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Testimony: 

Before the Subcommittee on Federal Financial Management, Government 
Information, and International Security, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:30 p.m. EDT: 

Thursday, April 21, 2005: 

Management Reform: 

Assessing the President's Management Agenda: 

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

GAO-05-574T: 

GAO Highlights:

Highlights of GAO-05-574T, a testimony before the Chairman, 
Subcommittee on Federal Financial Management, Government Information, 
and International Security, Committee on Homeland Security and 
Governmental Affairs, U.S. Senate.

Why GAO Did This Study: 

As part of its work to improve the management and performance of the 
federal government, GAO monitors progress and continuing challenges 
related to the Presidents Management Agenda (PMA). The Administration 
has looked to GAOs high-risk program to help shape various 
governmentwide initiatives, including the PMA. GAO remains committed to 
working with the Congress and the Administration to help address these 
important and complex issues.

What GAO Found: 

The administrations implementation of the PMA has been a very positive 
initiative. It has served to raise the visibility of key management 
challenges, increased attention to achieving outcome-based results, and 
reinforced the need for agencies to focus on making sustained 
improvements in addressing long-standing management problems, including 
items on GAOs high-risk list. Our work shows that agencies have made 
progress in the areas covered by the PMA, and the Office of Management 
and Budget (OMB) has indicated it will continue to focus on high-risk 
areas during the Presidents second term. Importantly, OMB needs to 
place additional attention on the Department of Defenses (DOD) many 
high-risk areas and overall business transformation efforts. While 
considerable progress has been made in connection with PMA issues, a 
number of significant challenges remain. 
	In the area of financial performance, the PMA recognizes the 
importance of timely, accurate and useful financial information and 
sound internal control. Agencies made significant progress in meeting 
accelerated financial statement reporting deadlines, and OMB has 
refocused attention on improving internal controls. However, agencies 
face several challengesimprovement lags on financial management 
reforms, especially at DOD which must overhaul its financial management 
and business operations.
	The PMA established a separate initiative for improper payments 
to ensure that agency managers are held accountable for meeting the 
goals of the Improper Payments Information Act of 2002. Effective 
implementation of this Act will be an important step toward addressing 
this area, which involves tens of billions of dollars. 
	The PMA recognizes that people are an important organizational 
asset. A governmentwide framework for advancing human capital reform is 
needed to avoid further fragmentation within the civil service, ensure 
management flexibility as appropriate, allow a reasonable degree of 
consistency, provide adequate safeguards within the overall civilian 
workforce, and help maintain a level playing field among federal 
agencies competing for talent.
	The initiative to integrate management and performance issues 
with budgeting is critical for progress in government performance and 
management. OMBs Program Assessment Rating Tool (PART) is designed to 
use results-oriented information to assess programs in the budget 
formulation process. However, more should be done to assess how each 
program fits within the broad portfolio of tools and strategies used to 
accomplish federal missions.
	Many e-government initiatives are showing tangible results. 
However, the government continues to face challenges, such as 
establishing a federal enterprise architecture intended to provide a 
framework to guide agencies enterprise architectures and investments.
The inclusion of real property asset management on the PMA, an 
executive order, and agencies actions are all positive steps in an 
area that had been neglected for years. However, the underlying 
conditionssuch as excess and deteriorating propertiescontinue to 
exist. More needs to be done in areas such as improving capital 
planning among agencies.

What GAO Recommends: 

We are not making any new recommendations in this testimony. Serious 
and sustained efforts are needed to improve the management and 
performance of federal agencies and to ensure accountability. To 
accomplish this, a governmentwide performance plan could help to 
institutionalize a focus on planning and managing for results while 
building on the administrations efforts to assess progress and 
contribute to efforts to compare results across similar programs. In 
addition, a governmentwide strategic plan, informed by a set of key 
national indicators to assess the governments performance, position, 
and progress, could provide an additional tool for governmentwide 
reexamination of existing, as well as new, programs. The PMA provides a 
valuable foundation for a fundamental review needed to address a range 
of 21st Century challenges.

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-574T].

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact George Stalcup at (202) 512-6806 or 
stalcupg@gao.gov

[End of Section]

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the President's Management 
Agenda (PMA), which has been a very positive initiative. The 
administration's implementation of the PMA has demonstrated its 
commitment to improving federal management and performance. It has 
served to raise the visibility of key management challenges, increased 
attention to achieving outcome-based results, and reinforced the need 
for agencies to focus on making sustained improvements in addressing 
long-standing problems, including items on GAO's high-risk 
list.[Footnote 1] I believe the concept of using red, yellow, and green 
stoplights both to indicate agencies' status and focus on progress made 
is an innovative approach. By calling attention to successes and needed 
improvements, the focus that PMA and the scorecards bring is certainly 
a step in the right direction, and our work shows that progress has 
been made in a number of important areas over the last several years. 
Importantly, OMB needs to place additional attention on the Department 
of Defense's many high-risk areas and business transformation efforts. 

Significant challenges remain particularly at the Department of Defense 
(DOD), where 14 of the 25 high-risk areas exist. GAO identifies areas 
that are at high risk due to their greater vulnerabilities to fraud, 
waste, abuse, and mismanagement as well as the need for broad based 
transformations to address major economy, efficiency, or effectiveness 
challenges. DOD's current and historical approach to business 
transformation has not proven effective in achieving meaningful and 
sustainable progress, and change is necessary in order to expedite a 
broad-based transformation. For years, we have reported on 
inefficiencies and the lack of adequate transparency and appropriate 
accountability across DOD's major business areas, resulting in billions 
of dollars of wasted resources annually. DOD has not taken the steps it 
needs to take to overhaul its financial management and related business 
operations. 

The Bush Administration has looked to our high-risk program to help 
shape various governmentwide initiatives, including the PMA, which has 
at its base many of the areas we had previously designated as high 
risk. To its credit, the Office of Management and Budget (OMB) has 
worked closely with a number of agencies that have high-risk issues, in 
many cases establishing action plans and milestones for agencies to 
complete needed actions to address areas that we have designated as 
high risk. In this regard, Clay Johnson, OMB's Deputy Director for 
Management, recently reaffirmed the Bush Administration's desire to 
refocus on GAO's high-risk list in order to make as much progress as 
possible in the President's second term. This is very encouraging. OMB 
will need to be engaged seriously on a sustained basis to make progress 
on a range of challenges that are costing taxpayers billions of dollars 
each year. Continued oversight by the Congress will also be key, and in 
the case of some areas, legislative actions will be needed. 

In the PMA, the President has identified five governmentwide 
initiatives that are interrelated and support each other--improved 
financial performance, strategic management of human capital, budget 
and performance integration, electronic government, and competitive 
sourcing. The PMA also includes program initiatives on eliminating 
improper payments and real property asset management. Today, as agreed 
with the subcommittee, my statement will focus on the progress made in 
these five governmentwide and the two program initiatives in PMA and 
the next steps our work shows will be key to effectively enhance the 
management and performance of the federal government. I will also 
highlight the importance of congressional oversight in continuing to 
provide the attention needed to improve management and performance 
across the federal government and ensure accountability. This testimony 
draws upon our wide-ranging work on federal management and 
transformation issues, including analysis of PMA initiatives and the 
President's 2006 Budget of the U.S Government. We conducted our work in 
accordance with generally accepted government auditing standards. 

