Report to Congressional Addressees 

March 2011 

GAO-11-318SP

United States Government Accountability Office

GAO

Opportunities to

Reduce Potential

Duplication in

Government

Programs, Save Tax 

Dollars, and Enhance

Revenue
1 

Contents 


Letter 

Section I GAO Identified Areas of Potential Duplication, 

Overlap, and Fragmentation, Which, if Effectively 

Addressed, Could Provide Financial and 

Other Benefits 5 

Section II Other GAO-Identified Cost-Saving and 

Revenue-Enhancing Areas 155 

Appendix I List of Congressional Addressees 334 

Appendix II Objectives, Scope, and Methodology 336 

Page i GAO-11-318SP 
Abbreviations 

AC Bureau of Arms Control 

AFR Agency Financial Report 

AFV alternative fuel vehicle 

AHLTA Armed Forces Health Longitudinal Technology 

Application 

ARS Agricultural Research Service 

ATF Bureau of Alcohol, Tobacco, Firearms and Explosives 

AUR Automated Underreporter Program 

BEA business enterprise architecture 

BEST Border Enforcement Security Task Force 

BLM Bureau of Land Management 

BOEMRE Bureau of Ocean Energy Management, Regulation and 

Enforcement 

BPA blanket purchase agreement 

BRAC base realignment and closure 

CBP Customs and Border Protection 

CDE Community Development Entities 

CFDA Catalog of Federal Domestic Assistance 

CDFI Community Development Financial Institution 

CERP Commander’s Emergency Response Program 

CIO Chief Information Officer 

CMS Centers for Medicare & Medicaid Services 

COBRA Consolidated Omnibus Budget Reconciliation Act of 

1985 

Commerce Department of Commerce 

Corrosion Office Office of Corrosion Policy and Oversight 

DHS Department of Homeland Security 

DLA Defense Logistics Agency 

DNDO Domestic Nuclear Detection Office 

DOD Department of Defense 

DOT Department of Transportation 

DSH Disproportionate Share Hospital 

EAS Essential Air Service 

Education Department of Education 

EDA Economic Development Administration 

EHR Electronic Health Record 

Energy Department of Energy 

EPA Environmental Protection Agency 

EPAct Energy Policy Act 

FAM Foreign Affairs Manual 

Page ii GAO-11-318SP 
FBI Federal Bureau of Investigation 

FCC Federal Communications Commission 

FDA Food and Drug Administration 

FEMA Federal Emergency Management Agency 

FFS fee-for-service 

FMCSA Federal Motor Carrier Safety Administration 

FPDS-NG Federal Procurement Data System-Next Generation 

FSIS Food Safety and Inspection Service 

FSSI Federal Strategic Sourcing Initiative 

FTA Federal Transit Administration 

FTHBC First-Time Homebuyer Credit 

Fund Universal Service Fund 

GAGAS generally accepted government auditing standards 

GHG greenhouse gas 

GPO Government Pension Offset 

GPRA Government Performance and Results Act 

GSA General Services Administration 

HHA home health agency 

HHS Department of Health and Human Services 

HUBZone Historically Underutilized Business Zone 

HUD Department of Housing and Urban Development 

IBET Integrated Border Enforcement Team 

IED improvised explosive device 

IG Inspector General 

Interior Department of the Interior 

IPERA Improper Payments Elimination and Recovery Act 

IRS Internal Revenue Service 

ISN Bureau of International Security and Nonproliferation 

ISR intelligence, surveillance, and reconnaissance 

IT information technology 

JIEDDO Joint IED Defeat Organization 

Justice Department of Justice 

Labor Department of Labor 

MAS Multiple Award Schedule 

MEA math error authority 

MHS Military Health System 

MPPR multiple procedure payment reduction 

NAFTA North American Free Trade Agreement 

NASA National Aeronautics and Space Administration 

NMTC New Markets Tax Credit 

NP Bureau of Nonproliferation 

NSLP National School Lunch Program 

Page iii GAO-11-318SP 
OFPP Office of Federal Procurement Policy 

OMB Office of Management and Budget 

ONRR Office of Natural Resources and Revenue 

O&S operating and support 

PAR Performance and Accountability Report 

PBL performance-based logistics 

PMS Payment Management System 

RAC recovery audit contractor 

RFS renewable fuel standard 

ROI return on investment 

S&T Science and Technology Directorate 

SBA Small Business Administration 

SNAP Supplemental Nutrition Assistance Program 

SPOT Screening of Passengers by Observation Techniques 

SSA Social Security Administration 

State Department of State 

STEM science, technology, engineering, and mathematics 

TANF Temporary Assistance for Needy Families 

Treasury Department of the Treasury 

TSA Transportation Security Administration 

USAC Universal Service Administrative Company 

USAID U.S. Agency for International Development 

USDA Department of Agriculture 

USICH U.S. Interagency Council on Homelessness 

VA Department of Veterans Affairs 

VC Bureau of Verification and Compliance 

VCI Bureau of Verification, Compliance and 

Implementation 

VEETC Volumetric Ethanol Excise Tax Credit 

VistA Veterans Health Information Systems and Technology 

Architecture 

WEP Windfall Elimination Provision 

WIA Workforce Investment Act 

WIC Special Supplemental Nutrition Program for Women, 

Infants, and Children 

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. 

Page iv GAO-11-318SP 
Page 1 GAO-11-318SP 

United States Government Accountability Office

Washington, DC 20548 

March 1, 2011 

Congressional Addressees: 

This is GAO’s first annual report to Congress in response to a new 

statutory requirement that GAO identify federal programs, agencies, 

offices, and initiatives, either within departments or governmentwide, 

which have duplicative goals or activities. Congress asked GAO to conduct 

this work and to report annually on our findings.1

 This work will inform 

government policymakers as they address the rapidly building fiscal 

pressures facing our national government. GAO’s most recent update of its 

annual simulations of the federal government’s fiscal outlook underscores 

the need to address the long-term sustainability of the federal 

government’s fiscal policies.

 2 Since the end of the recent recession, the 

gross domestic product has grown slowly and unemployment has 

remained at a high level. While the economy is still recovering and in need 

of careful attention, there is widespread agreement on the need to look not 

only at the near term but also at steps that begin to change the long-term 

fiscal path as soon as possible without slowing the recovery. With the 

passage of time, the window to address the challenge narrows and the 

magnitude of the required changes grows. GAO’s simulations show 

continually increasing levels of debt that are unsustainable over time 

absent changes in current fiscal policies. 

The objectives of this report are to (1) identify federal programs or 

functional areas where unnecessary duplication, overlap, or fragmentation 

exists, the actions needed to address such conditions, and the potential 

financial and other benefits of doing so; and (2) highlight other 

opportunities for potential cost savings or enhanced revenues. To meet 

these objectives, we are including 81 areas for consideration based on 

related GAO work. This report is divided into two sections. Section I 

presents 34 areas where agencies, offices, or initiatives have similar or 

overlapping objectives or provide similar services to the same populations; 

or where government missions are fragmented across multiple agencies or 

 

1

Pub. L. No. 111-139, § 21, 124 Stat. 29 (2010), 31 U.S.C. § 712 Note. 

2

GAO, The Federal Government’s Long-Term Fiscal Outlook: Fall 2010 Update, 

GAO-11-201SP (Washington, D.C.: Nov. 15, 2010). Additional information on the federal 

fiscal outlook, federal debt, and the outlook for the state and local government sector is 

available at: www.gao.gov/special.pubs/longterm/.

 Comptroller General

of the United States
programs. These areas span a range of government missions: agriculture, 

defense, economic development, energy, general government, health, 

homeland security, international affairs, and social services. Within and 

across these missions, this report touches on hundreds of federal 

programs, affecting virtually all major federal departments and agencies. 

Overlap and fragmentation among government programs or activities can 

be harbingers of unnecessary duplication. Reducing or eliminating 

duplication, overlap, or fragmentation could potentially save billions of tax 

dollars annually and help agencies provide more efficient and effective 

services. The areas identified in this report are not intended to represent 

the full universe of duplication, overlap, or fragmentation within the 

federal government. We will continue to identify additional issues in future 

reports. 

Given today’s fiscal environment, Section II of this report summarizes 47 

additional areas—beyond those directly related to duplication, overlap, or 

fragmentation—describing other opportunities for agencies or Congress to 

consider taking action that could either reduce the cost of government 

operations or enhance revenue collections for the Treasury. These costsavings and revenue opportunities also span a wide range of federal 

government agencies and mission areas. The issues raised in both sections 

were drawn from GAO’s prior and ongoing work. 

Many of the issues included in this report are focused on activities that are 

contained within single departments or agencies. In those cases, agency 

officials can generally achieve cost savings or other benefits by 

implementing existing GAO recommendations or by undertaking new 

actions suggested in this report. However, a number of issues we have 

identified, particularly in the duplication area, span multiple organizations 

and therefore may require higher-level attention by the executive branch 

or enhanced congressional oversight or legislative action. 

In some cases, there is sufficient information available today to show that 

if actions are taken to address individual issues summarized in this report, 

financial benefits ranging from the tens of millions to several billion 

dollars annually may be realized by addressing that single issue. For 

example, while the Department of Defense is making limited changes to 

the governance of its military health care system, broader restructuring 

could result in annual savings of up to $460 million. Similarly, we 

developed a range of options that could reduce federal revenue losses by 

up to $5.7 billion annually by addressing potentially duplicative policies 

designed to boost domestic ethanol production. Likewise, we identified a 

number of other opportunities for cost savings or enhanced revenues such 

Page 2 GAO-11-318SP 
 

 

as reducing improper federal payments totaling billions of dollars, or 

addressing the gap between taxes owed and paid, potentially involving 

billions of dollars. Collectively, these savings and revenues could result in 

tens of billions of dollars in annual savings, depending on the extent of 

actions taken. 

In other cases, precise estimates of the extent of unnecessary duplication 

among certain programs, and the cost savings that can be achieved by 

eliminating any such duplication, are difficult to specify in advance of 

congressional and executive branch decision making. In some instances, 

needed information on program performance is not readily available; the 

level of funding in agency budgets devoted to overlapping or fragmented 

programs is not clear; and the implementation costs that might be 

associated with program consolidations or terminations, among other 

variables, are difficult to predict. For example, we identified 44 federal 

employment and training programs that overlap with at least one other 

program in that they provide at least one similar service to a similar 

population. However, our review of three of the largest programs showed 

that the extent to which individuals receive the same services from these 

programs is unknown due to program data limitations. In addition, 

Congress’ determinations in making policy decisions and actions that 

agencies may take would affect the potential savings associated with any 

given option.3

 Nevertheless, considering the amount of program dollars 

involved in the issues we have identified, even limited adjustments could 

result in significant savings. 

Given the challenges noted above, careful, thoughtful actions will be 

needed to address many of the issues discussed in this report, particularly 

those involving potential duplication. Additionally, in January 2011, the 

President signed the GPRA Modernization Act of 2010,4

 updating the 

almost two-decades-old Government Performance and Results Act 

(GPRA).5

 Implementing provisions of the new act—such as its emphasis 

on establishing outcome-oriented goals covering a limited number of 

crosscutting policy areas—could play an important role in clarifying 

3

The mandate calling for this report also asked GAO to identify specific areas where 

Congress may wish to cancel budget authority it has previously provided—a process 

known as rescission. To date, GAO’s work has not identified a basis for proposing specific 

funding rescissions. 

4

Pub. L. No. 111-352, 124 Stat. 3866 (2011). 

5

Pub. L. No. 103-62, 107 Stat. 285 (1993). 

Page 3 GAO-11-318SP 
desired outcomes, addressing program performance spanning multiple 

organizations, and facilitating future actions to reduce unnecessary 

duplication, overlap, and fragmentation. 

As the nation rises to meet the current fiscal challenges, GAO will 

continue to assist Congress and federal agencies in reducing duplication, 

overlap, or fragmentation; achieving cost savings; and enhancing revenues. 

In GAO’s future annual reports, we will look at additional federal 

programs to identify further instances of duplication, overlap, or 

fragmentation, as well as other opportunities to reduce the cost of 

government operations or increase revenues to the government. Likewise, 

we will continue to monitor developments in the areas we have already 

identified. Issues of duplication, overlap, and fragmentation will be 

addressed in our routine audit work during the year as appropriate and 

summarized in our annual reports. 

This report is based substantially upon work conducted for ongoing audits 

and previously completed GAO products, which were conducted in 

accordance with generally accepted government auditing standards or 

with GAO’s quality assurance framework, as appropriate. We conducted 

the work for the overall report from February 2010 through February 2011. 

For issues being reported on for the first time, GAO sought comments 

from the agencies involved and incorporated those comments as 

appropriate. Appendix II contains additional details of our scope and 

methodology. 

This report was prepared under the coordination of Patricia Dalton, Chief 

Operating Officer, who may be reached at (202) 512-5600, or 

DaltonP@gao.gov; and Janet St. Laurent, Managing Director, Defense 

Capabilities and Management, who may be reached at (202) 512-4300, or 

StLaurentJ@gao.gov. Specific questions about individual issues may be 

directed to the area contact listed at the end of each summary. 

Gene L. Dodaro 

Comptroller General 

of the United States 

Page 4 GAO-11-318SP 
Section I: GAO Identified Areas of Potential 

Duplication, Overlap, and Fragmentation, 

Which, if Effectively Addressed, Could 

Provide Financial and Other Benefits 

 

Section I: GAO Identified Areas of Potential 

Duplication, Overlap, and Fragmentation, Which, if 

Effectively Addressed, Could Provide Financial and 

Other Benefits 

Table 1 presents 34 areas for consideration related to duplication, overlap, 

or fragmentation from GAO’s recently completed and ongoing work. In 

some cases, there is sufficient information to estimate potential savings or 

other benefits if actions are taken to address individual issues. In those 

cases, as noted below, financial benefits ranging from hundreds of millions 

to several billion dollars annually may be realized. In other cases, 

estimates of cost savings or other benefits would depend upon what 

congressional and executive branch decisions were made, including how 

certain GAO recommendations are implemented. Additionally, information 

on program performance, the level of funding in agency budgets devoted 

to overlapping or fragmented programs, and the implementation costs that 

might be associated with program consolidations or terminations, are 

factors that could impact actions to be taken as well as potential savings. 

Following the table are summaries for each of the 34 areas listed. In 

addition to summarizing what GAO has found, each area presents actions 

for the executive branch or Congress to consider. Each of the summaries 

contains a “Framework for Analysis” providing the methodology used to 

conduct the work and a list of related GAO products for further 

information. 

Table 1: Duplication, Overlap, or Fragmentation Areas Identified in This Report 

Missions 

Agriculture 

Defense 

Areas identified 

1. Fragmented food safety system has caused inconsistent 

oversight, ineffective coordination, and inefficient use of 

resources 

2. Realigning DOD’s military medical command structures 

and consolidating common functions could increase efficiency 

and result in projected savings ranging from $281 million to 

$460 million annually 

3. Opportunities exist for consolidation and increased 

efficiencies to maximize response to warfighter urgent 

needs 

Federal agencies and programs where 

duplication, overlap, or fragmentation 

may occur 

The Department of Agriculture’s (USDA) 

Food Safety and Inspection Service and 

the Food and Drug Administration are the 

primary food safety agencies, but 15 

agencies are involved in some way 

Department of Defense (DOD), including 

the Office of the Assistant Secretary for 

Health Affairs, the Army, the Navy, and 

the Air Force 

At least 31 entities within DOD 

Page 

8 

13 

18 

4. Opportunities exist to avoid unnecessary redundancies and 

improve the coordination of counter-improvised explosive 

device efforts 

The services and other components 

within DOD 23 

5. Opportunities exist to avoid unnecessary redundancies and 

maximize the efficient use of intelligence, surveillance, and 

reconnaissance capabilities 

6. A departmentwide acquisition strategy could reduce DOD’s 

risk of costly duplication in purchasing Tactical Wheeled 

Vehicles 

Multiple intelligence organizations within 

DOD 

DOD, including Army and Marine Corps 

26 

31 

Page 5 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

Section I: GAO Identified Areas of Potential 

Duplication, Overlap, and Fragmentation, 

Which, if Effectively Addressed, Could 

Provide Financial and Other Benefits 

7. Improved joint oversight of DOD’s prepositioning programs 

for equipment and supplies may reduce unnecessary 

duplication 

DOD including Air Force, Army, and 

Marine Corps 34 

8. DOD business systems modernization: opportunities exist 

for optimizing business operations and systems 

About 2,300 investments across DOD 38 

Economic 

development 

9. The efficiency and effectiveness of fragmented economic 

development programs are unclear 

USDA, Department of Commerce 

(Commerce), Housing and Urban 

Development (HUD), and the Small 

Business Administration (SBA); 80 

programs involved 

42 

10. The federal approach to surface transportation is 

fragmented, lacks clear goals, and is not accountable for 

Five agencies within the Department of 

Transportation (DOT); over 100 programs 48 

results involved 

11. Fragmented federal efforts to meet water needs in the U.S.­ USDA, Commerce’s Economic 

Mexico border region have resulted in an administrative Development Administration, 

burden, redundant activities, and an overall inefficient use of Environmental Protection Agency (EPA), 

resources Department of Health and Human 

Services’ (HHS) Indian Health Service, 52 

Department of the Interior’s (Interior) 

Bureau of Reclamation, HUD, and the 

U.S. Army Corps of Engineers 

Energy 12. Resolving conflicting requirements could more effectively A number of agencies, including the 

achieve federal fleet energy goals Department of Energy (Energy) and the 

General Services Administration (GSA) 55 

play a role overseeing the 

governmentwide requirements 

13. Addressing duplicative federal efforts directed at increasing EPA and the Department of the Treasury 

domestic ethanol production could reduce revenue losses 59 

by up to $5.7 billion annually 

General 

government 

14. Enterprise architectures: key mechanisms for identifying 

potential overlap and duplication 

Governmentwide 62 

15. Consolidating federal data centers provides opportunity to Twenty-four federal agencies 

improve government efficiency and achieve significant cost 66 

savings 

16. Collecting improved data on interagency contracting to Governmentwide 

minimize duplication could help the government leverage its 70 

vast buying power 

17. Periodic reviews could help identify ineffective tax Governmentwide 

expenditures and redundancies in related tax and spending 

programs, potentially reducing revenue losses by billions of 75 

dollars 

Health 18. Opportunities exist for DOD and VA to jointly modernize their 

electronic health record systems 

DOD and the Department of Veterans 

Affairs (VA) 79 

19. VA and DOD need to control drug costs and increase joint 

contracting whenever it is cost-effective 

DOD and VA 82 

20. HHS needs an overall strategy to better integrate nationwide 

public health information systems 

Multiple agencies, led by HHS 88 

Homeland 21. Strategic oversight mechanisms could help integrate USDA, DOD, Department of Homeland 

security/Law fragmented interagency efforts to defend against biological Security (DHS), HHS, Interior, and others; 

enforcement threats more than two dozen presidentially 92 

appointed individuals with responsibility for 

biodefense 

Page 6 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

 

Section I: GAO Identified Areas of Potential 

Duplication, Overlap, and Fragmentation, 

Which, if Effectively Addressed, Could 

Provide Financial and Other Benefits 

22. DHS oversight could help eliminate potential duplicating DHS and other federal law enforcement 

efforts of interagency forums in securing the northern partners 96 

border 

23. The Department of Justice plans actions to reduce overlap in Department of Justice’s Federal Bureau 

explosives investigations, but monitoring is needed to of Investigation and Bureau of Alcohol, 101 

ensure successful implementation Tobacco, Firearms and Explosives 

24. TSA’s security assessments on commercial trucking DHS’s Transportation Security 

companies overlap with those of another agency, but efforts are Administration (TSA) and DOT 105 

under way to address the overlap 

25. DHS could streamline mechanisms for sharing security- Three information-sharing mechanisms 

related information with public transit agencies to help funded by DHS and TSA 111 

address overlapping information 

26. FEMA needs to improve its oversight of grants and establish DHS’s Federal Emergency Management 

a framework for assessing capabilities to identify gaps and Agency (FEMA); 17 programs involved 116 

prioritize investments 

International 27. Lack of information sharing could create the potential for Principally DOD and the U.S. Agency for 

affairs duplication of efforts between U.S. agencies involved in International Development 120 

development efforts in Afghanistan 

28. Despite restructuring, overlapping roles and functions still 

exist at State’s Arms Control and Nonproliferation Bureaus 

Two bureaus within the Department of 

State (State) 123 

Social 29. Actions needed to reduce administrative overlap among USDA, DHS, and HHS; 18 programs 

services domestic food assistance programs involved 125 

30. Better coordination of federal homelessness programs may Seven federal agencies, including 

minimize fragmentation and overlap Department of Education (Education), 

HHS, and HUD; over 20 programs 129 

involved 

31. Further steps needed to improve cost-effectiveness and USDA, DOT, Education, Interior, HHS, 

enhance services for transportation-disadvantaged persons HUD, Department of Labor (Labor), and 134 

VA; 80 programs involved 

Training, 32. Multiple employment and training programs: providing Education, HHS, and Labor, among 

employment, 

and 

information on colocating services and consolidating 

administrative structures could promote efficiencies 

others; 44 programs involved 140 

education 

33. Teacher quality: proliferation of programs complicates Ten agencies including DOD, Education, 

federal efforts to invest dollars effectively Energy, National Aeronautics and Space 

Administration, and the National Science 144 

Foundation; 82 programs involved 

34. Fragmentation of financial literacy efforts makes 

coordination essential 

More than 20 different agencies; about 56 

programs involved 151 

Source: GAO analysis based on areas addressed in Section I of this report. 

Page 7 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Fragmented Food Safety System Has Caused 

Inconsistent Oversight, Ineffective 

Coordination, and Inefficient Use of 

Resources 

 

Fragmented Food Safety System Has Caused 

Inconsistent Oversight, Ineffective Coordination, and 

Inefficient Use of Resources 

Why GAO Is Focusing 

on This Area 

The fragmented federal oversight of food safety has caused inconsistent 

oversight, ineffective coordination, and inefficient use of resources. 

Fifteen federal agencies collectively administer at least 30 food related 

laws. Budget obligations for the two primary food safety agencies—the 

Food and Drug Administration (FDA) and the U.S. Department of 

Agriculture’s (USDA) Food Safety and Inspection Service (FSIS)—totaled 

over $1.6 billion in fiscal year 2009. USDA is responsible for the safety of 

meat, poultry, processed egg products, and catfish and FDA is responsible 

for virtually all other food, including seafood. Three major trends also 

create food safety challenges: (1) a substantial and increasing portion of 

the U.S. food supply is imported, (2) consumers are eating more raw and 

minimally processed foods, and (3) segments of the population that are 

particularly susceptible to food-borne illnesses, such as older adults and 

immune-compromised individuals, are growing. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

For more than a decade, GAO has reported on the fragmented nature of 

federal food safety oversight. The 2010 nationwide recall of more than 500 

million eggs due to Salmonella contamination highlights this 

fragmentation. FDA is generally responsible for ensuring that shell eggs, 

including eggs at farms such as those where the outbreak occurred, are 

safe, wholesome, and properly labeled and FSIS is responsible for the 

safety of eggs processed into egg products. In addition, while USDA’s 

Agricultural Marketing Service sets quality and grade standards for the 

eggs, such as Grade A, it does not test the eggs for microbes such as 

Salmonella. Further, USDA’s Animal and Plant Health Inspection Service 

helps ensure the health of the young chicks that are supplied to egg farms, 

but FDA oversees the safety of the feed they eat. 

Oversight is also fragmented in other areas of the food safety system. For 

example, the 2008 Farm Bill assigned USDA responsibility for catfish, thus 

splitting seafood oversight between USDA and FDA. In September 2009, 

GAO also identified gaps in food safety agencies’ enforcement and 

collaboration on imported food. Specifically, the import screening system 

used by the Department of Homeland Security’s Customs and Border 

Protection (CBP) does not notify FDA’s or FSIS’s systems when imported 

food shipments arrive at U.S. ports. Without access to time-of-arrival 

information, FDA and FSIS may not know when shipments that require 

examinations arrive at the port, which could increase the risk that unsafe 

food could enter U.S. commerce. GAO recommended that the CBP 

Commissioner ensure that CBP’s new screening system communicates 

time-of-arrival information to FDA’s and FSIS’s screening systems and 

GAO continues to monitor their actions. 

Page 8 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmented Food Safety System Has Caused 

Inconsistent Oversight, Ineffective 

Coordination, and Inefficient Use of 

Resources 

Actions Needed and 

Potential Financial or 

Other Benefits 

GAO has made numerous recommendations intended to address the 

fragmented federal oversight of the nation’s food supply. One key 

recommendation in October 2001 was to reconvene the President’s 

Council on Food Safety, which disbanded earlier that year. In response, 

the President created the Food Safety Working Group in 2009 to 

coordinate federal efforts and develop goals to make food safer. Through 

the working group, which is co-chaired by the Secretaries of Health and 

Human Services and Agriculture, federal agencies have begun 

collaborating in certain areas that cross regulatory jurisdictions— 

improving produce safety, reducing Salmonella contamination, and 

developing food safety performance measures. However, as a 

presidentially appointed working group its future is uncertain, and the 

experience of the Council on Food Safety, which disbanded less than 3 

years after it was created, illustrates that this type of approach can be 

short lived. In addition, developing a results-oriented governmentwide 

performance plan for food safety, commissioning a detailed analysis of 

alternative organizational structures, and enacting comprehensive riskbased food safety legislation could help address fragmentation. In January 

2007, GAO said that what remains to be done is to develop a 

governmentwide performance plan that is mission based, has a results 

orientation, and provides a cross-agency perspective. In July 2009, the 

Food Safety Working Group issued its key findings—a set of goals and 

actions for improving food safety. While the key findings are mission 

based and offer a cross-agency perspective, they are not fully results 

oriented. Further, the working group has not provided information about 

the resources that are needed to achieve its goals. As a next step, the 

Director of the Office of Management and Budget, in consultation with the 

federal agencies that have food safety responsibilities, should develop a 

governmentwide performance plan for food safety that includes resultsoriented goals and performance measures and a discussion of strategies 

and resources. Without a governmentwide performance plan for food 

safety, decision makers do not have a comprehensive picture of the federal 

government’s performance on this crosscutting issue. In addition, the 

federal government does not formulate an overall budget for food safety, 

making it difficult for Congress to monitor the federal resources allocated 

to federal food safety oversight. 

GAO, in October 2001, suggested that Congress consider commissioning 

the National Academy of Sciences or a blue ribbon panel to conduct a 

detailed analysis of alternative food safety organizational structures. A 

detailed analysis has yet to be commissioned and GAO reiterated its 

suggestion to Congress in February 2011. GAO and other organizations 

Page 9 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmented Food Safety System Has Caused 

Inconsistent Oversight, Ineffective 

Coordination, and Inefficient Use of 

Resources 

have identified alternative organizational structures that could be analyzed 

in more detail, including: 

•	 a single food safety agency, either housed within an existing agency or 

established as an independent entity, that assumes responsibility for all 

aspects of food safety at the federal level; 

•	 a single food safety inspection agency that assumes responsibility for 

food safety inspection activities, but not other activities, under an 

existing department, such as USDA or FDA; 

•	 a data collection and risk analysis center for food safety that 

consolidates data collected from a variety of sources and analyzes it at 

the national level to support risk-based decision making; and 

•	 a coordination mechanism that provides centralized, executive 

leadership for the existing organizational structure, led by a central 

chair who would be appointed by the president and have control over 

resources. 

GAO, the National Academy of Sciences, and others have also suggested 

that Congress enact comprehensive risk-based food safety legislation. In 

May 2004, GAO reported that such legislation can provide the foundation 

for focusing federal oversight and resources on the most important food 

safety problems from a public health perspective. New food safety 

legislation that was signed into law in January 2011 strengthens a major 

part of the food safety system and expands FDA’s oversight authority. 

However, the law does not apply to the federal food safety system as a 

whole and GAO reiterated its suggestion for comprehensive, risk-based 

food safety legislation in February 2011. The European Union adopted 

comprehensive food safety legislation in 2004 intended to create a single, 

transparent set of food safety rules. 

Although reducing fragmentation in federal food safety oversight is not 

expected to result in significant cost savings, new costs may be avoided by 

preventing further fragmentation, as illustrated by the approximately $30 

million for fiscal years 2011 and 2012 that USDA officials had said they 

would have to spend developing and implementing the agency’s new 

congressionally mandated catfish inspection program. Subsequently, no 

funding was proposed for the program in the President’s fiscal year 2012 

budget because of the need for considerable stakeholder engagement and 

regulatory development before its adoption and implementation. In 

addition, GAO has reported that user fees are means of financing federal 

Page 10 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmented Food Safety System Has Caused 

Inconsistent Oversight, Ineffective 

Coordination, and Inefficient Use of 

Resources 

services that can be designed to reduce the burden on tax payers and 

promote economic efficiency and equity. The Congressional Budget Office 

has estimated that if FSIS charged user fees, federal revenues would 

increase by $902 million in fiscal year 2011 and could offset inspection 

costs. FDA has proposed user fees in its fiscal year 2011 congressional 

budget request that it estimates could increase revenues by almost $194 

million and could enable the agency to expand its food safety efforts. 

GAO recognizes that reorganizing federal food safety responsibilities is a 

complex process. Further, GAO’s work on other agency mergers and 

transformations indicates that reorganizing food safety could have shortterm disruptions and transition costs. However, reducing fragmentation 

and overlap could result in a number of nonfinancial benefits. GAO 

reported in March 2004 that integrating food safety oversight can create 

synergy and economies of scale and can provide more focused and 

efficient efforts to protect the nation’s food supply. In June 2008, GAO also 

reported that other countries that reorganized their food safety systems 

have experienced additional benefits, such as improved public confidence 

in the systems. For example, GAO reported that industry and consumer 

stakeholders generally had positive views of the reorganized food safety 

systems and said that transparency had improved. 

Framework for 

Analysis 

The information contained in this analysis is based on the related GAO 

products listed below. In addition, GAO reviewed relevant food safety 

reports and legislation, and interviewed officials from USDA, FDA, and the 

Office of Management and Budget. GAO also collected and analyzed 

information about the Food Safety Working Group, its activities, and its 

plan for food safety, as well as alternative organizational structures for 

food safety oversight. 

Related GAO 

Products 

High-Risk Series: An Update. GAO-11-278. Washington, D.C.: 

February 16, 2011. 

Live Animal Imports: Agencies Need Better Collaboration to Reduce the 

Risk of Animal-Related Diseases. GAO-11-9. Washington, D.C.: 

November 8, 2010. 

Food Safety: Agencies Need to Address Gaps in Enforcement and 

Collaboration to Enhance Safety of Imported Food. GAO-09-873. 

Washington, D.C.: September 15, 2009. 

Page 11 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmented Food Safety System Has Caused 


Inconsistent Oversight, Ineffective 


Coordination, and Inefficient Use of 


Resources 


Seafood Fraud: FDA Program Changes and Better Collaboration among 

Key Federal Agencies Could Improve Detection and Prevention. 

GAO-09-258. Washington, D.C.: February 19, 2009. 

Food Safety: Selected Countries’ Systems Can Offer Insights into 

Ensuring Import Safety and Responding to Foodborne Illness. 

GAO-08-794. Washington, D.C.: June 10, 2008. 

Oversight of Food Safety Activities: Federal Agencies Should Pursue 

Opportunities to Reduce Overlap and Better Leverage Resources. 

GAO-05-213. Washington, D.C.: March 30, 2005. 

Food Safety and Security: Fundamental Changes Needed to Ensure Safe 

Food. GAO-02-47T. Washington, D.C.: October 10, 2001. 

For additional information about this area, contact Lisa Shames at Area Contact (202) 512-3841 or shamesl@gao.gov. 

Page 12 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Realigning DOD’s Military Medical Command 

Structures and Consolidating Common 

Functions Could Increase Efficiency and 

Reduce Costs 

 

Realigning DOD’s Military Medical Command Structures 

and Consolidating Common Functions Could Increase 

Efficiency and Reduce Costs 

Why GAO Is Focusing 

on This Area 

Department of Defense (DOD) components provide health care to over 

9.6 million eligible beneficiaries, including U.S. military personnel, 

retirees, and their family members. With more than 130,000 military and 

government medical professionals, a large network of private health care 

providers, 59 DOD hospitals, and hundreds of clinics worldwide, DOD’s 

collective Military Health System (MHS) manages more than 200,000 

medical visits and fills more than 300,000 prescriptions per day. 

Additionally, the MHS is an important source for education, military 

medical training, and research and development. However, MHS costs 

have more than doubled from $19 billion in fiscal year 2001 to $49 billion 

in 2010 and are expected to increase to over $62 billion by 2015. Studies by 

GAO and others over many years have identified opportunities to gain 

efficiencies and save costs by consolidating administrative, management, 

and clinical functions. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

The responsibilities and authorities for DOD’s military health system are 

distributed among several organizations within DOD with no central 

command authority or single entity accountable for minimizing costs and 

achieving efficiencies. Under the MHS’s current command structure, the 

Office of the Assistant Secretary of Defense for Health Affairs, the Army, 

the Navy, and the Air Force each has its own headquarters and associated 

support functions, such as information technology, human capital 

management, financial activities, and contracting. Additionally, the three 

services each have Surgeons General to oversee their deployable medical 

forces and operate their own health care systems. Moreover, while the 

Assistant Secretary of Defense for Health Affairs controls the Defense 

Health Program budget, this office does not directly supervise the services’ 

medical personnel. 

In 2005, GAO identified DOD’s health care system as an example of a key 

challenge facing the U.S. government in the 21st century as well as an area 

in which DOD could achieve economies of scale and improve delivery by 

combining, realigning, or otherwise changing selected support functions. 

In 2001, a RAND Corporation study on reorganizing the MHS uncovered at 

least 13 studies since the 1940s that had addressed military health care 

organization. All but three of those studies had either favored a unified 

system or recommended a stronger central authority to improve 

coordination among the services. However, DOD has taken limited actions 

to date to consolidate common administrative, management, and clinical 

functions within its MHS. 

Page 13 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Realigning DOD’s Military Medical Command 

Structures and Consolidating Common 

Functions Could Increase Efficiency and 

Reduce Costs 

In 2005, DOD formed a working group to develop an implementation plan 

for a joint medical command. This group in 2006 developed and evaluated 

several reorganization alternatives to promote effectiveness and efficiency 

in its medical command structure by increased sharing of resources, use of 

common operating processes, and reduction in duplicative functions and 

organizations. One alternative would have established a unified medical 

command similar to DOD’s unified transportation command; the second 

alternative would have established two separate commands—one to 

provide operational/deployable medicine and another to provide 

beneficiary care through military hospitals and contracted providers; and a 

third alternative would have designated one of the military services to 

provide all health care services across DOD. 

Because of an inability to obtain a consensus among the services on which 

alternative to implement, the Under Secretary of Defense for Personnel and 

Readiness and the Assistant Secretary of Defense for Health Affairs 

presented a new concept which, in November 2006, the Deputy Secretary of 

Defense approved. This chosen concept directed seven smaller scale, 

incremental reorganization efforts designed to minimize duplicative layers 

of command and control where possible; reduce redundant efforts, 

personnel, and expenses; and leverage efficiencies through combining 

common service support functions being performed within each of the 

services, such as finance, information management and technology, human 

capital management, support, and logistics. However, the concept left the 

existing command structures of the three services’ medical departments 

over all military treatment facilities essentially unchanged. In updating its 

previous reviews, GAO found that DOD officials have made varying levels of 

progress in implementing four of the seven incremental steps. 

More specifically, DOD is taking actions to (1) create a command, control, 

and management structure in DOD’s base realignment and closure (BRAC) 

markets (National Capital Area and San Antonio); (2) realign command 

and control of the Joint Medical Education Training Center in San 

Antonio; (3) colocate the Military Health System and service medical 

headquarters; and (4) consolidate all medical research and development 

under the Army Medical Research and Material Command. Progress on 

these actions has been facilitated by the fact that three of them are related 

to BRAC recommendations made in 2005 that DOD must complete by the 

BRAC statutory deadline of September 2011. According to officials, DOD 

has not implemented actions to (1) establish a Joint Military Health 

Service Directorate under Assistant Secretary of Defense for Health 

Affairs; (2) consolidate command and control in other locations with more 

than one DOD component providing military health care services; and 

Page 14 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Realigning DOD’s Military Medical Command 

Structures and Consolidating Common 

Functions Could Increase Efficiency and 

Reduce Costs 

(3) realign current TRICARE Management Activity to focus on health plan 

management. The Office of the Assistant Secretary of Defense for Health 

Affairs has not provided guidance on how and when to accomplish the 

three remaining steps, and officials indicated that further action is not 

likely to occur until the results of a broader, ongoing DOD-wide 

organizational and efficiency assessment is completed. 

For the three BRAC-related steps under way, DOD’s BRAC budget 

reporting1

 indicates a net annual savings of $275 million after full 

implementation. However, DOD medical officials have expressed 

uncertainty as to whether these savings will be achieved because of 

changes that occurred within the MHS since the BRAC decision was made. 

For example, they point out that the care of casualties from operations in 

Iraq and Afghanistan and the congressional direction to provide “world 

class health care” in the National Capital Region have all significantly 

increased MHS costs. 

Finally, GAO reported in July 2010 that DOD would benefit from enhanced 

collaboration among the services in their medical personnel requirements 

determination processes and recommended that DOD identify, develop, 

and implement cross-service medical personnel standards for common 

capabilities. The report made recommendations to each of the services to 

improve their medical personnel requirements determination processes. 

That report also recognized that while each of the services has unique 

operational medical capabilities, the day-to-day operations at military 

treatment facilities are very similar across the services and could be more 

collaboratively managed, and that DOD should identify the common 

medical capabilities that are shared across the services in their military 

treatment facilities that would benefit from the development of crossservice medical personnel standards. DOD replied that developing crossservice standards in specific medical functional areas where there is 

measurable benefit makes good sense, and the services generally agreed 

with the need for improvements to their respective requirements 

determination processes. 

1

DOD is required by section 2907 of the Defense Base Closure and Realignment Act of 1990, 

Pub. L. No. 101-510 (as amended by section 2831(b) of Pub. L. No. 109-163 (2006) and 

section 2711 of Pub. L. No. 110-417 (2008)) to, among other reporting requirements, 

estimate the total expenditures required and cost savings to be achieved by each closure 

and realignment. To calculate DOD’s expected BRAC annual savings, GAO used dollar 

amounts obtained from DOD’s budget submission for fiscal year 2011. 

Page 15 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Realigning DOD’s Military Medical Command 

Structures and Consolidating Common 

Functions Could Increase Efficiency and 

Reduce Costs 

Actions Needed and 


Potential Financial 


and Other Benefits 


To reduce duplication in its command structure and eliminate redundant 

processes that add to growing defense health care costs, DOD could take 

action to further assess alternatives for restructuring the governance 

structure of the military health care system. In 2007, GAO recommended 

that DOD needed to demonstrate a sound business case for proceeding 

with its chosen concept, including an analysis of benefits, costs, and risks 

of implementing that choice. Although not explicitly stated, such an 

analysis, to be complete, would require analyzing other alternatives such 

as a unified medical command. These analyses have not been conducted, 

and GAO’s ongoing review will seek to determine the extent to which DOD 

has developed an approach for implementing the remaining actions in its 

chosen concept. Without such actions, DOD is not in a sound position to 

assure the Secretary of Defense and Congress that it made an informed 

decision in implementing its chosen concept over other alternatives or 

whether it will have the desired impact on DOD’s MHS or achieve 

anticipated results. 

In 2006, if DOD and the services had chosen to implement one of the three 

other alternatives studied by the DOD working group, a May 2006 report 

by the Center for Naval Analyses showed DOD could have achieved 

significant savings. GAO’s adjustment of those projected savings from 2005 

into 2010 dollars indicates those savings could range from $281 million to 

$460 million annually depending on the alternative chosen and numbers of 

military, civilian, and contractor positions eliminated. The report largely 

focused on personnel as the primary source of potential savings or costs.2 

However, the report indicated that these savings would require a long and 

potentially costly transition period to be realized. Additionally, the report 

stated that DOD’s ability to realize the potential savings depended 

crucially on clear command and control to make the necessary changes. 

In his selection of the chosen option in 2006, the Deputy Secretary of 

Defense acknowledged that implementing the chosen concept may not 

achieve the estimated level of savings of implementing a unified medical 

structure but believed minimum annual savings of about $200 million 

($221 million in 2010 dollars) was a realistic goal. Additionally, significant 

cost avoidance from improved performance once changes had been 

2

The Center for Naval Analyses categorized the potential savings into the following 10 

areas: health care operations; comptroller operations; information management and 

information technologies; education and training; research and development; logistics; 

strategic planning; human capital management; force health protection and environmental 

health; and general headquarters. 

Page 16 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Realigning DOD’s Military Medical Command 

Structures and Consolidating Common 

Functions Could Increase Efficiency and 

Reduce Costs 

implemented was anticipated. For example, in September 2010, DOD 

officials told GAO that they had identified about $30 million in annual 

savings from the reduction in contract medical staff among the newly 

established joint hospitals in the National Capital Region—one of the seven 

incremental steps of the chosen concept. Additionally, officials believe the 

colocation of the medical headquarters will provide improved collaboration 

and opportunities for consolidating their operations where possible. 

Framework for 

Analysis 

The information contained in this analysis is based on the GAO reports 

listed below as well as work updating the extent to which DOD has 

(1) conducted a cost benefit analysis of its chosen concept and 

(2) implemented its 2006 chosen concept. To do this, GAO obtained, 

reviewed, and discussed with DOD officials any analyses performed 

related to the chosen concept or other alternatives subsequently 

considered. Additionally, GAO reviewed DOD documents, policies, 

directives, briefings, and concept papers related to DOD’s 2006 chosen 

concept, as well as GAO’s prior findings and recommendations associated 

with this effort. In meetings with officials from OSD, the services’ medical 

departments, and other relevant offices, GAO obtained, analyzed, and 

discussed documents related to the status, costs, and results of the seven 

steps in the chosen concept. In obtaining oral comments, DOD officials 

said that they generally agreed with the facts and findings in this analysis. 

Related GAO 

Products 

Military Personnel: Enhanced Collaboration and Process Improvements 

Needed for Determining Military Treatment Facility Medical Personnel 

Requirements. GAO-10-696. Washington, D.C.: July 29, 2010. 

Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, 

and Risks for Its Newly Approved Medical Command Structure. 

GAO-08-122. Washington, D.C.: October 12, 2007. 

Defense Health Care: Tri-Service Strategy Needed to Justify Medical 

Resources for Readiness and Peacetime Care. GAO/HEHS-00-10. 

Washington, D.C.: November 3, 1999. 

For additional information about this area, contact Brenda S. Farrell at Area Contact (202) 512-3604 or farrellb@gao.gov. 

Page 17 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Opportunities Exist for Consolidation and 

Increased Efficiencies to Maximize Response 

to Warfighter 

Urgent Needs 

 

Opportunities Exist for Consolidation and Increased 

Efficiencies to Maximize Response to Warfighter 

Urgent Needs 

Why GAO Is Focusing 

on This Area 

Forces in Iraq and Afghanistan have faced significant risks of mission 

failure and loss of life due to rapidly changing enemy threats. In response, 

the Department of Defense (DOD) established urgent needs processes to 

rapidly develop, modify, and field new capabilities, such as intelligence, 

surveillance, and reconnaissance (ISR) technology, and counterimprovised explosive devices (IED) systems. GAO identified at least 31 

entities that play a role in DOD’s urgent needs processes and has 

estimated funding for addressing urgent needs through those entities to be 

at least $76.9 billion, since 2005. 

GAO has identified challenges with the department’s fragmented guidance 

and GAO and others have raised concerns about the numbers and roles of 

the various entities and processes involved and the potential of overlap 

and duplication. With the shift in priority for overseas operations from Iraq 

to Afghanistan—a theater that may pose more complex long-term 

challenges—deployed or soon-to-deploy units will likely continue to 

request critical capabilities to help them accomplish their missions. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Over the past two decades, the fulfillment of urgent needs has evolved as a 

set of complex processes within the Joint Staff, the Office of the Secretary 

of Defense, each of the military services, and the combatant commands to 

rapidly develop, equip, and field solutions and critical capabilities to the 

warfighter. DOD’s experience with the rapidly evolving threats in Iraq and 

Afghanistan has led to the expanded use of existing urgent needs 

processes, the creation of new policies, and establishment of new 

organizations to manage urgent needs and to expedite the development of 

solutions to address them. However, DOD has not comprehensively 

evaluated opportunities for consolidation across the department, even 

though concerns have been raised by the Defense Science Board, GAO, 

and others about the numbers and roles of the various entities and 

processes involved and the potential of overlap and duplication. For 

example, the Defense Science Board, in July and September 2009 reports, 

found that DOD has done little to adopt urgent needs as a critical, ongoing 

DOD institutional capability essential to addressing future threats, and has 

provided recommendations to the department about potential 

consolidations. Many DOD and military service officials stated that higherlevel senior leadership needs to take decisive action to evaluate the 

breadth of DOD’s urgent needs activities to determine what opportunities 

may exist for reducing unnecessary duplication in staff, information 

technology, support, and funding. 

Page 18 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist for Consolidation and 

Increased Efficiencies to Maximize Response 

to Warfighter 

Urgent Needs 

Additionally, GAO found that overlap exists among urgent needs entities in 

the roles they play as well as the capabilities for which they are 

responsible. For example: 

•	 There are numerous places for the warfighter to submit a request for an 

urgently needed capability. Warfighters may submit urgent needs, 

depending on their military service and the type of need, to one of the 

following different entities: Joint Staff J/8, Army Deputy Chief of Staff 

G/3/5/7, Army Rapid Equipping Force, Navy Fleet Forces Command or 

Commander Pacific Fleet, Marine Corps Deputy Commandant for 

Combat Development and Integration, Air Force Major Commands, 

Special Operations Requirements and Resources, or the Joint IED 

Defeat Organization. These entities then validate the submitted urgent 

need request and thus allow it to proceed through their specific 

process. 

•	 Multiple entities reported a role in responding to similar types of 

urgently needed capabilities. GAO identified eight entities focused on 

responding to ISR capabilities, five entities focused on responding to 

counter-IED capabilities, and six entities focused on responding to 

communications, command and control, and computer technology. In 

some cases, duplication of efforts may have occurred—see related 

summaries in this report on the subjects of intelligence, surveillance, 

and reconnaissance systems and counter-improvised explosive devices. 

The department is hindered in its ability to identify key improvements, 

including consolidation to reduce any overlap, duplication, or 

fragmentation because it lacks a comprehensive approach to manage and 

oversee the breadth of its urgent needs efforts. Specifically, DOD does not 

have a comprehensive, DOD-wide policy that establishes a baseline and 

provides a common approach for how all joint and military service urgent 

needs are to be addressed—including key activities of the process such as 

validation, execution, or tracking. For example, the Joint Staff, the Joint 

IED Defeat Organization, the military services, and the Special Operations 

Command have issued their own guidance that varies in terms of the key 

activities associated with processing and meeting urgent needs—including 

how an urgent needs statement is generated by the warfighter, validated as 

an urgent requirement, and tracked after a solution is provided. 

Furthermore, DOD does not have visibility over the full range of its urgent 

needs efforts. For example, DOD cannot readily identify the cost of its 

Page 19 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Opportunities Exist for Consolidation and 

Increased Efficiencies to Maximize Response 

to Warfighter 

Urgent Needs 

departmentwide urgent needs efforts, which is at least $76.9 billion1 since 

2005 based on GAO’s analysis. Additionally, DOD does not have a 

comprehensive tracking system, a set of universal metrics, and a seniorlevel focal point to lead the department’s efforts to fulfill validated urgent 

needs requirements. Without DOD-wide guidance and a focal point to lead 

its efforts, DOD risks having duplicative, overlapping, and fragmented 

efforts, which can result in avoidable costs. 

Actions Needed and 

Potential Financial or 

Other Benefits 

In the absence of a comprehensive DOD evaluation, GAO’s March 2011 

report identified and analyzed several options, aimed at potential 

consolidations and increased efficiencies in an effort intended to provide 

ideas for the department to consider in streamlining its urgent needs 

entities and processes. These options include the following: 

•	 Consolidate into one entity, within the Office of the Secretary of 

Defense, all the urgent needs processes of the services and DOD, while 

keeping at the services’ program offices the development of solutions. 

•	 Consolidate entities that have overlapping mission or capability 

portfolios regarding urgent needs solutions. 

•	 Establish a gatekeeper within each service to oversee all key activities 

to fulfill a validated urgent needs requirement. 

•	 Consolidate within each service any overlapping activities in the urgent 

needs process. 

The options GAO identified are not meant to be exhaustive or mutually 

exclusive. Rather, DOD would need to perform its own analysis, carefully 

weighing the advantages and disadvantages of options it identifies to 

determine the optimal course of action. Additionally, it must be recognized 

that many entities involved in the fulfillment of urgent needs have other 

roles as well. However, until DOD performs such an evaluation, it will 

remain unaware of opportunities for consolidation and increased 

efficiencies in the fulfillment of urgent needs. 

1

Estimate is based on funding data provided by urgent needs-related entities responding to 

our data collection instrument and includes funding for processing of urgent needs as well 

as development of solutions and some acquisition costs. 

Page 20 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist for Consolidation and 

Increased Efficiencies to Maximize Response 

to Warfighter 

Urgent Needs 

GAO’s March 2011 report recommended that the department develop 

comprehensive guidance that, among other things, creates a focal point to 

lead its urgent needs efforts. Additionally, GAO recommended that DOD’s 

Chief Management Officer evaluate potential options for consolidation to 

reduce overlap, duplication, and fragmentation and take appropriate 

action. DOD concurred with these recommendations. This is an issue that 

may warrant continuing congressional oversight. Timely and effective 

actions on these recommendations should improve DOD’s ability to 

address urgent warfighter needs in the most efficient and cost-effective 

manner by minimizing the risks of duplication, overlap, and fragmentation. 

The information contained in this analysis is based on the related GAO Framework for products below.

Analysis 

Related GAO 

Products 

Warfighter Support: DOD’s Urgent Needs Processes Need a More 

Comprehensive Approach and Evaluation for Potential Consolidation. 

GAO-11-273. Washington, D.C.: March 1, 2011. 

Warfighter Support: Improvements to DOD’s Urgent Needs Processes 

Would Enhance Oversight and Expedite Efforts to Meet Critical 

Warfighter Needs. GAO-10-460. Washington, D.C.: April 30, 2010. 

Warfighter Support: Actions Needed to Improve Visibility and 

Coordination of DOD’s Counter-Improvised Explosive Device Efforts. 

GAO-10-95. Washington, D.C.: October 29, 2009. 

Warfighter Support: Challenges Confronting DOD’s Ability to Coordinate 

and Oversee Its Counter-Improvised Explosive Devices Efforts. 

GAO-10-186T. Washington, D.C.: October 29, 2009. 

Defense Management: More Transparency Needed over the Financial 

and Human Capital Operations of the Joint Improvised Explosive 

Device Defeat Organization. GAO-08-342. Washington, D.C.: March 6, 

2008. 

Defense Logistics: Lack of a Synchronized Approach between the Marine 

Corps and Army Affected the Timely Production and Installation of 

Marine Corps Truck Armor. GAO-06-274. Washington, D.C.: June 22, 2006. 

Page 21 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist for Consolidation and 


Increased Efficiencies to Maximize Response 


to Warfighter 


Urgent Needs 


Defense Logistics: Several Factors Limited the Production and 

Installation of Army Truck Armor during Current Wartime Operations. 

GAO-06-160. Washington, D.C.: March 22, 2006. 

Defense Logistics: Actions Needed to Improve the Availability of Critical 

Items during Current and Future Operations. GAO-05-275. Washington, 

D.C.: April 8, 2005. 

Defense Logistics: Preliminary Observations on the Effectiveness of 

Logistics Activities during Operation Iraqi Freedom. GAO-04-305R. 

Washington, D.C.: December 18, 2003. 

For additional information about this area, contact William M. Solis at Area Contact (202) 512-8365 or solisw@gao.gov. 

Page 22 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Opportunities Exist to Avoid Unnecessary 

Redundancies and Improve the Coordination 

of Counter-Improvised Explosive Device 

Efforts 

 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Improve the Coordination of 

Counter-Improvised Explosive Device Efforts 

Why GAO Is Focusing 

on This Area 

Improvised explosive devices (IED) continue to be the number one threat 

to U.S. troops. IED incidents in Afghanistan numbered 1,128 in the month 

of May 2010—a 120 percent increase over the prior year. In addition to 

Afghanistan incidents, the IED threat is increasingly expanding throughout 

the globe with over 300 IED events per month worldwide, according to the 

Joint IED Defeat Organization (JIEDDO). The Department of Defense 

(DOD) created this organization in 2006, reporting directly to the Deputy 

Secretary of Defense, to lead and coordinate all of DOD’s counter-IED 

efforts. While Congress has appropriated over $17 billion to JIEDDO 

through fiscal year 2010 to address the IED threat, other DOD 

components, including the Armed Services, have devoted at least 

$1.5 billion to develop their own counter-IED solutions. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

DOD created JIEDDO to lead and coordinate all of DOD’s counter-IED 

efforts, but many of the organizations engaged in the counter-IED-defeat 

effort prior to the creation of JIEDDO have continued to develop, 

maintain, and expand their own IED-defeat capabilities. GAO has 

preliminarily identified several instances in which DOD entities operate 

independently and may have developed duplicate counter-IED capabilities. 

For example, both the Army and the Marine Corps continue to develop 

their own counter-IED mine rollers with full or partial JIEDDO funding. 

The Marine Corps’ mine roller per unit cost is about $85,000 versus a cost 

range of $77,000 to $225,000 per unit for the Army mine roller. However 

officials disagree about which system is most effective, and DOD has not 

conducted comparative testing and evaluation of the two systems. 

Additionally, JIEDDO does not adequately involve the Services in its 

process to select initiatives. For example, the Navy developed a directed 

energy technology to fill a critical theater capability gap, yet JIEDDO later 

underwrote the Air Force’s development of the same technology for use in 

a different system. However, the Air Force has now determined that its 

system will not meet requirements and has deferred fielding it pending 

further study. This may have a negative impact on the continued 

development of this technology by the Navy or others for use in theater. 

For example, according to DOD officials, during the recent testing of the 

Air Force’s system, safety concerns were noted unique to that system that 

may limit warfighters’ willingness to accept the technology. 

Eliminating unnecessary duplication and enabling effective coordination in 

counter-IED efforts is hindered, in part, because neither JIEDDO nor any 

other DOD organization has full visibility over all of DOD’s counter-IED 

efforts. GAO has recommended that DOD establish a DOD-wide database 

for all counter-IED initiatives to establish comprehensive visibility, 

Page 23 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Improve the Coordination 

of Counter-Improvised Explosive Device 

Efforts 

however, DOD has yet to develop such a tool. According to DOD officials, 

DOD had initiated a database—the Technology Matrix—to establish a 

comprehensive list of counter-IED efforts and the organizations sponsoring 

these efforts; however, DOD has not required its various organizations 

involved in developing counter-IED solutions to use this database nor 

otherwise taken action to ensure these organizations provide information to 

JIEDDO on their respective counter-IED efforts. Therefore, the database 

has not been as comprehensive as intended. To date, DOD’s senior 

leadership has not taken adequate action to facilitate improved visibility, 

coordination, and authority for JIEDDO to address these shortcomings. This 

lack of leadership attention may be another key factor contributing to the 

lack of full visibility and effective coordination of the wide range of counterIED measures conducted throughout DOD. Consequently, DOD components 

and the Services continue to pursue counter-IED efforts independent of one 

another that may be redundant or overlapping. 

Actions Needed and 

Potential Financial or 

Other Benefits 

DOD has taken steps to address several of GAO’s prior recommendations 

regarding the improvement of its counter-IED programs, such as revising 

JIEDDO’s process for evaluating and implementing counter-IED solutions. 

However, 5 years after its coordination efforts began through JIEDDO, 

DOD has still not achieved full visibility over all of its counter-IED 

investments and resources nor has it required comprehensive data from all 

DOD components and the Services to enable effective coordination. 

JIEDDO has encountered difficulty obtaining information on all counterIED efforts, in part, because according to JIEDDO officials, the Services 

and components are not inclined to share this information. Therefore, 

DOD’s senior leadership, to include the Deputy Secretary of Defense, 

should consider what actions the department can take to assure that 

JIEDDO can centrally collect information and coordinate efforts and 

whether it should enhance JIEDDO’s tools to ensure all information on 

DOD-wide counter-IED programs is centrally collected and evaluated to 

limit unnecessary duplication, overlap, and fragmentation. DOD leadership 

should also take a more active role to ensure investment decisions of each 

of the individual counter-IED activities are consistent with DOD’s 

overarching counter-IED goals and objectives and that they are pursued in 

a coordinated and efficient manner. 

The information contained in this analysis is based on prior GAO products Framework for below, as well as GAO’s ongoing work on DOD’s counter-IED efforts. As part 

Analysis of this ongoing work GAO will comprehensively identify, to the extent 

possible, all counter-IED organizations and efforts within DOD, and collect 

Page 24 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Improve the Coordination 

of Counter-Improvised Explosive Device 

Efforts 

quantitative data on these efforts such as the funds invested and the number 

of persons engaged in these efforts. Using these data, GAO will evaluate the 

nature and extent of any overlap or duplication, as well as the potential for 

consolidation, improved coordination, or other efficiencies. GAO is also 

evaluating DOD’s progress in improving visibility over all counter-IED efforts. 

Related GAO 

Products 

Warfighter Support: DOD’s Urgent Needs Processes Need a More 

Comprehensive Approach and Evaluation for Potential Consolidation. 

GAO-11-273. Washington, D.C.: March 1, 2011. 

Warfighter Support: Actions Needed to Improve Visibility and 


Coordination of DOD’s Counter-Improvised Explosive Device Efforts. 


GAO-10-95. Washington, D.C.: October 29, 2009. 


Warfighter Support: Challenges Confronting DOD's Ability to Coordinate 


and Oversee Its Counter-Improvised Explosive Devices Efforts. 


GAO-10-186T. Washington, D.C.: October 29, 2009. 


Defense Management: More Transparency Needed over the Financial 


and Human Capital Operations of the Joint Improvised Explosive 


Device Defeat Organization. GAO-08-342. Washington, D.C.: 


March 6, 2008. 


Defense Logistics: Lack of a Synchronized Approach between the Marine
 

Corps and Army Affected the Timely Production and Installation of 


Marine Corps Truck Armor. GAO-06-274. Washington, D.C.: June 22, 2006. 


Defense Logistics: Several Factors Limited the Production and 


Installation of Army Truck Armor during Current Wartime Operations. 


GAO-06-160. Washington, D.C.: March 22, 2006. 


Defense Logistics: Actions Needed to Improve the Availability of Critical 


Items during Current and Future Operations. GAO-05-275. Washington,
 

D.C.: April 8, 2005. 


Defense Logistics: Preliminary Observations on the Effectiveness of 

Logistics Activities during Operation Iraqi Freedom. GAO-04-305R. 

Washington, D.C.: December 18, 2003. 

For additional information about this area, contact William M. Solis at Area Contact (202) 512-8365 or solisw@gao.gov. 

Page 25 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use 

of Intelligence, Surveillance, and 

Reconnaissance Capabilities 

 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use of 

Intelligence, Surveillance, and Reconnaissance 

Capabilities 

Why GAO Is Focusing 

on This Area 

To plan and execute military operations in Iraq and Afghanistan, military 

commanders depend on intelligence, surveillance, and reconnaissance 

(ISR) systems to collect, process, and disseminate timely and accurate 

information on adversaries’ capabilities and vulnerabilities. The 

Department of Defense’s (DOD) ISR enterprise consists of multiple 

intelligence organizations that individually plan for, acquire, and operate 

manned and unmanned airborne, space-borne, maritime, and groundbased ISR systems. The success of ISR systems at providing key 

information has led to increased demand, and DOD continues to invest in 

ISR programs. For example, DOD requested about $6.1 billion in fiscal 

year 2010 for unmanned aircraft programs alone. DOD is further 

examining its airborne ISR budget needs for fiscal year 2012 and beyond. 

Further, GAO has reported since 2005 that ISR activities are not integrated 

and efficient; effectiveness may be compromised by lack of visibility into 

operational use of ISR assets; and agencies could better collaborate in the 

acquisition of new capabilities. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

ISR activities cut across services and defense agencies, and no single entity 

at the departmental level has responsibility, authority, and control over 

investments to prioritize resources to meet joint priority requirements. The 

ISR enterprise exhibits extensive, structural fragmentation with a high 

number of separate organizations sharing the same roles. For example, 

multiple ISR organizations conduct strategic planning, budgeting, and data 

analysis across intelligence disciplines. Although DOD has designated the 

Under Secretary of Defense for Intelligence to manage ISR investments as a 

departmentwide portfolio, the Under Secretary of Defense for Acquisition, 

Technology, and Logistics has been designated to lead the task force 

responsible for oversight of issues related to the management and 

acquisition of unmanned aircraft systems that collect ISR data. In addition, 

as the ISR portfolio manager, the Under Secretary of Defense for 

Intelligence has only advisory authority and cannot direct the services or 

agencies to make changes in their investment plans. 

Further, two key factors make tracking DOD’s ISR spending difficult. First, 

funding for DOD’s ISR capabilities can come from several sources, 

including the Military Intelligence Program, the National Intelligence 

Program, and service budgets. Second, each service maintains or develops 

its own requirements process, budget, and strategic plans. For example, 

each service identifies its requirements and prioritizes spending for its 

equipment and personnel needs, and tracks and accounts for ISR funding 

differently. 

Page 26 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use 

of Intelligence, Surveillance, and 

Reconnaissance Capabilities 

The Secretary of Defense has identified ISR as an area of scrutiny for 

potential cost savings in the military intelligence program budget, which 

totals $27 billion in spending for fiscal year 2010 including ISR capabilities 

and personnel. In addition, the National Intelligence Program budget of 

$53.1 billion includes some resources for DOD ISR activities. Since 1988, 

GAO has reported on the potential for duplication and fragmentation in 

DOD’s unmanned ISR systems. Service-driven requirements and funding 

processes continue to hinder integration and efficiency and contribute to 

unnecessary duplication in addressing warfighter needs. Although several 

unmanned aircraft systems have achieved some commonality among the 

airframes they use, most are pursuing service-unique subsystems and 

components. The lack of collaboration and commonality among the 

services has led to duplicative costs for designing and manufacturing ISR 

systems, and has resulted in inefficiencies in the contracting and 

acquisition processes. For example in 2005, the Army initiated a 

development program with the same contractor for a variant of the Air 

Force Predator estimated to cost nearly $570 million, although the 

Predator was already successfully providing capabilities to the warfighter. 

Similarly, in 2009 GAO reported that, although the Navy expected to save 

time and money by using the Air Force’s existing Global Hawk airframe, 

the Navy also planned to spend over $3 billion to develop maritime 

surveillance capabilities. Conversely, the Marine Corps avoided the cost of 

initial system development and was able to quickly deliver a useful 

capability to the warfighter by choosing to procure existing Army Shadow 

systems rather than developing its own unmanned aircraft. 

DOD has established numerous organizations and initiatives intended to 

integrate the determination of requirements, development, acquisition, and 

operation of ISR systems to address joint and service-specific needs, but 

these efforts have not had the desired effect of minimizing fragmentation 

and overlap in its ISR enterprise. For example, although the Under 

Secretary of Defense for Intelligence, as capability portfolio manager, 

updated the congressionally directed ISR Integration Roadmap, the 

Roadmap does not represent a comprehensive ISR architecture to guide 

service investments to meet joint needs. For example, the Roadmap does 

not enable comparison and tradeoffs between intelligence platforms and 

capabilities. In addition, the Joint Requirements Oversight Council, which 

is charged with validating requirements and approving proposals for new 

capabilities to meet joint capability gaps, has been generally ineffective in 

ensuring that the services collaborate in developing capabilities for joint 

requirements. 

Page 27 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use 

of Intelligence, Surveillance, and 

Reconnaissance Capabilities 

In 2010, the Joint Staff launched a decision support tool intended to 

catalog existing airborne ISR capabilities and validate new requirements. 

This tool could help DOD prioritize investments in new programs and 

make tradeoffs among capabilities that could result in cost savings, but it 

is uncertain whether the effort will receive funding for expanding the 

database to include other ISR assets and improve functionality. 

Meanwhile, DOD continues to invest in ISR capabilities that may not be 

the most efficient or effective use of resources. Further, although DOD has 

invested heavily in capabilities to collect ISR data, it has not invested 

proportionally in the capabilities that would enable it to process and use 

the information. Weaknesses in the military services’ ability to process and 

securely share ISR data have led to gaps in or duplicative collection efforts 

and contributed to continuing warfighter demands for ISR assets to 

support their missions. 

Actions Needed and 

Potential Financial or 

Other Benefits 

DOD has taken steps to improve ISR management, but these actions have 

not had the desired effect. To develop a more fully integrated approach to 

minimizing fragmentation, overlap, and duplication in its ISR enterprise, 

DOD could align DOD-wide strategic goals, identify performance 

measures, and establish linkages between ISR acquisition plans and 

strategic goals to inform investment decisions. 

Since 2005, GAO has identified challenges with DOD’s ISR enterprise and 

made a number of recommendations to assist DOD in improving its ISR 

management and reducing unnecessary duplication and overlap. DOD has 

taken some positive steps to address GAO’s recommendations, such as 

recent military service efforts to acquire some common unmanned aircraft 

and sensors and develop performance measures, but its efforts are limited 

and have not yet improved its ability to integrate ISR requirements 

generation, development and acquisition, or utilization. In keeping with 

GAO’s previous recommendations, DOD could take several actions to 

develop a more fully integrated approach to minimize fragmentation, 

overlap, and duplication in its ISR enterprise. Specifically, DOD could do 

the following: 

•	 Develop an integrated ISR architecture, including manned and 

unmanned systems, to align DOD-wide strategic goals. 

•	 Continue to develop tools—such as the Joint Staff’s decision support 

tool—and performance measures to inform investment decisions. 

Page 28 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use 

of Intelligence, Surveillance, and 

Reconnaissance Capabilities 

•	 Establish linkages between ISR acquisition plans and strategic goals to 

better inform investment decisions. 

•	 Develop and enforce commonality and interoperability standards for 

sharing of ISR data and establish timelines for implementation. 

Increased integration of DOD’s ISR enterprise could improve efficiencies, 

reduce redundancies and avoid duplication of similar development 

initiatives, possibly saving production and life-cycle costs and improve the 

interoperability among systems. Although the department has begun to 

take some initial steps in this area, until all participants in the defense 

enterprise successfully share ISR information, inefficiencies will hamper 

the effectiveness of efforts to support the warfighter, and ISR data 

collection efforts may be unnecessarily duplicative. In addition, 

comprehensive data on its ISR enterprise, including resources and 

performance measures to assess the effectiveness of ISR assets, could 

better position DOD to make trade-offs among ISR capabilities. 

Framework for 

Analysis 

In addition to obtaining information from the reports listed below, GAO 

reviewed documentation related to DOD’s funding for ISR through the 

Military Intelligence Program and analyzed planned ISR investments in 

DOD’s Future Years Defense Program Fiscal Years 2012-2015. GAO also 

assessed the ISR Integration Roadmap against strategic planning and 

legislative criteria, and reviewed the Joint Staff’s ISR assessment tool. In 

addition, GAO conducted interviews with officials from the offices of 

DOD’s Under Secretary of Defense for Intelligence, the Joint Staff, the 

military services, the Defense Intelligence Agency, the National Geospatial 

Intelligence Agency, and the National Security Agency. 

Related GAO 

Products 

Defense Acquisitions: DOD Could Achieve Greater Commonality and 

Efficiencies among Its Unmanned Aircraft Systems. GAO-10-508T. 

Washington, D.C.: March 23, 2010. 

Intelligence, Surveillance, and Reconnaissance: Establishing Guidance, 

Timelines, and Accountability for Integrating Intelligence Data Would 

Improve Information Sharing. GAO-10-265NI. Washington, D.C.: 

January 22, 2010. 

Defense Acquisitions: Opportunities Exist to Achieve Greater 

Commonality and Efficiencies among Unmanned Aircraft Systems. 

GAO-09-520. Washington, D.C.: July 30, 2009. 

Page 29 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist to Avoid Unnecessary 

Redundancies and Maximize the Efficient Use 

of Intelligence, Surveillance, and 

Reconnaissance Capabilities 

Unmanned Aircraft Systems: Additional Actions Needed to Improve 

Management and Integration of DOD Efforts to Support Warfighter 

Needs. GAO-09-175. Washington, D.C.: November 14, 2008. 

Intelligence, Surveillance, and Reconnaissance: DOD Can Better Assess 

and Integrate ISR Capabilities and Oversee Development of Future ISR 

Requirements. GAO-08-374. Washington, D.C.: March 24, 2008. 

Unmanned Aircraft Systems: Advance Coordination and Increased 

Visibility Needed to Optimize Capabilities. GAO-07-836. Washington, 

D.C.: July 11, 2007. 

Unmanned Aircraft Systems: New DOD Programs Can Learn from Past 

Efforts to Craft Better and Less Risky Acquisition Strategies. 

GAO-06-447. Washington, D.C.: March 15, 2006. 

For additional information about this area, contact Davi M. D’Agostino at Area Contact (202) 512-5431 or dagostinod@gao.gov. 

Page 30 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
A Departmentwide Acquisition Strategy 

Could Reduce DOD’s Risk of Costly 

Duplication in Purchasing Tactical Wheeled 

Vehicles 

 

A Departmentwide Acquisition Strategy Could Reduce 

DOD’s Risk of Costly Duplication in Purchasing Tactical 

Wheeled Vehicles 

Why GAO Is Focusing 

on This Area 

The Department of Defense (DOD) spends billions of dollars each year to 

procure tactical wheeled vehicles, such as several types of Mine Resistant 

Ambush Protected vehicles. Tactical wheeled vehicles are used to 

transport people, weapons, and cargo. The advent of improvised explosive 

devices has had a significant effect on designing tactical wheeled vehicles 

for survivability. DOD is in the process of acquiring two new armored 

designs—the Mine Resistant Ambush Protected All Terrain Vehicle, and 

the Joint Light Tactical Vehicle. The estimated total acquisition cost for the 

Mine Resistant Ambush Protected All Terrain Vehicle is about $12.5 

billion. The military services expect to have a variety of tactical wheeled 

vehicles in use at any given time. Since 2008, GAO has identified tactical 

wheeled vehicle procurement as being at risk for duplication, and in 2009 

GAO recommended that DOD develop a unified acquisition strategy. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

DOD’s acquisition of two similar tactical wheeled vehicles—the Mine 

Resistant Ambush Protected vehicle, including an All Terrain variant, and 

eventually the Joint Light Tactical Vehicle—creates a risk of unplanned 

overlap in capabilities that could increase acquisition costs significantly. 

The Mine Resistant Ambush Protected All Terrain vehicle contractor was 

expected to complete deliveries in November 2010. According to program 

officials, the vehicles fielded so far appear to be performing well. 

Development efforts for the Joint Light Tactical Vehicle, with an expected 

initial acquisition of over 60,000 vehicles, are still ongoing. While 

acquisition costs for the Joint Light Tactical Vehicle are yet to be 

determined, a low-end estimate is $18.5 billion. The cost per unit, including 

mission equipment, could be over $800,000 each. 

To date, the services have not considered using the vehicles in the Mine 

Resistant Ambush Protected family—with the exception of some vehicles 

planned for use by route clearance, explosives ordinance disposal, and 

medical evacuation units—to offset the need for or replace other tactical 

wheeled vehicles. Currently, the services consider Mine Resistant Ambush 

Protected vehicles to be mainly additive to their fleets. Given the high 

potential cost of the Joint Light Tactical Vehicle, reducing the number of 

units acquired could offer substantial savings, albeit with potential 

performance tradeoffs. To illustrate, a 5 percent reduction in Joint Light 

Tactical Vehicle quantities could save nearly $2.5 billion, assuming a unit 

cost of $800,000. 

DOD does not have a unified tactical wheeled vehicle strategy that 

considers timing, capabilities, affordability, and sustainability. DOD stated 

in 2009 that it would create a unified plan for tactical wheeled vehicle 

Page 31 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

A Departmentwide Acquisition Strategy 

Could Reduce DOD’s Risk of Costly 

Duplication in Purchasing Tactical Wheeled 

Vehicles 

investment decisions. The plan would be a comprehensive strategy 

compatible with Army and Marine Corps equipping strategies. As of 

January 2011, the Army had completed and released its updated tactical 

wheeled vehicle strategy, the Marine Corps had not yet completed its 

updated strategy, and DOD had not yet issued a timetable for completing a 

unified, departmentwide strategy. 

With the Army and Marine Corps facing decisions about whether to repair, 

upgrade, or replace older tactical vehicles, it is important to fully assess 

the requirements and cost for buying and maintaining all classes of tactical 

wheeled vehicles from the dual perspectives of mission need and 

affordability. The services need to know what capabilities the Joint Light 

Tactical Vehicle will have, the scope and cost of any recapitalization of 

other vehicles or production effort, and the sustainment cost of placing 

the Mine Resistant Ambush Protected family of vehicles in their force 

structures. The services have expressed concern about their ability to fund 

operations and support costs for tactical wheeled vehicles in the future. 

Actions Needed and 

Potential Financial or 

Other Benefits 

DOD could save both acquisition and support costs through a 

departmentwide tactical wheeled vehicle strategy that considers costs and 

benefits of the Joint Light Tactical Vehicle compared to other tactical 

wheeled vehicle options. 

To help the agency assess the affordability of these acquisitions and their 

implications for competing demands within the department, DOD needs to 

complete its planned DOD-wide tactical wheeled vehicle strategy to 

determine 

•	 what capabilities Joint Light Tactical Vehicle will have, 

•	 the scope and cost of any recapitalization of other vehicles or 

production effort, and 

•	 the sustainment cost of placing the Mine Resistant Ambush Protected 

family of vehicles in their force structures. 

In addition, as GAO recommended in November 2010, DOD should include 

in the strategy a cost-benefit analysis that could minimize the collective 

acquisition and support costs of the various tactical wheeled vehicle 

programs and reduce the risk of unplanned overlap or duplication. Such a 

cost-benefit analysis should provide an estimate of dollar savings for 

Page 32 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

A Departmentwide Acquisition Strategy 

Could Reduce DOD’s Risk of Costly 

Duplication in Purchasing Tactical Wheeled 

Vehicles 

various options for offsetting Joint Light Tactical Vehicle quantities in 

favor of recapitalizing existing vehicles. 

Any potential offsets between Mine Resistant Ambush Protected vehicles 

and Joint Light Tactical Vehicles, to the extent that they are supported by 

cost-benefit analyses, could save both acquisition and support costs. 

Simply reducing the number of Joint Light Tactical Vehicles DOD procures 

could result in billions of dollars in cost savings. For instance, a reduction 

of just 5 percent would save $2.5 billion, assuming a unit cost of $800,000. 

In addition to saving initial procurement costs, reducing tactical wheeled 

vehicle acquisition quantities has the potential to reduce future 

operational and maintenance costs. 

DOD concurred with GAO’s recommendations and said that the Joint Light 

Tactical Vehicle program will conduct an analysis of alternatives that 

explores potential offsets to planned acquisition quantities, including 

those related to the replacement of Mine Resistant Ambush Protected 

vehicles. In addition, as a part of DOD’s planned analysis of alternatives to 

the Joint Light Tactical Vehicle, the Army and Marine Corps have stated 

they will explore the implications, including maintenance and lifecycle 

cost benefits, of acquiring a Joint Light Tactical Vehicle family of vehicles 

as a part of a mixed vehicle fleet. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Related GAO 

Products 

Defense Acquisitions: Issues to Be Considered as DOD Modernizes Its 

Fleet of Tactical Wheeled Vehicles. GAO-11-83. Washington, D.C.: 

November 5, 2010. 

Defense Acquisitions: Department of Defense Needs a Unified Strategy 

for Balancing Investments in Tactical Wheeled Vehicles. GAO-09-968R. 

Washington, D.C.: September 28, 2009. 

Rapid Acquisition of Mine Resistant Ambush Protected Vehicles. 

GAO-08-884R. Washington, D.C.: July 15, 2008. 

For additional information about this area, contact Mike Sullivan at (202) Area Contact 512-4841 or sullivanm@gao.gov. 

Page 33 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Improved Joint Oversight of DOD’s 

Prepositioning Programs May Reduce 

Unnecessary Duplication 

 

Improved Joint Oversight of DOD’s Prepositioning 

Programs May Reduce Unnecessary Duplication 

Why GAO Is Focusing 

on This Area 

The Department of Defense (DOD) prepositions equipment and supplies 

worth billions of dollars, including major items such as combat vehicles, 

rations, medical supplies, and repair parts at strategic locations around the 

world. Both afloat and ashore, prepositioning enables DOD to field 

combat-ready forces in days, rather than the weeks it would take if 

equipment had to be moved from the United States to the locations of 

conflicts. Prepositioned equipment can also be used to support security 

cooperation, deterrence, multilateral training exercises, and humanitarian 

assistance or disaster relief. 

The Air Force, Army, and Marine Corps have drawn on their prepositioned 

stocks to support military operations in Iraq and Afghanistan, increasing 

the opportunities to gain efficiencies in rebuilding these stocks. Since 

2005, GAO has identified challenges regarding DOD’s prepositioned stocks 

and made numerous recommendations related to strategic planning, 

requirements determination, inventory management, and other issues. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Although the services are expected to operate in a joint environment, 

some prepositioning activities are fragmented among the services, with the 

potential for unnecessary duplication. For example, the Army’s and Air 

Force’s transportable base equipment, including mobile housing and 

dining facilities, illustrates an instance in which the services separately 

fund and manage prepositioned equipment that has been used 

interchangeably among the services. Since 2005, GAO has reported that 

the lack of a departmentwide approach to prepositioning potentially 

misses opportunities to achieve greater efficiencies by reducing 

unnecessary duplication. Greater efforts toward a departmentwide 

approach to prepositioning that ensures the services’ plans to spend 

billions of dollars to rebuild prepositioned stocks accurately reflect DOD’s 

current and future needs could help prevent unnecessary duplication and 

expenditures. 

While prior GAO recommendations and DOD’s own instruction indicate 

the need for a departmentwide approach to prepositioning, the 

department still does not have such an approach. In 2008 DOD published 

an instruction on prepositioned stocks directing the development of 

overarching strategic guidance on prepositioning. However, as of 

September 2010 DOD’s guidance contained little information related to 

prepositioned stocks. As a result, the services’ individual plans and 

priorities for rebuilding their prepositioned stocks may continue to be 

implemented without a clear understanding of how these plans fit together 

to meet evolving defense goals. DOD has estimated that as of the end of 

Page 34 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Improved Joint Oversight of DOD’s 

Prepositioning Programs May Reduce 

Unnecessary Duplication 

fiscal year 2009, such replenishment will take about 8 years and cost an 

estimated $6.1 billion. GAO has reported that, as the rebuilding progresses, 

without the development and implementation of departmentwide guidance 

that includes planning and funding priorities linking current and future 

needs and desired responsiveness of DOD’s prepositioned stocks, the 

services may not be able to make fully informed decisions that would 

support the effective and efficient achievement of national military 

objectives. 

Organizational challenges that have hindered DOD’s joint oversight of its 

prepositioned stocks further illustrate the lack of a departmentwide 

approach to prepositioning. DOD’s 2008 instruction on prepositioned 

stocks formalized the establishment of a joint prepositioning working 

group. According to the federal standards for internal control, federal 

agencies are to employ internal control activities, such as reviews by 

managers, to help ensure that an organization’s directives are carried out 

and resources are effectively and efficiently used. However, as GAO 

recently reported, the working group has had a limited focus, such as 

information sharing, and has not conducted the wider range of tasks the 

working group was directed to perform, such as addressing joint issues 

concerning requirements for prepositioned stocks, developing 

recommendations for improved processes, and making recommendations 

that balance limited resources against operational risk during budget and 

program reviews. If performed, these tasks could produce cost savings. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Joint, departmental, and service components within DOD are in the 

process of undertaking or have completed five major reviews, which may 

have the potential to identify areas of needed enhancements to the 

management of prepositioning activities. Nevertheless, without 

overarching guidance and the organizational means to institutionalize the 

results of these efforts, their impact may be limited. Therefore, as GAO 

recently recommended, the Secretary of Defense should take the following 

actions to enhance joint oversight of DOD’s prepositioning programs: 

•	 Direct the Office of the Undersecretary of Defense for Policy to 

develop strategic guidance that includes planning and resource 

priorities, linking the department’s current and future needs for 

prepositioned stocks to evolving national defense objectives. 

•	 Direct the Undersecretary of Defense for Acquisition, Technology, and 

Logistics, in coordination with the Chairman of the Joint Chiefs of 

Staff, to strengthen DOD’s joint oversight of its prepositioned stocks 

Page 35 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Improved Joint Oversight of DOD’s 


Prepositioning Programs May Reduce
 

Unnecessary Duplication 


through such actions as clarifying lines of authority and reporting 

between the joint prepositioning working group and other components 

within DOD. 

•	 Direct the Chairman of the Joint Chiefs of Staff and the Secretaries of 

the military services to synchronize at a DOD-wide level, as 

appropriate, the services’ prepositioning programs so that they include 

updated requirements and maximize efficiency in managing 

prepositioned assets and activities across the department to reduce 

unnecessary duplication. 

In November 2010 DOD concurred with GAO’s recommendations, but 

insufficient time has passed to assess progress in implementing them. 

Also, information is not available on the extent of potential savings that 

may result from the integration of elements of the services’ prepositioning 

programs. Any actual savings would be dependent upon specific steps 

taken. However, implementing joint management for the staging and 

maintenance of prepositioned equipment stored on ships; consolidating 

elements common among the services’ programs, such as expeditionary 

base and fuel transfer equipment; and leveraging the Defense Logistics 

Agency to manage some prepositioned repair parts are some steps that 

service officials believe may reduce costs. 

Framework for 

Analysis 

This analysis draws on information contained in the GAO products listed 

below and in a classified report that GAO issued in February 2011. For this 

analysis, GAO excluded all information associated with certain details that 

DOD identified as being classified or sensitive in nature, which must be 

protected from public disclosure. Although the information contained in 

this analysis omits classified and sensitive information, these omissions 

addressed other issues and have no bearing on the findings, conclusions, 

and recommendations stated above. GAO plans to issue a full unclassified 

version of its report and conduct future work on DOD’s prepositioned 

stocks in response to its annual reporting mandate. 

Defense Logistics: Department of Defense’s Annual Report on the Status Related GAO of Prepositioned Materiel and Equipment Can Be Further Enhanced to 

Products Better Inform Congress. GAO-10-172R. Washington, D.C.: 

November 4, 2009. 

Page 36 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Improved Joint Oversight of DOD’s 


Prepositioning Programs May Reduce
 

Unnecessary Duplication 


Defense Logistics: Department of Defense’s Annual Report on the Status 

of Prepositioned Materiel and Equipment Can Be Enhanced to Better 

Inform Congress. GAO-09-147R. Washington, D.C.: December 15, 2008. 

Force Structure: Restructuring and Rebuilding the Army Will Cost 

Billions of Dollars for Equipment but the Total Cost Is Uncertain. 

GAO-08-669T. Washington, D.C.: April 10, 2008. 

Military Readiness: Impact of Current Operations and Actions Needed 

to Rebuild Readiness of U.S. Ground Forces. GAO-08-497T. Washington, 

D.C.: February 14, 2008. 

Defense Logistics: Army Has Not Fully Planned or Budgeted for the 

Reconstitution of Its Afloat Prepositioned Stocks. GAO-08-257R. 

Washington D.C.: February 8, 2008. 

