Testimony 

Before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security, 

U.S. Senate

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 2:30 p.m. EDT 

Thursday, April 21, 2005 MANAGEMENT REFORM

Assessing the President’s 

Management Agenda 

Statement of David M. Walker 

Comptroller General of the United States 

GAO-05-574T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-574T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact George Stalcup 

at (202) 512-6806 or stalcupg@gao.gov. 

Highlights of GAO-05-574T, a testimony 

before the Chairman, Subcommittee on 

Federal Financial Management, 

Government Information, and International 

Security, Committee on Homeland 

Security and Governmental Affairs, 

U.S. Senate 

April 21, 2005

MANAGEMENT REFORM 

Assessing the President’s Management 

Agenda 

The administration’s implementation of the PMA has been a very positive 

initiative. It has served to raise the visibility of key management challenges, 

increased attention to achieving outcome-based results, and reinforced the 

need for agencies to focus on making sustained improvements in addressing 

long-standing management problems, including items on GAO’s high-risk list. 

Our work shows that agencies have made progress in the areas covered by 

the PMA, and the Office of Management and Budget (OMB) has indicated it 

will continue to focus on high-risk areas during the President’s second term. 

Importantly, OMB needs to place additional attention on the Department of 

Defense’s (DOD) many high-risk areas and overall business transformation 

efforts. While considerable progress has been made in connection with PMA 

issues, a number of significant challenges remain. 

• In the area of financial performance, the PMA recognizes the importance 

of timely, accurate and useful financial information and sound internal 

control. Agencies made significant progress in meeting accelerated financial 

statement reporting deadlines, and OMB has refocused attention on 

improving internal controls. However, agencies face several challenges—

improvement lags on financial management reforms, especially at DOD 

which must overhaul its financial management and business operations. 

• The PMA established a separate initiative for improper payments to 

ensure that agency managers are held accountable for meeting the goals of 

the Improper Payments Information Act of 2002. Effective implementation 

of this Act will be an important step toward addressing this area, which 

involves tens of billions of dollars. 

• The PMA recognizes that people are an important organizational asset. 

A governmentwide framework for advancing human capital reform is needed

to avoid further fragmentation within the civil service, ensure management 

flexibility as appropriate, allow a reasonable degree of consistency, provide 

adequate safeguards within the overall civilian workforce, and help maintain 

a level playing field among federal agencies competing for talent. 

• The initiative to integrate management and performance issues with 

budgeting is critical for progress in government performance and 

management. OMB’s Program Assessment Rating Tool (PART) is designed 

to use results-oriented information to assess programs in the budget 

formulation process. However, more should be done to assess how each 

program fits within the broad portfolio of tools and strategies used to 

accomplish federal missions. 

• Many e-government initiatives are showing tangible results. However, 

the government continues to face challenges, such as establishing a federal 

enterprise architecture intended to provide a framework to guide agencies’ 

enterprise architectures and investments. 

• The inclusion of real property asset management on the PMA, an 

executive order, and agencies’ actions are all positive steps in an area that 

had been neglected for years. However, the underlying conditions—such as 

excess and deteriorating properties—continue to exist. More needs to be 

done in areas such as improving capital planning among agencies.

As part of its work to improve the 

management and performance of 

the federal government, GAO 

monitors progress and continuing 

challenges related to the 

President’s Management Agenda 

(PMA). The Administration has 

looked to GAO’s high-risk program 

to help shape various 

governmentwide initiatives, 

including the PMA. GAO remains 

committed to working with the 

Congress and the Administration to 

help address these important and 

complex issues. 

What GAO Recommends

We are not making any new 

recommendations in this 

testimony. Serious and sustained 

efforts are needed to improve the 

management and performance of 

federal agencies and to ensure 

accountability. To accomplish this, 

a governmentwide performance 

plan could help to institutionalize a 

focus on planning and managing 

for results while building on the 

administration’s efforts to assess 

progress and contribute to efforts 

to compare results across similar 

programs. In addition, a 

governmentwide strategic plan, 

informed by a set of key national 

indicators to assess the 

government’s performance, 

position, and progress, could 

provide an additional tool for 

governmentwide reexamination of 

existing, as well as new, programs. 

The PMA provides a valuable 

foundation for a fundamental 

review needed to address a range 

of 21st Century challenges. 
Page 1 GAO-05-574T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the President’s Management 

Agenda (PMA), which has been a very positive initiative. The 

administration’s implementation of the PMA has demonstrated its 

commitment to improving federal management and performance. It has 

served to raise the visibility of key management challenges, increased 

attention to achieving outcome-based results, and reinforced the need for 

agencies to focus on making sustained improvements in addressing longstanding problems, including items on GAO’s high-risk list.1

 I believe the 

concept of using red, yellow, and green stoplights both to indicate 

agencies’ status and focus on progress made is an innovative approach. By 

calling attention to successes and needed improvements, the focus that 

PMA and the scorecards bring is certainly a step in the right direction, and 

our work shows that progress has been made in a number of important 

areas over the last several years. Importantly, OMB needs to place 

additional attention on the Department of Defense’s many high-risk areas 

and business transformation efforts. 

Significant challenges remain particularly at the Department of Defense 

(DOD), where 14 of the 25 high-risk areas exist. GAO identifies areas that 

are at high risk due to their greater vulnerabilities to fraud, waste, abuse, 

and mismanagement as well as the need for broad based transformations 

to address major economy, efficiency, or effectiveness challenges. DOD’s 

current and historical approach to business transformation has not proven 

effective in achieving meaningful and sustainable progress, and change is 

necessary in order to expedite a broad-based transformation. For years, 

we have reported on inefficiencies and the lack of adequate transparency 

and appropriate accountability across DOD’s major business areas, 

resulting in billions of dollars of wasted resources annually. DOD has not 

taken the steps it needs to take to overhaul its financial management and 

related business operations. 

The Bush Administration has looked to our high-risk program to help 

shape various governmentwide initiatives, including the PMA, which has at 

its base many of the areas we had previously designated as high risk. To its 

credit, the Office of Management and Budget (OMB) has worked closely 

with a number of agencies that have high-risk issues, in many cases 

establishing action plans and milestones for agencies to complete needed 

 1

 GAO, High-Risk Series: An Update (GAO-05-207, January 2005). 
Page 2 GAO-05-574T 

actions to address areas that we have designated as high risk. In this 

regard, Clay Johnson, OMB’s Deputy Director for Management, recently 

reaffirmed the Bush Administration’s desire to refocus on GAO’s high-risk 

list in order to make as much progress as possible in the President’s 

second term. This is very encouraging. OMB will need to be engaged 

seriously on a sustained basis to make progress on a range of challenges 

that are costing taxpayers billions of dollars each year. Continued 

oversight by the Congress will also be key, and in the case of some areas, 

legislative actions will be needed. 

In the PMA, the President has identified five governmentwide initiatives 

that are interrelated and support each other—improved financial 

performance, strategic management of human capital, budget and 

performance integration, electronic government, and competitive 

sourcing. The PMA also includes program initiatives on eliminating 

improper payments and real property asset management. Today, as agreed 

with the subcommittee, my statement will focus on the progress made in 

these five governmentwide and the two program initiatives in PMA and the 

next steps our work shows will be key to effectively enhance the 

management and performance of the federal government. I will also 

highlight the importance of congressional oversight in continuing to 

provide the attention needed to improve management and performance 

across the federal government and ensure accountability. This testimony 

draws upon our wide-ranging work on federal management and 

transformation issues, including analysis of PMA initiatives and the 

President’s 2006 Budget of the U.S Government. We conducted our work 

in accordance with generally accepted government auditing standards. 

