prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: Medicare is one of four principal health-insurance programs administered by CMS; it provides health insurance for persons aged 65 and over, certain individuals with disabilities, and individuals with end-stage renal disease  See table 1 for information about Medicare’s component programs  Medicare is the largest CMS program, at $702 billion in fiscal year 2017  As discussed earlier, according to CBO, Medicare outlays are projected to rise to $1 5 trillion in 2028 (see fig  1)  Fraud involves obtaining something of value through willful misrepresentation  There are no reliable estimates of the extent of fraud in the Medicare program, or in the health-care industry as a whole  By its very nature, fraud is difficult to detect, as those involved are engaged in intentional deception  Further, potential fraud cases must be identified, investigated, prosecuted, and adjudicated—resulting in a conviction— before fraud can be established  As I mentioned earlier, we designated Medicare as a high-risk program in 1990 because its size, scope, and complexity make it vulnerable to fraud, waste, and abuse  Similarly, the Office of Management and Budget (OMB) designated all parts of Medicare a “high priority” program because they each report $750 million or more in improper payments in a given year  We also highlighted challenges associated with duplicative payments in Medicare in our annual report on duplication and opportunities for cost savings in federal programs  Improper payments are a significant risk to the Medicare program and may include payments made as a result of fraud  However, I would note that improper payments are not a proxy for the amount of fraud or extent of fraud risk in a particular program as improper payment measurement does not specifically identify or estimate such payments due to fraud  Improper payments are those that are either made in an incorrect amount (overpayments and underpayments) or those that should not have been made at all  Our December 2017 report found that CMS manages its fraud risks as part of a broader program-integrity approach working with a broad array of stakeholders  CMS’s program-integrity approach includes efforts to address waste, abuse, and improper payments as well as fraud across its four principal programs  In Medicare, CMS collaborates with contractors, health-insurance plans, and law-enforcement and other agencies to carry out its program-integrity responsibilities  According to CMS officials, this broader program-integrity approach can help the agency develop control activities to address multiple sources of improper payments, including fraud  According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks  Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives  The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks  Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level  In July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way  The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 2  The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires OMB to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities  The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines  In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies  Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework  Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of the controls established under OMB guidelines, among other things  CMS’s antifraud efforts partially aligned with the Fraud Risk Framework  Consistent with the framework, CMS has demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts  It has also taken steps to establish a culture conducive to fraud risk management, although it could expand its antifraud training to include all employees  CMS has taken some steps to identify fraud risks in Medicare; however, it has not conducted a fraud risk assessment or developed a risk-based antifraud strategy for Medicare as defined in the Fraud Risk Framework  CMS has established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with a risk-based antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare  The commit component of the Fraud Risk Framework calls for an agency to commit to combating fraud by creating an organizational culture and structure conducive to fraud risk management  This component includes establishing a dedicated entity to lead fraud risk management activities  Within CMS, the Center for Program Integrity (CPI) serves as the dedicated entity for fraud, waste, and abuse issues in Medicare, which is consistent with the Fraud Risk Framework  CPI was established in 2010, in response to a November 2009 Executive Order on reducing improper payments and eliminating waste in federal programs  This formalized role, according to CMS officials, elevated the status of program-integrity efforts, which previously were carried out by other parts of CMS  As an executive-level Center—on the same level with five other executive-level Centers at CMS, such as the Center for Medicare—CPI has a direct reporting line to executive-level management at CMS  The Fraud Risk Framework identifies a direct reporting line to senior-level managers within the agency as a leading practice  According to CMS officials, this elevated organizational status offers CPI heightened visibility across CMS, attention by CMS executive leadership, and involvement in executive-level conversations  The commit component of the Fraud Risk Framework also includes creating an organizational culture to combat fraud at all levels of the agency  Consistent with the Fraud Risk Framework, CMS has promoted an antifraud culture by, for example, coordinating with internal and external stakeholders  Consistent with leading practices in the Fraud Risk Framework to involve all levels of the agency in setting an antifraud tone, CPI has worked collaboratively with other CMS Centers  In addition to engaging executive-level officials of other CMS Centers through the Program Integrity Board, CPI has worked collaboratively with other Centers within CMS to incorporate antifraud features into new program design or policy development and established regular communication at the staff level  For example: Center for Medicare and Medicaid Innovation (CMMI)  When developing the Medicare Diabetes Prevention Program, CMMI officials told us they worked with CPI’s Provider Enrollment and Oversight Group and Governance Management Group to develop risk-based screening procedures for entities that would enroll in Medicare to provide diabetes-prevention services, among other activities  The program was expanded nationally in 2016, and CMS determined that an entity may enroll in Medicare as a program supplier if it satisfies enrollment requirements, including that the supplier must pass existing high categorical risk-level screening requirements  Center for Medicare (CM)  In addition to building safeguards into programs and developing policies, CM officials told us that there are several standing meetings, on monthly, biweekly, and weekly bases, between groups within CM and CPI that discuss issues related to provider enrollment, FFS operations, and contractor management  A senior CM official also told us that there are ad hoc meetings taking place between CM and CPI: “We interact multiple times daily at different levels of the organization  Working closely is just a regular part of our business ” CMS has also demonstrated its commitment to addressing fraud, waste, and abuse to its stakeholders  Representatives of CMS’s extensive stakeholder network whom we interviewed—contractors and officials from public and private entities—generally recognized the agency’s commitment to combating fraud  In our interviews with stakeholders, officials observed CMS’s increased commitment over time to address fraud, waste, and abuse and cited examples of specific CMS actions  CMS contractors told us that CMS’s commitment to combating fraud is incorporated into contractual requirements, such as requiring (1) data analysis for potential fraud leads and (2) fraud-awareness training for providers  Officials from entities that are members of the Healthcare Fraud Prevention Partnership (HFPP), specifically, a health-insurance plan and the National Health Care Anti-Fraud Association, added that CMS’s effort to establish the HFPP and its ongoing collaboration and information sharing reflect CMS’s commitment to combat fraud in Medicare  The Fraud Risk Framework identifies training as one way of demonstrating an agency’s commitment to combating fraud  Training and education intended to increase fraud awareness among stakeholders, managers, and employees serve as a preventive measure to help create a culture of integrity and compliance within the agency  The Fraud Risk Framework discusses requiring all employees to attend training upon hiring and on an ongoing basis thereafter  To increase awareness of fraud risks in Medicare, CMS offers and requires training for stakeholder groups such as providers, beneficiaries, and health-insurance plans  Specifically, through its National Training Program and Medicare Learning Network, CMS makes available training materials on combating Medicare fraud, waste, and abuse  These materials help to identify and report fraud, waste, and abuse in CMS programs and are geared toward providers, beneficiaries, as well as trainers and other stakeholders  Separately, CMS requires health- insurance plans working with CMS to provide annual fraud, waste, and abuse training to their employees  However, CMS does not offer or require similar fraud-awareness training for the majority of its workforce  For a relatively small portion of its overall workforce—specifically, contracting officer representatives who are responsible for certain aspects of the acquisition function—CMS requires completion of fraud and abuse prevention training every 2 years  According to CMS, 638 of its contracting officer representatives (or about 10 percent of its overall workforce) completed such training in 2016 and 2017  Although CMS offers fraud-awareness training to others, the agency does not require fraud-awareness training for new hires or on a regular basis for all employees because the agency has focused on providing process-based internal controls training for its employees  While fraud-awareness training for contracting officer representatives is an important step in helping to promote fraud risk management, fraud- awareness training specific to CMS programs would be beneficial for all employees  Such training would not only be consistent with what CMS offers to or requires of its stakeholders and some of its employees, but would also help to keep the agency’s entire workforce continuously aware of fraud risks and examples of known fraud schemes, such as those identified in successful HHS OIG investigations  Such training would also keep employees informed as they administer CMS programs or develop agency policies and procedures  Considering the vulnerability of Medicare and Medicaid programs to fraud, waste, and abuse, without regular required training CMS cannot be assured that its workforce of over 6,000 employees is continuously aware of risks facing its programs  In our December 2017 report, we recommended that the Administrator of CMS provide fraud-awareness training relevant to risks facing CMS programs and require new hires to undergo such training and all employees to undergo training on a recurring basis  In its March 2018 letter to GAO, HHS stated that CMS is in the process of developing Fraud, Waste, and Abuse Training for all new employees, to be presented at CMS New Employee Orientations  Additionally, CMS is also developing training to be completed by current CMS employees on an annual basis  As of July 2018, this recommendation remains open  The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile  Identifying fraud risks is one of the steps included in the Fraud Risk Framework for assessing risks to determine a fraud risk profile  In our December 2017 report, we discussed several examples of steps CMS has taken to identify fraud risks as well as control activities that target areas the agency has designated as higher risk within Medicare, including specific provider types and specific geographic locations  These examples include data analytics to assist investigations in Medicare FFS, including Medicare’s Fraud Prevention System (FPS ), prior authorization for Medicare FFS services or supplies, revised provider screening and enrollment processes for Medicare FFS, and temporary provider enrollment moratoriums for certain providers and geographic areas for Medicare FFS  CMS officials told us that CPI initially focused on developing control activities for Medicare FFS and consider these activities to be the most mature of all CPI efforts to address fraud risks  CMS Has Not Conducted a Fraud Risk Assessment for Medicare The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and assess risks to determine a fraud risk profile  Furthermore, federal internal control standards call for agency management to assess the internal and external risks their entities face as they seek to achieve their objectives  The standards state that, as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks  The Fraud Risk Framework states that, in planning the fraud risk assessment, effective managers tailor the fraud risk assessment to the program by, among other things, identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process  Fraud risk assessments that align with the Fraud Risk Framework involve (1) identifying inherent fraud risks affecting the program, (2) assessing the likelihood and impact of those fraud risks, (3) determining fraud risk tolerance, (4) examining the suitability of existing fraud controls and prioritizing residual fraud risks, and (5) documenting the results (see fig  3)  Although CMS had identified some fraud risks posed by providers in Medicare FFS, the agency had not conducted a fraud risk assessment for the Medicare program as a whole  Such a risk assessment would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy  According to CMS officials, CMS had not conducted a fraud risk assessment for Medicare because, within CPI’s broader approach of preventing and eliminating improper payments, its focus has been on addressing specific vulnerabilities among provider groups that have shown themselves particularly prone to fraud, waste, and