Defense Logistics: Army and Marine Corps Cannot Be Assured That 

Equipment Reset Strategies Will Sustain Equipment Availability While 

Meeting Ongoing Operational Requirements. GAO-07-814. Washington 

D.C.: September 19, 2007. 

Defense Logistics: Improved Oversight and Increased Coordination 

Needed to Ensure Viability of the Army’s Prepositioning Strategy. 

GAO-07-144. Washington, D.C.: February 15, 2007. 

Defense Logistics: Better Management and Oversight of Prepositioning 

Programs Needed to Reduce Risk and Improve Future Programs. 

GAO-05-427. Washington, D.C.: September 6, 2005. 

For additional information about this area, contact William Solis at Area Contact (202) 512-8365 or solisw@gao.gov. 

Page 37 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
DOD Business Systems Modernization: 

Opportunities Exist for Optimizing Business 

Operations and Systems 

 

DOD Business Systems Modernization: Opportunities 


Exist for Optimizing Business Operations and Systems 


Why GAO Is Focusing 

on This Area 

Delivering modernized business systems is at the heart of the Department 

of Defense (DOD) efforts to transform its business operations. These 

systems include timeworn and duplicative systems that support DOD 

business operations such as civilian personnel, finance, health, logistics, 

military personnel, procurement, and transportation. Since 1995, GAO has 

designated the department’s business systems modernization efforts as 

high risk. One key to effectively modernizing DOD’s multibillion dollar 

systems environment is ensuring that business system investments comply 

with an enterprisewide strategic blueprint, commonly called an enterprise 

architecture. For DOD’s business systems modernization, it is developing 

and using a federated business enterprise architecture (BEA), which is a 

coherent family of parent and subsidiary architectures, to help modernize 

its nonintegrated and duplicative business operations and the systems that 

support them. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

DOD reports that its business systems environment includes about 2,300 

investments, which are supported by billions of dollars in annual 

expenditures and are intended to support business functions and 

operations. As GAO has previously reported, DOD’s business systems 

environment has been characterized by (1) little standardization, (2) 

multiple systems performing the same tasks, (3) the same data stored in 

multiple systems, and (4) manual data entry into multiple systems. 

According to DOD, one purpose of the federated BEA is to identify and 

provide for sharing common applications and systems across the 

department and the components and promote interoperability and data 

sharing among related programs. Because DOD spends over $10 billion 

each year on its business systems and related information technology 

infrastructure, the potential for identifying and avoiding the costs 

associated with duplicative functionality across its business system 

investments is significant. 

To accomplish this, DOD has developed an automated tool to map each 

system’s functionality to the BEA operational activities and business 

functions that the system supports. Using an enterprise architecture in this 

way offers significant dollar savings potential, as it provides an 

authoritative frame of reference against which to analyze proposed 

investments and collect the information needed to identify where a given 

investment may overlap with other investments and thus unnecessary 

duplication of effort can be avoided. However, GAO has previously found 

that much remains to be done in extending and developing DOD’s BEA 

and ensuring that disciplined management controls are applied at the 

institutional and program-specific levels. Without sufficient rigor in its 

Page 38 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DOD Business Systems Modernization: 

Opportunities Exist for Optimizing Business 

Operations and Systems 

business systems modernization, GAO found that DOD programs were at 

increased risk of being defined and implemented in a way that does not 

sufficiently ensure interoperability and avoid duplication and overlap. To 

adequately ensure that DOD business system investments are defined and 

implemented within the context of the federated BEA, GAO recommended 

in August 2008 that DOD use the program-specific data in its architecture 

compliance tool to identify and analyze potential overlap and duplication 

and thus take advantage of opportunities for reuse and consolidation 

among programs. DOD agreed and stated that it plans to update its 

investment review board process guidance to require use of programspecific data for certification decisions on business systems compliance 

with the BEA. However, it has yet to establish a date for doing so. 

More broadly, GAO has recommended steps DOD needs to take to further 

improve its business systems modernization efforts. At the institutional level 

•	 the supporting component architectures need to be developed and 

aligned with the corporate architecture to complete the federated 

business enterprise architecture, 

•	 DOD business system investments need to be defined and implemented 

within the context of its federated business enterprise architecture, and 

•	 the investment process needs to evolve and be institutionalized at all 

levels of the organization. 

Furthermore, DOD needs to ensure that its business system programs and 

projects are managed with integrated institutional controls and that they 

consistently deliver benefits and capabilities on time and within budget. 

Between 2005 and 2008, GAO reported that DOD made progress 

implementing key institutional modernization management controls in 

response to GAO recommendations as well as to statutory requirements. 

For example, the department had continued to develop updates to its BEA 

that addressed important elements related to statutory requirements and 

best practices that GAO previously identified as missing. In addition, DOD 

defined and began implementing investment controls, such as the Business 

Capability Lifecycle, which is intended to streamline business system 

capability definition, acquisition, and investment oversight processes, to 

guide and constrain its departmentwide systems modernizations. However, 

notwithstanding this progress, additional actions are still needed. 

Page 39 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DOD Business Systems Modernization:
 

Opportunities Exist for Optimizing Business
 

Operations and Systems 


Actions Needed and 

Potential Financial or 

Other Benefits 

In May 2009, GAO reported that the pace of DOD’s efforts in defining and 

consistently implementing fundamental business systems modernization 

management controls (both institutional and program specific) had 

slowed compared with progress made in previous years, leaving much to 

be accomplished. To this end, GAO’s work has highlighted challenges that 

DOD still faces in aligning its corporate architecture and its component 

organization architectures, leveraging the federated architecture to avoid 

investments that provide similar but duplicative functionality in support of 

common DOD activities, and institutionalizing the business systems 

investment process at all levels of the organization. In addition, ensuring 

that effective system acquisition management controls are implemented 

on each business system investment also remains a formidable challenge, 

as GAO’s recent reports on management weaknesses associated with 

individual programs have disclosed. 

Because of these limitations, DOD programs continue to be at increased 

risk of being defined and implemented in a way that does not sufficiently 

ensure interoperability and avoid duplication and overlap, which are both 

goals of the BEA and the department’s related investment management 

approach. If these limitations are addressed, DOD and its components 

could have a sufficient basis for knowing if its business system programs 

have been defined to effectively and efficiently support corporate business 

operations. Congress can play a critical role by continuing to provide 

focus and oversight. 

At the request of the Senate Armed Services Committee, GAO is initiating 

two engagements focusing on (1) the status and progress of the military 

departments’ enterprise architecture programs and (2) prior GAO 

recommendations pertaining to the department’s and the military 

departments’ investment management processes, and the effectiveness of 

the department’s investment review boards in approving and certifying 

business system investments in accordance with applicable criteria. 

The information contained in this analysis is based on the related GAO Framework for reports listed below.

Analysis 

Page 40 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DOD Business Systems Modernization: 

Opportunities Exist for Optimizing Business 

Operations and Systems 

Related GAO 

Products 

Business Systems Modernization: Scope and Content of DOD’s 

Congressional Report and Executive Oversight of Investments Need to 

Improve. GAO-10-663. Washington, D.C.: May 24, 2010. 

DOD Business Systems Modernization: Navy Implementing a Number of 

Key Management Controls on Enterprise Resource Planning System, but 

Improvements Still Needed. GAO-09-841. Washington, D.C.: September 15, 

2009. 

DOD Business Systems Modernization: Recent Slowdown in 

Institutionalizing Key Management Controls Needs to Be Addressed. 

GAO-09-586. Washington, D.C.: May 18, 2009. 

DOD Business Systems Modernization: Important Management Controls 

Being Implemented on Major Navy Program, but Improvements Needed 

in Key Areas. GAO-08-896. Washington, D.C.: September 8, 2008. 

DOD Systems Modernization: Maintaining Effective Communication Is 

Needed to Help Ensure the Army’s Successful Deployment of the Defense 

Integrated Military Human Resources System. GAO-08-927R. 

Washington, D.C.: September 8, 2008. 

DOD Business Systems Modernization: Planned Investment in Navy 

Program to Create Cashless Shipboard Environment Needs to Be 

Justified and Better Managed. GAO-08-922. Washington, D.C.: September 

8, 2008. 

DOD Business Systems Modernization: Key Navy Programs’ Compliance 

with DOD’s Federated Business Enterprise Architecture Needs to Be 

Adequately Demonstrated. GAO-08-972. Washington, D.C.: August 7, 2008. 

For additional information about this area, contact Valerie C. Melvin at Area Contact (202) 512-6304 or melvinv@gao.gov. 

Page 41 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

 

Efficiency and Effectiveness of Fragmented Economic 

Development Programs Are Unclear 

Why GAO Is Focusing 

on This Area 

Economic development programs that are administered efficiently and 

effectively can contribute to the well-being of the nation’s economy at the 

least cost to taxpayers. Absent a common definition for economic 

development, GAO has previously developed a list of nine activities most 

often associated with economic development. These activities include: 

planning and developing strategies for job creation and retention, 

developing new markets for existing products, building infrastructure by 

constructing roads and sewer systems to attract industry to undeveloped 

areas, and establishing business incubators to provide facilities for new 

businesses’ operations. 

GAO is currently examining 80 economic development programs at four 

agencies—the Departments of Commerce (Commerce), Housing and 

Urban Development (HUD), and Agriculture (USDA); and the Small 

Business Administration (SBA)—to assess potential for overlap in the 

design of the programs, the extent to which the four agencies collaborate 

to achieve common goals, and the extent to which the agencies have 

developed measures to determine the programs’ effectiveness. Funding 

provided for these 80 programs in fiscal year 2010 amounted to $6.5 

billion, of which about $3.2 billion was for economic development efforts, 

largely in the form of grants, loan guarantees, and direct loans. Some of 

these 80 programs can fund a variety of activities, including those focused 

on noneconomic development activities, such as rehabilitating housing 

and building community parks. This analysis presents the preliminary 

findings of GAO’s ongoing work in conjunction with findings from its prior 

work. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Preliminary results of GAO’s ongoing work involving 80 economic 

development programs at four agencies—Commerce, HUD, SBA, and 

USDA—indicate that the design of each of these fragmented programs 

appears to overlap with that of at least one other program in terms of the 

economic development activities that they are authorized to fund. For 

example, as shown in the table below, the four agencies administer a total 

of 52 programs that can fund “entrepreneurial efforts,” which includes 

helping businesses to develop business plans and identify funding sources. 

Page 42 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

Overlap and Fragmentation Among Selected Agencies Authorized to Fund 

Economic Development Activities 

Programs by agency 

Activity Commerce HUD SBA USDA Total 

Entrepreneurial efforts 9 12 19 12 52 

Infrastructure 4 12 1 18 35 

Plans and strategies 7 13 13 6 39 

Commercial buildings 4 12 4 7 27 

New markets 6 10 6 6 28 

Telecommunications 3 11 2 10 26 

Business incubators 5 12 — 3 20 

Industrial parks 5 11 — 3 19 

Tourism 5 10 — 4 19 

Source: GAO 

Note: Numbers of programs by agency do not total to 80 since an individual program may fund 

several activities. 

GAO’s prior work going back more than 10 years also identified potential 

overlap and fragmentation in economic development programs and found 

that many of the programs were differentiated by legislative or regulatory 

restrictions that targeted funding on the basis of characteristics such as 

geography, income levels, and population density (rural or urban). 

While some of the 80 programs GAO is currently assessing fund several of 

the nine economic development activities, almost 60 percent of the 

programs (46 of 80) fund only one or two activities. These smaller, 

narrowly scoped programs appear to be the most likely to overlap because 

many of them can only fund the same limited types of activities. For 

example, narrowly scoped programs comprise 21 of the 52 programs that 

fund entrepreneurial efforts. Moreover, most of these 21 programs target 

similar geographic areas. 

To address issues arising from potential overlap and fragmentation in 

economic development programs, GAO has previously identified 

collaborative practices agencies should consider implementing in order to 

maximize the performance and results of federal programs that share 

common outcomes. These practices include leveraging physical and 

administrative resources, establishing compatible policies and procedures, 

monitoring collaboration, and reinforcing agency accountability for 

collaborative efforts through strategic or annual performance plans. 

Preliminary findings from GAO’s ongoing work show that Commerce, 

Page 43 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

HUD, SBA, and USDA appear to have taken actions to implement some of 

the collaborative practices, such as defining and articulating common 

outcomes, for some of their related programs. However, the four agencies 

have offered little evidence so far that they have taken steps to develop 

compatible policies or procedures with other federal agencies or search 

for opportunities to leverage physical and administrative resources with 

their federal partners. Moreover, GAO is finding that most of the 

collaborative efforts performed by program staff on the front line that 

GAO has been able to assess to date have occurred only on a case-by-case 

basis. As a result, it appears that the agencies do not consistently monitor 

or evaluate these collaborative efforts in a way that allows them to identify 

areas for improvement. GAO reported in September 2008 that the main 

causes for limited agency collaboration include few incentives to 

collaborate and no guide for agencies to rely on for consistent and 

effective collaboration. In GAO’s ongoing work, USDA and SBA officials 

also stated that certain statutory authorities may impede their ability to 

collaborate. In failing to find ways to collaborate more, agencies may miss 

opportunities to leverage each other’s unique strengths to more effectively 

promote economic development, in addition to inefficiently using the 

taxpayer dollars set aside for that purpose. 

In addition, a lack of information on program outcomes is a current and 

long-standing concern. This information is needed to determine whether 

this potential overlap and fragmentation is resulting in ineffective or 

inefficient programs. More specifically: 

•	 Commerce’s Economic Development Administration (EDA), which 

administers eight of the programs GAO is currently reviewing, 

continues to rely on a potentially incomplete set of variables and selfreported data to assess the effectiveness of its grants. The incomplete 

set of variables that the agency relies on to estimate the effectiveness 

of EDA program grants may lead to inaccurate claims about program 

results, such as the number of jobs created. Moreover, EDA staff 

request documentation or conduct site visits to validate the selfreported data provided by grantees only in limited instances. GAO first 

reported on this issue in March 1999 and issued a subsequent report in 

October 2005. In response to a recommendation GAO made in 2005, 

EDA issued revised operational guidance in December 2006 that 

included a new methodology that regional offices are to use to 

calculate estimated jobs and private sector investment attributable to 

EDA projects. However, GAO’s ongoing work found that the agency 

still primarily relies on grantee self-reported data and conducts a 

limited number of site visits to assess the accuracy of the data. While 

Page 44 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

acknowledging these findings, EDA officials stated that they do employ 

other verification and validation methods in lieu of site visits. These 

methods include reviews to ensure the data are consistent with 

regional trends and statistical tests to identify outliers and anomalies. 

GAO plans to assess the quality and adequacy of these methods as part 

of its ongoing work. 

•	 The USDA’s Office of Rural Development, which administers 31 of the 

programs GAO is reviewing, has yet to implement the USDA Inspector 

General’s (IG) 2003 recommendation related to ensuring that data exist 

to measure the accomplishments of one of its largest rural business 

programs—the Business and Industry loan program, which cost 

approximately $53 million to administer in fiscal year 2010. USDA 

officials stated that they have recently taken steps to address the open 

recommendation, including requiring staff to record actual jobs created 

rather than estimated jobs created, but according to an IG official it is 

too early to tell whether their actions will fully address the 

recommendation. 

•	 HUD does not track long-term performance outcome measures for its 

Section 108 program because the agency continues to lack a reporting 

mechanism to capture how program funds are used, an issue the Office 

of Management and Budget (OMB) reported on in 2007. Moreover, 

OMB also found in 2007 that the program’s impact and effectiveness in 

neighborhoods remained unknown. 

•	 SBA has not yet developed outcome measures that directly link to the 

mission of its Historically Underutilized Business Zones (HUBZone) 

program, nor has the agency implemented its plans to conduct an 

evaluation of the program based on variables tied to its goals. GAO 

reported in June 2008 that while SBA tracks a few performance 

measures, such as the number of small businesses approved to 

participate in the program, the measures do not directly link to the 

program’s mission. While SBA continues to agree that evaluating 

program outcomes is important, to date the agency has not yet 

committed resources for such an evaluation. 

Without quality data on program outcomes, these agencies lack key 

information that could help them better manage their programs. In 

addition, such information would enable congressional decision makers 

and others to make decisions to better realign resources, if necessary, and 

to identify opportunities for consolidating or eliminating some programs. 

Page 45 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

Actions Needed and 

Potential Financial or 

Other Benefits 

Preliminary findings of ongoing GAO work have identified several areas 

that could benefit from continued attention. 

•	 Agencies need to further utilize promising practices for enhanced 

collaboration. GAO first made this recommendation to SBA and USDA 

in September 2008, but these agencies have taken only limited steps to 

fully address GAO’s concerns. The actions that the four agencies 

should consider include seeking more opportunities for resourcesharing across economic development programs with shared 

outcomes, and identifying ways to leverage each program’s strengths to 

improve their existing collaborative efforts. Continuing to explore the 

extent to which these agencies collaborate could help identify 

promising practices that may result in more effective and efficient 

delivery of economic development programs to distressed areas. 

•	 Agencies need to collect accurate and complete data on program 

outcomes and use the information to assess each program’s 

effectiveness. In June 2008 GAO made a similar recommendation to 

SBA about its HUBZone program, but the agency has taken limited 

action thus far. 

Additional work to assess progress in collaboration and evaluation could 

identify areas for improvement, consolidation, or elimination. Further, 

programs that are designed to target similar economic development 

activities, locations, and applicants may not be adding unique value, and 

more analysis is needed by the agencies and OMB to determine the actual 

amount of duplicative spending. 

The above are actions that could be taken by agencies to address 

fragmentation and overlap, and increase program efficiencies across the 

multiple agencies, which support economic development efforts. 

However, given the long-standing nature of these issues, GAO also believes 

that increased attention and oversight by OMB and Congress are 

warranted to ensure needed actions are taken. 

Framework for 

Analysis 

The information contained in this analysis is based on the GAO products 

listed below, as well as GAO’s ongoing work following up on the 

recommendations from those products, and the preliminary results of 

GAO’s ongoing evaluation of economic development programs at four 

federal agencies. For the most recent work, GAO gathered new 

information related to, for example, program missions, targeted 

populations, and funding provided for the programs. The data on program 

Page 46 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Efficiency and Effectiveness of Fragmented 

Economic Development Programs Are Unclear 

funds were self-reported by agency officials. The data were determined to 

be sufficiently reliable for the purposes of this review. For this review, 

GAO focused on USDA, Commerce, HUD, and SBA. GAO met with 

officials from each of the agencies to discuss each of the programs and the 

program missions. Because SBA officials view all of their programs as 

being related to economic development, GAO included all SBA programs 

in this review. Using the Catalog of Federal Domestic Assistance and other 

agency documents, GAO identified 80 federal programs administered by 

the four agencies that could fund economic development activities. GAO 

did not include tax credit programs aimed at economic development in 

this review. For information on how tax programs can contribute to 

duplication, see the section of this report entitled “Periodic Reviews Could 

Help Identify Ineffective Tax Expenditures and Redundancies in Related 

Tax and Spending Programs.” 

Related GAO 

Products 

Rural Economic Development: Collaboration between SBA and USDA 

Could Be Improved. GAO-08-1123. Washington, D.C.: September 18, 2008. 

Small Business Administration: Additional Actions Are Needed to 

Certify and Monitor HUBZone Businesses and Assess Program Results. 

GAO-08-643. Washington, D.C.: June 17, 2008. 

Rural Economic Development: More Assurance Is Needed That Grant 

Funding Information Is Accurately Reported. GAO-06-294. Washington, 

D.C.: February 24, 2006. 

Economic Development Administration: Remediation Activities Account 

for a Small Percentage of Total Brownfield Grant Funding. GAO-06-7. 

Washington, D.C.: October 27, 2005. 

Economic Development: Multiple Federal Programs Fund Similar 

Economic Development Activities. GAO/RCED/GGD-00-220. Washington, 

D.C.: September 29, 2000. 

Economic Development: Observations Regarding the Economic 

Development Agency’s May 1998 Final Report on Its Public Works 

Program. GAO/RCED-99-11R. Washington, D.C.: March 23, 1999. 

For additional information about this area, contact William B. Shear at Area Contact (202) 512-4325 or shearw@gao.gov. 

Page 47 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
The Federal Approach to Surface 

Transportation Is Fragmented, Lacks Clear 

Goals, and Is Not Accountable for Results 

 

The Federal Approach to Surface Transportation Is 

Fragmented, Lacks Clear Goals, and Is Not Accountable 

for Results 

Why GAO Is Focusing 

on This Area 

The nation’s surface transportation system is critical to the economy and 

affects the daily life of most Americans. The Department of Transportation 

(DOT) currently administers scores of surface transportation programs 

costing over $58 billion annually. The cost to repair and upgrade roads, 

bridges, and other infrastructure so they can safely and reliably meet 

current and future demands is estimated in the hundreds of billions of 

dollars. However, large increases in federal expenditures for transportation 

in recent years have not commensurately improved system performance. 

Proposals to reauthorize the surface transportation program—which 

expired in September 2009 and has been extended until March 2011—have 

recommended consolidating or eliminating some of these programs. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

The current federal approach to surface transportation was established in 

1956 to build the Interstate Highway System, but has not evolved to reflect 

current national priorities and concerns. Over the years, in response to 

changing transportation, environmental, and societal goals, federal surface 

transportation programs grew in number and complexity to encompass 

broader goals, more programs, and a variety of program approaches and 

grant structures. This variety of approaches and structures did not result 

from a specific rationale or plan, but rather an agglomeration of policies 

and programs established over half a century without a well-defined 

overall vision of the national interest and federal role in our surface 

transportation system. This has resulted in a fragmented approach as five 

DOT agencies with 6,000 employees administer over 100 separate 

programs with separate funding streams for highways, transit, rail, and 

safety functions. This fragmented approach impedes effective decision 

making and limits the ability of decision makers to devise comprehensive 

solutions to complex challenges. For example, the federal government 

largely lacks mechanisms for aiding projects that span multiple 

jurisdictions and implementing projects that involve more than one state 

or local sponsor or multiple transportation modes. 

At the core of this fragmentation is the fact that federal goals and roles for 

the program are unclear or may conflict with other federal priorities, 

programs lack links to the performance of the transportation system or of 

the grantees, and programs do not use the best tools to target investments 

in transportation to the areas of greatest benefit. For example, the federal 

government lacks a comprehensive national strategy that defines its role in 

freight transportation projects, even though enhancing freight mobility is 

viewed as a top transportation priority. Furthermore, efforts to spur 

economic development through highway construction may conflict with 

efforts to improve air quality, and motor fuel taxes that encourage fuel 

Page 48 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

The Federal Approach to Surface 


Transportation Is Fragmented, Lacks Clear 


Goals, and Is Not Accountable for Results
 

consumption to finance highways may conflict with reducing carbon 

emissions. The largest highway, transit, and safety grant programs 

distribute funds through formulas that are typically not linked to 

performance and, in many cases, have only an indirect relationship to 

needs. As a result, it is difficult to assess the impact of funding on 

achieving transportation goals. The federal aid highway program, in 

particular, distributes about $40 billion a year to the states through 

complicated formulas that are ultimately overridden by provisions that 

return federal fuel excise tax revenues to their state of origin. Once DOT 

apportions funds, states have wide latitude to select their own projects 

and considerable flexibility to reallocate their funds among highway and 

transit programs. While these provisions give states the discretion to 

pursue their own priorities, the provisions may impede the targeting of 

federal funds toward specific national goals and objectives. To some 

extent, the federal aid highway program functions as a cash-transfer 

general-purpose grant program, rather than as a tool for pursuing a 

cohesive national transportation policy. 

Actions Needed and 

Potential Financial or 

Other Benefits 

A fundamental re-examination and reform of the nation’s surface 

transportation policies is needed. Since 2004, GAO has made several 

recommendations and matters for congressional consideration to address 

the need for a more goal-oriented approach to surface transportation, 

introduce greater performance and accountability for results, and break 

down modal stovepipes. Also, GAO has identified a number of principles 

that can help guide a fundamental re-examination and reform of the 

nation’s surface transportation policies that recognizes emerging national 

and global imperatives—such as reducing the nation’s dependence on 

foreign fuel sources and minimizing the effect of transportation systems 

on global climate. These principles include ensuring the federal role is 

defined based on identified areas of national interest and goals, 

incorporating accountability for results by entities receiving federal funds, 

employing the best tools and approaches to emphasize return on targeted 

federal investment, and ensuring fiscal sustainability. 

Applying these principles to a re-examination and reform of surface 

transportation programs would potentially result in a more clearly defined 

federal role in relation to other levels of government and thus a more 

targeted federal role focused around evident national interests. Where 

national interests are less evident—for example, where the economic 

benefits are more locally focused or there are varying regional 

preferences—other stakeholders could assume more responsibility, and 

some functions could potentially be assumed by the states or other levels of 

Page 49 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

The Federal Approach to Surface 

Transportation Is Fragmented, Lacks Clear 

Goals, and Is Not Accountable for Results 

government. This would then result in a more streamlined federal program 

approach and enhance the efficient delivery of programs and services. 

From the standpoint of state and local governments, re-examination and 

reform of the federal approach could reduce the administrative expenses 

states face complying with myriad federal statutory and regulatory 

requirements. For example, in May 2009, GAO reported that consolidating 

the application processes for three federal transit programs that provide 

funding for transportation-disadvantaged populations could reduce the 

administrative burden for states and transit agencies applying for these 

funds. However, GAO has reported that estimates from the states on the 

costs of complying with some federal requirements are not available. 

Congressional reauthorization of surface transportation programs presents 

an opportunity to address GAO recommendations and matters for 

congressional consideration that have not been implemented in large part 

because the current multiyear authorization for surface transportation 

programs expired in 2009, and existing programs have been funded since 

then through temporary extensions. Several reform proposals have been 

introduced, which indicate that some of GAO’s more recent 

recommendations and matters for congressional consideration are gaining 

traction. In its 2008 report, the National Surface Transportation Policy and 

Revenue Study Commission, established by Congress, recommended that 

federal surface transportation investments be carefully aligned with 

defined national interests through a comprehensive performance-based 

approach. In a bipartisan “blueprint” for reauthorization, the leadership of 

the House Transportation and Infrastructure Committee proposed 

redefining the federal role and restructuring programs by consolidating or 

eliminating more than 75 programs. The American Recovery and 

Reinvestment Act of 2009 helped break down modal barriers by 

establishing a $1.5 billion discretionary grant program that placed 

increased emphasis on integrated solutions to transportation challenges 

and provided an unprecedented ability for proposed projects that cut 

across modes of transportation to compete for federal funding. 

The information contained in this analysis is based on previously issued Framework for work listed in the following related GAO products. 

Analysis 

Page 50 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

The Federal Approach to Surface 


Transportation Is Fragmented, Lacks Clear 


Goals, and Is Not Accountable for Results
 

Related GAO 

Products 

Surface Transportation Planning: Opportunities Exist to Transition to 

Performance-Based Planning and Federal Oversight. GAO-11-77. 

Washington, D.C.: December 15, 2010. 

Federal Transit Programs: Federal Transit Administration Has 

Opportunities to Improve Performance Accountability. GAO-11-54. 

Washington, D.C.: November 17, 2010. 

Highway Trust Fund: Nearly All States Received More Funding Than 

They Contributed in Highway Taxes Since 2005. GAO-10-780. 

Washington, D.C.: June 30, 2010. 

Federal Transit Administration: Progress and Challenges in 

Implementing and Evaluating the Job Access and Reverse Commute 

Program. GAO-09-496. Washington, D.C.: May 21, 2009. 

Surface Transportation: Clear Federal Role and Criteria-Based Selection 

Process Could Improve Three National and Regional Infrastructure 

Programs. GAO-09-219. Washington, D.C.: Feb. 6, 2009. 

Federal-Aid Highways: Federal Requirements for Highways May 

Influence Funding Decisions and Create Challenges, but Benefits and 

Costs Are Not Tracked. GAO-09-36. Washington, D.C.: December 12, 2008. 

Surface Transportation Programs: Proposals Highlight Key Issues and 

Challenges in Restructuring the Programs. GAO-08-843R. Washington, 

D.C.: July 29, 2008. 

Surface Transportation: Restructured Federal Approach Needed for More 

Focused, Performance-Based, and Sustainable Programs. GAO-08-400. 

Washington, D.C.: March 6, 2008. 

Freight Transportation: National Policy and Strategies Can Help 

Improve Freight Mobility. GAO-08-287. Washington, D.C.: January 7, 2008. 

Intermodal Transportation: DOT Could Take Further Actions to Address 

Intermodal Barriers. GAO-07-718. Washington, D.C.: June 20, 2007. 

Intercity Passenger Rail: National Policy and Strategies Needed to 

Maximize Public Benefits from Federal Expenditures. GAO-07-15. 

Washington, D.C.: November 13, 2006. 

For additional information about this area, contact Phillip Herr at (202) Area Contact 512-2834, or herrp@gao.gov. 

Page 51 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Fragmented Federal Efforts to Meet Water 

Needs in the U.S.-Mexico Border Region Have 

Resulted in an Administrative Burden, 

Redundant Activities, and an Overall 

Inefficient Use of Resources 

 

Fragmented Federal Efforts to Meet Water Needs in the 

U.S.-Mexico Border Region Have Resulted in an 

Administrative Burden, Redundant Activities, and an 

Overall Inefficient Use of Resources 

Why GAO Is Focusing 

on This Area 

Meeting the drinking water and wastewater needs of rural areas, 

particularly areas such as the U.S.-Mexico border region, can be difficult. 

More than 90 percent of public water supply systems and 70 percent of 

wastewater systems throughout the United States serve communities with 

populations fewer than 10,000, usually in rural areas. The lack of access to 

safe drinking water and sanitation systems can pose risks to human health 

and the environment, including the risk of waterborne illnesses. In 2009, 

GAO found that seven federal agencies active in the border region—the 

Environmental Protection Agency (EPA), the U.S. Department of 

Agriculture (USDA), the Department of Housing and Urban Development 

(HUD), the U.S. Army Corps of Engineers, the Indian Health Service, the 

Economic Development Administration (EDA), and the Department of the 

Interior’s Bureau of Reclamation—obligated at least $1.4 billion from fiscal 

years 2000 through 2008 to fund numerous projects in the region. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Key federal agencies recognized more than a decade ago that coordinated 

policies and procedures would improve federal efforts to deliver water 

and wastewater systems to rural areas, including those in the U.S.-Mexico 

border region; however, overall these programs remain uncoordinated and 

fragmented, and their delivery continues to be inefficient and ineffective. 

The U.S.-Mexico border region is predominately rural in nature, and 

federal agencies can find it difficult to meet the needs of residents in this 

region. Specifically, the remoteness of some communities can make it 

challenging to identify residents in need of water and wastewater services, 

communities may not have the institutional capacity to identify solutions 

to address their water and wastewater needs, and rural areas typically lack 

adequate funds for constructing and upgrading water supply and 

wastewater treatment facilities. Overcoming differences in agency 

missions and cultures, as well as program differences resulting from 

separate mandates and project eligibility requirements, add to the 

complexity of meeting these communities’ water and wastewater needs. 

In December 2009, GAO found that federal efforts to meet drinking water 

and wastewater needs in the border region have been ineffective, in part, 

because most of the seven federal agencies that provide assistance have 

not comprehensively assessed the needs of the region. Federal agencies 

have assembled some data and conducted limited studies of drinking 

water and wastewater conditions in the border region, but the resulting 

patchwork of data does not provide a comprehensive assessment of the 

region’s needs. Without a comprehensive needs assessment, federal 

agencies cannot target resources toward the most urgent needs or provide 

assistance to communities that do not have the technical or financial 

Page 52 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Fragmented Federal Efforts to Meet Water 

Needs in the U.S.-Mexico Border Region Have 

Resulted in an Administrative Burden, 

Redundant Activities, and an Overall 

Inefficient Use of Resources 

resources to initiate a proposal for assistance. Instead, GAO found that 

most federal programs generally provide funds to those communities with 

the ability to initiate projects and seek assistance, which may not be the 

ones with the greatest need. Only one agency—the Indian Health 

Service—had collected data on water and wastewater conditions for each 

tribal reservation in the region, enabling it to select projects that target the 

greatest need. 

In addition, GAO found that the key agencies have not developed 

coordinated policies and procedures for selecting water and wastewater 

projects, resulting in an administrative burden, duplication of efforts, and 

inefficient use of resources. Specifically, most programs have different 

applications and application processes for water or wastewater projects, 

different requirements for engineering and environmental reports, and 

different deadlines for submitting applications. Because most federal 

programs require separate documentation to meet similar requirements 

and the agencies do not consistently coordinate in selecting projects, 

applicants can experience increased costs and delays in project 

completion. For example, a public utility engineer in Texas said that one 

applicant trying to expand water service to a particular area paid $30,000 

more in fees because the engineer had to complete two separate sets of 

engineering documentation for EPA and USDA. Also, because most federal 

programs have no process by which to coordinate and share information 

on projects they have selected for funding, GAO found examples where 

agencies made inefficient use of limited resources. For example, GAO 

found a case where HUD provided a utility in Hudspeth County, Texas, 

over $860,000 in grant funds from 2004 to 2006 to extend water 

distribution and waste collection lines for residents of a community. 

However, through September 2009, the distribution lines remained unused 

because the utility did not have enough water to serve the additional 

households. The utility intended to use funding from USDA to construct a 

new well, but the funding obligated by the agency was not enough to cover 

project costs. Three years after the HUD funds were provided to construct 

the distribution lines, the utility had not been able to obtain additional 

assistance from federal agencies to construct the well. 

Actions Needed and 

Potential Financial or 

Other Benefits 

To improve program coordination for rural water and wastewater 

infrastructure in the U.S.-Mexico border region, GAO suggested in 

December 2009 that Congress may wish to consider requiring federal 

agencies to establish an interagency mechanism or process, such as a task 

force on water and wastewater infrastructure, in the border region. GAO 

also suggested that Congress could direct a group or task force to conduct 

Page 53 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Fragmented Federal Efforts to Meet Water 

Needs in the U.S.-Mexico Border Region Have 

Resulted in an Administrative Burden, 

Redundant Activities, and an Overall 

Inefficient Use of Resources 

certain activities. Specifically, GAO suggested that a task force, in 

partnership with state and local officials, should leverage collective 

resources to identify needs within the border region and establish 

compatible and coordinated polices across relevant agencies, such as a 

coordinated process for the selection of projects, and standardize 

applications, environmental review requirements, and engineering 

requirements to the extent possible. Such activities would help to ensure 

that a comprehensive needs assessment for the region is completed and 

that coordination in other areas occurs. Although such coordination and 

uniformity will not likely result in significant cost savings for the federal 

government, these activities, if implemented, could improve the 

effectiveness of federal water and wastewater programs and result in more 

efficient use of funds provided to the border region. Most of the cost 

savings would likely be realized by the communities and utilities that 

would benefit from federal agencies establishing a uniform application and 

coordinated funding cycles. While these actions have not yet been taken, a 

bill introduced in the House of Representatives in March 2010 would have 

established a Southwest Border Region Water Task Force with specific 

responsibilities such as assessing the water needs of communities in the 

region and reporting to Congress every 6 months on its progress. 

The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

Rural Water Infrastructure: Improved Coordination and Funding Related GAO Product Processes Could Enhance Federal Efforts to Meet Needs in the U.S.­

Mexico Border Region. GAO-10-126. Washington, D.C.: December 18, 2009. 

For additional information about this area, contact Dave Trimble at (202) Area Contact 512-3991 or trimbled@gao.gov. 

Page 54 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Resolving Conflicting Requirements Could 

More Effectively Achieve Federal Fleet 

Energy Goals 

 

Resolving Conflicting Requirements Could More 


Effectively Achieve Federal Fleet Energy Goals 


Why GAO Is Focusing 

on This Area 

The federal government’s vehicle fleet has over 600,000 civilian and 

nontactical military vehicles and consumes over 963,000 gallons of 

petroleum-based fuel per day. In fiscal year 2009, the federal government 

spent approximately $1.9 billion on procuring new vehicles. According to 

General Services Administration (GSA) officials, the governmentwide fleet 

is used to support of a variety of missions and consists of approximately 

60 percent trucks, buses, and ambulances; fewer than 40 percent are 

passenger vehicles including passenger vans and sport utility vehicles. 

The federal government’s goals to reduce reliance on petroleum fuel and 

the negative impacts of greenhouse gas (GHG) emissions have led 

Congress and the Administration to prioritize the acquisition of alternative 

fuel vehicles (AFV) by federal agencies. The following federal laws and 

executive orders have set requirements and goals for acquiring alternativefuel and plug-in hybrid electric vehicles, increasing use of alternative fuels 

and reducing petroleum consumption: Energy Policy Act (EPAct) of 1992, 

EPAct of 2005, the Energy Independence and Security Act of 2007, 

Executive Order 13423, and Executive Order 13514. These laws and 

executive orders affect over 20 agencies. A number of federal agencies 

play a role in overseeing and implementing these requirements including, 

the Department of Energy (DOE) and GSA. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

In light of multiple and sometimes conflicting statutes and a lack of 

performance measures, fleet managers often lack the flexibility and tools 

to meet the goal of reducing the federal fleet’s use of petroleum and its 

GHG emissions. Congress and the Administration have defined a set of 

energy requirements for the federal fleet through statutes and executive 

orders. However, these statutes and orders were enacted and issued in a 

piecemeal fashion and represent a fragmented rather than integrated 

approach to meeting key national goals. Specifically, the requirements and 

priorities to increase use of alternative fuels, reduce petroleum use, and 

reduce GHG emissions, compel fleet managers to resolve the following 

conflicts: 

•	 Increase the use of alternative fuels vs. the unavailability of 

alternative fuels. Agencies are required to increase alternative fuel use, 

although most alternative fuels are not yet widely available. Thus, 

agencies have been purchasing primarily flex-fueled AFVs, those that 

can operate on E85—a blend of up to 85 percent ethanol and 

petroleum—or petroleum. However, since E85 was only available at 1 

percent of U.S. fueling stations in 2009, agencies are requesting waivers 

from the requirement to use alternative fuels. According to DOE, in 

Page 55 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Resolving Conflicting Requirements Could 

More Effectively Achieve Federal Fleet 

Energy Goals 

2010, approximately 55 percent of flex-fueled AFVs received a waiver. 

Further, some fleet operators indicated they use petroleum without a 

waiver when alternative fuels are available because it is either more 

convenient, less expensive, or both. 

•	 Acquire AFVs vs. reduce petroleum consumption. Agencies are 

required to purchase AFVs, but this requirement may, in some cases, 

undermine the requirement to reduce petroleum consumption. Virtually 

every agency has succeeded in acquiring more AFVs, but there have 

been only modest reductions in petroleum use and modest increases in 

alternative fuel use, due to the lack of available alternative fuels. As 

previously stated, the lack of available alternative fuels results in 

agencies using petroleum to fuel AFVs. In areas where alternative fuels 

are not available, purchasing more fuel efficient non-AFVs could 

reduce petroleum consumption more than purchasing AFVs.1 

•	 Reduce GHG emissions vs. acquire AFVs. Under existing law, 

according to DOE, some vehicles with the lowest GHG emissions do 

not qualify as AFVs; and according to GSA, some AFVs emit more GHG 

emissions than some petroleum-fueled vehicles. Thus, by procuring a 

new vehicle with low GHG emissions the agency may meet the 

requirement to reduce GHG emissions, but not the requirement to 

purchase AFVs for its fleet. 

•	 Use plug-in hybrid vehicles vs. reduce electricity consumption in 

federal facilities. Other conflicts exist between fleet energy goals and 

the federal government energy goals. Agencies are encouraged to 

acquire plug-in hybrids for their fleets when they become publicly 

available; however, this could conflict with other requirements that 

encourage agencies to reduce electricity consumption in federal 

facilities. Thus, if an agency acquires plug-in vehicles they may meet 

the requirement, but this may lead to increased electricity 

consumption.2 

1

According to DOE, agencies may acquire low-GHG-emitting vehicles and consider them 

AFVs when alternative fuels are not available. However, agencies have found very few lowGHG options exist that meet mission requirements. 

2

DOE has identified a reporting approach that would allow fleet electricity use to be 

subtracted from facility electricity use. 

Page 56 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Resolving Conflicting Requirements Could 

More Effectively Achieve Federal Fleet 

Energy Goals 

Because fleet managers have to follow these conflicting and narrowly 

defined requirements, they do not always have the flexibility to make 

procurement decisions that would maximize the reduction in petroleum 

use and GHG emissions. 

GAO has previously recommended that federal agencies propose 

legislative changes to resolve conflicts and set priorities for the 

requirements. DOE and GSA are working with stakeholders to develop 

proposed legislation that would create broader requirements targeted at 

fleet efficiency. These changes could streamline the federal fleet 

requirements to focus broadly on the reduction of petroleum use and GHG 

emissions. DOE has provided the results of these efforts to the Office of 

Management and Budget to inform their work. 

A broader, performance-based approach, as DOE and GSA propose, would 

provide federal agencies—subject to these laws and executive orders— 

greater flexibility to make procurement decisions that would maximize the 

reduction in petroleum use and GHG emissions. GAO has found that 

results-oriented organizations strive to ensure that their day-to-day 

activities move them closer to accomplishing their goals. Further, GAO has 

reported that performance-based measures should cover multiple 

priorities, support decision making by providing useful information, and 

be limited to a few vital measures. Interviews and meetings with DOE, 

GSA officials and other fleet managers indicate that such broad goals and 

related performance measures would provide agencies greater flexibility 

to achieve the requirements of reduced petroleum use, decreased GHG 

emissions, or any other requirement defined in statute. For example, GSA 

officials indicated that a simple mandate to reduce petroleum 

consumption and GHG emissions by increasing fleet efficiency—rather 

than by narrowly defining the vehicle or fuel type—would provide agency 

fleet managers with a rational target and allow them to use a variety of 

available options to attain it. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Changes in existing laws could streamline the requirements and provide 

fleet managers with more flexibility in meeting goals. DOE, in consultation 

with GSA and other appropriate agencies and organizations, has taken 

steps to implement GAO’s prior recommendation to propose legislative 

changes that resolve conflicts and set priorities for agencies by providing 

proposed legislative changes to OMB. This is an important step in 

addressing the issue of conflicting and narrowly defined requirements. In 

addition to helping agencies set priorities, these proposals could inform 

Congress and agencies on how to potentially resolve conflicting 

Page 57 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Resolving Conflicting Requirements Could 


More Effectively Achieve Federal Fleet 


Energy Goals 


requirements by developing performance-based goals and related 

measures which could provide agencies with greater flexibility allowing 

them to optimize strategies and meet broader goals. If properly developed, 

performance-based goals and measures would support fleet managers’ 

decision making by providing a few key measures that help managers 

balance the priorities of the fleet requirements. 

The information contained in this analysis is based primarily on previously Framework for issued work listed in the related GAO products below. Interviews with and 

Analysis 	 documentation from GSA and DOE, as well as attendance at and 

discussions during fleet operators’ meetings, together provided updated 

information. 

Related GAO 

Products 

Federal Energy and Fleet Management: Plug-in Vehicles Offer Potential 

Benefits, but High Costs and Limited Information Could Hinder 

Integration into the Federal Fleet. GAO-09-493. Washington, D.C.: June 9, 

2009. 

Federal Energy Management: Agencies Are Acquiring Alternative Fuel 

Vehicles but Face Challenges in Meeting Other Fleet Objectives. 

GAO-09-75R. Washington, D.C.: October 22, 2008. 

U.S. Postal Service: Vulnerability to Fluctuating Fuel Prices Requires 

Improved Tracking and Monitoring of Consumption Information. 

GAO-07-244. Washington, D.C.: February 16, 2007. 

For additional information about this area, contact Susan Fleming at Area Contact (202) 512-2834 or flemings@gao.gov. 

Page 58 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Duplicative Federal Efforts Directed at 

Increasing Domestic Ethanol Production Cost 

Billions Annually 

 

Duplicative Federal Efforts Directed at Increasing 

Domestic Ethanol Production Cost Billions Annually 

Why GAO Is Focusing 

on This Area 

Congress supported domestic ethanol production through a $5.4 billion 

tax credit program in 2010. The Volumetric Ethanol Excise Tax Credit 

(VEETC or the ethanol tax credit), a 45-cent-per-gallon federal tax credit, 

is provided to fuel blenders that purchase and blend ethanol with gasoline. 

Congress also supported domestic ethanol production through a 

renewable fuel standard (RFS or the fuel standard) that applies to 

transportation fuels used in the United States. First enacted in 2005 and 

expanded in 2007, the fuel standard generally requires overall 

transportation fuels in the United States to contain certain volumes of 

biofuels, such as ethanol and biodiesel. The fuel standard generally 

requires rising use of ethanol and other biofuels, from 12.95 billion gallons 

in 2010 to 36 billion gallons in 2022. At present, the fuel standard is largely 

met from conventional biofuels—defined as ethanol derived from corn 

starch—which made up 12 billion gallons of the 12.95 billion gallon fuel 

standard for 2010. Of the 36 billion gallon total required for 2022, 15 billion 

gallons can come from conventional biofuels. The other 21 billion gallons 

are to come from advanced biofuels such as ethanol made from the 

cellulose of plants. To meet the RFS, the Departments of Agriculture and 

Energy are developing advanced biofuels that use cellulosic feedstocks, 

such as corn stover and switchgrass. The Environmental Protection 

Agency administers the RFS. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

The ethanol tax credit and the renewable fuel standard can be duplicative 

in stimulating domestic production and use of ethanol, and can result in 

substantial loss of revenue to the Treasury. If reauthorized and left 

unchanged, the VEETC’s annual cost to the Treasury in forgone revenues 

could grow from $5.4 billion in 2010 to $6.75 billion in 2015, the year the 

fuel standard requires 15 billion gallons of conventional biofuels. The 

ethanol tax credit was recently extended at 45-cents-per-gallon through 

December 31, 2011, in the Tax Relief, Unemployment Insurance 

Reauthorization, and Job Creation Act of 2010 (Pub. L. No. 111-312). 

However, as GAO reported in August 2009, given the requirements of the 

fuel standard, the ethanol tax credit is largely unneeded today to ensure 

demand for domestic ethanol production. 

Since the 1970s the federal government has provided increasing levels of 

support to the domestic ethanol industry. The Energy Tax Act of 1978, 

among other things, provided tax incentives designed to stimulate the 

production of ethanol for blending with gasoline. These tax incentives 

were restructured in 2005 as the Volumetric Ethanol Excise Tax Credit. In 

addition, the Energy Policy Act of 2005 created the RFS, which established 

increasing annual floors for the amount of renewable fuels to be blended 

Page 59 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Duplicative Federal Efforts Directed at 

Increasing Domestic Ethanol Production Cost 

Billions Annually 

into U.S. transportation fuels. The act generally required transportation 

fuels in the United States to contain 4 billion gallons of renewable fuels, 

such as ethanol and biodiesel, in 2006 and 7.5 billion gallons in 2012. The 

Energy Independence and Security Act of 2007 expanded the RFS by 

substantially increasing its annual biofuel volume requirements, including 

up to 9 billion gallons of conventional corn starch ethanol in 2008 and up 

to 15 billion gallons of conventional corn starch ethanol in 2015. To offset 

the advantage foreign ethanol producers may gain from the ethanol tax 

credit, a 54-cent-per-gallon tariff is placed on imported ethanol. 

Both the ethanol tax credit and the fuel standard create demand for 

domestic ethanol production. Fuel blenders receive the ethanol tax credit 

for each gallon of ethanol they combine with gasoline and sell, yet they are 

also required under the fuel standard to acquire and blend specified 

volumes of ethanol with gasoline. As GAO reported in August 2009, the 

ethanol tax credit was important in helping to create a profitable corn 

starch ethanol industry when the industry had to fund investment in new 

facilities, but it is less important now for sustaining the industry because 

most of the capital investment in corn starch ethanol refineries has already 

been made. As of January 2010, the domestic corn starch ethanol industry 

had 13 billion gallons of refining capacity with an additional 1.4 billion 

gallons under construction, according to the Renewable Fuels Association. 

This domestic refining capacity is nearing the effective fuel standard limit 

of 15 billion gallons per year for conventional ethanol beginning in 2015. 

Importantly, the fuel standard is now at a level high enough to ensure that 

a market for domestic ethanol production exists in the absence of the 

ethanol tax credit and may soon itself be at a level beyond what can be 

consumed by the nation’s existing vehicle infrastructure. The ethanol 

content in gasoline available for most vehicles is 10 percent. This 10 

percent limitation results in an upper bound of about 15 billion gallons of 

ethanol that can be blended into the nation’s fuel pool. While EPA recently 

allowed newer vehicles to use gasoline that contains up to 15 percent 

ethanol this fuel is not yet readily available. 

Actions Needed and 

Potential Financial or 

Other Benefits 

The VEETC will cost $5.7 billion in forgone revenues in 2011. Because the 

fuel standard allows increasing annual amounts of conventional biofuels 

through 2015, which ensures a market for a conventional corn starch 

ethanol industry that is already mature, Congress may wish to consider 

whether revisions to the ethanol tax credit are needed. Options could 

include the following: 

Page 60 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Duplicative Federal Efforts Directed at 

Increasing Domestic Ethanol Production Cost 

Billions Annually 

•	 Maintain the VEETC at current levels. 

•	 Allow the VEETC to expire at the end of 2011. 

•	 Reduce the VEETC as Congress did in the 2008 Farm Bill, when the 

ethanol tax credit was reduced from 51 cents to 45 cents per gallon. 

•	 Phase out the VEETC over a number of years. 

•	 Modify the VEETC to counteract fluctuations in other commodities 

that can influence ethanol production, such as changes in crude oil 

prices. For instance, the ethanol tax credit could increase when crude 

oil prices are low and decrease when crude oil prices are high. 

The information contained in this analysis is based on the related GAO Framework for product listed below. In addition, information on the Tax Relief, 

Analysis 	 Unemployment Insurance Reauthorization, and Job Creation Act of 2010 

and information on tax expenditure estimates and domestic ethanol 

refining capacity were updated from more recent sources. 

Biofuels: Potential Effects and Challenges of Required Increases in Related GAO Product Production and Use. GAO-09-446. Washington, D.C.: August 25, 2009. 

For additional information about this area, contact Frank Rusco at Area Contact (202) 512-3841 or ruscof@gao.gov. 

Page 61 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Enterprise Architectures: Key Mechanisms for 

Identifying Potential Overlap and Duplication 

 

Enterprise Architectures: Key Mechanisms for 


Identifying Potential Overlap and Duplication 


Why GAO Is Focusing 

on This Area 

An enterprise architecture is a modernization blueprint that is used by 

organizations to describe their current state and a desired future state and 

to leverage information technology (IT) to transform business and mission 

operations. In light of the importance of developing well-defined 

enterprise architectures, GAO recently issued a seven-stage enterprise 

architecture management maturity framework that defines actions needed 

to effectively manage an architecture program. The alternative, as GAO’s 

work has shown, is the perpetuation of the kinds of operational 

environments that burden most agencies today, where a lack of integration 

among business operations and the IT resources supporting them leads to 

systems that are duplicative, poorly integrated, and unnecessarily costly to 

maintain. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Historically, federal agencies have struggled with operational 

environments characterized by a lack of integration among business 

operations and IT resources supporting them. A key to successfully 

leveraging IT for organizational transformation is having and using an 

enterprise architecture—or modernization blueprint—as an authoritative 

frame of reference against which to assess and decide how individual 

system investments are defined, designed, acquired, and developed. The 

development, implementation, and maintenance of architectures are 

widely recognized as hallmarks of successful public and private 

organizations, and their use is required by the Clinger-Cohen Act of 1996 

and the Office of Management and Budget. 

GAO’s experience has shown that attempting to modernize (and maintain) 

IT environments without an architecture to guide and constrain 

investments results in organizational operations and supporting 

technology infrastructures and systems that are duplicative, poorly 

integrated, unnecessarily costly to maintain and interface, and unable to 

respond quickly to shifting environmental factors. For example, GAO’s 

reviews of enterprise architecture management at federal agencies, such 

as the Department of Homeland Security and the Federal Bureau of 

Investigation, as well as reviews of critical agency functional areas, such 

as Department of Defense financial management, logistics management, 

combat identification, and business systems modernization have 

continued to identify the absence of complete and enforced enterprise 

architectures, which in turn has led to agency business operations, 

systems, and data that are duplicative, incompatible, and not integrated; 

these conditions have either prevented agencies from sharing data or 

forced them to depend on expensive, custom-developed system interfaces 

to do so. 

Page 62 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Enterprise Architectures: Key Mechanisms for
 

Identifying Potential Overlap and Duplication 


GAO’s framework provides a standard yet flexible benchmark against 

which to determine where the enterprise stands in its progress toward the 

ultimate goal: having a continuously improving enterprise architecture 

program that can serve as a featured decision support tool when 

considering and planning large-scale organizational restructuring or 

transformation initiatives. In addition, it also provides a basis for 

developing architecture management improvement plans, as well as for 

measuring, reporting, and overseeing progress in implementing these 

plans. 

In August 2006, GAO reported on its work in applying its prior framework 

across 27 major federal departments and agencies. This work showed that 

the state of enterprise architecture development and implementation 

varied considerably across departments and agencies, with some having 

more mature architecture programs than others. However, overall, most 

departments and agencies were not where they needed to be, particularly 

with regard to their approaches to assessing each investment’s alignment 

with the enterprise architecture and measuring and reporting on 

enterprise architecture results and outcomes. 

Accordingly, GAO made recommendations to departments and agencies 

that are aimed at improving the content and use of their respective 

architectures. Nonetheless, while some progress has been made, more 

time is needed for agencies to fully realize the value of having well-defined 

and implemented architectures. Such value can be derived from realizing 

cost savings through consolidation and reuse of shared services and 

elimination of antiquated and redundant mission operations, enhancing 

information sharing through data standardization and system integration, 

and optimizing service delivery through streamlining and normalization of 

business processes and mission operations. 

Actions Needed and 

Potential Financial or 

Other Benefits 

If managed effectively, enterprise architectures can be a useful change 

management and organizational transformation tool. The conditions for 

effectively managing enterprise architecture programs are contained in 

GAO’s enterprise architecture management maturity framework. To 

advance the state of enterprise architecture development and use in the 

federal government, senior leadership in the departments and agencies 

need to demonstrate their commitment to this organizational 

transformation tool, as well as ensure that the kind of management 

controls embodied in GAO’s framework are in place and functioning. 

Collectively, the majority of the departments and agencies’ architecture 

efforts can still be viewed as a work in progress with much remaining to 

Page 63 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Enterprise Architectures: Key Mechanisms for 

Identifying Potential Overlap and Duplication 

be accomplished before the federal government as a whole fully realizes 

their transformational value. Moving beyond this status will require most 

departments and agencies to overcome significant obstacles and 

challenges, such as organizational parochialism and cultural resistance, 

inadequate funding, and the lack of top management understanding and 

skilled staff. One key to doing so continues to be sustained organizational 

leadership. As GAO’s work has demonstrated, without such organizational 

leadership, the benefits of enterprise architecture will not be fully realized. 

In GAO’s prior work, most departments and agencies reported they expect 

to realize the benefits from their respective enterprise architecture 

programs, such as improved alignment between their business operations 

and the IT that supports these operations and consolidation of their IT 

infrastructure environments, which can reduce the costs of operating and 

maintaining duplicative capabilities, sometime in the future. What this 

suggests is that the real value in the federal government from developing 

and using enterprise architectures remains largely unrealized. GAO’s 

framework recognizes that a key to realizing this potential is effectively 

managing department and agency enterprise architecture programs. 

However, knowing whether benefits and results are in fact being achieved 

requires having associated measures and metrics. In this regard, it is 

important for agencies to satisfy the core element associated with 

measuring and reporting enterprise architecture results and outcomes. 

Examples of results and outcomes to be measured include costs avoided 

through eliminating duplicative investments or by reusing common 

services and applications and improved mission performance through reengineered business processes and modernized supporting systems. GAO’s 

work has shown that over 50 percent of the departments and agencies 

assessed had yet to fully satisfy this element. On the other hand, some 

have reported they are addressing this element and have realized 

significant financial benefits. For example, the Department of the Interior 

has demonstrated that it is using its enterprise architecture to modernize 

agency IT operations and avoid costs through enterprise software license 

agreements and hardware procurement consolidation. These architecturebased decisions have resulted in financial benefits of at least $80 million. 

This means that the departments and agencies can demonstrate 

achievement of expected benefits, to include costs avoided through 

eliminating duplicative investments, if enterprise architecture results and 

outcomes are measured and reported. The Office of Management and 

Budget can play a critical role by continuing to oversee the development 

and use of enterprise architecture efforts, to include the measurement and 

reporting of enterprise architecture results and outcomes across the 

federal government. 

Page 64 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Enterprise Architectures: Key Mechanisms for
 

Identifying Potential Overlap and Duplication 


GAO plans to follow up with those departments and agencies that reported 

having satisfied the element associated with measuring and reporting 

return on enterprise architecture results and outcomes to identify 

associated dollar savings resulting from elimination of duplicative 

investments. 

The information contained in this analysis is based on the related GAO Framework for reports listed below.

Analysis 

Related GAO 

Products 

Organizational Transformation: A Framework for Assessing and 

Improving Enterprise Architecture Management (Version 2.0). 

GAO-10-846G. Washington, D.C.: August 2010. 

Enterprise Architecture: Leadership Remains Key to Establishing and 

Leveraging Architectures for Organizational Transformation. 

GAO-06-831. Washington, D.C.: August 14, 2006. 

Information Technology: A Framework for Assessing and Improving 

Enterprise Architecture Management, version 1.1. GAO-03-584G. 

Washington, D.C.: April 2003. 

For additional information about this area, contact Valerie C. Melvin at Area Contact (202) 512-6304 or melvinv@gao.gov. 

Page 65 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Consolidating Federal Data Centers Provides 

Opportunity to Improve Government 

Efficiency 

 

Consolidating Federal Data Centers Provides 

Opportunity to Improve Government Efficiency 

Why GAO Is Focusing 

on This Area 

The federal government’s demand for information technology (IT) is everincreasing. Over time, this increasing demand has led to a dramatic rise in 

the number of federal data centers (defined as data processing and storage 

facilities over 500 square feet with strict availability requirements)—and a 

corresponding increase in operational costs. The growth in the number of 

federal data centers, many offering similar services and resources, has 

resulted in overlap and duplication among the centers. 

In February 2010, the Office of Management and Budget (OMB) launched 

the Federal Data Center Consolidation Initiative to guide federal agencies 

in developing and implementing data center consolidation plans. OMB 

plans to oversee the agencies’ plans and measure their progress. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

In recent years, as federal agencies modernized their operations, put more 

of their services online, and increased their information security profiles, 

they have demanded more computing power and data storage resources. 

According to OMB, the number of federal data centers grew from 432 in 

1998 to more than 2,000 in 2010. These data centers often house similar 

types of equipment and provide similar processing and storage 

capabilities. These factors have led to concerns associated with the 

provision of redundant capabilities, the underutilization of resources, and 

the significant consumption of energy. 

Operating such a large number of centers places costly demands on the 

government. In 2010, the Federal Chief Information Officer (CIO) reported 

that operating and maintaining such redundant infrastructure investments 

was costly, inefficient, and unsustainable, and had a significant impact on 

energy consumption. While the total annual federal spending associated 

with data centers has not yet been determined, the Federal CIO has found 

that operating data centers is a significant cost to the federal government, 

including hardware, software, real estate, and cooling costs. For example, 

according to the Environmental Protection Agency, the electricity cost to 

operate federal servers and data centers across the government is about 

$450 million annually. According to the Department of Energy, data center 

spaces can consume 100 to 200 times as much electricity as standard 

office spaces. Reported server utilization rates as low as 5 percent and 

limited reuse of these data centers within or across agencies lends further 

credence to the need to restructure federal data center operations to 

improve efficiency and reduce costs. 

In February 2010, OMB and the Federal CIO announced the Federal Data 

Center Consolidation Initiative and outlined four high-level goals: 

Page 66 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Consolidating Federal Data Centers Provides 

Opportunity to Improve Government 

Efficiency 

•	 Promote the use of Green IT by reducing the overall energy and real 

estate footprint of government data centers. 

•	 Reduce the cost of data center hardware, software, and operations. 

•	 Increase the overall IT security posture of the government. 

•	 Shift IT investments to more efficient computing platforms and 

technologies. 

As part of this initiative, OMB directed federal agencies to prepare an 

inventory of their data center assets and a plan for consolidating these 

assets by August 30, 2010, and to begin implementing them in fiscal year 

2011. In October 2010, OMB reported that all of the agencies submitted 

their plans. OMB plans to monitor agencies’ progress through annual 

reports and has established a goal of closing 800 of the over 2,100 federal 

data centers by 2015. 

Data center consolidation makes sense economically and as a way to 

achieve more efficient IT operations, but challenges exist. For example, 

agencies face challenges in ensuring the accuracy of their inventories and 

plans, providing upfront funding for the consolidation effort long before 

any cost savings accrue, integrating consolidation plans into fiscal year 

2012 agency budget submissions (as required by OMB), establishing and 

implementing shared standards (for storage, systems, security, etc.), 

establishing reimbursement mechanisms to fund the centralized 

operations, overcoming cultural resistance to such major organizational 

changes, and maintaining current operations during the transition to 

consolidated operations. Mitigating these and other challenges will require 

commitment from the agencies and continued oversight by OMB and the 

Federal CIO. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Moving forward, it will be important for individual agencies to move 

quickly to correct any missing items in their plans, establish sound 

baselines so that progress and efficiencies can be measured, begin their 

consolidation efforts, track their progress, and report to OMB on their 

progress over time. It will also be important for OMB to work with 

agencies to establish goals and targets for consolidation (both in terms of 

cost savings and reduced data centers), maintain strong oversight of the 

agencies’ efforts, and look for consolidation opportunities across agencies. 

Doing so will more fully address unnecessary overlap and duplication, and 

Page 67 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Consolidating Federal Data Centers Provides 

Opportunity to Improve Government 

Efficiency 

could achieve further operational improvements, efficiencies, and 

financial benefits. 

As part of their individual consolidation plans, each federal department 

and agency was expected to estimate cost savings over time. In ongoing 

work, GAO reviewed 15 of the 24 agencies’ consolidation plans. In these 

plans, agencies provided the following information on estimated savings: 

•	 Seven agencies estimated savings totaling over $369 million between 

fiscal years 2011 and 2015; however, actual savings may be even higher 

because three of these agencies’ estimates were only partial estimates. 

They included expected energy savings but not savings from other 

sources, such as facilities or equipment reductions. 

•	 Two agencies reported that net savings would not accrue until fiscal 

years 2017 and 2018, respectively. 

•	 Six agencies did not provide estimated cost savings; however, two of 

these agencies suggested that they plan to develop cost-benefit 

analyses in the future. 

Although some agencies reported that it was too soon to estimate cost 

savings because they are just beginning to plan to consolidate and other 

agencies noted that near-term savings were offset by consolidation costs, 

the opportunity for long-term savings is significant. In October 2010, a 

council of chief executive officers representing technical industry 

companies estimated that the federal government could save $150 billion 

to $200 billion over the next decade, primarily through data center and 

server consolidation. 

GAO has ongoing work reviewing the Federal Data Center Consolidation 

Initiative as well as federal agencies’ efforts to develop and implement 

consolidation plans. 

Framework for 

Analysis 

As part of an ongoing review of the Federal Data Center Consolidation 

Initiative, GAO analyzed 15 of 24 federal agencies’ data center 

consolidation plans and inventories to identify plans and anticipated cost 

savings, and discussed challenges to the consolidation initiative with those 

agencies. GAO also met with agency officials to discuss data center 

consolidation initiatives at OMB, the Agency for International 

Development, the Department of Agriculture, the Department of Defense, 

the Department of Energy, the Department of Homeland Security, the 

Page 68 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Consolidating Federal Data Centers Provides
 

Opportunity to Improve Government 


Efficiency 


Department of the Interior, the Department of Labor, the Department of 

State, the Department of the Treasury, the Environmental Protection 

Agency, the National Aeronautics and Space Administration, the Nuclear 

Regulatory Commission, the Small Business Administration, the 

Department of Commerce, the Department of Education, the Department 

of Health and Human Services, the Department of Housing and Urban 

Development, the Department of Justice, the Department of 

Transportation, the Department of Veterans Affairs, the General Services 

Administration, the National Science Foundation, the Office of Personnel 

Management, and the Social Security Administration. 

Related GAO 

Products 

Information Security: Governmentwide Guidance Needed to Assist 

Agencies in Implementing Cloud Computing. GAO-10-855T. Washington, 

D.C.: July 1, 2010. 

Information Security: Federal Guidance Needed to Address Control 

Issues with Implementing Cloud Computing. GAO-10-513. Washington, 

D.C.: May 27, 2010. 

Social Security Administration: Effective Information Technology 

Management Essential for Data Center Initiative. GAO-09-662T. 

Washington, D.C.: April 28, 2009. 

For additional information about this area, contact David Powner at (202) Area Contact 512-9286 or pownerd@gao.gov. 

Page 69 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Improved Data on Interagency Contracting 

Needed to Minimize Duplication and Better 

Leverage the Government’s Buying Power 

 

Improved Data on Interagency Contracting Needed to 

Minimize Duplication and Better Leverage the 

Government’s Buying Power 

Why GAO Is Focusing 

on This Area 

Interagency and agencywide contracting was responsible for at least $54 

billion of the approximately $540 billion that was obligated 

governmentwide for goods and services in fiscal year 2009. Interagency 

contracting is a process by which one agency either uses another agency’s 

contract directly or obtains contracting support services from another 

agency. In agencywide contracting, sometimes called enterprisewide 

contracting, a component within an agency awards a contract for use by 

all components of that agency. Both contracting methods are intended to 

leverage the government’s buying power and provide cost savings. By 

providing a simplified, expedited, and lower cost method of procurement, 

they can help agencies save both time and administration costs. However, 

unjustified duplication among available contracts can result in increased 

costs to the government. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Agencies have created numerous interagency and agencywide contracts 

using existing statutes, the Federal Acquisition Regulation, and agencyspecific policies. The creation of these contracts is based on a number of 

rationales, including avoiding user fees that would be paid for using 

another agency’s contract, allowing for cost-reimbursement contracts, and 

gaining more control over procurement actions within the agencies. With 

the proliferation of these contracts, however, there is a risk of unintended 

duplication and inefficiency. Billions of taxpayer dollars flow through 

interagency and agencywide contracts, but the federal government does 

not have a clear, comprehensive view of which agencies use these 

contracts and if they are being utilized in an efficient and effective manner. 

Without this information, agencies may be unaware of existing contract 

options that could meet their needs and may be awarding new contracts 

when use of an exiting contract would suffice. The government, therefore, 

might be missing opportunities to better leverage its vast buying power. 

Government contracting officials and representatives of vendors have 

expressed concerns about potential duplication among the interagency 

and agencywide contracts across government, which they said can result 

in increased procurement costs, redundant buying capacity, and an 

increased workload for the acquisition workforce. Some vendors stated 

they offer similar products and services on multiple contracts and that the 

effort required to be on multiple contracts results in extra costs to the 

vendor, which they pass to the government through increased prices. 

Some vendors stated that the additional cost of being on multiple 

contracts ranged from $10,000 to $1,000,000 per contract due to increased 

bid and proposal and administrative costs. One vendor stated that General 

Services Administration contracts compete with agencywide contracts, 

Page 70 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Improved Data on Interagency Contracting 

Needed to Minimize Duplication and Better 

Leverage the Government’s Buying Power 

and from industry’s perspective, this has introduced redundant buying 

capacity. 

For several years the General Service Administration’s Federal Acquisition 

Service and its Inspector General have reported that unnecessary 

duplication exists within the Multiple Award Schedule (MAS) program. 

Similarly, the January 2007 Report of the Acquisition Advisory Panel 

identified several problems regarding interagency contracting. In 

particular, the report noted that too many choices without information 

related to the performance and management of these contracts make the 

cost-benefit analysis and market research needed to select an appropriate 

acquisition contract impossible. Such problems persist, as GAO reported 

in April 2010. 

GAO has identified two overriding factors that hamper the government’s 

ability to realize the strategic value of using interagency and agencywide 

contracts: (1) the lack of consistent governmentwide policy on the 

creation, use, and costs of awarding and administering some contracts; 

and (2) long-standing problems with the quality of information on 

interagency and agencywide contracts in the federal procurement data 

system. Both factors may have contributed to unnecessary duplication. 

In April 2010, GAO recommended that the Office of Management and 

Budget (OMB), which has governmentwide procurement policy 

responsibilities, establish a policy framework for establishing some types 

of interagency contracts and agencywide contracts, including a 

requirement to conduct a sound business case. GAO also recommended 

that OMB take steps to improve the data on interagency contracts 

including updating existing data on interagency and agencywide contracts, 

ensuring that departments and agencies accurately record this data, and 

assessing the feasibility of creating and maintaining a centralized database 

of interagency and agencywide contracts. This database would allow 

contracting officers to identify and make informed decisions on available 

contracts. GAO’s recommendations were consistent with provisions in the 

2009 National Defense Authorization Act, which directed that the Federal 

Acquisition Regulation be amended to require that certain interagency 

contracts entered into by an executive agency be supported by a business 

case analysis and all interagency contracting be supported by a written 

determination that the approach is the best procurement alternative. An 

interim regulation addressing the legislation was issued in December 2010. 

OMB has taken some steps to improve interagency contracting and related 

data. It reported in August 2010 that agencies are working to improve their 

Page 71 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Improved Data on Interagency Contracting 

Needed to Minimize Duplication and Better 

Leverage the Government’s Buying Power 

internal management controls, such as making determinations that using 

another agency’s contract is in the best interest of the government. In 

addition to the recent interim regulation, OMB reported that it planned to 

issue overarching guidance that would address the need for agencies to 

prepare business cases describing the need for a new multiagency or 

agencywide contract, the value added by its creation, and the agency’s 

suitability to serve as an executive agent. According to OMB, the 

upcoming guidance will require agencies to address the anticipated impact 

that a proposed multiagency contract will have on the government’s ability 

to leverage its buying power—such as how it differs from an existing 

contract and the basis for concluding that it will offer greater value than 

an existing contract. This business case analysis also will require the 

agency to evaluate the cost of awarding and managing the contract and 

compare this cost to the likely fees that would be incurred if the agency 

used an existing contract or sought out acquisition assistance. 

While the interim regulation and OMB’s plans concerning a requirement 

for agencies to submit business cases for new multiagency or agencywide 

contracts constitute steps forward, in the absence of better data regarding 

the universe of such contracts, agencies may face challenges in evaluating 

the value of existing contracts. GAO has reported numerous times over the 

years on issues related to the quality of the government’s data on 

contracts. In that regard, OMB reports that it has a new effort under way 

to improve contract information in the Federal Procurement Data SystemNext Generation (FPDS-NG), the current federal government database for 

information and data on all federal contracts. OMB also is discussing 

options for creating a clearinghouse of existing interagency and 

agencywide contracts. 

In OMB’s announcement of its planned guidance, it noted that progress 

has been insufficient on the issue of contract duplication and concerns 

remain that agencies are duplicating each other’s contracting efforts and 

creating redundant contracting capacity. Until controls to address the 

issue of duplication are fully implemented, the government will continue 

to miss opportunities to take advantage of the government’s buying power 

through more efficient and more strategic contracting. At the same time, 

the added workload for the acquisition workforce and procurement costs 

for vendors, which result in higher prices for the government, will 

continue until this problem is addressed. 

Page 72 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Improved Data on Interagency Contracting 

Needed to Minimize Duplication and Better 

Leverage the Government’s Buying Power 

Actions Needed and 

Potential Financial or 

Other Benefits 

To realize the benefits of using interagency and agencywide contracts, 

OMB and the General Services Administration will need to fully implement 

the steps they are taking to address identified shortcomings in the 

management of interagency contracting. The procuring agencies will have 

to play their parts as well. In particular, despite numerous GAO 

recommendations over the years, improvements are still needed regarding 

the accuracy of the federal contracts database in order to determine 

whether the contracts are being used in an efficient and effective manner. 

Continued congressional oversight of this issue is warranted. 

Requiring business case analyses for new multiagency and agencywide 

contracts and ensuring agencies have access to up-to-date and accurate 

data on the available contracts will promote the efficient use of 

interagency and agencywide contracting and, by reducing the costs 

associated with duplicate contracts, help the government better leverage 

its purchasing power when buying commercial goods and services. 

The information contained in this analysis has been based on the related Framework for products list below, with updates provided through the OMB Report to 

Analysis Congress from August 2010 and an interview with OMB officials. GAO 

determined that the data it used were sufficiently reliable for its purposes. 

Related GAO 

Products 

Contracting Strategies: Better Data and Management Needed to Leverage 

Value of Interagency and Enterprisewise Contracts. GAO-10-862T. 

Washington, D.C.: June 30, 2010. 

Contracting Strategies: Data and Oversight Problems Hamper 

Opportunities to Leverage Value of Interagency and Enterprisewide 

Contracts. GAO-10-367. Washington, D.C.: April 29, 2010. 

Federal Contracting: Observations on the Government’s Contracting 

Data Systems. GAO-09-1032T. Washington, D.C.: September 29, 2009. 

High-Risk Series: An Update. GAO-09-271 Washington, D.C.: January 

2009. 

Interagency Contracting: Need for Improved Information and Policy 

Implementation at the Department of State. GAO-08-578. Washington, 

D.C.: May 8, 2008. 

Page 73 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Improved Data on Interagency Contracting
 

Needed to Minimize Duplication and Better 


Leverage the Government’s Buying Power
 

Department of Homeland Security: Better Planning and Assessment 

Needed to Improve Outcomes for Complex Service Acquisitions. 

GAO-08-263. Washington, D.C.: April 22, 2008. 

Federal Acquisition: Oversight Plan Needed to Help Implement 

Acquisition Advisory Panel Recommendations. GAO-08-160. Washington, 

D.C.: December 20, 2007. 

A Call For Stewardship: Enhancing the Federal Government’s Ability to 

Address Key Fiscal and Other 21st Century Challenges. GAO-08-93SP. 

Washington, D.C.: December 2007. 

Improvements Needed to the Federal Procurement Data System-Next 

Generation. GAO-05-960R. Washington, D.C.: September 27, 2005. 

Contract Management: Opportunities to Improve Pricing of GSA 

Multiple Award Schedules Contracts. GAO-05-229. Washington, D.C.: 

February 11, 2005. 

High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 

2005. 

Contract Management: Guidance Needed to Promote Competition for 

Defense Task Orders. GAO-04-874. Washington D.C.: July 30, 2004. 

For additional information about this area, contact John Needham at Area Contact (202) 512-4841 or needhamjk1@gao.gov. 

Page 74 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Periodic Reviews Could Help Identify 

Ineffective Tax Expenditures and 

Redundancies in Related Tax and Spending 

Programs 

 

Periodic Reviews Could Help Identify Ineffective Tax 

Expenditures and Redundancies in Related Tax and 

Spending Programs 

Why GAO Is Focusing 

on This Area 

According to the sum of U.S. Department of the Treasury estimates for 

fiscal year 2009, almost $1 trillion in federal revenue was forgone due to 

tax exclusions, credits, deductions, deferrals, and preferential tax rates— 

legally known as tax expenditures. The revenue that the government 

forgoes is viewed by many analysts as spending channeled through the tax 

system. Similar to spending programs, tax expenditures represent a 

substantial federal commitment in a wide range of mission areas. For 

fiscal year 2009, the U.S. Department of the Treasury listed a total of 173 

tax expenditures, some of which were of the same magnitude or larger 

than related federal spending for some mission areas. Like mandatory 

spending programs such as Medicare, many tax expenditures are governed 

by eligibility rules and formulas that provide benefits to those who are 

eligible and wish to participate. Since 1994, GAO has recommended 

greater scrutiny of tax expenditures. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Tax expenditures, if well designed and effectively implemented, can be an 

effective tool to further federal goals, such as encouraging economic 

development in disadvantaged areas, financing higher education, and 

stimulating research and development. However, tax expenditures can 

contribute to mission fragmentation and program overlap, thus creating 

the potential for duplication. Moreover, some tax expenditures may be 

ineffective at achieving their social or economic purposes. Tax 

expenditures do not compete overtly with other priorities in the annual 

budget, and spending embedded in the tax code is effectively funded 

before discretionary spending is considered. Many tax expenditures are 

not subject to congressional reauthorization. Therefore, Congress lacks 

the opportunity to regularly review their effectiveness. Periodic reviews 

could help identify redundancy in related tax and spending programs and 

determine how well specific tax expenditures work to achieve their goals 

and how their benefits and costs compare to those of programs with 

similar goals. 

In the case of higher education, the federal government offers seven tax 

expenditures and nine spending programs—grant and loan programs 

authorized by Title IV of the Higher Education Act of 1965—to help 

students and their families pay for postsecondary education. In 2005, the 

number of tax filers claiming a higher education tax credit or tuition 

deduction surpassed the number of Title IV aid recipients. Perhaps due to 

the multiple, complex tax provisions, hundreds of thousands of taxpayers 

in 2005 failed to claim tax incentives or did not claim the most 

advantageous tax benefit. Simplifying the tax, grant, and loan programs 

may reduce complexities in higher education financing, including reducing 

Page 75 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Periodic Reviews Could Help Identify 

Ineffective Tax Expenditures and 

Redundancies in Related Tax and Spending 

Programs 

the number of eligible taxpayers that do not claim tax benefits. However, 

GAO reported in 2008 that Congress had received little information about 

the roles and effectiveness of the tax and Title IV programs. 

To date, the Office of Management and Budget (OMB) has not used its 

budget and performance review processes to systematically review tax 

expenditures and promote integrated reviews of related tax and spending 

programs. 

Past GAO reviews of specific tax expenditures have identified options to 

improve their design and better target resources. For example, in 2010, 

GAO suggested that Congress modify the Research Tax Credit to reduce 

windfalls to taxpayers for research spending they would have done 

anyway. GAO also suggested that Congress convert at least part of the 

New Markets Tax Credit to a grant program to increase the amount of 

federal subsidy reaching businesses in impoverished, low-income 

communities. 

Data availability has been a challenge in assessing tax expenditure 

performance. In the case of the Empowerment Zone, Enterprise 

Community, and Renewal Community programs, the lack of tax benefit 

data limits the ability of the Department of Housing and Urban 

Development (HUD) and the Department of Agriculture to evaluate the 

overall mix of grant and tax programs to revitalize selected urban and 

rural communities. In response to GAO recommendations, HUD and the 

Internal Revenue Service (IRS) collaborated to share data on some 

program tax credits. However, the IRS data do not tie the program tax 

incentives to specific designated communities, making it difficult to assess 

the impact of the tax benefits. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Coordinated reviews of tax expenditures with related federal spending 

programs could help policymakers reduce overlap and inconsistencies and 

direct scarce resources to the most effective or least costly methods to 

deliver federal support. 

In 2005, GAO recommended that the Director of the Office of Management 

and Budget in consultation with the Secretary of the Treasury take specific 

actions to ensure that policymakers have necessary information to 

exercise scrutiny of tax expenditures: 

•	 Present tax expenditures in the budget together with related outlay 

programs. 

Page 76 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Periodic Reviews Could Help Identify 


Ineffective Tax Expenditures and 


Redundancies in Related Tax and Spending 


Programs 


•	 Develop and implement a framework for conducting performance 

reviews of tax expenditures. This includes (1) outlining leadership 

responsibilities and coordination among agencies with related 

responsibilities; (2) setting a review schedule; (3) identifying review 

methods and ways to address the lack of credible tax expenditure 

performance information; and (4) identifying resources needed for tax 

expenditure reviews. 

•	 Develop guidance on incorporating tax expenditures in agencies’ 

strategic plans and performance reports. 

•	 Require that tax expenditures be included in Executive Branch budget 

and performance review processes. 

The Executive Branch had made little progress in implementing similar 

recommendations that GAO made in 1994, and, OMB, citing 

methodological and conceptual issues, disagreed with GAO’s 2005 

recommendations. However, in its fiscal year 2012 budget guidance, OMB 

instructed agencies, where appropriate, to analyze how to better integrate 

tax and spending policies that have similar objectives and goals. Such 

analysis could be useful in identifying redundancies. 

Improving tax expenditure performance or eliminating tax expenditures 

could reduce revenue losses, potentially by billions of dollars. For 

example, improved designs may enable individual tax expenditures to 

achieve better results for the same revenue loss or the same results with 

less revenue loss. Also, reductions in revenue losses from eliminating 

ineffective or redundant tax expenditures could be substantial depending 

on the size of the eliminated provisions. Whether and how much federal 

revenues would increase from improving tax expenditures’ performance 

or eliminating them also would depend on whether and how much 

Congress might adjust overall tax rates as tax expenditure inefficiencies 

are addressed. GAO believes that tax expenditure performance is an area 

that would benefit from enhanced congressional scrutiny as Congress 

considers ways to address the nation’s long-term fiscal imbalance. 

The information contained in this analysis is based on the related GAO Framework for products listed below and GAO’s work following up on the 

Analysis recommendations from those products. 

Page 77 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Periodic Reviews Could Help Identify 


Ineffective Tax Expenditures and 


Redundancies in Related Tax and Spending 


Programs 


Related GAO 

Products 

Revitalization Programs: Empowerment Zones, Enterprise 

Communities, and Renewal Communities. GAO-10-464R. Washington, 

D.C.: March 12, 2010. 

New Markets Tax Credit: The Credit Helps Fund a Variety of Projects in 

Low-Income Communities, but Could Be Simplified. GAO-10-334. 

Washington, D.C.: January 29, 2010. 

Tax Policy: The Research Tax Credit’s Design and Administration Can 

Be Improved. GAO-10-136. Washington, D.C: November 6, 2009. 

Higher Education: Multiple Higher Education Tax Incentives Create 

Opportunities for Taxpayers to Make Costly Mistakes. GAO-08-717T. 

Washington, D.C.: May 1, 2008. 

21st Century Challenges: How Performance Budgeting Can Help. 

GAO-07-1194T. Washington, D.C.: September 20, 2007. 

Empowerment Zone and Enterprise Community Program: 

Improvements Occurred in Communities, but the Effect of the Program 

is Unclear. GAO-06-727. Washington, D.C.: September 22, 2006. 

Government Performance and Accountability: Tax Expenditures 

Represent a Substantial Federal Commitment and Need to Be 

Reexamined. GAO-05-690. Washington, D.C.: September 23, 2005. 

Student Aid and Postsecondary Tax Preferences: Limited Research 

Exists on Effectiveness of Tools to Assist Students and Families through 

Title IV Student Aid and Tax Preferences. GAO-05-684. Washington, D.C.: 

July 29, 2005. 

Community Development: Federal Revitalization Programs Are Being 

Implemented, but Data on the Use of Tax Benefits Are Limited. 

GAO-04-306. Washington, D.C.: March 5, 2004. 

Tax Policy: Tax Expenditures Deserve More Scrutiny. 

GAO/GGD/AIMD-94-122. Washington, D.C.: June 3, 1994. 

For additional information about this area, contact Michael Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 78 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Opportunities Exist for DOD and VA to 

Jointly Modernize Their Electronic Health 

Record Systems 

 

Opportunities Exist for DOD and VA to Jointly 

Modernize Their Electronic Health Record Systems 

Why GAO Is Focusing 

on This Area 

The Departments of Defense (DOD) and Veterans Affairs (VA) operate two 

of the nation’s largest health care systems, providing health care to 9.6 

million active duty service members and their beneficiaries and 6 million 

veterans at estimated annual costs of about $49 billion and $48 billion, 

respectively. Although they have identified many common health care 

business needs, both departments have spent large sums of money to 

develop and operate electronic health record systems that they rely on to 

create and manage patient health information. Furthermore, the 

departments have each begun multimillion dollar modernizations of their 

electronic health record systems. Specifically, DOD has obligated 

approximately $2 billion over the 13-year life of its Armed Forces Health 

Longitudinal Technology Application (AHLTA) and requested $302 million 

in fiscal 2011 year funds for a new system. For its part, VA reported 

spending almost $600 million from 2001 to 2007 on eight projects as part of 

its Veterans Health Information Systems and Technology Architecture 

(VistA) modernization. In April 2008, VA estimated an $11 billion total cost 

to complete the modernization by 2018. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Although DOD and VA have many common health care business needs, the 

departments have begun separate modernizations of their electronic 

health record systems. Reduced duplication in this area could save system 

development and operation costs while supporting higher-quality health 

care for service members and veterans. 

