Management's Discussion and Analysis:

Achieving Results on Behalf of the Congress and All Americans:

Focusing on Results:

Focusing on Our Clients:

Focusing on Our People:

GAO's High-Risk Program:

Building Partnerships:

Managing Our Resources:

Strategies and Challenges:

Part II: Performance Information:

Performance Information by Strategic Goal:

Goal 1 Results:

Goal 1 Overview:

Financial Benefits:

Other Benefits:

New Recommendations Made:

Testimonies:

Multiyear Performance Goals:

Goal 2 Results:

Goal 2 Overview:

Financial Benefits:

Other Benefits:

New Recommendations Made:

Testimonies:

Multiyear Performance Goals:

Goal 3 Results:

Goal 3 Overview:

Financial Benefits:

Other Benefits:

New Recommendations Made:

Testimonies:

Multiyear Performance Goals:

Goal 4 Results:

Goal 4 Overview:

Data Quality and Program Evaluation:

Verifying and Validating Performance Data:

Program Evaluation:

Part III: Financial Information:

From the Chief Financial Officer:

Overview of Financial Statements:

Financial Systems and Internal Controls:

Purpose of Each Financial Statement:

Balance Sheet:

Statement of Net Cost:

Statement of Changes in Net Position:

Statement of Budgetary Resources:

Statement of Financing:

Notes to Financial Statements:

Audit Advisory Committee's Report:

Independent Auditor's Report:

Part IV: Appendixes:

1. Accomplishments and Other Contributions:

2. From the Inspector General:

3. GAO's Report on Personnel Flexibilities:

4. GAO's Information Security Efforts:

Image Sources:

Obtaining Copies of GAO Documents:

[End of Contents]

Abbreviations:

AIDS: acquired immune deficiency syndrome:

AOC: Office of the Architect of the Capitol:

BLS: Bureau of Labor Statistics:

CAO: Chief Administrative Officer and Chief Administrative Office:

CBP: U.S. Customs and Border Protection:

CIO: Chief Information Officer:

CMS: Centers for Medicare & Medicaid Services:

CPI: Consumer Price Index:

CSRS: Civil Service Retirement System:

DHS: Department of Homeland Security:

DOD: Department of Defense:

DOE: Department of Energy:

DOL: Department of Labor:

EAGLE: Electronic Assistance Guide for Leading Engagements:

EPA: Environmental Protection Agency:

FCC: Federal Communications Commission:

FDA: Food and Drug Administration:

FECA: Federal Employees' Compensation Act:

FEHBP: Federal Employees Health Benefit Program:

FEGLIP: Federal Employees Group Life Insurance Program:

FERS: Federal Employees Retirement System:

FHWA: Federal Highway Administration:

FICA: Federal Insurance Contributions Act:

FISMA: Federal Information Security Management Act:

FTE: full-time equivalent:

GAAP: Generally Accepted Accounting Principles:

GAGAS: generally accepted government auditing standards:

GAO: Government Accountability Office:

GSE: government-sponsored enterprise:

HHS: Department of Health and Human Services:

HUD: Department of Housing and Urban Development:

IG: Office of Inspector General:

INTOSAI: International Organization of Supreme Audit Institutions:

IRS: Internal Revenue Service:

IT: information technology:

NASA: National Aeronautics and Space Administration:

NFC: National Finance Center:

OMB: Office of Management and Budget:

OPM: Office of Personnel Management:

PART: Program Assessment Rating Tool:

PBGC: Pension Benefit Guaranty Corporation:

PDP: Professional Development Program:

QCI: Quality and Continuous Improvement:

SGA: substantial gainful activity:

SSA: Social Security Administration:

TRICARE: DOD's managed health care program:

UAV: unmanned aerial vehicles:

USACE: U.S. Army Corps of Engineers:

USDA: U.S. Department of Agriculture:

US-VISIT: United States Visitor and Immigrant Status Indicator 
Technology:

VA: Department of Veterans Affairs:

VETS: Veterans Employment and Training Service:

[End of Abbreviations]

How to Use This Report:

This report describes the U.S. Government Accountability Office's (GAO) 
performance measures, results, and accountability processes for fiscal 
year 2004. In assessing our performance, we are comparing actual 
results against targets and goals set in our annual performance plan, 
which were developed to help carry out our strategic plan. Our complete  
set of strategic planning and performance and accountability reports is 
available on our Web site at [Hyperlink, http://www.gao.gov/sp.html].

This report has an introduction and 4 major parts:

* Introduction:

Look here for the letter from the Comptroller General and a statement 
attesting to the completeness and accuracy of the data in this report. 
Also, look here for a discussion of our mission, organizational 
structure, strategic planning process, and process for assessing our 
performance.

* Management's Discussion and Analysis:

Look here for our agencywide performance results and use of resources 
in fiscal year 2004. Look here also for information on the strategies 
we use to achieve our goals and the management challenges and external 
factors that affect our performance.

* Performance Information:

Look here for details on our performance results by strategic goal in 
fiscal year 2004 and the targets we are aiming for in fiscal year 2005. 
Look here also for an explanation of how we ensure the completeness and 
reliability of the performance data used in this report.

* Financial Information:

Look here for details on our finances in fiscal year 2004, including a 
letter from our Chief Financial Officer, audited financial statements 
and notes, and the reports from our external auditor and audit advisory 
committee. Look here also for information on our internal controls and 
for an explanation of what kind of information each of our financial 
statements conveys.

* Appendixes:

Look here for detailed write-ups about our most significant 
accomplishments and contributions recorded in fiscal year 2004, for our 
Inspector General's assessment of our agency's management challenges, 
and for information on certain human capital management flexibilities 
and on information security reform measures.

[End of How to Use This Report]

Introduction: 

From the Comptroller General:

November 15, 2004:

As I reflect on GAO's work during the past fiscal year, I am pleased 
with and proud of our results in serving the Congress and the American 
people, which we convey in this fiscal year 2004 performance and 
accountability report. Our business involves helping to improve 
performance and ensure accountability in connection with a broad range 
of federal programs, policies, and activities. Simply put, we try to 
help improve the way the federal government works for the benefit of 
all of our nation's citizens. To determine our success, we set 
performance targets and follow financial management practices that help 
ensure that we are making the best use of the federal funds invested in 
us.

In short, fiscal year 2004 was an exceptional year for GAO. For 
example, we received a clean opinion from independent auditors on our 
financial statements and met or exceeded all but one of our key 
performance measures. In addition, we exceeded or equaled our all-time 
record for six of our seven key performance indicators while continuing 
to improve our client and employee feedback survey results. I am 
especially happy to report that we documented $44 billion in financial 
benefits--a return of $95 for every dollar spent, or $13.7 million per 
employee. We also recorded over 1,000 nonfinancial benefits that helped 
to shape important legislation, such as the Social Security Protection 
Act, and increase the efficiency of various federal programs, thus 
improving the lives of millions of Americans. In addition, the rate at 
which our recommendations had been implemented by the Congress or 
federal agencies rose to 83 percent and we made over 2,700 new 
recommendations in fiscal year 2004. We just missed our timeliness goal 
by delivering 97 percent of our products to the Congress when promised. 
This report demonstrates our many contributions in fiscal year 2004 
toward improving the government. I am confident that the performance 
data and financial information in this report are complete and 
reliable, as noted in GAO's statement of assurance, which appears just 
after this letter.

Not surprisingly, during fiscal year 2004, our work covered a number of 
major topics of concern to the nation and, in some cases, the world. 
For example, we reported on the reconstruction efforts in Afghanistan 
and Iraq; highlighted important concerns about pay and other support 
for the National Guard and Reserve forces; reported on numerous topics 
related to homeland security, including improving mission effectiveness 
at the Department of Homeland Security, curbing the use of counterfeit 
identity documents, and making our nation's transportation system safer 
from potential acts of terrorism; continued to raise concerns and 
propose a strategy for dealing with the nation's long-term fiscal 
imbalance; summarized key health care statistics and published a 
proposed framework for related reforms; and provided staff support to 
the 9/11 Commission. We also testified more than 200 times before the 
Congress, contributing to the public debate on a variety of topics in 
the international area as well as on homeland security and other 
domestic issues. For example, we testified on improvements needed in 
our overseas visa process, security weaknesses on our railways and at 
our ports, and issues related to the 9/11 Commission's recommendations. 
We also testified on health care issues such as strengthening the 
Medicare program and increasing the public's awareness of risks 
associated with Internet pharmacies. In addition, we spoke about our 
work examining the risks associated with private pension plans and 
various revenue-related issues, such as abusive tax shelters.

The American people benefited this year as federal agencies took a wide 
range of actions based on our analyses and recommendations, while our 
efforts also heightened the visibility of issues needing attention. For 
example, adoption of our recommendations will improve oversight of 
nursing home fire safety, increase security measures at chemical 
facilities nationwide, strengthen tools to fight terrorism, and help 
curb the use of abusive tax shelters and schemes. It is important for 
our nation and citizens not only that these issues are made visible, 
but also that the nation's leaders address them. We feel fortunate and 
honored that, in the vast majority of cases, our clients and federal 
agencies listen to what we have to say and act on our recommendations. 
Furthermore, virtually all of our reports are published and available 
on our Web site ([Hyperlink, http://www.gao.gov]), keeping us 
accountable to the American people and the world at large.

In fiscal year 2004, we also continued to take steps internally to be a 
model federal agency and a world-class professional services 
organization. These steps helped us to address our three management 
challenges--human capital, physical security, and information 
security. Through the GAO Human Capital Reform Act of 2004, the 
Congress granted GAO several additional human capital flexibilities 
that will allow us to, among other things, move to an even more 
performance-oriented and market-based compensation system. Our most 
valuable asset continues to be our people, and the flexibilities 
granted in this act will help us to continue to modernize our people-
related policies and strategies, which, in turn, will help to ensure 
that we are well equipped to serve the Congress and the American people 
in the years to come. One other change made in the act was to modify 
our name from the General Accounting Office to the Government 
Accountability Office to more accurately reflect the nature of our 
work. Despite this change, we remain GAO and all that it stands for--
accountability, integrity, and reliability.

In summary, fiscal year 2004 was a very successful year for us. I 
believe that those who read this report will agree that the taxpayers 
received an excellent return on their investment in GAO.

Signed by: 

David M. Walker: 
Comptroller General of the United States:

[End of From the Comptroller General]

Financial Reporting Assurance Statements:

November 15, 2004:

We, as GAO's executive committee, are responsible for preparing and 
presenting the financial statements and other information included in 
this Performance and Accountability Report. The financial statements 
included herein are presented in conformity with U.S. generally 
accepted accounting principles; incorporate management's reasonable 
estimates and judgments, where applicable; and contain appropriate and 
adequate disclosures. Based on our knowledge, the financial statements 
are presented fairly in all material respects, and other financial 
information included in this report is consistent with the financial 
statements.

On the basis of GAO's comprehensive management control program, we are 
pleased to certify, with reasonable assurance, that:

* Our financial reporting is reliable--transactions are properly 
recorded, processed, and summarized to permit the preparation of 
financial statements in accordance with U.S. generally accepted 
accounting principles, and assets are safeguarded against loss from 
unauthorized acquisition, use, or disposition.

* GAO is in compliance with all applicable laws and regulations--
transactions are executed in accordance with (1) laws governing the use 
of budget authority and other laws and regulations that could have a 
direct and material effect on the financial statements and (2) any 
other laws, regulations, and governmentwide policies applicable to GAO.

* Our performance reporting is reliable--transactions and other data 
that support reported performance measures are properly recorded, 
processed, and summarized to permit the preparation of performance 
information in accordance with the criteria stated by GAO's management.

We also believe these same systems of accounting and internal controls 
provide reasonable assurance that GAO is in compliance with the spirit 
of 31 U.S.C. 3512 (commonly referred to as the Federal Managers' 
Financial Integrity Act). This is an objective that we set for 
ourselves even though, as part of the legislative branch of the federal 
government, we are not technically required to do so.

Signed by: 

David M. Walker: 
Comptroller General of the United States; 

Signed by: 

Gene L. Dodaro: 
Chief Operating Officer; 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer; 

Signed by: 

Anthony H. Gamboa: 
General Counsel; 

[End of Financial Reporting Assurance Statements]

About GAO:

Mission:

GAO is an independent, nonpartisan, professional services agency in the 
legislative branch of the federal government. Commonly known as the 
"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.

We exist 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.

We accomplish our mission by providing reliable information and 
informed analysis while making recommendations for improvement, when 
appropriate, on a wide variety of issues. The vast majority of our work 
is undertaken in response to congressional requests. However, as 
authorized by our enabling legislation, we also independently allocate 
a limited portion of our resources for research and development that 
enables us to (1) invest in issues the Congress may need to address in 
the future and (2) provide products of broad institutional interest to 
the Congress.

Our efforts to support the Congress and inform the general public 
include:

* engaging in a range of oversight, insight, and foresight activities 
that span the full breadth and scope of federal programs, policies, 
operations, and performance;

* overseeing government operations through financial and other 
performance audits to determine whether public funds are being spent 
efficiently and effectively;

* providing legal opinions to determine whether agencies are in 
compliance with applicable laws and regulations;

* investigating whether illegal or improper activities are occurring;

* analyzing the financing for government activities;

* conducting a range of constructive engagements in which we work 
proactively with agencies, when appropriate, to help guide their 
efforts toward achieving positive results;

* studying national and international trends and challenges to 
anticipate their implications for public policy;

* conducting policy analyses to assess needed actions and the 
implications of proposed actions;

* publishing thousands of reports and other documents annually; and:

* testifying before the Congress.

We conduct specific engagements as a result of requests from 
congressional committees and mandates written into legislation, 
resolutions, and committee reports. In fiscal year 2004, we devoted 90 
percent of our engagement resources to work requested or mandated by 
the Congress. We independently initiated the remaining 10 percent of 
the engagement work, as authorized by our enabling legislation; much of 
this work was related to programs that are at high risk for fraud, 
abuse, and mismanagement; reviews of agencies' budget requests; and 
various emerging challenges facing the Congress and the 
country.[Footnote 1] By making recommendations to improve the 
accountability, operations, and services of government agencies, we 
contribute to increasing the effectiveness of federal spending and 
enhancing the taxpayers' trust and confidence in their government.

As a legislative branch agency, we differ in some ways from executive 
branch agencies. We are, for instance, exempt from many laws applicable 
to the executive branch. However, we hold ourselves to the spirit of 
many of these laws, including 31 U.S.C. 3512 (commonly referred to as 
the Federal Managers' Financial Integrity Act), the Government 
Performance and Results Act of 1993, and the Federal Financial 
Management Improvement Act of 1996.[Footnote 2] Accordingly, this 
performance and accountability report for fiscal year 2004 supplies 
what we consider to be information that is at least equivalent to that 
supplied by executive branch agencies in their annual performance and 
accountability reports.

GAO’s 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, which is in the 
legislative branch of the federal government, had begun to perform the 
type of work we are noted for today—program evaluation—which examines 
whether government programs are meeting their objectives. Our new name, 
the U.S. Government Accountability Office, effective July 7, 2004, 
reflects our people, our work, and our reputation. 

Organizational Structure:

As the Comptroller General of the United States, David M. Walker is the 
head of GAO and is serving a 15-year term that began in November 1998. 
The Comptroller General is assisted by three other Executive Committee 
members, who are Chief Operating Officer Gene L. Dodaro, Chief 
Administrative Officer/Chief Financial Officer Sallyanne Harper, and 
General Counsel Anthony H. Gamboa. To achieve our strategic goals, we 
maintain a workforce of highly trained professionals with degrees in 
many academic disciplines, including accounting, law, engineering, 
public and business administration, economics, and the social and 
physical sciences. About three-quarters of our approximately 3,300 
employees are based at our headquarters in Washington, D.C; the rest 
are deployed in 11 field offices across the country. As shown in 
Figure 1, these staff are arrayed in the following 13 research, audit, 
and evaluation teams:

* Acquisition and Sourcing Management;

* Applied Research and Methods;

* Defense Capabilities and Management;

* Education, Workforce, and Income Security;

* Financial Management and Assurance;

* Financial Markets and Community Investment;

* Health Care;

* Homeland Security and Justice;

* Information Technology;

* International Affairs and Trade;

* Natural Resources and Environment;

* Physical Infrastructure; and:

* Strategic Issues.

The teams are organized under our three external strategic goals (see 
the Strategic Management Process and Structure section for more 
information about our strategic goals). The teams are supported by 
staff offices, such as General Counsel and Congressional Relations, and 
the following mission support units organized under our fourth and 
only internal strategic goal:

* Controller/Administrative Services Office,

* Human Capital Office,

* Information Systems and Technology Services,

* Knowledge Services, and:

* Professional Development Program.

GAO Field Locations:

Atlanta: 
Boston: 
Chicago: 
Dallas: 
Dayton: 
Denver: 
Huntsville: 
Los Angeles: 
Norfolk: 
San Francisco: 
Seattle: 

Figure 1: Organizational Structure:

[See PDF for image] - graphic text:

An organization chart showing GAO’s basic structure. The agency’s top 
level of organization was the Executive Committee, which includes the 
Comptroller General, the Chief Operating Officer, the Chief 
Administrative Officer/Chief Financial Officer, and the General 
Counsel. Twenty-three units report directly to the Comptroller 
General and the Chief Operating Officer. The units included the 
following staff offices: Public Affairs, Strategic Planning and 
External Liaison, Congressional Relations, Opportunity and 
Inclusiveness, and Inspector General, which report to the Comptroller 
General; and Quality and Continuous Improvement and the Office of 
Special Investigations, which report to the Chief Operating Officer. 

Other units that report to the Chief Operating Officer include teams 
and field operations that conduct audits, evaluations, and research. 
These teams perform work primarily supporting one of our three external 
strategic goals but several teams perform work in support of multiple 
strategic goals. Generally the teams fall under the following goals: 

Goal 1: 

Provide timely, quality service to the Congress and the federal 
government to address current and emerging challenges to the well-being 
and financial security of the American people. 

* Education, Workforce, and Income Security; 
* Financial Markets and Community Investment; 
* Health Care; 
* Homeland Security and Justice; 
* Natural Resources and Environment; 
* Physical Infrastructure; 

Goal 2: 

Provide timely, quality service to the Congress and the federal 
government to respond to the changing security threats and the 
challenges of global interdependence. 

* Acquisition and Sourcing Management; 
* Defense Capabilities and Management; 
* International Affairs and Trade; 

Goal 3: 

Help transform the federal government’s role and how it does business 
to meet 21st century challenges. 

* Applied Research and Methods; 
* Financial Management and Assurance; 
* Information Technology; 
* Strategic Issues; 

Goal 4: 

Five units that report to the Chief Administrative Officer support our 
fourth goal; which is to maximize the value of GAO by being a model 
federal agency and a world-class professional services organization. 
These are: 

* Controller; 

* Human Capital Office: 
- Chief Human Capital Officer; 

* Information Systems and Technology Services: 
- Chief Information Officer; 

* Knowledge Services: 
- Chief Knowledge Services Officer; 

* Professional Development Program.

General Counsel's structure largely mirrors the agency's goal 
structure, and attorneys assigned to a goal work with teams on specific 
engagements. General Counsel has support or advisory relationship with 
the goals and teams rather than a direct reporting relationship. 
General Counsel provides audit and other legal support services for 
all goals and staff offices and manages GAO’s procurement law and bid 
protest work. 

Source: GAO.

Senior executives in charge of the teams that support our strategic 
goals manage a mix of engagements and ensure that the Congress's need 
for information on quickly emerging issues is met as we continue 
longer-term work efforts that flow from our strategic plan. To 
effectively serve the Congress with a finite set of resources, senior 
managers, in consultation with our congressional clients, determine the 
timing and priority of engagements for which they are responsible.

[End of Organizational Structure]

Strategic Management Process and Structure:

To ensure that we are well positioned to meet the Congress's current 
and future needs, we update our 6-year strategic plan every 3 years, 
consulting extensively during the update with our clients on Capitol 
Hill and with other experts (see our complete strategic plan on 
[Hyperlink, http://www.gao.gov/sp/d04534sp.pdf]). Using the plan as a 
blueprint, we lay out the areas in which we expect to conduct research, 
audits, analyses, and evaluations to meet our clients' needs, and we 
allocate the resources we receive from the Congress accordingly. Given 
the increasingly fast pace with which crucial issues emerge and evolve, 
we design a certain amount of flexibility into our plans and staffing 
structure so that we can respond readily to the Congress's changing 
priorities. When we revise our plans or our allocation of resources, we 
disclose those changes in annual performance plans which are posted--
like our strategic plan--on the Web for public inspection 
([Hyperlink, http://www.gao.gov/sp.html]). For example, we issued our 
performance plan for fiscal year 2005 in May 2004 and plan to issue our 
fiscal year 2006 performance plan as soon as the budget process 
permits. Each year, we hold ourselves accountable to the Congress and 
to the American people for our performance, primarily through the 
annual performance and accountability report. However, we have included 
some information about future plans in this report to provide as 
cohesive a view as possible of what we have done, what we are doing, 
and what we expect to do to support the Congress and to serve the 
nation. Last year, the Association of Government Accountants awarded us 
for the third consecutive year its Certificate of Excellence in 
Accountability Reporting for our fiscal year 2003 performance and 
accountability report. According to the association, this certificate 
means that we produced an interesting and informative report that 
achieved the goal of complete and fair reporting. We also received 
awards from several other organizations for our fiscal year 2003 
report. 

[See PDF for image] - graphic text: 

A graphic that shows the performance and accountability report for 
fiscal year 2003 along with award certificates from the Association of 
Government Accountants, Graphic Design:USA, the League of American 
Communications Professionals, and the American Business Communicators. 

[End of figure]

Our strategic plan and management process is based on a hierarchy of 
four elements--strategic goals, strategic objectives, performance 
goals, and key efforts. This hierarchy establishes the structure we use 
to align our work and resources and to discuss our performance. (See 
fig. 2.)

Figure 2: GAO's Strategic Planning Hierarchy:

[See PDF for image] - graphic text:

A four step pyramid illustrating GAO's strategic planning hierarchy. 

Step 1: Strategic Goals (4); 
Step 2: Strategic Objectives (21); 
Step 3: Performance Goals (99); 
Step 4: Key Efforts (400+); 

Source: GAO. 

[End of figure]

Strategic Goals:

At the highest level, we describe our performance in terms of four 
strategic goals. Our work is primarily organized under three broad 
strategic goals that span both domestic and international issues that 
affect the lives of all Americans as well as the issues specific to 
governance that influence how well the nation's current and future 
interests are served by the U.S. government. (See fig. 3.) In addition, 
we have a fourth internal strategic goal aimed at maximizing our 
productivity through such efforts as steady investments in information 
technology (IT) and ensuring the safety and security of our people, 
information, and assets.

Figure 3: GAO's Goals and Selected Issues:

Goal: 1; 
Description: Provide timely, quality service to the Congress and the 
federal government to address current and emerging challenges to the 
well-being and financial security of the American people; 
In fiscal year 2004, GAO provided information that helped to...
* Protect Americans from identity theft; 
* Modernize federal disability programs; 
* Promote healthful eating in schools; 
* Ensure that Medicare providers are paid appropriately; 
* Enhance the care and safety of nursing home residents; 
* Ensure that steps are taken to increase the safety of commercial 
aviation; 
* Foster more effective federal response to wildland fires; 
* Implement postal service reforms to address structural and systemic 
deficiencies; 
* Improve the enforcement of fair housing policies; 
* Improve environmental cleanup at former defense sites.

Goal: 2; 
Description: Provide timely, quality service to the Congress and the 
federal government to respond to changing security threats and the 
challenges of global interdependence; 
In fiscal year 2004, GAO provided information that helped to...
* Oversee the reconstruction of Afghanistan and Iraq; 
* Inform congressional decision making on funding for military needs; 
* Improve the Missile Defense Agency's acquisition strategy; 
* Improve oversight of federally supported financial institutions; 
* Provide investors with better information on mutual fund expenses; 
* Strengthen the tools to protect our borders and improve the 
government's ability to fight terrorist attacks; 
* Protect against potential terrorist threats involving the smuggling 
of nuclear materials; 
* Inform congressional decision making on the military's aging fleet 
of aerial refueling aircraft; 
* Enhance domestic security with better data on illegal aliens; 
* Analyze how U.S. interests are served through trade agreements and 
programs.

Goal: 3; 
Description: Help transform the federal government's role and how it 
does business to meet 21st century challenges; 
In fiscal year 2004, GAO provided information that helped to...
* Strengthen the Department of Homeland Security's (DHS) IT management; 
* Strengthen management of the space program by improving the National 
Aeronautics and Space Administration's (NASA) cost-estimating 
processes; 
* Transform and modernize the accountability profession; 
* Reveal that the government has paid for employee degrees from diploma 
mills and other unaccredited schools; 
* Audit the U.S. government's financial statements; 
* Increase decision makers' understanding of the federal government's 
long-term fiscal imbalance; 
* Alert the Congress to abusive tax shelters and schemes; 
* Reform the military's processes for acquiring satellites and other 
space-related systems that provide intelligence.

Goal: 4; 
Description: Maximize the value of GAO by being a model federal agency 
and a world-class professional services organization; 
In fiscal year 2004, GAO provided information that helped to...
* Serve as a model for other federal agencies by making effective use 
of enhanced human capital tools and flexibilities and using enabling 
technology to improve GAO's crosscutting business practices.

Source: GAO. 

[End of figure]

Strategic Objectives:

Each of the strategic goals is supported by a set of objectives. Under 
strategic goal 1, for instance, are 8 strategic objectives that call 
for us to address issues that range from health care needs and 
financing to a secure and effective national physical infrastructure. 
Altogether, there are 21 strategic objectives. (See the Strategic Plan 
Framework) Our organizational units typically contribute to the 
achievement of more than one strategic objective, with some working 
toward more than one strategic goal as well. This matrixing allows us 
more flexibility in deploying the agency's resources to meet 
congressional requests on complex issues.

[See PDF for image] - graphic text:

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

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.

Themes:

* Long-Term Fiscal Imbalance;

* National Security;

* Global Interdependence;

* Changing Economy;

* Demographics;

* Science and Technology;

* Quality of Life;

* Governance;

Goals and Objectives:

Provide Timely, Quality Service to the Congress and the Federal 
Government to...

Address Current and Emerging Challenges to the Well-Being and Financial 
Security of the American People related to...

* Health care needs and financing;

* Education and protection of children;

* Work opportunities and worker protection;

* Retirement income security;

* Effective system of justice;

* Viable communities;

* Natural resources use and environmental protection;

* Physical infrastructure;

Provide Timely, Quality Service to the Congress and the Federal 
Government to...

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving...

* Emerging threats;

* Military capabilities and readiness;

* Advancement of U.S. interests;

* Global market forces;

Help Transform the Federal Government Government's Role and How It 
Does Business to Meet 21st Century Challenges by assessing...

* Roles in achieving federal objectives;

* Government transformation;

* Key management challenges and program risks;

* Fiscal position and financing of the government:

Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of...

* Client and customer satisfaction;

* Strategic leadership;

* Institutional knowledge and experience;

* Process improvement;

* Employer of choice:

Core Values:

* Accountability;

* Integrity;

* Reliability;

Fiscal Years 2004-2009. 

[End of GAO's Strategic Plan Framework]

Performance Goals:

About 100 multiyear qualitative performance goals further define the 
strategic objectives and describe major areas in which we expect to 
make a contribution over 2 or more years. For instance, 7 performance 
goals support our strategic objective on health care needs and 
financing--one of them is to evaluate Medicare reform, financing, and 
operations. Performance goals constitute our strategies for achieving 
our strategic goals and objectives; they are listed later in the 
Performance Information section of this report.

Key Efforts:

Finally, more than 400 key efforts describe the work we must do to 
accomplish our performance goals. For example, analyzing the potential 
consequences of Medicare structural reforms is one of five key efforts 
supporting the performance goals of evaluating Medicare reform, 
financing, and operations; this performance goal is one of seven that 
support the strategic objective of addressing the health needs of an 
aging and diverse population, which is one of eight strategic 
objectives supporting strategic goal 1. The key efforts are published 
electronically in our strategic plan or separately at [Hyperlink, 
http://www.gao.gov/sp/d04534spsupplements.pdf].

Examples of Our Strategic Planning Elements: 
 
Strategic Goal 1: Provide Timely, Quality Service to the Congress and 
the Federal Government to Address Current and Emerging Challenges to 
the Well-Being and Financial Security of the American People: 
 
Strategic Objective: The Health Needs of an Aging and Diverse 
Population; 
 
Performance Goal: Evaluate Medicare Reform, Financing, and Operations; 

Key Efforts: 
* Analyze Medicare’s financial condition and the potential consequences 
of program structural reforms; 
* Evaluate the Centers for Medicare & Medicaid Services’ (CMS) 
management of Medicare, including its implementation of legislative 
reforms and its service to providers and beneficiaries; 
* Evaluate Medicare payment methods for health care providers; 
* Assess the effects of Medicare’s payment methods on access to, and 
quality of, health care services; 
* Evaluate CMS’s safeguards and program controls over provider payments 
and beneficiary access and quality. 

[End of Strategic Management Process and Structure]

How We Measure Our Performance:

We measure our performance using annual quantitative measures and 
multiyear qualitative performance goals. Together, these indicators 
help us to determine how well we are meeting the needs of the Congress 
and maximizing our value as a world-class organization.

Annual Performance Measures:

For several years, we have measured our performance annually using 
seven key indicators that are related to the results of our work and 
its usefulness to our primary client--the Congress. To establish 
targets for these measures, we examine what we have been able to 
achieve in the past and the external factors that influence our work 
(those factors are discussed in the section of this report called 
Strategies and Challenges). The teams and offices that are directly 
engaged in the work discuss their views of what must be accomplished in 
the upcoming fiscal year with our top executives, who then establish 
targets for the performance measures. Once approved by the Comptroller 
General, the targets become final and are published in our annual 
performance plan. In some cases, we may adjust the future targets after 
they are initially published, based on our analysis of more current 
data and expected future work or based on the level of funding 
provided. In these cases, we include the modified targets in later 
documents, such as a performance and accountability report, and 
annotate them as being modified. In this regard, we have made certain 
modifications (generally increases) to our fiscal year 2005 performance 
targets since publishing our latest performance plan earlier this year.

Measuring the Results of Our Work:

We use five of our annual measures to assess our efforts to provide the 
kind of information and recommendations that will lead to benefits for 
the American people. These measures are briefly described in table 1.

Table 1: Annual Measures of Results:

Measure: Financial benefits; 
Description: Benefits to the federal government that can be estimated 
in dollar terms (e.g., decreased costs, increased revenues, or monetary 
revenues made available for other purposes) that result in improved 
statutes or regulations, improved services to the public, or improved 
government business operations that occurred as a result of work that 
we completed over the past several years.

Measure: Other benefits; 
Description: Benefits to the federal government that cannot be 
estimated in dollar terms that result in improved services to the 
public, improved statutes or regulations, or improved government 
business operations that occurred as a result of work that we completed 
over the past several years.

Measure: New recommendations made; 
Description: The number of recommendations made in products issued 
within the fiscal year.

Measure: Past recommendations implemented; 
Description: Of the recommendations made 4 fiscal years prior to the 
current fiscal year, the percentage of recommendations that were 
implemented.

Measure: Percentage of products with recommendations; 
Description: Of the written products issued in the fiscal year (except 
testimonies, which seldom contain recommendations), the percentage that 
included at least one recommendation. Not all products that we issue 
during the fiscal year contain recommendations--some are purely 
informational. This measure allows us to respond to a variety of 
requests that may not result in recommendations. 

Source: GAO.

[End of table]

For financial benefits, other benefits, and new recommendations made, 
we first set targets for the agency as a whole and then we set targets 
for each of the external goals--that is, goals 1, 2, and 3--so that the 
sum of the targets for the goals will equal the agencywide targets. For 
the remaining two measures--past recommendations implemented and 
percentage of products with recommendations--we set targets and report 
performance for the agency as a whole because we want our performance 
on these measures to be consistent across goals. We track our 
performance by strategic goal in order to understand why we met or did 
not meet the agencywide target. We also use this information to provide 
feedback to our teams on the extent to which they are contributing to 
the overall target and to help them identify areas in which they need 
to improve.

Financial benefits and other benefits provide quantitative and 
qualitative information, respectively, on the outcomes or results that 
were achieved from our work. They often represent outcomes that 
occurred over a period of several years. The remaining measures are 
intermediate outcomes in that they often lead to achieving outcomes 
that are ultimately captured in our financial or other benefits.

Measuring Client Service:

We use two performance measures--the number of testimonies and the 
timeliness of our products--as indicators of how well we are meeting 
our clients' needs (see table 2). We consider requests to present 
testimony as an indicator that our clients believe that our work can 
add value to the congressional decision-making process. We set a target 
at the agencywide level for the number of testimonies and then assign a 
portion of the testimonies as a target for each of the external goals--
that is, goals 1, 2, and 3--based on their expected contribution to the 
agencywide total. As in measuring the results of our work, we track our 
progress on this measure at the goal level in order to understand why 
we met or did not meet the agencywide target.

Table 2: Annual Measures of Client Service:

Measure: Testimonies; 
Description: The number of hearings at which we presented testimony.

Measure: Timeliness; 
Description: Of the products issued in the fiscal year, the percentage 
that were issued by the date agreed upon with the client or, for our 
research and development work, by the date agreed to internally.

Source: GAO.

[End of table]

We also believe that our ability to provide products by the agreed-upon 
date means that we have met the clients' needs for providing 
information in time for it to be of value to them. We set agencywide 
targets for timeliness because we want our performance on these 
measures to be consistent across goals. We use this information to 
provide feedback to our teams on the extent to which they are 
contributing to the overall target and to help them identify areas in 
which they need to improve.

Measuring the Management of Our People:

Our most important asset is our people and they determine our capacity 
to perform. Therefore, beginning in fiscal year 2005, we will hold our 
managers accountable for performance measures that will help us 
determine how well we are attracting, retaining, using, investing in, 
and leading our human resources. Table 3 describes the measures that we 
will be using to assess our performance in this area. Each year, we 
will set an agencywide target for each of these measures. The 
information needed for these measures will come from a variety of 
sources, including the U.S. Department of Agriculture's (USDA) National 
Finance Center database--which handles payroll and personnel data for 
GAO and other agencies--and our annual confidential survey of 
employees. (For more details about our data sources for theses 
measures, see table 19, the data verification and validation table.)

Table 3: Annual Measures Related to Our People:

Measure: New hire rate; 
Description: The ratio of the number of people hired to the number we 
planned to hire.

Measure: Acceptance rate; 
Description: The ratio of the number of applicants accepting offers to 
the number of offers made.

Measure: Retention rate; 
Description: Computed by taking 100 percent minus the attrition rate, 
where attrition is defined as the number of employee separations 
divided by the average on-board strength. This measure is the inverse 
of attrition rate. We calculate this measure with and without 
retirements.

Measure: Staff development; 
Description: From the annual employee survey, the percentage of people 
responding favorably to questions on internal, external, and on- the-
job training.

Measure: Staff utilization; 
Description: From the annual employee survey, the percentage of people
responding favorably to questions on our use of staff's knowledge and 
skills.

Measure: Leadership; 
Description: From the annual employee survey, the percentage of people 
responding favorably to questions about specific qualities of our 
managers, such as whether leaders treated staff fairly, made timely 
decisions, demonstrated GAO's core values, implemented change 
effectively, and dealt effectively with diversity issues.

Measure: Organizational climate; 
Description: From the annual employee survey, the percentage of people 
responding favorably to questions on teamwork, morale, and overall 
satisfaction. 

Source: GAO.

[End of table]

[End of Annual Performance Measures]

Multiyear Performance Goals:

We use two elements in our strategic planning hierarchy--performance 
goals and key efforts--as qualitative indicators of our performance. We 
ask senior managers to determine whether the performance goals 
established in our strategic plan have been met over a multiyear 
period. To do this, senior managers examine the amount of work 
conducted and recommendations made for each key effort supporting each 
performance goal. Senior managers also consider any other assistance 
provided to the client or customer that is related to these efforts. 
These senior executives then judge whether the work completed 
collectively for all key efforts actually achieved the performance 
goal.

With our strategic plan that was updated in March 2004 to cover fiscal 
years 2004 through 2009, we established new performance goals and 
initiated a new multiyear assessment cycle. In this performance and 
accountability report, we assess the extent to which we are on track to 
meet the new performance goals, and in our fiscal year 2005 report we 
will assess the extent to which we met these performance goals. We will 
revisit our key efforts and performance goals in our annual performance 
plan and strategic plan to ensure that they are still relevant to the 
work we are doing or plan to do in support of the Congress.

On the pages that follow, we assess our performance for fiscal year 
2004 against our previously established performance targets. We also 
present our financial statements, the independent auditor's report, and 
a statement from GAO's Inspector General.

[End of How We Measure Our Performance]

[End of About GAO]

[End of Introduction]

Part I: Management's Discussion and Analysis:

Achieving Results on Behalf of the Congress and All Americans:

In fiscal year 2004, much of our work examined the effectiveness of the 
federal government's day-to-day operations, such as administering 
benefits to the elderly and other needy populations, providing grants 
and loans to college students, and collecting taxes from businesses and 
individuals. Yet we remained alert to emerging problems that demanded 
the attention of lawmakers and the public. For example, we continued to 
closely monitor developments affecting the Iraq war, defense 
transformation, homeland security, health care, the postal service, 
civil service reform, and the nation's private pension system. We also 
informed policy makers about long-term challenges facing the nation, 
such as the federal government's financial outlook, new security 
threats in the post-Cold War world, the aging of America and its impact 
on our health care and retirement systems, changing economic 
conditions, and the increasing demands on our infrastructure--from 
highways to water systems. We provided congressional committees, 
members, and staff with information in the form of reports; 
recommendations; testimonies; briefings; and expert comments on bills, 
laws, and other legal matters affecting the federal government. We 
performed this work in accordance with our strategic plan, consistent 
with our professional standards, and guided by our core values (see our 
Strategic Plan Framework discussed earlier in this report).

To understand how well we supported the Congress in meeting its 
constitutional responsibilities in fiscal year 2004, we monitored our 
performance using seven annual performance measures that capture the 
results of our work and the assistance we provided to our client--the 
Congress (see table 4). These measures indicate that we had an 
exceptional year--we again exceeded our performance targets for six of 
our seven measures. Two of our results measures--financial benefits and 
other benefits--illustrate the outcomes of our work and our value to 
the American people because they track federal dollars saved or better 
used and programmatic improvements implemented as a result of our work. 
Three additional results measures track recommendations implemented, 
new products with recommendations, and recommendations made that help 
us to achieve financial and other benefits. Our client measures--
testimonies and timeliness--indicate to a great extent how well we, as 
an information provider, serve the Congress.

In fiscal year 2004, we exceeded or equaled our records for all of our 
performance measures except for the number of testimonies. Our 
financial benefits of $44 billion represent a $95 return on every 
dollar invested in us. In addition, we greatly exceeded two of our 
annual performance targets--other benefits and new recommendations 
made. We surpassed our target for other benefits by about 33 percent 
and our target for new recommendations by 76 percent primarily because 
we issued several products--governmentwide in scope--that contained 
numerous recommendations aimed at strengthening federal agencies' 
financial management and IT. These agencies subsequently implemented 
many of our recommendations, thus producing significant benefits in 
these areas. Beginning in fiscal year 2005, we will not set or report 
publicly a target for the number of recommendations made because we 
believe the measure is no longer needed. We created this measure to 
provide some performance information related to recommendations. 
Subsequently, we added a measure for the percentage of new products 
with recommendations. Now that we have had several years to establish a 
baseline for the latter, we feel that it alone is a sufficient measure 
to ensure that our work results in beneficial recommendations. However, 
we will continue to monitor the number of new recommendations made to 
ensure that teams supporting strategic goals 1 through 3 continue to 
plan and complete engagements that result in recommendations--the basis 
for our financial and other benefits for the American people.

Table 4: Agencywide Summary of Annual Measures and Targets:

Performance measures: 

Results: Financial benefits; 
2000 actual: $23.2 billion; 
2001 actual: $26.4 billion; 
2002 actual: $37.7 billion; 
2003 actual: $35.4 billion; 
2004 Target: $35.0 billion; 
2004 Actual: $44.0 billion; 
Met/not met: Met; 
2005 target: $37.5 billion.

Results: Other benefits; 
2000 actual: 788; 
2001 actual: 799; 
2002 actual: 906; 
2003 actual: 1,043; 
2004 Target: 900; 
2004 Actual: 1,197; 
Met/not met: Met; 
2005 target: 1,000.

Results: Past recommendations implemented; 
2000 actual: 78%; 
2001 actual: 79%; 
2002 actual: 79%; 
2003 actual: 82%; 
2004 Target: 79%; 
2004 Actual: 83%; 
Met/not met: Met; 
2005 target: 80%.

Results: New recommendations made[A]; 
2000 actual: 1,224; 
2001 actual: 1,563; 
2002 actual: 1,950; 
2003 actual: 2,175; 
2004 Target: 1,500; 
2004 Actual: 2,790;
Met/not met: Met; 
2005 target: Not applicable. 

Results: New products with recommendations; 
2000 actual: 39%; 
2001 actual: 44%; 
2002 actual: 53%; 
2003 actual: 55%; 
2004 Target: 50%; 
2004 Actual: 63%; 
Met/not met: Met; 
2005 target: 55%.

Client: Testimonies; 
2000 actual: 263; 
2001 actual: 151; 
2002 actual: 216; 
2003 actual: 189; 
2004 Target: 190; 
2004 Actual: 217; 
Met/not met: Met; 
2005 target: 185.

Client: Timeliness; 
2000 actual: 96%; 
2001 actual: 95%; 
2002 actual: 96%; 
2003 actual: 97%; 
2004 Target: 98%; 
2004 Actual: 97%; 
Met/not met: Not met; 
2005 target: 98%.

Source: GAO.

[A] Beginning in fiscal year 2005, we will eliminate this as a 
performance measure and will use the percentage of new products with 
recommendations to show how our work results in beneficial 
recommendations. However, we will continue to track the number of new 
recommendations made to ensure that teams supporting strategic goals 1 
through 3 continue to plan and complete engagements that result in 
recommendations.

[End of table]

To help us examine trends over time, we also look at 4-year averages 
for all measures except the percentage of past recommendations 
implemented because it is a composite that is drawn from a number of 
years rather than an annual percentage. Calculating 4-year averages for 
the other measures minimizes the effect of an atypical result in any 
given year. Table 5 shows that between fiscal year 2000 and fiscal year 
2004 financial and other benefits increased along with the number of 
new recommendations made and the percentage of new products with 
recommendations. The average number of testimonies, on the other hand, 
declined during this period in part because a decline in the number of 
oversight hearings. Our ability to provide timely products leveled off 
between fiscal year 2002 and fiscal year 2004 at 96 percent.

Table 5: Four-Year Rolling Averages for Selected GAO Measures:

Performance measure: 

Results: Financial benefits; 
2000: $21.0 billion; 
2001: $22.4 billion; 
2002: $26.9 billion; 
2003: $30.7 billion; 
2004: $35.9 billion.

Results: Other benefits; 
2000: 581; 
2001: 683; 
2002: 775; 
2003: 884; 
2004: 986.

Results: New recommendations made; 
2000: 997; 
2001: 1,179; 
2002: 1,419; 
2003: 1,728; 
2004: 2,120.

Results: New products with recommendations; 
2000: 35%; 
2001: 37%; 
2002: 42%; 
2003: 48%; 
2004: 54%.

Client: Testimonies; 
2000: 233; 
2001: 225; 
2002: 215; 
2003: 205; 
2004: 193.

Client: Timeliness; 
2000: 94%; 
2001: 95%; 
2002: 96%; 
2003: 96%; 
2004: 96%.

Source: GAO.

[End of table]

Regarding our qualitative multiyear performance goals, at the close of 
fiscal year 2004 (halfway through our 2-year performance cycle) we were 
on track to meet almost all of our 99 performance goals by the end of 
fiscal year 2005. In Part II of this report, we present detailed 
information about the multiyear performance goals developed to measure 
our progress toward achieving each of our four strategic goals.

Focusing on Results:

Focusing on outcomes and the efficiency of the processes needed to 
achieve them is fundamental to accomplishing our mission. The following 
five annual measures indicate that we have fulfilled our mission and 
delivered results that benefit the nation.

Financial and Other Benefits:

We describe many of the benefits produced by our work as either 
financial or other (nonfinancial) benefits. Both types of benefits 
result from our efforts to provide information to the Congress that 
helped to (1) change laws and regulations, (2) improve services to the 
public, and (3) promote sound agency and governmentwide management. In 
many cases, the benefits we claimed in fiscal year 2004 are based on 
work we did in past years because it often takes the Congress and 
agencies time to implement our recommendations or to act on our 
findings.

To claim either type of benefit, our staff must document the connection 
between the benefits reported and the work that we performed.

Financial benefits:

Our findings and recommendations produce measurable financial benefits 
for the federal government when the Congress or agencies act on them 
and the funds are made available to reduce government expenditures or 
are reallocated to other areas. The monetary effect realized can be the 
result of changes in:

* business operations and activities;

* the structure of federal programs; or:

* entitlements, taxes, or user fees.

For example, financial benefits could result if the Congress were to 
reduce the annual cost of operating a federal program or lessen the 
cost of a multiyear program or entitlement. Financial benefits could 
also result from increases in federal revenues--due to changes in laws, 
user fees, or asset sales--that our work helped to produce.

In fiscal year 2004, our work generated $44 billion in financial 
benefits (see fig. 4), primarily from recommendations we made to 
agencies and the Congress. Of this amount, about $27 billion (or 
approximately 61 percent) resulted from changes in laws or regulations 
(see fig. 5).

Figure 4: GAO's Fiscal Year 2004 Financial Benefits:

[See PDF for image] - graphic text:

Bar graph with 7 items.

2000 Actual: $23.2 billion; 
2001 Actual: $26.4 billion; 
2002 Actual: $37.7 billion; 
2003 Actual: $35.4 billion; 
2004 Target: $35.0 billion; 
2004 Actual: $44.0 billion.

Source: GAO.

[End of figure]

Figure 5: Types of Financial Benefits Recorded in Fiscal Year 2004 from 
Our Work:

[See PDF for image] - graphic text:

Pie graph with 3 items.

Category: Agencies acted on GAO information to improve services to the 
public; 
Financial Benefits: $11.1 billion (25.2%).

Category: Information GAO provided to the Congress resulted in 
statutory or regulatory changes; 
Financial Benefits: $26.7 billion (60.7%). 

Category: Core business processes improved at agencies and 
governmentwide management reforms advanced by GAO’s work; 
Financial Benefits: $6.2 billion (14.1%). 

Total Financial Benefits: $44 billion.

Source: GAO.

[End of figure]

Financial benefits included in our performance measures are net 
benefits--that is, estimates of financial benefits that have been 
reduced by the costs associated with taking the action that we 
recommended. We convert all estimates involving past and future years 
to their net present value and use actual dollars to represent 
estimates involving only the current year. Financial benefit amounts 
vary depending on the nature of the benefit, and we can claim financial 
benefits over multiple years based on a single agency or congressional 
action. To ensure conservative estimates of net financial benefits, 
reductions in operating cost are typically limited to 2 years of 
accrued reductions. Multiyear reductions in long-term projects, changes 
in tax laws, program terminations, or sales of government assets are 
limited to 5 years. Estimates must be based on third-party sources and 
reduced by any identifiable offsetting costs. The third parties are 
typically the agency that acted on our work, a congressional committee, 
or the Congressional Budget Office.

To document financial benefits, our staff complete reports documenting 
accomplishments that are linked to specific products or actions. All 
accomplishment reports for financial benefits are documented and 
reviewed by (1) another GAO staff member not involved in the work and 
(2) a senior executive in charge of the work. Also, a separate unit, 
our Quality and Continuous Improvement (QCI) office, reviews all 
financial benefits and approves benefits of $100 million or more, which 
amounted to 95 percent of the total dollar value of benefits recorded 
in fiscal year 2004. Additionally, our Office of Inspector General (IG) 
performs an independent review of all accomplishment reports claiming 
benefits of $500 million or more.

Figure 6 lists several of our major financial benefits for fiscal year 
2004 and briefly describes some of our work contributing to financial 
benefits.

Figure 6: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2004:

Description: Eliminated Medicaid's upper payment limit loophole. We 
identified a weakness in Medicaid's upper payment limit methodology 
that allowed states to make excessive payments to local, government- 
owned nursing facilities and then have the facilities return the 
payments to the states, creating the illusion that they had made large 
Medicaid payments in order to generate federal matching payments. 
Closing the loophole prevented the federal government from making 
significant federal matching payments to states above those intended 
by Medicaid. The amount shown represents the net present value of 
estimated financial benefits for fiscal years 2005 and 2006--the final 
years for which benefits can be claimed; 
Amount: $10.073 billion.

Description: Updated the Consumer Price Index (CPI). We recommended 
that the Bureau of Labor Statistics (BLS) periodically update the 
expenditure weights of its market basket of goods and services used to 
calculate the CPI to make it more timely and representative of consumer 
expenditures. BLS agreed to do this every 2 years, and the CPI for 
January 2002 reflected the new weights. For federal programs that use 
the CPI as an index for determining benefits, the adjustments have 
resulted in decreased federal expenditures (e.g., reduced Social 
Security cost-of-living adjustments) and increased federal revenues, 
such as reductions in the growth of personal exemptions for federal 
income taxes. The amount shown represents projected financial benefits 
for fiscal year 2007, the fifth and final year for which we will allow 
benefits to be claimed for this action; 
Amount: $5.074 billion.

Description: Reduced costs associated with Medicare spending on home 
health care. We reported in 2002 that Medicare's payments for home 
health care episodes were, on average, about 35 percent higher than the 
estimated costs of home health care provided in the first 6 months of 
2001. Our report helped to ensure that the Congress did not delay or 
eliminate a scheduled reduction in Medicare home health payments that 
had risen rapidly from the late 1980s through the mid-1990s; 
Amount: $4.661 billion.

Description: Reduced the cost of federal housing programs. We 
determined that the Department of Housing and Urban Development (HUD) 
did not have the information it needed to routinely calculate and track 
unexpended balances in its housing and community development programs. 
As a result of our work, the Congress required HUD to prepare quarterly 
reports on unexpended balances for each program, and HUD management 
committed to closely monitor these balances and identify amounts 
available for recapture; 
Amount: $3.638 billion.

Description: Improved the use of the Iraqi Freedom Fund. We reported 
that the military services may obligate all of the funds appropriated 
for the global war on terrorism in fiscal year 2003 as required. Thus, 
the Congress rescinded $3.49 billion from the September 2003 balance 
remaining in the Iraqi Freedom Fund as part of the Fiscal Year 2004 
Department of Defense Appropriations Act. These funds were made 
available for other purposes; 
Amount: $3.490 billion.

Description: Reduced costs associated with preparing the Department of 
Defense's (DOD) financial statements. We determined that DOD's initial 
plans to obtain a favorable fiscal year 2004 audit opinion were not 
feasible or cost-effective. Therefore, instead of moving $2.2 billion 
to fund the DOD components' efforts focused on a fiscal year 2004 audit 
opinion, the DOD Comptroller shifted $184 million to begin auditability 
assessments and audits, as applicable, as part of a long-term strategy 
to improve DOD's fiscal accountability. The Comptroller's decision not 
to reprogram the funds allowed DOD to use over $2 billion for other 
purposes during the fiscal year; 
Amount: $2.057 billion.

Description: Modified the focus of funding for DOD's V-22 Osprey 
aircraft program. We highlighted for DOD officials--before full 
production of the aircraft was scheduled to begin--numerous risks and 
unknowns that existed in the V-22 Osprey program because of inadequate 
testing and evaluation. We reported these concerns to a blue-ribbon 
investigative panel established after a second fatal crash of the V-22. 
As a result of our work, the blue-ribbon panel recommended that DOD 
temporarily reduce the production of the V-22 to a minimum level to 
free up funds to better address the research and development issues we 
raised. The Congress reduced the procurement funding for purchasing 
V-22 aircraft from the planned 37 to 11 for each of fiscal years 2003 
and 2004. This action allowed some funds to be used for development 
testing of the V- 22 aircraft, but the remaining funds were made 
available for other purposes; 
Amount: $1.618 billion.

Description: Eliminated unnecessary military funding from the budget. 
We recommended that requested fiscal year 2004 funds be eliminated for 
three terminated military operations involving Iraq's compliance with 
various United Nations resolutions, Operations Northern and Southern 
Watch and Operation Desert Spring. These funds were made available for 
other purposes; 
Amount: $1.353 billion.

Description: Improved DOD's contracting and acquisition practices. We 
developed a strategic framework--based on the best practices of leading 
private- sector companies--to guide DOD's services contracting reforms 
and recommended changes in DOD's organizational structure and approach 
to acquiring goods and services, such as using cross-functional teams 
and spend analyses to coordinate key purchases and leverage buying 
power for the agency. As a result of work done by us and others, the 
Congress cut DOD's budget in its fiscal year 2003 appropriation in 
anticipation of expected savings. This accomplishment amends a 
financial benefit we claimed in fiscal year 2002 and represents an 
additional benefit in fiscal year 2004--the final year for which a 
benefit can be claimed; 
Amount: $868 million. 

Source: GAO.

[End of figure]

Other Benefits:

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2004, we recorded a total of 1,197 
other benefits (see fig. 7).

Figure 7: Other Benefits:

[See PDF for image] - graphic text:

Bar graph with 6 items.

2000 Actual: 788; 
2001 Actual: 799; 
2002 Actual: 906; 
2003 Actual: 1,043; 
2004 Target: 900; 
2004 Actual: 1,197.

Source: GAO. 

[End of figure]

We documented 74 instances where information we provided to the 
Congress resulted in statutory or regulatory changes, 570 instances 
where federal agencies improved services to the public, and 553 
instances where agencies improved core business processes or 
governmentwide reforms were advanced. (See fig. 8.) These actions 
spanned the full spectrum of national issues, from ensuring the safety 
of commercial airline passengers to identifying abusive tax shelters. 
In figure 9 we provide examples of some of the other benefits we 
claimed as accomplishments in fiscal year 2004.

Figure 8: Types of Other Benefits Recorded in Fiscal Year 2004 from Our 
Work:

[See PDF for image] - graphic text:

Pie graph with 3 items.

Category: Agencies acted on GAO information to improve services to the 
public; 
Other Benefits: 570 (47.6%). 

Category: Information GAO provided to the Congress resulted in 
statutory or regulatory changes; 
Other Benefits: 74 (6.2%). 

Category: Core business processes improved at agencies and 
governmentwide management reforms advanced by GAO’s work; 
Other Benefits: 553 (46.2%).

Source: GAO. 

[End of figure]

Figure 9: GAO's Selected Other (Nonfinancial) Benefits Reported in 
Fiscal Year 2004:

Other Benefits That Helped to Change Laws: 

Vision 100-Century of Aviation Reauthorization Act, Pub. L. No. 108-
176; We worked closely with the Congress to draft language that was 
included in this law related to curriculum and certification 
requirements for aviation mechanics. The language, which was based on 
recommendations we had made, included a requirement that the Federal 
Aviation Administration update and revise curriculum standards for 
aviation mechanics.

Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 
Pub. L. No. 108-173; Congress included six provisions in the law based 
on analyses and recommendations we made. For example, our work found 
that Medicare's method for establishing payment rates for drugs 
obtained under Medicare Part B--which covers doctors' services, 
outpatient hospital care, and some other nonhospital services--was 
flawed because it based payments on nonmarket-driven price estimates. 
The law addressed these issues by lowering payment rates in 2004 for 
drugs covered by Part B to more closely reflect acquisition costs, and 
by changing the method for calculating these payment rates in 2005, 
basing these rates on a market-driven estimate. Also, partly on the 
basis of our work, the Congress modified the eligibility criteria for 
small rural hospitals to qualify as critical access hospitals under the 
Medicare program. This change provides flexibility for some additional 
hospitals to consider conversion. Because of Medicare's payment 
methodology, converting to a critical access hospital may help bolster 
a hospital's financial condition, allowing it to continue to provide 
services to patients.

Consolidated Appropriations Act, 2004, Pub. L. No. 108-199; We found 
that HUD could make more accurate eligibility decisions for individuals 
seeking housing assistance if it had access to more timely income 
information available from the Department of Health and Human Service's 
Office of Child Support Enforcement's National Directory of New Hires. 
We recommended that HUD match applicants and current recipients of its 
Section 8 housing programs with the new hires database. This law gives 
HUD access to information from the database that will better ensure 
that only eligible individuals receive housing assistance.

National Defense Authorization Act for Fiscal Year 2004, Pub. L. No. 
108-136; We testified that most existing federal performance appraisal 
systems, including a vast majority of DOD's systems, are not designed 
to support a meaningful performance-based personnel system and agencies 
should have to demonstrate that these systems are modern, effective, 
and valid in order to receive any additional performance-based 
flexibilities. We suggested that the Congress establish a 
governmentwide fund whereby agencies could apply for funds to modernize 
their performance management systems and ensure that those systems have 
adequate safeguards to prevent abuse. This law established the Human 
Capital Performance Fund to support all executive agencies as they plan 
for and carry out performance-based rewards for their civilian 
employees.

Other Benefits That Helped to Improve Services to the Public: 

Helped to Ensure the Safety of Shellfish; In July 2001, we reported 
that the Food and Drug Administration's (FDA) oversight of states' 
shellfish safety programs was not risk-based and thus FDA was not using 
its limited resources wisely. To better ensure shellfish safety, we 
recommended that FDA identify risk factors for each of its program 
elements (growing area classification, processing and shipping, and 
control of harvest). FDA developed a scoring system for these factors. 
FDA shellfish specialists compute a total risk score of high, medium, 
or low that determines the frequency of the evaluation of that program 
element. High-risk elements were to be evaluated every year beginning 
in fiscal year 2003, medium-risk elements every second year beginning 
in fiscal year 2004, and low-risk elements every third year beginning 
in fiscal year 2005.

Identified the Need for Better Criteria to Determine Highly Qualified 
Teachers; Our report found that states did not have the information 
needed to determine whether teachers had met criteria to be considered 
highly qualified, as required by the No Child Left Behind Act. 
Specifically, states did not have the information they needed to 
develop methods to evaluate the subject area knowledge of teachers. To 
help states determine the number of highly qualified teachers they have 
and the actions they need to take to meet the requirements for highly 
qualified teachers by the end of the 2005-06 school year, we 
recommended that the Secretary of Education provide more information to 
states about methods to evaluate subject area knowledge of current 
teachers. In January 2004, Education issued a revised version of the 
guidance "Improving Teacher Quality," which contains more information 
on how to evaluate subject area knowledge to meet the federal 
definition of a highly qualified teacher. Specifically, the guidance 
includes a new section that, among other things, defines evaluation 
standards and factors to consider when developing them.

Encouraged VA to Clarify the Array of Home Health Care Services 
Available to Veterans; We recommended that the Department of Veterans 
Affairs (VA) specify in policy whether three home health services--
home-based primary care, homemaker/home health aide, and skilled home 
health care--are to be available to all enrolled veterans. In response, 
VA published an information letter on October 1, 2003, clarifying that 
according to VA policy, the three home health services are to be 
available for all enrolled, eligible veterans in need of such services. 
The information letter was distributed to all facilities through e-mail 
and is available on the VA Web site.