abuse  With this approach, however, it is unlikely that CMS will be able to design and implement the most-appropriate control activities to respond to the full portfolio of fraud risks  A fraud risk assessment consists of discrete activities that build upon each other  Specifically: Identifying inherent fraud risks affecting the program  As discussed earlier, CMS took steps to identify fraud risks  However, CMS has not used a process to identify inherent fraud risks from the universe of potential vulnerabilities facing Medicare, including threats from various sources  According to CPI officials, most of the agency’s fraud control activities are focused on fraud risks posed by providers  The Fraud Risk Framework discusses fully considering inherent fraud risks from internal and external sources in light of fraud risk factors such as incentives, opportunities, and rationalization to commit fraud  For example, according to CMS officials, the inherent design of the Medicare Part C program may pose fraud risks that are challenging to detect  A fraud risk assessment would help CMS identify all sources of fraudulent behaviors, beyond threats posed by providers, such as those posed by health-insurance plans, contractors, or employees  Assessing the likelihood and impact of fraud risks and determining fraud risk tolerance  CMS has taken steps to prioritize fraud risks in some areas, but it had not assessed the likelihood or impact of fraud risks or determined fraud risk tolerance across all parts of Medicare  Assessing the likelihood and impact of inherent fraud risks would involve consideration of the impact of fraud risks on program finances, reputation, and compliance  Without assessing the likelihood and impact of risks in Medicare or internally determining which fraud risks may fall under the tolerance threshold, CMS cannot be certain that it is aware of the most-significant fraud risks facing this program and what risks it is willing to tolerate based on the program’s size and complexity  Examining the suitability of existing fraud controls and prioritizing residual fraud risks  CMS had not assessed existing control activities or prioritized residual fraud risks  According to the Fraud Risk Framework, managers may consider the extent to which existing control activities—whether focused on prevention, detection, or response—mitigate the likelihood and impact of inherent risks and whether the remaining risks exceed managers’ tolerance  This analysis would help CMS to prioritize residual risks and to determine mitigation approaches  For example, CMS had not established preventive fraud control activities in Medicare Part C  Using a fraud risk assessment for Medicare Part C and closely examining existing fraud control activities and residual risks, CMS could be better positioned to address fraud risks facing this growing program and develop preventive control activities  Furthermore, without assessing existing fraud control activities and prioritizing residual fraud risks, CMS cannot be assured that its current control activities are addressing the most-significant risks  Such analysis would also help CMS determine whether additional, preferably preventive, fraud controls are needed to mitigate residual risks, make adjustments to existing control activities, and potentially scale back or remove control activities that are addressing tolerable fraud risks  Documenting the risk-assessment results in a fraud risk profile  CMS had not developed a fraud risk profile that documents key findings and conclusions of the fraud risk assessment  According to the Fraud Risk Framework, the risk profile can also help agencies decide how to allocate resources to respond to residual fraud risks  Given the large size and complexity of Medicare, a documented fraud risk profile could support CMS’s resource-allocation decisions as well as facilitate the transfer of knowledge and continuity across CMS staff and changing administrations  Senior CPI officials told us that the agency plans to start a fraud risk assessment for Medicare after it completes a separate fraud risk assessment of the federally facilitated marketplace  This fraud risk assessment for the federally facilitated marketplace eligibility and enrollment process is being conducted in response to a recommendation we made in February 2016  In April 2017, CPI officials told us that this fraud risk assessment was largely completed, although in September 2017 CPI officials told us that the assessment was undergoing agency review  CPI officials told us that they have informed CM officials that there will be future fraud risk assessments for Medicare; however, they could not provide estimated timelines or plans for conducting such assessments, such as the order or programmatic scope of the assessments  Once completed, CMS could use the federally facilitated marketplace fraud risk assessment and apply any lessons learned when planning for and designing fraud risk assessments for Medicare  According to the Fraud Risk Framework, factors such as size, resources, maturity of the agency or program, and experience in managing risks can influence how the entity plans the fraud risk assessment  Additionally, effective managers tailor the fraud risk assessment to the program when planning for it  The large scale and complexity of Medicare as well as time and resources involved in conducting a fraud risk assessment underscore the importance of a well-planned and tailored approach to identifying the assessment’s programmatic scope  Planning and tailoring may involve decisions to conduct a fraud risk assessment for Medicare as a whole or divided into several subassessments to reflect their various component parts (e g , Medicare Part C)  CMS’s existing fraud risk identification efforts as well as communication channels with stakeholders could serve as a foundation for developing a fraud risk assessment for Medicare  The leading practices identified in the Fraud Risk Framework discuss the importance of identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process  CMS’s fraud risk identification efforts discussed earlier could provide key information about fraud risks and their likelihood and impact  Furthermore, existing relationships and communication channels across CMS and its extensive network of stakeholders could support building a comprehensive understanding of known and potential fraud risks for the purposes of a fraud risk assessment  For example, the fraud vulnerabilities identified through data analysis and information sharing with health-insurance plans, law-enforcement organizations, and contractors could inform a fraud risk assessment  CPI’s Command Center missions—facilitated collaboration sessions that bring together experts from various disciplines to improve the processes for fraud prevention in Medicare—could bring together experts to identify potential or emerging fraud vulnerabilities or to brainstorm approaches to mitigate residual fraud risks  As CMS makes plans to move forward with a fraud risk assessment for Medicare, it will be important to consider the frequency with which the fraud risk assessment would need to be updated  While, according to the Fraud Risk Framework, the time intervals between updates can vary based on the programmatic and operating environment, assessing fraud risks on an ongoing basis is important to ensure that control activities are continuously addressing fraud risks  The constantly evolving fraud schemes, the size of the programs in terms of beneficiaries and expenditures, as well as continual changes in Medicare—such as development of innovative payment models and increasing managed- care enrollment—call for constant vigilance and regular updates to the fraud risk assessment  In our December 2017 report we recommended that the Administrator of CMS conduct fraud risk assessments for Medicare and Medicaid to include respective fraud risk profiles and plans for regularly updating the assessments and profiles  In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation  As of July 2018, the recommendation remains open  The design and implement component of the Fraud Risk Framework calls for federal managers to design and implement a strategy with specific control activities to mitigate assessed fraud risks and collaborate to help ensure effective implementation  According to the Fraud Risk Framework, effective managers develop and document an antifraud strategy that describes the program’s approach for addressing the prioritized fraud risks identified during the fraud risk assessment, also referred to as a risk-based antifraud strategy  A risk- based antifraud strategy describes existing fraud control activities as well as any new fraud control activities a program may adopt to address residual fraud risks
Report 2:  According to an Air Force analysis, doing so would achieve savings of over $67 million as it replaces or retires devices  As of July 2018, the Air Force had not fully implemented this guidance  Efforts by the military services to demonstrate that they have achieved print device reduction goals have been limited because they have not monitored the actions they have taken to reduce the number of print devices  Military service officials we interviewed said they were unaware of any efforts by the DOD CIO to ensure that device reductions occurred and that DOD components achieved their planned savings, such as providing information to the CIO on the status of their efforts to implement the guidance in the memorandum or data on reductions in the number of devices  Standards for internal control state that management should implement control activities through policies that use quality information to achieve an entity’s objectives, monitor the internal control system, and evaluate the results of the system  Efforts to implement the memorandum to achieve print device reduction goals have also been limited because responsibility for implementation was not clearly assigned  According to a DOD CIO official, the responsibility for the memorandum is not clearly assigned to a member of the CIO staff  This official also stated that because of the consolidation of information technology services in the Pentagon and the national capital region, the Defense Information Systems Agency’s Joint Service Provider assumed responsibility for implementing the memorandum  According to Joint Service Provider officials, however, they were only responsible for implementing the memorandum for the customers they serve in the Pentagon and the national capital region, and not for other DOD components outside those areas, such as military services  Standards for internal control state that management should ensure that key roles in operating the internal control system are clearly assigned  In the absence of these controls, such as reporting procedures to monitor actions to reduce the number of print devices and establishing clear responsibility for implementing the CIO memorandum, DOD has been unable to ensure that it is achieving any estimated savings, which could represent tens of millions of dollars annually  DLA Document Services may be able to realize additional savings from further consolidating facilities beyond those already identified, but it does not currently plan to do so, and it does not have the complete data it would need to make those determinations  As a part of its transformation plan, DLA Document Services identified 38 of its 112 facilities in the continental United States that it would retain  DLA Document Services officials stated that they considered a number of factors in determining whether to consolidate or retain facilities, including the number of staff and customers and the facilities’ workloads, but that they generally consolidated or retained facilities based on whether the facility provided “mission specialty” services  These mission specialties are services that DLA Document Services officials believe cannot be easily outsourced, such as printing and reproduction of classified and sensitive documents and on-demand printing and distribution of certain technical materials  However, our analysis of DLA Document Services data found that some facilities retained for certain mission specialties were responsible for a relatively small share of business for those specialties in fiscal year 2016 (the last full year for which data were provided), which suggests that further consolidations are possible  For example, for each of the four mission specialties for which DLA Document Services provided us with revenue data, the bottom quartile (25 percent) of the facilities retained for each specialty were responsible for less than 5 percent of the total revenue for that specialty, as shown in figure 6  We also found some cases in which DLA Document Services retained facilities that reported less revenue for a given specialty than facilities that it did not retain  According to officials, DLA Document Services took a number of factors into consideration in deciding on consolidations, including the complexity of the work at a facility and whether nearby sites could fulfill the orders  According to these officials, this allowed them to consolidate some facilities even if those facilities had greater revenue from a given mission specialty than other facilities  DOD Instruction 5330 03 requires DLA Document Services to provide effective and efficient document services support to DOD components  Our key practices for efficiency initiatives also note the importance of targeting both short-term and long-term efficiency initiatives  DLA Document Services officials stated that they would consider additional consolidations of facilities, but they have not conducted any analysis or planning to gain further efficiencies and do not currently have plans to do so  These officials stated they are committed to implementing the current transformation plan as announced  Officials also stated that they want to have a better sense of the results from the current transformation, including how workloads may change among facilities as consolidations occur, before considering additional consolidations  DLA Document Services’ current transformation plan includes the possible consolidation of facilities outside the continental United States following the implementation of its current plan (which only addressed facilities inside the continental United States); it does not have any plans for further consolidations within the continental