Improved Financial Performance: 

The PMA initiative to improve financial performance is aimed at 
ensuring that federal financial systems produce accurate and timely 
information to support operating, budget, and policy decisions. It 
focuses on key issues such as data reliability, clean financial 
statement audit opinions, and effective internal control and financial 
management systems. Our work in these areas over a number of years 
demonstrates the importance of the improvement efforts that are 
underway. The Congress enacted a number of statutory reforms during the 
1990s in the area of financial management. Although progress has been 
made under the PMA, the federal government is a long way from 
successfully implementing these reforms. 

Reliable information, including cost data, is critical for effective 
performance measurement to support program management decisions in 
areas ranging from program efficiency and effectiveness to sourcing and 
contract management. For effective management, this information must 
not only be timely and reliable, but also both useful and used. Under 
this PMA initiative, agencies are expected to implement integrated 
financial and performance management systems that routinely produce 
information that is (1) timely--to measure and affect performance 
immediately, (2) useful--to make more informed operational and 
investing decisions, and (3) reliable--to ensure consistent and 
comparable trend analysis over time and to facilitate better 
performance measurement and decision making. Producing timely, useful, 
and reliable information is critical for achieving the goals that the 
Congress established in the Chief Financial Officers (CFO) Act of 1990 
and other federal financial management reform legislation. 

The executive branch management scorecard for the financial performance 
area not only recognizes the importance of achieving an unqualified or 
"clean" opinion from auditors on financial statements, but also focuses 
on the fundamental and systemic issues that must be addressed in order 
to routinely generate timely, accurate, and useful financial 
information and provide sound internal control and effective compliance 
systems, which represents the end goal of the CFO Act.[Footnote 2]

For fiscal year 2004, OMB accelerated agencies' financial statement 
reporting date to November 15, 2004, as compared with January 30, 2004, 
for fiscal year 2003. Twenty-two of twenty-three CFO Act agencies were 
able to issue their fiscal year 2004 financial statements by the 
accelerated reporting date, a significant improvement in the timeliness 
of these statements. Eighteen of these agencies were able to attain 
unqualified audit opinions on their financial statements. At the same 
time, the growing number of CFO Act agencies that restated certain of 
their financial statements for fiscal year 2003 to correct errors 
emerged as an issue of concern that merits close scrutiny. Eleven of 
the twenty-three CFO Act agencies fell into this category in fiscal 
year 2004, as compared with at least five CFO Act agencies that had 
restatements of prior year financial statements in fiscal year 2003. 
Frequent restatements to correct errors can undermine public trust and 
confidence in both the entity and all responsible parties. 

The scorecard also measures whether agencies have any material internal 
control weaknesses or material noncompliance with laws and regulations, 
and whether agencies meet Federal Financial Management Improvement Act 
(FFMIA) of 1996 requirements.[Footnote 3] As stated in the PMA, without 
sound internal controls and accurate and timely financial information, 
it will not be possible to accomplish the President's agenda to secure 
the best performance and highest measure of accountability for the 
American people. 

Reinforcing the PMA's emphasis on effective internal controls, OMB 
revised Circular A-123, Management's Responsibility for Internal 
Control in December, 2004. These revisions recognize that effective 
internal control is critical to improving federal agencies' 
effectiveness and accountability and to achieving the goals that the 
Congress established in 1950 and reaffirmed in 1982 with passage of the 
Federal Managers' Financial Integrity Act (FMFIA).[Footnote 4] The 
Circular correctly recognizes that instead of considering internal 
control as an isolated management tool, agencies should integrate their 
efforts to meet the FMFIA requirements with other efforts to improve 
effectiveness and accountability. Internal control should be an 
integral part of the entire cycle of planning, budgeting, management, 
accounting, and auditing. It should support the effectiveness and the 
integrity of every step of the process and provide continual feedback 
to management. 

We support OMB's efforts to revitalize FMFIA, particularly the 
principles-based approach in the revised Circular A-123 for 
establishing and reporting on internal control that should increase 
accountability. This approach provides a floor for expected behavior, 
rather than a ceiling, and by its nature, calls for greater judgment on 
the part of those applying the principles. Accordingly, clear 
articulation of objectives, the criteria for measuring whether the 
objectives have been successfully achieved and the rigor with which 
these criteria are applied will be critical. Providing agencies with 
supplemental guidance and implementation tools, which OMB and the CFO 
Council are developing, is particularly important in light of the 
varying levels of maturity in internal control across government as 
well as the divergence in implementation of a principles-based approach 
that is typically found across entities with varying capabilities. 

A challenge of great complexity that many agencies face is ensuring 
that underlying financial management processes, procedures, and 
information systems are in place for effective program management. 
Agencies need to take steps to (1) continuously improve internal 
controls and underlying financial and management information systems to 
ensure that managers and other decision makers have reliable, timely, 
and useful financial information to ensure accountability; (2) measure, 
control, and manage costs; (3) manage for results; and (4) make timely 
and fully informed decisions about allocating limited resources. 
Meeting FFMIA requirements presents long-standing, significant 
challenges that will only be met through time, investment, and 
sustained emphasis on correcting deficiencies in federal financial 
management systems. The widespread systems problems facing the federal 
government need sustained management commitment at the highest levels 
of government to ensure that these needed modernizations come to 
fruition. PMA provides the visibility needed for sustaining these 
efforts. 

Much work remains to be done across government to improve financial 
performance, as shown by the December 2004 scorecards. Of the 23 CFO 
Act agencies that OMB scored, 15 were rated red for financial 
performance. This is not surprising, considering the well-recognized 
need to transform financial management and other business processes at 
agencies such as the Department of Defense (DOD), the results of our 
analyses under FFMIA, the various financial management operations we 
have designated as high risk, and known long-standing material 
weaknesses. Seven agencies improved their scores to green from the 
initial baseline evaluation for financial performance which was as of 
September 30, 2001; however, several agencies' scores declined, 
reflecting increased challenges. Overhauling financial management 
represents a challenge that goes far beyond financial accounting to the 
very fiber of an agency's business operations and management culture, 
particularly at agencies with longstanding problems, such as DOD. For 
the new Department of Homeland Security (DHS), establishing sound 
financial management is a critical success factor. 

In the area of financial performance, the federal government is a long 
way from successfully implementing needed financial management reforms. 
Widespread financial management system weaknesses, poor recordkeeping 
and documentation, weak internal controls, and the lack of information 
have prevented the federal government from having the cost information 
it needs to effectively and efficiently manage operations through 
measuring the full cost and financial performance of programs and 
accurately reporting a large portion of its assets, liabilities, and 
costs. The government's ability to adequately safeguard significant 
assets has been impaired by these conditions. 

Across government, there is a range of financial management improvement 
initiatives under way that, if effectively implemented, will improve 
the quality of the government's financial management and reporting. 
Federal agencies have started to make progress in their efforts to 
modernize their financial management systems and improve financial 
management performance as called for in PMA. However, until these 
challenges are adequately addressed, they will continue to present a 
number of adverse implications for the federal government and the 
taxpayers. At the same time, the need for timely, reliable, and useful 
financial and performance information is greater than ever. Our 
nation's large and growing long-term fiscal imbalance, which is driven 
largely by known demographic trends and rising health care costs, 
coupled with new homeland security and defense commitments and the 
recent downward trend in revenue as a share of gross domestic product, 
serves to sharpen the need to fundamentally review and re-examine the 
base of federal entitlement, discretionary, and other spending and tax 
policies. Clearly, tough choices will be required to address the 
resulting structural imbalance. 