Other Benefits That Helped to Promote Sound Agency and Governmentwide 
Management: 

Identified the Need for More Specific Criteria to Select for Audit Tax 
Returns From Large Corporations; We found that the Internal Revenue 
Service (IRS) is investing more in audits of large corporations and 
getting less in return. To improve the audits of tax returns filed by 
large corporations, we recommended that IRS provide more specific 
objective criteria and procedures to guide the selection of large 
corporate tax returns and classification of tax issues with high audit 
potential across the districts. In March 2002, IRS implemented a 
process for scoring returns in order to fully implement a plan to place 
these returns in the field for audit. IRS has begun to identify high-
risk returns from corporate and partnership tax returns using the 
Discriminant Analysis System.

Helped to Centralize the Oversight of Major DOD Contracts; We examined 
various DOD initiatives under way that are intended to better manage 
acquisition of services, including drafting policy to provide better 
oversight on purchases of high-dollar value services. In response to 
our work, the Under Secretary of Defense for Acquisition, Technology, 
and Logistics and each of the military departments now have a 
management structure in place and a process for reviewing major (i.e., 
large-dollar or program-critical) service acquisitions for adherence to 
performance and other contracting requirements. The new policy 
establishes a threshold of $500 million or more for selecting service 
purchases for review and approval by the military department and 
possibly DOD headquarters, allowing DOD to adequately plan major 
purchases before committing the government to major expenditures.

Helped to Reduce Fraud, Waste, and Abuse of Agencies' Purchase Cards; 
In a series of reports and testimonies beginning in 2001, we 
highlighted pervasive weaknesses in the government's $16 billion 
purchase card program. Our work identified numerous cases of fraud, 
waste, and abuse at DOD, HUD, and the Federal Aviation Administration. 
These agencies have taken significant steps to implement the hundreds 
of recommendations we made to upgrade their controls. Major improvement 
areas include enhanced controls over card issuance and cancellation, 
reduced span of control for approving officials, increased human 
capital resources and training, new performance measures and goals, 
required advance approval of purchases, and independent receiving and 
acceptance of goods and services. These efforts will substantially 
reduce the government's vulnerability to fraud, waste, and abuse in 
agencies' purchase card programs.

Source: GAO.

[End of table]

In addition to the financial and other benefits claimed in fiscal year 
2004 from our work, we also achieved the following results.

Past Recommendations Implemented:

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2004, 83 percent of the 
recommendations we made in fiscal year 2000 had been implemented (see 
fig. 10), primarily by executive branch agencies. Putting these 
recommendations into practice will generate tangible benefits for the 
American people in the years ahead.

Figure 10: Past Recommendations Implemented:

[See PDF for image] - graphic text:

Bar graph with 6 items.

2000 Actual: 78%;
2001 Actual: 79%;
2002 Actual: 79%;
2003 Actual: 82%;
2004 Target: 79%;
2004 Actual: 83%.

Source: GAO.

[End of figure]

The 83 percent implementation rate for fiscal year 2004 exceeded our 
target for the year by 4 percentage points as well as our actual 
performance for fiscal year 2000 through fiscal year 2003. As figure 11 
indicates, agencies need time to act on recommendations. Therefore, we 
assess recommendations implemented after 4 years, the point at which 
experience has shown that if a recommendation has not been implemented, 
it is not likely to be.

Figure 11: Cumulative Implementation Rate for Recommendations Made in 
Fiscal Year 2000:

[See PDF for image] - graphic text:

Bar graph with 4 items.

After 1 year: 30%; 
After 2 years: 38%; 
After 3 years: 44%; 
After 4 years: 83%. 

Source: GAO. 

[End of figure]

We continually follow up on our recommendations. Specifically, as of 
the end of fiscal year 2004, agencies and the Congress had implemented 
48 percent of the recommendations we had made in fiscal year 2001, 31 
percent of those made in fiscal year 2002, and 18 percent of those made 
in fiscal year 2003.

New Recommendations Made:

As shown in figure 12, we made 2,790 new recommendations in fiscal year 
2004, again exceeding our target for this year and the past 4 years. 
Though all of the products we issued did not include recommendations, 
developing useful and material recommendations is an important part of 
our work for the Congress because it helps to improve how the 
government functions and often leads to financial and other benefits 
for the public. This year 436 of the written products we issued yielded 
the 2,790 recommendations reported.[Footnote 3]

In fiscal year 2005 we will eliminate this measure from our performance 
scorecard. We created this measure in fiscal year 2000 to provide some 
performance information related to recommendations. Subsequently, we 
added a measure for the percentage of new products with 
recommendations. Now that we have had several years to establish a 
baseline for the latter, we feel that it alone is a sufficient measure 
to ensure that our work results in beneficial recommendations. However, 
we will continue to monitor the number of new recommendations made to 
ensure that teams supporting strategic goals 1 through 3 continue to 
plan and complete engagements that result in recommendations.

Figure 12: New Recommendations Made:

[See PDF for image] - graphic text:

Bar graph with 6 items. 

2000 Actual: 1,224;
2001 Actual: 1,563;
2002 Actual: 1,950;
2003 Actual: 2,175;
2004 Target: 1,500;
2004 Actual: 2,790.

Source: GAO.

[End of figure]

New Products Containing Recommendations:

This year, about 63 percent of the 673 written products we issued 
(excluding testimonies) included recommendations. (See fig. 13.) This 
measure recognizes that our products do not always include 
recommendations and that the Congress and agencies often find such 
informational reports just as useful as those that contain 
recommendations. Our informational reports have the same analytical 
rigor and meet the same quality standards as those with recommendations 
and, similarly, can help to bring about significant financial and other 
benefits. Hence, this measure allows us ample leeway to respond to 
requests that result in reports without recommendations.

Figure 13: New Products with Recommendations:

[See PDF for image] - graphic text:

Bar graph with 6 items. 

2000 Actual: 39%;
2001 Actual: 44%;
2002 Actual: 53%;
2003 Actual: 55%;
2004 Target: 50%;
2004 Actual: 63%.

Source: GAO.

[End of figure]

Multiyear Performance Goals:

In addition to our annual measures, we track our progress on 99 
multiyear performance goals. At the end of fiscal year 2004, we were on 
track to meet all but 3 of our performance goals. Our performance goals 
measure the extent to which we did the work we had planned to do to 
support the Congress during fiscal years 2004 and 2005. Senior GAO 
managers developed these performance goals at the beginning of the 
assessment cycle (fiscal year 2004) based on their knowledge of the 
specific subject area and in consultation with our customers and 
clients. However, because congressional or GAO priorities can change 
over the time period covered by these performance goals, we may not be 
able to meet some of them because resources had to be shifted away from 
planned work to address new or more urgent priorities. In such 
circumstances, we do not view an unmet performance goal as a failure. 
Rather, we believe it shows that we are responsive in carrying out our 
mission of serving the Congress and the nation and devoting our 
resources to efforts of critical importance. We consider these 
performance goals qualitative rather than quantitative because our 
senior managers determine whether enough work (i.e., key efforts) has 
been performed to achieve a performance goal. In Part II of this 
report, we list by strategic goal the multiyear qualitative performance 
goals supporting each strategic objective and indicate whether the 
performance goal is on track to be met.

[End of Focusing on Results]

Focusing on Our Clients:

To fulfill the Congress's information needs, we strive to deliver the 
results of our work orally as well as in writing at a time agreed upon 
with our client. Our performance this year indicates that we served our 
client--the Congress--very well, though we fell a little short of our 
target to deliver products on time.

Testimonies:

During fiscal year 2004, experts from our staff testified at 217 
congressional hearings covering a wide range of complex issues (see 
fig. 14). For example, our senior executives testified on the financial 
condition of the Pension Benefit Guaranty Corporation's single-employer 
program, the effects of various proposals to reform Social Security on 
benefit distributions, and enhancing federal accountability through 
inspectors general. Nearly half of our testimonies were related to 
high-risk areas and programs, which are discussed on page 34. See page 
33 for a summary of issues we testified on by strategic goal in fiscal 
year 2004.

Figure 14: Testimonies:

[See PDF for image] - graphic text:

Bar graph with 6 items. 

2000 Actual: 263;
2001 Actual: 151;
2002 Actual: 216;
2003 Actual: 189;
2004 Target: 190;
2004 Actual: 217.

Source: GAO.

[End of figure]

Selected Issues on Which GAO Testified During Fiscal Year 2004: 

Goal 1: Well-Being and Financial Security of the American People: 

* Student loan programs; 
* Child welfare; 
* Pension plan insurance programs; 
* Energy Employees’ Occupational Illness Compensation Program; 
* Social Security reform’s effect on benefits and taxes; 
* Medicare spending; 
* Intergovernmental Medicaid transfers; 
* Private health insurance; 
* Defense and veterans’ health care; 
* U.S. gasoline markets; 
* Farm program payments; 
* Security challenges at chemical facilities; 
* Oil and gas activities on federal lands; 
* Postal Service transformation; 
* Rail security; 
* Federal real property; 
* Federal aviation management and modernization; 
* Pipeline safety; 
* Telecommunications. 

Goal 2: Changing Security Threats and Challenges of Globalization: 

* Gulf War illnesses; 
* International broadcasting; 
* Border security; 
* Terrorist financing; 
* United Nations Oil-for-Food program; 
* Oversight of government- sponsored enterprises; 
* Securities and Exchange Commission operations; 
* Mutual funds; 
* Use of Reserve forces; 
* Destruction of chemical weapons; 
* Mail delivery to deployed troops; 
* Defense personnel clearances; 
* Unmanned aerial vehicles; 
* Military base closures; 
* Operations in Iraq; 
* Challenges in inspecting oceangoing cargo containers; 
* Homeland security advisory system; 
* Security at nuclear facilities; 
* Counterfeit identities; 
* Information security; 
* Critical infrastructure protection; 
* International defense sales; 
* U.S. Army combat systems; 
* Military aircraft; 
* Defense’s space systems; 
* National strategy for homeland security. 

Goal 3: Transforming the Federal Government’s Role: 

* Army Reserve and Army National Guard pay; 
* Defense contractor tax system abuses; 
* Fraudulent diplomas; 
* Illicit Internet pharmacies; 
* Information technology management; 
* Information technology continuity of operations; 
* Electronic government; 
* Border and transportation security; 
* Electronic voting; 
* Abusive tax shelters; 
* Diversity among senior federal executives; 
* Transformation of the federal government; 
* Long-term federal budget issues; 
* Office of Management and Budget's Program Assessment Rating Tool; 
* The impact of the Government Performance and Results Act; 
* District of Columbia government; 
* Federal financial management and fiscal challenges; 
* Federal purchase and travel cards; 
* Excess Defense property; 
* Space shuttle program; 
* Defense contract management. 

Source: GAO.

[End of Selected Issues on which GAO Testified]

Timeliness:

We track the percentage of our products that are delivered on or before 
the day we agreed to with our clients because it is critical that our 
work be done on time for it to be used by policy makers. While the vast 
majority of our products--97 percent--were completed on time for our 
clients in fiscal year 2004, we slightly missed our target of providing 
98 percent of them on the promised day. (See fig. 15.) We are taking 
steps to improve our performance in the future by encouraging matrix 
management practices among the teams supporting various strategic goals 
and identifying early those teams that need additional resources to 
ensure the timely delivery of their products to our clients.

Figure 15: Timeliness:

[See PDF for image] - graphic text:

Bar graph with 6 items. 

2000 Actual: 96%;
2001 Actual: 95%;
2002 Actual: 96%;
2003 Actual: 97%;
2004 Target: 98%;
2004 Actual: 97%.

Source: GAO.

[End of figure]

[End of Focusing on Our Clients]

Focusing on Our People:

We could not have performed as well as we did in fiscal year 2004 
without the support and commitment of our highly professional, 
multidisciplinary staff. Our ability to hire, develop, retain, and lead 
staff is critical to fulfilling our mission of serving the Congress and 
the American people. Since 2002 we have refined our processes for 
measuring how well we manage our human capital and have benchmarked our 
performance in this area. Beginning in fiscal year 2005, we will add 
eight measures to our annual performance scorecard, and we intend to 
hold senior managers accountable for these measures and report our 
results agencywide. Table 6 shows the targets we have set for these 
measures in fiscal year 2005 and some past performance data.

For more information about our people measures, see Verifying and 
Validating Performance Data in Part II of this report.

Table 6: Actual Performance and Targets Related to Our People 
Measures:

Performance measure: New hire rate;
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 96%;
2003 actual: 98%;
2004 actual: 98%;
2005 target: 97%.
 
Performance measure: Acceptance rate;
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 81%;
2003 actual: 72%;
2004 actual: 72%;
2005 target: 75%.
 
Performance measure: Retention rate[A]: With retirements;
2000 actual: 91%;
2001 actual: 91%;
2002 actual: 91%;
2003 actual: 92%;
2004 actual: 90%;
2005 target: 90%.
 
Performance measure: Retention rate[A]: Without retirements;
2000 actual: 94%;
2001 actual: 95%;
2002 actual: 97%;
2003 actual: 96%;
2004 actual: 95%;
2005 target: 94%.
 
Performance measure: Staff development[B];
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 71%[C];
2003 actual: 67%[D];
2004 actual: 70%;
2005 target: 72%.
 
Performance measure: Staff utilization[B];
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 67%;
2003 actual: 71%;
2004 actual: 72%;
2005 target: 74%.
 
Performance measure: Leadership[B];
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 75%;
2003 actual: 78%;
2004 actual: 79%;
2005 target: 80%.
 
Performance measure: Organizational climate[B];
2000 actual: Not applicable;
2001 actual: Not applicable;
2002 actual: 67%;
2003 actual: 71%;
2004 actual: 74%;
2005 target: 75%.

Source: GAO.

Note: We have set targets for these performance measures for the first 
time in fiscal year 2005. Not applicable indicates that the data are 
not available.

[A] In our performance plan for fiscal year 2005, we showed the target 
for retention rate with retirements. Subsequently, we decided to report 
retention rates with and without retirements.

[B] These measures are based on responses to selected questions on an 
annual employee survey. We began administering this survey in 2002. See 
p. 16 for a brief definition of each measure and pp. 71-76 for more 
detailed information. On the basis of past and expected future 
performance, we revised the targets for these measures after we issued 
our fiscal year 2005 performance plan. The targets increased from 70 
percent for staff development, staff utilization, and organizational 
climate and increased from 75 percent for leadership.

[C] This percentage does not include employee responses to questions 
about our computer-based training courses that were added to our 
curriculum of in-house training in April 2004.

[D] This percentage includes our computer-based training courses. We 
recomputed this number after we had issued our performance plan for 
fiscal year 2005; the percentage decreased from 72 percent as a result.

[End of table]

[End of Focusing on Our People]

GAO's High-Risk Program:

In tandem with our reviews of federal programs that the Congress 
mandates or requests us to perform, we also focus resources on selected 
federal programs and certain broad areas of the federal government that 
are more vulnerable to waste, fraud, abuse, and mismanagement than 
other programs or have major challenges associated with their economy, 
efficiency, or effectiveness. Since 1993, we have identified these 
high-risk programs in our high-risk updates issued to coincide with the 
start of each new Congress. This work is very important because it 
further helps to improve the performance and accountability of the 
federal government.

Our high-risk updates list government programs and operations in need 
of special attention or transformation to ensure that the federal 
government operates in the most economical, efficient, and effective 
manner possible. Our latest report, released in January 2003, 
spotlights more than 20 troubled areas across government. Many of these 
areas involve essential government services, such as Medicare, housing 
programs, and postal service operations, that directly affect the well-
being of the American people.

In fiscal year 2004, we issued 218 reports and delivered 96 testimonies 
related to our high-risk areas and programs, and our work involving 
these areas resulted in financial benefits totaling over $20 billion. 
This work, for example, included 13 reports and 10 testimonies 
examining problems with DOD's financial management practices, such as 
weak internal controls over travel cards, inadequate management of 
payments to the Navy's telecommunications vendors, and abuses of the 
federal tax system by DOD contractors, resulting in $2.7 billion in 
financial benefits. In addition, we documented $700 million in 
financial benefits based on previous work related to modernizing 
federal disability programs and produced 7 reports and 4 testimonies 
focusing on, for example, improving Social Security Administration (SSA) 
and Department of Energy processes that result in inconsistent 
disability decisions and inconsistent benefit outcomes.

Over the years, agencies have made strong efforts to address the 
deficiencies cited in our high-risk reports, and some have improved 
enough to be removed from the list (e.g., farm loan programs). We have 
also identified other areas of high risk including challenges faced by 
government programs and operations in need of broad-based 
transformations, such as strategic human capital management.

We plan to issue our next high-risk update early in 2005. To learn more 
about our work on the high-risk areas or to download the January 2003 
update in full, go to [Hyperlink, http://www.gao.gov/pas/2003/].

[End of GAO's High-Risk Program]

Building Partnerships:

In fiscal year 2004, we began to explore indicators that could help us 
measure how well we develop mutually beneficial relationships with 
other accountability organizations. Such partnerships are important 
because they create opportunities for collaboration and cooperation 
that help all organizations involved address common challenges and 
enhance their ability to improve government operations and serve the 
public better. Moreover, these partnerships allow us and other 
organizations to make meaningful changes in our internal accountability 
processes and policies as well as leverage available resources. 
Currently we have established key partnerships with a variety of 
organizations such as the National Academies, the International 
Organization of Supreme Audit Institutions (INTOSAI), the National 
Intergovernmental Audit Forum, the Governmental Accounting Standards 
Advisory Committee, the Partnership for Public Service (which now 
includes the Private Sector Council), the Council for Excellence in 
Government, and the Woodrow Wilson International Center for Scholars; 
professional associations such as the Association of Government 
Accountants; and various GAO advisory groups. (For more information 
about these partnerships, see Strategies and Challenges later in this 
section of the report.) In the coming years, we will attempt to 
identify data needed to set a baseline for qualitative measures that 
will help us assess our performance in developing and maintaining 
partnerships, encouraging good government practices, and producing 
results that benefit the American people.

[End of Building Partnerships]

Managing Our Resources:

Resources Used to Achieve Our Fiscal Year 2004 Performance Goals:

Our financial statements for fiscal year 2004 received an unqualified 
opinion from an independent auditor. The auditor found our internal 
controls to be effective--which means that no material weaknesses were 
identified--and the auditor reported substantial compliance with the 
requirements for financial systems in the Federal Financial Management 
Improvement Act of 1996. The auditor also found no instances of 
noncompliance with the laws or regulations in the areas tested. The 
statements and their accompanying notes, along with the auditor's 
report, appear later in this report. Table 7 summarizes key data. 
Compared with the statements of large and complex agencies in the 
executive branch, our statements present a relatively simple picture of 
a small yet important agency in the legislative branch. We focus most 
of our financial activity on the execution of our congressionally 
approved budget with most of our resources devoted to the human capital 
needed for our mission of supporting the Congress with professional, 
objective, fact-based, nonpartisan, and nonideological information and 
analysis.

Table 7: GAO's Financial Highlights: Resource Information:

Total budgetary resources[A]; 
Fiscal year 2003: $474.3 million; 
Fiscal year 2004: $487.5 million. 

Total outlays[A]; 
Fiscal year 2003: $451.3 million; 
Fiscal year 2004: $469.0 million. 

Net cost of operations: Goal 1: well-being and financial security of 
the American people; 
Fiscal year 2003: $186.4 million; 
Fiscal year 2004: $194.7 million. 

Net cost of operations: Goal 2: changing security threats and 
challenges of globalization; 
Fiscal year 2003: $122.0 million; 
Fiscal year 2004: $131.7 million. 

Net cost of operations: Goal 3: transforming the federal government's 
role; 
Fiscal year 2003: $144.9 million; 
Fiscal year 2004: $145.8 million. 

Net cost of operations: Goal 4: maximizing the value of GAO; 
Fiscal year 2003: $20.0 million; 
Fiscal year 2004: $23.4 million. 

Net cost of operations: Less reimbursable services not attributable to 
goals; 
Fiscal year 2003: ($2.2 million); 
Fiscal year 2004: ($5.5 million). 

Total net cost of operations[A]; 
Fiscal year 2003: $471.1 million; 
Fiscal year 2004: $490.1 million. 

Actual full-time equivalents; 
Fiscal year 2003: 3,269; 
Fiscal year 2004: 3,224.

Source: GAO.

[A] The net cost of operations figures include nonbudgetary items, such 
as imputed pension and depreciation costs, which are not included in 
the figures for total budgetary resources or total outlays.

[End of table]

Our budget consists of an annual appropriation covering salaries and 
expenses and revenue from reimbursable audit work and rental income. 
For fiscal year 2004, our total budgetary resources increased by $13.2 
million from fiscal year 2003. This increase consists primarily of 
funds needed to cover mandatory and uncontrollable costs.

Our total assets were $118.2 million, consisting mostly of property and 
equipment (including the headquarters building, land and improvements, 
and computer equipment and software) and funds with the U.S. Treasury. 
The largest dollar change in our assets was in property and equipment, 
which decreased in fiscal year 2004 as a result of normal depreciation 
amounts being greater than asset purchases. Total liabilities of $84.7 
million were composed largely of employees' accrued annual leave, 
amounts owed to other government agencies, accounts payable, and 
employees' salaries and benefits. The greatest changes in the 
liabilities were an increase in salaries and benefits and a decrease in 
capital lease liability. The increase in salaries and benefits 
liability is a result of two additional days of payroll accrual. There 
were 9 days of accrued payroll for fiscal year 2004 versus 7 days 
accrued at the end of fiscal year 2003. The decrease in capital lease 
liability is a result of making final lease payments for a substantial 
number of agency laptop computers during fiscal year 2004 that continue 
to be used in fiscal year 2005.

The net cost of operating GAO during fiscal year 2004 and fiscal year 
2003 was approximately $490 million and $471 million, respectively. 
Expenses for salaries and related benefits accounted for 79 percent of 
our net cost of operations in both fiscal years. Figure 16 shows how 
our fiscal year 2004 costs break down by category.

We report net cost of operations according to our four strategic goals, 
consistent with our strategic plan. Goal 2 accounted for the greatest 
dollar increase in our net cost of operations between fiscal year 2003 
and fiscal year 2004. The increase is due to a redistribution of 
resources from goals 1 and 3 for homeland security efforts. The 
increase in goal 4 is primarily related to our efforts to enhance IT 
systems security and enterprise architecture.

Figure 16: Use of Funds by Category:

[See PDF for image] - graphic text:

Pie graph with five items. 

Salaries and benefits; 
Percentage of total net costs: 79.4%. 

Building and hardware maintenance services; 
Percentage of total net costs: 10.0%.

Rent (space and hardware); 
Percentage of total net costs: 3.3%.

Depreciation; 
Percentage of total net costs: 3.0%.

Other; 
Percentage of total net costs: 4.3%.

Source: GAO.

[End of figure]

Figures 17 and 18 show our net costs by goal for fiscal year 2001 
through fiscal year 2004. Figure 17 shows costs unadjusted for 
inflation, while figure 18 shows the same costs in 2004 dollars, that 
is, adjusted for inflation.

As these figures indicate, our first goal, under which we organize our 
work on challenges to the well-being and financial security of the 
American people, accounted for the largest share of the costs. We 
expect this goal to continue to represent the largest share of costs.

Figure 17: Net Cost by Goal, Unadjusted for Inflation:

[See PDF for image] - graphic text:

Bar chart with 4 groups of 4 items each.

Goal 1; 
2001: $161.1 million; 
2002: $178.3 million; 
2003: $186.4 million; 
2004: $194.7 million. 

Goal 2; 
2001: $93.4 million; 
2002: $110.5 million; 
2003: $122.0 million; 
2004: $131.7 million. 

Goal 3; 
2001: $139.5 million; 
2002: $141.0 million; 
2003: $144.9 million; 
2004: $145.8 million. 

Goal 4; 
2001: $20.7 million;
2002: $25.3 million;
2003: $20.0 million;
2004: $23.4 million.

Source: GAO.

[End of figure]

Figure 18; Net Cost by Goal, Adjusted for Inflation:

[See PDF for image] - graphic text:

Bar chart with 4 groups of 4 items each.

Goal 1; 
2001: $171.5 million; 
2002: $185.9 million; 
2003: $190.3 million; 
2004: $194.7 million. 

Goal 2; 
2001: $99.4 million; 
2002: $115.2 million; 
2003: $124.6 million; 
2004: $131.7 million. 

Goal 3; 
2001: $148.5 million; 
2002: $147.0 million; 
2003: $147.9 million; 
2004: $145.8 million.

Goal 4; 
2001: $22.0 million; 
2002: $26.4 million; 
2003: $20.4 million; 
2004: $23.4 million.

Source: GAO.

[End of figure]

Audit Advisory Committee:

Assisting the Comptroller General in overseeing the effectiveness of 
GAO's financial operations is a three-member external Audit Advisory 
Committee. The committee's report for fiscal year 2004 appears after 
our financial statements and accompanying notes. Current members of the 
committee are:

* Sheldon S. Cohen (Chairman), a certified public accountant and 
practicing attorney in Washington, D.C., a former Commissioner and 
Chief Counsel of the Internal Revenue Service, and a Senior Fellow of 
the National Academy of Public Administration.

* Edward J. Mazur, CPA; Member of the Governmental Accounting Standards 
Board, former State Comptroller of Virginia, and a former Controller of 
the Office of Federal Financial Management in the Office of Management 
and Budget (OMB).

* Charles O. Rossotti, senior advisor at The Carlyle Group; former 
Commissioner of the Internal Revenue Service; and founder and former 
Chief Executive Officer and Chairman of American Management Systems, 
Inc., an international business and information technology consulting 
firm.

Limitation on Financial Statements:

Responsibility for the integrity and objectivity of the financial 
information presented in the financial statements in this report rests 
with our managers. The statements were prepared to report our financial 
position and results of operations, consistent with the requirements of 
the Chief Financial Officers Act, as amended (31 U.S.C. 3515). The 
statements were prepared from our financial records in accordance with 
the formats prescribed in OMB's Bulletin 01-09, Form and Content of 
Agency Financial Statements. These financial statements differ from the 
financial reports used to monitor and control our budgetary resources. 
However, both were prepared from the same financial records.

Our financial statements should be read with the understanding that, as 
an agency of a sovereign entity, the U.S. government, we cannot 
liquidate our liabilities (i.e., pay our bills) without legislation 
that provides resources to do so. Although future appropriations to 
fund these liabilities are likely and anticipated, they are not 
certain.

Planned Resources to Achieve Our Fiscal Year 2005 Performance Goals:

As we go to press on this report, the Congress has not yet completed 
action on our fiscal year 2005 budget, and we, like most other federal 
government agencies, are operating at fiscal year 2004 levels under a 
continuing resolution through November 20, 2004, pending enactment of 
the fiscal year 2005 appropriations bills for the federal government. 
We requested $486 million--an increase of 4.9 percent over our fiscal 
year 2004 budget authority--primarily to cover annual pay and related 
costs, estimated inflationary increases, and certain other items. At 
this time the House has approved a 3.8 percent increase and the Senate 
3 percent. When the Congress returns in November, it is expected to 
develop an omnibus appropriations bill combining nondefense activities, 
including funding for us. Table 8 reflects the requested budget level 
and full-time equivalent (FTE) positions. Once final appropriations 
decisions are enacted, we will adjust our resources to reflect the 
appropriated amount.

Table 8: Fiscal Year 2005 Resources by Strategic Goal Based on Budget 
Request (dollars in millions):

Strategic goal: Goal 1; Provide timely, quality service to the Congress 
and the federal government to address current and emerging challenges 
to the well-being and financial security of the American people; 
FTEs: 1,069; 
Amount: $163.

Strategic goal: Goal 2; Provide timely, quality service to the Congress 
and the federal government to respond to changing threats and the 
challenges of global interdependence; 
FTEs: 798; 
Amount: $122.

Strategic goal: Goal 3; Help transform the federal government's role 
and how it does business to meet 21st century challenges; 
FTEs: 844; 
Amount: $130.

Strategic goal: Goal 4; Maximize the value of GAO by being a model 
federal agency and a world-class professional services organization; 
FTEs: 562; 
Amount: $71.

Total; 
FTEs: 3,273; 
Amount: $486. 

Source: GAO.

[End of table]

In addition to salaries and expenses, we intend to invest resources in 
addressing our key management challenges: human capital and information 
and physical security. For example, on the human capital front, to 
ensure our ability to attract and retain high-quality staff, we plan to 
continue staff recruitment, succession planning, retention, and 
recognition programs. We also plan to continue efforts to update our 
training curriculum to strengthen performance in the competencies 
contained in our revised performance management systems, address 
organizational and technical needs, and maximize staff productivity and 
effectiveness. In addition, we will continue efforts to implement new 
human capital authorities included in legislation recently enacted by 
the Congress, including a more market-oriented and performance-based 
compensation system.

On the information security front, we plan to continue initiatives to 
ensure a secure environment, detect intruders in our systems, and 
recover in the event of a disaster. We are also continuing to make the 
investments necessary to enhance the safety and security of our staff, 
facilities, and other assets for the mutual benefit of GAO and the 
Congress. In addition, we plan to continue initiatives designed to 
further increase employees' productivity, facilitate knowledge 
sharing, and maximize the use of technology through tools available at 
the desktop and by reengineering the systems that support our business 
processes.

[End of Managing Our Resources]

Strategies and Challenges:

The Government Performance and Results Act directs agencies to 
articulate not just goals, but also strategies for achieving those 
goals. As detailed in the following sections, our strategies primarily 
emphasize conducting audits, evaluations, analyses, research, and 
investigations and providing the information from that work to the 
Congress and the public in a variety of forms. Our strategies also 
emphasize the importance of two overarching approaches: (1) working 
with other organizations on crosscutting issues and (2) effectively 
addressing the challenges to achieving our agency's goals--that is, 
those internal and external factors that could impair our performance.

Strategies for Achieving Our Goals and Coordinating with Others:

As the audit, evaluation, and investigative arm of the Congress, we 
have a unique role to play. Within the legislative branch, we are the 
only agency with staff in the field, conducting performance analyses 
and financial audits, among other congressionally requested activities, 
and reporting our findings not only to our congressional clients but 
also to the American public. While we work with the inspectors general 
at every federal agency, our engagements typically differ from theirs 
in that ours are often more strategic, complex, crosscutting 
(governmentwide or multi-agency in scope), longer-range in nature, and 
initiated by requests from the Congress.

Attaining our goals and objectives rests, for the most part, on 
providing professional, objective, fact-based, nonpartisan, 
nonideological, fair, and balanced information. We develop and present 
this information in a number of ways to support the Congress in 
carrying out its constitutional responsibilities, including:

* evaluating federal policies and the performance of agencies;

* overseeing government operations through financial and other 
management audits to determine whether public funds are spent 
efficiently, effectively, and in accordance with applicable laws;

* investigating whether illegal or improper activities are occurring;

* analyzing the financing for government activities;

* conducting various constructive engagements in which we work 
proactively with agencies, when appropriate, to provide advice that may 
assist their efforts toward positive results;

* providing legal opinions that determine whether agencies are in 
compliance with applicable laws and regulations;

* conducting policy analyses to assess needed actions and the 
implications of proposed actions; and:

* providing additional assistance to the Congress in support of its 
oversight and decision-making responsibilities.

The performance goals lay out the work we plan to complete by the end 
of fiscal year 2005 using the strategies above (the performance goals 
are shown in Part II of this report). In our annual performance plan 
for fiscal year 2006, we will discuss our performance goals covering 
the work we plan to do in fiscal year 2006.

Because achieving our strategic goals and objectives also requires 
strategies for coordinating with other organizations with similar or 
complementary missions, we:

* use advisory panels and other bodies to inform our strategic and 
annual work planning and,

* initiate and support collaborative national and international audit, 
technical assistance, and other knowledge-sharing efforts.

These two types of strategic working relationships allow us to extend 
our institutional knowledge and experience, to leverage our resources, 
and, in turn, improve our service to the Congress and the American 
people. Our office of Strategic Planning and External Liaison takes the 
lead and provides strategic focus for the work with external partner 
organizations, while our research, audit, and evaluation teams lead the 
work with most of the issue-specific organizations.

Strategic and Annual Work Planning:

Through a series of forums, advisory boards, and panels; periodic 
environmental scans; and our speakers' series, we gather information 
and perspectives for our strategic and annual performance planning 
efforts. In fiscal year 2004, the Comptroller General convened various 
experts from the public, private, and nonprofit sectors in a series of 
forums and panels intended to enhance our understanding of emerging 
issues and to identify opportunities for action:

* In November 2003, we hosted a forum entitled High-Performing 
Organizations: Metrics, Means, and Mechanisms for Achieving High 
Performance in the 21st Century Public Management Environment and 
issued a report summarizing the discussion in February 2004.

* In April 2004, we convened a forum on human capital and civil service 
reform, the results of which were reported in November 2004.

* In January 2004, we held a forum on health care entitled 
Unsustainable Trends Necessitate Comprehensive and Fundamental Reforms 
to Control Spending and Improve Value and summarized in a May 2004 
report the results of this discussion.

* In April 2004, we conducted a forum entitled Workforce Challenges and 
Opportunities for the 21st Century: Changing Labor Force Dynamics and 
the Role of Government Policies and in June 2004 we issued highlights 
of the forum.

* In July 2004, we convened a forum on financial literacy with a report 
forthcoming before the end of November 2004.

* Throughout 2004, we held six sessions of our speakers' series 
Conversations on 21st Century Challenges, wherein prominent leaders 
discuss emerging themes and their implications for public policy.

Advisory boards and panels also support our strategic and annual work 
planning by alerting us to issues, trends, and lessons learned across 
the national and international audit community that we should factor 
into our own work. These groups include the Comptroller General's 
Advisory Board, whose 40 members from the public and private sectors 
have broad expertise in areas related to our strategic objectives. The 
board meets with our leadership annually to share its views on our 
strategic direction and specific initiatives. Through the National 
Intergovernmental Audit Forum, chaired by the Comptroller General, and 
10 regional intergovernmental audit forums, we consult regularly with 
federal inspectors general and state and local auditors. In addition, 
through the Domestic Working Group, the Comptroller General and the 
heads of 18 federal, state, and local audit organizations exchange 
information and seek opportunities to collaborate.

We also work with a number of issue-specific and technical panels to 
improve our strategic and annual work planning, including the 
following:

* The Advisory Council on Government Auditing Standards provides us 
guidance on promulgating auditing standards. These standards articulate 
auditors' responsibilities when examining government organizations, 
programs, activities, or functions and government assistance received 
by contractors, nonprofits, and other nongovernment organizations. The 
council's work ensured that the revised standards would be generally 
accepted and feasible.

* The Accountability Advisory Council, made up of experts in the 
financial management community, advises us on audits of the U.S. 
government's consolidated financial statements and emerging issues 
involving financial management and accountability reporting.

* The Executive Council on Information Management and Technology, whose 
19 members are experts from the public and private sectors and 
representatives of related professional organizations, help us to 
identify high-risk and emerging issues in the IT arena.

* The Comptroller General's Educators' Advisory Panel, composed of 
deans, professors, and other academics from prominent universities 
across the United States, advises us on recruiting, retaining, and 
developing staff and strategic planning matters.

Internationally, we participate in INTOSAI--the professional 
organization of the national audit offices of 184 countries. During 
2004, we led a 10-nation task force that developed a 5-year strategic 
plan--the first in INTOSAI's 50-year history. The plan was unanimously 
endorsed by INTOSAI's Governing Board and unanimously adopted by the 
INTOSAI Congress this fall. It provides a blueprint for a major 
transformation of INTOSAI and a structure and rationale that will 
facilitate member institutions' strategic engagement in INTOSAI in a 
way that maximizes contributions while minimizing resources.

Collaborating with Others:

By collaborating with numerous organizations and individuals, we have 
strengthened professional standards, provided technical assistance, 
leveraged resources, and developed best practices. In our work with 
INTOSAI, we chair the accounting and reporting committee and we are an 
active member of INTOSAI's auditing standards, internal control 
standards, and other technical committees. We also publish INTOSAI's 
quarterly International Journal of Government Auditing in five 
languages to further the global understanding of standards, best 
practices, and technical issues. To help ensure that the public sector 
perspectives are reflected in the International Federation of 
Accountants standards development project, we are collaborating closely 
with the International Auditing and Assurance Standards Board and the 
World Bank to develop international auditing standards through an 
effort led by the National Audit Office of Sweden.

To build capacity in national audit offices around the world, we 
conduct an international fellows training program each year for mid-to 
senior-level staff from other countries. In 2004, 22 fellows from 
Africa, Asia, Latin America, the Caribbean, and Eastern Europe spent 
about 4 months at GAO learning how we are organized to do our work, how 
we plan work, and what methodologies we use, particularly for 
performance audits. As part of our strategy to promote continuous 
learning and sustainability once the fellows return to their countries, 
we are working with major donors--such as the World Bank and the U.S. 
Agency for International Development--to identify or support relevant 
capacity-building projects in fellows' institutions. Six current and 
seven former Auditor Generals as well as several Deputy Auditor 
Generals, including the current chair of INTOSAI, are graduates of this 
program. Our partnerships with the Inter-American Development Bank, the 
INTOSAI Development Initiative, and two organizations whose members are 
Latin American and Caribbean audit institutions have resulted in the 
design and delivery of performance audit and information technology 
courses for our counterparts in Latin America.

Other collaborative activities undertaken by our staff during 2004 
included the following:

* Conferring with the Private Sector Council, a nonprofit, nonpartisan, 
public service organization committed to helping the federal government 
improve its efficiency, management, and productivity through the 
cooperative sharing of knowledge. Council members have assisted us on a 
number of engagements. For example, the council assisted a GAO team 
that is examining best practices used by private sector companies to 
plan for, acquire, and manage telecommunications services. Late in 
fiscal year 2004, the Private Sector Council merged with the 
Partnership for Public Service, which is another of our external 
partner organizations.

* Assisting the Environmental Protection Agency's (EPA) IG and the 
Domestic Working Group in their collaborative review on information 
used by water utilities to conduct vulnerability assessments by 
identifying appropriate state and local participants contacts. EPA's IG 
issued the results of this collaborative effort in January 2004.

* Actively participating in four other Domestic Working Group 
collaborative efforts of federal, state, and local audit officials to 
address issues regarding access to records, grants management, long-
term fiscal challenges, and governance.

* Leading the effort to develop the National Intergovernmental Audit 
Forum's first-ever strategic plan that will help maximize the 
organization's effectiveness in promoting good government and 
accountability at all levels of government. The task force working on 
the plan is composed of federal, state, and local auditors and an 
independent public accountant. The forum adopted a strategic plan 
framework, and it is anticipated that a final plan will be adopted in 
December 2004.

Using Our Internal Experts:

We coordinated extensively within our own organization on our strategic 
and annual performance planning efforts, as well as on the preparation 
of our performance and accountability reports. Our efforts are 
completed under the overall direction of the Comptroller General and 
the Chief Operating Officer. We relied on our Chief Administrative 
Officer/Chief Financial Officer and her staff to provide key 
information, such as the financial information that is included in Part 
III of this report. Her staff also coordinated with others throughout 
the agency to provide the information on goal 4's results, which 
appears in Part II of this report, and provided input on other efforts 
dealing with issues that include financial management, budgetary 
resources, training, and security. We obtained input on all aspects of 
our strategic and annual performance planning and reporting efforts 
from each of our engagement teams and organizational units through 
their respective managing directors, as well as other staff responsible 
for planning or engagement activities in the teams. QCI staff prepared 
the report, ensuring, among other things, that the report was 
responsive to comments and suggestions received from the Association of 
Government Accountants and other reviewers. In short, we involved 
virtually every part of GAO and used our internal expertise in our 
planning and reporting efforts.

Addressing Management Challenges That Could Affect Our Performance:

At GAO, management challenges are identified by the Comptroller General 
and the agency's senior executives through the agency's strategic 
planning, management, and budgeting processes. Our progress in 
addressing the challenges is monitored through our annual performance 
and accountability process. Under our strategic goal 4, we establish 
performance goals focused on each of our management challenges, track 
our progress in completing the key efforts for those performance goals 
quarterly, and report at 2-year intervals whether the performance goals 
have been met or not met. We have also asked our IG to examine 
management's assessment of the challenges and the agency's progress in 
addressing them, and our IG's assessment can be found in this report in 
the section entitled From the Inspector General.

In fiscal year 2004, we had three major management challenges--human 
capital, physical security, and information security. We have reported 
in the past on our efforts to address these challenges. Although we 
have made progress with these challenges, we still have work to do.

The Human Capital Challenge:

Given our role as a key provider of professional and objective 
information and analyses to the Congress, maintaining the right mix of 
technical knowledge and expertise as well as general analytical skills 
is vital to achieving our mission. We spend about 80 percent of our 
resources on our people, but without excellent human capital policies 
and management practices, we could run the risk of being unable to meet 
the expectations of the Congress and the American people.

During fiscal year 2004, we continued to make significant improvements 
in our human capital management. Provisions in the newly enacted GAO 
Human Capital Reform Act of 2004, signed into law on July 7, 2004, 
provide GAO a number of human capital tools and flexibilities that 
better position the agency to serve the Congress. These provisions, 
among others, include decoupling GAO from the across-the-board pay 
adjustment system applicable to much of the executive branch; amending 
pay retention rules for employees affected by a workforce 
restructuring, reclassification, or other action; creating a executive 
exchange program with the private sector; and making permanent our 
early retirement and buy-out authorities.

We completed our first separate strategic plan for human capital (GAO: 
Human Capital Strategic Plan, Fiscal Years 2004-2006). The purpose of 
the plan is to communicate both internally and externally GAO's 
strategy for becoming a model professional services organization, 
including how we plan to attract, retain, motivate, and reward a high-
performing and top-quality workforce. Published in September 2004, the 
plan is posted on GAO's Web site.

We also built on our fiscal year 2003 accomplishments in attracting and 
retaining a diverse workforce with the knowledge, skills, and abilities 
to meet the new century's challenges. Among other things, in fiscal 
year 2004 we expanded the use of the Academic Achievement Program to 
hire college graduates with records of superior academic achievement; 
increased the number of internships; and used direct-hire, short-term, 
and time-limited appointing authorities like the Visiting Fellows 
Program to fill gaps identified during our workforce planning effort. 
Our intern program focuses on attracting student interns with the skill 
sets needed for our analyst positions, since many of our interns are 
hired as entry-level employees upon successful completion of their 
internships. To promote the retention of staff with critical skills and 
1 to 3 years of GAO experience, we offered student loan repayments for 
the third year in a row in exchange for commitments to federal service. 
In accordance with Office of Personnel Management regulations, we 
disbursed repayments of between $5,000 and $6,000 (or the full amount 
of the loan if the individual's balance was less than $5,000) directly 
to lending institutions during fiscal year 2004 for 236 employees, each 
of whom signed a 3-year agreement to continue working at GAO.

In addition, we made some significant changes to GAO's performance 
management systems. A new competency-based appraisal system for our 
administrative and professional support staff was instituted. This new 
system establishes a clear link between employee performance and GAO's 
mission, core values, and strategic objectives. We converted all 
administrative and professional support staff to a broadband pay system 
and began the first year of performance-based pay, removing these GAO 
staff from the General Schedule. In addition, on the basis of feedback 
from GAO managers and staff, we implemented a number of improvements to 
the analysts' competency-based performance management system. For 
example, we shortened the processing time for appraisals, pay, and 
promotion decisions; eliminated some of the narrative requirements to 
make the process less burdensome; and developed a plan to replace pay 
categories with individualized pay decisions.

Finally, to ensure that GAO staff have the knowledge and expertise to 
meet our goals and objectives, we developed 14 new courses as part of 
our competency-driven curriculum and initiated a leadership development 
program to address the needs of new supervisors. We also provided GAO 
staff "just-in-time" access to learning through over 900 courses and 
almost 60 skill simulations available online and accessible from GAO or 
home at any time of day.

The Physical Security Challenge:

In the aftermath of the September 11 terrorist attacks, subsequent 
anthrax incidents, and Operation Enduring Freedom and Afghanistan 
operations, our ability to provide a safe and secure workplace was 
challenged. Protecting our people and our assets is critical to our 
ability to carry out our mission. We devoted additional resources to 
this area and implemented measures, such as upgrading the headquarters 
fire alarm system and installing a parallel emergency notification 
system. We also designed several security enhancements that are 
currently under way such as the installation of a wall and bollards 
around the perimeter of the headquarters building. The remaining 
upgrades, which include vehicle restraints at the guard ramps, 
ballistic-rated security guard booths, vehicle surveillance equipment 
at the garage entrances, and state-of-the-art electronic security, will 
be installed during fiscal year 2005. We previously distributed a 
Shelter in Place plan for headquarters staff, an Emergency Response 
Handbook for staff, and provided emergency preparedness briefings for 
staff. In fiscal year 2004, we updated the Shelter in Place plan for 
headquarters, updated the Emergency Response Handbook for staff, and 
prepared Shelter in Place plans for the field offices that will be 
distributed during the first quarter of fiscal year 2005. We continue 
to hold annual security fair seminars to disseminate information on 
security and emergency preparedness at the workplace and at home. 
During fiscal year 2004, we developed a continuity-of-operations plan 
that we plan to issue during the first quarter of fiscal year 2005. As 
part of our plan to ensure our continuity of operations should we have 
to vacate our headquarters because of an emergency, we identified an 
alternative facility to house our continuity-of-operations team.

The Information Security Challenge:

Protecting our information assets and ensuring information systems 
security and disaster recovery that allow for continuity of operations 
is a critical requirement for us. The risk is that in an emergency, our 
information could be compromised and we would be unable to respond to 
the needs of the Congress. In light of this risk, and in keeping with 
our goal of being a model federal agency, we have a wide range of 
initiatives under way to strengthen and protect the security of our 
information systems and data, including our financial systems. We have 
undertaken several projects that have significantly improved our 
information security program during fiscal year 2004. For example, we 
completed the revision of the IT Security Policy Order. We added a 
second external firewall to the GAO architecture. The additional layer 
of security provided by this firewall enhances our ability to identify 
and stop potential hackers and improve the service to our customers. To 
better secure our computing assets within GAO, we are completing the 
implementation of internal firewalls to the core switches and each 
field office. We also instituted a process to scan the computer system 
for vulnerabilities and potential exploitation. We established a 
Security Operations Center responsible for the daily monitoring of 
security devices within our IT infrastructure. Daily reports identify 
potential threats to GAO that require investigation to ensure our 
environment is uncompromised. In addition, we are continually refining 
our disaster recovery procedures and have conducted some limited 
testing exercises during fiscal year 2004 to ensure the viability of 
our contingency plan. We have strategically positioned critical backup 
services at a remote location and have implemented a contingency Web-
based portal to establish essential remote telecommunications links for 
GAO's client-server-based systems. As we refine our contingency 
processes and improve our services, we will be implementing additional 
technologies that mirror our current daily IT services during fiscal 
year 2005. More detailed information on our information security 
efforts is in Part IV.

Mitigating External Factors That Could Affect Our Performance:

Several external factors could affect the achievement of our 
performance goals, including national and international developments 
and the resources we receive. Limitations imposed on our work by other 
organizations or limitations on the ability of other federal agencies 
to make the improvements we recommend are additional factors that could 
affect the achievement of our goals.

As the Congress focuses on unpredictable events--such as the global 
threat posed by sophisticated terrorist networks, international 
financial crises, or natural disasters--the mix of work we are asked to 
undertake may change, diverting our resources from some strategic 
objectives and performance goals. We can and do mitigate the impact of 
these events on the achievement of our goals in various ways:

* We are alert to possibilities that could shift the Congress's and, 
therefore, our priorities.

* We continue to identify in our products and meetings with the 
Congress conditions that could trigger new priorities.

* We quickly redirect our resources, when appropriate, so that we can 
deal with major changes that do occur.

* We maintain broad-based staff expertise so that we can readily 
address emerging needs.

* We perform self-initiated research on a limited number of selected 
topics.

Another external factor is the extent to which we can obtain access to 
certain types of information. With concerns about operational security 
being unusually high at home and abroad, we may have more difficulty 
obtaining information and reporting on sensitive issues. Historically, 
our auditing and information gathering has been limited whenever the 
intelligence community is involved. Nor have we had the authority to 
access or inspect records or other materials held by other countries 
or, generally, by the multinational institutions that the United States 
works with to protect its interests. Consequently, our ability to fully 
assess the progress being made in addressing national and homeland 
security issues may be hampered, and because some of our reports may be 
subjected to greater classification reviews than in the past, their 
public dissemination may be limited. We will work with the Congress to 
identify both legislative and nonlegislative opportunities for 
strengthening our access authority as necessary and appropriate.

[End of Strategies and Challenges]

[End of Achieving Results on Behalf of the Congress and All Americans] 

[End of Part I]

PART II: Performance Information: 

Performance Information by Strategic Goal:

In the following sections, we discuss how each of our four strategic 
goals contributed to our fiscal year 2004 performance results. Teams 
supporting strategic goals 1, 2, and 3 worked on a variety of 
congressional requests, mandates, and research and development 
engagements that helped to improve the functioning and integrity of the 
federal government, resulting in significant benefits for millions of 
American taxpayers. In addition, our Goal 4 activities played a 
significant role in moving us toward our goal of being a world-class, 
professional services employer.

Goal 1 Results:

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People:

Goal 1 Overview:

Our first strategic goal upholds our mission to support the Congress in 
carrying out its constitutional responsibilities by focusing on work 
that helps address the current and emerging challenges affecting the 
well-being and financial security of America's people and communities. 
Our eight objectives for this goal are to support congressional and 
federal efforts on:

* the health needs of an aging and diverse population;

* the education and protection of the nation's children;

* the promotion of work opportunities and the protection of workers;

* a secure retirement for older Americans;

* an effective system of justice;

* the promotion of viable communities;

* responsible stewardship of natural resources and the environment; 
and:

* a safe, secure, and effective national physical infrastructure.

To accomplish our work under these strategic objectives, we conducted 
audits, analyses, and evaluations of programs at major federal agencies 
and developed reports and testimonies on the efficacy and soundness of 
those programs. Much of our work was initiated in response to 
congressional requests and mandates.

Selected Work under Goal 1:

Enhancing care and safety for nursing home residents: Our 
recommendations support improved oversight of nursing home fire safety, 
strengthened fire safety standards, and thorough investigations of any 
future multiple-death nursing home fires in order to reevaluate the 
adequacy of fire safety standards (see app. 1, item 1.24.C).

Modernizing federal disability programs: Our work supported sweeping 
changes to SSA's disability programs to foster applicants' return to 
work at all stages of its eligibility determination process and to 
improve the timeliness and consistency of its decision making and 
initiated actions that will improve quality assurance processes related 
to federal disability programs at SSA and VA (see app. 1, item 1.34.A).

Protecting Americans from identity theft: Our recent reports, 
testimonies, and recommendations have helped the Congress consider 
policy and management improvements that may not only better protect 
Americans from the financial effects of this crime but also help 
prevent potential terrorists from assuming false identities (see app. 
1, item 1.44.C).

Improving the security of chemical facilities: We contributed to 
several congressional bills calling for increased security measures at 
chemical facilities nationwide that would help frame a national 
strategy for security at chemical facilities (see app. 1, item 1.63.C).

Fostering a more effective federal response to wildland fires: In more 
than 25 reports since 1999, our recommendations contributed to the 
enactment of the Healthy Forest Restoration Act of 2003 and to 
significant actions by the agencies to strengthen their wildland fire 
programs (see app. 1, item 1.66.C).

Ensuring that steps taken to ensure the security of commercial aviation 
are effective: Our reviews of the training and performance of passenger 
screeners and of controls to secure restricted airport areas from 
unauthorized access have helped strengthen commercial aviation security 
in the United States (see app. 1, item 1.82.C).

Implementing postal reforms to address structural and systemic 
deficiencies: We emphasized the urgent need for fundamental postal 
reforms to minimize the risk of a significant taxpayer bailout or 
dramatic postal rate increases (see app. 1, item 1.83.C).

As shown in table 9, we exceeded our fiscal year 2004 targets for all 
of the performance measures for this strategic goal.

Table 9: Strategic Goal 1's Annual Performance Results and Targets:

Performance measure: Financial benefits;
2000 actual: $14.1 billion;
2001 actual: $8.9 billion;
2002 actual: $24.1 billion;
2003 actual: $23.6 billion;
2004 Target: $23.3 billion;
2004 Actual: $26.6 billion[A];
Met/not met: Met;
2005 target: $19.6 billion.

Performance measure: Other benefits;
2000 actual: 182;
2001 actual: 210;
2002 actual: 226;
2003 actual: 217;
2004 Target: 215;
2004 Actual: 252;
Met/not met: Met;
2005 target: 240.

Performance measure: New recommendations made[B];
2000 actual: 435;
2001 actual: 396;
2002 actual: 524;
2003 actual: 557;
2004 Target: 328;
2004 Actual: 614;
Met/not met: Met;
2005 target: Not applicable.

Performance measure: Testimonies;
2000 actual: 131;
2001 actual: 73;
2002 actual: 111;
2003 actual: 80;
2004 Target: 77;
2004 Actual: 85;
Met/not met: Met;
2005 target: 78.

Source: GAO.

Note: Not applicable means not applicable.

[A] The financial benefits for goals 1, 2, and 3 do not equal the 
agencywide total due to rounding.

[B] Beginning in fiscal year 2005, we will eliminate this measure. 
However, we will continue to track the number of new recommendations 
made to ensure that teams supporting strategic goals 1 through 3 
continue to plan and complete engagements that result in 
recommendations.

[End of table]

To help us examine trends over time, we look at 4-year averages for all 
but one of these measures. Specifically, we do not look at averages for 
the percentage of past recommendations implemented because it is a 
composite that is drawn from a number of years rather than an annual 
percentage. These 4-year averages, which are shown in table 10, 
minimize the effect of an atypical result in any given year. This table 
indicates that the number of testimonies for goal 1 has declined since 
fiscal year 2000, while performance on other indicators has generally 
risen over time.

Table 10: Four-Year Rolling Averages for Strategic Goal 1:

Performance measure: Financial benefits;
2000: $11.8 billion;
2001: $11.9 billion;
2002: $15.2 billion;
2003: $17.7 billion;
2004: $20.8 billion.

Performance measure: Other benefits;
2000: 154;
2001: 177;
2002: 190;
2003: 209;
2004: 226.

Performance measure: New recommendations made;
2000: 336;
2001: 367;
2002: 426;
2003: 478;
2004: 523.

Performance measure: Testimonies;
2000: 121;
2001: 114;
2002: 110;
2003: 99;
2004: 87.

Source: GAO.

[End of table]

The following sections describe our performance in goal 1 for each of 
our quantitative performance measures and describe the targets for 
fiscal year 2005. This analysis is followed by a discussion of our 
multiyear qualitative performance goals.

Financial Benefits:

The financial benefits reported for this goal in fiscal year 2004 
totaled $26.6 billion, exceeding the target of $23.3 billion by 14 
percent. Five of these accomplishments, which are reported in detail in 
the goal 1 section of appendix 1, produced financial benefits that 
accounted for over 90 percent of goal 1's total. The largest of them, 
valued at $10.1 billion, arose from our recommendation to close a 
loophole to prevent the federal government from making matching 
payments to states above those intended by Medicaid. (see app. 1, item 
1.6.A). The other large financial benefits for this goal stemmed from 
efforts such as our work on the CPI, the Medicare program, recaptured 
funds from unexpended balances in HUD programs, and DOD programs.

Because financial benefits often result from work completed in prior 
years, we set our fiscal year 2005 target on the basis of our 
assessment of the progress agencies are making in implementing our past 
recommendations. Our analysis indicates that financial benefits in the 
future are more likely to stem from our work in goals 2 and 3. We, 
therefore, have set a target of $19.6 billion for fiscal year 2005.

Other Benefits:

Other tangible, nonfinancial benefits reported for goal 1 in fiscal 
year 2004 included 227 actions taken by federal agencies to improve 
their services and operations in response to our work and another 25 in 
which information we provided to the Congress resulted in statutory or 
regulatory changes. This total of 252 other benefits exceeded our 
target of 215 for the year by 17 percent. Some of our major 
accomplishments are reported in detail in the goal 1 section of 
appendix 1. For fiscal year 2005, we have increased the target to 240.

Examples of Goal 1's Other Benefits:

Outreach to low-income Medicare beneficiaries: Our analysis helped the 
Congress include an outreach requirement in the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 to notify low-income 
beneficiaries of the availability of new subsidies to assist with drug 
costs (see app. 1, item 1.3.A).

Administration of the food stamp program: Our work led to changes in 
two food stamp program options that will help ease the reporting burden 
for almost all participating households, help families transition from 
welfare to work, and may lower food stamp error rates (see app. 1, item 
1.39.A).

Safety of underground storage tanks: Our work on underground storage 
tanks, including those at gasoline stations, has led to agency actions 
and proposed legislation to shore up systemic weaknesses and reduce the 
risk that these tanks will leak and cause significant environmental and 
health risks (see app. 1, item 1.55.A).

New Recommendations Made:

We made recommendations on:

* airliner cabin air quality,

* decommissioning nuclear power plants,

* improved coordination on managing endangered species,

* federal funding of public television,

* election-related voting irregularities, and:

* improving the accuracy of responses to policy-oriented inquiries from 
Medicare providers.

During fiscal year 2004, we issued 614 new recommendations under goal 1 
for additional improvements to government accountability, operations, 
and services, exceeding the target of 328 by 87 percent. We exceeded 
our target largely because of our increased emphasis on including 
recommendations related to our work. Since we began emphasizing the 
number of recommendations made, we have seen a steady increase in the 
number of products containing recommendations. Also, in some cases, our 
recommendations have been more specific, resulting in more 
recommendations per product. As explained in Part I of this report, we 
are discontinuing number of recommendations made as a performance 
measure and will focus more on the percentage of products containing 
recommendations as a measure. However, we will continue to monitor our 
recommendations internally.

Testimonies:

Our witnesses testified at 85 congressional hearings related to this 
strategic goal, which exceeded the fiscal year 2004 target of 77 
testimonies by 10 percent. Among the testimonies given were those on 
student loan programs, Social Security reform, Medicare spending, 
private health insurance, farm program payments, and transportation 
security (see the list of selected issues on which we testified, which 
appears in Part I). On the basis of our assessment of the potential 
need to testify on issues under this goal, we have set a target of 
presenting testimony at 78 hearings during fiscal year 2005.

Multiyear Performance Goals:

As shown in table 11, at the close of fiscal year 2004, we are on track 
to meet 39 of the 40 performance goals for this strategic goal. We are 
not on track to meet the performance goal of assessing the 
administrative efficiency and effectiveness of the federal court and 
prison systems because we did not receive requests to perform work in 
this area and could not undertake self-initiated work because of 
resources being needed for work requested by the Congress in other 
areas.

Table 11: Strategic Goal 1's Multiyear Performance Goals, Fiscal Years 
2004 and 2005:

Strategic Objective: 1.1. The health needs of an aging and diverse 
population:

Performance goal: 1.1.1. Evaluate Medicare reform, financing, and 
operations; On track to meet. 

Performance goal: 1.1.2. Assess trends and issues in private health 
insurance coverage; On track to meet. 

Performance goal: 1.1.3. Assess actions and options for improving the 
Department of Veterans Affairs' and the Department of Defense's health 
care services; On track to meet. 