The PMA initiative to improve financial performance is aimed at ensuring 

that federal financial systems produce accurate and timely information to 

support operating, budget, and policy decisions. It focuses on key issues 

such as data reliability, clean financial statement audit opinions, and 

effective internal control and financial management systems. Our work in 

these areas over a number of years demonstrates the importance of the 

improvement efforts that are underway. The Congress enacted a number 

of statutory reforms during the 1990s in the area of financial management. 

Although progress has been made under the PMA, the federal government 

is a long way from successfully implementing these reforms. 

Reliable information, including cost data, is critical for effective 

performance measurement to support program management decisions in 

areas ranging from program efficiency and effectiveness to sourcing and 

Improved Financial 

Performance 
Page 3 GAO-05-574T 

contract management. For effective management, this information must 

not only be timely and reliable, but also both useful and used. Under this 

PMA initiative, agencies are expected to implement integrated financial 

and performance management systems that routinely produce information 

that is (1) timely—to measure and affect performance immediately, (2) 

useful—to make more informed operational and investing decisions, and 

(3) reliable—to ensure consistent and comparable trend analysis over time 

and to facilitate better performance measurement and decision making. 

Producing timely, useful, and reliable information is critical for achieving 

the goals that the Congress established in the Chief Financial Officers 

(CFO) Act of 1990 and other federal financial management reform 

legislation. 

The executive branch management scorecard for the financial 

performance area not only recognizes the importance of achieving an 

unqualified or “clean” opinion from auditors on financial statements, but 

also focuses on the fundamental and systemic issues that must be 

addressed in order to routinely generate timely, accurate, and useful 

financial information and provide sound internal control and effective 

compliance systems, which represents the end goal of the CFO Act.2

For fiscal year 2004, OMB accelerated agencies’ financial statement 

reporting date to November 15, 2004, as compared with January 30, 2004, 

for fiscal year 2003. Twenty-two of twenty-three CFO Act agencies were 

able to issue their fiscal year 2004 financial statements by the accelerated 

reporting date, a significant improvement in the timeliness of these 

statements. Eighteen of these agencies were able to attain unqualified 

audit opinions on their financial statements. At the same time, the growing 

number of CFO Act agencies that restated certain of their financial 

statements for fiscal year 2003 to correct errors emerged as an issue of 

concern that merits close scrutiny. Eleven of the twenty-three CFO Act 

agencies fell into this category in fiscal year 2004, as compared with at 

least five CFO Act agencies that had restatements of prior year financial 

statements in fiscal year 2003. Frequent restatements to correct errors can 

undermine public trust and confidence in both the entity and all 

responsible parties. 

The scorecard also measures whether agencies have any material internal 

control weaknesses or material noncompliance with laws and regulations, 

 2

 31 U.S.C. §§ 901-903. 
Page 4 GAO-05-574T 

and whether agencies meet Federal Financial Management Improvement 

Act (FFMIA) of 1996 requirements.3

 As stated in the PMA, without sound 

internal controls and accurate and timely financial information, it will not 

be possible to accomplish the President’s agenda to secure the best 

performance and highest measure of accountability for the American 

people. 

Reinforcing the PMA’s emphasis on effective internal controls, OMB 

revised Circular A-123, Management’s Responsibility for Internal Control 

in December, 2004. These revisions recognize that effective internal 

control is critical to improving federal agencies’ effectiveness and 

accountability and to achieving the goals that the Congress established in 

1950 and reaffirmed in 1982 with passage of the Federal Managers’ 

Financial Integrity Act (FMFIA).4

 The Circular correctly recognizes that 

instead of considering internal control as an isolated management tool, 

agencies should integrate their efforts to meet the FMFIA requirements 

with other efforts to improve effectiveness and accountability. Internal 

control should be an integral part of the entire cycle of planning, 

budgeting, management, accounting, and auditing. It should support the 

effectiveness and the integrity of every step of the process and provide 

continual feedback to management. 

We support OMB’s efforts to revitalize FMFIA, particularly the principlesbased approach in the revised Circular A-123 for establishing and 

reporting on internal control that should increase accountability. This 

approach provides a floor for expected behavior, rather than a ceiling, and 

by its nature, calls for greater judgment on the part of those applying the 

principles. Accordingly, clear articulation of objectives, the criteria for 

measuring whether the objectives have been successfully achieved and the 

rigor with which these criteria are applied will be critical. Providing 

agencies with supplemental guidance and implementation tools, which 

OMB and the CFO Council are developing, is particularly important in light 

of the varying levels of maturity in internal control across government as 

well as the divergence in implementation of a principles-based approach 

that is typically found across entities with varying capabilities. 

A challenge of great complexity that many agencies face is ensuring that 

underlying financial management processes, procedures, and information 

 3

 Public Law 104-208, §§ 801-808, September 30, 1996. 

4

 31 U.S.C. §§ 1113, 3512. 
Page 5 GAO-05-574T 

systems are in place for effective program management. Agencies need to 

take steps to (1) continuously improve internal controls and underlying 

financial and management information systems to ensure that managers 

and other decision makers have reliable, timely, and useful financial 

information to ensure accountability; (2) measure, control, and manage 

costs; (3) manage for results; and (4) make timely and fully informed 

decisions about allocating limited resources. Meeting FFMIA requirements 

presents long-standing, significant challenges that will only be met through 

time, investment, and sustained emphasis on correcting deficiencies in 

federal financial management systems. The widespread systems problems 

facing the federal government need sustained management commitment at 

the highest levels of government to ensure that these needed 

modernizations come to fruition. PMA provides the visibility needed for 

sustaining these efforts. 

Much work remains to be done across government to improve financial 

performance, as shown by the December 2004 scorecards. Of the 23 CFO 

Act agencies that OMB scored, 15 were rated red for financial 

performance. This is not surprising, considering the well-recognized need 

to transform financial management and other business processes at 

agencies such as the Department of Defense (DOD), the results of our 

analyses under FFMIA, the various financial management operations we 

have designated as high risk, and known long-standing material 

weaknesses. Seven agencies improved their scores to green from the 

initial baseline evaluation for financial performance which was as of 

September 30, 2001; however, several agencies’ scores declined, reflecting 

increased challenges. Overhauling financial management represents a 

challenge that goes far beyond financial accounting to the very fiber of an 

agency’s business operations and management culture, particularly at 

agencies with longstanding problems, such as DOD. For the new 

Department of Homeland Security (DHS), establishing sound financial 

management is a critical success factor. 

In the area of financial performance, the federal government is a long way 

from successfully implementing needed financial management reforms. 

Widespread financial management system weaknesses, poor 

recordkeeping and documentation, weak internal controls, and the lack of 

information have prevented the federal government from having the cost 

information it needs to effectively and efficiently manage operations 

through measuring the full cost and financial performance of programs 

and accurately reporting a large portion of its assets, liabilities, and costs. 

The government’s ability to adequately safeguard significant assets has 

been impaired by these conditions. 
Page 6 GAO-05-574T 

Across government, there is a range of financial management 

improvement initiatives under way that, if effectively implemented, will 

improve the quality of the government’s financial management and 

reporting. Federal agencies have started to make progress in their efforts 

to modernize their financial management systems and improve financial 

management performance as called for in PMA. However, until these 

challenges are adequately addressed, they will continue to present a 

number of adverse implications for the federal government and the 

taxpayers. At the same time, the need for timely, reliable, and useful 

financial and performance information is greater than ever. Our nation’s 

large and growing long-term fiscal imbalance, which is driven largely by 

known demographic trends and rising health care costs, coupled with new 

homeland security and defense commitments and the recent downward 

trend in revenue as a share of gross domestic product, serves to sharpen 

the need to fundamentally review and re-examine the base of federal 

entitlement, discretionary, and other spending and tax policies. Clearly, 

tough choices will be required to address the resulting structural 

imbalance. 