Eliminating Improper Payments: 

Improper payments are a longstanding, widespread, and significant 
problem in the federal government. The Congress enacted the Improper 
Payments Information Act (IPIA) of 2002 to address this issue of 
improper payments.[Footnote 5] The separate improper payments PMA 
program initiative began in the first quarter of fiscal year 2005. 
Previously, agency efforts related to improper payments were tracked 
along with other financial management activities as part of the 
Improved Financial Performance initiative. The objective of 
establishing a separate initiative for improper payments was to ensure 
that agency managers are held accountable for meeting the goals of the 
IPIA and are therefore dedicating the necessary attention and resources 
to meeting IPIA requirements. 

Across the federal government, improper payments occur in a variety of 
programs and activities, including those related to health care, 
contract management, federal financial assistance, and tax refunds. 
Improper payments include inadvertent errors, such as duplicate 
payments and miscalculations, payments for unsupported or inadequately 
supported claims, payments for services not rendered, payments to 
ineligible beneficiaries, and payments resulting from fraud and abuse 
by program participants and/or federal employees. Many improper 
payments occur in federal programs that are administered by entities 
other than the federal government, such as states, municipalities, and 
intermediaries such as insurance companies. Generally, improper 
payments result from a lack of or an inadequate system of internal 
control, but some result from program design issues. 

Federal agencies' estimates of improper payments based on available 
information for fiscal year 2004 exceeded $45 billion. This estimate 
could increase significantly over the next several years as agencies 
become more effective at estimating and reporting improper payment 
amounts for programs and activities that are susceptible to significant 
improper payments. Of the 15 agencies identified for this PMA 
initiative, no agencies were rated green and 10 were rated red in the 
first scores for this initiative as of December 31, 2004. 

These results are consistent with our previous work both agencywide and 
in specific program areas. For example, our preliminary reviews of 29 
federal agencies' fiscal year 2004 PARs suggest that a number of 
agencies were not well positioned to meet the reporting requirements of 
IPIA. Additionally, improper payments for specific programs have been 
identified as a high-risk area. For example, the Centers for Medicare & 
Medicaid Services has made improvements in assessing the level of 
improper payments, collecting overpayments from providers, and building 
the foundation for modernizing its information technology. 
Nevertheless, much work remains to be done given the magnitude of its 
challenges in safeguarding program payments. This includes more 
effectively overseeing Medicare's claims administration contractors, 
managing the agency's information technology initiatives, and 
strengthening financial management processes across multiple 
contractors and agency units. In light of these challenges and the 
program's size and fiscal significance, Medicare remains on our list of 
high-risk programs. For Medicaid, an estimate of improper payments was 
not reported for fiscal year 2004. 

Our prior work has demonstrated that attacking improper payments 
requires a strategy appropriate to the organization and its particular 
risks. We have found that entities using successful strategies to help 
address their improper payments shared a common focus of improving the 
internal control system--the first line of defense in safeguarding 
assets and preventing and detecting errors and fraud. As discussed in 
the Comptroller General's Standards for Internal Control in the Federal 
Government,[Footnote 6] the components of any control system are: 

* control environment--creating a culture of accountability,

* risk assessment--performing analyses of program operations to 
determine if risks exist,

* control activities--taking actions to address identified risk areas,

* information and communications--using and sharing relevant, reliable, 
and timely information, and: 

* monitoring--tracking improvement initiatives and identifying 
additional actions needed to further improve program efficiency and 
effectiveness. 

Effective implementation of the IPIA will be an important step towards 
addressing the longstanding, significant issue of improper payments. 
OMB has an important role, and we support their efforts to call 
attention to this issue. Fiscal year 2004 represents the first year 
that federal agencies were required to report improper payment 
information required by the IPIA in their Performance and 
Accountability Reports (PAR). IPIA raised improper payments to a new 
level of importance by requiring federal agencies to annually review 
all programs and activities and identify those that may be susceptible 
to significant improper payments. Federal agencies are required to 
estimate the annual amount of improper payments for those programs and 
activities identified as susceptible to significant improper payments. 
The law further requires federal agencies to report to the Congress the 
improper payment estimates and information on the actions the agency is 
taking to reduce the improper payments. OMB implementation guidance 
required that estimates and, if applicable, the corrective action 
report, be included in federal agencies' PARs beginning with fiscal 
year 2004.[Footnote 7]

OMB's guidance addresses the specific reporting requirements called for 
in the act and lays out the general steps agencies are to perform to 
meet those requirements. The guidance defines key terms used in the 
law, such as programs and activities, and offers criterion that clarify 
the meaning of the term significant improper payments. It requires that 
agencies use statistical sampling when estimating improper payments and 
sets statistical sampling confidence and precision levels for 
estimation purposes. It also requires that agencies report the results 
of their improper payment activities in their annual PAR. The ultimate 
success of the legislation and the PMA initiative hinges on each 
agency's diligence and commitment in identifying, estimating, 
determining the causes of, taking corrective actions, and measuring 
progress in reducing all improper payments. Designating this area as a 
separate program initiative under the PMA, will bring visibility to 
this problem that we hope will lead to action and further progress. 

Strategic Human Capital Management: 

The PMA recognizes that people are an important organizational asset to 
an agency. Under the PMA, agencies are to implement a comprehensive 
human capital plan that aligns with agency mission and goals. 
Considerable progress has been made in strategic human capital 
management since we designated it as high risk in 2001.[Footnote 8] For 
example, OMB recently reported that agencies are making improvements in 
addressing key human capital challenges. Nevertheless, ample 
opportunities exist for agencies to improve their strategic human 
capital management to achieve results and respond to current and 
emerging challenges. Specifically, agencies continue to face challenges 
in four key areas: 

* Leadership: Agencies need sustained leadership to provide the focused 
attention essential to completing multiyear transformations. 

* Strategic Human Capital Planning: Agencies need effective strategic 
workforce plans to identify and focus their human capital investments 
on the long-term issues that best contribute to results. 

* Acquiring, Developing, and Retaining Talent: Agencies need to 
continue to create effective hiring processes and use flexibilities and 
incentives to retain critical talent and reshape their workforces. 

* Results-Oriented Organizational Cultures: Agencies need to reform 
their performance management systems so that pay and awards are linked 
to performance and organizational results. 

Going forward, federal agencies need to develop and effectively 
implement the human capital approaches that best meet their needs, 
resources, context, and authorities. While these approaches will depend 
on each organization's specific situation, leading public sector 
organizations build an infrastructure that at a minimum, includes (1) a 
human capital planning process that integrates the agency's human 
capital policies, strategies, and programs with its program goals, 
mission, and desired outcomes; (2) the capabilities to effectively 
develop and implement a hew human capital system; and importantly, (3) 
the existence of a modern, effective, and credible performance 
management system that includes adequate safeguards (such as reviews 
and appeal processes) to ensure fair, effective, non-discriminatory, 
and credible implementation of the new system. Our observations follow. 

Conducting strategic human capital planning: Such planning aligns human 
capital programs with programmatic goals and develops strategies to 
acquire, develop, and retain staff to achieve these goals.[Footnote 9] 
As part of the PMA, agencies are to implement a workforce planning 
system to identify and address gaps in mission critical occupations and 
competencies and develop succession strategies. 