Performance goal: 1.1.4. Evaluate the effectiveness of federal programs 
to promote and protect the public health; On track to meet. 

Performance goal: 1.1.5. Evaluate the effectiveness of federal programs 
to improve the nation's preparedness for the public health and medical 
consequences of bioterrorism; On track to meet. 

Performance goal: 1.1.6. Evaluate federal and state program strategies 
for financing and overseeing long-term health care; On track to meet. 

Performance goal: 1.1.7. Assess state experiences in providing health 
insurance coverage for low-income populations; On track to meet.

Strategic Objective: 1.2. The education and protection of the nation's 
children:

Performance goal: 1.2.1. Analyze the effectiveness and efficiency of 
early childhood education, care, and nutrition programs in serving 
their target populations; On track to meet. 

Performance goal: 1.2.2. Assess options for federal programs to 
effectively address the educational and nutritional needs of elementary 
and secondary students; On track to meet. 

Performance goal: 1.2.3. Determine the effectiveness and efficiency of 
child support enforcement and child welfare programs in serving their 
target populations; On track to meet. 

Performance goal: 1.2.4. Identify opportunities to better manage 
postsecondary, vocational, and adult education programs and deliver 
more effective services; On track to meet.

Strategic Objective: 1.3. The promotion of work opportunities and the 
protection of workers:

Performance goal: 1.3.1. Assess the effectiveness of federal efforts to 
help adults leave welfare for work and to assist other low-income 
individuals; On track to meet. 

Performance goal: 1.3.2. Analyze the impact of programs designed to 
maintain a skilled workforce and ensure employers have the workers they 
need; On track to meet. 

Performance goal: 1.3.3. Assess the success of various enforcement 
strategies to protect workers while minimizing employers' burden in the 
changing work environment; On track to meet. 

Performance goal: 1.3.4. Identify ways to improve federal support for 
people with disabilities; On track to meet.

Strategic Objective: 1.4. A secure retirement for older Americans:

Performance goal: 1.4.1. Assess the policy challenges facing the future 
of the Social Security system and the need for reform; On track to 
meet;

Performance goal: 1.4.2. Bolster retirement security by identifying 
opportunities to foster greater pension coverage, raise personal 
saving, and increase the employment earnings of seasoned workers; On 
track to meet. 

Performance goal: 1.4.3. Identify opportunities to improve the ability 
of government agencies to administer and protect workers' retirement 
benefits; On track to meet. 

Performance goal: 1.4.4. Assess the role of the Social Security number 
in improving government operations, minimizing fraud and abuse, and 
protecting citizens from identity theft and other illegal activity; On 
track to meet.

Strategic Objective: 1.5. An effective system of justice:

Performance goal: 1.5.1. Identify ways to improve federal agencies' 
ability to prevent and respond to terrorism and other major crimes; On 
track to meet. 

Performance goal: 1.5.2. Assess the effectiveness of federal programs 
to control illegal drug use; On track to meet. 

Performance goal: 1.5.3. Assess federal efforts to enforce immigration 
and customs laws; On track to meet. 

Performance goal: 1.5.4. Assess the administrative efficiency and 
effectiveness of the federal court and prison systems; Not on track to 
meet.

Strategic Objective: 1.6. The promotion of viable communities:

Performance goal: 1.6.1. Assess federal community and economic 
development assistance and its impact on communities; On track to meet. 

Performance goal: 1.6.2. Assess the effectiveness of federal 
initiatives to assist small and minority-owned businesses; On track to 
meet;

Performance goal: 1.6.3. Assess how the federal government can balance 
the promotion of home ownership with financial risk; On track to meet. 

Performance goal: 1.6.4. Assess federal efforts to enhance national 
preparedness and capacity to respond to and recover from natural and 
man-made disasters; On track to meet. 

Performance goal: 1.6.5. Assess how well federal programs that support 
affordable housing meet objectives, manage financial risk, and improve 
recipients' well-being; On track to meet.

Strategic Objective: 1.7. Responsible stewardship of natural resources 
and the environment:

Performance goal: 1.7.1. Assess the nation's ability to ensure reliable 
and environmentally sound energy for current and future generations; On 
track to meet. 

Performance goal: 1.7.2. Assess federal strategies for managing land 
and water resources in a sustainable fashion for multiple uses; On 
track to meet. 

Performance goal: 1.7.3. Assess environmental protection strategies and 
programs; On track to meet. 

Performance goal: 1.7.4. Assess efforts to reduce the threats posed by 
hazardous and nuclear wastes; On track to meet. 

Performance goal: 1.7.5. Assess federal programs' ability to ensure a 
plentiful and safe food supply, provide economic security for farmers, 
and minimize agricultural environmental damage.

Strategic Objective: 1.8. A safe, secure, and effective national 
physical infrastructure:

Performance goal: 1.8.1. Assess strategies for identifying, evaluating, 
prioritizing, financing, and implementing integrated solutions to the 
nation's transportation infrastructure challenges; On track to meet. 

Performance goal: 1.8.2. Assess the impact of transportation and 
telecommunications policies and practices on competition and consumers; 
On track to meet. 

Performance goal: 1.8.3. Assess federal government's role in fostering 
and overseeing telecommunications in the public interest; On track to 
meet;

Performance goal: 1.8.4. Assess efforts to improve safety in moving 
people and goods across the nation's transportation system; On track to 
meet;

Performance goal: 1.8.5. Assess efforts to improve security in all 
transportation modes; On track to meet. 

Performance goal: 1.8.6. Assess the U. S. Postal Service's 
transformation efforts to ensure its viability and accomplish its 
mission; On track to meet. 

Performance goal: 1.8.7. Assess federal efforts to plan for, acquire, 
manage, maintain, secure, and dispose of the government's real property 
assets; On track to meet.

Source: GAO.

Note: In indicating whether we are on track to meet a performance goal, 
the responsible senior executive considers the amount of work conducted 
and recommendations made for each key effort under that performance 
goal, as well as other assistance provided to the client or customer 
that is related to these efforts. The senior executive then judges 
whether the work completed collectively for all key efforts is likely 
to lead to achieving the performance goal. To view the 155 key efforts 
for the 40 performance goals above, go to 
[Hyperlink, http://www.gao.gov/sp.html].

[End of table]

[End of Goal 1 Results]

Goal 2 Results:

Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence:

Goal 2 Overview:

The federal government is working to promote foreign policy goals, 
sound trade policies, and other strategies to advance the interests of 
the United States and its allies while also seeking to anticipate and 
address emerging threats to the nation's security and economy. Given 
the importance of these efforts, our second strategic goal focuses on 
helping the Congress and the federal government respond to changing 
security threats and the challenges of global interdependence. Our four 
strategic objectives under this goal are to support congressional and 
federal efforts to:

* respond to emerging threats to security,

* ensure military capabilities and readiness,

* advance and protect U.S. international interests, and:

* respond to the impact of global market forces on U.S. economic and 
security interests.

To accomplish our work, we conducted field work related to federal 
programs that took us across five continents--Europe, Africa, Asia, 
South America, and North America. We subsequently developed reports, 
testimonies, and briefings on our work, most of which were initiated in 
response to congressional requests and mandates.

Selected Work under Goal 2:

Improving security related to nuclear materials and facilities: in 
response to our recommendations, the U.S. Customs and Border Protection 
issued a comprehensive plan that will help the agency detect the 
smuggling of dangerous nuclear materials into the United States. Also, 
the Department of Energy ordered a reexamination of the potential size 
and capability of the terrorist forces against which the agency must 
successfully defend its nuclear weapons facilities (see app. 1, item 
2.1.A and 2.20.C).

The military's aging fleet of aerial refueling aircraft: DOD concurred 
with our recommendation to study the potential for contractor-provided 
refueling support. DOD's subsequent actions should ensure that the 
fleet meets DOD's needs in the most cost-effective manner (see app. 1, 
item 2.23.C).

Strengthening the tools to fight terrorism: As a result of our 
recommendations on tools for fighting terrorism, the Department of 
State strengthened the visa application process, the Federal Bureau of 
Investigation initiated steps to improve data on mechanisms used by 
terrorists to finance their activities, and IRS accelerated its efforts 
to develop and implement procedures for sharing information with the 
states (see app. 1, item 2.37.A).

Overseeing the reconstruction of Afghanistan and Iraq: After we 
recommended that the U.S. Agency for International Development improve 
its reconstruction strategy for Afghanistan, the agency committed 
itself to developing a more comprehensive strategy to guide its efforts 
in Afghanistan. Our report on rebuilding Iraq provided important 
information about Iraq to American taxpayers and provided the Congress 
with key oversight questions as it assessed progress in rebuilding Iraq 
(see app. 1, item 2.48.C).

Protecting economic interests by improving oversight of federally 
supported financial institutions: The Congress developed legislation 
incorporating major features of our recommendations regarding the 
creation of a single government-sponsored enterprise regulator for 
housing that would be governed by a hybrid board and have both safety 
and soundness and mission oversight responsibilities (see app. 1, item 
2.62.C).

As shown in table 12, we met or exceeded our fiscal year 2004 targets 
for all of the performance measures for this strategic goal.

Table 12: Strategic Goal 2's Annual Performance Results and Targets:

Performance measure: Financial benefits;
2000 actual: $5.5 billion;
2001 actual: $10.5 billion;
2002 actual: $8.4 billion;
2003 actual: $7.1 billion;
2004 Target: $7.0 billion;
2004 Actual: $9.7 billion[A];
Met/not met: Met;
2005 target: $9.4 billion.

Performance measure: Other benefits;
2000 actual: 129;
2001 actual: 188;
2002 actual: 218;
2003 actual: 273;
2004 Target: 244;
2004 Actual: 369;
Met/not met: Met;
2005 target: 300.

Performance measure: New recommendations made[B];
2000 actual: 376;
2001 actual: 618;
2002 actual: 618;
2003 actual: 846;
2004 Target: 602;
2004 Actual: 708;
Met/not met: Met;
2005 target: Not applicable.

Performance measure: Testimonies;
2000 actual: 56;
2001 actual: 34;
2002 actual: 38;
2003 actual: 48;
2004 Target: 56;
2004 Actual: 70;
Met/not met: Met;
2005 target: 52.

Source: GAO.

Note: Not applicable means not applicable.

[A] The financial benefits for goals 1, 2, and 3 do not equal the 
agencywide total due to rounding.

[B] Beginning in fiscal year 2005, we will eliminate this measure. 
However, we will continue to track the number of new recommendations 
made to ensure that teams supporting strategic goals 1 through 3 
continue to plan and complete engagements that result in 
recommendations.

[End of table]

To help us examine trends over time, we look at 4-year averages for all 
but one of our measures. Specifically, we do not look at averages for 
the percentage of past recommendations implemented because it is a 
composite that is drawn from a number of years rather than an annual 
percentage. These 4-year averages, which are shown in table 13, 
minimize the effect of an atypical result in any given year. Table 13 
indicates that financial and other benefits derived from our work, as 
well as new recommendations made related to this goal, have risen. At 
the same time, the number of testimonies for goal 2 has remained fairly 
stable. 

Table 13: Four-Year Rolling Averages for Strategic Goal 2:

Performance measure: Financial benefits;
2000: $6.0 billion; 
2001: $6.2 billion; 
2002: $6.9 billion; 
2003: $7.9 billion; 
2004: $8.9 billion.

Performance measure: Other benefits;
2000: 90;
2001: 118;
2002: 154;
2003: 202;
2004: 262.

Performance measure: New recommendations made;
2000: 279;
2001: 373;
2002: 467;
2003: 615;
2004: 698.

Performance measure: Testimonies;
2000: 46;
2001: 43;
2002: 41;
2003: 44;
2004: 48.

Source: GAO.

[End of table]

The following sections describe our performance in goal 2 for each of 
our quantitative performance measures and describe the targets for 
fiscal year 2005. This analysis is followed by a discussion of our 
multiyear qualitative performance goals.

Financial Benefits:

The financial benefits reported for this goal in fiscal year 2004 
totaled $9.7 billion, exceeding the target of $7.0 billion by over 39 
percent. Most of the financial benefits (66 percent of the total) were 
attributable to four accomplishments valued at $500 million or more 
each. These accomplishments, which are described in detail in the goal 
2 section of appendix 1, stemmed from engagements that improved funding 
of DOD's activities or reduced costs associated with DOD's operations. 
For example, a financial benefit of about $1.35 billion stemmed from 
our findings that DOD no longer needed funds for an operation that had 
ended after the budget request was submitted to Congress, but before 
the funds had been appropriated (see app.1, item 2.13.A).

Given the large portion of the U.S. budget that defense spending 
consumes, we expect our work under this goal to continue to produce 
economies and efficiencies that will yield billions of dollars in 
financial benefits for the American people each year. We set our fiscal 
year 2005 target at $9.4 billion--well above the target for fiscal year 
2004--based on our assessment of the progress agencies are making in 
implementing our past recommendations that might yield financial 
benefits.

Other Benefits:

The other tangible benefits reported for goal 2 in fiscal year 2004 
included 343 actions taken by federal agencies to improve their 
services and operations in response to our work and another 26 in which 
information we provided to the Congress resulted in statutory or 
regulatory changes. This total of 369 other benefits exceeded our 
target of 244 for the year by 51 percent. Our success in this area 
arose from our increased emphasis on follow-up efforts and increased 
monitoring of our progress toward the targets throughout the year. Some 
of our major accomplishments are reported in detail in the goal 2 
section of appendix 1.

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
raise our target to 300. While this target is lower than our fiscal 
year 2004 actual performance, it is well above the 4-year average for 
this measure.

Examples of Goal 2's Other Benefits:

Improving the tracking of in-transit munitions shipments: as a result 
of our recommendations, DOD has initiated corrective actions and 
revised operating procedures that should provide the level of in-
transit visibility required for munitions shipments and decrease their 
vulnerability to compromise (see app. 1, item 2.15.A).

Improving Trade Advisory Committee operations: Our recommendation that 
members of the Trade Advisory Committee take steps to quickly fill gaps 
on the committee led USDA--one member agency--to identify gaps in 
coverage that it then worked to fill, and several member agencies 
revised their processes to grant interim security clearances to 
committee advisers, if necessary, so that they could assist the 
committee while awaiting full clearance (see app. 1, item 2.54.A and 
2.55.A).

Clarifying guidance on promoting tobacco: In response to our report 
that USDA's Foreign Agricultural Service had not issued guidance 
implementing tobacco-related restrictions since 1994, USDA has reviewed 
all of its ongoing activities, revised its reporting guidelines, and 
instructed overseas offices not to comment on tobacco product and price 
matters and to ensure that reported material is consistent with 
legislated restrictions (see app. 1, item 2.57.A).

New Recommendations Made:

We made recommendations on:

* continuity-of-operations plans for ensuring the delivery of essential 
government services,

* preventing foreign countries from obtaining classified spare parts or 
unclassified items containing military technology, and:

* U.S. assistance to Afghanistan.

We issued 708 new recommendations for additional improvements to 
government accountability, operations, and services during fiscal year 
2004, exceeding the target of 602 by about 18 percent. As explained in 
Part I of this report, we are discontinuing number of recommendations 
made as a performance measure and will focus more on the percentage of 
products containing recommendations as a measure. However, we will 
continue to monitor our recommendations internally.

Testimonies:

Our witnesses testified at 70 congressional hearings related to this 
strategic goal, exceeding our target of 56 hearings by 25 percent. 
Among other things, we testified on international broadcasting, 
terrorist financing, oversight of government-sponsored enterprises, 
mutual funds, cruise missiles, unmanned aerial vehicles, counterfeit 
identities, and security at nuclear facilities (see the list of 
selected issues on which we testified, which appears in Part I). We 
have set our target for presenting testimony at hearings to 52 for 
fiscal year 2005.

Multiyear Performance Goals:

As shown in table 14, at the close of fiscal year 2004, we are on 
target to meet 22 of our 23 performance goals for this strategic goal. 
We are not on track to meet the performance goal of identifying 
opportunities to embed homeland security concepts in ongoing national 
initiatives because our homeland security resources were needed for 
other work requested by the Congress and we did not have resources in 
the homeland security area to undertake self-initiated work related to 
this performance goal.

Table 14: Strategic Goal 2's Multiyear Performance Goals, Fiscal Years 
2004 and 2005:

Strategic Objective: 2.1. Respond to emerging threats to security:

Performance goal: 2.1.1. Assess federal homeland security management, 
responsibility, effectiveness, and achievement of mission goals; On 
track to meet. 

Performance goal: 2.1.2. Identify ways to strengthen strategies related 
to homeland security and their implementation; On track to meet. 

Performance goal: 2.1.3. Evaluate homeland security resource 
priorities, costs, and approaches to stimulate desired investments; On 
track to meet. 

Performance goal: 2.1.4. Identify opportunities to embed homeland 
security concepts in ongoing national initiatives; Not on track to 
meet;

Performance goal: 2.1.5. Evaluate ways to strengthen government 
information security and protect computer and telecommunications 
systems that support the nation's critical infrastructures; On track to 
meet;

Performance goal: 2.1.6. Assess the effectiveness of U.S. and 
international efforts to prevent the proliferation of nuclear, 
biological, chemical, and conventional weapons and sensitive 
technologies; On track to meet.

Strategic Objective: 2.2. Ensure military capabilities and readiness:

Performance goal: 2.2.1. Assess DOD's ability of to maintain adequate 
readiness levels while addressing the force structure changes needed in 
the 21st century; On track to meet. 

Performance goal: 2.2.2. Assess overall human capital management 
practices to ensure a high-quality total force; On track to meet. 

Performance goal: 2.2.3. Assess the ability of weapon system 
acquisition programs and processes to achieve desired outcomes; On 
track to meet. 

Performance goal: 2.2.4. Identify ways to improve the economy, 
efficiency, and effectiveness of DOD's support infrastructure and 
business systems and processes; On track to meet. 

Performance goal: 2.2.5. Assess the National Nuclear Security 
Administration's efforts to maintain a safe and reliable nuclear 
weapons stockpile; On track to meet. 

Performance goal: 2.2.6. Assess whether DOD and the services have 
developed integrated systems, procedures, and doctrines to support 
joint and coalition forces on the battlefield safely and effectively; 
On track to meet. 

Performance goal: 2.2.7. Analyze and support DOD's efforts to improve 
planning, programming, budgeting, execution, and program performance; 
On track to meet.

Strategic Objective: 2.3. Advance and protect U.S. international 
interests:

Performance goal: 2.3.1. Analyze the plans, strategies, costs, and 
results of the United States and its allies in conflict interventions; 
On track to meet. 

Performance goal: 2.3.2. Analyze the effectiveness and management of 
U.S. foreign aid and developmental and humanitarian programs and the 
tools used to implement them; On track to meet. 

Performance goal: 2.3.3. Analyze the plans, costs, and outcomes of 
responding to challenges to U.S. strategic interests; On track to meet. 

Performance goal: 2.3.4. Evaluate the extent to which U.S. interests 
are effectively served by U.S. participation in multilateral 
organizations; On track to meet. 

Performance goal: 2.3.5. Assess the strategies and management practices 
for U.S. foreign affairs functions and activities; On track to meet.

Strategic Objective: 2.4. Respond to the impact of global market forces 
on U.S. economic and security interests:

Performance goal: 2.4.1. Analyze how U.S. interests are served through 
trade agreements and U.S. programs; On track to meet. 

Performance goal: 2.4.2. Improve understanding of the effects of a 
global industrial base on U.S. national security interests; On track to 
meet;

Performance goal: 2.4.3. Assess how the United States can influence 
improvements in the world financial system; On track to meet. 

Performance goal: 2.4.4. Assess the ability of the financial services 
industry and its regulators to maintain a stable and efficient 
financial system in the face of market change and innovation; On track 
to meet. 

Performance goal: 2.4.5. Assess the effectiveness of regulatory 
programs and policies in ensuring access to financial services and 
deterring fraud and abuse in financial markets; On track to meet.

Source: GAO.

Note: In indicating whether we are on track to meet a performance goal, 
the responsible senior executive considers the amount of work conducted 
and recommendations made for each key effort under that performance 
goal, as well as other assistance provided to the client or customer 
that is related to these efforts. The senior executive then judges 
whether the work completed collectively for all key efforts is likely 
to lead to achieving the performance goal. To view the 88 key efforts 
for the 23 performance goals above, go to 
[Hyperlink, http://www.gao.gov/sp.html].

[End of table]

[End of Goal 2 Results]

Goal 3 Results:

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges:

Goal 3 Overview:

Our third strategic goal focuses on the collaborative and integrated 
elements needed for the federal government to achieve results. The 
federal government faces an array of challenges, including the national 
response to terrorism, transition to a knowledge-based economy, rapid 
technological advances, and changing demographics. These challenges 
require a fundamental reexamination of the government's priorities, 
processes, policies, and programs to effectively address shifting 
public expectations and needs. Moreover, addressing today's priorities 
must be balanced against the long-term fiscal pressures of financing 
existing programs and operations. In summary, the work under this goal 
highlights the intergovernmental relationships that are necessary to 
achieve national goals.

To ensure that we help transform the role of the government and how it 
does business to meet 21st century challenges, we have established the 
following four strategic objectives:

* reexamine the federal government's role in achieving evolving 
national objectives;

* support the transformation to results-oriented, high performing 
government;

* support congressional oversight of key management challenges and 
program risks to improve federal operations and ensure accountability; 
and:

* analyze the government's fiscal position and strengthen approaches 
for addressing the current and projected fiscal gap.

Selected Work under Goal 3:

Strengthening DHS's IT management: We helped strengthen the management 
of DHS's efforts to consolidate approximately 700 IT systems that 
support its 22 component agencies, and, in turn, helped DHS be in a 
better position to effectively leverage IT as a resource to achieving 
its challenging mission (see app. 1, item 3.32.C).

Improving accountability by revealing government costs for employee 
degrees from diploma mills: We highlighted the lack of uniform 
verification practices across the government for obtaining information 
on schools and their accreditation status to properly verify academic 
degrees or to avoid paying fees for degrees that are masked as training 
courses (see app. 1, item 3.49.C).

Deterring fraud by curtailing purchases of addictive pain medication 
through the Internet: Our testimony described how our investigators 
easily obtained a potentially dangerous and addictive narcotic pain 
medication without submitting a prescription or undergoing an 
examination by a physician (see app. 1, item 3.50.C).

Transforming and modernizing the accountability profession: We worked 
closely with the Public Company Accounting Oversight Board and other 
standards setters to promote and communicate major accountability 
reforms for publicly traded companies--reforms that are vital to 
safeguarding taxpayer and investor interests --and the applicability of 
those reforms to government entities (see app. 1, item 3.52.C).

Alerting the Congress to abusive tax shelters and schemes: We 
contributed to the debate on curbing abusive tax shelters and schemes 
by providing information on the nature of the problems and the 
challenges faced by IRS in combating them (see app. 1, item 3.58.C).

Auditing the U.S. government's financial statements: We fulfilled our 
responsibilities as principal auditor of the U.S. government's 
consolidated financial statements and improved the quality of the 
federal government's financial management and reporting (see app. 1, 
item 3.62.C).

Understanding the federal government's long-term fiscal imbalance: In 
concert with other budget experts, we called attention to the magnitude 
of the long-term fiscal challenge facing the federal government (see 
app. 1, item 3.63.C).

To accomplish our work under these four objectives, we conducted 
audits, evaluations, and analyses in response to congressional requests 
and through work initiated under the Comptroller General's authority. 
As shown in table 15, we exceeded all of the performance targets for 
this strategic goal.

Table 15: Strategic Goal 3's Annual Performance Results and Targets:

Performance measure: Financial benefits;
2000 actual: $5.1 billion; 
2001 actual: $7.0 billion; 
2002 actual: $5.2 billion; 
2003 actual: $4.7 billion; 
2004 Target: $4.7 billion; 
2004 Actual: $7.6 billion[A];
Met/not met: Met;
2005 target: $8.5 billion.

Performance measure: Other benefits;
2000 actual: 503;
2001 actual: 401;
2002 actual: 462;
2003 actual: 553;
2004 Target: 441;
2004 Actual: 576;
Met/not met: Met;
2005 target: 460.

Performance measure: New recommendations made[B];
2000 actual: 413;
2001 actual: 549;
2002 actual: 808;
2003 actual: 772;
2004 Target: 570;
2004 Actual: 1,468;
Met/not met: Met;
2005 target: Not applicable.

Performance measure: Testimonies;
2000 actual: 105;
2001 actual: 42;
2002 actual: 65;
2003 actual: 56;
2004 Target: 57;
2004 Actual: 60;
Met/not met: Met;
2005 target: 55.

Source: GAO.

Note: Not applicable means not applicable.

[A] The financial benefits for goals 1, 2, and 3 do not equal the 
agencywide total due to rounding.

[B] Beginning in fiscal year 2005, we will eliminate this measure. 
However, we will continue to track the number of new recommendations 
made to ensure that teams supporting strategic goals 1 through 3 
continue to plan and complete engagements that result in 
recommendations.

[End of table]

To help us examine trends over time, we look at 4-year averages for all 
but one of our measures. Specifically, we do not look at averages for 
the percentage of past recommendations implemented because it is a 
composite that is drawn from a number of years rather than an annual 
percentage. These 4-year averages, which are shown in table 16, 
minimize the effect of an atypical result in any given year. Table 16 
indicates that financial benefits and number of testimonies for goal 3 
have remained fairly stable while other benefits and new 
recommendations made related to this goal have risen.

Table 16: Four-Year Rolling Averages for Strategic Goal 3:

Performance measure: Financial benefits;
2000: $5.7 billion; 
2001: $5.3 billion; 
2002: $5.5 billion; 
2003: $5.5 billion; 
2004: $6.1 billion.

Performance measure: Other benefits;
2000: 361;
2001: 407;
2002: 445;
2003: 480;
2004: 498.

Performance measure: New recommendations made;
2000: 383;
2001: 439;
2002: 526;
2003: 636;
2004: 899.

Performance measure: Testimonies;
2000: 90;
2001: 86;
2002: 78;
2003: 67;
2004: 56.

Source: GAO.

[End of table]

The following sections describe our performance in goal 3 for each of 
our quantitative performance measures and describe the targets for 
fiscal year 2005. This analysis is followed by a discussion of our 
multiyear qualitative performance goals.

Financial Benefits:

The financial benefits reported for this goal in fiscal year 2004 
totaled $7.6 billion, exceeding our target of $4.7 billion by over 62 
percent. Under goal 3, we typically work on core government business 
processes and governmentwide management reforms. Our assessments of the 
executive branch's current efforts to implement the recommendations we 
made in our work under this goal indicate that financial benefits 
related to this goal are likely to increase; consequently, we set the 
target for financial benefits at $8.5 billion for fiscal year 2005.

Other Benefits:

The other tangible benefits reported for goal 3 in fiscal year 2004 
included 553 instances in which agencies' core business processes were 
improved or governmentwide management reforms were advanced as a result 
of our work. In addition, there were 23 instances in which information 
we provided to the Congress resulted in statutory or regulatory 
changes. This total of 576 other benefits exceeded our target of 441 
for the year by over 30 percent. The larger number of other benefits 
occurred mainly in our financial management and IT areas, where we 
tend to make multiple, specific recommendations for change to more than 
one entity. Some of our major accomplishments are reported in detail in 
the goal 3 section of appendix 1.

Looking ahead, our assessments of the executive branch's current 
efforts to implement our recommendations made under this goal led us to 
set a fiscal year 2005 target of 460 other benefits for goal 3. While 
this target is lower than our fiscal year 2004 actual performance, it 
is higher than our fiscal year 2004 target and consistent with our 4-
year average for this measure.

Examples of Goal 3's Other Benefits:

Addressing shortfalls in foreign language capability: Our work led the 
Department of State to adopt a results-oriented approach to human 
capital management for foreign language speakers. State also launched 
an initiative that will allow for longer language training, enhanced 
efforts to attract more qualified language speakers, and a plan to help 
meet the need for more people with higher levels of competence in all 
languages, especially those deemed critical to national security 
concerns (see app. 1, item 3.5.A).

Influencing federal acquisition rules: In response to our work, the 
Federal Acquisition Regulation Council adopted new rules that increase 
competitive quote requirements when agencies buy schedule services and 
require proper justification and higher-level approval of sole-source 
orders when competition is not possible--two actions that should result 
in best pricing under the General Services Administration's schedule 
(see app. 1, item 3.6.A).

Addressing NASA's workforce challenges: Our concerns about workforce 
issues facing NASA led to enactment of the NASA Flexibility Act of 2003 
(Pub. L. No. 108-201), which gives NASA more flexibility to recruit and 
retain a highly skilled workforce (see app. 1, item 3.40.A).

New Recommendations Made: 

We made recommendations on:

* controlling costs of the 2010 Census;

* improving controls over DOD's travel cards to decrease losses related 
to unused airline tickets; and:

* reducing vulnerability to improper, wasteful, and questionable 
government purchase card transactions.

We issued 1,468 new recommendations for additional improvements to 
government operations and services during fiscal year 2004, exceeding 
the target of 570 by 158 percent. Our success in this area was partly 
due to our making recommendations on multiple financial and information 
management topics that were more specific than in the past. As 
explained in Part I of this report, we are discontinuing number of 
recommendations made as a performance measure and will focus more on 
the percentage of products containing recommendations as a measure. 
However, we will continue to monitor our recommendations internally.

Testimonies:

During fiscal year 2004, our witnesses testified at 60 congressional 
hearings related to this strategic goal, slightly exceeding the target 
of 57. Among the testimonies presented were those on Army Reserve and 
Army National Guard pay, tax system abuse by DOD contractors, diploma 
mills, federal purchase and travel cards, NASA's shuttle program, and 
DOD contract management (see the list of selected topics on which we 
testified, which appears in Part I). For fiscal year 2005, we have set 
a target of presenting testimony at 55 hearings.

Multiyear Performance Goals:

As shown in table 17, at the close of fiscal year 2004, we are on 
target to meet all of the 19 performance goals for this strategic goal.

Table 17: Strategic Goal 3's Multiyear Performance Goals, Fiscal Years 
2004 and 2005:

Strategic Objective: 3.1. Reexamine the federal government's role in 
achieving evolving national objectives:

Performance goal: 3.1.1. Examine emerging challenges and opportunities 
to position the federal government for the 21st century; On track to 
meet. 

Performance goal: 3.1.2. Develop new resources and approaches that can 
be used to assess the nation's position and progress; On track to meet. 

Performance goal: 3.1.3. Explore ways to evaluate the effectiveness of 
the entire set of policy tools that the federal government uses to 
achieve national objectives; On track to meet. 

Performance goal: 3.1.4. Assess how involvement of state and local 
governments and nongovernmental organizations affects federal program 
implementation and achievement of national goals; On track to meet.

Strategic Objective: 3.2. Support the transformation to results-
oriented, high-performing government:

Performance goal: 3.2.1. Analyze and support efforts to improve the 
human capital infrastructure key to the successful transformation of 
the government; On track to meet. 

Performance goal: 3.2.2. Assess and support efforts to improve results-
oriented management across the government; On track to meet. 

Performance goal: 3.2.3. Analyze efforts to build high-performing 
organizations; On track to meet. 

Performance goal: 3.2.4. Identify ways to improve the collection, 
dissemination, and quality of federal information; On track to meet. 

Performance goal: 3.2.5. Identify ways to improve financial management 
infrastructure capacity to provide useful information for managing 
results and costs day to day; On track to meet. 

Performance goal: 3.2.6. Assess the government's planning, 
implementation, and use of information technology to improve 
performance and modernize federal programs and operations; On track to 
meet. 

Performance goal: 3.2.7. Identify ways to improve how federal agencies 
acquire goods and services; On track to meet.

Strategic Objective: 3.3. Support congressional oversight of key 
management challenges and program risks to improve federal operations 
and ensure accountability:

Performance goal: 3.3.1. Highlight the federal programs and operations 
at highest risk and the major performance and management challenges 
confronting agencies; On track to meet. 

Performance goal: 3.3.2. Assess the management and results of the 
federal investment in science and technology and the effectiveness of 
efforts to protect intellectual property; On track to meet. 

Performance goal: 3.3.3. Identify ways to strengthen accountability for 
the federal government's assets and operations; On track to meet. 

Strategic Objective: 3.4. Analyze the government's fiscal position and 
strengthen approaches for addressing the current and projected fiscal 
gap:

Performance goal: 3.4.1. Analyze the long-term fiscal position of the 
federal government; On track to meet. 

Performance goal: 3.4.2. Analyze the structure and information for 
budgetary choices and explore alternatives for improvement; On track to 
meet. 

Performance goal: 3.4.3. Contribute to congressional deliberations on 
tax policy; On track to meet. 

Performance goal: 3.4.4. Support congressional oversight of the federal 
tax administration; On track to meet. 

Performance goal: 3.4.5. Assess the reliability of financial 
information on the government's fiscal position and financing sources; 
On track to meet.

Source: GAO.

Note: In indicating whether we are on track to meet a performance goal, 
the responsible senior executive considers the amount of work conducted 
and recommendations made for each key effort under that performance 
goal, as well as other assistance provided to the client or customer 
that is related to these efforts. The senior executive then judges 
whether the work completed collectively for all key efforts is likely 
to lead to achieving the performance goal. To view the 90 key efforts 
for the 19 performance goals above, go to 
[Hyperlink, http://www.gao.gov/sp.html].

[End of table]

[End of Goal 3 Results]

Goal 4 Results: Maximize the Value of GAO by Being a Model Federal 
Agency and a World-Class Professional Services Organization:

Goal 4 Overview:

The focus of our fourth strategic goal is to make GAO a model 
organization. For us, this means that our work is driven by our 
external clients and internal customers, our managers exhibit the 
characteristics of leadership and management excellence, our employees 
are devoted to ensuring quality in our work process and products 
through continuous improvement, and our agency is regarded by current 
and potential employees as an excellent place to work.

Our five strategic objectives are to:

* continuously improve client and customer satisfaction and stakeholder 
relationships,

* lead strategically to achieve enhanced results,

* leverage GAO's institutional knowledge and experience,

* continuously enhance GAO's business and management processes, and:

* become a professional services employer of choice.

Selected Work under Goal 4:

Effectively using enhanced human capital tools and flexibilities: We 
supported legislation that gave us enhanced tools and flexibilities 
with which to hire, manage, and retain the world-class workforce we 
need to carry out our mission (see app. 1, item 4.10.C).

Improving our crosscutting business practices: We implemented 
initiatives that resulted in more efficient processes and cost savings 
for the agency and we implemented online learning technology to 
minimize training costs and provide our staff with flexibility in 
obtaining training (see app. 1, item 4.24.C).

The annual measures used to assess our performance under our external 
strategic goals are not applicable to this internal strategic goal, but 
the multiyear qualitative performance goals do apply. As shown in table 
18, at the close of fiscal year 2004, we are on track to meet all but 
one of the performance goals for this strategic goal. We are not on 
track to meet our performance goal of maximizing the collection, use, 
and retention of essential organizational knowledge. While we have 
completed substantial work for this performance goal, we do not think 
we will complete this work until after fiscal year 2005. Specifically, 
our work has been slower than we anticipated because anticipated 
funding was rescinded in fiscal year 2004 and some essential steps--
such as developing prototypes and conducting pilot tests--have taken 
longer than we initially anticipated. We now plan to complete efforts 
under this performance goal during fiscal year 2006.

Table 18: Strategic Goal 4's Multiyear Performance Goals, Fiscal Years 
2004 and 2005:

Strategic Objective: 4.1. Continuously improve client and customer 
satisfaction and stakeholder relationships:

Performance goal: 4.1.1. Strengthen communication with congressional 
clients and more broadly measure their satisfaction with GAO's work; On 
track to meet. 

Performance goal: 4.1.2. Assess internal customer satisfaction with 
GAO's services and processes and implement and measure improvement 
efforts; On track to meet. 

Performance goal: 4.1.3. Strengthen relationships with GAO's 
stakeholders and increase the accessibility of GAO's products; On track 
to meet.

Strategic Objective: 4.2. Lead strategically to achieve enhanced 
results:

Performance goal: 4.2.1. Integrate planning, budgeting, and performance 
measurement to achieve enhanced results; On track to meet. 

Performance goal: 4.2.2. Strengthen GAO's strategic human capital 
management to achieve enhanced results; On track to meet. 

Performance goal: 4.2.3. Ensure exemplary practices and systems in 
GAO's fiscal operations; On track to meet. 

Performance goal: 4.2.4. Strengthen IT governance practices and 
processes to achieve strategic results; On track to meet.

Strategic Objective: 4.3. Leverage GAO's institutional knowledge and 
experience:

Performance goal: 4.3.1. Maximize the collection, use, and retention of 
essential organizational knowledge; Not on track to meet. 

Performance goal: 4.3.2. Increase GAO's knowledge-sharing capability; 
On track to meet. 

Performance goal: 4.3.3. Enhance knowledge sharing with other national 
and international accountability and professional organizations; On 
track to meet.

Strategic Objective: 4.4. Continuously enhance GAO's business and 
management processes:

Performance goal: 4.4.1. Improve engagement support services; On track 
to meet. 

Performance goal: 4.4.2. Use enabling technology to improve GAO's 
crosscutting business processes; On track to meet.

Strategic Objective: 4.5. Become a professional services employer of 
choice:

Performance goal: 4.5.1. Promote an environment that is fair and 
unbiased and that values opportunity and inclusiveness; On track to 
meet;

Performance goal: 4.5.2. Provide GAO staff with tools, technology, and 
a world-class working environment; On track to meet. 

Performance goal: 4.5.3. Provide a safe and secure workplace; On track 
to meet. 

Performance goal: 4.5.4. Enhance employee views about GAO; On track to 
meet;

Performance goal: 4.5.5. Improve the development and experiences of 
newly hired staff; On track to meet.

Source: GAO.

Note: In indicating whether we are on track to meet a performance goal, 
the responsible senior executive considers the amount of work conducted 
and recommendations made for each key effort under that performance 
goal, as well as other assistance provided to the client or customer 
that is related to these efforts. The senior executive then judges 
whether the work completed collectively for all key efforts is likely 
to lead to achieving the performance goal. To view the 80 key efforts 
for the 17 performance goals above, go to 
[Hyperlink, http://www.gao.gov/sp.html].

[End of table]

[End of Goal 4 Results]

[End of Performance Information by Strategic Goal]

Data Quality and Program Evaluation:

Verifying and Validating Performance Data:

Each year, we measure our performance by (1) evaluating our annual 
performance on measures that cover the outcomes and outputs related to 
our work results, client service, and management of our people and (2) 
assessing our progress in performing work related to the multiyear 
qualitative performance goals. To assess our performance in fiscal year 
2004, we used performance data that were complete and actual (rather 
than projected) for all of our performance measures. We believe the 
data to be reliable because we followed the verification and validation 
procedures described here to ensure the data's quality.

The specific sources of the data for our annual performance measures 
and multiyear qualitative performance goals, procedures for 
independently verifying and validating these data, and the limitations 
of these data are described in table 19.

Table 19: How We Ensure Data Quality for Our Annual Performance 
Measures and Multiyear Performance Goals:

Financial benefits:

Definition and background: Our work--including our findings and 
recommendations--may produce benefits to the federal government that 
can be estimated in dollar terms. These benefits can result in better 
services to the public, changes to statutes or regulations, or improved 
government business operations. A financial benefit is an estimate of 
the federal monetary effect of agency or congressional actions. These 
financial benefits generally result from work that we completed over 
the past several years. The funds made available as a result of the 
actions taken in response to our work may be used to reduce government 
expenditures, increase revenues, or reallocate funds to other areas. 
Financial benefits included in our performance measures are net 
benefits--that is, estimates of financial benefits that have been 
reduced by the costs associated with taking the action that we 
recommended. We convert all estimates involving past and future years 
to their net present value and use actual dollars to represent 
estimates involving only the current year. Financial benefit amounts 
vary depending on the nature of the benefit, and we can claim financial 
benefits over multiple years based on a single agency or congressional 
action.

Financial benefits are linked to specific recommendations or other 
work. To claim that financial benefits have been achieved, our staff 
must file an accomplishment report documenting that (1) the actions 
taken as a result of our work have been completed or substantially 
completed, (2) the actions generally were taken within 2 fiscal years 
prior to filing the accomplishment report, (3) a cause-and-effect 
relationship exists between the benefits reported and our 
recommendation or work performed, and (4) estimates of financial 
benefits were based on information obtained from third parties. Prior 
to fiscal year 2002, we limited the period over which the benefits from 
an accomplishment could be accrued to no more than 2 years. Beginning 
in fiscal year 2002, we extended the period to 5 years for certain 
types of accomplishments known to have multiyear effects such as those 
associated with multiyear reductions in longer-term projects, changes 
embodied in law, program terminations, or sales of government assets 
yielding multiyear financial benefits. For financial benefits involving 
events that occur on a regular but infrequent basis--such as the 
decennial census--we may extend the measurement period until the event 
occurs and then compute the associated financial benefits using GAO's 
present value calculator. In fiscal year 2002, we began requiring that 
all financial benefits be calculated in net present value terms.

Managing Directors decide when their staff can claim financial 
benefits. A Managing Director may choose to claim a financial benefit 
all in one year or decide to claim it over several years especially if 
the benefit spans future years and the Managing Director wants greater 
precision as to the amount of the benefit.

Data sources:

Our Accomplishment Reporting System provides the data for this measure. 
Teams use this Web-based data system to prepare, review, and approve 
accomplishments and forward them to QCI for its review. Once 
accomplishment reports are approved, they are compiled by QCI, which 
annually tabulates total financial benefits agencywide and by goal. All 
financial benefits are calculated in net present value.

Verification and validation:

Our policies and procedures require us to use the Accomplishment 
Reporting System to record the financial benefits that result from our 
work. They also provide guidance on estimating those financial 
benefits. The teams identify when a financial benefit has occurred as a 
result of our work. Teams develop estimates based on third-party 
sources such as the agency that acted on our work, a congressional 
committee, or the Congressional Budget Office and file accomplishment 
reports based on those estimates. The estimates are reduced by any 
identifiable offsetting costs. Teams develop work papers to support 
accomplishments with evidence that meets our evidence standard; 
supervisors review the work papers; and an independent person within 
GAO reviews the accomplishment report. The team's Managing Director or 
Director is authorized to approve financial accomplishment reports with 
benefits of less than $100 million.

The team forwards the report to QCI where it reviews all accomplishment 
reports and approves accomplishment reports claiming benefits of $100 
million or more. QCI provides summary data on approved financial 
benefits to unit managers, who check the data on a regular basis to 
make sure that approved accomplishments submitted by their staff have 
been accurately recorded. Our Engagement Review System also contains 
fiscal year 2004 accomplishment data. In fiscal year 2004, QCI approved 
accomplishment reports covering 95 percent of the dollar value of 
financial benefits we reported.

Every year, our IG reviews accomplishment reports that claim benefits 
of $500 million or more. In addition, on a periodic basis, the IG 
independently tests compliance with our process for claiming financial 
benefits of less than $500 million. For example, for benefits 
documented during fiscal year 2003, the IG tested compliance with our 
process for claiming financial benefits of less than $100 million and 
determined that we have a reasonable basis for claiming these financial 
benefits. In fiscal year 2004 we used the same processes for claiming 
financial benefits in this category.

Data limitations:

Not every financial benefit from our work can be readily estimated or 
documented as attributable to our work. As a result, the amount of 
financial benefits is a conservative estimate. Estimates are based on 
information from third parties and are based on both objective and 
subjective data, and as a result, professional judgment is required in 
reviewing accomplishment reports. We feel that the verification and 
validation steps that we take minimize any adverse impact from this 
limitation.

Other benefits (nonfinancial):

Definition and background:

Our work--including our findings and recommendations--may produce other 
benefits to the federal government that cannot be estimated in dollar 
terms. These benefits can result in better services to the public, 
changes to statutes or regulations, or improved government business 
operations. Other (nonfinancial) benefits generally result from work 
that we completed over the past several years.

Other benefits are linked to specific recommendations or other work 
that we completed over several years. To claim that other benefits have 
been achieved, our staff must file an accomplishment report that 
documents that (1) the actions taken as a result of our work have been 
completed or substantially completed; (2) the actions generally were 
taken within the past 2 fiscal years of filing the accomplishment 
report; and (3) a cause-and-effect relationship exists between the 
benefits reported and our recommendation or work performed.

Data sources:

Our Accomplishment Reporting System provides the data for this measure. 
Teams use this automated system to prepare, review, and approve 
accomplishments and forward them to QCI for its review. Once 
accomplishment reports are approved, they are compiled by QCI, which 
annually tabulates total other (nonfinancial) benefits agencywide and 
by goal.

Verification and validation:

Our policies and procedures require us to use the Accomplishment 
Reporting System to record the other benefits that result from our 
findings and recommendations. Staff in the teams file accomplishment 
reports to claim that benefits have resulted from their work. Teams 
develop work papers to support accomplishments with evidence that meets 
our evidence standard; supervisors review the work papers; an 
independent person within GAO reviews the accomplishment report; and 
the team's Managing Director or Director approves the accomplishment 
report to ensure the appropriateness of the claimed accomplishment, 
including attribution to our work.

The team forwards the report to QCI, where it is reviewed for 
appropriateness. QCI provides summary data on other benefits to unit 
managers, who check the data on a regular basis to make sure that 
approved accomplishments from their staffs have been accurately 
recorded. Additionally, on a periodic basis, the IG independently tests 
compliance with our process for claiming other benefits. For example, 
the IG performed these tests during fiscal year 2003 and found them to 
be reasonable. The IG also suggested actions to strengthen 
documentation of our other benefits. In fiscal year 2004, we 
implemented the IG's recommendations and followed our established 
process for claiming other benefits.

Data limitations:

The data may be underreported because we cannot always document a 
direct cause-and-effect relationship between our work and benefits it 
produced. However, we feel that this is not a significant limitation on 
the data because the data represent a conservative measure of our 
overall contribution toward improving government.

Recommendations made and percentage of products with recommendations:

Definition and background:

These measures count the number of recommendations made in products 
issued within the fiscal year and the percentage of the written 
products issued in the fiscal year that included at least one 
recommendation. We make recommendations that specify actions that can 
be taken to improve federal operations or programs. We strive for 
recommendations that are directed at resolving the cause of identified 
problems; that are addressed to parties who have the authority to act; 
and that are specific, feasible, and cost-effective. Some products we 
issue contain no recommendations and are strictly informational in 
nature.

We track the number of recommendations made in products (excluding 
testimonies) that are issued during the fiscal year. We also track the 
percentage of our written products that are issued during the fiscal 
year and contain recommendations. The latter indicator recognizes that 
our products do not always include recommendations and that the 
Congress and agencies often find such informational reports just as 
useful as those that contain recommendations. For example, 
informational reports can help to bring about significant financial and 
other benefits. This means that a product with a single recommendation 
can help bring about significant financial or other benefits.

Data sources:

Our document database records recommendations as they are issued. The 
database is updated daily. As our staff monitor implementation of 
recommendations, they submit updated information to the database.

Verification and validation:

Through a formal process, each team identifies the number of 
recommendations included in each product and an external contractor 
enters them into a database. Our managers are provided with reports on 
the recommendations being tracked to help ensure that all 
recommendations have been captured and that each recommendation has 
been completely and accurately stated. Additionally, on a periodic 
basis, the IG independently tests the teams' compliance with our 
policies and procedures. For example, during fiscal year 2003, the IG 
performed these tests and determined that the number of recommendations 
and the percentage of written products with recommendations were 
reasonable. In fiscal year 2004, we used the same procedures to report 
and calculate these two measures.

Data limitations:

These measures are a conservative estimate of the extent to which we 
assist the Congress and federal agencies because not all products and 
services we provide lead to recommendations. For example, the Congress 
may request information on federal programs that is purely descriptive 
or analytical and does not lend itself to recommendations.

Past recommendations implemented:

Definition and background:

We make recommendations designed to improve the operations of the 
federal government. For our work to produce financial or other 
benefits, the Congress or other federal agencies must implement these 
recommendations. As part of our audit responsibilities under generally 
accepted government auditing standards, we follow up on recommendations 
we have made and report to the Congress on their status. Experience has 
shown that it takes time for some recommendations to be implemented. 
For this reason, this measure is the percentage rate of implementation 
of recommendations made 4 years prior to a given fiscal year (e.g., the 
fiscal year 2004 implementation rate is the percentage of 
recommendations made in fiscal year 2000 products that were implemented 
by the end of fiscal year 2004). Experience has shown that if a 
recommendation has not been implemented within 4 years, it is not 
likely to be implemented.

This measure assesses action on recommendations made 4 years 
previously, rather than the results of our activities during the fiscal 
year in which the data are reported. For example, the cumulative 
percentage of recommendations made in fiscal year 2000 that were 
implemented in the ensuing years is as follows: 30 percent by the end 
of the first year (fiscal year 2001), 38 percent by the end of the 
second year (fiscal year 2002), 44 percent by the end of the third year 
(fiscal year 2003), and 83 percent by the end of the fourth year 
(fiscal year 2004).

Data sources:

Our document database records recommendations as they are issued. The 
database is updated daily. As our staff monitor implementation of 
recommendations, they submit updated information to the database.

Verification and validation:

Through a formal process, each team identifies the number of 
recommendations included in each product and an external contractor 
enters them into a database.

Policies and procedures specify that our staff must verify, with 
sufficient supporting documentation, that an agency's reported actions 
are adequately being implemented. Staff update the status of the 
recommendations on a periodic basis. To accomplish this, our staff may 
interview agency officials, obtain agency documents, access agency 
databases, or obtain information from an agency's IG. Recommendations 
that are reported as implemented are reviewed by a senior executive in 
the unit and by QCI.

Summary data are provided to the units that issued the recommendations. 
The units check the data regularly to make sure the recommendations 
they have reported as implemented have been accurately recorded. We 
also provide to the Congress a database with the status of 
recommendations that have not been implemented, and we maintain a 
publicly available database of open recommendations that is updated 
daily.

Additionally, on a periodic basis, the IG independently tests our 
process for calculating the percentage of recommendations implemented 
for a given fiscal year. For example, the IG determined that our 
process was reasonable for calculating the percentage of 
recommendations that had been made in our fiscal year 1999 products and 
implemented by the end of fiscal year 2003. In fiscal year 2004, we 
followed the same process for calculating the percentage of 
recommendations that had been made in fiscal year 2000 products and 
implemented by the end of fiscal year 2004.

Data limitations:

The data may be underreported because sometimes a recommendation may 
require more than 4 years to implement. We also may not count cases in 
which a recommendation is partially implemented. However, we feel that 
this is not a significant limitation on the data because the data 
represent a conservative measure of our overall contribution toward 
improving government.

Testimonies:

Definition and background:

The Congress may ask us to testify at hearings on various issues. 
Participation in hearings is one of our most important forms of 
communication with the Congress, and the number of hearings at which we 
testify reflects the importance and value of our institutional 
knowledge in assisting congressional decision making. In cases where 
multiple GAO witnesses with separate testimonies appear at a single 
hearing, we count the case as a single testimony.

Data sources:

The data on hearings at which we testify are compiled in our 
congressional hearing system.

Verification and validation:

The units responding to requests for testimony are responsible for 
entering data in the congressional hearing system. After a GAO witness 
has testified at a hearing, our Congressional Relations office verifies 
that the data in the system are correct and records the hearing as one 
at which we testified. Congressional Relations provides weekly status 
reports to unit managers, who check to make sure the data are complete 
and accurate. Additionally, on a periodic basis, the IG independently 
examines the process for recording the number of hearings where we 
testified. For example, the IG determined that our process for 
recording hearings during fiscal year 2003 was reasonable. In fiscal 
year 2004, we followed the same process for recording hearings.

Data limitations:

This measure does not include statements for the record that we prepare 
for congressional hearings. Also, this measure may be influenced by 
factors other than the quality of our performance in any specific year. 
The number of hearings held each year depends on the Congress's agenda, 
and the number of times we are asked to testify may reflect 
congressional interest in work in progress, as well as work completed 
that year or the previous year. To mitigate this limitation, we try to 
adjust our workload to reflect cyclical changes in the congressional 
schedule. We also outreach to our clients on a continuing basis to 
increase their awareness of our readiness to participate in hearings.

Timeliness:

Definition and background:

The likelihood that our products will be used is enhanced if they are 
delivered when needed to support congressional and agency decision 
making. To determine whether our products are timely, we measure the 
proportion of our products that are issued by the dates agreed to with 
our clients or, for our research and development work, by the dates 
agreed to internally.

Data sources:

The data supporting this measure are from our Mission and Assignment 
Tracking System, which is used to monitor our progress on assignments.

Verification and validation:

Our staff enter the data supporting this measure into our Mission and 
Assignment Tracking System. The data are then uploaded into our 
Engagement Review System, allowing the teams to monitor their 
performance on this measure on a daily basis, if necessary, and resolve 
any issues. When an assignment is completed, data on its target and 
completion dates are reported to the project manager, who reviews and 
signs the report to confirm its accuracy. Additionally, on a periodic 
basis, the IG independently examines our process for calculating 
product timeliness. For example, the IG found that our process for 
calculating timeliness for products issued during fiscal year 2003 was 
reasonable. We followed the same process for calculating the timeliness 
of products issued during fiscal year 2004.

Data limitations:

We do not measure the timeliness of all of our external products. 
Products such as staff studies, certain correspondence, and guidance 
are not part of our main product line and are excluded.

New hire rate:

Definition and background:

This performance measure is the ratio of the number of people hired to 
the number we planned to hire. Annually, we develop a workforce plan 
that takes into account projected workload changes, as well as other 
changes such as retirements, other attrition, promotions, and skill 
gaps. The workforce plan for the upcoming year specifies the number of 
planned hires and, for each hire, specifies the skill type and the 
level. The plan is conveyed to each of our units to guide hiring 
throughout the year. Progress toward achieving the workforce plan is 
monitored monthly by the Chief Operating Officer and the Chief 
Administrative Officer (CAO). Adjustments to the workforce plan are 
made throughout the year, if necessary, to reflect changing needs and 
conditions.

Data sources:

The executive committee approves the workforce plan. The workforce plan 
is coordinated and maintained by the CAO. Data on accessions--that is, 
new hires coming on board--is taken from a database that contains 
employee data from USDA's National Finance Center (NFC) database, which 
handles payroll and personnel data for GAO and other agencies.

Verification and validation:

The CAO maintains a database that monitors and tracks all our hiring 
offers, declinations, and accessions. In coordination with our Human 
Capital Office, our CAO staff input workforce information supporting 
this measure into the CAO database. While the database is updated on a 
daily basis, monthly reports are provided to the Chief Operating 
Officer and the CAO to monitor progress by GAO units in achieving 
workforce plan hiring targets. The CAO continuously monitors and 
reviews accessions maintained in the NFC data against its database to 
ensure consistency and to resolve discrepancies. The office follows up 
on any discrepancies. In addition, on a periodic basis, the IG examines 
our process for calculating the new hire rate. During fiscal year 2004, 
the IG independently reviewed this process and found it to be 
reasonable. The IG also suggested actions to improve the documentation 
of the process used to calculate this measure. We have implemented the 
IG's suggestions.

Data limitations:

There is a lag of one to two pay periods (up to 4 weeks) before the NFC 
database reflects actual data. We generally allow sufficient time 
before requesting data for this measure to ensure that we get accurate 
results.

Acceptance rate:

Definition and background:

This measure is the ratio of the number of applicants accepting offers 
to the number of offers made. Acceptance rate is a proxy for GAO's 
attractiveness as an employer and an indicator of our competitiveness 
in bringing in new talent.

Data sources:

The information required is the number of job offers made (excluding 
interns, experts/consultants, and reemployed annuitants), the number of 
offers declined, and the number of individuals who come on board. Our 
CAO staff maintains a database that contains the job offers made and 
accepted or declined. Data on accessions--that is, new hires coming on 
board--is taken from a database that contains employee data from USDA's 
NFC database, which handles payroll and personnel data for GAO and 
other agencies.

Verification and validation:

Human capital managers in the Human Capital Office work with the CAO to 
ensure that each job offer made and its outcome (declination or 
acceptance) is noted in the database that is maintained by the CAO's 
staff; periodic checking is performed to review the accuracy of the 
database. In addition, on a periodic basis, the IG examines our process 
for calculating the acceptance rate. During fiscal year 2004, the IG 
independently reviewed this process and found it to be reasonable. The 
IG also suggested actions to improve the documentation of the process 
used to calculate this measure and the reporting of this measure. We 
have implemented the IG's suggestions.

Data limitations:

There is a lag of one to two pay periods (up to 4 weeks) before the NFC 
database reflects actual data. We generally allow sufficient time 
before requesting data for this measure to ensure that we get accurate 
results.

Retention rate:

Definition and background:

We continuously strive to make GAO a place where people want to work. 
Once we have made an investment in hiring and training people, we would 
like to retain them. This measure is one indicator that we are 
attaining that objective and is the inverse of attrition. We calculate 
this measure by taking 100 percent of the on-board strength minus the 
attrition rate, where attrition rate is defined as the number of 
separations divided by the average on-board strength. We calculate this 
measure with and without retirements.

Data sources:

Data on retention--that is, people who are on board at the beginning of 
the fiscal year and are still here at the end of the fiscal year as 
well as the average number of people on board during the year--are 
taken from a CAO database that contains some data from the NFC 
database, which handles payroll and personnel data for GAO and other 
agencies.

Verification and validation:

CAO staff continuously monitor and review accessions and attritions 
against the contents of their database that has NFC data and they 
follow up on any discrepancies. In addition, on a periodic basis, the 
IG examines our process for calculating the retention rate. During 
fiscal year 2004, the IG reviewed this process and found it to be 
reasonable. The IG also suggested actions to improve the documentation 
of the process used to calculate this measure. We have implemented the 
IG's suggestions.

Data limitations:

There is a lag of one to two pay periods (up to 4 weeks) before the NFC 
database reflects actual data. We generally allow sufficient time 
before requesting data for this measure to ensure that we get accurate 
results.

Staff development:

Definition and background:

One way that we measure how well we are doing and identify areas for 
improvement is through our annual employee feedback survey. This Web-
based survey, which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our managers
--from the immediate supervisor to the Executive Committee--on key 
aspects of their leadership styles. The survey consists of over 100 
questions to which staff are asked to respond.

This measure is based on staff's favorable responses to four of the six 
questions related to staff development on our annual employee survey. 
This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Staff were 
asked to respond to these four questions on a five-point scale or 
choose "no basis to judge/not applicable" or "no answer."

Data sources:

These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff how 
much positive or negative impact (1) internal training, (2) computer 
based training, (3) external training/conferences, and (4) on-the job-
training have on their ability to do your job during the last 12 
months. From the staff who expressed an opinion, we calculated the 
percentage of staff selecting the two categories that indicate 
satisfaction with or a favorable response to the question. For this 
measure, the favorable responses were either "very positive impact" or 
"generally positive impact."

Verification and validation:

The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
We have historically achieved a high response rate (over 80 percent) to 
the survey, which indicates that its results are largely representative 
of the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey.

In addition, on a periodic basis, the IG independently examines our 
process for calculating the percentage of favorable responses for staff 
development. The IG examined this process during fiscal year 2004 and 
found it to be reasonable. The IG also suggested actions to improve the 
documentation of the process used to calculate this measure. We have 
implemented the IG's suggestions.

Data limitations:

The information contained in the survey is the self-reported opinions 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion.