Improper payments are a longstanding, widespread, and significant 

problem in the federal government. The Congress enacted the Improper 

Payments Information Act (IPIA) of 2002 to address this issue of improper 

payments.5

 The separate improper payments PMA program initiative began 

in the first quarter of fiscal year 2005. Previously, agency efforts related to 

improper payments were tracked along with other financial management 

activities as part of the Improved Financial Performance initiative. The 

objective of establishing a separate initiative for improper payments was 

to ensure that agency managers are held accountable for meeting the goals 

of the IPIA and are therefore dedicating the necessary attention and 

resources to meeting IPIA requirements. 

Across the federal government, improper payments occur in a variety of 

programs and activities, including those related to health care, contract 

management, federal financial assistance, and tax refunds. Improper 

payments include inadvertent errors, such as duplicate payments and 

miscalculations, payments for unsupported or inadequately supported 

claims, payments for services not rendered, payments to ineligible 

beneficiaries, and payments resulting from fraud and abuse by program 

 5

 31 U.S.C. § 3321 note. 

Eliminating Improper 

Payments 
Page 7 GAO-05-574T 

participants and/or federal employees. Many improper payments occur in 

federal programs that are administered by entities other than the federal 

government, such as states, municipalities, and intermediaries such as 

insurance companies. Generally, improper payments result from a lack of 

or an inadequate system of internal control, but some result from program 

design issues. 

Federal agencies’ estimates of improper payments based on available 

information for fiscal year 2004 exceeded $45 billion. This estimate could 

increase significantly over the next several years as agencies become more 

effective at estimating and reporting improper payment amounts for 

programs and activities that are susceptible to significant improper 

payments. Of the 15 agencies identified for this PMA initiative, no agencies 

were rated green and 10 were rated red in the first scores for this initiative 

as of December 31, 2004. 

These results are consistent with our previous work both agencywide and 

in specific program areas. For example, our preliminary reviews of 29 

federal agencies’ fiscal year 2004 PARs suggest that a number of agencies 

were not well positioned to meet the reporting requirements of IPIA. 

Additionally, improper payments for specific programs have been 

identified as a high-risk area. For example, the Centers for Medicare & 

Medicaid Services has made improvements in assessing the level of 

improper payments, collecting overpayments from providers, and building 

the foundation for modernizing its information technology. Nevertheless, 

much work remains to be done given the magnitude of its challenges in 

safeguarding program payments. This includes more effectively overseeing 

Medicare’s claims administration contractors, managing the agency’s 

information technology initiatives, and strengthening financial 

management processes across multiple contractors and agency units. In 

light of these challenges and the program’s size and fiscal significance, 

Medicare remains on our list of high-risk programs. For Medicaid, an 

estimate of improper payments was not reported for fiscal year 2004. 

Our prior work has demonstrated that attacking improper payments 

requires a strategy appropriate to the organization and its particular risks. 

We have found that entities using successful strategies to help address 

their improper payments shared a common focus of improving the internal 

control system—the first line of defense in safeguarding assets and 

preventing and detecting errors and fraud. As discussed in the Comptroller 
Page 8 GAO-05-574T 

General’s Standards for Internal Control in the Federal Government,6 the 

components of any control system are: 

• control environment—creating a culture of accountability, 

• risk assessment—performing analyses of program operations to determine 

if risks exist, 

• control activities—taking actions to address identified risk areas, 

• information and communications—using and sharing relevant, reliable, 

and timely information, and 

• monitoring—tracking improvement initiatives and identifying additional 

actions needed to further improve program efficiency and effectiveness. 

Effective implementation of the IPIA will be an important step towards 

addressing the longstanding, significant issue of improper payments. OMB 

has an important role, and we support their efforts to call attention to this 

issue. Fiscal year 2004 represents the first year that federal agencies were 

required to report improper payment information required by the IPIA in 

their Performance and Accountability Reports (PAR). IPIA raised 

improper payments to a new level of importance by requiring federal 

agencies to annually review all programs and activities and identify those 

that may be susceptible to significant improper payments. Federal 

agencies are required to estimate the annual amount of improper 

payments for those programs and activities identified as susceptible to 

significant improper payments. The law further requires federal agencies 

to report to the Congress the improper payment estimates and information 

on the actions the agency is taking to reduce the improper payments. OMB 

implementation guidance required that estimates and, if applicable, the 

corrective action report, be included in federal agencies’ PARs beginning 

with fiscal year 2004.7

OMB’s guidance addresses the specific reporting requirements called for 

in the act and lays out the general steps agencies are to perform to meet 

those requirements. The guidance defines key terms used in the law, such 

as programs and activities, and offers criterion that clarify the meaning of 

the term significant improper payments. It requires that agencies use 

statistical sampling when estimating improper payments and sets 

statistical sampling confidence and precision levels for estimation 

purposes. It also requires that agencies report the results of their improper 

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

7

 OMB Memorandum M-03-13, May 21, 2003. 
Page 9 GAO-05-574T 

payment activities in their annual PAR. The ultimate success of the 

legislation and the PMA initiative hinges on each agency’s diligence and 

commitment in identifying, estimating, determining the causes of, taking 

corrective actions, and measuring progress in reducing all improper 

payments. Designating this area as a separate program initiative under the 

PMA, will bring visibility to this problem that we hope will lead to action 

and further progress. 

The PMA recognizes that people are an important organizational asset to 

an agency. Under the PMA, agencies are to implement a comprehensive 

human capital plan that aligns with agency mission and goals. 

Considerable progress has been made in strategic human capital 

management since we designated it as high risk in 2001.8

 For example, 

OMB recently reported that agencies are making improvements in 

addressing key human capital challenges. Nevertheless, ample 

opportunities exist for agencies to improve their strategic human capital 

management to achieve results and respond to current and emerging 

challenges. Specifically, agencies continue to face challenges in four key 

areas: 

• Leadership: Agencies need sustained leadership to provide the focused 

attention essential to completing multiyear transformations. 

• Strategic Human Capital Planning: Agencies need effective strategic 

workforce plans to identify and focus their human capital investments on 

the long-term issues that best contribute to results. 

• Acquiring, Developing, and Retaining Talent: Agencies need to continue to 

create effective hiring processes and use flexibilities and incentives to 

retain critical talent and reshape their workforces. 

• Results-Oriented Organizational Cultures: Agencies need to reform their 

performance management systems so that pay and awards are linked to 

performance and organizational results. 

Going forward, federal agencies need to develop and effectively 

implement the human capital approaches that best meet their needs, 

resources, context, and authorities. While these approaches will depend 

on each organization’s specific situation, leading public sector 

organizations build an infrastructure that at a minimum, includes (1) a 

 8

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

Strategic Human 

Capital Management 
Page 10 GAO-05-574T 

human capital planning process that integrates the agency’s human capital 

policies, strategies, and programs with its program goals, mission, and 

desired outcomes; (2) the capabilities to effectively develop and 

implement a hew human capital system; and importantly, (3) the existence 

of a modern, effective, and credible performance management system that 

includes adequate safeguards (such as reviews and appeal processes) to 

ensure fair, effective, non-discriminatory, and credible implementation of 

the new system. Our observations follow. 

Conducting strategic human capital planning: Such planning aligns human 

capital programs with programmatic goals and develops strategies to 

acquire, develop, and retain staff to achieve these goals.9

 As part of the 

PMA, agencies are to implement a workforce planning system to identify 

and address gaps in mission critical occupations and competencies and 

develop succession strategies. 