Agencies are experiencing significant challenges to deploying the right 
skills, in the right places, at the right time in the wake of extensive 
downsizing during the early 1990s that was done largely without 
sufficient consideration of the strategic consequences. Agencies are 
also facing a growing number of employees who are eligible for 
retirement and are finding it difficult to fill certain mission-
critical jobs, a situation that could significantly drain agencies' 
institutional knowledge. For example, the achievement of DOD's mission 
is dependent in large part on the skills and expertise of its civilian 
workforce. We recently reported that DOD's future strategic workforce 
plans may not result in workforces that possess the critical skills and 
competencies needed.[Footnote 10] Among other things, DOD and the 
components do not know what competencies their staff needs to do their 
work now and in the future and what type of recruitment, retention, and 
training and professional development workforce strategies should be 
developed and implemented to meet future organizational goals. It is 
questionable whether DOD's implementation of its new personnel reforms 
will result in the maximum effectiveness and value. 

Building the capability to develop and implement human capital systems: 
An essential element to acquiring, developing, and retaining a high-
quality workforce is effective use of human capital flexibilities. 
These flexibilities represent the policies and practices that an agency 
has the authority to implement in managing its workforce. As part of 
the PMA, agencies are to establish goals to accelerate their hiring 
processes, monitor their progress, and implement needed improvements. 

We reported that agencies must take greater responsibility for 
maximizing the efficiency and effectiveness of their individual hiring 
processes within the current statutory and regulatory framework that 
Congress and the Office of Personnel Management (OPM) have provided and 
recommended that OPM take additional actions to assist agencies in 
strengthening the federal hiring process.[Footnote 11] We subsequently 
reported that although Congress, OPM, and agencies have all undertaken 
efforts to help improve the federal hiring process, agencies appeared 
to be making limited use of the new hiring flexibilities provided by 
Congress in 2002--category rating and direct hire.[Footnote 12]

Consistent with our findings and recommendations, OPM has taken a 
number of important actions to assist agencies in their use of hiring 
flexibilities. For example, OPM issued final regulations on the use of 
category rating and direct-hire authority, providing some clarification 
in response to various comments it had received in interim regulation. 
Also, OPM conducted a training symposium to provide federal agencies 
with further instruction and information on ways to improve the quality 
and speed of the hiring process. 

Implementing modern, effective, and credible performance management 
systems: Effective performance management systems can help drive 
internal change and achieve external results. Such systems are not 
merely used for expectation setting and rating processes, but are also 
used to facilitate two-way communication so that discussions about 
individual and organizational performance are integrated and ongoing. 
Leading public sector organizations have created a clear linkage--"line 
of sight"--between individual performance and organizational success. 
Under the PMA, agencies are to establish performance appraisal plans 
for all senior executives and managers that link to agency mission, 
goals, and outcomes. 

Recently, Congress and the administration have sought to modernize 
senior executive performance management systems by establishing a new 
performance-based pay system for the Senior Executive Service (SES) 
that is designed to provide a clear and direct linkage between SES 
performance and pay.[Footnote 13] With the new system, an agency can 
raise the pay cap for its senior executives if OPM certifies and OMB 
concurs that the agency's performance management system, as designed 
and applied, makes meaningful distinctions based on relative 
performance. However, data suggest that more work is needed in making 
such distinctions. Agencies rated about 75 percent of senior executives 
at the highest level their systems permit in fiscal year 2003, the most 
current year for which data are available, which is about the same 
percent of executives as fiscal year 2002. 

Framework for Human Capital Reform: 

Congress has recently given agencies such NASA, DHS, and DOD statutory 
authorities to help them manage their human capital strategically to 
achieve results. Consequently, in this environment, the federal 
government is quickly approaching the point where "standard 
governmentwide" human capital policies and processes are neither 
standard nor governmentwide. To be effective, human capital reform 
needs to avoid further fragmentation within the civil service, ensure 
reasonable consistency within the overall civilian workforce, and help 
maintain a reasonably level playing field among federal agencies 
competing for talent. 

To help advance the discussion concerning how governmentwide human 
capital reform should proceed, GAO and the National Commission on the 
Public Service Implementation Initiative hosted a forum on whether 
there should be a governmentwide framework for human capital reform 
and, if so, what this framework should include.[Footnote 14] While 
there were divergent views among the forum participants, there was 
general agreement on a set of principles, criteria, and processes that 
would serve as a starting point for further discussion in developing a 
governmentwide framework in advancing needed human capital reform, as 
shown in figure 1. 

Figure 1: Principles, Criteria, and Processes: 

[See PDF for image]

Source: GAO. 

[End of figure]

There is general recognition for a need to continue to develop a 
governmentwide framework for human capital reform that Congress and the 
administration can implement to enhance performance, ensure 
accountability, and position the nation for the future. Nevertheless, 
how it is done, when it is done, and on what basis it is done can make 
all the difference. Agencies authorized to implement any statutory 
authority should demonstrate that they have the capacity, not just the 
design, to do so. The principles, criteria, and processes suggested 
above can help ensure consistency when granting both (1) agency-
specific human capital authorities so agencies can design and implement 
effective human capital systems to help them address 21st century 
challenges and succeed in their transformations and (2) governmentwide 
reform to provide broad consistency where desirable and appropriate. 

Budget and Performance Integration: 

The current administration has taken several steps to strengthen the 
integration of budget, cost, and performance information for which the 
Government Performance and Results Act (GPRA), the CFO Act, and the 
Government Management Reform Act (GMRA) laid the groundwork. The budget 
and performance integration initiative includes elements such as the 
Program Assessment Rating Tool (PART) used to review programs, an 
emphasis on improving outcome measures, and improving monitoring of 
program performance. Another effort is budget restructuring, which is 
meant to improve the alignment of resources with performance. None of 
these efforts are simple or straightforward. 

Integrating management and performance issues with budgeting is 
absolutely critical for progress in government performance and 
management. Such integration is obviously important to ensuring that 
management initiatives obtain the resource commitments and sustained 
leadership commitment throughout government needed to be successful. 
GPRA was enacted to provide a greater focus on performance in the 
federal government with the expectation that this would be linked and 
integrated with the budget. GPRA has succeeded in 10 years in expanding 
the supply of information and institutionalizing a culture of 
performance.[Footnote 15]

In 2002, OMB introduced a formal assessment tool into executive branch 
budget deliberation: PART is the central element in the performance 
budgeting piece of the PMA.[Footnote 16] GPRA expanded the supply of 
performance information generated by federal agencies. OMB's PART 
builds on GPRA by actively promoting the use of results-oriented 
information to assess programs in the budget. It has the potential to 
promote a more explicit discussion and debate between OMB, the 
agencies, and the Congress about the performance of selected programs. 

The promise of performance budgeting is that it can help shift the 
focus of budgetary debates and oversight activities by changing the 
agenda of questions asked. Performance information can help 
policymakers address a number of questions such as whether programs are 
(1) contributing to their stated goals, (2) well-coordinated with 
related initiatives at the federal level or elsewhere, and (3) targeted 
to those most in need of services or benefits. Results-oriented 
information is also needed for better day-to-day management and agency 
decisionmaking. It can provide information on what outcomes are being 
achieved, whether resource investments have benefits that exceed their 
costs, and whether program managers have the requisite capacities to 
achieve promised results. PART reviews are directed towards answering 
many of these questions; in many cases these reviews illustrated how 
far we have to go before performance information can be used with 
complete confidence. 