The practical difficulties of conducting any survey may introduce 
errors, commonly referred to as nonsampling errors. These errors could 
result from, for example, respondents misinterpreting a question or 
data entry staff incorrectly entering data into a database used to 
analyze the survey responses. Such errors can introduce unwanted 
variability into the survey results. We took steps in the development 
of the survey to minimize nonsampling errors. Specifically, when we 
developed the survey instrument we held extensive focus groups and 
pretests to refine the questions and define terms used to decrease the 
chances that respondents would misunderstand the questions. We also 
limited the chances of introducing nonsampling errors by creating a 
Web-based survey for which respondents entered their answers directly 
into an electronic questionnaire. This approach eliminated the need to 
have the data keyed into a database by someone other than the 
respondent, thus removing an additional source of error.

Staff utilization:

Definition and background:

One way that we measure how well we are doing and identify areas for 
improvement is through our annual employee feedback survey. This Web-
based survey, which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our managers
--from the immediate supervisor to the Executive Committee--on key 
aspects of their leadership styles. The survey consists of over 100 
questions to which staff are asked to respond.

This measure is based on staff's favorable responses to three of the 
six questions related to staff utilization on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Staff were 
asked to respond to these four questions on a five-point scale or 
choose "no basis to judge/not applicable" or "no answer."

Data sources:

These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff how 
often the following occurred in the last 12 months: (1) my job made 
good use of my skills; (2) GAO provided me with opportunities to do 
challenging work; and (3) in general, I was utilized effectively. From 
the staff who expressed an opinion, we calculated the percentage of 
staff selecting the two categories that indicate satisfaction with or a 
favorable response to the question. For this measure, the favorable 
responses were either "very positive impact" or "generally positive 
impact."

Verification and validation:

The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
We have historically achieved a high response rate (over 80 percent) to 
the survey, which indicates that its results are largely representative 
of the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey.

In addition, on a periodic basis, the IG independently examines our 
process for calculating the percentage of favorable responses for staff 
utilization. The IG examined this process during fiscal year 2004 and 
found it to be reasonable. The IG also suggested actions to improve the 
documentation of the process used to calculate this measure. We have 
implemented the IG's suggestions.

Data limitations:

The information contained in the survey is the self-reported opinions 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion.

The practical difficulties of conducting any survey may introduce 
errors, commonly referred to as nonsampling errors. These errors could 
result from, for example, respondents misinterpreting a question or 
data entry staff incorrectly entering data into a database used to 
analyze the survey responses. Such errors can introduce unwanted 
variability into the survey results. We took steps in the development 
of the survey to minimize nonsampling errors. Specifically, when we 
developed the survey instrument we held extensive focus groups and 
pretests to refine the questions and define terms used to decrease the 
chances that respondents would misunderstand the questions. We also 
limited the chances of introducing nonsampling errors by creating a 
Web-based survey for which respondents entered their answers directly 
into an electronic questionnaire. This approach eliminated the need to 
have the data keyed into a database by someone other than the 
respondent, thus removing an additional source of error.

Leadership:

Definition and background:

One way that we measure how well we are doing and identify areas for 
improvement is through our annual employee feedback survey. This Web-
based survey, which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our 
managers--from the immediate supervisor to the Executive Committee--on 
key aspects of their leadership styles. The survey consists of over 
100 questions to which staff are asked to respond.

This measure is based on staff's favorable responses to 10 of 20 
questions related to six areas of leadership on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgment about the questions' relevance to the measure and 
specialists' knowledge about the development of indexes. Specifically, 
our calculation included responses to one of 4 questions related to 
empowerment; two of four questions related to trust; all three 
questions related to recognition; one of three questions related to 
decisiveness; two of three questions related to leading by example and 
one of three questions related to work life. Staff were asked to 
respond to these 10 questions on a five-point scale or choose "no basis 
to judge/not applicable" or "no answer."

Data sources:

These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff about 
empowerment, trust, recognition, decisiveness, leading by example, and 
work life as they pertain to the respondent's immediate supervisor. For 
example, we looked at the responses related to specific qualities of 
our managers, such as "My immediate supervisor gave me the opportunity 
to do what I do best" and "My immediate supervisor provided meaningful 
incentives for high performance." From the staff who expressed an 
opinion, we calculated the percentage of staff selecting the two 
categories that indicate satisfaction with or a favorable response to 
the question. For this measure, the favorable responses were either 
"always or almost always" or "most of the time."

Verification and validation:

The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
We have historically achieved a high response rate (over 80 percent) to 
the survey, which indicates that its results are largely representative 
of the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey.

In addition, on a periodic basis, the IG independently examines our 
process for calculating the percentage of favorable responses for 
leadership. The IG examined this process during fiscal year 2004 and 
found it to be reasonable. The IG also suggested actions to improve the 
documentation of the process used to calculate this measure. We have 
implemented the IG's suggestions.

Data limitations:

The information contained in the survey is the self-reported opinions 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion.

The practical difficulties of conducting any survey may introduce 
errors, commonly referred to as nonsampling errors. These errors could 
result from, for example, respondents misinterpreting a question or 
data entry staff incorrectly entering data into a database used to 
analyze the survey responses. Such errors can introduce unwanted 
variability into the survey results. We took steps in the development 
of the survey to minimize nonsampling errors. Specifically, when we 
developed the survey instrument we held extensive focus groups and 
pretests to refine the questions and define terms used to decrease the 
chances that respondents would misunderstand the questions. We also 
limited the chances of introducing nonsampling errors by creating a 
Web-based survey for which respondents entered their answers directly 
into an electronic questionnaire. This approach eliminated the need to 
have the data keyed into a database by someone other than the 
respondent, thus removing an additional source of error.

Organizational climate:

Definition and background:

One way that we measure how well we are doing and identify areas for 
improvement is through our annual employee feedback survey. This Web-
based survey, which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our 
managers--from the immediate supervisor to the Executive Committee--on 
key aspects of their leadership styles. The survey consists of over 100 
questions to which staff are asked to respond.

This measure is based on staff's favorable responses to 5 of the 13 
questions related to organizational climate on our annual employee 
survey. This subset of questions was selected on the basis of senior 
management's judgement about the questions' relevance to the measure 
and specialists' knowledge about the development of indexes. Staff were 
asked to respond to these five questions on a five-point scale or 
choose "no basis to judge" or "no answer."

Data sources:

These data come from our staff's responses to an annual Web-based 
survey. The survey questions we used for this measure ask staff to 
think back over the last 12 months and indicate how strongly they agree 
or disagree with each of the following statements: (1) a spirit of 
cooperation and teamwork exists in my work unit; (2) I am treated 
fairly and with respect in my work unit; (3) my morale is good; (4) 
sufficient effort is made in my work unit to get the opinions and 
thinking of people who work here; and (5) overall, I am satisfied with 
my job at GAO. From the staff who expressed an opinion, we calculated 
the percentage of staff selecting the two categories that indicate 
satisfaction with or a favorable response to the question. For this 
measure, the favorable responses were either "strongly agree" or 
"generally agree."

Verification and validation:

The employee feedback survey gathers staff opinions on a variety of 
topics. The survey is password protected, and only the outside 
contractor has access to passwords. In addition, when the survey 
instrument was developed, extensive focus groups and pretests were 
undertaken to refine the questions and provide definitions as needed. 
We have historically achieved a high response rate (over 80 percent) to 
the survey, which indicates that its results are largely representative 
of the GAO population. In addition, many teams and work units conduct 
follow-on work to gain a better understanding of the information from 
the survey.

In addition, on a periodic basis, the IG independently examines our 
process for calculating the percentage of favorable responses for 
organizational climate. The IG examined this process during fiscal year 
2004 and found it to be reasonable. The IG also suggested actions to 
improve the documentation of the process used to calculate this 
measure. We have implemented the IG's suggestions.

Data limitations:

The information contained in the survey is the self-reported opinions 
of staff expressed under conditions of confidentiality. Accordingly, 
there is no way to further validate those expressions of opinion.

The practical difficulties of conducting any survey may introduce 
errors, commonly referred to as nonsampling errors. These errors could 
result from, for example, respondents misinterpreting a question or 
data entry staff incorrectly entering data into a database used to 
analyze the survey responses. Such errors can introduce unwanted 
variability into the survey results. We took steps in the development 
of the survey to minimize nonsampling errors. Specifically, when we 
developed the survey instrument we held extensive focus groups and 
pretests to refine the questions and define terms used to decrease the 
chances that respondents would misunderstand the questions. We also 
limited the chances of introducing nonsampling errors by creating a 
Web-based survey for which respondents entered their answers directly 
into an electronic questionnaire. This approach eliminated the need to 
have the data keyed into a database by someone other than the 
respondent, thus removing an additional source of error.

Multiyear qualitative performance goals:

Definition and background:

We consult with our congressional clients and other outside experts in 
setting our multiyear qualitative performance goals. Thus, assessing 
the extent to which we achieve our performance goals helps focus our 
efforts on issues of critical importance and provides a tool for 
holding ourselves accountable for the resources the Congress provides. 
These goals measure the extent to which we did the work we had planned 
to do to support the Congress over a period of time. In this case, they 
cover fiscal years 2004 and 2005.

For each performance goal, we identify the key efforts needed to 
achieve it. To determine whether a performance goal has been met, we 
assess the work completed under the goal's key efforts. In making this 
assessment, the responsible senior executives for strategic goals 1 
through 3--our external goals--consider the number of reports issued 
and recommendations made for each key effort as well as any other 
assistance provided to the Congress related to these efforts. Senior 
executives then judge whether the work completed collectively for all 
key efforts actually achieved the performance goal. For strategic goal 
4--our internal goal--senior executives also judge whether the 
performance goals have been met based on the work done on the goal's 
key efforts.

Data sources:

The data supporting this measure are from our senior executives' 
assessments, which are supported by documentation, of work completed 
under performance goals' key efforts. The supporting documentation 
comes from our automated Mission and Assignment Tracking System and 
document database for strategic goals 1 through 3 and from reports 
produced by the managers responsible for each key effort for strategic 
goal 4.

Verification and validation:

The assessment of each performance goal under strategic goals 1 through 
3 is supported by documentation showing, by key effort, the number of 
reports issued and recommendations made during the assessment period. 
The assessment of the performance goals under strategic goal 4 is also 
supported by documentation showing the work completed under each key 
effort. Managing Directors in all four goals sign this documentation.

QCI provides this information to our managers several times a year so 
that they can check its accuracy. QCI also reviews the assessments and 
supporting documentation for all performance goals to ensure that 
criteria are consistently applied and that requirements are met. On a 
periodic basis, our IG independently tests our process for determining 
whether performance goals are met. For example, in fiscal year 2003, 
the IG tested our process and found it to be reasonable. The IG also 
suggested actions to strengthen documentation of these multiyear 
qualitative performance goals, and we have implemented those actions.

Data limitations:

The assessment data represent opinions in the form of qualitative, 
professional judgments of the work performed under each performance 
goal. We feel that the verification and validation steps that we take 
minimize any adverse impact from this limitation.

Source: GAO.

[End of table]

[End of Verifying and Validating Performance Data]

Program Evaluation:

To assess our progress toward our first three strategic goals and their 
objectives and to update them for our strategic plan, we evaluate 
actions taken by federal agencies and the Congress in response to our 
recommendations. The results of these evaluations are conveyed in this 
performance and accountability report as financial benefits and other 
benefits that reflect the value of our work.

In addition, we actively monitor the status of our open 
recommendations--those that remain valid but have not yet been 
implemented--and report our findings annually to the Congress and the 
public ([Hyperlink, http://www.gao.gov/openrecs.html). We use the 
results of that analysis to determine the need for further work in 
particular areas. For example, if an agency has not implemented a 
recommended action that we consider to be worthwhile, we may decide to 
pursue further action with agency officials or congressional 
committees, or we may decide to undertake additional work on the 
matter.

We also use our biennial high-risk series to provide a status report on 
those major government operations considered "high risk" because of 
their vulnerabilities to waste, fraud, abuse, and mismanagement or the 
need for broad-based transformations. The series is a valuable 
evaluation and planning tool because it helps us to identify those 
areas where our continued efforts are needed to maintain the focus on 
important policy and management issues that the nation faces.

To help ensure the quality of our work supporting goals 1, 2, and 3, 
has begun an external peer review of the process and practices we use 
to perform many of our engagements (specifically, performance audits). 
The review--which is being led by the Office of the Auditor General of 
Canada--will assess whether our quality assurance policies and 
procedures are suitably designed and operating effectively. By the end 
of fiscal year 2004, the team had reached agreement with us on the 
standards and objectives for the peer review, completed its examination 
plan and its assessment of the suitability of the design of our 
engagement quality control system, and started the review of audit 
documentation for a sample of products. The team plans to issue a final 
written report in April 2005.

To help us assess our progress toward the strategic objectives under 
goal 4, we began a congressionally mandated study in fiscal year 2004 
of our internal operations and completed a number of other studies and 
evaluations related to this goal.

In response to the mandate in the House report on the fiscal year 2005 
legislative branch appropriation (H.R. 108-577), we and other 
legislative branch agencies were asked to identify opportunities for 
streamlining, improving agency management, and outsourcing and to 
evaluate document distribution activities and requirements. To help 
address the management improvement and streamlining portion of the 
mandate, we developed a self-certification survey to be completed by 
each legislative branch agency, including us, that will document (1) 
past efforts to streamline operations and make management improvements 
in organization alignment (including cross-servicing and outsourcing 
administrative services and other activities), acquisition management, 
IT, human capital, financial management, and strategic planning; (2) 
planned future actions; and (3) additional opportunities, using leading 
practice principles, for further improvements. To address the 
outsourcing portion of the mandate, our CAO continued to work with the 
Legislative Branch CAO Council on work already under way by the council 
to document existing cross-servicing efforts among the legislative 
branch agencies. To evaluate document distribution efforts and 
requirements, we began collecting information on the costs that other 
legislative branch agencies incur to distribute their documents and 
coordinated with the Government Printing Office on ways to reduce 
document distribution costs. All of our efforts to address the 
legislative branch mandate will continue into fiscal year 2005.

All of the following evaluations are related to goal 4's strategic 
objectives and resulted in internal products or briefings in fiscal 
year 2004 that are not available publicly.

* The status of our financial management. As part of our effort to be a 
model agency, in fiscal 2004 we retained the independent audit firm, 
Cotton & Co., LLP, to audit our financial statements. The auditors 
issued an unqualified opinion. We also conducted internal reviews of 
our compliance with requirements set forth in 31 U.S. 3512 (commonly 
referred to as the Federal Managers' Financial Integrity Act) and the 
Office of Management and Budget's Circular A-127, Financial Management 
Systems. The A-127 review covered budget preparation, documentation, 
and internal controls. The Financial Integrity Act review covered 
payroll testing; time and attendance procedures; Human Capital Office 
personnel files operations; our vendor contracts; the credit card 
program; and internal controls for purchases, payments, and employee 
reimbursements. These reviews uncovered no problems and showed that we 
have the proper controls in place and that they are being followed.

* Customer satisfaction with internal operations and services. To 
improve the satisfaction of our internal customers with our critical 
internal operations and services, we deployed our first-ever customer 
satisfaction survey. We used the feedback obtained from this survey to 
identify pain points, determine gaps between customer expectations and 
service provided, and implement improvements. The results from our next 
customer satisfaction survey, in November 2004, will be used to measure 
the impact of our improvement efforts, refine our targets, and make 
adjustments to improve service and reduce the gap between expectations 
and service provided. As a separate effort we launched a Web-based 
customer satisfaction survey focusing on services provided by our 
Product Assistance Groups to better identify where changes may be 
needed in the report production process.

* Development and retention of mission staff. To improve the 
development and effective utilization of mission staff and our 
prospects for staff retention, task teams identified staffing methods 
and systems and 79 proposed solutions for implementation during fiscal 
year 2005 to modify and strengthen various institutional issues in 
support of staffing.

* Equitability in the telework program. Based on an internal study of 
the implementation of the telework program--a program under which 
employees can work from their homes--we revised our guidance to ensure 
equitability in the decision-making process and provide for greater 
consistency and accountability in the management of the program.

* Disaster recovery testing. We conducted a disaster recovery test in 
December 2003 to identify weaknesses in our IT operations and implement 
improvements. In August 2004, we conducted an additional test to 
determine whether the fixes we implemented worked.

* Mailroom risk assessment. We completed a risk assessment of our mail 
room that resulted in several recommendations for improvements.

* Updating agency awards policy. A matrixed team studied our awards 
program and made recommendations for changes to the program and 
policies to ensure consistency with our performance management system. 
To implement these recommendations, we established a hierarchy of 
mechanisms for rewarding staff for outstanding performance; added a 
monetary component to our annual honor awards; eliminated career 
service gifts; increased the dollar limits for annual and spot awards 
that are given by teams or other units; established team budgets for 
time-off awards and limited the number of hours any individual can be 
awarded per year; and established a program to reward employees who use 
frequent flyer benefits for official travel, resulting in savings to 
GAO.

* Travel systems assessment. A contractor conducted an assessment of 
our Travel Manager and Web-based time and attendance systems and 
completed its review in September 2004. We are in the process of 
addressing the resulting findings, which were minor.

* IT Security Program assessment. We contracted for an audit of our 
security practices and controls. This assessment was designed to 
analyze the effectiveness of our IT Security Program and assist 
management in determining how to best utilize resources to protect our 
information and information systems. It is a critical onsite 
examination and analysis of the program to ascertain the present 
program status, to identify deficiencies or excesses, to determine the 
protection needed, and to make recommendations for improvement.

[End of Program Evaluation]

[End of Data Quality and Program Evaluation]

[End of Part II] 

Part III: Financial Information:

From the Chief Financial Officer:

November 15, 2004:

I am pleased to report that in fiscal year 2004 the U.S. Government 
Accountability Office continued to set the standard for excellence in 
government financial management. For the 18th consecutive year, 
independent auditors gave GAO's financial statements an unqualified 
opinion with no material weaknesses and no major compliance problems. 
In accordance with the Office of Management and Budget's new 
accelerated reporting schedule, our audited financial statements were 
completed and made publicly available 45 days after the end of the 
fiscal year. In addition, for the third year in a row, the Association 
of Government Accountants awarded GAO a certificate of excellence for 
its fiscal year 2003 annual performance and accountability report.

We worked hard to reach our goal of becoming a model federal agency and 
a world-class professional services organization. We sought legislation 
that would provide us with significant new personnel flexibilities to 
help us to continue to recruit, retain, and reward top talent. This 
bill, which the President signed into law in July, decouples GAO from 
the general across-the-board pay adjustment system applicable to much 
of the executive branch and gives greater weight to individual employee 
performance in pay decisions.

We also used new technology to improve the efficiency and the 
effectiveness of GAO's support services. All GAO employees now use a 
Web-based time and attendance system, which has greatly improved the 
efficiency of our payroll cost-allocation processes. Employees also now 
have access 24 hours a day to more than 900 online training classes 
that cover the range of competencies staff at various levels are 
expected to demonstrate, such as project planning, team building, 
report writing, data analysis, computer skills, supervision, and 
management. Another major project was the conversion of thousands of 
paper personnel files to an electronic format that can be stored off-
site and retrieved easily in the event of a natural disaster.

We redesigned the agency's Web site to give it a clean, modern look and 
updated its document search capabilities. We have reached an impressive 
1 million hits per week on the Web site, and electronic subscriptions 
to GAO reports and other products now exceed 100,000.

To better meet the needs and expectations of GAO employees, we 
developed and deployed our first-ever customer satisfaction survey on 
key internal services. We incorporated the survey results into a 
scorecard that revealed several areas needing improvement. We plan to 
measure the effectiveness of our improvement efforts during our next 
customer satisfaction survey, in November 2004.

In the coming year, we will continue to investigate new approaches to 
doing our work that will help us to save time and money while 
delivering the same outstanding results GAO is known for.

Signed by: 

Sallyanne Harper: 
Chief Financial Officer:

[End of From the Chief Financial Officer]

Overview of Financial Statements:

Our financial statements and accompanying notes begin on page 86.
[Footnote 4] Our financial statements for the fiscal years ended 
September 30, 2004 and 2003, were audited by an independent auditor, 
Cotton & Co., LLP.

Cotton & Co., LLP, rendered an unqualified opinion on our financial 
statements and an unqualified opinion on the effectiveness of our 
internal controls over financial reporting and compliance with laws and 
regulations. The auditor also reported that we have substantially 
complied with the applicable requirements of the Federal Financial 
Management Improvement Act (Improvement Act) of 1996 and found no 
reportable instances of noncompliance with selected provisions of laws 
and regulations. In the opinion of the independent auditor, the 
financial statements are presented fairly in all material respects and 
are in conformity with generally accepted accounting principles.

Financial Systems and Internal Controls:

We recognize the importance of strong financial systems and internal 
controls to ensure our accountability, integrity, and reliability. To 
achieve a high level of quality, management maintains a quality control 
program and seeks advice and evaluation from both internal and external 
sources.

We are committed to fulfilling the internal control objectives of 31 
U.S.C. 3512, commonly referred to as the Federal Managers' Financial 
Integrity Act (Integrity Act). Although we are not subject to the act, 
we comply voluntarily with its requirements. Our internal controls are 
designed to provide reasonable assurance that obligations and costs are 
in compliance with applicable laws and regulations; funds, property, 
and other assets are safeguarded against loss from unauthorized 
acquisition, use, or disposition; and revenues and expenditures 
applicable to our operations are properly recorded and accounted for to 
enable our agency to prepare reliable financial reports and maintain 
accountability over our assets.

Our management assesses compliance with these controls through a series 
of comprehensive internal reviews, applying the evaluation criteria in 
OMB's guidance for implementing the Integrity Act. The results of these 
reviews are discussed with our Audit Advisory Committee, and action is 
taken to correct deficiencies as they are identified.

We assessed our internal controls as of September 30, 2004, based on 
the criteria mentioned above for effective internal controls in the 
federal government. On the basis of this assessment, we believe that as 
of September 30, 2004, we have effective internal controls in place. 
Additionally, our independent auditor found that we maintained 
effective internal controls over financial reporting and compliance 
with laws and regulations. Consistent with our evaluation, the auditor 
found no material internal control weaknesses.

In addition, we are committed to fulfilling the objectives of the 
Improvement Act, which is also covered within 31 U.S.C. 3512. Although 
not subject to the act, we voluntarily comply with its requirements. We 
believe that we have implemented and maintained financial systems that 
comply substantially with federal financial management systems 
requirements, applicable federal accounting standards, and the United 
States Government Standard General Ledger at the transaction level as 
of September 30, 2004. We made this assessment based on criteria 
established under the Improvement Act and guidance issued by OMB. Also, 
our auditor reported that we had substantially complied with the 
applicable requirements of the Improvement Act as of September 30, 
2004.

GAO's Office of Inspector General (IG) also conducts audits and 
investigations that are internally focused, functions as an independent 
fact-gathering adviser to the Comptroller General, and reviews all 
accomplishment reports totaling $500 million or more. During fiscal 
year 2004, the IG examined compliance with our policy and procedures 
for conflict-of-interest determinations, recruiting and hiring, 
performance evaluations, career advancement, professional development, 
continuing professional education, cellular telephone usage, student 
loans, and time and attendance. In addition, the IG independently tests 
our compliance with procedures related to our performance data on a 
rotating basis over a 3-year period; these actions are specifically 
identified in the table that begins on page 67 of this report. This 
fiscal year, the IG tested compliance with procedures and methodologies 
for several new performance measures, such as the new hire rate, 
acceptance rate, retention rate, staff development, leadership and 
organizational climate. No material weaknesses were reported by the IG.
During fiscal year 2004, we completed actions related to nine IG 
recommendations made in previous years, none of which affected the 
financial statements. There are no unresolved issues.

Our Audit Advisory Committee assists the Comptroller General in 
overseeing the effectiveness of our financial reporting and audit 
processes, internal controls over financial operations, and processes 
to ensure compliance with laws and regulations relevant to our 
financial operations. As of September 30, 2004, the committee consisted 
of Sheldon S. Cohen (Chairman), Edward J. Mazur, and Charles O. 
Rossotti, whose relevant experience was described on page 37 of this 
report. The committee's report follows our financial statements and 
accompanying notes.

[End of Financial Systems and Internal Controls]

Purpose of Each Financial Statement:

The financial statements on the next five pages present the following 
information:

* The balance sheet presents the combined amounts we had available to 
use (assets) versus the amounts we owed (liabilities) and the residual 
amounts after liabilities were subtracted from assets (net position).

* The statement of net cost presents the annual cost of our operations. 
The gross cost less any offsetting revenue earned from our activities 
is used to arrive at the net cost of work performed under our four 
strategic goals.

* The statement of changes in net position presents the accounting 
items that caused the net position section of the balance sheet to 
change from the beginning to the end of the fiscal year.

* The statement of budgetary resources presents how budgetary resources 
were made available to us during the fiscal year and the status of 
those resources at the end of the fiscal year.

* The statement of financing reconciles the resources available to us 
with the net cost of operating the agency.

[End of Purpose of Each Financial Statement]

[End of Overview of Financial Statements]

Balance Sheet:

Financial Statements:

U.S. Government Accountability Office: 

Balance Sheet: 

As of September 30, 2004 and 2003: 

(Dollars in thousands): 

Assets: Intragovernmental: Funds with the U.S. Treasury and cash (Note 
2); 
2004: $67,169; 
2003: $69,382.

Assets: Intragovernmental: Accounts receivable (Note 1); 
2004: $1,501; 
2003: $506.

Assets: Total Intragovernmental; 
2004: $68,670; 
2003: $69,888.

Assets: Property and equipment, net (Note 3); 
2004: $49,180; 
2003: $57,928.

Assets: Other (Note 1); 
2004: $382; 
2003: $414.

Total Assets; 
2004: $118,232; 
2003: $128,230.

Liabilities: Intragovernmental: Accounts payable (Note 1); 
2004: $7,359; 
2003: $7,789.

Liabilities: Intragovernmental: Employee benefits (Note 5); 
2004: $1,928; 
2003: $1,416.

Liabilities: Intragovernmental: Workers' compensation (Note 4 and 6); 
2004: $1,961; 
2003: $1,922.

Liabilities: Total Intragovernmental; 
2004: $11,248; 
2003: $11,127.

Liabilities: Accounts payable (Note 1); 
2004: $12,749; 
2003: $11,936.

Liabilities: Salaries and benefits (Note 4 and 5); 
2004: $15,035; 
2003: $11,347.

Liabilities: Accrued annual leave and other (Note 4); 
2004: $29,958; 
2003: $30,415.

Liabilities: Workers' compensation (Note 4 and 6); 
2004: $9,819; 
2003: $11,093.

Liabilities: Capital leases (Note 4 and 8); 
2004: $5,934; 
2003: $9,647.

Total Liabilities; 
2004: $84,743; 
2003: $85,565.

Net Position (Note 1): Unexpended appropriations; 
2004: $34,621; 
2003: $40,327.

Net Position (Note 1): Cumulative results of operations; 
2004: ($1,132); 
2003: $2,338.

Net Position (Note 1): Total Net Position; 
2004: $33,489; 
2003: $42,665.

Total Liabilities and Net Position; 
2004: $118,232; 
2003: $128,230.

The accompanying notes are an integral part of these statements.

[End of Balance Sheet]

Financial Statements: 

U.S. Government Accountability Office: 

Statement of Net Cost: 

For Fiscal Years Ended September 30, 2004 and 2003: 

(Dollars in thousands): 

Net Costs by Goal: 

Goal 1: Well-Being/Financial Security of American People; 
2004: $194,733; 
2003: $186,443.

Goal 1: Less: reimbursable services; 
2004: ($2); 
2003: -.

Goal 1: Net goal costs; 
2004: $194,731; 
2003: $186,443.

Goal 2: Changing Security Threats/ Challenges of Global 
Interdependence; 
2004: $131,745; 
2003: $122,031.

Goal 2: Less: reimbursable services; 
2004: ($85); 
2003: ($56).

Goal 2: Net goal costs; 
2004: $131,660; 
2003: $121,975.

Goal 3: Transforming the Federal Government's Role; 
2004: $148,196; 
2003: $146,509.

Goal 3: Less: reimbursable services; 
2004: ($2,435); 
2003: ($1,648).

Goal 3: Net goal costs; 
2004: $145,761; 
2003: $144,861.

Goal 4: Maximize the Value of GAO; 
2004: $23,410; 
2003: $19,982.

Goal 4: Less: reimbursable services; 
2004: -; 
2003: -.

Goal 4: Net goal costs; 
2004: $23,410; 
2003: $19,982.

Less: reimbursable services not attributable to goals; 
2004: ($5,493); 
2003: ($2,153).

Net Cost of Operations (Note 9); 
2004: $490,069; 
2003: $471,108.

The accompanying notes are an integral part of these statements: 

[End of Statement of Net Cost]

Statement of Changes in Net Position:

Financial Statements: 

U.S. Government Accountability Office: 

Statement of Changes in Net Position: 

For Fiscal Years Ended September 30, 2004 and 2003: 

(Dollars in thousands): 

Balances, Beginning of Fiscal Year; 
2004: Cumulative Results of Operations: $2,338; 
2004: Unexpended Appropriations: $40,327; 
2003: Cumulative Results of Operations: $5,163; 
2003: Unexpended Appropriations: $29,925.

Budgetary Financing Sources: Current year appropriations; 
2004: Cumulative Results of Operations: -; 
2004: Unexpended Appropriations: $457,606; 
2003: Cumulative Results of Operations: -; 
2003: Unexpended Appropriations: $453,051.

Budgetary Financing Sources: Lapsed budget authority; 
2004: Cumulative Results of Operations: -; 
2004: Unexpended Appropriations: ($1,809); 
2003: Cumulative Results of Operations: -; 
2003: Unexpended Appropriations: ($1,552).

Budgetary Financing Sources: Appropriations used; 
2004: Cumulative Results of Operations: $461,503; 
2004: Unexpended Appropriations: ($461,503); 
2003: Cumulative Results of Operations: $441,097; 
2003: Unexpended Appropriations: ($441,097).

Other Financing Sources: Intragovernmental transfer of property and 
equipment; 
2004: Cumulative Results of Operations: ($788); 
2004: Unexpended Appropriations: -; 
2003: Cumulative Results of Operations: ($85); 
2003: Unexpended Appropriations: -.

Other Financing Sources: Federal employee retirement benefit costs 
paid by OPM and imputed to GAO (Note 5); 
2004: Cumulative Results of Operations: $25,884; 
2004: Unexpended Appropriations: -; 
2003: Cumulative Results of Operations: $24,757; 
2003: Unexpended Appropriations: -.

Other Financing Sources: Amortization of deferred lease revenue (Note 
7); 
2004: Cumulative Results of Operations: -; 
2004: Unexpended Appropriations: -; 
2003: Cumulative Results of Operations: $2,514; 
2003: Unexpended Appropriations: -.

Total Financing Sources; 
2004: Cumulative Results of Operations: $486,599; 
2004: Unexpended Appropriations: ($5,706); 
2003: Cumulative Results of Operations: $468,283; 
2003: Unexpended Appropriations: $10,402.

Net Cost of Operations; 
2004: Cumulative Results of Operations: ($490,069); 
2004: Unexpended Appropriations: -; 
2003: Cumulative Results of Operations: ($471,108); 
2003: Unexpended Appropriations: -.

Balances, End of Fiscal Year (Note 1); 
2004: Cumulative Results of Operations: ($1,132); 
2004: Unexpended Appropriations: $34,621; 
2003: Cumulative Results of Operations: $2,338; 
2003: Unexpended Appropriations: $40,327.

The accompanying notes are an integral part of these statements.

[End of Statement of Changes in Net Position]

Financial Statements: 

U.S. Government Accountability Office: 

Statement of Budgetary Resources: 

For Fiscal Years Ended September 30, 2004 and 2003: 

(Dollars in thousands): 

Budgetary Resources (Note 10): Current year appropriations; 
2004: $457,606; 
2003: $453,051.

Budgetary Resources (Note 10): Unobligated appropriations, beginning 
of fiscal year; 
2004: $18,895; 
2003: $14,198.

Budgetary Resources (Note 10): Reimbursable services (Note 9); 
2004: $8,015; 
2003: $3,857.

Budgetary Resources (Note 10): Cost sharing and pass-through CPA 
contract reimbursements; 
2004: $3,006; 
2003: $3,243.

Total Budgetary Resources; 
2004: $487,522; 
2003: $474,349.

Status of Budgetary Resources: Obligations incurred; 
2004: $471,647; 
2003: $453,902.

Status of Budgetary Resources: Unobligated appropriations, end of 
fiscal year; 
2004: $14,066; 
2003: $18,895.

Status of Budgetary Resources: Lapsed budget authority; 
2004: $1,809; 
2003: $1,552.

Total Status of Budgetary Resources; 
2004: $487,522; 
2003: $474,349.

Relationship of Obligations to Outlays: Obligations incurred; 
2004: $471,647; 
2003: $453,902.

Relationship of Obligations to Outlays: Obligated balance, net - 
beginning of fiscal year; 
2004: $50,487; 
2003: $47,856.

Relationship of Obligations to Outlays: Less: Obligated balance, net - 
end of fiscal year; 
2004: ($53,103); 
2003: ($50,487).

Total Outlays; 
2004: $469,031; 
2003: $451,271.

Less: Reimbursable services; 
2004: ($8,015); 
2003: ($3,857).

Cost sharing and pass-through CPA contract reimbursements (Note 10); 
2004: ($3,006); 
2003: ($3,243).

Net Outlays; 
2004: $458,010; 
2003: $444,171.

Outlays: Disbursements; 
2004: $469,031; 
2003: $451,271.

Outlays: Collections; 
2004: ($11,021); 
2003: ($7,100).

Net Outlays; 
2004: $458,010; 
2003: $444,171.

The accompanying notes are an integral part of these statements.

[End of Statement of Budgetary Resources]

Financial Statements: 

U.S. Government Accountability Office: 

Statement of Financing: 

For Fiscal Years Ended September 30, 2004 and 2003: 

(Dollars in thousands): 

Resources Used to Finance Activities: Budgetary Resources Obligated: 
Obligations incurred; 
2004: $471,647; 
2003: $453,902.

Resources Used to Finance Activities: Budgetary Resources Obligated: 
Less: Reimbursable services (Note 9); 
2004: ($8,015); 
2003: ($3,857).

Resources Used to Finance Activities: Budgetary Resources Obligated: 
Cost sharing and pass-through CPA contract reimbursements (Note 10); 
2004: ($3,006); 
2003: ($3,243).

Resources Used to Finance Activities: Net obligations; 
2004: $460,626; 
2003: $446,802.

Resources Used to Finance Activities: Other Resources: 
Intragovernmental transfer of property and equipment; 
2004: ($788); 
2003: ($85).

Resources Used to Finance Activities: Other Resources: Federal employee 
retirement benefit costs paid by OPM and imputed to GAO (Note 5); 
2004: $25,884; 
2003: $24,757.

Resources Used to Finance Activities: Other Resources: Amortization of 
deferred lease revenue (Note 7); 
2004: -; 
2003: $2,514.

Resources Used to Finance Activities: Net other resources used to 
finance activities; 
2004: $25,096; 
2003: $27,186.

Resources Used to Finance Activities: Total resources used to finance 
activities; 
2004: $485,722; 
2003: $473,988.

Resources Used to Finance Items Not Part of the Net Cost of Operations: 
Net decrease/(increase) in unliquidated obligations; 
2004: $876; 
2003: ($5,705).

Resources Used to Finance Items Not Part of the Net Cost of Operations: 
Costs capitalized on the balance sheet; 
2004: ($11,703); 
2003: ($14,304).

Total resources used to finance items not part of the net cost of 
operations; 
2004: ($10,827); 
2003: ($20,009).

Total resources used to finance the net cost of operations; 
2004: $474,895; 
2003: $453,979.

Components That Generate Resources in Future Periods: Decrease in 
Workers' Compensation, Accrued Annual Leave, and Other Liabilities 
(Note 11); 
2004: ($1,630); 
2003: ($341).

Costs That Do Not Require Resources: Depreciation; 
2004: $16,804; 
2003: $17,470.

Net Cost of Operations; 
2004: $490,069; 
2003: $471,108.

The accompanying notes are an integral part of these statements.

[End of Statement of Financing]

Notes to Financial Statements:

Note 1. Summary of Significant Accounting Policies:

Reporting Entity:

The accompanying financial statements present the financial position, 
net cost of operations, changes in net position, budgetary resources, 
and financing of the United States Government Accountability Office 
(GAO). Congress passed the GAO Human Capital Reform Act of 2004 that, 
among other things, authorized GAO to officially change its name from 
the General Accounting Office. The name change does not affect the 
reporting entity or the information presented for financial reporting 
purposes. GAO, an agency in the legislative branch of the federal 
government, supports the Congress in carrying out its constitutional 
responsibilities. GAO carries out its mission primarily by conducting 
audits, evaluations, analyses, research, and investigations and 
providing the information from that work to the Congress and the public 
in a variety of forms. The financial activity presented relates 
primarily to the execution of GAO's congressionally approved budget. 
GAO's budget consists of an annual appropriation covering salaries and 
expenses and revenue from reimbursable audit work and rental income. 
The revenue from audit services and rental income is included on the 
Statement of Budgetary Resources as "reimbursable services." The 
financial statements, except for federal employee benefit costs paid by 
the Office of Personnel Management (OPM) and imputed to GAO, do not 
include the effects of centrally administered assets and liabilities 
related to the federal government as a whole, such as interest on the 
federal debt, which may in part be attributable to GAO; they also do 
not include activity related to GAO's trust function described in Note 
12.

Basis of Accounting:

GAO's financial statements have been prepared on the accrual basis of 
accounting in conformity with Generally Accepted Accounting Principles 
(GAAP) for the federal government. Accordingly, revenues are recognized 
when earned and expenses are recognized when incurred, without regard 
to the receipt or payment of cash. These principles differ from 
budgetary reporting principles. The differences relate primarily to the 
capitalization and depreciation of property and equipment, as well as 
the recognition of other long-term assets and liabilities. The 
statements were also prepared in conformity with OMB Bulletin 01-09, 
Form and Content of Agency Financial Statements.

Assets:

Intragovernmental assets are those assets that arise from transactions 
with other federal entities. Funds with the U.S. Treasury composed the 
majority of intragovernmental assets on GAO's balance sheet.

Funds with the U.S. Treasury:

The U.S. Treasury processes GAO's receipts and disbursements. Funds 
with the U.S. Treasury represent appropriated funds Treasury will 
provide to pay liabilities and to finance authorized purchase 
commitments.

Accounts Receivable:

GAO's accounts receivable are due principally from federal agencies for 
reimbursable services; therefore, GAO has not established an allowance 
for doubtful accounts. The increase in fiscal year 2004 accounts 
receivable is due primarily to new reimbursable audit work.

Property and Equipment:

The GAO building qualifies as a multi-use heritage asset and is GAO's 
only heritage asset. The designation of multi-use heritage asset is a 
result of both being listed in the National Register of Historic Places 
and being used in general government operations. Maintenance of the 
building has been kept on a current basis. The building is depreciated 
on a straight-line basis over 25 years.

Generally, property and equipment individually costing more than 
$15,000 are capitalized at cost. Building improvements and leasehold 
improvements are capitalized when the cost is $25,000 or greater. Bulk 
purchases of lesser-value items that aggregate more than $150,000 are 
also capitalized at cost. Assets are depreciated on a straight-line 
basis over the estimated useful life of the property as follows: 
building improvements, 10 years; computer equipment, software, and 
capital lease assets, ranging from 3 to 6 years; leasehold 
improvements, 5 years; and other equipment, ranging from 5 to 20 years. 
GAO's property and equipment have no restrictions as to use or 
convertibility except for the restrictions related to the GAO 
building's classification as a multi-use heritage asset.

Other Assets:

The composition of Other Assets as of September 30, 2004 and 2003, is 
as follows:

[Beginning of table]

Dollars in thousands:

Operating supplies to be consumed in normal operations (valued at 
cost); 
2004: $298; 
2003: $363.

Other receivables; 
2004: $84; 
2003: $51.

Total Other Assets; 
2004: $382; 
2003: $414.
[End of table]

Liabilities:

Liabilities represent amounts that are likely to be paid by GAO as a 
result of transactions that have already occurred.

Intragovernmental liabilities arise from transactions with other 
federal entities. Detail of GAO's intragovernmental liabilities by 
agency as of September 30, 2004 and 2003, is as follows:

[Beginning of table]

Dollars in thousands:

Agency: General Services Administration; 
2004: $5,559; 
2003: $6,992.

Agency: Office of Personnel Management; 
2004: $1,884; 
2003: $1,106.

Agency: Department of Labor; 
2004: $2,176; 
2003: $2,059.

Agency: All others; 
2004: $1,629; 
2003: $970.

Total Intragovernmental Liabilities; 
2004: $11,248; 
2003: $11,127.

[End of table]

Accounts Payable:

Accounts Payable consists of amounts owed to federal agencies and 
commercial vendors for goods, services, and other expenses received but 
not yet paid.

Federal Employee Benefits:

GAO recognizes its share of the cost of providing future pension 
benefits to eligible employees over the period of time that they render 
services to GAO. The pension expense recognized in the financial 
statements equals the current service cost for GAO's employees for the 
accounting period less the amount contributed by the employees. OPM, 
the administrator of the plan, supplies GAO with factors to apply in 
the calculation of the service cost. These factors are derived through 
actuarial cost methods and assumptions. The excess of the recognized 
pension expense over the amount contributed by GAO and employees 
represents the amount being financed directly through the Civil Service 
Retirement and Disability Fund administered by OPM. This amount is 
considered imputed financing to GAO (see Note 5).

GAO recognizes a current-period expense for the future cost of 
postretirement health benefits and life insurance for its employees 
while they are still working. GAO accounts for and reports this expense 
in its financial statements in a manner similar to that used for 
pensions, with the exception that employees and GAO do not make current 
contributions to fund these future benefits.

Federal employee benefit costs paid by OPM and imputed to GAO are 
reported as resources on the Statements of Changes in Net Position and 
Financing and are also included as a component of net cost by goal on 
the Statement of Net Cost.

Annual, Sick, and Other Leave:

Annual leave is recognized as an expense and a liability as it is 
earned; the liability is reduced as leave is taken. The accrued leave 
liability is principally long-term in nature. Sick leave and other 
types of leave are expensed as leave is taken.

Contingencies:

GAO has certain claims and lawsuits pending against it. When claims are 
expected to result in payments, and the payment amounts can be 
reasonably estimated, appropriate provision is included in the 
accompanying financial statements. In the opinion of management and 
legal counsel, the resolution of other claims and lawsuits will not 
materially affect the financial position or operations of GAO.

Net Position:

Net position on the balance sheet is composed of unexpended 
appropriations and cumulative results of operations. Included in 
unexpended appropriations are appropriations not yet obligated or 
expended, including undelivered orders. Cumulative results of 
operations represent the excess of financing sources over expenses 
since inception. Detail of the components of GAO's cumulative results 
of operations for the year ended September 30, 2004 and 2003, are as 
follows:

[Beginning of table]

Dollars in thousands:

Investment in property and equipment, net; 
2004: $49,180; 
2003: $57,928.

Other; 
2004: $297; 
2003: $362.

Liabilities not covered by budgetary resources; 
2004: ($50,609); 
2003: ($55,952).

Cumulative Results of Operations; 
2004: ($1,132); 
2003: $2,338.

[End of table]

Liabilities not covered by budgetary resources are liabilities for 
which congressional action is needed before budgetary resources can be 
provided. (See Note 4.)

Note 2. Funds with the U.S. Treasury and Cash:

GAO's funds with the U.S. Treasury consist of only appropriated funds. 
GAO also maintains cash imprest funds for use in daily operations. The 
status of these funds as of September 30, 2004 and 2003, is as follows:

[Beginning of table]

Dollars in thousands:

Unobligated balance: Available; 
2004: $3,609; 
2003: $10,214.

Unobligated balance: Unavailable; 
2004: $10,451; 
2003: $8,664.

Obligated balances not yet disbursed; 
2004: $53,103; 
2003: $50,487.

Total Funds with U.S. Treasury; 
2004: $67,163; 
2003: $69,365.

Cash; 
2004: $6; 
2003: $17.

Total Funds with U.S. Treasury and Cash; 
2004: $67,169; 
2003: $69,382.

[End of table]

Note 3. Property and Equipment, Net:

The composition of property and equipment as of September 30, 2004, is 
as follows:

[Beginning of table]

Dollars in thousands:

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $10,025; 
Book value: $5,639.

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191.

Classes of property and equipment: Building improvements; 
Acquisition value: $109,389; 
Accumulated depreciation: $87,413; 
Book value: $21,976.

Classes of property and equipment: Computer and other equipment and 
software; 
Acquisition value: $34,525; 
Accumulated depreciation: $20,533; 
Book value: $13,992.

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $5,091; 
Accumulated depreciation: $4,895; 
Book value: $196.

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $30,321; 
Accumulated depreciation: $24,135; 
Book value: $6,186.

Total property and equipment; 
Acquisition value: $196,181; 
Accumulated depreciation: $147,001; 
Book value: $49,180.

[End of table]

The composition of property and equipment as of September 30, 2003, is 
as follows:

[Beginning of table]

Dollars in thousands:

Classes of property and equipment: Building; 
Acquisition value: $15,664; 
Accumulated depreciation: $9,398; 
Book value: $6,266.

Classes of property and equipment: Land; 
Acquisition value: $1,191; 
Accumulated depreciation: -; 
Book value: $1,191.

Classes of property and equipment: Building improvements; 
Acquisition value: $106,427; 
Accumulated depreciation: $80,306; 
Book value: $26,121.

Classes of property and equipment: Computer and other equipment, and 
software; 
Acquisition value: $32,872; 
Accumulated depreciation: $18,517; 
Book value: $14,355.

Classes of property and equipment: Leasehold improvements; 
Acquisition value: $5,036; 
Accumulated depreciation: $4,793; 
Book value: $243.

Classes of property and equipment: Assets under capital lease; 
Acquisition value: $28,728; 
Accumulated depreciation: $18,976; 
Book value: $9,752.

Total property and equipment; 
Acquisition value: $189,918; 
Accumulated depreciation: $131,990; 
Book value: $57,928.

[End of table]

Note 4. Liabilities Not Covered by Budgetary Resources:

The liabilities on GAO's Balance Sheet as of September 30, 2004 and 
2003, include liabilities not covered by budgetary resources, which are 
liabilities for which congressional action is needed before budgetary 
resources can be provided. Although future appropriations to fund these
liabilities are likely and anticipated, it is not certain that 
appropriations will be enacted to fund these liabilities. The 
composition of liabilities not covered by budgetary resources as of 
September 30, 2004 and 2003, is as follows:

[Beginning of table]

Dollars in thousands:

Intragovernmental liabilities--Workers' compensation; 
2004: $1,961; 
2003: $1,922.

Salaries and benefits--Comptrollers General retirement plan; 
2004: $2,937; 
2003: $2,875.

Accrued annual leave and other; 
2004: $29,958; 
2003: $30,415.

Workers' compensation; 
2004: $9,819; 
2003: $11,093.

Capital leases; 
2004: $5,934; 
2003: $9,647.

Total liabilities not covered by budgetary resources; 
2004: $50,609; 
2003: $55,952.

[End of table]

Note 5. Federal Employee Benefits:

All permanent employees participate in the contributory Civil Service 
Retirement System (CSRS) or the Federal Employees Retirement System 
(FERS). Temporary employees and employees participating in FERS are 
covered under the Federal Insurance Contributions Act (FICA). GAO makes 
contributions to CSRS, FERS, and FICA and matches certain employee 
contributions to the thrift savings component of FERS. The pension 
expense recognized in GAO's financial statements for fiscal year 2004 
and fiscal year 2003 amounted to approximately $40,237,000 and 
$39,672,000, respectively. These amounts include pension costs financed 
by OPM and imputed to GAO of $13,341,000 and $13,876,000, respectively. 
To the extent that employees are covered by FICA, the taxes they pay to 
the program and the benefits they will eventually receive are not 
recognized in GAO's financial statements. However, the payments to FICA 
that GAO makes are recognized as operating expenses. During fiscal year 
2004 and fiscal year 2003, these payments amounted to approximately 
$14,545,000 and $13,556,000, respectively. To the extent that GAO 
employees are covered by the thrift savings component of FERS, GAO 
payments to the plan are recognized as operating expenses. GAO's costs 
associated with the thrift savings component of FERS during fiscal year 
2004 and fiscal year 2003 amounted to approximately $7,889,000 and 
$7,097,000, respectively.

In addition, all permanent employees are eligible to participate in the 
contributory Federal Employees Health Benefit Program (FEHBP) and 
Federal Employees Group Life Insurance Program (FEGLIP) and may 
continue to participate after retirement. GAO makes contributions 
through OPM to FEHBP and FEGLIP for active employees to pay for their 
current benefits. GAO's contributions for active employees are 
recognized as operating expenses and, during fiscal year 2004 and 
fiscal year 2003, amounted to approximately $14,257,000 and 
$13,191,000, respectively. Using the cost factors supplied by OPM, GAO 
has also recognized an expense in its financial statements for the 
estimated future cost of post-retirement health benefits and life 
insurance for its employees. These costs amounted to approximately 
$12,543,000 and $10,881,000 during fiscal year 2004 and fiscal year 
2003, respectively, and are financed by OPM and imputed to GAO.

Amounts owed to OPM and the U.S. Treasury as of September 30, 2004 and 
2003, are, $1,928,000 and $1,416,000, respectively for FEHBP, FEGLIP, 
FICA, FERS, and CSRS contributions and are shown on the Balance Sheet 
as an employee benefits liability.

Comptrollers General and their surviving beneficiaries who qualify and 
so elect to participate are paid retirement benefits by GAO under a 
separate retirement plan. These benefits are paid from current year 
appropriations and amounted to approximately $278,000 and $272,000 
during fiscal year 2004 and fiscal year 2003, respectively. Because GAO 
is responsible for future payments under this plan, the estimated 
present value of accumulated plan benefits of $2,937,000 as of 
September 30, 2004, and $2,875,000 as of September 30, 2003, is 
included as a component of salary and benefit liabilities on GAO's 
Balance Sheet.

Note 6. Workers' Compensation:

The Federal Employees' Compensation Act (FECA) provides income and 
medical cost protection to covered federal civilian employees injured 
on the job, employees who have incurred a work-related occupational 
disease, and beneficiaries of employees whose death is attributable to 
a job-related injury or occupational disease. Claims incurred for 
benefits for GAO employees under FECA are administered by the 
Department of Labor (DOL) and are paid, ultimately, by GAO.

For fiscal year 2003, and again in fiscal year 2004, GAO used estimates 
provided by DOL to report the FECA liability. This practice is 
consistent with the practices of other federal agencies.

GAO recorded an estimated liability for claims incurred but not 
reported as of September 30, 2004 and 2003, which is expected to be 
paid in future periods. This estimated liability of $9,819,000 and 
$11,093,000 as of September 30, 2004 and 2003, respectively, is 
reported on GAO's Balance Sheet. GAO also recorded a liability for 
amounts paid to claimants by DOL as of September 30, 2004 and 2003, of 
$1,961,000 and $1,922,000, respectively, but not yet reimbursed to DOL 
by GAO. The amount owed to DOL is reported on GAO's Balance Sheet as an 
intragovernmental liability. Consistent with DOL's billing and 
collection practices, this amount represents about 2 years worth of 
claims paid by DOL to GAO employees.

Note 7. Deferred Lease Revenue:

The U.S. Army Corps of Engineers (USACE) entered into an agreement with 
GAO to lease the entire third floor of the GAO building. USACE provided 
all funding for the third floor renovation. Occupancy began August 3, 
2000, for an initial period of 3 years, with options to renew on an 
annual basis for 7 additional years. Total rental revenue to GAO 
includes a base rent, which remains constant for the entire 10-year 
period, plus operating expense reimbursements at a fixed amount for the 
first 3 years, with escalation clauses from year 4 through year 10 if 
the option years are exercised. Beginning in fiscal year 2002, USACE 
leased additional space on the sixth floor with occupancy lasting 
through the original lease term.

In addition, USACE paid for the design, construction, and renovation of 
one-half of the sixth floor to be occupied by GAO. In 2000, GAO 
capitalized the renovations at a cost of $9,053,000. GAO has repaid 
USACE for the entire cost of the renovations in the form of rental 
credits during the first 3 lease years. Rental credits were recorded as 
deferred lease revenue and were amortized over the original 3-year 
lease term ending in fiscal year 2003.

Rent received by GAO for fiscal year 2004 was $4,799,000 and for fiscal 
year 2003 rent received net of the deferred lease revenue amortization 
amounted to $1,619,000. These amounts are included in reimbursable 
services on the Statements of Budgetary Resources and Financing. Total 
rental revenue for the remaining period of the 10-year lease is as 
follows:

[Beginning of table]

Dollars in thousands:

Fiscal year ending September 30, 2005; 
Total rental revenue[A]: $4,856.

Fiscal year ending September 30, 2006; 
Total rental revenue[A]: $4,916.

Fiscal year ending September 30, 2007; 
Total rental revenue[A]: $4,978.

Fiscal year ending September 30, 2008; 
Total rental revenue[A]: $5,045.

Fiscal year ending September 30, 2009; 
Total rental revenue[A]: $5,111.

Fiscal year ending September 30, 2010; 
Total rental revenue[A]: $5,179.

Total rental revenue[A]: $30,085.

[A] If option years are exercised.

[End of table]

Note 8. Leases:

Capital Leases:

GAO has entered into capital leases for office and computer equipment 
under which the ownership of the equipment covered under the leases 
transfers to GAO when the leases expire. When GAO enters into these 
leases, the present value of the future lease payments is capitalized, 
net of imputed interest, and recorded as a liability. The acquisition 
value and accumulated depreciation of GAO's capital leases are shown 
in Note 3, Property and Equipment, Net. As of September 30, 2004 and 
2003, the capital lease liability was $5,934,000 and $9,647,000, 
respectively. This decrease in capital lease liability is a result of 
making final lease payments for a substantial number of agency laptop 
computers during fiscal year 2004 that continue to be used in fiscal 
year 2005.

These lease agreements are written as contracts with a base year and 
option years. The option years are subject to the availability of 
funds. Early termination of the leases for reasons other than default 
is subject to a negotiation between the parties. These leases are lease 
to ownership agreements. GAO's leases are short-term in nature, and no 
liability exists beyond the years shown in the table below. GAO's 
estimated future minimum lease payments under the terms of the leases 
are as follows:

[Beginning of table]

Dollars in thousands:

Fiscal year ending September 30, 2005; 
Total: $3,161.

Fiscal year ending September 30, 2006; 
Total: $2,006.

Fiscal year ending September 30, 2007; 
Total: $1,042.

Total Estimated Future Lease Payments: $6,209.

Less: Imputed Interest: ($275).

Net Capital Lease Liability: $5,934.

[End of table]

Operating Leases:

GAO leases office space, predominately for field offices, from the 
General Services Administration and has entered into various other 
operating leases for office communication and computer equipment. 
Lease costs for office space and equipment for fiscal year 2004 and 
fiscal year 2003 amounted to approximately $7,991,000 and $7,526,000, 
respectively. GAO's estimated future minimum lease payments for field 
office space under the terms of the leases are as follows:

[Beginning of table]

Dollars in thousands:

Fiscal year ending September 30, 2005; 
Total: $7,833.

Fiscal year ending September 30, 2006; 
Total: $3,893.

Fiscal year ending September 30, 2007; 
Total: $3,352.

Fiscal year ending September 30, 2008; 
Total: $2,972.

Fiscal year ending September 30, 2009; 
Total: $2,845.

Fiscal year ending September 30, 2010 and thereafter; 
Total: $9,763.

Total Estimated Future Lease Payments; 
$30,658.

[End of table]

Leased property and equipment must be capitalized if certain criteria 
are met (see Capital Leases description). Because property and 
equipment covered under GAO's operating leases do not satisfy these 
criteria, GAO's operating leases are not reflected on the Balance 
Sheet. However, annual lease costs under the operating leases are 
included as components of net cost by goal in the Statement of Net 
Cost.

Note 9. Net Cost of Operations:

Expenses for salaries and related benefits for fiscal year 2004 and 
fiscal year 2003 amounted to $389,104,000 and $372,060,000, 
respectively, which were about 79 percent of GAO's annual net cost of 
operations in both years. Included in the net cost of operations are 
federal employee benefit costs paid by OPM and imputed to GAO of 
$25,884,000 in fiscal year 2004 and $24,757,000 in fiscal year 2003.

Revenues from reimbursable services are shown as an offset against the 
full cost of the goal to arrive at its net cost. GAO's pricing policy 
is to seek reimbursement for actual costs incurred, including overhead 
costs where allowed by law. Earned revenues that are insignificant or 
cannot be associated with a major goal are shown in total, the largest 
component of which is rental revenue from the lease of space in the GAO 
building. Revenues from reimbursable services for fiscal year 2004 and 
fiscal year 2003 amounted to $8,015,000 and $3,857,000, respectively. 
Of the revenues from reimbursable services received in fiscal year 
2004, $7,939,000 were intragovernmental--substantially from USACE, 
$4,799,000; Federal Deposit Insurance Corporation, $1,540,000; and 
Securities and Exchange Commission, $849,000. Likewise, in fiscal year 
2003 the amount of revenues from reimbursable services from other 
governmental entities was $3,746,000, of which $1,621,000 was from 
USACE and $1,505,000 was from the Federal Deposit Insurance 
Corporation. The increase between fiscal years 2003 and 2004 is a 
result of new audit work with the Securities and Exchange Commission 
as well as the rental credit to USACE being fully applied through 
fiscal year 2003 (see Note 7).

The net cost of operations represents GAO's operating costs that must 
be funded by financing sources other than revenues earned from 
reimbursable services. These financing sources are presented in the 
Statement of Changes in Net Position.

Note 10. Budgetary Resources:

Budgetary resources made available to GAO include current 
appropriations, unobligated appropriations, and reimbursements arising 
from both revenues earned by GAO from providing goods and services to 
other federal entities for a price (reimbursable services), and cost- 
sharing and pass-through contract arrangements with other federal 
entities.

For fiscal year 2003, differences exist between the total budgetary 
resources on the Statement of Budgetary Resources and the budget 
authority amount in the President's Budget. These differences are due 
to (1) unobligated funds available in expired accounts not included in 
the President's Budget submission and (2) reimbursements from cost- 
sharing and pass-through contract arrangements that could not have 
been anticipated at the time the President's Budget was developed. In 
addition, as the fiscal year 2006 President's Budget is not yet 
available, comparison between the Statement of Budgetary Resources and 
the actual fiscal year 2004 data in the President's Budget cannot be 
performed.

Fiscal year 2004 reimbursements from cost-sharing and pass-through 
contract arrangements consisted primarily of collections from other 
federal entities for the support of the Federal Accounting Standards 
Advisory Board and collections from other federal entities that utilize 
GAO contracts to obtain services. The costs and reimbursements for 
these activities are not included in the Statement of Net Cost.

Note 11. Components That Generate Resources in Future Periods:

Decreases in workers compensation, accrued annual leave, and other 
liabilities are reported in the Statement of Financing. These changes 
represent the decreases in liabilities not covered by budgetary 
resources, as reported in Note 4.