United States  We also found that DLA Document Services did not have revenue data on all of its mission specialties to inform any future decisions on facility consolidations  Standards for internal control state that entities’ management should use quality information to achieve the entities’ objectives  However, DLA Document Services could not provide revenue data on three specific mission specialties—sensitive, classified, and Naval Nuclear Propulsion Information—for which it retained 30 of its facilities, including some that it retained exclusively for those specialties  According to DLA Document Services officials, they did not collect revenue data for these mission specialties because the facilities responsible for processing this type of information were generally retained, regardless of the revenue they produced, due to the sensitive nature of this work  As noted above, our analysis of available mission specialty data found that some facilities that DLA retained for certain mission specialties did a relatively small share of business for those specialties, indicating that there may be opportunities for additional facility consolidations  DLA Document Services officials told us that they had consulted with managers at the facilities about the amount of sensitive and classified they conducted  Because of these consultations, DLA Document Services is closing some facilities that handled sensitive and classified information  However, DLA Document Services does not routinely collect these data as it does for other mission specialties  By collecting and analyzing more complete revenue data on its mission specialties and using those data to evaluate opportunities for further consolidations, DLA Document Services would be better positioned to determine if opportunities exist to achieve additional cost savings  DOD reports some financial information regarding its document services, but this information does not accurately capture the scope of its document services mission  We reviewed the O&M obligations for printing and reproduction in fiscal years 2012 through 2016 that were reported to Congress by the military services  The total obligations ranged from about $534 million to about $736 million annually for the 5-year period (see fig  7)  Our analysis found that DOD’s O&M budget materials for printing and reproduction are inaccurate in two ways  First, the budget materials include obligations that are primarily for non-printing activities, such as the purchase of advertising and radio and television time  DOD and military service financial management officials prepare budget justification materials for their O&M funding requests on an annual basis  DOD and the services report printing and reproduction costs in the Summary of Price and Program Changes budget exhibit (the “OP-32”)  It contains information by line item, detailing, among other items, printing and reproduction and related operations performed by the military services, DLA, or GPO  It also contains elements of expenses for purchases related to document services that are provided by DLA  The OP-32 exhibits are provided to Congress with the budget justification materials accompanying the President’s annual budget request  Officials from AMRG told us that, in accordance with Army guidance, printing and reproduction obligations are coupled with other obligations, including the purchase of advertising space and radio and television time for recruiting activities  Data provided by these officials show that in fiscal year 2016, AMRG’s obligations for printing and reproduction accounted for only about $2 million, or 2 percent, of the Army’s total fiscal year 2016 obligations included in the printing and reproduction line of the OP-32  Obligations for the publication of notices, advertising, and radio and television time accounted for about $78 million, or 63 percent, of the obligations reported for printing and reproduction  According to officials, the Navy, Air Force, and Marine Corps also follow their respective guidance on reporting printing and reproduction obligations together with these other obligations  Second, the budget justification information does not represent the full scope of the military services’ document services mission  Specifically, we found that the military services’ annual budget requests do not provide distinct information on two areas of their document services mission— print device procurement and electronic content management  Data we reviewed indicate that the military services obligate a considerable amount of resources in these areas  For example, according to DLA Document Services, sales to DOD and the military services for its print device services are comparable to sales for its printing and reproduction services  According to DLA data, in fiscal year 2017, it received in revenue about $108 million for print device and about $105 million for printing and reproduction services  Officials from the military services told us that obligations for these activities are included within the budget requests for various IT procurement categories  For example, Army Budget Office officials noted that the budget request for IT procurement and office supplies would include estimates associated with the purchase and sustainment of devices, but those line items would include other, non-printing obligations as well  According to these officials, the Army has made efforts to standardize the procurement of information technology, including collecting better data on spending for these types of devices  They told us that these efforts will result in shifts in how those obligations are reported in budget justification materials  The accuracy and completeness of DOD’s financial information about its document services can affect the allocation of budgetary resources, and inaccurate or incomplete information can hamper initiatives to gain further efficiencies  The Handbook of Federal Accounting Standards states that its managerial cost accounting concepts and standards are aimed at agencies providing reliable and timely information on the full costs of their federal programs that congressional and executive decision makers can use in making decisions about allocating federal resources and program managers can use in making decisions to improve operating economy and efficiency  DOD’s Financial Management Regulation lays out the structure of the budget exhibits that the military services develop during the department’s budget process  According to a DOD Comptroller official, DOD has historically reported its budget requests following the format prescribed by the Financial Management Regulation, and it follows this format in its reporting of printing and reproduction costs that are coupled with non-printing costs  Although the department has followed this format, the House Armed Services Committee has expressed concern about the military services’ printing budgets, noting that they were excessive and that portions of the budgets should be realigned to address unfunded readiness priorities  Further, as we discussed earlier in this report, DOD has outlined specific steps it intends to take to achieve a recommended goal of 34 percent reduction in spending on its printing and related activities  Without quality information on the scope of its document services mission, DOD will lack the information it needs to assess whether it is achieving this goal  To assess its progress toward achieving this goal, it will be critical for decision makers to have accurate financial information  According to a DOD Comptroller official, the Financial Management Regulation provides flexibility in how obligations are categorized and reported internally and to Congress, but DOD has not evaluated options to report more accurate funding information on its document services  Unless DOD evaluates options to report more accurate funding information and takes steps to improve the accuracy of its budgetary and financial information reporting, DOD and Congress will not have the full visibility over these costs that they need to make informed decisions  DOD is taking important steps to address congressional concerns about its spending on document service activities  Most notably, DOD is implementing its plan to transform its DLA Document Services mission and has taken certain steps to reduce the number and cost of print devices  These efforts have begun to produce results, but DOD can do more to build on these gains  By better managing fragmentation in printing and reproduction services, DOD could ensure that DLA Document Services is providing the best value in obtaining document services  DOD could further reduce overlap in print device procurement by assessing the various approaches employed by DLA and the military services to determine what constitutes the most cost-effective approach for the department  DOD has set goals intended to reduce the number of print devices and realize tens of millions of dollars in savings each year, but it has not demonstrated that it has achieved these savings, because of limitations in internal controls  Additional efforts aimed at collecting and analyzing information to examine areas for further consolidation of DLA Document Services’ mission specialty locations might provide DOD with additional cost savings  DOD’s O&M budget materials for printing and reproduction activities include information on non-printing activities that make up a much larger portion of its reported spending than printing does  In addition, these O&M budget materials omit information that would capture the full scope of DOD’s document services mission, such as device procurement and electronic content management, which are included with information technology budget materials  By providing more accurate costs for its document services activities, DOD would ensure that Congress and departmental leaders have the insight needed to make informed decisions  We are making a total of six recommendations to DOD  The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment assesses whether DLA Document Services’ single manager role for printing and reproduction provides the best value to the government—as determined by quality, price, and delivery time and in light of DLA Document Services’ transformation plan—and whether any additional efficiencies are possible, and use the results of that assessment to inform the revision of DOD Instruction 5330 03  (Recommendation 1) The Secretary of Defense should ensure that the Under Secretary of Defense for Acquisition and Sustainment assesses whether DOD’s current approach to obtaining print devices represents the best value to the government or whether other approaches, such as further consolidations under DLA Document Services as a proposed single manager for print device procurement, would be more cost effective  (Recommendation 2) The Secretary of Defense should ensure that the DOD CIO implements controls, such as reporting procedures, to routinely monitor actions to reduce the number of print devices, consistent with department-wide goals for reducing the number of print devices that are included in the CIO’s 2012 memorandum  (Recommendation 3) The Secretary of Defense should ensure that the DOD CIO assigns responsibility for implementing the CIO’s 2012 memorandum on optimizing the use of employee information technology devices  (Recommendation 4) The Secretary of Defense should ensure that the Director, DLA, in coordination with the Director, DLA Document Services and following implementation of the current transformation plan, gathers data on workload revenue at retained facilities and all mission specialties and evaluate whether additional opportunities for consolidation exist based on those data  (Recommendation 5) The Secretary of Defense should ensure that the Under Secretary of Defense (Comptroller), in consultation with the military services and DLA, evaluates options to report more accurate funding information and takes steps to improve the accuracy of its budgetary and financial information reporting on document services internally and to Congress, including making distinctions between printing and non-printing-related costs and information on device procurement and electronic content management  This information could be provided as part of DOD’s annual O&M budget justification materials  (Recommendation 6) We provided a draft of this report to DOD for review and comment  In its written comments, DOD concurred with five recommendations and identified specific actions and time frames for addressing them, and it partially concurred with the remaining recommendation  DOD’s written comments are reprinted in their entirety in appendix II  DOD also provided technical comments, which we incorporated into the report, where appropriate  DOD partially concurred with our recommendation that the Under Secretary of Defense (Comptroller), in consultation with the military services and DLA, evaluate options to report more accurate funding information and take steps to improve the accuracy of budgetary and financial information reporting on document services internally and to Congress, including making distinctions between printing and non- printing-related costs and information on device procurement and electronic content management  Our recommendation noted that this information could be provided as part of DOD’s annual O&M budget justification materials  DOD stated that the budget materials it submits to Congress are in compliance with OMB Circular A-11’s definitions of printing and reproduction and equipment  It further noted that Working Capital Fund exhibits provided with each annual budget include a breakout, by service, of the appropriated and Working Capital Fund activities and a detailed accounting of unit cost and pricing for all sub- activities of DLA Document Services  As we noted in our report, a DOD Comptroller official told us that the Financial Management Regulation provides DOD with flexibility in categorizing and reporting obligations internally and to Congress  However, we found that, based on this flexibility, DOD’s O&M budget materials reported obligations for printing and reproduction that were primarily for non-printing activities, such as the purchase of advertising and radio and television time  This budget information did not represent the full scope of DOD’s document services mission, since it omitted obligations for print device procurement and electronic content management  We also