While no data are perfect, agencies need to have sufficiently credible 
performance data to provide transparency of government operations so 
that Congress, program managers, and other decision makers can use the 
information. However, as our work on PART and GPRA implementation 
shows, limited confidence in the credibility of performance data has 
been a longstanding weakness.[Footnote 17]

Credible performance information can facilitate a fundamental 
reassessment of what the government does and how it does business by 
focusing on the outcomes--or program results--achieved with budgetary 
resources. Our work has shown that agencies are making progress, but 
improvement is needed to ensure that agencies measure performance 
toward a comprehensive set of goals that focus on results.[Footnote 18] 
We have previously reported that stakeholder involvement appears 
critical for getting consensus on goals and measures. Although 
improving outcome measures continues to be a major focus of PART 
reviews, as we reported in our January 2004 report,[Footnote 19] these 
assessments are conducted during the executive branch budget 
formulation process. An agency's communication with stakeholders, 
including Congress, about goals and measures created or modified during 
the formulation of the President's budget is likely to be less than 
during the development of the agency's own strategic or performance 
plan. 

Moreover, in order for performance information to more fully inform 
resource allocations, decision makers must also feel comfortable with 
the appropriateness and accuracy of the performance information and 
measures associated with these goals. It is unlikely that decision 
makers will use performance information unless they believe it is 
credible and reliable and reflects a consensus about performance goals 
among a community of interested parties. Similarly, the measures used 
to demonstrate progress toward a goal, no matter how worthwhile, cannot 
serve the interests of a single stakeholder or purpose without 
potentially discouraging use of this information by others. 

Regarding OMB's budget restructuring effort, this represents more than 
structural or technical changes. It reflects important trade-offs among 
different and valid perspectives and needs of these different decision 
makers. The structure of appropriations accounts and congressional 
budget justifications reflects fundamental choices and incentives 
considered most important. As such, changes to the account structure 
have the potential to change the nature of management and oversight and 
ultimately the relationship among the primary budget decision makers--
Congress, OMB, and agencies.[Footnote 20] This suggests that the goal 
of enhancing the use of performance information in budgeting is a 
multifaceted challenge that must build on a foundation of accepted 
goals, credible measures, reliable cost and performance data, tested 
models linking resources to outcomes, and performance management 
systems that hold agencies and managers accountable for performance. 

Understanding performance issues requires an in-depth evaluation of the 
factors contributing to the program results. Targeted evaluation 
studies can be designed to detect important program side effects or to 
assess the comparative advantages of current programs to alternative 
strategies for achieving a program's goals. Further, although the 
evaluation of programs in isolation may be revealing, it is often 
critical to understand how each program fits with a broader portfolio 
of tools and strategies to accomplish federal missions and performance 
goals. Such an analysis is necessary to capture whether a program 
complements and supports other related programs, whether it is 
duplicative and redundant, or whether it actually works at cross-
purposes with other initiatives. Although the administration has taken 
some steps to use PART for crosscutting reviews, this falls short of 
the more expansive planning and review process called for in GPRA. 

Although clearly much more remains to be done, the statutory reforms of 
the 1990s have laid the foundation for performance budgeting by 
establishing infrastructures in the agencies to improve the supply of 
information on performance and costs. Merely the number of programs 
"killed" or a measurement of funding changes against performance 
"grades" cannot measure the success of performance budgeting. Rather, 
success must be measured in terms of the quality of the discussion, the 
transparency of the information, the meaningfulness of that information 
to key stakeholders, and how it is used in the decision-making process. 
The determination of priorities is a function of competing values and 
interests that may be informed by performance information but also 
reflects such factors as equity, unmet needs, and the perceived 
appropriate role of the federal government in addressing these needs. 
If members of Congress and the executive branch have better information 
about the link between resources and results, they can make the trade-
offs and choices cognizant of the many and often competing claims on 
the federal budget. 

Expanded Electronic Government: 

Electronic government, or e-government, has been seen as promising a 
wide range of benefits based largely on harnessing the power of the 
Internet to facilitate interconnections and information exchange 
between citizens and their government. Federal agencies have 
implemented a wide array of e-government applications, including using 
the Internet to collect and disseminate information and forms; buy and 
pay for goods and services; submit bids and proposals; and apply for 
licenses, grants, and benefits. Although substantial progress has been 
made, the government continues to face challenges in fully reaching its 
potential in this area.[Footnote 21]

Recognizing the magnitude of challenges facing the federal government, 
Congress has enacted important legislation to guide the development of 
e-government. Specifically, in December 2002, Congress enacted the E-
Government Act of 2002 with the general purpose of promoting better use 
of the Internet and other information technologies to improve 
government services for citizens, internal government operations, and 
opportunities for citizen participation in government.[Footnote 22] 
Among other things, the act required the establishment of an Office of 
Electronic Government within OMB to oversee implementation of the act's 
provisions. The act also mandated additional actions to strengthen e-
government activities in a number of specific areas, including 
accessibility and usability of government information, protection of 
personal privacy, coordination of information related to disaster 
response and recovery, and common protocols for geographic information 
systems. Additionally, title III of the act includes provisions to 
strengthen agency information security, known as the Federal 
Information Security Management Act of 2002. 

To implement the PMA initiative, OMB has taken a number of actions. The 
centerpiece of the effort has been oversight of 25 high-profile e-
government projects covering a wide spectrum of government activities, 
ranging from the establishment of centralized portals on government 
information to eliminating redundant, nonintegrated business operations 
and systems.[Footnote 23] For example, Grants.gov is a Web portal for 
all federal grant customers to find, apply for, and ultimately manage 
federal grants online. Other e-government efforts, such as the e-
payroll initiative to consolidate federal payroll systems, do not 
necessarily rely on the Internet. The results of these e-government 
initiatives, according to OMB, could produce several billion dollars in 
savings from improved operational efficiency. More recently, OMB has 
initiated efforts to develop common business-driven, government-wide 
solutions in five e-government "lines of business" case management, 
federal health architecture, grants management, human resources 
management, and financial management. These efforts are also expected 
to reap cost savings and gains in efficiency. 

While many e-government initiatives are showing tangible results, we 
found, in March 2004, that overall progress on the 25 OMB-sponsored e-
government initiatives was mixed. At that time we reported that, of the 
91 objectives originally defined in the initiatives' work plans, 33 had 
been fully or substantially achieved; 38 had been partially achieved; 
and for 17, no significant progress had been made. In addition, three 
of the objectives were no longer being pursued, because they had been 
found to be impractical or inappropriate. We found that the extent to 
which the 25 initiatives had met their original objectives could be 
linked to a common set of challenges that they all faced, including (1) 
focusing on achievable objectives that address customer needs, (2) 
maintaining management stability through executive commitment, (3) 
collaborating effectively with partner agencies and stakeholders, (4) 
driving transformational changes in business processes, and (5) 
implementing effective funding strategies. Initiatives that had 
overcome these challenges generally met with success in achieving their 
objectives, whereas initiatives that had problems dealing with these 
challenges made less progress. 

Additionally, as we reported in December 2004, in most cases, OMB and 
federal agencies have taken positive steps toward implementing major 
provisions of the E-Government Act of 2002.[Footnote 24] For example, 
OMB established the Office of E-Government in April 2003, and published 
guidance to federal agencies on implementing the act in August 2003. 
Apart from general requirements applicable to all agencies (which we 
did not review), we found that in most cases, OMB and designated 
federal agencies had taken action to address the act's requirements 
within stipulated timeframes. To help ensure that the act's objectives 
are achieved, we made recommendations to OMB regarding implementation 
of the act in the areas of e-government approaches to crisis 
preparedness, contractor innovation, and federally funded research and 
development. 