[Beginning of table]

Dollars in thousands:

Liabilities not covered by budgetary resources, as disclosed in Note 4; 
Fiscal year ending September 30 2004: $50,609; 
Fiscal year ending September 30 2003: $55,952.

Liabilities that are not components of net cost: Capital leases; 
Fiscal year ending September 30 2004: ($5,934); 
Fiscal year ending September 30 2003: ($9,647).

Current year liabilities not covered by budgetary resources that are 
components of net cost; 
Fiscal year ending September 30 2004: $44,675; 
Fiscal year ending September 30 2003: $46,305.

Prior year liabilities that are not components of current year net 
costs; 
Fiscal year ending September 30 2004: ($46,305); 
Fiscal year ending September 30 2003: ($46,646).

Decrease in Workers' Compensation, Accrued Annual Leave, and Other 
Liabilities, as reported on the Statement of Financing; 
Fiscal year ending September 30 2004: ($1,630); 
Fiscal year ending September 30 2003: ($341).

[End of table]

Note 12. Davis-Bacon Act Trust Function:

GAO is responsible for administering for the federal government the 
trust function of the Davis-Bacon Act receipts and payments and 
publishes separate, audited financial statements for this fund. GAO 
maintains this fund to pay claims relating to violations of the Davis-
Bacon Act and Contract Work Hours and Safety Standards Act. Under 
these acts, DOL investigates violation allegations to determine if 
federal contractors owe additional wages to covered employees. If DOL 
concludes that a violation has occurred, GAO collects the amount owed 
from the contracting federal agency, deposits the funds in an account 
with the U.S. Treasury, and remits payment to the employee. GAO is 
accountable to the Congress and to the public for the proper 
administration of the assets held in the trust. Trust assets under 
GAO's administration totaled approximately $4,752,000 as of September 
30, 2004. These assets are not the assets of GAO or the federal 
government and are held for distribution to appropriate claimants. 
During fiscal year 2004, receipts and disbursements in the trust 
amounted to $1,249,000 and $1,021,000, respectively. Because the trust 
assets and related liabilities are not assets and liabilities of GAO, 
they are not included in the accompanying financial statements.

[End of Notes to Financial Statements] 

Audit Advisory Committee's Report:

The Audit Advisory Committee (the Committee) assists the Comptroller 
General in overseeing the U.S. Government Accountability Office's (GAO) 
financial operations. As part of that responsibility, the Committee 
meets with agency management and its internal and external auditors to 
review and discuss GAO's external financial audit coverage, the 
effectiveness of GAO's internal controls over its financial operations, 
and its compliance with certain laws and regulations that could 
materially impact GAO's financial statements. GAO's external auditors 
are responsible for expressing an opinion on the conformity of GAO's 
audited financial statements with the U.S. generally accepted 
accounting principles. The Committee reviews the findings of the 
internal and external auditors, and GAO's responses to those findings, 
to ensure that GAO's plan for corrective action includes appropriate 
and timely follow-up measures. In addition, the Committee reviews the 
draft Performance and Accountability Report, including its financial 
statements, and provides comments to management who has primary 
responsibility for the Performance and Accountability report. The 
Committee met two times with respect to its responsibilities as 
described above. During these sessions, the Committee met with the 
internal and external auditors without GAO management being present 
and discussed with the external auditors the matters that are required 
to be discussed by generally accepted auditing standards. Based on 
procedures performed as outlined above, we recommend that GAO's audited 
statements and footnotes be included in the 2004 Performance and 
Accountability Report.

Signed by: 

Sheldon S. Cohen: 
Chairman: 
Audit Advisory Committee:

[End of Audit Advisory Committee's Report]

Independent Auditor's Report:

COTTON & COMPANY LLP:

auditors: 
advisors: 

333 NORTH FAIRFAX STREET: 
SUITE 401: 
ALEXANDRIA, VIRGINIA 22314: 

703/836/6701: 
FAX: 703/836/0941 

WWW.COTTONCPA.COM:

INDEPENDENT AUDITOR'S REPORT:

Comptroller General of the United States:

Cotton & Company LLP audited the Government Accountability Office's 
(GAO's Balance Sheets as of September 30, 2004 and 2003, and the 
related Statements of Net Cost, Changes in Net Position, Budgetary 
Resources, and Financing for the years then ended. We found:

* The financial statements referred to above are fairly presented, in 
all material respects, in conformity with U.S. generally accepted 
accounting principles,

* GAO maintained effective internal control over financial reporting 
(including safeguarding of assets) and compliance with laws and 
regulations,

* GAO's financial management systems substantially complied with the 
applicable requirements of the Federal Financial Management Improvement 
Act of 1996 (FFMIA), and:

* No reportable noncompliance with laws and regulations we tested.

The following four sections discuss the above conclusions in more 
detail. Our conclusions on Management's Discussion and Analysis (MD&A) 
and other accompanying information appear below, under the caption 
Consistency of Other Information.

Opinion on Financial Statements:

In our opinion, the accompanying financial statements present fairly, 
in all material respects, the financial position of GAO as of September 
30, 2004 and 2003, and its net costs, changes in net position, 
budgetary resources, and financing for the years then ended in 
conformity with U.S. generally accepted accounting principles.

Opinion on Internal Control:

In our opinion, GAO maintained, in all material respects, effective 
internal control over financial reporting (including safeguarding of 
assets) and compliance with laws and regulations as of September 30, 
2004, based on criteria established under the Federal Managers' 
Financial Integrity Act (FMFIA).

Opinion on FFMIA Compliance:

In our opinion, GAO's financial management systems substantially 
complied with the three FFMIA requirements: (1) Federal financial 
management system requirements, (2) Federal accounting standards, and 
(3) the U.S. Government Standard General Ledger (SGL) at the 
transaction level, as of September 30, 2004.

Compliance with Laws and Regulations:

The objective of our audits was not to provide an opinion on overall 
compliance with laws and regulations. Accordingly, we do not express 
such an opinion. However, our tests for compliance with certain 
provisions of laws and regulations disclosed no instances of 
noncompliance that would be reportable under Government Auditing 
Standards or Office of Management and Budget (OMB) Bulletin No. 01-02, 
Audit Requirements for Federal Financial Statements.

This conclusion is intended solely for the information and use of the 
management of GAO, OMB, and Congress and is not intended to be, and 
should not be, used by anyone other than these specified parties. 
However, this report is a matter of public record and its distribution 
is not limited.

Consistency of Other Information:

We conducted our audits for the purpose of forming an opinion on the 
fiscal year 2004 and 2003 financial statements taken as a whole. 
Certain portions of the Performance and Accountability Report are not a 
required part of the basic financial statements, but are required by 
OMB Bulletin No. 01-09, Form and Content of Agency Financial Statements, 
and the Federal Accounting Standards Advisory Board's Statement of 
Federal Financial Accounting Standards No. 15, Management's Discussion 
and Analysis.

There are two types of material within GAO's Performance and 
Accountability Report that are not a part of GAO's basic financial 
statements: MD&A and other accompanying information. MD&A describes GAO 
and its missions, activities, program and financial results, and 
financial condition. MD&A is required supplementary information. With 
respect to GAO's MD&A, we made certain inquiries of management and 
compared the information for consistency with GAO's audited financial 
statements and against other knowledge we obtained during our audits. 
Other accompanying information consists of the full Performance and 
Accountability Report except for the MD&A, the basic financial 
statements and notes to the financial statements, and this auditor's 
report. With respect to other accompanying information, we compared the 
information for consistency with the audited financial statements. 
Based on these limited procedures, we found no material inconsistencies 
between either the MD&A or the other accompanying information and the 
financial statements or notes. However, we did not audit the MD&A or 
the other accompanying information, and express no opinion on them.

Management's Responsibility:

Management is responsible for:

* Preparing the financial statements in conformity with U.S. generally 
accepted accounting principles,

* Establishing, maintaining, and assessing internal control to provide 
reasonable assurance that the broad control objectives of FMFIA are 
met,

* Implementing, maintaining, and assessing financial management systems 
to provide reasonable assurance of substantial compliance with the 
requirements of FFMIA, and:

* Complying with applicable laws and regulations.

Auditor's Responsibility and Methodology:

Cotton & Company LLP performed its audits and examinations in 
accordance with Government Auditing Standards, U.S. generally accepted 
auditing standards, the American Institute of Certified Public 
Accountants' (AICPA) attestation standards, and OMB Bulletin No. 01-02. 
We believe our audits and examinations provide a reasonable basis for 
our opinions.

We are responsible for planning and performing our audits to obtain 
reasonable assurance about whether the financial statements are free of 
material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements. An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as 
evaluating overall financial statement presentation.

We have examined management's assertion that GAO maintained effective 
control over financial reporting (including safeguarding of assets) and 
compliance with applicable laws and regulations as of September 30, 
2004, based on internal GAO evaluations using criteria established in 
FMFIA. Our responsibility is to express an opinion on the effectiveness 
of internal control based on our examination. We conducted our 
examination in accordance with attestation standards established by the 
AICPA and Government Auditing Standards and, accordingly, obtained an 
understanding of internal control over financial reporting (including 
safeguarding of assets) and compliance with laws and regulations; 
tested and evaluated the design and operating effectiveness of internal 
control; and performed other procedures considered necessary in the 
circumstances. We believe that our examination provides a reasonable 
basis for our opinion.

With respect to internal control related to significant performance 
measures included in the MD&A, we obtained an understanding of the 
design of internal control relating to the existence and completeness 
assertions and determined whether they had been placed in operation, as 
required by OMB Bulletin No. 01-02. Our procedures were not designed to 
provide assurance on internal control over reported performance 
measures and, accordingly, we do not express an opinion on such 
control.

Because of inherent limitations in internal control, misstatements, 
losses, or noncompliance may nevertheless occur and not be detected. 
Also, projections of any evaluation of internal control to future 
periods are subject to the risk that internal control may become 
inadequate as the result of changes in conditions, or that the degree 
of compliance with the policies or procedures may deteriorate.

We have examined management's assertion that, as of September 30, 2004, 
GAO's financial management systems substantially complied with the 
three FFMIA requirements: (1) Federal financial management system 
requirements, (2) Federal accounting standards, and (3) the SGL at the 
transaction level. Management's assertion was based on internal GAO 
evaluations using compliance indicators set forth in OMB guidance, 
dated January 4, 2001, Revised Implementation Guidance for FFMIA, and 
criteria in OMB Circulars A-127, Financial Management Systems, and A-
130, Management of Federal Information Resources. Our responsibility is 
to express an opinion on whether GAO's financial management systems 
substantially complied with the above-mentioned requirements, based on 
our examination. We conducted our examination in accordance with 
attestation standards established by the AICPA and Government Auditing 
Standards and, accordingly, we examined, on a test basis, evidence 
about GAO's substantial compliance with those requirements, and 
performed such other procedures as we considered necessary in the 
circumstances. We believe our examination provides a reasonable basis 
for our opinion. Our examination does not provide a legal determination 
of GAO's financial management systems' compliance with specified 
requirements.

We are responsible for testing compliance with selected provisions of 
laws and regulations that have a direct and material effect on the 
financial statements. We did not test compliance with all laws and 
regulations applicable to GAO. We limited our tests of compliance to 
those laws and regulations required by OMB audit guidance that we 
deemed applicable to the financial statements for the fiscal year ended 
September 30, 2004. We caution that noncompliance may occur and may not 
be detected by these tests, and that such testing may not be sufficient 
for other purposes.

We noted other nonreportable matters involving internal control and its 
operation that we will communicate in a separate management letter.

COTTON & COMPANY LLP:

Signed by: 

Charles Hayward, CPA:

Alexandria, Virginia: 
November 1, 2004: 

[End of Independent Auditor's Report]

[End of Part III]

Part IV: Appendixes:

1. Accomplishments and Other Contributions:

In pursuing our strategic goals during fiscal year 2004, we recorded 
hundreds of accomplishments and made numerous other contributions. This 
appendix provides details on the most significant of these. In 
reporting accomplishments (designated by an A in the item number below) 
and other contributions (designated by a C in the item number below), 
we are holding ourselves accountable for the resources we received to 
implement our strategic plan. The accomplishments document financial or 
other benefits achieved through action on our findings or 
recommendations.

Typically, the accomplishments describe work that we completed in prior 
fiscal years because it takes time to implement recommendations, 
realize benefits, and record them. The other contributions, which often 
refer to work completed in fiscal year 2004, describe instances in 
which we provided information or recommendations that aided 
congressional decision making or informed the public debate to a 
significant degree.

Strategic Goal 1:

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People:

The Health Needs of an Aging and Diverse Population:

1.1.A. Improving Veterans' Access to Noninstitutional Long-Term Care 
Services:

In response to our review of the Department of Veterans Affairs' (VA) 
noninstitutional long-term care services, VA took actions to improve 
veterans' access to these services--including adult day health care, 
geriatric evaluation, respite care, home-based primary care, homemaker/
home health aide, and skilled home health care. As we recommended, VA 
specified the home health services that medical facilities must make 
available and notified facilities that they must use VA's eligibility 
standards, rather than establish different local standards, in making 
noninstitutional services available. 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-487]).

1.2.A. Reforming Medicare Inpatient Hospital Payments:

We provided information on hospital labor markets to the Congress that 
resulted in changes to the criteria hospitals must meet in order to be 
reassigned to a different labor market. Medicare payments to hospitals 
are adjusted to reflect the varying labor costs of providing services 
across labor markets. Each metropolitan statistical area is considered 
to be a single labor market, and all areas outside of metropolitan 
areas in each state are treated as a single labor market. Some 
hospitals indicate that the wages they must pay are higher than the 
average wages in their metropolitan statistical area because they must 
compete for employees in nearby areas that offer higher wages. To 
address this issue, the Congress established an administrative process 
that allows hospitals meeting the criterion concerning their average 
wages and proximity to a higher-paying area to obtain a geographic 
reclassification. We analyzed hospital labor markets based on the 
commuting patterns of hospital employees and identified commuting 
criteria that could be incorporated into geographic reclassification. 
The commuting criteria would enable hospitals located outside proximity 
thresholds but still competing for labor with higher cost areas to 
qualify for geographic reclassification to a higher cost area. Our work 
assisted the Congress in developing legislation to incorporate 
commuting patterns into geographic reclassification criteria. The 
revisions were incorporated as Section 505 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173). 
(Based on briefing):

1.3.A. Improving Outreach to Low-Income Medicare Beneficiaries:

In several reports, we found that many eligible low-income Medicare 
beneficiaries are not enrolled in federal or state programs that 
provide financial assistance with Medicare costs. We also found that a 
2002 Social Security Administration (SSA) mailing to low-income 
Medicare beneficiaries resulted in 74,000 additional beneficiaries 
enrolling in these programs. Our analysis of this 2002 mailing helped 
the Congress include a similar outreach requirement in the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 
No. 108-173) to notify low-income beneficiaries of the availability of 
new subsidies to assist with drug costs. 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-363]).

1.4.A. Increasing Opportunities to Enhance Medicare Program Integrity:

Staffing companies that contract with physicians have not been allowed 
to enroll in Medicare and directly bill the program. Instead, these 
companies submit claims to Medicare on behalf of their contractor 
physicians. As a consequence, the Centers for Medicare & Medicaid 
Services (CMS) was unable to readily identify contractor physicians, 
the claims they submit, and the staffing companies with which they 
associate. In response to a mandate, we examined about 2.8 million 
Medicare claims and compared the billings of physicians that contract 
with staffing companies with the billings of other physicians. To 
enhance Medicare's program integrity, we suggested and the Congress 
ultimately included a provision permitting the reassignment of benefits 
to staffing companies that retain contractor physicians in the recently 
enacted Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. No. 108-173). 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-185]).

1.5.A. Improving Nursing Home Care:

Our work over the past 5 years has helped raise public awareness of the 
unacceptable conditions prevalent in some 15 percent of America's 
nursing homes, where serious and recurring problems have harmed 
patients. As we recommended, CMS, which oversees nursing facilities, is 
increasing the number of federal comparative surveys designed to 
identify weaknesses in state oversight. A comparative survey involves a 
federal survey team conducting a complete, independent survey of a home 
shortly after the state's survey to compare and contrast the findings. 
We believe that federal comparative surveys, which CMS plans to more 
than double, provide the most accurate picture of the adequacy of state 
survey activities. 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-6]).

1.6.A. Eliminating Medicaid's Upper Payment Limit Loophole:

In a series of products, we reported on a financing scheme that was 
used by some states to generate additional federal monies under the 
joint federal-and state-funded Medicaid program. Under this scheme, 
states took advantage of a loophole in Medicaid's upper payment limit 
requirement and created the illusion that they made large Medicaid 
payments in order to generate federal matching payments. In reality, 
states made these large payments to certain providers, such as local-
government-owned nursing homes, only to require the return of these 
payments to the states. Citing our work as key evidence, the Department 
of Health and Human Services (HHS) developed and published a regulation 
in 2001 that phases out this loophole with resulting financial benefits 
to the federal government. Using estimates from HHS, we reported last 
year that the estimated financial benefits were $5.9 billion for fiscal 
years 2002 through 2004. Using estimates from the same agency, we are 
reporting this year that the present value of the estimated financial 
benefits will be $10.1 billion for fiscal years 2005 and 2006. 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS-00-193]).

1.7.A. Reducing Medicare Home Health Care Payments:

The Congress directed us to evaluate payments for home health care in 
order to help decide whether to implement, modify, or eliminate a 
planned reduction of Medicare home health payments. We determined that 
Medicare's payments for home health care episodes were, on average, 
about 35 percent higher than the estimated costs of the home health 
care provided for the time period covered by our study--the first 6 
months of 2001. On the basis of this finding, we asked the Congress to 
consider making no change in the requirement for a reduction in 
Medicare home health payments. The payment reduction was implemented in 
fiscal year 2003. The Congressional Budget Office estimated the cost of 
eliminating the Medicare home health payment at about $5 billion for 5 
years. Thus, the present value of the financial benefit of our work is 
about $4.7 billion for fiscal years 2003 through 2007.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-663]).

1.8.A. Providing Health Care Assistance to Mobilized Reservists' 
Families:

We recommended that the Department of Defense (DOD) provide health care 
assistance to families of mobilized reservists through its health care 
system called TRICARE. In response, officials in the Office of the 
Assistant Secretary of Defense for Reserve Affairs have ensured that 
all the information related to health care that mobilized reservists' 
families need is available on TRICARE's and Reserve Affairs' Web sites. 
The office has also developed brochures describing reservists' medical 
and dental benefits. DOD has developed a commanders' briefing on health 
protection and health care benefits that is used to inform reservists 
of their benefits and their families' benefits when the member is 
mobilized.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-829]).

1.9.A. Revising the Consumer Product Safety Commission's Methods for 
Estimating Fire Losses:

In 1999, we recommended that the Consumer Product Safety Commission 
identify a more accurate method for calculating fire losses as part of 
its assessment of the need, cost, and benefits of a upholstered 
furniture flammability standard. In response to our recommendations, 
the commission made several changes that should result in better 
estimates of fire losses.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-3]).

1.10.A. Improving the Nation's Capability to Detect and Respond to Drug 
Use:

Despite some enhancements that had been made prior to our work, we 
raised concerns about the nation's ability to detect and respond to 
emerging drug crises and recommended specific actions that the Director 
of the Office of National Drug Control Policy should take to improve 
the nation's drug use detection and response capability. Since then, 
the office has taken and continues to take steps--such as supporting 
the expansion and redesign of the National Household Survey on Drug 
Abuse and the design and implementation of the Arrestee Drug Abuse 
Monitoring program--to improve the nation's data collection systems and 
the usefulness of drug-related data. The office also works with 
localities to identify emerging drug problems and develop initiatives 
to address them.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-98-130]).

1.11.A. Improving Medical and Dental Screening of Army Reservists:

To help ensure that early-deploying reservists are healthy enough to 
carry out their duties, we recommended that the Army make sure that the 
5-year physical examinations for early-deploying reservists under 40 
and the biennial physical examinations for early-deploying reservists 
over 40 are current and complete. We also recommended that the Army 
comply with existing statutory requirements to make sure that the 
required dental examinations and treatments for all early-deploying 
reservists are complete. The Army responded by contracting for services 
so that the statutory requirements for physical examinations for 
reserve personnel will be met. Under the contract, physical 
examinations and other medical services are being provided to 
reservists through the Federal Strategic Health Alliance--a joint 
partnership involving DOD, VA, and HHS. In addition, the Army (1) now 
provides dental assessments to reservists through the Federal Strategic 
Health Alliance, (2) increased its emphasis and efforts to use 
automated tracking of all dental readiness through a Web-based system, 
and (3) increased its marketing and education about the availability of 
the reserve dental plan to reservists.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-437]).

1.12.A. Protecting Human Research Subjects from Institutional and 
Investigator Financial Conflicts of Interest:

In our work on financial conflicts of interest in biomedical research 
conducted by academic research institutions, we found that there was no 
direct link between HHS's regulations governing individual 
investigators' financial interests and HHS's regulations governing 
human subjects' protection. At the level of academic research 
institutions, this meant that information about investigators' 
financial interests was not necessarily conveyed to an institutional 
review board for consideration when they reviewed research proposals 
for risks to human subjects. We also found that HHS had not provided 
detailed advice on managing institutional financial conflicts of 
interest and we recommended that it develop guidance or regulations in 
this area. Our work helped spur HHS to issue guidance in May 2004 that 
addresses the issues that we raised.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-89]).

1.13.A. Improving the Efficiency of DOD's Disability Program:

In an October 2001 report, we recommended that DOD establish procedures 
to facilitate and expedite the process used by beneficiaries of the 
Program for Persons with Disabilities when they must reapply for 
benefits after moving from one TRICARE region to another. We reported 
that some patients have been inconvenienced and experienced service 
delays. DOD changed its policy and now requires that the TRICARE 
contractor in the gaining region honor the authorization issued by the 
losing region, therefore minimizing reapplication, inconvenience to 
patients, and service delays.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-73]).

1.14.A. Prioritizing Research on Toxic Chemicals:

We reported that federal and state efforts to collect data on human 
exposure to toxic chemicals were limited, in part, because of the lack 
of laboratory methods for measuring some chemicals. We recommended that 
the Secretary of Health and Human Services coordinate with the 
Administrator of the Environmental Protection Agency (EPA) and develop 
a strategy that establishes research priorities for laboratory methods 
development and a mechanism or process for setting chemical monitoring 
priorities. HHS's Centers for Disease Control and Prevention, with 
input from EPA, has established such a chemical nomination process. We 
also recommended that HHS and EPA work together to identify common or 
complementary performance goals that could be a basis for structuring 
and supporting interagency collaborations to collect and use human 
exposure data. In line with this recommendation, the heads of these 
agencies have signed a memorandum of understanding that delineates 
issues of mutual interest and serves as a framework for improving HHS's 
and EPA's cooperative working relationship in collecting environmental 
health data.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-80]).

1.15.A. Improving Guidance on Bioterrorism Preparedness for State and 
Local Officials:

We found that officials from response organizations in seven states (1) 
reported a lack of guidance from the federal government on what it 
means to be prepared for bioterrorism and (2) expressed a desire for 
increased information sharing among state and local jurisdictions of 
best practices on various types of bioterrorism preparedness 
activities. Consistent with one of our recommendations, the Centers for 
Disease Control and Prevention developed interim evidence-based 
performance goals for public health disaster preparedness and 
distributed them to state and local public health departments for their 
current use. In addition, the Department of Homeland Security (DHS) is 
incorporating the public health performance goals into a federal effort 
to standardize state and local public health departments' bioterrorism 
preparedness exercises and training. Also, the Centers for Disease 
Control and Prevention, in coordination with the American Medical 
Association, held its First National Congress on Public Health 
Readiness in July 2004, with the purpose of providing a forum for 
discussion, information sharing, resource development, networking, and 
collaboration with key partners.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-373]).

1.16.A. Targeting National Health Service Corps Placement Options:

Over the past decade, we have reported and testified that changing the 
law to allow greater use of the National Health Service Corps loan 
repayment program would provide greater opportunity to stretch program 
dollars and improve provider retention. We also recommended that the 
Congress consider eliminating the option for National Health Service 
Corps scholarship recipients to fulfill their service obligation under 
the National Research Service Award. We reported that while the 
research efforts of these scholarship recipients may be important in 
their own right, the costs borne by the National Health Service Corps 
did not result in any benefits related to meeting the program's goal of 
providing primary care providers to health professional shortage areas. 
When the Congress subsequently reauthorized the National Health Service 
Corps in 2002, it implemented our recommendations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-96-28]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS-97-204]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS-00-81]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-1042T]).

1.17.A. Expediting the Openings of Outpatient Clinics:

In our review of veterans' access to VA health care in the Chattanooga, 
Tennessee, area, we noted that additional community-based clinics would 
improve veterans' access to outpatient services. In August 2003, VA 
announced plans to open new clinics after fiscal year 2010 to serve 
Chattanooga-area veterans. Consistent with our recommendation that 
expeditious openings of these clinics be explored, the Secretary 
announced in May 2004 that VA would open two new outpatient clinics 
near Chattanooga in fiscal years 2006 and 2007.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-162]).

1.18.A. Better Managing VA's Capital Assets:

In 1999, we reported that better management of VA's inventory of 
capital assets could significantly reduce funds used to operate 
unneeded or outdated medical facilities in markets where facilities 
have excess capacity, provide duplicate services, or are aged or 
inefficient. For example, we found that VA could meet veterans' health 
care needs more efficiently by closing one of its four Chicago-area 
medical facilities and that many of VA's facilities are no longer well 
suited to providing accessible, high quality, cost-effective health 
care in the 21st century because they were built more than 50 years 
ago. As we recommended, VA assessed its use of existing assets in 
relation to its mission. In May 2004, on the basis of its assessments, 
VA (1) decided to close inpatient medical facilities in five cities and 
shift inpatient services to other VA medical facilities; (2) decided to 
consolidate selected inpatient services from six other medical 
facilities with other VA medical facilities that already provide those 
services; (3) announced its decisions concerning a long-term capital 
investment plan that included more than 100 major construction projects 
in 37 states, the District of Columbia, and Puerto Rico for modernizing 
medical facilities; and (4) announced its intention to dispose of over 
3.6 million square feet of unneeded assets. We also reported that VA 
could enhance veterans' health care benefits by assessing the 
advantages of restructuring its inventory of capital assets or 
purchasing care from other public or private providers who are located 
closer to where veterans live. As we recommended, VA conducted market-
based assessments of its service delivery practices and identified 39 
geographic areas where veterans face lengthy travel to access VA 
inpatient services. Consequently, VA decided to reduce veterans' travel 
times to access care by (1) constructing new medical facilities to 
serve veterans in 2 areas, (2) adding nonacute inpatient services such 
as spinal cord injury or blind rehabilitation to 7 geographic areas 
where VA currently does not provide such services, and (3) purchasing 
inpatient services through contracts with local providers or 
collaborative arrangements with DOD to serve veterans in 27 areas. VA 
plans to continue studying alternatives for reducing lengthy travel 
times in 3 other geographic areas.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-99-145]).

1.19.A. Clarifying the Definition of Abuse to Benefit Nursing Home 
Residents:

We found that states had various interpretations of CMS's definition of 
abuse. These interpretations affected whether nurse aides were reported 
to state nurse aide registries, which could prevent them from obtaining 
employment in a nursing home. To better protect nursing home residents, 
we recommended that CMS clarify the definition of abuse and ensure that 
states apply that definition consistently and appropriately. CMS 
implemented our recommendation by sending a memorandum to state survey 
agency directors, clarifying its definition of abuse and by instructing 
them to report suspected abuse to law enforcement authorities and, if 
appropriate, to the state's Medicaid Fraud Control Unit.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-312]).

1.20.A. Developing a Strategy for Expanding Childhood Vaccine 
Stockpiles:

Our report on childhood vaccine shortages underscored the need for 
strategic planning and improved communication between federal agencies 
to help ensure a stable supply of recommended pediatric vaccines. We 
identified multiple factors that contributed to recent shortages and 
explored federal agencies' options for mitigating future shortages. As 
a result, the Centers for Disease Control and Prevention developed a 
strategic plan to expand national stockpiles of pediatric vaccines and 
worked with the Food and Drug Administration (FDA) to implement 
procedures for systematic interchange of information between them. In 
addition, FDA now makes available compliance program guidelines to 
vaccine manufacturers, which will help manufacturers understand 
evolving expectations for inspections.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-987]).

1.21.C. Informing the Debate on Geographic Variations in Spending:

The Congress is seeking information about the scope and determinants of 
geographic variations in private sector health care spending in order 
to better target cost containment initiatives. As part of our work on 
geographic variations in spending in the Federal Employees Health 
Benefits Program, we identified Milwaukee as one of the most expensive 
areas of the country to receive medical treatment, in part because of 
the high prices of inpatient and physician services. Our analysis 
confirmed stakeholder perceptions that provider consolidation was a 
contributing factor that enabled providers to negotiate high prices 
with insurers and other payers.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1000R]).

1.22.C. Improving Oversight of the Medicaid Program to Protect the 
Program's Fiscal Integrity:

In a series of reports reviewing HHS's and CMS's oversight of state-
administered Medicaid programs, we found that HHS and CMS were not 
adequately protecting the fiscal integrity of the federal-and state-
financed Medicaid program. We found that CMS's decision to lengthen the 
time that two states could claim federal Medicaid funding through these 
financing schemes would allow these states to receive over $600 million 
more in federal matching funds than they could have claimed otherwise. 
We also questioned HHS's use of authority to waive certain Medicaid 
requirements for states seeking to deliver services through 
demonstration projects. HHS had not ensured that, in line with its 
policy on budget neutrality, the four approved demonstrations would not 
cost the federal government more. CMS agreed with our recommendations 
that it improve its oversight of the upper payment limit arrangements, 
and HHS agreed with several of our recommendations for strengthening 
demonstration approval and oversight.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-228]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-480]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-574T]).

1.23C. Improving Medicare Communications with Providers:

We placed 300 calls to 34 Medicare call centers and found that only 4 
percent of the responses to the policy-oriented questions frequently 
asked by providers that we posed were correct and complete. Several 
factors, including fragmented sources of information, confusing policy 
information, and difficulties in retaining customer service 
representatives responding to these calls, appear to account for the 
lack of correct and complete answers. Although many call centers 
serving other industries handle incoming calls by first identifying the 
nature of the call and then routing it to the customer service 
representative who is best qualified to respond, CMS has not adopted 
this approach. We also found CMS's oversight of call centers to be 
inadequate. CMS agreed with our recommendations that it develop (1) a 
process to route policy inquiries to staff with the appropriate 
expertise, (2) clear and easily accessible policy-oriented material to 
assist customer service representatives, and (3) an effective 
monitoring program for call centers.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-669]).

1.24.C. Enhancing Care and Safety for Nursing Home Residents:

In July 2004, we reported that nursing home fires in Connecticut and 
Tennessee reflected systemic weaknesses in both federal and state 
enforcement of fire safety standards, as well as in the standards 
themselves. CMS has accepted our recommendations to (1) improve 
oversight of nursing home fire safety, such as reviewing the 
appropriateness of exemptions to federal standards granted to 
facilities without sprinklers, and (2) strengthen the fire safety 
standards and ensure thorough investigations of any future multiple-
death nursing home fires in order to reevaluate the adequacy of fire 
safety standards.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-660]).

1.25.C. Targeting of Medicare Ambulance Payments:

Following our report on Medicare payments for ambulance trips, we 
pointed out that the method of targeting higher payments for longer 
trips in nonurban areas was flawed. Specifically, we reported that 
trips in less densely populated areas tend to be more costly than trips 
in other areas. Ambulance trip volume is the key factor affecting 
differences in ambulance providers' average cost per trip. The majority 
of ambulance providers' total costs are related to their need to have 
ambulances and crew available when an ambulance is required. As long as 
a provider has excess capacity, these readiness-related costs are fixed 
and do not increase with the number of trips. Consequently, providers 
that make fewer trips tend to have a higher cost per trip than those 
that make many trips. As a result of our report, the Congress increased 
payments for trips by adapting our method of making higher payments for 
trips in counties with lower population densities in the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 
No. 108-173).
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-986]).

1.26.C. Enhancing Congressional Oversight of an HHS Waiver Authority:

We found that the Secretary of HHS continues to exercise his waiver 
authority to permit use of State Children's Health Insurance Program 
funds for demonstration projects that provide health coverage to 
childless adults. We originally raised this as a concern in a July 2002 
report and in our January 2004 correspondence, we maintained that this 
practice is not consistent with the statutory goals for the program. 
Subsequently, the Senate introduced a bill that would prohibit use of 
this program's funds for childless adults and require improvements in 
the waiver approval process. These proposals are consistent with the 
matters for congressional consideration in our July 2002 report.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-166R]).

1.27.C. Exposing Bogus Health Insurance Entities That Exploit Employers 
and Individuals Seeking Affordable Coverage:

In a March 2004 report and testimony, we found that between 2000 and 
2004, 144 bogus health insurance entities had been identified; these 
had exploited at least 15,000 employers and 200,000 policyholders by 
selling health benefits despite not being authorized to do so. These 
entities left more than $250 million in unpaid medical claims. Our 
findings were used by the Congress to highlight the vulnerability of 
individuals and small employers to these bogus entities. In response, 
the National Association of Insurance Commissioners and the trade 
association America's Health Insurance Plans have each announced 
enhanced public information campaigns to caution employers and 
individuals about these bogus entities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-312]).

1.28.C. Alerting Consumers to Potential Safety Risks of Purchasing 
Prescription Drugs over the Internet:

We found that consumers face safety risks when purchasing prescription 
drugs over the Internet. Posing as consumers, we purchased prescription 
drugs from Internet pharmacies in the United States and around the 
world and received a wide range of drugs--including narcotics--without 
providing a prescription. We also received drugs that contained no 
instructions for use or safety warnings and drugs that were unapproved, 
mishandled, and counterfeit. These findings have helped shape ongoing 
congressional debate about whether to allow consumers to reimport 
prescription drugs from other countries and how to ensure that 
reimported drugs are safe and effective.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-820]) and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-888T]).

1.29.C. Ensuring That VA Practitioners Have the Professional 
Credentials and Personal Backgrounds to Provide Safe and Appropriate 
Health Care to Veterans:

In response to recent events that have raised concerns about VA's 
screening of its health care practitioners, the Congress asked us to 
examine VA's policies and practices intended to ensure that health care 
practitioners at VA facilities have appropriate professional 
credentials and personal backgrounds to provide care to veterans. We 
testified in March 2004 that while the screening requirements for 
certain VA practitioners, such as physicians and dentists, were 
adequate, screening requirements for other practitioners, such as 
nurses and respiratory therapists, were not adequate and created 
vulnerabilities that could place veterans at risk. In addition, we 
found a lack of oversight of human resource functions by VA 
headquarters and mixed compliance with existing VA screening 
requirements at facilities visited. VA is in the process of 
strengthening its screening procedures for health care practitioners 
and has created an office in its headquarters to provide oversight of 
human resource functions in its health care facilities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-566]).

The Education and Protection of the Nation's Children:

1.30.A. Ensuring Access to Postsecondary Education in the District of 
Columbia:

In 2002, we reported on problems with procedures to determine 
eligibility for the D.C. Tuition Assistance Grant program and with its 
promotional materials. About half of all applicants deemed ineligible 
may not have had their applications fully reviewed by program 
officials, and the pamphlet promoting the program was so confusing that 
it could cause frustrated District of Columbia residents to discontinue 
their efforts to pursue grant aid through the program. Acting on our 
recommendations, the Tuition Assistance Grant program changed its 
policy to require that all applicants receive a complete review and 
verification of all eligibility factors, and revised its pamphlet to 
clarify and provide more information. This will help reduce barriers to 
participation and make it easier for applicants to obtain grant 
assistance through this program.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-265]).

1.31.C. Protecting Children from Abuse and Neglect:

Each year about 900,000 children are victims of abuse or neglect, and 
the federal government spends over $7 billion to support state and 
local efforts to protect these children from further abuse or neglect 
and ensure the safety, permanency, and well-being of all children. 
During this fiscal year, we reported and testified on national child 
welfare financing, workforce, and data issues and federal oversight of 
state child welfare programs as well as conducted congressionally 
mandated studies of the District of Columbia's child welfare program, 
including related operations of its Family Court. Partly on the basis 
of our testimony, the Congress appropriated $14 million to the District 
of Columbia to help improve its foster care system. Also in response to 
our findings and recommendations, HHS provided additional guidance to 
help ensure that states abide by the restrictions on the use of funds 
for services to help families address problems that lead to child abuse 
and neglect.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-267T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-234]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-418T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-377]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-333]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-685T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-781T]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1017]).

1.32.C. Promoting Healthy Eating in Schools:

The rising rate of obesity among the nation's youth has focused added 
attention on child nutrition and the need for a healthy eating 
environment in schools. Through a series of reports on child nutrition 
over the last 2 years, we highlighted the availability in schools of 
foods with limited nutritional value and gaps in nutrition education 
provided to school-age children. These reports helped inform the 
Congress as it reauthorized the school meal programs, and the Congress 
added measures, such as requiring each school district to develop a 
wellness policy, that could help address a number of the issues we 
identified.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-673]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-528]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-569]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-506]).

1.33.C. Helping Children and Youth at Risk of Failure:

There is great concern about whether American children are being 
prepared to succeed in school. We issued reports in 2004 that should 
improve the access of low-income children to Head Start services so 
they may become better prepared for school; help disadvantaged children 
receive mentoring services more quickly to help them stay in school; 
ensure that children with disabilities are taught by highly qualified 
teachers; provide strategies to improve the academic performance of 
students in small, isolated school districts; and ensure that public 
schools are effectively determining whether they meet academic 
proficiency goals. The Congress has used this information to inform its 
deliberations on reauthorizing the Head Start program and programs 
covered by the Individuals with Disabilities Education Act. For 
example, Head Start reauthorization bills incorporated enhanced 
requirements for teacher training and measures to ensure that 
underenrollment is promptly addressed. In addition, our report on 
Migrant Head Start program influenced HHS's efforts to establish 
performance measures for the first time in the program's history and 
evaluate the program to ensure its effectiveness. In responding to our 
findings on the lack of state data to determine the number of highly 
qualified teachers states had, as required by the No Child Left Behind 
Act, the Department of Education revised and expanded guidance to help 
states meet this goal.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-4]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-631]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-5]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-17]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-581]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-659]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-909]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-734]) and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-879]).

The Promotion of Work Opportunities and the Protection of Workers:

1.34.A. Modernizing Federal Disability Programs:

Federal disability programs at the SSA and VA have experienced 
significant growth over the past decade and are expected to grow even 
more as more baby boomers reach their disability-prone years. Yet 
federal disability programs remain mired in concepts from the past and 
are poorly positioned to provide meaningful and timely support for 
workers with disabilities. In light of the projected slowdown in the 
growth of the nation's labor force, it is imperative that those who can 
work are supported in their efforts to do so. We have built a 
substantial body of work examining these issues--calling for a 
fundamental transformation and modernization of federal disability 
programs, and adding the modernizing of these programs to our high-risk 
list in 2003. In the same year, SSA proposed sweeping changes to its 
disability programs to foster applicants' return to work at all stages 
of its eligibility determination process and to improve the timeliness 
and consistency of its decision making. Moreover, both SSA and VA have 
expressed willingness to improve their quality assurance processes in 
response to our recommendations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-96-133]) and 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-153]).

1.35.A. Containing Federal Disability Insurance Costs:

In addition to meeting medical eligibility criteria, to establish and 
maintain eligibility for disability insurance benefits, blind 
disability insurance beneficiaries must demonstrate that they are not 
earning above a certain amount--known as the substantial gainful 
activity (SGA) level. The Congress had introduced legislation that 
would effectively eliminate the SGA level for the blind. However, we 
testified in March 2000 that eliminating the SGA would allow working 
beneficiaries to keep more of their benefits but it would also increase 
disability insurance costs and fundamentally alter the purpose of the 
disability insurance program by removing the connection between benefit 
eligibility and the inability to work. Since the hearing, the Congress 
has retained the SGA level for the blind. Over the past 2 years, we 
have reported financial benefits for this work for fiscal years 2001 
through 2003. For fiscal year 2004, the financial benefit is estimated 
to be $700 million, which is a cost avoidance based on estimates from 
SSA's Office of the Chief Actuary.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS-00-82]).

1.36.A. Deterring Supplemental Security Income Overpayments:

Complex rules determining eligibility and payment of SSA's Supplemental 
Security Income program--the nation's largest cash assistance program 
for the poor--make the program vulnerable to overpayments. SSA has the 
authority to use various tools to deter overpayments, such as benefit 
sanctions against individuals who present false or misleading 
information affecting their benefits. In September 2002, we reported 
that SSA field staff rarely imposed these sanctions and recommended 
that SSA reevaluate its current policy to impose sanctions and reduce 
barriers to their usage and effectiveness. As a result, in October 
2002, SSA notified its field offices about the application of sanctions 
and asked staff to apply them where appropriate. Improved communication 
and education with field staff will enhance SSA's ability to deter 
overpayments.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-849]).

1.37.A. Improving Employment Services to Veterans:

We reported on the Department of Labor's Veterans Employment and 
Training Service (VETS) assistance to veterans in a series of reports 
and testimony in 2001 and 2002. Acting on our recommendations, VETS 
identified disabled veterans as a priority, provided incentives to 
focus the staff in the states on these veterans, and revised its 
performance measures to ensure this population receives appropriate 
services and opportunities for employment. VETS also took action to 
strengthen oversight by improving performance measurement, 
accountability, and the consistency of its monitoring. For example, 
VETS specified performance measures for providing training and 
employment services to veterans that are similar to measures being used 
in nonveteran programs, which will allow for a better indication of the 
overall quality of service provided to veterans. In addition, the 
Congress passed the Jobs for Veterans Act in November 2002 to increase 
flexibility in the two programs so that VETS can broaden its services 
to veterans and better meet veterans' needs.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-928]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-192T]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-580]).

1.38.A. Addressing the Need for High-Skill Workers More Strategically:

Our report on federal efforts to meet employers' demand for high-skill 
workers in America found a lack of coordination across federal agencies 
to address this need. We also found that local skill grant and 
scholarship programs sponsored by the Department of Labor and the 
National Science Foundation had limited opportunity to share 
information that would identify successful strategies, encourage 
networking, and attract and retain scholarship grantees. As a result of 
recommendations we made to remedy these weaknesses, Labor enhanced 
coordination both within and outside the agency. It partnered its grant 
program with another Labor component--the Building Relations Group--and 
is working more closely with the Department of Commerce to improve 
marketing, outreach and consistency in selecting grantees. In addition, 
Labor and the National Science Foundation instituted formal and informal 
mechanisms to facilitate networking among grantees. For example, Labor 
launched an initiative to link high-skill workers via e-mail and an 
electronic list group, and the National Science Foundation hired a 
contractor to coordinate meetings for grantees.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-881]).

1.39.A. Improving the Administration of the Food Stamp Program:

Our work led to changes in two food stamp program options that will 
help ease the reporting burden for almost all households, help families 
transition from welfare to work, and may lower food stamp error rates. 
In February 2002, we found that more states would use the food stamp 
simplified reporting option if it was expanded to households with 
unearned income, not just households with earned income. Our report 
also provided evidence that additional months of support to families 
transitioning from welfare to work would make the implementation cost 
of the transitional benefits option worthwhile. In May 2002, the 
Congress incorporated several of these suggestions into the 2002 Farm 
Act, including extending transitional benefits to 5 months and 
expanding the reporting option to include households with unearned 
income. These changes will reduce reporting requirements for more 
households, helping to simplify program administration and possibly 
reducing errors. The changes will also provide more support for 
families moving from welfare to work and ensure they are better off 
working than on welfare. In addition, because households will no longer 
be required to report changes in their circumstances during this 
transition period, states may have lower error rates for families 
receiving transitional benefits than for some of their other caseloads.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-409]).

1.40.C. Addressing the Health Problems of Nuclear Weapons Workers:

Through a series of testimonies and reports, we assisted the Congress 
in crafting major improvements to a program intended to compensate 
individuals who worked in nuclear weapons facilities and developed 
illnesses due to exposure to hazardous materials. We highlighted varied 
problems that had given rise to a slow federal bureaucracy in 
evaluating these workers' claims for compensation. In addition, we 
identified program features that would likely lead to inconsistent 
benefit outcomes for claimants. For example, some claimants would 
likely receive no compensation from state workers compensation systems, 
even though the Department of Energy (DOE) had determined that their 
illnesses were caused by work at a DOE facility. We presented several 
options for improving the consistency of benefit outcomes and a 
framework for assessing these options. As a result, the Senate passed 
legislation that would combine features of two of these options and 
thereby federalize the payment of benefits but retain states' differing 
criteria for calculating the amount of benefits.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-515]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-516]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-298T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-294R]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-571T]).

1.41.C. Informing the Congress of States' Policy Choices in the 
Evolving Welfare System:

Our recent studies, including our 2004 report on how states support 
low-income families, have focused on changing labor markets and state 
fiscal conditions, state and local policy choices about welfare program 
design and services, as well as states' use of federal welfare dollars. 
This information has helped keep the Congress up to date on key changes 
in the decentralized welfare system since the landmark 1996 welfare 
reform legislation. In addition, our findings on how states have used 
federal welfare funds to increasingly support families' work efforts 
have provided important information for the Congress as it deliberates 
over welfare reform reauthorization that will continue to promote work 
as well as adequately support needy families.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-256]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1094]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-977]).

A Secure Retirement for Older Americans:

1.42.A. Increasing Safeguards for Social Security Numbers:

Our 2002 report that identified weaknesses in the security of 
information systems prompted many states to improve safeguards to 
veterans' Social Security numbers. We found that military discharge 
documents, which generally contain veterans' Social Security numbers, 
become public records that are available for anyone to review. This can 
contribute to the rising crime of identify theft. We made 
recommendations and worked with trade associations to strengthen state 
laws to ensure greater security for these public documents. As a 
result, many states enacted new legislation or amended their laws to 
strengthen safeguards or limit access to these documents, thereby 
ensuring better protection of Social Security numbers.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-352]).

1.43.A. Strengthening Operations at the Pension Benefit Guaranty 
Corporation (PBGC):

Our reports on PBGC's contracting practices in 2000 and 2003 identified 
weaknesses in PBGC's ability to control administrative costs that have 
legislative limitations, which are subject to congressional review and 
approval (unlike nonlimitation funds, which are not subject to such 
review). We made recommendations to the Congress to remedy this 
weakness, including the possibility of eliminating limitation expenses. 
This helped influence the Congress to eliminate the distinction between 
limitation and nonlimitation expenses in 2004, making it easier for 
PBGC to control administrative and operational expenses, thereby 
strengthening Congress's ability to provide oversight. We also found 
weaknesses in the agency's human capital operations that limited the 
agency's ability to ensure it had the appropriate level of skilled 
staff to meet its workload challenges. We recommended that PBGC conduct 
a comprehensive review of its future human capital needs. PBGC 
contracted with the National Academy of Public Administration to 
conduct such a study, and PBGC used the results to develop strategies 
to address recruitment, succession, curriculum development, and 
outsourcing. These new strategies can better link the agency's staffing 
with its strategic planning process.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-130]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-301]).

1.44.C. Protecting Americans from Identity Theft:

Each year, a half million Americans report identity crimes to the 
Federal Trade Commission. Many of the crimes involve the theft or 
misuse of an individual's Social Security number. We have built a body 
of work examining the uses of the Social Security number, the range and 
adequacy of measures employed to protect it, the ability of federal and 
state law enforcement to detect and sanction those who steal personal 
identifiers, and the effectiveness of identity verification processes 
that could help identify perpetrators of such crimes. Our recent 
reports, testimonies, and recommendations have helped the Congress 
consider policy and management improvements that may not only better 
protect Americans from the financial effects of this crime, but also 
help prevent potential terrorists from assuming false identities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-11]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-768T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-12]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-920]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1147T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-941T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-352]).

1.45.C. Reforming Social Security:

The unsustainable nature of the Social Security program represents one 
of the nation's most difficult fiscal challenges. Strategies to address 
this challenge will affect virtually all Americans, including future 
generations yet unborn. Our body of analytic work on Social Security 
reform has contributed substantially to the Congress's and the public's 
understanding of this critical national issue. Notably, our 2004 report 
and testimony discussed and illuminated the potential impacts of 
different reform proposals on the benefits that could accrue to 
Americans of different earnings levels and different generations and 
were considered a major contribution toward this understanding. This 
information can help prepare policy makers to create a financially 
solvent and economically sustainable Social Security program that will 
continue to provide adequate income support for older Americans.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-872T]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-747]).

An Effective System of Justice:

1.46.A. Transforming the Federal Bureau of Investigation to Fight 
Terrorism:

In a series of testimonies over the past 2 years, we stressed the 
importance of the need for the Federal Bureau of Investigation to 
develop both strategic and human capital plans. These plans are 
essential to successful transformation of the Bureau from a traditional 
crime fighting operation to an organization focused on preventing 
terrorism. During fiscal year 2004, the Bureau completed both a new 
strategic plan and a human capital plan that incorporated many of the 
features that we have long promoted as part of sound planning and as 
essential ingredients of successful transformation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-759T]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-578T]).

1.47.C. Addressing Departures from Federal Sentencing Guidelines for 
Drug Offenses:

Federal judges use the Federal Sentencing Guidelines to determine 
sentences. The guidelines' purpose was to enhance the probability that 
similar offenders convicted of similar crimes would receive similar 
sentences. Judges may sentence below the sentencing guidelines' range 
or statutory minimum sentence under certain circumstances, and there 
was concern that judges were not consistent in their use of such 
downward departures for drug crimes. We found that prosecutorial 
decisions accounted for the majority of differences in downward 
departures for drug crimes. The courts and the U.S. Sentencing 
Commission agreed to address data problems that limit identifying 
sentencing departures initiated by judges.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-105]).

1.48.C. Recommending Improvements for the Targeting of Oceangoing Cargo 
Containers:

In 2003 and 2004, we evaluated the way that the U.S. Customs and Border 
Protection (CBP) developed and implemented a targeting strategy to 
assess the risk of incoming oceangoing cargo containers. We recommended 
that CBP incorporate all key elements of a risk management framework 
(e.g., conducting threat assessment and mitigation evaluation) and 
recognized modeling practices (e.g., conducting external peer review 
and testing through simulated terrorist events), and that CBP improve 
management controls to better implement the targeting strategy at 
seaports. CBP agreed with our recommendations, the adoption of which 
will put CBP in a better position to protect against terrorist attempts 
to use oceangoing cargo containers to smuggle weapons of mass 
destruction into the United States.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-557T]).

1.49.C. Improving the Justice Department's Tracking of Alleged Voting 
Irregularities:

In the wake of the November 2000 election, the Department of Justice 
received more than 11,000 allegations of voting irregularities, such as 
being unable to cast a ballot because the voter's name was improperly 
removed from the voter registration rolls. Complete, accurate, and 
specific information is important for assessing whether there are 
specific actions or patterns of behavior that may be violations of 
federal law. We reviewed how the department recorded these allegations 
and the actions it took on them and found that the information recorded 
was often incomplete and not specific. The department agreed to 
implement our recommendation that it develop and implement for the 
November 2004 election a reliable method of systematically tracking and 
documenting its actions on alleged voting irregularities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1041R]).

The Promotion of Viable Communities:

1.50.A. Improving Oversight of the HOPE VI Program:

In a series of reports beginning in November 2002, we questioned 
various aspects of the Department of Housing and Urban Development's 
(HUD) oversight of the $6.2 billion HOPE VI program, a competitive 
grant program for the revitalization of severely distressed public 
housing. In response to our work, HUD started providing important HOPE 
VI program information in annual reports to the Congress, developed a 
HOPE VI enforcement policy, and published new guidance that clarified 
the role of HUD's field offices in holding grantees accountable for the 
status of their grants. These actions will greatly improve HUD's 
oversight of the HOPE VI program.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-555]).

1.51.A. Strengthening Lenders' Accountability for Property Appraisals:

Property appraisals are an important part of the underwriting process 
for mortgages insured by HUD because incomplete or inaccurate 
appraisals resulting in overvaluations may expose HUD to greater 
financial risks. We found that HUD was not aggressively enforcing its 
policy to hold lenders responsible for the quality of appraisals used 
to underwrite HUD-insured mortgages because of disagreement within HUD 
over its authority to do so. Acting on our recommendations, HUD 
finalized regulations in July 2004 that, among other things, make 
lenders whose appraisals do not meet HUD's requirements subject to 
administrative sanctions. These regulations will help protect HUD's 
insurance fund, ensure better compliance with appraisal standards, and 
help ensure that home buyers receive an accurate statement of appraised 
value.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-99-72]).

1.52.A. Reducing the Cost of Federal Housing Programs:

In a September 1999 report, we determined that the potential existed 
for (1) HUD to better manage unexpended balances and (2) some 
unobligated funding to be used to meet other needs. We recommended that 
HUD review its unexpended balances to ensure the expeditious obligation 
and expenditure of these funds. As a result of this work, the Congress 
increased HUD's reporting requirements for some of its funds, and HUD 
instituted a review of unexpended balances in all of its programs. Our 
briefings with the incoming administration and our April 2001 testimony 
led to recapturing $3.49 billion--$3.64 billion in current dollars--
from HUD's fiscal year 2002 balances.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-663T]).

1.53.C. Helping Improve Emergency Preparedness Assessments in the 
National Capital Region:

The Washington, D.C., area is a high-risk area for terrorist attacks. 
In response to a congressional request, we examined how federal funds 
had been used to enhance the capacity of emergency responders to 
respond effectively to any attack in the area. We found that it was not 
possible to assess the readiness of emergency responders in the area 
because there was (1) no coordinated strategic plan to enhance their 
preparedness, (2) a lack of standards for their performance, and (3) a 
lack of systematic data available on monies spent for what with what 
effect. At a congressional hearing, DHS officials said they would 
develop data that would help them to assess and monitor progress in 
achieving preparedness in the region.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-433]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-904T]).

1.54.C. Improving Fair Housing Enforcement:

We reported in April 2004 that individuals alleging housing 
discrimination sometimes faced long waits in having their complaints 
investigated and decided by HUD. To improve HUD's management and 
oversight of the fair housing process, we recommended that HUD explore 
ways to disseminate effective practices used at various enforcement 
locations, improve tracking and data-gathering procedures, and develop 
human capital staffing and skill-building strategies. HUD concurred and 
has taken action to provide training for investigators and attorneys 
and revise guidance for receiving complaints and conducting 
investigations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-463]).

Responsible Stewardship of Natural Resources and the Environment:

1.55.A. Improving the Safety of Underground Storage Tanks:

Our recent report and testimonies showed systemic weaknesses and 
inconsistencies in the states' inspection procedures, equipment, and 
maintenance requirements for ensuring the safety of the nation's 
thousands of underground storage tanks--primarily at gas stations. 
Acting on our recommendations, EPA is working with states to locate 
tanks that pose the greatest potential risk of leaking. Our work has 
also led to proposed legislation to shore up systemic weaknesses and 
reduce the risk that these tanks will leak and cause significant 
environmental and health risks.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-464]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-176R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-712T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-529T]).

1.56.A. Increasing Consumption of Fruits and Vegetables:

In response to recommendations in our 2002 report, HHS examined and 
implemented some of the most promising ideas for increasing fruit and 
vegetable consumption. For example, HHS awarded a grant increasing 
funding to 20 states to assist them in implementing the "5-a-day" 
program, which encourages people to eat five servings of fruits or 
vegetables each day. In addition, HHS has provided technical assistance 
to a number of states that are implementing salad bars in schools. 
These efforts will encourage healthy dietary choices across the nation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-657]).

1.57.A. Improving Data on Water Quality:

During the past few years, we completed a body of reports and testimony 
documenting deficiencies in the water quality data that are used as a 
basis for making critical, multibillion-dollar cleanup decisions. This 
work has resulted in greater attention (funding and otherwise) in the 
Congress for improving water quality data, and its recommendations have 
spurred agencies to undertake their own initiatives to improve water 
quality monitoring. Our most recent report in this series, which 
underscores the need to make better use of the data that are collected 
through better coordination among data-collecting organizations, has 
already spurred efforts on the part of some agencies to improve their 
cooperation in this important enterprise. For example, EPA and the U.S. 
Geological Survey have indicated that to address these concerns, they 
are exploring additional opportunities for collaboration in order to 
better support states in their water monitoring efforts. According to 
the agencies, their general focus will be to find innovative approaches 
that use available monitoring and assessment tools in a more strategic, 
integrated, and streamlined manner.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-00-54]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-382]).

1.58.A. Improving Environmental Cleanup at Former Defense Sites:

Our work over the past 3 years has helped improve DOD's cleanup at over 
9,000 former defense sites, many of which are contaminated with 
hazardous and toxic wastes and unexploded ordnance. As we recommended, 
DOD has revised its guidance for the cleanup process to require 
specific actions be taken when assessing properties for cleanup, ensure 
closer coordination with federal and state regulators, reassess several 
hundred properties that were improperly assessed, and notify current 
property owners of the results of its cleanup reviews.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-658]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-146]).

1.59.A. Improving DOE's Contract and Project Management:

Over the past decade, we and others have expressed concerns about DOE's 
contract and project management practices and the resulting wasteful 
spending on facilities that either fail to work or encounter 
unnecessary cost increases and schedule delays. Since 1997, we have 
issued a series of reports focusing on problems managing individual 
contracts and contractors as well as reports addressing systemic 
weaknesses in planning for an acquisition and overseeing the work 
necessary to carry it out. Responding to our recommendations and those 
of other organizations, DOE (1) in 2000, revised and strengthened its 
guidance on how to plan for and acquire major assets; (2) in 2001, 
issued guidance aimed at improving how DOE and its contractors manage 
major projects; (3) in 2003, decided to compete its contract with the 
University of California to operate Los Alamos National Laboratory 
after encountering a series of performance problems; and (4) in 2004, 
agreed to avoid a concurrent design/build approach when constructing 
complex nuclear facilities, since that approach has contributed to 
significant cost overruns and schedule delays on many DOE projects. On 
the basis of our concerns about how DOE has managed its contract and 
project management reform initiatives, in 2003, DOE also established a 
more systematic approach to better ensure that such initiatives are 
effectively implemented and produce the desired results.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-798]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-570T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-932T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-611]).

1.60.A. Designing a Risk-Based Approach to Shellfish Safety:

In 2001, we reported that FDA's oversight of states' shellfish programs 
was not risk-based; thus, FDA was not using is limited resources 
wisely. In response to our recommendations, FDA designed a risk-based 
approach to overseeing states' shellfish programs and incorporated it 
into their fiscal year 2003 to fiscal year 2005 compliance program. 
Risk factors have been identified for each of the three program 
elements (growing area classification, processing and shipping, and 
control of harvest). Based on a scoring system for these factors, FDA 
shellfish specialists compute a total risk score of high, medium, or 
low for each program element and use these risk designations to 
determine the frequency of the evaluation of that program element. As a 
result, FDA is better able to ensure the safety of domestic and 
imported shellfish consumed by the public.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-702]).

1.61.C. Improving Management of the Great Lakes:

Our reports and testimony showed inefficiencies in the management of 
Great Lakes restoration and cleanup activities that have contributed to 
inefficient expenditure of funds and limited progress in the Great 
Lakes. Our work led to proposed legislation to establish an 
organizational entity responsible for improving coordination and 
funding prioritization for Great Lakes restoration and cleanup 
activities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-563]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-999T]).