In May 2010, the departments identified 10 areas—inpatient 

documentation, outpatient documentation, pharmacy, laboratory, order 

entry and management, scheduling, imaging and radiology, third-party 

billing, registration, and data sharing—in which they have common 

business needs. Moreover, the results of a 2008 study conducted for the 

departments found that over 97 percent of functional requirements for an 

inpatient electronic health record system are common to both 

departments. Nevertheless, DOD has initiated an effort called the EHR 

(Electronic Health Record) Way Ahead to modernize AHLTA. At the same 

time, VA has begun a separate effort to modernize VistA. 

The departments’ distinct modernization efforts are due in part to barriers 

they face to jointly addressing their common health care system needs. 

These barriers stem from weaknesses in three key information technology 

(IT) management areas: strategic planning, enterprise architecture, and 

investment management. First, the departments have not articulated 

explicit plans, goals, and time frames for jointly addressing the health IT 

requirements common to their electronic health record systems. For 

Page 79 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist for DOD and VA to 

Jointly Modernize Their Electronic Health 

Record Systems 

example, DOD’s and VA’s joint strategic plan, which is intended to 

describe the departments’ coordination and sharing efforts, does not 

discuss how or when the departments propose to identify and develop 

joint health IT solutions, and department officials have not yet determined 

whether the IT capabilities developed for the new Federal Health Care 

Center can or will be implemented at other DOD and VA medical facilities. 

Second, although DOD and VA have taken steps toward developing and 

maintaining elements of a joint health architecture, such as a description 

of business processes and supporting technologies, it is not being used to 

guide the departments’ health IT modernization efforts. For example, the 

departments have not defined how they intend to transition from their 

current architecture to a planned future state. Third, DOD and VA have not 

established a joint process for selecting IT investments based on criteria 

that consider cost, benefit, schedule, and risk elements, which would help 

to ensure that the chosen solution meets their common health IT needs 

and provides better value and benefits to the government as a whole. 

Without these key management capabilities in place, DOD and VA are 

impeded in identifying and implementing efficient and effective IT 

solutions to jointly address their common needs and achieving the 

seamless, comprehensive access to information that is necessary to 

optimally treat patients as they transition from servicemember to veteran 

status. 

Actions Needed and 

Potential Financial or 

Other Benefits 

GAO’s recent work identified several actions that the Secretaries of 

Defense and Veterans Affairs could take to overcome barriers that DOD 

and VA face in modernizing their electronic health record systems to 

jointly address their common health care business needs, including the 

following: 

•	 Revise the departments’ joint strategic plan to include information 

discussing their electronic health record system modernization efforts 

and how those efforts will address the departments’ common health 

care business needs. 

•	 Further develop the departments’ joint health architecture to include 

their planned future state and transition plan from their current state to 

the next generation of electronic health record capabilities. 

•	 Define and implement a process, including criteria that considers costs, 

benefits, schedule, and risks, for identifying and selecting joint IT 

investments to meet the departments’ common health care business 

needs. 

Page 80 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Opportunities Exist for DOD and VA to 

Jointly Modernize Their Electronic Health 

Record Systems 

Officials from both DOD and VA agreed with these recommendations. 

GAO will continue to monitor their progress on this important issue. 

Efforts by the departments to jointly identify and develop common IT 

solutions to address their mutual health care needs could result in system 

development and operation cost savings while supporting higher-quality 

health care for service members and veterans. Although the financial 

benefit of reducing duplication in this area is to be determined, a joint 

approach to electronic health record modernization should not only result 

in cost savings, it should also improve the departments’ ability to share 

health information, which in turn can optimize the quality of health care 

the departments provide to service members and veterans. 

The information contained in this analysis is based on findings from GAO’s Framework for recent report on DOD and VA electronic health record system 

Analysis modernizations and the other products listed below. 

Related GAO 

Products 

Electronic Health Records: DOD and VA Should Remove Barriers and 

Improve Efforts to Meet Their Common System Needs. GAO-11-265. 

Washington, D.C.: February 2, 2011. 

Information Technology: Opportunities Exist to Improve Management of 

DOD’s Electronic Health Record Initiative. GAO-11-50. Washington, D.C.: 

October 6, 2010. 

Information Technology: Management Improvements Are Essential to 

VA’s Second Effort to Replace Its Outpatient Scheduling System. 

GAO-10-579. Washington, D.C.: May 27, 2010. 

Electronic Health Records: DOD and VA Interoperability Efforts Are 

Ongoing; Program Office Needs to Implement Recommended 

Improvements. GAO-10-332. Washington D.C.: January 28, 2010. 

Veterans Affairs: Health Information System Modernization Far from 

Complete; Improved Project Planning and Oversight Needed. 

GAO-08-805. Washington, D.C.: June 30, 2008. 

For additional information about this area, contact Valerie C. Melvin at Area Contact (202) 512-6304 or melvinv@gao.gov. 

Page 81 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

 

 

 

VA and DOD Need to Control Drug Costs and Increase 

Joint Contracting Whenever it is Cost Effective 

Why GAO Is Focusing 

on This Area 

The Department of Veterans Affairs (VA) and the Department of Defense 

(DOD) spent about $11.4 billion on prescription drugs for beneficiaries in 

fiscal year 2009. Reflecting national trends, VA and DOD drug 

expenditures have risen significantly. Since the early 1980s, Congress has 

urged the departments to achieve greater efficiencies through increased 

collaboration. Therefore, VA and DOD have attempted to restrain 

pharmacy costs by jointly contracting for some drugs to obtain discounts 

from drug manufacturers. In 2001, GAO recommended that VA and DOD 

jointly procure all brand name and generic drugs for which such 

procurement was clinically appropriate and cost-effective and report to 

Congress annually on their joint drug procurement efforts. VA and DOD 

agreed with GAO’s recommendations. Also, GAO testified that addressing 

differences in their health care systems could increase joint contracting 

for brand name drugs, which make up a smaller share of the departments’ 

drug volume than generic drugs but account for a far higher share of 

expenditures. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

As GAO previously recommended, from fiscal year 2002 through 2005, VA 

and DOD increased joint procurement of brand name and generic drugs. 

However, GAO found that by fiscal year 2009, joint national contracts1

 for 

prescription drugs accounted for only a small proportion of VA and DOD 

spending on prescription drugs. Specifically, in fiscal year 2009, VA spent 

about $3.7 billion and DOD spent about $7.7 billion on prescription drugs, 

while spending under joint national contracts represented about 5 percent 

and less than 1 percent of those totals, respectively. As the following bar 

chart shows, although VA and DOD spending on joint national contracts 

increased from $183 million on 76 contracts in fiscal year 2002 to $560 

million on 84 contracts in fiscal year 2005, it decreased by fiscal year 2009 

to $214 million on 67 contracts.2 

1

Joint national contracts are one of the strategies used by VA and DOD to obtain discounts 

on drugs from manufacturers beyond those that might otherwise be available to federal 

purchasers. 

2

The Veterans Benefits and Health Care Improvement Act of 2000 included a provision 

encouraging VA and DOD to increase their level of cooperation in the procurement and 

management of prescription drugs. Pub. L. No. 106-419, § 223, 114 Stat. 1822, 1845 (2000). 

Page 82 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

VA

VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

VA and DOD Joint National Contracts and Spending 

Spending on Joint National Contracts (dollars in millions) 

2002 2003 2004 2005 2006 2007 2008 2009 

0 

100 

200 

300 

400 

500 

600 

187 193

301 308

422 367 

207 

116 

37 21 82 

163

138

140 

104 

67 

214 224 

390 

464 

560 

507 

311 

183

Year 

76 85 81 84 78 65 59 67

Total Joint National Contracts by year 

DOD 

VA 

Sources: VA and DOD. 

With regard to brand name drugs—which account for more than 80 

percent of VA’s and DOD’s total drug spending—VA and DOD had no joint 

national contracts for brand name drugs in 2002, had three in 2003, four in 

2004 and 2005, three in 2006, two in 2007, and none in 2008 or 2009. VA and 

DOD have attributed significant cost avoidance3

 to their joint contracting 

efforts; for example, VA estimated about $666 million in cost avoidance in 

fiscal year 2005 alone. These cost avoidance estimates have declined 

significantly as joint contract spending has decreased. 

VA and DOD officials attributed the decline in joint contracting since 2005 

primarily to the elimination of joint contracting for brand name drugs due 

to a change to DOD’s drug procurement process which occurred as a 

3

VA and DOD generally calculate the cost avoidance attributable to joint contracting efforts 

by determining the difference between actual costs under the joint contract pricing and 

estimated costs they would have incurred had the joint contract pricing not been in place. 

Page 83 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

result of its implementation of its uniform formulary.4,5 Prior to DOD’s 

implementation of its uniform formulary process, a VA contracting officer 

offered formulary placement to a drug manufacturer in connection with 

the award of a brand name drug joint contract, taking into account clinical 

reviews conducted by the relevant VA and DOD committees.6

 By statute, 

responsibility for DOD’s uniform formulary is vested under the Secretary 

of Defense, and by DOD regulation the Director of DOD’s TRICARE 

Management Activity is responsible for formulary placement decisions.7 

VA and DOD officials told us that DOD’s uniform formulary process 

therefore precludes DOD from participating in a VA-led joint contract that 

offers formulary placement as part of the contracting process. According 

to VA and DOD, they can still jointly contract for generic drugs because 

these contracts do not usually require formulary addition.8

 In 2001, GAO 

reported that a DOD uniform formulary could increase joint contracting 

opportunities because the larger the departments’ formularies, the greater 

the chance they would overlap and provide opportunities to jointly 

procure brand name drugs. However, DOD’s formulary process appears to 

have limited rather than increased joint contracting opportunities. VA data 

confirm that the decline in spending under joint national contracts since 

4

Formularies are lists of medications that health care organizations encourage or require 

providers to prescribe for patients. By concentrating their purchases on particular drugs, 

organizations can negotiate with manufacturers to secure better prices. Likewise, 

manufacturers have a strong interest in having their drugs listed on formularies in order to 

capture greater market shares for their drugs. VA and DOD each has had centralized 

formularies since 1997, but DOD implemented its current uniform formulary in fiscal year 

2005. 

5

DOD was required by the National Defense Authorization Act for Fiscal Year 2000 to 

establish a uniform formulary. Pub. L. No. 106-65, § 701, 113 Stat. 512, 677-80 (1999). 

Neither the act nor the accompanying reports addressed joint contracting with VA, and it is 

not clear whether or not Congress considered the matter when passing the uniform 

formulary requirement. 

6

For VA these committees are the VA Pharmacy Benefits Management Strategic Healthcare 

Group, Medical Advisory Panel, and Veterans Integrated Service Network Formulary 

Leaders Committee. For DOD, this committee is the Pharmacy & Therapeutics Committee. 

7

TRICARE is DOD’s regionally structured health care program for active duty personnel 

and their dependents, eligible National Guard and Reserve servicemembers and their 

dependents, and retirees and their dependents and survivors. 

8

Typically, a generic drug being considered for a joint national contract would already be 

included on VA’s and DOD’s formularies. For generic drug joint contracts, one 

manufacturer is selected from a group of manufacturers who make the same generic drug. 

In contrast, a joint contract for a brand name drug would typically involve selection of one 

brand name drug from a group of drugs that were determined to be therapeutic 

alternatives, with the selected drug being placed on the formularies. 

Page 84 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

2005 can be largely attributed to the elimination of joint contracting for 

costly brand name drugs. VA data show that spending under joint national 

contracts for generic drugs has remained relatively constant between 

fiscal years 2005 and 2009, fluctuating between $175 million and $196 

million, while VA spending under joint national contracts for brand name 

drugs declined over this period, from $232 million in 2005 to $0 in 2008 and 

2009. 

In addition, officials told us that joint contracting is not available for a 

large segment of drug spending. Specifically, DOD does not contract, 

jointly or on its own, for drugs dispensed through retail pharmacies. In 

fiscal year 2009, DOD officials reported $5.8 billion in retail pharmacy drug 

spending, none of which currently presents a joint contracting 

opportunity. 

Despite the limits to joint contracting, VA and DOD officials said they are 

independently achieving cost savings in other ways. VA officials told us 

that VA obtains equally good prices working independently as it does 

when it jointly contracts with DOD, and consequently VA officials believe 

VA is not missing any savings opportunities by not jointly contracting with 

DOD for brand name drugs. VA officials told us they do not think 

additional joint contracting could lead to increased cost savings for VA. 

Additionally, DOD officials said that while joint contracting has declined, 

their uniform formulary process has been more effective at producing 

savings, citing $926 million in cost avoidance in fiscal year 2007.9 

Actions Needed and 

Potential Financial or 

Other Benefits 

While VA and DOD officials assert they are independently achieving 

significant drug cost savings, the departments’ spending on brand-name 

drugs has been increasing, totaling almost $10 billion dollars in fiscal year 

2009, or about 85 percent of the approximately $11.4 billion in total drug 

spending that year. Since it is unclear whether substantial cost savings 

could be realized if the departments resumed joint contracting for brand 

name drugs, VA and DOD should analyze whether greater cost savings 

could be achieved through joint contracting for brand name drugs than are 

currently achieved through their independent strategies, and determine 

whether it would be cost-effective to take steps to resume joint 

9

For more information about uniform formulary cost savings, see GAO, DOD Pharmacy 

Benefits Program: Reduced Pharmacy Costs Resulting from the Uniform Formulary and 

Manufacturer Rebates, GAO-08-172R (Washington, D.C.: Oct. 31, 2007). 

Page 85 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

 

VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

contracting for brand name drugs. Regardless of whether joint contracting 

for brand name drugs is practicable, the departments face continued 

challenges in controlling increasing drug costs, and should make finding 

drug savings a priority. For example, GAO previously recommended that 

DOD identify, implement, and monitor efforts to control retail pharmacy 

spending, an area for which drug spending is increasing and cannot be 

controlled through joint contracting efforts.10 DOD agreed with this 

recommendation. The departments should also continue their efforts to 

jointly contract for generic drugs, and look for opportunities to increase 

joint contracting efforts as generic versions of existing brand name drugs 

become available. Officials noted, for example, that generic versions of 

drugs for reducing cholesterol and controlling asthma may become 

available within a few years. 

VA and DOD provided comments on GAO’s draft analysis of this issue. VA 

stated that it would explore whether cost savings might be possible if it 

resumed joint contracting for brand name drugs, and agreed that the 

departments should continue and potentially increase joint contracting for 

generic drugs. DOD concurred with the draft and offered additional 

contextual information. For example, DOD noted that while its retail 

pharmacy network remains the largest and most costly component of its 

pharmacy benefit, the agency has received a total of over $960 million in 

federal pricing discounts11 on purchases made through retail pharmacies in 

fiscal years 2009 and 2010.12 

Framework for 

Analysis 

The information contained in this analysis is based in part on the related 

GAO products listed below. In addition, to determine the factors that 

contributed to the decline in joint contracting since 2005, GAO interviewed 

VA and DOD pharmacy and procurement officials and obtained and 

reviewed relevant documents, including articles and reports to Congress 

related to VA’s and DOD’s pharmacy management systems. GAO also 

reviewed VA and DOD drug spending and joint contracting data from 2002 

10See GAO, DOD Pharmacy Program: Continued Efforts Needed to Reduce Growth in 

Spending at Retail Pharmacies, GAO-08-327 (Washington, D.C.: Apr. 4, 2008). 

11The National Defense Authorization Act for Fiscal Year 2008 required that federal pricing 

arrangements be applied to drugs dispensed at retail pharmacies as of January 28, 2008. See 

Pub. L. No. 110-181, § 703, 122 Stat. 3, 188 (codified at 10 U.S.C. § 1074g(f)). 

12DOD reported federal pricing discounts received through July 31, 2010. 

Page 86 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

VA and DOD Need to Control Drug Costs and 

Increase Joint Contracting Whenever it is 

Cost Effective 

through 2009 and determined that the data were sufficiently reliable for 

use in this report. 

Related GAO 

Products 

Prescription Drugs: Overview of Approaches to Control Prescription 

Drug Spending in Federal Programs. GAO-09-819T. Washington, D.C.: 

June 24, 2009. 

DOD Pharmacy Program: Continued Efforts Needed to Reduce Growth 

in Spending at Retail Pharmacies. GAO-08-327. Washington, D.C.: April 4, 

2008. 

DOD Pharmacy Benefits Program: Reduced Pharmacy Costs Resulting 

from the Uniform Formulary and Manufacturer Rebates. GAO-08-172R. 

Washington, D.C.: October 31, 2007. 

Mail Order Pharmacies: DOD’s Use of VA’s Mail Pharmacy Could 

Produce Savings and Other Benefits. GAO-05-555. Washington, D.C.: June 

22, 2005. 

DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly 

Buying and Mailing Out Drugs. GAO-01-588. Washington, D.C.: May 25, 

2001. 

DOD and VA Health Care: Jointly Buying and Mailing Out 

Pharmaceuticals Could Save Millions of Dollars. T-HEHS-00-121. 

Washington, D.C.: May 25, 2000. 

For additional information about this area, contact Randall B. Williamson Area Contact at (202) 512-7114 or williamsonr@gao.gov. 

Page 87 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
HHS Needs an Overall Strategy to Better 

Integrate Nationwide Public Health 

Information Systems 

 

 

HHS Needs an Overall Strategy to Better Integrate 

Nationwide Public Health Information Systems 

Why GAO Is Focusing 

on This Area 

Public health functions in the United States—such as disease surveillance 

and emergency detection and response—are conducted by public health 

officials from 59 state and territorial health departments; more than 3,000 

local health departments; over 180,000 clinical laboratories; and multiple 

federal agencies. As the federal point of contact for public health 

initiatives, the Department of Health and Human Services (HHS) is 

responsible for coordinating nationwide efforts to detect and respond to 

disease outbreaks and other public health emergencies. Because of the 

many participants involved, the identification and management of public 

health emergencies call for effective communication and collaboration 

across all levels of government and the private sector. In addition, officials 

at HHS and other federal, state, and local agencies recognize the need to 

improve the use of information technology to collect, analyze, and share 

data that can be used to enhance nationwide public health situational 

awareness—that is, public knowledge of key health-related events and the 

availability of medical and emergency response resources. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

HHS has taken steps over the past decade to improve the ability of public 

health entities to electronically collect, analyze, and share information that 

supports early event detection and emergency response operations, but 

the department’s initiatives have been undertaken without the strategic 

planning needed to coordinate and integrate the priorities, goals, and 

objectives of various related initiatives. HHS officials have identified at 

least 25 information technology systems that are key to the department’s 

efforts to support public health situational awareness. In fiscal year 2009, 

reported costs for developing and implementing these systems were 

approximately $40 million. Additionally, other federal, state, local, and 

tribal public health entities throughout the country have expended scarce 

resources to develop and implement numerous other systems for 

conducting public health functions within their own jurisdictions. 

HHS has also defined data and other technical standards intended to 

better enable public health entities throughout the nation to develop and 

implement interoperable systems for collecting, analyzing, and sharing 

data. However, the department has not developed and implemented an 

overall strategy that defines goals, objectives, and priorities and that 

integrates related strategies to achieve the unified electronic nationwide 

situational awareness capability required by the Pandemic and All-Hazards 

Preparedness Act.1

 Rather, HHS and the public health community have 

1

Pub. L. No. 109-417 (Dec. 19, 2006). 

Page 88 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

HHS Needs an Overall Strategy to Better 

Integrate Nationwide Public Health 

Information Systems 

developed and implemented information systems to enhance public health 

situational awareness in an often stove-piped fashion, focusing on specific 

public health functions. Therefore, public health entities are limited in 

their ability to electronically collect, analyze, and share information 

needed to enhance public health situational awareness and improve the 

effectiveness of their efforts to prepare for and respond to public health 

emergencies. 

In December 2006, the Pandemic and All-Hazards Preparedness Act 

mandated that the Secretary of HHS, in collaboration with state, local, and 

tribal public health entities, develop and implement a strategic plan for the 

establishment of an electronic network of interoperable systems to 

enhance nationwide public health situational awareness. GAO’s December 

2010 report on HHS’s efforts to establish an electronic network for 

enhancing nationwide situational awareness of public health emergencies 

found that the Secretary of HHS had not developed and delivered a 

strategic plan within 180 days of the mandate as required (i.e., by June 16, 

2007). Without an overall strategic plan that defines requirements for 

establishing and evaluating the capabilities of existing and planned 

information systems implemented throughout the public health 

community, HHS cannot be assured that its resources are being effectively 

used to provide a unified electronic nationwide public health situational 

awareness capability. Further, absent more effective planning, HHS runs 

the risk of expending additional funds for continued fragmented efforts 

without realizing the mandated goal. 

Actions Needed and 

Potential Financial or 

Other Benefits 

GAO’s December 2010 report recommended that the Secretary of HHS 

develop and implement a strategic plan that defines goals, objectives, and 

priorities for establishing an electronic public health situational awareness 

network. Such a plan should include performance measures for evaluating 

capabilities of existing and planned information systems. Additionally, the 

strategic plan should integrate related strategies and information 

technology initiatives within HHS for sharing information among federal, 

state, local, and tribal entities. In responding to the report, HHS stated that 

a complete strategy for health and public health situational awareness will 

be developed and incorporated into the Biennial Implementation Plan for 

the National Health Security Strategy, which will identify actions to be 

accomplished in the next 2 years. The department added that it intends to 

release this first biennial plan in early 2011. As discussed in GAO’s report, 

developing a strategic plan that integrates the goals, objectives, and 

priorities of related strategies will be essential to establishing 

cohesiveness of HHS’s related information technology initiatives, therefore 

Page 89 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

HHS Needs an Overall Strategy to Better 


Integrate Nationwide Public Health 


Information Systems 


better ensuring the success of the department’s efforts to support and 

enhance nationwide public health situational awareness. To what extent 

future savings may be expected from this effort are unclear, but more 

effective planning has the potential to ensure more cost-effective efforts in 

the future. 

GAO expects to complete additional work in the future assessing HHS’s 

progress toward developing and implementing an overall strategic plan for 

establishing and evaluating an electronic network of systems that meets 

the information-sharing requirements for enhanced nationwide public 

health situational awareness defined by law. 

The information contained in this analysis is based on the GAO products Framework for listed below. 

Analysis 

Related GAO 

Products 

Public Health Information Technology: Additional Strategic Planning 

Needed to Guide HHS’s Efforts to Establish Electronic Situational 

Awareness Capabilities. GAO-11-99. Washington, D.C.: December 17, 

2010. 

Biosurveillance: Efforts to Develop a National Biosurveillance 

Capability Need a National Strategy and a Designated Leader. 

GAO-10-645. Washington, D.C.: June 30, 2010. 

Biosurveillance: Developing a Collaboration Strategy Is Essential to 

Fostering Interagency Data and Resource Sharing. GAO-10-171. 

Washington, D.C.: December 18, 2009. 

Health Information Technology: More Detailed Plans Needed for the 

Centers for Disease Control and Prevention’s Redesigned BioSense 

Program. GAO-09-100. Washington, D.C.: November 20, 2008. 

Information Technology: Federal Agencies Face Challenges in 

Implementing Initiatives to Improve Public Health Infrastructure. 

GAO-05-308. Washington, D.C.: June 10, 2005. 

Combating Terrorism: Evaluation of Selected Characteristics in 

National Strategies Related to Terrorism. GAO-04-408T. Washington, 

D.C.: February 3, 2004. 

Page 90 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

HHS Needs an Overall Strategy to Better 


Integrate Nationwide Public Health 


Information Systems 


Bioterrorism: Information Technology Strategy Could Strengthen 

Federal Agencies’ Abilities to Respond to Public Health Emergencies. 

GAO-03-139. Washington, D.C.: May 30, 2003. 

For additional information about this area, contact Valerie C. Melvin at Area Contact (202) 512-6304 or melvinv@gao.gov. 

Page 91 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Strategic Oversight Mechanisms Could Help 

Integrate Fragmented Interagency Efforts to 

Defend against Biological Threats 

 

 

Strategic Oversight Mechanisms Could Help Integrate 

Fragmented Interagency Efforts to Defend against 

Biological Threats 

Why GAO Is Focusing 

on This Area 

A catastrophic biological event, such as a terrorist attack with a weapon of 

mass destruction or a naturally occurring pandemic, could cause mass 

casualties, weaken the economy, damage public morale, and threaten 

national security. Biodefense includes measures to prevent, detect, 

respond to, and recover from harm or damage caused by microorganisms 

or biological toxins to humans, animals, or the food supply. In January 

2010, the bipartisan Commission on the Prevention of Weapons of Mass 

Destruction Proliferation and Terrorism (now known as the WMD Center), 

which was established by the Implementing Recommendations of the 9/11 

Commission Act (Pub. L. No. 110-53, § 1851), gave the nation a failing 

grade in its efforts to enhance capabilities for rapid response to prevent 

biological attacks from inflicting mass casualties. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

According to the head of the WMD Center, there are more than two dozen 

presidentially appointed individuals with some responsibility for 

biodefense. In addition, numerous federal agencies, encompassing much 

of the federal government, have some mission responsibilities for 

supporting biodefense activities. However, there is no individual or entity 

with responsibility, authority, and accountability for overseeing the entire 

biodefense enterprise. 

According to Homeland Security Presidential Directive 10, published in 

April 2004, successful implementation of the nation’s biodefense 

enterprise requires optimizing critical cross-cutting functions such as 

information management and communications, research and 

development, and acquisition. In 2004, GAO reported that interagency and 

intergovernmental activities can benefit from the leadership of a single 

entity with sufficient time, responsibility, authority, and resources needed 

to provide assurance that the federal programs are well coordinated, and 

that gaps and duplication in capabilities are avoided. GAO also reported in 

2001 that complex interagency and intergovernmental efforts can benefit 

from developing a national strategy. 

Biodefense is organized into four pillars—threat awareness, prevention 

and protection, surveillance and detection, and response and recovery— 

and multiple federal agencies have some biodefense responsibilities within 

them, as shown in the figure below. Each of these pillars comprise 

numerous activities—such as controlling access to dangerous biological 

agents used in research—that generally require coordination across 

federal departments as well as with state, local, and international 

governments, and the private sector. Deterrence of bioterrorism rests 

upon the ability of the nation to mitigate the effects of an attack. 

Page 92 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

Strategic Oversight Mechanisms Could Help 

Integrate Fragmented Interagency Efforts to 

Defend against Biological Threats 

According to the WMD Center’s January 2010 report, Prevention of WMD 

Proliferation and Terrorism Report Card, there is no national plan to 

coordinate federal, state, and local efforts following a bioterror attack, and 

the United States lacks the technical and operational capabilities required 

for an adequate response. The report goes on to say that these technical 

and operational capabilities are each links in a chain, critical to the 

strength of the attack response, and that weakness in any capability leads 

to a diminished response, and diminished effectiveness in deterring an 

attack. 

Pillars of Biodefense and Examples of Associated Federal Departments 

Threat 

awareness

Prevention 

and protection 

Surveillance 

and detection 

Response 

and recovery 

Department of 

Homeland Security

 Federal Bureau

 of Investigation

 Department of Defense

 Intelligence Community

 Department of Health 

and Human Services

Department of Health 

and Human Services

 Department of Agriculture 

Department of Health 

and Human Services

 Department of Defense 

Department of Health 

and Human Services

Department of Agriculture 

Department of the Interior 

Department of 

Homeland Security

 Department of 

Homeland Security

 Department of Health 

and Human Services

 Department of Agriculture

 Department of Defense 

Source: GAO analysis of Homeland Security Presidential Directive 10.

GAO’s past work has highlighted fragmentation in the surveillance and 

detection pillar, which indicates the need for strategic oversight 

mechanisms—such as a national strategy and a focal point—across the 

entire biodefense enterprise. In June 2010, GAO reported that an activity in 

the surveillance and detection pillar known as biosurveillance is 

fragmented and that the decision makers responsible for developing a 

national biosurveillance capability are spread across multiple agencies and 

Page 93 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Strategic Oversight Mechanisms Could Help 

Integrate Fragmented Interagency Efforts to 

Defend against Biological Threats 

departments, as it is with the rest of the biodefense enterprise. Yet, 

strategic oversight mechanisms, such as a focal point or national strategy, 

had not been established to coordinate and lead efforts across the multiple 

federal departments with biosurveillance responsibilities. GAO 

recommended that the Homeland Security Council, which was established 

to serve as a mechanism for ensuring coordination of federal homeland 

security-related activities and development of homeland security policies, 

should direct the National Security Staff to establish a focal point and 

charge this focal point with the responsibility for developing a national 

biosurveillance strategy. The National Security Staff did not comment on 

these recommendations. 

While some high-level biodefense strategies have been developed, there is 

no broad, integrated national strategy that encompasses all stakeholders 

with biodefense responsibilities that can be used to guide the systematic 

identification of risk, assessment of resources needed to address those 

risks, and the prioritization and allocation of investment across the entire 

biodefense enterprise. Further, neither the Office of Management and 

Budget nor the federal agencies account for biodefense spending across 

the entire federal government. As a result, the federal government does 

not know how much is being spent on this critical national security 

priority. However, a private sector analysis of the fiscal year 2011 federal 

budget for civilian biodefense estimates that the U.S. biodefense effort will 

total $6.48 billion across 8 of the more than 12 federal agencies with 

biodefense responsibilities. GAO’s work noted that having a strategy in 

place to guide development of a national biosurveillance capability could 

potentially help agencies address challenges that are complex, inherent to 

building capabilities that cross mission areas and agencies, and not easily 

resolved—challenges that are also present in the larger biodefense 

enterprise. A national strategy could define the scope of the problems to 

be addressed, and in turn could lead to specific objectives and activities 

for tackling those problems, better allocation and management of 

resources, clarification of roles and responsibilities, and, finally, to 

integration of a biodefense strategy with other related preparedness and 

response strategies. In addition, because responsibilities and resources are 

dispersed across a number of federal agencies, the nation’s biodefense 

enterprise could benefit from designated leadership—a focal point—that 

provides leadership for the interagency community. 

Page 94 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Strategic Oversight Mechanisms Could Help 


Integrate Fragmented Interagency Efforts to 


Defend against Biological Threats 


Actions Needed and 

Potential Financial or 

Other Benefits 

Because none of the departments has authority over the entire biodefense 

enterprise, the Homeland Security Council should consider establishing a 

focal point to coordinate federal biodefense activities, including 

biosurveillance, consistent with GAO’s previous recommendation for the 

Council to establish a focal point for biosurveillance. The overarching 

biodefense enterprise would benefit from strategic oversight mechanisms, 

including a focal point such as a national biodefense coordinator and a 

national strategy, to ensure efficient, effective, and accountable results. 

Reduced fragmentation in the biodefense enterprise could enhance 

assurance that the nation is prepared to prevent, detect, and respond to 

biological attacks with potentially devastating consequences in terms of 

loss of life, economic damage, and decreased national security. 

The information contained in this analysis is based on the related GAO Framework for products listed below. GAO also has work under way on threat and risk

Analysis 	 assessments and countermeasure development, which focuses on issues 

of integration and coordination across multiple agencies and expects to 

report on its results in spring 2011. 

Related GAO 

Products 

Biosurveillance: Efforts to Develop a National Biosurveillance 

Capability Need a National Strategy and Designated Leader. 

GAO-10-645. Washington, D.C.: June 30, 2010. 

Combating Terrorism: Evaluation of Selected Characteristics in 

National Strategies Related to Terrorism. GAO-04-408T. Washington, 

D.C.: February 3, 2004. 

Combating Terrorism: Selected Challenges and Recommendations. 

GAO-01-822. Washington D.C.: September 20, 2001. 

For additional information about this area, contact William O. Jenkins at Area Contact (202) 512-8777 or jenkinswo@gao.gov. 

Page 95 	 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
DHS Oversight Could Help Eliminate 

Potential Duplicating Efforts of Interagency 

Forums in Securing the Northern Border 

 

DHS Oversight Could Help Eliminate Potential 

Duplicating Efforts of Interagency Forums in Securing 

the Northern Border 

Why GAO Is Focusing 

on This Area 

The Department of Homeland Security (DHS) has primary responsibility 

for securing the nearly 4,000 miles that comprise the U.S.-Canadian border 

from Washington state to Maine. DHS components, in collaboration with 

other federal, state, local, tribal, and Canadian law enforcement partners, 

are responsible for securing this border, which involves coordination and 

the leveraging of scarce resources through interagency forums. In 

December 2010, GAO reported on overlap and potential duplication among 

two of these forums—the Integrated Border Enforcement Team (IBET) 

and the Border Enforcement Security Task Force (BEST). These forum 

members meet to share information on coordination of cross-border law 

enforcement efforts, among other activities, to enhance bi-national border 

security. IBET members focus on national security, organized crime, and 

other criminal activity between ports of entry; BEST members work to 

identify, disrupt, and dismantle organizations seeking to exploit border 

vulnerabilities. DHS components, such as U.S. Customs and Border 

Protection, U.S. Immigration and Customs Enforcement, and the U.S. 

Coast Guard, along with Canadian law enforcement partners participate in 

24 IBETs (which are part of 15 regions across the northern border) and 3 

BESTs (led by Immigration and Customs Enforcement) that have been 

established across the northern border. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

In December 2010, GAO reported on northern border interagency 

coordination and highlighted concerns about mission overlap and 

potential duplication of effort between the BEST and IBET interagency 

forums. For example, of the 13 partners GAO interviewed that operate 

within two jurisdictions where two BEST and four IBET interagency 

forums are located, more than half of these partners cited concerns about 

mission overlap between these two forums that could result in duplication 

of effort. Specifically, these partners expressed concern that some BEST 

activities to investigate and interdict cross-border illegal activity 

duplicated IBET efforts to conduct the same activities because, among 

other factors, smuggling rings and other criminal organizations do not 

limit their activities by geographic area. 

Overlap and potential duplication of effort between the BEST and IBET 

may also exist when these interagency forums are established in the same 

location, as has been done in at least two jurisdictions where BEST and 

IBET forums are located. DHS officials stated that decisions to establish 

interagency forums are made, in part, by DHS components participating in 

the forums based on their work requirements. Specifically, the 

Immigration and Customs Enforcement headquarters program manager 

stated that the agency sponsored the establishment of BEST interagency 

Page 96 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

DHS Oversight Could Help Eliminate 

Potential Duplicating Efforts of Interagency 

Forums in Securing the Northern Border 

forums along the northern border because of the need for additional 

Immigration and Customs Enforcement investigative resources, and that 

the locations were identified on the basis of the agency’s investigative 

workload requirements, but that analyses of whether the existing IBETs 

established in these areas could be used for these investigative purposes 

were not a factor. 

Moreover, in an April 2007 report, the DHS Inspector General reported 

that it was not clear how a BEST would operate differently from IBETs 

and that care should be taken to avoid duplication of efforts with IBETs on 

the northern border. In 2009, IBET members convened an interagency 

working group to study the interaction between the IBET and BEST.1

 This 

group raised concerns about mission overlap and duplication of effort 

between the two interagency forums and identified the need for a vision 

that clearly defines IBET-BEST roles and responsibilities, as well the 

framework for their routine interaction and collaboration. According to 

DHS officials, in November 2010, DHS, the Department of Justice, and 

Canadian officials established another working group to evaluate best 

practices of existing interagency forums, including the IBET and BEST, to 

improve U.S.-Canadian border enforcement efforts.2

 However, as of 

December 2010 it is too soon to tell whether this effort will address the 

recommendation made by the previous working group. 

In December 2010, GAO reported that DHS does not provide guidance or 

oversight to its components to establish or assess the results of 

interagency forums across northern border locations. GAO has previously 

reported that federal agencies can enhance and sustain their collaborative 

efforts by, in part, developing mechanisms to monitor their results. DHS 

officials stated that DHS is developing processes to provide departmentlevel oversight of those forums; however, DHS has not provided 

documentation to support its plans, and thus the scope and the time 

frames for finalizing this effort are unclear. Completing such guidance and 

1

Eight agencies were represented on the IBET/BEST working group, including Canada’s 

Royal Canadian Mounted Police and the Canada Border Services Agency and U.S. agencies 

including Customs and Border Protection, Immigration and Customs Enforcement, the 

Coast Guard, and the Department of Justice. The findings of this working group were 

published in a final report. DHS, IBET/BEST Interaction Final Report (Washington, D.C., 

April 2009). 

2

This working group consists of the representatives from the same agencies that served on 

the 2009 interagency working group, which include DHS, Department of Justice, and 

Canadian law enforcement agencies, according to DHS officials. 

Page 97 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

DHS Oversight Could Help Eliminate 

Potential Duplicating Efforts of Interagency 

Forums in Securing the Northern Border 

processes for oversight could better position DHS to identify areas of 

duplication and determine if existing forums could be modified or 

consolidated to leverage its resources more efficiently in conducting 

border security operations. 

DHS intends to outline a vision for interagency coordination with an 

emphasis on partnerships, including the Canadian government, through its 

northern border strategy scheduled to be issued in calendar year 2011.3

 In 

addition, in November 2010, the Secretary of Homeland Security directed 

DHS components to develop a new approach to better integrate northern 

border enforcement efforts. Until DHS clearly defines IBET-BEST roles 

and responsibilities, aligns its resources, and ensures accountability 

through oversight, DHS risks hindering collaborative relationships with its 

partners and lacks reasonable assurance that resources are deployed 

efficiently and effectively to secure the northern border. 

DHS is also working to establish a mechanism to identify and report on the 

benefits achieved through its participation in the IBET-BEST interagency 

forums, but has not maintained comprehensive data on the costs of these 

forums to help it ascertain whether the benefits obtained outweigh the 

costs. For example, Immigration and Customs Enforcement officials 

maintained information on that agency’s participation in two of three 

northern border BEST locations and estimated its costs for IBET 

locations.4

 However, DHS could not provide information on the costs 

incurred by other federal, state, local, tribal, and international agencies 

that participate in BEST or IBET. The interagency group studying these 

forums raised concerns about law enforcement agencies gathering the 

resources necessary to participate in the increasing number of these 

forums. By leading efforts to develop a framework for identifying both its 

3

According to DHS officials, in addition to emphasizing the importance of its partners, this 

strategy is to guide efforts to deter and prevent illicit smuggling and trafficking along the 

northern border. 

4

Specifically, in 2010, Immigration and Customs Enforcement’s costs ranged from 

approximately $1.5 million to $6.3 million per BEST location and from almost $480,000 to 

about $2 million per IBET location (dedicated personnel, facilities, and equipment). Since 

IBET positions are created out of the responsible Immigration and Customs Enforcement 

office’s base funding, all costs associated with these programs are estimated since each 

responsible Immigration and Customs Enforcement office has to shift resources from one 

program to another. Customs and Border Protection does not track its costs of 

participating in either forum, but a Customs and Border Protection official responsible for 

patrolling the border estimated that its fiscal year 2010 cost averaged $100,000 for one 

BEST location and $182,000 for IBET. 

Page 98 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DHS Oversight Could Help Eliminate 


Potential Duplicating Efforts of Interagency 


Forums in Securing the Northern Border 


and its partners’ costs for participating in each forum, DHS would be 

better positioned to evaluate the need for and success of both forums. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Ongoing DHS oversight of the interagency forums could help prevent 

duplication of efforts. DHS headquarters officials report that policies 

governing DHS coordination efforts are under development and that 

Immigration and Customs Enforcement and Customs and Border 

Protection have deployed personnel to key northern border locations to 

improve collaboration and facilitate timely information sharing. However, 

DHS does not currently provide guidance or oversight to its components 

to establish or assess the results of interagency forums—which include 

both IBET and BEST interagency forums—across northern border 

locations to help ensure that forums established in the same locations do 

not duplicate activities. Accordingly, GAO recommended in December 

2010 that DHS provide guidance and oversight for interagency forums to 

help prevent duplication of effort and help efficiently utilize personnel 

resources to strengthen DHS’s coordination efforts along the northern 

border. By implementing this recommendation, DHS could help prevent 

duplication and identify whether existing forums can be modified or 

consolidated to better leverage scarce resources and more efficiently 

conduct border security operations. Moreover, as DHS establishes a 

mechanism for determining the benefits of participating in the IBET and 

BEST interagency forums, DHS could lead efforts to develop a framework 

for identifying the costs incurred by all partners participating in each 

forum. Doing so could help DHS evaluate the success of these forums and 

the need for both the IBETs and BESTs. 

Framework for 

Analysis 

The information contained in this analysis was based on GAO’s December 

2010 report as well as selected updates obtained from September 2010 

through February 2011, including cost data related to Immigration and 

Customs Enforcement and Customs and Border Protection’s participation 

in IBET and BEST for fiscal year 2010. GAO interviewed relevant agency 

officials responsible for overseeing the accuracy of these data and 

determined they were sufficiently reliable for purposes of this report. 

Border Security: Enhanced DHS Oversight and Assessment of Related GAO Interagency Coordination Is Need for the Northern Border. GAO-11-97. 

Products Washington, D.C.: December 17, 2010. 

Page 99 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DHS Oversight Could Help Eliminate 

Potential Duplicating Efforts of Interagency 

Forums in Securing the Northern Border 

Border Security: Additional Actions Needed to Better Ensure a 

Coordinated Federal Response to Illegal Activity on Federal Lands. 

GAO-11-177. Washington, D.C.: November 18, 2010. 

For additional information about this area, contact Richard M. Stana at Area Contact (202) 512-8777 or stanar@gao.gov. 

Page 100 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
The Department of Justice Plans Actions to 

Reduce Overlap in Explosives Investigations, 

but Monitoring Is Needed to Ensure 

Successful Implementation 

 

The Department of Justice Plans Actions to Reduce 

Overlap in Explosives Investigations, but Monitoring Is 

Needed to Ensure Successful Implementation 

Why GAO Is Focusing 

on This Area 

In fiscal year 2009, the Bureau of Alcohol, Tobacco, Firearms and 

Explosives (ATF) and the Federal Bureau of Investigation (FBI), both 

components of the Department of Justice (Justice), initiated over 1,600 

cases involving explosives incidents such as actual or attempted bombings 

with improvised explosive devices. Since 2004, Justice has taken actions 

intended to address duplication and overlap in the areas of explosives 

investigations jurisdiction, training, information sharing and use of 

databases, and laboratory forensic analysis. However, a 2009 report from 

Justice’s Inspector General found there has been little progress since 2004 

in addressing overlap and duplication. In response to the Inspector 

General’s report, in August 2010, the Acting Deputy Attorney General 

issued a protocol for assigning lead agency jurisdiction in explosives 

investigations. The memorandum accompanying the protocol directed the 

ATF and FBI to take actions to conduct assessments of its explosives 

operations and make recommendations by November 1, 2010, for 

consolidating and eliminating redundancies, where appropriate. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

GAO has reviewed actions planned by Justice to reduce overlap and 

duplication and improve explosives investigation coordination between 

the ATF and FBI. GAO found that the actions Justice is proposing should 

address most of these issues, but additional monitoring by Congress and 

agency personnel could help ensure that plans to address these longstanding challenges are fully implemented and successful since Justice did 

not follow through on past efforts to achieve these same objectives. GAO 

has reported that federal agencies can enhance and sustain their 

collaborative efforts by creating the means to monitor and evaluate their 

efforts to identify areas for improvement. In his August 2010 memorandum 

directed to ATF and FBI, the Deputy Attorney General highlighted four 

areas of explosives investigations where duplication and redundant efforts 

needed to be addressed: jurisdiction, explosives training, shared 

explosives databases, and laboratories. 

Jurisdiction. The Deputy Attorney General noted that defining lead 

agency jurisdiction over explosives investigations has been a persistent 

problem for Justice; led to confusion among federal, state, and local law 

enforcement; and resulted in duplication of effort between ATF and FBI. 

GAO’s ongoing work on law enforcement coordination found that disputes 

have occurred over the past 5 years between the agencies regarding 

jurisdiction of explosives investigations and there is potential overlap. For 

example, Justice had designated FBI as the lead agency for incidents 

related to domestic terrorism but had not defined the term, so ATF and 

FBI have had disputes about when an incident would be related to 

Page 101 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

The Department of Justice Plans Actions to 

Reduce Overlap in Explosives Investigations, 

but Monitoring Is Needed to Ensure 

Successful Implementation 

terrorism, and, therefore, under FBI’s jurisdiction. A 2009 Inspector 

General report found that, despite Justice’s attempts to coordinate 

explosives investigations and activities, the components have developed 

separate and conflicting approaches to these investigations. The August 

2010 directive attempted to resolve the dispute regarding jurisdiction by 

citing a definition for both “International Terrorism” and “Domestic 

Terrorism,” and outlining factors associated with an explosive incident 

that indicate a presumptive nexus to terrorism. The directive also intended 

to clarify roles and responsibilities in all other explosives jurisdiction 

matters. However, it is too soon to know to what extent the directive will 

resolve the dispute. 

Explosives training. ATF and FBI continue to separately operate their 

own explosives-training facilities and programs, both of which are located 

at the Redstone Arsenal in Huntsville, Alabama, resulting in potential 

duplication.1

 Regarding facilities, for example, the FBI’s Hazardous 

Devices School trains and certifies federal, state, and local bomb 

technicians and bomb squads. Similarly, ATF’s National Center for 

Explosives Training and Research offers explosives courses to ATF and 

state and local law enforcement personnel. Regarding programs, both 

components offer post-blast explosives training.2

 According to ATF and 

FBI data, the cost of the training facilities in fiscal year 2010 totaled $11.0 

million and $7.5 million, respectively.3

 In August 2010, the Deputy Attorney 

General directed the components to provide a joint plan to consolidate 

training programs with recommendations for consolidating and 

eliminating redundancies. Justice officials said the components submitted 

a plan in November 2010 that proposed consolidating post-blast training 

programs and curricula beginning in the spring of 2011, which is 

consistent with the Deputy Attorney General’s directive. Justice officials 

also stated that both components concluded they should continue to 

operate separate explosives-training facilities because of the high demand 

and wait lists for explosives courses offered at each facility. By continually 

monitoring the need to support both facilities, Justice’s ability to 

determine that its resources are being used effectively could be 

strengthened. 

1

FBI also operates the Secure Training Facility and Vehicle-Borne Improvised Explosives 

Device Training Facility as part of the Hazardous Devices School in Alabama. 

2

Post-blast explosives training teaches methods and processes for investigating explosives 

scenes. 

3

$7.4 million of ATF’s cost were for construction. 

Page 102 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

The Department of Justice Plans Actions to 

Reduce Overlap in Explosives Investigations, 

but Monitoring Is Needed to Ensure 

Successful Implementation 

Shared explosives database. In 2009, Justice’s Inspector General reported 

that ATF and FBI have not effectively consolidated and maintained one 

distinct explosives incident reporting database, as directed by the Attorney 

General. Also, the Inspector General found that although FBI had 

discontinued use of its database that compiles information on explosives 

incidents and transferred its historical data into ATF’s Bomb and Arson 

Tracking System,4

 FBI had not subsequently input any additional explosives 

incident information. In addition, ATF had not consistently reported all its 

explosives incidents to the Bomb and Arson Tracking System. Taken 

together, these omissions undermined the components’ ability to accurately 

determine trends in explosives incidents. In response to the August 2010 

protocol, according to Justice officials, the components have developed and 

plan to implement information-sharing procedures in early 2011 to ensure 

that FBI bomb technicians and state and local bomb squads have access to 

and report explosives incidents to the reporting system. By monitoring 

implementation of this plan, Justice would be better positioned to obtain 

feedback for improving both policy and operational effectiveness. 

Explosives laboratories. Both ATF and FBI have laboratories that perform 

forensic analysis of explosives evidence. Specifically, ATF operates 

laboratories in Maryland, Georgia, and California, while FBI uses its 

Virginia laboratory for forensic analysis. For fiscal year 2010, ATF reported 

the cost to operate its three laboratories was $11.2 million,5

 and FBI 

reported the cost to conduct analysis at its laboratory was $6.6 million.6

 In 

2004, the Attorney General required Justice to establish a Lab Board to 

examine its available laboratory resources and workloads, analyze 

demands, and make recommendations to the Deputy Attorney General on 

the most productive allocation of resources. While Justice established the 

Lab Board, its Inspector General found no record of a report or 

recommendations. In August 2010, the Deputy Attorney General directed 

the Lab Board to reconvene to develop recommendations by November 1, 

2010, for further integration of Justice’s laboratory capabilities, among 

other things. According to Justice officials, the components submitted a 

4

The Bomb and Arson Tracking System is intended to be Justice’s single source for 

reporting and sharing explosives incident information. 

5

According to ATF, the laboratory costs include explosives, arson, and firearms forensic 

analysis. 

6

According to FBI, the costs for explosives forensic analysis does not include Laboratory 

Division employees who perform forensic analysis on improvised-explosive-device-related 

submissions. 

Page 103 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

The Department of Justice Plans Actions to 

Reduce Overlap in Explosives Investigations, 

but Monitoring Is Needed to Ensure 

Successful Implementation 

progress report in November 2010 that outlines areas they believed could 

produce operational efficiencies and better coordination. These areas 

include the adoption of a common laboratory information management 

system and coordinated training of laboratory personnel. By continually 

monitoring these actions, Justice’s ability to ensure that the components 

follow through on these areas to better coordinate and integrate 

laboratory resources could be enhanced. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Continually monitoring these efforts can help key decision makers within 

the agencies, as well as clients and stakeholders, obtain feedback for 

improving policy and operational effectiveness. Justice, ATF, and FBI 

officials have planned or begun actions to reduce duplication and overlap, 

and achieve efficiencies, which Justice officials stated are responsive to 

the Deputy Attorney General’s directives. These actions represent positive 

steps that, if implemented effectively, should lead to more efficient 

approaches to explosives investigations and related activities such as 

training, information sharing, and forensic analysis. However, given that 

the components did not fully follow through on past efforts to achieve 

these same objectives, by continually monitoring the components’ actions, 

Congress and Justice would be better positioned to ensure that the plans 

have their intended effect and are enforced. 

Framework for 

Analysis 

The information contained in this analysis is based on GAO’s ongoing 

work for the Chairman of the House Judiciary Committee on law 

enforcement coordination and recent Inspector General reports and 

internal efforts at Justice to address the Inspector General’s 

recommendations to improve explosives-related coordination between 

ATF and FBI. GAO interviewed representatives from the Deputy Attorney 

General’s Office, FBI, and ATF to discuss actions planned or under way to 

remedy duplication and overlap in explosives-related operations. GAO also 

obtained and analyzed fiscal year 2010 cost data from the components, and 

assessed the data sources. GAO found the components’ cost data reliable 

for the purposes of this report. 

No GAO products related to this issue have previously been published. Related GAO Product 

For additional information about this area, contact Eileen R. Larence at Area Contact (202) 512-8777 or larencee@gao.gov. 

Page 104 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

 

Transportation Security Administration’s Security 

Assessments on Commercial Trucking Companies 

Overlap with Those of Another Agency, but Efforts Are 

Under Way to Address Overlap 

Why GAO Is Focusing 

on This Area 

Terrorist attacks on transportation systems in Moscow and Mumbai 

caused significant loss of life and highlighted the vulnerability of surface 

transportation systems to terrorist attacks. The Transportation Security 

Administration (TSA), within the Department of Homeland Security 

(DHS), is the primary federal agency responsible for securing the nation’s 

transportation system. GAO has previously reported that TSA has taken 

actions to improve transportation security, but additional actions could 

enhance its efforts, such as consistently coordinating security 

assessments. GAO made recommendations to improve TSA’s coordination 

with stakeholders, including other DHS entities and federal agencies. 

Likewise, the Administration’s Surface Transportation Security Priority 

Assessment highlighted the need for federal entities to coordinate their 

security assessment activities given that TSA’s security assessment 

responsibilities overlap with those of other federal agencies, such as the 

Department of Transportation (DOT). The report recommended, among 

other things, an integrated federal approach for conducting security 

assessments to produce more thorough risk-based evaluations. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

GAO has found that TSA and DOT do not have a process in place to share 

information on the results of their security programs, and stakeholders in 

the commercial trucking industry have expressed concerns about a lack of 

coordination between the two agencies. Specifically, TSA’s security 

assessments for hazardous material trucking companies overlapped with 

efforts conducted by DOT’s Federal Motor Carrier Safety Administration 

(FMCSA), and as a result, government resources were not being used 

effectively. After GAO discussed this overlap with TSA in January 2011, 

TSA officials stated that, moving forward, they intend to only conduct 

reviews on trucking companies that are not covered by FMCSA’s program, 

which, if implemented as intended, GAO projects could save more than $1 

million over the next 5 years. However, it will be important for TSA and 

FMCSA to continue efforts to improve data sharing and coordination to 

help prevent future overlap in security reviews, as well as continue efforts 

toward the long-term goal of TSA assuming full regulatory responsibility 

from FMCSA for commercial trucking security, thereby reducing 

fragmentation. 

In February 2009, GAO reported that TSA and FMCSA have similar 

security review programs for hazardous material trucking companies. TSA 

conducts corporate security reviews (TSA review)—voluntary in-person 

Page 105 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

reviews of a trucking company’s security practices and plans.1 FMCSA, 

which has primary responsibility for commercial trucking safety, conducts 

security contact reviews (FMCSA review)—mandatory in-person reviews 

that enforce the Pipeline and Hazardous Materials Safety Administration’s 

regulations on hazardous material trucking companies’ security plans. In 

2010, GAO continued to identify considerable overlap between TSA’s and 

FMCSA’s security reviews. For example, nearly half (43 percent) of the 95 

questions in a TSA review were either “somewhat similar” or “substantially 

or entirely similar” to one or more of the questions in an FMCSA review, 

and almost all (92 percent) of the 48 questions that comprise an FMCSA 

review were either “somewhat similar” or “substantially or entirely 

similar” to one or more of the questions in a TSA review.2

 In addition, 

officials from both agencies agreed that there are similarities between the 

two reviews. Furthermore, 71 of the 200 TSA reviews performed from 

fiscal years 2006 through 2010 by TSA staff on hazardous material trucking 

companies were conducted on companies that had received an FMCSA 

review during the same period; of these, 31 were conducted less than 2 

years after the FMCSA review.3

 The Implementing Recommendations of 

the 9/11 Commission Act of 2007 requires that DOT consult with DHS to 

limit, to the extent practicable, duplicative reviews of hazardous material 

security plans.4 

In February 2009, GAO recommended that TSA establish a process to 

strengthen coordination with the commercial vehicle industry, including 

ensuring that the roles and responsibilities of industry and government are 

fully defined and clearly communicated. DHS concurred with this 

recommendation and has taken steps to address it. However, in August 

and September 2010, officials from three industry associations GAO 

interviewed continued to express concerns about overlap between TSA’s 

1

TSA also conducts corporate security reviews on nonhazardous material trucking 

companies, as well as entities in other transportation modes. GAO excluded these other 

reviews from its analysis. 

2

For the purposes of this analysis, the term “substantially or entirely similar” refers to 

questions for which a trucking company would likely provide the same or mostly the same 

information. The term “somewhat similar” refers to questions for which a trucking 

company would likely provide some of the same information, but would likely also provide 

additional or different information for one of the questions. 

3

TSA reviews were also conducted by state inspectors in five states, primarily Missouri. 

However, TSA was unable to provide comprehensive data for these reviews, and as a result 

GAO excluded them from its analysis. 

4

Pub. L. No. 110-53, § 1555, 121 Stat. 266, 475 (2007) (codified at 6 U.S.C. § 1205). 

Page 106 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

and FMCSA’s security reviews and a lack of coordination between the two 

agencies. Moreover, in July 2010, the Office of Management and Budget 

advised TSA to work with DOT to implement an integrated federal 

approach for security assessments and take advantage of existing 

information to avoid redundancy. 

Actions Needed and 

Potential Financial or 

Other Benefits 

By taking action to reduce or eliminate overlap in hazardous material 

security reviews and improve data sharing and coordination, TSA and 

FMCSA could use their resources more effectively and improve the 

relationship between the federal government and industry stakeholders. 

TSA and FMCSA officials have stated that TSA’s long-term plan is to 

develop security regulations for hazardous material trucking companies to 

replace the existing security regulations FMCSA enforces, which they 

believe would address the overlap between the two agencies’ security 

reviews. These officials added that once TSA develops regulations, the 

agencies plan to work together to eliminate FMCSA’s security-related 

regulatory responsibilities so that it can focus solely on safety issues while 

TSA focuses on security issues. However, TSA is in the early stages of the 

rulemaking process, which TSA officials believe may take up to 3 years. 

Until the rulemaking is completed and TSA is able to assume full 

responsibility for commercial trucking security, it will be important for 

TSA and FMCSA to continue efforts to delineate their respective security 

roles and reduce fragmentation. 

Until TSA issues security regulations to replace the existing regulations 

enforced by FMCSA, GAO has identified two potential options for 

improving data sharing and coordination to address the overlap of TSA’s 

and FMCSA’s security reviews in the short term; in addition, TSA proposed 

a third option that GAO believes, if implemented as intended, should also 

address existing overlap in the short term: 

(1) 	 Improve interagency coordination by sharing each other’s schedules 

for conducting future security reviews, and avoid scheduling reviews 

on hazardous material trucking companies that have recently 

received, or are scheduled to receive, a review from the other agency. 

TSA and FMCSA considered this option worthy of pursuit, and in 

October 2010 they signed an interagency agreement to coordinate 

with each other when scheduling their respective security reviews. 

The agreement is intended to eliminate duplicate visits to the same 

trucking company that occur within 2 years of each other. However, 

it is too early to assess the results from this effort. 

Page 107 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

(2) 	 Enable TSA to access the full results of past FMCSA reviews through 

an existing DOT Web portal. This increased access could enable TSA 

to leverage security information on the thousands of hazardous 

material trucking companies that have received FMCSA reviews 

without having to conduct a TSA review on them, thereby efficiently 

increasing the agency’s knowledge of industry security. TSA has 

spent $400,000 since February 2010 to access the Web portal, and 

according to FMCSA, TSA already has access to data on FMCSA 

reviews through the portal. However, although the portal does 

include some data related to FMCSA reviews (such as the dates and 

recipients of past reviews), it does not contain the full results of these 

reviews, which TSA officials agreed would be beneficial. DOT 

officials who administer the portal stated that adding this information 

to the portal and granting TSA access to it most likely would be 

relatively straightforward, but doing so would require a request and 

cooperation from both TSA and FMCSA. TSA officials added that they 

were unsure whether future budget constraints would allow 

continued funding for TSA access to the portal. 

(3) 	 Discontinue conducting the voluntary TSA reviews on hazardous 

material trucking companies, thereby enabling TSA to increase its 

security efforts in other areas. For example, TSA could seek to 

improve security practices among nonhazardous material trucking 

companies, as these entities are not subject to the FMCSA security 

reviews. TSA officials stated in January 2011 that they intend to 

pursue this option, which, if implemented as intended, should 

eliminate the short-term overlap between FMCSA and TSA 

commercial trucking security assessments. However, as stated 

previously, GAO believes it will be important for TSA and FMCSA to 

continue efforts to improve data sharing and coordination to help 

prevent future overlap in security reviews, as well as continue efforts 

toward the long-term goal of TSA assuming full regulatory 

responsibility from FMCSA for commercial trucking security, thereby 

reducing fragmentation. 

Reducing overlap between TSA’s and FMCSA’s security reviews could 

result in cost savings. TSA’s total spending on the 71 reviews it conducted 

from fiscal years 2006 through 2010 on companies that had also received 

an FMCSA review during the same period was about $268,000. TSA’s 

spending on the 31 reviews that occurred less than 2 years after an FMCSA 

review at the same company was about $120,000. Extrapolating from data 

from prior years, GAO estimated that, over the next 5 years, avoiding TSA 

reviews conducted on companies less than 2 years after an FMCSA review 

Page 108 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

could save approximately $164,000; avoiding TSA reviews on companies 

that receive an FMCSA review during the same 5-year period could save 

approximately $373,000; and eliminating all TSA reviews on hazardous 

material trucking companies could save over $1 million.5

 Reducing overlap 

between the two agencies’ security reviews could also improve their 

relationship with the commercial trucking industry. As industry observes 

more coordination among federal agencies, trucking companies may be 

more willing to participate in voluntary security initiatives and share 

information with federal stakeholders. 

Framework for 

Analysis 

The information contained in this analysis is based on a previously issued 

report, noted below, and recent efforts to update that work. To update that 

information and identify continuing issues related to overlap in 

commercial trucking security assessments, GAO interviewed officials from 

TSA, FMCSA, and other agencies, as well as officials from three key 

industry groups that represent a large portion of the trucking industry.6 

GAO also reviewed prior reports and relevant documentation, including 

DHS/DOT interagency agreements and examples of completed TSA and 

FMCSA security reviews. To estimate the amount of overlap in trucking 

company security assessments, GAO compared the 95 questions in TSA’s 

hazardous material corporate security review protocol with the 48 

questions in FMCSA’s security contact review protocol and assessed their 

similarity using three categories: substantially or entirely similar, 

5

All estimated costs are reported in 2010 dollars and based on TSA estimates of the staff 

time, staff salaries, and travel costs associated with conducting TSA reviews. While 

eliminating some or all TSA reviews could result in cost savings, it may also result in the 

loss of some security information, since TSA reviews do not completely duplicate FMCSA 

reviews. Additionally, GAO identified 84 FMCSA reviews from fiscal years 2006 through 

2010 on trucking companies that had also received a TSA review during the same time 

period. Of these FMCSA reviews, 21 were conducted less than 2 years after a TSA review. 

However, FMCSA was unable to provide cost estimates for its security reviews, so GAO 

could not calculate the cost associated with this overlap. Moreover, FMCSA conducted 

more than 9,000 reviews during the same period, and less than 1 percent of these reviews 

overlapped with a TSA review. 

6

These three stakeholder groups were the American Trucking Associations, the 

Commercial Vehicle Safety Alliance, and the Owner-Operator Independent Drivers 

Association. 

Page 109 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Transportation Security Administration’s 

Security Assessments on Commercial 

Trucking Companies Overlap with Those of 

Another Agency, but Efforts Are Under Way 

to Address Overlap 

somewhat similar, and not at all or slightly similar.7 To determine the 

extent to which TSA’s and FMCSA’s security reviews were conducted on 

the same companies, GAO analyzed TSA and FMCSA data on reviews 

conducted from fiscal years 2006 through 2010. GAO reviewed the data for 

obvious errors and spoke with knowledgeable officials to determine that 

the data were sufficiently reliable for the purposes of its review. GAO 

estimated the cost of overlapping security reviews on hazardous material 

trucking companies by using TSA data on (1) the number of TSA reviews 

conducted from fiscal years 2006 through 2010 and (2) the staff time, 

estimated staff salaries, and estimated travel costs associated with 

conducting these reviews. Cost estimates do not include indirect costs, 

such as general administrative costs. GAO estimated the potential financial 

savings associated with eliminating overlapping security reviews by (1) 

estimating the average annual number of reviews, and (2) multiplying by 

the estimated cost of conducting a review. GAO reviewed the data for 

obvious errors and spoke with knowledgeable TSA officials to determine 

that the data were sufficiently reliable to provide a general indication of 

costs and potential savings. 

Commercial Vehicle Security: Risk-Based Approach Needed to Secure the Related GAO Product Commercial Vehicle Sector. GAO-09-85. Washington, D.C.: February 27, 

2009. 

For additional information about this area, contact Steve Lord at (202) Area Contact 512-4379 or lords@gao.gov. 

7

GAO categorized each question based on its assessment of the similarity of the 

information that trucking companies would likely provide in response to that question. 

Specifically, if GAO determined that, in response to a TSA review question, a company 

would likely provide the same or mostly the same information as it would in response to an 

FMCSA review question (and vice versa), those questions were considered “substantially or 

entirely similar.” If GAO determined that a company would likely provide some of the same 

information in response to a TSA review question as it would in response to an FMCSA 

review question (and vice versa)—but would likely also provide additional or different 

information for one of the questions that likely would not be provided for the other—those 

questions were considered “somewhat similar.” If GAO determined that a company would 

likely provide mostly or completely different information in responding to a TSA review 

question relative to an FMCSA review question (and vice versa), those questions were 

considered “not at all or slightly similar.” 

Page 110 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
DHS Could Streamline Mechanisms for 

Sharing Security-Related Information with 

Public Transit Agencies to Help Address 

Overlapping Information 

 

DHS Could Streamline Mechanisms for Sharing 

Security-Related Information with Public Transit 

Agencies to Help Address Overlapping Information 

Why GAO Is Focusing 

on This Area 

Since January 2005, GAO has identified sharing terrorism-related 

information as a high-risk area because the federal government continues 

to face challenges with its information-sharing efforts. To facilitate 

information sharing with the public transit industry, the Department of 

Homeland Security (DHS) and the Transportation Security Administration 

(TSA) created and funded various mechanisms. For example, the publicly 

funded but privately operated public transit analysis center and the public 

transit subportal on DHS’s information network were established to serve 

as the primary mechanisms for sharing security threats and other types of 

security-related information with public transit agencies. In March 2010, 

TSA also introduced its portal on DHS’s information network to share 

information with the transportation industry. However, in September 2010, 

GAO reported that public transit agencies receive similar security-related 

information from multiple sources and recommended that DHS establish 

time frames for its working group to assess opportunities to streamline 

information-sharing mechanisms to reduce any unneeded overlap. DHS 

concurred and has begun taking steps to address this recommendation, 

but has not provided specifics on the extent to which its actions will 

reduce overlap. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

GAO identified the potential for overlap between three informationsharing mechanisms that DHS funds and uses to communicate securityrelated information with public transit agencies, which could 

unnecessarily complicate those agencies’ efforts to discern relevant 

information and take appropriate actions to enhance transportation 

security. While a certain amount of redundancy is understandable and can 

be beneficial if it occurs as part of a management strategy to provide 

better customer service delivery, GAO found that this potential for overlap 

could overwhelm public transit agencies with similar information. 

According to a key TSA transportation strategy document, a streamlined 

and effective system to share transit and passenger rail information is 

needed to facilitate information sharing among the federal government 

and public and private stakeholders. 

In September 2010, GAO reported that public transit agencies received 

similar security-related information from a variety of sources, including 

the three discussed below. Specifically, GAO reported that: 

•	 According to the American Public Transportation Association, which 

co-sponsors the public transit analysis center, this mechanism is 

intended to be a one stop shop for public transit agencies’ information 

Page 111 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

DHS Could Streamline Mechanisms for 

Sharing Security-Related Information with 

Public Transit Agencies to Help Address 

Overlapping Information 

needs. This mechanism received a total of $1.2 million during fiscal 

years 2009 and 2010 from TSA. 

•	 TSA officials stated that the agency intends for the public transit portal 

on DHS’s information network to be the primary mechanism for 

sharing such information with public transit agencies. DHS could not 

provide cost data for the operation of this specific portal because, 

according to DHS officials, the department does not break out the costs 

associated with maintaining individual portals on its information 

network. However, DHS reported that for fiscal years 2009 and 2010, 

the department expended $62 million on its information network— 

which includes the public transit portal—and its estimated lifecycle 

costs are $451 million. 

•	 According to TSA officials, TSA’s portal on DHS’s information network 

was established to serve as a collaborative information-sharing 

platform for all transportation modes, including public transit.1

 In 

September 2010, TSA told GAO that for fiscal years 2009 and 2010, it 

applied $2.5 million to its portal on DHS’s information network, 

primarily on developing and organizing data for all transportation 

modes. 

GAO’s survey of 96 U.S. public transit agencies, representing about 91 

percent of total 2008 public transit ridership, highlighted the variety of 

mechanisms used by public transit agencies to obtain security-related 

information. Twenty-four of the 80 transit agencies that responded to the 

survey provided comments in favor of consolidating existing informationsharing mechanisms to reduce the volume of similar information they 

receive. 

GAO reported in 2007 and 2009 that effective information sharing 

continues to be a challenge for the federal government. Similarly, the 

Administration’s March 2010 Surface Transportation Security Priority 

Assessment recommended that TSA take steps to improve the 

effectiveness of information flow. In August 2010, the Office of 

Management and Budget (OMB) added DHS’s information network to its 

list of high-priority information technology projects, indicating that this 

mechanism is at risk of failure and requires additional oversight. 

According to the Federal Chief Information Officer, in order to justify 

1

The six transportation modes include aviation, maritime, public transit, highway, freight 

rail, and pipeline. 

Page 112 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

DHS Could Streamline Mechanisms for 

Sharing Security-Related Information with 

Public Transit Agencies to Help Address 

Overlapping Information 

future funding for these technology projects, agencies will need to, among 

other things, define deliverables and outcomes and put in place a strong 

governance structure. Projects that do not meet such criteria will not be 

continued. DHS officials have indicated that they are working with OMB to 

address OMB’s concerns, but have not provided GAO with information 

related to the specific actions that DHS has taken. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Taking steps to streamline information sharing with public transit agencies 

could reduce the volume of similar information public transit agencies 

receive, making it easier for them to discern relevant information and take 

appropriate actions to enhance security. Government and private sector 

stakeholders are participating in an information-sharing working group to 

review how information-sharing mechanisms might be streamlined to 

reduce the volume of overlapping information public transit agencies 

receive. In September 2010, GAO recommended that TSA establish time 

frames for this working group to develop options for improving its 

information-sharing efforts with public transit agencies. In October 2010, 

TSA reported that the working group had agreed upon a consolidated 

product for sharing security-related information with public transit 

agencies. In January 2011, TSA reported that the working group had 

established a proposed time frame for piloting and implementing this 

product. However, TSA did not provide specifics on the extent to which 

this product will reduce overlap among existing information-sharing 

mechanisms. Thus, it is too early to tell whether GAO’s recommendation 

has been fully addressed. 

GAO’s review of the costs associated with maintaining the public transit 

analysis center, the public transit portal on DHS’s information network, 

and the TSA portal on DHS’s information network found that the 

department continues to face challenges collecting and reporting useful 

financial management information. According to DHS officials, the 

department does not break out the costs associated with maintaining 

individual portals on its information network—including the public transit 

portal and TSA’s portal—and therefore could not provide GAO with a 

reliable estimate of the potential cost savings resulting from consolidating 

the public transit portal on DHS’s information network with the public 

transit analysis center or the TSA portal on DHS’s information network. 

Developing such cost data could assist the department in determining how 

to best allocate its limited resources to provide public transit agencies 

with quality security-related information. 

Page 113 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DHS Could Streamline Mechanisms for 

Sharing Security-Related Information with 

Public Transit Agencies to Help Address 

Overlapping Information 

Moreover, by assessing the various mechanisms available to public transit 

agencies and the information they provide, and identifying opportunities 

to streamline these mechanisms, DHS could identify and implement ways 

to more efficiently share security-related information, which would allow 

public transit officials to more quickly obtain security-related information 

and thereby enhance transit agencies’ efforts to secure their transportation 

systems. In doing so, DHS could develop and track verifiable cost data 

specific to each of its information-sharing mechanisms as part of TSA’s 

streamlining and financial management efforts. Developing such baseline 

cost data could assist TSA in identifying potential cost savings resulting 

from the consolidation of these mechanisms and provide opportunities for 

the agency to better allocate its information-sharing resources. 

DHS officials stated that conducting a cost comparison of the public 

transit portal on DHS’s information network, TSA’s portal on this network, 

and the public transit analysis center would not result in a meaningful 

comparison because DHS’s information-sharing mechanism costs are 

distributed across several transportation sectors, including public transit, 

while the costs for the public transit analysis center are applied to a 

specific sector. Additionally, TSA officials stated that TSA’s portal on 

DHS’s information network was not designed to compete with the public 

transit analysis center or the public transit subportal on DHS’s information 

network since TSA’s portal shares information with all transportation 

modes. GAO recognizes that TSA’s portal was designed to share 

information with all transportation modes, including public transit. 

However, GAO believes that to the extent possible, TSA should consider 

ways to reduce any unneeded overlap of information sharing for the public 

transit industry regardless of the mechanisms used to share such 

information. Furthermore, GAO continues to believe that developing and 

tracking verifiable cost data specific to each information-sharing 

mechanism as it relates to services provided to the public transit sector 

could assist TSA in identifying potential cost savings resulting from 

consolidating such mechanisms. 

Framework for 

Analysis 

The information contained in this analysis is based on GAO’s September 

2010 report on federal efforts to share security-related information with 

public transit agencies. In addition, this analysis contains updated 

information obtained from September 2010 through January 2011. GAO 

reviewed DHS’s cost data for completeness and accuracy and determined 

the data were reliable for the purposes of this analysis. 

Page 114 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

DHS Could Streamline Mechanisms for 


Sharing Security-Related Information with 


Public Transit Agencies to Help Address 


Overlapping Information 


Related GAO 

Products 

Public Transit Security Information Sharing: DHS Could Improve 

Information Sharing through Streamlining and Increased Outreach. 

GAO-10-895. Washington, D.C.: September 22, 2010. 

Interagency Collaboration: Key Issues for Congressional Oversight of 

National Security Strategies, Organizations, Workforce, and 

Information Sharing. GAO-09-904SP. Washington, D.C.: September 25, 

2009. 

High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 22, 

2009. 

Information Technology: Management Improvements Needed on the 

Department of Homeland Security’s Next Generation Information 

Sharing System. GAO-09-40. Washington, D.C.: October 8, 2008. 

Homeland Security: Departmentwide Integrated Financial Systems 

Remain a Challenge. GAO-07-536. Washington, D.C.: June 21, 2007. 

Information Technology: Numerous Federal Networks Used to Support 

Homeland Security Need to Be Better Coordinated with Key State and 

Local Information-Sharing Initiatives. GAO-07-455. Washington, D.C.: 

April 16, 2007. 

For additional information about this area, contact Steve Lord at Area Contact (202) 512-4379 or lords@gao.gov. 

Page 115 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
FEMA Needs to Improve Its Oversight of 

Grants and Establish a Framework for 

Assessing Capabilities to Identify Gaps and 

Prioritize Investments 

 

 

FEMA Needs to Improve Its Oversight of Grants and 

Establish a Framework for Assessing Capabilities to 

Identify Gaps and Prioritize Investments 

Why GAO Is Focusing 

on This Area 

From fiscal year 2002 through 2010, Congress appropriated over $34 

billion for homeland security preparedness grant programs to enhance the 

ability of state, territory, local, and tribal governments to prevent, protect 

against, respond to, and recover from terrorist attacks and other disasters, 

according to the Congressional Research Service. The number of 

preparedness grant programs Federal Emergency Management Agency 

(FEMA) administers has grown from 8 in 2002 to 17 in 2010 as the result of 

congressional and executive branch actions. A number of FEMA’s 

preparedness grant programs fund common eligible recipients (such as 

state homeland security agencies) for similar-broad purposes. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

FEMA does not compare and coordinate grant applications across its 

preparedness programs to identify potential duplication. In addition, 

FEMA has not established measurable goals or performance measures for 

preparedness capabilities to identify gaps to assist in effectively 

prioritizing national investments through preparedness grant programs. 

The Department of Homeland Security (DHS) Inspector General reported 

in March 2010 that FEMA’s application process for its preparedness grant 

programs did not promote effectiveness and efficiency because FEMA did 

not compare and coordinate grant applications across preparedness 

programs to identify and mitigate potential duplications (for example, 

planning and interoperable communications are two activities that can be 

funded by almost all of the programs reviewed by the Inspector General); 

the report recommended FEMA do so.1

 The report also cited barriers at 

the legislative, departmental, and state levels that impede FEMA’s ability 

to coordinate these programs, such as annual appropriation laws that may 

contain congressional earmarks dedicating funds toward specific grant 

projects. The report made two other recommendations for improving 

grant management, and FEMA concurred, saying the agency had efforts 

under way that will help to address the report’s findings. Until FEMA 

evaluates grant applications across grant programs, FEMA cannot 

ascertain whether or to what extent multiple funding requests are being 

submitted for similar purposes. 

1

The Inspector General reviewed 13 preparedness grant programs; see Department of 

Homeland Security Office of Inspector General, Efficacy of DHS Grant Programs, OIG-10­

69 (Washington, D.C., Mar. 22, 2010). 

Page 116 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

FEMA Needs to Improve Its Oversight of 

Grants and Establish a Framework for 

Assessing Capabilities to Identify Gaps and 

Prioritize Investments 

In October 2006, the Post-Katrina Emergency Management Reform Act 

charged FEMA with leading the nation in developing a national 

preparedness system.2

 The act requires FEMA to develop a national 

preparedness system and assess preparedness capabilities—capabilities 

needed to respond effectively to disasters—to determine the nation’s 

preparedness capability levels and the resources needed to achieve 

desired capability levels.3

 In a report to Congress in March 2009, FEMA 

identified, among other things, the need for federal agencies to work 

jointly to develop national standards for describing the functionality and 

performance characteristics of preparedness resources and capabilities 

for use by relevant homeland security grant programs to enable crossprogram coordination and assessment.4 

In October 2010, GAO reported that FEMA had not developed measurable 

national preparedness capability requirements to provide a framework for 

these assessments. In January 2011, FEMA reported that the Administrator 

had established a strategic priority, referred to as “Whole of Community” 

that identified a series of requirements or core capabilities, to ensure 

response and recovery actions are driven by the needs of the affected 

community in the event of a catastrophic disaster. As a result, FEMA is 

planning to generate measurable national preparedness capability 

requirements, and evaluation criteria (e.g., in terms of speed, effectiveness, 

and efficiency, among other factors) that are to provide a comprehensive 

framework for guiding investments and assessing readiness. Until FEMA 

has done so, it cannot operationalize and implement its approach for 

assessing local, state, and federal preparedness capabilities to identify gaps 

for prioritizing investments in national preparedness. According to program 

officials, FEMA’s efforts to define a framework within which its capability 

assessments can be effectively applied rely on the results of two key efforts: 

the recommendations of the October 2010 report of the congressionally 

mandated Local, State, Tribal and Federal Preparedness Task Force, and 

2

Pub. L. No. 109-295, § 644, 120 Stat. 1355, 1425 (2006) (codified at 6 U.S.C. § 744). The Act 

defines capability as “the ability to provide the means to accomplish one or more tasks 

under specific conditions and to specific performance standards.” Id. at 641, 120 Stat. at 

1424 (codified at 6 U.S.C. § 741). 

3

Pub. L. No. 109-295, § 649, 120 Stat. 1355, 1428 (2006) (codified at 6 U.S.C. § 749). 

4

FEMA, Grant Programs Directorate, Interagency Report on Preparedness Grant 

Programs, Report to Congress (Washington, D.C., May 2009). 

Page 117 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

FEMA Needs to Improve Its Oversight of 

Grants and Establish a Framework for 

Assessing Capabilities to Identify Gaps and 

Prioritize Investments 

planned revisions to Homeland Security Presidential Directive-8.5 If the 

problems regarding preparedness grant applications and capabilities are not 

addressed, FEMA could spend billions of dollars without the ability to 

identify duplication of effort and prioritize the development and 

maintenance of the most important preparedness capabilities. 

On October 12, 2010, Congress enacted the Redundancy Elimination and 

Enhanced Performance for Preparedness Grants Act.6

 The act calls for the 

FEMA administrator to identify redundant reporting requirements for 

recipients of certain grants and regularly report to Congress on efforts to 

eliminate identified redundancies; submit a plan for developing 

performance metrics for the grants; and conduct an assessment of the 

grant programs. In January 2011, FEMA reported that it is reviewing its 

grant programs and application processes to identify operational 

redundancies and is working with DHS to consolidate grant programs 

where activities are allowable under multiple grants. FEMA also stated 

that the agency is working with the National Academy of Public 

Administration to develop a plan by December 2011, for developing 

quantifiable performance measures and metrics to assess the effectiveness 

of preparedness grant programs. While these are positive steps, it is too 

early to determine their effectiveness in eliminating redundancies, 

increasing efficiency in administering FEMA’s grant programs, and 

assessing the effectiveness of preparedness grant programs. 

Actions Needed and 

Potential Financial or 

Other Benefits 

GAO has not previously made recommendations in this area, but to identify 

and address any unnecessary overlap and duplication, as well as to achieve 

operational improvements, efficiencies, and associated financial benefits, 

FEMA could benefit from examining its grant programs and coordinating its 

application process to eliminate or reduce redundancy among grant 

recipients and program purposes. FEMA’s actions in response to the 

Redundancy Elimination and Enhanced Performance for Preparedness 

Grants Act may help FEMA measure and assess the performance of its 

grants programs and achieve efficiencies and savings in administering these 

5

The Local, State, Tribal and Federal Preparedness Task Force is a group of experts 

charged with assessing the state of the nation’s disaster preparedness and making 

recommendations to the Secretary of Homeland Security about ways to build preparedness 

in communities across America. The Task Force is composed of 35 members of federal, 

state, local and tribal governments. 

6

Pub. L. No. 111-271, 124 Stat. 2852 (2010). 

Page 118 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

FEMA Needs to Improve Its Oversight of 

Grants and Establish a Framework for 

Assessing Capabilities to Identify Gaps and 

Prioritize Investments 

programs. However, FEMA’s actions in response to this act are still ongoing, 

thus it is too early to assess their effectiveness. 

In addition, Congress may wish to consider limiting preparedness grant 

funding to maintaining existing capabilities (as determined by FEMA) until 

FEMA completes a national preparedness assessment of capability gaps at 

each level based on tiered, capability-specific performance objectives to 

enable prioritization of grant funding. According to FEMA officials, the 

administration is planning to issue a revision of Homeland Security 

Presidential Directive-8 (no issue date has been set); the revision will 

significantly affect FEMA’s national preparedness policies and plans. 

Once FEMA has completed a comprehensive, measurable, national 

preparedness assessment of capability gaps, as described above, FEMA 

could identify the potential costs for establishing and maintaining those 

capabilities at each level, and determine what capabilities federal agencies 

should provide. Accordingly, Congress may wish to consider limiting the 

use of federal preparedness grant programs to fund only projects that 

support the development of identified, validated, and documented 

capability gaps. 

Framework for 

Analysis 

The information contained in this analysis is based on GAO’s review of 

agency reports and other sources well as the related GAO products listed 

below. GAO determined that the data it used were sufficiently reliable for 

its purposes. 

At the request of the House Homeland Security Committee, GAO has a review 

under way examining FEMA’s management of selected homeland security 

grants and potential duplication and expects to issue a report in 2011. 

Related GAO 

Products 

FEMA Has Made Limited Progress in Efforts to Develop and Implement 

a System to Assess National Preparedness Capabilities. GAO-11-51R. 

Washington, D.C., October 29, 2010. 

National Preparedness: FEMA Has Made Progress, but Needs to 

Complete and Integrate Planning, Exercise, and Assessment Efforts. 

GAO-09-369. Washington, D.C.: April 30, 2009. 

For additional information about this area, contact William O. Jenkins Jr. Area Contact at (202) 512-8757 or jenkinswo@gao.gov. 