OMB's PMA scorecard for the expanded electronic government initiative 
reflects a broad view of the many components of an effective program 
for expanding electronic government. For example, the scorecard 
assesses whether an agency has an enterprise architecture[Footnote 25] 
in place that is linked to the Federal Enterprise Architecture, which 
is intended to provide a government wide framework to guide and 
constrain federal agencies' enterprise architectures and information 
technology investments. The federal government's efforts in this area 
are still maturing. In May 2004, we reported that the Federal 
Enterprise Architecture remained very much a work in progress and that 
agencies' enterprise architectures were likewise still 
maturing.[Footnote 26] When we surveyed agencies in 2003, we found that 
only 20 of 96 agencies had established at least the foundation for 
effective architecture management and that the level of maturity had 
not changed much over the previous years.[Footnote 27]

In addition, OMB's e-government scorecard requires agencies to properly 
secure their information technology systems, a task that has been 
daunting for many government agencies. We recently reported that 
although agencies were generally reporting an increasing number of 
systems meeting key statutory information security requirements, 
challenges nevertheless remained.[Footnote 28] For example, only 7 of 
24 agencies reported that they had tested contingency plans for 90 
percent or more of their systems. Contingency plans provide specific 
instructions for restoring critical systems in case the usual 
facilities are significantly damaged or cannot be accessed due to 
unexpected events, and testing of these plans is essential to 
determining whether they will function as intended in an emergency 
situation. 

Competitive Sourcing: 

The federal government needs to undertake a fundamental review of who 
will do the government's business in the 21st Century. In this regard, 
agencies are assessing what functions and transactions the private 
sector could perform, and in many cases they are asking agency 
employees to compete with private entities for this business. The 
objectives of the PMA initiative on competitive sourcing are to improve 
quality and reduce costs. 

Aspects of the government's process for making sourcing decisions had 
been criticized as cumbersome, complicated, and slow. Against this 
backdrop, and in response to a requirement in the National Defense 
Authorization Act for fiscal year 2001, I convened a panel of experts 
to study the process. The Commercial Activities Panel, consisting of 
representatives from agencies, federal labor unions, private industry, 
and other individuals with expertise in this area, conducted a yearlong 
study. The panel members heard repeatedly about the importance of 
competition and its central role in fostering economy, efficiency, and 
continuous performance improvement. The panel strongly supported 
continued emphasis on competition and concluded that whenever the 
government is considering converting work from one sector to another, 
public-private competitions should be the norm, consistent with the 10 
overarching principles adopted unanimously by the panel.[Footnote 29]

As part of the administration's efforts to advance this PMA initiative 
and implement the recommendations of the Commercial Activities Panel, 
OMB revised circular A-76, which sets forth federal policy for 
determining whether federal employees or private contractors will 
perform commercial activities. The revisions are broadly consistent 
with the principles and recommendations of the Panel. In particular, 
the revised circular stresses the use of competition in making sourcing 
decisions and, through reliance on procedures contained in the Federal 
Acquisition Regulation, should result in a more transparent, 
expeditious, fair, and consistently applied competitive process. We 
continue to review various aspects of this initiative. 

One issue not fully addressed in the revised Circular was the right of 
federal employees or their representatives to file protests challenging 
the conduct or the outcomes of public-private competitions. In April 
2004, we issued a decision holding that federal employees lacked 
standing to file such protests under the Competition in Contracting Act 
(CICA).[Footnote 30] We pointed out that the Congress would have to 
amend CICA in order to provide that right. Congress amended CICA late 
last year,[Footnote 31] and just last week, after receiving and 
considering various public comments, we issued final regulations 
implementing the change.[Footnote 32]

Federal Real Property Asset Management: 

The federal real property portfolio is vast and diverse--over 30 
agencies control hundreds of thousands of real property assets 
worldwide, including facilities and land worth hundreds of billions of 
dollars. Unfortunately, much of this vast, valuable portfolio reflects 
an infrastructure based on the business model and technological 
environment of the 1950s. Many of these assets are no longer 
effectively aligned with, or responsive to, agencies' changing 
missions. Further, many assets are in an alarming state of 
deterioration; agencies have estimated restoration and repair needs to 
be in the tens of billions of dollars. Maintaining underused or 
unneeded federal property is also costly due to day-to-day operational 
costs, such as regular maintenance, utilities fees, and security 
expenses. Compounding these problems are the lack of reliable 
governmentwide data for strategic asset management; a heavy reliance on 
costly leasing, instead of ownership, to meet new needs; and the cost 
and challenge of protecting these assets against terrorism. In January 
2003, we designated federal real property as a high-risk area due to 
these longstanding problems. 

In February 2004, the President added the Federal Asset Management 
Initiative to the President's Management Agenda and signed Executive 
Order 13327 to address challenges in this area. The order requires 
senior real property officers at all executive branch departments and 
agencies to, among other things, develop and implement an agency asset 
management plan; identify and categorize all real property owned, 
leased, or otherwise managed by the agency; prioritize actions needed 
to improve the operational and financial management of the agency's 
real property inventory; and make life-cycle cost estimations 
associated with the prioritized actions. In addition, the senior real 
property officers are responsible, on an ongoing basis, for monitoring 
the real property assets of the agency. The order also established a 
new Federal Real Property Council (the Council) at OMB. 

In April 2005, OMB officials updated us on the status of the 
implementation of the executive order. According to these officials, 
all of the senior real property officers are in place, and the Council 
has been working to identify common data elements and performance 
measures to be captured by agencies and ultimately reported to a 
governmentwide database. In addition, OMB officials reported that 
agencies are working on their asset management plans. Plans for DOD, 
the Departments of Veterans Affairs, (VA) and Energy, and the General 
Services Administration (GSA) have been completed and approved by OMB. 
The Council has also developed guiding principles for real property 
asset management. These guiding principles state that real property 
asset management must, among other things, support agency missions and 
strategic goals, use public and commercial benchmarks and best 
practices, employ life-cycle cost-benefit analysis, promote full and 
appropriate utilization, and dispose of unneeded assets. 

In addition to these reform efforts, Public Law 108-447 gave GSA the 
authority to retain the net proceeds from the disposal of federal 
property for fiscal year 2005 and to use such proceeds for GSA's real 
property capital needs.[Footnote 33] Also, Public Law 108-422 
established a capital asset fund and gave VA the authority to retain 
the proceeds from the disposal of its real property for the use of 
certain capital asset needs such as demolition, environmental clean-up, 
and major repairs.[Footnote 34] And, agencies such as DOD and VA have 
made progress in addressing longstanding federal real property problems 
and governmentwide efforts in the facility protection area are 
progressing. For example: 

* VA has implemented a process called Capital Asset Realignment for 
Enhanced Services (CARES) to address its aging and obsolete portfolio 
of health care facilities. In March 2005, we reported that through 
CARES, VA identified 136 locations for evaluation of alternative ways 
to align inpatient services: 99 of these facilities had potential 
duplication of services with another nearby facility or low acute 
patient workload.[Footnote 35] VA made decisions to realign inpatient 
health care services at 30 of these locations. For example, it will 
close all inpatient services at five facilities. VA's decisions on 
inpatient alignment and plans for further study of its capital asset 
needs are tangible steps in improving management of its capital assets 
and enhancing health care. Accomplishing its goals, however, will 
depend on VA's success in completing its evaluations and implementing 
its CARES decisions to ensure that resources now spent on unneeded 
capital assets are redirected to health care. 