1.62.C. Defending against Terrorist Attacks on Nuclear Plants:

Commercial nuclear power plants have been identified as possible 
terrorist targets. In 2003, we reported that the Nuclear Regulatory 
Commission had conducted exercises (mock terrorist attacks) to test the 
nuclear power plants' defenses. However, these exercises were not 
realistic enough to provide information on how well a plant could be 
defended against such attacks. In addition, the commission suspended 
the exercises subsequent to the September 11 terrorist attacks. We 
recommended reinstating the exercises with a number of changes that 
would improve the realism of the exercises and provide more meaningful 
information on plant defensive capabilities. The commission is 
reinstituting the exercises in the fall of 2004, including most of the 
improvements that we recommended. As a result, the commission should be 
in a better position to determine the ability of the plants to defend 
against a terrorist attack.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-752]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1064T]).

1.63.C. Improving the Security of Chemical Facilities:

Across the nation, thousands of industrial facilities manufacture, use, 
or store hazardous chemicals in quantities that could put large numbers 
of Americans at risk of injury or death in the event of a chemical 
release. Federal requirements mandate vulnerability assessments in some 
other critical infrastructures--such as water treatment facilities and 
nuclear power plants--but there is currently no federal requirement for 
chemical facilities to assess their vulnerabilities and take steps to 
reduce them. In addition, although DHS, with assistance from EPA, is 
beginning vulnerability assessments; no comprehensive assessment of the 
nation's chemical facilities has been completed. Our 2003 report and 
February 2004 testimony contributed to several congressional bills 
calling for increased security measures at chemical facilities 
nationwide that would help frame a national strategy for security at 
chemical facilities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-482T]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-439]).

1.64.C. Assessing the Implementation of the 1848 Treaty of Guadalupe 
Hidalgo:

Under the Treaty of Guadalupe Hidalgo, which ended the Mexican-American 
War, Mexico ceded what is now the southwest United States--including 
present-day New Mexico--and the United States agreed to "inviolably 
respect" property of Mexican citizens then living there. Since the time 
the treaty was signed in 1848, there have been heated debates over how 
this U.S. obligation should apply to so-called community land grants, 
which had been made by Spain and Mexico dating back as far as the 17th 
century and which included land to be used for common purposes as well 
as individual allocations. We concluded that the United States legally 
implemented the treaty with respect to community land grants in New 
Mexico as a matter of U.S. domestic law. However, the stricter 
standards that the Congress imposed in 1891 for the approval of 
community land grants resulted in the rejection of claims for 1.28 
million acres of land in 17 grants. As a result of our work, for policy 
or other reasons, the Congress may determine that some kind of 
additional action may be appropriate.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-59]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-60]).

1.65.C. Reducing the Cost of Federal Farm Programs:

In 2004, we testified and reported that the U.S. Department of 
Agriculture (USDA) did not have measurable standards for those who 
claim to have an active role in farming, allowing some people and 
businesses with limited involvement in farming to circumvent farm 
payment eligibility rules to qualify for a share of the $15 billion the 
government pays farmers annually. USDA's regulations also lacked 
clarity as to whether certain transactions and farming operation 
structures that we found could be considered schemes to evade the 
payment rules. By acting to resolve these issues, the government could 
save millions of dollars in farm payments annually. The Congress has 
proposed legislation to close these loopholes by, among other things, 
limiting certain types of payments. Overall, our work provided greater 
clarity on the most important areas to be addressed.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-407]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-861T]).

1.66.C. Fostering a More Effective Federal Response to Wildland Fires:

In more than 25 products since 1999, we have addressed the federal 
management--principally by USDA's U.S. Forest Service and the 
Department of the Interior--of wildland fires, which annually consume 
millions of acres of land and result in catastrophic losses to 
communities and resources. Our reports and recommendations contributed 
to the enactment of the Healthy Forest Restoration Act of 2003 and to 
significant actions by the agencies to strengthen their wildland fire 
programs, including (1) establishing an interagency coordination body 
to ensure more effective joint policy, planning, and implementation; 
(2) funding development of a geospatial data system to better identify 
wildland fire threats and initiating related enterprise architecture 
improvements; (3) accelerating completion of agency field unit fire 
management plans of action to address these threats; (4) securing 
increased funding to address identified threats; and (5) adopting a 
performance measure that identifies reductions in the number of acres 
at highest risk of severe fires.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-259]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-430]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-805]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-808R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-612]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-705]).

1.67.C. Reducing Risks in the Federal Farm Program:

We reported in June 2004 that USDA's Risk Management Agency needed to 
improve oversight of insurance companies selling and servicing 
federally reinsured crop insurance. USDA has spent over $40 million to 
fund the dissolution of the largest crop insurance company since it 
failed in 2002, and to ensure that all related farmers' claims were 
paid. We identified weaknesses in USDA's oversight of crop insurance 
companies and recommended steps to strengthen federal oversight of 
these companies and coordination with state insurance regulators. 
USDA's actions to implement our recommendations will reduce the risk of 
future company failures and the costs associated with these failures.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-517]).

1.68.C. Establishing a National Heritage Area Program:

The Congress designates geographic sites such as river valleys, canal 
ways, coal mining areas, and battlefields as national heritage areas to 
recognize their value to the nation. We found that a more systematic 
process for identifying sites that qualify as national heritage areas 
and actions to improve accountability for them are needed. In this 
regard, we recommended that the National Park Service--which provides 
funds and assistance to these areas but has no formal program for them-
-(1) develop consistent standards and processes for reviewing areas' 
management plans, (2) review areas' financial audit reports, and (3) 
develop results-oriented goals and measures for the agency's heritage 
area activities. The Park Service has not taken the needed actions 
because, without a formal program from the Congress, it lacks adequate 
direction and funding. On the basis of our work, legislation has been 
introduced that would establish a National Heritage Area Program within 
the Park Service, improve the designation process, place limits on 
federal funding to the areas, and initiate measures we recommended to 
increase areas' accountability for their use of federal funds.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-593T]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-914T]).

1.69.C. Funding Suppression of Wildland Fires:

Over the last 5 years, when funds appropriated for wildfire suppression 
were insufficient, the USDA's Forest Service and the Department of the 
Interior transferred over $2.7 billion from their other programs to 
help pay suppression costs. We reported that these transfers affected 
numerous agency activities and resulted in project cancellations and 
delays, strained relationships with state and local agency partners, 
and management disruptions in other agency programs. We recommended the 
agencies take several measures to minimize the impacts of funding 
transfers and develop budget requests that more accurately reflect 
likely suppression costs. We also asked the Congress to consider 
alternative approaches for funding wildfire suppression activities. Our 
work increased congressional awareness of the effects of these 
transfers and influenced introduction of legislative proposals to 
establish alternative means for funding wildfire suppression activities 
in fiscal year 2005, as well as provide supplemental funds for fiscal 
year 2004 in advance of agencies needing to transfer funds.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-612]).

1.70.C. Improving Oversight of EPA's Grants:

Our many reports and testimonies over the past 2 years have identified 
the key management challenges that EPA faces in addressing its $4 
billion annual investment in grants, which constitute about one-half of 
the agency's budget. With our assistance, the Congress and EPA are 
taking actions to strengthen oversight, enhance staff accountability, 
and optimize the results achieved through grants.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-459]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-510T]), and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-983T]).

A Safe, Secure, and Effective National Physical Infrastructure:

1.71.A. Improving Federal Oversight of Research Examining the Potential 
Health Effects of Mobile Phone Service:

In 2001, we reported on the status of scientific research on mobile 
phone health effects and recommended that the Federal Communications 
Commission (FCC) and FDA better coordinate their research, that FDA 
take steps to better inform the public about ongoing research, and that 
FCC develop a strategy for meeting the need for additional expertise in 
radio frequency and testing. As a result of these recommendations, FCC 
and FDA met several times to discuss research measurement uncertainty 
and updated a joint Web site to reflect these discussions. In addition, 
FDA published material on its Web site that allows the public to follow 
the status of ongoing research into potential health effects of mobile 
phone service, and FCC hired two additional engineers to work on radio 
frequency exposure and testing issues. These changes should better 
inform the public and provide it with more reliable information on this 
important consumer issue.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-545]).

1.72.A. Improving the Processing of Postal Service Employees' Claims 
for Workers' Compensation Program Benefits:

In 2002, we recommended that the Postmaster General monitor and take 
appropriate actions to improve the preparation and processing of 
employee claims for workers' compensation benefits and ensure that 
claims submitted to the Office of Workers' Compensation Programs are as 
complete as possible. Responding to our recommendation, the Postal 
Service set goals to increase the percentage of claims submitted on 
time and took specific steps to make sure they were submitted timely 
and complete. As a result, the Postal Service reported that its on-time 
submission rate for workers' compensation claims increased by about 11 
percent in fiscal year 2003.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-158R]).

1.73.A. Improving the Distribution of Highway Trust Funds to States:

In 2000, we reported on weaknesses in the process the Federal Highway 
Administration (FHWA) uses to estimate each state's highway motor fuel 
usage; that estimate is then used in formulas that direct how highway 
trust funds will be distributed to the states. In response to the 
report's recommendations, FHWA took several actions including 
developing a "smart tool" to allow states to electronically report 
their motor fuel data to FHWA headquarters and hiring a contractor to 
comprehensively review the attribution methodology. As a result, states 
are more accurately reporting their fuel data to FHWA, and FHWA has 
made a number of changes that allow it to more accurately estimate 
states' use of gasohol.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED/AIMD-00-148]).

1.74.A. Improving the Coordination of Transportation Services:

In 2003, we reported that 62 federal programs, administered by eight 
departments, can fund transportation services for the elderly, persons 
with disabilities, or low-income persons, but several obstacles impede 
the coordination of these services. In response to our recommendations 
on addressing these obstacles, federal agencies have expanded their 
membership in the Coordinating Council on Access and Mobility, thereby 
bringing 23 additional programs under its umbrella; developed and 
distributed guidance on coordination to states and localities; and 
incorporated performance measures for coordinating transportation 
services into their strategic and annual performance plans. In 
addition, council members launched a major initiative to improve state 
and local transportation coordination efforts, and the Congress 
included coordination provisions in surface transportation 
reauthorization legislation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-697]).

1.75.A. Updating the Consumer Price Index (CPI):

In October 1997, we recommended that the Commissioner, Bureau of Labor 
Statistics (BLS), update the expenditure weights of its market basket 
of goods and services more frequently to make it timely and more 
representative of consumer expenditures. In December 1998, BLS 
announced that it would update expenditure weights every 2 years 
beginning in 2002, and the CPI for January 2002 reflected the new 
weights. BLS's adjustments have resulted in (1) lower federal 
expenditures on programs like Social Security that use the CPI to 
calculate benefits and (2) increased federal revenues associated with 
lower growth in personal exemptions on federal income taxes. Last year, 
we reported financial benefits for this work for fiscal years 2003 
through 2006. The financial benefit for fiscal year 2007 in current 
dollars is estimated as $5.07 billion based on the Congressional Budget 
Office's projections of the impact of the CPI update.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD/OCE-98-2]).

1.76.A. Improving Processes Related to Airport Expansion Projects:

Prior to the events of September 11, airport capacity was reaching its 
limits at many of the nation's busiest airports--producing near-
gridlock conditions at some and increasing the demand for airport 
expansion projects. Our review of the environmental impacts of airport 
operations and the environmental requirements that airport officials 
must follow to receive federal funding for such projects found, among 
other things, that (1) some of these environmental requirements were 
duplicative and (2) airports were not receiving credit for their 
voluntary projects to reduce air pollutant emissions. The Congress 
subsequently enacted the Vision 100-Century of Aviation Authorization 
Act of 2003 (Pub. L. No. 108-176), which addressed two recommendations 
based on this work. First, it eliminated the "Governor's Certificate," 
which had required the chief executive of the state in which the an 
airport project would be located to certify in writing that the project 
will be located, designed, constructed, and operated in compliance with 
applicable air and water quality standards. Second, it called for the 
Federal Aviation Administration and EPA to work together to provide 
airports with credits for qualifying projects that targeted reductions 
in air pollutant emissions, which could be used to offset the emissions 
from future airport expansion projects.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-00-153]).

1.77.A. Improving the Oversight of State Highway Safety Programs:

In 2003, we reported that National Highway Traffic Safety 
Administration regional offices were inconsistent both in their use of 
grants oversight practices such as management reviews and in requiring 
states to take remedial actions through improvement plans. In response 
to our recommendations that it clarify guidance and standardize these 
practices, the agency developed new policies for its regional offices 
on when it is appropriate to use management reviews and improvement 
plans to assist state highway safety programs. The new guidance 
requires the regional offices (1) to review each state at least once 
every 3 years and (2) develop improvement plans when a state fails to 
meet performance goals, shows substandard performance, or fails to show 
improvement over a 3-year period. The agency also developed training 
for regional staff to standardize the implementation of the new 
policies and guidance.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-474]).

1.78.A. Addressing Long-standing Problems in the Federal Real Property 
Area:

In our January 2003 high-risk report on federal real property and 
subsequent testimonies, we raised concern about persistent and long-
standing problems in this area. Problems with excess and underutilized 
real property, deteriorating facilities, unreliable real property data, 
and costly space challenges are shared by several agencies. Federal 
agencies also face many challenges securing real property from the 
threat of terrorism. In response to our high-risk designation and as 
part of the administration's ongoing effort to promote real property 
reform, the President added the Federal Asset Management Initiative to 
the President's Management Agenda and signed Executive Order 13327 on 
February 4, 2004. Under the order, agencies will designate a senior 
real property officer to, among other things, identify and categorize 
owned and leased real property managed by the agency and develop agency 
asset management plans. Also, a newly established Federal Real Property 
Council composed of agency senior real property officers will create a 
set of common measures that agencies will use to mark their progress on 
real property management. According to Office of Management and Budget 
(OMB) officials, the Federal Real Property Council has created a series 
of committees to develop performance measures, a real property 
inventory database, and an asset management plan to address the high-
risk issues outlined in our report and testimonies.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-122]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-839T]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-119T]).

1.79.C. Improving the FCC's Data Gathering Efforts:

Because of the rapid evolution in the subscription video industry, it 
is important for accurate, current, and relevant information to be 
available to the Congress and FCC. In our report on the cable industry, 
we found numerous problems with FCC's collection and reporting of data 
on the factors underlying cable rate increases and the competitive 
status of cable franchises. In response to our work, FCC has modified 
its survey instrument to be clearer and now conducts additional follow-
up work to ensure that its data are accurate and to reflect current 
conditions.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-8]).

1.80.C. Promoting the Conversion to Digital Television to Enable the 
Recapture of Broadcast Spectrum:

The transition to digital television is important because the end of 
the transition will release a substantial amount of radio spectrum from 
use in broadcasting. Some of this spectrum will be deployed for public-
safety first responders, and some will be auctioned for wireless 
services. The auction is expected to reap a substantial monetary return 
for the federal government. To help speed the transition, in November 
2002, we recommended that FCC examine the possible benefits of setting 
a specific date when cable operators' legal obligation to carry 
broadcast signal switches from analog signals to digital signals. FCC 
has informally proposed a plan that would be designed to promote the 
transition to digital television. One component of the plan is to 
transfer the broadcasters' must-carry rights from the analog signal to 
the digital signal on January 1, 2009.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-7]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-742T]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-262T]).

1.81.C. Improving Security at the Nation's Ports:

In a series of reports and testimonies, beginning after the September 
11 terrorist attacks, we identified the challenges the Coast Guard 
faced in improving port security. We reported that it would be 
important for the Coast Guard to expeditiously identify the key risks 
and vulnerabilities on the basis of sound risk management principles 
and work with port stakeholders to develop strategies and action plans 
to mitigate these vulnerabilities and risks. Our analysis of the early 
phases of the Coast Guard's implementation of the Maritime Security Act 
of 2002 helped the Coast Guard develop its strategy and plan and caused 
the Coast Guard to modify its port vulnerability assessment program, 
freeing up $38 million for other port security efforts. Our work also 
is leading the Coast Guard to make other changes that will improve the 
its port security program management and controls.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1155T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-432]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-636T]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-838]).

1.82.C. Ensuring That Steps Taken to Ensure the Security of Commercial 
Aviation Are Effective:

Our evaluations of aviation security enhancements since the terrorist 
attacks of September 11 have helped DHS focus its limited resources on 
the areas of greatest need and helped strengthen commercial aviation 
security in the United States. Our reviews of the training and 
performance of passenger screeners and of controls to secure restricted 
airport areas from unauthorized access have led to the strengthening of 
screener training programs, increased testing of screeners' abilities 
to detect threat objects, and the establishment of procedures to 
prevent unauthorized access to secure airport areas. Our work has also 
helped raise public awareness of the continuing weaknesses in aviation 
security and enhanced understanding of the numerous steps taken to 
secure commercial aviation, including the fiscal and operational 
challenges these steps entail.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-232T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-285T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-385]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-440T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-504T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-505T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-592T]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-728]).

1.83.C. Implementing Postal Reforms to Address Structural and Systemic 
Deficiencies:

Since 2001, the U.S. Postal Service has been on our high-risk list 
because of the risks to its ongoing financial viability. In particular, 
the Postal Service is at risk of a continuing "death spiral" of 
decreases in mail volume that lead to increases in postal rates that 
lead, in turn, to further decreases in mail volume. In a report and 
three testimonies before the Congress in fiscal year 2004, we pointed 
out once again the urgent need for fundamental reforms to minimize the 
risk of a significant taxpayer bailout or dramatic postal rate 
increases. Congressional members have frequently cited our work as 
identifying financial, human capital, and operational challenges that 
need to be addressed to make the case for pending comprehensive postal 
reform legislation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-108T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-397T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-455R]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-565T]).

1.84.C. Promoting Improvements to the Nation's Transportation Security:

Since September 11, we have reported on the challenges involved in 
making our nation's transportation system safer from potential acts of 
terrorism. This year, we reported on progress and operational and 
management control issues that emerged during the rapid expansion of 
the Federal Air Marshal Service. We provided the Congress with two 
reports and responses to the requester's questions that discussed the 
significant challenges faced by the Service in the rapid expansion. We 
made recommendations directed at helping DHS develop the Service into a 
high-performing organization by taking actions to improve management 
information and implement key practices that contribute to successful 
mergers and organizational transformations. We also provided the 
Congress with several briefings and a report on the Transportation 
Security Administration's and DHS's research and development of 
technologies for transportation security. We made recommendations aimed 
at improving these agencies' management of their R&D programs by 
conducting some basic research, completing their strategic planning and 
risk assessment efforts, developing a management information system, 
and better coordinating with other federal agencies and reaching out to 
the transportation industry.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-242]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-890]).

1.85.C. Improving Aviation Safety:

Our work in the field of aviation safety resulted in improvement 
initiatives in several areas. The results of our curriculum and 
certification requirements study for aviation mechanics led to 
legislative changes to update and improve those requirements. 
Similarly, our analysis of how airline pilots' safety information is 
shared among potential pilot employers was a major contributing factor 
to revisions of those policies and procedures. We also reported on the 
potential safety concerns related to operational errors at contract 
towers. Additionally, we reported in fiscal year 2004 on airliner cabin 
safety and health issues. In response to the severe acute respiratory 
syndrome (SARS) epidemic and questions raised over the years by 
travelers and flight attendants, we reported on how airliner cabin air 
quality could contribute to health effects, such as upper respiratory 
infections. Additional work discussed how cabin occupants' chances of 
surviving a commercial airliner accident could be increased with 
technological and operational improvements.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-117]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-317]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-722]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-33]); and:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-54]).

1.86.C. Improving Pipeline Safety:

In a report and a series of testimonies in fiscal year 2004, we 
reported on opportunities to increase the effectiveness of the 
enforcement strategy used by the Office of Pipeline Safety in the 
Department of Transportation's Research and Special Programs 
Administration. The office has responded positively to these products 
and to recommendations and findings in an earlier report. The office is 
reinvigorating its enforcement system, in part through better 
partnerships with state pipeline safety agents and through using a 
wider mix of and stronger enforcement actions. However, as we recently 
reported, the Office of Pipeline Safety needs to set goals for its 
enforcement program, fully define its strategy, and establish 
performance measures linked to goals that would allow an assessment of 
results. These are key elements of effective management without which 
the office cannot determine whether recent changes in its strategy are 
having the desired effects on pipeline safety.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-801]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-826T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-875T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-985T]).

1.87.C. Improving the Postal Service's Response to Biohazards:

In a report and testimony in fiscal year 2004, we addressed the Postal 
Service's response to biohazards in the mail. We testified on errors in 
communicating health risk information to employees returning to the 
Brentwood postal facility in Washington, D.C. Instead of notifying 
employees of the possibility of residual health risks, employees were 
informed that the facility was 100 percent free of anthrax 
contamination. The Postal Service corrected and distributed updated 
information to its employees in response to our work. Our report 
focused on the response to anthrax at five postal facilities 
contaminated in the fall of 2001 and identified several lessons that 
can be learned from the response, including the need to err on the side 
of caution when considering actions to protect people from uncertain 
and potentially life-threatening health risks. We also highlighted the 
need for improving guidance for responding to a future anthrax crisis.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-205T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-239]).

1.88.C. Controlling Costs in Federal Construction and Management of 
Real Property:

In a series of reports since 2002, we described the challenges of 
managing the federal government's real property and controlling costs 
in federal construction. Over 30 agencies control hundreds of thousands 
of real property assets worldwide, including facilities and land that 
cost more than $335 billion. In January 2003, we designated federal 
real property as a high-risk issue because of long-standing problems 
with excess and underutilized property, deteriorating facilities, 
unreliable real property data, and costly space. These factors have 
multibillion-dollar cost implications and can seriously jeopardize 
mission accomplishment. We continue to report on and monitor the 
timeliness of and cost controls over major federal construction 
projects, including courthouses and the Kennedy Center.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-119T]).

1.89.C. Maintaining the National Airspace System:

In fiscal year 2004, we examined the Federal Aviation Administration's 
efforts to modernize air traffic control equipment and controller 
workforce issues. We testified twice on the agency's progress and 
remaining challenges in modernizing its air traffic control equipment. 
We updated our work on impending retirements in the air traffic 
controller workforce and the Federal Aviation Administration's progress 
in hiring and training replacement controllers. The Congress used our 
work to monitor the Federal Aviation Administration's progress in 
managing its multibillion dollar efforts to modernize the National 
Airspace System.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-227T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-770T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-887T]).

Strategic Goal 2:

Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence:

Respond to Emerging Threats to Security:

2.1.A. Improving Plans for Deploying Radiation Detection Equipment:

In 2003, we reported on CBP's efforts to deploy radiation detection 
equipment at U.S. ports of entry to detect smuggled nuclear material. 
We found that although CBP had developed a partial plan for deploying 
equipment, its lack of a comprehensive plan covering every port of 
entry into the United States hindered the ability of CBP to develop 
schedules and budgets and could result in delays in deploying 
equipment. In response to our recommendations, CBP issued a 
comprehensive project execution plan that will help the agency deploy 
equipment to detect the potential smuggling of dangerous nuclear 
materials into the United States in the shortest time frame possible. 
(Based on briefing):

2.2.A. Strengthening Security Awareness in Federal Buildings:

In the summer of 2003, we tested security at federally owned and leased 
buildings. Using a series of investigative methods, we entered some 
federal buildings in San Francisco, California, and Las Vegas, Nevada, 
carrying concealed test contraband materials and simulating conditions 
under which plastic explosives could be introduced into the buildings. 
During these tests, the security guards did not detain us, and the 
security procedures and equipment at the buildings did not detect the 
test contraband materials. As a result of our briefings, the Federal 
Protective Service issued a policy letter to all its regional directors 
that transmitted supplemental X-ray and magnetometer screening policies 
to strengthen procedures related to items carried into federal 
buildings such as food and containers that could conceal harmful 
objects. And the U.S. Marshals Service issued a memorandum that 
described the methods we used to penetrate the buildings. As part of 
the memorandum, the U.S. Marshals Service asked marshals to share the 
information with their respective building security committees and 
directed marshals to develop written guidelines to establish screening 
policies for food, beverages, and unusual circumstances such as casts, 
wheelchairs, and medical bags and equipment. (Based on briefing):

2.3.A. Strengthening Federal Agency Information Security:

For many years, we identified specific information security 
improvements needed at selected federal agencies. In 2004, such 
agencies included the Internal Revenue Service (IRS), USDA, and the 
Federal Deposit Insurance Corporation. Also, on the basis of our prior 
recommendations, agencies--including IRS, VA, DOD, the Department of 
Interior, the Department of Education, the Financial Management 
Service, and the Federal Deposit Insurance Corporation--took numerous 
actions to strengthen their information security practices. Actions 
included improvements to agencies' security management programs to aid 
in understanding risks and selecting and properly implementing 
effective controls; access controls to limit to only authorized 
individuals the ability to read, alter, or delete data; software change 
controls to allow only authorized software programs to operate; and 
service continuity controls to protect computer-dependent operations 
from significant disruptions.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-126]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-154]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-522T]).

2.4.C. Overseeing Weapons Programs:

In May 2004, we reported that DOD did not know how many Stinger 
missiles it had sold overseas and that its annual inventory process had 
significant deficiencies. As a result of our work, DOD has begun to (1) 
establish standard requirements for keeping Stinger missile records, 
(2) create an electronic database to consolidate all DOD records for 
Stinger missiles sold overseas and track the worldwide Stinger 
inventory, and (3) develop standardized procedures for conducting 
Stinger inventories. Also, we found that several multilateral forums 
had introduced measures to limit the international proliferation of 
man-portable air defense systems. However, these forums lacked 
mechanisms to monitor whether member states were actually implementing 
their commitments. The Department of State, which represents the United 
States in these forums, concurred with our recommendation and has begun 
working with other governments to establish mechanisms to assess 
foreign compliance with commitments to limit proliferation of man-
portable air defense systems.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-519]).

2.5.C. Baselining DHS's Progress in Implementing Our Recommendations:

We identified the status of key recommendations that we had made 
between March 1, 1997, and March 1, 2003, to DHS and its legacy 
agencies. This work established a baseline that the Congress and others 
can use in assessing DHS's progress and effectiveness in improving 
homeland security. We reported that as of June 28, 2004, DHS had 
implemented 40 of 104 recommendations that we consider to be key to 
DHS's ability to effectively fulfill its homeland security mission and 
is working to address another 63 key recommendations. This review also 
resulted in our and DHS's teams focusing additional attention on 
implementing various recommendations resulting in positive results 
toward improve mission effectiveness. For example, actions DHS's 
Science and Technology Directorate took to implement nine key 
recommendations reduced unauthorized access to pathogens and 
strengthened security over the facility that houses these pathogens.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-865R]).

2.6.C. Demonstrating How Counterfeit Identification Can Easily Be Used 
to Exploit Security Vulnerabilities:

We testified to the Congress in October 2003 about problems we 
identified in our efforts to test the effectiveness of various security 
measures throughout the United States. We performed a series of tests 
over a 3-year period, which showed that security measures could often 
be exploited through the use of counterfeit identification documents 
such as driver's licenses, birth certificates, and Social Security 
cards. Using inexpensive computer software and hardware readily 
available to any purchaser, we created fictitious identities and 
documents that allowed them to easily (1) enter the United States from 
such Western Hemisphere countries as Jamaica, Barbados, Mexico, and 
Canada; (2) purchase firearms from licensed dealers in some states such 
as Virginia and Montana; (3) gain access to federal buildings and other 
facilities; and (4) obtain Social Security numbers for fictitious names 
and use these numbers to obtain authentic but fraudulent driver's 
licenses. The results of our work demonstrated that (1) government 
officials and others generally did not recognize that the documents we 
presented were counterfeit; (2) many government officials were not 
alert to the possibility of identify fraud and some failed to follow 
security procedures; and (3) identity verification procedures are 
oftentimes inadequate.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-133T]).

2.7.C. Ensuring a Sound Approach to Securing Electronic Government 
Transactions:

Under OMB's direction, the General Services Administration made plans 
to build a central computer system, called the E-Authentication 
Gateway, to ensure the identity of individuals attempting to conduct 
sensitive transactions--such as transactions involving financial or 
personal information--with government agencies. We found that the 
General Services Administration's plan for a centralized gateway was 
unlikely to be feasible, especially the goal of making the system 
operational by March 2004. In response to our report, OMB and the 
General Services Administration decided to cancel their plans to 
develop a centralized gateway and refocused the initiative on setting a 
framework of policies and standards for agencies to use in procuring 
commercial products to meet their authentication needs.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-952]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-561T]).

2.8.C. Enhancing Government and Private Sector Critical Infrastructure 
Protection Efforts:

Critical infrastructure protection activities are intended to enhance 
the security of the public and private infrastructures that are 
essential to our national security, economic security, and public 
health and safety. Examples of critical infrastructures include power 
distribution, telecommunications, water supply, and national defense. 
Over the last several years, we assessed the progress of federal 
agencies and nonfederal infrastructure sectors in implementing the 
activities required and suggested by federal critical infrastructure 
protection policy. In July 2004, we reported on the status of sector-
based, voluntary information sharing and analysis centers and discussed 
challenges in their efforts to help protect our nation's critical 
infrastructures. Also, we identified the need for DHS to develop 
appropriate plans, policies, and procedures to improve its ability to 
carry out its information-sharing responsibilities and relationships. 
In March 2004, we reported on the cybersecurity of the computerized 
control systems that perform vital functions across many of our 
nation's critical infrastructures. These functions include electric 
power generation, transmission, and distribution; oil and gas refining 
and pipelines; and water treatment and distribution. We identified 
significant cybersecurity risks associated with control systems, 
including the adoption of standardized technologies with known 
vulnerabilities and the increased connectivity of control systems to 
other information systems. We also identified significant challenges to 
securing control systems, including the limitations of current security 
technologies and the perception that securing control systems may not 
be economically justifiable. In addition, we identified the need for 
DHS to implement a strategy for coordinating with the private sector 
and other government agencies to improve control system security. 
Further, in May 2004, we reported on the many cybersecurity 
technologies that could be used to protect critical infrastructures 
from cyberattack. These technologies--including access control 
technologies, cryptography, and audit and monitoring tools--can help to 
protect information that is being processed, stored, and transmitted in 
the networked computer systems that are prevalent in critical 
infrastructures.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-321]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-354]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-780]).

2.9.C. Improving Governmentwide Management of Federal Information 
Security:

Since 1997, we have designated information security as a governmentwide 
high-risk issue with potentially devastating consequences. In March 
2004, we noted opportunities for OMB to improve the usefulness of the 
annual security performance data reported by the agencies. Also, in 
March 2004, we identified commercially available, state-of-the-
practice cybersecurity technologies that federal agencies could use to 
defend their systems against cyberattack. In June 2004, we reported the 
need for OMB to require agencies to assess the quality of their 
security certifications and accreditations, a key process in assessing 
information security risks, to ensure that decisions are based on 
consistent consideration of key criteria outlined in federal guidance. 
Additionally, in June 2004, we reported on several areas related to a 
critical process referred to as patch management. The patch management 
process includes acquiring, testing, applying, and monitoring software 
patches in order to alleviate security vulnerabilities that are 
introduced by flaws in software code. We identified patch management 
tools and services that are available to federal agencies, challenges 
to performing effective patch management, and additional steps that can 
be taken to mitigate the risks created by software vulnerabilities. 
Also, we identified the need for OMB to issue guidance to agencies to 
provide more refined information on patch management practices, and 
determine the feasibility of providing selected centralized patch 
management services.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-376]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-467]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-483T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-706]).

2.10.C. Influencing National Preparedness Standards for Homeland 
Security:

In a briefing to the 9/11 Commission, we provided analyses and insights 
on the need for and content of a national preparedness standard for 
emergency management and business continuity. We identified an existing 
standard to serve as the foundation for the national preparedness 
standard and produced a "gap analysis" for revisions addressing 
homeland security needs; those revisions will be incorporated into the 
standard. The panel recommended the standard to the 9/11 Commission for 
all organizations regardless of industry, size, or location. Secretary 
Ridge has endorsed the standard for national adoption. (Based on a 
formal statement to the panel):

2.11.C. Improving U.S. Assistance to the Former Soviet Union:

Over the past 10 years we have assessed the U.S. government's programs 
to help Russia and the other former Soviet states secure weapons of 
mass destruction, including hundreds of tons of nuclear material; 
employ their weapons scientists; and secure their borders from nuclear 
smuggling. Our recommendations to improve the management of these 
programs have been used by the Congress to legislate, redirect, and 
streamline the delivery of this assistance.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-148]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-312]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-429]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-582]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-694]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-726T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-426]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-482]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-483]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-526T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-638]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-662]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-807]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-924]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-930R]).

2.12.C. Enhancing Domestic Security with Better Data on Illegal Aliens:

Weaknesses we identified in DHS's system for keeping track of foreign 
visitors--and persons who overstay their terms of admission to the 
United States--enable millions to reside here illegally and may hamper 
the monitoring of potentially suspicious aliens. Our reporting that 6 
of the 19 hijackers on September 11 were current or prior overstays 
showed the implications these long-standing weaknesses can have for 
domestic security. We also reported that thousands of illegal aliens 
have used fraudulent documents to obtain airport employment and other 
jobs with access to secure areas and critical infrastructure locations. 
We reported how a new homeland security program to collect, maintain, 
and share information on foreign nationals, might be strengthened--
before it is fully phased in--by evaluating the kinds of weaknesses 
limiting the tracking system. The Transportation Security Agency, 
consistent with our findings on airport employment, has increased the 
physical screening of employees who enter secure areas of airports.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-82]).

Ensure Military Capabilities and Readiness:

2.13.A. Contributing to Properly Funding the Military's Needs:

We reviewed the reasonableness of DOD's fiscal year 2004 budget 
request, its use of budgeted funds in prior years, its future resource 
needs, and the status of its war on terrorism expenditures. In 
September 2003, we identified billions of dollars in potential costs 
avoided and opportunities for DOD to improve its internal oversight of 
the use and tracking of funds and to provide greater transparency over 
projected resource needs. Specifically, we reported that some of the 
military services might not spend all the funds provided in fiscal year 
2003 for the war in Iraq and that some funds being requested for fiscal 
year 2004 were no longer needed because the operations they funded had 
ended in March 2003. This allowed the Congress to rescind some of the 
previously authorized funds that remained available. In addition, the 
Congress reduced DOD's budget request for fiscal year 2004 because some 
of the requested funds were for operations that ended prior to that 
fiscal year. Our work also prompted DOD to reevaluate certain funding 
requirements, adjust financial records, and take other actions to 
reduce its unobligated balances. Our work contributed to actions that 
resulted in financial benefits of about $5.2 billion dollars, of which 
$3.49 billion was rescinded from the Iraqi Freedom Fund, $1.35 billion 
was eliminated from funds related to Southwest Asia, and $0.355 billion 
was related to the actions taken by DOD.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1088]).

2.14.A. Improving DOD's Antiterrorism Efforts:

Since the October 2000 attack on the Navy destroyer USS Cole in the 
port of Aden, Yemen, which cost the lives of 17 crew members and 
significantly damaged the vessel, other incidents have further 
illustrated the continuing danger of unconventional threats from 
determined terrorists to our military forces. Following the attack on 
the USS Cole, we initiated a series of reviews that examined DOD's 
antiterrorism efforts to protect military forces at domestic 
installations, and as forces deploy through ports in the United States 
and in the European, Southern, and Pacific Commands. These reviews, 
which examined the department's overall antiterrorism approach, the 
management tools in place to guide a commander's efforts to protect 
military forces, and the specific security measures being used, 
highlighted several opportunities for the department to strengthen its 
antiterrorism efforts. Working in a collaborative manner with the 
department, we made a number of specific recommendations to address 
these issues, and DOD generally agreed with our findings and 
recommended corrective actions. In 2004, the department began 
implementing many of our recommendations, which in turn have had a 
direct impact on department operations. For example, the department 
established the Navy as the executive agent responsible for protecting 
military sealift assets, including military cargo shipped using 
chartered vessels, where previously this responsibility was unclear and 
undefined. The department also revised its antiterrorism policies and 
implementing guidance, incorporating several of our recommendations 
related to improving the mechanisms to identify critical assets, assess 
threats, and improve overall antiterrorism planning. Also, in response 
to a recommendation we made in September 2001, the department finalized 
its first antiterrorism strategic plan, which clarifies the 
department's antiterrorism goals, highlights related performance 
goals, and sets specific measures to assess the results of improvement 
efforts. Most recently, the department has agreed to implement our 
recommendations to designate a single authority to integrate worldwide 
installation preparedness improvement efforts, clearly define the roles 
and responsibilities of key organizations, fully incorporate results-
oriented management principles in its strategy to improve installation 
preparedness, and better coordinate DOD installation preparedness 
improvements with the local civilian communities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-909]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-15]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-14]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-855]).

2.15.A. Improving the Tracking of In-Transit Munitions Shipments:

Over the last few years, we have issued a series of reports identifying 
gaps in tracking in-transit munitions shipments. The loss of visibility 
that occurs in transit leaves those shipments vulnerable to compromise 
by forces hostile to the United States. DOD initially took steps to 
revise and strengthen requirements in its regulation for in-transit 
visibility, but we found that visibility did not improve because 
shippers, receivers, and commercial carriers within the United States 
did not comply with the revised requirements. In addition, we assessed 
the adequacy of in-transit visibility of munitions shipments moving 
within the Republic of Korea and the U.S. European Command and found 
that deficiencies in policies and procedures and a lack of compliance 
with requirements has also resulted in gaps in visibility. As a result 
of our recommendations, DOD has initiated corrective actions and 
revised operating procedures both within the United States and in the 
Republic of Korea that should provide the level of in-transit 
visibility required for munitions shipments and decrease their 
vulnerability to compromise. (Based on a briefing):

2.16.A. Influencing Budget Reduction in the Transformational 
Communications Satellite Program:

The Air Force planned to initiate development of the new 
Transformational Communications Satellite before maturing technologies 
and stabilizing the design--a high-risk acquisition approach--and 
accelerate annual funding needs to over $1 billion. We reported this 
finding to the Congress in our annual assessment of major weapons 
programs and in other written products. On the basis of this work, the 
Congress reduced the program's funding by $300 million for fiscal year 
2005 to better ensure the technologies and design were sufficiently 
matured before development of the satellite began.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-71R]).

2.17.A. Improving Outcomes of DHS's Efforts to Counter Man-Portable Air 
Defense Systems:

In late 2002, terrorists fired surface-to-air missiles at an Israeli 
airliner departing from Mombasa, Kenya. To reduce this threat, DHS 
initiated a 2-year system development and demonstration program for a 
counter-man-portable air defense system. During the course of our 
review of this effort, we determined that while DHS's program plan 
incorporated many aspects of a knowledge-based acquisition approach--an 
approach that has been proven to optimize the chance of successful 
outcomes--the plan did not incorporate others, including criteria 
needed to ensure that decisions are based on sufficient information and 
to monitor contractor progress. As a result of this finding and 
recommendations that we made in January 2004, DHS revised its 
solicitation to provide such criteria.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-341R]).

2.18.A. Restructuring the Funding for DOD's Osprey V-22 Aircraft 
Program:

In a briefing to a blue-ribbon panel that was established to 
investigate the V-22 aircraft after the second fatal crash of a V-22 
aircraft in calendar year 2000, we highlighted numerous concerns with 
the aircraft that had not previously been made public. Specifically, we 
told the panel that numerous risks and unknowns existed in the program 
because of inadequate testing and evaluation and highlighted concerns 
raised in the Navy Judge Advocate General's investigation of the April 
2000 fatal crash--concerns that had not been publicly revealed because 
they had been omitted from the Judge Advocate General's investigation 
report. After completing its work, the blue-ribbon panel recommended 
that production of the aircraft be temporarily reduced to a minimum 
sustaining level to provide funds for a development maturity phase. In 
the fiscal year 2001 defense appropriations bill, the Congress stated 
that the overall production rate should be no more than 11 aircraft per 
year until the program completed its program restructure and returned 
to flight status. Prior to this decision, plans called for procuring 37 
V-22 aircraft in fiscal year 2003 and an additional 37 V-22s in fiscal 
year 2004. The present value of the reduced procurement funding that 
accompanied this decision--less the increase in funding for the program 
to resume development testing--totaled about $1.6 billion.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-369R]).

2.19.C. Estimating Exposure of U.S. Troops to Chemical Warfare Agents 
During the Gulf War:

Congressional questions about undiagnosed illnesses of Gulf War 
veterans led to our assessing the basis of DOD's conclusions about the 
extent of exposure of U.S. troops to chemical warfare agents during the 
Gulf War. We found that DOD's conclusions about troops' exposure to 
chemical warfare agents--which were based on models prepared by DOD and 
the Central Intelligence Agency of the plumes that resulted from the 
use of chemical agents--could not be adequately supported. Given the 
weaknesses with the specific models and the uncertainties in some of 
the data used in the models, we concluded that DOD could not know which 
troops had or had not been exposed. We recommended that DOD and VA not 
use the plume-modeling data for future epidemiological studies of the 
1991 Gulf War. VA concurred with this recommendation. We also 
recommended that DOD require no additional plume modeling of 1991 Gulf 
War sites bombed or demolished by Coalition forces. DOD concurred with 
this recommendation. In addition, the House of Lords in the British 
Parliament had used our report as justification to establish a 
commission to examine the causes of Gulf War illnesses of British 
troops.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-159]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-821T]).

2.20.C. Improving Security at DOE's Nuclear Weapons Facilities:

Over the last 2 years, we evaluated DOE's post-September 11 efforts to 
improve security at the nation's nuclear weapons facilities. A key 
component of an effective security program is the design basis threat, 
a classified document that identifies the potential size and 
capabilities of the terrorist forces that DOE facilities must 
successfully defend against. We reported that the threat contained in 
DOE's May 2003 design basis threat was, in most cases, less than the 
terrorist threat identified in the intelligence community's postulated 
threat--on which the design basis threat traditionally had been based. 
In response, the Secretary of Energy ordered a full reexamination of 
the May 2003 design basis threat and the process used to develop the 
design basis threat.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-623]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-701T]).

2.21.C. Providing Housing for Unmarried Service Members and Military 
Families:

DOD spends billions of dollars annually to provide housing for military 
members and their families either by paying cash allowances for members 
to live in private sector housing or by assigning members to military-
owned or-leased quarters. Recognizing that housing is a major component 
of the military's compensation package and a key factor affecting 
quality of life, DOD has placed priority on improving both its family 
housing program and its program for unmarried members, who often are 
required to live in military barracks. For example, over the past 
several years, DOD has significantly increased housing allowances to 
make private sector housing more affordable and has improved the 
condition of military-owned family housing and barracks through 
increased construction spending and, in the case of family housing, 
through privatization, which allows private sector financing, 
ownership, operation, and maintenance of military housing. Since 2000, 
we issued several reports on DOD's housing programs. These reports have 
discussed opportunities for DOD to reduce barracks costs, improve the 
processes used to determine housing requirements and allowance rates, 
and enhance the implementation of privatization. In response to these 
reports, DOD and the services have taken several steps to reduce costs 
and improve housing program management. For example, as recommended in 
one of our reports, the Air Force decided to allow more junior enlisted 
personnel to live off base, which decreased planned future barracks 
construction costs by $234 million. Also, in response to another 
report, which showed that DOD often underestimated the ability of local 
communities to meet family housing needs and thus overestimated the 
need for more costly military-owned or privatized housing, DOD revised 
its housing requirements determination process. Further, as we 
recommended, DOD took steps to improve program oversight and enhance 
provisions in privatization contracts designed to protect the 
government's interests.
GAO/NSIAD-00-71; 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-889]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-624]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-257R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-602]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-556]).

2.22.C. Improving the Processing of Personnel Security Clearances:

Terrorist attacks have heightened national security concerns and 
underscored the need for a timely, high-quality personnel security 
clearance process. However, in reports issued during 2004, we 
identified long-standing backlogs, delays, and other problems 
associated with DOD's security clearance process that could result in 
millions of dollars of additional costs to the government and heighten 
the risk of national security breaches. To resolve these problems, we 
recommended matching investigative and adjudicative workforces to 
workloads, developing tools and metrics to forecast and monitor 
clearance needs, gaining better access to investigative information, 
determining the feasibility of implementing initiatives that could 
decrease the backlog, and providing better oversight for all aspects of 
the process. DOD generally agreed with our findings and has begun 
implementing our recommendations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-344]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-632]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-202T]).

2.23.C. Assisting Congressional Decision Making on the Military's Aging 
Fleet of Aerial Refueling Aircraft:

Our body of work on whether to continue to operate or to replace DOD's 
nearly half-century-old fleet of KC-135 aerial refueling aircraft 
prompted DOD to reevaluate its needs and we informed congressional 
decision makers on how to proceed with replacement of the aging 
aircraft. In 2004, we reported that DOD did not know how many aerial 
refueling aircraft are needed because its requirements assessment was 
based on the outdated two major theater war strategy rather than on 
current national security strategy. DOD concurred and is currently 
studying aerial refueling aircraft requirements as part of its Mobility 
Capabilities Study. Our report on DOD's analysis of alternatives, in 
which the Congress required DOD to identify options for acquiring new 
aircraft, highlighted the fact that the methodology employed by DOD did 
not include all of the potential alternatives for these acquisitions 
and in fact excluded the potential for contractor-provided refueling 
support. DOD concurred with our recommendation to expand the scope of 
its study to include the potential for contractor-provided refueling 
support and is now studying that option.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-923T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1143T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1048T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-938T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-349]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-169R]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-164R]).

2.24.C. Reassessing Program Strategy, Funding Priorities, and Risks for 
Selected Military Equipment:

Congressional concern over aging military equipment and reports by DOD 
that the condition of major equipment items was rapidly deteriorating 
led to our review of the condition, program strategy, and funding 
priorities for selected equipment items. In our report, we identified 
weaknesses and inconsistencies in DOD's program strategies and funding 
priorities for specific equipment items in relation to the condition of 
those items. As a result, we recommended that the Secretary of Defense, 
in conjunction with the military services, reassess the program 
strategies for equipment modernization and recapitalization, and 
reconcile those strategies with the services' funding requests to 
ensure that key legacy equipment systems are sustained until 
replacement systems can be fielded. Acting on our work, the Congress 
included a requirement in the National Defense Authorization Act for 
Fiscal Year 2005 that whenever a new major defense acquisition program 
begins development, the defense acquisition authority responsible for 
that program develop a plan for sustaining and modernizing the existing 
system that the system under development is intended to replace to 
ensure that the existing system is adequately sustained and funded 
until the replacement system is fielded and assumes responsibility for 
the mission.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-112]).

2.25.C. Promoting Greater Efficiencies in Development, Fielding, and 
Use of Unmanned Aerial Vehicles in DOD:

Our body of work on the development, fielding, and usage of unmanned 
aerial vehicles (UAV) has offered DOD strategies and approaches to more 
efficiently use resources as these new technologies play increasingly 
important roles in military operations. UAVs were used in Afghanistan 
and Iraq in 2002 and 2003 to observe, track, target, and strike enemy 
forces. Our prior work on UAV systems found programs that suffered from 
requirements growth, risky acquisition strategies, and uncertain 
funding support within the individual services. Consequently, some of 
these programs were terminated. To address these problems, we made 
recommendations intended to promote strong leadership in UAV 
development. In 2004, we reported that DOD had made progress in 
addressing our previous concerns, but that DOD's approach to developing 
and fielding UAVs still did not provide reasonable assurance that its 
investment in the technology would facilitate efficient integration 
into the force structure. Consequently, to further enhance management 
control over the UAV program, we recommended that DOD establish a 
strategic plan for developing and fielding UAVs and designate an 
appropriate departmental organization to oversee the plan's 
implementation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-342]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-530T]).

2.26.C. Highlighting Challenges Associated with Unprecedented Use of 
the Reserve Component since September 11:

In a 2001 series of reports and a testimony on DOD's use of the reserve 
component, we identified numerous inefficiencies in DOD's process for 
readying and mobilizing the reserve component for domestic and overseas 
missions associated with the global war on terror. Our August 2003 
report noted that some threats are impossible to predict, but until DOD 
identifies all of the mobilization requirements that have evolved since 
September 11--and creates or updates its operation plans as necessary 
to account for these requirements--it risks the continued need for 
additional management oversight and layers of coordination between 
officials to fill mobilization requirements, thus slowing the 
mobilization effort and making it less efficient. We also noted actions 
needed to address visibility over the process, predictability for 
mobilizing Army units, and access to the Individual Ready Reserve 
population. We made several recommendations to DOD focusing on 
enhancing the mobilization process. DOD has taken action and noted that 
our report is invaluable to its mobilization reengineering efforts. In 
April 2004, we testified that the heavy use of National Guard forces, 
particularly the Army National Guard, has led to declining readiness of 
nondeployed units because of long-standing equipment and personnel 
shortages. We concluded that ongoing initiatives to restructure the 
Army National Guard to perform overseas and homeland security missions 
face a number of implementation challenges and suggested that a 
comprehensive reassessment of the Army Guard's structure and funding 
requirements is needed.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-921]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-670T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1031]).

2.27.C. Contributing to Congressional Decisions on National Guard and 
Reserve Component Personnel Compensation:

In September 2004, we issued the third and last report in a series 
responding to House Report 107-436 accompanying the National Defense 
Authorization Act of 2003, which directed us to review compensation 
programs for reserve personnel. We also testified three times before 
the Congress on reserve compensation issues. Our reviews addressed the 
fair treatment of reservists in light of the increased reliance upon 
reserve personnel to carry out DOD's military operations domestically 
and abroad. Our work provided key information on such issues as 
providing health care to members and their families when members are 
not on active duty, lowering the age for retirement eligibility, 
compensating reservists for income loss during mobilizations, enhancing 
family support programs, and expanding special pay rates. Our work 
enabled congressional decision makers to make informed decisions on 
complex and costly proposals. For example, we reported that estimated 
costs to expand the military's health care system to reservists and 
their families when the member is not on active duty would be over $5 
billion dollars. As a result of our work, DOD agreed to study the need 
to expand this benefit and the Congress scaled back its health care 
benefit proposal and passed legislation authorizing health coverage for 
1 year for certain populations of the reserve force when not mobilized.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-1005]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1004]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-554]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-549T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-573T]).

2.28.C. Contributing to Improved Warfighter Support for Operation Iraqi 
Freedom:

Our work on warfighter support for Operation Iraqi Freedom helped focus 
the attention of the Congress and DOD to more fully understand the 
breadth and depth of long-standing problems in DOD's logistics system. 
In December 2003, we reported our preliminary findings on the 
operation, indicating that Army and Marine Corps units were short of 
spare parts and other supplies because of (1) a lack of adequate 
accountability or visibility of the contents of hundreds of pallets and 
containers shipped to and held up at various distribution points around 
the world, (2) insufficient and ineffective distribution capability to 
transport supplies to units within the operation's theater of 
operations, (3) a $1.2 billion discrepancy between material shipped to 
the Army units in the theater and material acknowledged as received, 
(4) a potential cost to DOD of millions of dollars for late fees (or 
the replacement) of leased and DOD-owned containers, (5) decreased 
readiness and cannibalization of vehicles and equipment, and (6) Army 
prepositioned equipment that was not configured appropriately for a 
contingency like Operation Iraqi Freedom. Subsequently, in March 2004, 
the Congress asked us to submit a written statement for the record on 
the performance, current status, and future plans to improve the Army's 
and the Marine Corps's equipment propositioning programs. The Congress, 
also in March 2004, used our report as the basis for a hearing on 
logistics lessons and logistics transformation related to Operation 
Iraqi Freedom. We also reported in April 2004 that mail delivery to 
troops in Iraq was hampered by similar long-standing postal problems 
experienced during contingency operations such as the lack of trained 
personnel and transportation assets to move mail. As a result of our 
work, several DOD components, including the Army and the Marine Corps, 
have taken a number of actions that address these and other logistics 
problems. If successfully implemented, these actions should improve the 
management of warfighter support for Operation Iraqi Freedom and other 
contingency operations. We are currently continuing work in this area.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-305R]) and 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-562T]).

2.29.C. Maintaining Congressional Focus on Risks Associated with the F/
A-22 Program:

In our continuing review of the Air Force's $72 billion F/A-22 program, 
we reported and testified in March 2004 that despite the significant 
changes in requirements, cost, and schedule that have occurred since 
the program began development in 1986, DOD does not have a business 
case that reflects current program conditions. For example, DOD does 
not define the need for the F/A-22 under current and projected threats 
or the need for investments in new air-to-ground capabilities, nor does 
it address the number of aircraft required to accomplish the Air 
Force's missions and the number it can afford. As a result of our 
recommendation that the Secretary of Defense complete a new business 
case analysis, the Congress included in its final report for DOD's 
fiscal year 2005 budget a requirement for a new comprehensive F/A-22 
independent cost estimate, to be submitted by March 1, 2005.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-391]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-597T]).

2.30.C. Improving the Missile Defense Agency's Acquisition Strategy:

Since the mid-1980s, DOD has invested tens of billions of dollars to 
develop ballistic missile defense capabilities; in 2002, the program 
underwent a significant transformation to address ongoing challenges. 
However, in April 2004, we reported that the program's aggressive 
schedule, optimistic cost estimates, and inadequate testing have 
continued to put several program elements at risk of costing more, 
taking longer to deliver, and failing to fully meet performance goals. 
As we recommended, the agency is taking steps to establish more 
realistic cost and schedule estimates and to improve testing of the 
integrated system. Our ongoing work has also influenced specific 
program elements. For example, in February 2004, the Air Force 
announced its plans to delay the purchase of a second aircraft for its 
Airborne Laser program and focus on demonstrating the maturity of the 
system's technologies--an approach we identified as a means to improve 
program outcomes.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-643R]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-409]).

2.31.C. Maintaining Congressional Focus on Risks Associated with the 
Future Combat Systems:

The Army's Future Combat Systems--a networked suite of lighter and more 
agile weapons and other systems--is, in the Army's words, the "greatest 
technology and integration challenge the Army has ever undertaken." We 
found that the program is at significant risk of not delivering 
required capability within cost and schedule estimates. For example, to 
meet a demanding schedule, the Army has launched the program with less 
than 25 percent of critical technologies sufficiently matured--an 
action that leading companies have learned ultimately requires more 
resources, a reduction in requirements, or both. On the basis of our 
findings, which we testified on in April 2004, the House Armed Services 
Committee included language in its version of the Fiscal Year 2005 
Defense Authorization Bill that, among other things, restricts funding 
for the Future Combat Systems until improvements are made in its 
acquisition strategy. The Army recently decided to slow the pace of the 
program to lower risk.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-635T]).

2.32.C. Influencing Systemic Reform in DOD Space System Acquisitions:

DOD spends nearly $18 billion annually to develop, acquire, and operate 
satellites and other space-related systems that provide intelligence, 
surveillance, reconnaissance, and other data critical to the warfighter 
and national security. These systems have been plagued with problems 
that have driven up program costs by billions of dollars, delayed 
schedules, and increased technical risk. In some cases, capabilities 
have not been delivered to the warfighter after decades of development. 
Our reports over the past 2 years, which have recommended reforms based 
on our best practices reviews, have prompted the Congress to make 
funding decisions that have helped programs gain the knowledge they 
need before making significant investment commitments. Further, our 
report on common acquisition problems and their effects has been cited 
by experts in the space acquisition and technology development 
communities as the definitive compendium of challenges facing space 
programs. Our work has also helped spur and guide reform within DOD, 
which is now revising its space acquisition policy; developing a 
strategy for optimizing its investment in space technology development; 
and piloting ways to deliver space capabilities to the warfighter more 
quickly.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-597]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-825R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1073]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-48]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-71R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-253T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-379R]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-759]).

2.33.C. Improving the Transparency and Management of DOD's Software-
Intensive Acquisitions:

DOD estimates that software constitutes as much as 40 percent of its 
research, development, test, and evaluation budget and has attributed 
significant cost and schedule overruns in its software-intensive 
systems to the delivery of the software. In a March 2004 
congressionally mandated review, we reported that three acquisition 
programs--the F/A-22, the Space-Based Infrared System, and the 
Comanche--did not follow evolutionary development practices for 
software and did not collect and analyze meaningful metrics to measure 
progress, two strategies that leading companies use to ensure the 
delivery of high-quality products on time and within budget. On the 
basis of these findings, a Senate report on the fiscal year 2005 
National Defense Authorization Act included language requiring DOD to 
include in its quarterly acquisition reports to the Congress 
information on any significant changes in the cost, schedule, or 
performance of the software components of each major defense 
acquisition program.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-393]).

Advance and Protect U.S. International Interests:

2.34.A. Improving Oversight of Charities to Deter Terrorist Financing:

We found that IRS had not taken advantage of existing law to enable 
greater information sharing with states concerning the oversight of 
charities, which could lead to the possible disruption of terrorist 
financing. Terrorist abuse of charities highlighted the increased need 
for such information sharing. To improve the oversight of charities, we 
recommended that IRS work with the states to establish interim IRS 
procedures and state guidelines to regularly share data as allowed by 
law. We also recommended that these actions include setting milestones 
and assigning resources for developing and implementing these 
procedures and guidelines. In response, IRS expedited its efforts and 
issued IRS procedures and state guidance a year earlier than planned.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-163]).

2.35.A. Improving Efforts to Recruit Officers with Hard Language 
Skills:

In November 2003, we recommended that the Secretary of State collect 
and maintain data on the effectiveness of the Department of State's 
(State) efforts to address language gaps. We stated that the data 
should be used to report on State's efforts to recruit more junior 
officers with hard language skills. We noted that State's system did 
not provide more credit to candidates with skills in hard-to-learn 
languages as compared with those with skills in other foreign 
languages. Partially in response to our work, State reported that it 
had implemented a new hiring policy to provide additional credit to 
speakers of critical needs languages.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-139]).

2.36.A. Focusing the Broadcasting Board on Key Audiences:

Over a 3-year period, we recommended that the Broadcasting Board of 
Governors--the independent entity responsible for all U.S. government 
and government-sponsored, nonmilitary, international broadcasting--
revise its 5-year strategic plan. In response, the board revised its 
performance management and reporting system and standardized its 
program review processes by (1) instituting performance plans with 
audience targets and (2) requiring that program reviews produce action 
plans keyed to audience size targets. These changes have helped ensure 
that the key components of the board's strategic planning and 
performance management system are focused on the board's strategic 
objective of reaching large audiences in areas of key strategic 
interest to the United States, such as the Middle East.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-222]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-772]).

2.37.A. Strengthening the Tools to Fight Terrorism:

Our work has spurred several federal agencies to improve the design and 
application of their tools for fighting terrorism. For example, in 
2004, our recommendations for tightening U.S. visa processes--the 
nation's first line of homeland defense--led the Department of State to 
take steps to strengthen the Visas Mantis process, under which 
applicants for entry visas undergo a security check to prevent the 
transfer of sensitive technologies. Specifically, State said it had 
prepared a plan to improve the process, had created a new system for 
fully electronic communication of data, was working with other agencies 
to improve the system, was clarifying its guidance, and had begun 
providing feedback to overseas posts. Further, State is working with 
DHS to strengthen the process for revoking visas. In addition, we 
highlighted concerns about terrorists' use of alternative financing 
mechanisms (such as charities, bulk cash, informal banking, and 
commodities), as well as some of the challenges facing the United 
States in addressing this threat. As a result of our recommendations, 
the Federal Bureau of Investigation is taking steps to systematically 
collect and better analyze data on these alternative financing 
mechanisms, and IRS has sped up its efforts to develop and implement 
procedures for sharing information with the states.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-371]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-708R]).