Page 119 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Lack of Information Sharing Could Create the 

Potential for Duplication of Efforts between 

U.S. Agencies Involved in Development 

Efforts in Afghanistan 

 

Lack of Information Sharing Could Create the Potential 

for Duplication of Efforts between U.S. Agencies 

Involved in Development Efforts in Afghanistan 

Why GAO Is Focusing 

on This Area 

The United States has appropriated over $16 billion since fiscal year 2002 

for development efforts in Afghanistan, implemented by the U.S. Agency 

for International Development (USAID) and the Department of Defense 

(DOD). USAID, through its assistance program, and DOD, through its 

Commander’s Emergency Response Program (CERP), have implemented 

development projects focusing on similar initiatives, such as improving 

Afghanistan’s road, water, and other infrastructure sectors. This line of 

effort is an integral part of the U.S. integrated civilian-military campaign 

plan focused on countering insurgents in Afghanistan and requires 

extensive interagency coordination and information sharing. There is a 

potential for duplication of agencies’ efforts. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Agencies involved in the implementation of development projects in 

Afghanistan—principally USAID and DOD—have not adopted a centralized 

data system that tracks all U.S. government-funded Afghan development 

efforts and is accessible by all relevant agencies. GAO has made 

recommendations for such action and agencies have concurred with those 

recommendations. Without a centralized data system to improve visibility of 

individual development projects, the U.S. government may not be able to 

fully leverage available resources and risks duplicating efforts and wasting 

taxpayer dollars, as a result of fragmented or overlapping efforts. 

Maintaining an accessible data system that promotes interagency 

information sharing is particularly important in an environment such as 

Afghanistan, where several agencies are involved in similar development 

efforts that are dispersed throughout the country. In a review of U.S.­

funded road projects in Afghanistan, GAO reported in July 2008 that, 

despite CERP guidance requiring DOD to provide CERP-funded project 

information to a USAID-maintained database, DOD had not done so. As a 

result, a comprehensive database of all U.S.-funded road projects in 

Afghanistan did not exist. Moreover, DOD officials said that because of 

missing documentation and frequent staff rotation, they did not know 

where some CERP-funded roads were built. GAO recommended that 

information on DOD’s CERP-funded road projects be included in a USAIDmaintained database, and DOD concurred. 

However, in a May 2009 report that reviewed DOD’s coordination of 

CERP-funded projects in Afghanistan with USAID, GAO found that, while 

the two agencies had mechanisms in place to facilitate coordination, they 

lacked a common database accessible to all parties involved in 

development efforts in Afghanistan. GAO noted that DOD used a classified 

database—Combined Information Data Network Exchange—to track 

Page 120 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Lack of Information Sharing Could Create the 

Potential for Duplication of Efforts between 

U.S. Agencies Involved in Development 

Efforts in Afghanistan 

CERP-funded projects, while USAID used a database called GeoBase to 

track its development projects. GAO further noted that in early 2009, 

USAID officials were granted access to the unclassified portion of DOD’s 

database, but DOD officials did not have access to USAID’s GeoBase 

database at the time. 

Subsequently, in late 2009 USAID initiated a new database system, known 

as Afghan Info, to replace GeoBase. According to USAID, Afghan Info is 

intended to provide a comprehensive and transparent interagency picture 

of how project implementers use foreign assistance resources to support 

U.S. objectives in Afghanistan. USAID officials said they would like the 

Afghan Info system designated as the official system for data on U.S. 

assistance activities in Afghanistan, subject to Ambassador-level approval. 

However, GAO’s review of U.S. development efforts in Afghanistan’s water 

sector completed in November 2010 found that a centralized database that 

contains information on all U.S.-funded development projects, including 

information on water sector projects, still did not exist. Each agency 

continues to maintain its own project tracking system that identifies 

agency-specific information on water projects in Afghanistan. 

A USAID official responsible for developing the Afghan Info database 

noted that Afghan Info did not include data from any other agency, aside 

from unclassified quarterly CERP data that DOD began providing to 

USAID in February 2010. This official also did not know whether the 

system was being used to coordinate water sector development in 

Afghanistan. Moreover, senior DOD officials told GAO they were not 

familiar with the Afghan Info system or the data it contained. For its 

CERP-related data, DOD continues to use the Combined Information Data 

Network Exchange, which was not intended as a platform for interagency 

coordination. Agency officials have acknowledged that having access to 

project data from other agencies would contribute to better project 

planning, eliminate potential overlap, and allow agencies to leverage each 

other’s resources more effectively. 

Actions Needed and 

Potential Financial or 

Other Benefits 

To enhance interagency coordination and to help ensure there is no 

overlap or duplication and to increase accountability for use of agency 

funds, USAID, in consultation with DOD and other relevant U.S. agencies, 

should consider designating Afghan Info or some other database as the 

centralized U.S. government database for U.S. development efforts in 

Afghanistan. This database should, among other things, ensure that the 

information in the database (1) captures all agency development efforts 

Page 121 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Lack of Information Sharing Could Create the 

Potential for Duplication of Efforts between 

U.S. Agencies Involved in Development 

Efforts in Afghanistan 

and (2) is accessible to all U.S. government agencies involved in U.S.­

funded development projects in Afghanistan. 

The information contained in this analysis is based on the related products Framework for identified below. 

Analysis 

Related GAO 

Products 

Afghanistan Development: U.S. Efforts to Support Afghan Water Sector 

Increasing but Improvements Needed in Project Planning, Coordination, 

and Management. GAO-11-138. Washington, D.C.: November 15, 2010. 

Military Operations: Actions Needed to Improve Oversight and 

Interagency Coordination for the Commander’s Emergency Response 

Program in Afghanistan. GAO-09-615. Washington, D.C.: May 18, 2009. 

Afghanistan Reconstruction: Progress Made in Constructing Roads, but 

Assessments for Determining Impact and a Sustainable Maintenance 

Program Are Needed. GAO-08-689. Washington, D.C.: July 8, 2008. 

For additional information about this area, contact Charles Michael Area Contact Johnson at (202) 512-7331 or johnsoncm@gao.gov. 

Page 122 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Despite Restructuring, Overlapping Roles and 

Functions Still Exist at State’s Arms Control 

and Nonproliferation Bureaus 

 

 

 

Despite Restructuring, Overlapping Roles and 

Functions Still Exist at State’s Arms Control and 

Nonproliferation Bureaus 

Why GAO Is Focusing 

on This Area 

State assumed direct responsibility for arms control, nonproliferation, and 

disarmament issues in 1999 and established three bureaus to perform these 

missions. In 2004, the Department of State (State) Inspector General (IG) 

concluded that State’s three-bureau structure for conducting arms control 

and nonproliferation policy—the bureaus for Arms Control (AC), 

Nonproliferation (NP), and Verification and Compliance (VC)—did not 

adequately address post-September 11 challenges, including possible 

terrorist use of weapons of mass destruction. The IG also noted that State 

had yet to formalize the responsibilities of the three bureaus in its Foreign 

Affairs Manual (FAM), which sets out agency organization and functions. 

Between late 2005 and early 2006, State created a new two-bureau 

structure—the bureaus for International Security and Nonproliferation 

(ISN) and Verification, Compliance and Implementation (VCI)—to better 

address these issues and improve efficiency. In July 2009, GAO documented 

continuing problems with the department’s reorganization of these bureaus. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

GAO’s 2009 review of the reorganization of State bureaus responsible for 

nonproliferation activities found that the lack of clear guidance in the FAM 

contributed to past and current overlap problems among the AC, NP, and 

VC bureaus (referred to as T bureaus). Despite previous reorganization 

efforts, the fragmentation, overlap, and redundancies continue to exist 

among the T bureaus. This may be due somewhat to the lack of clear 

guidance in the department’s FAM. 

In 2004, the State IG identified a number of areas of overlap among the T 

bureaus. The overlap included multiple bureau reporting channels for some 

U.S. international conference representatives and treaty negotiators, and 

unclear and conflicting demarcation of responsibilities between AC and NP 

for their South Asia and North Korea issues. State’s objectives of the 2006 

reorganization were to eliminate overlap among the bureaus, missions, and 

issues; reduce bureaucratic inefficiencies and top-heavy management; and 

enable the department to better focus on post-September 11 challenges. 

State officials noted that the reorganization undertaken in 2006 addressed 

some organizational redundancies. Specifically, State reduced the number 

of offices, functions, and staff slots when it merged its three-bureau 

structure for conducting arms control and nonproliferation policy into a 

two-bureau structure. However, a May 2006 State study on workforce 

allocation conducted after the reorganization found that mission 

redundancies persisted for chemical weapons, missile defense and space 

policy, nuclear nonproliferation, and bioterrorism issues among 14 offices 

and functions of the new ISN and VCI bureaus. 

Page 123 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Despite Restructuring, Overlapping Roles and 

Functions Still Exist at State’s Arms Control 

and Nonproliferation Bureaus 

GAO’s 2009 review of the reorganization found that the lack of clear 

guidance in the FAM contributed to past and current overlap problems 

among the T bureaus. As a result, concerns about mission overlaps persist; 

State employees stated that some offices remain overworked while others 

are underworked. The section of the manual detailing the roles and 

responsibilities of these bureaus had never been drafted and approved 

since the 1999 incorporation of the Arms Control and Disarmament 

Agency into State and the creation of the AC, NP, and VC bureaus. A State 

official on the panel responsible for assigning roles and missions under the 

new two-bureau structure stated that their deliberations were hindered by 

the lack of an up-to-date FAM. The department agreed with GAO’s 2009 

recommendation that it delineate the roles and responsibilities for the ISN 

and VCI bureaus and add them to the FAM. On October 1, 2010, State 

announced a new reorganization of its arms control and nonproliferation 

functions, with the goal of improving and revitalizing efforts to enhance 

U.S. national security by effectively addressing global nuclear, chemical, 

biological, and conventional weapons threats. However, as of January 

2011, State has not modified the FAM. 

Actions Needed and 

Potential Financial or 

Other Benefits 

State should implement GAO’s recommendations to (1) formally delineate 

in the FAM the roles of the two new bureaus, and (2) direct that key 

transformation practices and steps be incorporated into the FAM. 

Implementing these recommendations could reduce personnel and other 

overhead costs by helping the T bureaus address the multiple mission 

redundancies identified among the offices and functions of the new ISN 

and VCI bureaus. The fiscal year 2010 appropriations for the ISN and VCI 

bureaus were $48.9 million and $31.0 million, respectively. 

The information contained in this analysis is based on the related product Framework for identified below. 

Analysis 

State Department: Key Transformation Practices Could Have Helped in Related GAO Product Restructuring Arms Control and Nonproliferation Bureaus. GAO-09-738. 

Washington, D.C.: July 15, 2009. 

For additional information about this area, contact Joseph Christoff at Area Contact (202) 512-8979 or christoffj@gao.gov. 

Page 124 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Actions Needed to Reduce Administrative 

Overlap among Domestic Food Assistance 

Programs 

 

Actions Needed to Reduce Administrative Overlap 

among Domestic Food Assistance Programs 

Why GAO Is Focusing 

on This Area 

The federal government spent more than $62.5 billion on 18 domestic food 

and nutrition assistance programs in fiscal year 2008. Programs’ spending 

ranged from $4 million for the smallest program to more than $37 billion 

for the largest. These programs help ensure that millions of low-income 

individuals have consistent, dependable access to enough food for an 

active, healthy life. Programs provide nutrition assistance in a variety of 

forms, ranging from agricultural commodities to prepared meals to 

vouchers or other targeted benefits used in commercial food retail 

locations. The U.S. Department of Agriculture’s (USDA) Food and 

Nutrition Service oversees most of these programs—including the five 

largest. The Department of Homeland Security (DHS) and the Department 

of Health and Human Services (HHS) also fund food assistance programs. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Domestic food and nutrition assistance is provided through a 

decentralized system of primarily 18 different federal programs that shows 

signs of overlap and inefficient use of resources. In addition to USDA, 

HHS, DHS, and multiple state and local government and nonprofit 

organizations work together to administer a complex network of programs 

and providers. GAO has found that some of these programs provide 

comparable benefits to similar or overlapping populations. For example, 

individuals eligible for groceries through the Commodity Supplemental 

Food Program are also generally eligible for groceries through the 

Emergency Food Assistance Program and for targeted benefits that are 

redeemed in authorized stores through the largest program, the 

Supplemental Nutrition Assistance Program (SNAP—formerly the Food 

Stamp Program). The availability of multiple programs with similar 

benefits helps ensure that those in need have access to nutritious food, but 

can also increase administrative costs, which account for approximately a 

tenth to more than a quarter of total costs among the largest of these 

programs. In addition, GAO’s previous work has shown that overlap 

among programs can lead to inefficient use of federal funds, duplication of 

effort, and confusion among those seeking services. 

These 18 programs were created individually by Congress over the past 

several decades to address a variety of emerging needs, such as targeting 

benefits to groups at high risk of malnutrition or hunger. Agency officials 

and local providers have indicated that the multiple food assistance 

programs work together and provide various points of entry to the system 

to help increase access to food for vulnerable or target populations. Those 

officials and providers told us that, since no one program alone is intended 

to meet a household’s full nutritional needs, the variety of food assistance 

Page 125 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

Actions Needed to Reduce Administrative 


Overlap among Domestic Food Assistance 


Programs 


programs can help households fill gaps and address the specific needs of 

individual members. 

Despite the potential benefits of varied points of entry, program rules related 

to determining eligibility often require the collection of similar information by 

multiple entities. For example, six programs—the National School Lunch 

Program, the School Breakfast Program, the Fresh Fruit and Vegetable 

Program, the Summer Food Service Program, the Special Milk Program, and 

the Child and Adult Care Food Program—all provide food to eligible children 

in settings outside the home, such as at school, day care, or summer day 

camps. Most of the 18 programs have specific and often complex legal 

requirements and administrative procedures that federal, state, and local 

organizations follow to help manage each program’s resources. According to 

previous GAO work and state and local officials, rules that govern these and 

other nutrition assistance programs often require applicants who seek 

assistance from multiple programs to submit separate applications for each 

program and provide similar information verifying, for example, household 

income. This can create unnecessary work for both providers and applicants 

and may result in the use of more administrative resources than needed. 

Moreover, not enough is known about the effectiveness of many of these 

programs. Research suggests that participation in 7 of the 18 programs— 

including the Special Supplemental Nutrition Program for Women, Infants, 

and Children (WIC), the National School Lunch Program, the School 

Breakfast Program, and SNAP—is associated with positive health and 

nutrition outcomes consistent with programs’ goals, such as raising the 

level of nutrition among low-income households, safeguarding the health 

and well-being of the nation’s children, and strengthening the agricultural 

economy. Yet little is known about the effectiveness of the remaining 11 

programs because they have not been well studied. As part of its broader 

recommendation GAO suggested that USDA consider which of the lesserstudied programs need further research, and USDA agreed to consider the 

value of examining potential inefficiencies and overlap among smaller 

programs 

Actions Needed and 

Potential Financial or 

Other Benefits 

Actions to address food assistance programs’ overlap and inefficiencies 

are needed to better leverage government resources. Provided such 

actions are balanced with the program goals of serving eligible vulnerable 

and low-income individuals and the need to maintain program integrity, 

creating efficiencies could put these agencies in a position to better assist 

program participants while decreasing administrative burdens. In April 

2010, GAO recommended that USDA identify and develop methods for 

Page 126 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Actions Needed to Reduce Administrative 

Overlap among Domestic Food Assistance 

Programs 

addressing potential inefficiencies and reducing unnecessary overlap 

among its smaller food assistance programs while ensuring that those who 

are eligible receive the assistance they need. These methods could include 

conducting a study as a first step; convening a group of experts; 

identifying which of the lesser-studied programs need further research and 

taking steps to fill the research gap; or identifying and piloting proposed 

changes. To date, USDA has not taken action on this recommendation. 

One of the possible methods for reducing program inefficiencies would 

entail USDA broadening its efforts to simplify, streamline, or better align 

eligibility procedures and criteria across programs to the extent that it is 

permitted by law. For example, the Child Nutrition and WIC 

Reauthorization Act of 2004 requires sharing of data between SNAP and 

the National School Lunch Program (NSLP) to allow automatic eligibility 

for NSLP without further application. According to USDA officials, by the 

2008-2009 school year, 78 percent of local educational agencies directly 

certified SNAP-participant children for free school meals, which increased 

administrative efficiency and reduced improper payments. While privacy 

concerns and incompatible data systems pose challenges, expanding these 

efforts across programs could further improve efficiency. Because the 

legislative and regulatory eligibility criteria for the various entitlement 

programs are not identical, with some more stringent than others, changes 

to better align eligibility criteria could result in either fewer or more 

eligible individuals. Nevertheless, such efforts could result in sizable 

administrative cost savings since, as noted earlier, they are a large part of 

program costs. 

Options such as consolidating or eliminating overlapping programs also 

have the potential to reduce administrative costs but may not reduce 

spending on benefits unless fewer individuals are served as a result. For 

example, in fiscal years 2007, 2008, and 2009, USDA proposed eliminating 

the Commodity Supplemental Food Program, which targets low-income 

pregnant women, children, and persons age 60 or over, but Congress 

continued to fund the program. USDA viewed this program as duplicative 

of other programs, and eliminating the program would have yielded close 

to $140 million savings in fiscal year 2008. However, according to agency 

officials, because the program is targeted to particularly vulnerable 

groups, elimination of the program would likely increase enrollment in 

programs such as WIC, reducing overall savings. As part of any effort to 

significantly change the nutrition assistance benefit delivery system, care 

must be taken to understand the likely effects on target populations. 

Nevertheless, GAO believes opportunities exist for reducing costs and 

improving the efficiency of nutrition assistance programs. 

Page 127 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Actions Needed to Reduce Administrative 

Overlap among Domestic Food Assistance 

Programs 

The information contained in this analysis builds upon prior GAO work, Framework for which is cited below. 

Analysis 

Related GAO 

Products 

Domestic Food Assistance: Complex System Benefits Millions, but 

Additional Efforts Could Address Potential Inefficiency and Overlap 

among Smaller Programs. GAO-10-346. Washington, D.C.: April 15, 2010. 

School Meal Programs: Experiences of the States and Districts That 

Eliminated Reduced-price Fees. GAO-09-584. Washington, D.C.: July 17, 

2009. 

Food Stamp Program: Options for Delivering Financial Incentives to 

Participants for Purchasing Targeted Foods. GAO-08-415. Washington, 

D.C.: July 30, 2008. 

Department of Agriculture, Food and Nutrition Service: Special 

Supplemental Nutrition Program for Women, Infants and Children 

(WIC): Revisions in the WIC Food Packages. GAO-08-358R. Washington, 

D.C.: December 17, 2007. 

Nutrition Education: USDA Provides Services through Multiple 

Programs, but Stronger Linkages among Efforts Are Needed. 

GAO-04-528. Washington, D.C.: April 27, 2004. 

Federal Food Safety and Security System: Fundamental Restructuring Is 

Needed to Address Fragmentation and Overlap. GAO-04-588T. 

Washington, D.C.: March 30, 2004. 

Food Stamp Program: Steps Have Been Taken to Increase Participation 

of Working Families, but Better Tracking of Efforts Is Needed. 

GAO-04-346. Washington, D.C.: March 5, 2004. 

For additional information about this area, contact Kay Brown (202) 512­ Area Contact 7215 or brownke@gao.gov. 

Page 128 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Better Coordination of Federal Homelessness 

Programs May Minimize Fragmentation and 

Overlap 

 

Better Coordination of Federal Homelessness Programs 

May Minimize Fragmentation and Overlap 

Why GAO Is Focusing 

on This Area 

According to the Department of Housing and Urban Development (HUD), 

approximately 643,000 individuals and persons in families experienced 

homelessness on a single night in January 2009. Multiple federal programs 

provide assistance targeted to those experiencing homelessness or more 

broadly assist low-income populations. GAO reported that in 2009 federal 

agencies spent about $2.9 billion on over 20 programs targeted to address 

the various needs of persons experiencing homelessness. Some federal 

programs may offer similar types of services and serve similar 

populations, potentially leading to overlap or fragmentation. 

In June 2010, GAO recommended that the Departments of Education, 

Health and Human Services (HHS), and HUD develop a common 

vocabulary to better coordinate homeless services. GAO also 

recommended in July 2010 that HUD and HHS consider more formally 

linking their housing and supportive services programs. The agencies 

concurred with these recommendations and to date have taken some 

actions to address them. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Several federal agencies provide a range of programs that offer not only 

housing assistance but also supportive services to those experiencing 

homelessness and to those at risk of becoming homeless, but coordination 

of these programs varies by program and agency. A number of federal 

programs are specifically targeted to address issues related to 

homelessness while other mainstream programs that are generally 

designed to help low-income individuals by providing housing assistance 

and services such as health care, job training, and food assistance may 

also serve those experiencing homelessness or at risk of becoming 

homeless. In some cases, different agencies may be offering similar types 

of services to similar populations. For example, GAO reported in July 2010 

that at least seven federal agencies administered more than 20 programs 

that provide some type of shelter or housing assistance. Similarly, five 

agencies administered programs that deliver food and nutrition services, 

and four agencies administered programs that provide health services 

including mental health services and substance abuse treatment. This 

range of programs has resulted in a fragmented service system. 

Fragmentation and overlap in some of these programs may be due in part 

to their legislative creation as separate programs under the jurisdiction of 

Page 129 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Better Coordination of Federal Homelessness 

Programs May Minimize Fragmentation and 

Overlap 

several agencies.1 Moreover, additional programs have since developed 

incrementally over time to address the specific needs of certain segments 

of the population. Nevertheless, this fragmentation can create difficulties 

for people in accessing services as well as administrative burdens for 

providers who must navigate various application requirements, selection 

criteria, and reporting requirements. Fragmentation of programs across 

federal agencies has also resulted in differing methods for collecting data 

on those experiencing homelessness. In part because of the lack of 

comprehensive data collection requirements, the data have limited 

usefulness. Complete and accurate data are essential for understanding 

and meeting the needs of those who are experiencing homelessness and to 

prevent homelessness from occurring. 

Coordination among targeted homelessness programs and with other 

mainstream programs that support individuals or families experiencing 

homelessness includes agencies working together on program guidance 

and prevention strategies. In July 2010, GAO reported that agencies had 

taken some steps toward improved coordination and that the U.S. 

Interagency Council on Homelessness (USICH) has provided a renewed 

focus on such coordination. However, the lack of federal coordination was 

still viewed by some local service providers as an important barrier to the 

effective delivery of services to those experiencing homelessness. Without 

more formal coordination of federal programs to specifically include the 

linking of supportive services and housing, federal efforts to address 

homelessness may remain fragmented and not be as effective as they 

could be. 

Actions Needed and 

Potential Financial or 

Other Benefits 

Federal agencies have taken some positive steps to improve coordination 

of programs that benefit those experiencing homelessness and reduce 

overlap and fragmentation but more needs to be done. In 2010, the 19 

members and staff of USICH, including the Departments of Education, 

HUD, and HHS, worked collaboratively to develop a plan—the Federal 

Strategic Plan to Prevent and End Homelessness. The plan is an important 

1

Many federal programs providing services to persons experiencing homelessness were 

created by the McKinney-Vento Homeless Assistance Act, Pub. L. No. 100-77 (1987). The 

act, enacted originally as the Stewart B. McKinney Homeless Assistance Act, was renamed 

in 2000. Pub. L. No. 106-400. The act originally consisted of 15 programs providing a range 

of services to persons experiencing homelessness, including emergency shelter, 

transitional housing, job training, primary health care, education, and some permanent 

housing. 

Page 130 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

Better Coordination of Federal Homelessness 

Programs May Minimize Fragmentation and 

Overlap 

first step that recognizes that to prevent and end homelessness, targeted 

and mainstream programs including housing, health, education, and 

human services must be coordinated. Consistent with recent GAO 

recommendations, a key plan objective is to increase collaborative 

planning and better target initiatives to populations that need support 

across multiple systems. 

In keeping with GAO’s previous recommendations and the plan’s objective 

to increase coordination, it will be important for the federal agencies that 

have adopted the plan to develop implementation plans that include but 

are not limited to a project schedule, resource allocation, outreach 

measures, and a performance measurement strategy to evaluate their 

progress. The plan recognizes that collection, analysis, and reporting of 

quality, timely data on homelessness are essential for targeting 

interventions, tracking results, strategic planning, and resource allocation. 

As noted above, currently each federal program generally has distinct data 

requirements. The plan acknowledges that a common data standard and 

uniform performance measures across all federal programs that are 

targeted at homelessness would facilitate greater understanding and 

simplify local data management. Consistent with the plan, representatives 

with USICH noted that agencies are taking steps to improve and 

coordinate data, specifically citing the December 2010 announcement by 

the Department of Veterans Affairs to participate in Homeless Information 

Management Systems over the next 12 months.2

 The formal coordination 

among agencies outlined in this plan may minimize fragmentation of 

federal programs and help address gaps in supportive services while 

linking housing and supportive services. The linking of these services is 

considered to be important for effectively delivering assistance to those 

experiencing homelessness. 

Implementation challenges could hamper efforts to increase agency 

coordination as outlined in the plan. For example, according to 

representatives with USICH, agencies may face challenges in coordinating 

plans, programs, and activities because of individual agency regulations 

2

The Homeless Management Information System (HMIS) is a software application designed 

to record and store information on the characteristics and service needs of those 

experiencing homelessness. HUD and other planners and policymakers at the federal, 

state, and local levels can use aggregate HMIS data to obtain information about the extent 

and nature of homelessness over time. Specifically, HMIS can be used to produce an 

unduplicated count of homeless persons, understand patterns of service use, and measure 

the effectiveness of homeless programs. 

Page 131 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Better Coordination of Federal Homelessness 

Programs May Minimize Fragmentation and 

Overlap 

that could prohibit sharing budgetary or other predecisional program 

information. Nevertheless, to facilitate interagency coordination, the plan 

encourages identifying and removing barriers to working together and 

seeking opportunities to conduct data matches and share data on those 

experiencing homelessness. It also indicates agencies at the state and local 

levels could review budget processes to determine if avenues exist for 

recognizing savings across partners and seek opportunities for engaging 

congressional committees jointly on issues related to preventing and 

ending homelessness. Despite these potential challenges, it is important 

for agencies to improve collaborative efforts as outlined in the plan. Given 

the importance of these issues, GAO believes that coordination of targeted 

and mainstream federal programs could benefit from increased Office of 

Management and Budget and congressional oversight. 

GAO plans to examine further the extent to which these programs have 

been evaluated on their efficiency and effectiveness and the potential 

benefits of consolidating or eliminating federal programs that deliver 

services to those experiencing homelessness. GAO also plans to evaluate 

what other options may more fully address fragmentation and overlap and 

achieve operational improvements, efficiencies, or financial savings. 

GAO reviewed prior reports, listed below, about federal agencies that Framework for provide homelessness assistance. GAO also obtained information from 

Analysis 	 representatives of the U.S. Interagency Council on Homelessness as well 

as national policy and advocacy organizations that deal with issues of 

homelessness. 

Related GAO 

Products 

Rural Homelessness: Better Collaboration by HHS and HUD Could 

Improve Delivery of Services in Rural Areas. GAO-10-724. Washington, 

D.C.: July 20, 2010. 

Homelessness: A Common Vocabulary Could Help Agencies Collaborate 

and Collect More Consistent Data. GAO-10-702. Washington, D.C.: June 

30, 2010. 

Homelessness: Improving Coordination and Client Access to Programs. 

GAO-02-485T. Washington, D.C.: March 6, 2002. 

Homelessness: Barriers to Using Mainstream Programs. 

GAO/RCED-00-184. Washington, D.C.: July 6, 2000. 

Page 132 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Better Coordination of Federal Homelessness 


Programs May Minimize Fragmentation and 


Overlap 


Homelessness: Coordination and Evaluation of Programs Are Essential. 

GAO/RCED-99-49. Washington, D.C.: February 26, 1999. 

For additional information about this area, contact Alicia Puente Cackley Area Contact at (202) 512-8678 or cackleya@gao.gov. 

Page 133 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Further Steps Needed to Improve CostEffectiveness and Enhance Services for 

Transportation-Disadvantaged Persons 

 

Further Steps Needed to Improve Cost-Effectiveness 

and Enhance Services for TransportationDisadvantaged Persons 

Why GAO Is Focusing 

on This Area 

Millions of Americans are unable to provide their own transportation or 

have difficulty accessing public transportation. Individuals who are 

“transportation disadvantaged” may include people who are elderly, have 

disabilities, or low incomes. In 2003, GAO reported that eight federal 

departments had 62 programs providing transportation services to this 

population. At that time, GAO was unable to identify spending on 

transportation services for more than half of these programs. However, 

spending for 29 programs totaled more than $2 billion in fiscal year 2001. 

Following GAO’s recommendation to increase federal agency participation, 

a 2004 Executive Order expanded the existing Interagency Transportation 

Coordinating Council on Access and Mobility to include 10 federal agencies 

and charged it with promoting interagency cooperation and establishing 

mechanisms to minimize program duplication and overlap. A 2004 GAO 

report found that some federal agencies were developing guidance and 

technical assistance for transportation coordination as recommended by 

GAO, and the Coordinating Council had launched the “United We Ride” 

transportation coordination initiative. These actions notwithstanding, 

program overlap and fragmentation continue today. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Agencies providing transportation services to transportation-disadvantaged 

persons often provide similar services to similar client groups, leading to 

potential duplication and service inefficiencies when coordination does not 

occur. Interagency forums for coordination at the federal, state, and local 

levels have expanded in recent years, but participation has varied among 

federal departments and program requirements have not been aligned to 

facilitate coordination. To improve cost-effectiveness and transportation 

services, federal departments should facilitate coordination by identifying 

and assessing programs, collecting information on expenditures, and 

developing or disseminating guidance and policies. 

GAO and others have reported that the variety of federal programs 

providing transportation services to the transportation disadvantaged has 

resulted in fragmented services that can be difficult for clients to navigate 

and narrowly focused programs that may result in service gaps. Further, 

services can be costly because of inconsistent, duplicative, and often 

restrictive program rules and regulations. 

Page 134 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Further Steps Needed to Improve CostEffectiveness and Enhance Services for 

Transportation-Disadvantaged Persons 

•	 GAO identified 80 existing federal programs in eight departments that 

provided funding for transportation services for the transportation 

disadvantaged in fiscal year 2010 (see table).1 

•	 Programs may provide bus tokens, transit passes, taxi vouchers, or 

mileage reimbursement, for example, to transportation-disadvantaged 

persons for trips to access government services (such as job-training 

programs), the grocery store, medical appointments, or for other 

purposes. 

As in prior work, GAO could not determine the total amount spent, 

because agencies often do not separately track transportation costs from 

other program costs. However, GAO obtained fiscal year 2009 funding 

information for 23 programs, which spent an estimated total of $1.7 billion 

on transportation services that year. Further, the Medicaid program in the 

Department of Health and Human Services spent $704 million in fiscal year 

2010—the first year for which such information was available. 

Number of Programs GAO Identified That Provide Transportation Services to 

Transportation-disadvantaged Persons, by Federal Department, as of October 2010 

Federal department 	 Number of programs identified 

Agriculture 	 2 

Education 

Health and Human Services 

Housing and Urban Development 

Interior 

Labor 

Transportation 

Veterans Affairs 

Totala	 80 

Source: Federal departments and GAO analysis of the Catalog of Federal Domestic Assistance (October 2010). 

a

The Corporation for National and Community Service—an independent federal agency—also funds 

three programs that provide transportation services. 

The Interagency Transportation Coordinating Council on Access and 

Mobility—the venue charged with promoting interagency coordination— 

1

Two new programs in the Departments of Agriculture and Housing and Urban 

Development have not yet awarded grants, but will have transportation as an eligible use of 

funds. These have not been included in the count of programs. 

Page 135 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 

11 

30 

11 

7 

9 

7 

3 
 

 

Further Steps Needed to Improve CostEffectiveness and Enhance Services for 

Transportation-Disadvantaged Persons 

has developed an action plan and a policy statement to encourage and 

facilitate coordination, but action by federal departments—individually 

and in concert—will be necessary to better coordinate programs and 

eliminate duplication and fragmentation at the federal level. For example, 

because neither the Coordinating Council nor most federal departments 

have an inventory of existing programs providing transportation services 

or their expenditures, they lack the information to identify opportunities 

to improve the efficiency and service of their programs through 

coordination. Available information is outdated and incomplete. 

Additionally, departments have not aligned program requirements. For 

instance, a 2009 report by the National Resource Center for Human 

Service Transportation Coordination found that three federal departments 

providing transportation services—the departments of Health and Human 

Services, Labor, and Education—had yet to coordinate their planning 

processes or requirements with the Department of Transportation.2

 GAO 

found that these steps still had not occurred as of the end of 2010. These 

departments account for 50 of the 80 existing programs identified. 

With limited interagency coordination and direction at the federal level, 

the “United We Ride” initiative and the Federal Transit Administration 

(FTA) have encouraged state and local coordination. For example, certain 

FTA transit programs require that projects selected for grant funding be 

derived from locally developed, coordinated public transit-human service 

transportation plans.3

 The National Conference of State Legislatures 

reported in 2010 that 25 states had created councils to improve 

coordination among state and local grantees.4

 Some states also have 

regional or local councils. These councils are generally responsible for 

identifying available transportation services, conducting needs 

assessments, and determining how gaps should be filled. However, 

participation by non-FTA grantees—which is optional—has varied, 

limiting these efforts. 

2

See Report to the Secretary of Transportation, National Resource Center for Human 

Service Transportation Coordination (March 2009). 

3

See Formula grants for special needs of elderly individuals and individuals with 

disabilities, 49 U.S.C. § 5310(d)(2)(B); Job Access and Reverse Commute formula grants, 49 

U.S.C. § 5316(g)(3); New Freedom Program, 49 U.S.C. § 5317(f)(3). 

4

National Conference of State Legislatures, State Human Service Transportation 

Coordinating Councils: An Overview and State Profiles (Denver, Colo., February 2010). 

Page 136 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Further Steps Needed to Improve Cost-


Effectiveness and Enhance Services for 


Transportation-Disadvantaged Persons 


Actions Needed and 

Potential Financial or 

Other Benefits 

Federal coordination of transportation services can lead to economic 

benefits, such as funding flexibility, reduced costs or great efficiency, and 

increased productivity, as well as improved customer service and 

enhanced mobility, as GAO and others have reported. To realize these 

benefits, GAO now suggests departments undertake actions in two key 

areas to help identify opportunities to eliminate duplication and 

fragmentation and improve coordination: 

•	 Program information. To reduce fragmentation, overlap, and 

duplication, federal departments on the Coordinating Council should 

identify and assess their transportation programs and related 

expenditures and work with other departments to identify potential 

opportunities for additional coordination such as the use of one-call 

centers, transportation brokerages, or shared resources, among other 

options. The Coordinating Council should develop the means for 

collecting and sharing this information by establishing agency roles and 

responsibilities and developing a strategy to reinforce cooperation. 

•	 Policies and guidance. Federal departments also have more work to 

do in developing and disseminating policies and grantee guidance for 

coordinating transportation services. This is important because state 

and local grantees typically look to their administrating departments 

for guidance on issues such as coordination. Some stakeholders 

indicated that policies for cost sharing among programs still need to be 

developed. Another noted that some coordination policies, such as 

vehicle sharing among service providers, could be better disseminated. 

In 2003, GAO discussed three potential options to overcome obstacles to 

the coordination of transportation for the transportation disadvantaged, 

two of which would require substantial statutory or regulatory changes 

and include potential costs: making federal program standards more 

uniform or creating some type of requirement or financial incentive for 

coordination. As a result, at that time GAO recommended expanding the 

Coordinating Council and better disseminating guidance. Subsequently, 

the Coordinating Council was expanded and several coordination 

initiatives were launched, and progress has been made in coordination 

efforts, particularly at the state and local level. However, to assure that 

coordination benefits are realized, Congress may want to consider 

requiring key programs to participate in coordinated planning. 

Page 137 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Further Steps Needed to Improve CostEffectiveness and Enhance Services for 

Transportation-Disadvantaged Persons 

Framework for 

Analysis 

GAO reviewed prior work listed below on the coordination of 

transportation services and the Job Access and Reverse Commute 

program. GAO interviewed department officials with the FTA and United 

We Ride and contacted the Departments of Agriculture, Education, Health 

and Human Services, Housing and Urban Development, the Interior, 

Justice, Labor, and Veterans Affairs. GAO also spoke with the National 

Resource Center for Human Service Transportation Coordination, the 

National Council on Disability, American Association of Retired Persons, 

American Association of State Highway and Transportation Officials, and 

Project ACTION, and reviewed relevant reports. Finally, GAO searched the 

Catalog of Federal Domestic Assistance for 2010 to confirm that programs 

identified in 2003 still exist and offer transportation services and to 

identify new programs funding these services. Program information was 

verified with department officials, who provided spending data. 

Related GAO 

Products 

Federal Transit Administration: Progress and Challenges in 

Implementing and Evaluating the Job Access and Reverse Commute 

Program. GAO-09-496. Washington, D.C.: May 21, 2009. 

Transportation Disadvantaged: Progress in Implementing the New 

Freedom Program Has Been Limited, and Better Monitoring Procedures 

Would Help Ensure Program Funds Are Used as Intended. GAO-07-999R. 

Washington, D.C.: July 19, 2007. 

Transportation-Disadvantaged Populations: Actions Needed to Clarify 

Responsibilities and Increase Preparedness for Evacuations. GAO-07-44. 

Washington, D.C.: December 22, 2006. 

Federal Transit Administration: Progress Made in Implementing 

Changes to the Job Access Program, but Evaluation and Oversight 

Processes Need Improvement. GAO-07-43. Washington, D.C.: November 17, 

2006. 

Disaster Preparedness: Preliminary Observations on the Evacuation of 

Vulnerable Populations due to Hurricanes and Other Disasters. 

GAO-06-790T. Washington, D.C.: May 18, 2006. 

Transportation-Disadvantaged Seniors: Efforts to Enhance Senior 

Mobility Could Benefit from Additional Guidance and Information. 

GAO-04-971. Washington, D.C.: August 30, 2004. 

Transportation-Disadvantaged Populations: Federal Agencies Are Taking 

Steps to Assist States and Local Agencies in Coordinating Transportation 

Services. GAO-04-420R. Washington, D.C.: February 24, 2004. 

Page 138 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Further Steps Needed to Improve Cost-


Effectiveness and Enhance Services for 


Transportation-Disadvantaged Persons 


Transportation-Disadvantaged Populations: Some Coordination Efforts 

Among Programs Providing Transportation Services, but Obstacles 

Persist. GAO-03-697. Washington, D.C.: June 30, 2003. 

Transportation-Disadvantaged Populations: Many Federal Programs 

Fund Transportation Services, but Obstacles to Coordination Persist. 

GAO-03-698T. Washington, D.C.: May 1, 2003. 

For additional information about this area, contact David Wise at Area Contact (202) 512-2834 or wised@gao.gov. 

Page 139 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Multiple Employment and Training Programs: 

Providing Information on Colocating Services 

and Consolidating Administrative Structures 

Could Promote Efficiencies 

 

Multiple Employment and Training Programs: Providing 

Information on Colocating Services and Consolidating 

Administrative Structures Could Promote Efficiencies 

Why GAO Is Focusing 

on This Area 

Federally funded employment and training programs play an important 

role in helping job seekers obtain employment. In fiscal year 2009, 47 

programs spent about $18 billion to provide services, such as job search 

and job counseling, to program participants. Most of these programs are 

administered by the Departments of Labor, Education, and Health and 

Human Services (HHS). 

GAO has previously issued reports on the number of programs that 

provide employment and training services and overlap among them. In the 

1990s, GAO issued a series of reports that identified program overlap and 

possible areas of resulting inefficiencies. In 2000 and 2003, GAO identified 

programs for which a key program goal was providing employment and 

training assistance and tracked the increasing number of programs. GAO 

recently updated information on these programs, found overlap among 

them, and examined potential duplication among three selected large 

programs—HHS’s Temporary Assistance for Needy Families (TANF) and 

the Department of Labor’s Employment Service and Workforce Investment 

Act (WIA) Adult programs. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Forty-four of the 47 federal employment and training programs GAO 

identified, including those with broader missions such as multipurpose 

block grants, overlap with at least one other program in that they provide 

at least one similar service to a similar population. Some of these 

overlapping programs serve multiple population groups. Others target 

specific populations, most commonly Native Americans, veterans, and 

youth. Even when programs overlap, they may have meaningful 

differences in their eligibility criteria or objectives, or they may provide 

similar types of services in different ways. 

GAO examined the TANF, Employment Service, and WIA Adult programs 

for potential duplication and found they provide some of the same services 

to the same population through separate administrative structures. 

Although the extent to which individuals receive the same services from 

these programs is unknown due to limited data, GAO found these 

programs maintain parallel administrative structures to provide some of 

the same services, such as job search assistance, to low-income 

individuals (see following table). It should be noted that employment is 

only one aspect of the TANF program, which also provides a wide range of 

other services, including cash assistance. At the state level, the TANF 

program is typically administered by the state human services or welfare 

agency, while the Employment Service and WIA Adult programs are 

typically administered by the state workforce agency and provided 

Page 140 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Multiple Employment and Training Programs: 

Providing Information on Colocating Services 

and Consolidating Administrative Structures 

Could Promote Efficiencies 

through one-stop centers. Agency officials acknowledged that greater 

efficiencies could be achieved in delivering services through these 

programs, but said factors such as the number of clients that any one-stop 

center can serve and one-stop centers’ proximity to clients, particularly in 

rural areas, could warrant having multiple entities provide the same 

services. 

Selected Employment and Training Services Provided by the Employment Service, 

TANF, and WIA Adult Programs, Fiscal Year 2009 

Program name 

Employment 

counseling and 

assessment 

Development 

of job 

opportunities

Job readiness

skills training

Job 

referrals

Job search or 

job placement 

activities

Employment Service/WagnerPeyser Funded Activities (DOL) 

Temporary Assistance for 

Needy Families (HHS) 

WIA Adult Program (DOL) 

Primary services Secondary services

Source: GAO survey of agency officials. 

Note: DOL = Department of Labor 

Colocating services and consolidating administrative structures may 

increase efficiencies and reduce costs, but implementation can be 

challenging. Some states have colocated TANF employment and training 

services in one-stop centers where Employment Service and WIA Adult 

services are provided. Three states—Florida, Texas, and Utah—have gone 

a step further by consolidating the agencies that administer these 

programs, and state officials said this reduced costs and improved 

services, but they could not provide a dollar figure for cost savings. States 

and localities may face challenges to colocating services, such as limited 

office space. In addition, consolidating administrative structures may be 

time consuming and any cost savings may not be immediately realized. 

An obstacle to further progress in achieving greater administrative 

efficiencies is that little information is available about the strategies and 

results of such initiatives. In addition, little is known about the incentives 

that states and localities have to undertake such initiatives and whether 

additional incentives are needed. 

Page 141 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Multiple Employment and Training Programs: 

Providing Information on Colocating Services 

and Consolidating Administrative Structures 

Could Promote Efficiencies 

Actions Needed and 

Potential Financial or 

Other Benefits 

To facilitate further progress by states and localities in increasing 

administrative efficiencies in employment and training programs, GAO 

recommended in 2011 that the Secretaries of Labor and HHS work 

together to develop and disseminate information that could inform such 

efforts. This should include information about state initiatives to 

consolidate program administrative structures and state and local efforts 

to colocate new partners, such as TANF, at one-stop centers. Information 

on these topics could address challenges faced, strategies employed, 

results achieved, and remaining issues. As part of this effort, Labor and 

HHS should examine the incentives for states and localities to undertake 

such initiatives, and, as warranted, identify options for increasing such 

incentives. Labor and HHS agreed that they should develop and 

disseminate this information. HHS noted that it lacks legal authority to 

mandate increased TANF-WIA coordination or create incentives for such 

efforts. 

To the extent that colocating services and consolidating administrative 

structures reduce administrative costs, funds could potentially be 

available to serve more clients or for other purposes. For the TANF 

program alone, GAO estimated that states spent about $160 million to 

administer employment and training services in fiscal year 2009. According 

to a Department of Labor official, the administrative costs for the WIA 

Adult program were at least $56 million in program year 2009. Officials 

told GAO they do not collect data on the administrative costs associated 

with the Employment Service program, as they are not a separately 

identifiable cost in the legislation. Labor officials said that, on average, the 

agency spends about $4,000 for each WIA Adult participant who receives 

training services. In periods of budgetary constraints, it is all the more 

important that resources are used effectively. Depending on the reduction 

in administrative costs associated with colocation and consolidation, these 

funds could be used to train potentially hundreds or thousands of 

additional individuals. 

The information contained in this analysis is based on GAO products listed Framework for below. GAO did not conduct a legal review in order to determine the 

Analysis programs, their requirements, or goals. 

Page 142 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Multiple Employment and Training Programs: 

Providing Information on Colocating Services 

and Consolidating Administrative Structures 

Could Promote Efficiencies 

Related GAO 

Products 

Multiple Employment and Training Programs: Providing Information 

on Colocating Services and Consolidating Administrative Structures 

Could Promote Efficiencies. GAO-11-92. Washington, D.C.: January 13, 

2011. 

Multiple Employment and Training Programs: Funding and 

Performance Measures for Major Programs. GAO-03-589. Washington, 

D.C.: April 18, 2003. 

Multiple Employment and Training Programs: Overlapping Programs 

Indicate Need for Closer Examination of Structure. GAO-01-71. 

Washington, D.C.: October 13, 2000. 

For additional information about this area, contact Andrew Sherrill at Area Contact (202) 512-7215 or sherrilla@gao.gov. 

Page 143 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

 

Teacher Quality: Proliferation of Programs Complicates 

Federal Efforts to Invest Dollars Effectively 

Why GAO Is Focusing 

on This Area 

In fiscal year 2009, the federal government spent over $4 billion 

specifically to improve the quality of our nation’s 3 million teachers 

through numerous programs across the government. Teacher quality can 

be enhanced through a variety of activities, including training, recruitment, 

and curriculum and assessment tools. In turn, these activities can 

influence student learning and ultimately improve the global 

competitiveness of the American workforce in a knowledge-based 

economy. Prior GAO reports have noted that sustained coordination 

among key federal education programs could enhance state efforts to 

improve teacher quality. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Federal efforts to improve teacher quality have led to the creation and 

expansion of a variety of programs across the federal government; 

however, there is no governmentwide strategy to minimize fragmentation, 

overlap, or duplication among these many programs. Specifically, GAO 

identified 82 distinct programs designed to help improve teacher quality, 

either as a primary purpose or as an allowable activity, administered 

across 10 federal agencies. Many of these programs share similar goals. 

For example, 9 of the 82 programs support improving the quality of 

teaching in science, technology, engineering, and mathematics (STEM 

subjects) and these programs alone are administered across the 

Departments of Education, Defense, and Energy; the National Aeronautics 

and Space Administration; and the National Science Foundation. Further, 

in fiscal year 2010, the majority (53) of the programs GAO identified 

supporting teacher quality improvements received $50 million or less in 

funding and many have their own separate administrative processes. 

The proliferation of programs has resulted in fragmentation that can 

frustrate agency efforts to administer programs in a comprehensive 

manner, limit the ability to determine which programs are most costeffective, and ultimately increases program costs. For example in the 

Department of Education (Education), eight different offices administer 

over 60 of the federal programs supporting teacher quality improvements, 

primarily in the form of competitive grants. Education officials believe that 

federal programs have failed to make significant progress in helping states 

close achievement gaps between schools serving students from different 

socioeconomic backgrounds, because, in part, federal programs that focus 

on teaching and learning of specific subjects are too fragmented to help 

state and district officials strengthen instruction and increase student 

achievement in a comprehensive manner. While Education officials noted, 

and GAO concurs, that a mixture of programs can target services to 

underserved populations and yield strategic innovations, the current 

Page 144 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

programs are not structured in a way that enables educators and 

policymakers to identify the most effective practices to replicate. 

According to Education officials, it is typically not cost-effective to 

allocate the funds necessary to conduct rigorous evaluations of small 

programs; therefore, small programs are unlikely to be evaluated. Finally, 

it is more costly to administer many separately authorized federal 

programs because each program has its own policies, applications, award 

competitions, reporting requirements, and, in some cases, federal 

evaluations. 

While all of the 82 federal programs GAO identified support teacher quality 

improvement efforts, several overlap in that they share more than one key 

program characteristic. For example, teacher quality programs may 

overlap if they share similar objectives, serve similar target groups, or fund 

similar activities. GAO previously reported that 23 of the programs 

administered by Education in fiscal year 2009 had improving teacher 

quality as a specific focus, which suggested that there may be overlap 

among these and other programs that have teacher quality improvements 

as an allowable activity. When looking across a broader set of criteria, 

GAO found that 14 of the programs administered by Education overlapped 

with another program with regard to allowable activities as well as shared 

objectives and target groups (see table). For example, the Transition to 

Teaching program and Teacher Quality Partnership Grant program can 

both be used to fund similar teacher preparation activities through 

institutions of higher education for the purpose of helping individuals from 

non-teaching fields become qualified to teach. 

Page 145 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

 

 

 

Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

Areas of Overlap among Selected Programs Administered by Education That Support Teacher Quality Improvement 

Even Starta 

Striving Readersa Mathematics and Science Partnershipsa 

Improving Teacher Quality State Grantsa 

Title I, Part A 

School Improvement Grants

Transition to Teachinga

Advanced Certification or

Advanced Credentialinga 

Teacher Quality Partnership Grantsa 

Language Resource CentersTeach for Americaa 

Teachers for a Competitive Tomorrow 

Program: Baccalaureatea 

Teachers for a Competitive Tomorrow: 

Mastersa 

Foreign Language Assistance Programa 

Objective 

Improve Education in 

Specific Subjects

Improve Education 

in General 

Improve Education for 

Special Populations

Tar get Group 

Current Teachers

Prospective Teachers

Other Education 

Professionals

Activity b 

Teacher Preparation 

Professional

 Development 

Recruitment or 

Retention 

Certification or

 Licensure 

Induction or Mentoring 

Source: GAO analysis of Department of Education documents and interviews. 

Note: The 14 programs shown in the table are a subset of over 60 Education programs supporting 

teacher quality improvement either specifically or as an allowable activity. Specifically, although Title 

I, Part A, School Improvement Grants, and Even Start allow program funds to be used for teacher 

quality activities, this is not their primary focus. The 14 programs presented above overlapped with at 

least 1 other program across objective, target group, and activity. 

a

Education has proposed consolidating this program under a broader program in its proposal for the 

reauthorization of the Elementary and Secondary Education Act of 1965. 

b

This is not an exhaustive list of activities allowed under these programs, but rather the activities GAO 

determined were most relevant for the purposes of this analysis. 

Although there is overlap among these programs, several factors make it 

difficult to determine whether there is unnecessary duplication. First, 

when similar teacher quality activities are funded through different 

programs and delivered by different entities, some overlap can occur 

Page 146 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

unintentionally, but is not necessarily wasteful. For example, a local 

school district could use funds from the Foreign Language Assistance 

program to pay for professional development for a teacher who will be 

implementing a new foreign language course, and this teacher could also 

attend a summer seminar on best practices for teaching the foreign 

language at a Language Resource Center. Second, by design, individual 

teachers may benefit from federally funded training or financial support at 

different points in their careers. Specifically, the teacher from this 

example could also receive teacher certification through a program funded 

by the Teachers for a Competitive Tomorrow program. Further, both 

broad and narrowly targeted programs exist simultaneously, meaning that 

the same teacher who receives professional development funded from any 

one or more of the above three programs might also receive professional 

development that is funded through Title I, Part A. The actual content of 

these professional development activities may differ though, since the 

primary goal of each program is different. In this example, it would be 

difficult to know whether the absence of any one of these programs would 

make a difference in terms of the teacher’s ability to teach the new 

language effectively. 

In past work, GAO and Education’s Inspector General have concluded that 

improved planning and coordination could help Education better leverage 

expertise and limited resources, and to anticipate and develop options for 

addressing potential problems among the multitude of programs it 

administers. Generally, GAO has reported that uncoordinated program 

efforts can waste scarce funds, confuse and frustrate program customers, 

and limit the overall effectiveness of the federal effort. However, given the 

large number of teacher quality programs and the extent of overlap, it is 

unlikely that improved coordination alone can fully mitigate the effects of 

the fragmented and overlapping federal effort. 

Actions Needed and 

Potential Financial or 

Other Benefits 

In 2009, GAO recommended that the Secretary of Education work with 

other agencies as appropriate to develop a coordinated approach for 

routinely and systematically sharing information that can assist federal 

programs, states, and local providers in achieving efficient service 

delivery. Coordination is essential to ensure that programs do not work at 

cross-purposes, do not repeat mistakes, and do not engage in wasteful 

duplication of services. Education has established working groups to help 

develop more effective collaboration across Education offices, and has 

reached out to other agencies to develop a framework for sharing 

information on some teacher quality activities, but it has noted that 

coordination efforts do not always prove useful and cannot fully eliminate 

Page 147 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

barriers to program alignment, such as programs with differing definitions 

for similar populations of grantees, which create an impediment to 

coordination. 

Congress could help eliminate some of these barriers through legislation, 

particularly through the pending reauthorization of the Elementary and 

Secondary Education Act of 1965 and other key education bills. 

Specifically, to minimize any wasteful fragmentation and overlap among 

teacher quality programs, Congress may choose either to eliminate 

programs that are too small to evaluate cost-effectively or combine 

programs serving similar target groups into a larger program. Education 

has already proposed combining 38 programs into 11 programs in its 

reauthorization proposal, which could allow the agency to dedicate a 

higher portion of its administrative resources to monitoring programs for 

results and providing technical assistance. Congress might also include 

legislative provisions to help Education reduce fragmentation, such as by 

giving broader discretion to the agency to move resources away from 

certain programs. Congress could provide Education guidelines for 

selecting these programs. For example, Congress could allow Education 

discretion to consolidate programs with administrative costs exceeding a 

certain threshold or failing to meet performance goals, into larger or more 

successful programs. Finally, to the extent that overlapping programs 

continue to be authorized, they could be better aligned with each other in 

a way that allows for comparison and evaluation to ensure they are 

complementary rather than duplicative. 

Framework for 

Analysis 

The information contained in this analysis is based in part on issued GAO 

products listed below. Additionally, it is based on recent GAO analysis of 

overlap among teacher quality programs among a broad range of 82 

federal programs that support teacher quality efforts directly as a primary 

purpose, or as an allowable activity. GAO reviewed programs that it had 

previously identified as teacher quality programs and refined the initial list 

of programs based on a keyword search of the Catalog of Federal 

Domestic Assistance (CFDA) for programs that included “teacher quality,” 

“teacher training,” or “professional development” in their descriptions. 

GAO then reviewed agency Web sites, budget documents, and other 

information to verify that these programs support teacher quality 

improvements directly or allowed funds to be used to support teacher 

quality improvements. Education verified that the 63 programs that they 

administer and that GAO identified as supporting teacher quality 

improvement did so either directly or as an allowable activity; GAO did not 

ask other agencies to verify other programs on the list. 

Page 148 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Teacher Quality: Proliferation of Programs 


Complicates Federal Efforts to Invest Dollars 


Effectively
 

To specifically identify potential fragmentation and overlap among these 

programs, GAO reviewed the CFDA descriptions and other documentation 

to determine if programs had similar objectives, served similar target 

groups, and provided similar types of assistance. For purposes of this 

report, GAO focused on Education programs, which further narrowed the 

list of potentially overlapping programs to 14. GAO then interviewed 

responsible program officials to obtain more detailed information about 

each of these programs. GAO also interviewed Education officials to 

determine if progress had been made in addressing previous 

recommendations aimed at improving coordination among agencies 

administering teacher quality programs, and to obtain information about 

the potential impact of consolidating or eliminating programs that GAO 

identified as being potentially duplicative. 

Related GAO 

Products 

English Language Learning: Diverse Federal and State Efforts to 

Support Adult English Language Learning Could Benefit from More 

Coordination. GAO-09-575. Washington, D.C.: July 29, 2009. 

Teacher Preparation: Multiple Federal Education Offices Support 

Teacher Preparation for Instructing Students with Disabilities and 

English Language Learners, but Systematic Departmentwide 

Coordination Could Enhance This Assistance. GAO-09-573. Washington, 

D.C.: July 20, 2009. 

Teacher Quality: Sustained Coordination among Key Federal Education 

Programs Could Enhance State Efforts to Improve Teacher Quality. 

GAO-09-593. Washington, D.C.: July 6, 2009. 

No Child Left Behind Act: Education Actions Could Improve the 

Targeting of School Improvement Funds to Schools Most in Need of 

Assistance. GAO-08-380. Washington, D.C.: February 29, 2008. 

Teacher Quality: Approaches, Implementation, and Evaluation of Key 

Federal Efforts. GAO-07-861T. Washington, D.C.: May 17, 2007. 

No Child Left Behind Act: States Face Challenges in Measuring 

Academic Growth that Education’s Initiatives May Help Address. 

GAO-06-661. Washington, D.C.: July 17, 2006. 

Troops-to-Teachers: Program Brings More Men and Minorities to the 

Teaching Workforce, but Education Could Improve Management to 

Enhance Results. GAO-06-265. Washington, D.C.: March 1, 2006. 

Page 149 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Teacher Quality: Proliferation of Programs 

Complicates Federal Efforts to Invest Dollars 

Effectively 

No Child Left Behind Act: Improved Accessibility to Education’s 

Information Could Help States Further Implement Teacher Qualification 

Requirements. GAO-06-25. Washington, D.C.: November 21, 2005. 

Higher Education: Activities Underway to Improve Teacher Training, 

but Reporting on These Activities Could Be Enhanced. GAO-03-6. 

Washington, D.C.: December 11, 2002. 

Early Education and Care: Overlap Indicates Need to Assess 

Crosscutting Programs. GAO/HEHS-00-78. Washington, D.C.: April 28, 

2000. 

Federal Education Funding: Multiple Programs and Lack of Data Raise 

Efficiency and Effectiveness Concerns. GAO/T-HEHS-98-46. Washington, 

D.C.: November 6, 1997. 

For additional information about this area, contact George Scott at Area Contact (202) 512-7215 or scottg@gao.gov. 

Page 150 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Fragmentation of Financial Literacy Efforts 

Makes Coordination Essential 

 

Fragmentation of Financial Literacy Efforts Makes 

Coordination Essential 

Why GAO Is Focusing 

on This Area 

Improving financial literacy is essential to ensuring consumers’ economic 

well-being and security. Poor money management and financial decision 

making can lower a family’s standard of living and interfere with crucial 

long-term goals, such as buying a home and financing retirement. 

Financial literacy has broader public policy implications as well. For 

example, financial markets work best when consumers understand how 

financial services providers and products work and know how to choose 

among them. Federal financial literacy programs and resources are spread 

widely among many different federal agencies, raising concerns of 

potential duplication or fragmentation. 

What GAO Has Found 

to Indicate 

Duplication, Overlap, 

or Fragmentation 

Federal financial literacy activities are fragmented across multiple 

agencies, with more than 20 different federal agencies providing about 56 

programs related to financial literacy. This increases the risk of 

inefficiency and highlights the need for strong coordination of these 

efforts. Federally funded financial literacy programs cover a number of 

topics (such as saving for retirement and avoiding fraudulent practices), 

target a range of audiences (such as schoolchildren, prospective 

homeowners, and investors), and include a variety of delivery mechanisms 

(such as classroom curricula, print materials, Web sites, broadcast media, 

and individual counseling). To streamline federal efforts in this area and 

improve coordination, Congress created the multiagency Financial 

Literacy and Education Commission (the Commission) in 2003. It charged 

the Commission with, among other things, developing a national strategy 

to promote financial literacy and education, coordinating federal efforts, 

and identifying—and proposing means of eliminating—areas of overlap 

and duplication. 

GAO recommended in 2006 that the Commission use an unbiased, thirdparty evaluator to examine the extent of overlap and duplication among 

federal financial literacy activities. In response, the Treasury Department, 

which staffs and chairs the Commission and coordinates its activities, 

contracted for two studies, both of which found limited evidence of 

overlap and duplication. Staff at four federal agencies and two research 

institutions that GAO spoke with noted that even when different agencies’ 

programs appeared similar, closer inspection can reveal important 

differences in such elements as the target audience or the specific content. 

However, with 20 different agencies playing a role in financial education, 

federal financial literacy efforts clearly are fragmented. There are some 

advantages to having multiple federal agencies involved in financial 

literacy—for example, agencies can focus their efforts on the particular 

Page 151 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmentation of Financial Literacy Efforts 

Makes Coordination Essential 

subject matter or target audiences for which they have expertise. At the 

same time, fragmentation across agencies can also make it difficult to 

develop a coherent global approach for identifying gaps and needs and for 

rationally allocating overall resources. In part to encourage a more 

coordinated approach to federal financial literacy resources, Congress 

mandated the Commission to develop a national strategy. However, as 

GAO has reported, the 2006 National Strategy for Financial Literacy largely 

was descriptive rather than strategic; generally did not include a plan for 

implementation; and only partially addressed or defined elements such as 

performance measures, resource needs, and roles and responsibilities. In 

December 2010, the Commission released a new national strategy, which 

identifies five action areas—policy, education, practice, research, and 

coordination—as well as a series of goals and related objectives intended 

to help guide financial literacy efforts over the next 3 to 5 years. The 

Commission stated that in 2011 it will release an implementation plan for 

how the Commission, its members, and other organizations can best 

incorporate the new strategy into their activities and initiatives. As that 

implementation plan is developed, GAO believes that one of its goals 

should be to address the fragmentation of federal financial literacy efforts. 

Fragmentation across federal agencies has the potential to result in 

inefficient, uncoordinated, or redundant use of resources. In the case of 

financial literacy programs, there are numerous funding streams and little 

good data on the amount of federal funds devoted to financial literacy. 

Financial literacy efforts are not necessarily organized as separate budget 

line items or cost centers within federal agencies and there is no estimate 

of overall federal spending for financial literacy and education, according 

to the Department of the Treasury. The Commission was charged with 

coordinating federal resources, but GAO has noted in the past that the 

Commission faces significant challenges in its role as a centralized focal 

point: it is composed of many agencies, but it has no independent budget 

and no legal authority to compel member agencies to take any action. 

Actions Needed and 

Potential Financial or 

Other Benefits 

GAO has identified several possible steps that could be taken to address 

fragmentation in federal financial literacy efforts: 

•	 Improve coordination among federal agencies. Because of the 

crosscutting nature of financial literacy, it would be difficult, if not 

impossible, for one agency alone to address the issue, but coordination 

among agencies is clearly essential. In prior work, GAO has identified 

barriers to coordinating programs and initiatives across the federal 

government, which can include competing missions, concerns about 

Page 152 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmentation of Financial Literacy Efforts 

Makes Coordination Essential 

protecting resources, and a lack of clearly articulated roles and 

responsibilities. The Commission should enhance its efforts to 

coordinate federal activities, such as by exploring further opportunities 

to strengthen its role as a central clearinghouse for federal financial 

literacy resources. 

•	 Delineate roles for two key financial education offices. In 2010, 

Congress enacted legislation creating an Office of Financial Education 

within the new Bureau of Consumer Financial Protection. This office is 

charged with duties that are in some ways similar to those of the 

separate Office of Financial Education and Financial Access within the 

Department of the Treasury. The respective offices will need to 

coordinate their roles and activities closely to avoid unnecessary 

overlap and make the most productive use of their respective 

resources. 

•	 Foster public-private partnerships. Given the wide array of state, 

local, nonprofit, and private organizations providing financial literacy 

programs, it is essential to leverage private sector resources and 

coordinate federal activities with resources at the community level. 

The Commission should build on progress it has made in recent years 

in promoting such partnerships. Federal collaboration with state and 

local governments may be particularly important given the critical role 

that school districts can play in improving financial literacy among 

young people. 

•	 Measure outcomes and focus resources accordingly. Federal financial 

literacy resources should be focused on those agencies and programs 

with the most expertise and best track records. The Commission and 

the Bureau of Consumer Financial Protection could potentially play a 

role in developing or disseminating a standard set of evaluation tools or 

benchmarks that would help assess which federal initiatives have the 

most effective outcomes. 

The potential monetary savings to coordinating or consolidating financial 

literacy efforts is unknown. As noted earlier, there is no estimate of overall 

federal spending for financial literacy and education, and most federal 

agencies do not have an estimate for spending on “financial literacy” per 

se. However, streamlining federal financial literacy resources would have 

other benefits—it would make the best use of scarce resources and focus 

efforts on programs and initiatives that have been shown to be most 

effective in improving the financial literacy of the American people. 

Page 153 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
 

Fragmentation of Financial Literacy Efforts 

Makes Coordination Essential 

Framework for 

Analysis 

The information contained in this analysis builds upon prior GAO work, 

which is cited below. To supplement that work, GAO reviewed two studies 

on federal financial literacy resources that were conducted by private 

entities and commissioned by the Department of the Treasury. GAO also 

conducted interviews with staff at four federal agencies and two research 

organizations. 

Related GAO 

Products 

Financial Literacy and Education Commission: Progress Made in 

Fostering Partnerships, but National Strategy Remains Largely 

Descriptive Rather Than Strategic. GAO-09-638T. Washington, D.C.: April 

29, 2009. 

Financial Literacy and Education Commission: Further Progress 

Needed to Ensure an Effective National Strategy. GAO-07-100. 

Washington, D.C.: December 4, 2006. 

Highlights of a GAO Forum: The Federal Government’s Role in 

Improving Financial Literacy. GAO-05-93SP. Washington, D.C.: 

November 15, 2004. 

For additional information about this area, contact Alicia Puente Cackley Area Contact at (202) 512-8678 or cackleya@gao.gov. 

Page 154 GAO-11-318SP Section I: Duplication, Overlap, or Fragmentation 
Section II: Other GAO-Identified Cost-Saving 

and Revenue-Enhancing Areas 

 

 

 

 

Section II: Other GAO-Identified Cost-Saving and 

Revenue-Enhancing Areas 

Table 2 provides 47 areas for consideration where the government can 

achieve cost savings or enhance revenue collections. The table includes 

the estimated cost savings or additional revenues, if available. In many 

cases, there is sufficient information to show that if actions are taken to 

address individual issues summarized in Table 2, financial benefits ranging 

from tens of millions to tens of billions of dollars annually may be realized. 

In other cases, however, estimates for savings or revenues would depend 

upon the nature and scope of congressional and executive branch 

decisions, or additional programmatic data may be needed. Following the 

table are summaries for each of the areas listed. Each of the summaries 

contains a “Framework for Analysis” providing the methodology used to 

conduct the work and a list of related GAO products for further 

information. 

Table 2: Federal agencies and programs where cost saving or revenue enhancement opportunities may exist 

Missions 

Agriculture 

Defense 

Economic 

development 

Areas identified 

35. Reducing some farm program payments could result in 

savings from $800 million over 10 years to up to $5 billion 

annually 

36. DOD should assess costs and benefits of overseas 

military presence options before committing to costly 

personnel realignments and construction plans, thereby 

possibly saving billions of dollars 

37. Total compensation approach is needed to manage 

significant growth in military personnel costs 

38. Employing best management practices could help DOD 

save money on its weapon systems acquisition 

programs 

39. More efficient management could limit future costs of 

DOD’s spare parts inventory 

40. More comprehensive and complete cost data can help 

DOD improve the cost-effectiveness of sustaining 

weapon systems 

41. Improved corrosion prevention and control practices 

could help DOD avoid billions in unnecessary costs over 

time 

42. Revising the essential air service program could improve 

efficiency and save over $20 million annually 

Federal agencies and programs where 

cost-saving or revenue-enhancement 

options may exist 

Department of Agriculture 

Department of Defense (DOD) 

DOD 

DOD 

DOD, including the military services and 

Defense Logistics Agency 

DOD 

DOD’s Office of Corrosion Policy and 

Oversight 

Department of Transportation 

Page 

159 

164 

169 

173 

178 

182 

186 

190 

43. Improved design and management of the universal 

service fund as it expands to support broadband could 

help avoid cost increases for consumers 

Federal Communications Commission; four 

programs involved 194 

Page 155 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Section II: Other GAO-Identified Cost-Saving 

and Revenue-Enhancing Areas 

Missions Areas identified 

Federal agencies and programs where 

cost-saving or revenue-enhancement 

options may exist Page 

44. The Corps of Engineers should provide Congress with 

project-level information on unobligated balances 

U.S. Army Corps of Engineers 198 

Energy 45. Improved management of federal oil and gas resources 

could result in approximately $1.75 billion over 10 years 

Department of the Interior’s Bureau of Land 

Management, Bureau of Ocean Energy 

Management, Regulation and Enforcement, 

and Office of Natural Resources Revenue 

200 

General 

government 

46. Efforts to address governmentwide improper payments 

could result in significant cost savings 

About 20 federal agencies; over 70 

programs involved 205 

47. Promoting competition for the over $500 billion in federal 

contracts can potentially save billions of dollars over time 

Governmentwide 211 

48. Applying strategic sourcing best practices throughout the 

federal procurement system could save billions of dollars 

annually 

Governmentwide 

215 

49. Adherence to new guidance on award fee contracts could 

improve agencies’ use of award fees and produce savings 

Several agencies, including DOD and the 

National Aeronautics and Space 

Administration 

219 

50. Agencies could realize cost savings of at least $3 billion by 

continued disposal of unneeded federal real property 

Governmentwide, including DOD, General 

Services Administration (GSA), and 

Department of Veterans Affairs 

222 

51. Improved cost analyses used for making federal facility 

ownership and leasing decisions could save tens of 

millions of dollars 

Primarily GSA, the central leasing agent for 

most agencies 226 

52. The Office of Management and Budget’s IT Dashboard 

reportedly has already resulted in $3 billion in savings and 

can further help identify opportunities to invest more 

efficiently in information technology 

Governmentwide 

230 

53. Increasing electronic filing of individual income tax 

returns could reduce IRS’s processing costs and increase 

revenues by hundreds of millions of dollars 

Department of the Treasury’s (Treasury) 

Internal Revenue Service (IRS) 234 

54. Using return on investment information to better target 

IRS enforcement could reduce the tax gap; for example, a 

1 percent reduction would increase tax revenues by $3 

billion 

IRS 

238 

55. Better management of tax debt collection may resolve 

cases faster with lower IRS costs and increase debt 

IRS 

241 

collected 

56. Broadening IRS’s authority to correct simple tax return 

errors could facilitate correct tax payments and help IRS 

avoid costly, burdensome audits 

IRS 

244 

57. Enhancing mortgage interest information reporting could 

improve tax compliance 

IRS 248 

58. More information on the types and uses of canceled debt 

could help IRS limit revenue losses on forgiven mortgage 

debt 

IRS 

251 

Page 156 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Section II: Other GAO-Identified Cost-Saving 

and Revenue-Enhancing Areas 

Missions Areas identified 

Federal agencies and programs where 

cost-saving or revenue-enhancement 

options may exist Page 

59. Better information and outreach could help increase 

revenues by tens or hundreds of millions of dollars 

annually by addressing overstated real estate tax 

deductions 

IRS 

254 

60. Revisions to content and use of Form 1098-T could help 

IRS enforce higher education requirements and increase 

IRS 

258 

revenues 

61. Many options could improve the tax compliance of sole 

proprietors and begin to reduce their $68 billion portion of 

the tax gap 

IRS 

260 

62. IRS could find additional businesses not filing tax 

returns by using third-party data, which show such 

businesses have billions of dollars in sales 

IRS 

264 

63. Congress and IRS can help S corporations and their 

shareholders be more tax compliant, potentially increasing 

tax revenues by hundreds of millions of dollars each year 

IRS 

267 

64. IRS needs an agencywide approach for addressing tax 

evasion among the at least 1 million networks of 

businesses and related entities 

IRS 

270 

65. Opportunities exist to improve the targeting of the $6 billion 

research tax credit and reduce forgone revenue 

Treasury and IRS 273 

66. Converting the new markets tax credit to a grant program 

may increase program efficiency and significantly reduce 

the $3.8 billion 5-year revenue cost of the program 

Treasury 

276 

67. Limiting the tax-exempt status of certain governmental 

bonds could yield revenue 

Treasury 279 

68. Adjusting civil tax penalties for inflation potentially could 

increase revenues by tens of millions of dollars per year, 

not counting any revenues that may result from 

maintaining the penalties’ deterrent effect 

IRS 

281 

69. IRS may be able to systematically identify nonresident 

aliens reporting unallowed tax deductions or credits 

IRS 284 

70. Tracking undisbursed balances in expired grant 

accounts could facilitate the reallocation of scarce 

Governmentwide 

286 

resources or the return of funding to the Treasury 

Health 71. Preventing billions in Medicaid improper payments 

requires sustained attention and action by CMS 

Department of Health and Human Services’ 

Centers for Medicare & Medicaid Services 

(CMS) 

289 

72. Federal oversight over Medicaid supplemental payments 

needs improvement, which could lead to substantial cost 

savings 

CMS 

293 

73. Better targeting of Medicare’s claims review could reduce 

improper payments 

CMS 296 

Page 157 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Section II: Other GAO-Identified Cost-Saving 

and Revenue-Enhancing Areas 

Missions Areas identified 

Federal agencies and programs where 

cost-saving or revenue-enhancement 

options may exist Page 

74. Potential savings in Medicare’s payments for health care CMS 300 

Homeland 

security/Law 

enforcement 

75. DHS’s management of acquisitions could be 

strengthened to reduce cost overruns and schedule and 

performance shortfalls 

Department of Homeland Security (DHS) 

306 

76. Improvements in managing research and development 

could help reduce inefficiencies and costs for homeland 

security 

DHS 

311 

77. Validation of TSA’s behavior-based screening program 

is needed to justify funding or expansion 

Transportation Security Administration 

(TSA) 316 

78. More efficient baggage screening systems could result in 

about $470 million in reduced TSA personnel costs over 

the next 5 years 

TSA 

320 

79. Clarifying availability of certain customs fee collections 

could produce a one-time savings of $640 million 

DHS’s Customs and Border Protection 

(CBP) 324 

Income 

security 

80. Social Security needs data on pensions from noncovered 

earnings to better enforce offsets and ensure benefit 

fairness, resulting in estimated $2.4-$2.9 billion savings 

over 10 years 

Social Security Administration 

326 

International 

affairs 

81. Congress could pursue several options to improve 

collection of antidumping and countervailing duties 

CBP 330 

Source: GAO analysis based on areas addressed in Section II of this report. 

Page 158 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Reducing Some Farm Program Payments 

Could Result in Substantial Savings 

 

Reducing Some Farm Program Payments Could Result 

in Substantial Savings 

Why GAO Is Focusing 

on This Area 

Between 2005 and 2009, the U.S. Department of Agriculture (USDA) spent 

an average of about $15 billion annually on programs to support farm 

income, assist farmers after disasters, and conserve natural resources. 

Under one of these federal farm programs, USDA provides fixed annual 

payments—called direct payments—to farmers based on a farm’s history 

of crop production. Direct payments were most recently reauthorized in 

the Food, Conservation, and Energy Act of 2008, which will expire in 2012 

without future action. 

GAO has shown that taxpayer dollars can be saved with strengthened 

oversight of farm program payments, including direct payments. For 

example, GAO reported in October 2008 that USDA provided farm 

program payments to thousands of individuals with incomes exceeding 

income eligibility caps. GAO has also shown that USDA’s oversight and 

enforcement of program rules is not always effective. For example, in July 

2007, GAO reported that USDA paid $1.1 billion in such payments to more 

than 170,000 deceased individuals, and in April 2004 GAO reported that 

USDA provided such payments to people who may have had only limited 

involvement in farming because the agency lacks sufficient management 

controls. Since then, USDA has taken some actions in response to GAO’s 

recommendations. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Reducing or eliminating direct payments to farmers—particularly those to 

large farming operations—could achieve cost savings of as much as $5 

billion annually. In contrast to other major farm programs, which 

compensate farmers for declines in price or lost crops, direct payments go 

to farmers regardless of risk factors. Direct payments are calculated using 

a formula that considers the crop and production history and the number 

of acres planted during certain years in the past on a farm. Generally, a 

percentage of the acres that were planted is multiplied by a set payment 

rate for the crop that was planted.1

 For 2009 through 2011, this percentage 

is 83.3 percent, and for 2012, it will be 85 percent. Although a farmer’s 

direct payments are based on the historical production of a particular 

crop, the farmer has almost complete flexibility in deciding which crops to 

plant and whether to plant any crops at all. To be eligible for such a 

payment, a farmer’s average nonfarm income (over the preceding 3 tax 

1

Specifically, the formula uses a percentage of the average number of acres planted during 

1998 through 2001 and multiplies it by a set payment rate and the historical crop yield for a 

farm. The percentage and payment rates for each crop are specified in legislation 

commonly referred to as farm bills passed by Congress roughly every 5 years. 

Page 159 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Reducing Some Farm Program Payments 

Could Result in Substantial Savings 

years) can be no more than $500,000, or average farm income no more 

than $750,000. Direct payments are limited to $40,000 per person per year; 

however, a farm can receive multiple payments depending on its 

ownership structure. For example, a husband and wife operating a farm 

together can collect up to $80,000 annually, and a partnership with 10 

partners can collect up to $400,000 annually. 

In light of the following observations made by GAO and others, the need 

for direct payments should be reconsidered: 

•	 Farmers receive direct payments even in years of record farm 

income. Although direct payments were established after a period of 

relatively lower farm income in the early 1990s, USDA reported that the 

top 5 earnings years since the payments began have occurred after 

2004, attesting to the profitability of farming in this decade. 

Furthermore, USDA estimated farm income was about $82 billion in 

2010—up by $19 billion, or 31 percent, from 2009—which would be the 

third-highest level ever recorded for U.S. farming. 

•	 Direct payments are concentrated among the largest recipients 

because they are tied to land and paid on a per-acre basis. About 62 

percent of farm program payments—including direct payments—went 

to the largest 12 percent of farms in 2008, according to USDA. 

Similarly, GAO found that in 2009, 305 farm operations each received 

$200,000 or more in direct payments, in part because they were 

structured so that five or more partners or members of a farm business 

were eligible to receive the payments. Noting this concentration of 

payments, the Office of Management and Budget (OMB) and others 

have cited direct payments for failing to target the payments to those 

who need them the most, including small farmers. 

•	 Recipients of farm program payments have higher incomes, on 

average, than other tax filers. When farm programs were first 

established, farmers had lower incomes on average than other 

Americans, but now the opposite may be true—particularly for those 

receiving program payments. In 2008, GAO reported that individuals 

who receive program payments, including direct payments, are more 

than twice as likely to have higher incomes as other tax filers. For 

example, in examining the more than 138 million federal tax returns 

filed for 2006, GAO found that 4.6 percent of individuals receiving 

program payments reported adjusted gross income of between 

$200,000 and $500,000, whereas 2.3 percent of other tax filers reported 

income at this level. 

Page 160 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Reducing Some Farm Program Payments 

Could Result in Substantial Savings 

•	 Direct payments may compound challenges for beginning farmers. 

GAO reported in September 2007 that beginning farmers face multiple 

challenges, including a need for funds to purchase farmland. With an 

aging farmer population in the United States, USDA set a goal of 

increasing assistance to beginning farmers, but direct payments may 

instead compound the challenges beginning farmers face. According to 

USDA studies, these payments result in higher prices to buy or rent 

land because in some cases the payments go directly to landowners— 

resulting in increased land value—and in other cases the payments go 

to tenants, prompting landlords to increase rental rates. Furthermore, 

because direct payments are linked to a farm’s number of acres, large 

farms can use these payments to expand their operations, but higher 

land values make it difficult for beginning farmers to do so, as OMB 

and others have noted. 

•	 Direct payments were expected to be transitional. According to the 

Conference Report to the 1996 farm bill, direct payments were 

established to help farmers make a transition to planting decisions on 

the basis of market signals rather than government programs. 

Accordingly, the payments were scheduled to decrease over time and 

expire in 2002. However, subsequent farm bills have continued these 

payments. 

•	 Direct payments may no longer be needed to comply with trade 

agreements. Proponents of direct payments say they help the United 

States meet its commitments under international trade agreements, 

which set ceilings on government payments classified as tradedistorting. Unlike other farm program payments, direct payments do 

not depend on current market prices, so the World Trade Organization 

generally considers them to be non-trade distorting and the United 

States does not count them against the international restrictions. As a 

result, other farm program payments can be provided with a reduced 

risk of exceeding the ceilings. However, according to economists, this 

advantage has become less relevant recently because high crop prices, 

which are expected to continue through the foreseeable future, have 

kept farm program payments well below the ceiling on trade-distorting 

payments. 

Page 161 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Reducing Some Farm Program Payments 

Could Result in Substantial Savings 

Actions Needed and 

Potential Savings 

Recognizing current budget constraints, the National Commission on 

Fiscal Responsibility and Reform,2

 the Debt Reduction Taskforce,3 the 

administration, Members of Congress, GAO, and some farming groups 

have proposed options to reduce or eliminate direct payments. For 

example, Congress may wish to consider the following three. To reduce 

direct payments, the administration and others have proposed lowering 

payment or income eligibility limits. They argue that lower limits leave 

payments intact for recipients of smaller payments or with smaller 

incomes and could therefore still help smaller and beginning farmers. On 

the other hand, critics say, focusing on payment limits may be ineffective 

because farmers may develop methods to avoid being restricted by the 

limits. GAO previously reported that many farmers structure their 

operations to avoid payment limits and that USDA has not consistently 

enforced eligibility requirements, bringing into question the effectiveness 

of both types of limits. 

Congress may also wish to consider reducing the portion of a farm’s acres 

eligible for direct payments. In 2009, GAO reported that reducing the 

portion of eligible acres to 80 percent from 83.3 percent might save 

millions of dollars annually.4

 Further reducing the portion of eligible acres 

to 75 percent could save millions more each year. Such an across-theboard reduction would affect all recipients. Moreover, Congress may wish 

to consider terminating the payments. Some agriculture organizations, 

including the National Farmers Union and the Iowa Farm Bureau, have 

recommended phasing out or terminating the payments altogether and 

using the savings to bolster other farm programs. 

2

The National Commission on Fiscal Responsibility and Reform was established under 

Executive Order 13531 (Feb. 18, 2010). It issued The Moment of Truth: Report of the 

National Commission on Fiscal Responsibility and Reform (Washington, D.C., December 

2010). 

3

Led by former Senate Budget Committee Chairman Pete Domenici and former White 

House Budget Director Alice Rivlin, the Debt Reduction Task Force issued Restoring 

America’s Future: Reviving the Economy, Cutting Spending and Debt, and Creating a 

Simple, Pro-Growth Tax System (Washington, D.C., Nov. 17, 2010). 

4

See http://www.gao.gov/highrisk/opportunities/natural_resources/ 

strengthening-integrity-and-efficiency-of-federal-farm-programs.php. 

Page 162 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Reducing Some Farm Program Payments 


Could Result in Substantial Savings 


GAO has identified the following potential for cost savings: 

•	 about $800 million over 10 years by reducing payment and income 

eligibility limits for a very small portion of recipients, according to the 

administration’s estimate in its budget for fiscal year 2011; 

•	 about $600 million annually by reducing the portion of acres used to 

calculate payments to 75 percent, according to GAO’s estimate; or 

•	 about $5 billion annually by terminating or phasing out the payments. 

Framework for 

Analysis 

To update information on the number of farms receiving direct payments 

of $200,000 or more, GAO used data from USDA’s Producer Payment 

Reporting System and determined that the data were sufficiently reliable 

for its purposes. To estimate the potential savings from reducing the 

portion of acres used to calculate direct payments and from terminating 

the payments, GAO used the most recent budget figures from the 

Congressional Budget Office. Other information in this analysis is 

primarily based on the related GAO products listed below. 

Related GAO 

Products 

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Payments to Individuals Who Exceed Income Eligibility Limits. 

GAO-09-67. Washington, D.C.: October 24, 2008. 

Beginning Farmers: Additional Steps Needed to Demonstrate the 

Effectiveness of USDA Assistance. GAO-07-1130. Washington, D.C.: 

September 18, 2007. 

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Improper Payments to Estates and Deceased Individuals. GAO-07-818. 

Washington, D.C.: July 9, 2007. 

Farm Program Payments: USDA Needs to Strengthen Regulations and 

Oversight to Better Ensure Recipients Do Not Circumvent Payment 

Limitations. GAO-04-407. Washington, D.C.: April 30, 2004. 

For additional information about this area, contact Lisa Shames at Area Contact (202) 512-3841 or shamesl@gao.gov. 