reported that DOD had not evaluated options to report more accurate funding information on its document services  DOD’s comments did not include plans to address this recommendation  We continue to believe that by providing more accurate costs for its document services activities, DOD would ensure that Congress and departmental leaders have the insight needed to make more informed decisions  We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the DOD Chief Information Officer, the Under Secretary of Defense (Comptroller), the Under Secretary of Defense for Acquisition and Sustainment, the Director, Defense Logistics Agency, the Secretaries of the Army, Navy, and Air Force, and the Commandant of the Marine Corps  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-2775 or fielde1@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  Our objectives were to evaluate (1) the progress the Department of Defense (DOD) has made in achieving efficiencies in its document services and opportunities, if any, for further efficiencies, and (2) the extent to which DOD reports accurate financial information about its document services to key stakeholders  For our first objective, we reviewed DOD documents and interviewed DOD officials in order to understand how each military service obtains document services and identify department-wide and military service efficiency initiatives for these services  We also reviewed the Defense Logistics Agency’s (DLA) and the military services’ document services activities and compared them with a DOD statutory periodic review; DOD Instructions and other guidance; Office of Management and Budget (OMB) guidance; internal control standards; and best practices for consolidation initiatives, efficiency initiatives, and strategic sourcing to identify any potentially unnecessary duplication, overlap, or fragmentation and any opportunities for greater efficiencies  For specific efficiency initiatives identified by DOD officials or in DOD documents, we interviewed DOD officials regarding their progress in implementing and meeting the goals of these initiatives  To evaluate DLA Document Services’ transformation plan, we interviewed DLA Document Services officials, reviewed DLA Document Services documents regarding the plan, and assessed that plan based on leading practices for consolidation and efficiency initiatives  To assess the plan against these practices, one analyst reviewed the testimony and documents provided and compared it to our key questions to consider when evaluating proposals to consolidate physical infrastructure and management functions  A second analyst reviewed and concurred with the first analyst’s assessments  In any cases where there was a disagreement, the analysts discussed any discrepancies  If they were not resolved, a third analyst reviewed the assessments  To assess the extent to which there may be additional opportunities for facility consolidations, we obtained DLA Document Services data on revenue reported by each facility, which DOD Document Services officials told us they used in determining which facilities to consolidate as a part of their transformation plan  We analyzed the share of mission specialty revenue reported by facilities that (1) were retained by DLA Document Services for a given mission specialty, (2) were retained but not for a given specialty, and (3) were not retained  We further divided those facilities retained for a given specialty into quartiles to better understand the concentration of revenue in those facilities  To assess the reliability of these data, we interviewed DLA Documents Services officials regarding how the data were gathered, analyzed, reported, and used  We found that these data were reliable for the purpose of analyzing the shares of mission specialty revenue represented by each facility or group of facilities  To compare the cost of print devices offered by DLA Document Services, the Army, and the Air Force, we gathered and analyzed data on the monthly cost of multifunction devices with comparable specifications  We compared costs for similar devices based on device specifications including print speeds, monthly volumes, and paper capacities  Because Army and Air Force costs are estimated and there might be other differences in device specifications, approaches to obtaining devices, and which associated services were included, this analysis does not allow us to conclude which sources provide the greatest value  However, it illustrates differences in the cost of print devices across sources  For DLA Document Services, we used DLA Document Services’ standard monthly pricing for 2018 for various categories of multifunction devices  For the Army, Army officials were unable to provide data on the cost of multifunction devices purchased by Army customers  Instead, they provided us with documentation of vendor responses to requests for quotes from the Army’s mandatory source for print devices from April 2017 through January 2018  We reviewed those documents and assigned each device to a DLA Document Services category, based on the device’s specifications as identified in the documentation  We then estimated the monthly cost for each device  For leased devices, we used the monthly cost of the lease  For purchased devices, we used the total cost of the device divided by an estimated service life for the device  We estimated this service life using some indication available in the documentation, such as the length of time a maintenance agreement or extended warranty was provided for the device  Army officials provided 183 quotes for devices  Of those, we were able to include 24 in our analysis  We excluded the other 159 because either we could not determine the cost for individual devices in a quote, there was not enough information on a device’s specifications, there was no DLA Document Services equivalent for the device, or we were unable to estimate a service life based on the information provided  Because the information included all vendor quotes provided and not just those that were selected by a customer, the costs may not represent the actual costs of devices to the customer  For the Air Force, we used an estimated average monthly cost based the standard pricing included in the Air Force’s 2018 catalog for print devices  We reviewed the catalog and assigned each multifunction device offered to a DLA Document Services category, based on the devices’ specifications  The Air Force’s catalog contained 32 devices; we were able to determine the equivalent DLA Document Services category for 13 of those devices  All devices in the Air Force’s catalog are available for purchase and include a 4-year maintenance agreement; therefore, we estimated the average monthly cost as the purchase price divided by 48  To evaluate the extent to which DOD reports accurate and complete financial information to key stakeholders to manage its document services, we analyzed DOD’s operation and maintenance (O&M) budget justification materials for fiscal years 2012 through 2016 and Defense Logistics Agency data on its document services mission  We focused our review on O&M obligations reported by DLA and the military services, which accounted for an average of about 92 percent of DOD’s total document service costs reported by DLA Document Services in fiscal years 2012 through 2016  We interviewed officials, including officials from the Office of the Under Secretary of Defense (Comptroller), DLA Document Services, and the military services to determine how they reported costs for document services  We assessed the information we collected against federal accounting standards on how information should be recorded and communicated to management and others  To determine the reliability of the O&M budget justification data provided to us by DOD, we obtained information on how the data were collected, managed, and used through interviews with relevant officials  We determined that the data were sufficiently reliable to represent the military services’ total O&M obligations for document services for fiscal years 2012 through 2016  We interviewed officials and, where appropriate, obtained documentation, from the following organizations: Office of the Under Secretary of Defense for Acquisition, Technology Office of the Under Secretary of Defense (Comptroller) Department of Defense Chief Information Officer Defense Logistics Agency – Chief Information Officer Defense Logistics Agency – Document Services Defense Information Systems Agency – Joint Service Provider Army Chief Information Officer Army Publishing Directorate Army Marketing Research Group Army 7th Signal Command Headquarters Air Force – Chief Information Officer Department of the Navy – Chief Information Officer Headquarters Marine Corps Command, Control, Communications, Headquarters Marine Corps Publishing and Logistics Headquarters Marine Corps Budget and Execution Marine Corps Combat Camera Marine Corps Reprographic Equipment Management Program We conducted this performance audit from August 2017 to October 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Matthew Ullengren (Assistant Director), Adam Hatton (Analyst in Charge), Adam Brooks, Joanne Landesman, Amie Lesser, Daniel Ramsey, Carter Stevens, and Walter Vance made key contributions to this report 

ground_truth: Federal agencies use heavy equipment such as cranes and forklifts to carry out their missions, but there is no government-wide data on federal agencies' acquisition or management of this equipment. GAO was asked to review federal agencies' management of heavy equipment. This report, among other objectives, examines: (1) the number, type, and costs of heavy equipment items that are owned by 20 federal agencies and (2) the heavy equipment that selected agencies recently acquired as well as how they decided whether to purchase or lease this equipment. GAO collected heavy equipment inventory data as of June 2017 from the 24 agencies that have chief financial officers responsible for overseeing financial management. GAO also selected three agencies (using factors such as the heavy equipment fleet's size) and reviewed their acquisitions of and guidance on heavy equipment. These agencies' practices are not generalizable to all acquisitions but provide insight into what efforts these agencies take to acquire thousands of heavy equipment items. GAO also interviewed officials at the three selected agencies. Of the 24 agencies GAO reviewed, 20 reported owning over 136,000 heavy equipment items such as cranes, backhoes, and forklifts, and spending over $7.4 billion (in 2016 dollars) to acquire this equipment. The remaining 4 agencies reported that they do not own any heavy equipment. The three selected agencies GAO reviewed in-depth—the Air Force within the Department of Defense (DOD), and the Fish and Wildlife Service and the National Park Service within the Department of the Interior (Interior)—spent about $360 million to purchase about 3,500 heavy equipment assets in calendar years 2012 through 2016 and over $5 million to lease heavy equipment from fiscal years 2012 through 2016. Officials from all three agencies stated that they consider mission needs and the availability of equipment leases when deciding whether to lease or purchase heavy equipment. Federal regulations provide that agencies should consider whether it is more economical to lease or purchase equipment when acquiring heavy equipment, and federal internal control standards require that management clearly document all transactions in a manner that allows the documentation to be readily available for examination. However, in reviewing selected leases and purchases of heavy equipment from these three agencies, GAO found that officials did not consistently conduct or document lease-versus-purchase analyses. Officials at the Air Force and Interior said that there was a lack of clarity in agency policies about when they were required to conduct and document such analyses. Without greater clarity on when lease-versus-purchase analyses should be conducted and documented, these agencies may not be spending funds on heavy equipment effectively. The Department of the Interior and the Air Force should clarify the circumstances in which lease-versus-purchases analyses for heavy equipment acquisitions are to be conducted and documented. The Departments of the Interior and Defense concurred with these recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: Agencies generally acquire equipment from commercial vendors and through GSA, which contracts for the equipment from commercial vendors  In acquiring heavy equipment from a commercial vendor or GSA, agencies can purchase or lease the equipment  Generally, agencies use the term “lease” to refer to acquisitions that are time-limited and therefore distinct from purchases  The term “lease” is used to refer to both long-term and short-term leases  For example, the three agencies we reviewed in-depth use the term “rental” to refer to short-term leases of varying time periods  According to Air Force officials, they define rentals as leases that are less than 120 days while FWS and NPS officials said they generally use the term rental to refer to leases that are a year or less  For the purposes of this report, we use the term “rental” to refer to short-term leases defined as rentals by the agency and “long-term lease” to refer to a lease that is not considered a rental by the agency  (See fig  1 ) In 2013, GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part to eliminate ownership and maintenance cost for infrequently used heavy equipment  Under this program, agencies can request a short-term equipment rental (less than a year) from GSA, and GSA will work with a network of commercial vendors to provide the requested heavy equipment  Unlike for some other types of federal property, there are no central reporting requirements for agencies’ inventories of heavy equipment  However, each federal agency is required to maintain inventory controls for its property, which includes heavy equipment  Agencies maintain inventory data through the use of agency-specific databases, and each agency can set its own requirements for what data are required and how these data are maintained  For example, while an agency may choose to maintain data in a headquarters database, it could also choose to maintain data at the local level  As another example, an agency may decide to track and maintain data on the utilization of its heavy