* In DOD's support infrastructure management area, which we identified 
as high-risk in 1997, DOD has made progress and expects to continue 
making improvements. In April 2005, we testified that DOD's 
infrastructure costs continue to consume a larger-than-necessary 
portion of its budget than DOD believes is desirable.[Footnote 36] For 
several years, DOD has been concerned about its excess facilities 
infrastructure, which affects its ability to fund weapons system 
modernization and other critical needs. DOD has achieved some operating 
efficiencies from such efforts as base realignments and closures, 
consolidations, and business process reengineering. Despite this 
progress, much work remains for DOD to transform its support 
infrastructure so that it can concentrate resources on critical needs. 
DOD also needs to strengthen its recent efforts to develop and refine 
its comprehensive long-range plan for its facility infrastructure to 
ensure adequate funding for facility sustainment, modernization, and 
recapitalization. 

* In light of the need to invest in facility protection since September 
11, funding available for repair and restoration and preparing excess 
property for disposal may be further constrained. The Interagency 
Security Committee (ISC), which is chaired by DHS, is tasked with 
coordinating federal agencies' facility protection efforts, developing 
standards, and overseeing implementation. In November 2004, we reported 
that ISC had made progress in coordinating the government's facility 
protection efforts by, for example, developing security standards for 
leased space and design criteria for security in new construction 
projects.[Footnote 37] Despite this progress, we found that its actions 
to ensure compliance with security standards and oversee implementation 
have been limited. Nonetheless, the ISC serves as a forum for 
addressing security issues, which can have an impact on agencies' 
efforts to improve real property management. 

The inclusion of real property asset management on the President's 
Management Agenda, the executive order, and agencies' actions are 
clearly positive steps in an area that had been neglected for many 
years. However, despite the increased focus on real property issues in 
recent years, the underlying conditions--such as excess and 
deteriorating properties and costly leasing--continue to exist and more 
needs to be done to address various obstacles that led to our high risk 
designation. For example, the problems have been exacerbated by 
competing stakeholder interests in real property decisions, various 
legal and budget related disincentives to businesslike outcomes, and 
the need for better capital planning among real property-holding 
agencies. In light of this, we continue to believe that there is a need 
for a comprehensive and integrated transformation strategy for federal 
real property. Realigning the government's real property assets with 
agency missions, taking into account the requirements of the future 
federal role and workplace, will be critical to improving the 
government's performance and ensuring accountability within expected 
resource limits. A transformation strategy could serve as a useful 
guide for implementing further change and achieving such results. 

Continuing Attention Is Needed to Improve Management and Performance 
Across the Federal Government: 

As my testimony today has highlighted, serious and disciplined efforts 
are needed to improve the management and performance of federal 
agencies and to ensure accountability. Along with OMB's leadership in 
implementing PMA, it will only be through the attention of Congress, 
the administration, and federal agencies, that progress can be 
sustained and, more importantly, accelerated. The stakes associated 
with federal program performance are large, both for beneficiaries of 
these programs and the nation's taxpayers. Policymaking institutions 
will be challenged to shift from the traditional focus on incremental 
changes in spending or revenues to look more fundamentally at the 
programs, policies, functions, and activities in addressing current and 
emerging national needs and problems across levels of government and 
sectors, including all major areas of the federal budget--discretionary 
spending, entitlements and other mandatory spending, and tax policies 
and programs. 

Congressional support has proven to be critical in sustaining interest 
in management initiatives over time. Congress has served as an 
institutional champion for many reform initiatives over the years, such 
as the CFO Act and GPRA. Our March 2004 report on GPRA found that it 
has established a solid foundation for achieving greater results, but 
that significant challenges to GPRA implementation still 
exist.[Footnote 38] Our survey data suggested that more federal 
managers, especially at the SES level, believed that OMB was paying 
attention to their agencies' efforts under GPRA. However, we found 
inconsistent commitment in other areas where OMB could further enhance 
its leadership. Agencies' plans and reports still suffer from 
persistent weaknesses and could improve in a number of areas, such as 
attention to issues that cut across agency lines, and better 
information about the quality of the data that underlie agency 
performance goals. We recommended that OMB improve its guidance and 
oversight of GPRA implementation, as well as develop a governmentwide 
performance plan. 

As discussed earlier, GPRA requires a governmentwide performance plan, 
but OMB has not issued a distinct plan since 1999. Most recently, the 
President's fiscal year 2006 budget described agencies' progress in 
addressing the PMA and the results of PART reviews of agencies' 
programs. While such information is important and useful, alone it is 
not adequate to provide a broader and more integrated perspective of 
planned performance on governmentwide outcomes. The PART focus on 
individual programs needs to be supplemented by a more crosscutting 
assessment of the relative contribution of portfolios of programs and 
tools to broader outcomes. Most key performance goals of importance--
ranging from low income housing to food safety to counterterrorism--are 
addressed by a wide range of discretionary, entitlement, tax, and 
regulatory approaches that cut across a number of agencies. 

Preparing a governmentwide plan could build on the administration's 
efforts to assess progress across the government as well as contribute 
to efforts to compare the performance results across similar programs 
that address common outcomes. Although there has been limited progress, 
efforts to date have not provided the Congress and others with an 
integrated perspective on the extent to which programs and tools 
contribute to national goals and position the government to 
successfully meet 21st century demands. 

We also suggested that Congress consider amending GPRA to require that 
the President develop a governmentwide strategic plan. Although it 
generally agreed with our recommendations, OMB stated that the 
President's Budget can serve as both a governmentwide strategic and 
annual plan. However, we believe that the budget provides neither a 
long-term nor an integrated perspective on the federal government's 
performance. A strategic plan for the federal government, supported by 
a set of key national indicators to assess the government's 
performance, position, and progress, could provide an additional tool 
for governmentwide reexamination of existing programs, as well as 
proposals for new programs. Such a plan could be of particular value in 
linking agencies' long-term performance goals and objectives 
horizontally across the government and could provide a basis for 
integrating, rather than merely coordinating, a wide array of federal 
activities. This raises the issue of the need for a set of key 
indicators to inform decision makers about the position and progress of 
the nation as a whole and to help set agency and program goals and 
priorities. 

Further, given the financial constraints we are likely to face for many 
years to come and the trends at work that are changing the world in 
which our government operates, a fundamental review of major program 
and policy areas is needed to update the federal government's programs 
and priorities to meet current and future challenges. Our recent report 
on 21st Century Challenges is intended to help the Congress in 
reviewing and reconsidering the base of federal spending and tax 
programs.[Footnote 39] As this Subcommittee is well aware, the nature 
and magnitude of the fiscal, security, and economic and other 
adjustments that need to be considered are not amenable to "quick 
fixes;" rather they will likely require an iterative, thoughtful 
process of disciplined changes and reforms over many years. Therefore, 
providing an ongoing and consistent focus, such as the PMA has provided 
on management reform efforts, is an important element in helping to 
ensure that the federal government is managed effectively to achieve 
results important to the American people. 

Our report on 21st century challenges laid out some of the most 
pressing issues for policymakers to consider as the government 
increasingly relies on new networks and partnerships to achieve 
critical results. A complex network of governmental and nongovernmental 
entities--such as federal agencies, domestic and international non-or 
quasi-governmental organizations, for-profit and not-for-profit 
contractors, and state and local governments--contribute to shaping the 
actual outcomes achieved. Some of the issues are consistent with those 
raised by the PMA, such as in the area of real property asset 
management--focusing on opportunities to more strategically manage the 
federal government's assets to make the federal portfolio more relevant 
to current missions and less costly. Moving forward, some additional 
questions that are particularly relevant to the focus of this hearing 
on improving governance include the following: 

* In a modern society with advanced telecommunications and electronic 
information capabilities, which agencies still need a physical presence 
in all major cities?

* How can agencies more strategically manage their portfolio of tools 
and adopt more innovative methods to contribute to the achievement of 
national outcomes?