Page 163 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
DOD Should Assess Costs and Benefits of 

Overseas Military Presence Options Before 

Committing to Costly Personnel Realignments 

and Construction Plans 

DOD Should Assess Costs and Benefits of Overseas 

Military Presence Options Before Committing to Costly 

Personnel Realignments and Construction Plans 

Why GAO Is Focusing 

on This Area 

Overseas presence provides operational capabilities and demonstrates a 

commitment to our allies. In addition to the costs of supporting ongoing 

combat operations, the Department of Defense (DOD) spends billions of 

dollars annually on its network of installations around the world. For 

example, according to data provided by the military services, between 

fiscal years 2006 and 2009 the military services obligated $17.2 billion for 

the installations they manage in Europe. These obligations do not include 

funds obligated by other DOD organizations that use those facilities, 

overseas contingency funding, or personnel costs. Further, the military 

services estimated a requirement of $24 billion through fiscal year 2015 to 

build, operate, and maintain these installations. In light of current fiscal 

challenges facing the country, questions have arisen about the magnitude 

of overseas basing projects and costs, and whether DOD’s planned 

investments support a coherent and affordable strategy. GAO’s prior work 

has shown that DOD has taken positive steps to improve its planning for 

overseas infrastructure, but continues to devote insufficient attention to 

costs or analysis of alternatives. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Having U.S. troops stationed overseas provides benefits, such as deterring 

aggression against U.S. allies, but permanent stationing may come at 

significantly higher costs than other alternative approaches such as 

deploying domestically stationed forces when needed. GAO’s work since 

2006 has found a systemic lack of cost information used to inform DOD’s 

planning for its overseas infrastructure. As a consequence, DOD and 

Congress lack reasonable assurance that overseas presence is being 

planned and implemented in a cost-effective and financially sustainable 

way. Reliable and complete cost estimates are critical to allow analyses of 

alternatives and oversight by decision makers. 

Since 2008, DOD has taken steps to develop regional plans for its overseas 

infrastructure, but department guidance regarding these posture plans has 

not required comprehensive cost information to support this emerging 

process. Recognizing the considerable costs involved with stationing 

forces overseas, in August 2010 the Secretary of Defense identified DOD’s 

overseas presence as an area for review. Among other concerns, the 

Secretary of Defense questioned the growth in the number of general and 

flag officers across the department, highlighting that the U.S. European 

Command maintains four-star service component headquarters more than 

20 years after the end of the Cold War and the vast majority of their 

fighting forces have departed from the region. Recent GAO reports have 

identified several evolving elements of DOD’s global infrastructure, which 

have the potential to cost—or possibly save—the department billions of 

Page 164 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
DOD Should Assess Costs and Benefits of 

Overseas Military Presence Options Before 

Committing to Costly Personnel Realignments 

and Construction Plans 

dollars depending on decisions DOD and Congress make. For each of 

these decisions, reliable, complete cost data will be invaluable to the 

ability of decision makers to choose among available options. For 

example: 

•	 Plans to reduce forces in Europe are being reconsidered. DOD 

recently held up the planned return of two Army brigades from 

Germany pending an announcement of the North Atlantic Treaty 

Organization’s strategic concept as well as the results of ongoing U.S. 

assessments of the global defense posture. GAO’s work has shown that 

leaving these two brigades in Europe could cost DOD between $1 

billion and $2 billion over 10 years compared to bringing the forces 

back to the United States. In addition, the Army plans to continue to 

invest in a new Army headquarters in Germany even though the 

Secretary of Defense has questioned the size of U.S. European 

Command and its associated service component commands, and DOD 

may ultimately return some forces to the United States. U.S. European 

Command and service officials noted that forward military presence in 

Europe provides important but difficult-to-quantify benefits, including 

commitment to the North Atlantic Treaty Organization. Recognizing 

this, in September 2010, GAO recommended that DOD reassess its 

alternatives for Europe, weighing the costs of the presence against its 

perceived benefits to ensure DOD takes a cost-effective course of 

action. DOD officials agreed with this recommendation and noted that 

certain actions have already been undertaken, and DOD is currently 

conducting a broad review of the European theater. 

•	 Efforts to establish military presence in Africa have met with 

concerns. DOD has few facilities in Africa, but Camp Lemonnier in 

Djibouti houses a 2,000-person joint task force as well as supports 

other U.S. and multinational missions such as building the security 

capacity of partner states, at a cost of about $238 million in 2010. 

However, as GAO reported in April 2010, the task force’s future is 

uncertain because it relies on overseas contingency operations 

appropriations. Moreover, the task force’s original war-fighting mission 

has evolved to civil affairs missions like drilling water wells and 

building schools, and needs to be reassessed. Efforts to date have not 

always yielded the intended results or were sometimes poorly 

coordinated with other U.S. agencies. It is uncertain where DOD will 

ultimately place a headquarters for U.S. Africa Command, which it 

designated as being fully operational in 2008. DOD had planned to 

locate the headquarters in Africa but stepped back from those plans 

after some African nations raised concerns. The command currently 

Page 165 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
DOD Should Assess Costs and Benefits of 

Overseas Military Presence Options Before 

Committing to Costly Personnel Realignments 

and Construction Plans 

occupies temporary facilities in Stuttgart, Germany, and has postponed 

its decision on a permanent headquarters until 2012. 

•	 Substantial costs are anticipated for enduring locations in Iraq, 

Afghanistan, and other locations in southwest Asia. Supporting the 

continuing operations in Iraq and Afghanistan is DOD’s priority, and its 

regional presence includes installations in Kuwait, Bahrain, and Qatar, 

among other nations. While DOD has made progress executing the 

drawdown, challenges remain that could impact DOD’s ability to close 

bases in Iraq as planned. GAO has begun work to examine how much 

DOD’s presence in the region will cost moving forward relative to the 

potential benefits and what other alternatives to current plans may 

exist. 

•	 Large and costly realignment is being undertaken in Asia. DOD has 

several major initiatives under way in the Pacific region that represent 

a significant restructuring and transformation of the U.S. military 

presence in Asia. For example, DOD plans to increase the U.S. military 

presence on Guam from about 15,000 in 2009 to more than 39,000 by 

2020, which will increase the current island population by about 14 

percent over those years. GAO has previously reported that the 

reported costs for these and other posture initiatives may be 

significantly understated. GAO is examining the scope, magnitude, 

management, and costs associated with DOD posture initiatives in 

Asia, as well as the extent to which DOD has incorporated cost and 

benefit analysis into its decision-making process. GAO plans to report 

the results of its analysis in early 2011. 

GAO has made recommendations since 2006 that DOD gather more 

comprehensive cost data and report it to Congress; in general, DOD has 

generally agreed with these recommendations but has yet to implement 

them in full. As a result, initiatives are proceeding without assurance that 

the efforts are being undertaken in a cost-effective way. 

Actions Needed and 

Potential Savings 

Given the significant resources being dedicated to building and 

maintaining DOD’s global presence, DOD needs to ensure it is routinely 

assessing the benefits of its overseas presence relative to the cost of 

maintaining that presence. Specifically, DOD should conduct a 

comprehensive reassessment of its overseas presence, including the costs 

and benefits of various alternatives. 

Page 166 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
DOD Should Assess Costs and Benefits of 

Overseas Military Presence Options Before 

Committing to Costly Personnel Realignments 

and Construction Plans 

To address the specific regional issues in Europe and Africa, GAO has 

issued a number of recommendations that DOD generally agreed with 

including reassessing: 

•	 plans in Europe, including the costs and benefits of keeping Army 

brigades in Germany and the appropriateness of building a new Army 

headquarters given the potential changes in force structure; and 

•	 missions of the combined joint task force in Djibouti as well as 

identifying the projected costs for the task force and, in concert with 

DOD or the Navy, developing a realistic funding plan for the task 

force’s sustainability. 

The financial stakes are high for DOD, since according to DOD data the 

department has obligated billions of dollars annually to build and maintain 

its global network of installations. A thorough consideration of 

alternatives and an assessment of their costs and benefits could help DOD 

shape its future overseas investments and ensure long-term affordability. 

Savings or cost avoidances would be dependent upon the nature of 

changes made to DOD’s plans and how DOD implements its chosen 

options. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Related GAO 

Products 

Defense Management: Additional Cost Information and Stakeholder 

Input Needed to Assess Military Posture in Europe. GAO-11-131. 

Washington, D.C.: February 3, 2011. 

Defense Planning: DOD Needs to Review the Costs and Benefits of 

Basing Alternatives for Army Forces in Europe. GAO-10-745R. 

Washington, D.C.: September 13, 2010. 

Defense Management: Improved Planning, Training, and Interagency 

Collaboration Could Strengthen DOD’s Efforts in Africa. GAO-10-794. 

Washington, D.C.: July 28, 2010. 

Operation Iraqi Freedom: Actions Needed to Facilitate the Efficient 

Drawdown of U.S. Forces and Equipment from Iraq. GAO-10-376. 

Washington, D.C.: April 19, 2010. 

Page 167 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
DOD Should Assess Costs and Benefits of 

Overseas Military Presence Options Before 

Committing to Costly Personnel Realignments 

and Construction Plans 

Defense Management: DOD Needs to Determine the Future of Its Horn of 

Africa Task Force. GAO-10-504. Washington, D.C.: April 15, 2010. 

Defense Infrastructure: Guam Needs Timely Information from DOD to 

Meet Challenges in Planning and Financing Off-Base Projects and 

Programs to Support a larger Military Presence. GAO-10-90R. 

Washington, D.C.: November 13, 2009. 

Force Structure: Actions Needed to Improve DOD’s Ability to Manage, 

Assess, and Report on Global Defense Posture Initiatives. GAO-09-706R. 

Washington, D.C.: July 2, 2009. 

Defense Management: Actions Needed to Address Stakeholder Concerns, 

Improve Interagency Collaboration, and Determine Full Costs 

Associated with the U.S. Africa Command. GAO-09-181. Washington, 

D.C.: February 20, 2009. 

Defense Management: Comprehensive Strategy and Annual Reporting 

Are Needed to Measure Progress and Costs of DOD’s Global Posture 

Restructuring. GAO-06-852. Washington, D.C.: September 13, 2006. 

For additional information about this area, contact John Pendleton at Area Contact (404) 679-1816 or pendletonj@gao.gov or Brian Lepore at (202) 512-4523 or 

leporeb@gao.gov. 

Page 168 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Total Compensation Approach Is Needed to 

Manage Significant Growth in Military 

Personnel Costs 

Total Compensation Approach Is Needed to Manage 

Significant Growth in Military Personnel Costs 

Why GAO Is Focusing 

on This Area 

Over the years, the Department of Defense’s (DOD) military compensation 

system has become an increasingly complex and piecemeal addition of 

pays, allowances, and benefits costing over $200 billion each year. Pay and 

benefits are important tools used by DOD to recruit, retain, and motivate 

sufficient numbers—approximately 1.4 million active duty and 1.2 million 

reservists—of qualified people. In recent years, Congress has taken steps 

to fund enhanced compensation and benefit programs for active duty and 

reserve personnel at a time when many military personnel are spending 

months or years away from home, often in harm’s way. DOD leaders have 

expressed concern about growing personnel costs and their effect on 

other important investments, such as recapitalizing equipment and 

infrastructure. 

In 2005 and in 2007, GAO found that the cost for military compensation 

was significantly increasing, and the total cost for compensation was not 

transparent because it was spread across different budgets within DOD. 

GAO recommended that DOD improve the transparency of compensation 

costs and assess the appropriateness of its compensation system. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

DOD and Congress have expanded military pay and benefits using a 

piecemeal approach rather than a total compensation approach that could 

help to balance the appropriateness, affordability, and sustainability of 

personnel-related costs. GAO has estimated that the federal government’s 

total compensation costs for active duty servicemembers increased about 

32 percent, using fiscal year 2008 constant dollars, from $143.8 billion in 

fiscal year 2000 to $189.4 billion in fiscal year 2008. Also, GAO found that 

using fiscal year 2008 constant dollars, the federal government’s total 

estimated compensation for reserve and national guard members grew 

over 31 percent from about $17.8 billion in fiscal year 2001 to nearly $23.5 

billion in fiscal year 2008. Basic pay alone, the largest component of active 

duty military compensation, has increased from $45 billion to $50.1 billion 

between fiscal years 2000 and 2008. In addition to basic pay, DOD expends 

billions of dollars each year to recruit, retain, and motivate its personnel 

using other pays and benefits. For instance, in fiscal year 2008, for active 

duty servicemembers, DOD spent $17.1 billion on non-taxable housing 

allowances; $6.4 billion on special and incentive pays, such as enlistment 

and re-enlistment bonuses; $10.9 billion on health care for active duty 

Page 169 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Total Compensation Approach Is Needed to 

Manage Significant Growth in Military 

Personnel Costs 

servicemembers and their dependents1; and $31.4 billion on retirement pay 

and retiree health care. 

Much of the increase in basic pay in recent years has been driven by 

concerns that military basic pay was not equivalent to civilian (or private 

sector) pay, without taking into consideration other types of 

compensation beyond basic pay. GAO reported in April 2010 that studies 

done by the Congressional Budget Office and the Center for Naval 

Analyses concluded that when pay and some benefits are taken into 

account, military compensation compares favorably to civilian 

compensation when considering personnel of similar age and education 

level. GAO also reported that when comparing military and civilian 

compensation, it is reasonable to take into account other types of 

compensation than basic pay. For example, according to DOD, in 2010 the 

basic allowance for housing for an O-5 (i.e., a lieutenant colonel) with 

dependents living in the Washington, D.C., metro area is approximately 

$2,900 a month. In addition, recent growth of total compensation has been 

driven by the costs for deferred compensation, primarily attributed to 

enhanced health care benefits, and DOD officials anticipate significant 

continued growth in health care costs because of these expansions in 

coverage. 

DOD has sponsored some efforts to assess its military personnel 

compensation strategy, such as the 10th Quadrennial Review of Military 

Compensation, which was released in 2008, but these reviews have not 

been comprehensive, and the department does not know the extent to 

which the current mix of pays and benefits is best suited to meet its 

human capital goals. Further, GAO’s work has shown that DOD is unable 

to demonstrate the efficiency and effectiveness of these changes in 

meeting its recruiting and retention goals because it does not have 

performance measures for its compensation system. Without performance 

measures, DOD cannot determine the return on its compensation 

investment or make fact-based choices on how its compensation 

resources should be allocated. 

1

This is an estimated costs for providing active duty servicemembers and their dependents 

health care. It does not include costs such as medical personnel salaries or construction 

costs of medical facilities. However, a more comprehensive medical cost for DOD is the 

Unified Medical Budget, which for fiscal year 2010 was about $50 billion. This cost includes 

military medical personnel costs, construction cost of any medical facilities, operation and 

maintenance funds, procurement funds, and research and development funds. 

Page 170 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Total Compensation Approach Is Needed to 

Manage Significant Growth in Military 

Personnel Costs 

Actions Needed and 

Potential Savings 

Using a total compensation approach in making decisions about military 

pay and benefits would provide DOD with an important tool for more 

efficiently and effectively managing its human-capital-related costs. 

Assessing the mix of pay and benefits and developing a comprehensive 

compensation strategy could enable DOD to more effectively recruit and 

retain a highly qualified force with the right skills in sufficient numbers to 

carry out its mission while minimizing unnecessary cost increases. GAO 

has recommended in the past that DOD (1) assess the affordability and 

sustainability of its military compensation system, as well as the 

reasonableness and appropriateness of the allocation to cash and benefits, 

and whether changes in the allocation are needed to more efficiently 

achieve recruiting and retention goals; and (2) establish a clear 

compensation strategy that includes performance measures to evaluate 

the efficiency of compensation in meeting recruiting and retention goals 

and use of data from the performance measures to monitor the 

effectiveness of compensation and assess what mix of compensation will 

be most efficient in the future. 

DOD concurred with GAO’s recommendation to assess the affordability 

and sustainability of its military compensation system and stated that it is 

engaged in multiple simultaneous efforts to assess the overarching 

strategy. GAO acknowledges that DOD has sponsored and engaged in a 

number of studies looking at aspects of compensation, such as the 

Quadrennial Review of Military Compensation, but the department has not 

taken a total compensation approach to assessing compensation. 

DOD partially concurred with GAO’s recommendation to establish a clear 

compensation strategy noting that it has consistently communicated its 

approach to Congress in congressional testimony. GAO continues to assert 

that with a total compensation strategy the department would be in a 

better position to make business case arguments for or against changes to 

its compensation system, and provide fact-based evidence regarding the 

efficiency of the allocation of cash, noncash, or deferred compensation. 

GAO’s prior work has indicated that compensation areas should have 

closer scrutiny in terms of continued need and the potential to reduce 

unnecessary costs. For example, GAO reported in 2006 and 2009 instances 

of excessive payments of enlistment and re-enlistment bonuses (types of 

special and incentive pays) to servicemembers in occupations that 

exceeded their authorized levels while other occupations were underfilled. 

GAO recommended that DOD, among other things, assess reasons 

occupations are over- or underfilled and justify use of financial incentives 

for overfilled occupations. As a result of GAO’s findings and 

Page 171 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Total Compensation Approach Is Needed to 

Manage Significant Growth in Military 

Personnel Costs 

recommendations, DOD developed a more rigorous approach to managing 

and overseeing its recruiting and retention bonuses leading to savings 

totaling $947.3 million. More broadly, DOD could recognize long-term cost 

avoidance by addressing in a compensation strategy what types of 

compensation are effective and not incurring costs for compensation that 

may not be effective in helping the department achieve its recruiting and 

retention goals. 

The information contained in this analysis is based on the related products Framework for listed below. 

Analysis 

Related GAO 

Products 

Questions for the Record Related to Military Compensation. 

GAO-10-803R. Washington, D.C.: June 3, 2010. 

Military Personnel: Military and Civilian Pay Comparisons Present 

Challenges and Are One of Many Tools in Assessing Compensation. 

GAO-10-561R. Washington, D.C.: April 1, 2010. 

Military Personnel: Reserve Component Servicemembers on Average 

Earn More Income While Activated. GAO-09-688R. Washington, D.C.: June 

23, 2009. 

Military Personnel: Army Needs to Focus on Cost-Effective Use of 

Financial Incentives and Quality Standards in Managing Force Growth. 

GAO-09-256. Washington, D.C.: May 4, 2009. 

Military Personnel: DOD Needs to Establish a Strategy and Improve 

Transparency over Reserve and National Guard Compensation to 

Manage Significant Growth in Cost. GAO-07-828. Washington, D.C.: June 

20, 2007. 

Military Personnel: DOD Needs to Improve the Transparency and 

Reassess the Reasonableness, Appropriateness, Affordability, and 

Sustainability of Its Military Compensation System. GAO-05-798. 

Washington, D.C.: July 19, 2005. 

For additional information about this area, contact Brenda Farrell at Area Contact (202) 512-3604 or farrellb@gao.gov. 

Page 172 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Employing Best Management Practices Could 

Help DOD Save Money on Its Weapon Systems 

Acquisitions 

Employing Best Management Practices Could Help 

DOD Save Money on Its Weapon Systems Acquisitions 

Why GAO Is Focusing 

on This Area 

Over the next 5 years, the Department of Defense (DOD) expects to invest 

almost $343 billion (in fiscal year 2011 dollars) on the development and 

procurement of major defense acquisition programs. Defense acquisition 

programs usually take longer, cost more, and deliver fewer quantities and 

capabilities than DOD originally planned. For several decades, Congress 

and DOD have taken steps to improve the acquisition of major weapon 

systems, yet some program outcomes continue to fall short of what was 

agreed to when the programs started. With the prospect of slowly growing 

or flat defense budgets for the foreseeable future, DOD must get better 

value for its weapon system spending and find ways to deliver needed 

capability to the warfighter for less than it has spent in the past. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Increasing combat demands and fiscal constraints make it critical for DOD 

to ensure that its weapon systems investments not only meet the needs of 

the warfighter but make the most efficient use of available resources. Over 

the last several years, GAO’s work has highlighted a number of underlying 

systemic causes for cost growth and schedule delays in weapon programs. 

At the strategic level, DOD’s processes for identifying warfighter needs, 

allocating resources, and managing acquisitions, which together define its 

weapon system investment strategy, are often not fully aligned. For 

example, the department often fails to balance the competing needs of the 

warfighter and commits to more programs than available resources can 

support. At the program level, GAO’s work has shown that DOD’s culture 

and environment often allow programs to start with too many unknowns, 

such as entering the acquisition process without a full understanding of 

requirements; cost and schedule estimates based on overly optimistic 

assumptions; and insufficient knowledge about the maturity of technology, 

the completeness and the performance of the design, and predictability of 

manufacturing processes when decisions are made to move forward into 

the next phase of the acquisition process. Poor outcomes in DOD’s 

weapon system programs reverberate across the entire federal 

government as every additional dollar spent on acquiring weapon systems 

is less money available for other priorities. 

Since fiscal year 2000, DOD has significantly increased the number of 

major defense acquisition programs and its overall investment in them. 

From that time to the present, acquisition outcomes in some cases 

continued to fall short of what was agreed to when the programs started. 

In most cases, the programs GAO assessed failed to deliver capabilities 

when promised—often forcing the department to spend additional funds 

on maintaining legacy systems. In March 2009, GAO reported that 

programs experienced, on average, a 22-month delay in delivering initial 

Page 173 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Employing Best Management Practices Could 

Help DOD Save Money on Its Weapon Systems 

Acquisitions 

capabilities to the warfighter. Continued cost growth in such acquisitions 

results in less funding being available for other DOD priorities and 

programs. Schedule delays prevent timely delivery of critical capabilities 

to the warfighter. 

GAO has reported that greater adherence to proven management practices 

at key phases of the acquisition process can reduce weapon system costs, 

help contain pressures for increased funding, and better address critical 

warfighter needs. Early systems engineering, ideally beginning before a 

program is initiated and a business case is set, is critical to designing a 

system that meets requirements within available resources. In addition, an 

analysis of alternatives can help ensure that new programs have a sound, 

executable business case and represent a cost-effective solution to 

meeting warfighters’ needs. Another key step in the process involves 

managing requirements changes, which if minimized, could decrease the 

amount of cost growth experienced by acquisition programs. Finally, more 

prototyping early in programs could help DOD ensure that a system’s 

proposed design can meet performance requirements. 

Additionally, DOD requirements continue to be driven primarily by the 

individual services with little involvement from the combatant commands, 

which are largely responsible for planning and carrying out military 

operations. By continuing to rely on capability proposals that lack a joint 

perspective, DOD may be losing opportunities to improve joint warfighting 

capabilities and reduce the duplication of capabilities in some areas. 

DOD has demonstrated a strong commitment, at the highest levels, to 

address the management of its weapon system acquisitions, and has 

started to reprioritize and rebalance its weapon system investments. In 

2009 and 2010, the Secretary of Defense proposed canceling or 

significantly curtailing certain weapon programs, such as the Army’s 

Future Combat System Manned Ground Vehicle and the Navy’s DDG-1000 

Destroyer—which he characterized as too costly or no longer relevant for 

current operations. DOD plans to replace several of the canceled programs 

and therefore has an opportunity to pursue knowledge-based acquisition 

strategies on the new programs. In addition, DOD plans to eliminate 

redundant programs within capability portfolios and make affordability a 

key requirement for weapon programs. These actions are consistent with 

past GAO findings and recommendations. However, if these initiatives are 

going to have a lasting, positive effect, they need to be translated into 

better day-to-day management and decision making. 

Page 174 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Employing Best Management Practices Could 

Help DOD Save Money on Its Weapon Systems 

Acquisitions 

GAO’s recent observations present a mixed picture of DOD’s adherence to 

a knowledge-based acquisition approach, which is key for improving 

acquisition outcomes. For 42 programs GAO assessed in depth in 2010, 

there was continued improvement in the technology, design, and 

manufacturing knowledge the programs had at key points in the 

acquisition process. However, most programs were still proceeding with 

less knowledge than best practices suggest, putting them at higher risk for 

cost growth and schedule delays. 

Congress passed a number of acquisition reforms in the Weapon Systems 

Acquisition Reform Act of 2009 to emphasize and increase oversight and 

reporting on cost estimating, early systems engineering, developmental 

testing, and technology maturity for major weapon system programs. 

Since then, DOD has begun to implement a revised acquisition policy 

based on these congressional reforms to address these and other areas of 

acquisition risk. If DOD consistently implements these reforms, the 

number of programs adhering to a knowledge-based acquisition approach 

should increase and the outcomes for DOD programs should improve. 

Actions Needed and 

Potential Savings 

DOD can take steps to maximize its use of taxpayer dollars by improving 

its business operations, including the acquisition process. By employing 

best management practices at all phases of its weapon system acquisition 

process—including early systems engineering, analyzing alternatives, 

managing changes in system requirements, and more prototyping early in 

programs development testing—DOD could achieve significant cost 

savings. While activities, such as early prototyping, require upfront 

investments, the knowledge gained can help products proceed more 

quickly and smoothly through development into production, thereby 

lowering the costs to develop them. 

While DOD’s acquisition policies and process may be improving, fiscal 

pressures continue to build. In addition to the federal government’s longterm fiscal challenges, DOD faces its own near- and long-term fiscal 

pressures as it attempts to balance competing demands, including ongoing 

operations in Afghanistan and Iraq, initiatives to grow and modernize the 

force, and increasing personnel and health care costs. DOD’s fiscal year 

2010 budget request started the process of reprioritizing acquisition dollars 

to meet warfighters’ most pressing needs, but the department must still 

address the overall affordability of its weapon system investments. 

As DOD competes for resources in a constrained fiscal environment, it can 

not afford to miss opportunities to achieve greater efficiencies and free up 

Page 175 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Employing Best Management Practices Could 

Help DOD Save Money on Its Weapon Systems 

Acquisitions 

resources for higher-priority needs. Because of the complexity and 

magnitude of the challenges facing DOD in transforming its business 

operations, it will need strong and sustained leadership, as well as sound 

strategic planning to guide and integrate its efforts. Ultimately, DOD still 

needs to do a better job planning and executing programs on a day-to-day 

basis to achieve better outcomes. Critical to achieving successful 

outcomes is establishing and sustaining knowledge-based, realistic 

program baselines. Without realistic baselines, there is no foundation for 

accurately measuring the knowledge and health of programs. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Related GAO 

Products 

Defense Acquisitions: Observations on Weapon Program Performance 

and Acquisition Reforms. GAO-10-706T. Washington, D.C.: May 19, 2010. 

Defense Acquisitions: Strong Leadership Is Key to Planning and 

Executing Stable Weapon Programs. GAO-10-522. Washington, D.C.: May 

6, 2010. 

Defense Acquisitions: Assessments of Selected Weapon Programs. GAO10-388SP. Washington, D.C.: March 30, 2010. 

Defense Acquisitions: Managing Risk to Achieve Better Outcomes. GAO10-374T. Washington, D.C.: January 20, 2010. 

Maximizing DOD’s Potential to Face New Fiscal Challenges and 

Strengthen Interagency Partnerships. GAO-10-359CG. Washington, D.C.: 

January 6, 2010. 

Defense Acquisitions: Many Analyses of Alternatives Have Not Provided 

a Robust Assessment of Weapon System Options. GAO-09-665. 

Washington, D.C.: September 24, 2009. 

Defense Acquisitions: Measuring the Value of DOD’s Weapon Programs 

Requires Starting with Realistic Baselines. GAO-09-543T. Washington, 

D.C.: April 1, 2009. 

Defense Acquisitions: Assessments of Selected Weapon Programs. GAO09-326SP. Washington, D.C.: March 30, 2009. 

Page 176 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Employing Best Management Practices Could 

Help DOD Save Money on Its Weapon Systems 

Acquisitions 

Defense Acquisitions: DOD Must Prioritize Its Weapon System 

Acquisitions and Balance Them with Available Resources. GAO-09-501T. 

Washington, D.C.: March 18, 2009. 

DOD’s High Risk Areas: Actions Needed to Reduce Vulnerabilities and 

Improve Business Outcomes. GAO-09-460T. Washington, D.C.: March 12, 

2009. 

Defense Acquisitions: Fundamental Changes Are Needed to Improve 

Weapon Program Outcomes. GAO-08-1159T. Washington, D.C.: September 

25, 2008. 

Defense Acquisitions: DOD’s Requirements Determination Process Has 

Not Been Effective in Prioritizing Joint Capabilities. GAO-08-1060. 

Washington, D.C.: September 25, 2008. 

Defense Acquisitions: Better Weapon Program Outcomes Require 

Discipline, Accountability, and Fundamental Changes in the 

Acquisition Environment. GAO-08-782T. Washington, D.C.: June 3, 2008. 

Defense Acquisitions: Assessments of Selected Weapon Programs. GAO08-467SP. Washington, D.C.: March 31, 2008. 

Best Practices: Successful Application to Weapon Acquisitions Requires 

Changes in DOD’s Environment. GAO/NSIAD-98-56. Washington, D.C.: 

February 24, 1998. 

For additional information about this area, contact Mike Sullivan at Area Contact (202) 512-4841 or sullivanm@gao.gov. 

Page 177 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Efficient Management Could Limit More Efficient Management Could Limit Future Costs Future Costs of DOD’s Spare Parts Inventory 

of DOD’s Spare Parts Inventory 

Why GAO Is Focusing 

on This Area 

The military services and the Defense Logistics Agency (DLA) purchase 

spare parts to keep military equipment ready and operating. At the end of 

fiscal year 2009, the Department of Defense (DOD) reported that the total 

value of its inventory of over 4 million spare parts and other support 

items—not including weapons systems and other primary equipment— 

was more than $90 billion. GAO has identified weaknesses in DOD’s 

inventory management practices, including problems in accurately 

forecasting demand for spare parts. At a time when U.S. military forces 

and materiel are in high demand and the nation and military face long-term 

fiscal challenges, it is critical that DOD demonstrate good stewardship 

over the billions of dollars invested in its spare parts inventory while 

continuing to supply warfighters with the right items at the right time. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

DOD can enhance efficiencies in the management of its spare parts 

inventory and potentially achieve significant cost avoidance in the future 

by aligning inventory levels more closely with current needs and projected 

demand. DOD has made some improvement in recent years but continues 

to consistently have higher levels of inventory than needed to meet current 

needs (called the requirements objective) plus projected demands over the 

next 2 years. DOD inventory data show that much of the inventory that is 

beyond current needs and projected demand is either retention stock 

(stock that is considered inactive but is being held for possible future use 

or for other reasons) or potential reutilization stock (stock that has been 

identified as “excess” and may be disposed of). These data include both 

on-hand inventory and on-order inventory that is not yet in DOD’s 

possession. Some inventory items may be in such low demand that current 

supplies could last for decades. Acquiring large amounts of inventory for 

which actual demand is much lower than expected reduces the amount of 

funding available for other current military needs. 

In a series of reports issued from 2007 to 2010, GAO analyzed spare parts 

inventory managed by the Air Force, the Navy, the Army, and DLA and 

identified factors contributing to higher-than-needed inventory levels. 

Most recently, GAO reviewed DLA inventory levels and reported in 2010 

that DLA, over a period of 3 fiscal years, averaged $1 billion of inventory 

annually in potential reutilization stock. DOD policy requires that its 

components minimize investment in inventory while also providing 

inventory needed to support requirements, but several factors were 

causing DLA to order and stock parts that did not align with current needs 

and projected demand. These factors often occur in the initial stages of the 

inventory process when acquisition decisions are being made. 

Page 178 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Efficient Management Could Limit 


Future Costs of DOD’s Spare Parts Inventory 


•	 First, DLA’s ability to determine how many parts to buy is hindered by 

inaccurate estimates of customers’ future demand for parts—known as 

demand forecasting—as well as by other challenges such as unresolved 

problems with accurately estimating lead times needed to acquire 

parts. 

•	 Second, DLA has initiatives that show promise for reducing the 

acquisition and retention of unneeded parts, but these initiatives do not 

appear to be achieving their full potential. DLA continues to face 

difficulties closing gaps in providing accurate, timely data to inventory 

managers to better inform purchase decisions, as well as modifying or 

canceling planned purchases that may no longer be needed. 

•	 Finally, DLA is not tracking the overall cost efficiency of its inventory 

management processes. 

GAO identified similar issues in its prior reviews of spare parts inventory 

managed by the Air Force, the Navy, and the Army. In all three of those 

reviews, the predominant reason for mismatches between inventory levels 

and needs was changes in demand. In addition, Army data revealed 

substantial amounts of inventory deficits, where quantities of on-hand and 

on-order spare parts were not sufficient to meet current requirements. In 

prior reports, GAO also has addressed other aspects of inventory 

management, including problems with asset visibility, lead times for 

acquiring parts, and managing retention stocks. 

Actions Needed and 

Potential Savings 

GAO has identified a number of areas where DOD could improve the 

efficiency of its inventory management, while maintaining effective supply 

support for warfighter requirements. Since GAO’s work has consistently 

shown that the greatest opportunities to minimize investment in unneeded 

inventory are at the initial stages of the inventory management process 

when acquisition decisions are being made, DOD could limit future costs 

by focusing its efforts on better managing on-order inventory, with a view 

toward reducing on-order inventory levels that are not needed for current 

needs or projected demand. For example, GAO found in its review of DLA 

inventory that the agency could benefit from efforts to (1) identify and 

evaluate planned purchases of spare parts that, if carried out, might result 

in the potential procurement of unneeded parts, and (2) take action to 

modify or cancel these planned purchases. Also, GAO has recommended 

that DOD address systemic weaknesses in demand forecasting, revise 

management practices to incorporate flexibility needed to minimize the 

impact of demand fluctuations, and track the cost efficiency of its 

Page 179 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

More Efficient Management Could Limit 

Future Costs of DOD’s Spare Parts Inventory 

inventory management processes. DOD has generally concurred with 

these recommendations. 

Recent legislative action underscores the need for DOD to address 

inventory management weaknesses. Specifically, Section 328 of the National 

Defense Authorization Act for Fiscal Year 2010 required the Secretary of 

Defense to submit a comprehensive plan for improving the inventory 

management systems of the military departments and DLA, with the 

objective of reducing the acquisition and storage of inventory that is excess 

to requirements. The act directed DOD to address eight areas of inventory 

management. DOD submitted its plan to Congress in November 2010. 

DOD states in its plan that it has already reduced unneeded inventory and 

that further reductions are possible. DOD has reported, for example, that 

$10.3 billion (11 percent) of its secondary inventory has been designated 

as excess and categorized for potential reuse or disposal. The plan cites a 

number of improvement efforts and establishes two broad goals for 

reducing (1) the value of on-order potential reutilization stock as a 

percentage of total obligated on-order dollars and (2) the value of on-hand 

potential reutilization stock as a percentage of total inventory value. 

DOD’s plan is an important step in improving inventory management 

practices; however, successful implementation will be challenging and will 

require sustained oversight by DOD as well as collaboration among the 

services and DLA. 

To assess the potential for DOD to achieve cost savings by better aligning Framework for inventory levels with requirements, GAO relied on its prior work.

Analysis 

Related GAO 

Products 

DOD’s 2010 Comprehensive Inventory Management Improvement Plan 

Addressed Statutory Requirements, but Faces Implementation 

Challenges. GAO-11-240R. Washington, D.C.: January 7, 2011. 

Defense Inventory: Defense Logistics Agency Needs to Expand on Efforts 

to More Effectively Manage Spare Parts. GAO-10-469. Washington, D.C.: 

May 11, 2010. 

Defense Inventory: Army Needs to Evaluate Impact of Recent Actions to 

Improve Demand Forecasts for Spare Parts. GAO-09-199. Washington, 

D.C.: January 12, 2009. 

Page 180 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Efficient Management Could Limit 


Future Costs of DOD’s Spare Parts Inventory 


Defense Inventory: Management Actions Needed to Improve the Cost 

Efficiency of the Navy’s Spare Parts Inventory. GAO-09-103. Washington, 

D.C.: December 12, 2008. 

Defense Inventory: Opportunities Exist to Save Billions by Reducing Air 

Force’s Unneeded Spare Parts Inventory. GAO-07-232. Washington, D.C.: 

April 27, 2007. 

Defense Inventory: Opportunities Exist to Improve the Management of 

DOD’s Acquisition Lead Times for Spare Parts. GAO-07-281. Washington, 

D.C.: March 2, 2007. 

For additional information about this area, contact Jack E. Edwards at Area Contact (202) 512-8246 or edwardsj@gao.gov. 

Page 181 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Comprehensive and Complete Cost Data 

Can Help DOD Improve the Cost

Effectiveness of Sustaining Weapon Systems 

More Comprehensive and Complete Cost Data Can Help -

DOD Improve the Cost-Effectiveness of Sustaining 

Weapon Systems 

Why GAO Is Focusing 

on This Area 

The Department of Defense (DOD) spends billions of dollars each year to 

sustain its weapon systems. After a weapon system is developed, tested, 

and produced, it enters the operating and support (O&S) phase of its life 

cycle. O&S costs can account for 70 percent or more of the total 

ownership costs over a system’s lifetime and include the direct and 

indirect costs for spare parts, fuel, maintenance, personnel, support 

facilities, and training. GAO’s work has shown that weapon systems may 

experience O&S cost growth after they are acquired due to various factors 

such as lower than expected reliability, obsolete replacement parts, and 

increased usage. If agency budgets tighten, the continued burden of O&S 

cost growth could affect DOD’s ability to afford other priorities. 

In an effort to improve weapon system support and reduce costs in the 

late 1990s, DOD began to use a support strategy known as performancebased logistics (PBL). Unlike more traditional support arrangements, 

which involve the purchase of individual support elements (such as parts), 

PBL arrangements involve the purchase of performance outcomes such as 

weapon system availability. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

DOD can improve the cost-effectiveness of sustaining individual weapon 

systems, potentially saving billions of dollars, by enhancing its effort to 

collect, retain, and analyze more comprehensive and accurate O&S cost 

data, including cost data for PBL arrangements. In the absence of key 

information on O&S costs for its major weapon systems, DOD may not be 

well equipped to analyze, manage, and reduce these costs. DOD estimated 

that costs for supporting its weapon systems amounted to at least $132 

billion in fiscal year 2008, but the department does not know total O&S 

costs associated with its systems. 

GAO reviewed seven aviation weapon systems and reported in 2010 that 

DOD lacked life-cycle O&S cost estimates and complete historical data on 

actual O&S costs, which are needed to effectively track and analyze the 

growth of these costs. Life-cycle cost estimates are developed to support 

decisions at key acquisition milestones and, under GAO’s guidance for costestimating best practices, the thorough documentation and retention of 

these estimates are also essential for use in preparing future cost estimates. 

However, current DOD acquisition and cost-estimating guidance does not 

specifically address requirements for the retention of life-cycle O&S cost 

estimates and supporting documentation. 

Additionally, GAO found problems with incomplete and inaccurate data in 

the services’ cost visibility data systems designated as the authoritative 

Page 182 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

More Comprehensive and Complete Cost Data 

Can Help DOD Improve the CostEffectiveness of Sustaining Weapon Systems 

sources for historical data on actual O&S costs. DOD has issued guidance 

that includes a recommendation regarding the types of historical data on 

actual O&S costs that the services could collect for their weapon systems, 

but this suggestion is not mandatory. Although O&S costs for the seven 

systems GAO reviewed had grown, it was unclear how much of the growth 

was unexpected without more complete cost information. 

While DOD has moved toward PBL as its preferred strategy to support 

weapon systems, GAO reviewed PBL arrangements for selected weapon 

systems in 2008 and found that the ability of these arrangements to reduce 

costs remained unclear. According to a department assessment in 2009, 

about 20 percent of weapon systems were being supported under PBL 

arrangements. GAO found that many DOD program offices that 

implemented PBL arrangements lack detailed support cost data. 

Additionally, various other factors—such as the lack of business case 

analyses to compare the costs and benefits of PBL against other weapon 

system support options—further limited an evaluation of the costs of this 

support strategy. At the time GAO conducted its review, it found that 

neither DOD nor the services required detailed cost reporting for PBL 

arrangements. Also, GAO reported that business case analyses were 

inconsistently used for PBL decision making because DOD did not require 

that the analyses be conducted and updated or provide specific criteria to 

guide their development. 

Actions Needed and 

Potential Savings 

DOD currently has a number of initiatives to improve weapon system 

support and better manage and reduce weapon system O&S costs. For 

example, DOD has indicated its intent to focus more attention on O&S 

cost requirements and weapon system reliability during the acquisition 

process. DOD is also working to implement the recommendations made in 

an internal November 2009 assessment of weapon system product support. 

The assessment identified weaknesses in O&S cost management and 

recommended a number of corrective actions, such as (1) establishing an 

O&S affordability requirement, including linking O&S budgets to 

readiness; (2) developing and implementing an affordability process with 

all DOD stakeholders (such as the financial and program management 

communities); and (3) increasing the visibility of O&S costs and their 

drivers across the supply chain. Regarding PBL, the Air Force now 

requires program managers to conduct business case analyses, thereby 

comparing the costs and benefits of PBL against other support options, 

and Air Force interim guidance, issued in 2009, also directs detailed cost 

reporting for contractor logistics support arrangements, which often 

include PBL arrangements. DOD also included a broad cost reporting 

Page 183 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Comprehensive and Complete Cost Data 

Can Help DOD Improve the CostEffectiveness of Sustaining Weapon Systems 

requirement for certain programs in acquisition guidance and is 

developing additional guidance for the collection of more comprehensive 

cost data from PBL support providers. However, this guidance and DOD’s 

other initiatives are either not yet implemented or too recent for GAO to 

evaluate their impact. 

While DOD has taken some positive steps, more remains to be done to 

improve the collection, retention, and analysis of O&S cost data—steps 

that would significantly enhance DOD’s ability to manage and potentially 

reduce O&S costs. GAO recommended in July 2010 that the department 

take the following actions: 

•	 Revise guidance to specifically require the retention of life-cycle O&S 

cost estimates for major weapon systems, as well as the supporting 

documentation used to develop these estimates. These estimates and 

supporting documentation, if retained, could provide a benchmark for 

subsequent cost analysis of the weapon systems, enable identification of 

major cost drivers, and aid in improving cost estimates for future 

systems. 

•	 Identify the cost elements needed to track and assess actual O&S costs 

for effective cost analysis and program management for major weapon 

systems, and require the collection of these elements in the services’ 

O&S cost visibility data systems. Collecting complete data would put 

the services in a good position to track costs over time, compare costs 

with previous estimates, and determine whether and why cost growth 

is occurring. 

•	 Require the services to periodically update life-cycle O&S cost 

estimates for major weapon systems after these systems are acquired, 

which would enhance DOD’s ability to compare actual performance to 

planned or expected results. 

DOD concurred or partially concurred with these and other related 

recommendations, noting that the department is committed to 

strengthening its O&S data availability as well as its use of O&S estimates 

in the governance process for major defense acquisition programs. 

With regard to PBL, GAO recommended in December 2008 that the 

department (1) require program offices to collect and report detailed 

support cost data for their PBL arrangements; (2) revise guidance to 

require the development of PBL business case analyses to better support 

the decision-making process on the use of these arrangements; and (3) 

Page 184 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Comprehensive and Complete Cost Data 

Can Help DOD Improve the CostEffectiveness of Sustaining Weapon Systems 

define the elements to be included in these analyses so they are 

comprehensive and sound. 

These actions would generate more detailed cost data and improve the 

analyses of PBL arrangements to determine if they are the most costeffective approach to supporting weapon systems. DOD concurred or 

partially concurred with these and other related recommendations but has 

not yet implemented all corrective actions. 

The lack of complete and reliable O&S cost data makes it difficult to 

determine the full extent of potential savings on weapon system O&S 

costs. However, based on DOD’s estimate that it spent at least $132 billion 

in fiscal year 2008 on weapon system support alone, for every 1 percent 

reduction in costs, there would be an annual cost savings of $1.3 billion. 

As an illustration of the potential for significant cost-savings, a goal of 

reducing support costs by 5 percent over a period of time would translate 

to annual cost savings of approximately $6.6 billion. More ambitious O&S 

cost reduction goals would potentially result in greater cost savings. 

To assess the potential for DOD to achieve savings by reducing its O&S Framework for costs, GAO relied on the prior work below. 

Analysis 

Related GAO 

Products 

Defense Management: DOD Needs Better Information and Guidance to 

More Effectively Manage and Reduce Operating and Support Costs of 

Major Weapon Systems. GAO-10-717. Washington, D.C.: July 20, 2010. 

Defense Logistics: Improved Analysis and Cost Data Needed to Evaluate 

the Cost-effectiveness of Performance Based Logistics. GAO-09-41. 

Washington, D.C.: December 19, 2008. 

Defense Management: DOD Needs to Demonstrate That PerformanceBased Logistics Contracts Are Achieving Expected Benefits. GAO-05-966. 

Washington, D.C.: September 9, 2005. 

Best Practices: Setting Requirements Differently Could Reduce Weapon 

Systems’ Total Ownership Costs. GAO-03-57. Washington, D.C.: February 

11, 2003. 

For additional information about this area, contact Jack E. Edwards at Area Contact (202) 512-8246 or edwardsj@gao.gov. 

Page 185 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Corrosion Prevention and Control 

Practices Could Help DOD Avoid Billions in 

Unnecessary Costs 

Improved Corrosion Prevention and Control Practices 


Could Help DOD Avoid Billions in Unnecessary Costs 


Why GAO Is Focusing 

on This Area 

The Department of Defense (DOD) estimates that corrosion costs the 

department over $23 billion each year. Corrosion—the unintended 

destruction or deterioration of a material due to interaction with the 

environment—affects military readiness. According to a 2009 study, 

corrosion was responsible for taking up to 16 percent of military assets, 

most notably aircraft, out of action. Corrosion also creates safety hazards. 

GAO reported in 2007 that the Army attributed over 50 aircraft accidents 

and 12 fatalities to corrosion since 1985. Corrosion takes such varied 

forms as rusting; pitting; calcium or other mineral buildup; degradation 

from exposure to ultraviolet light; and mold, mildew, and other organic 

decay. It negatively affects all military assets, including equipment and 

infrastructure. In 2003, DOD created the Office of Corrosion Policy and 

Oversight (Corrosion Office), which is responsible for the prevention and 

mitigation of corrosion. Since 2008, the Director of the Corrosion Office 

reports directly to the Under Secretary of Defense for Acquisition, 

Technology and Logistics. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Corrosion, if left unchecked, can degrade the readiness and safety of 

equipment and facilities and can result in substantial, sometimes 

avoidable, costs. The Defense Science Board Task Force estimated in a 

2004 report that 30 percent of corrosion costs could be avoided through 

proper investment in prevention and mitigation of corrosion during design, 

manufacture, and sustainment. Using fiscal year 2006 data, DOD’s 

Corrosion Office estimated that approximately a quarter of the $80 billion 

in annual expenses to maintain its ships, aircraft, strategic missiles, and 

ground combat and tactical vehicles is spent for corrosion-related 

concerns. DOD also spends about $10 billion annually to maintain about 

577,000 buildings and structures, with about $1.9 billion of that amount 

spent for corrosion-related concerns. According to DOD, increased 

corrosion prevention and control efforts are needed to adequately address 

the wide-ranging and expensive effects of corrosion on equipment and 

infrastructure. However, DOD did not fund about one-third of acceptable 

corrosion projects for fiscal years 2005 through 2010. Also, military 

departments have not validated the cost-effectiveness of many of the 

previously funded corrosion projects. 

To target funding toward corrosion prevention and control, DOD 

established a separate program element and line item within its budget. 

Among other things, the Corrosion Office uses much of that budget to fund 

projects designed to develop and test new technologies. To receive 

Corrosion Office funding, the military departments submit project 

proposals that are evaluated by a panel of experts assembled by the 

Page 186 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Corrosion Prevention and Control 

Practices Could Help DOD Avoid Billions in 

Unnecessary Costs 

Director of the Corrosion Office. The Corrosion Office currently funds up 

to $500,000 per project, and the military departments pledge 

complementary funding for each project they propose. The level of 

military department funding and the estimated return on investment are 

two of the criteria used to evaluate the projects proposals. For fiscal years 

2005 through 2010, the Corrosion Office judged 271 corrosion prevention 

and control projects to be acceptable for funding. However, DOD funded 

$129 million (63 percent) of the $206 million that was needed to fund those 

271 projects. 

During the 6 years that the Corrosion Office has been funding corrosion 

projects, the average estimated return on investment for those projects 

has been 50:1. DOD is currently asking the military departments to validate 

the actual return on investment for the projects funded in fiscal year 2005 

compared to the original estimates. To date, validations have been 

completed for 10 of the 28 corrosion projects funded in that fiscal year. 

Nine of the 10 projects were facilities projects with a validated return on 

investment of 11:1. Weapons projects have been estimated to have higher 

returns on investment (67:1 average), but these estimates have not been 

validated by the military departments. Also, none of those estimates have 

been independently validated. 

Actions Needed and 

Potential Savings 

If the corrosion prevention and control projects accepted from fiscal years 

2005 through 2010 had been fully funded, DOD potentially could have 

avoided $3.6 billion in corrosion-related costs—assuming those projects 

achieved the same level of cost-effectiveness as was estimated for all 

accepted projects in those years. In April 2010, GAO reported that the 

corrosion requirements for the fiscal year 2011 budget identified $12 

million for projects, leaving an unfunded requirement of about $35 million. 

If fully funded, that $35 million could result in a potential cost avoidance 

of $418 million. Similarly, by underfunding all of its estimated corrosion 

prevention and control requirements, DOD may be missing an opportunity 

for additional cost avoidance totaling $1.4 billion. 

However, these calculations are highly contingent on the accuracy of 

estimated return on investment data provided by the Corrosion Office, 

much of which have not been validated by the military departments or an 

independent entity. GAO has recommended that the Corrosion Office 

ensure that return on investment estimates for funded corrosion 

prevention and control projects are validated. If the Corrosion Office 

wishes to convince DOD and congressional decision makers that more 

fully funding its corrosion prevention programs could provide such a 

Page 187 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Corrosion Prevention and Control 

Practices Could Help DOD Avoid Billions in 

Unnecessary Costs 

Page 188 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 

significant return on investment, the Corrosion Office needs to complete 

the validation of return on investment estimates in order to demonstrate 

the costs and benefits of its corrosion prevention and control projects. 

GAO is required by law to report annually on DOD’s corrosion prevention 

and control budget submission and on the corrosion report that 

accompanies defense budget materials. GAO has also done other work on 

corrosion issues. This analysis is based on GAO’s previously published 

work in that area from 2003 through 2010. 

Defense Management: DOD Has a Rigorous Process to Select Corrosion 

Prevention Projects, but Would Benefit from Clearer Guidance and 

Validation of Returns on Investment. GAO-11-84. Washington, D.C.: 

December 8, 2010. 

Defense Management: Observations on Department of Defense and 

Military Service Fiscal Year 2011 Requirements for Corrosion 

Prevention and Control. GAO-10-608R. Washington, D.C.: April 15, 2010. 

Defense Management: Observations on the Department of Defense’s 

Fiscal Year 2011 Budget Request for Corrosion Prevention and Control.

GAO-10-607R. Washington, D.C.: April 15, 2010. 

Defense Management: Observations on DOD’s Fiscal Year 2010 Budget 

Request for Corrosion Prevention and Control. GAO-09-732R. 

Washington, D.C.: June 1, 2009. 

Defense Management: Observations on DOD’s Analysis of Options for 

Improving Corrosion Prevention and Control through Earlier Planning 

in the Requirements and Acquisition Processes. GAO-09-694R. 

Washington, D.C.: May 29, 2009. 

Defense Management: Observations on DOD’s FY 2009 Budget Request 

for Corrosion Prevention and Control. GAO-08-663R. Washington, D.C.: 

April 15, 2008. 

Defense Management: High-Level Leadership Commitment and Actions 

Are Needed to Address Corrosion Issues. GAO-07-618. Washington, D.C.: 

April 30, 2007. 

Framework for 

Analysis 

Related GAO 

Products 
Improved Corrosion Prevention and Control 


Practices Could Help DOD Avoid Billions in
 

Unnecessary Costs 


Defense Management: Additional Measures to Reduce Corrosion of 

Prepositioned Military Assets Could Achieve Cost Savings. GAO-06-709. 

Washington, D.C.: June 14, 2006. 

Defense Management: Opportunities Exist to Improve Implementation 

of DOD’s Long-Term Corrosion Strategy. GAO-04-640. Washington, D.C.: 

June 23, 2004. 

Defense Management: Opportunities to Reduce Corrosion Costs and 

Increase Readiness. GAO-03-753. Washington, D.C.: July 7, 2003. 

Defense Infrastructure: Changes in Funding Priorities and Strategic 

Planning Needed to Improve the Condition of Military Facilities. 

GAO-03-274. Washington, D.C.: February 19, 2003. 

For additional information about this area, contact Jack E. Edwards at Area Contact (202) 512-8246 or edwardsj@gao.gov. 

Page 189 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Revising the Essential Air Service Program 

Could Improve Efficiency and Reduce Costs 

 

Revising the Essential Air Service Program Could 

Improve Efficiency and Reduce Costs 

Why GAO Is Focusing 

on This Area 

Since 1978, the Essential Air Service (EAS) program, administered by the 

Department of Transportation, has subsidized air service to eligible 

communities. In 2010, the program supported air service to about 150 

communities nationally. The EAS program was originally established as a 

10-year transitional program to ease communities into a deregulated 

aviation environment. The cost of this program has risen as subsidies to 

air carriers and the number of communities being served have increased. 

Over the years GAO has expressed concerns that rising costs may 

jeopardize the EAS program’s long-term viability. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Revising the EAS program and re-examining the need for air service across 

the country could increase program efficiency and reduce costs. In fiscal 

year 2009, Congress appropriated $136.2 million for the EAS program, and 

in 2010 increased this amount to $200 million.1

 Costs could continue to 

increase for a number of reasons; for example, some eligible communities 

may lose existing unsubsidized air service and obtain EAS subsidies. GAO 

has previously reported on issues related to the EAS program, including 

the following: 

Eligibility criteria are dated and not well targeted. Eligibility for the 

program was set in 1978 and largely based on communities that had or 

could have scheduled air service at that time; thus eligibility may bear little 

relation to current demand for air service. Communities have been added 

and removed from EAS funding, but the approach to determining EAS 

eligibility has remained the same and affects the cost of the program. For 

example, EAS currently uses distance to medium- and large-hub airports 

as a basis for eligibility. Past GAO analyses have shown that if eligibility 

criteria considered the distance to small-hub airports, in addition to the 

current criteria of distance to medium- and large-hub airports, and used a 

125 mile distance instead of the current 70 miles, fewer communities 

would be eligible for EAS. In addition, because communities located near 

each other are eligible for EAS flights, in some regions duplicate federal 

subsidies are paid to air carriers when a single subsidy could provide air 

service. Communities and states have been reticent to select one regional 

airport to serve needs for a greater region because they do not want to 

give up the service for which they are eligible. 

1

These amounts include the $50 million EAS receives each year through a permanent, 

indefinite appropriation. 

Page 190 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Revising the Essential Air Service Program
 

Could Improve Efficiency and Reduce Costs 


Operating requirements are inefficient. The program has operating 

requirements that are inefficient and increase costs. For example, 

legislation mandates that airlines use larger aircraft when smaller, less 

expensive to operate, aircraft could in some instances meet passenger 

demand.2

 In addition, the program requires a certain number of flights, 

regardless of passenger demand. Past GAO analyses have shown that most 

EAS flights operate with aircraft that are largely empty—some EAS 

airports operate with fewer than five passengers per day. In fiscal year 

2008, the percentage of available seats filled by passengers was 37 percent 

on EAS flights. 

Alternative transportation options could be more cost-effective in some 

cases. Some communities have not been able to generate sufficient 

demand to justify costly air service, resulting in rising per-passenger 

subsidies. Because potentially cost-effective alternatives, such as bus 

service to other airports, are not used, subsidies may be higher than 

necessary to link these communities to the nation’s passenger aviation 

system. 

Actions Needed and 

Potential Savings 

Congress may wish to consider fundamentally re-examining the design and 

efficiency of the EAS program. GAO has reported on several potential 

solutions to these issues facing the EAS program that Congress and the 

Department of Transportation may wish to consider. All have drawbacks, 

but they present the opportunity for the government to target and use 

funds more efficiently. 

•	 Updating eligibility criteria and targeting service. Changing the 

program criteria to target more remote communities would result in 

savings. In 2006 GAO found that about $24 million could be saved 

annually if service were terminated at airports that were within 125 

highway miles of a medium- or large-hub airport. Under this approach, 

more remote communities would have remained eligible for EAS, but 

less remote communities receiving subsidized service would have been 

ineligible. In addition, changing program criteria to consolidate 

subsidized air service to one regional airport could help reduce the 

number of EAS locations served while maintaining regional 

connections to the nation’s air transportation system. However, this 

potential solution is controversial at the local level, in part because 

2

Communities currently may waive their guarantee of larger aircraft. 

Page 191 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Revising the Essential Air Service Program
 

Could Improve Efficiency and Reduce Costs 


regionalizing service would require some communities to give up their 

own service for potentially improved service at a less convenient 

regional facility 

•	 Revising operating requirements to improve efficiency. Revising 

operating requirements to better match capacity with community use 

could improve efficiency and save federal subsidies. Air carriers could 

reduce unused capacity by using smaller aircraft, for example, by using 

9-seat aircraft in place of the 19-seat aircraft typically used, or reducing 

the number of flights. This would improve the efficiency of the 

program, but it would also create challenges, since smaller aircraft may 

not be suitable for certain routes, such as those in mountainous areas 

that require pressurized cabins. Similarly, reducing the number of 

flights would mean passengers have fewer options from which to 

choose. However, as discussed below, passengers could potentially 

have additional transportation options if given other means of 

transportation to alternative airports. 

•	 Assessing multimodal solutions to provide communities alternatives 

to EAS. Other means of transportation might be more cost-effective 

and practical than EAS subsidies for intercity transportation for small 

communities that may have limited demand for air service due to the 

proximity of other airports or limited population. This could include 

potentially more cost-effective bus service to hub airports or ondemand air service on small aircraft, usually called air taxi service. 

While communities may be concerned about losing existing scheduled 

air service, assessing multimodal alternatives could maintain access to 

the aviation system at a lower cost. 

The information contained in this analysis is based on the related products Framework for below. 

Analysis 

National Transportation System: Options and Analytical Tools to Related GAO Strengthen DOT’s Approach to Supporting Communities’ Access to the 

Products System. GAO-09-753. Washington, D.C.: July 17, 2009. 

Commercial Aviation: Programs and Options for Providing Air Service 

to Small Communities. GAO-07-793T. Washington, D.C.: April 25, 2007. 

Page 192 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Revising the Essential Air Service Program
 

Could Improve Efficiency and Reduce Costs 


Commercial Aviation: Programs and Options for the Federal Approach 

to Providing and Improving Air Service to Small Communities. 

GAO-06-398T. Washington, D.C.: September 14, 2006. 

Federal Aviation Administration: Reauthorization Provides 

Opportunities to Address Key Agency Challenges. GAO-03-653T. 

Washington, D.C.: April 10, 2003. 

Commercial Aviation: Issues Regarding Federal Assistance for 

Enhancing Air Service to Small Communities. GAO-03-540T. 

Washington, D.C.: March 11, 2003. 

Commercial Aviation: Factors Affecting Efforts to Improve Air Service 

at Small Community Airports. GAO-03-330. Washington, D.C.: January 17, 

2003. 

Options to Enhance the Long-Term Viability of the Essential Air Service 

Program. GAO-02-997R. Washington, D.C. August 30, 2002. 

For additional information about this area, contact Gerald Dillingham at Area Contact (202) 512-2834 or dillinghamg@gao.gov. 

Page 193 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Design and Management of the 

Universal Service Fund As It Expands to 

Support Broadband Could Help Avoid Cost 

Increases for Consumers 

Improved Design and Management of the Universal 

Service Fund As It Expands to Support Broadband 

Could Help Avoid Cost Increases for Consumers 

Why GAO Is Focusing 

on This Area 

The policy that Americans should enjoy “universal” access to affordable 

communications services has existed since the 1930s. In 2009, the nation’s 

Universal Service Fund (Fund), managed by the Federal Communications 

Commission (FCC), disbursed roughly $7.3 billion to subsidize telephone 

and other communications services through four programs. The High Cost 

program subsidizes companies serving rural and high-cost areas. The LowIncome, E-rate, and Rural Health Care programs subsidize telephone bills 

and communications services for low-income consumers, schools and 

libraries, and rural health care providers, respectively. The National 

Broadband Plan, released in March 2010 by an FCC task force, calls for 

modifying the Fund to support greater deployment of more expensive 

broadband technologies. Universal Service Fund programs are funded 

through mandatory payments from companies providing 

telecommunications services—payments usually passed along to 

consumers as a line item fee on their telephone bill. Fund disbursements 

have more than tripled since beginning in 1998. GAO has reported the need 

for improved management practices in each of the four programs. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

GAO has examined each of the Fund’s programs and concluded that 

proposals to modify them to support greater deployment of more 

expensive broadband technologies without re-examining the purpose, 

design, and management of the programs could increase disbursements 

from the Fund and the costs borne by consumers. FCC’s design of Fund 

programs, including the High Cost and Low-Income programs having no 

limits on disbursements, have allowed disbursements to grow significantly 

over time. For example, due to increased program participation, LowIncome support payments for 2010 are estimated to reach approximately 

$1.4 billion—a 36 percent single-year increase over 2009. In September 

2010, FCC indexed the E-rate program’s $2.25 billion annual funding cap to 

inflation, which will lead to increases in that program’s expenditures. 

Using each program to support greater broadband deployment will further 

increase the upward pressure on spending. 

Page 194 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Design and Management of the 

Universal Service Fund As It Expands to 

Support Broadband Could Help Avoid Cost 

Increases for Consumers 

Total Fiscal Year Disbursements from the Four Universal Service Fund Programs 

Dollars in billions

8

7.4 7.3

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

7.0

7 6.8

6.3

6 5.7 5.6 

5.1 4.9 5 

4.0 

4 

3.3

3

2.3

2 

1 

0 

Fiscal year 

Source: GAO presentation of FCC data. 

In February 2005, GAO raised concerns with the unusual structure that 

FCC established for the Fund that has caused FCC to struggle over the 

years with identifying the fiscal and accountability requirements that apply 

to the Fund. These concerns included the extent to which FCC has 

delegated some functions to the Universal Service Administrative 

Company (USAC)—the not-for-profit corporation that FCC appointed as 

the permanent administrator of the Fund. In response to GAO’s concerns 

that USAC was operating and disbursing funds under less explicit federal 

ties than many other federal programs, FCC established a memorandum of 

understanding with USAC in 2007. However, concerns about FCC’s design 

and structure of the Fund remain, including the Fund being outside of 

Congress’ annual appropriations oversight process. 

In its management of the Fund, FCC has not undertaken a data-driven 

approach to overseeing the four programs. For example, GAO found in its 

November 2010 report on the Rural Health Care program that FCC never 

conducted a comprehensive needs assessment to learn how the program 

can best target the telecommunications needs of rural health care 

providers. Proper needs assessments are crucial to the effective design 

and assessment of programs. If FCC had obtained data through a needs 

assessment, it may have been able to articulate a clearer vision for the 

Page 195 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Design and Management of the 

Universal Service Fund As It Expands to 

Support Broadband Could Help Avoid Cost 

Increases for Consumers 

program, more accurately ascertain why some rural health care providers 

do not participate in the program, and better ensure that FCC’s 

programmatic changes achieved the intended results. Using data-based 

assessments would supplement the information gained through FCC’s 

regulatory procedures and enhance FCC’s ability to manage Fund 

programs. 

Finally, GAO has found that FCC lacks performance goals and measures 

for all four Fund programs. Results-oriented organizations establish a 

strong foundation for successful program management through setting 

performance goals to clearly define desired outcomes and developing 

performance measures that are linked to the program goals. GAO has 

recommended over the years that FCC establish performance goals and 

measures for all of the Universal Service Fund programs and FCC has 

generally agreed with these recommendations. However, FCC has made 

only partial progress toward implementing performance goals and 

measures in each of the four programs. 

Actions Needed and 

Potential Savings 

The National Broadband Plan recommends shifting Universal Service 

Fund support from legacy voice technologies to supporting a broadband 

platform that enables many applications, including voice. However, two of 

the programs remain uncapped and FCC has not adequately addressed the 

Fund’s continued growth. GAO’s work illustrates the need for a broader 

rethinking of the vision, size, structure, and goals of the Universal Service 

Fund, coupled with management improvements by FCC that will address 

GAO’s recommendations. For example, FCC conducting comprehensive 

needs assessments would be a good first step toward designing programs 

that properly target broadband needs. Establishing clear performance 

goals and measures for the programs will allow FCC to better determine 

the proper amount of funding for each program, target the funding to meet 

the needs of the intended beneficiaries, and conduct needed program 

evaluations. FCC and USAC have noted they will work together to respond 

to recent GAO recommendations regarding improving internal controls 

and other oversight mechanisms. Beyond GAO’s previous 

recommendations, Congress may also wish to give the Fund increased 

attention since it falls outside of the annual appropriations process. These 

actions would help ensure stronger governmental accountability over the 

Fund in the future and help avoid continued cost increases for rate payers. 

Page 196 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Design and Management of the 

Universal Service Fund As It Expands to 

Support Broadband Could Help Avoid Cost 

Increases for Consumers 

This analysis is based on the work conducted for the products listed Framework for below, as well as a review of the March 2010 National Broadband Plan and 

Analysis FCC’s recent proposed rulemakings and orders related to implementation 

of Universal Service Fund reform. 

Related GAO 

Products 

Telecommunications: FCC’s Performance Management Weaknesses 

Could Jeopardize Proposed Reforms of the Rural Health Care Program. 

GAO-11-27. Washington, D.C.: November 17, 2010. 

Telecommunications: Improved Management Can Enhance FCC 

Decision Making for the Universal Service Fund Low-Income Program. 

GAO-11-11. Washington, D.C.: October 28, 2010. 

Telecommunications: FCC Should Assess the Design of the E-rate 

Program’s Internal Control Structure. GAO-10-908. Washington, D.C.: 

September 29, 2010. 

Telecommunications: Long-Term Strategic Vision Would Help Ensure 

Targeting of E-rate Funds to Highest-Priority Uses. GAO-09-253. 

Washington, D.C.: March 27, 2009. 

Telecommunications: FCC Needs to Improve Performance Management 

and Strengthen Oversight of the High-Cost Program. GAO-08-633. 

Washington, D.C.: June 13, 2008. 

Telecommunications: Greater Involvement Needed by FCC in the 

Management and Oversight of the E-Rate Program. GAO-05-151. 

Washington, D.C.: February 9, 2005. 

Telecommunications: Federal and State Universal Service Programs and 

Challenges to Funding. GAO-02-187. Washington, D.C.: February 4, 2002. 

Schools and Libraries Program: Actions Taken to Improve Operational 

Procedures Prior to Committing Funds. GAO/RCED-99-51. Washington, 

D.C.: March 5, 1999. 

Telecommunications: FCC Lacked Authority to Create Corporations to 

Administer Universal Service Programs. GAO/T-RCED/OGC-98-84. 

Washington, D.C.: March 31, 1998. 

For additional information about this area, contact Mark Goldstein at Area Contact (202) 512-2834 or goldsteinm@gao.gov. 

Page 197 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
The Corps of Engineers Should Provide 

Congress With Project-Level Information on 

Unobligated Balances 

The Corps of Engineers Should Provide Congress With 

Project-Level Information on Unobligated Balances 

Why GAO Is Focusing 

on This Area 

The U.S. Army Corps of Engineers (Corps) is the world’s largest public 

engineering, design, and construction management agency. The Corps 

provides vital public engineering services in peace and war to strengthen 

the nation’s security, energize the economy, and reduce risks from 

disasters. 

Congress provides the Corps with “no-year” appropriations—that is, funds 

that are available for obligation until expended—so funding may be 

carried over to subsequent fiscal years. For example, if the Corps obligates 

$40 million of a $50 million appropriation, the $10 million that was not 

obligated is available for use in subsequent years. 

In fiscal year 2010 the Corps’ civil works program received about $5.7 

billion to plan, construct, operate, and maintain hundreds of water 

resource projects. However, the budget presentation does not provide 

information on the amount of unobligated balances that remain available 

for each project. Such project-level information would help congressional 

decision makers make appropriations and oversight decisions informed by 

the availability of existing resources. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

The budget presentation for the Corps lacks transparency on key elements 

of the President’s budget request. Specifically, it does not include 

information on how much remains available for specific projects that 

could potentially offset new funding requests for projects. For example, a 

Sabine-Neches Waterway project in Texas had about $31 million in 

unobligated balances from its fiscal year 2009 allocation that remained 

available to offset its fiscal year 2010 request. Consequently, Congress has 

not been able to consider the full level of resources available for projects 

when making its appropriations decisions. Corps review boards routinely 

review whether projects are meeting financial milestones, so unobligated 

balance information is available. Although a senior Corps budget official 

told GAO that detailed project-level information—such as remaining 

balances—would not be available until after budget materials are 

submitted to Congress, the Corps would be able to provide timely 

information before final appropriations decisions are made. 

Actions Needed and 

Potential Savings 

To ensure that all relevant information is considered during congressional 

deliberations, GAO recommended in April 2010—and the Department of 

Defense agreed—that the Corps provide Congress with information on 

estimated project-level unobligated balances as a supplement to its budget 

presentation. GAO expects to follow up at a later date to assess the 

Page 198 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
The Corps of Engineers Should Provide 


Congress With Project-Level Information on 


Unobligated Balances 


implementation of this recommendation. Although GAO cannot quantify 

the potential savings, this information would enable Congress to consider 

how much of the previous year’s funding remains available to offset new 

funding requests. 

The information contained in this analysis is based on the previously Framework for issued report cited below. 

Analysis 

Army Corps of Engineers: Budget Formulation Process Emphasizes Related GAO Product Agencywide Priorities, but Transparency of Budget Presentation Could 

Be Improved. GAO-10-453. Washington, D.C.: April 2, 2010. 

For additional information about this area, contact Denise Fantone at Area Contact (202) 512-4997 or fantoned@gao.gov or Anu K. Mittal at (202) 512-3841 or 

mittala@gao.gov. 

Page 199 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Ensuring the Federal Government Receives 

Fair Market Value for Its Oil and Gas 

Resources Could Enhance Federal Revenues 

 

 

Ensuring the Federal Government Receives Fair Market 

Value for Its Oil and Gas Resources Could Enhance 

Federal Revenues 

Why GAO Is Focusing 

on This Area 

The Department of the Interior (Interior) collected approximately $40 

billion in oil and gas revenues from company bids for new oil and gas 

leases, annual rents on existing leases, and royalties paid on oil and gas 

sold from federal leases in fiscal years 2008 through 2010. Interior’s 

Bureau of Land Management (BLM) manages onshore oil and gas leases, 

and its Bureau of Ocean Energy Management, Regulation and 

Enforcement (BOEMRE) manages offshore leases. Interior’s Office of 

Natural Resources and Revenue (ONRR) is responsible for collecting 

revenues associated with oil and gas produced from onshore and offshore 

leases. 

GAO has reviewed Interior’s oil and gas management and revenue 

collection and found in September 2008 that Interior has not routinely 

evaluated its federal oil and gas revenue collection system. By not 

evaluating this system, Interior is unable to state whether current revenue 

policies ensure that the federal government is receiving a fair return on the 

production and sale of oil and gas produced from federal leases. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Revising Interior’s federal oil and gas revenue collection system represents an 

opportunity to collect substantial additional revenues from the development 

of federal oil and gas resources. In fiscal year 2010, Interior estimated that 

increasing both rental rates for non-producing oil and gas leases and onshore 

oil and gas royalty rates would generate over $1.7 billion over 10 years. 

A considerable body of legislation governs Interior’s authority and 

obligations to manage resources on federal lands and within federal 

waters. For example, under the Outer Continental Shelf Lands Act1

 and the 

Federal Land Policy and Management Act,2 Interior must ensure the United 

States receives fair market value on the development of its oil and gas 

resources. The federal government receives payment for the development 

of oil and gas resources on federal lands and waters in potentially three 

ways. First, to obtain federal leases, companies generally must pay the 

federal government an amount—called a bonus bid—determined through 

a competitive auction. Second, after the lease is awarded, companies must 

pay rent to hold the land. Onshore, for example, the rental rate is generally 

between $1.50 and $2 per acre per year. Third, after production begins, the 

companies must accurately measure the oil and gas volumes and pay 

1

Pub. L. No. 83-212, 67 Stat. 462 (1953) (codified as amended at 43 U.S.C. §§ 1331-1356a). 

2

Pub. L. No. 94-579, 90 Stat. 2743 (1976) (codified as amended at 43 U.S.C. §§ 1701-1784). 

Page 200 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Ensuring the Federal Government Receives 

Fair Market Value for Its Oil and Gas 

Resources Could Enhance Federal Revenues 

royalties to Interior based on a percentage of the cash value of oil and gas 

produced and sold. The royalty rates for onshore leases are generally 12.5 

percent, while royalty rates for offshore leases in the Gulf of Mexico 

generally range from 12.5 percent to 18.75 percent. 

In October 2008, GAO reported that Interior does less to encourage 

development of oil and gas on federal leases than some states and private 

landowners. Moreover, some of the tools that states and private landowners 

use may also result in increased revenues. For example, four of the eight 

states GAO reviewed increase rental rates over time on nonproducing oil 

and gas leases to (1) encourage faster development of oil and gas 

resources—on which royalties are due, and (2) increase revenues from 

nonproducing leases. While Interior officials stated that rental rates for a 10­

year onshore federal lease increased from $1.50 per acre per year for the 

first 5 years to $2 per acre per year for years 6 through 10, states GAO 

reviewed typically increased rental rates to a greater extent. For example, 

one state increases the rental rate from $5 per acre per year to $25 per acre 

per year if the lease is not developed by the end of the third year. 

In September 2008, GAO reported that Interior had not conducted a 

comprehensive evaluation of the oil and gas revenue system in over 25 

years and that it did not have a system in place to evaluate whether the 

federal system is in need of reassessment. At the time, GAO also reported 

that Interior collected lower levels of revenues for oil and gas production 

than do some resource owners, including other countries and some U.S. 

states. For example, GAO reported that federal revenues for oil and gas 

produced in the Gulf of Mexico were lower than 93 out of 104 resource 

owners. In addition, the lack of price flexibility in royalty rates—automatic 

adjustment of these rates to changes in oil and gas prices or other market 

conditions—and the inability to change fiscal terms on existing leases put 

pressure on Interior and Congress to change royalty rates in the past on an 

ad hoc basis with consequences that could amount to billions of dollars of 

foregone revenue. For example, special lower royalty rates—referred to as 

royalty relief—granted on leases issued in the deep water areas of the Gulf 

of Mexico from 1996 to 2000 (a period when oil and gas prices and 

industry profits were much lower than they are today) could result in $21 

billion to $53 billion in lost revenue to the federal government, compared 

with what it would have received without these provisions. GAO’s 2008 

User Fee Design Guide also notes the importance of regular fee reviews to 

determine whether a fee needs to be adjusted. User fees represent a 

charge to readily identifiable users of a government service or benefit 

above and beyond what is normally available to the general public. 

Further, fee reviews can facilitate effective communication and provide 

Page 201 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Ensuring the Federal Government Receives 

Fair Market Value for Its Oil and Gas 

Resources Could Enhance Federal Revenues 

opportunity for stakeholder input. GAO has previously reported that such 

communication with stakeholders can provide feedback that could affect 

the outcome of changes in fees and program implementation. 

In 2010, GAO issued two reports that found Interior’s verification of the 

volume of oil and gas produced from federal leases—on which royalties 

are due to the federal government—does not provide reasonable 

assurance that operators are accurately measuring and reporting these 

volumes. In March 2010, GAO reported that Interior’s measurement 

regulations and procedures for oil and gas measurement were insufficient 

for providing reasonable assurance that oil and gas were being measured 

accurately. As a result, there is a risk that the government is not receiving 

all the oil and gas royalties it is due. Additionally, GAO reported in October 

2010 that Interior’s data likely underestimated the amount of natural gas 

produced on federal leases that is released directly to the atmosphere 

(vented) or is burned (flared). This vented and flared gas contributes to 

greenhouse gases and represents lost royalties. It is also important to 

consider the costs of verification and validation in the context of the 

benefits likely to be realized. GAO’s User Fee Design Guide discusses the 

importance of striking a balance between ensuring compliance and 

minimizing the administrative costs of collection. 

Interior has begun to address these issues. For example, in January 2007, 

Interior announced that it was raising the royalty rate for new deep water 

leases in the Gulf of Mexico from 12.5 percent to 16.7 percent. At that time, 

Interior estimated that the increased royalty rate of 16.7 percent for new 

deepwater offshore Gulf of Mexico leases would increase revenue from 

royalty payments by $4.5 billion over 20 years. Interior also estimated that 

the increase in royalty rates would decrease the amount companies would 

bid for the rights to explore for and develop oil and gas on affected leases 

as well as reduce the amount of oil and gas ultimately produced in affected 

areas, but that in net, the increase in revenue would be greater than the 

reductions associated with lower bids and production. Furthermore, in 

response to GAO’s October 2008 report, Interior stated in 2010 that the 

administration would propose legislation to impose a fee on new 

nonproducing oil and gas leases to encourage energy development on both 

onshore and offshore leases. To date, such a fee has not come into effect. 

However, in an April 12, 2010, press release, Interior stated that it is 

undertaking a study in response to GAO’s September 2008 report, which it 

expects to complete in 2011. The purpose of the study is to inform 

decisions about federal lease terms, such as royalties, by consistently 

comparing the federal oil and gas fiscal systems with such systems of 

other countries. Specifically, Interior stated that the results of this study 

Page 202 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Ensuring the Federal Government Receives 


Fair Market Value for Its Oil and Gas 


Resources Could Enhance Federal Revenues 


will enable it to ensure that its leasing policies give the public a fair return 

on federally owned oil and gas resources, while balancing other 

objectives, including production and environmental quality. The results of 

the study may reveal the potential for greater revenues to the federal 

government. Given the significant financial stakes, there may be 

opposition from the oil and gas industry. Interior may also face significant 

difficulties designing and implementing an entirely new revenue collection 

system, given its recent struggles to successfully oversee oil and gas 

production. Finally, while Interior agreed with the recommendations from 

both reports issued in 2010 addressing improvements to its oversight of 

the measurement of oil and gas produced from federal leases, it has not 

yet implemented these recommendations. 

Actions Needed and 

Potential Revenue 

To encourage companies to diligently develop oil and gas leases, ensure 

that the government obtains a fair return on oil and gas produced from 

federal leases, and for Interior to have reasonable assurance that oil and 

gas produced from federal oil and gas leases is being measured accurately: 

•	 Congress may need to take action to authorize or encourage Interior to 

revise its rental fee structure for nonproducing leases. 

•	 Interior should complete its study examining how other oil and gas 

resource owners select fiscal parameters for leasing and adjusting oil 

and gas royalty rates and use that information to adjust, as appropriate, 

its royalty rates to a level that ensures the government a fair return. In 

doing so it should ensure opportunities for substantive, two-way 

communication with program stakeholders. 

•	 Depending on the results of the study, Congress may wish to provide 

additional guidance or take additional actions to enable Interior to 

change how it oversees federal lands and waters and the revenues 

derived from production of oil and gas there. 

•	 Interior should implement GAO’s recommendations from prior reports 

addressing a variety of oil and gas measurement factors. 

According to Interior, increasing the rental fee for onshore nonproducing 

leases to $4 per acre per year would generate $760 million over 10 years. 

While the total additional revenue generated by adjusting both onshore 

and offshore royalty rates is uncertain, a 2010 Interior estimate of 

increasing onshore royalty rates projects additional federal revenues of $1 

billion over 10 years. 

Page 203 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Ensuring the Federal Government Receives 


Fair Market Value for Its Oil and Gas 


Resources Could Enhance Federal Revenues 


The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Related GAO 

Products 

Federal Oil and Gas Leases: Opportunities Exist to Capture Vented and 

Flared Natural Gas, Which Would Increase Royalty Payments and Reduce 

Greenhouse Gases. GAO-11-34. Washington, D.C.: October 29, 2010. 

Oil and Gas Management: Interior’s Oil and Gas Production 

Verification Efforts Do Not Provide Reasonable Assurance of Accurate 

Measurement of Production Volumes. GAO-10-313. Washington, D.C.: 

March 15, 2010. 

Oil and Gas Leasing: Interior Could Do More to Encourage Diligent 

Development. GAO-09-74. Washington, D.C.: October 3, 2008. 

Oil and Gas Royalties: The Federal System for Collecting Oil and Gas 

Revenues Needs Comprehensive Reassessment. GAO-08-691. Washington, 

D.C.: September 3, 2008. 

Oil and Gas Royalties: Litigation over Royalty Relief Could Cost the 

Federal Government Billions of Dollars. GAO-08-792R. Washington, D.C.: 

June 5, 2008. 

Federal User Fees: A Design Guide. GAO-08-386SP. Washington, D.C.: 

May 29, 2008. 

Oil and Gas Royalties: A Comparison of the Share of Revenue Received 

from Oil and Gas Production by the Federal Government and Other 

Resource Owners. GAO-07-676R. Washington, D.C.: May 1, 2007. 

Oil and Gas Royalties: Royalty Relief Will Cost the Government Billions 

of Dollars but Uncertainty Over Future Energy Prices and Production 

Levels Make Precise Estimates Impossible at this Time. GAO-07-590R. 

Washington, D.C.: April 12, 2007. 

For additional information about this area, contact Frank Rusco at Area Contact (202) 512-3841 or ruscof@gao.gov. 

Page 204 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

Recent Efforts to Address Governmentwide Improper 

Payments Could Result in Significant Cost Savings 

Why GAO Is Focusing 

on This Area 

Reported estimated improper payments governmentwide have steadily 

increased over the past decade from an estimated $20 billion in 2000 to 

approximately $125 billion in 2010. An improper payment is defined as any 

payment that should not have been made or that was made in an incorrect 

amount (including overpayments and underpayments) under statutory, 

contractual, administrative, or other legally applicable requirements. 

Reported improper payments also include payments for which insufficient 

or no documentation was found. GAO’s work has demonstrated that 

improper payments continue to be a long-standing, widespread, and 

significant problem in the federal government. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

For fiscal year 2010, about 20 federal agencies reported estimated 

improper payments for over 70 programs totaling about $125.4 billion, for 

a governmentwide error rate of about 5.5 percent. According to GAO’s 

analysis of those agencies’ fiscal year 2010 Performance and 

Accountability Reports (PAR) or Agency Financial Reports (AFR), the 

majority of reported estimated improper payments for fiscal year 2010 is 

accounted for by the following 10 programs: 

Program Agency 

FY 2010 estimated 

improper payments Primary cause(s)a 

Medicare Fee-forService Health and Human 

Services 

$34.3 billion Medically unnecessary services and insufficient 

documentation 

Medicaid Health and Human 

Services 

$22.5 billion Insufficient or no documentation provided for conducting 

medical review and cases that were either ineligible or 

their eligibility status could not be determined 

Unemployment 

Insurance 

Labor $17.5 billion Eligibility errors, errors in handling separation issues, and 

claimants who have returned to work and continue to 

claim benefits 

Earned Income Tax 

Credit 

Treasury $16.9 billion High turnover of eligible claimants, confusion among 

eligible claimants, complexity of the law, structure of the 

program, unscrupulous return preparers, and fraud 

Medicare Advantage Health and Human 

Services 

$13.6 billion Insufficient supporting documentation, and errors in the 

transfer of data and payment calculations 

Supplemental Security 

Income 

Social Security 

Administration 

$4.8 billion Incorrect computations, misapplication of an income or 

resource exclusion, and inadequate verification of 

accounts and wages 

Old Age Survivors’ 

and Disability 

Insurance 

Social Security 

Administration 

$3.2 billion Computation errors; nonverification of earnings, income 

or work status; and incorrect processing of applications or 

payments 

Supplemental Nutrition 

Assistance 

Agriculture $2.2 billion Incomplete or inaccurate reporting of income by 

participants and incorrect eligibility determination by 

caseworkers 

Page 205 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

Program Agency 

FY 2010 estimated 

improper payments Primary cause(s)a 

National School Lunch Agriculture $1.5 billion Verification and authentication errors including 

inadequate documentation and fraud or 

misrepresentation by participants 

Pell Grants Education $1 billion Verification errorsb 

Source: GAO 


a

As reported by the agencies. 


b

Primary causes were provided by the Department of Education and were not reported in the AFR. 