Agencies are experiencing significant challenges to deploying the right 

skills, in the right places, at the right time in the wake of extensive 

downsizing during the early 1990s that was done largely without sufficient 

consideration of the strategic consequences. Agencies are also facing a 

growing number of employees who are eligible for retirement and are 

finding it difficult to fill certain mission-critical jobs, a situation that could 

significantly drain agencies’ institutional knowledge. For example, the 

achievement of DOD’s mission is dependent in large part on the skills and 

expertise of its civilian workforce. We recently reported that DOD’s future 

strategic workforce plans may not result in workforces that possess the 

critical skills and competencies needed.10 Among other things, DOD and 

the components do not know what competencies their staff needs to do 

their work now and in the future and what type of recruitment, retention, 

and training and professional development workforce strategies should be 

developed and implemented to meet future organizational goals. It is 

questionable whether DOD’s implementation of its new personnel reforms 

will result in the maximum effectiveness and value. 

Building the capability to develop and implement human capital systems: 

An essential element to acquiring, developing, and retaining a high-quality 

 9

 GAO, Human Capital: Key Principles for Effective Strategic Workforce Planning, 

GAO-04-39 (Washington, D.C.: Dec. 11, 2003). 

10 GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce Plans Needed, 

GAO-04-753 (Washington, D.C.: June 30, 2004). 
Page 11 GAO-05-574T 

workforce is effective use of human capital flexibilities. These flexibilities 

represent the policies and practices that an agency has the authority to 

implement in managing its workforce. As part of the PMA, agencies are to 

establish goals to accelerate their hiring processes, monitor their progress, 

and implement needed improvements. 

We reported that agencies must take greater responsibility for maximizing 

the efficiency and effectiveness of their individual hiring processes within 

the current statutory and regulatory framework that Congress and the 

Office of Personnel Management (OPM) have provided and recommended 

that OPM take additional actions to assist agencies in strengthening the 

federal hiring process.11 We subsequently reported that although Congress, 

OPM, and agencies have all undertaken efforts to help improve the federal 

hiring process, agencies appeared to be making limited use of the new 

hiring flexibilities provided by Congress in 2002—category rating and 

direct hire.12

Consistent with our findings and recommendations, OPM has taken a 

number of important actions to assist agencies in their use of hiring 

flexibilities. For example, OPM issued final regulations on the use of 

category rating and direct-hire authority, providing some clarification in 

response to various comments it had received in interim regulation. Also, 

OPM conducted a training symposium to provide federal agencies with 

further instruction and information on ways to improve the quality and 

speed of the hiring process. 

Implementing modern, effective, and credible performance management 

systems: Effective performance management systems can help drive 

internal change and achieve external results. Such systems are not merely 

used for expectation setting and rating processes, but are also used to 

facilitate two-way communication so that discussions about individual and 

organizational performance are integrated and ongoing. Leading public 

sector organizations have created a clear linkage—”line of sight”—

between individual performance and organizational success. Under the 

 11 GAO, Human Capital: Opportunities to Improve Executive Agencies’ Hiring Processes, 

GAO-03-450 (Washington, D.C.: May 30, 2003). 

12 GAO, Human Capital: Increasing Agencies’ Use of New Hiring Flexibilities, 

GAO-04-959T (Washington, D.C.: July 13, 2004); Human Capital: Additional Collaboration 

Between OPM and Agencies Is Key to Improved Federal Hiring, GAO-04-797 (Washington, 

D.C.: June 7, 2004); and Human Capital: Status of Efforts to Improve Federal Hiring, 

GAO-04-796T (Washington, D.C.: June 7, 2004). 
Page 12 GAO-05-574T 

PMA, agencies are to establish performance appraisal plans for all senior 

executives and managers that link to agency mission, goals, and outcomes. 

Recently, Congress and the administration have sought to modernize 

senior executive performance management systems by establishing a new 

performance-based pay system for the Senior Executive Service (SES) that 

is designed to provide a clear and direct linkage between SES performance 

and pay.13 With the new system, an agency can raise the pay cap for its 

senior executives if OPM certifies and OMB concurs that the agency’s 

performance management system, as designed and applied, makes 

meaningful distinctions based on relative performance. However, data 

suggest that more work is needed in making such distinctions. Agencies 

rated about 75 percent of senior executives at the highest level their 

systems permit in fiscal year 2003, the most current year for which data 

are available, which is about the same percent of executives as fiscal year 

2002. 

Congress has recently given agencies such NASA, DHS, and DOD statutory 

authorities to help them manage their human capital strategically to 

achieve results. Consequently, in this environment, the federal government 

is quickly approaching the point where “standard governmentwide” human 

capital policies and processes are neither standard nor governmentwide. 

To be effective, human capital reform needs to avoid further 

fragmentation within the civil service, ensure reasonable consistency 

within the overall civilian workforce, and help maintain a reasonably level 

playing field among federal agencies competing for talent. 

To help advance the discussion concerning how governmentwide human 

capital reform should proceed, GAO and the National Commission on the 

Public Service Implementation Initiative hosted a forum on whether there 

should be a governmentwide framework for human capital reform and, if 

so, what this framework should include.14 While there were divergent 

views among the forum participants, there was general agreement on a set 

 13 See section 1322 of Public Law 107-296, November 25, 2002, and section 1125 of Public 

Law 108-136, November 24, 2003. 

14 GAO and the National Commission on the Public Service Implementation Initiative, 

Highlights of a Forum: Human Capital: Principles, Criteria, and Processes for 

Governmentwide Federal Human Capital Reform, GAO-05-69SP (Washington, D.C.: 

Dec. 1, 2004). 

Framework for 

Human Capital 

Reform 
Page 13 GAO-05-574T 

of principles, criteria, and processes that would serve as a starting point 

for further discussion in developing a governmentwide framework in 

advancing needed human capital reform, as shown in figure 1. 

Figure 1: Principles, Criteria, and Processes 

• Principles that the government should retain in a framework for reform because 

of their inherent, enduring qualities: 

• Merit principles that balance organizational mission, goals, and performance 

objectives with individual rights and responsibilities 

• Ability to organize, bargain collectively, and participate through labor organizations 

• Certain prohibited personnel practices 

• Guaranteed due process that is fair, fast, and final 

• Criteria that agencies should have in place as they plan for and manage their new 

human capital authorities: 

• Demonstrated business case or readiness for use of targeted authorities 

• An integrated approach to results-oriented strategic planning and human capital 

planning and management 

• Adequate resources for planning, implementation, training, and evaluation 

• A modern, effective, credible, and integrated performance management system that 

includes adequate safeguards to help ensure equity and prevent discrimination 

• Processes that agencies should follow as they implement new human capital 

authorities: 

• Prescribing regulations in consultation or jointly with the Office of Personnel 

Management 

• Establishing appeals processes in consultation with the Merit Systems Protection 

Board 

• Involving employees and stakeholders in the design and implementation of new 

human capital systems 

• Phasing in implementation of new human capital systems 

• Committing to transparency, reporting, and evaluation 

• Establishing a communications strategy 

• Assuring adequate training 

Source: GAO. 

There is general recognition for a need to continue to develop a 

governmentwide framework for human capital reform that Congress and 

the administration can implement to enhance performance, ensure 

accountability, and position the nation for the future. Nevertheless, how it 

is done, when it is done, and on what basis it is done can make all the 

difference. Agencies authorized to implement any statutory authority 
Page 14 GAO-05-574T 

should demonstrate that they have the capacity, not just the design, to do 

so. The principles, criteria, and processes suggested above can help ensure 

consistency when granting both (1) agency-specific human capital 

authorities so agencies can design and implement effective human capital 

systems to help them address 21st century challenges and succeed in their 

transformations and (2) governmentwide reform to provide broad 

consistency where desirable and appropriate. 