2.38.A. Improving Visa Processing at the Toronto Consulate:

Although most U.S. consular officials working at U.S. posts in Canada 
told us that they had enough time to screen visa applicants carefully 
for possible security risks, some officers expressed concerns about 
their ability to remain vigilant, given workload constraints. After we 
relayed this information to the Department of State, it sent an 
assistance team to alleviate workload constraints at the Toronto 
consulate, which was experiencing the most severe problems.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-708R]).

2.39.A. Reforming United Nations Operations:

Our products on efforts to reform the United Nations included 
recommendations that the Secretary of State report annually to the 
Congress on reform efforts and work with other member states to ensure 
that the United Nations adopts results-based budgeting and develops a 
strategy for monitoring and evaluating the impact of its activities. In 
response to our recommendations, State has reported annually to the 
Congress on United Nations reform as part of oversight hearings. Also, 
the United Nations adopted a results-based budgeting approach, 
developed a strategy to systematically monitor and evaluate the results 
of its programs, and began implementing the strategy in 2002.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-150]).

2.40.A. Improving Budgeting at the Organization for the Prohibition of 
Chemical Weapons:

In 2002, we recommended that the Secretary of State work with 
representatives of other member states and the Director-General of the 
Organization for the Prohibition of Chemical Weapons to develop a 
comprehensive plan to improve the organization's budgetary practices. 
In response, the Organization for the Prohibition of Chemical Weapons 
has improved its ability to better estimate its workload, expenditures, 
income, and cash flow and implemented results-based budgeting, which 
should increase the organization's effectiveness and accountability.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-5]).

2.41.A. Improving the Visa Revocation Process:

State and DHS have taken steps to overcome weaknesses that we 
identified in the visa revocation process. Specifically, State 
developed a master list of visas revoked since September 11, 2001; 
established easy access to the list by other agencies that need access; 
and issued explicit guidance regarding time frames for the process. DHS 
now enters visa revocation cases into a lead-tracking database to 
monitor the status of cases and has established time frames for 
researching, assigning, and investigating cases. State and DHS also 
have taken steps to reconcile their records and share more information. 
In addition, the Terrorist Screening Center (an interagency group) 
developed a process for coordinating the sharing of information on visa 
revocation cases. State is coordinating the operating procedures of all 
the involved agencies and documenting them in a consolidated flowchart 
that is designed to ensure that the agencies have a written account of 
what the other players are doing in the process.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-795]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-798]).

2.42.A. Selling Overseas Excess Property:

In 1996, we reported that the Department of State did not have an 
effective process for identifying and selling unneeded overseas real 
estate. On the basis of our recommendation, an independent advisory 
panel was established to help State decide which properties to sell. In 
2002, we reported that State continued to own a large number of 
unneeded properties, had inaccuracies in its inventory database that 
prevented the some properties from being identified as unneeded, and 
had failed to sell several of the properties recommended by the 
advisory panel. In response to our work, State has sold excess property 
in South Korea that generated payments in fiscal years 2002 and 2003 
totaling about $59.7 million. State subsequently sold 31 properties and 
21 posts for $21 million in fiscal year 2003 and fiscal year 2004.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-590]).

2.43.A. Focusing on Management Weaknesses in the Global Food for 
Education Initiative:

In July 2000, the U.S. government announced a new, $300 million school 
nutrition pilot program--called the Global Food for Education 
Initiative--to improve student enrollment, attendance, and performance 
in poor countries. Through congressional briefings and a report, we 
detailed significant program management weaknesses. The Congress 
considered our information as part of its deliberations on the 
appropriateness of increasing program funding from the original $300 
million. The Congress ultimately decided to cut funding for this 
program by $50 million for fiscal year 2003.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-328]).

2.44.A. Reducing the Impact of Micronesian Migration:

In response to our work, funding agreements now target future health 
and education funds provided to the Federated States of Micronesia and 
the Republic of the Marshall Islands in ways that address migration 
problems from these countries. For example, the amended agreements 
state that health grants shall prioritize establishing sustainable 
funding mechanisms for operating a system that emphasizes prevention, 
primary care, mental health, and hospitals to reduce reliance on 
medical referrals abroad.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-40]).

2.45.A. Improving the Management of the U.S. Overseas Presence:

Language in the House report on fiscal year 2005 appropriations was 
based on our work on rightsizing U.S. overseas presence. In 2002, we 
developed a framework for determining appropriate staffing levels that 
could be used by U.S. agencies and that included considering the 
physical security risks, mission priorities and requirements, and costs 
of operations before placing staff at overseas posts. In 2003, we 
recommended that OMB and the Department of State use such a framework 
to assess staffing levels worldwide. In a separate report, we found 
that the U.S. government lacked a systematic process to develop 
accurate and reliable staffing projections for new embassy compounds. 
The Congress drew from our work in directing the Department of State to 
establish an office to lead its ongoing efforts to "put the right 
people in the right places at the right times" overseas. State 
established this office in January 2004.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-780]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-396]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-411]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1061]).

2.46.A. Improving Accountability Over U.S. Funds Provided to Two 
Micronesian Nations:

In 2000, we recommended that the Department of State negotiate new 
funding agreements with the Federated States of Micronesia and the 
Republic of the Marshall Islands to include provisions such as 
specifying eligible uses of capital account funds, requiring that funds 
be set aside to maintain capital projects, expanding annual reporting 
requirements to include information on expenditures in priority areas, 
and stating that the United States could withhold funds for 
noncompliance with spending and oversight requirements. State--in close 
cooperation with the Department of the Interior--responded directly to 
all of our recommendations. For example, the amended agreements state 
that the United States can withhold future payments if the Federated 
States of Micronesia and the Republic of the Marshall Islands fail to 
comply with grant terms and conditions or do not cooperate in U.S. 
investigations into the use of funds.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-216]).

2.47.C. Ensuring Results and Accountability for Microenterprise 
Programs:

Acting on our recommendations that the U.S. Agency for International 
Development review and reconsider the methodologies it used for 
collection, analysis, and reporting on results of key program areas, a 
House of Representatives' report cited our key findings and 
recommendation as justifying the need for new legislation and better 
program implementation and monitoring.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-171]).

2.48. C. Overseeing the Reconstruction of Afghanistan and Iraq:

In June 2004, we reported that the deteriorating security situation and 
limited resources have impeded the progress of U.S. reconstruction 
efforts in Afghanistan. We recommended that the U.S. Agency for 
International Development improve its reconstruction strategy for 
Afghanistan. In response, the U.S. Agency for International Development 
committed itself to developing a more comprehensive strategy to guide 
its efforts in Afghanistan. We also recommended that the Department of 
State improve its reporting of U.S. reconstruction expenditures in 
Afghanistan. Also in June 2004, we reported on U.S. efforts to rebuild 
Iraq, including (1) reconstruction costs; (2) efforts to stabilize Iraq 
and develop Iraqi security forces; (3) programs to help Iraq develop a 
unified, democratic government; and (4) efforts to restore electricity. 
The report detailed the ways in which the deteriorating security 
situation in the year following the conclusion of major combat 
operations hindered Iraqi reconstruction activities and presented 
challenges to Iraq's political transition. The report was widely cited 
in national media, provided key information about Iraq to American 
taxpayers, and provided the Congress with crucial oversight questions 
as it assesses progress in rebuilding Iraq.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-403]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-902R]).

2.49.C. Improving Efforts to Treat Acquired Immune Deficiency Syndrome 
(AIDS) Overseas:

We reported on key challenges U.S. government agencies face in 
expanding AIDS treatment in resource-poor settings under the 
President's $15 billion Emergency Plan for AIDS Relief. Nearly all of 
the U.S. field staff we interviewed in 14 focus countries cited 
problems coordinating with non-U.S. groups, and slightly fewer cited 
problems coordinating with other U.S. government entities. Limited 
coordination has led to duplicate efforts, confusion regarding 
standards, and heavy administrative burdens. Partly in response to our 
work, a House committee report on pending legislation called on the 
U.S. Global AIDS Coordinator to report on the depth and breadth of U.S. 
coordination with each host country and with other donors.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-784]).

2.50.C. Improving the Compact of Free Association:

In past work we found that over $1.6 billion in U.S. funding to the 
Federated States of Micronesia and the Republic of the Marshall Islands 
under a "Compact of Free Association" during a 12-year period between 
1987 and 1998 had resulted in little economic development in either 
country. Further, we reported that accountability for these funds had 
been limited. In the summer of 2003, as the Congress considered 
approval of a recently amended compact, we testified on three occasions 
and reported that (1) recently renegotiated economic assistance 
sections of the compact could cost the U.S. government over $3.5 
billion during the next 20 years and (2) recently strengthened 
reporting and monitoring measures in the compact could lead to improved 
accountability if diligently implemented. As a result of our work, 
congressional members emphasized that our contribution was invaluable 
to the Congress's understanding of the many complex issues involved in 
considering approval of the revised compact and required improved 
accountability in the revised agreement.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-890T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-988T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1007T]).

2.51.C. Ensuring That U.S. Aid Does Not Benefit Terrorists:

We reviewed the United Nations Relief and Works Agency's efforts to 
comply with U.S. laws that require the agency to take all possible 
steps to ensure that it is not using U.S. government funds to aid 
Palestinian refugees involved in terrorism. While we found that the 
agency's efforts had been constrained by security concerns and other 
factors, we also determined that the agency had not agreed to take 
steps recommended by the Department of State--including issuing 
explicit guidelines for staff to report compromises of the United 
Nations Relief and Works Agency's staff or facilities. Citing our work, 
the appropriations committees urged the agency to implement State's 
recommendations and asked State to provide the agency with funds needed 
to implement a key recommendation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-276R]).

2.52.C. Overseeing the United Nations Oil for Food Program:

Between March and July 2004, we testified five times before the 
Congress on the corruption, diversion of funds, and responsibilities 
related to the United Nations Oil for Food Program in Iraq and the 
efforts to find the illicit funds. We estimated that the former Iraqi 
regime acquired over $10 billion from oil smuggling and illicit 
manipulation of the program and that the new Iraq government faced 
significant challenges in making an effective transition from the 
program. Partly on the basis of our work, the national media informed 
U.S. citizens about the issue, the United Nations began an official 
inquiry into the program, and the Congress began five investigations of 
the oversight of the program and passed legislation to ensure full 
accountability.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-579T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-651T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-730T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-880T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-953T]).

Respond to the Impact of Global Market Forces on U.S. Economic and 
Security Interests:

2.53.A. Overseeing the Farm Credit System:

Statutes require associations covered by the Farm Credit System 
(System) to prepare programs for making credit available to young, 
beginning, and small farmers. In 2002, we recommended that, as the 
regulator of the System, the Board of the Farm Credit Administration, 
promulgate a regulation that outlines specific activities and standards 
that constitute an acceptable program for these farmers. The Farm 
Credit Administration has issued a final regulation that delineates the 
minimum components that each association must include when developing 
programs for young, beginning, and small farmers. These components 
include a mission statement describing program objectives and specific 
means for achieving such objectives, annual quantitative targets for 
credit-qualified farmers that are based on an understanding of 
reasonably reliable demographic data for the lending territory, annual 
qualitative goals, and methods to ensure that credit and services 
offered to qualified farmers are provided in a safe and sound manner. 
The regulations provide that such methods could include customized loan 
underwriting standards, loan guarantee programs, fee waiver programs, 
or other credit enhancement programs. Setting such standards in 
regulation will enhance the Farm Credit Administration's oversight of 
the System's efforts in achieving its mission to serve young, 
beginning, and small farmers.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-304]).

2.54.A. Filling Gaps in the Trade Advisory Committee:

In September 2002, we recommended that the agencies that are members of 
the committee continue to increase outreach efforts to fill gaps in 
committee composition and revitalize membership. In response, one 
member agency--USDA--examined current committee composition and 
identified gaps in coverage that it then worked to fill.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-876]).

2.55.A. Using Interim Security Clearances to Speed Appointments:

We recommended that the United States Trade Representative work with 
other agencies to make the existing trade advisory committee's 
consultation process more meaningful and reliable. Specifically, we 
recommended that the agencies streamline the nomination and appointment 
process for committee members and prevent disruptions in the committee 
activity caused by lapses in charters. In response, the United States 
Trade Representative, USDA, and the Departments of Commerce and Labor 
now grant new advisors interim security clearances, if necessary, so 
that they can actively participate in the committee while the full 
clearance process is conducted.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-876]).

2.56.A. Providing Trade Advisors With Better Access to Important 
Information:

We recommended that agencies provide sufficient technological and human 
resources to support meaningful consultations and ensure effective 
functioning of the trade advisory committee system. Officials from the 
United States Trade Representative, USDA, and the Departments of 
Commerce and Labor all stated that in response to this recommendation, 
a new secure Web site was created to allow all cleared advisors better 
access to important trade documents. This secure system was 
instrumental in providing advisors access to final agreement texts, so 
they could prepare required reports to the Congress. It is also being 
used for current negotiations. In order to improve advisor access to 
key United States Trade Representative officials, USDA also arranged to 
have more frequent meetings to achieve pressing goals.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-876]).

2.57.A. Clarifying Guidance on Promoting Tobacco:

We reported that USDA's Foreign Agricultural Service had not issued 
guidance implementing tobacco-related restrictions since 1994. In 
response to our report, the Secretary of Agriculture instructed 
overseas offices on not promoting the sale or export of tobacco or 
tobacco products. USDA has taken action to provide detailed 
instructions on tobacco-related activities to overseas staff, 
emphasizing the restrictions related to challenging a country's laws 
and regulations on tobacco promotion. USDA has reviewed all of its 
ongoing activities, revised its reporting guidelines, and instructed 
overseas offices not to comment on tobacco product and price matters 
and to ensure that reported material is consistent with legislated 
restrictions.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-618]).

2.58.A. Improving Government-Sponsored Enterprises (GSE) Oversight:

In a September 2003 report, we recommended that the Federal Housing 
Finance Board--the regulator of the 12 Federal Home Loan Banks 
(FHLBanks)--should collect better data on loan (or advance) collateral 
to monitor the FHLBanks' safety and soundness. We found that the 
FHLBanks used differing methodologies to collect and report the data to 
the Federal Housing Finance Board, which raised questions about the 
data's value. The Federal Housing Finance Board agreed with the 
recommendation and has developed revised guidance to the FHLBanks 
designed to ensure consistent collateral data collection and reporting. 
With improved data, the Federal Housing Finance Board should be in a 
better position to monitor the FHLBanks' safety and soundness as well 
as the placement of certain types of collateral, such as small business 
and agricultural loans pledged as collateral for FHLBanks advances.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-973]).

2.59.A. Improving Foreign Military Sales End-Use Monitoring:

The transfer of defense articles to U.S. allies is an integral 
component of U.S. national security and foreign policy, as it helps 
promote interoperability among allies and assists foreign governments 
to defend themselves. However, criminal efforts to divert weapons and 
spare parts to terrorist countries have heightened concerns that U.S. 
transfers of defense materiel are not secure. In August 2000, we 
reported that DOD field personnel were not monitoring the end use of 
U.S. weapons sold to foreign governments--as required by the Arms 
Export Control Act--to provide reasonable assurance that recipients are 
complying with U.S. government requirements on the use, transfer, and 
security of defense articles and services. We further found that DOD 
was not complying with the act's end-use monitoring reporting 
requirements. On the basis of our recommendations, DOD developed end-
use monitoring guidance for headquarters and field personnel and, 
beginning with the fiscal year 2005 Congressional Budget Justification 
for Foreign Operations, reported required information to the Congress 
on the activities and resource expenditures associated with end-use 
monitoring of foreign military sales.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-208]).

2.60.A. Improving the Monitoring and Enforcement of Trade Agreements:

In response to our recommendations, USDA, the Department of Commerce 
(Commerce), and the U.S. Trade Representative took actions to improve 
the United States' capacity to monitor and enforce trade agreements. 
For example, the U.S. Trade Representative reconciled its list of trade 
agreements with Commerce's list, helped clarify that agriculture 
agreements be maintained on USDA's Web site, periodically reviews the 
list for scope and coverage on behalf of the participants of the 
interagency Trade Policy Staff Committee, helped develop and implement 
a series of procedures to improve record keeping within the executive 
branch for trade agreements, and directed committee participants to 
submit appropriate trade agreements to Commerce and USDA. To strengthen 
the existing interagency process for prioritizing the monitoring and 
enforcement workload, the agencies developed a training course on trade 
compliance and created the Monitoring and Enforcement Subcommittee of 
the committee.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-24]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-76]).

2.61.A. Estimating Export Growth:

Between 2000 and 2002, we issued several reports on efforts to provide 
debt relief to the poorest and most indebted countries. We reported 
that when the World Bank and International Monetary Fund calculated the 
amount of debt relief countries could receive, they assumed that 
countries would achieve strong, sustained economic growth. We found 
this assumption to be optimistic since these countries rely on primary 
commodities--such as coffee--for much of their export revenue and the 
prices of such commodities have fluctuated, with earnings declining in 
certain years. We further reported that failure to achieve the 
projected growth levels could lead to these countries again have 
difficulty repaying their debt. Partly in response to our work, the 
World Bank and International Monetary Fund have made their export 
growth projections more realistic.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-161]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-215R]).

2.62.C. Improving Oversight of Federally Supported Financial 
Institutions:

To improve oversight of the risk management and mission activities of 
GSEs that support housing and home ownership--the Federal National 
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage 
Corporation (Freddie Mac), and the Federal Home Loan Bank System--we 
recommended the creation of a single, independent agency. We also 
recommended steps to strengthen corporate governance of GSEs and to 
establish standards for measuring GSE mission compliance in order to 
facilitate better regulatory and congressional oversight. The Congress 
developed pending legislation incorporating major features of our 
recommendations, including the creation of a single housing GSE 
regulator that would be governed by a hybrid board and have both safety 
and soundness and mission oversight responsibilities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-269T]).

2.63.C. Providing Investors with Better Information on Mutual Fund 
Expenses:

To give investors a better understanding of the fees charged by their 
mutual funds, and to promote healthy competition in the mutual fund 
industry, we recommended in a series of reports and testimonies that 
the Securities and Exchange Commission improve transparency regarding 
mutual fund fees and enhance the disclosure of related distribution 
practices. As a result of our work, the commission adopted a new rule 
improving the disclosure of mutual fund fees to shareholders. The rule 
requires that fund shareholder reports include a table that shows the 
cost in dollars associated with an investment of a standardized amount 
($1,000) that earned the fund's actual return for the period. This rule 
will enhance the ability of investors to evaluate the cost of investing 
in various mutual funds by making more it transparent and easier to 
compare the fees charged by mutual funds. In addition, the commission 
recently proposed enhanced requirements for the disclosure of mutual 
funds' transaction costs.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-551T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-763]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-909T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-317T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-533T]).

2.64.C. Strengthening the Oversight of Missile Technology Exports:

In 2001, we reported that the Departments of Commerce and State have 
not clearly established export jurisdiction for almost 25 percent of 
the items the United States agreed to control as part of an 
international missile nonproliferation agreement. To help prevent the 
unauthorized export and proliferation of missile technologies, we 
recommended that the departments take action to establish clear and 
comprehensive export control jurisdiction over missile technology 
items. Despite having opportunities to implement these recommendations, 
the departments failed to do so. As a result, the House of 
Representatives included language in the Department of State's 
authorization bill for fiscal years 2004 and 2005 requiring the 
departments to certify that all missile technology items are controlled 
and report any areas of overlap or omission to the Congress.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-120]).

Strategic Goal 3:

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges:

Reexamine the Federal Government's Role in Achieving Evolving National 
Objectives:

3.1.C. Developing a System of Key National Indicators:

We helped catalyze a growing amount of activity and interest in 
developing a system of selected key national indicators that would 
provide a single, independent, trusted, reliable, widely available, and 
usable source of information. Contributions included (1) advancing the 
Key National Indicators Initiative, a public/private effort established 
to build a prototype of a U.S. economic, social and cultural, and 
environmental indicator set that was formed in response to a February 
2003 forum that we and the National Academies hosted; (2) helping 
provide impetus to launch a nationwide community indicators consortium 
to increase the availability of information; and (3) supporting 
participation in a November 2004 Organisation for Economic Co-operation 
and Development forum that is intended to catalyze, promote, and 
sustain a global community of practice on how to develop and use 
indicator systems.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-672SP]).

3.2.C. Addressing the District of Columbia's Structural Imbalance and 
Management Issues:

As a result of our May 2003 report, the Congress is addressing the 
District of Columbia's large fiscal imbalance. Specifically, in May 
2004, a bipartisan bill was introduced in the House (H.R. 4269) to 
provide the District of Columbia with an $800 million federal payment, 
which would increase in future years. Our report is referenced in the 
bill as evidence that the District of Columbia faces an imbalance of 
this magnitude. Further, in June 2004, we testified at a hearing where 
our work was cited as a key document in informing this debate and 
spurring action to address the imbalance.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-666]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-908T]).

Support the Transformation to Results-Oriented, High-Performing 
Government:

3.3.A. Creating a Senior-Level Information Technology (IT) Executive in 
the Office of the Architect of the Capitol (AOC):

As a result of our 2003 management review of AOC, we recommended that 
AOC establish a chief information officer or comparable senior 
executive who has the responsibility, authority, and adequate resources 
for managing IT operations across the agency and who is a full 
participant in AOC's senior decision-making processes. In response, AOC 
established a senior executive with our recommended responsibility, 
authority, and resources, including control of AOC's IT budget. These 
actions should position the agency to effectively leverage IT as an 
agencywide resource.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-299]).

3.4.A. Eliminating Congressional Reporting Requirements:

Our products that highlighted the need to eliminate outdated 
congressionally mandated reporting requirements led to a statutory 
provision for the President to submit a list of reporting requirements 
that could be eliminated. Acting on a list submitted with the fiscal 
year 1997 budget document, the Congress passed the Federal Reports 
Elimination Act of 1998 (Pub. L. No. 105-362), which eliminated or 
modified approximately 187 congressionally mandated reports. The 
Congressional Budget Office estimated fiscal year 1999 savings of $1 
million and subsequent savings of $500,000 per year beginning with 
fiscal year 2000.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-92-90FS]).

3.5.A. Addressing Shortfalls in Foreign Language Capability:

Our January 2002 report led the Department of State to adopt a results-
oriented approach to human capital management for foreign language 
speakers. State also launched an initiative that will allow for longer 
language training, enhanced efforts to attract more qualified language 
speakers, and a plan to help meet the need for more people with higher 
levels of competence in all languages, especially those deemed critical 
to national security concerns.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-375]).

3.6.A. Influencing Federal Acquisition Rules to Maximize Competition 
and Savings when Buying Services:

Each year, DOD and other federal agencies spend billions of dollars to 
acquire IT and other services through the General Services 
Administration's Federal Supply Schedule. However, in November 2000, we 
found that because of unclear procedural guidance on contract orders, 
agencies were not taking the necessary steps to ensure that they were 
getting the best services at the best prices. DOD, for example, 
consistently purchased IT services from the schedule without seeking 
competitive quotes. In response to our work, the government's 
acquisition regulation councils adopted new rules in July 2004 that 
increase competitive quote requirements when agencies buy schedule 
services and require proper justification and higher-level approval of 
sole-source orders when competition is not possible--two actions that 
should result in best pricing under the General Services 
Administration's schedule.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-125]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-399R]).

3.7.A. Influencing Budget Reduction for DOD Services Contracting:

Although DOD is the government's largest purchaser of services--
spending nearly $100 billion in contract actions in fiscal year 2002--
it has failed to effectively leverage its enormous buying power. We 
found that this was due in large part to DOD's highly decentralized 
contracting environment and presented in our January 2002 report an 
overall strategic framework to guide DOD services-contracting reforms. 
In response to our work, the Congress enacted Defense authorization 
legislation in 2002 and appropriations legislation in 2003 directing 
DOD to institute reforms of its services contracting and cutting DOD's 
2003 appropriations by $850 million, which is a financial benefit of 
over $867 million in current dollars.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-230]).

3.8.A. Increasing Efficiency and Improving Performance of Competitive 
Sourcing:

Competitive Sourcing--a governmentwide Presidential management 
initiative--aims to expand competition between public and private 
sources to encourage innovation, increase cost efficiencies, and 
improve agency performance. Although each of the agencies we reviewed 
had laid the foundation for a competitive sourcing program, they faced 
several challenges in strategically focusing their long-range 
competitive sourcing plans to achieve improved outcomes. On the basis 
of recommendations that we made in our February 2004 report, OMB issued 
guidance requiring agencies to submit long-term plans that explain why 
functions are being selected for competition in an effort to help 
agencies realize the potential benefits of competitive sourcing and 
ensure greater transparency and accountability.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-367]).

3.9.A. Influencing Legislation to Ensure Improved Acquisition of 
Government Services:

The Services Acquisition Reform Act of 2003 provides federal agencies 
tools for addressing acquisition workforce reductions and using 
alternative contracting approaches. In April 2003, we testified that we 
supported certain provisions of the legislation--such as creating a 
Chief Acquisition Officer in each civilian executive agency--but noted 
concerns about others. For example, one provision would have changed 
the Federal Acquisition Regulation to include the use of time-and-
materials and labor-hour contracts for commercial services commonly 
sold to the general public. Such contracts may only be used when it is 
not possible to accurately estimate the extent or duration of the work 
or to anticipate costs with any reasonable degree of confidence. In 
line with our observation that adequate surveillance would be needed to 
give reasonable assurance that the contractor is using efficient 
methods and effective cost controls, the enacted legislation stipulated 
that certain conditions must be met for time-and-materials and labor-
hour contracts.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-716T]).

3.10.A. Enhancing the Transformation to e-Government--the "Electronic 
Connection" between Government and the Public:

We helped the Congress further the goal of effectively expanding the 
use of e-government to better serve the public. For example, we 
identified strengths and weaknesses of draft versions of the E-
Government Act of 2002, which became law in December 2002. Recognizing 
the importance of this transformation, the President designated 
expanded e-government as one of the governmentwide priorities in the 
President's Management Agenda. In addition, as the time frames for 
implementing these initiatives drew to a close, we reported on the 
mixed progress that agencies have made, highlighting the common 
challenges that need to be overcome if these projects are to produce 
meaningful results and pinpointing the need for better collaboration to 
improve the results for one poorly performing initiative. Other 
detailed assessments of individual initiatives have led to further 
improvements. For example, we reported on the challenges of developing 
a centralized e-Authentication Gateway for ensuring secure electronic 
transactions, a key element of expanded e-government. As a result of 
our raising these issues, the centralized gateway design was dropped in 
favor of a more effective decentralized approach. Similarly, our 
detailed look at emerging technologies, such as smart cards and public 
key infrastructure technology, identified potential opportunities for 
leveraging these technologies to support more secure electronic 
transactions.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-277]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-144]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-952]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-6]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-157]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-561T]).

3.11.A. Helping Federal Agencies Advance Their IT Modernization 
Programs:

Our ongoing work has helped to strengthen the management of complex, 
multibillion-dollar IT modernization programs at IRS, the Federal 
Aviation Administration, and DOD. For example, our continuing 
constructive engagement with IRS on its multibillion-dollar systems 
modernization program resulted in improved controls over software 
development and contributed to additional operational improvements and 
reduced costs by helping IRS more effectively manage the pace and scope 
of the program. Similarly, the Federal Aviation Administration has made 
progress in implementing our recommendations to implement key systems 
acquisition practices, IT investment management processes, and a 
systems architecture. The Federal Aviation Administration's adoption of 
these recommendations, combined with our recent recommendations for 
further improving IT management, has improved the agency's acquisition 
and oversight capabilities and resulted in reduced exposure to risks. 
Further, we continued to work constructively with DOD in its efforts to 
improve management of its multibillion-dollar business systems 
modernization efforts. For example, we maintained focus on DOD actions 
to implement our recommendations for developing and implementing an 
enterprise architecture. This work has resulted in some improvements in 
architecture and investment management process controls, but has also 
continued to highlight limited progress in other areas and identified 
additional weaknesses that require DOD's attention, such as the 
completeness of the architecture, the focus of architecture 
improvements, oversight and control of business system investments, and 
the use of system acquisition best practices.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-356]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-108]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-438T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-731R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-822]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-901]).

3.12.A. Improving the Government's Collection, Use, and Dissemination 
of Information:

We provided assistance to the Congress in ensuring that federal 
information is effectively managed and leveraged to improve agency 
performance and to protect citizens' rights. For example, we reported 
annually on governmentwide progress in implementing the Freedom of 
Information Act, highlighting the rise in the number of requests for 
information from the public that were fully granted, as well as the 
decrease in denials. On the issue of privacy, we also identified 
specific opportunities to improve governmentwide guidance on and 
compliance with the Privacy Act. Further, we highlighted related 
emerging issues by inventorying efforts across government to "mine" 
federal data to identify trends and patterns and determining the extent 
to which these efforts involved personal information. In addition, in a 
series of reviews mandated by the Congress, we made contributions 
toward ensuring that valuable electronic records created today will be 
adequately preserved in the future by identifying specific ways in 
which the National Archives and Records Administration could improve 
its planning for an electronic record archive. This work has resulted 
in substantial improvements to the Archives' efforts. Acting on a 
series of congressional mandates, we also provided perspective on how 
the changing technological environment is affecting printing and 
information dissemination in the federal government. Most recently, we 
reported on the challenges that the Government Printing Office faces 
and identified options for the future, focusing on electronic 
dissemination rather than printing.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-304]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-257]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-548]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-729T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-830]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-927]).

3.13.A. Baselining and Improving Federal Agencies' Major Information 
Technology Management Practices:

Drawing on IT management criteria in law, executive branch policy, and 
guidance, in fiscal year 2004, we baselined agencies' implementation of 
key strategic planning, performance measurement, and investment 
management practices. Upon finding significant deviations from these 
criteria, we issued numerous recommendations to 26 departments and 
agencies addressing, for example, IT strategic planning; establishing 
and linking enterprisewide goals and performance measures and tracking 
progress against these measures; and selecting, controlling, and 
evaluating investments. The departments and agencies have begun 
implementing these recommendations, which are intended to better ensure 
that agencies are responsible stewards of the billions of dollars for 
IT with which they have been entrusted.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-49]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-478T]).

3.14.C. Improving Federal IT Investment Management:

In reports and testimonies over several years, we demonstrated the need 
for improved IT investment management in the federal government. In 
2004, we released two particularly significant reports that contribute 
to improving IT investment management. In January 2004, we provided for 
the first time a governmentwide perspective of agencies' capability to 
manage the approximately $60 billion yearly federal IT investment. We 
reported that the major federal agencies had in place less than half of 
the critical IT investment management practices we reviewed. In March 
2004, we issued a significant revision to our IT Investment Management 
Framework, which provides a model for agencies to follow as they 
improve their investment processes. Among other things, the revision 
further explains the use of IT portfolio management as an important 
tool for the efficient and effective use of information resources. 
Together, these reports provide a status report on the state of IT 
investment management in the government and guidance on how to improve 
management of the federal government's IT investments.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-49]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-394G]).

3.15.C. Improving OMB Guidance on Evaluation Quality:

To improve consistency in OMB reviews of federal programs with its 
Program Assessment Rating Tool (PART) (a diagnostic tool meant to 
provide a consistent approach to evaluating federal programs as part of 
the executive budget formulation process), we recommended that OMB 
improve the tool's guidance to better define an "independent, quality 
evaluation." OMB subsequently released guidance for preparing the 
fiscal year 2006 budget that expanded on its discussion of evaluation 
quality and included references to our reports on evaluation as well as 
other evaluation resources from a list we circulated to federal 
evaluation officials, including OMB staff. For example, OMB explained 
the impacts that evaluations should ideally measure and explained the 
types of evaluations considered to be of the highest quality. 
Clarifying what constitutes quality evaluation evidence should help 
increase the credibility and acceptance of OMB's program ratings and 
associated program recommendations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-174]).

3.16.C. Improving the Performance and Accountability of the Census 
Bureau:

Our ongoing series of reviews of the decennial census has made the U.S. 
Census Bureau more results-oriented and has highlighted for the 
Congress the key budgetary and operational issues that need to be 
resolved to help ensure a more cost-effective head count in 2010. Our 
report on the cost and design of the census identified ways of 
improving the transparency of the bureau's planning process and 
underscored the need for policy makers to consider the long-term costs 
associated with the census to control spiraling expenditures and reduce 
the nation's future fiscal exposure. Similarly, our report on the 
feasibility of counting Americans abroad concluded that clear policy 
direction was needed on whether and how to count these individuals, 
while another study called the Congress's attention to shortcomings of 
the bureau's mail security procedures. Our work will also help improve 
the quality of census data in that our recommendations spurred the 
bureau to take steps to improve its procedures for counting migrant and 
seasonal farm workers.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-37]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-470]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-605]).

3.17.C. Developing a Database for the Federal Vacancies Reform Act of 
1998:

In December 2003, we identified for the Congress approximately 500 
executive branch positions subject to presidential appointment and 
Senate confirmation that are covered under the Vacancies Reform Act. We 
are maintaining a database of this information, which was obtained by 
surveying 116 executive branch agencies. The database represents the 
first comprehensive listing of such federal positions and will be very 
useful to the White House, the Congress, and us in our respective 
legislative and oversight roles regarding these positions. (Unnumbered 
correspondence):

3.18.C. Consolidating and Standardizing the Federal Government's Use of 
Terrorist Watch Lists:

Our work with the federal departments and agencies that develop and 
maintain watch lists and our constructive engagement with the recently 
created Terrorist Screening Center--which is administered by the 
Federal Bureau of Investigation--have helped the administration move to 
identify the level of watch list consolidation and standardization 
necessary to effectively control and protect our nation's borders. Our 
2003 report and testimony, which highlighted that the federal 
government's decentralized approach to using watch lists in performing 
its border security mission had resulted in nonstandard and overlapping 
lists, provided recommendations that included a step-by-step framework 
for determining the level of consolidation and standardization needed. 
Since our report, the Administration has taken actions that are 
consistent with our recommendations. For example, in September 2003, 
the President issued Homeland Security Presidential Directive 6, which, 
among other things, (1) makes it U.S. policy to develop, integrate, and 
maintain thorough and accurate information on terrorists and (2) 
directs the Attorney General to establish an organization to 
consolidate the federal government's approach to terrorist screening. 
In addition, the Attorney General, the Secretaries of State and 
Homeland Security, and the Director of Central Intelligence signed a 
memorandum of understanding to implement the President's directive, 
including establishing the Terrorist Screening Center, which became 
operational in December 2003. Our work has been key to helping the 
federal government transform how it manages watch lists and has 
improved our ability to effectively screen for terrorists at our 
borders.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-322]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-715T]).

3.19.C. Improving the Federal Bureau of Investigation's IT Management:

Our work at the Federal Bureau of Investigation helped to improve 
management of the bureau's ongoing and proposed IT investments, which 
total approximately a billion dollars over 3 years and are key to 
supporting the bureau's ongoing transformation. Specifically, our work 
in late 2003--which noted that the bureau did not have a blueprint, 
commonly referred to as an enterprise architecture, to guide and 
constrain IT investments or the management foundation needed to develop 
one--helped move the bureau to make architecture development a priority 
in fiscal year 2004 and energize efforts planned and under way to 
complete its architecture management foundation. For example, the 
bureau established an enterprise architecture policy that requires all 
IT investments to be reviewed by designated architecture governance 
board members. In addition, the bureau has hired a contractor to assist 
the bureau in developing, implementing, and maintaining the 
architecture. Our testimony and work in 2004 on systems modernization 
planning and other key IT management processes helped the bureau's new 
Chief Information Officer (CIO) identify the need to bring the bureau's 
policies and procedures for investment management and systems 
acquisition into alignment with the best practices used by leading 
organizations; these practices include granting the CIO the authority 
and responsibility to effectively manage IT resources across the 
bureau. In response, the CIO is, among other things, developing a new 
system life cycle process for managing IT investments that is to 
incorporate best practices. The CIO has also developed a proposal to 
provide his office with the requisite authority and responsibility to 
be effective. Collectively, our work helped the bureau to better 
position itself to effectively leverage IT in transforming the bureau 
to support critical mission operations such as preventing terrorism.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-959]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-190R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-578T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-842]).

3.20.C. Improving the Federal Government's Human Capital Practices:

We completed extensive and varied work that further developed and 
advanced the principles laid out in our Strategic Human Capital Model 
in areas including strategic workforce planning, training and 
development, equal employment opportunity and diversity, performance 
management, the federal hiring process, and the creation of much needed 
Chief Human Capital Officers in federal agencies. In doing so, we 
encouraged federal agencies to take discrete actions or enhance their 
current efforts to address human capital challenges in the 21st 
century.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-914]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-39]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-83]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-123T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-127T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-614]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-796T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-800T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-546G]).

3.21.C. Identifying Challenges Faced in the Establishment of DHS:

We reported on a number of management issues, and related needed 
actions, surrounding DHS's establishment. First, we reported on the 
potential use of the Chief Operating Officer Concept as a strategy to 
improve management at DHS. Such a position could elevate, integrate, 
and institutionalize attention on key management challenges. We also 
issued a series of reports and testimonies on the process to design 
DHS's human capital management system, proposed human capital 
regulations, and the infrastructure needed to successfully implement 
the system. We reported that DHS's effort to design the system was 
collaborative and consistent with positive elements of transformation. 
We also noted that DHS is in the early stages of developing the 
infrastructure needed to implement its new human capital management 
system. Finally, we produced a report and two testimonies on the need 
for DHS leadership to help the nation achieve interoperable wireless 
communication systems among emergency first responders. This work 
resulted in recommendations that DHS assess interoperability nationwide 
and use federal grant awards to encourage states to develop 
interoperability plans.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1099]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-231T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-479T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-570R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-617R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-790]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-876R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-963T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-740]).

3.22.C. Improving Legislative Branch Agencies' Performance and 
Accountability:

We completed comprehensive reviews of the major management functions, 
including human capital, financial management, and IT, at several 
legislative branch agencies. These reviews were conducted as 
constructive engagements and provided the agencies with best practice 
guidance and agency-specific recommendations related to the strategic 
planning process that should lead to improved performance, address 
program areas of long-standing concern, and move those agencies to a 
more results-oriented focus.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-36]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-299]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-400]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-830]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-966]).

3.23.C. Strengthening OMB's PART:

In June 2002, we responded to OMB's request for comments on the pilot 
version of PART, which is a tool intended to provide a consistent 
approach to evaluating federal programs during budget formulation. We 
questioned PART's ability to adequately evaluate programs that 
encompassed more than one of PART's seven mechanisms for service 
delivery and argued that the four components of a program's overall 
score were more meaningful than the overall score itself. Our analysis 
prompted OMB to allow its examiners to tailor the tool to each program 
being rated by selecting questions specific to more than one program 
type when necessary, and to publish a program's component scores in 
addition to its overall score in the fiscal year 2004 President's 
budget. In a later report, we recommended that OMB improve consistency 
in its PART reviews by improving its PART guidance. Specifically, we 
suggested (1) discussing the implications of how programs are defined; 
(2) clarifying the use of output measures versus outcome measures; and 
(3) better defining an "independent, quality evaluation." The 2006 PART 
guidance expanded the discussion in all three areas. OMB also 
supplemented the 2006 guidance with a list on its Web site of 
frequently asked questions about PART. Clarifying these areas of the 
guidance should help increase the credibility and acceptance of OMB's 
program ratings and associated program recommendations, ultimately 
increasing governmentwide interest in and awareness of linking 
resources and results during budget formulation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-174]).

3.24.C. Improving Results-Oriented Management Governmentwide:

Our 2004 review of the Government Performance and Results Act of 1993 
highlighted its effect in creating a governmentwide focus on results. 
Our report has moved the debate from the utility of agency planning and 
reporting efforts to how those efforts can be further strengthened. In 
addition to providing a comprehensive source of information for the 
accountability community on the effectiveness of the act and the 
challenges that remain, the report influenced legislation introduced in 
2004 to provide for enhanced evaluation of federal programs and routine 
assessment of program performance by OMB. The proposed legislation also 
calls for changes to time frames for agency strategic plan updates from 
3 years to 4 to correspond with changes in political leadership, as we 
recommended. Finally, the report influenced OMB to clarify its guidance 
to agencies on the relationship between the act and OMB's PART 
initiative.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-38]).

3.25.C. Strengthening DOD's Award Procedures for Contracts to Rebuild 
Iraq:

As of September 2003, agencies had obligated nearly $3.7 billion on 100 
contracts or task orders with private sector companies to support 
rebuilding efforts in Iraq. To determine whether these contracts had 
been awarded properly and administered effectively, we reviewed 25 
contract actions, which represented about 97 percent of the obligated 
funds. Although agencies generally complied with applicable laws and 
regulations when awarding new contracts, we found that agency officials 
overstepped the latitude provided by competition laws by issuing task 
orders for work outside the scope of existing contracts. During the 
course of our review and on the basis of our preliminary findings, the 
Air Force released new guidance for issuing task orders, and the Army 
took steps to appropriately justify some of its decisions. Subsequent 
to our report, issued in June 2004, DOD has taken steps to implement a 
number of additional corrective actions to ensure compliance with 
competition requirements and to reduce cost risk to the government, as 
we recommended.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-605]).

3.26.C. Realizing Savings from Government Purchase Cards:

Over the past decade, government purchase card spending has exploded 
from $1 billion to $16 billion. To determine whether agencies were 
leveraging this significant buying power to negotiate discounts, we 
analyzed purchase card prices at eight agencies that account for over 
85 percent of the government's purchase card spending. Our analysis 
showed that most agencies had not identified and taken action to obtain 
more favorable prices on purchase card buys, and that the government 
could realize savings of up to $300 million if agencies were to 
negotiate discount agreements with their major purchase card vendors. 
On the basis of our findings, which we reported in March 2004 and 
testified on in April 2004, the Purchase Card Waste Elimination Act of 
2004 was introduced. The act requires OMB and the General Services 
Administration to implement the recommendations we made to enable the 
government to obtain better prices on purchase card buys.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-430]).

3.27.C. Improving Internal Controls Related to the CPI:

The CPI is one of the most important economic indexes produced by the 
federal government, and it has a significant impact on the federal 
budget. To compile the CPI, BLS collects tens of thousands of prices 
every month. Other than for certain food items, we found that BLS did 
not have any written guidance for its analysts when they made 
adjustments for replacement items that were "substitutions" for items 
it had been tracking. Nor did BLS have a policy of systematically 
reviewing adjustments made. We recommended that BLS address these 
issues because substitutions have a large impact on the price increases 
reported in the CPI. As a result of our report, BLS created written 
guidance for almost all of its items and instituted a program of 
monthly review to improve its internal controls and provide greater 
assurance that the CPI is an accurate measure of monthly price changes.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-84]).

3.28.C. Helping Make the Government's Mapping Information More Useful:

Agencies at all governmental levels collect electronic information 
linked to specific geographic locations (geospatial information) in 
many different formats and resolutions, which is not only wasteful but 
prevents the information from being used to best advantage. Because 
good geospatial information is critical to many types of decision 
making, we reviewed existing coordination efforts and made 
recommendations to OMB to better streamline and consolidate geospatial 
information and also recommended that the Secretary of the Interior 
direct development of a national geospatial strategic plan. 
Congressional overseers, concerned about this long-standing problem, 
used our work as the basis for a hearing in June 2004 to draw attention 
to the problems of duplicative geospatial investments and spur efforts 
at better coordination and consolidation.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-703]).

3.29.C. Helping CBP Improve Its IT Modernization Program:

Our work has resulted in DHS's CBP strengthening its ability to manage 
its multibillion-dollar IT modernization program and provided the 
Congress with information on which to base funding decisions. Our 
recommendations have focused on the need for the bureau to reduce the 
number of concurrent system development activities, reconcile program 
cost estimates with independent estimates, address human capital 
weaknesses, and ensure the independence of its function to oversee the 
modernization program. CBP's adoption of our earlier recommendations 
related to developing and using an enterprise architecture, following 
an incremental system acquisition approach, and establishing system 
acquisition process controls has resulted in reduced exposure to risk.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-406]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-719]).

3.30.C. Improving Electronic Health Information Exchange Capabilities:

Through a series of reviews in fiscal year 2004, we highlighted 
critical planning and management weaknesses in VA's and DOD's multiyear 
efforts to develop and exchange electronic medical records that are 
essential to providing veterans and active duty military personnel with 
quality health care and necessary assistance in adjudicating disability 
claims. We reported that after 6 years of effort, the departments had 
not yet defined an architecture and technological solution to guide 
their development of the electronic capability needed to exchange 
patient health information between their systems, and lacked a fully 
established project management structure for the undertaking. Our 
findings and related recommendations helped the Congress establish an 
agenda for more effectively overseeing and tracking VA's and DOD's 
progress toward defining interoperable health technologies and 
encouraged a closer collaboration between the departments--which has 
helped strengthen their project planning and management and positioned 
them to more successfully contribute to the President's initiatives to 
define a framework and strategy for nationwide adoption of health 
information technology.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-687]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-811T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-402T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-271T]).

3.31.C. Strengthening the Nation's Border Security:

DHS's United States Visitor and Immigrant Status Indicator Technology 
(US-VISIT) program is a legislatively required effort to track the 
entry and exit of foreign visitors traveling to the United States and 
is one of DHS's largest single programs. In reviewing the fiscal year 
2004 expenditure plan for the US-VISIT program, we identified a number 
of areas where US-VISIT could improve its program management 
activities. We noted that the program office was not employing the kind 
of rigorous and disciplined management controls typically associated 
with successful programs and that as the program grows in scope and 
complexity, these controls would become even more critical. The US-
VISIT program management office generally agreed with our findings and 
has begun implementing some of our recommendations, including 
developing effective risk management processes and plans and developing 
system security plans.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-586]).

3.32.C. Strengthening DHS's IT Management:

Our work at DHS helped to strengthen the management of the department's 
strategic plans and efforts to consolidate and integrate the 
approximately 700 IT systems and supporting IT organizations of the 22 
component agencies merged within the department in 2003. In addition, 
our continuing constructive engagement with DHS on its development of 
its blueprint for current and future strategic operations and 
technology--commonly called an enterprise architecture--has 
contributed to helping the department design and implement a more 
effective and efficient approach to integrating business operation with 
supporting IT. For the third consecutive fiscal year, we conducted a 
mandated review of DHS's governmentwide, multibillion-dollar program to 
track the entry and exit of foreign visitors traveling to the United 
States, known as US-VISIT. Our work resulted in recommendations to 
strengthen the US-VISIT Program Office's ability to manage this program 
and provided the Congress with information upon which to make funding 
decisions. Our recommendations have focused on the need to establish a 
governmentwide entity to guide and direct the program, develop and 
implement key systems acquisition practices, address program and human 
capital management weaknesses, and assess the project's mission value 
in relation to its costs and risks. Also, since 1999, we have reported 
on CBP's efforts to acquire the Automated Commercial Environment, a new 
trade processing system. Our work has resulted in improved system 
acquisition management controls and reduced overlap between programs to 
develop multiple trade systems. Further, we made recommendations 
intended to reduce the risks of acquiring the Automated Commercial 
Environment by, for example, improving human capital management, 
instituting reliable cost estimating, ensuring independent 
verification and validation, and coordinating the Automated Commercial 
Environment with other programs such as US-VISIT. Collectively, our 
work has helped DHS to better position itself to effectively leverage 
IT as a departmentwide resource and thus achieve its challenging 
mission goals and objectives.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-406]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-509]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-719]).

3.33.C. Improving the Government's Ability to Respond to Terrorist 
Attacks and Other Emergencies:

We helped the Congress move toward ensuring that the federal government 
is prepared for emergencies, including terrorist attacks. For example, 
we reported, based on detailed assessments of continuity-of-operations 
plans at major federal agencies, that agencies had not yet identified 
their functions that must be accomplished in an emergency and that none 
of the plans fully met the requirements of federal planning guidance. 
This work has focused congressional, agency, and public attention on 
the importance of these issues and resulted in improved planning 
guidance that places greater emphasis on the identification of 
essential agency functions.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-160]).

3.34.C. Developing Tools to Assist Agencies in Better Managing and 
Leveraging IT Dollars in Support of Business Operations:

Guidance and tools that we developed are used today as an integral part 
of many federal agencies' IT programs. Most recently, in 2004, we 
issued the latest update to an IT investment management framework, 
which identifies and organizes critical processes for selecting, 
controlling, and evaluating IT investments in a framework of 
increasingly mature stages. Among other things, our update further 
explains the use of IT portfolio management as an important tool for 
the efficient and effective use of information resources. Use of this 
framework and our targeted agency reviews have helped to bring about 
improvements in the way billions of IT dollars are invested and managed 
each year in support of federal agencies' business operations. Another 
example is our work promoting the effective management of enterprise 
architectures--blueprints for engineering business processes and for 
implementing and evolving supporting information technology systems to 
optimize mission performance. Specifically, the enterprise 
architecture maturity framework we developed has become a common 
benchmarking tool for OMB to use in measuring improvements in the 
content of federal agencies' enterprise architectures and has 
established us as a "thought leader" in the architecture field.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-40]).

3.35.C. Promoting Effective Development and Use of Enterprise 
Architectures:

We promoted effective management of enterprise architectures--
blueprints for engineering business processes and for implementing and 
evolving supporting information technology systems to optimize mission 
performance. Building on our work in the late 1990s, which indicated 
that agencies were struggling with enterprise architecture development 
and use, we devised and published a maturity framework to provide a 
common benchmarking tool for planning and measuring efforts to improve 
their enterprise architecture management. In 2001, we conducted the 
first governmentwide survey that established a baseline indicating 
where improvements were needed, provided agencies with a road map for 
making those improvements, and called attention to the need for OMB to 
address barriers to challenges agencies were facing in their 
architecture efforts. Subsequently, our 2003 governmentwide 
architecture survey showed progress relative to the baseline and 
highlighted the need for continued improvements by individual agencies 
and OMB. Further, our participation in a congressional hearing on the 
Federal Enterprise Architecture, which is the cornerstone of OMB's 
effort to promulgate enterprise architectures throughout agencies, 
served to clarify the Federal Enterprise Architecture's purposes of 
facilitating the development of agencies' enterprise architectures and 
identifying opportunities for interagency collaboration on common IT 
solutions. Additionally, our reviews of DOD, DHS, and the National 
Aeronautics and Space Administration (NASA) have each highlighted the 
need for improvement to the management and content of their enterprise 
architectures. Taken together, our work has established us as a leader 
in the enterprise architecture field and a valued participant in 
governmentwide bodies, including the Chief Architect's Forum of the 
Chief Information Officers Council.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-6]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-458]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-40]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-43]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-777]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-798T]).

Support Congressional Oversight of Key Management Challenges and 
Program Risks to Improving Federal Operations and Ensuring 
Accountability:

3.36.A. Helping DOD Recognize Significant Flaws in Its Plans to Obtain 
an Audit Opinion:

As part of a joint effort with DOD's Office of Inspector General to 
review DOD components' plans for obtaining a favorable fiscal year 2004 
audit opinion, we concluded that the plans were neither feasible nor 
cost-effective. Specifically, we noted that DOD's plans omitted a 
substantial number of material financial statement line items; were 
based on erroneous key assumptions (such as the acceptability of 
unaudited beginning balances); were predicated on completion of 
corrective actions within short, unrealistic time frames; and failed to 
identify work-arounds to address reported deficiencies or relied upon 
extensive and costly manual work-arounds prior to the implementation of 
business process/system solutions. In response to our joint assessment, 
DOD's Comptroller recognized that the effort--estimated to cost 
approximately $2.2 billion--was neither cost-effective nor feasible and 
recognized that the effort would have failed to result in sustainable 
business processes and system improvements or achievement of the 
department's goal of a favorable opinion on its fiscal year 2004 
financial statements. The Comptroller's decision not to spend these 
funds resulted in a financial benefit of over $2 billion in fiscal year 
2004. (Based on work papers):

3.37.A. Reducing DOD System Funding:

In congressional testimony and a related report, we have stated that 
despite an annual investment of $19 billion, DOD's system solutions 
have not been implemented on time and within budget, nor have they 
delivered the promised capability. Further, our analysis showed that 
DOD did not submit for approval $863 million in system modernization 
improvements to the DOD Comptroller, prior to the funds being 
obligated, as required by the fiscal year 2003 National Defense 
Authorization Act. As we have recommended, DOD has efforts under way to 
improve its control and accountability over its business system 
investments. For example, the DOD Comptroller has rejected or curtailed 
funding for several business systems, totaling about $130 million 
because the system efforts lacked adequate business cases. 
Institutionalizing this approach will help offer appropriate assurances 
that systems are delivered on time, within cost limits, and satisfy the 
planned capabilities.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-525]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-458]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-465]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-615]).

3.38.A. Protecting Government Officials from Potential Security Risks:

In June 2003, we found that personal information, such as addresses, 
for some federal government officials could be easily obtained from 
various Internet Web sites. Also, we found that some counties in the 
United States have made property tax records--including such data as 
the names of property owners, their addresses, and the value of the 
property as assessed for tax purposes--publicly available on the 
Internet. We advised the heads of 30 federal agencies that the 
availability of such information might pose serious security threats 
for some officials and their families because any individuals, 
including terrorists and other criminals inside or outside the United 
States, can easily obtain it. In response to our recommendations, the 
Department of the Treasury directed its officials to request unlisted 
telephone numbers and the removal of their names from real estate and 
tax databases available on the Internet. Also, the Assistant Sergeant-
at-Arms of the Senate has included our recommendations on the 
protection of personal information as part of the U.S. Capitol Police's 
security briefing to newly arrived senators. (Based on briefing):

3.39.A. Revising DOD Working Capital Fund Appropriations:

Over the years, we have reviewed DOD funds related to work that is 
carried over from one fiscal year to the next--referred to as 
carryover--and various aspects of the defense working capital fund, 
including cash management requirements. Our work on excessive amounts 
of carryover resulted in the Congress reducing Air Force and Navy 
fiscal year 2004 operation and maintenance appropriations by $258 
million. Further, our work on cash management requirements found that 
(1) the Army and Air Force working capital funds' cash balances would 
exceed DOD's cash requirement at the end of fiscal year 2004 and (2) 
the Navy working capital fund cash balance would not exceed the cash 
requirement because the Navy planned to move $448 million of cash out 
of the working capital fund during fiscal year 2004. Acting on this 
review, the Congress reduced the Army, Air Force, and Navy fiscal year 
2004 operation and maintenance appropriations by $372 million because 
of excessive amounts of working capital fund cash.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-96-54]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD/NSIAD-97-
221]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-559]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-623]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-668]).

3.40.A. Influencing Legislation That Addresses NASA's Workforce 
Challenges:

In a series of reports and testimonies over the past several years, we 
highlighted concerns about workforce issues facing NASA, including a 
lack of qualified staff to support areas critical to shuttle safety. 
Recognizing the seriousness of this problem, we identified 
"strengthening human capital management" as one of NASA's major 
management challenges beginning in January 2001. In response, NASA 
proposed legislation to provide it with further flexibilities for 
attracting and retaining a skilled workforce. On February 24, 2004, the 
Congress enacted the NASA Flexibility Act of 2003 (Pub. L. No. 108-
201), which gives NASA more flexibility to recruit and retain a highly 
skilled workforce.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD/GGD-00-186]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-1122T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-258]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-945T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-114]).

3.41.A. Improving Controls over Government Purchase Cards:

In a series of reports and testimonies beginning in 2001, we 
highlighted pervasive weaknesses in the government's $16 billion 
purchase card program. Our work identified numerous cases of fraud, 
waste, and abuse at DOD, HUD, and the Federal Aviation Administration. 
These agencies have taken significant steps to implement the hundreds 
of recommendations we made to upgrade their controls. Major improvement 
areas include enhanced controls over card issuance and cancellation, 
reduced span of control for approving officials, increased human 
capital resources and training, new performance measures and goals, 
required advance approval of purchases, and independent receiving and 
acceptance of goods and services. These efforts will substantially 
reduce the government's vulnerability to fraud, waste, and abuse in 
agencies' purchase card programs.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-995T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-32]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-506T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-732]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-1041]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-154T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-167T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-292]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-489]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-405]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-156]).

3.42.A. Reducing National Security Risks Related to Sales of Excess DOD 
Property:

Our testimony and report to the Congress stated that DOD sold excess 
biological laboratory equipment; chemical and biological protective 
suits; and related gear such as masks, hoods, filters, boots, and 
gloves that could be used to produce and disseminate biological agents 
such as anthrax. As a result of our work, DOD performed a risk 
assessment to determine and establish appropriate controls over excess 
laboratory equipment and discontinued the sale of chemical and 
biological protective suits and related gear to the public--actions 
that should significantly reduce the associated national security risk. 
(GAO-04-15NI and GAO-04-81TNI):

3.43.A. Improving Collection of Delinquent Nontax Debt:

We continue to promote using key provisions of the Debt Collection 
Improvement Act of 1996 to collect nontax delinquent debt that annually 
has exceeded $60 billion. Acting on our recommendations, the Department 
of the Treasury and other federal agencies have continued actions to 
implement the act's key provisions to improve collections. For example, 
Treasury added certain Social Security benefit payments to its payment 
offset program to recover delinquent debts. Also, USDA's Farm Service 
Agency and Rural Housing Service improved debt collection performance 
and have taken actions to refer all eligible delinquent debts to 
Treasury for collection. These actions, along with the actions that 
other agencies have taken in response to our recommendations, have 
added about $366 million to a steady stream of recoveries.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AFMD-90-12]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD-98-195]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-308]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-313]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-463]).

3.44.C. Improving NASA's Cost-Estimating Processes to Help Strengthen 
Program Management:

For more than a decade, NASA's contract management has been on our 
high-risk list--partly because of persistent cost growth and NASA's 
inability to collect, maintain, and report the full cost of its 
programs. Through a review of selected programs, we found that NASA 
lacks the basic cost-estimating processes needed to establish 
priorities, quantify risks, and make informed investment decisions. As 
a result, programs may be restructured to fit available resources, 
increasing the risk of cost and schedule overruns and failure to meet 
program objectives--a risk that will escalate if NASA reallocates 
funding from existing programs to support new visions for space 
exploration. We also identified a number of barriers to implementing 
effective cost-estimating practices, including the lack of reliable 
financial and performance data and the lack of incentive to measure and 
monitor cost trends. Acting on our analysis and recommendations, NASA 
has begun to take actions--including developing or revising policies 
and directives--to remove these barriers and improve its cost 
estimating practices.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-642]).

3.45.C. Identifying Unpaid Taxes Owed by DOD Contractors:

We reported that DOD and IRS records showed that over 27,000 
contractors registered in DOD's Central Contractor Registration system 
owed about $3 billion in unpaid taxes as of September 30, 2002. DOD had 
not fully implemented provisions of the Debt Collection Improvement Act 
that would have assisted IRS in levying up to 15 percent of each 
contract payment to offset DOD contractors' federal tax debt. IRS's 
continuing challenges in collecting unpaid federal taxes--resource and 
workload management constraints and control breakdowns--also 
contributed to the problem. We estimated that DOD could have collected 
at least $100 million in fiscal year 2002 had it and IRS fully utilized 
the levy process authorized by the Taxpayer Relief Act of 1997. As of 
September 2003, DOD had collected only about $687,000, in part because 
DOD provided contractor payment information from only one of its 
numerous payment systems to the Treasury Offset Program. As a result of 
our recommendations, DOD agreed to fully comply with the law, and IRS 
noted a number of actions to accelerate the collection of delinquent 
taxes and estimated that more than 2 million additional accounts and 
over $25 billion would be included earlier in the collection process.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-95]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-414T]).