Agencies have made progress in reducing improper payments, and, in 

some programs, they have reported reducing the rate of improper 

payments. For example, the Department of Health and Human Services 

(HHS) reported that the fiscal year 2010 Head Start program’s estimated 

improper payments decreased by $90 million—or 1.3 percent of total 

program outlays—from the estimated amount reported for fiscal year 

2009. HHS reported that it reduced improper payments errors by issuing 

additional guidance for employees on verifying income eligibility and 

developing a standard template form to help guide grantees in the 

enrollment process. In another example, the Department of Agriculture 

reported reductions from fiscal year 2009 to fiscal year 2010 for seven of 

its programs, including the Marketing Assistance Loan Program which had 

a reduction in improper payments of about $50 million—or 1.75 percent of 

total program outlays. The agency reported actions taken to reduce 

improper payments, which include providing additional training and 

instruction on improper payment control procedures, and integrating the 

employee’s individual performance results related to reducing improper 

payments into annual performance ratings. 

Nonetheless, the federal government still faces challenges in determining 

the full extent to which improper payments occur, and in ensuring 

appropriate actions are being taken to reduce them. For example, three 

agencies have not reported on the extent of improper payments for seven 

risk-susceptible programs with significant amounts of outlays. Most 

notably, HHS has yet to report a comprehensive improper payment 

estimate amount for the Medicare Prescription Drug Benefit program, 

which had about $59 billion in outlays in fiscal year 2010. However, HHS 

expects to report a comprehensive estimate for this program in fiscal year 

2011. In addition, it is not always clear whether agencies are identifying 

the root cause or the underlying internal control weaknesses that caused 

the payment error in order to determine the appropriate corrective action. 

Page 206 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

To help reduce improper payments, the President issued (1) Executive 

Order 13520, Reducing Improper Payments, in November 2009, focused 

on increasing transparency and accountability for reducing improper 

payments, and creating incentives to reduce improper payments; (2) a 

Presidential Memorandum in March 2010 that expands agency efforts to 

recapture improper overpayments;1

 and (3) a Presidential Memorandum in 

June 2010, directing that a Do Not Pay List be established to prevent 

improper payments from being made to ineligible recipients. Moreover, in 

July 2010, Congress passed the Improper Payments Elimination and 

Recovery Act (IPERA) to enhance reporting and recouping of improper 

payments. These actions further heightened awareness of the need to 

reduce improper payments and eliminate waste, fraud, and abuse in 

federal programs. In addition, the President has set goals, as part of the 

Accountable Government Initiative, for federal agencies to reduce overall 

improper payments by $50 billion and recapture at least $2 billion in 

improper contract payments and overpayments to health providers, by the 

end of 2012. 

Under the Executive Order, the Office of Management and Budget 

established a Web site (www.paymentaccuracy.gov) to enhance 

transparency and accountability, and designated 14 high-error programs to 

focus attention on the programs that significantly contribute to the federal 

government’s improper payments.2

 The Web site contains important 

information on the programs’ senior accountable officials responsible for 

efforts to reduce improper payments; current, targeted, and historical 

estimated rates of improper payments; why they occur; and what agencies 

are doing to reduce and recover them. For example, the Web site reported 

a current improper payment rate for HHS’s Medicare Fee-for-Service 

program of 10.5 percent for fiscal year 2010 and a reduction target for 

fiscal year 2013 of 5.8 percent. 

1

Payment recapture audits, also called recovery audits, are conducted to identify and 

reclaim payments made in error. 

2

The 14 high-error programs designated by the Office of Management and Budget for fiscal 

year 2010 include: Medicare Fee-for-Service; Medicaid; Unemployment Insurance; Medicare 

Advantage; Supplemental Security Income; Retirement, Survivors, and Disability Insurance; 

Supplemental Nutrition Assistance Program; National School Lunch Program; Rental 

Housing Assistance Programs; Federal-Aid Highway Program, Highway Planning and 

Construction; Children’s Health Insurance Program; Earned Income Tax Credit; High Cost 

Program of the Universal Service Fund; and Medicare Prescription Drug Benefit. The 

Children’s Health Insurance Program, High Cost Program of the Universal Service Fund, 

and Medicare Prescription Drug Benefit programs did not report improper payment error 

rates and amounts for fiscal year 2010. 

Page 207 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

IPERA established additional requirements related to manager 

accountability, recovery auditing, compliance and noncompliance 

determinations and reporting, and an opinion on internal controls over 

improper payments. For example, IPERA repealed a previous recovery 

audit requirement and enacted a new, broader requirement for agencies to 

conduct recovery audits for those programs with at least $1 million in total 

program outlays, where cost-effective. Final guidance on expanding 

payment recapture audits is expected to be issued under IPERA 

implementing guidance, in early 2011. 

Actions Needed and 

Potential Savings 

GAO views these efforts as positive steps toward improving transparency 

over, and reducing, improper payments; however, it is too soon to 

determine whether the activities called for in Executive Order 13520, the 

Presidential Memoranda, and IPERA will achieve their goals of reducing 

improper payments while continuing to ensure that federal programs serve 

and provide access to intended beneficiaries. Identifying the nature, extent 

and underlying causes of improper payments is an essential prerequisite to 

taking action to reduce them. Moreover, corrective actions needed to 

reduce improper payments vary across specific entities and programs. 

Until the federal government has implemented effective processes to 

determine the full extent to which improper payments occur and to 

reasonably assure that appropriate actions are taken across entities and 

programs to effectively recover and reduce improper payments, the 

federal government will not have reasonable assurance that the use of 

taxpayer funds is adequately safeguarded. 

In addition, the level of importance the agencies and the administration 

place on the efforts to implement the requirements established by IPERA, 

the Executive Order, and other guidance will be a key factor in 

determining their overall effectiveness in reducing improper payments and 

ensuring that federal funds are used efficiently and for their intended 

purposes. If fully and successfully implemented, the requirements will 

provide additional transparency, improve oversight and accountability, 

and should help to reduce the federal government’s vulnerability to 

improper payments in the future. Continuous congressional oversight is 

key to determining whether these recent efforts are effective in reducing 

improper payments. Congressional efforts to monitor agencies will be 

essential to ensure they are taking action to fully implement these 

legislative requirements to improve accountability, achieve targeted goals, 

and reduce overall improper payments. 

Page 208 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

This analysis is based on agency-reported information in their fiscal year Framework for 2010 Performance Accountability and Agency Financial Reports, as well as 

Analysis previous GAO reports. 

Related GAO 

Products 

Medicare Recovery Audit Contracting: Lessons Learned to Address 

Improper Payments and Improve Contractor Coordination and 

Oversight. GAO-10-864T. Washington, D.C.: July 15, 2010. 

Medicare Fraud, Waste, and Abuse: Challenges and Strategies for 

Preventing Improper Payments. GAO-10-844T. Washington, D.C.: June 15, 

2010. 

U.S. Government Financial Statements: Fiscal Year 2009 Audit 

Highlights Financial Management Challenges and Unsustainable LongTerm Fiscal Path. GAO-10-483T. Washington, D.C.: April 14, 2010. 

Medicare Recovery Audit Contracting: Weaknesses Remain in 

Addressing Vulnerabilities to Improper Payments, Although 

Improvements Made to Contractor Oversight. GAO-10-143. Washington, 

D.C.: March 31, 2010. 

Improper Payments: Significant Improvements Needed in DOD’s Efforts 

to Address Improper Payment and Recovery Auditing Requirements. 

GAO-09-442. Washington, D.C.: July 29, 2009. 

Improper Payments: Responses to Posthearing Questions Related to 

Eliminating Waste and Fraud in Medicare and Medicaid. GAO-09-838R. 

Washington, D.C.: July 20, 2009. 

Improper Payments: Progress Made but Challenges Remain in 

Estimating and Reducing Improper Payments. GAO-09-628T. 

Washington, D.C.: April 22, 2009. 

Improper Payments: Responses to Posthearing Questions Related to 

Status of Agencies’ Efforts to Address Improper Payment and Recovery 

Auditing Requirements. GAO-08-819R. Washington, D.C.: June 20, 2008. 

Improper Payments: Status of Agencies’ Efforts to Address Improper 

Payment and Recovery Auditing Requirements. GAO-08-438T. 

Washington, D.C.: January 31, 2008. 

Page 209 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Recent Efforts to Address Governmentwide 

Improper Payments Could Result in 

Significant Cost Savings 

Improper Payments: Federal Executive Branch Agencies’ Fiscal Year 

2007 Improper Payment Estimate Reporting. GAO-08-377R. Washington, 

D.C.: January 23, 2008. 

Improper Payments: Responses to Posthearing Questions Related to 

Agencies’ Progress in Addressing Improper Payment and Recovery 

Auditing Requirements. GAO-07-834R. Washington, D.C.: May 30, 2007. 

Improper Payments: Agencies’ Efforts to Address Improper Payment and 

Recovery Auditing Requirements Continue. GAO-07-635T. Washington, 

D.C.: March 29, 2007. 

Improper Payments: Posthearing Responses on a December 5, 2006, 

Hearing to Assess the Improper Payments Information Act of 2002. 

GAO-07-533R. Washington, D.C.: February 27, 2007. 

For additional information about this area, contact Kay Daly at Area Contact (202) 512-9312 or dalykl@gao.gov. 

Page 210 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Promoting Competition for Federal Contracts Promoting Competition for Federal Contracts Can Can Produce Savings 

Produce Savings 

Why GAO Is Focusing 

on This Area 

Competition is a cornerstone of the federal acquisition system and a 

critical tool for achieving the best possible return on what has grown to 

become an annual investment of about $540 billion. The benefits of 

competition in acquiring goods and services from the private sector are 

well established. Competitive contracts can save money, improve 

contractor performance, and promote accountability for results. 

Federal agencies generally are required to award contracts competitively, 

but a substantial amount of federal money is being obligated on 

noncompetitive contracts annually. Full and open competition, defined as 

allowing all responsible sources to submit proposals, is the required 

method for federal agencies to award contracts, unless an exception 

applies. For example, full and open competition is not required under 

urgent circumstances, or when the required goods or services are available 

from only one source. Full and open competition also may not be required 

for contracts below certain dollar values or some contracts awarded under 

small business programs, such as the 8(a) small business development 

program of the Small Business Administration (SBA). 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Although some agency decisions to forego competition may be justified, 

GAO has found that when federal agencies decide to open their contracts 

to competition, they frequently realize savings. For example, the 

Department of State (State) awarded a noncompetitive contract for 

installation and maintenance of technical security equipment at U.S. 

embassies in 2003. In response to a GAO recommendation, State 

subsequently competed this requirement, and in 2007 it awarded contracts 

to four small businesses for a total savings of over $218 million. In another 

case, GAO found in 2006 that the Army had awarded noncompetitive 

contracts for security guards, but later spent 25 percent less for the same 

services when the contracts were competed. 

Federal agencies obligated approximately $170 billion on noncompetitive 

contracts in fiscal year 2009 alone. While there has been some fluctuation 

over the years, the percentage of obligations under noncompetitive 

contracts recently has been in the range of 31 percent to over 35 percent. 

GAO reported in July 2010 that circumstances precluding competition 

included the government’s lack of access to a contractor’s proprietary 

data, which may be needed by other contractors in order to compete, or in 

some cases its reliance on a particular contractor’s expertise. In other 

instances, agencies have used the competition exception allowed for the 

SBA’s section 8(a) business development program, which provides 

agencies with an easy and fast method to award contracts without using 

Page 211 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Promoting Competition for Federal Contracts 

Can Produce Savings 

full and open competition. Congress created the 8(a) program to help 

small disadvantaged businesses access the federal procurement market 

and eventually compete successfully in the U.S. economy. But there have 

been concerns about the lack of competition in the program, such as large, 

sole-source contracts awarded to 8(a) firms owned by Alaska Native 

Corporations, which have special advantages in the 8(a) program. In 

response to those concerns, legislation now requires agencies to provide 

more scrutiny of noncompetitive contracts over $20 million awarded 

under SBA’s 8(a) program. 

Another issue involves the extent of competition actually achieved. 

Specifically, the government obligates billions of dollars every year on 

procurements categorized as competitive even though only one offer was 

received. There is currently no requirement for agencies to assess the 

reasons why only one offer was received. GAO reported that the 

government’s requirements can influence the number of offers received 

under competitive solicitations. For example, when existing contracts 

expire and are opened to competition, the new contract’s requirements 

may be written so restrictively that they are geared toward the holder of 

the current contract. GAO has recommended that the Office of Federal 

Procurement Policy (OFPP) determine whether the regulations should be 

amended to require agencies to evaluate the circumstances leading to only 

one offer being received and to identify additional steps that can be taken 

to increase the likelihood that multiple offers will be submitted in the 

future. The OFPP Administrator agreed with GAO’s recommendation. 

GAO work also shows that agencies do not always use a competitive 

process when establishing or using blanket purchase agreements (BPA) 

under the General Services Administration’s schedules program. These are 

agreements agencies put in place in advance of known requirements, 

which then may be used to order goods or services quickly when specific 

needs arise. Agencies have frequently entered into BPAs with just one 

vendor, even though multiple vendors could satisfy agency needs. And 

even when agencies entered into BPAs with multiple vendors, GAO has 

found that agencies have not always held subsequent competitions among 

those vendors for orders under the BPAs, even though such competitions 

at the ordering level are required. GAO recommended that OFPP consider 

amending the regulations to clarify this requirement, and OFPP agreed. By 

not consistently promoting competition, federal government agencies have 

not taken advantage of opportunities for significant cost savings. 

Page 212 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Promoting Competition for Federal Contracts 

Can Produce Savings 

Actions Needed and 

Potential Savings 

The Office of Management and Budget (OMB), the executive agency that 

oversees the federal procurement process, has provided additional 

guidance for agencies to promote competition in contracting, and improve 

the effectiveness of their competition practices. In July 2009, OMB called 

for agencies to reduce obligations under new contract actions that are 

awarded using high-risk contracting authorities by 10 percent in fiscal year 

2010. These high-risk contracts include, among other considerations, those 

that are awarded noncompetitively and those that are structured as 

competitive but for which only one offer is received. While sufficient data 

are not yet available to determine whether this goal was met, GAO is 

currently reviewing the agencies’ savings plans to identify steps taken 

toward that goal, and will continue to monitor the progress agencies make 

toward achieving this and any subsequent goals set by OMB. Further, OMB 

has challenged agencies to take immediate action to aggressively seek 

deeper discounts on BPAs. 

In addition to legislation and guidance, promoting competition in 

contracting to the greatest extent possible requires overcoming 

conventional thinking. For example, because program officials have an 

essential role in the acquisition process, it is important that these officials, 

not just contracting officers, actively promote competition. This means not 

insisting on retaining incumbent contractors even when competition is 

possible. Keeping an incumbent contractor in place without competition 

simply because the contractor is doing a good job, or resisting legitimate 

suggestions that competition be used even though it may take longer, 

could result in missed opportunities for savings. 

By more consistently promoting competition in contracts, federal agencies 

would have greater opportunities to take advantage of the effectiveness of 

the marketplace and potentially achieve billions of dollars in cost savings. 

The information contained in this analysis is based on the related products Framework for listed below. 

Analysis 

Related GAO 

Products 

Federal Contracting: Opportunities Exist to Increase Competition and 

Assess Reasons When Only One Offer Is Received. GAO-10-833. 

Washington, D.C.: July 26, 2010. 

Recovery Act: Contracting Approaches and Oversight Used by Selected 

Federal Agencies and States. GAO-10-809. Washington, D.C.: July 10, 2010. 

Page 213 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Promoting Competition for Federal Contracts 

Can Produce Savings 

Contract Management: Agencies Are Not Maximizing Opportunities for 

Competition or Savings under Blanket Purchase Agreements despite 

Significant Increase in Usage. GAO-09-792. Washington, D.C.: September 

9, 2009. 

High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 22, 

2009. 

Department of State Contract for Security Installation at Embassies. 

GAO-07-34R. Washington, D.C.: November 8, 2006. 

Contract Management: Increased Use of Alaska Native Corporations’ 

Special 8(a) Provisions Calls for Tailored Oversight. GAO-06-399. 

Washington, D.C.: April 27, 2006. 

Contract Security Guards: Army’s Guard Program Requires Greater 

Oversight and Reassessment of Acquisition Approach. GAO-06-284. 

Washington, D.C.: April 3, 2006. 

For additional information about this area, contact John Hutton at Area Contact (202) 512-4841 or huttonj@gao.gov. 

Page 214 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Applying Strategic Sourcing Best Practices 

throughout the Federal Procurement System 

Could Produce Significant Savings 

Applying Strategic Sourcing Best Practices throughout 

the Federal Procurement System Could Produce 

Significant Savings 

Why GAO Is Focusing 

on This Area 

Since 2002, spending on federal contracts has more than doubled to about 

$540 billion in 2009, consuming a significant share of agencies’ 

discretionary budgets. Because procurement at federal departments and 

agencies generally is decentralized, the federal government is not fully 

leveraging its aggregate buying power to obtain the most advantageous 

terms and conditions for its procurements. 

In the private sector, however, an approach called strategic sourcing has 

been used since the 1980s to reduce procurement costs at companies with 

large supplier bases and high procurement costs. Strategic sourcing is a 

process sometimes led by a central procurement organization that improves 

purchasing activities by moving a company away from numerous individual 

procurements to a broader aggregate approach. Leading companies GAO 

reviewed in 2002 found they could save billions of dollars and improve the 

quality of the products and services received by using strategic sourcing. 

Bringing about such changes was not easy, but the strategic sourcing best 

practices of leading companies GAO studied can serve as a framework to 

guide federal strategic sourcing efforts. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

The federal government could save billions of dollars annually by 

leveraging its enormous buying power. Like the federal government, major 

companies in the private sector rely on products and services from 

numerous suppliers, and many have struggled with methods to better 

manage their purchasing. GAO has reported that to reduce costs, improve 

productivity, and more effectively procure products and services, many 

companies have adopted a strategic sourcing approach—centralizing and 

reorganizing their procurement operations to get the best value for the 

company as a whole. The federal government could do the same and 

realize significant savings as a result. 

The leading companies GAO studied in 2002 made a number of dramatic 

changes to the way they managed procurement and found that these 

changes, in turn, resulted in significant cost savings and other 

improvements. These changes generally began with a corporate decision 

by top leaders to pursue a strategic procurement approach. This approach 

involved a range of activities—from developing a better picture of what 

the company was spending on various types of supplies and services, to 

taking an enterprisewide approach to procurement, to developing new 

ways of doing business. Specifically, once top leaders committed to taking 

a strategic approach, the companies took a hard look at how much they 

were spending on products and services and from whom. By using this 

Page 215 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Applying Strategic Sourcing Best Practices 

throughout the Federal Procurement System 

Could Produce Significant Savings 

“spend analysis” to arm themselves with knowledge, the companies 

identified opportunities to leverage their buying power, reduce costs, and 

better manage their suppliers. The companies also instituted a series of 

structural, process, and role changes aimed at moving away from a 

fragmented procurement process to a more efficient and effective 

enterprisewide process. 

Applying a strategic sourcing approach in the private sector clearly has paid 

dividends. Studies have reported significant cost savings for some 

companies of 10 percent to 20 percent of their total procurement costs. For 

example, GAO identified one 2002 survey of 147 companies in 22 industries 

that indicated a strategic sourcing approach produced savings of more than 

$13 billion in the year 2000 alone. Saving even 10 percent of total federal 

procurement spending would produce more than $50 billion in savings 

annually. 

Since 2005, the Office of Management and Budget (OMB) has encouraged 

agencies to coordinate their buys through Federal Strategic Sourcing 

Initiative (FSSI) interagency procurement vehicles1

 awarded by the 

General Services Administration. In addition, some agencies have awarded 

agencywide (also referred to as enterprisewide) contracts awarded under 

strategic sourcing programs within an individual federal department or 

agency. In July 2010, OMB’s congressional testimony on the status of 

improvements to federal acquisition cited examples of what progress is 

being achieved under agency strategic sourcing efforts. Under the FSSI 

effort for example, a team of agencies selected office products in late 2009 

as a promising strategic sourcing opportunity to combine buying power 

for about $250 million in requirements. This office products initiative is 

expected to reduce costs at these agencies by as much as 20 percent, for a 

total savings of almost $200 million over the next 4 years. Further, an 

agencywide initiative at the Department of Homeland Security—which 

accounted for $14.3 billion in contract spending in 2009—is expected to 

save $87 million during the next 6 years for a standardized suite of 

discounted desktop operating systems, e-mail, and office automation 

products. 

1

The FSSI was launched in 2005 to strategically source across federal agencies and create a 

strategic sourcing community of practice. The FSSI is led by the General Services 

Administration, in partnership with the Department of Treasury, with active participation 

by more than 20 federal agencies. FSSI contracts have been made for office products, 

domestic delivery services, and wireless device ordering and expense management 

services. 

Page 216 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Applying Strategic Sourcing Best Practices 

throughout the Federal Procurement System 

Could Produce Significant Savings 

These results demonstrate the potential to achieve significant savings 

through the use of strategic sourcing approaches. The starting point for 

such efforts, however, is having good data on current spending. But 

according to an April 2010 GAO report, OMB and agencies cannot be sure 

the government is fully leveraging its buying power because of the lack of 

comprehensive, reliable data to effectively manage and oversee an 

important segment of total procurement spending: interagency and 

agencywide contracts. That is, the total number of and sales volume of these 

contracts are unknown because the federal government’s official 

procurement database does not fully capture this information. To provide 

better transparency and a coordinated approach, GAO has recommended 

that OMB ensure that departments and agencies accurately record these 

contracts in the procurement data system. The President has called on OMB 

to issue governmentwide guidance on improving the effectiveness of 

government acquisition. In response, OMB’s 2009 guidance calls on agencies to 

increase their participation in strategic sourcing initiatives that will leverage 

federal buying power. Because these types of contracts are now being used 

as part of the governmentwide strategic sourcing initiative, improved 

knowledge will help identify additional opportunities for savings and ensure 

that these contracts are being used in an efficient and effective manner. 

Actions Needed and 

Potential Savings 

Acquisition leaders across the government need to more fully embrace the 

strategic sourcing initiative beginning with collecting, maintaining, and 

analyzing data on current procurement spending. Then, agencies have to 

conduct assessments of acquisition and supply chain functions to initiate 

enterprisewide transformations. Only then will they be able to fully 

implement strategic sourcing programs that drive immediate and longterm efficiencies. 

The information contained in this analysis is based on the related products Framework for listed below with updates provided by more recent OMB testimony. GAO 

Analysis determined that the data it used were sufficiently reliable for its purposes. 

Related GAO 

Products 

Streamlining Government: Opportunities Exist to Strengthen OMB’s 

Approach to Improving Efficiency. GAO-10-394. Washington, D.C.: 

May 7, 2010. 

Contracting Strategies: Data and Oversight Problems Hamper 

Opportunities to Leverage Value of Interagency and Enterprisewide 

Contracts. GAO-10-367. Washington, D.C.: April 29, 2010. 

Page 217 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Applying Strategic Sourcing Best Practices 

throughout the Federal Procurement System 

Could Produce Significant Savings 

U.S. Postal Service: Purchasing Changes Seem Promising, but 

Ombudsman Revisions and Continued Oversight Are Needed. 

GAO-06-190. Washington, D.C.: December 15, 2005. 

Amtrak Management: Systemic Problems Require Actions to Improve 

Efficiency, Effectiveness, and Accountability. GAO-06-145. Washington, 

D.C.: October 4, 2005. 

Homeland Security: Successes and Challenges in DHS’s Efforts to Create 

an Effective Acquisition Organization. GAO-05-179. Washington, D.C.: 

March 29, 2005. 

Best Practices: Using Spend Analysis to Help Agencies Take a More 

Strategic Approach to Procurement. GAO-04-870. Washington, D.C.: 

September 16, 2004. 

Opportunities for Congressional Oversight and Improved Use of 

Taxpayer Funds: Budgetary Implications of Selected GAO Work. 

GAO-04-649. Washington, D.C.: May 7, 2004. 

Contract Management: High-Level Attention Needed to Transform DOD 

Services Acquisition. GAO-03-935. Washington, D.C.: September 10, 2003. 

Opportunities for Oversight and Improved Use of Taxpayer Funds: 

Examples from Selected GAO Work. GAO-03-1006. Washington, D.C.: 

August 1, 2003. 

Best Practices: Improved Knowledge of DOD Service Contracts Could 

Reveal Significant Savings. GAO-03-661. Washington, D.C.: June 9, 2003. 

Best Practices: Taking a Strategic Approach Could Improve DOD’s 

Acquisition of Services. GAO-02-230. Washington, D.C.: January 18, 2002. 

For additional information about this area, contact John Needham at Area Contact (202) 512-4841 or needhamjk1@gao.gov. 

Page 218 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adherence to New Guidance on Award Fee 

Contracts Could Improve Agencies’ Use of 

Award Fees and Produce Savings 

Adherence to New Guidance on Award Fee Contracts 

Could Improve Agencies’ Use of Award Fees and 

Produce Savings 

Why GAO Is Focusing 

on This Area 

GAO has reported that several major agencies spent over $300 billion from 

fiscal year 2004 through fiscal year 2008 on contracts that included 

monetary incentives known as award fees. The purpose of these incentives 

is to motivate enhanced contractor performance. In 2005, however, GAO 

found that the Department of Defense (DOD) paid billions of dollars in 

award fees regardless of acquisition outcomes. In 2007, GAO found 

significant disconnects between program results and fees paid at the 

National Aeronautics and Space Administration. In 2009, GAO reported 

that five agencies had paid more than $6 billion in award fees, but were 

not consistently following award fee guidance and did not have methods 

for evaluating the effectiveness of an award fee as a tool for improving 

contractor performance. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

GAO has identified three primary issues related to the use of award fees 

that, if addressed, could improve the use of these incentives and produce 

savings. Specifically, (1) award fees are not always linked to acquisition 

outcomes, (2) award fee payments are made despite unsatisfactory 

contract performance, and (3) contractors have been permitted to earn 

previously unearned award fees in subsequent evaluation periods, a 

practice known as “rollover,” where unearned award fees are transferred 

from one evaluation period to a subsequent period, thus allowing 

contractors additional opportunities to earn previously unearned fees. 

GAO has made recommendations to address these issues, several of which 

have been reflected in revised Office of Management and Budget (OMB) 

guidance and in amendments to the Federal Acquisition Regulation, 

effective October 2010. The key to improving the use of these fees, 

however, will be whether agencies change their practices to conform to 

the revised policies. 

Although required by OMB guidance since 2007, GAO reported in 2009 that 

award fees were not always linked to acquisition outcomes. But when 

efforts are made to do so, savings can be achieved. For example, the Joint 

Strike Fighter program created metrics for areas such as software 

performance, warfighter capability, and cost control that were previously 

assessed using less-defined criteria. By using metrics to assess 

performance, the Joint Strike Fighter program paid an estimated $29 

million less in fees in the 2 years since the policy changed than it might 

have when applying the former criteria. 

As GAO previously reported, OMB guidance directed agencies to ensure 

that no award fee should be paid for performance that does not meet 

contract requirements or is judged to be unsatisfactory. GAO found in 

practice the guidance was not always followed. Specifically, GAO reported 

Page 219 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adherence to New Guidance on Award Fee 

Contracts Could Improve Agencies’ Use of 

Award Fees and Produce Savings 

in 2009 that programs across the agencies reviewed used evaluation tools 

that could allow contractors to earn award fees without performing at a 

level that is acceptable to the government under the terms of the contract. 

For example, a Department of Energy research contract allowed the 

contractor to earn up to 84 percent of the award fee for performance that 

was defined as not meeting expectations. In addition, GAO found two 

Department of Health and Human Services contracts, including a contract 

for Medicare claims processing, in which it was possible for the contractor 

to receive at least 49 percent of the award fee for unsatisfactory 

performance. Some programs within DOD, by contrast, have prohibited 

award fee payments for unsatisfactory performance. For example, GAO 

found that the Air Force saved $10 million on a contract for a satellite 

program by not paying an award fee to a contractor with unsatisfactory 

performance. 

DOD guidance on award fees since 2006 has been that the practice of 

rollover should be limited to exceptional circumstances to avoid 

compromising the integrity of the award fee process. GAO found that 

based on contracts reviewed in 2005, DOD rolled over an average of 51 

percent of the total unearned fees. For example, the contractor for the F22 Raptor received over 90 percent of the award fee, including fee paid in 

subsequent evaluation periods, even though the program’s cost and 

schedule targets had to be revised 14 times. By later limiting rollover, GAO 

estimated in 2009 that DOD would save over $450 million on 8 programs 

from April 2006 through October 2010. A DOD Inspector General report in 

2010, however, indicates that rollover is still being used. The recent 

amendments to the Federal Acquisition Regulation now prohibit rollover 

of unearned award fees. 

Actions Needed and 

Potential Savings 

Recent changes to the Federal Acquisition Regulation and practices on 

award fees are encouraging: 

•	 Amendments to the Federal Acquisition Regulation in 2010 have 

prohibited the practices of rollover of unearned award fees and 

awarding fees to contractors that have performed unsatisfactorily. 

Some agencies are updating and disseminating guidance that could 

increase the pace and success rate of implementing these new 

regulations. 

•	 Further, agencies such as DOD are increasing the likelihood that award 

fees would be better linked to acquisition outcomes by implementing 

key practices. For example, DOD is implementing a peer review 

Page 220 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adherence to New Guidance on Award Fee 

Contracts Could Improve Agencies’ Use of 

Award Fees and Produce Savings 

process for contracts over a certain dollar threshold that includes 

examining the plan for administering award fees. 

•	 However, sustained progress in the use of award fees will require that 

contracting agencies adhere to the recent changes to the Federal 

Acquisition Regulation. Enhanced oversight by OMB and Congress may 

be useful as well. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Related GAO 

Products 

Defense Acquisitions: Status of DOD's Implementation of Independent 

Management Reviews for Services Acquisitions. GAO-10-284. 

Washington, D.C.: January 28, 2010. 

Federal Contracting: Application of OMB Guidance Can Improve Use of 

Award Fee Contracts. GAO-09-839T. Washington, D.C.: August 3, 2009. 

Federal Contracting: Guidance on Award Fees Has Led to Better 

Practices but Is Not Consistently Applied. GAO-09-630. Washington, D.C.: 

May 29, 2009. 

Defense Contract Management: DOD’s Lack of Adherence to Key 

Contracting Principles on Iraqi Oil Contract Put Government Interests 

at Risk. GAO-07-839. Washington, D.C.: July 31, 2007. 

NASA Procurement: Use of Award Fees for Achieving Program Outcomes 

Should Be Improved. GAO-07-58. Washington, D.C.: January 17, 2007. 

Defense Acquisitions: DOD Wastes Billions of Dollars through Poorly 

Structured Incentives. GAO-06-409T. Washington, D.C.: April 5, 2006. 

Defense Acquisitions: DOD Has Paid Billions in Award and Incentive 

Fees Regardless of Acquisition Outcomes. GAO-06-66. Washington, D.C.: 

December 19, 2005. 

For additional information about this area, contact John Hutton at Area Contact (202) 512-4841 or huttonj@gao.gov. 

Page 221 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Agencies Could Realize Cost Savings by 

Disposal of Unneeded Federal Real Property 

 

Agencies Could Realize Cost Savings by Disposal of 

Unneeded Federal Real Property 

Why GAO Is Focusing 

on This Area 

The federal real property portfolio is vast and diverse. In fiscal year 2009, 

the federal inventory included over 3 billion square feet of building space 

and over 900,000 assets. The Departments of Defense and Veterans Affairs, 

the U.S. Postal Service, and General Services Administration (GSA) hold 

the majority of federally owned and leased space. 

The Office of Management and Budget (OMB) is responsible for reviewing 

agencies’ progress on federal real property management and chairs the 

Federal Real Property Council, which includes representatives from the 

major property-holding agencies. Congressional committees that provide 

oversight of this area include the Senate Environment and Public Works, 

Senate Homeland Security and Governmental Affairs, House 

Transportation and Infrastructure, House Oversight and Government 

Reform, and appropriations committees. 

GAO designated management of federal real property as a high-risk area in 

2003 due to problems with excess and underutilized property, among other 

things. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Many federal agencies hold real property they do not need, including 

property that is excess or underutilized.1

 Disposing of these properties 

presents potential governmentwide cost savings by generating sales 

proceeds, reducing maintenance and operating costs, and avoiding rent 

costs by ending leases. According to data from the Federal Real Property 

Profile, a central database, in fiscal year 2009, agencies reported 45,190 

underutilized buildings, an increase of 1,830 such buildings from the 

previous fiscal year. These figures are conservative, as they do not include 

the U.S. Postal Service, a major property holder that does not report to the 

Federal Real Property Profile. Excess and underutilized properties present 

significant potential risks to federal agencies because they are costly to 

maintain. For example, in fiscal year 2009, agencies reported underutilized 

buildings accounted for $1.66 billion in annual operating costs. Excess 

properties also represent a lost opportunity to generate sales revenue for 

the federal government. Many assets are no longer effectively aligned with, 

or responsive to, agencies’ changing missions. In April 2007 GAO reported 

1

“Excess property” has been determined by the controlling federal agency as not required 

to meet the agency’s needs. “Not utilized property” is property not occupied for the 

agency’s current purposes. “Underutilized property” is property that is used only at 

irregular periods or is used for purposes that can be satisfied with only a portion of the 

property. 

Page 222 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Agencies Could Realize Cost Savings by 

Disposal of Unneeded Federal Real Property 

that technological advances have changed the way the public interacts 

with the federal government, and this change will have significant 

implications for the type and location of property needed in the 21st 

century. 

In 2004, Executive Order 13327 established the Federal Real Property 

Council and required senior real property officers to, among other things, 

develop and implement an agency asset management plan, identify and 

categorize all real property owned and leased by their agency, and 

prioritize actions needed to improve the operational and financial 

management of the agency’s real property inventory.2

 According to OMB 

officials, a governmentwide initiative started under the executive order 

focused on disposing of unneeded assets. In a June 2010 Presidential 

Memorandum to federal agencies, the administration established a new 

target of saving $3 billion through disposals and other methods by the end 

of fiscal year 2012. However, federal agencies continue to face obstacles to 

disposing of unneeded property, such as competing stakeholder interests. 

For example, the U.S. Postal Service has faced resistance to facility 

closures and consolidations because of concerns of how these actions 

might affect jobs, service, and communities as GAO reported in April 2010. 

Legal and budgetary limitations also have implications for real property 

decisions. For example, as GAO reported in April 2007, federal agencies 

are required by law to assess and pay for any environmental cleanup that 

may be needed before disposing of a property—a process that may require 

years of study and result in significant costs, and in some cases, may 

exceed the costs of continuing to maintain the excess property in a shutdown status. If the government does not address the issue of excess and 

underutilized property, the costs to maintain these properties will 

continue to rise, putting the government at risk for lost dollars and missed 

opportunities. 

Actions Needed and 

Potential Savings 

The recent Presidential Memorandum’s targeted $3 billion in savings 

related to property disposals and other methods represents another step in 

realigning the federal portfolio to agencies’ missions and needs. However, 

OMB could assist agencies in meeting this target by implementing GAO’s 

April 2007 recommendation of developing an action plan to address key 

problems associated with disposing of unneeded real property, including 

2

Executive Order 13327 applies to 24 executive branch departments and agencies but not to 

the U.S. Postal Service, which is an independent establishment in the executive branch. 

Page 223 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Agencies Could Realize Cost Savings by 

Disposal of Unneeded Federal Real Property 

reducing the effect of competing stakeholder interests on real property 

decisions. OMB agreed with the recommendation but has yet to fully 

implement it. 

The cost savings for real property disposals are not limited to a one-time 

savings or income. Once a lease is ended, the government continues to 

save the rent payments from that property indefinitely. As GAO reported in 

June 2010, operations and maintenance costs typically represent from 60 

percent to 85 percent of the costs of a facility over its lifetime, while 

design and construction costs represent about 5 percent to 10 percent of 

these costs. Thus, once the government disposes of an owned property, it 

avoids costs related to operations and maintenance that would have 

otherwise continue to accrue, eventually representing approximately 10 

times the design and construction costs of the property. 

Framework for 

Analysis 

The information contained in this analysis is based on the related GAO 

products listed below. In addition, to update existing information on this 

topic, GAO staff interviewed federal government officials from OMB and 

real property-holding agencies (Departments of Defense, Homeland 

Security, Energy, the Interior, State, and Veterans Affairs; U.S. Postal 

Service; and GSA), and analyzed governmentwide and agency-level real 

property plans and reports. 

Related GAO 

Products 

Federal Real Property: The Government Faces Challenges to Disposing of 

Unneeded Buildings. GAO-11-370T. Washington, D.C.: February 10, 2011. 

Federal Courthouse Construction: Better Planning, Oversight, and 

Courtroom Sharing Needed to Address Future Costs. GAO-10-417. 

Washington, D.C.: June 21, 2010. 

U.S. Postal Service: Strategies and Options to Facilitate Progress toward 

Financial Viability. GAO-10-455. Washington, D.C.: April 12, 2010. 

VA Real Property: VA Emphasizes Enhanced-Use Leases to Manage Its 

Real Property Portfolio. GAO-09-776T. Washington, D.C.: June 10, 2009. 

Federal Real Property: Authorities and Actions Regarding Enhanced Use 

Leases and Sale of Unneeded Real Property. GAO-09-283R. Washington, 

D.C.: February 17, 2009. 

Page 224 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Agencies Could Realize Cost Savings by 

Disposal of Unneeded Federal Real Property 

U.S. Postal Service Facilities: Improvements in Data Would Strengthen 

Maintenance and Alignment of Access to Retail Services. GAO-08-41. 

Washington, D.C.: December 10, 2007. 

Federal Real Property: DHS Has Made Progress, but Additional Actions 

Are Needed to Address Real Property Management and Security 

Challenges. GAO-07-658. Washington, D.C.: June 22, 2007. 

U.S. Postal Service: Mail Processing Realignment Efforts Under Way 

Need Better Integration and Explanation. GAO-07-717. Washington, D.C.: 

June 21, 2007. 

Federal Real Property: Progress Made Toward Addressing Problems, but 

Underlying Obstacles Continue to Hamper Reform. GAO-07-349. 

Washington, D.C.: April 13, 2007. 

Federal Real Property: Most Public Benefit Conveyances Used as 

Intended, but Opportunities Exist to Enhance Federal Oversight. 

GAO-06-511. Washington, D.C.: June 21, 2006. 

Federal Real Property: Further Actions Needed to Address Long-standing 

and Complex Problems. GAO-05-848T. Washington, D.C.: June 22, 2005. 

Federal Real Property: Vacant and Underutilized Properties at GSA, VA, 

and USPS. GAO-03-747. Washington, D.C.: August 19, 2003. 

VA Health Care: Improved Planning Needed for Management of Excess 

Real Property. GAO-03-326. Washington, D.C.: January 29, 2003. 

For additional information about this area, contact David Wise at Area Contact (202) 512-5731 or wised@gao.gov. 

Page 225 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Cost Analyses Used for Making 

Federal Facility Ownership and Leasing 

Decisions Could Lead to Cost Savings 

Governmentwide 

Improved Cost Analyses Used for Making Federal 

Facility Ownership and Leasing Decisions Could Lead 

to Cost Savings Governmentwide 

Why GAO Is Focusing 

on This Area 

Federal building ownership is often more cost-effective than leasing to meet 

long-term space needs, and its increased use could save millions of dollars 

over the period used. Federal agencies rely extensively on leasing, and 

leased about 289 million square feet of buildings in 2008. The General 

Services Administration (GSA), the central leasing agent for most agencies, 

leases more than 8,000 assets and now leases more space than it owns. 

The Office of Management and Budget (OMB) is responsible for reviewing 

agencies’ progress on real property management and chairs the Federal 

Real Property Council, which includes representatives from major 

property-holding agencies. Congressional committees that provide 

oversight of this area include the Senate Committee on Environment and 

Public Works, Senate Homeland Security and Governmental Affairs, 

House Transportation and Infrastructure, House Oversight and 

Government Reform, and appropriations committees. 

GAO added managing federal real property to its high-risk list in 2003 due 

in part to costly leasing. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

GAO’s work over the years has repeatedly shown that building ownership 

often costs less than operating leases, especially for long-term space needs. 

•	 In December 1989, GAO found that GSA could have saved $12 billion 

over 30 years by constructing instead of leasing real property in 43 

projects. 

•	 In July 1995, GAO found that 55 of 73 GSA proposed operating leases 

cost $700 million more than construction over 30 years. 

•	 In January 2008, GAO found that decisions to lease selected federal 

properties were not always driven by cost-effectiveness considerations. 

Four of seven GSA leases GAO analyzed were more costly than 

construction by $83.3 million based on 30-year net present value 

calculations. For example, the decision to lease the Federal Bureau of 

Investigation’s field office in Chicago, Illinois, instead of constructing a 

building the government would own, was estimated to cost about $40 

million more over 30 years. GSA officials stated that limited availability 

of upfront capital and security considerations, among other reasons, 

prevented ownership at that time. 

While federal ownership is less expensive than leasing in many cases, in 

certain situations it is not. For example, in 2008, GAO found that for three 

Page 226 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Cost Analyses Used for Making 

Federal Facility Ownership and Leasing 

Decisions Could Lead to Cost Savings 

Governmentwide 

of seven GSA leases it analyzed, leasing was less costly than construction 

by $35 million over 30 years. Agency operational requirements such as 

immediate space needs, security requirements, or desire for flexibility as 

well as short-term or small space needs are also situations where leasing is 

often preferred by agencies and may be economically advantageous over 

ownership. 

Federal budget scorekeeping rules require the full cost of construction to 

be recorded upfront in the budget, whereas only the annual lease 

payments plus cancellation costs need to be recorded for operating leases. 

As a result, leases appear less expensive in any single year when compared 

to new construction even though they generally are more costly over time. 

GAO has raised the scorekeeping issue as a challenge that needs to be 

addressed in several reports and testimonies over the past 20 years. 

According to GSA officials, constraints on capital funding influence their 

ability to pursue ownership as a realistic option in many cases. If not 

addressed, GAO expects continued reliance on leasing at a potentially high 

cost over the long term. 

The Federal Real Property Profile, a real property inventory, is an 

important tool available to track governmentwide trends on real property 

management, including leasing. Updated annually, it includes information 

helpful to measuring overall volume as well as annual operating costs of 

leased versus owned properties, among other factors. 

Actions Needed and 

Potential Savings 

OMB has not yet implemented GAO’s recommendation, made in April 2007 

and January 2008, to develop a strategy to reduce agencies’ reliance on 

costly leasing where ownership would result in long-term savings. Such a 

strategy could identify the conditions under which leasing is an acceptable 

alternative, include an analysis of real property budget scoring issues, and 

provide an assessment of viable alternatives. This strategy would inform 

future decision making on this difficult issue. As GAO reported in January 

2008, implementation challenges such as obtaining consensus on specific 

changes to scoring rules are expected. Efforts to resolve the leasing 

challenge could benefit from input from Federal Real Property Council 

and stakeholders, including Congress. 

The information contained in this analysis is based on the related GAO Framework for products listed below, interviews with federal government officials at 

Analysis OMB and major property holding agencies including GSA, and analysis of 

governmentwide and agency-level real property plans and reports. 

Page 227 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Cost Analyses Used for Making 

Federal Facility Ownership and Leasing 

Decisions Could Lead to Cost Savings 

Governmentwide 

Related GAO 

Products 

Building Security: New Federal Standards Hold Promise, But Could Be 

Strengthened to Better Protect Leased Space. GAO-10-873. Washington, 

D.C.: September 22, 2010. 

Federal Real Property: An Update on High Risk Issues. GAO-09-801T. 

Washington, D.C.: July 15, 2009. 

Government Printing Office: Issues Faced in Obtaining a New Facility. 

GAO-09-392R. Washington, D.C.: February 20, 2009. 

Federal Real Property: Strategy Needed to Address Agencies’ Longstanding Reliance on Costly Leasing. GAO-08-197. Washington, D.C.: 

January 24, 2008. 

General Services Administration: Improvements Needed in Managing 

Delegated Authority of Real Property Activities. GAO-07-1000. 

Washington, D.C.: September 5, 2007. 

Federal Real Property: Progress Made Toward Addressing Problems, but 

Underlying Obstacles Continue to Hamper Reform. GAO-07-349. 

Washington, D.C.: April 13, 2007. 

GSA Leasing: Initial Implementation of the National Broker Services 

Contracts Demonstrates Need for Improvements. GAO-07-17. Washington, 

D.C.: January 31, 2007. 

Federal Real Property: NIH Has Improved Its Leasing Process, but Needs 

to Provide Congress with Information on Some Leases. GAO-06-918. 

Washington, D.C.: September 8, 2006. 

Federal Real Property: Further Actions Needed to Address Long-standing 

and Complex Problems. GAO-05-848T. Washington, D.C.: June 22, 2005. 

General Services Administration: Factors Affecting the Construction 

and Operating Costs of Federal Buildings. GAO-03-609T. Washington, 

D.C.: April 2, 2003. 

General Services Administration: Opportunities for Cost Savings in the 

Public Buildings Area. GAO/T-GGD-95-149. Washington, D.C.: July 13, 

1995. 

Public Buildings: Budget Scorekeeping Prompts Difficult Decisions. 

GAO/T-AIMD/GGD-94-43. Washington, D.C.: October 28, 1993. 

Page 228 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improved Cost Analyses Used for Making
 

Federal Facility Ownership and Leasing 


Decisions Could Lead to Cost Savings
 

Governmentwide 


Federal Office Space: Increased Ownership Would Result in Significant 

Savings. GAO/GGD-90-11. Washington, D.C.: December 22, 1989. 

For additional information about this area, contact David Wise at Area Contact (202) 512-2834 or wised@gao.gov. 

Page 229 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
OMB’s IT Dashboard Can Further Help 

Identify Opportunities to Invest More 

Efficiently in Information Technology 

OMB’s IT Dashboard Can Further Help Identify 

Opportunities to Invest More Efficiently in Information 

Technology 

Why GAO Is Focusing 

on This Area 

Each year the federal government spends billions of dollars on 

information technology (IT) investments; federal spending on IT has risen 

to an estimated $79 billion for fiscal year 2011. Over the past several years, 

GAO has reported and testified on the Office of Management and Budget’s 

(OMB) initiatives to highlight troubled IT projects, justify investments, and 

use project management tools. Given the importance of transparency, 

oversight, and management of the government’s IT investments, in June 

2009 OMB established a public Web site, referred to as the IT Dashboard, 

that provides detailed information on about 800 investments at 27 federal 

agencies, including ratings of their performance against cost and schedule 

targets. The public dissemination of this information is intended to allow 

OMB; other oversight bodies, including Congress; and the general public to 

hold agencies accountable for results and performance. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

In July 2010, GAO reported that OMB’s Dashboard had increased 

transparency and oversight, but that improvements were needed for the 

Dashboard to more fully realize its potential as a management and costsavings tool. Specifically, the cost and schedule ratings on the Dashboard 

were not always accurate for the investments that GAO reviewed. GAO 

found that four of the eight selected investments had notable 

discrepancies in either cost or schedule ratings. For example, the 

Dashboard indicated that one investment had a less-than-5-percent cost 

variance for every month from July 2009 through January 2010. However, 

GAO’s analysis showed that this investment had a cost performance 

variance from 10 percent to less than 15 percent in December 2009 

through January 2010. In another case, an investment on the Dashboard 

reported that it has been less than 30 days behind schedule since July 

2009. Investment data that GAO examined, however, showed that the 

investment was behind schedule by 30 days to almost 90 days from 

September to December 2009. 

A primary reason for the data inaccuracies was that while the Dashboard 

was intended to represent near real-time performance information, the 

cost and schedule ratings did not take into consideration current 

performance. As a result, the ratings were based on outdated information. 

For example, cost ratings for each of the investments were based on data 

from 2 months to almost 2 years old. Another issue with the ratings 

stemmed from the wide variation in the number of milestones agencies 

reported, which was partly because OMB’s guidance was too general. 

Having too many milestones can mask performance problems because the 

performance of each milestone (dated and recent) was equally averaged 

into the ratings. This means that investments that performed well during 

Page 230 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
OMB’s IT Dashboard Can Further Help 

Identify Opportunities to Invest More 

Efficiently in Information Technology 

previously completed milestones can maintain ratings that reflect good 

performance, even if they begin to perform poorly. Conversely, having too 

few milestones limits the amount of information available to rate 

performance, allowing agencies to potentially distort their ratings. 

GAO also assessed whether the data on the Dashboard were being used as 

a tool to improve the management of IT investments. Officials at three of 

the five agencies in GAO’s review stated they were not using the 

Dashboard to manage their investments because they already had existing 

means to do so; officials at the other two agencies indicated they were 

using the Dashboard to supplement their existing management processes. 

The Federal Chief Information Officer stated that the Dashboard greatly 

improved oversight capabilities compared to previously used mechanisms 

and that it has increased the accountability of agencies’ chief information 

officers and established much-needed visibility. OMB officials indicated 

they had relied on the Dashboard as a management tool, including using 

investment trend data to identify and address performance issues and to 

select investments for a TechStat session—a review of selected IT 

investments between OMB and agency leadership that is led by the 

Federal Chief Information Officer. According to OMB, as of December 

2010, 58 TechStat sessions have been held with federal agencies. 

Additionally, OMB officials stated that, as a result of these sessions, 11 

investments have been reduced in scope and 4 have been cancelled. For 

example, TechStats on 

•	 the Department of Housing and Urban Development’s Transformation 

Initiative investment resulted in the reduction of projects from 29 to 7 

and the limit of fiscal year 2010 funds for these 7 priority projects to 

$85.7 million (from $138 million); and 

•	 the National Archives and Records Administration’s Electronic 

Records Archives investment resulted in six corrective action steps, 

including halting fiscal year 2012 development funding pending the 

completion of a strategic plan. 

To better ensure that the Dashboard provides meaningful ratings and 

accurate investment data, GAO recommended that OMB report on the 

effect of planned changes to the Dashboard to improve the accuracy of 

ratings and to provide guidance to agencies to standardize milestone 

reporting. OMB agreed with these recommendations and initiated work to 

update the Dashboard to factor the performance of ongoing milestones 

into cost and schedule ratings. 

Page 231 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
OMB’s IT Dashboard Can Further Help
 

Identify Opportunities to Invest More 


Efficiently in Information Technology
 

Finally, GAO has work under way to evaluate the data provided by the 

Dashboard in order to determine the extent to which agencies may be 

investing in projects in the same line of business. GAO is also reviewing 

OMB’s current approach to identifying and acting on such duplicative 

investments. 

Actions Needed and 

Potential Savings 

According to the Federal Chief Information Officer, use of the Dashboard 

as a management and oversight tool has already resulted in a $3 billion 

budget reduction. OMB’s planned improvements to the Dashboard, along 

with full implementation of GAO’s recommendations (as discussed above) 

and the possible identification of duplicative investments, have the 

potential to result in further significant savings. Additional opportunities 

for potential cost savings exist with the use of the Dashboard by executive 

branch agencies to identify and make decisions about poorly performing 

investments, as well as its continued use by congressional committees to 

support critical oversight efforts. 

The information above is based on ongoing work on the Dashboard and Framework for related GAO products listed below.

Analysis 

Related GAO 

Products 

Information Technology: OMB’s Dashboard Has Increased Transparency 

and Oversight, but Improvements Needed. GAO-10-701. Washington, D.C.: 

July 16, 2010. 

Information Technology: Management and Oversight of Projects 

Totaling Billions of Dollars Need Attention. GAO-09-624T. Washington, 

D.C.: April 28, 2009. 

Information Technology: OMB and Agencies Need to Improve Planning, 

Management, and Oversight of Projects Totaling Billions of Dollars. 

GAO-08-1051T. Washington, D.C.: July 31, 2008. 

Information Technology: Further Improvements Needed to Identify and 

Oversee Poorly Planned and Performing Projects. GAO-07-1211T. 

Washington, D.C.: September 20, 2007. 

Information Technology: Improvements Needed to More Accurately 

Identify and Better Oversee Risky Projects Totaling Billions of Dollars. 

GAO-06-1099T. Washington, D.C.: September 7, 2006. 

Page 232 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
OMB’s IT Dashboard Can Further Help
 

Identify Opportunities to Invest More 


Efficiently in Information Technology
 

Information Technology: Agencies and OMB Should Strengthen 

Processes for Identifying and Overseeing High Risk Projects. 

GAO-06-647. Washington, D.C.: June 15, 2006. 

Information Technology: OMB Can Make More Effective Use of Its 

Investment Reviews. GAO-05-276. Washington, D.C.: April 15, 2005. 

For additional information about this area, contact David A. Powner at Area Contact (202) 512-9286 or pownerd@gao.gov. 

Page 233 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Increasing Electronic Filing of Individual 

Income Tax Returns Could Reduce IRS’s 

Processing Costs and Ultimately Increase 

Enforcement Revenue 

Increasing Electronic Filing of Individual Income Tax 

Returns Could Reduce IRS’s Processing Costs and 

Ultimately Increase Enforcement Revenue 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Service (IRS) received more than 130 million 

individual income tax returns during the 2010 filing season. The 

percentage of returns filed electronically has increased from 52 percent in 

2005 to 71 percent in 2010. However, in 2010, IRS still processed 40 million 

tax returns filed on paper—some of which must be filed on paper due to 

their complexity or required supplemental documentation. Electronic 

filing benefits taxpayers by reducing processing errors and expediting 

their refunds. It also benefits IRS because no transcription of tax data is 

necessary, unlike for returns filed on paper. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Increasing electronic filing would reduce IRS’s return processing costs and 

increase revenue by facilitating enforcement. As noted in GAO’s December 

2010 report, IRS estimated savings of $3.10 per return for returns filed 

electronically versus paper in fiscal year 2009. Millions of dollars in 

processing costs could therefore be avoided by encouraging electronic 

filing. Based on GAO’s prior reports from 2007 to 2010, IRS has three 

opportunities to increase electronic filing of individual income tax returns: 

Require tax software identification numbers: As noted in GAO’s 

February 2009 report, having a more complete software identification 

number would allow IRS to better target its research of ways to promote 

electronic filing. IRS now requires software identification numbers for 

returns prepared using software and then printed and submitted on paper, 

but does not have plans to transcribe this information. More 

comprehensive information about tax software versions used to prepare 

both electronically-filed and paper returns would help inform research 

into how the pricing and attributes of different software products affect 

taxpayers’ willingness to use software and file electronically. 

Prevent rejects of electronically filed returns: As noted in GAO’s 

September 2009 report, IRS could also increase electronic filing by 

working with taxpayers and their representatives to reduce the number of 

rejected returns. As tax returns are received electronically, IRS begins a 

series of automated checks to verify basic information (such as Social 

Security numbers) and then rejects returns containing errors. If a return is 

rejected, IRS sends an electronic notice with one or more error codes 

explaining why the return was rejected, and how the error can be 

corrected and the return resubmitted. However, some codes are very 

general and cover multiple issues, while others are so narrow that they are 

rarely used. Frustrated taxpayers may simply print and mail their returns 

to IRS without making corrections leaving IRS to identify and correct the 

Page 234 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Increasing Electronic Filing of Individual 

Income Tax Returns Could Reduce IRS’s 

Processing Costs and Ultimately Increase 

Enforcement Revenue 

errors and process the paper returns, thereby losing the benefits of 

electronic filing. 

Require bar coding: As noted in GAO’s November 2007 report, IRS could 

require that tax software vendors encode relevant information in a bar 

code that would be embedded on all paper returns printed from tax 

software and mailed, as several states already do. IRS could then scan the 

bar code to obtain electronic information such as a taxpayer’s Social 

Security number and address from the return. While not as beneficial as 

electronic filing, bar coding would still provide efficiencies over data 

transcription and enable more information to be available electronically. 

In December 2010, IRS reported that it is reviewing options to enhance 

current systems with bar code capabilities and developing detailed 

requirements and timetables. 

In keeping with efforts to increase the availability of electronic tax data for 

enforcement purposes, IRS could also increase the amount of tax data 

available electronically by increasing the amount of data from paper tax 

returns it transcribes into its computer databases. Currently, to control 

data-entry costs, IRS does not transcribe all data from paper tax returns 

into its computer databases, thus limiting information available 

electronically for enforcement purposes. As noted in GAO’s November 

2007 report, transcribing more or all return information, thus having it 

available electronically, could help IRS target audits on noncompliant 

taxpayers, avoid burdening compliant taxpayers with unnecessary audits, 

and make more productive use of IRS’s audit resources. For example, in 

2007 officials from one of IRS’s enforcement programs (Automated 

Underreporter) estimated that having all tax return information available 

electronically would increase tax revenue annually by $175 million. 

Actions Needed and 

Potential Revenue 

IRS generally agreed with GAO’s prior recommendation to require a more 

complete software identification number, and said that it would do so by 

the 2010 filing season. IRS has taken some actions such as requiring a 

software identification number on printed returns but does not plan to 

transcribe this information. GAO continues to believe that if IRS were to 

collect more information via expanded software identification numbers on 

tax returns, such information could support research into how software 

affects electronic filing. GAO recognizes that there would be some 

offsetting costs. However, increasing electronic filing could lower total tax 

return processing costs by switching costly paper filing to more 

economical electronic filing. 

Page 235 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Increasing Electronic Filing of Individual
 

Income Tax Returns Could Reduce IRS’s 


Processing Costs and Ultimately Increase
 

Enforcement Revenue 


IRS agreed with GAO’s prior recommendations to develop a reject 

prevention strategy, include external stakeholders in its reject working 

group, develop an action plan for that group, and provide clearer 

descriptions of why returns are being rejected. IRS has taken significant 

action to address these recommendations in conjunction with its ongoing 

research into advancing electronic filing. 

IRS agreed with GAO’s prior recommendations that it should determine 

actions needed to require software vendors to include bar codes on 

printed individual income tax returns and the cost of those actions. While 

bar coded paper returns are still more expensive to process than 

electronically filed returns, states that require bar coding of returns report 

that greater electronic access to return data has allowed them to more 

easily verify information and improve enforcement. GAO continues to 

believe that bar coding of printed returns has the potential to reduce 

processing costs, facilitate access to taxpayer information, and improve 

compliance. IRS has conducted further research on the burden to IRS and 

software providers of requiring bar codes on printed returns as part of its 

ongoing studies to promote electronic filing. 

Finally, IRS agreed with GAO’s prior recommendation that more 

comprehensive and easily accessible electronic return information would 

facilitate enforcement efforts and thus increase revenue collected from 

noncompliant taxpayers, and IRS is taking steps to study the issue. For 

example, IRS recently identified options to increase electronic filing, but 

has yet to define an overall strategy for doing so. As noted above, having 

more tax return information available electronically could increase 

revenues by at least hundreds of millions of dollars. 

GAO expects to continue assessing IRS’s progress in addressing these 

issues. 

The information contained in this analysis is based on the related GAO Framework for products listed below and GAO’s work following up on the 

Analysis recommendations from those products. 

2010 Tax Filing Season: IRS’s Performance Improved in Some Key Related GAO Areas, but Efficiency Gains Are Possible in Others. GAO-11-111. 

Products Washington, D.C.: December 16, 2010. 

Page 236 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Increasing Electronic Filing of Individual
 

Income Tax Returns Could Reduce IRS’s 


Processing Costs and Ultimately Increase
 

Enforcement Revenue 


Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer 

Service and Enforcement for the 2010 Filing Season. GAO-09-1026. 

Washington, D.C.: September 23, 2009. 

Tax Administration: Many Taxpayers Rely on Tax Software and IRS 

Needs to Assess Associated Risks. GAO-09-297. Washington, D.C.: 

February 25, 2009. 

Tax Administration: 2007 Filing Season Continues Trend of 

Improvement, but Opportunities to Reduce Costs and Increase Tax 

Compliance Should be Evaluated. GAO-08-38. Washington, D.C.: 

November 15, 2007. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 237 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Using Return on Investment Information to 

Better Focus IRS Enforcement Could Increase 

Tax Compliance and Revenues 

Using Return on Investment Information to Better 

Focus IRS Enforcement Could Increase Tax 

Compliance and Revenues 

Why GAO Is Focusing 

on This Area 

Taxpayers paid more than $2.3 trillion in federal taxes in fiscal year 2009. 

However, the Internal Revenue Service (IRS) estimates that taxpayers 

failed to pay an additional $290 billion (based on a 2001 estimate—the 

most recent available). Experts believe the current tax gap, or the 

difference between the amount of taxes owed and the amount paid 

voluntarily and timely, may be larger. IRS seeks to allocate its 

approximately $12 billion budget over several service and enforcement 

programs to maximize taxpayer compliance. IRS taxpayer services range 

from telephone, Web site, and in-person assistance to collaboration with 

paid tax preparers and tax software companies. Enforcement includes 

audits, a variety of computerized checks, as well as efforts targeting 

specific industries or types of taxpayers, such as those with offshore bank 

accounts. However, IRS has little information about either the relative 

effectiveness or costs of its service and enforcement programs. IRS has 

begun to estimate return on investment (ROI), which compares revenues 

collected as a result of such enforcement actions with the cost of 

collecting them, but use of ROI has been limited. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Increasing IRS’s use of ROI and similar information, including developing 

actual ROI information after an enforcement program is implemented and 

comparing it to IRS’s initial revenue projections, would provide a powerful 

tool for Congress and other budget decision makers, by identifying both 

cost savings within IRS and opportunities to cost-effectively reallocate 

resources to improve compliance and thereby bring in additional revenue 

for the federal government. 

Beginning in fiscal year 2008, IRS has provided ROI information about the 

projected costs and potential revenues of new enforcement initiatives in 

its budget justification. For example, in its fiscal year 2011 justification, 

IRS reported that its proposed new initiatives would cost $237 million and 

increase revenue collected from noncompliant taxpayers by a projected $2 

billion. However, IRS provides projected ROI information for only its new 

enforcement initiatives—accounting for less than 2 percent of the IRS’s 

fiscal year 2011 budget request. Further, although guidance from the Office 

of Management and Budget (OMB), GAO, and the Government 

Performance and Results Act of 1993 suggest the use of ROI information, 

IRS does not provide projected ROI information for any of its existing 

enforcement or service programs that would continue to be funded under 

the budget request. IRS also does not estimate the ROI actually realized by 

its programs. 

Page 238 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Using Return on Investment Information to 

Better Focus IRS Enforcement Could Increase 

Tax Compliance and Revenues 

Citing GAO’s June 2009 ROI recommendation in its fiscal year 2011 

committee report, the Senate Committee on Appropriations directed IRS 

to provide detailed information about actual costs, revenues, and ROI for 

its new enforcement initiatives. IRS officials have been considering 

options to collect actual ROI data to compare with projections, however, 

actual ROI data have as yet to be produced. ROI information is challenging 

to develop and should be supplemented with information on compliance 

costs for taxpayers and others. Further, it is difficult to isolate the effects 

of a particular program on taxpayer compliance and IRS lacks some data 

needed to make complete ROI estimates. However, even limited ROI 

information could help identify programs that are not justifying their cost 

or opportunities to reallocate resources to programs that have larger tax 

compliance and revenue impact per dollar spent. 

Similarly, IRS’s fiscal year 2011 budget justification included 24 legislative 

proposals from the Department of the Treasury aimed at reducing the tax 

gap and generating nearly $26 billion in additional revenue over the next 

10 years. For example, two legislative proposals suggest increased 

information reporting requirements, which are estimated to result in more 

than $12 million in revenues, but there were no estimates of the upfront 

costs of these proposals, such as the cost of purchasing or modernizing 

information technology or training staff or increased costs to the private 

sector. OMB guidance suggest that agencies should provide estimates of 

the implementation costs associated with any proposed legislation in their 

budget justifications, but IRS has provided no such estimates for its 

proposals. As a result, it is difficult to determine whether the potential 

benefits of IRS’s legislative proposals are worth the costs, or how long it 

will take for the agency to recoup any initial investments. 

Actions Needed and 

Potential Revenue 

To help Congress and other budget decision makers better determine 

whether IRS’s resources could be reallocated to collect more revenue and 

identify possible cost savings, and building on earlier recommendations, 

GAO believes that IRS should continue to increase its use of ROI 

information. IRS recognizes that this will require additional research to 

identify the impacts of specific programs including the effect on voluntary 

compliance by taxpayers. Once actual ROI statistics are developed for 

programs, and supplemented with compliance cost information, IRS could 

then compare results across programs. Actual ROI information could also 

be compared to initial ROI projections for a program to determine whether 

the anticipated results were actually achieved. The potential for cost 

savings and increased revenue that could result from more use of ROI 

information is significant. For example, if more effective utilization of 

Page 239 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Using Return on Investment Information to 

Better Focus IRS Enforcement Could Increase 

Tax Compliance and Revenues 

IRS’s existing resources reduced the tax gap by 1 percent, the additional 

tax revenue would be about $3 billion. 

Also, as GAO has previously recommended, IRS should also coordinate 

with the Department of the Treasury to provide Congress with preliminary 

cost estimates or descriptions of resource needs for legislative proposals 

in future budget justifications. Even though many of the 24 legislative 

proposals IRS submitted to Congress in its fiscal year 2011 budget 

justification are conceptual—and therefore developing precise cost 

estimates for them may be difficult—providing approximate costs or other 

information such as whether the proposal would involve significant 

systems, staff, or training expenses could help Congress evaluate the 

proposals. Without such information, Congress is left at a disadvantage 

when weighing the costs and benefits of competing proposals aimed at 

increasing the amount of federal tax revenue collected. 

The information contained in this analysis is based on the related GAO Framework for products listed below and additional work following up on the 

Analysis recommendations from those products. 

Related GAO 

Products 

Internal Revenue Service: Assessment of Budget Justification for Fiscal 

Year 2011 Identified Opportunities to Enhance Transparency. 

GAO-10-687R. Washington, D.C.: May 26, 2010. 

Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer 

Service and Enforcement for the 2010 Filing Season. GAO-09-1026. 

Washington, D.C.: September 23, 2009. 

Internal Revenue Service: Review of the Fiscal Year 2010 Budget 

Request. GAO-09-754. Washington, D.C.: June 3, 2009. 

Internal Revenue Service: Fiscal Year 2009 Budget Request and Interim 

Performance Results of IRS’s 2008 Tax Filing Season. GAO-08-567. 

Washington, D.C.: March 13, 2008. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 240 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Management of IRS Debt Collection 

May Reduce Costs and Increase the Amount 

of Tax Revenue Collected from Individuals 

Better Management of IRS Debt Collection May Reduce 

Costs and Increase the Amount of Tax Revenue 

Collected from Individuals 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Service (IRS) has recognized that each year 

individuals do not pay billions of dollars of their acknowledged tax debts, 

which include tax assessments as well as related penalty and interest 

charges that build up over the years. It is important for the IRS to pursue 

collection of unpaid tax debt to help ensure compliance and confidence in 

the tax system as well as to provide needed revenue for government 

operations. 

IRS has a three-phase strategy for resolving billions of dollars of 

individuals’ unpaid tax debt. The first phase—referred to as the notice 

phase—involves mailing tax due notices to the taxpayers. The second and 

third phases—the telephone and in-person contact phases—are more 

labor intensive and expensive. 

Used well, notices can help IRS collect or otherwise resolve many tax 

debts at relatively low cost while generating significant revenue. IRS 

generally sends up to four notices to solicit payment before taking other 

collection steps. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

The notice phase of IRS’s three-phase tax collection approach is the least 

costly, and achieves billions in results annually but many billions more 

remain uncollected at the end of the phase. During fiscal year 2008, IRS 

sent approximately 22 million notices to individuals to try to collect 

around $129 billion in tax debts that had accumulated over the years. 

Through the use of notices, IRS obtained full or partial payments of close 

to $6 billion and moved about $41 billion of unpaid debts to the other, 

more costly collection phases during fiscal year 2008. 

Having clear program objectives linked with performance measures can 

help agencies identify risks to achieving a program’s purpose and, if 

possible, improve program performance. Given that IRS relies on 

individual taxpayers to respond to its notices, being clear about what IRS 

expects and what outcomes are being achieved is especially important in 

order to gain insights on how to maximize performance. 

However, whether the notice phase is achieving optimum results is 

unclear because of the lack of objectives and performance measures for 

gauging its effectiveness. IRS has not documented its objectives or 

developed related measures to indicate how well the notice phase is 

performing. Nor has IRS documented clear responsibility for reviewing 

this performance compared to targets. IRS also lacks information on the 

full costs of collection notices. 

Page 241 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Management of IRS Debt Collection 

May Reduce Costs and Increase the Amount 

of Tax Revenue Collected from Individuals 

To make the best use of collection resources, IRS has developed business 

rules to dictate actions to be taken on individual tax debts. Based on 

certain dollar thresholds and other characteristics of individual tax debt 

cases, the business rules can vary the number and types of notices sent to 

taxpayers and determine whether unresolved cases will be sent for further 

collection action or further action will be deferred. However, IRS has not 

documented the business rules that govern notices sent to individuals. For 

its major rules, IRS lacks basic information on the rationale when the rules 

were established, how the rules are to work, and whether the rules work 

as intended. 

Without such information, IRS does not know whether its business rules 

are working as originally designed or achieve IRS’s desired collection 

results at the least cost. With such controls over the notices sent to 

individuals that have federal tax debts, IRS would be better able to assure 

Congress and the taxpayers that it is using this collection phase to the 

greatest benefit. 

Actions Needed and 

Potential Revenue 

As GAO recommended in September 2009, IRS needs to establish 

objectives and performance measures for the notice phase of its collection 

process for individual taxpayers as well as management responsibility for 

reviewing the performance of the notice phase. In addition, IRS needs to 

better document the business rules and their rationales, and periodically 

evaluate how well they are working. 

IRS has started to implement all of these actions. IRS has made the most 

progress in assigning responsibility for reviewing performance and 

documenting rationales for the business rules for some of the frequently 

issued collection notices. However, IRS must ensure that those with the 

responsibility for reviewing performance of the collection notice phase 

use outcome-focused performance measures that are clearly linked to 

documented objectives. Further, as GAO previously recommended, IRS 

must ensure that the business rules are not only better documented but 

are also periodically evaluated on how well they are doing what they were 

intended to do. GAO expects to evaluate IRS’s progress in implementing 

all these actions. 

Better data and a more justifiable basis for sending notices or deciding to 

implement other enforcement actions will produce better decisions that 

avoid waste and possibly collect more tax debts sooner. Although data are 

not now readily available to estimate the revenue to be gained from taking 

these steps, improved performance in collecting more tax debts sooner 

Page 242 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Management of IRS Debt Collection 

May Reduce Costs and Increase the Amount 

of Tax Revenue Collected from Individuals 

could help reduce the tens of billions of dollars that are annually sent to 

the two more expensive tax debt collection phases; this amount was about 

$41 billion for fiscal year 2008. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Tax Debt Collection: IRS Needs to Better Manage the Collection Notices Related GAO Sent to Individuals. GAO-09-976. Washington, D.C.: September 30, 2009. 

Products 

Tax Debt Collection: IRS Has a Complex Process to Attempt to Collect 

Billions of Dollars in Unpaid Tax Debts. GAO-08-728. Washington, D.C.: 

June 13, 2008. 

For additional information about this area, contact Michael Brostek Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 243 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Broadening IRS’s Authority to Correct Simple 

Tax Return Errors Could Facilitate Correct 

Tax Payments and Help IRS Avoid Costly, 

Burdensome Audits 

Broadening IRS’s Authority to Correct Simple Tax 

Return Errors Could Facilitate Correct Tax Payments 

and Help IRS Avoid Costly, Burdensome Audits 

Why GAO Is Focusing 

on This Area 

In 2009, IRS sent out more than 12 million math error notices. Math error 

notices result from cases of mathematical or other simple tax return errors 

where Congress has granted the Internal Revenue Service (IRS) math 

error authority (MEA), or the ability to assess tax or take other actions to 

correct such errors in limited circumstances. For example, when a 

taxpayer claims a credit amount exceeding a statutory limit, IRS uses MEA 

to fix the error during return processing. 

For almost a century, Congress has been expanding IRS’s MEA on a caseby-case basis. However, because IRS can use MEA only in specifically 

authorized situations, it has been unable to timely use MEA in several 

notable instances where substantial numbers of taxpayers made similar 

easily correctable errors. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS’s use of recent additions to MEA have efficiently corrected hundreds 

of thousands of taxpayer errors and ensured proper payments of tax. For 

example, in September 2009, GAO suggested that Congress consider 

providing IRS with additional MEA to help IRS enforce compliance with 

the First-Time Homebuyer Credit (FTHBC). In November 2009, after 

learning about compliance problems with this tax credit that froze refunds 

and prompted civil and criminal investigations, Congress extended MEA to 

cover certain eligibility requirements for the FTHBC. As of July 2010, more 

than 3 million taxpayers have made more than $23 billion in FTHBC 

claims. Broader MEA has given IRS the ability to automatically verify 

those claims, correct errors where necessary, and deny approximately 

350,000 erroneous claims in 2010 alone, thus saving tax revenue and 

enabling IRS to use resources elsewhere. 

Similarly, in 2009, after finding more than $600 million of inappropriately 

claimed Hope credits for higher education (currently called the American 

Opportunity tax credit), both GAO and the Treasury Inspector General for 

Tax Administration suggested that Congress give IRS broader MEA. 

Specifically, GAO suggested that broader MEA be provided so IRS could 

use prior years’ tax return information to automatically verify taxpayers’ 

compliance with the limit on the number of years the Hope credit can be 

claimed. In the absence of this authority, IRS relies on audits to ensure 

compliance. However, audits may not be effective because they are laborintensive, costly, and often do not yield high revenues. Consequently, IRS 

does relatively few audits on the millions of credits claimed. 

When using MEA, IRS need not follow its standard deficiency procedures, 

which allow taxpayers an appeal and petition to the Tax Court. Instead, 

Page 244 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Broadening IRS’s Authority to Correct Simple 

Tax Return Errors Could Facilitate Correct 

Tax Payments and Help IRS Avoid Costly, 

Burdensome Audits 

IRS must only notify the taxpayer that it has identified the error and has 

made a change. While MEA helps IRS avoid costly audits, which are 

burdensome to taxpayers, the National Taxpayer Advocate and some in 

Congress are concerned that not following standard deficiency procedures 

might undermine taxpayer rights because IRS might use broad authority in 

situations where it does not know with a high degree of certainty that the 

taxpayer made an error. However, as discussed below, other steps could 

be taken to address this concern. 

Actions Needed and 

Potential Revenue 

To ensure the proper amount of taxes are paid and help IRS avoid costly, 

burdensome audits, Congress many want to consider granting IRS broader 

math error authority, with appropriate safeguards against misuse of that 

authority, to correct errors during tax return processing. With broader 

MEA granted by Congress, IRS could take the steps necessary to ensure 

proper payment of taxes in many situations. Although the amount of 

increased revenues would depend on the nature of future MEA use, 

revenue increases could be substantial based on past uses. Such authority 

could also reduce taxpayers’ burdens by giving IRS an alternative to more 

intrusive enforcement actions. Broader authority could take several forms. 

For instance, it could be granted for newly created or revised refundable 

credits. Refundable credits, which provide cash payments to taxpayers 

irrespective of the amount of their tax liabilities, are growing in popularity, 

and automatic authority could enable IRS to monitor low-dollar amounts 

on individual returns that would be too labor intensive and costly to audit. 

Or, authority could be granted for any situation where IRS could check for 

obvious noncompliance. Had such authority existed, IRS could have 

addressed FTHBC compliance issues more quickly. 

Controls may be needed to ensure MEA is properly used. For example, as 

GAO has previously reported, Congress could require IRS to submit a 

report on each proposed new use of MEA. The report could include how 

such use would meet Congress’s standards or criteria for MEA use. The 

report could also describe IRS’s or the National Taxpayer Advocate’s 

assessment of any potential effect on taxpayer rights. Or, Congress could 

require a more informal procedure whereby IRS simply notifies a 

committee, such as the Joint Committee on Taxation, of its proposed MEA 

use and submits a report after such use is under way. 

Authorizing the use of MEA on a broader basis could have several benefits 

for IRS and taxpayers. It could 

Page 245 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Broadening IRS’s Authority to Correct Simple 

Tax Return Errors Could Facilitate Correct 

Tax Payments and Help IRS Avoid Costly, 

Burdensome Audits 

•	 enable IRS to correct all or nearly all returns with types of 

noncompliance for which IRS identifies with virtual certainty the 

noncompliance and the needed correction, not just those it can address 

through other enforcement means; 

•	 be low cost and less intrusive and burdensome to taxpayers than 

audits; 

•	 ensure that taxpayers who are noncompliant on a particular issue are 

more often treated alike, that is, that a greater portion of them are 

brought into compliance, not just those that IRS could otherwise 

address; 

•	 provide a taxpayer service as it would generally allow noncompliant 

taxpayers to receive their refunds faster than if IRS had to address the 

error through some other compliance mechanism, have their returns 

corrected without penalty and before interest is accrued, and avoid 

time-consuming interaction with IRS under its other programs for 

resolving noncompliance; 

•	 help ensure taxpayers receive the tax benefits for which they are 

eligible by identifying taxpayers underclaiming a tax benefit; 

•	 free up IRS resources to pursue other forms of noncompliance; and 

•	 allow IRS to quickly address provisions arising from new and quickly 

moving initiatives, such as the American Recovery and Reinvestment 

Act of 2009, without waiting for new MEA to go through the legislative 

process. 

The information contained in this analysis is based on the related products Framework for listed below and additional work following up on the recommendations 

Analysis from those products. 

Tax Administration: Usage and Selected Analyses of the First-Time Related GAO Homebuyer Credit. GAO-10-1025R. Washington, D.C.: September 2, 2010. 

Products 

Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting 

and Enforcement Improvements Are Needed. GAO-10-349. Washington, 

D.C.: February 10, 2010. 

Page 246 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Broadening IRS’s Authority to Correct Simple 

Tax Return Errors Could Facilitate Correct 

Tax Payments and Help IRS Avoid Costly, 

Burdensome Audits 

2009 Tax Filing Season: IRS Met Many 2009 Goals, but Telephone Access 

Remained Low and Taxpayer Service and Enforcement Could Be 

Improved. GAO-10-225. Washington, D.C.: December 10, 2009. 

First-Time Homebuyer Tax Credit: Taxpayers’ Use of the Credit and 

Implementation and Compliance Challenges. GAO-10-166T. Washington, 

D.C.: October 22, 2009. 

Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer 

Service and Enforcement for the 2010 Filing Season. GAO-09-1026. 

Washington, D.C.: September 23, 2009. 

Tax Administration: IRS’s 2008 Filing Season Generally Successful 

Despite Challenges, although IRS Could Expand Enforcement during 

Returns Processing. GAO-09-146. Washington, D.C.: December 12, 2008. 

For additional information about this area, contact Michael Brostek or Area Contact James White at (202) 512-9110 or brostekm@gao.gov or whitej@gao.gov. 

Page 247 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Enhancing Mortgage Interest Information Enhancing Mortgage Interest Information Reporting Reporting Could Improve Tax Compliance 

Could Improve Tax Compliance 

Why GAO Is Focusing 

on This Area 

The Joint Committee on Taxation estimated that individual taxpayers’ 

deductions of home mortgage interest reduced federal revenue by about 

$80 billion in 2009. Also, in its most recently completed comprehensive 

study of individual taxpayer compliance for 2001, the Internal Revenue 

Service (IRS) found that 12 percent to 14 percent of individual taxpayers 

deducting mortgage interest misreported deducted amounts. About half of 

taxpayers underreported the deduction while about half overreported. 

Subject to various limitations, taxpayers may deduct interest on home 

mortgages or mortgage refinancings. Additionally, taxpayers with rental 

real estate are ordinarily allowed to deduct mortgage interest expenses for 

their rental properties from their rental income. 

Lending institutions and other third parties are required to report to 

taxpayers and IRS on a Form 1098 Mortgage Interest Statement the amount 

of mortgage interest taxpayers paid during the year, if more than $600. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS has the opportunity to collect additional information about taxpayers’ 

mortgages to help it determine whether taxpayers are deducting correct 

amounts of mortgage interest and identify the most productive cases to 

examine. Requiring expanded information on mortgage interest could also 

improve voluntary compliance, as taxpayers tend to more accurately report 

items that third parties report on information returns, such as Form 1098. 

Lending institutions are generally required to report on Form 1098 the 

amounts of mortgage interest taxpayers paid during the year, but the form 

does not include other items, such as (1) the address of the property 

secured by the mortgage to which the interest on the form relates, (2) 

outstanding mortgage debt balances on the property, and (3) an indicator 

of whether the mortgage interest is for a loan that was refinanced during 

the current year. 

Because a property address is not currently required on Form 1098, IRS 

cannot use an automated process to determine whether a taxpayer’s 

deducted mortgage interest corresponds to a residence that is eligible for 

the deduction. For example, IRS cannot automatically determine if 

addresses reported on Form 1098 match the addresses that taxpayers list 

on their tax returns. Also, IRS is less able to determine if the interest 

reported on Form 1098 is for a property used for rental or personal 

purposes. 

Page 248 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Enhancing Mortgage Interest Information
 

Reporting Could Improve Tax Compliance 


Because Form 1098 shows the dollar amount of interest a taxpayer paid in 

a year but not the mortgage balance, IRS’s computer-matching program 

comparing Form 1098 to tax returns cannot be used by itself to determine 

whether taxpayers claimed interest on mortgages in excess of the legal 

limitations. For example, taxpayers generally cannot deduct interest on 

mortgage debt exceeding $1.1 million. Also, because Form 1098 does not 

show whether interest paid is from a refinanced mortgage, IRS cannot 

readily tell whether taxpayers are complying with rules specific to 

refinancing, such as the rule to amortize certain types of prepaid interest, 

or points. 

Actions Needed and 

Potential Revenue 

To provide additional information that could further IRS efforts to identify 

taxpayers improperly deducting mortgage interest, GAO recommended in 

July 2009 that IRS revise Form 1098 to include information on the address 

of a property securing a mortgage, mortgage balances, and an indicator of 

whether the mortgage is for a current year refinancing. GAO also 

recommended, in August 2010, requiring mortgage-secured property 

addresses to be reported on other forms to help IRS detect taxpayers who 

fail to pay taxes on certain forgiven mortgage debt. With this additional 

information, IRS could check for noncompliance through its automated 

document-matching process, which is generally a less expensive 

enforcement action than conducting examinations. Additional information 

would also help IRS better select returns to examine. IRS agreed to study 

collecting additional information on Form 1098, stating it currently does 

not have enough data to support revisions. Because IRS has acknowledged 

it does not have information about taxpayers’ mortgage debts to easily 

detect noncompliance, GAO believes that the recommended revisions to 

Form 1098 would be cost-effective ways to provide IRS with additional 

useful information to help it detect noncompliance. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Tax Administration: Expanded Information Reporting Could Help IRS Related GAO Address Compliance Challenges with Forgiven Mortgage Debt. 

Products GAO-10-997. Washington, D.C.: August 31, 2010. 