The current administration has taken several steps to strengthen the 

integration of budget, cost, and performance information for which the 

Government Performance and Results Act (GPRA), the CFO Act, and the 

Government Management Reform Act (GMRA) laid the groundwork. The 

budget and performance integration initiative includes elements such as 

the Program Assessment Rating Tool (PART) used to review programs, an 

emphasis on improving outcome measures, and improving monitoring of 

program performance. Another effort is budget restructuring, which is 

meant to improve the alignment of resources with performance. None of 

these efforts are simple or straightforward. 

Integrating management and performance issues with budgeting is 

absolutely critical for progress in government performance and 

management. Such integration is obviously important to ensuring that 

management initiatives obtain the resource commitments and sustained 

leadership commitment throughout government needed to be successful. 

GPRA was enacted to provide a greater focus on performance in the 

federal government with the expectation that this would be linked and 

integrated with the budget. GPRA has succeeded in 10 years in expanding 

the supply of information and institutionalizing a culture of performance.15

In 2002, OMB introduced a formal assessment tool into executive branch 

budget deliberation: PART is the central element in the performance 

budgeting piece of the PMA.16 GPRA expanded the supply of performance 

information generated by federal agencies. OMB’s PART builds on GPRA 

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

16 PART applies 25 questions to all “programs” under four broad topics: (1) program 

purpose and design, (2) strategic planning, (3) program management, and (4) program 

results (i.e., whether a program is meeting its long-term and annual goals) as well as 

additional questions that are specific to one of seven mechanisms or approaches used to 

deliver the program. 

Budget and 

Performance 

Integration 
Page 15 GAO-05-574T 

by actively promoting the use of results-oriented information to assess 

programs in the budget. It has the potential to promote a more explicit 

discussion and debate between OMB, the agencies, and the Congress 

about the performance of selected programs. 

The promise of performance budgeting is that it can help shift the focus of 

budgetary debates and oversight activities by changing the agenda of 

questions asked. Performance information can help policymakers address 

a number of questions such as whether programs are (1) contributing to 

their stated goals, (2) well-coordinated with related initiatives at the 

federal level or elsewhere, and (3) targeted to those most in need of 

services or benefits. Results-oriented information is also needed for better 

day-to-day management and agency decisionmaking. It can provide 

information on what outcomes are being achieved, whether resource 

investments have benefits that exceed their costs, and whether program 

managers have the requisite capacities to achieve promised results. PART 

reviews are directed towards answering many of these questions; in many 

cases these reviews illustrated how far we have to go before performance 

information can be used with complete confidence. 

While no data are perfect, agencies need to have sufficiently credible 

performance data to provide transparency of government operations so 

that Congress, program managers, and other decision makers can use the 

information. However, as our work on PART and GPRA implementation 

shows, limited confidence in the credibility of performance data has been 

a longstanding weakness.17

Credible performance information can facilitate a fundamental 

reassessment of what the government does and how it does business by 

focusing on the outcomes—or program results—achieved with budgetary 

resources. Our work has shown that agencies are making progress, but 

improvement is needed to ensure that agencies measure performance 

toward a comprehensive set of goals that focus on results.18 We have 

previously reported that stakeholder involvement appears critical for 

 17 GAO has suggested various approaches to addressing this and other challenges in The 

Government Performance and Results Act: 1997 Governmentwide Implementation Will 

Be Uneven, GAO/GGD-97-109 (Washington, D.C.: June 1997). 

18 GAO, Performance Reporting: Few Agencies Reported on the Completeness and 

Reliability of Performance Data, GAO-02-372 (Washington, D.C.: Apr. 26, 2002); and 

Managing for Results: Opportunities for Continued Improvements in Agencies’ 

Performance Plans, GAO/GGD/AIMD-99-215 (Washington, D.C.: July 20, 1999). 
Page 16 GAO-05-574T 

getting consensus on goals and measures. Although improving outcome 

measures continues to be a major focus of PART reviews, as we reported 

in our January 2004 report,19 these assessments are conducted during the 

executive branch budget formulation process. An agency’s communication 

with stakeholders, including Congress, about goals and measures created 

or modified during the formulation of the President’s budget is likely to be 

less than during the development of the agency’s own strategic or 

performance plan. 

Moreover, in order for performance information to more fully inform 

resource allocations, decision makers must also feel comfortable with the 

appropriateness and accuracy of the performance information and 

measures associated with these goals. It is unlikely that decision makers 

will use performance information unless they believe it is credible and 

reliable and reflects a consensus about performance goals among a 

community of interested parties. Similarly, the measures used to 

demonstrate progress toward a goal, no matter how worthwhile, cannot 

serve the interests of a single stakeholder or purpose without potentially 

discouraging use of this information by others. 

Regarding OMB’s budget restructuring effort, this represents more than 

structural or technical changes. It reflects important trade-offs among 

different and valid perspectives and needs of these different decision 

makers. The structure of appropriations accounts and congressional 

budget justifications reflects fundamental choices and incentives 

considered most important. As such, changes to the account structure 

have the potential to change the nature of management and oversight and 

ultimately the relationship among the primary budget decision makers—

Congress, OMB, and agencies.20 This suggests that the goal of enhancing 

the use of performance information in budgeting is a multifaceted 

challenge that must build on a foundation of accepted goals, credible 

measures, reliable cost and performance data, tested models linking 

resources to outcomes, and performance management systems that hold 

agencies and managers accountable for performance. 

 19 GAO, Performance Budgeting: Observations on the Use of OMB’s Program Assessment 

Rating Tool for the Fiscal Year 2004 Budget, GAO-04-174. (Washington, D.C.: Jan. 30, 2004). 

20 GAO, Performance Budgeting: Efforts to Restructure Budgets to Better Align Resources 

With Performance, GAO-05-117SP (Washington, D.C.: Feb. 1, 2005). 
Page 17 GAO-05-574T 

Understanding performance issues requires an in-depth evaluation of the 

factors contributing to the program results. Targeted evaluation studies 

can be designed to detect important program side effects or to assess the 

comparative advantages of current programs to alternative strategies for 

achieving a program’s goals. Further, although the evaluation of programs 

in isolation may be revealing, it is often critical to understand how each 

program fits with a broader portfolio of tools and strategies to accomplish 

federal missions and performance goals. Such an analysis is necessary to 

capture whether a program complements and supports other related 

programs, whether it is duplicative and redundant, or whether it actually 

works at cross-purposes with other initiatives. Although the 

administration has taken some steps to use PART for crosscutting reviews, 

this falls short of the more expansive planning and review process called 

for in GPRA. 

Although clearly much more remains to be done, the statutory reforms of 

the 1990s have laid the foundation for performance budgeting by 

establishing infrastructures in the agencies to improve the supply of 

information on performance and costs. Merely the number of programs 

“killed” or a measurement of funding changes against performance 

“grades” cannot measure the success of performance budgeting. Rather, 

success must be measured in terms of the quality of the discussion, the 

transparency of the information, the meaningfulness of that information to 

key stakeholders, and how it is used in the decision-making process. The 

determination of priorities is a function of competing values and interests 

that may be informed by performance information but also reflects such 

factors as equity, unmet needs, and the perceived appropriate role of the 

federal government in addressing these needs. If members of Congress 

and the executive branch have better information about the link between 

resources and results, they can make the trade-offs and choices cognizant 

of the many and often competing claims on the federal budget. 