* How can greater coordination and dialogue be achieved across all 
levels of government to ensure a concerted effort by the public sector 
as a whole in addressing key national challenges and problems?

* What are the specific leadership models that can be used to improve 
agency management and address transformation challenges? For example, 
should we create chief operating officer or chief management officer 
positions with term appointments within selected agencies to elevate, 
integrate, and institutionalize responsibility and authority for 
business management and transformation efforts?

Mr. Chairman, we are pleased to be able to participate in this hearing 
today. We have issued a large body of reports, guides, and tools on 
issues directly relevant to PMA, and plan to continue to actively 
support congressional and agency actions to address today's challenges 
and prepare for the future. As I have discussed in my statement today, 
although efforts to transform agencies by improving their management 
and performance are under way, more remains to be done to ensure that 
the government has the capacity to deliver on its promises meet current 
and emerging needs, and to remain relevant in the 21st Century. 
Decisive action and sustained attention will be necessary to make the 
hard choices needed to reexamine and transform the federal government, 
maximize its performance, and ensure accountability. 

This concludes my prepared statement. I would be pleased to respond to 
any questions that you or other members of the subcommittee may have. 

FOOTNOTES

[1] GAO, High-Risk Series: An Update (GAO-05-207, January 2005). 

[2] 31 U.S.C.  901-903. 

[3] Public Law 104-208,  801-808, September 30, 1996. 

[4] 31 U.S.C.  1113, 3512. 

[5] 31 U.S.C.  3321 note. 

[6] GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[7] OMB Memorandum M-03-13, May 21, 2003. 

[8] GAO, High-Risk Series: An Update (GAO-01-263, January 2001). 

[9] GAO, Human Capital: Key Principles for Effective Strategic 
Workforce Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003). 

[10] GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce 
Plans Needed, GAO-04-753 (Washington, D.C.: June 30, 2004). 

[11] GAO, Human Capital: Opportunities to Improve Executive Agencies' 
Hiring Processes, GAO-03-450 (Washington, D.C.: May 30, 2003). 

[12] GAO, Human Capital: Increasing Agencies' Use of New Hiring 
Flexibilities, GAO-04-959T (Washington, D.C.: July 13, 2004); Human 
Capital: Additional Collaboration Between OPM and Agencies Is Key to 
Improved Federal Hiring, GAO-04-797 (Washington, D.C.: June 7, 2004); 
and Human Capital: Status of Efforts to Improve Federal Hiring, GAO-04-
796T (Washington, D.C.: June 7, 2004). 

[13] See section 1322 of Public Law 107-296, November 25, 2002, and 
section 1125 of Public Law 108-136, November 24, 2003. 

[14] GAO and the National Commission on the Public Service 
Implementation Initiative, Highlights of a Forum: Human Capital: 
Principles, Criteria, and Processes for Governmentwide Federal Human 
Capital Reform, GAO-05-69SP (Washington, D.C.: Dec. 1, 2004). 

[15] 5 U.S.C.  306, 31 U.S.C.  1115-1119. 

[16] PART applies 25 questions to all "programs" under four broad 
topics: (1) program purpose and design, (2) strategic planning, (3) 
program management, and (4) program results (i.e., whether a program is 
meeting its long-term and annual goals) as well as additional questions 
that are specific to one of seven mechanisms or approaches used to 
deliver the program. 

[17] GAO has suggested various approaches to addressing this and other 
challenges in The Government Performance and Results Act: 1997 
Governmentwide Implementation Will Be Uneven, GAO/GGD-97-109 
(Washington, D.C.: June 1997). 

[18] GAO, Performance Reporting: Few Agencies Reported on the 
Completeness and Reliability of Performance Data, GAO-02-372 
(Washington, D.C.: Apr. 26, 2002); and Managing for Results: 
Opportunities for Continued Improvements in Agencies' Performance 
Plans, GAO/GGD/AIMD-99-215 (Washington, D.C.: July 20, 1999). 

[19] GAO, Performance Budgeting: Observations on the Use of OMB's 
Program Assessment Rating Tool for the Fiscal Year 2004 Budget, GAO-04-
174. (Washington, D.C.: Jan. 30, 2004). 

[20] GAO, Performance Budgeting: Efforts to Restructure Budgets to 
Better Align Resources With Performance, GAO-05-117SP (Washington, 
D.C.: Feb. 1, 2005). 

[21] GAO, Electronic Government: Initiatives Sponsored by the Office of 
Management and Budget Have Made Mixed Progress, GAO-04-561T 
(Washington, D.C., March 24, 2004) and GAO, Electronic Government: 
Proposal Addresses Critical Challenges, GAO-02-1083T (Washington, D.C., 
Sept. 18, 2002). 

[22] Public Law 107-347, December 17, 2002. 

[23] For more information about the selection of initiatives, see GAO, 
Electronic Government: Selection and Implementation of the Office of 
Management and Budget's 24 Initiatives, GAO-03-229 (Washington, D.C., 
Nov. 22, 2002). 

[24] GAO, Electronic Government: Federal Agencies Have Made Progress 
Implementing the E-Government Act of 2002, GAO-05-12, (Washington, 
D.C., Dec. 10, 2004). 

[25] An enterprise architecture is a blue print, defined largely by 
interrelated models, that describes (in both business and technology 
terms) an entity's "as is" or current environment, its "to be" or 
future environment, and its investment plan for transitioning from the 
current to the future environment. 

[26] GAO, Information Technology: The Federal Enterprise Architecture 
and Agencies' Enterprise Architectures Are Still Maturing, GAO-04-798T 
(Washington, D.C.: May 19, 2004). 

[27] GAO, Information Technology: Leadership Remains Key to Agencies 
Making Progress on Enterprise Architecture Efforts, GAO-04-40 
(Washington, D.C.: Nov. 17, 2003). 

[28] GAO, Information Security: Continued Efforts Needed to Sustain 
Progress in Implementing Statutory Requirements, GAO-05-483T 
(Washington, D.C.: Apr. 7, 2005). 

[29] Improving the Sourcing Decisions of the Government. Final report 
of the Commercial Activities Panel (Washington, D. C.: April 2002). 

[30] B-293590.2, April 19, 2004, 2004 CPD  82. 

[31] Public Law 98-369, July 18, 1984, as amended by Public Law 108-
375,  326(d), October 28, 2004. 

[32] 70 Fed. Reg. 19679-19681 (Apr. 14, 2005). 

[33] Division H,  412, December 8, 2004. 

[34] Sec. 411, November 30, 2004. 

[35] GAO, VA Health Care: Important Steps Taken to Enhance Veterans' 
Care By Aligning Inpatient Services with Projected Needs, GAO-05-160 
(Washington, D.C.: Mar. 2, 2005). 

[36] GAO, DOD's High-Risk Areas: Successful Business Transformation 
Requires Sound Strategic Planning and Sustained Leadership, GAO-05-520T 
(Washington, D.C.: Apr. 13, 2005). 

[37] GAO, Homeland Security: Further Actions Needed to Coordinate 
Federal Agencies' Facility Protection Efforts and Promote Key 
Practices, GAO-05-49 (Washington, D.C.: Nov. 30, 2004). 

[38] GAO, Results-Oriented Government: GPRA Has Established a Solid 
Foundation for Achieving Greater Results, GAO-04-38 (Washington, D.C., 
March 10, 2004). 

[39] U.S. Government Accountability Office, 21st Century Challenges: 
Reexamining the Base of the Federal Government, GAO-05-325SP 
(Washington, D.C.: February 2005).