Page 249 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Enhancing Mortgage Interest Information
 

Reporting Could Improve Tax Compliance 


Home Mortgage Interest Deduction: Despite Challenges Presented by 

Complex Tax Rules, IRS Could Enhance Enforcement and Guidance. 

GAO-09-769. Washington, D.C.: July 29, 2009. 

Tax Gap: Actions That Could Improve Rental Real Estate Reporting 

Compliance. GAO-08-956. Washington, D.C.: August 28, 2008. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 250 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Information on the Types and Uses of 

Canceled Debt Could Help IRS Limit Revenue More Information on the Types and Uses of Canceled Losses on Forgiven Mortgage Debt 

Debt Could Help IRS Limit Revenue Losses on Forgiven 

Mortgage Debt 

Why GAO Is Focusing 

on This Area 

The housing market downturn is resulting in billions of dollars of forgiven 

mortgage debt. In tax year 2008 (the most current data available), the 

Internal Revenue Service (IRS) estimates that individual taxpayers 

excluded $6.4 billion to $11.8 billion in forgiven mortgage debts on 

principal residences. While most forgiven debt is treated as a financial gain 

and included in taxable income, forgiven mortgage debt is, according to 

complex rules, sometimes excluded from taxable income. 

Through 2012, taxpayers may exclude forgiven mortgage debts from 

taxable income if the mortgage proceeds were used to buy, build, or 

substantially improve a principal residence. Forgiven mortgage amounts 

used for other purposes, including purchases of vacation or investment 

properties, would generally still be considered taxable income unless the 

taxpayer is bankrupt or insolvent. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Housing market data show the potential for significant revenue losses from 

failure to pay taxes on certain forgiven mortgage debt, but IRS is not 

collecting enough information to assess compliance. Complex rules 

governing forgiven mortgage debt may lead individual taxpayers to exclude 

such debt erroneously from taxable income. For example, only forgiven 

mortgage debts that were used to buy, build, or substantially improve a 

principal residence may be excluded from taxable income. However, in 

recent years many taxpayers cashed out equity from their primary 

residences and used the proceeds for personal consumption or to 

consolidate other debts—not to buy, build, or improve the home. In 

addition, taxpayers losing investment or vacation homes through 

foreclosure are still liable for taxes on forgiven mortgages secured by these 

properties. Vacation home and investment property purchases are estimated 

to be well over a quarter of all house purchases in recent years. Despite the 

financial hardship that leads to forgiven debt, recent housing market 

analyses suggest that thousands of taxpayers with forgiven mortgage debt 

not eligible for exclusion (debt forgiven on second homes or investment 

property) may be able to pay the taxes legally due on such debt. 

Current forms used to collect information from lenders and taxpayers on 

forgiven debts do not provide adequate information for IRS to assess 

compliance with the mortgage debt forgiveness provision. For example, 

neither lenders nor taxpayers are required to disclose the address of the 

secured property—potentially a key source of information for determining 

whether the property is the taxpayer’s principal residence. Also, taxpayers 

with multiple forgiven debts only need to indicate the types of forgiven 

debts and the total amount to be excluded from income, but not the 

Page 251 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Information on the Types and Uses of 

Canceled Debt Could Help IRS Limit Revenue 

Losses on Forgiven Mortgage Debt 

individual amounts of each forgiven debt. Without this information, it is 

difficult for the IRS to estimate the extent of noncompliance and 

determine whether additional resources for compliance are needed. 

Actions Needed and 

Potential Revenue 

GAO, in its August 2010 report cited the need to obtain better information 

to determine the revenue losses due to incorrectly excluded mortgage 

debts, and recommended that IRS modify existing forms to capture more 

information from taxpayers and lenders about forgiven debt and any 

securing property. IRS initially agreed with most of GAO’s 

recommendations but, after further analysis, indicated that making 

changes to the forms would not generate benefits that exceed the costs of 

doing so. However, GAO continues to believe that without first revising 

the associated forms, any review of a sample of tax returns using only 

currently available data risks understating the benefits of additional 

information reporting. GAO continues to recommend that by taking some 

relatively low-cost steps, including revising the associated forms, 

collecting more information from taxpayers and lenders, and using thirdparty data to determine whether taxpayers are correctly excluding 

mortgage debt from taxable income, IRS could determine how much 

additional revenue could be gained from refocusing its enforcement 

efforts. Since lenders already maintain property address records, reporting 

this additional information to IRS is not expected to impose significant 

burdens on lenders. Further, as GAO previously recommended, IRS should 

also determine if other available data would allow it to identify taxpayers 

with multiple homes. 

The potential for increased revenue from increased IRS enforcement 

related to forgiven mortgage debt is uncertain because IRS does not know 

the extent of noncompliance with the complex rules. Nonetheless, given 

the billions in forgiven mortgage debt annually, if only a small portion of 

the excluded amount is improperly avoiding taxation, the impact on 

revenue could be significant. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Page 252 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Information on the Types and Uses of 

Canceled Debt Could Help IRS Limit Revenue 

Losses on Forgiven Mortgage Debt 

Related GAO 

Products 

Tax Administration: Expanded Information Reporting Could Help IRS 

Address Compliance Challenges with Forgiven Mortgage Debt. 

GAO-10-997. Washington, D.C.: August 31, 2010. 

Home Mortgage Interest Deduction: Despite Challenges Presented by 

Complex Tax Rules, IRS Could Enhance Enforcement and Guidance. 

GAO-09-769. Washington, D.C.: July 29, 2009. 

Tax Gap: Actions That Could Improve Rental Real Estate Reporting 

Compliance. GAO-08-956. Washington, D.C.: August 28, 2008. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 253 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Information and Outreach Could Help 

Reduce Revenue Losses Due to Overstated 

Real Estate Tax Deductions 

Better Information and Outreach Could Help Reduce 

Revenue Losses Due to Overstated Real Estate Tax 

Deductions 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Service (IRS) estimated most recently for tax year 

2001 that 9 million taxpayers misreported their federal deductions for 

local real estate taxes paid. Average overstated real estate tax deductions 

are small—$85 per overstatement in 2001—but the net overstatement, 

which generally would reduce taxes owed, was about $2.5 billion. IRS has 

not estimated how much these overstated deductions improperly reduced 

tax liabilities, but the annual total loss could be substantial. 

GAO first reported 17 years ago that taxpayers overstated the real estate 

tax deduction because real estate tax bills did not distinguish between 

deductible taxes and nondeductible user fees, and IRS education and 

enforcement activities were inadequate. GAO conducted a follow-up study 

in 2009 to determine whether taxpayers were continuing to overstate the 

deduction. 

What GAO Has Found IRS can take several steps to help improve individual taxpayer compliance 

with the itemized deduction for real estate taxes and thus reduce 

Indicating Potential associated revenue losses. Individuals who wish to comply in claiming a 

real estate tax deduction face challenges. The rules for deductibility can for Enhancing be complex as illustrated below. 

Revenue 

Determining What Qualifies As Deductible Is Complex 

Deductible 

Nondeductible 

Yes

No No 

Yes

General 

public welfare 

Local benefits that tend to 

increase the value of the 

propertya

Is the tax 

levied by a

state, local, 

or foreign 

government? 

Is the tax 

imposed on an 

interest in real 

property? 

For what 

purpose is the 

tax levied? 

Increasing level of effort and knowledge may be 

required to determine deductibility of charges

Source: GAO analysis of Internal Revenue Code provisions.
 

a

Charges for the repair or maintenance of local benefits and associated interest are deductible. 


GAO estimated in 2009 that almost half of local governments nationwide 

included charges in 2007 on their real estate tax bills that were generally 

nondeductible (e.g., fees for trash and garbage pickup). About 78 percent 

of those local governments did not label such charges in a way that would 

alert individuals that their real estate tax bill might have nondeductible 

charges. GAO also estimated that taxpayers in Alameda, California, and 

Page 254 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

 

Better Information and Outreach Could Help 

Reduce Revenue Losses Due to Overstated 

Real Estate Tax Deductions 

Hennepin, Minnesota, counties1 collectively overstated their 2006 real 

estate tax deductions between $23 million and $46 million depending on 

the assumptions used in the estimation methodology. 

Local governments generally do not identify for taxpayers which charges 

on real estate tax bills are deductible because local collectors lack the 

expertise to identify which charges are federally deductible. Further, 

taxpayers with mortgages may receive information on real estate tax 

payments made on their behalf by mortgage servicers, but it does not 

identify deductible amounts. 

Tax preparation software and assistance from paid return preparers may 

not be sufficient to help taxpayers deduct qualified real estate taxes. Two 

of the three most frequently used tax preparation software programs for 

2008 did not alert taxpayers that some charges on real estate tax bills may 

not be deductible.2

 Paid tax return preparers invested limited time 

ensuring that taxpayers deducted qualified real estate taxes. 

IRS instructions and guidance for taxpayers on claiming the real estate tax 

deduction had explained the types of charges that can be deducted. 

However, they had not adequately informed taxpayers that they should 

check both real estate tax bills and local government resources to collect 

information about specific bill charges, which is needed to determine 

deductibility. 

When IRS examiners do audit the real estate tax deduction they usually do 

not focus on deductibility because they believe the effort required does 

not justify the likely small changes to taxes that may be due. Rather, they 

focus on whether the amounts deducted were actually paid. IRS’s 

guidance to examiners does not require them to verify that the entire real 

estate tax deduction amount is deductible. Examiners are authorized to 

review many documents, but most of these documents verify whether 

payment was made rather than whether all of a payment is deductible. 

1

GAO initially selected 5 of the 41 counties with the largest property revenue for its review 

based on criteria such as the presence of generally nondeductible items on their tax bills. 

However, GAO limited its analysis to 2 of the 5 counties due to practical limitations with 

the data from the counties. 

2

These software firms did make changes to their programs to better inform taxpayers what 

qualifies as deductible real estate taxes in response to discussions with GAO for its May 

2009 report. 

Page 255 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Information and Outreach Could Help
 

Reduce Revenue Losses Due to Overstated 


Real Estate Tax Deductions 


Finally, IRS does not know which local governments have large 

nondeductible charges on their real estate tax bills. 

Actions Needed and 

Potential Revenue 

To help individual taxpayers comply in claiming the real estate tax 

deduction, GAO recommended in May 2009 that IRS instructions and 

guidance need to be strengthened and spotlight for taxpayers that the real 

estate tax bill may include nondeductible charges and that taxpayers need 

to check for such charges. GAO also recommended that IRS provide 

guidance on how to get information about which charges are 

nondeductible. IRS took steps in 2009 to improve its guidance in response 

to the recommendations, but the effects of the changes remain to be seen. 

To help individual taxpayers get the best information and assistance from 

third parties, GAO recommended that IRS reach out to local governments, 

mortgage servicers, and the tax preparation industry about clarifying 

information they provide to individual taxpayers on what is deductible, 

and/or providing alerts and disclaimers about nondeductible charges that 

are or may be on their real estate tax bill. In response to GAO’s 

recommendations, IRS created a brochure in 2010 for distribution to such 

third parties with information on what they can do to help clarify for 

taxpayers what is and is not deductible. 

As of December 2010, IRS still needs to take actions on other 

recommendations included in GAO’s May 2009 report. For example: 

•	 To improve IRS examinations of the real estate tax deduction, 

examination guidance needs to clarify the type of evidence for verifying 

deductibility and to require examiners to ask taxpayers to substantiate 

deductions that appear to include nondeductible charges that are large, 

unusual, or questionable. 

•	 To support targeted efforts to improve compliance, IRS needs to 

develop a cost-effective means of identifying local governments with 

potentially large nondeductible charges on their real estate tax bills. 

IRS then should work with these local governments to identify charges 

that are nondeductible and work with the localities and other third 

parties to help taxpayers correctly claim the deduction. IRS should also 

use the information to target examinations covering the real estate tax 

deduction. 

Although no precise estimate is available of the potential increased 

revenues these actions might generate, a relatively modest reduction in 

Page 256 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Better Information and Outreach Could Help 

Reduce Revenue Losses Due to Overstated 

Real Estate Tax Deductions 

total overstated deductions could generate tens or hundreds of millions of 

dollars annually.3 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Real Estate Tax Deduction: Taxpayers Face Challenges in Determining Related GAO What Qualifies; Better Information Could Improve Compliance. 

Products GAO-09-521. Washington, D.C.: May 13, 2009. 

Tax Administration: Overstated Real Estate Tax Deductions Need to Be 

Reduced. GAO/GGD-93-43. Washington, D.C.: January 19, 1993. 

For additional information about this area, contact Michael Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

3

For example, IRS’s most recent estimate for 2001 indicated that 5.5 million taxpayers 

overstated their deductions collectively by $5 billion. A 1-percent to 10-percent reduction in 

this amount would have reduced overstatements by $50 million to $500 million. The 

resulting actual tax revenue savings would be much less depending on factors such as the 

tax rate for these noncompliant taxpayers. 

Page 257 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Revisions to Content and Use of Form 1098-T 

Could Help IRS Enforce Higher Education 

Requirements and Increase Revenues 

Revisions to Content and Use of Form 1098-T Could 

Help IRS Enforce Higher Education Requirements and 

Increase Revenues 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Service (IRS) faces challenges ensuring compliance 

with the eligibility requirements of the Hope and Lifetime Learning tax 

credits. Millions of taxpayers claim the credits to offset qualified 

postsecondary education expenses. For fiscal years 2009 through 2013, 

taxpayers are estimated to claim Hope and Lifetime Learning credits 

totaling $27 billion and $13 billion respectively. These tax provisions are 

complicated and may lead taxpayers to claim either more or fewer 

benefits than they are entitled. 

IRS requires educational institutions to report on Form 1098-T information 

about qualifying educational expenses to taxpayers and IRS. However, the 

information reported by educational institutions and sent to the IRS and 

taxpayers (on Form 1098-T) is not easily comprehensible to taxpayers, nor 

is this information fully used by IRS in its compliance programs. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS does not make full use of information reported by educational 

institutions to taxpayers and IRS on Form 1098-T to identify and correct 

noncompliance with higher education tax benefits. In addition, revising 

the form to provide more complete information on qualified expenses 

could make it easier for taxpayers to use, which could also reduce 

noncompliance. IRS requires institutions to report on Form 1098-T either 

(1) the amount of payments received or (2) the amount billed for qualified 

expenses. Many institutions report the amount billed and do not report 

payments, but the amount billed may not equal the amount that can be 

claimed as a credit. For example, the amount billed may not account for 

all scholarships or grants the student received. In such cases, the Form 

1098-T may overstate the amount that can be claimed as a credit, 

confusing taxpayers. Conversely, if institutions are not providing 

information on other eligible items, such as books or equipment, taxpayers 

might be understating their claims. 

Because the amount billed may not be the amount taxpayers are eligible to 

claim as a credit, IRS does not compare tuition statement information to 

information reported on a tax return. However, IRS is missing 

opportunities to use some of the more basic information (for example, a 

student’s Social Security number and a school’s location) to verify 

eligibility for the credit. Using IRS’s compliance computer-matching 

systems to automatically compare information on statements to taxpayers’ 

claims could be a low-cost enforcement tool for IRS to verify certain 

aspects of taxpayers’ eligibility for higher education credits. While 

changing the requirements for how higher educational institutions report 

qualified expenses on tuition statements would likely impose some burden 

Page 258 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Revisions to Content and Use of Form 1098-T 

Could Help IRS Enforce Higher Education 

Requirements and Increase Revenues 

on those institutions, the additional burden could be low because the 

institutions are already required to complete Form 1098-T. 

Actions Needed and 

Potential Revenue 

Given that every year millions of taxpayers claim billions of dollars of 

credits for post-secondary education tuition expenses, even a small 

increase in compliance could increase revenue. To reduce taxpayer 

confusion and enhance compliance with the eligibility requirements for 

higher education benefits, GAO recommended in December 2009 that IRS 

(1) determine the feasibility of using current information reported on 

Form 1098-T in its compliance computer matching systems; and (2) revise 

Form 1098-T to improve the usefulness of information on qualifying 

education expenses. IRS agreed to consider the feasibility of using current 

information on Form 1098-T in its compliance programs, and develop a 

plan to address possible changes to that form but these actions have yet to 

be completed. GAO continues to believe these actions are needed since 

automatically matching readily available information has been a proven, 

low-cost way to improve compliance. 

The information contained in this analysis is based on the related GAO Framework for product listed below and GAO’s work following up on the 

Analysis recommendations from that product. 

2009 Tax Filing Season: IRS Met Many 2009 Goals, but Telephone Access Related GAO Product Remained Low, and Taxpayer Service and Enforcement Could Be 

Improved. GAO-10-225. Washington, D.C.: December 10, 2009. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 259 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Many Options Could Improve the Tax 

Compliance of Sole Proprietors and Increase Many Options Could Improve the Tax Compliance of Revenues 

Sole Proprietors and Increase Revenues 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Service (IRS) estimates that $68 billion of the $345 

billion gross tax gap for 2001 was due to underreporting of federal income 

tax liabilities by self-employed owners of unincorporated businesses—also 

known as sole proprietors. An additional part of the tax gap was due to the 

noncompliance of some sole proprietors with employment tax laws. The 

federal tax gap is the difference between the amount of income and other 

federal taxes owed and the amount that is voluntarily and timely paid. The 

gap arises from taxpayers underreporting taxable income, underpaying 

known tax liabilities, and not filing required tax returns. 

Unlike wage and some investment income, sole proprietors’ income is not 

subject to tax withholding and only a portion is subject to independent 

verification through third-party information reporting, such as those who 

pay sole proprietors for services rendered. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Because the sole proprietor tax gap is so large, successful efforts to 

reduce it could result in significant revenue increases. Key reasons for the 

sole proprietor tax gap are well known. Their income is not subject to 

withholding, and only a portion of it is subject to third-party information 

reporting. When used, third-party reports on payments made give IRS a 

powerful tool for verifying the tax compliance of payment recipients. 

A principal IRS compliance program—the Automated Underreporter 

Program (AUR)—has limited reach over sole proprietors. Under AUR, IRS 

computers match these third-party reports on payments made to taxpayers 

with the taxpayer’s tax return in order to verify taxpayer compliance in 

reporting those payments as income. Currently, information reporting 

covers only about a quarter of sole proprietors’ business gross receipts 

and very little of their expenses because of limited information reporting 

by third parties. Expanding information returns coverage would require 

IRS to identify other types of third parties who could file information 

reports about payments made to sole proprietors without imposing 

unacceptable burdens. 

IRS’s other compliance program for a sole proprietor—the examination 

(audit) program—also has limited reach. Because most of sole proprietors’ 

understated tax was in small amounts—half of the understatements were 

for about $900 or less—IRS examinations of their tax returns generally 

have yielded less revenue per IRS staff hour than those covering other 

categories of taxpayers, such as larger businesses. IRS spent substantial 

time on sole proprietor examinations in 2008, but examined about only 1 

percent of the estimated noncompliant population. 

Page 260 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Many Options Could Improve the Tax 


Compliance of Sole Proprietors and Increase
 

Revenues 


Without either examinations or AUR, IRS can not easily tell whether sole 

proprietors are reporting legitimate business losses that can be used to 

offset other taxable income. In a study for tax year 2001 only, IRS 

estimated that 25 percent of all sole proprietors reported losses with an 

estimated 70 percent of those losses being fully or partially noncompliant 

with tax laws. Since examinations of sole proprietor tax returns are costly 

for IRS, require experienced IRS examiners to conduct, and are 

burdensome for the businesses, additional options need to be considered 

to improve sole proprietor tax compliance. 

Actions Needed and 

Potential Revenue 

Because of the variety of challenges to addressing the sole proprietor tax 

gap, there is no single solution. However, a variety of actions are likely to 

help reduce that tax gap. 

GAO recommended in July 2007 that the Department of the Treasury’s tax 

gap strategy cover sole proprietor compliance in detail while coordinating 

it with broader tax gap reduction efforts. Such a strategy could include a 

mix of numerous options. These options recognize that some solutions, 

such as a large increase in audits, are not likely to be cost-effective given 

the large number of sole proprietors and the relatively small amounts of 

noncompliance on average. Also, many of the options involve tradeoffs, 

both for sole proprietors and for IRS. The list of options includes helping: 

•	 sole proprietors keep better records of their income and expenses by, 

for example, requiring business bank accounts to be separated from 

personal accounts or targeting tax assistance on new businesses; 

•	 third parties comply with current information return filing 

requirements by, for example, providing an online portal for 

submissions or exempting first-time filers from penalties for being late; 

•	 IRS identify more unreported income and more overstated expense 

deductions through more detailed reporting of gross receipts on tax 

returns or matching of expense deductions claimed by a business with 

the information returns filed by the same business; 

•	 IRS collect unpaid taxes from sole proprietors through expanded 

withholding or denial of federal benefits to delinquent sole proprietors; 

and 

•	 IRS more efficiently manage its limited resources through more 

automated audit selection processes, assessing additional data sharing 

Page 261 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Many Options Could Improve the Tax 


Compliance of Sole Proprietors and Increase
 

Revenues 


with states, more targeted use of notices to taxpayers about 

compliance issues, and clearer policies on when to apply penalties. 

Furthermore, as GAO also recommended in September 2009, IRS should 

use its ongoing research efforts to develop a better understanding of the 

nature of sole proprietor noncompliance, including sole proprietors 

improperly claiming business losses. The high rate of noncompliance 

associated with claims of sole proprietor business losses suggests that 

limiting the ability of sole proprietors to use losses to offset tax on other 

income could present another option for reducing the sole proprietor tax 

gap. However, an indicator to target noncompliant losses without 

including compliant losses has not been identified. Absent such targeting, 

any policy change to limit all business losses would inevitably limit some 

legitimate businesses losses. 

IRS has taken actions to implement some of these options. As of January 

2011, IRS has initiated, but not completed, studies on: compliance with 

third-party information reporting requirements, additional data sharing 

with the states, and identifying the extent of noncompliant sole proprietor 

losses. These studies are scheduled for completion through 2015. 

Following completion, IRS will assess the study results and identify 

whether changes should be recommended and made. GAO expects to 

assess IRS’s progress in completing these actions. 

Because sole proprietors are responsible for almost one-fifth of the tax 

gap, the potential for raising substantial amounts of revenue by taking 

such incremental actions to improve sole proprietor tax compliance is 

significant. However, the revenue potential related to any of these actions 

has not been estimated. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Tax Gap: Limiting Sole Proprietor Loss Deductions Could Improve Related GAO Compliance but Would Also Limit Some Legitimate Losses. GAO-09-815. 

Products Washington, D.C.: September 10, 2009. 

Tax Compliance: Opportunities Exist to Improve Tax Compliance of 

Applicants for State Business Licenses. GAO-09-569. Washington, D.C.: 

June 15, 2009. 

Page 262 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Many Options Could Improve the Tax 

Compliance of Sole Proprietors and Increase 

Revenues 

Tax Gap: IRS Could Do More to Promote Compliance by Third Parties 

with Miscellaneous Income Reporting Requirements. GAO-09-238. 

Washington, D.C.: January 28, 2009. 

Tax Gap: A Strategy for Reducing the Gap Should Include Options for 

Addressing Sole Proprietor Noncompliance. GAO-07-1014. Washington, 

D.C.: July 13, 2007. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 263 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Should Do More Evaluation and Use More 

Third-Party Data to Find Businesses Not 

Filing Tax Returns 

IRS Should Do More Evaluation and Use More Third-


Party Data to Find Businesses Not Filing Tax Returns 


Why GAO Is Focusing 

on This Area 

Historically, the Internal Revenue Service (IRS) has identified several 

million businesses each year that may have failed to file tax returns—more 

than it can thoroughly investigate. IRS has had difficulty determining if 

these businesses that IRS identified are still active and thus required to file 

a tax return. As a result, IRS has pursued many inactive businesses, which 

has not been a productive use of its resources. In addition, IRS has had no 

estimate of the nonfiler population. Given the lack of data, IRS has neither 

a clear estimate of the revenue loss from businesses not filing required tax 

returns nor a clear basis for allocating resources to addressing this type of 

noncompliance. 

Recently, IRS has begun to use third-party information about payments 

between businesses and other available data as indicators of business 

activity. The intent is to prioritize cases with the most revenue potential, 

using just the third-party information that IRS already possesses. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS has the potential to increase the revenue it collects from noncompliant 

taxpayers by increasing the effectiveness of its business nonfiler program, 

but the efficiency and productivity of IRS’s efforts to ensure compliance 

by business nonfilers have been hampered by a lack of data. IRS cannot 

develop a comprehensive estimate of the business nonfiling rate and 

associated revenue loss because it lacks sufficient data on the population 

of businesses. Absent such an estimate, IRS will have no basis to know 

what priority to give its business nonfiler program and whether resources 

should be reallocated from other enforcement efforts. 

IRS has not used private sector data that it could obtain to verify taxpayer 

statements about whether a business is active and a tax return should have 

been filed. A number of private companies maintain business activity data, 

such as data on a business’s gross sales and number of employees, which 

could aid IRS in making these determinations. Dun and Bradstreet is one 

provider of such data. Its databases include information on business name, 

address, amount of sales, and number of employees. GAO’s analysis of 

Dun and Bradstreet data showed they could be used to identify business 

activity that IRS was not aware of. For two states, GAO analyzed 2007 data 

on the businesses that IRS initially identified as potential nonfilers but 

later determined were not liable to file returns. Of these, GAO found 7,688 

businesses where IRS data indicated little or no business activity, but Dun 

and Bradstreet data showed business activity as measured by sales 

totaling $4.1 billion. 

Page 264 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Should Do More Evaluation and Use More 

Third-Party Data to Find Businesses Not 

Filing Tax Returns 

GAO also performed a similar analysis using data on federal contractors. 

GAO found 13,852 businesses listed on the federal contractor registry— 

indicating likely business activity—even though IRS had determined they 

had no filing obligation. GAO did not determine which non-IRS data would 

be most useful nor did it examine the capacity of IRS’s systems to use such 

data on a large scale. 

Until recently IRS also has not had a way to prioritize cases in its 

inventory. IRS modernized its business nonfiler program in 2009 by 

incorporating income and other data in its records indicating business 

activity. Active businesses, for example those with sales or employees, 

generally have an obligation to file a return. IRS’s Business Master File 

Case Creation Nonfiler Identification Process now assigns each case a 

code based on these data. IRS uses the code to select cases to work with 

the goal of securing tax returns from nonfilers and collecting additional 

revenue. This is a significant modernization, but IRS lacks a formal plan to 

evaluate how well the codes are working. Absent evaluation, IRS will not 

know to what extent the initiative is successful and whether it has resulted 

in a better allocation of enforcement resources. 

Actions Needed and 

Potential Revenue 

While potentially significant, the revenue gains that may be available 

through IRS actions to identify and pursue more business nonfilers cannot 

be quantified due to the lack of data on the size of the business nonfiler 

problem and the effectiveness of IRS’s new process. As GAO 

recommended in its August 2010 report, to better allocate and use its 

enforcement resources, IRS should develop at least a partial estimate for 

the business nonfiler rate based on its existing inventory of cases. In 

addition, IRS should 

•	 set a deadline for developing performance data on its business nonfiler 

efforts; 

•	 develop a plan for evaluating its new initiative including codes for 

selecting nonfiler cases to pursue; 

•	 better use income data and selection codes in verifying taxpayer 

statements about their filing requirements; and 

•	 study the feasibility and cost-effectiveness of using non-IRS, private 

data to verify taxpayer statements. 

Page 265 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Should Do More Evaluation and Use More 

Third-Party Data to Find Businesses Not 

Filing Tax Returns 

IRS has agreed to start reviewing or implementing these actions. As of 

December 2010, IRS has laid out planned implementation steps up through 

January 2013. The scope of GAO’s recent work did not extend to analyzing 

IRS’s capability to meet these implementation plans. The potential revenue 

significance merits GAO tracking of IRS’s progress over the next few 

years. 

The information contained in this analysis is based on the related GAO Framework for product below. 

Analysis 

Tax Gap: IRS Has Modernized Its Business Nonfiler Program but Could Related GAO Product Benefit from More Evaluation and Use of Third-Party Data. GAO-10-950. 

Washington, D.C.: August 31, 2010. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 266 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress and IRS Can Help S Corporations 

and Their Shareholders Be More Tax 

Compliant 

Congress and IRS Can Help S Corporations and Their 

Shareholders Be More Tax Compliant 

Why GAO Is Focusing 

on This Area 

The number of S corporations—corporations with no more than 100 

shareholders that meet certain other requirements—has grown steadily in 

recent years, reaching around 4 million with over $400 billion in total net 

income. S corporation status provides liability protection to shareholders. 

S corporations’ income gains and losses “pass through” to shareholders 

who are to report these passed-through amounts on their individual 

income tax returns. Shareholders are allowed to claim S corporation passthrough losses up to the amount of their basis in an S corporation (value 

of their investment). Shareholders are to track basis changes, which can 

arise from their actions, like new investments in the corporation, or S 

corporation actions, like reinvesting profits. 

S corporations can pay shareholders wages and make nonwage 

distributions, like dividends, but employment taxation only applies to the 

wages. The Internal Revenue Service (IRS) requires S corporations to pay 

reasonable wages to shareholders who perform services, and if they do 

not, employment taxes can be improperly avoided. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

According to IRS’s most recent research, for tax years 2003 and 2004, 68 

percent of S corporation returns misreported net income. As a result, S 

corporations passed through an estimated $85 billion less taxable income 

to their shareholders than should have occurred. IRS’s research did not 

cover how the shareholders treated this misreported S corporation income 

on their individual tax returns. However, applying the lowest individual 

income tax rate of 10 percent to this S corporation misreported amount 

suggests that S corporation shareholders could have underpaid their 

income taxes by $8.5 billion over those 2 years. IRS does not know the 

reasons for this misreporting, which could be intentional attempts to 

improperly lower tax liability for individual shareholders or unintentional 

errors due to confusion over what to report. 

Shareholders of S corporations are required to track their basis, but have 

made mistakes in that area. For fiscal years 2006 through 2008, IRS 

examiners found that shareholders, on average, claimed about $21,600 in 

losses that exceeded their basis in the S corporation. These overclaimed 

losses could reduce taxes on the taxpayers’ other income. IRS views basis 

as a common issue on shareholder returns. In particular, shareholders of 

new S corporations are less likely to understand the requirement to track 

and calculate basis. One factor contributing to basis noncompliance is that 

S corporations are not required to calculate shareholder basis and report it 

to shareholders and IRS, even though S corporations have information that 

Page 267 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress and IRS Can Help S Corporations 

and Their Shareholders Be More Tax 

Compliant 

shareholders could use to calculate basis. In addition, IRS does not send 

new S corporations and their shareholders information alerting them to 

the necessary record-keeping requirements 

Unlike other businesses, S corporations can improperly lower employment 

tax liabilities by paying shareholders who perform services less in wages 

and more through other means, like profit distributions. For tax years 2003 

and 2004, IRS estimated that 13 percent of S corporations underpaid a net 

of $23.6 billion in wages. To illustrate the potential loss of revenue to the 

government, applying the maximum Federal Insurance Contributions Act 

tax rate of 15.3 percent to the net underpayment amount roughly equates 

to $3 billion in employment tax losses. The vagueness of federal tax law as 

well as IRS and Department of the Treasury guidance on determining 

adequate shareholder wages make employment tax evasion difficult to 

control. Nearly all of the stakeholder representatives GAO interviewed 

indicated that having clear and specific IRS guidance would be helpful for 

taxpayers and preparers. IRS has some training materials for its examiners 

that go beyond published guidance, but those materials are not available 

for S corporations. 

IRS examinations of S corporations’ wage payments could be more 

effective. In the sample that GAO reviewed, when IRS examiners used 

tools like Bureau of Labor Statistics data on compensation, they tended to 

more frequently identify underpayment of wage income. IRS does not 

require use of such tools nor does IRS require its examiners to document 

the analysis done to support their compensation determinations or why an 

analysis was not done. 

Paid preparers had little impact on S corporation compliance as the 

overall misreporting rate was about the same whether or not an S 

corporation used a paid preparer. Some stakeholders GAO interviewed 

thought some preparers lacked the expertise needed to address S 

corporation tax issues. IRS has begun regulating all paid tax return 

preparers and could begin requiring preparers to pass competency 

examinations. This may be a way to improve preparers’ ability to 

adequately handle S corporation returns. 

As GAO reported in December 2009, to improve basis compliance, Actions Needed and Congress could require S corporations to use information already available 

Potential Revenue to them to calculate shareholders’ basis as completely as possible and 

report it to shareholders and IRS. 

Page 268 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress and IRS Can Help S Corporations 

and Their Shareholders Be More Tax 

Compliant 

Furthermore, GAO recommended in December 2009 that IRS require 

examiners to document their compensation analyses and their use of 

comparable salary data when determining adequate shareholder 

compensation. IRS took steps by publishing an article in August 2010 

reminding examiners of the importance of addressing adequate 

shareholder compensation and the need to document such analysis. 

As of December 2010, IRS is considering or taking action on other 

recommendations included in GAO’s December 2009 report, but none of 

them have been implemented. GAO recommended that IRS should 

evaluate options for improving paid tax return preparer performance, send 

additional guidance on S corporation requirements such as on basis 

calculations and adequate wage determinations to new S corporations, 

and provide more guidance to shareholders and tax preparers on 

determining adequate shareholder compensation. The effect of 

implementations should be improved tax compliance by S corporations 

and their shareholders. Although an estimate of potential revenue 

increases from improved compliance is not available, a small decrease in 

the billions of dollars of income and wage underreporting could increase 

tax revenues by hundreds of millions of dollars each year. 

The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

Tax Gap: Actions Needed to Address Noncompliance with S Corporation Related GAO Product Tax Rules. GAO-10-195. Washington, D.C.: December 15, 2009. 

For additional information about this area, contact Mike Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 269 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Needs an Agencywide Approach for 

Addressing Tax Evasion by Networks of 

Businesses and Related Entities 

IRS Needs an Agencywide Approach for Addressing Tax 

Evasion by Networks of Businesses and Related 

Entities 

Why GAO Is Focusing 

on This Area 

At least 1 million networks involving partnerships, trusts, corporations, 

and similar entities existed in the United States in tax year 2008. These 

networks can serve a variety of legitimate business purposes. However, 

transactions made among related entities within networks also can be 

used in tax evasion schemes to hide taxable income or shift expenses. 

Such schemes—such as the one described in the text box below—result in 

lost tax revenue and are difficult for the Internal Revenue Service (IRS) to 

identify, due to data limitations. 

IRS recognizes the risk from network-related tax evasion and is 

developing new tools and programs to better identify such evasion. These 

IRS efforts are in various stages of development, but their potential 

effectiveness in terms of cost savings or added revenue, is not known. 

However, GAO has identified the need for additional efforts to strengthen 

enforcement in the networks area and to assess progress. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS knows that many questionable tax shelters and abusive transactions 

rely on the links among commonly owned entities in a network, but it does 

not have estimates of the associated revenue loss in part because data do 

not exist on the population of networks. IRS generally addresses networkrelated tax evasion through its examination (audit) programs. These 

programs traditionally involve identifying a single return from a single tax 

year and routing the return to the IRS division that specializes in auditing 

that type of return. From a single return, examiners may branch out to 

review other entities if information on the original return appears 

suspicious. However, this traditional approach does not align well with 

how network tax evasion schemes work. Such schemes can cross multiple 

IRS divisions or require time and expertise that IRS may not have 

allocated at the start of an examination. A case of network tax evasion 

also may not be evident without looking at multiple tax years. 

Network Scheme Example: Installment Sale Bogus Optional Basis 

Transaction (iBOB) 

An iBOB is an example of a network-related tax evasion scheme that shows 

how networks pose enforcement challenges for IRS. In an iBOB, a taxpayer 

uses multiple entities, all owned or controlled by the taxpayer, to artificially 

adjust the basis of an asset to evade capital gains taxes. The scheme can 

involve multiple transactions and take place over many tax years, making it 

difficult for IRS to detect. A short video illustrating the iBOB is available at 

http://www.gao.gov/products/GAO-10-968. 

Page 270 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Needs an Agencywide Approach for 

Addressing Tax Evasion by Networks of 

Businesses and Related Entities 

IRS is developing programs and tools that more directly address network 

tax evasion. One, called Global High Wealth Industry, selects certain highincome individuals and examines their network of entities as a whole to 

look for tax evasion. Another, yK-1, is a computerized visualization tool 

that shows the links between entities in a network. These efforts show 

promise. They represent new analytical approaches, have uppermanagement support, and cut across divisions and database boundaries. 

However, there are opportunities for more progress. For example, IRS has 

no agencywide strategy or goals for coordinating its network efforts. A 

strategy would include assessing of IRS’s network tools and determining 

the value of incorporating more data into its network programs and 

tools—neither of which IRS has done. Without a strategy and assessments, 

IRS risks duplicating efforts and managers will not have information about 

the effectiveness of the new programs and tools that could inform 

resource allocation decisions. 

Actions Needed and 

Potential Revenue 

GAO recommended in its September 2010 report that IRS create an 

agencywide strategy with goals to coordinate and plan its enforcement 

efforts on network tax evasion. The strategy should include assessing the 

effectiveness of network analysis tools to ensure that resources are being 

devoted to those that provide the largest return on investment; 

determining whether to increase access to IRS data or collect new data for 

network analysis; developing network analysis tools on a specific time 

schedule; and deciding how to manage network efforts across IRS. IRS 

should ensure that its staff understand the network tools and establish 

formal ways for users to interact with tool programmers and analysts to 

ensure that the network tools are easy to use and achieve goals. IRS 

agreed with GAO’s recommendations and said it would make plans to take 

actions on them but it is too early to determine IRS’s progress. 

Estimates are not available on the potential for increased tax revenues 

because IRS has not measured the potential impact of its network efforts 

on reducing tax noncompliance due to data limitations, but these efforts 

have significant potential, based on the number of networks that exist. 

The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

Page 271 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS Needs an Agencywide Approach for 


Addressing Tax Evasion by Networks of
 

Businesses and Related Entities 


Tax Gap: IRS Could Improve Efforts to Address Tax Evasion by Related GAO Product Networks of Business and Related Entities. GAO-10-968. Washington, 

D.C.: September 24, 2010. 

For additional information about this area, contact James White at Area Contact (202) 512-9110 or whitej@gao.gov. 

Page 272 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Opportunities Exist to Improve the Targeting 

of the Research Tax Credit and Make It More 

Cost-Effective 

Opportunities Exist to Improve the Targeting of the 

Research Tax Credit and Make It More Cost-Effective 

Why GAO Is Focusing 

on This Area 

Since 1981, the research tax credit has provided significant subsidies (an 

estimated $6 billion for fiscal year 2011) to encourage business to invest in 

research and development. The credit, which has been a temporary 

provision since its inception, was most recently renewed at the end of 

2010 and is scheduled to expire after December 31, 2011. The Department 

of the Treasury and the Internal Revenue Service play key roles in issuing 

guidance to clarify what types of spending qualify and ensuring that 

taxpayers adequately support their credit claims. 

Two factors—the definition of research expenses that qualify for the credit 

and the credit’s design—are important in targeting the subsidy in a manner 

that increases the social benefits stimulated per dollar of tax revenue 

foregone. (This ratio of benefits to forgone revenue is a key measure of 

credit’s cost-effectiveness.) The research credit has always been an 

incremental subsidy, meaning that taxpayers earn the credit only for 

qualified spending that exceeds a defined threshold, known as the base 

spending amount. The credit’s design is most cost-effective when the base 

spending amount accurately reflects the amount of spending that a 

taxpayer would have done anyway (in the absence of the credit). 

The figure below compares the effects of a hypothetical incremental credit 

with a perfectly accurate base to a flat credit, which has no base spending 

amount. The flat credit gives the taxpayer 20 cents for every research 

dollar spent, while the incremental credit gives 20 percent for only the 

amount of spending above what the taxpayer would have done anyway. 

A Comparison of an Incremental Credit with a Flat Credit 

Qualified research spending

A 20% flat credit (with no base) 

Taxpayer’s marginal 

spending 

Spending on research 

that taxpayer would 

have done anyway Revenue cost: $220 Revenue cost: $20 

$100 

$1,000 

$100 

$1,000 

$20 $20 

Marginal 

incentive 

(20% of $100) 

Marginal 

incentive 

(20% of $100) 

Windfall 

credit 

(20% of $1,000) 

$200 

Windfall 

credit 

An incremental 20% credit 

with a $1,000 base 

$100 

$1,000 

Source: GAO. 

Page 273 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Opportunities Exist to Improve the Targeting 

of the Research Tax Credit and Make It More 

Cost-Effective 

Both types of tax credit provide the same 20 percent reward for each 

additional dollar of qualified spending (referred to as “marginal 

incentive”). In each case that incentive encourages the taxpayer to 

increase spending for research by $100. However, the flat credit is less 

cost-effective for the government because it also gives the taxpayer a $200 

windfall for conducting research that would have been done anyway. 

The difficulty in designing an incremental credit to be as cost-effective as 

the one in the figure is to develop rules for computing the base spending 

amount so that the base accurately represents what the taxpayer would 

have spent anyway. GAO testified as early as 1995 that the computation 

method in place at that time had grown inaccurate and should be updated. 

An alternative approach for computing base spending (the alternative 

simplified credit) has been added but, the older computation option— 

commonly known as the regular credit—still has not been updated. 

What GAO Has Found 

Indicating Potential 

Cost Saving 

The research tax credit, as currently designed, distributes incentives 

unevenly across taxpayers and provides many recipients with windfall 

benefits, earned for spending that they would have done anyway. The 

disparities in incentives can lead to an inefficient allocation of investment 

resources across businesses and the windfall benefits represent foregone 

tax revenue that does not contribute to the credit’s objective. 

In November 2009 GAO estimated that, due to shortcomings in the 

computation of base spending, the research tax credit has provided some 

taxpayers with more than a 10 percent reduction in the cost of additional 

research, while providing other research-performing taxpayers with a 

disincentive to increase their research in the current year. Moreover, some 

taxpayers earned credits on as much as 50 percent of their total research 

spending, even though the most favorable empirical estimates of the 

credit’s stimulative effects suggest that less than 15 percent of that 

spending was actually new spending that they would not have done in the 

absence of the credit. 

An important cause of these problems is that, as GAO has previously 

reported, the base spending amount for the regular version of the credit is 

extrapolated from the amount of research spending that taxpayers did as 

long ago as the early 1980s. That base is a poor measure of the spending 

that a taxpayer would be doing now in the absence of the credit. The 

alternative credit option uses a more current spending history for 

computing the incremental credit, but it provides lower incentives for new 

Page 274 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Opportunities Exist to Improve the Targeting 

of the Research Tax Credit and Make It More 

Cost-Effective 

research, even as some taxpayers can receive larger windfalls than they 

would get from the regular credit.1 

Actions Needed and 

Potential Savings 

Based on analyses of numerous design alternatives in its 2009 study, GAO 

found that the targeting of the research tax credit could be improved by 

eliminating the regular credit and adding a minimum base amount (equal 

to 50 percent of a taxpayer’s current spending) to the method for 

computing the alternative credit. GAO found that an alternative simplified 

credit with this modification could provide the same average incentive to 

taxpayers as the current version of that credit, but at a lower revenue cost 

by reducing windfalls. Cost reductions exceeded 3 percent under most of 

the alternative assumptions GAO used in its 2009 analyses and exceeded 

1.4 percent under all assumptions that GAO considered likely. 

The elimination of the regular credit not only would improve targeting, it 

would also significantly reduce compliance and administrative costs by 

eliminating the need for taxpayers to keep (and for IRS to review) records 

dating back to the 1980s. 

The information contained in this analysis is based on the related products Framework for below. 

Analysis 

Tax Policy: The Research Tax Credit’s Design and Administration Can Related GAO Be Improved. GAO-10-136. Washington, D.C.: November 6, 2009.

Products 

Tax Policy: Additional Information on the Research Tax Credit. 

GAO/T-GGD-95-161. Washington, D.C.: May 10, 1995. 

Area Contact For additional information about this area, contact James White at 

(202) 512-9110 or whitej@gao.gov. 

1

As the figure comparing basic hypothetical credit designs above illustrates, the rate of 

incentive and the amount of windfall a credit provides are independent of each other. 

Page 275 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Converting the New Markets Tax Credit to a 

Grant Program May Increase Program 

Efficiency and Reduce the Overall Cost of the 

Program 

Converting the New Markets Tax Credit to a Grant 

Program May Increase Program Efficiency and Reduce 

the Overall Cost of the Program 

Why GAO Is Focusing 

on This Area 

Federal tax revenue losses for the New Markets Tax Credit (NMTC) were 

over $700 million for 2010 according to the Department of the Treasury. 

Congress enacted the NMTC in 2000 as part of an ongoing effort to 

revitalize impoverished, low-income communities. The Treasury 

Department’s Community Development Financial Institutions (CDFI) 

Fund awards tax credits to Community Development Entities (CDE), who 

sell the credits to investors to raise funds. Investors can claim a tax credit 

over 7 years totaling 39 percent of their investment in a CDE. Through 

fiscal year 2008, CDE reported investing about $12 billion in 2,111 projects 

located in all 50 states, the District of Columbia, and Puerto Rico. In 

December 2010, Congress extended the NMTC for tax year 2010 and 2011. 

However, the complexity of NMTC transaction structures appears to make 

it difficult to complete smaller projects and often results in less equity 

ending up in low-income community businesses—the beneficiaries of 

NMTC financing—than would be the case if the program were simplified. 

An alternative to the NMTC could be the use of a grant program, 

recognizing that Congress has turned to grant programs in similar cases. 

Such grants would eliminate the program’s dependence on the market for 

tax credits and could reduce transaction costs. 

What GAO Has Found 

Indicating Potential 

for Cost Saving and 

Increasing Revenue 

Replacing the tax credit with a grant likely would increase the equity that 

could be placed in low-income businesses and make the federal subsidy 

more cost-effective. When CDE sell credits to investors to raise additional 

funds, the price investors pay for the credits reflects market conditions 

and the investors’ attitudes toward risk. According to CDE representatives 

GAO interviewed in 2009, when the demand for NMTCs was highest, 

before the housing market collapse and 2008 credit crisis, the tax credits 

sold for $0.75 to $0.80 per dollar. Therefore, the federal subsidy intended 

to assist low-income businesses was reduced by 20 percent to 25 percent 

before any funds were made available to CDE. Representatives from CDE 

GAO interviewed also noted that with low demand for the tax credits, as 

was the case when GAO conducted its work during 2009, the credits 

generally sold for about $0.65 to $0.70 and have sold for as little as $0.50 or 

less. After accounting for CDE and other third-party fees, such as asset 

management and legal fees, about 50 percent to 65 percent of the federal 

subsidy generally reaches low-income businesses. 

In a grant program, these up-front reductions in the federal subsidy could 

be largely avoided. If the grant program is well designed and at least as 

effective as the credit in attracting private investment, it could save a 

Page 276 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Converting the New Markets Tax Credit to a 

Grant Program May Increase Program 

Efficiency and Reduce the Overall Cost of the 

Program 

significant portion of the estimated $3.8 billion five-year revenue cost of 

the current program. 

Congress has turned to grant programs in other cases where tax credits 

had formerly been used. For example, to fill funding gaps in Low-Income 

Housing Tax Credit projects, under the American Recovery and 

Reinvestment Act of 2009, Congress offered the option of allowing state 

housing finance agencies to exchange Low-Income Housing Tax Credits 

for federal grants to subsidize low-income rental housing. 

However, CDFI officials were concerned that a grant may not channel a 

greater portion of the federal subsidy to intended recipients than the tax 

credit and a grant program could have administrative costs or other effects 

that would reduce its desirability. 

Actions Needed and 

Potential Savings and 

Revenue 

As stated in its January 2010 report, GAO continues to believe that 

Congress should consider offering grants in lieu of credits to CDE if it 

extends the program again. Doing so would help ensure that the maximum 

amount of capital ends up in low-income community businesses. If it does 

so, Congress should require Treasury to gather appropriate data to assess 

whether and to what extent the grant program increases the amount of 

federal subsidy provided to low-income community businesses compared 

to the NMTC; how costs for administering the program incurred by the 

CDFI Fund, CDE, and investors would change; and whether the grant 

program otherwise affects the success of efforts to assist low-income 

communities. One option would be for Congress to set aside a portion of 

funds to be used as grants and a portion to be used as tax credit allocation 

authority under the current structure of the program to facilitate 

comparison of the two program structures. Such a study could help 

resolve uncertainties about the relative effectiveness of grants and the tax 

credit in promoting economic development. Although eliminating the tax 

credit would increase federal revenues, replacing the NMTC with a grant 

would introduce outlay costs. However, given that the federal subsidy to 

low-income community businesses was reduced by 20 percent to 25 

percent up front even when the price paid by investors to claim NMTC was 

at its highest and transaction costs due to the credit’s structure can be 

substantial, the grant could result in a similar amount of investment in 

low-income communities at a lower overall cost to the federal 

government. 

Page 277 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Converting the New Markets Tax Credit to a
 

Grant Program May Increase Program 


Efficiency and Reduce the Overall Cost of the 


Program 


The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

New Markets Tax Credit: The Credit Helps Fund a Variety of Projects in Related GAO Product Low-Income Communities, but Could be Simplified. GAO-10-334. 

Washington, D.C.: January 29, 2010. 

For additional information about this area, contact Michael Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 278 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Limiting the Tax-Exempt Status of Certain Limiting the Tax-Exempt Status of Certain 
 Governmental Bonds Could Yield Revenue 

Governmental Bonds Could Yield Revenue 


Why GAO Is Focusing 

on This Area 

Federal tax revenue losses for state and local tax-exempt bonds were 

about $28 billion in 2010, according to GAO’s analysis of the Department 

of the Treasury’s estimates. The loss occurs because taxpayers can 

exclude the bond interest from their federal taxable income. 

For federal tax purposes, tax-exempt bonds are classified as either 

governmental bonds or private activity bonds. In general, governmental 

bonds are used to build public capital facilities like roads and serve the 

general public interest. Private activity bonds, which can be either taxable 

or nontaxable depending on their purpose, provide financing to private 

businesses and are subject to restrictions that do not apply to 

governmental bonds. State and local governments have issued 

governmental bonds for facilities, such as sports stadiums, that are 

generally considered to be for private use but may serve some broader 

public purpose. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Tax-exempt bonds are sometimes used to fund facilities or activities that 

are private in nature, costing the federal government revenue losses for 

purposes that may not merit federal subsidies. State and local 

governments have broad discretion in deciding which activities and 

facilities to finance using tax-exempt bonds. When they issue 

governmental bonds for facilities and activities that are essentially private, 

such as for hotels and golf courses, they may indicate that the bonds serve 

a broader public purpose. For example, they may indicate there are 

benefits to the community that extend beyond the purpose of the facility 

being financed by the bonds or that the facilities provide certain services 

to those who would not otherwise be able to use them. GAO was asked to 

identify hotels and municipal golf courses funded with tax-exempt bonds 

and found 18 hotels financed from 2002 through 2006 and six golf courses 

that opened in 2005 that GAO could confirm had some tax-exempt bond 

financing. However, it is not clear whether facilities like hotels and golf 

courses always provide public benefits to federal taxpayers that extend 

beyond the purposes of the facilities. Since GAO’s 2008 report, applicable 

laws that would limit the use of tax-exempt bond financing have not been 

changed. 

Members of Congress have recently shown interest in whether certain 

facilities providing benefits that are essentially private in nature, such as 

stadiums, should be financed with tax-exempt governmental bonds. 

However, similar attention has not been given to other types of facilities. 

Page 279 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Limiting the Tax-Exempt Status of Certain 


Governmental Bonds Could Yield Revenue 


Actions Needed and 

Potential Revenue 

GAO continues to believe, as indicated in its February 2008 report, that as 

Congress considers whether tax-exempt governmental bonds should be 

used for professional sports stadiums that are generally privately used, it 

also should consider whether other privately used facilities, including 

hotels and golf courses, should continue to be financed with such bonds. 

How much additional federal revenue would be gained would depend on 

how broadly Congress applies new limitations. For instance, because 

wider-ranging limitations on governmental bonds would reduce the 

purposes for which such bonds may be issued, limitations that applied 

only to sports stadiums would raise less revenue than limitations that 

applied more broadly to include additional types of facilities, such as 

hotels and golf courses. 

The information contained in this analysis is based on the related GAO Framework for product listed below and updated data on the amount of lost federal 

Analysis revenue each year. 

Tax Policy: Tax-Exempt Status of Certain Bonds Merits Related GAO Product Reconsideration, and Apparent Noncompliance with Issuance Cost 

Limitations Should Be Addressed. GAO-08-364. Washington, D.C.: 

February 15, 2008. 

For additional information about this area, contact Michael Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 280 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adjusting Civil Tax Penalties for Inflation 

Could Help Increase Collections and Deter 

Noncompliance 

Adjusting Civil Tax Penalties for Inflation Could Help 

Increase Collections and Deter Noncompliance 

Why GAO Is Focusing 

on This Area 

The Internal Revenue Code has over 150 civil penalties that potentially 

deter taxpayer noncompliance. A number of civil tax penalties have fixed 

dollar amounts—either a specific dollar amount, or a minimum or 

maximum amount—that are not indexed for inflation. Over time, the lack 

of indexing can decrease the real value of Internal Revenue Service (IRS) 

assessments and collections significantly. Further, not adjusting the fixed 

penalties also means they are not maintained at the level Congress initially 

believed was appropriate to deter noncompliance. Finally, not adjusting 

these penalties for inflation may lead to inconsistent treatment of 

otherwise equal taxpayers over time because taxpayers who were 

penalized when the amounts were originally set could effectively pay a 

higher penalty than taxpayers who were penalized many years later. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

GAO has long recommended the periodic adjustment of civil tax penalties 

for inflation and previously identified that almost all of the increased 

revenues from inflation-adjusting penalties would have come from 4 of the 

22 penalties it reviewed. In recent years Congress has adjusted some 

penalties, but has not inflation-adjusted the majority of penalties GAO 

studied and has rarely required IRS to inflation-adjust penalties going 

forward. In resetting penalties since GAO’s report, Congress has generally 

fully restored their value but one fell well below a full adjustment. GAO 

continues to believe that adjusting civil penalties for inflation could increase 

collections, help deter noncompliance, and better ensure consistent 

treatment of taxpayers over time. 

GAO found in August 2007 that adjusting civil tax penalty fixed-dollar 

amounts for inflation from 2000 to 2005 would have increased IRS 

collections by an estimated $38 million to $61 million per year based on a 

limited number of penalties GAO reviewed (see table below). Almost all of 

the estimated increase in collections would have been generated by four 

penalties: 

•	 failure to file tax returns, 

•	 failure to file correct information returns, 

•	 various penalties on returns by exempt organizations and by certain 

trusts, and 

•	 failure to file partnership returns. 

Page 281 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adjusting Civil Tax Penalties for Inflation 

Could Help Increase Collections and Deter 

Noncompliance 

Estimated Increase in IRS Collections from Inflation-Adjusting of Penalties 

Assessed, 2000-2005 

Dollars in millions 

Increased collections after 

Assessment year penalty adjustment 

2000 $38.2 

2001 42.1 

2002 47.9 

2003 53.2 

2004 61.0 

2005 60.3 

Source: GAO analysis of IRS data. 

These increases would have resulted because some of the penalties were 

set decades earlier and had decreased significantly in real value—in some 

cases by over one-half. For example, by 2007, the failure-to-file-tax-returns 

penalty decreased in real value by 53 percent since it had been set in 1982, 

and the failure-to-file-partnership-returns penalty decreased in real value 

by 64 percent since it had been set in 1979. 

Since August 2007, Congress has increased the amount of five fixed 

penalties, three of which—failure to file correct information returns, failure 

to file partnership returns, and failure to file tax returns—were among the 

four penalties GAO had previously found would increase IRS collections the 

most if they were inflation-adjusted. The adjustment to one of the five— 

failure to file tax returns—was about two-thirds short of the level needed to 

fully adjust for inflation since the penalty was set in 1982. The 2008 

adjustment to the failure-to-file-tax-returns penalty moved it from $100 to 

$135 whereas a full adjustment would have been to $225. Recently, in 2010, 

Congress did act to require IRS to periodically inflation-adjust two 

penalties—one of which—the failure to file correct information returns— 

Congress had increased since 2007 and one—intentional failure to file a 

certain information return form—it had not. Those more recent 

requirements for inflation-adjusting were consistent with the intent of 

GAO’s previously stated position that Congress should consider requiring 

IRS to periodically adjust fixed-penalty amounts for inflation. However, 

many fixed penalties have not been adjusted at all and only the two will be 

periodically inflation-adjusted in the future. 

According to GAO interviews with officials in the IRS offices that would 

be involved, the likely administrative burden associated with adjusting the 

Page 282 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Adjusting Civil Tax Penalties for Inflation 

Could Help Increase Collections and Deter 

Noncompliance 

fixed-dollar amounts of civil tax penalties for inflation on a regular basis 

would not be significant for IRS. Officials from the Office of Penalties, 

which has only a few staff, thought some additional staff might be needed 

to coordinate the necessary changes to forms, training materials, 

computer systems, and guidance, but not a significant increase. According 

to interviews with 28 tax practitioners associated with four professional 

organizations, periodic inflation adjustments to civil penalties likely would 

not place a significant burden on practitioners. 

Actions Needed and 

Potential Revenue 

In its August 2007 report, GAO said that Congress may want to consider 

requiring IRS to periodically adjust for inflation, and round appropriately, 

the fixed-dollar amounts of the civil penalties to account for the decrease 

in real value over time and so that penalties for the same infraction are 

consistent over time. Although Congress has increased the amount of 

some fixed penalties since GAO’s report, only two penalties are to be 

adjusted for inflation on a periodic basis. Consequently, GAO continues to 

believe Congress should consider requiring IRS to periodically adjust all 

fixed penalties for inflation. Increased revenues potentially could be in the 

tens of millions of dollars per year, not counting any revenues that may 

result from maintaining the penalties’ deterrent effect. 

The information contained in this analysis is based on the related GAO Framework for product listed below and additional GAO work from January 2008 through 

Analysis January 2011 to follow up on any actions taken pursuant to that report. 

Tax Compliance: Inflation Has Significantly Decreased the Real Value of Related GAO Product Some Penalties. GAO-07-1062. Washington, D.C.: August 23, 2007. 

For additional information about this area, contact Michael Brostek or Area Contact James White at (202) 512-9110 or brostekm@gao.gov or whitej@gao.gov. 

Page 283 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS May Be Able to Systematically Identify 

Nonresident Aliens Reporting Unallowed 

Deductions or Credits 

IRS May Be Able to Systematically Identify Nonresident 

Aliens Reporting Unallowed Deductions or Credits 

Why GAO Is Focusing 

on This Area 

Every year, the United States receives millions of legal visits by foreign 

individuals, some of whom have income from a U.S. source or are engaged 

in a U.S. trade or business. Individuals who are neither U.S. citizens nor 

residents are known as nonresident aliens for tax purposes and may be 

required to file federal income tax returns to report their U.S.-source 

income. For 2007, individuals filed about 634,000 nonresident alien income 

tax returns, reporting about $12.8 billion in income and $2.5 billion in tax. 

Nonresident aliens’ failure to comply with their tax requirements can 

contribute to the tax gap, which is the difference between the amount of 

taxes owed and the amount paid voluntarily and timely and was last 

estimated to be $345 billion. As it is for U.S. citizens and residents, the 

Internal Revenue Service (IRS) is responsible for ensuring that 

nonresident aliens comply with their tax obligations. IRS has not 

developed estimates for the extent of nonresident alien tax noncompliance 

because it often lacks information to distinguish between nonresident 

aliens and other filers. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

IRS may be missing an opportunity to identify more potentially 

noncompliant nonresident alien taxpayers because it does not 

systematically identify nonresidents filing the incorrect type of tax return. 

Nonresidents who file the individual tax return for U.S. citizens and 

residents (Form 1040) instead of the return for nonresidents (Form 

1040NR) may claim credits or take deductions to which they are not 

entitled, such as the earned income credit, which may lead to reduced tax 

revenue. IRS has generally conducted face-to-face examinations of 

nonresident aliens through special projects that focus on particular types 

of taxpayers, such as individuals employed by foreign embassies or 

consulates and international organizations in the United States. Through 

its examinations, IRS has found that some nonresidents improperly file 

Form 1040 instead of Form 1040NR. However, IRS does not have a 

program to automatically identify taxpayers who may have made this type 

of error. 

IRS may be able to systematically identify nonresidents who improperly 

file Form 1040 instead of 1040NR. As with U.S. citizens and residents, 

nonresidents must have a taxpayer identification number in order to file a 

tax return. Nonresidents who do not qualify for a Social Security number 

but have a valid filing requirement may apply to IRS for a 9-digit individual 

tax identification number to use in lieu of a Social Security number in 

filing a tax return and are to indicate if they are resident or nonresident 

aliens, or a spouse or dependent of either, on their applications. 

Page 284 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
IRS May Be Able to Systematically Identify
 

Nonresident Aliens Reporting Unallowed 


Deductions or Credits 


If IRS were able to identify taxpayers who should have filed Form 1040NR 

instead of Form 1040 by identifying tax returns filed with an individual tax 

identification number and using information from individual tax 

identification number applications, it may be able to cost-effectively 

address this form of noncompliance for some taxpayers and increase tax 

revenue. For example, IRS may be able to examine potentially 

noncompliant taxpayers through correspondence, which would be less 

time consuming, complex, and costly than the face-to-face examinations 

IRS has traditionally conducted for nonresident aliens. Without further 

study, IRS cannot know if systematically identifying and addressing 

nonresidents who filed an incorrect type of tax return would be costeffective. 

Actions Needed and 

Potential Revenue 

GAO recommended in April 2010 that IRS determine if creating an 

automated program to identify nonresident aliens who may have 

improperly filed Form 1040 instead of Form 1040NR would be a costeffective means to improve compliance. IRS has formed a team to study 

the feasibility of such a program, which it plans to complete by December 

2011. GAO plans to follow up on this issue to assess progress in 

completing the study as well as to identify potential revenue increases. 

The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

Tax Compliance: IRS May Be Able to Improve Compliance for Related GAO Product Nonresident Aliens and Updating Requirements Could Reduce Their 

Compliance Burden. GAO-10-429. Washington, D.C.: April 14, 2010. 

For additional information about this area, contact Michael Brostek at Area Contact (202) 512-9110 or brostekm@gao.gov. 

Page 285 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Tracking Undisbursed Balances in Expired 

Grant Accounts Could Facilitate the 

Reallocation of Scarce Resources or the 

Return of Funding to the Treasury 

Tracking Undisbursed Balances in Expired Grant 

Accounts Could Facilitate the Reallocation of Scarce 

Resources or the Return of Funding to the Treasury 

Why GAO Is Focusing 

on This Area 

According to Office of Management and Budget (OMB) estimates, federal 

grant awards to nonfederal entities, such as states and nonprofit 

organizations, increased from $300 billion in 2000 to over $500 billion in 

2009. If even a small fraction of the federal government’s total grant 

funding is not spent in a prudent and timely fashion, it can prevent the 

reallocation of scarce resources or the return of funding to the United 

States Treasury. 

Undisbursed funding is funding the federal government has obligated 

through a grant agreement, but which the grantee has not entirely spent. 

An expired grant account is an agency-level account for which the period 

of availability to the grantee has ended. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

The existence of unspent funds can hinder the achievement of national 

objectives in various ways, such as leaving projects incomplete or making 

federal funds more susceptible to improper spending or accounting as 

monitoring diminishes over time. Closeout procedures help ensure 

grantees have met all financial requirements, provided final reports, and 

that unused funds are de-obligated. However, past audits of federal 

agencies by GAO and Inspectors General, and agencies’ annual 

performance reports have suggested grant management challenges, 

including failure to conduct grant closeouts and undisbursed balances, are 

a long-standing problem. The audits generally attributed the problems to 

inadequacies in awarding agencies’ grant management processes, 

including regarding closeouts as a low management priority, inconsistent 

closeout procedures, poorly timed communications with grantees, or 

insufficient compliance or enforcement. 

GAO found that when federal agencies took corrective actions, there were 

improvements in grant closeouts and resolution of undisbursed funding. 

Using federal payment systems to track undisbursed funding in expired 

grant accounts and including the status of grant closeouts in annual 

performance reports could raise the visibility of the problem both within 

the agency and governmentwide, and lead to improvements in grant 

closeouts and reduce undisbursed balances. 

In August 2008, GAO reported that during calendar year 2006, about $1 

billion in undisbursed funding remained in expired grant accounts in the 

Department of Health and Human Services’ Payment Management System 

(PMS)—the largest civilian grant payment system. In 2006, PMS made 

payments for about 70 percent of all federal grants awarded by nine 

federal departments and three other federal entities. The expired but still 

Page 286 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Tracking Undisbursed Balances in Expired 

Grant Accounts Could Facilitate the 

Reallocation of Scarce Resources or the 

Return of Funding to the Treasury 

open grant accounts found in PMS were associated with thousands of 

grantees and over 325 different federal programs. While GAO has not 

updated this figure, it illustrates the potential financial benefits to be 

gained by improving oversight of undisbursed grant funding. Better 

tracking of grant accounts maintained in all federal payment systems 

could identify the expired grants with undisbursed balances and make 

funds available for other assistance projects or facilitate the return of 

these funds to the Treasury. GAO recommended that the Director of OMB 

instruct executive departments and independent agencies to annually 

track the amount of undisbursed grant funding remaining in expired grant 

accounts and report on the status and resolution of such funding in their 

annual performance plans and Performance and Accountability Reports 

(PAR). As of January 13, 2011, OMB had not issued governmentwide 

guidance regarding undisbursed balances in expired grant accounts. 

As an example of how agencies could be instructed to provide this 

information, section 537 of the Consolidated Appropriations Act of 2010 

(Public Law 111-117), signed into law on December 16, 2009, required that 

the Director of OMB instruct departments, agencies, and other entities 

receiving funds under the Commerce, Justice, Science and Related Agencies 

Act of 2010 to track undisbursed balances in expired grant accounts and 

include in its annual PARs details on the (1) actions the department, agency, 

or instrumentality will take to resolve such balances; (2) methods used to 

track such balances; (3) identification of balances that may be returned to 

the U.S. Treasury; and (4) the number of such accounts for the preceding 3 

years. In October 2010, OMB issued the instructions to the federal entities 

funded by this appropriations act, as required. GAO reviewed available 

fiscal year 2010 PARs and found three entities reported they had 

undisbursed and/or unobligated balances remaining in expired grant 

accounts over the last 3 or 4 years. The most recent balances that these 

agencies reported were as follows: Department of Justice, fiscal year 2010— 

$2.9 million; National Aeronautics and Space Administration (NASA), fiscal 

year 2009—$58 million; and National Science Foundation, fiscal year 2010— 

$1.7 billion. Of these three agencies, only NASA grant accounts were 

included in the total undisbursed balances GAO reported in 2008. 

In a recent example of how to identify, resolve, and quantify the savings 

resulting from resolving undisbursed funding in expired grant accounts, 

the U.S. Department of Agriculture’s Office of Inspector General reported 

in 2009 that the Agricultural Research Service (ARS) did not timely deobligate unused funds from 32 of 121 cooperative agreements that expired 

in fiscal years 2005 and 2006. The inspector general cited GAO in 

recommending that the ARS de-obligate the $2.75 million remaining on the 

Page 287 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Tracking Undisbursed Balances in Expired 

Grant Accounts Could Facilitate the 

Reallocation of Scarce Resources or the 

Return of Funding to the Treasury 

32 expired agreements to make the funds available for other research 

projects and prevent the potential misuse of funds. The ARS reported to 

the inspector general, in April 2009, that it had de-obligated the $2.75 

million, as recommended. 

Actions Needed and 

Potential Savings 

Better tracking of grant accounts maintained in all federal payment 

systems could identify the expired grants with undisbursed balances. 

Ongoing, systematic resolution of these undisbursed grant balances could 

potentially make these funds available for other assistance programs or 

facilitate the return of these funds to the Treasury. In August 2008, GAO 

recommended that OMB instruct all executive departments and 

independent agencies to track undisbursed balances in expired grant 

accounts and report on the resolution of this funding in their annual 

performance plan and PARs. While OMB has not issued governmentwide 

guidance regarding undisbursed balances in expired grant accounts, GAO 

continues to believe its recommendations should be implemented. 

The analysis above was based on a prior GAO product, GAO-08-432, listed Framework for below. 

Analysis 

Telecommunications: Long-Term Strategic Vision Would Help Ensure Related GAO Targeting of E-rate Funds to Highest-Priority Uses. GAO-09-253. 

Products Washington, D.C.: March 27, 2009. 

Grants Management: Attention Needed to Address Undisbursed Balances 

in Expired Grant Accounts. GAO-08-432. Washington, D.C.: August 29, 

2008. 

For additional information about this area, contact Stanley J. Czerwinski Area Contact at (202) 512-6520 or czerwinskis@gao.gov. 

Page 288 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Preventing Billions in Medicaid Improper 

Payments Requires Sustained Attention and 

Action by the Centers for Medicare & 

Medicaid Services 

Preventing Billions in Medicaid Improper Payments 

Requires Sustained Attention and Action by the Centers 

for Medicare & Medicaid Services 

Why GAO Is Focusing 

on This Area 

In fiscal year 2009, the Medicaid program covered over 65 million people at 

a cost to the federal government and states, which share the cost of the 

program, of an estimated $381 billion. Medicaid is a federal-state program 

that consists of more than 50 distinct state-based programs that cover acute 

health care and long-term care services for certain low-income individuals, 

including children and persons who are aged or disabled. The Congressional 

Budget Office has estimated that, under the Patient Protection and 

Affordable Care Act, enacted in 2010, the cost of the Medicaid expansion 

will exceed $430 billion from 2010 to 2019, with the federal government 

responsible for paying over 90 percent of these increased costs. 

The Centers for Medicare & Medicaid Services (CMS) in the Department of 

Health and Human Services (HHS) is responsible for overseeing the 

program at the federal level. States administer their respective programs’ 

day-to-day operations, including processing and paying claims submitted 

by health care providers for services provided to Medicaid beneficiaries. 

Due to the size, growth, and diversity of the Medicaid program, rigorous 

fiscal oversight is necessary to prevent improper payments. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Improper payments to Medicaid providers that submit inappropriate claims 

can result in substantial financial losses to states and the federal 

government. The amount of improper payments in the Medicaid program is 

among the largest of all government programs. For fiscal year 2010, HHS 

estimated that 9.4 percent of Medicaid payments were improper, 

representing $22.5 billion in federal expenditures. Medicaid payments can 

be improper for various reasons, including payments made for which 

required documentation is missing or inadequate or payments on claims 

with errors. Improper payments also include payments for people who are 

not eligible for Medicaid or to providers who are barred from participating 

in the program. For example, in 2009, GAO found that Medicaid 

beneficiaries and providers were involved in potentially wasteful or abusive 

purchases of controlled substances in five selected states. For example, 

GAO found that Medicaid paid over $2 million in controlled substance 

prescriptions during fiscal years 2006 and 2007 that were written or filled by 

65 medical practitioners and pharmacies that were barred, excluded, or 

both from federal health care programs, including Medicaid. 

State efforts to maximize federal reimbursement also can increase the risk 

of improper federal payments to states, to the extent states’ efforts may 

inappropriately shift state costs to the federal government. In 2005, GAO 

reported that a growing number of states were using contingency-fee 

consultants—consultants employed under contracts whereby payments 

Page 289 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Preventing Billions in Medicaid Improper 

Payments Requires Sustained Attention and 

Action by the Centers for Medicare & 

Medicaid Services 

were contingent upon the consultant’s performance—to maximize federal 

Medicaid reimbursement. States may employ consultants to serve valid 

Medicaid-related roles, such as adding needed staff or a particular 

expertise. However, in two states reviewed, GAO identified certain claims 

for federal funding from contingency-fee projects in five categories of 

Medicaid services that were problematic because they appeared to be 

inconsistent with CMS policy, were inconsistent with federal law, or 

undermined Medicaid fiscal integrity. GAO also found that CMS and state 

oversight of claims associated with contingency-fee projects was limited 

and recommended that CMS routinely require states to identify claims or 

projects developed by contingency-fee consultants. CMS recognizes that 

claims resulting from consultant revenue maximization projects are at 

higher risk of being inconsistent with certain federal Medicaid 

requirements, but as of the end of 2010 it had not established processes to 

routinely collect information enabling it to identify claims or projects 

developed by contingency-fee consultants to maximize federal 

reimbursement. Without adequate controls over improper payments and 

state maximization efforts, tens of billions of additional federal dollars are 

at risk as program expenditures grow. 

Actions Needed and 

Potential Savings 

Sustained agency attention is needed to implement and oversee processes 

to prevent, identify, and recover improper payments and to reduce the 

billions of dollars that are annually lost to improper Medicaid payments. 

Both the executive branch and Congress have acted to curtail improper 

Medicaid payments, but challenges in preventing such payments remain. 

The issuance of Presidential Memoranda and a 2009 Executive Order, 

Reducing Improper Payments, along with enactment of the Improper 

Payments Elimination and Recovery Act of 2010 (IPERA), are positive 

steps toward improving transparency and reducing improper payments. 

However, it is too soon to determine whether the activities called for in the 

Presidential Memoranda, Executive Order, and IPERA will achieve their 

goals of reducing improper payments. Further, the magnitude of the 

program’s payment errors indicates that CMS and the states face 

significant challenges to address the program’s vulnerabilities. In its 2009 

report on top management and performance challenges facing HHS, the 

HHS Office of Inspector General reported multiple priorities related to 

Medicaid, including the need to ensure the integrity of payments to 

providers by ensuring they are appropriately enrolled and eligible to 

receive payments. CMS has taken steps to strengthen its financial 

oversight of Medicaid, but the agency can do more to address gaps in its 

oversight and financial management. 

Page 290 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Preventing Billions in Medicaid Improper 


Payments Requires Sustained Attention and 


Action by the Centers for Medicare & 


Medicaid Services 


GAO recommended in 2009 that CMS issue guidance to states to 

implement processes that better prevent payment of improper claims for 

controlled substances in Medicaid. CMS generally agreed with GAO’s 

recommendations; however, guidance had not been issued as of the end of 

2010. With regard to Medicaid claims related to state efforts to maximize 

federal reimbursements, GAO recommended that CMS improve its 

oversight of projects developed by consultants on a contingency-fee basis, 

in part by routinely requesting information on these projects and 

associated claims. CMS stated in 2010 that it was committed to fully 

assessing the basis for all claims, but indicated it did not plan to routinely 

request this information. GAO maintains that the high-risk nature of 

consultant-led maximization projects to shift state costs to the federal 

government by submitting claims for federal matching funds that are 

inconsistent with federal law or CMS policy, warrants their identification 

and close oversight. 

The information contained in this analysis is based on work GAO has Framework for conducted over the past 5 years, ongoing work examining the federal 

Analysis government efforts to curtail improper payments, and recent work to 

update the status of recommendations. 

Related GAO 

Products 

Medicaid: Fraud and Abuse Related to Controlled Substances Identified 

in Selected States. GAO-09-957. Washington, D.C.: September 9, 2009. 

Improper Payments: Progress Made but Challenges Remain in 

Estimating and Reducing Improper Payments. GAO-09-628T. 

Washington, D.C.: April 22, 2009. 

Improper Payments: Status of Agencies’ Efforts to Address Improper 

Payment and Recovery Auditing Requirements. GAO-08-438T. 

Washington, D.C.: January 31, 2008. 

Improper Payments: Federal Executive Branch Agencies’ Fiscal Year 

2007 Improper Payment Estimate Reporting. GAO-08-377R. Washington, 

D.C.: January 23, 2008. 

Medicaid Financial Management: Steps Taken to Improve Federal 

Oversight but Other Actions Needed to Sustain Efforts. GAO-06-705. 

Washington, D.C.: June 22, 2006. 

Page 291 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Preventing Billions in Medicaid Improper 

Payments Requires Sustained Attention and 

Action by the Centers for Medicare & 

Medicaid Services 

Medicaid Financing: States’ Use of Contingency-Fee Consultants to 

Maximize Federal Reimbursements Highlights Need for Improved 

Federal Oversight. GAO-05-748. Washington, D.C.: June 28, 2005. 

For additional information about this area, contact Katherine Iritani at Area Contact (202) 512-7114 or iritanik@gao.gov. 

Page 292 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Federal Oversight over Medicaid 

Supplemental Payments Needs Improvement 

 

Federal Oversight over Medicaid Supplemental 

Payments Needs Improvement 

Why GAO Is Focusing 

on This Area 

Strong federal oversight of Medicaid is warranted as the program 

continues to grow in size and cost, and GAO has had long-standing 

concern with the adequacy of federal oversight of state Medicaid 

supplemental payments. Each state administers a Medicaid program and 

covers a variety of health care services for low-income individuals. The 

federal government oversees states’ Medicaid programs and, by a formula 

established in law, pays from half to more than three-fourths of each 

state’s Medicaid expenditures. Subject to certain requirements, states 

establish Medicaid payment rates for providers and may make 

supplemental payments to providers, which are separate from and in 

addition to standard state Medicaid payment rates. States make two 

general types of supplemental payments. First, Disproportionate Share 

Hospital (DSH) payments are required under federal law to be made to 

hospitals that serve a large number of low-income individuals and are 

designed to help offset hospitals’ uncompensated costs for serving 

Medicaid and uninsured low-income individuals. Second, states often 

make non-DSH Medicaid supplemental payments, which are also funded in 

part with federal dollars, for example to help offset the costs of care 

provided to individuals covered by Medicaid. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Varied financing arrangements that states use to make Medicaid 

supplemental payments can inappropriately increase federal Medicaid 

matching payments. GAO found that, under certain financing 

arrangements, some states paid state or local government providers 

supplemental payments that greatly exceeded standard Medicaid rates, 

resulting in large matching payments from the federal government. Some 

states required providers to return most, or all, of the large supplemental 

payments to the state, which the states then used for other purposes. Such 

financing arrangements threaten the fiscal integrity of Medicaid’s federal 

and state partnership because they effectively increase the federal 

Medicaid share above what is established by law, and there is no 

assurance that federal Medicaid funds are used for Medicaid purposes. 

The Centers for Medicare & Medicaid Services (CMS) within the 

Department of Health and Human Services—the agency that oversees 

Medicaid at the federal level—has taken action to curb inappropriate 

payments, but gaps in oversight remain. For example, in 2003, CMS began 

an initiative to closely review supplemental payment arrangements and 

required states to end those it found inappropriate; however, in 2008, GAO 

reported that CMS had not reviewed all arrangements to ensure that 

payments were appropriate and used for Medicaid purposes. In 2009, GAO 

found that ongoing federal oversight of supplemental payments was 

Page 293 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Federal Oversight over Medicaid 

Supplemental Payments Needs Improvement 

warranted, in part because in two of the four states reviewed the states did 

not comply with federal requirements to account for all Medicaid 

payments when calculating DSH payment limits for uncompensated 

hospital care. States calculate these limits to provide assurances that DSH 

payments to hospitals do not exceed individual hospitals’ actual costs of 

providing services. For a small number of hospitals, the state calculation 

errors resulted in payments in excess of hospital limits. In two states, a 

state-operated hospital received combined Medicaid supplemental and 

standard Medicaid payments that exceeded the hospital’s total operating 

costs by 3 percent in one case and 6 percent in another. 

In 2011, under federal regulations, improved transparency and 

accountability requirements will become effective for state DSH payments, 

including standards for state calculations of DSH payment limits. Also, 

states will be required to report DSH payments on a facility basis and to 

obtain independent audits for their DSH payment reports and calculations. 

Under the Patient Protection and Affordable Care Act, reductions in 

federal DSH expenditures will occur in future years. At the same time, 

similar requirements are not in place for non-DSH payments, which appear 

to be increasing. In 2006 states reported making $6.3 billion in non-DSH 

supplemental Medicaid payments, of which the federal share was $3.7 

billion, but not all states were reporting their payments. By 2010, this 

amount had grown to $14 billion, with a federal share $9.6 billion, 

however, according to CMS officials reporting was likely incomplete. 

Requirements for DSH supplemental payments, such as standards for 

calculating the amount of the payments and reporting of payments on a 

facility specific basis, do not apply to non-DSH supplemental payments. 

Further, processes have not been implemented to ensure that all 

supplemental payment arrangements are reviewed. 

Actions Needed and 

Potential Savings 

In light of the magnitude of Medicaid supplemental payments and recent 

reported growth of non-DSH supplemental payments, along with past 

concerns about the inappropriateness of some supplemental payments, 

further action by CMS is warranted to ensure that these payments are 

appropriate and used for Medicaid purposes. Some key prior GAO 

recommendations aimed at improving federal oversight of supplemental 

payments have not been implemented. In particular, GAO has 

recommended that CMS establish uniform guidance for states that sets 

acceptable methods for calculating non-DSH payment amounts, require 

facility specific reporting of non-DSH supplemental payments, and develop 

a strategy to ensure all state supplemental payment arrangements have 

been reviewed by CMS. 

Page 294 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Federal Oversight over Medicaid 

Supplemental Payments Needs Improvement 

Given concerns associated with Medicaid supplemental payments, strong 

and sustained CMS oversight is necessary. Ensuring that the federal 

government provides matching funds only for appropriate supplemental 

payments could result in substantial costs savings. 

The information contained in this analysis is based on work GAO has Framework for conducted over the past 15 years and recent work to update the status of 

Analysis prior recommendations and payment amounts. 

Related GAO 

Products 

Medicaid: Ongoing Federal Oversight of Payments to Offset 

Uncompensated Hospital Care Costs Is Warranted. GAO-10-69. 

Washington D.C.: November 20, 2009. 

Medicaid: CMS Needs More Information on the Billions of Dollars Spent 

on Supplemental Payments. GAO-08-614. Washington, D.C.: May 30, 2008. 

Medicaid Financing: Long-standing Concerns about Inappropriate State 

Arrangements Support Need for Improved Federal Oversight. 

GAO-08-650T. Washington D.C.: April 3, 2008. 

Medicaid Financing: Long-standing Concerns about Inappropriate State 

Arrangements Support Need for Improved Federal Oversight. 

GAO-08-255T. Washington D.C.: November 1, 2007. 

Medicaid Financing: Federal Oversight Initiative Is Consistent with 

Medicaid Payment Principles but Needs Greater Transparency. 

GAO-07-214. Washington, D.C.: March 30, 2007. 

Medicaid: State Financing Schemes Again Drive Up Federal Payments. 

GAO/T-HEHS-00-193. Washington D.C.: September 6, 2000. 

Medicaid: States Use Illusory Approaches to Shift Program Costs to 

Federal Government. GAO/HEHS-94-133. Washington D.C.: August 1, 1994. 

For additional information about this area, contact Katherine Iritani at Area Contact (202) 512-7114 or iritanik@gao.gov. 

Page 295 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Targeting of Medicare’s Claims Review Better Targeting of Medica Could Reduce Improper Payments re’s Claims Review Could 

Reduce Improper Payments 

Why GAO Is Focusing 

on This Area 

The Centers for Medicare & Medicaid Services (CMS)—the agency that 

administers Medicare—has estimated that improper payments for 

Medicare fee-for-service (FFS) were $34.3 billion in fiscal year 2010. 

Because the program’s complexity and size make it vulnerable to billions 

of dollars in improper payments—over- and underpayments that should 

not have been made—GAO has designated it as a high-risk program. CMS 

and its contractors conduct activities to identify improper payments, 

including reviewing claims before and after payment. CMS contractors are 

also responsible for processing and paying approximately 4.5 million 

claims per work day, which makes the volume and cost to review the 

claims challenging. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Aspects of the Medicare program’s design make it susceptible to improper 

payments and effective use of payment controls can help ensure that these 

improper payments are minimized. GAO found that improving automated 

review and better targeting of claims to review manually could help 

prevent improper payments. 