Electronic government, or e-government, has been seen as promising a 

wide range of benefits based largely on harnessing the power of the 

Internet to facilitate interconnections and information exchange between 

citizens and their government. Federal agencies have implemented a wide 

array of e-government applications, including using the Internet to collect 

and disseminate information and forms; buy and pay for goods and 

services; submit bids and proposals; and apply for licenses, grants, and 

Expanded Electronic 

Government 
Page 18 GAO-05-574T 

benefits. Although substantial progress has been made, the government 

continues to face challenges in fully reaching its potential in this area.21

Recognizing the magnitude of challenges facing the federal government, 

Congress has enacted important legislation to guide the development of egovernment. Specifically, in December 2002, Congress enacted the EGovernment Act of 2002 with the general purpose of promoting better use 

of the Internet and other information technologies to improve government 

services for citizens, internal government operations, and opportunities 

for citizen participation in government.22 Among other things, the act 

required the establishment of an Office of Electronic Government within 

OMB to oversee implementation of the act’s provisions. The act also 

mandated additional actions to strengthen e-government activities in a 

number of specific areas, including accessibility and usability of 

government information, protection of personal privacy, coordination of 

information related to disaster response and recovery, and common 

protocols for geographic information systems. Additionally, title III of the 

act includes provisions to strengthen agency information security, known 

as the Federal Information Security Management Act of 2002. 

To implement the PMA initiative, OMB has taken a number of actions. The 

centerpiece of the effort has been oversight of 25 high-profile egovernment projects covering a wide spectrum of government activities, 

ranging from the establishment of centralized portals on government 

information to eliminating redundant, nonintegrated business operations 

and systems.23 For example, Grants.gov is a Web portal for all federal grant 

customers to find, apply for, and ultimately manage federal grants online. 

Other e-government efforts, such as the e-payroll initiative to consolidate 

federal payroll systems, do not necessarily rely on the Internet. The results 

of these e-government initiatives, according to OMB, could produce 

several billion dollars in savings from improved operational efficiency. 

More recently, OMB has initiated efforts to develop common business-

 21 GAO, Electronic Government: Initiatives Sponsored by the Office of Management and 

Budget Have Made Mixed Progress, GAO-04-561T (Washington, D.C., March 24, 2004) and 

GAO, Electronic Government: Proposal Addresses Critical Challenges, GAO-02-1083T

(Washington, D.C., Sept. 18, 2002).

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

23 For more information about the selection of initiatives, see GAO, Electronic 

Government: Selection and Implementation of the Office of Management and Budget’s 24 

Initiatives, GAO-03-229 (Washington, D.C., Nov. 22, 2002). 
Page 19 GAO-05-574T 

driven, government-wide solutions in five e-government “lines of 

business”: case management, federal health architecture, grants 

management, human resources management, and financial management. 

These efforts are also expected to reap cost savings and gains in 

efficiency. 

While many e-government initiatives are showing tangible results, we 

found, in March 2004, that overall progress on the 25 OMB-sponsored egovernment initiatives was mixed. At that time we reported that, of the 91 

objectives originally defined in the initiatives’ work plans, 33 had been 

fully or substantially achieved; 38 had been partially achieved; and for 17, 

no significant progress had been made. In addition, three of the objectives 

were no longer being pursued, because they had been found to be 

impractical or inappropriate. We found that the extent to which the 25 

initiatives had met their original objectives could be linked to a common 

set of challenges that they all faced, including (1) focusing on achievable 

objectives that address customer needs, (2) maintaining management 

stability through executive commitment, (3) collaborating effectively with 

partner agencies and stakeholders, (4) driving transformational changes in 

business processes, and (5) implementing effective funding strategies. 

Initiatives that had overcome these challenges generally met with success 

in achieving their objectives, whereas initiatives that had problems dealing 

with these challenges made less progress. 

Additionally, as we reported in December 2004, in most cases, OMB and 

federal agencies have taken positive steps toward implementing major 

provisions of the E-Government Act of 2002.24 For example, OMB 

established the Office of E-Government in April 2003, and published 

guidance to federal agencies on implementing the act in August 2003. 

Apart from general requirements applicable to all agencies (which we did 

not review), we found that in most cases, OMB and designated federal 

agencies had taken action to address the act’s requirements within 

stipulated timeframes. To help ensure that the act’s objectives are 

achieved, we made recommendations to OMB regarding implementation 

of the act in the areas of e-government approaches to crisis preparedness, 

contractor innovation, and federally funded research and development. 

 24 GAO, Electronic Government: Federal Agencies Have Made Progress Implementing the 

E-Government Act of 2002, GAO-05-12, (Washington, D.C., Dec. 10, 2004). 
Page 20 GAO-05-574T 

OMB’s PMA scorecard for the expanded electronic government initiative 

reflects a broad view of the many components of an effective program for 

expanding electronic government. For example, the scorecard assesses 

whether an agency has an enterprise architecture25 in place that is linked 

to the Federal Enterprise Architecture, which is intended to provide a 

government wide framework to guide and constrain federal agencies’ 

enterprise architectures and information technology investments. The 

federal government’s efforts in this area are still maturing. In May 2004, we 

reported that the Federal Enterprise Architecture remained very much a 

work in progress and that agencies’ enterprise architectures were likewise 

still maturing.26 When we surveyed agencies in 2003, we found that only 20 

of 96 agencies had established at least the foundation for effective 

architecture management and that the level of maturity had not changed 

much over the previous years.27

In addition, OMB’s e-government scorecard requires agencies to properly 

secure their information technology systems, a task that has been daunting 

for many government agencies. We recently reported that although 

agencies were generally reporting an increasing number of systems 

meeting key statutory information security requirements, challenges 

nevertheless remained.28 For example, only 7 of 24 agencies reported that 

they had tested contingency plans for 90 percent or more of their systems. 

Contingency plans provide specific instructions for restoring critical 

systems in case the usual facilities are significantly damaged or cannot be 

accessed due to unexpected events, and testing of these plans is essential 

to determining whether they will function as intended in an emergency 

situation. 

 25 An enterprise architecture is a blue print, defined largely by interrelated models, that 

describes (in both business and technology terms) an entity’s “as is” or current 

environment, its “to be” or future environment, and its investment plan for transitioning 

from the current to the future environment. 

26 GAO, Information Technology: The Federal Enterprise Architecture and Agencies’ 

Enterprise Architectures Are Still Maturing, GAO-04-798T (Washington, D.C.: May 19, 

2004). 

27 GAO, Information Technology: Leadership Remains Key to Agencies Making Progress 

on Enterprise Architecture Efforts, GAO-04-40 (Washington, D.C.: Nov. 17, 2003). 

28 GAO, Information Security: Continued Efforts Needed to Sustain Progress in 

Implementing Statutory Requirements, GAO-05-483T (Washington, D.C.: Apr. 7, 2005). 
Page 21 GAO-05-574T 

The federal government needs to undertake a fundamental review of who 

will do the government’s business in the 21st Century. In this regard, 

agencies are assessing what functions and transactions the private sector 

could perform, and in many cases they are asking agency employees to 

compete with private entities for this business. The objectives of the PMA 

initiative on competitive sourcing are to improve quality and reduce costs. 

Aspects of the government’s process for making sourcing decisions had 

been criticized as cumbersome, complicated, and slow. Against this 

backdrop, and in response to a requirement in the National Defense 

Authorization Act for fiscal year 2001, I convened a panel of experts to 

study the process. The Commercial Activities Panel, consisting of 

representatives from agencies, federal labor unions, private industry, and 

other individuals with expertise in this area, conducted a yearlong study. 

The panel members heard repeatedly about the importance of competition 

and its central role in fostering economy, efficiency, and continuous 

performance improvement. The panel strongly supported continued 

emphasis on competition and concluded that whenever the government is 

considering converting work from one sector to another, public-private 

competitions should be the norm, consistent with the 10 overarching 

principles adopted unanimously by the panel.29

As part of the administration’s efforts to advance this PMA initiative and 

implement the recommendations of the Commercial Activities Panel, OMB 

revised circular A-76, which sets forth federal policy for determining 

whether federal employees or private contractors will perform commercial 

activities. The revisions are broadly consistent with the principles and 

recommendations of the Panel. In particular, the revised circular stresses 

the use of competition in making sourcing decisions and, through reliance 

on procedures contained in the Federal Acquisition Regulation, should 

result in a more transparent, expeditious, fair, and consistently applied 

competitive process. We continue to review various aspects of this 

initiative. 