3.46.C. Increasing Focus on Pay Problems Experienced by Mobilized Army 
National Guard and Reserve Soldiers:

In reports and related testimonies, we highlighted significant pay 
problems--including overpayments, underpayments, and late payments--to 
Army National Guard and Reserve soldiers mobilized to active duty in 
support of Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom. 
Overall, we found 782 of the 829 soldiers we studied from 14 case study 
units had at least one pay problem associated with their mobilization. 
DOD's inability to provide timely and accurate payments to these 
soldiers, many of whom risked their lives in dangerous combat missions 
in Iraq or Afghanistan, distracted them from their missions, imposed 
financial hardships on the soldiers and their families, and has had a 
negative impact on retention. DOD agreed with the series of 39 
recommendations we made to improve its processes, human capital 
operations, and systems operations and has initiated some actions and 
planned other actions to address these deficiencies. Thus far, DOD has 
consolidated related pay policies and procedures, eliminated error-
prone manual monthly entry for certain types of pay, and established 
required clearer explanations of pay transactions on soldiers' leave 
and earnings statements.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-89]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-413T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-911]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-990T]).

3.47.C. Improving Controls over DOD's Credit Cards:

As part of our series of reports on DOD's controls over credit card 
transactions, we reported and testified on flaws in DOD's systems, 
processes, and internal control environment related to the use of 
premium-class (first-class and business-class) airline travel by DOD 
military and civilian personnel. On the basis of statistical sampling, 
we estimated that 72 percent of the over 68,000 premium-class airline 
tickets DOD purchased for fiscal years 2001 and 2002 were not properly 
authorized and that 73 percent were not properly justified. During 
fiscal years 2001 and 2002, DOD spent almost $124 million on premium-
class tickets that included at least one leg in premium class--usually 
business class. In response to recommendations in our report, DOD has 
taken action to establish and monitor adherence to policies and 
procedures to limit premium-class travel and to increase the level of 
authority required to approve premium-class travel. These actions, 
along with DOD's newly formed premium-class taskforce, should help 
establish clear lines of responsibility, authority, monitoring, and 
accountability to improve controls over premium-class travel.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-88]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-229T]).

3.48.C. Terminating a HUD Contractor Engaged in Highly Questionable 
Billing Practices:

In 2004, we identified $16.5 million in payments for questionable items 
that were made by HUD's Federal Housing Administration single-family 
property program. These included payments of $181,450 to a property 
management contractor for work that was substandard or not performed. 
For over 5 years, HUD documented its concerns regarding the firm's 
serious performance deficiencies and questionable billing practices. At 
the same time, HUD paid bills from this contractor that totaled over 
$425 million. Using various forensic auditing techniques, we detected a 
pattern of suspicious billing schemes and identified the potentially 
fraudulent claims from this contractor. Our work contributed to the 
termination of this firm's contract with HUD and a referral to the U.S. 
Attorney's Office for prosecution.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-390]).

3.49.C. Revealing Government Costs for Employee Degrees from Diploma 
Mills and Other Unaccredited Schools:

We testified this year before the Congress on our work involving 
degrees from diploma mills and other unaccredited schools. We obtained 
information from three such schools that indicated payments totaling 
almost $170,000 by the federal government for students identified as 
federal employees who had received degrees. However, on the basis of 
our work, we believe that the amount paid by the federal government 
probably exceeds that total. We found that many of the eight agencies 
we contacted had difficulty in providing reliable data because they did 
not have systems in place to properly verify academic degrees or to 
detect fees for degrees that are masked as fees for training courses. 
Further, the agency data we obtained likely do not reflect the true 
extent to which senior-level federal employees have diploma-mill 
degrees. This is because the agencies do not sufficiently verify the 
degrees that employees claim to have or the schools that issue the 
degrees--a necessary step considering similarity that frequently exists 
between the names of accredited schools and the names assumed by 
diploma mills. Finally, we found that there are there are no uniform 
verification practices across the government by which agencies can 
obtain information and conduct effective queries on schools and their 
accreditation status.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-771T]).

3.50.C. Curtailing Purchases of an Addictive Pain Medication through 
the Internet without a Prescription:

In congressional testimony this year, we told how our investigators 
easily obtained hydrocodone--a potentially dangerous and addictive 
narcotic pain medication whose illicit use has increased significantly 
in recent years. Our investigators placed orders for hydrocodone 
through certain Web sites and found that they were easily able to 
purchase the drug without submitting a prescription or undergoing an 
examination by a physician. Also, our investigators found that the 
Internet pharmacies from which they purchased the hydrocodone charged 
significantly higher prices for the drug than walk-in pharmacies. We 
concluded that Internet drug operations like these appear to be in the 
business of knowingly servicing, and profiting from, individuals who 
may purchase pain medication for illicit purposes.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-892T]).

3.51.C. Demonstrating How Illegal Drug Trafficking Undermines Patient 
Drug Rehabilitation Efforts:

In our July 2004 testimony before the Congress, we discussed our work 
related to illegal drug activities in the vicinity of some District of 
Columbia drug rehabilitation clinics. Specifically, we conducted 
physical surveillance of five District of Columbia clinics and found 
that significant illegal drug trafficking took place in the vicinity of 
these clinics. On a daily basis, patients trying to make their way to 
the clinics must navigate their way through a virtual bazaar of illegal 
drug dealing when they enter and exit the clinics. Also, clinic 
personnel and law enforcement officials we interviewed at three of the 
five clinics confirmed that extensive illegal drug dealing activity 
occurred in the vicinity of their clinics. Clinic personnel told us of 
problems patients had in resisting the temptations offered to them by 
drug dealers who confront the patients on a daily basis. Also, clinic 
personnel told us that at least monthly, at least one patient reports 
being assaulted in the clinic's vicinity and robbed of methadone. On 
the basis of our work, we concluded that because of the significant 
amount of drug trafficking and criminal activity that took place around 
the five clinics, the efforts of patients who are seeking 
rehabilitation and the clinic personnel who serve them are 
significantly undermined.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-946T]).

3.52.C. Transforming and Modernizing the Accountability Profession:

Building on the high standards of independence in auditing set forth in 
our Government Auditing Standards--popularly known as the Yellow Book-
-we are continuing to foster the transformation of the accountability 
profession. We are working closely with the Public Company Accounting 
Oversight Board and other standard setters to promote and communicate 
the major accountability reforms required by the Sarbanes-Oxley Act and 
to consider the important principles of those reforms and how they can 
be applied to improve accountability in governmental and other types of 
entities. Our staff experts have spoken on these topics before hundreds 
of forums and conferences, reaching thousands of state, local, federal, 
and international government and private sector accountability 
professionals. These efforts and others we have taken to promote 
important principle-based changes and discussions about the future 
direction of the profession are vital to safeguarding taxpayer and 
investor interests. (Based on coordination efforts and continual work):

3.53.C. Establishing an Auditing Standards Coordinating Forum:

The Comptroller General has established the U.S. Auditing Standards 
Coordinating Forum whose members include GAO, the Public Company 
Accounting Oversight Board, and the American Institute of Certified 
Public Accountants' Auditing Standards Board to help coordinate the 
various bodies responsible for setting standards that apply to auditing 
all types of entities in the United States, including governmental 
entities, publicly traded and privately held companies, and not-for-
profit organizations. The forum's objectives are to ensure consistency 
in core U.S. auditing standards, where appropriate; identify gaps in 
standards; minimize duplicative efforts; and modernize the accounting 
profession. The results are already evident in cooperation and 
coordination on current reforms, the current development of new 
standards, and dialog on important emerging challenges, including the 
harmonization and convergence of U.S. and international standards. With 
a commitment to advancing the clarity, integrity, and consistency of 
auditing standards, the U.S. Auditing Standards Coordinating Forum is 
furthering the goals of accountability in the public interest. (Based 
on coordination efforts and continual work):

3.54.C. Alerting the Congress to Fraud, Waste, and Improper Payments 
Related to DOD's Travel Cards:

We reported that a weak control environment and breakdowns in key 
controls over DOD's centrally billed travel accounts led to millions of 
dollars wasted on unused airline tickets, reimbursements to travelers 
for improper and potentially fraudulent airline ticket claims, and 
issuance of airline tickets based on invalid travel orders. For 
example, we identified 58,000 airline tickets--primarily purchased in 
fiscal years 2001 and 2002--with a residual value of more than $21 
million that were unused and not refunded as of October 2003. After 
examining limited airline data, we determined that the potential 
magnitude of DOD's unused tickets might total more than $100 million 
since 1997. DOD concurred with our recommendations to improve controls, 
including moving to a well-managed individually billed account program. 
DOD has taken action to attempt to recover the value of the unused 
tickets that were not refunded and has recovered more than half of the 
$100,000 in improper payments that we identified.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-398]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-576]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-825T]).

Analyze the Government's Fiscal Position and Strengthen Approaches for 
Addressing the Current and Projected Fiscal Gap:

3.55.C. Helping Measure the Tax Gap:

We have played a pivotal role in IRS's development of a new program to 
identify the nature and causes of taxpayer noncompliance--key 
information needed to help IRS reduce the $311 billion annual tax gap. 
The tax gap is the difference between taxes owed and what taxpayers 
voluntarily and timely pay. In reports and testimonies dating back to 
the early 1990s, along with numerous discussions with senior 
administration and congressional officials, we encouraged IRS to 
develop and the Congress to support research that balances the 
competing demands of providing sound information without unduly 
burdening taxpayers. IRS now has under way the first iteration of the 
National Research Program, a research effort that we concluded is 
likely to meet these demands. The first reliable information since the 
early 1990s on individual taxpayers' compliance will soon be in the 
hands of IRS researchers and enforcement personnel.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-93-52]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-95-39]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-GGD-95-207]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-95-199R]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-96-21]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-96-89]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-535]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-769]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-614]).

3.56.C. Enforcing Charitable Contribution Rules:

In reviewing vehicle donations to charities, we found examples of 
taxpayers claiming deductions that far exceeded the actual proceeds to 
the charities. After the release of our report, the Congress introduced 
legislation to require more substantial documentation of claimed 
deductions, including a better link to the actual value of the vehicle 
to the receiving charity. Treasury also proposed legislation intended 
to ensure taxpayers claim appropriate values for their donated 
vehicles.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-73]).

3.57.C. Governmentwide Actions to Manage Improper Payments:

We informed congressional deliberations in passing the Improper 
Payments Information Act of 2002 and influenced related OMB 
initiatives. Cumulatively, these efforts establish for the first time 
governmentwide expectations that agencies will take efforts to measure 
and report improper payments. Public acknowledgement of the extent of 
these weaknesses and related requirements to identify and resolve the 
causes offers substantial promise that payment controls will be 
improved. While this is a long-term effort, OMB has reported 
expectations of substantial savings and benefits to the taxpayer while 
ensuring that government payments are made as intended.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-99]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-631T]).

3.58.C. Alerting the Congress to Abusive Tax Shelters and Schemes:

We reported this year on abusive tax shelters and schemes, which 
represent a significant threat to the country's tax system. Not only do 
these shelters and schemes reduce tax revenues, they also threaten to 
erode public confidence in the tax system, leading compliant taxpayers 
to believe that the system is unfair. As the Congress considered 
legislation this year to curb abusive tax shelters and schemes, we 
contributed to the debate, in part by providing information on the 
nature of the problems and the challenges faced by IRS in combating 
them.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-50]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-104T]).

3.59.C. Comparing Reported Tax Liabilities of Foreign-and U.S.-
Controlled Corporations:

We contributed to the congressional debate over tax policy and the 
impact of foreign ownership, including the debate over pending 
corporate tax legislation, by comparing reported tax liabilities of 
foreign-controlled corporations with those of U.S.-controlled 
corporations. Our comparison showed that the tax liabilities of these 
types of corporations varied depending on the measure. A majority of 
all corporations reported no tax liabilities during the years 1996 
through 2000, with a higher percentage of foreign-controlled 
corporations doing so than U.S.-controlled corporations. However, the 
results were reversed for large corporations. Also, for all 
corporations and for large corporations in particular, foreign-
controlled corporations reported a lower amount of tax liability per 
$1,000 in gross receipts than U.S.-controlled corporations.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-358]).

3.60.C. Identifying Unintended Tax Consequences for Some Combat-
Deployed Service Members:

We identified how some low income-earning members who serve in a combat 
zone are worse off for tax purposes because of the interaction between 
the combat zone exclusion and the earned income and child tax credits. 
We suggested that the Congress consider revising the rules of the 
credits to remedy the tax consequences associated with the combat zone 
exclusion, and legislation was introduced to address the tax credit 
rules for computing the earned income and child tax credits. This bill 
will allow military personnel in combat zones to include combat pay 
when calculating their earned income and child tax credits. Thus, it 
will allow military personnel to continue to receive the combat zone 
exclusion along with other tax credits that members may be eligible to 
receive. As of the end of fiscal year 2004, the Working Families Tax 
Relief Act of 2004, which included this legislation, was awaiting the 
President's signature.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-721R]).

3.61.C. Providing the Congress Insight on DOD's Financial and Business 
Management Transformation Challenges:

DOD's substantial financial and business management weaknesses 
adversely affect its ability to produce auditable financial statements 
and to provide timely, reliable information for management and the 
Congress to use in making informed decisions. They also hinder 
operational efficiency; adversely affect mission performance; and leave 
DOD vulnerable to fraud, waste, and abuse. Our work within various DOD 
business process areas, such as logistics, finance and accounting, 
travel, and military pay and our work pertaining to DOD's enterprise 
architecture and business system modernization efforts provided the 
basis for two congressional testimonies on the condition of DOD 
business operations, the underlying causes of DOD business 
transformation challenges, key elements of successful reform, and the 
status of selected DOD reform efforts. To further improve the 
likelihood of meaningful, broad-based financial management and related 
business reform at DOD, we highlighted two suggestions for legislative 
consideration. First, we suggested that a senior management position be 
established to spearhead DOD-wide business transformation efforts. 
Second, we proposed that the leaders of DOD's functional areas, 
referred to as domains, receive and control the funding for system 
investments, as opposed to the military services. Domain leaders would 
be responsible for managing business system and process reform efforts 
within their business areas and would be accountable to the new senior 
management official for ensuring their efforts comply with DOD's 
business enterprise architecture.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-551T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-626T]).

3.62.C. Auditing the U.S. Government's Financial Statements:

As in the past 6 fiscal years, we were again unable to express an 
opinion on the U.S. government's consolidated financial statements 
because of ongoing material weaknesses in internal control and 
accounting and reporting issues. However, our efforts are contributing 
to significant improvements in (1) the reliability and accuracy of the 
information contained in the U.S. government's consolidated financial 
statements, (2) the quality of financial statement audits being 
performed by agencies' Offices of Inspectors General, and (3) 
addressing one of the major impediments to an opinion on the 
consolidated financial statements related to accounting for billions of 
dollars of transactions between federal government entities. For 
example, our work again identified numerous material inaccuracies in 
amounts presented and descriptive information contained in the 
consolidated financial statements that, if not corrected, could be 
misleading to readers. In addition, acting on our suggestions, agency 
auditors have improved their audit procedures, thereby enhancing our 
ability to use their work in fulfilling our responsibilities as 
principal auditor of the U.S. government's consolidated financial 
statements and improving the quality of the federal government's 
financial management and reporting.
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-477T]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-886T]).

3.63.C. Helping Decision Makers Understand the Federal Government's 
Long-Term Fiscal Imbalance:

We continued this year to call attention to the federal government's 
long-term fiscal health and the need for greater transparency about the 
nation's finances. As the baby boom generation retires, federal 
spending on retirement and health programs--Social Security, Medicare, 
and Medicaid--will grow dramatically. Additionally, a range of other 
federal fiscal commitments, some explicit and some representing 
implicit public expectations, also bind the nation's fiscal future. 
Absent policy change, a growing imbalance between expected federal 
spending and tax revenue could mean escalating and ultimately 
unsustainable federal deficits and debt. We have put forth a three-
pronged approach to begin addressing this fiscal gap and called for 
changes to the federal government's accounting practices and budget 
processes. In concert with those of other budget experts, our efforts 
have raised awareness and increased understanding of the nature and 
magnitude of the long-term fiscal challenge:
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-38]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-477T]); 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-485SP]); 
and ([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-886T]).

Strategic Goal 4:

Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization:

Continuously Improve Client and Customer Satisfaction and Stakeholder 
Relationships:

4.1.C. Strengthening Communication with our Congressional Clients:

To obtain information on client needs, the Comptroller General and the 
Managing Director of Congressional Relations met with all targeted key 
committees and leadership staff of the 108th Congress. We also refined 
the protocols governing our work for the Congress and issued the 
updated "GAO's Congressional Protocols" in July 2004. The revisions in 
the new version of the protocols reflect feedback we received from 
members of the Congress and their staffs. The congressional protocols 
continue to provide a means of holding us accountable for our 
commitments to the Congress and for ensuring that we are consistent in 
all our dealings with committees and members. (Based on internal 
activities):

4.2.C. Measuring Congressional Satisfaction with Our Work:

We increased the number of client feedback survey recipients to include 
the staffs of all congressional committees and individual offices that 
requested work resulting in a product involving a high resource 
investment, an area of high interest, or testimony, to ensure that all 
cognizant committees and offices have an opportunity to register their 
satisfaction with the quality of these products. We shortened the time 
between issuance of a product and the survey request, which resulted in 
increased client response rate and positive client satisfaction scores. 
(Based on internal activities):

4.3.C. Developing Options for Electronic Dissemination:

To communicate our work results more effectively and efficiently, we 
began a pilot to determine the feasibility of disseminating our reports 
in an electronic format, rather than printed format. We also developed 
a new report option--e-supplements--for Web-based surveys, which may be 
especially appropriate for our work involving state and local 
governments. This should enable our congressional clients to obtain 
data for their areas of interest at the state and local levels. Other 
efforts to improve the availability of our results information include 
implementing electronic posting of surveys conducted in support of our 
reports and the question-by-question results and revising our process 
for posting full product information--the report abstract, subject 
terms, and open recommendations--on our external Web site, thereby 
reducing the posting time from over 3.5 days to 1.7 days. (Based on 
internal activities):

4.4.C. Assessing Internal Customer Satisfaction with Our Services and 
Processes:

We developed and deployed our first-ever customer satisfaction survey 
to obtain employee feedback on all critical internal operations and 
services. The survey helped us to identify customer concerns and 
determine the gaps between customer expectations and service provided. 
As a result of the survey, we implemented a major remote access upgrade 
providing staff stable, secure, and reliable remote network access 
through a variety of devices including digital subscriber lines and 
cable modems; upgraded and simplified the Travel Manager system; 
improved building facilities; and improved our Web-based time and 
attendance system and meeting room booking system, adding features and 
making them more user friendly. We will use the results of the next 
customer satisfaction survey in November 2004 to measure the impact of 
our improvement efforts, refine our targets, and make necessary 
adjustments to improve service and reduce the gap between customer 
expectations and the service provided. In conjunction with the customer 
survey, we developed a Chief Administrative Office (CAO) balanced 
scorecard based on the analysis of survey responses. The balanced 
scorecard sets targets and priorities for CAO initiatives and links to 
our agencywide set of balanced performance measures. (Based on internal 
activities):

4.5.C. Assessing GAO Staff Views on Overall Operations and the Work 
Environment:

We deployed our confidential Employee Feedback Survey in July 2004--the 
fourth such survey since 1999. With a very high 83 percent response 
rate, the overall ratings, as well as the ratings for all four of our 
"people measures," increased over last year's scores. Those measures, 
part of our overall performance measures, will also be used to 
determine our standing in the Partnership for Public Service's survey 
of "Best Places to Work in the Federal Government." (Based on internal 
activities):

4.6.C. Strengthening Relationships with Our Stakeholders and Increasing 
the Accessibility of Our Products:

We continued our work to develop and issue international protocols to 
strengthen our relationships with our stakeholders in the international 
community. We have incorporated comments on the draft protocols and are 
planning release of a 1-year pilot in early fiscal year 2005. We also 
continued our efforts to increase the accessibility of our products in 
fiscal year 2004, completing the project to scan all Comptroller 
General Decisions and post them on our external Web site. As a result, 
over 14,000 documents are now available online to our client and the 
public. We now have over 100,000 e-mail subscriptions to our products. 
We also posted a new electronic version of the third edition of Volume 
1, Principles of Federal Appropriations Law, commonly known as the Red 
Book. This new version includes links to many of the GAO decisions 
cited in the Red Book and provides links between volume 1 and its 
companion index and table of authorities. (Based on internal 
activities):

4.7.C. Achieving External Recognition:

One way that we determine the quality of our products is to seek 
feedback on them from outside entities. During fiscal year 2004, our 
products received awards from the National Association of Government 
Communicators' 2003 Blue Pencil/Gold Screen awards competition, which 
recognizes outstanding print and electronic products produced by 
federal, state, and local government agencies. Specifically, we 
received first place in the category of public relations videos; second 
place in the category of public affairs for the video "Transformation," 
featuring Comptroller General Walker discussing the need for government 
to change the way it does business to meet new and emerging challenges; 
and an excellence award in the category of brochures produced in-house 
for "About GAO," a new brochure introducing the U.S. Government 
Accountability Office. (Based on internal activities):

Lead Strategically to Achieve Enhanced Results:

4.8.C. Integrating Planning, Budgeting, and Performance Measurement:

In fiscal year 2004, we identified and implemented improvements in 
integrating our planning, budgeting, and performance measurement 
activities, including issuing the performance plan following issuance 
of the strategic plan so that it reflected the revisions of the 
strategic plan and submitting an enhanced and streamlined fiscal year 
2005 performance budget that integrated and recapped highlights of our 
strategic plan, our fiscal year 2003 Performance and Accountability 
Report, fiscal year 2005 and 2006 workforce plans, and unit program 
information. In November 2003, we established and met an accelerated 
deadline for issuing the fiscal year 2003 Performance and 
Accountability Report. We received the Association of Government 
Accountants' Certificate of Excellence in Accountability Reporting for 
our 2003 Performance and Accountability Report. In May 2004, we issued 
the fiscal year 2005 performance plan, which included a more balanced 
set of performance measures and, for the first time, set fiscal year 
2005 performance targets for the measures related to how we manage 
people. (Based on internal activities):

4.9.C. Improving Our Strategic and Budget Planning Processes:

We took steps this year to improve and streamline our strategic 
planning process. Under this revised process, the plan will be updated 
every 3 years, and a newly created strategic planning and monitoring 
group will meet regularly both to oversee the planning process and to 
identify major changes that should be highlighted in the plan updates. 
Although the strategic plan will be updated less frequently under this 
proposal, there are strategies and means to ensure that our work 
continues to reflect key, emerging issues and that modifications to our 
planned work are communicated to the Congress and the public in a 
timely manner. We also strengthened our budget planning process, 
established an Investment Committee to evaluate and prioritize budget 
requirements, and restructured the budget/investment process to more 
closely evaluate the budget baseline and provide more programmatic 
information in response to management needs and a congressional 
mandate. (Based on internal activities):

4.10.C. Strengthening Our Strategic Human Capital Management:

During fiscal year 2004, we continued to make significant improvements 
in our human capital management. Provisions in the newly enacted Human 
Capital Reform Act of 2004 provide us a number of human capital tools 
and flexibilities that better position the agency to service the 
Congress. These provisions include decoupling us from the general 
across-the-board pay adjustments applicable to most of the executive 
branch; amending pay retention rules for employees demoted as a result 
of workforce restructurings, reclassification, or other action; and 
creating an executive exchange program with the private sector. The 
legislation makes permanent our authority to offer voluntary early 
retirement opportunities and voluntary separation payments (buy-outs), 
provides greater flexibility for reimbursing employees for relocation 
benefits, and allows certain employees and officers with less than 3 
years of federal service to earn increased amounts of annual leave. 
Finally, and most visibly, the bill changes our name to the Government 
Accountability Office to better reflect the modern professional 
services organization that we have become. Our human capital strategic 
planning efforts were capped by the completion of GAO: The Human 
Capital Strategic Plan, Fiscal Years 2004-2006, focusing on key efforts 
with corresponding expected outcomes, measures, and specific 
initiatives for our four human capital cornerstones: leadership; 
strategic human capital planning; acquiring, developing, and retaining 
talent; and creating a results-oriented organizational climate. (Based 
on internal activities):

4.11.C. Retaining and Attracting Staff:

To improve the development and effective utilization of mission staff 
and our prospects for staff retention, we formed task teams to identify 
staffing methods and systems. The task teams have proposed solutions 
for implementation during fiscal year 2005 to modify and strengthen 
various institutional issues in support of staffing. In addition, to 
enhance our ability to effectively anticipate and secure an adequate 
supply of talent for current and future needs, we expanded the use of 
the Academic Achievement Program; increased the number internships; 
provided workshops for interns on the hiring process for permanent 
positions; used direct hire, short-term, and time-limited appointing 
authorities; and established baseline recruitment reporting data to 
assist in measuring the effectiveness of our entry-level recruitment 
program. (Based on internal activities):

4.12.C. Refining Performance Management:

We instituted several major initiatives in performance management. We 
made improvements to the analysts' competency-based performance system 
based on feedback from our managing directors and the Employee Advisory 
Council including shortening the processing time for appraisals, pay, 
and promotion decisions; decoupling appraisal feedback from pay and 
best-qualified feedback; and developing a plan to replace pay 
categories with individualized pay decisions. On June 1, 2004, we 
implemented the new competency-based appraisal system for our 
administrative and professional support staff, ensuring that all our 
staff are covered by modern performance management systems that 
establish a clear link between employee performance and GAO's mission, 
core values, and strategic objectives. In addition, we converted all 
administrative and professional support staff to a broadband pay system 
and began the first year of performance-based pay. With completion of 
this effort we have met our goal to have all communities of our staff 
covered by modern human capital systems. We also initiated several 
improvements based on our customer satisfaction survey feedback 
including distributing fewer, more succinct, and more timely 
communications on appraisal, pay, and promotions; restructuring the 
performance management Web site; and creating a guide for managing 
directors on how to access and use statistical reports containing staff 
appraisal, compensation, feedback, and promotion data. (Based on 
internal activities):

4.13.C. Enhancing Our Classification and Compensation Systems:

We began an initiative in fiscal year 2004, the Classification and 
Compensation Review, to ensure that our classification and compensation 
systems are reasonable, competitive, credible, equitable, affordable, 
sustainable, and non-discriminatory in nature. Our consultant on this 
complex and controversial internal human capital project is also 
considering ways to make the systems more performance-based and is 
taking into consideration market data for comparable positions in 
organizations with which we compete for talent. (Based on internal 
activities):

4.14.C. Enhancing Opportunities for Training:

In the training area, we developed 14 new courses as part of our 
competency-driven curriculum and initiated a leadership development 
program to address the needs of new supervisors. We also provided our 
staff "just-in-time" access to learning through over 900 courses and 
almost 60 skill simulations available online--from work or home, any 
time of day. We implemented training related to the policy manual 
update for all staff; integrated training related to generally accepted 
government auditing standards (GAGAS) and the Quality Assurance 
Framework into the curriculum required for new hires and summer 
interns; established electronic links between the framework and 
available training courses; and modified our training program for 
delivering testimony, based on client feedback survey responses. We 
also implemented online learning technology including Web-based 
training programs and deployment of courses via desktop video and the 
intranet, to provide flexibility for staff and cost savings for the 
agency in training delivery and completion. Finally, we initiated 
online evaluation of training classes and self-certification of 
completed training in April 2004. Eliminating contractor support to key 
records of completed training has saved us $40,800 this fiscal year, 
and the annual savings in following years will be $81,600. In addition, 
at least one staff year is saved through the elimination of numerous 
manual tasks and storage requirements for forms and data were reduced. 
(Based on internal activities):

4.15.C. Ensuring Exemplary Practices and Systems in Our Fiscal 
Operations:

Our financial statements, included in the fiscal year 2003 Performance 
and Accountability Report, received a clean opinion from the fiscal 
year 2003 audit. We conducted internal reviews of our compliance with 
Financial Integrity Act and OMB Circular A-127, Federal Managers' 
Financial Management Systems, requirements. The A-127 review covered 
budget preparation, documentation, and internal controls. The Financial 
Integrity Act review covered payroll testing; time and attendance 
procedures; Human Capital Office personnel files operations; our vendor 
contracts; the credit card program; and internal controls for 
purchases, payment, and employee reimbursements. There are no material 
internal control weaknesses to report, which supports management's 
assertion that our internal controls are proper and functioning well. 
(Based on internal activities):

4.16.C. Implementing an Integrated Asset Management System:

In the area of asset management, we implemented a new integrated asset 
management system that meets audit guideline standards in accounting 
for our physical assets and strengthens our practices in managing them. 
The new system also improves our reporting and accountability 
capability and makes more efficient use of our human resources. (Based 
on internal activities):

4.17.C. Strengthening IT Governance Practices and Processes:

To provide a road map for technology initiatives and ensure they are 
fully aligned with and enable achievement of our strategic and business 
goals, we revised our IT plan during this fiscal year. The updated plan 
focuses on the following guiding principles: lead by example, 
facilitate and improve client service, enhance network connectivity, 
promote effectiveness and efficiency, ensure IT reliability, and 
exercise vigilance in IT security. The plan was published and 
implemented in June 2004. In recognition of its strategic IT approach, 
we were selected by CIO Magazine as a winner of the CIO 100 Award for 
Agility, for demonstrating a strategic business model that helps 
execute more than 1,000 engagements, resulting in significant financial 
benefits to taxpayers. This is the second year in a row that CIO 
Magazine recognized us as a model in IT leadership. (Based on internal 
activities):

Leverage GAO's Institutional Knowledge and Experience:

4.18.C. Maximizing the Collection, Use, and Retention of Essential 
Organizational Knowledge:

In fiscal year 2004 we organized and inventoried our legislative 
history collection, which resulted in a master set of the histories to 
be transferred to the National Archives and Records Administration, and 
a reference set for use in GAO. We also created an online database for 
use in accessing these records. Similar projects are under way for our 
collection of GAO-produced videos and for our microfiche collection of 
our reports. To increase public awareness of our work, we facilitated 
hundreds of broadcast and print interviews with our senior executives 
as well as nearly two dozen editorial board meetings for the 
Comptroller General with major U.S. newspapers and news services. We 
also arranged to publish a number of his articles and speeches in 
magazines and newspapers, including his National Press Club speech on 
the nation's fiscal imbalance. (Based on internal activities):

4.19.C. Increasing Our Knowledge Sharing Capability:

We launched a new course entitled Library Resources in March 2004 to 
enhance our staff's ability to access our library resources and 
services. We redesigned the gao.gov Web site to enhance usability and 
facilitate access to our information products and services. This new 
design, launched on June 29, 2004, is more flexible and will be easier 
to modify when necessary. Users are more easily able to find a report 
or information on a particular topic because of the improved look, 
feel, navigation, and search capabilities of the site. According to the 
latest e-government satisfaction scores reported by the American 
Customer Satisfaction Index, our Web site achieved one of the largest 
increases during the quarter of any of the government Web sites listed, 
which was attributed to our Web site redesign. (Based on internal 
activities):

4.20.C. Enhancing Knowledge Sharing with Other National and 
International Accountability and Professional Organizations:

We convened a number of forums, symposia, and other meetings to provide 
opportunities for an exchange of knowledge between accountability and 
professional organizations. This year, five Comptroller General Forums, 
were held, and the speakers' series Conversations on 21st Century 
Challenges brought six distinguished leaders to GAO to explore issues 
affecting the United States and its place in the world. In addition, 
the Domestic Working Group is collaborating on four projects (access to 
records, governance, long-term fiscal challenges, and grants 
management), the Partnership for Public Service is assisting on several 
engagements, and our teams and the states' auditors continue to 
collaborate on common issues and concerns. Internationally, we chaired 
the 10-nation task force that developed the first strategic plan for 
the International Organization of Supreme Audit Institutions (INTOSAI). 
The 5-year plan, unanimously endorsed by the INTOSAI Governing Board, 
provides a blueprint for a major transformation of INTOSAI and a 
structure and rationale that will facilitate the member organization's 
strategic engagement in INTOSAI in a way that maximizes contributions 
while minimizing resources allocated. Nationally, we led the effort to 
develop the first-ever strategic plan for the National 
Intergovernmental Audit Forum. The strategic plan framework was adopted 
by the forum and will help maximize the organization's effectiveness in 
promoting good government and accountability at all levels of 
government. (Based on internal activities):

Continuously Enhance GAO's Business and Management Processes:

4.21.C. Improving Engagement Support Services:

We developed new tools to increase analysts' awareness of engagement 
requirements, including a template checklist for use in researching a 
new engagement that provides a general guide to sources as well as a 
record of sources checked and an Excel program for organizing 
literature search results that allows greater efficiency in identifying 
and retrieving relevant information. We improved the audit tools that 
support engagements by implementing a Quality Assurance Framework to 
provide reasonable assurance that our work is professional, independent 
(in fact and appearance), and objectively designed; our evidence is 
competent and reliable; our conclusions are supported; our products are 
fair and balanced; and our recommendations are sound. We revised our 
policy manual to mirror this framework, to identify GAGAS on which our 
policies are based, and to define the key responsibilities of our 
staff. We then revised the online Electronic Assistance Guide for 
Leading Engagements (EAGLE) to incorporate the framework, the policy 
manual, and the auditing standards. Finally, we updated the Audit 
Documentation Set to clearly identify the questions that need to be 
answered to be GAGAS compliant, and electronically integrated all of 
these references by providing fully searchable online versions of our 
intranet. (Based on internal activities):

4.22.C. Updating Our Weapons System Database:

We updated our Weapons Systems Database to greatly enhance and expand 
on the system's reporting capabilities, which provided automated 
production of the Budget Justification Fact Sheet and accomplishment 
tracking for staff in our Acquisition and Sourcing Management team. The 
fact sheet provides pertinent and timely information that the Congress 
can use during budget deliberations and demonstrates budget 
consequences that congressional committees can cite as support for 
actions such as rescissions, restrictions, realignments, or reductions. 
The accomplishment tracking capability allows staff to track our 
recommendations to the Congress and the actions of the major 
congressional committees in response to those recommendations. This 
database--which currently contains data on weapons systems with 
associated funding of $1.24 trillion--has become the Congress's primary 
source of annual evaluations of DOD acquisitions, including trend 
analyses, and has resulted in our staff being able to increase their 
productivity on weapons system reviews by 410 percent. (Based on 
internal activities):

4.23.C. Initiating Process Improvement:

In the area of process improvement, we launched a Web-based customer 
satisfaction survey to obtain feedback from analysts about services 
provided by our four Product Assistance Groups so that we can identify 
where changes may be needed in the report production process; opened a 
new Imaging Center to provide scanning services to staff and facilitate 
our move to electronic workpapers; reorganized and streamlined our 
personnel security investigation process to reduce the time required to 
grant clearances for our staff; reengineered our exit process for 
employees separating from GAO to streamline the process and make it 
more user-friendly for the employee, yet still ensure that accountable 
property is returned, and indebtedness is cleared; and revised the 
guidance in our EAGLE Web site concerning our streamlined mission team 
procurement review and approval process. In addition, the Applied 
Research and Methods team's Web site for the National Academy of 
Sciences task order was modified to describe the Engagement Review 
Meeting review process for mission procurements. In fiscal year 2004 we 
decided to phase out our in-house print plant operations, because of 
increased availability of our products through electronic publication, 
as well as the savings to be realized. We will be completing that goal 
very early in fiscal year 2005. (Based on internal activities):

4.24.C. Using Enabling Technology to Improve Our Crosscutting Business 
Processes:

We implemented numerous initiatives in fiscal year 2004 that resulted 
in more efficient processes and cost savings for the agency. The agency 
moved to full implementation of Travel Manager in January 2004, 
replacing our previous paper-driven process with an efficient 
electronic process that also provides real-time travel budget tracking 
information. We also completed implementation of WebTA, improving 
controls, streamlining processes, reducing errors for the time and 
attendance function throughout the entire agency, and providing $40,700 
savings in fiscal year 2004 contract labor costs due to the reduction 
in data entry services needed. We anticipate continued substantial 
annual contractor cost savings. We provided a major update and some 
additional reporting enhancements to GC Track, our in-house application 
that tracks and accesses General Counsel work by goal, team, and 
attorney. These improvements increased search and reporting 
capabilities, and eliminated re-keying of documents by providing the 
ability to link documents using DM5, our document management system. 
(Based on internal activities):

4.25.C. Using Web-Based Technology to Improve or Replace Existing 
Systems:

On October 1, 2004, we launched the new Congressional Contact System. 
Using this system, our staff enter and track planned and actual 
contacts that we have with members of the Congress, congressional 
committees, and congressional staff. This automated system has reduced 
current process steps by two-thirds. We replaced the outdated database 
for tracking credit card purchases and blanket purchase orders with an 
up-to-date, user-friendly, Web-based tracking system. To support and 
integrate the human capital transaction processing, position 
management, and awards processing functions, we implemented a Web-based 
front end to the National Finance Center personnel/payroll system, 
known as HRIS. This will result in improved data accuracy and 
timeliness, optimization of human capital processes and resources, a 
reduction in administrative costs and staff time, and the capability 
for customized and real-time reports. We also redesigned our Human 
Capital Office Web site to improve access to the vast array of human 
capital information for agency employees. Its user-friendly design 
mirrors our new external Web site design and is already serving as a 
model for other internal Web sites under development. Finally, we made 
several improvements to our network capabilities, increasing the 
connectivity and bandwidth to provide more direct and faster 
communications, and preparing the network for future implementations of 
voice, data, and video applications. (Based on internal activities):

Become a Professional Services Employer of Choice:

4.26.C. Promoting an Environment That Is Fair and Unbiased and That 
Values Opportunity and Inclusiveness:

We implemented several policy recommendations this year to ensure a 
fair and unbiased work environment. In the performance management area, 
we now require management review when supervisors and staff disagree on 
the staff's rating and allow staff to attach formal responses to 
counseling memos on file. We also met with team management officials 
during the fourth quarter to emphasize the importance of preparing 
annual assessments consistent with the agency's guidance. In the area 
of recruitment and promotions, we modified requirements and procedures 
to improve representation in the application and selection process. To 
ensure equitability in our telework program, under which employees can 
work from their homes, we examined and revised our guidance for the 
decision-making process. We also achieved improvements to information 
access and communication for our deaf community by installing 
connections to permit closed captioning on cable programs and by 
providing Blackberry devices to deaf employees. Finally, our Office of 
Opportunity and Inclusiveness delivered a presentation on safeguards in 
performance management at the 19th Annual Federal Dispute Resolution 
Conference in August 2004. This presentation provided a model for human 
capital reviews of performance appraisal decisions, pay determinations, 
promotions, awards, hiring, and recruitment for the conference 
participants from more than 30 federal agencies. (Based on internal 
activities):

4.27.C. Promoting Diversity:

Our Asian American Liaison Group has worked to raise awareness about 
diversity in our organization at all levels. Among the activities the 
group has been involved with this year are assisting with recruitment 
of qualified applicants at two major Asian American federal employee 
conferences; facilitating discussions between our Asian American 
interns and our Asian American senior executives; launching an informal 
network to link the group's senior managers with our field office 
members; and initiating a research project to update prior reports on 
the status of Asian American employees. (Based on internal activities):

4.28.C. Upgrading Tools and Technology:

We implemented several upgrades to provide our staff with enhanced 
tools and capabilities, as well as reliability of equipment and 
systems. We upgraded our shredding equipment to meet a DOD requirement 
and ensure our staff's continued ability to obtain classified 
information for engagements. We also upgraded the mice and keyboards 
for all staff to provide additional functionality and special features, 
and replaced all 3,800 of the expiring SecurIDs that provide computer 
access, efficiently and without disruption to our customers. We have 
realized an annual operating cost savings of $140,000 for the first 
time this fiscal year, related to the purchase of flat panel monitors 
for all of our staff last fiscal year. The savings is due to the 
reduction in energy required by the new monitors. We also converted the 
IT team's staffing and individual development plan applications to a 
Web-based application; implemented more stable, secure, and reliable 
remote access to our network using a wide range of devices, such as 
digital subscriber lines and cable modems; upgraded our e-mail system 
and the Atlanta telephone system; and doubled the field office 
videoconferencing capability. To enhance our disaster recovery 
capabilities and provide a more efficient method for processing 
backups, we established a central storage facility for data stored from 
our network. To ensure that our staff have the most current software 
patches installed, we implemented an automatic patch delivery system 
that causes minimal disruption to our customers. Finally, we conducted 
30 open door learning sessions designed to inform and educate staff 
about newly introduced or upgraded network tools, and provide our staff 
with the opportunity to ask IT-related questions. (Based on internal 
activities):

4.29.C. Providing a World-Class Working Environment:

To meet our goal of providing a world-class working environment, we 
accomplished a large number of staff moves related to organizational 
realignments. In conjunction with a relocation of over 1,000 staff, we 
added telephone and network connections to the renovated space prior to 
the relocation. We also negotiated the move of the Senate Employees 
Credit Union into larger, more user-friendly space in the building. 
(Based on internal activities):

4.30.C. Ensuring the Security of Our IT Systems:

To help ensure the security of our IT systems, we updated our order on 
information systems security policies, conducted mandatory training for 
all staff on computer security as required by the E-Government Act of 
2002, held our fourth annual security fair to increase awareness of 
security issues at work and at home, installed software to control 
spam, and improved the security of our infrastructure by adding 
switches with firewalls in our local area network operations center. As 
part of our long-term IT plan, we converted thousands of paper Official 
Personnel Folders to electronic versions that can be stored off-site 
for disaster recovery. We also conducted two disaster recovery tests 
this fiscal year, the first in December 2003, and the second in August 
2004. We used the data from the first test to identify weaknesses and 
implement improvements in existing operations, and during the second 
test these fixes were thoroughly checked. Several additional operations 
or systems were tested as well, such as the use of BlackBerry devices 
for contacting designated managers, and the ability to restore a 
document in process. Finally, we became one of the first federal 
agencies to obtain diverse pathway fiber optic cabling, which provides 
the most reliable means of maintaining circuit continuity for our 
telecommunications system. (Based on internal activities):

4.31.C. Providing a Safe and Secure Workplace:

In the area of physical security we developed and approved a plan to 
reengineer our processes in personnel security; expanded our Security 
Clearance Tracking System to track and provide data on the clearance 
process; modified our Security Services Contract to upgrade 
qualifications of the security force and to add a position to provide 
more technical expertise; completed a risk assessment of our mail room 
and made recommendations; and updated our Shelter in Place Plan, 
Emergency Response Handbook, and Continuity-of-Operations Plan. In 
addition, we are well on our way to upgrading our external and internal 
physical security systems. The perimeter security wall in under 
construction, and features of the new access control intrusion 
detection system have been determined such as turnstiles, intrusion 
detection system, smart card credentials, digital closed circuit 
television, integration with our field offices, and a new emergency 
operations center. (Based on internal activities):

4.32.C. Updating Our Agency Awards Policy:

After extensive study by a matrixed awards team, we updated our agency 
awards policy to better ensure a cost-effective and transparent awards 
and recognition program. Our revised order established a hierarchy of 
mechanisms for rewarding staff for outstanding performance; added a 
monetary component to our annual honor awards; eliminated career 
service gifts; increased the dollar limits for team/unit annual and 
spot awards; established team budgets for time-off awards and limited 
the number of hours any individual can be awarded per year to 40; 
clarified the types of spot gift awards that can be given with managing 
director approval; and established a program to reward employees who 
use frequent flyer benefits for official travel resulting in savings to 
GAO. (Based on internal activities):

4.33.C. Expanding Our Telework Program:

We led by example in fiscal year 2004 by expanding our telework 
policies to implement best practices that were included in our 
Strategic Issues team's report--see Human Capital: Further Guidance, 
Assistance, and Coordination Can Improve Federal Telework Efforts: 
([Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-679], July 18, 
2003). The new policies provide for greater consistency and 
accountability in management of the program that we believe will 
encourage greater use of telework by our staff. Over 18 percent of our 
employees now telework in some fashion, either under a continuing 
arrangement or on a short-term basis to accommodate special needs or 
circumstances. (Based on internal activities):

4.34.C. Extending Our Student Loan Program:

We expanded our student loan program this year, increasing the number 
of loans for which we provided some payment by increasing the amount 
budgeted from $945,000 in fiscal year 2003 to $1,154,000. (Based on 
internal activities):

4.35.C. Improving the Development and Experiences of Newly Hired Staff:

We enhanced and modified our Professional Development Program (PDP) 
processes, procedures, oversight, and management to improve development 
and experiences of newly hired staff and increase their job 
satisfaction and retention. To assist our PDP staff we updated the New 
Hire Training course with information on staff utilization; provided 
information packets for new hires and their supervisors; disseminated 
information on career development opportunities through a newsletter, 
our Web site, and e-mails; extended the time available at headquarters 
for field PDP staff to pursue additional developmental opportunities; 
trained five new PDP advisors; and instituted meetings between PDP 
staff and our senior managers to communicate issues relevant to newly 
hired analysts with outside experience. In addition, we developed and 
implemented a system that provides information to assist in managing 
staff levels and full-time equivalent positions GAO-wide and enhances 
our ability to effectively match staff to teams where they will have 
the greatest opportunities to contribute. We also provided additional 
guidance to our PDP advisors in the form of an expectation setting 
checklist, guidelines on staff utilization, and an updated PDP Advisor 
Manual. We continued to standardize and improve our processes by 
aligning the PDP permanent placement process with the workforce 
planning effort, initiating use of Performance Review Group performance 
categories, standardizing PDP rater and reviewer functions, and 
codifying our processes and procedures into our program policy 
guidance. Finally, to improve program oversight and management, we 
documented our PDP Management Information System processes and 
procedures, created a system user's manual, and integrated headquarters 
and field data to provide consistency and effective reports. (Based on 
internal activities, no report):

[End of Accomplishments and Other Contributions]

2. From the Inspector General:

GAO: 

Accountability: 
Integrity: 
Reliability:

Memorandum:

Date: October 15, 2004:

To: Comptroller General:

From: Inspector General - Frances Garcia

Signed by Frances Garcia: 

Subject: Management Challenges:

We have examined management's assessment of the management challenges. 
Based on our work and institutional knowledge, we agree that human 
capital, physical security, and information security are the management 
challenges that may affect our performance. We are in agreement with 
management's assessment of progress made in addressing these 
challenges.

In addition, we reviewed all fiscal 2004 accomplishment reports 
claiming financial benefits of $500 million or more and found that GAO 
has a reasonable basis for claiming these benefits. We also tested the 
procedures and methodologies used to calculate the new performance 
measures related to GAO's management of people and found them to be 
reasonable.

[End of From the Inspector General]

3. GAO's Report on Personnel Flexibilities:

The GAO Personnel Flexibilities Act of 2000 (Pub. L. No. 106-303) and 
the GAO Human Capital Reform Act of 2004 (Pub. L. No. 108-271) require 
us to provide a review of the actions we have taken in fiscal year 2004 
under specific sections of these acts. This appendix details the 
activities we have undertaken separately for each act. As required by 
the 2004 act, we plan to provide a separate report on our 
implementation of that act in July 2005.

GAO Personnel Flexibilities Act of 2000:

Section 1 of this act provided us with temporary authority to offer 
voluntary early retirement opportunities to our employees in order to 
realign our workforce, meet budgetary constraints or mission needs, 
correct skill imbalances, and reduce high-graded positions. This 
authority, which expired on December 31, 2003, was made permanent by 
the 2004 act. Two voluntary retirement opportunities affected our 
workforce in fiscal year 2004. The first opportunity was made under the 
2000 act and was open for application from June 26, 2003, to August 16, 
2003. Approved applicants were required to retire between September 1, 
2003, and October 31, 2003. Of the 16 applications that were received, 
1 was disapproved, and 4 of the 15 approved applicants decided not to 
retire. Of the 11 individuals who accepted the opportunity, 2 retired 
in fiscal year 2003 and 9 in fiscal year 2004. The second opportunity 
was made under the 2004 act and is discussed below. We have found this 
authority to be very helpful in reshaping our workforce by reducing the 
number of our high-graded managers and replacing many of them with 
entry-level and midlevel hires who bring a range of skills and 
knowledge that will allow us to continue to accomplish our mission and 
serve the needs of the Congress and American people for many years to 
come.

Under section 2 of the 2000 act, we were given temporary authority to 
offer voluntary separation payments of up to $25,000 to employees for 
the purpose of realigning the workforce to meet budgetary constraints 
or mission needs, correct skill imbalances, or reduce high-graded 
positions. This authority, which, like the voluntary early retirement 
authority, expired on December 31, 2003, was also made permanent by the 
2004 act. We did not use this authority in fiscal year 2004. Unlike the 
early retirement authority provision, this provision requires us to 
make the payment out of current appropriations and to pay an additional 
amount into the retirement fund. In certain instances, the additional 
amount can be quite high. Thus, we have chosen to not to exercise this 
authority, and while we appreciate the flexibility it affords us, we 
have no plans to use it in the near future.

Section 3 of the 2000 act amended section 31(h) of title 31, United 
States Code, by deleting the prior reduction-in-force procedures, 
adding a new provision, and requiring us to report the effect of using 
this authority on preference eligibles such as disabled veterans. We 
did not conduct any reduction in force or other workforce restructuring 
in fiscal year 2004; consequently, there was no impact on preference 
eligibles.

GAO Human Capital Reform Act of 2004:

This act made permanent our authority to offer voluntary early 
retirement opportunities to our employees. Two voluntary retirement 
opportunities affected our workforce in fiscal year 2004. As discussed 
above, the first opportunity was made under the authority of the 2000 
act. The second opportunity was made under the 2004 act and was open 
for application from July 15, 2004, to August 30, 2004. Approved 
applicants were required to retire on September 30, 2004, unless 
otherwise extended by the Comptroller General. Of the 17 applications 
that were received, 3 were disapproved, 4 of the approved applicants 
decided not to retire, and 10 of the applicants retired in fiscal year 
2004. As noted above, we have found this authority to be very helpful 
in reshaping our workforce.

The section of the act concerning annual pay adjustments does not take 
effect until October 1, 2005. We are in the process of formulating a 
strategy to derive the appropriate methodologies for implementing this 
provision by its effective date.

The sections of the act that relate to pay retention, increased annual 
leave for key employees, and an executive exchange program were not 
used in fiscal year 2004. We have begun drafting regulations related to 
the executive exchange program, which we hope to implement during 
fiscal year 2005.

Section 9 of the this act requires (1) a link between our performance 
management system and our strategic plan, (2) training and retraining 
for supervisors and employees in the implementation and operation of 
the system, (3) procedures to ensure feedback between all participants 
in the system and setting timetables for review, (4) effective 
transparency and accountability measures to ensure that the system is 
fair and equitable, and (5) a means to ensure that adequate agency 
resources are allocated for all aspects of the system. While these 
requirements were not statutorily mandated for our performance 
management system prior to the passage of the act, our performance 
management system for analysts and attorneys met all of these 
requirements in fiscal year 2004. In addition, the system for 
administrative and support staff, which will be implemented in fiscal 
year 2005, meets these requirements. Our system has numerous procedures 
to enable feedback for all the participants, and we continually review 
the system to ensure that it is applied fairly, consistently, 
transparently, and equitably to all employees. These actions allow us 
to constantly improve our performance management system, resulting in a 
system that objectively and correctly measures employees' performance 
on a number of competencies related to our mission, performance goals, 
and strategic plan. Use of performance appraisal data enables us to 
reward appropriate employees with performance-based increases in 
compensation--a feature that contributes to our attracting and 
retaining top performers. Moreover, our system enables us to more 
correctly use staff to carry out our mission, meet our performance 
goals, and fulfill our strategic plan.

Finally, section 10 of the 2004 act requires us to consult with any 
interested groups or associations representing officers and employees 
of GAO when implementing the changes brought about by this act. This is 
a practice that we have implemented for several years. Typically, in 
implementing changes such as those in this act, we consult with 
interested groups and associations within GAO, provide them with draft 
policies and regulations, and obtain input from them on suggested 
clarifications or changes to the policies and regulations. We carefully 
consider this input and incorporate it, when appropriate, before 
distributing policies or regulations for comment to all employees. We 
will continue this practice in implementing the changes related to the 
2004 act and have already taken steps to ensure that all groups, 
associations, and employees at GAO are aware of the impending changes 
in the performance management system because of this act.

[End of GAO's Report on Personnel Flexibilities]

4. GAO's Information Security Efforts:

IT security management, policies, and procedures continue to evolve 
given the changing nature of threats to our IT services. During the 
past year, we focused our efforts on implementing an information 
security program, consistent with key requirements delineated in the 
Federal Information Security Management Act (FISMA) provisions enacted 
under the E-Government Act of 2002 (Pub. L. No. 107-347) and National 
Institute of Standards and Technology 800 Series guidance. While we are 
not obligated by law to comply with FISMA, we have adopted its 
requirements to help ensure that we establish an effective information 
security program and to fulfill our goal of being a model federal 
agency. This appendix serves as our annual report on information 
security efforts, as required by the act.

We have programs and processes in place to assess the status of our 
information security program, including the results of internal reviews 
by program offices and security staff, and independent external 
evaluations and testing of IT controls of our major payroll/personnel 
applications by a public accounting firm, who are independent of our IT 
support function. Results of these reviews and evaluations identified 
no material weaknesses in our payroll personnel applications (WebTA and 
Travel Manager). In addition, an independent external auditor was 
contracted to conduct a detailed review of our existing security 
program, as well as a vulnerability assessment to identify any 
outstanding or new weaknesses and recommend corrective actions. Results 
of these findings indicate a strong foundation of a security program 
with identified recommendations to improve performance, integration and 
standardization of IT security initiatives consistent with the our 
strategic plan and our IT plan. Results also identified that we are 
making substantial progress in implementing information security 
requirements consistent with FISMA through our efforts to:

* implement an enterprisewide risk-based security program;

* develop essential policies, procedures, and reporting mechanisms to 
ensure that our security program is integrated into every aspect of 
system life cycle planning and maintenance;

* provide recurring security training and awareness to all GAO staff;

* integrate security into our capital investment control process; and:

* implement an enterprise disaster recovery solution.

We have defined security initiatives that have identified needed 
changes in our existing infrastructure as well as the need for new 
security technologies. We have undertaken several projects that have 
significantly improved our information security program during fiscal 
year 2004. Among these projects are the following:

* IT Security Policy Order--we have completed the revision of our IT 
Security Policy Order. Working in coordination with General Counsel, we 
identified changes needed to make the new order consistent with FISMA 
and the National Institute of Standards and Technology 800 Series 
guidance. This order establishes the foundation for our IT services as 
related to security configurations and implementations.

* Vulnerability assessment--we have instituted a process consistent 
with the requirements cited in FISMA to scan the General Support System 
for vulnerabilities and potential exploits. Using FoundScan, each 
network device is scanned on a routine schedule to identify 
vulnerabilities that are remediable via patches, configuration changes 
to secure services and system standardization that will meet our system 
hardening guidelines. We integrated this process with system engineers 
to maintain up-to-date patched systems to stabilize our network.

* Personal firewalls--we are implementing a desktop firewall product 
that provides the necessary policy-based protection for our user 
community. Using an enterprise solution that is centrally managed, we 
have the ability to ensure select security practices are implemented 
for each staff providing for a secure computing environment. The 
initial pilot was implemented for 300 desktops in fiscal year 2004. The 
agencywide implementation is slated for fiscal year 2005.

* Second external firewall--providing a layered approach toward 
security, a second external firewall was introduced into GAO's 
architecture in fiscal year 2004. This dual firewall approach allows 
for more granular filtering of connections to our resources from 
external customers. The additional layer of security provided by this 
firewall enhances our ability to identify and stop potential hackers 
and improve the service to our customers.

* Internal firewalls--to better secure our computing assets within GAO, 
we are completing the implementation of internal firewalls to the core 
switches and each field office during fiscal year 2004. These firewalls 
will allow us to separate network assets and control communications to 
those assets. This approach provides a "best practice" computing 
defense against the threat of a disgruntled employee. The additional 
layer of security provided by the internal firewalls enhances our 
ability to identify and stop potential security risks and improve the 
service to our customers.

* Enhanced IT disaster recovery--we are continually refining our 
disaster recovery procedures and have conducted some limited testing 
exercises during fiscal year 2004 to ensure the viability of our 
contingency plan. We have developed a continuity of operations plan to 
document procedures to ensure management oversight of mission/mission 
support activities during a time of emergency. In addition, we have 
strategically positioned critical backup services at a remote location 
and have reproduced validated restorations of our data. We have 
implemented a contingency Web-based portal to establish essential 
remote telecommunications links for our client-server-based systems. As 
we refine our contingency processes and improve our services, we will 
be implementing additional technologies that mirror our current daily 
IT services during fiscal year 2005.

* Upgrade classified processing--our investigative mission requiring 
classified DOD information has been limited to select sites with 
limited access. During fiscal year 2004, we began expanding our Secret 
Internet Protocol Router Network connections to multiple GAO field 
office sites providing these sites, with a secure computing facility 
and new equipment. Rooms were renovated to meet the Defense Information 
Systems Agency's specifications and equipment was purchased that 
included switches, routers, firewalls, intrusion detection devices, 
servers, and workstations. Full installation at all sites will conclude 
in fiscal year 2005.

* Implement a Security Operations Center--we have implemented a 
Security Operations Center responsible for the daily monitoring of 
security devices within our IT infrastructure. Daily reports identify 
potential threats to us that require investigations to ensure our 
environment is uncompromised. Intrusion detection devices are the 
primary source of information, using intruder alert server agents 
(host-based) and SourceFire intrusion detection system equipment 
(network-based) to monitor our environment.

[End of GAO's Information Security Efforts]

[End of Part IV]

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FOOTNOTES

[1] In fiscal years 2002 and 2003, our research and development work 
represented 11 percent and 8 percent, respectively, of our engagement 
efforts.

[2] The Federal Managers' Financial Integrity Act requires ongoing 
evaluations and reports on the adequacy of the systems of internal 
accounting and administrative control of each agency. The Government 
Performance and Results Act seeks to improve public confidence in 
federal agency performance by requiring that federally funded agencies 
develop and implement an accountability system based on performance 
measurement, including setting goals and objectives and measuring 
progress toward achieving them. The Federal Financial Management 
Improvement Act emphasizes the need to improve federal financial 
management by requiring that federal agencies implement and maintain 
financial management systems that comply with federal financial 
management systems requirements, applicable federal accounting 
standards, and the United States Government Standard General Ledger at 
the transaction level.

[3] We have an extensive product line including oral briefings, 
testimonies, and various types of other written products. The 436 
written products include chapter reports, letter reports, and numbered 
correspondence, some of which contain classified or sensitive material.

[4] Note 12 to the financial statements describes our Davis Bacon Act 
trust function. For more detailed Davis Bacon Act financial 
information, contact our Office of General Counsel.

[End of Footnotes]

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[End of Performance & Accountability Report, Fiscal Year 2004]