Medicare is designed to pay claims promptly and the number of claims it 

receives limits the amount of possible review. CMS is generally required to 

pay electronic claims between 14 and 30 days from the date of receipt and 

the program now pays 4.5 million claims each work day. The amount of 

program payments that are made with minimal review has made Medicare 

a target for fraud, waste, and abuse that can result in improper payments. 

Medicare requires that covered services be reasonable and medically 

necessary—and of course, be provided as claimed. Since it was first 

estimated in 1996, Medicare’s improper payment rate has been in the 

billions of dollars each year, although efforts to improve the methodology 

used for the estimate have made current year estimates noncomparable to 

any made before 2009. Prior to 1996, CMS had controls in place to try to 

minimize improper payments and beginning in fiscal year 1997, Congress 

provided funds specifically for CMS activities designed to ensure that 

claims are paid correctly. CMS allocates these funds to contractors that 

conduct a number of activities, including a limited amount of claims 

review, to help prevent or identify and address improper payments. 

Despite agency efforts, CMS still faces challenges in designing and 

implementing internal controls to effectively prevent or recoup improper 

payments and to prevent fraud, waste, and abuse. Previous GAO products 

identified some specific weaknesses in the area of claims review and made 

recommendations to implement key strategies related to automating and 

targeting claims review that are particularly important to helping prevent 

Page 296 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Targeting of Medicare’s Claims Review 

Could Reduce Improper Payments 

fraud, waste, and abuse, and ultimately, to reducing improper payments. 

The claims review weaknesses identified include: 

Prepayment review of claims did not identify atypical billing associated 

with fraud. Overall, less than 1 percent of Medicare’s claims are subject to a 

medical record review by trained personnel—so having robust automated 

payment controls in place that can deny inappropriate claims or flag them 

for further review is critical. However, GAO has found weaknesses in this 

area. Specifically, in 2007, GAO found that contractors responsible for 

reviewing claims from suppliers of durable medical equipment, prosthetics, 

orthotics, and supplies did not have automated prepayment controls in 

place to identify questionable claims that might suggest fraud, such as those 

associated with atypically rapid increases in billing or for items unlikely to 

be prescribed in the course of routine quality medical care. 

Postpayment claims review was not focused on most vulnerable areas. 

Postpayment reviews are critical to identifying payment errors, recouping 

overpayments, or repaying underpayments. CMS’s contractors have 

conducted limited postpayment reviews—for example, GAO reported in 

2009 that the contractors paying claims for home health care conducted 

postpayment reviews on fewer than 700 of the more than 8.7 million 

claims that they paid in fiscal year 2007. Further, GAO found they were not 

using evidence, such as findings from prepayment review, to target their 

postpayment review resources on providers with a demonstrated high risk 

of improper payments. 

Regular cross-checking of claims for home health services with the 

physicians listed as prescribing them was not always done. CMS does 

not routinely provide physicians responsible for authorizing home health 

care with information that would enable them to determine whether a 

home health agency (HHA) was billing for unauthorized care. In one 

instance, a CMS contractor identified overpayments in excess of $9 million 

after interviewing physicians whose names and signatures appeared on 

referrals for beneficiaries with high home health costs. Some physicians 

indicated their signatures had been forged or they had not realized the 

amount of care they had authorized. 

CMS’s new national recovery audit contracting program, begun in 

March 2009, added to postpayment efforts; but not for fraud-prone 

claims. Recovery audit contractors (RAC) review claims after payment, 

with reimbursement to them contingent on the improper over- and 

underpayments identified. According to CMS, because RACs are paid fees 

contingent on the dollar value of the improper payments identified, RACs 

Page 297 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Targeting of Medicare’s Claims Review
 

Could Reduce Improper Payments 


have focused on high-dollar claims from inpatient hospital stays, not other 

services prone to improper payment, such as home health services. 

Actions Needed and 

Potential Savings 

More targeted claims review could help reduce improper payments. While 

the potential for savings exists, the extent of savings realized would 

depend on the efforts taken to address weaknesses in the review process. 

GAO continues to believe that CMS should address these previously made 

recommendations: 

•	 In 2007, GAO recommended that CMS require its contractors to 

develop thresholds for unexplained increases in billing and use them to 

develop automated prepayment controls. CMS agreed with this 

recommendation in its comments on the report, but has not 

implemented it. The agency has added other prepayment controls to 

flag claims for services that were unlikely to be provided in the normal 

course of medical care. However, implementing GAO’s 

recommendation and adding additional prepayment controls could 

enhance identification of improper claims before they are paid. 

•	 In 2009, GAO’s report on home health services recommended that 

postpayment reviews be conducted on claims submitted by HHAs with 

high rates of improper billing identified through prepayment review. 

CMS did not indicate that it agreed or disagreed with this 

recommendation and has not implemented it. The agency stated that its 

contractors conduct pre- and postpayment reviews for HHAs with high 

utilization as resources allow. However, this might not lead to 

postpayment review of claims by HHAs with high rates of improper 

prepayment billing and GAO continues to believe that such reviews 

would be valuable. 

•	 The 2009 home health report also recommended that CMS require that 

physicians receive a statement of home health services beneficiaries 

received based on the physicians’ certification. The agency agreed to 

consider this recommendation, but has not taken action. Such action 

could also be beneficial for other items and services susceptible to fraud 

and abuse that are often not directly billed by physicians, such as highcost durable medical equipment, prosthetics, orthotics, and supplies. 

CMS indicated in 2010 that the Affordable Care Act included a section 

requiring a physician (or nonphysician working for or in collaboration 

with a physician) to document that a face-to-face encounter with the 

physician occurred before home health services can be implemented. 

Page 298 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Better Targeting of Medicare’s Claims Review
 

Could Reduce Improper Payments 


However, the actual services provided could differ from what the initial 

ordering physician intended, and the initial documentation of a face-toface encounter would not address that issue. 

In addition, as GAO pointed out in 2010 testimony on Medicare fraud, 

waste, and abuse, because the RACs are focusing on review of hospitals, 

other contractors’ postpayment review activities could be more valuable if 

CMS directed these contractors to focus on services where RACs are not 

expected to focus their reviews, and where improper payments are known 

to be high, specifically home health services. 

The amount that could be saved from taking these actions has not been 

estimated and would depend on how they were implemented. 

The information contained in this analysis is based on findings from the Framework for GAO reports listed below.

Analysis 

Related GAO 

Products 

Medicare Fraud, Waste, and Abuse: Challenges and Strategies for 

Preventing Improper Payments. GAO-10-844T. Washington, D.C.: 

June 15, 2010. 

Medicare Recovery Audit Contracting: Weaknesses Remain in 

Addressing Vulnerabilities to Improper Payments, Although 

Improvements Made to Contractor Oversight. GAO-10-143. Washington, 

D.C.: March 31, 2010. 

Improper Payments: Progress Made but Challenges Remain in 

Estimating and Reducing Improper Payments. GAO-09-628T. 

Washington, D.C.: April 22, 2009. 

Medicare: Improvements Needed to Address Improper Payments in 

Home Health. GAO-09-185. Washington, D.C.: February 27, 2009. 

Medicare: Improvements Needed to Address Improper Payments for 

Medical Equipment and Supplies. GAO-07-59. Washington, D.C.: 

January 31, 2007. 

For additional information about this area, contact Kathleen King at Area Contact (202) 512-7114 or kingk@gao.gov. 

Page 299 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Potential Savings in Medicare s Payments for 

Health Care 

’

Potential Savings in Medicare’s Payments for 

Health Care 

Why GAO Is Focusing 

on This Area 

Medicare expenditures are growing faster than the overall economy and 

are expected to continue to do so, leading to concerns about the program’s 

long-term sustainability. Furthermore, it is widely recognized that 

Medicare’s contribution to the nation’s long-term fiscal shortfall is 

considerable. 

The primary drivers of increased Medicare spending are growth in the 

volume of services (the number of services provided per beneficiary) and 

the intensity of services (services’ complexity and costliness). The 

behavior of physicians is particularly critical to attempts to control these 

increases, because physicians not only provide services, but also order 

services such as imaging studies and home oxygen. 

Medicare, which is administered by the Centers for Medicare & Medicaid 

Services (CMS), an agency of the Department of Health and Human 

Services (HHS), helps pay for hospital, physician, and other inpatient and 

outpatient services for about 38.7 million aged and 7.6 million disabled 

beneficiaries. According to the 2010 Medicare Trustees Report, about $336 

billion was spent on health care (excluding Medicare’s managed care and 

prescription drug spending for beneficiaries in those programs) in 2009. 

Medicare is funded primarily by tax revenues and beneficiaries’ premiums. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

Some Medicare spending for services provided and ordered by physicians 

may not be warranted, and Medicare’s review of claims is not always 

sufficiently targeted and systematic. For example, the wide geographic 

variation in Medicare spending per beneficiary—unrelated to health status 

or outcomes—suggests that health needs alone do not determine 

spending. In other cases, such as home oxygen, Medicare simply overpays. 

Additionally, Medicare pays for portions of some services twice because it 

fails to take into account the extent to which services that are commonly 

furnished together overlap. 

GAO has reviewed four specific areas in which a potential for savings 

exists: 

•	 Physician practice patterns. Some private and public health care 

purchasers have initiated programs to identify inefficient physicians— 

that is, physicians who provide and order a level of services that is 

excessive, given the patient’s health status—and to encourage patients 

to receive their care from other, more efficient physicians. GAO 

profiled Medicare generalist physicians and identified those whose 

practices included a higher proportion of overly expensive patients 

Page 300 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Potential Savings in Medicare’s Payments for 

Health Care 

(after adjusting for health status) than would occur by chance. GAO 

concluded that these physicians were likely to practice medicine 

inefficiently. GAO also profiled Medicare physicians in four 

specialties—cardiology, diagnostic radiology, internal medicine, and 

orthopedic surgery—and showed that expenditures for institutional 

services grew as the level of resource use increased. 

•	 Imaging services. From 2000 through 2006, expenditures for imaging 

services paid under the Medicare physician fee schedule more than 

doubled in nominal terms, increasing to about $14 billion. Spending on 

advanced imaging services such as CT scans, MRIs, and nuclear 

medicine, rose faster—17 percent per year—than spending on less 

complex services, such as ultrasound or X-ray. Although overall 

spending on imaging declined to $12.1 billion in 2007—primarily due to 

a cap imposed on certain imaging fees by the Deficit Reduction Act of 

2005—utilization continued to increase. While much of this growth may 

be appropriate, several other trends—including a shift toward 

provision of imaging services in physicians’ offices where there is less 

oversight, broader use of imaging by nonradiologists, and an almost 

eight-fold geographic variation in spending on in-office imaging in 

2006—raise concerns that imaging services may be over utilized. 

•	 Home oxygen. In 2009, Medicare spent $2.15 billion to provide home 

oxygen for beneficiaries with conditions such as chronic pulmonary 

disease. GAO reported more than a decade ago that Medicare payment 

rates for home oxygen were significantly higher than those of the 

Department of Veterans Affairs, and the HHS Office of Inspector 

General has reported several times that oxygen payment rates were 

excessive. Congress has reduced or limited payments several times— 

most recently in 2009. However, according to GAO’s analysis, payment 

rates remain higher than those of some other national payers. 

Additionally, the average monthly Medicare payment for home oxygen 

per beneficiary in 2009 was up to 44 percent higher than suppliers’ 

overall costs. Nearly all beneficiaries who receive home oxygen use a 

stationary oxygen concentrator and about two-thirds also use portable 

oxygen equipment. Although portable oxygen equipment typically 

requires refills, stationary concentrators do not.1

 However, Medicare’s 

bundled payment for stationary concentrators includes a payment for 

1

Stationary oxygen concentrators are electrically powered machines that extract oxygen 

from the air. 

Page 301 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Potential Savings in Medicare’s Payments for 

Health Care 

oxygen refills. Consequently, in 2008, in about one-third of instances in 

which Medicare paid for a stationary concentrator, it was also paying 

for oxygen refills that were not provided. 

•	 Physician payments. Medicare’s physician fees may not always reflect 

efficiencies that occur when services are commonly furnished together. 

For example, certain portions of practice expenses such as a nurse’s 

time preparing a patient for a medical procedure or a technician’s time 

setting up the required equipment are incurred only once when services 

are provided together; and certain portions of physician work 

activities—such as reviewing the patient’s medical record—occur only 

once when services are provided together, yet payment for these 

overlapping portions is generally included in the fee for each service, 

resulting in excessive payments by Medicare. CMS has implemented a 

multiple procedure payment reduction (MPPR) for certain imaging and 

surgical services when two or more related services are furnished 

together. Under the MPPR, the full fee is paid for the highest-price 

service and a reduced fee is paid for each subsequent service, but the 

policy has not been systematically applied to services commonly 

furnished together. Looking only at those services that had the greatest 

impact on Medicare expenditures, GAO identified areas, such as 

physical therapy, in which efficiencies for services commonly 

furnished together were not taken into account. 

Actions Needed and 

Potential Savings 

GAO has reported that significant potential for savings exists by profiling 

physician practice patterns to encourage more efficient provision of health 

care services, introducing prior approval requirements and other front-end 

approaches to better manage the use of imaging services, reducing and 

restructuring payments for home oxygen, and reforming payments for 

physician services so that when two services overlap, only one payment is 

made for the overlapping portion. 

•	 Profiling physicians’ practice patterns. GAO recommended in April 

2007 that CMS develop a profiling system to identify individual 

physicians with inefficient practice patterns and use the results to 

improve the efficiency of care financed by Medicare. Physicians play a 

central role in the generation of health care expenditures. About 20 

percent of services are provided by physicians. However, they 

influence up to 90 percent of spending by, for instance, referring 

patients to other physicians; admitting patients to hospitals, skilled 

nursing facilities, and hospices; and ordering services delivered by 

other health care providers, such as imaging studies, laboratory tests, 

Page 302 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Potential Savings in Medicare’s Payments for 

Health Care 

and home health services. GAO found that providing feedback to 

physicians on their practice patterns is a promising step toward 

encouraging efficiency in Medicare. However, GAO noted that CMS 

would likely have to seek legislative changes to maximize the 

usefulness of profiling—for example, changes that would allow CMS to 

incentivize beneficiaries to select efficient providers. The Medicare 

Improvements for Patients and Providers Act of 2008 directed the 

Secretary of HHS to establish a confidential physician feedback 

program. The Patient Protection and Affordable Care Act2

 expanded 

the program and also requires the Secretary of HHS to adjust payments 

to those physicians whose practice patterns promote both high-quality 

and the efficient use of health care services. The feedback program is 

in its early stages and potential savings to the $336 billion Medicare 

program will depend on implementation details. 

•	 Better management of imaging services. GAO recommended in June 

2008 that CMS examine the feasibility of adding more front-end 

management approaches, such as prior authorization, for imaging 

services. In this way, CMS might be able to improve its efforts to be a 

prudent purchaser of imaging services, which cost Medicare over $12 

billion in 2008. However, the Secretary of HHS has not implemented or 

examined the feasibility of these practices, saying in 2008 that it is 

concerned about administrative burden as well as the advisability of 

prior authorization for the Medicare program. It also questioned how 

prior authorization would fit within its current postpayment review 

program. Specific savings estimates are not available and would 

depend on the number of Medicare imaging services deemed 

inappropriate by additional front-end approaches. However, GAO 

continues to believe that additional front-end management would help 

Medicare become a more prudent purchaser of imaging services and 

could generate savings. 

•	 Reducing payments for home oxygen. GAO suggested in January 2011 

that Congress consider reducing Medicare home oxygen rates to align 

them more closely with the costs of supplying home oxygen. Congress 

has required the Secretary of HHS to institute competitive bidding for 

home oxygen and other durable medical equipment. Prices from the 

first round of competitive bidding took effect in nine geographic areas 

2

The Patient Protection and Affordable Care Act was signed by the President in 

March 2010. 

Page 303 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Potential Savings in Medicare’s Payments for 

Health Care 

in January 2011. According to CMS, the bid prices for home oxygen and 

other durable medical equipment for 2011 are 32 percent less than 

Medicare paid in 2010. However, this payment reduction will result in a 

payment reduction only in the nine geographic areas. In 2011, the 

process to expand competitive bidding to an additional 91 areas is 

expected to begin. Eventually competitive bidding is expected to 

expand beyond these first 100 areas. Certain geographic areas, such as 

rural areas, are exempt from competitive bidding until 2015. It will be 

several years before competitive bids affect Medicare payments for 

home oxygen nationwide. Therefore, GAO continues to believe it 

would be appropriate for Congress to consider reducing Medicare 

home oxygen payment rates. 

•	 Reducing payments for overlapping physician services. In a July 2009 

report, GAO recommended that CMS systematically review services 

commonly furnished together and implement a MPPR to capture 

efficiencies, where appropriate, for these services, focusing on those 

services that have the greatest impact on Medicare spending. GAO 

identified several areas, including physical therapy, where an MPPR 

could be applied to reflect efficiencies in overlapping services. GAO 

also recommended in this report that CMS expand the scope of its 

MPPR by applying it to nonsurgical and nonimaging services, such as 

physical therapy, thereby saving an estimated $500 million. Further, 

GAO recommended that the MPPR be applied to the part of the 

payment that covers a physician’s work; according to GAO’s estimates, 

if that were done only for imaging it would result in savings of $175 

million. CMS has taken some steps to implement GAO’s 

recommendations, but GAO cannot estimate the full extent of savings if 

CMS were to systematically review services commonly furnished 

together and eliminate duplicate payments. Under a Medicare budget 

neutrality provision, savings obtained from any significant change in 

physician payments for a particular service or set of services are added 

to the total amount available for paying physicians and are 

redistributed. Therefore, GAO also suggested in this report that 

Congress exempt savings attributable to the implementation of policies 

that reflect efficiencies occurring when services are furnished together 

from the budget neutrality requirement. 

In summary, GAO has identified numerous opportunities for savings in 

Medicare, and CMS has taken actions to address several of them. 

However, many actions remain to be taken, which could increase 

efficiencies and reduce Medicare’s spending. Increased congressional 

attention may be warranted in these areas. 

Page 304 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Potential Savings in Medicare’s Payments for
 

Health Care 


The information contained in this analysis is based primarily on the Framework for following related GAO products, supplemented by the 2010 Medicare 

Analysis 	 Trustees Report, the 2011 Proposed Rule for Medicare Physician Payment, 

the Patient Protection and Affordable Care Act, and data from CMS’s Web 

site. 

Related GAO 

Products 

Medicare Home Oxygen: Refining Payment Methodology Has Potential 

to Lower Program and Beneficiary Spending. GAO-11-56. Washington, 

D.C.: January 21, 2011. 

Medicare: Per Capita Method Can Be Used to Profile Physicians and 

Provide Feedback on Resource Use. GAO-09-802. Washington, D.C.: 

September 25, 2009. 

Medicare Physician Payments: Fees Could Better Reflect Efficiencies 

Achieved When Services Are Provided Together. GAO-09-647. Washington, 

D.C.: July 31, 2009. 

Medicare: Trends in Fees, Utilization, and Expenditures for Imaging 

Services before and after Implementation of the Deficit Reduction Act of 

2005. GAO-08-1102R. Washington, D.C.: September 26, 2008. 

Medicare Part B Imaging Services: Rapid Spending Growth and Shift to 

Physician Offices Indicate Need for CMS to Consider Additional 

Management Practices. GAO-08-452. Washington, D.C.: June 13, 2008. 

Medicare: Providing Systematic Feedback to Physicians on their 

Practice Patterns is a Promising Step Toward Encouraging Program 

Efficiency. GAO-07-862T. Washington, D.C.: May 10, 2007. 

Medicare: Focus on Physician Practice Patterns Can Lead to Greater 

Program Efficiency. GAO-07-307. Washington, D.C.: April 30, 2007. 

For additional information about this area, contact James C. Cosgrove at Area Contact (202) 512-7114 or cosgrovej@gao.gov. 

Page 305 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Department of Homeland Security’s 

Management of Acquisitions Could Be 

Strengthened to Reduce Cost Overruns and 

Schedule and Performance Shortfalls 

 

Department of Homeland Security’s Management of 


Acquisitions Could Be Strengthened to Reduce Cost 


Overruns and Schedule and Performance Shortfalls 


Why GAO Is Focusing 

on This Area 

The Department of Homeland Security (DHS), established in 2003 through 

the consolidation of 22 agencies with disparate missions, has obligated 

billions of dollars annually to meet its expansive homeland security 

mission. DHS acquisitions represent hundreds of billions of dollars in 

lifecycle costs and support a wide range of missions and investments 

including Coast Guard ships and aircraft, border surveillance and 

screening equipment, nuclear detection equipment, and systems to track 

the department’s financial and human resources. DHS has not effectively 

developed, acquired, and provided oversight of its complex investments, 

such as programs for securing the border and the nation’s transportation 

systems, with many programs experiencing cost overruns and schedule 

and performance shortfalls. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

DHS faces significant challenges in managing its acquisitions, including 

programs not meeting their cost, schedule, and performance expectations. 

Strengthening its acquisition management process would help DHS to 

deliver critical mission capabilities that meet identified needs on time and 

within budget, including helping to reduce the cost overruns and schedule 

delays that DHS continues to experience in many of the major acquisition 

programs GAO has reviewed. 

DHS acquisition spending has increased by 66 percent since fiscal year 

2004—from $8.5 billion in fiscal year 2004 to $14.2 billion in fiscal year 

2009—and DHS’s portfolio of complex acquisitions continues to expand. 

DHS has made progress in strengthening its acquisition management by, 

for example, implementing a revised acquisition management directive 

that includes more detailed guidance for programs to use in informing 

component and departmental decision making. However, most acquisition 

programs GAO has reviewed at the department have not met cost, 

schedule, and performance expectations.1

 In particular, most DHS 

acquisition programs reported cost growth from initial estimates. Further, 

most programs GAO reviewed experienced estimated or actual schedule 

delays in delivery of initial operating capability of an average of 12 months. 

As GAO reported in June 2010, weaknesses in the department’s acquisition 

management process continue to hinder the department’s ability to 

provide needed capabilities on time and within budget. For example: 

1

GAO reviewed 15 DHS major acquisition programs for which cost, schedule, and 

performance data were available. 

Page 306 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Department of Homeland Security’s 

Management of Acquisitions Could Be 

Strengthened to Reduce Cost Overruns and 

Schedule and Performance Shortfalls 

•	 DHS’s senior-level Acquisition Review Board had not reviewed most of 

its major acquisition programs by the end of fiscal year 2009 and 

programs that had been reviewed had not consistently implemented 

action items identified as part of the review by established deadlines. 

GAO’s prior work has shown that when these types of reviews are 

skipped or not fully implemented, programs move forward with little, if 

any, early department-level assessment of the programs’ costs and 

feasibility, which contributes to poor cost, schedule, and performance 

outcomes. DHS acquisition oversight officials said that funding and 

staffing levels have limited the number of programs they can review. 

GAO recommended that DHS identify and align sufficient management 

resources to implement oversight reviews in a timely manner. DHS 

generally concurred with the recommendation, and, as of January 2011, 

has reported taking action to address it. For example, DHS reported 

that it has increased its acquisition management staffing, and plans to 

hire more staff to develop cost estimates. DHS also reported that it 

held 35 Acquisition Review Board meetings in fiscal year 2010 and 

plans to hold between 36 and 40 in fiscal year 2011. In addition, DHS 

reported making progress in tracking and closing action items. These 

planned actions are positive steps and, if implemented effectively, 

could help strengthen DHS’s acquisition review process. However, it is 

too early to tell what impact these planned actions will have on the 

department’s review process. 

•	 DHS’s acquisition review process has not informed DHS’s annual 

budget process for funding major programs, and many major programs 

received funding without validation of mission needs and requirements, 

largely because department-level reviews were seldom conducted. 

DHS’s Joint Requirements Council, which was responsible for 

validating program requirements, stopped meeting in 2006. GAO 

recommended that the department ensure that budget decisions are 

informed by the results of investment reviews including approved 

acquisition information and cost estimates and reinstate the Joint 

Requirements Council or establish another departmental oversight 

board to perform this function. DHS concurred with this 

recommendation and, as of January 2011, was planning to establish a 

council to analyze DHS mission and strategic requirements. DHS also 

reported it plans to better link the development of requirements to 

resource allocation and program management. Until these efforts are 

fully and effectively implemented, DHS may continue to experience 

difficulties in ensuring that resources are allocated to acquisition 

programs commensurate with their requirements. 

Page 307 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Department of Homeland Security’s 


Management of Acquisitions Could Be 


Strengthened to Reduce Cost Overruns and 


Schedule and Performance Shortfalls 


•	 DHS has not developed accurate cost estimates for most of its major 

acquisition programs. For example, the Coast Guard’s Rescue 21 

search and rescue system has experienced significant cost growth—by 

131 percent since the department’s initial cost estimate in 2003—due 

to, among other things, underestimation of costs for program 

management, deployment, and operations and maintenance. GAO’s 

work has shown that accurate cost estimates are critical to making 

funding decisions, evaluating resource requirements, and developing 

performance measurement baselines. DHS has reported that the 

department is working to address this concern by assisting programs in 

developing cost estimates and obtaining independent cost estimates for 

some high-risk programs. While these are positive steps, until accurate 

cost estimates are in place, DHS will be challenged in making informed 

funding decisions and assessing program performance. 

•	 Over half of the 15 programs GAO reviewed awarded contracts to 

initiate acquisition activities without component or department 

approval of documents essential to planning acquisitions, setting 

operational requirements, and establishing acquisition program 

baselines. For example, the Secure Flight program for comparing air 

passengers’ information to terrorist watch lists did not have an 

approved program baseline until over 4 years after initiation of the 

acquisition, and U.S. Customs and Border Protection’s program to 

modernize its computer application for disseminating data to support 

port-of-entry inspections did not have a component or departmentapproved baseline after more than 6 years. Further, the Federal 

Emergency Management Agency has not yet approved an acquisition 

program baseline or other key program documents for its Integrated 

Public Alert and Warning System, which was initiated in 2004, and DHS 

did not develop its lifecycle cost estimates until 2009. GAO’s prior work 

has noted that without the development, review, and approval of these 

key documents, agencies are at risk of having poorly defined 

requirements that can negatively affect program performance and 

contribute to increased costs. In January 2011, DHS reported that it has 

begun to implement an initiative to assist programs with completing 

departmental approval of acquisition program baselines. However, it is 

too early to fully assess the impact of this planned initiative. 

GAO’s work has highlighted the need for the department to improve its Actions Needed and acquisition portfolio management and adhere to key acquisition 

Potential Savings management processes to help improve the department’s ability to deliver 

major acquisition programs to meet critical mission needs on time and 

Page 308 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Department of Homeland Security’s 


Management of Acquisitions Could Be 


Strengthened to Reduce Cost Overruns and 


Schedule and Performance Shortfalls 


within budget. Ensuring that requirements and cost estimates are well 

defined upfront could help DHS make sure there is a more accurate 

picture of the total costs and needs for a program. Further, establishing 

and measuring performance against department-approved baselines and 

indicators would help ensure that the acquisition program is on track with 

regard to performance, schedule, and cost. As GAO has recommended, 

DHS needs to ensure that its investment decisions are transparent and 

documented; ensure that budget decisions are informed by the results of 

acquisition investment reviews, including acquisition information and cost 

estimates; identify and align sufficient management resources, such as 

acquisition staff, to implement oversight reviews in a timely manner; and 

review and validate acquisition programs’ requirements. These actions, if 

implemented effectively, should help DHS identify and avoid the cost 

overruns and schedule delays that DHS acquisition programs have 

experienced. 

DHS is planning to address these challenges by, among other things, 

establishing an Investment Review Board to oversee activities of the 

Acquisition Review Board and the status of all acquisition investments; 

expanding its Acquisition Corps to provide trained procurement and 

program management professionals to manage DHS’s most critical 

acquisition programs; and developing a tool to track programs’ cost, 

schedule, and performance indicators. However, it is too early to tell what 

effect these planned changes will have on DHS’s acquisition management. 

In addition, due to previously mentioned concerns about the accuracy of 

current cost estimates and DHS challenges in measuring against cost, 

schedule, and performance baselines, GAO is unable to quantify future 

savings at this time. Success in reducing acquisition cost overruns will 

depend on DHS’s further implementation of key actions GAO has 

recommended for strengthening the department’s acquisition 

management. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Department of Homeland Security: Assessments of Selected Complex Related GAO Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. 

Products 

Aviation Security: TSA Is Increasing Procurement and Deployment of 

the Advanced Imaging Technology, but Challenges to This Effort and 

Page 309 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

Department of Homeland Security’s 


Management of Acquisitions Could Be 


Strengthened to Reduce Cost Overruns and 


Schedule and Performance Shortfalls 


Other Areas of Aviation Security Remain. GAO-10-484T. Washington, 

D.C.: March 17, 2010. 

Homeland Security: Despite Progress, DHS Continues to Be Challenged 

in Managing Its Multi-Billion Dollar Annual Investment in Large-Scale 

Information Technology Systems. GAO-09-1002T. Washington, D.C.: 

September 15, 2009. 

Department of Homeland Security: A Strategic Approach Is Needed to 

Better Ensure the Acquisition Workforce Can Meet Mission Needs. 

GAO-09-30. Washington, D.C.: November 19, 2008. 

Department of Homeland Security: Billions Invested in Major Programs 

Lack Appropriate Oversight. GAO-09-29. Washington, D.C.: November 18, 

2008. 

For additional information about this area, contact David Maurer at Area Contact (202) 512-9627 or maurerd@gao.gov; John Hutton at (202) 512-7773 or 

huttonj@gao.gov; or David Powner at (202) 512-9286 or pownerd@gao.gov. 

Page 310 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improvements in Managing Research and 

Development Could Help Reduce 

Inefficiencies and Costs for Homeland 

Security 

 

Improvements in Managing Research and Development 

Could Help Reduce Inefficiencies and Costs for 

Homeland Security 

Why GAO Is Focusing 

on This Area 

The federal government allocates billions of dollars for researching, 

developing, and testing technologies and other countermeasures to 

address chemical, biological, radiological, nuclear, and other threats 

facing the nation. The Department of Homeland Security’s (DHS) Science 

and Technology Directorate (S&T) conducts research and development 

efforts to improve homeland security by, among other things, providing its 

federal, state, local, tribal, and territorial emergency responder customers 

with technology to help them achieve their missions. DHS’s Domestic 

Nuclear Detection Office (DNDO) is charged with developing, acquiring, 

and deploying equipment to detect nuclear and radiological materials, 

supporting the efforts of DHS and other federal agencies. According to 

DHS documents, the total budget authority for S&T and DNDO was over 

$5.8 billion for fiscal years 2007 through 2010. 1

 DHS has experienced 

challenges in managing its multibillion dollar research and development 

efforts, and GAO has identified problems with its testing and cost-benefit 

analyses efforts in this area. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

In managing its multibillion dollar research and development efforts, DHS 

has experienced cost overruns and delays in the procurement and 

deployment of technologies and systems needed to meet critical homeland 

security needs. DHS could help reduce inefficiencies and costs in its 

research and development program by completing testing efforts before 

making acquisition decisions and including cost-benefit analyses in its 

research and development efforts. 

DHS has made acquisition decisions without completing testing efforts to 

ensure that the systems purchased met program requirements. GAO’s prior 

work has shown that failure to resolve problems discovered during testing 

can sometimes lead to costly redesign and rework at a later date. 

Addressing such problems during the testing phase before moving to the 

acquisition phase can help agencies avoid future cost overruns. 

•	 In September 2010, GAO reported that DNDO was simultaneously 

engaged in the research and development phase while planning for the 

acquisition phase of its cargo advanced automated radiography system 

to detect certain nuclear materials in vehicles and containers at ports. 

1

GAO determined total budget authority for S&T and DNDO based on DHS’s Monthly 

Budget Execution Reports for fiscal years 2007 through 2010. GAO has not independently 

verified amounts in the reports. 

Page 311 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improvements in Managing Research and 

Development Could Help Reduce 

Inefficiencies and Costs for Homeland 

Security 

DNDO pursued the deployment of the cargo advanced automated 

radiography system without fully understanding that it would not fit 

within existing inspection lanes at ports of entry and would slow down 

the flow of commerce through these lanes, causing significant delays. 

DHS spent $113 million on the program since 2005. DHS cancelled the 

acquisition phase of the program in 2007. 

•	 In June 2010, GAO reported that three Coast Guard programs—the 

Maritime Patrol Aircraft, Response Boat-Medium, and Sentinel Class 

Patrol Boat—placed orders for or received significant numbers of units 

prior to completing testing, placing the Coast Guard at risk for needing 

to make expensive changes to the design of these vessels after 

production had begun if significant problems were identified during 

testing. Acquisition cost estimates for these three programs together 

totaled about $6.8 billion, according to Coast Guard data. 

•	 In October 2009, GAO reported that the Transportation Security 

Administration (TSA), within DHS, deployed explosives trace portals, a 

technology for detecting traces of explosives on passengers at airport 

checkpoints, even though TSA officials were aware that tests 

conducted during 2004 and 2005 on earlier models of the portals 

suggested the portals did not demonstrate reliable performance in an 

airport environment. TSA also lacked assurance that the portals would 

meet functional requirements in airports within estimated costs. In 

June 2006, TSA halted deployment of the explosives trace portals 

because of performance problems, and the machines were more 

expensive to install and maintain than expected. GAO recommended 

that TSA ensure that tests are completed before deploying checkpoint 

screening technologies to airports. The agency concurred with the 

recommendation and has taken action to address it. For example, TSA 

has required more recent passenger checkpoint technologies to 

complete both laboratory tests and operational tests prior to their 

deployment. 

In addition, GAO’s prior work has shown that cost-benefit analyses help 

congressional and agency decision makers assess and prioritize resource 

investments and consider potentially more cost-effective alternatives. 

However, DHS has not included cost-benefit analyses in its testing efforts 

and acquisition decision making. 

•	 In 2006, GAO recommended that DHS’s decision to deploy next 

generation radiation detection equipment, or advanced spectroscopic 

portals, used to detect smuggled nuclear or radiological materials, be 

Page 312 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improvements in Managing Research and 

Development Could Help Reduce 

Inefficiencies and Costs for Homeland 

Security 

based on an analysis of both the benefits and costs—which GAO later 

estimated at over $2 billion—and a determination of whether any 

additional detection capability provided by the portals was worth their 

additional cost. DHS subsequently issued a cost-benefit analysis, but 

GAO reported that this analysis did not provide a sound analytical basis 

for DHS’s decision to deploy the portals. In June 2009 GAO reported 

that an updated cost-benefit analysis might show that DNDO’s plan to 

replace existing equipment with advanced spectroscopic portals was 

not justified, particularly given the marginal improvement in detection 

of certain nuclear materials required of advanced spectroscopic portals 

and the potential to improve the current-generation portal monitors’ 

sensitivity to nuclear materials, most likely at a lower cost. After 

spending more than $200 million on the program, in February 2010 DHS 

announced that it was scaling back its plans for development and use 

of the portals technology. 

•	 In October 2009 GAO reported that TSA had not yet completed a costbenefit analysis to prioritize and fund its technology investments for 

screening passengers at airport checkpoints. One reason that TSA had 

difficulty developing a cost-benefit analysis was that it had not yet 

developed lifecycle cost estimates for its various screening 

technologies. GAO reported that this information was important 

because it would help decision makers determine, given the cost of 

various technologies, which technology provided the greatest 

mitigation of risk for the resources that were available. GAO 

recommended that TSA develop a cost-benefit analysis. The agency has 

completed a lifecycle cost estimate and collected information for its 

checkpoint technologies, but has not yet completed any cost-benefit 

analysis. 

In January 2011, DHS reported that it plans to take additional actions to 

strengthen its research and development efforts. For example, DHS 

reported that it plans to establish a new model for managing 

departmentwide investments across their life cycles. DHS reported that 

S&T will be involved in each phase of the investment life cycle and will 

participate in new entities DHS is planning to create to help ensure that 

test and evaluation methods are appropriately considered as part of DHS’s 

overall research and development investment strategies. According to 

DHS, S&T will help ensure that new technologies are properly scoped, 

developed, and tested before being implemented. In addition, DHS 

reported that the new entities it is planning to establish to strengthen 

management of the department’s acquisition and investment review 

process will be responsible for, among other things, making decisions on 

Page 313 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improvements in Managing Research and 

Development Could Help Reduce 

Inefficiencies and Costs for Homeland 

Security 

research and development initiatives based on factors such as viability and 

affordability, and overseeing key acquisition decisions for major programs 

using baseline and actual data. 

Actions Needed and 

Potential Savings 

GAO’s work has highlighted the need for the department to strengthen its 

research and development efforts by ensuring that (1) testing efforts are 

completed before making acquisition decisions and (2) cost-benefit 

analyses are conducted to reduce research and development inefficiencies 

and costs. The planned actions DHS reports it is taking or has under way 

to address management of its research and development programs are 

positive steps and, if implemented effectively, could help the department 

address many of these challenges. However, it is too early to fully assess 

the impact of these actions. 

GAO has reported that DHS could take further actions to improve its 

management of research and development efforts and reduce costs in 

procuring and deploying programs that have not been fully tested. For 

example, rigorously testing devices using actual agency operational tactics 

before making decisions on acquisition would help DHS reduce 

inefficiencies and costs. Further, conducting cost-benefit analyses as part 

of research, development, and testing efforts would help DHS and 

congressional decision makers better assess and prioritize investment 

decisions, including assessing possible program alternatives that could be 

more cost-effective. 

The information contained in this analysis is based on the related GAO Framework for products listed below. GAO has ongoing work for the Senate Committee 

Analysis 	 on Homeland Security and Governmental Affairs reviewing the role that 

S&T has in conducting testing and evaluation of major acquisitions 

programs prior to implementation. 

Related GAO 

Products 

Combating Nuclear Smuggling: Inadequate Communication and 

Oversight Hampered DHS Efforts to Develop an Advanced Radiography 

System to Detect Nuclear Materials. GAO-10-1041T. Washington D.C.: 

September 15, 2010. 

Combating Nuclear Smuggling: DHS Has Made Some Progress but Not 

Yet Completed a Strategic Plan for Its Global Nuclear Detection Efforts or 

Closed Identified Gaps. GAO-10-883T. Washington D.C.: June 30, 2010. 

Page 314 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Improvements in Managing Research and 


Development Could Help Reduce 


Inefficiencies and Costs for Homeland 


Security
 

Department of Homeland Security: Assessments of Selected Complex 

Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. 

Aviation Security: DHS and TSA Have Researched, Developed, and 

Begun Deploying Passenger Checkpoint Screening Technologies, but 

Continue to Face Challenges. GAO-10-128. Washington, D.C.: October 7, 

2009. 

Combating Nuclear Smuggling: Lessons Learned from DHS Testing of 

Advanced Radiation Detection Portal Monitors. GAO-09-804T. 

Washington, D.C.: June 25, 2009. 

Combating Nuclear Smuggling: DHS Improved Testing of Advanced 

Radiation Detection Portal Monitors, but Preliminary Results Show 

Limits of the New Technology. GAO-09-655. Washington D.C.: May 21, 

2009. 

For additional information about this area, contact David Maurer at Area Contact (202) 512-9627 or maurerd@gao.gov. 

Page 315 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Validation of TSA’s Behavior-Based Screening 

Program Is Needed to Justify Funding or 

Expansion 

 

Validation of TSA’s Behavior-Based Screening Program 

Is Needed to Justify Funding or Expansion 

Why GAO Is Focusing 

on this Area 

The terrorist attacks of September 11, 2001, highlighted the need to 

improve security within the nation’s civil aviation system to deter persons 

seeking to repeat similar attacks on the nation’s critical infrastructure. To 

enhance aviation security, the Department of Homeland Security’s (DHS) 

Transportation Security Administration (TSA) began testing in October 

2003 of its Screening of Passengers by Observation Techniques (SPOT) 

program to identify persons who may pose a risk to aviation security. In 

fiscal year 2010, about 3,000 Behavior Detection Officers were deployed to 

161 airports at an annual cost of over $200 million. As highlighted in GAO’s 

May 2010 report, TSA did not validate the science supporting the program 

or determine if behavior detection techniques could be successfully used 

across the aviation system to detect threats before deploying the SPOT 

program. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

TSA has implemented and now seeks to expand a behavior screening 

program, which has not yet been validated. A validation study is 

underway, but questions exist regarding whether the study’s methodology 

is sufficiently comprehensive to validate the SPOT program. The results of 

an independent assessment are needed to determine whether current 

validation efforts are sufficiently comprehensive to validate the program. 

After operationally testing behavioral detection screening started in 

October 2003, TSA created separate Behavior Detection Officer positions 

as part of the SPOT program beginning in fiscal year 2007. TSA designed 

SPOT to provide these officers with a means of identifying persons who 

may pose a potential security risk at TSA-regulated airports by focusing on 

behaviors and appearances that deviate from an established baseline, and 

that may be indicative of stress, fear, or deception. Behavior Detection 

Officers have been selectively deployed to 161 of the 462 TSA-regulated 

airports in the United States. The conference report accompanying the 

fiscal year 2010 DHS appropriations act provided that $211.9 million was 

for the SPOT program.1

 The administration has requested $232 million for 

SPOT for fiscal year 2011, a $20.2 million (9.5 percent) increase over the 

current funding level. This increase would support a workforce increase 

from about 3,000 to 3,350 Behavior Detection Officers. 

As discussed in GAO’s May 2010 report, TSA deployed SPOT nationwide 

before first determining whether there was a scientifically valid basis for 

1

H.R. Rep. 111-298, at 77 (2009) (Conf. Rep.). 

Page 316 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

Validation of TSA’s Behavior-Based Screening 

Program Is Needed to Justify Funding or 

Expansion 

using behavior and appearance indicators as a means for reliably 

identifying passengers who may pose a risk to the U.S. aviation system. 

According to TSA, SPOT was deployed before a scientific validation of the 

program was completed in response to the need to address potential 

threats, but was based upon scientific research available at the time 

regarding human behaviors. TSA officials also stated that no other largescale U.S. or international screening program incorporating behavior- and 

appearance-based indicators has ever been rigorously scientifically 

validated. 

However, a 2008 report issued by the National Research Council of the 

National Academy of Sciences noted that an information-based program, 

such as a behavior detection program, should first determine if a scientific 

foundation exists and use scientifically valid criteria to evaluate its 

effectiveness before going forward. The report added that programs 

should have a sound experimental basis and that the documentation on 

the program’s effectiveness should be reviewed by an independent entity 

capable of evaluating the supporting scientific evidence.2

 Thus, and as 

recommended in GAO’s May 2010 report, an independent panel of experts 

could help DHS develop a comprehensive methodology to determine if the 

SPOT program is based on valid scientific principles that can be effectively 

applied in an airport environment for counterterrorism purposes. 

Specifically, GAO’s May 2010 report recommended that the Secretary of 

Homeland Security convene an independent panel of experts to review the 

methodology of a validation study on the SPOT program being conducted 

by DHS’s Science and Technology Directorate to determine whether the 

study’s methodology is sufficiently comprehensive to validate the SPOT 

program. GAO recommended that this assessment include appropriate 

input from other federal agencies with expertise in behavior detection and 

relevant subject matter experts. DHS concurred and stated that its current 

validation study includes an independent review of the program that will 

include input from other federal agencies and relevant experts. According 

to DHS, this independent review is expected to be completed in February 

2011. 

2

A study performed by the JASON program office raised similar concerns. The JASON 

program office is an independent scientific advisory group that provides consulting 

services to the U.S. government on matters of defense science and technology. 

Page 317 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Validation of TSA’s Behavior-Based Screening 

Program Is Needed to Justify Funding or 

Expansion 

Actions Needed and 

Potential Savings 

As discussed in GAO’s May 2010 report, DHS has contracted with the 

American Institutes for Research to conduct its validation study. However, 

DHS’s response to GAO’s report did not describe how the review currently 

planned is designed to determine whether the study’s methodology is 

sufficiently comprehensive to validate the SPOT program. As GAO noted 

in its report, research on other issues, such as determining the number of 

individuals needed to observe a given number of passengers moving at a 

given rate per day in an airport environment or the duration that such 

observation can be conducted by Behavior Detection Officers before 

observation fatigue affects effectiveness, could provide additional 

information on the extent to which SPOT can be effectively implemented 

in airports. Additional research could also help determine the need for 

periodic refresher training since research has not yet determined whether 

behavior detection is easily forgotten or can be potentially degraded with 

time or lack of use. Because such questions exist, using an independent 

panel of experts to assess the methodology of the study could provide 

DHS with additional assurance regarding whether the study’s methodology 

is sufficiently comprehensive to validate the SPOT program. DHS stated 

that the ongoing independent review is being conducted by an 

independent panel of experts that includes a broad range of operational 

agencies and academia and will include, among other things, 

recommended additional studies that should be undertaken to more fully 

validate the science underlying the SPOT screening process. Moreover, 

DHS stated that its current effort to validate the science underlying SPOT 

includes three years of operational SPOT referral data and preliminary 

results indicate that it is supportive of SPOT. However, in May 2010, GAO 

reported weaknesses in TSA’s process for maintaining operational data 

from the SPOT program database. Because of these data-related issues, 

GAO reported that meaningful analyses could not be conducted to 

determine if there is an association between certain behaviors and the 

likelihood that a person displaying certain behaviors would be referred to 

a law enforcement officer or whether any behavior or combination of 

behaviors could be used to distinguish deceptive from nondeceptive 

individuals. 

Congress may wish to consider limiting program funding pending receipt 

of an independent assessment of TSA’s SPOT program. GAO identified 

potential budget savings of about $20 million per year if funding were 

frozen at current levels until validation efforts are complete. Specifically, 

in the near term, Congress could consider freezing appropriation levels for 

the SPOT program at the 2010 level until the validation effort is completed. 

Assuming that TSA is planning to expand the program at a similar rate 

each year, this action could result in possible savings of about $20 million 

Page 318 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Validation of TSA’s Behavior-Based Screening 


Program Is Needed to Justify Funding or 


Expansion 


per year, since TSA is seeking about a $20 million increase for SPOT in 

fiscal year 2011. Upon completion of the validation effort, Congress may 

also wish to consider the study’s results—including the program’s 

effectiveness in using behavior-based screening techniques to detect 

terrorists in the aviation environment—in making future funding decisions 

regarding the program. 

The information contained in this analysis is based on the related GAO Framework for product listed below.

Analysis 

Aviation Security: Efforts to Validate TSA’s Passenger Screening Related GAO Product Behavior Detection Program Underway, but Opportunities Exist to 

Strengthen Validation and Addresses Operational Challenges. 

GAO-10-763. Washington, D.C.: May 2010. 

For additional information about this area, contact Steve Lord at Area Contact (202) 512-4379 or lords@gao.gov. 

Page 319 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Efficient Baggage Screening Systems 

Could Result in Substantial Reduction in 

Personnel Costs 

 

 

 

More Efficient Baggage Screening Systems Could 


Result in Substantial Reduction in Personnel Costs 


Why GAO Is Focusing 

on This Area 

The Transportation Security Administration’s (TSA) Electronic Baggage 

Screening Program—which facilitates the development and deployment of 

checked baggage screening systems—is one of the largest acquisition 

programs in the Department of Homeland Security. According to TSA, 

over $8 billion has been made available for enhancing the screening of 

checked baggage transported on passenger aircraft since fiscal year 2001. 

In fiscal year 2010, over $1 billion was made available to procure and 

install screening equipment. The Department of Homeland Security’s fiscal 

year 2011 request amounts to $624 million for procurement and 

installation in fiscal year 2011.1 

Through the Electronic Baggage Screening Program, TSA deploys baggage 

screening systems to best fit security needs and infrastructure at the 462 

airports at which TSA performs or oversees screening activities. TSA 

generally deploys equipment for screening checked baggage in one of two 

ways: (1) in-line baggage screening systems, which are integrated into the 

conveyor systems that sort and transport baggage for loading onto an aircraft 

and (2) stand-alone machines that are typically situated in airport lobbies. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

GAO estimates that TSA could achieve up to $470 million in net savings 

based on reduced TSA staffing costs through the replacement or 

modification of existing systems with more efficient baggage screening 

systems at airports over the next 5 years, assuming that funding for 

procurement and installation under the Electronic Baggage Screening 

Program continues at TSA-projected levels.2 

In March 2005, GAO reported that airports benefit from the installation of 

more efficient systems, such as in-line baggage screening systems, because 

these systems reduce the time needed for baggage screening and allow 

airports and TSA to streamline their operations. Moreover, a 2006 Aviation 

Security Advisory Committee study reported that modifying or replacing 

existing systems with more efficient systems could reduce the number of 

1

From this amount, TSA also plans to support its Security Technology Integrated Program, 

Advanced Surveillance Program, and other programs related to the operation and 

integration of security technologies. 

2

Net savings account for differences in acquisition, modification, installation, and operation 

and maintenance costs between existing systems replaced with more efficient systems at 

airports. 

Page 320 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

More Efficient Baggage Screening Systems 

Could Result in Substantial Reduction in 

Personnel Costs 

screener personnel required to operate these systems.3 In 2005, GAO also 

reported that TSA had not conducted a systematic, prospective analysis to 

determine at which airports it could achieve long-term savings and 

enhance efficiencies and security by installing more efficient in-line 

systems. GAO recommended, among other things, that TSA identify and 

prioritize the airports where the cost-savings benefits of optimizing 

baggage screening operations by replacing existing baggage screening 

systems with more efficient in-line systems are likely to exceed the 

estimated up-front investment costs of installing the systems, or where the 

systems are needed to address security risks. TSA concurred with this 

recommendation and published a plan to deploy more efficient systems 

for 250 airports. As of January 2011, TSA plans to complete its efforts to 

replace or modify systems at these airports by 2024. TSA officials have not 

provided GAO with information on its plans at the remaining airports. 

Replacing or modifying existing systems with more efficient systems 

results in net personnel cost savings to the extent all other costs, except 

for personnel—acquisition, installation, modification, and operations and 

maintenance costs—are relatively equal over time. Using TSA data on its 

planned average annual program budget rate of $448 million and estimated 

screener personnel costs, GAO estimates that if TSA continues to replace 

or modify older systems with more efficient systems, including in-line 

screening systems, it could reduce full-time equivalent baggage screener 

positions as a result of investments made in fiscal years 2011 through 2015. 

This reduction in personnel could result in up to $470 million in estimated 

3

The committee, comprised of government and private sector representatives, examines 

areas of civil aviation security to develop recommendations for improving aviation security 

methods, equipment, and procedures. 

Page 321 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
 

 

 

 

 

 

 

 

 

More Efficient Baggage Screening Systems 

Could Result in Substantial Reduction in 

Personnel Costs 

net cost savings.4 These estimates are based on airport planning and 

acquisition costs for 250 airports provided by TSA that are subject to 

change but are illustrative of the potential magnitude of federal cost 

savings that could be achieved. More precise estimates could be developed 

as these plans are further developed and refined. 

Actions Needed and 

Potential Savings 

By continuing to replace or modify older systems with more efficient 

solutions, including in-line screening systems, at its planned average annual 

program budget rate of $448 million,5

 TSA could continue to eliminate 

baggage screener positions achieving up to $470 million in estimated net 

costs savings over the next 5 years.6

 TSA agreed that the deployment of 

more efficient systems offers potential cost savings to the federal 

government. GAO will continue to assess these issues as part of its ongoing 

work examining more efficient checked baggage screening systems for the 

4

GAO estimates that these cost savings are equivalent to up to approximately 10,400 

cumulative full-time equivalent screener positions resulting from investments for fiscal years 

2011 through 2015. To calculate these estimated cost savings, GAO computed an average 

return on investment by determining the projected 5-year savings TSA could realize by 

replacing or modifying baggage systems at individual airports in 2009 and comparing the 

savings to funding made available to TSA in fiscal year 2009 for procurement and installation 

of the systems. First, GAO calculated the present value of estimated full-time equivalent 

savings across a 5-year period (i.e., fiscal years 2009 through 2013) which totaled about $117 

million in fiscal year 2009. The $117 million assumes differences in acquisition, modification, 

installation, and operation and maintenance costs between existing systems, and more 

efficient systems at airports continue to be relatively equal. This assumption is based on 

TSA’s analysis conducted in 2004 and 2005, which was the most recent analysis available. 

GAO reviewed and reported on this analysis in its March 2005 report. Second, GAO divided 

the cost savings by the $544 million in funding made available for procurement and 

installation in fiscal year 2009 (excluding any carry-over balances from prior fiscal years and 

funds appropriated through the American Recovery and Reinvestment Act). Thus, the average 

return on TSA’s investment or the ratio of cost savings as a share of investment is $117/$544 

million, or about 0.21. GAO multiplied this ratio (0.21) by TSA’s planned future program 

budget for replacing or modifying baggage systems for fiscal year 2011 through fiscal year 

2015 (assuming TSA receives funding at anticipated levels) to estimate the resulting net cost 

savings. However, the 0.21 ratio may not necessarily continue into the future depending on 

changing costs and circumstances. To calculate the average annual program budget, GAO 

used information TSA provided on its planned annual program budget on acquisition and 

planning costs for fiscal years 2011 through 2014. GAO did not have information on TSA’s 

planned annual program budget for fiscal year 2015. 

5

TSA’s Office of Security Technology, Acquisition Review Board presentation, 

November 5, 2009. 

6

Anticipated cost savings may be reduced as TSA diverts funding to, for example, 

recapitalize existing baggage screening systems for sustained operations. 

Page 322 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
More Efficient Baggage Screening Systems 

Could Result in Substantial Reduction in 

Personnel Costs 

Senate Committee on Commerce, Science and Transportation. GAO plans to 

report on the final results of this review in 2011. 

Framework for 

Analysis 

This analysis is based on GAO’s preliminary observations from its ongoing 

work as well as information contained in the related GAO products listed 

below. To develop GAO’s preliminary observations, GAO reviewed available 

documentation on TSA’s checked baggage screening program, including 

TSA’s estimated cost data for full-time equivalent screeners from fiscal year 

2009 to fiscal year 2013; TSA’s planned program budget data for continued 

installation of more efficient systems; and modification costs from fiscal 

years 2009 to fiscal years 2010. GAO could not independently verify the 

reliability of all of this information, but it compared this information with 

other supporting documents, when available, to determine data consistency 

and reasonableness. On the basis of these efforts, GAO concluded that the 

data were sufficiently reliable for its purposes. 

Related GAO 

Products 

Department of Homeland Security: Assessments of Selected Complex 


Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. 


Airport Finance: Observations on Planned Airport Development Costs 


and Funding Levels and the Administration’s Proposed Changes in the 


Airport Improvement Program. GAO-07-885. Washington, D.C.: 


June 29, 2007. 


Aviation Security: Cost Estimates Related to TSA Funding of Checked 


Baggage Screening Systems at Los Angeles and Ontario Airports. 


GAO-07-445. Washington, D.C.: March 30, 2007. 

Aviation Security: TSA Has Strengthened Efforts to Plan for the Optimal 

Deployment of Checked Baggage Screening Systems, but Funding 

Uncertainties Remain. GAO-06-875T. Washington, D.C.: June 29, 2006. 

Aviation Security: Enhancements Made in Passenger and Checked 

Baggage Screening, but Challenges Remain. GAO-06-371T. Washington, 

D.C.: April 4, 2006. 

Aviation Security: Systematic Planning Needed to Optimize the 

Deployment of Checked Baggage Screening Systems. GAO-05-365. 

Washington, D.C.: March 15, 2005. 

For additional information about this area, contact Steve Lord at Area Contact (202) 512-4379 or lords@gao.gov. 

Page 323 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Clarifying Availability of Certain Customs Clarifying Availability of Certain Customs Fee Fee Collections Could Produce Savings 

Collections Could Produce Savings 

Why GAO Is Focusing 

on This Area 

The U.S. Customs and Border Protection (CBP) collects user fees to 

recover certain costs incurred for processing, among other things, air and 

sea passengers; and various private and commercial land, sea, air, and rail 

carriers and shipments. These fees were created by the Consolidated 

Omnibus Budget Reconciliation Act of 1985 (COBRA) and are deposited 

into the Customs User Fee Account. CBP also receives appropriations, 

including a Salaries and Expenses appropriation. To pay for certain 

expenses, it reimburses its salaries and expenses appropriation from its 

COBRA collections. 

GAO discovered that CBP has a $639.4 million unobligated balance in its 

Customs User Fee Account as a result of excess collections from a 

temporary fee increase and elimination of North American Free Trade 

Agreement (NAFTA) country exemptions from January 1, 1994, to 

September 30, 1997. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Clarifying the availability of unobligated balances in CBP’s Customs User 

Fee Account could enable Congress to revise the agency’s future 

appropriations, thereby producing a one-time savings of up to $640 

million. When the NAFTA Implementation Act was amended in 1993, in 

addition to authorizing a temporary increase in the COBRA user fees 

charged to passengers arriving in the United States from abroad on 

commercial vessels or aircraft from $5 to $6.50, the amendment also 

temporarily lifted the exemption for passengers arriving from Mexico, 

Canada and adjacent islands, and U.S. territories (other than Puerto Rico). 

The additional amounts collected due to these temporary adjustments, 

which expired in 1997, were deposited in the Customs User Fee Account 

and were available for reimbursement of inspection costs, including those 

related to passenger processing. These funds, which accumulated from 

January 1, 1994, to September 30, 1997, remain unobligated in the account. 

GAO first identified these unobligated balances in 2008. CBP officials 

stated at that time that although they formerly believed they needed 

additional authorization to spend these balances, it later appeared that the 

funds may be used as authorized by law. However, when GAO discussed 

these unobligated balances again in 2009 and 2010, CBP officials said they 

provided information on the excess collections to the Office of 

Management and Budget (OMB) and requested OMB’s assistance multiple 

times to clarify the availability of these funds. They said OMB has not 

responded to their request. 

Page 324 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Clarifying Availability of Certain Customs 


Fee Collections Could Produce Savings 


GAO believes this is an issue that Congress may wish to address since Actions Needed and these unobligated balances have remained in CBP’s Customs User Fee 

Potential Revenue 	 account for more than 10 years. Congress could clarify the purposes for 

which the $640 million in unobligated balances is available and take action 

as appropriate. 

Framework for 

Analysis 

This analysis is based on reviews of CBP’s user fee accounts, which were 

provided to Congress as technical advice in a Budget Justification Review 

in the context of GAO’s annual review of the President’s annual budget 

request. GAO conducted that work in accordance with all sections of 

GAO’s Quality Assurance Framework that were relevant to its objectives. 

The framework requires that GAO plan and perform the engagement to 

obtain sufficient and appropriate evidence to meet its stated objectives 

and to discuss any limitations in its work. GAO believes that the 

information and data obtained, and the analysis conducted, provide a 

reasonable basis for any findings and conclusions. 

There are no publicly available products related to this analysis. Related GAO 

Products 

For additional information about this area, contact Susan Irving at Area Contact (202) 512-8288 or irvings@gao.gov. 

Page 325 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Social Security Needs Data on Pensions from 

Noncovered Earnings to Better Enforce 

Offsets and Ensure Benefit Fairness 

Social Security Needs Data on Pensions from 

Noncovered Earnings to Better Enforce Offsets and 

Ensure Benefit Fairness 

Why GAO Is Focusing 

on This Area 

The Social Security Administration (SSA) needs accurate information from 

state and local governments on retirees who receive pensions from 

employment not covered under Social Security. SSA needs this 

information to fairly and accurately apply the Government Pension Offset 

(GPO), which generally applies to spouse and survivor benefits, and the 

Windfall Elimination Provision (WEP), which applies to retired worker 

benefits. Information on receipt of pensions from noncovered employment 

is not available to SSA for many state and local pension benefits, even 

though it is for federal pension benefits from the federal Office of 

Personnel Management. The resulting disparity in the application of the 

provisions is a continuing source of confusion and frustration for affected 

workers. Providing information on the receipt of state and local 

noncovered pension benefits to SSA via tax data could help the agency 

more accurately and fairly administer the GPO and WEP and could save 

nearly $3 billion over 10 years, according to estimates by the Office of 

Management and Budget. 

Social Security covers about 96 percent of all U.S. workers; the vast 

majority of the remaining 4 percent are public employees who work for 

federal, state, and local government. In the case of state and local 

government employees, about one-fourth, or about 7 million, have jobs 

that are not covered by Social Security. Although these workers do not pay 

Social Security taxes on their noncovered government earnings, they may 

still be eligible for Social Security benefits through their spouses’ or their 

own earnings from other jobs that Social Security does cover. Social 

Security’s GPO and WEP provisions attempt to take noncovered 

employment into account when calculating the Social Security benefits. 

However, these provisions have been difficult to administer because SSA 

does not have the pension data it needs to perform these calculations 

accurately. 

One of Social Security’s most fundamental principles is that benefits 

reflect the earnings on which workers have paid Social Security taxes. At 

the same time, Social Security helps ensure that its beneficiaries have 

adequate incomes. Social Security’s benefit provisions redistribute income 

in a variety of ways—from those with higher lifetime earnings to those 

with lower ones and from those without dependents to those with 

dependents. Such distributional effects depend, to a great extent, on the 

universal and compulsory nature of the program. Noncovered employment 

has unintended effects on these distributional outcomes. Accordingly, 

Social Security uses the GPO and WEP to take noncovered employment 

into account. 

Page 326 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Social Security Needs Data on Pensions from 

Noncovered Earnings to Better Enforce 

Offsets and Ensure Benefit Fairness 

The GPO provides an offset for spouses with noncovered earnings that is 

similar to an offset that applies, in effect, to spouses with covered 

earnings. Under Social Security’s benefit provisions, workers may be 

entitled to (1) retired worker benefits based on their own covered earnings 

or to (2) spouse or survivor benefits based on their spouses’ covered 

earnings. However, they are not entitled to receive both, only the higher of 

the two. In effect, spouses with covered earnings are subject to an offset 

equal to 100 percent of their spouse or survivor benefits if their retired 

worker benefits are higher. Similarly, the GPO reduces the Social Security 

spousal benefit for workers who also receive a worker’s pension from 

noncovered employment. 

The WEP provides an offset to retired worker benefits and accounts for 

the fact that workers with noncovered pensions have higher lifetime 

earnings than the covered earnings on which their benefits are calculated. 

Social Security’s benefit formula replaces a relatively higher proportion of 

wages for low earners than for high earners, which helps ensure adequate 

retirement incomes. Workers with lengthy careers in noncovered 

employment appear on SSA’s records as low earners even when they are 

not because those records do not reflect noncovered earnings. Without the 

WEP, Congress was concerned that the design of the Social Security 

benefit formula provided unintended windfall benefits to workers who had 

spent most of their careers in noncovered employment. 

What GAO Has Found 

Indicating Potential 

for Cost Saving 

In an April 1998 report, GAO found that SSA did not have the information 

it needed on beneficiaries’ receipt of state and local noncovered pensions, 

even though it did have such information for federal pension benefits. As a 

result, a disparity in the application of the provisions existed. GAO 

recommended that SSA work with the Internal Revenue Service (IRS) to 

revise the reporting of pension information on IRS Form 1099R, so that 

SSA would be able to identify people receiving a pension from noncovered 

employment, especially in state and local governments. However, IRS did 

not believe it could make the recommended change without new 

legislative authority. In May 2003, June 2005, and November 2007, GAO 

suggested that Congress consider giving IRS the authority to collect the 

information that SSA needs on government pension income. The Senate 

Finance Committee proposed a version of the Social Security Protection 

Act of 2004 that contained such a provision, but this provision was not 

included when the final version of the bill was passed and signed into law. 

Critics of the GPO and WEP contend that the provisions are inaccurate 

and often unfair. For example, critics of the GPO contend that the 

Page 327 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Social Security Needs Data on Pensions from 

Noncovered Earnings to Better Enforce 

Offsets and Ensure Benefit Fairness 

reduction is imprecise and could be based on a more rigorous formula. 

According to an analysis conducted by the Congressional Research 

Service, the GPO formula slightly overestimates the benefit reduction that 

some individuals (particularly higher earners) would otherwise receive if 

they worked in Social Security-covered employment, and greatly 

underestimates the reduction that others (particularly lower earners) 

would receive. In the case of the WEP, opponents argue that the formula 

adjustment is an arbitrary and inaccurate way to estimate the value of the 

windfall and causes a relatively larger benefit reduction for lower-paid 

workers. However, accounting for such effects of differences in lifetime 

earnings would involve having complete records of noncovered earnings, 

which SSA does not have. In contrast, to implement the current 

provisions, SSA only needs to determine whether a beneficiary is receiving 

a pension based on noncovered earnings. 

Extending mandatory coverage for all state and local workers has been 

proposed among other options for addressing Social Security’s long-term 

financial deficit. While this would eventually make the GPO and WEP 

offsets obsolete, they would still be needed for many years to come for 

existing employees and beneficiaries. 

Actions Needed and 

Potential Savings 

GAO continues to believe that it is important to apply these laws 

consistently and equitably. Specifically, GAO continues to suggest that 

Congress consider giving IRS the authority to collect the information that 

SSA needs on government pension income to administer the GPO and 

WEP provisions accurately and fairly. 

The President’s 2011 budget’s proposals for terminations, reductions, and 

savings contains a provision that would address the need for more 

complete and accurate information on noncovered state and local 

pensions, and it estimates savings of $2.9 billion over 10 years. The 

Congressional Budget Office’s 2009 Budget Options, Volume 2, has a 

similar provision and estimates savings of $2.4 billion over 10 years. 

The information contained in this analysis is based on the related GAO Framework for products listed below.

Analysis 

Page 328 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Social Security Needs Data on Pensions from
 

Noncovered Earnings to Better Enforce 


Offsets and Ensure Benefit Fairness 


Related GAO 

Products 

Social Security Administration: Management Oversight Needed to 

Ensure Accurate Treatment of State and Local Government Employees. 

GAO-10-938. Washington, D.C.: September 29, 2010. 

Social Security: Issues Regarding the Coverage of Public Employees. 

GAO-08-248T. Washington, D.C.: November 6, 2007. 

Social Security: Coverage of Public Employees and Implications for 

Reform. GAO-05-786T. Washington, D.C.: June 9, 2005. 

Social Security Reform: Answers to Key Questions. GAO-05-193SP. 

Washington, D.C.: May 2, 2005. 

Social Security: Issues Relating to Noncoverage of Public Employees. 

GAO-03-710T. Washington, D.C.: May 1, 2003. 

Social Security: Congress Should Consider Revising the Government 

Pension Offset “Loophole.” GAO-03-498T. Washington, D.C.: February 27, 

2003. 

Social Security: Implications of Extending Mandatory Coverage to State 

and Local Employees. GAO/HEHS-98-196. Washington, D.C.: August 18, 

1998. 

Social Security: Better Payment Controls for Benefit Reduction 

Provisions Could Save Millions. GAO/HEHS-98-76. Washington, D.C.: 

April 30, 1998. 

Federal Workforce: Effects of Public Pension Offset on Social Security 

Benefits of Federal Retirees. GAO/GGD-88-73. Washington, D.C.: April 27, 

1988. 

For additional information about this area, contact Charles Jeszeck at Area Contact (202) 512-7215 or jeszeckc@gao.gov. 

Page 329 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress Could Pursue Several Options to 

Improve Collection of Antidumping and 

Countervailing Duties 

Congress Could Pursue Several Options to Improve 


Collection of Antidumping and Countervailing Duties 


Why GAO Is Focusing 

on This Area 

In March 2008 GAO reported that, as of September 2007, U.S. Customs and 

Border Protection (CBP) has been unable to collect more than $600 

million owed in antidumping and countervailing duties imposed to remedy 

injurious unfair foreign trade practices. These include duties imposed on 

products exported to the United States at unfairly low prices (i.e., 

dumped) and duties on products exported to the United States that were 

subsidized by foreign governments. In addition to the substantial amount 

of lost revenue, the uncollected duties cause concern that the U.S. 

government has not fully remedied the unfair trade practices. 

What GAO Has Found 

Indicating Potential 

for Enhancing 

Revenue 

Since 2005 GAO has reported several times on the U.S. government’s 

inability to collect substantial amounts of antidumping and countervailing 

duties and in 2008 proposed a variety of options for improving the system 

for collecting these duties. Two key components of the antidumping and 

countervailing duty system have received particular attention. One key 

component of the system is its retrospective nature, which means that— 

though importers pay estimated duties at the time of importation—final 

duties are not assessed until after products enter the country. Another 

component is the “new shipper” review process that allows new 

manufacturers or exporters to petition for their own separate antidumping 

and countervailing duty rate. Despite other efforts by Congress and CBP, 

these components of the system have not been addressed and the 

collection of antidumping and countervailing duties remains a problem. 

While there are a variety of factors that affect the amount of antidumping 

and countervailing duties assessed, in 2008 GAO comprehensively 

reviewed the $613 million in uncollected antidumping and countervailing 

duties and identified the key factors contributing to the collections 

problems, including: 

•	 Retrospective component of the antidumping and countervailing 

duty system. Under the current retrospective system, importers pay 

the estimated amount of antidumping and countervailing duties when 

products enter the United States, but the final amount of duties owed is 

not determined until later. This creates a risk that the government will 

be unable to collect the full amount owed, which can be substantially 

more than the original estimate. In 2008 GAO reported that when they 

increased—because of some large increases—duty rates rose an 

average of 62 percentage points, and some increases exceeded 200 

percentage points. The long time lags between the initial entry of a 

product and the final assessment of duties heightens the risk that the 

government will be unable to collect the full amount owed. In 2008 

GAO found that, on average, this process took more than 3 years, 

Page 330 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress Could Pursue Several Options to 

Improve Collection of Antidumping and 

Countervailing Duties 

though in one instance it took more than 18 years. During this time, 

importers may disappear, cease business operations, or declare 

bankruptcy, which creates challenges to the government’s ability to 

collect antidumping and countervailing duties owed. 

•	 ”New shipper” reviews. Under current law, “new shippers” 

(manufacturers/exporters whose costs were not previously reviewed) 

can request that the government conduct a review to establish an 

individual antidumping and countervailing duty rate. However, U.S. law 

does not specify a minimum amount of exports or number of 

transactions that a company must make to be eligible for a new shipper 

review, and according to Department of Commerce (Commerce) 

officials, they do not have the legislative authority to create any such 

requirement. As a result, a shipper can be assigned an individual duty 

rate based on a very minimal amount of exports, and can intentionally 

set a high price for this small amount of initial exports. This creates the 

possibility that companies may be able to get a low (or 0 percent) 

initial antidumping duty rate, which will subsequently rise when the 

exporter lowers its price, and puts the government in the position of 

having to collect additional duties. In 2008 GAO found that importers 

purchasing from companies undergoing “new shipper reviews” 

accounted for approximately 40 percent of the uncollected 

antidumping and countervailing duties as of fiscal year 2007. 

Actions Needed and 

Potential Revenue 

In March 2008 GAO identified several options for Congress to consider for 

improving the collection of antidumping and countervailing duties. GAO 

also indicated that these options have both potential advantages and 

disadvantages. By adjusting features of the antidumping or countervailing 

duty system that create the risk that companies can evade paying duties, 

Congress could further protect government revenue, while also minimizing 

incentives for companies to pursue unfair trade practices. For example, 

Congress could: 

•	 Eliminate the retrospective component of the U.S. antidumping and 

countervailing duty system. U.S. law could be changed to eliminate 

the retrospective component of the U.S. antidumping and 

countervailing duty system and, instead, treat the antidumping and 

countervailing duties assessed at the time the product enters the 

country as final. If the antidumping or countervailing duty rate is 

changed, it is applied only to future imports and has no effect on the 

amount of duties owed for previous imports. Other countries GAO 

reviewed did not determine their final antidumping and countervailing 

Page 331 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress Could Pursue Several Options to 

Improve Collection of Antidumping and 

Countervailing Duties 

duties by calculating actual amount of duties owed after products enter 

the country. In 2008 GAO found that while each country’s antidumping 

and countervailing duty system operates differently, major U.S. trading 

partners such as Canada, Australia, and the European Union have 

antidumping and countervailing duty systems that are not 

retrospective. 

•	 Adjust requirements for new shipper reviews. Congress could choose 

to provide Commerce the discretion to require companies applying for 

a new shipper review to have a greater volume of imports before 

establishing an individual antidumping and countervailing duty rate. 

According to Commerce officials, this could help mitigate the risks 

posed by establishing an antidumping and countervailing duty rate 

based on one shipment. 

Following GAO’s 2008 report, Congress mandated that the Department of 

Commerce review the relative advantages and disadvantages of 

prospective and retrospective antidumping and countervailing duty 

systems. In November 2010 Commerce released its report which, in 

addition to discussing the likely effects of each type of system on duty 

collection, also highlighted the administrative burden the current 

retrospective system places on both Commerce and CBP. This suggests 

the continuing need for action to reform the system for the collection of 

antidumping and countervailing duties. 

The information contained in this analysis is based on findings from the Framework for GAO reports listed below.

Analysis 

Related GAO 

Products 

Agencies Believe Strengthening International Agreements to Improve 

Collection of Antidumping and Countervailing Duties Would Be 

Difficult and Ineffective. GAO-08-876R. Washington, D.C.: July 24, 2008. 

Antidumping and Countervailing Duties: Congress and Agencies Should 

Take Additional Steps to Reduce Substantial Shortfalls in Duty 

Collection. GAO-08-391. Washington, D.C.: March 26, 2008. 

International Trade: Customs’ Revised Bonding Policy Reduces Risk of 

Uncollected Duties, but Concerns about Uneven Implementation and 

Effects Remain. GAO-07-50. Washington, D.C.: Oct.18, 2006. 

Page 332 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Congress Could Pursue Several Options to 

Improve Collection of Antidumping and 

Countervailing Duties 

International Trade: Issues and Effects of Implementing the Continued 

Dumping and Subsidy Offset Act. GAO-05-979. Washington, D.C.: Sept. 26, 

2005. 

For additional information about this area, contact Loren Yager at Area Contact (202) 512-4347 or YagerL@gao.gov. 

Page 333 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements 
Appendix I: List of Congressional Addressees Appendix I: List of Congressional Addressees 


The Honorable Daniel K. Inouye 

Chairman 

The Honorable Thad Cochran 

Vice Chairman 

Committee on Appropriations 

United States Senate 

The Honorable Kent Conrad 

Chairman 

The Honorable Jeff Sessions 

Ranking Member 

Committee on the Budget 

United States Senate 

The Honorable Joseph I. Lieberman 

Chairman 

The Honorable Susan M. Collins 

Ranking Member 

Committee on Homeland Security 

and Governmental Affairs 

United States Senate 

The Honorable Harold Rogers 

Chairman 

The Honorable Norman D. Dicks 

Ranking Member 

Committee on Appropriations 

House of Representatives 

The Honorable Paul Ryan 

Chairman 

The Honorable Chris Van Hollen 

Ranking Member 

Committee on the Budget 

House of Representatives 

The Honorable Darrell Issa 

Chairman 

The Honorable Elijah E. Cummings 

Ranking Member 

Committee on Oversight 

and Government Reform 

House of Representatives 

Page 334 GAO-11-318SP Appendix I: List of Congressional Addressees 
Appendix I: List of Congressional Addressees 

The Honorable Scott Brown 

United States Senate 

The Honorable Tom Coburn 

United States Senate 

The Honorable Claire McCaskill 

United States Senate 

The Honorable Mark R. Warner 

United States Senate 

Page 335 GAO-11-318SP Appendix I: List of Congressional Addressees 
Appendix II: Objectives, Scope, and 

Methodology 

 

Appendix II: Objectives, Scope, and Methodology 


Section 21 of Public Law 111-139, enacted in February 2010, requires GAO 

to conduct routine investigations to identify federal programs, agencies, 

offices, and initiatives with duplicative goals and activities within 

departments and governmentwide. This provision also requires GAO to 

report annually to Congress on its findings, including the cost of such 

duplication, and recommendations for consolidation and elimination to 

reduce duplication and specific rescissions (legislation canceling 

previously enacted budget authority) that Congress may wish to consider. 

As agreed with the key congressional committees, our objectives in this 

report are to (1) identify federal programs or functional areas where 

unnecessary duplication, overlap, or fragmentation exists, the actions 

needed to address such conditions, and the potential financial and other 

benefits of doing so; and (2) highlight opportunities for additional 

potential savings or increased revenues.1 

For the purposes of our analysis, we considered “duplication” to occur 

when two or more agencies or programs are engaged in the same activities 

or provide the same services to the same beneficiaries. We used the term 

“overlap” when multiple agencies or programs have similar goals, engage 

in similar activities or strategies to achieve them, or target similar 

beneficiaries. We used the term “fragmentation” to refer to those 

circumstances in which more than one federal agency (or more than one 

organization within an agency) is involved in the same broad area of 

national need. The presence of fragmentation and overlap can suggest the 

need to look closer at the potential for unnecessary duplication. However, 

determining whether and to what extent programs are actually duplicative 

requires programmatic information that is often not readily available. In 

certain instances in this report, we use the term “potential duplication” to 

include duplication, overlap, or fragmentation. 

To identify federal programs or functional areas where unnecessary 

duplication, overlap, or fragmentation exists, we reviewed GAO’s ongoing 

and previously completed work. In some instances, issues related to 

potential for duplication, overlap, or fragmentation were identified from 

GAO’s body of work2

 specifically examining these issues across 

1

To date, this work has not identified a basis for proposing specific funding rescissions. 

2

For example, see GAO, Managing for Results: Using the Results Act to Address Mission 

Fragmentation and Program Overlap, GAO-AIMD-97-146 (Washington, D.C.: Aug. 29, 

1997); Managing for Results: Barriers to Interagency Coordination, GAO/GGD-00-106 

(Washington, D.C.: Mar. 29, 2000); and 21st Century Challenges: Reexamining the Base of 

the Federal Government, GAO-05-325SP (Washington, D.C.: February 2005). 

Page 336 GAO-11-318SP Appendix II: Objectives, Scope, and Methodology 
Appendix II: Objectives, Scope, and 

Methodology 

government. This body of work included GAO’s reviews of a variety of 

federal programs, such as those related to training, employment, and 

education and social services. In other instances, we drew examples of 

potential duplication, overlap, or fragmentation from our ongoing audits 

and evaluations not specifically focused on these issues but where they 

were identified as challenges to the efficient and effective operation of 

certain federal programs or activities we reviewed. While our report 

includes examples where duplication, overlap, or fragmentation can 

hinder program performance and cause inefficiencies, we recognize that 

there could be instances where some degree of program duplication, 

overlap, or fragmentation may be warranted due to the nature or 

magnitude of the federal effort. 

We also considered the work of other agencies such as the Office of 

Management and Budget and the Congressional Budget Office. While the 

work of other agencies informed our selection of specific areas for this 

year’s report, we only included issues where we had current work or could 

update prior work within our reporting time frames. Therefore, this report 

is not a comprehensive survey of all government programs where 

unnecessary duplication, overlap, or fragmentation may exist. Rather, this 

report highlights a number of federal programs and activities where GAO’s 

work indicates these issues exist. Each issue area contained in Sections I 

and II of this report lists the relevant GAO reports and publications upon 

which it is based. Those prior reports contain additional information on 

GAO’s supporting work and methodologies. For issues based on GAO 

work that has not yet been published or those that update prior GAO 

work, we provide additional information on the methodologies used in 

that ongoing work or update in the Framework for Analysis section of the 

issue area. 

To identify the actions needed to address unnecessary duplication, 

overlap, or fragmentation, we reviewed and updated prior GAO work and 

recommendations and in some cases completed ongoing work or 

conducted new work to identify what additional actions agencies may 

need to take and Congress may wish to consider. In some instances, the 

long-standing nature or significance of certain issues, especially those that 

transcended more than one agency, led us to suggest the potential need for 

heightened congressional oversight. To identify the potential financial and 

other benefits that might result from actions addressing duplication, 

overlap, or fragmentation, we reviewed and updated prior GAO work and 

conducted ongoing work with a specific focus on the potential for cost 

savings. In some cases, we had sufficient information to show that if 

actions are taken to address the individual issues summarized in this 

Page 337 GAO-11-318SP Appendix II: Objectives, Scope, and Methodology 
 

Appendix II: Objectives, Scope, and 

Methodology 

report, opportunities for financial benefits ranging from the tens of 

millions to several billion dollars annually might be realized. Estimating 

the benefits that could result from eliminating unnecessary duplication, 

overlap, or fragmentation was not possible in some cases because 

information about the extent of unnecessary duplication among certain 

programs is not available. Further, the financial benefits that can be 

achieved from eliminating duplication, overlap, or fragmentation were not 

always quantifiable in advance of congressional and executive branch 

decision making, and information was not readily available on program 

performance, the level of funding devoted to overlapping programs, or the 

implementation costs and time frames that might be associated with 

program consolidations or terminations. 

In light of the long-term fiscal imbalances that the federal government 

faces, we highlighted other opportunities for potential cost saving or 

revenue enhancements in addition to those associated with duplication, 

overlap, or fragmentation. Specifically, we reviewed and updated the 

existing groupings of major cost-saving opportunities that had previously 

been identified and summarized on GAO’s Web site,3

 drawn from our past 

reviews of government programs at high risk of fraud, waste, abuse, and 

mismanagement or in need of restructuring. Similar to the duplication, 

overlap, and fragmentation work, we also reviewed our ongoing and 

recently completed work to determine whether the existing areas could be 

updated within the reporting time frames for this report, and we identified 

additional opportunities for consideration in areas where we had updated 

information available. We provided estimates of the cost savings or 

revenue enhancements, where available. At the beginning of each section, 

we include tables listing the areas for consideration, including information 

on the agencies and programs4

 involved and cost savings or revenue 

enhancements, if available. 

We will continue to examine issues related to duplication, overlap, and 

fragmentation in our ongoing work. In our future mandated annual 

reports, we will look at additional federal programs to identify further 

instances of duplication, overlap, or fragmentation as well as highlight 

additional opportunities to reduce the cost of government operations or 

increase revenues to the government. Likewise, we will continue to 

3

See http://www.gao.gov/highrisk/opportunities/. 

4

To provide the most current information, we cited only those programs that were 

identified in GAO reports published in 2008 or later. 

Page 338 GAO-11-318SP Appendix II: Objectives, Scope, and Methodology 
Appendix II: Objectives, Scope, and 

Methodology 

monitor developments in the areas we have already identified. Issues of 

duplication, overlap, or fragmentation also may be addressed in our 

routine audit work during the year and will be summarized in our 

mandated annual reports as appropriate. 

This report is based substantially upon ongoing audits and previously 

completed GAO products, which were conducted in accordance with 

generally accepted government auditing standards (GAGAS), or with 

GAO’s Quality Assurance Framework, as appropriate. 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 one instance GAGAS did not apply to the work we did 

to identify the revenue enhancement opportunity pertaining to unobligated 

balances in the U.S. Customs and Border Protection’s Customs User Fee 

Account. This work reviewed the agency’s justification for certain 

estimates in the President’s annual budget request to Congress rather than 

an audit and was performed in accordance with all relevant sections of 

GAO’s Quality Assurance Framework. The framework requires that we 

plan and perform the engagement to obtain sufficient and appropriate 

evidence to meet our stated objectives and to discuss any limitations in 

our work. We believe that the information and data obtained, and the 

analysis conducted, provide a reasonable basis for any findings and 

conclusions in this product. For issues being reported on for the first time, 

GAO sought comments from the agencies involved and incorporated their 

comments, as appropriate. We briefed the Office of Management and 

Budget on a draft of this report. We conducted the work for the overall 

report from February 2010 through February 2011. 

Page 339 GAO-11-318SP Appendix II: Objectives, Scope, and Methodology 
GAO’s Mission 
 The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost Obtaining Copies of is through GAO’s Web site (www.gao.gov). Each weekday afternoon, GAO 

GAO Reports and posts on its Web site newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, Testimony go to www.gao.gov and select “E-mail Updates.” 

Order by Phone The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s Web site, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Contact: To Report Fraud, 

Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Federal Programs Automated answering system: (800) 424-5454 or (202) 512-7470 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 Congressional U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Relations Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548 

Please Print on Recycled Paper