equipment (such as the hours used) or may choose not to have such data or require any particular utilization levels  The Federal Acquisition Regulation (FAR) governs the acquisition process of executive branch agencies when acquiring certain goods and services, including heavy equipment  Under the FAR, agencies should consider whether to lease equipment instead of purchasing it based on several factors  Specifically, the FAR provides that agency officials should evaluate cost and other factors by conducting a “lease-versus-purchase” analysis before acquiring heavy equipment  Additionally, DOD’s regulations require its component agencies to prepare a justification supporting lease-versus-purchase decisions if the equipment is to be leased for more than 60 days  Twenty agencies reported data on their owned heavy equipment, including the (1) number, (2) types, (3) acquisition year, and (4) location of agencies’ owned heavy equipment in their inventories as of June 2017  The 20 agencies reported owning over 136,000 heavy equipment items  DOD reported owning most of this heavy equipment—over 100,000 items, about 74 percent  (See app  I for more information on agencies’ ownership of these items ) The Department of Agriculture reported owning the second highest number of heavy equipment items—almost 9,000 items, about 6 percent  (See fig  2 ) Four agencies—the Nuclear Regulatory Commission, the Department of Housing and Urban Development, the Office of Personnel Management, and the Agency for International Development—reported owning five or fewer heavy equipment items each  The 20 agencies reported owning various types of heavy equipment, such as cranes, backhoes, and road maintenance equipment in five categories: (1) construction, mining, excavating, and highway maintenance equipment; (2) airfield-specialized trucks and trailers; (3) self-propelled warehouse trucks and tractors; (4) tractors; and (5) soil preparation and harvesting equipment  Thirty-eight percent (almost 52,000 items) were in the construction, mining, excavating, and highway maintenance category (see fig  3)  Fifteen of the 20 agencies reported owning at least some items in this category  Twenty-four percent (over 33,000 items) were in the airfield- specialized trucks and trailers category, generally used to service and re-position aircraft on runways  DOD reported owning 99 percent (over 32,000) of these items, while 9 other agencies, including the Department of Labor and the National Aeronautics and Space Administration, reported owning the other one percent (317 items)  Twenty-two percent (over 29,000 items) were in the self-propelled warehouse trucks and tractors category, which includes equipment such as forklift trucks  All 20 agencies reported owning at least one item in this category, and five agencies—the Agency for International Development, Department of Housing and Urban Development, the Environmental Protection Agency, the Nuclear Regulatory Commission, and the Office of Personnel Management—reported owning only items in this category  (For additional information on agencies’ ownership of heavy equipment in various categories, see app  I ) The twenty agencies reported acquiring their owned heavy equipment between 1944 and 2017, with an average of about 13 years since acquisition (see fig  4)  One heavy equipment manager we interviewed reported that a dump truck can last 10 to 15 years, whereas other types of equipment can last for decades if regularly used and well-maintained  The 20 agencies reported that over 117,000 heavy equipment items (86 percent) were located within the United States or its territories  Of these, about one-fifth (over 26,000) were located in California and Virginia, the two states with the most heavy equipment (see fig  5)  Of the equipment located outside of the United States and its territories, 94 percent was owned by the Department of Defense  The rest was owned by the Department of State (714 items in 141 countries from Afghanistan to Zimbabwe) and the National Science Foundation (237 items in areas such as Antarctica)  The twenty agencies reported spending over $7 4 billion in 2016 dollars to acquire the heavy equipment they own (see table 1)  However, actual spending was higher because this inflation-adjusted figure excludes over 37,000 heavy equipment items for which the agencies did not report acquisition cost or acquisition year, or both  Without this information, we could not determine the inflation-adjusted cost and therefore did not include the cost of these items in our calculation  The Army owns almost all of these items, having not reported acquisition cost or acquisition year, or both, for 36,589 heavy equipment items because, according to Army officials, the data were not available centrally but may have been available at individual Army units and would have been resource- intensive to obtain  The heavy equipment items reported by the 20 agencies ranged in acquisition cost from zero dollars to over $2 million in 2016 dollars, with an average acquisition cost in 2016 dollars of about $78,000, excluding assets with a reported acquisition cost of $0  Of the items which we adjusted to 2016 dollars and for which non-zero acquisition costs were provided: 94 percent cost less than $250,000 and accounted for 57 percent of the total adjusted acquisition costs (See fig  6 ) 6 percent of items cost more than $250,000 and accounted for 43 percent of the adjusted acquisition costs  (See fig  6 ) High-cost items included a $779,000 hydraulic crane acquired by the National Aeronautics and Space Administration in 1997 ($1 2 million in 2016 dollars), a $1 4 million ultra-deep drilling simulator acquired by the Department of Energy in 2009 ($1 6 million in 2016 dollars), and several $2 2 million well-drilling machines acquired by the Air Force in 2013 ($2 3 million in 2016 dollars)  In calendar years 2012 through 2016, the Air Force, FWS, and NPS purchased almost 3,500 pieces of heavy equipment through GSA and private vendors at a total cost of about $360 million to support mission needs  (See table 2 ) These agencies also spent over $5 million on long- term leases and rentals during this time period  The Air Force spent over $300 million to purchase over 2,600 heavy equipment assets in calendar years 2012 through 2016 that were used to support and maintain its bases globally  For example, according to Air Force officials, heavy equipment is often used to maintain runways and service and reposition aircraft on runways  While the majority of Air Force heavy equipment purchased in this time period is located in the United States, 41 percent of this heavy equipment is located outside the United States and its territories in 17 foreign countries to support global military bases  The Air Force could not provide complete information on its heavy equipment leases for fiscal years 2012 through 2016  Specifically, the Air Force provided data on 33 commercial heavy equipment leases that were ongoing as of August 2017 but could not provide cost data for these leases because this information is not tracked centrally  Additionally, the Air Force could not provide any data on leases that occurred previously because, according to Air Force officials, lease records are removed from the Air Force database upon termination of the lease  Officials said that rentals are generally handled locally and obtaining complete data would require a data call to over 300 base contracting offices  Air Force officials stated that rentals are generally used in unique situations involving short- term needs such as responding to natural disasters  For example, following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean up and repair the base  Although Air Force did not provide complete information on rentals, data we obtained from GSA’s Short-Term Rental program indicated that Air Force rented heavy equipment in 46 transactions not reflected in the Air Force data we received totaling over $3 7 million since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013  FWS spent over $32 million to purchase 348 heavy equipment assets from calendar years 2012 through 2016  FWS used its heavy equipment to maintain refuge areas throughout the United States and its territories, including maintaining roads and nature trails  FWS also used heavy equipment to respond to inclement weather and natural disasters  Most of the heavy equipment items purchased by FWS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which were used for moving soil, supplies, and other resources  FWS officials reported that they did not have any long-term leases for any heavy equipment in fiscal years 2012 through 2016 because they encourage equipment sharing and rentals to avoid long-term leases whenever possible  FWS officials provided data on 228 rentals for this time period with a total cost of over $1 million  Information regarding these rentals is contained in an Interior-wide property management system, the Financial Business Management System (FBMS)  FWS officials told us that they have not rented heavy equipment through GSA’s program because they have found lower prices through local equipment rental companies  NPS spent over $27 million to purchase 471 heavy equipment assets from calendar years 2012 through 2016  NPS uses heavy equipment— located throughout the United States and its territories—to maintain national parks and respond to inclement weather and natural disasters  For example, NPS used heavy equipment such as dump trucks, snow plows, road graders, and wheel loaders to clear and salt the George Washington Memorial Parkway in Washington, D C , following snow and ice storms  Most of the heavy equipment items purchased by NPS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which are used for moving soil, supplies, and other resources  NPS reported spending about $360,000 on 230 long-term leases and rentals in fiscal years 2012 through 2016, not including rentals through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program  As with FWS, NPS leases and rentals are contained in FBMS, which is Interior’s property management system  Data we obtained from GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program indicated that NPS rented heavy equipment in 26 transactions totaling over $200,000 since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013, for a potential total cost of over $560,000 for these long-term leases and rentals  As mentioned earlier, the FAR provides that executive branch agencies seeking to acquire equipment should consider whether it is more economical to lease equipment rather than purchase it and identifies factors agencies should consider in this analysis, such as estimated length of the period that the equipment is to be used, the extent of use in that time period, and maintenance costs  This analysis is commonly referred to as a lease-versus-purchase analysis  While the FAR does not specifically require that agencies document their lease-versus-purchase analyses, according to federal internal control standards, management should clearly document all transactions and other significant events in a manner that allows the documentation to be readily available for examination and also communicate quality information to enable staff to complete their responsibilities  As discussed below, we found that most acquisitions we reviewed from FWS, NPS, and the Air Force did not contain any documentation of a lease-versus-purchase analysis  Specifically, officials were unable to provide documentation of a lease-versus-purchase analysis for six of the eight acquisitions we reviewed  FWS officials were able to provide documentation for the other two  Officials told us that a lease-versus- purchase analysis was not conducted for five of the six acquisitions and did not know if such analysis was conducted for the other acquisition  According to agency officials, the main reason why analyses were not conducted or documented for these six acquisitions is that the circumstances in which such analyses were to be performed or documented were not always clear to FWS, NPS, and Air Force officials  In addition to the FAR, Interior has agency guidance stating that bureaus should conduct and document lease-versus-purchase analyses  This July 2013 guidance—that FWS and NPS are to follow—states that requesters of equipment valued at $15,000 or greater should perform a lease-versus- purchase analysis when requesting heavy equipment  According to the guidance, this analysis should address criteria in the FAR and include a discussion of the financial and operating advantages of alternate approaches that would help contracting officials determine the final appropriate acquisition method  At the time the guidance was issued, Interior also provided a lease-versus-purchase analysis tool to aid officials in conducting this analysis  Additionally, in April 2016, Interior issued a policy to implement the July 2013 guidance  The 2016 policy clarifies that program offices are required to complete Interior’s lease-versus-purchase analysis tool and provide the completed analysis to the relevant contracting officer  Within Interior, bureaus are responsible for ensuring that procurement requirements are met, including the requirements and directives outlined in Interior’s 2013 guidance and 2016 policy on lease-versus-purchase analyses, according to agency officials  Within FWS, local procurement specialists prepare procurement requests and ensure that procurement requirements are met and that all viable options have been considered  Regional equipment managers review these procurement requests, decide whether to purchase or lease the requested equipment, and prepare the lease-versus-purchase analysis tool if the procurement specialist has indicated that it is required  Within NPS, local procurement specialists are responsible for ensuring that all procurements adhere to relevant requirements and directives, including documenting the lease- versus-purchase analysis  Of the three FWS heavy equipment acquisitions we reviewed for which the 2013 Interior guidance was applicable, one included a completed lease-versus-purchase analysis tool; one documented the rationale for purchasing rather than leasing, although it did not include Interior’s lease- versus-purchase analysis tool; and one did not include any documentation related to a lease-versus-purchase analysis  (See table 3 ) Regarding the acquisition for which no documentation of