One issue not fully addressed in the revised Circular was the right of 

federal employees or their representatives to file protests challenging the 

conduct or the outcomes of public-private competitions. In April 2004, we 

 29 Improving the Sourcing Decisions of the Government. Final report of the Commercial 

Activities Panel (Washington, D. C.: April 2002). 

Competitive Sourcing 
Page 22 GAO-05-574T 

issued a decision holding that federal employees lacked standing to file 

such protests under the Competition in Contracting Act (CICA).30 We 

pointed out that the Congress would have to amend CICA in order to 

provide that right. Congress amended CICA late last year,31 and just last 

week, after receiving and considering various public comments, we issued 

final regulations implementing the change.32

The federal real property portfolio is vast and diverse—over 30 agencies 

control hundreds of thousands of real property assets worldwide, 

including facilities and land worth hundreds of billions of dollars. 

Unfortunately, much of this vast, valuable portfolio reflects an 

infrastructure based on the business model and technological environment 

of the 1950s. Many of these assets are no longer effectively aligned with, or 

responsive to, agencies’ changing missions. Further, many assets are in an 

alarming state of deterioration; agencies have estimated restoration and 

repair needs to be in the tens of billions of dollars. Maintaining underused 

or unneeded federal property is also costly due to day-to-day operational 

costs, such as regular maintenance, utilities fees, and security expenses. 

Compounding these problems are the lack of reliable governmentwide 

data for strategic asset management; a heavy reliance on costly leasing, 

instead of ownership, to meet new needs; and the cost and challenge of 

protecting these assets against terrorism. In January 2003, we designated 

federal real property as a high-risk area due to these longstanding 

problems. 

In February 2004, the President added the Federal Asset Management 

Initiative to the President’s Management Agenda and signed Executive 

Order 13327 to address challenges in this area. The order requires senior 

real property officers at all executive branch departments and agencies to, 

among other things, develop and implement an agency asset management 

plan; identify and categorize all real property owned, leased, or otherwise 

managed by the agency; prioritize actions needed to improve the 

operational and financial management of the agency’s real property 

inventory; and make life-cycle cost estimations associated with the 

 30 B-293590.2, April 19, 2004, 2004 CPD ¶ 82. 

31 Public Law 98-369, July 18, 1984, as amended by Public Law 108-375, § 326(d), October 

28, 2004. 

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

Federal Real Property 

Asset Management 
Page 23 GAO-05-574T 

prioritized actions. In addition, the senior real property officers are 

responsible, on an ongoing basis, for monitoring the real property assets of 

the agency. The order also established a new Federal Real Property 

Council (the Council) at OMB. 

In April 2005, OMB officials updated us on the status of the 

implementation of the executive order. According to these officials, all of 

the senior real property officers are in place, and the Council has been 

working to identify common data elements and performance measures to 

be captured by agencies and ultimately reported to a governmentwide 

database. In addition, OMB officials reported that agencies are working on 

their asset management plans. Plans for DOD, the Departments of 

Veterans Affairs, (VA) and Energy, and the General Services 

Administration (GSA) have been completed and approved by OMB. The 

Council has also developed guiding principles for real property asset 

management. These guiding principles state that real property asset 

management must, among other things, support agency missions and 

strategic goals, use public and commercial benchmarks and best practices, 

employ life-cycle cost-benefit analysis, promote full and appropriate 

utilization, and dispose of unneeded assets. 

In addition to these reform efforts, Public Law 108-447 gave GSA the 

authority to retain the net proceeds from the disposal of federal property 

for fiscal year 2005 and to use such proceeds for GSA’s real property 

capital needs.33 Also, Public Law 108-422 established a capital asset fund 

and gave VA the authority to retain the proceeds from the disposal of its 

real property for the use of certain capital asset needs such as demolition, 

environmental clean-up, and major repairs.34 And, agencies such as DOD 

and VA have made progress in addressing longstanding federal real 

property problems and governmentwide efforts in the facility protection 

area are progressing. For example: 

• VA has implemented a process called Capital Asset Realignment for 

Enhanced Services (CARES) to address its aging and obsolete portfolio of 

health care facilities. In March 2005, we reported that through CARES, VA 

identified 136 locations for evaluation of alternative ways to align inpatient 

services: 99 of these facilities had potential duplication of services with 

 33 Division H, § 412, December 8, 2004. 

34 Sec. 411, November 30, 2004. 
Page 24 GAO-05-574T 

another nearby facility or low acute patient workload.35 VA made decisions 

to realign inpatient health care services at 30 of these locations. For 

example, it will close all inpatient services at five facilities. VA’s decisions 

on inpatient alignment and plans for further study of its capital asset needs 

are tangible steps in improving management of its capital assets and 

enhancing health care. Accomplishing its goals, however, will depend on 

VA’s success in completing its evaluations and implementing its CARES 

decisions to ensure that resources now spent on unneeded capital assets 

are redirected to health care. 

• In DOD’s support infrastructure management area, which we identified as 

high-risk in 1997, DOD has made progress and expects to continue making 

improvements. In April 2005, we testified that DOD’s infrastructure costs 

continue to consume a larger-than-necessary portion of its budget than 

DOD believes is desirable.36 For several years, DOD has been concerned 

about its excess facilities infrastructure, which affects its ability to fund 

weapons system modernization and other critical needs. DOD has 

achieved some operating efficiencies from such efforts as base 

realignments and closures, consolidations, and business process 

reengineering. Despite this progress, much work remains for DOD to 

transform its support infrastructure so that it can concentrate resources 

on critical needs. DOD also needs to strengthen its recent efforts to 

develop and refine its comprehensive long-range plan for its facility 

infrastructure to ensure adequate funding for facility sustainment, 

modernization, and recapitalization. 

• In light of the need to invest in facility protection since September 11, 

funding available for repair and restoration and preparing excess property 

for disposal may be further constrained. The Interagency Security 

Committee (ISC), which is chaired by DHS, is tasked with coordinating 

federal agencies’ facility protection efforts, developing standards, and 

overseeing implementation. In November 2004, we reported that ISC had 

made progress in coordinating the government’s facility protection efforts 

by, for example, developing security standards for leased space and design 

criteria for security in new construction projects.37 Despite this progress, 

 35 GAO, VA Health Care: Important Steps Taken to Enhance Veterans’ Care By Aligning 

Inpatient Services with Projected Needs, GAO-05-160 (Washington, D.C.: Mar. 2, 2005). 

36 GAO, DOD’s High-Risk Areas: Successful Business Transformation Requires Sound 

Strategic Planning and Sustained Leadership, GAO-05-520T (Washington, D.C.: Apr. 13, 

2005). 

37 GAO, Homeland Security: Further Actions Needed to Coordinate Federal Agencies’ 

Facility Protection Efforts and Promote Key Practices, GAO-05-49 (Washington, D.C.: 

Nov. 30, 2004). 
Page 25 GAO-05-574T 

we found that its actions to ensure compliance with security standards 

and oversee implementation have been limited. Nonetheless, the ISC 

serves as a forum for addressing security issues, which can have an impact 

on agencies’ efforts to improve real property management. 

The inclusion of real property asset management on the President’s 

Management Agenda, the executive order, and agencies’ actions are 

clearly positive steps in an area that had been neglected for many years. 