a lease-versus- purchase analysis was provided—a 12-month lease of an excavator and associated labor costs for over $19,000—FWS officials initially told us that a lease-versus-purchase analysis was not required because the equipment lease was less than $15,000, and Interior’s guidance required a lease-versus-purchase analysis for procurements of equipment valued at $15,000 or greater  However, we found the guidance did not specify whether the $15,000 threshold includes the cost of labor  We also found that Interior’s guidance did not specify if a lease-versus-purchase analysis was required if the total cost of a rental is less than the purchase price  FWS officials acknowledged that Interior guidance is not clear and that it would be helpful for Interior to clarify whether these leases require a lease-versus-purchase analysis  NPS officials were unable to provide documentation of a lease-versus- purchase analysis for the single heavy equipment acquisition we reviewed—the purchase of a wheeled tractor in 2015 for $43,177  According to these officials, they could not do so because of personnel turnover in the contracting office that would have documented the analysis  In addition, they told us that they believe that such analyses are not always completed for heavy equipment acquisitions because responsibility for completing these analyses is unclear  Specifically, they told us that it was unclear whether the responsibility lies with the official requesting the equipment, the contracting personnel who facilitate the acquisition, or the property personnel who manage inventory data  However, when we discussed our findings with Interior and NPS officials, NPS officials were made aware of the 2016 Interior policy that specifically requires program offices—the officials requesting the equipment—to complete the lease-versus-purchase analysis and provide documentation of this analysis to the contracting officer  As a result, NPS officials told us at the end of our review that program office officials will now be required to complete the lease-versus-purchase analysis tool and document this analysis  According to Air Force officials responsible for managing heavy equipment, financial or budget personnel at individual bases are responsible for conducting lease-versus-purchase analyses, also called economic analyses, to support purchase and lease requests  Air Force fleet officials told us that they then review these requests from a fleet perspective, considering factors such as whether the cost information provided in the request is from a reputable source, expected maintenance costs, and whether a requesting base has the capability to maintain the requested equipment  However, they said they do not check to ensure that a lease-versus-purchase analysis was completed or review the analysis  Equipment rentals can be approved at individual bases  In our review of four Air Force heavy equipment acquisitions, we found no instances in which Air Force officials documented a lease-versus- purchase analysis (see table 4)  For the acquisitions that we reviewed, Air Force officials told us they did not believe a lease-versus-purchase analysis was required because the new equipment was either replacing old equipment that was previously approved or could be deployed  Accordingly, the Air Force purchased two forklifts in 2013 without conducting lease-versus-purchase analyses because the forklifts were replacing old forklifts that were authorized in 1997 and 2005  Furthermore, Air Force officials told us that both of these forklifts could be deployed and indicated that lease-versus-purchase analyses are not required for deployable equipment  However, the Air Force does not have guidance that describes the circumstances that require either a lease-versus-purchase analysis or documentation of the rationale for not completing such analysis  Although we identified several instances in which officials in the three selected agencies did not document lease-versus-purchase analyses, officials from these agencies stated that they consider mission needs and equipment availability, among other factors, when making these decisions  For example, Air Force officials told us following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean and repair the base because the equipment was needed immediately to ensure the base could meet its mission  Moreover, availability of heavy equipment for lease or rental, which can be affected by factors such as geography and competition for equipment, is a key consideration  For example, FWS officials told us that the specialized heavy equipment sometimes needed may not be available for long-term lease or rent in remote areas such as Alaska and the Midway Islands, so the agency purchases the equipment  In addition, some agency officials told us that they may purchase heavy equipment even if that equipment is needed only sporadically if there is likely to be high demand for rental equipment  For example, following inclement weather or a natural disaster, demand for certain heavy equipment rentals can be high and equipment may not be available to rent when it is needed  While we recognize that mission needs and other factors are important considerations, without greater clarity regarding when to conduct or document lease-versus-purchase analyses, officials at FWS, NPS, and Air Force may not be conducting such analyses when appropriate and may not always make the best acquisition decisions  These agencies could be overspending on leased equipment that would be more cost- effective if purchased or overspending to purchase equipment when it would be more cost-effective to lease or rent  Moreover, without documenting decisions on whether to purchase or lease equipment, they lack information that could be used to inform future acquisition decisions for similar types of equipment or projects  Air Force guidance requires that fleet managers collect utilization data for both vehicles and heavy equipment items, such as the number of hours used, miles traveled, and maintenance costs  The Air Force provided us with utilization data for over 18,000 heavy equipment items and uses such data to inform periodic base validations  Specifically, Air Force officials said that every 3 to 5 years each Air Force base reviews the on- base equipment to ensure that the installation has the appropriate heavy equipment to complete its mission and reviews utilization data to identify items that are underutilized  If heavy equipment is considered underutilized, the equipment is relocated—either moved to another location or sent to the Defense Logistics Agency for reuse or transfer to another agency  According to Air Force officials the Air Force has relocated over 700 heavy equipment items based on the results of the validation process and other factors such as replacing older items and agency needs since 2014  Similarly, FWS guidance for managing heavy equipment utilization sets forth minimum utilization hours for certain types of heavy equipment and describes requirements for reporting utilization data  FWS provided us with utilization data on over 3,000 heavy equipment items  According to officials, condition assessments of heavy equipment are required by FWS guidance every 3 to 5 years  According to FWS officials, condition assessments inform regional-level decision making about whether to move equipment to another FWS location or dispose of the equipment  In contrast, NPS does not require the collection of utilization data to evaluate heavy equipment use and does not have guidance for managing heavy equipment utilization  However, NPS officials told us that they recognize the need for such guidance  NPS officials shared with us draft guidance that they have developed, which would require collection of utilization data for heavy equipment such as hours or days of usage each month  According to NPS officials, they plan to send the guidance to the NPS policy office for final review in March 2018  Until this guidance is completed and published, NPS is taking interim actions to manage the utilization of its heavy equipment  For example, NPS officials stated that they have asked NPS locations to collect and post monthly utilization data, discussed the collection of utilization data at fleet meetings, and distributed job aids to support this effort  During the course of our review, NPS officials provided us with some utilization data for about 1,400 of the more than 2,400 NPS heavy equipment items  Specifically, for the 1,459 heavy equipment items for which NPS provided utilization data, 541 items had utilization data for each month  For the remaining 918 items, utilization data were reported for some, but not all months  The federal government has spent billions of dollars to acquire heavy equipment  There is no requirement that agencies report on the inventory of this equipment, as there is no standard definition of heavy equipment  When deciding how to acquire this equipment, agencies’ should conduct a lease-versus-purchase analysis as provided in the FAR, which is a critical mechanism to ensure agencies are acquiring the equipment in the most cost-effective manner  Because FWS, NPS and the Air Force were unclear when such an analysis was required, they did not consistently conduct or document analyses of whether it was more economical to purchase or lease heavy equipment  In the absence of clarity on the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented, the agencies may not be spending funds on heavy equipment cost- effectively  We are making two recommendations—one to the Air Force and one to the Department of the Interior  The Secretary of the Air Force should develop guidance to clarify the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented  (Recommendation 1) The Secretary of the Interior should further clarify in guidance the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented  (Recommendation 2) We provided a draft of this report to the Departments of Agriculture, Defense, Energy, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, and Veterans Affairs; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; and U S  Agency for International Development  The departments of Agriculture, Energy, Homeland Security, Housing and Urban Development, Justice, State and Veterans Affairs, as well as the General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management; and U S  Agency for International Development did not have comments  The Department of Labor provided technical comments, which we incorporated as appropriate  In written comments, reproduced in appendix III, the Department of Defense stated that it concurred with our recommendation and plans to issue a bulletin to Air Force contracting officials  In written comments, reproduced in appendix IV, the Department of the Interior stated that it concurred with our recommendation and plans to implement it  If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  Major contributors to this report are listed in appendix V  Specialized Trucks and Trailers 37   Self-Propelled Warehouse Trucks and Tractors 1,733 3                                       Specialized Trucks and Trailers 7   Self-Propelled Warehouse Trucks and Tractors 2,925 134                                     Specialized Trucks and Trailers   Self-Propelled Warehouse Trucks and Tractors 146             7       - 109       Self-Propelled Warehouse Trucks and Tractors 575 64 40                       4                   Nuclear Regulatory Commission Office of Personnel Management Social Security Administration United States Agency for International Development Grand Total         This report addresses: (1) the number, type, and cost of heavy equipment items that are owned by the 24 CFO Act agencies; (2) the heavy equipment items selected agencies have recently acquired and how selected agencies decided to purchase or lease this equipment; and (3) how selected agencies manage the utilization of their heavy equipment  To identify the number, type, and cost of heavy equipment owned by federal agencies, we first interviewed officials at the General Services Administration to determine whether there were government-wide reporting requirements for owned heavy equipment and learned that there are no such requirements  We then obtained and analyzed data on agencies’ spending on equipment purchases and leases from the Federal Procurement Data System–Next Generation (FPDS-NG), which contains government-wide data on agencies’ contracts  However, in reviewing the data available and identifying issues with the reliability of the data, we determined that data on contracts would not be sufficient to answer the question of what heavy equipment the 24 CFO Act agencies own  We therefore conducted a data collection effort to obtain heavy equipment inventory information from the 24 CFO Act agencies, which are the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; Environmental Protection Agency; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; Small Business Administration; Social Security Administration; and Agency for International Development  Because there is no generally accepted definition of heavy equipment, we identified 12 federal supply classes in which the majority of items are self- propelled equipment but not passenger vehicles or items that are specific to combat and tactical purposes, as these items are generally not considered to be heavy equipment  (See table 5 ) We then vetted the appropriateness of these selected supply classes with Interior, FWS, NPS, and Air Force agency officials, as well as with representatives from a fleet management consultancy and a rental company, and they generally agreed that items in selected federal supply classes are considered heavy equipment  Federal supply classes are used in FPDS- NG and are widely used in agencies’ inventory systems  Overall, about 90 percent of the heavy equipment items that agencies reported were assigned a federal supply class in the agency’s inventory data  In discussing heavy equipment categories in the report, we use the category titles below  To identify points of contact at the 24 CFO Act agencies, we obtained GSA’s list of contact information for agencies’ national utilization officers, who are agency property officers who coordinate with GSA  As a preliminary step, we contacted these individuals at each of the 24 CFO Act agencies and asked them to either confirm that they were the appropriate contacts or provide contact information for the appropriate contact and to inform us if they do not own heavy equipment  Officials at 4 agencies—Department of Education, Department of the Treasury, General Services Administration, and Small Business Administration— indicated that the agency did not own any items in the relevant federal supply classes  Officials at 16 of these agencies indicated that they would be able to respond on a departmental level because the relevant inventory data are maintained centrally, while officials at 4 agencies indicated that we would need to obtain responses from officials at some other level because the relevant inventory data are not maintained centrally  (See table 7 for a list of organizations within the 20 CFO Act agencies that indicated they own relevant equipment and responded to our data collection effort ) After identifying contacts responsible for agencies’ heavy-equipment inventory data, we prepared data collection instruments for requesting information on heavy equipment and tested these documents with representatives from 4 of the 20 CFO Act agencies that indicated they own heavy equipment to ensure that the documents were clear and logical and that respondents would be able to provide the requested data and answer the questions without undue burden  These agency representatives were selected to provide a variety of spending on federal supply group 38 equipment as reported in FPDS-NG, civilian and military agencies, and different levels at which the agency would be responding to the data collection effort (e g , at the departmental level or at a sub- departmental level)  Our data collection instrument requested the following data on respondent organizations’ owned assets in 12 federal supply classes as of June 2017: Respondents provided data on original acquisition costs in nominal terms, with some acquisitions occurring over 50 years ago  In order to provide a fixed point of reference for appropriate comparison, we present in our report inflation-adjusted acquisition costs using calendar year 2016 as the reference  To adjust these dollar amounts for inflation, we used the Bureau of Labor Statistic’s Producer Price Index by Commodity for Machinery and Equipment: Construction Machinery and Equipment (WPU112), compiled by the Federal Reserve Bank of St  Louis  We conducted the data collection effort from July 2017 through October 2017 and received responses from all 20 agencies that indicated they own heavy equipment  In order to assess the reliability of agencies’ reported data, we collected and reviewed agencies’ responses regarding descriptions of their inventory systems, frequency of data entry, agency uses of the data, and agencies’ opinions on potential limitations of the use of their data in our analysis  We conducted some data cleaning, which included examining the data for obvious errors and eliminating outliers  We did not verify the data or responses received; the results of our data collection effort are used only for descriptive purposes and are not generalizable beyond the 24 CFO Act agencies  Based on the steps we took, we found these data to be sufficiently reliable for our purposes  To determine the heavy equipment items that selected agencies recently acquired and how these agencies decided whether to purchase or lease this equipment, we first used data from the FPDS-NG to identify agencies that appeared to have the highest obligations for construction or heavy equipment, or both, and used this information, along with other factors, to select DOD and Interior  At the time, in the absence of a generally accepted definition of heavy equipment, we reviewed data related to federal supply group 38—construction, mining, excavating, and highway maintenance equipment—because (1) we had not yet defined heavy equipment for the purposes of our review; (2) agency officials had told us that most of what could be considered heavy equipment was in this federal supply group; and (3) our analysis of data from usaspending gov showed that about 80 percent of spending on items that may be considered heavy equipment were in this federal supply group  In meeting with officials at these departments, we learned that agencies within each department manage heavy equipment independently, so we requested current inventory data for Interior bureaus and the DOD military departments and selected three agencies that had among the largest inventories of construction and/or heavy equipment at the time, among other criteria: the U S  Air Force (Air Force); the Fish and Wildlife Service (FWS); and the National Park Service (NPS)  We then used information from our data collection effort—which included the number, type, cost, acquisition year and other data elements—to determine heavy equipment items that these agencies acquired during 2012 through 2016  We interviewed agency officials to determine what lease data were available from the three selected agencies  We assessed the reliability of these data with agency official interviews and reviewed the data for completeness and potential outliers  We determined that the data provided were sufficiently reliable for the purposes of documenting leased and rental heavy equipment  We also obtained data from GSA’s Short- Term Rental program, which had previously been limited to passenger vehicles, in part program for August 2012, when the first item was rented under this program, to February 2017, when GSA provided the data  We used these data to identify selected agencies’ rentals of heavy equipment through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program and associated costs  We interviewed officials from GSA’s Short-Term Rental program to discuss the program history as well as the reliability of their data on these rented heavy equipment items  We determined that the data were sufficiently reliable for our purposes  To determine how the three selected agencies decide whether to purchase or lease heavy equipment, we interviewed fleet and property managers at these selected agencies and asked them to describe their process for making these decisions as well as to identify relevant federal and agency regulations and guidance  We reviewed relevant federal and agency regulations and guidance regarding how agencies should make these decisions, including: Federal Acquisition Regulation, Office of Management Budget’s A-94, Guidelines and Discount Rates for Benefit- Cost Analysis of Federal Programs, Defense Federal Acquisition Regulation Supplement, Air Force Manual 65-506, Air Force Guidance Memorandum to Air Force Instruction 65-501, and Interior’s Guidance On Lease Versus Purchase Analysis and Capital Lease Determination for Equipment Leases  We also reviewed the Standards for Internal Control in the Federal Government for guidance on documentation as well as past GAO work that reviewed agencies’ lease-versus-purchase analyses  To determine whether the three selected federal agencies documented lease-versus-purchase decisions for selected acquisitions and adhered to relevant agency guidance, we selected and reviewed a non-generalizable sample of 10 heavy equipment acquisitions—two purchases each from the Air Force, FWS, and NPS, and two leases each from the Air Force and FWS  Specifically, we used inventory data obtained through our data collection effort, described above, to randomly select two heavy equipment purchases from each selected agency using the following criteria: calendar years 2012 through 2016; the two federal supply classes most prevalent in each selected agency’s heavy equipment inventory, as determined by the data collection effort described above; and for NPS and FWS, acquisition costs of over $15,000  In addition, we used lease data provided by the Air Force and FWS to randomly selected two heavy equipment leases per agency  Because NPS could not provide data on heavy equipment leases, we did not select or review any NPS lease decisions  To select the Air Force and FWS leases we used the following criteria: fiscal years 2012 through 2016; for the Air Force, which included federal supply classes in the lease data provided, the two federal supply classes most prevalent in the lease data and for FWS, which did not include federal supply class in the lease data provided, the two federal supply classes most prevalent in the purchase data; and for FWS, leases over $15,000  After selecting these acquisitions, we determined that one FWS lease and one NPS purchase we selected pre-dated Interior’s 2013 guidance on lease-versus-purchase analysis and excluded these acquisitions from our analysis for a total of eight acquisitions  In reviewing agencies’ documentation related to these acquisitions, we developed a data collection instrument to assess the extent to which agencies documented lease-versus-purchase analyses and, in the case of FWS and NPS, adhered to relevant Interior guidance  We supplemented our review of these acquisition decisions with additional information by interviewing officials at the three selected agencies and requesting additional information to understand specific circumstances surrounding each procurement  Our findings are not generalizable across the federal government or within each selected department  To determine how selected agencies manage heavy equipment utilization, we interviewed officials at the three selected agencies to identify departmental and agency-specific guidance and policies and to determine whether utilization requirements exist  We reviewed guidance identified by these officials, including Interior and Air Force vehicle guidance, both of which apply to heavy equipment, and FWS’s Heavy Equipment Utilization and Replacement Handbook  We also compared their practices to relevant Standards for Internal Control in the Federal Government  For the selected agencies with guidance for managing heavy equipment—Air Force and FWS—we reviewed the guidance to determine if and how selected agencies measured and documented heavy equipment utilization  For example, we reviewed whether selected agencies developed reports for managing heavy equipment utilization such as Air Force validation reports and FWS conditional assessment reports  We also reviewed Air Force, FWS, and NPS utilization data for heavy equipment but we did not independently calculate or verify the utilization rate for individual heavy equipment items because each heavy equipment item (backhoe, forklift, tractor, etc ,) has different utilization requirements depending on various factors such as the brand, model, or age of equipment  However, we did request information about agency procedures to develop and verify utilization rates  We assessed the reliability of the utilization data with agency official interviews and a review of the data for completeness and potential outliers  We determined that the data were sufficiently reliable for the purposes of providing evidence of utilization data collection for heavy equipment assets  We also visited the NPS George Washington Memorial Parkway to interview equipment maintenance officials regarding the procurement and management of heavy equipment and to document photos of heavy equipment  We selected this site because of its range of heavy equipment and close proximity to the Capital region  We conducted this performance audit from October 2016 to February 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the individual named above, John W  Shumann (Assistant Director), Rebecca Rygg (Analyst in Charge), Nelsie Alcoser, Melissa Bodeau, Terence Lam, Ying Long, Josh Ormond, Kelly Rubin, Crystal Wesco, and Elizabeth Wood made key contributions to this report 


Report 2:  In developing a strategy and antifraud control activities, effective managers focus on fraud prevention over detection, develop a plan for responding to identified instances of fraud, establish collaborative relationships with stakeholders, and create incentives to help effectively implement the strategy  Additionally, as part of a documented strategy, management identifies roles and responsibilities of those involved in fraud risk management activities; describes control activities as well as plans for monitoring and evaluation; creates timelines; and communicates the antifraud strategy to employees and stakeholders, among other things  As discussed earlier, CMS had some control activities in place to identify fraud risk in Medicare, particularly in the FFS program  However, CMS had not developed and documented a risk-based antifraud strategy to guide its design and implementation of new antifraud activities and to better align and coordinate its existing activities to ensure it is targeting and mitigating the most-significant fraud risks  Antifraud strategy  CMS officials told us that CPI does not have a documented risk-based antifraud strategy  Although CMS has developed several documents that describe efforts to address fraud, the agency had not developed a risk-based antifraud strategy for Medicare because, as discussed earlier, it had not conducted a fraud risk assessment that would serve as a foundation for such strategy  In 2016, CPI identified five strategic objectives for program integrity, which include antifraud elements and an emphasis on prevention  However, according to CMS officials, these objectives were identified from discussions with CMS leadership and various stakeholders and not through a fraud risk assessment process to identify inherent fraud risks from the universe of potential vulnerabilities, as described earlier and called for in the leading practices  These strategic objectives were presented at an antifraud conference in 2016, but were not announced publicly until the release of the Annual Report to Congress on the Medicare and Medicaid Integrity Programs for Fiscal Year 2015 in June 2017  Stakeholder relationships and communication  CMS has established relationships and communicated with stakeholders, but, without an antifraud strategy, stakeholders we spoke with lacked a common understanding of CMS’s strategic approach  Prior work on practices that can help federal agencies collaborate effectively calls for a strategy that is shared with stakeholders to promote trust and understanding  Once an antifraud strategy is developed, the Fraud Risk Framework calls for managers to collaborate to ensure effective implementation  Although some CMS stakeholders were able to describe various CMS program- integrity priorities and activities, such as home health being a fraud risk