However, despite the increased focus on real property issues in recent 

years, the underlying conditions—such as excess and deteriorating 

properties and costly leasing—continue to exist and more needs to be 

done to address various obstacles that led to our high risk designation. For 

example, the problems have been exacerbated by competing stakeholder 

interests in real property decisions, various legal and budget related 

disincentives to businesslike outcomes, and the need for better capital 

planning among real property-holding agencies. In light of this, we 

continue to believe that there is a need for a comprehensive and integrated 

transformation strategy for federal real property. Realigning the 

government’s real property assets with agency missions, taking into 

account the requirements of the future federal role and workplace, will be 

critical to improving the government’s performance and ensuring 

accountability within expected resource limits. A transformation strategy 

could serve as a useful guide for implementing further change and 

achieving such results. 

As my testimony today has highlighted, serious and disciplined efforts are 

needed to improve the management and performance of federal agencies 

and to ensure accountability. Along with OMB’s leadership in 

implementing PMA, it will only be through the attention of Congress, the 

administration, and federal agencies, that progress can be sustained and, 

more importantly, accelerated. The stakes associated with federal program 

performance are large, both for beneficiaries of these programs and the 

nation’s taxpayers. Policymaking institutions will be challenged to shift 

from the traditional focus on incremental changes in spending or revenues 

to look more fundamentally at the programs, policies, functions, and 

activities in addressing current and emerging national needs and problems 

across levels of government and sectors, including all major areas of the 

federal budget—discretionary spending, entitlements and other mandatory 

spending, and tax policies and programs. 

Congressional support has proven to be critical in sustaining interest in 

management initiatives over time. Congress has served as an institutional 

Continuing Attention 

Is Needed to Improve 

Management and 

Performance Across 

the Federal 

Government 
Page 26 GAO-05-574T 

champion for many reform initiatives over the years, such as the CFO Act 

and GPRA. Our March 2004 report on GPRA found that it has established a 

solid foundation for achieving greater results, but that significant 

challenges to GPRA implementation still exist.38 Our survey data suggested 

that more federal managers, especially at the SES level, believed that OMB 

was paying attention to their agencies’ efforts under GPRA. However, we 

found inconsistent commitment in other areas where OMB could further 

enhance its leadership. Agencies’ plans and reports still suffer from 

persistent weaknesses and could improve in a number of areas, such as 

attention to issues that cut across agency lines, and better information 

about the quality of the data that underlie agency performance goals. We 

recommended that OMB improve its guidance and oversight of GPRA 

implementation, as well as develop a governmentwide performance plan. 

As discussed earlier, GPRA requires a governmentwide performance plan, 

but OMB has not issued a distinct plan since 1999. Most recently, the 

President’s fiscal year 2006 budget described agencies’ progress in 

addressing the PMA and the results of PART reviews of agencies’ 

programs. While such information is important and useful, alone it is not 

adequate to provide a broader and more integrated perspective of planned 

performance on governmentwide outcomes. The PART focus on individual 

programs needs to be supplemented by a more crosscutting assessment of 

the relative contribution of portfolios of programs and tools to broader 

outcomes. Most key performance goals of importance—ranging from low 

income housing to food safety to counterterrorism—are addressed by a 

wide range of discretionary, entitlement, tax, and regulatory approaches 

that cut across a number of agencies. 

Preparing a governmentwide plan could build on the administration’s 

efforts to assess progress across the government as well as contribute to 

efforts to compare the performance results across similar programs that 

address common outcomes. Although there has been limited progress, 

efforts to date have not provided the Congress and others with an 

integrated perspective on the extent to which programs and tools 

contribute to national goals and position the government to successfully 

meet 21st century demands. 

 38 GAO, Results-Oriented Government: GPRA Has Established a Solid Foundation for 

Achieving Greater Results, GAO-04-38 (Washington, D.C., March 10, 2004). 
Page 27 GAO-05-574T 

We also suggested that Congress consider amending GPRA to require that 

the President develop a governmentwide strategic plan. Although it 

generally agreed with our recommendations, OMB stated that the 

President’s Budget can serve as both a governmentwide strategic and 

annual plan. However, we believe that the budget provides neither a longterm nor an integrated perspective on the federal government’s 

performance. A strategic plan for the federal government, supported by a 

set of key national indicators to assess the government’s performance, 

position, and progress, could provide an additional tool for 

governmentwide reexamination of existing programs, as well as proposals 

for new programs. Such a plan could be of particular value in linking 

agencies’ long-term performance goals and objectives horizontally across 

the government and could provide a basis for integrating, rather than 

merely coordinating, a wide array of federal activities. This raises the issue 

of the need for a set of key indicators to inform decision makers about the 

position and progress of the nation as a whole and to help set agency and 

program goals and priorities. 

Further, given the financial constraints we are likely to face for many 

years to come and the trends at work that are changing the world in which 

our government operates, a fundamental review of major program and 

policy areas is needed to update the federal government’s programs and 

priorities to meet current and future challenges. Our recent report on 21st 

Century Challenges is intended to help the Congress in reviewing and 

reconsidering the base of federal spending and tax programs.39 As this 

Subcommittee is well aware, the nature and magnitude of the fiscal, 

security, and economic and other adjustments that need to be considered 

are not amenable to “quick fixes;” rather they will likely require an 

iterative, thoughtful process of disciplined changes and reforms over many 

years. Therefore, providing an ongoing and consistent focus, such as the 

PMA has provided on management reform efforts, is an important element 

in helping to ensure that the federal government is managed effectively to 

achieve results important to the American people. 

Our report on 21st century challenges laid out some of the most pressing 

issues for policymakers to consider as the government increasingly relies 

on new networks and partnerships to achieve critical results. A complex 

network of governmental and nongovernmental entities—such as federal 

 39 U.S. Government Accountability Office, 21st Century Challenges: Reexamining the Base 

of the Federal Government, GAO-05-325SP (Washington, D.C.: February 2005). 
Page 28 GAO-05-574T 

agencies, domestic and international non- or quasi-governmental 

organizations, for-profit and not-for-profit contractors, and state and local 

governments—contribute to shaping the actual outcomes achieved. Some 

of the issues are consistent with those raised by the PMA, such as in the 

area of real property asset management—focusing on opportunities to 

more strategically manage the federal government’s assets to make the 

federal portfolio more relevant to current missions and less costly. Moving 

forward, some additional questions that are particularly relevant to the 

focus of this hearing on improving governance include the following: 

• In a modern society with advanced telecommunications and electronic 

information capabilities, which agencies still need a physical presence in 

all major cities? 

• How can agencies more strategically manage their portfolio of tools and 

adopt more innovative methods to contribute to the achievement of 

national outcomes? 

• How can greater coordination and dialogue be achieved across all levels of 

government to ensure a concerted effort by the public sector as a whole in 

addressing key national challenges and problems? 

• What are the specific leadership models that can be used to improve 

agency management and address transformation challenges? For example, 

should we create chief operating officer or chief management officer 

positions with term appointments within selected agencies to elevate, 

integrate, and institutionalize responsibility and authority for business 

management and transformation efforts? 

Mr. Chairman, we are pleased to be able to participate in this hearing 

today. We have issued a large body of reports, guides, and tools on issues 

directly relevant to PMA, and plan to continue to actively support 

congressional and agency actions to address today’s challenges and 

prepare for the future. As I have discussed in my statement today, 

although efforts to transform agencies by improving their management 

and performance are under way, more remains to be done to ensure that 

the government has the capacity to deliver on its promises meet current 

and emerging needs, and to remain relevant in the 21st Century. Decisive 

action and sustained attention will be necessary to make the hard choices 

needed to reexamine and transform the federal government, maximize its 

performance, and ensure accountability. 

This concludes my prepared statement. I would be pleased to respond to 

any questions that you or other members of the subcommittee may have. 

(450409) 
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