priority, the stakeholders could not communicate, articulate, or cite a common CMS strategic approach to address fraud risks in its programs  Incentives  The Fraud Risk Framework discusses creating incentives to help ensure effective implementation of the antifraud strategy once it is developed  Currently, some incentives within stakeholder relationships may complicate CMS’s antifraud efforts  Among contractors, CMS encourages information sharing through conferences and workshops; however, competition for CMS business among contractors can be a disincentive to information sharing  CMS officials acknowledged this concern and said that they expect contractors to share information related to fraud schemes, outcomes of investigations, and tips for addressing fraud, but not proprietary information such as algorithms to risk-score providers  Without developing and documenting an antifraud strategy based on a fraud risk assessment, as called for in the design and implement component of the Fraud Risk Framework, CMS cannot ensure that it has a coordinated approach to address the range of fraud risks and to appropriately target and allocate resources for the most-significant risks  Considering fraud risks to which Medicare is most vulnerable, in light of the malicious intent of those who aim to exploit the programs, would help CMS to examine its current control activities and potentially design new ones with recognition of fraudulent behavior it aims to prevent  This focus on fraud is distinct from a broader view of program integrity and improper payments by considering the intentions and incentives of those who aim to deceive rather than well-intentioned providers who make mistakes  Also, continued growth of the program, such as growth of Medicare Part C, calls for consideration of preventive fraud control activities across the entire network of entities involved  Furthermore, considering the large size and complexity of Medicare and the extensive stakeholder network involved in managing fraud in the program, a strategic approach to managing fraud risks within the programs is essential to ensure that a number of existing control activities and numerous stakeholder relationships and incentives are being aligned to produce desired results  Once developed, an antifraud strategy that is clearly articulated to various CMS stakeholders would help CMS to address fraud risks in a more coordinated and deliberate fashion  Thinking strategically about existing control activities, resources, tools, and information systems could help CMS to leverage resources while continuing to integrate Medicare program-integrity efforts along functional lines  A strategic approach grounded in a comprehensive assessment of fraud risks could also help CMS to identify future enhancements for existing control activities, such as new preventive capabilities for its Fraud Prevention System (FPS) or additional fraud factors in provider enrollment and revalidation, such as provider risk-scoring, to stay in step with evolving fraud risks  CMS Has Established Monitoring and Evaluation Mechanisms That Could Inform a Risk-Based Antifraud Strategy for Medicare The evaluate and adapt component of the Fraud Risk Framework calls for federal managers to evaluate outcomes using a risk-based approach and adapt activities to improve fraud risk management  Furthermore, according to federal internal control standards, managers should establish and operate monitoring activities to monitor the internal control system and evaluate the results, which may be compared against an established baseline  Ongoing monitoring and periodic evaluations provide assurances to managers that they are effectively preventing, detecting, and responding to potential fraud  CMS has established monitoring and evaluation mechanisms for its program-integrity activities that it could incorporate into an antifraud strategy  As described in the Fraud Risk Framework, agencies can gather information on the short-term or intermediate outcomes of some antifraud initiatives, which may be more readily measured  For example, CMS has developed some performance measures to provide a basis for monitoring its progress towards meeting the program-integrity goals set in the HHS Strategic Plan and Annual Performance Plan  Specifically, CMS measures whether it is meeting its goal of “increasing the percentage of Medicare FFS providers and suppliers identified as high risk that receive an administrative action ” CMS does not set specific antifraud goals for other parts of Medicare; other CMS performance measures relate to measuring or reducing improper payments in the various parts of Medicare  CMS uses return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities and FPS  For example, CMS uses return-on-investment to measure the effectiveness of FPS and, in response to a recommendation we made in 2012, CMS developed outcome-based performance targets and milestones for FPS  CMS has also conducted individual evaluations of its program-integrity activities, such as an interim evaluation of the prior-authorization demonstration for power mobility devices that began in 2012 and is currently implemented in 19 states  Commensurate with greater maturity of control activities in Medicare FFS compared to other parts of Medicare and Medicaid, monitoring and evaluation activities for Medicare Parts C and D and Medicaid are more limited  For example, CMS calculates savings for its program-integrity activities in Medicare Parts C and D, but not a full return-on-investment  CMS officials told us that calculating costs for specific activities is challenging because of overlapping activities among contractors  CMS officials said they continue to refine methods and develop new savings estimates for additional program-integrity activities  According to the Fraud Risk Framework, effective managers develop a strategy and evaluate outcomes using a risk-based approach  In developing an effective strategy and antifraud activities, managers consider the benefits and costs of control activities  Ongoing monitoring and periodic evaluations provide reasonable assurance to managers that they are effectively preventing, detecting, and responding to potential fraud  Monitoring and evaluation activities can also support managers’ decisions about allocating resources, and help them to demonstrate their continued commitment to effectively managing fraud risks  As CMS takes steps to develop an antifraud strategy, it could include plans for refining and building on existing methods such as return-on- investment or savings measures, and setting appropriate targets to evaluate the effectiveness of all of CMS’s antifraud efforts  Such a strategy would help CMS to efficiently allocate program-integrity resources and to ensure that the agency is effectively preventing, detecting, and responding to potential fraud  For example, while doing so would involve challenges, CMS’s strategy could detail plans to advance efforts to measure a potential fraud rate through baseline and periodic measures  Fraud-rate measurement efforts could also inform risk assessment activities, identify currently unknown fraud risks, align resources to priority risks, and develop effective outcome metrics for antifraud controls  Such a strategy would also help CMS ensure that it has effective performance measures in place to assess its antifraud efforts beyond those related to providers in Medicare FFS, and establish appropriate targets to measure the agency’s progress in addressing fraud risks  In our December 2017 report we recommended that the Administrator of CMS should, using the results of the fraud risk assessments for Medicare, create, document, implement, and communicate an antifraud strategy that is aligned with and responsive to regularly assessed fraud risks  This strategy should include an approach for monitoring and evaluation  In its March 2018 letter to GAO, HHS stated that it is currently evaluating its options with regards to implementing this recommendation  As of July 2018, the recommendation remains open  Chairman Jenkins and Ranking Member Lewis, this concludes my prepared statement  I look forward to the subcommittee’s questions  If you or your staff have any questions concerning this testimony, please contact Seto J  Bagdoyan, who may be reached at (202) 512-6722 or bagdoyans@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  Other individuals who made key contributions to this testimony include Tonita Gillich (Assistant Director), Irina Carnevale (Analyst-in- Charge), Colin Fallon, Scott Hiromoto, and Maria McMullen  Improper Payments: Actions and Guidance Could Help Address Issues and Inconsistencies in Estimation Processes  GAO-18-377  Washington, D C : May 31, 2018  Medicare: CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending  GAO-18-341  Washington, D C : April 20, 2018  Medicare and Medicaid: CMS Needs to Fully Align Its Antifraud Efforts with the Fraud Risk Framework  GAO-18-88  Washington, D C : December 5, 2017  Medicare: CMS Fraud Prevention System Uses Claims Analysis to Address Fraud  GAO-17-710  Washington, D C : August 30, 2017  Medicare Advantage Program Integrity: CMS’s Efforts to Ensure Proper Payments and Identify and Recover Improper Payments  GAO-17-761T  Washington, D C : July 19, 2017  Medicare Provider Education: Oversight of Efforts to Reduce Improper Billing Needs Improvement  GAO-17-290  Washington, D C : March 10, 2017  High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others  GAO-17-317  Washington, D C : February 15, 2017  Medicare Advantage: Limited Progress Made to Validate Encounter Data Used to Ensure Proper Payments  GAO-17-223  Washington, D C : January 17, 2017  Medicare: Initial Results of Revised Process to Screen Providers and Suppliers, and Need for Objectives and Performance Measures  GAO-17-42  Washington, D C : November 15, 2016  Medicare: Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data  GAO-16-394  Washington, D C : April 13, 2016  Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments  GAO-16- 76  Washington, D C : April 8, 2016  Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards  GAO-16-216  Washington, D C : January 22, 2016  A Framework for Managing Fraud Risks in Federal Programs  GAO-15-593SP  Washington, D C : July 28, 2015  Medicare Program Integrity: Increased Oversight and Guidance Could Improve Effectiveness and Efficiency of Postpayment Claims Reviews  GAO-14-474  Washington, D C : July 18, 2014  Medicare Fraud Prevention: CMS Has Implemented a Predictive Analytics System, but Needs to Define Measures to Determine Its Effectiveness  GAO-13-104  Washington, D C : October 15, 2012  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: Medicare covered over 58 million people in 2017 and has wide-ranging impact on the health-care sector and the overall U.S. economy. However, the billions of dollars in Medicare outlays as well as program complexity make it susceptible to improper payments, including fraud. Although there are no reliable estimates of fraud in Medicare, in fiscal year 2017 improper payments for Medicare were estimated at about $52 billion. Further, about $1.4 billion was returned to Medicare Trust Funds in fiscal year 2017 as a result of recoveries, fines, and asset forfeitures. In December 2017, GAO issued a report examining how CMS managed its fraud risks overall and particularly the extent to which its efforts in the Medicare and Medicaid programs aligned with GAO's Framework. This testimony, based on that report, discusses the extent to which CMS's management of fraud risks in Medicare aligns with the Framework. For the report, GAO reviewed CMS policies and interviewed officials and external stakeholders. In its December 2017 report, GAO found that the Centers for Medicare & Medicaid Services' (CMS) antifraud efforts for Medicare partially align with GAO's 2015 A Framework for Managing Fraud Risks in Federal Programs (Framework). The Fraud Reduction and Data Analytics Act of 2015 required OMB to incorporate leading practices identified in this Framework in its guidance to agencies on addressing fraud risks. Consistent with the Framework, GAO determined that CMS had demonstrated commitment to combating fraud by creating a dedicated entity to lead antifraud efforts; the Center for Program Integrity (CPI) serves as this entity for fraud, waste, and abuse issues in Medicare. CMS also promoted an antifraud culture by, for example, coordinating with internal stakeholders to incorporate antifraud features into new program design. To increase awareness of fraud risks in Medicare, CMS offered and required training for stakeholder groups such as providers of medical services, but it did not offer or require similar fraud-awareness training for most of its workforce. CMS took some steps to identify fraud risks in Medicare; however, it had not conducted a fraud risk assessment or designed and implemented a risk-based antifraud strategy for Medicare as defined in the Framework. CMS identified fraud risks through control activities that target areas the agency designated as higher risk within Medicare, including specific provider types, such as home health agencies. Building on earlier steps and conducting a fraud risk assessment, consistent with the Framework, would provide the detailed information and insights needed to create a fraud risk profile, which, in turn, is the basis for creating an antifraud strategy. CMS established monitoring and evaluation mechanisms for its program-integrity control activities that, if aligned with an antifraud strategy, could enhance the effectiveness of fraud risk management in Medicare. For example, CMS used return-on-investment and savings estimates to measure the effectiveness of its Medicare program-integrity activities. In developing an antifraud strategy, consistent with the Framework, CMS could include plans for refining and building on existing methods such as return-on-investment, to evaluate the effectiveness of all of its antifraud efforts. In its December 2017 report, GAO made three recommendations, namely that CMS (1) require and provide fraud-awareness training to its employees; (2) conduct fraud risk assessments; and (3) create an antifraud strategy for Medicare, including an approach for evaluation. The Department of Health and Human Services agreed with these recommendations and reportedly is evaluating options to implement them. Accordingly, the recommendations remain open.