U.S. TREASURY

Government at the Brink

Volume I.

Urgent Federal

Government

Management

Problems Facing

the Bush

Administration

Senator Fred Thompson

Committee on

Governmental Affairs

United States Senate

Washington, DC

June, 2001
i.

Table of Contents Volume I.

Preface by Senator Fred Thompson...................................................................................................... 1

Report Overview .................................................................................................................................. 3

A. Federal Workforce Problems .......................................................................................................... 9

B. Financial Management Problems................................................................................................... 24

C. Information Technology Problems ................................................................................................ 35

D. Overlap and Duplication................................................................................................................ 54

Appendix: Top Management Challenges Most Frequently Identified by Inspectors General .......... 68
1

Obviously we will never completely

eliminate fraud, waste, and error in an

operation as large and complex as the

federal government. Some of the

ludicrous situations we uncover,

however, make you wonder if anyone is

even trying. 

The only thing we really need to solve

these problems is leadership. 

A PREFACE BY SENATOR 

FRED THOMPSON

Like most Americans, I had heard about waste,

fraud, and abuse committed in the federal

government long before I came to Washington.

But after being here for just a few years, I realized

I didn’t know the half of it. Because of its size and

scope, and the terrible way it is managed, the

federal government wastes billions and billions of

your tax dollars every year. The waste, fraud, and

abuse reported to the Governmental Affairs

Committee each year is staggering. 

Of course, no one knows exactly how much fraud,

waste, and mismanagement cost the taxpayers

because the federal government makes no effort to

keep track of it. But, based on just a few examples

from reports by the General Accounting Office and

agency Inspectors General, we came up with a

figure of $220 billion--$35 billion in just one year

alone. 

Obviously we will never completely eliminate

fraud, waste, and error in an operation as large and

complex as the federal government. Some of the

ludicrous situations we uncover, however, make

you wonder if anyone is even trying. For example,

Medicare paid millions of dollars for services

allegedly rendered to beneficiaries after Medicare’s

own records showed they were deceased.

Prisoners get food stamps and other federal

benefits to which they’re obviously not entitled.

The Internal Revenue Service issued a $15,000 tax

refund to someone who actually owed $350,000 in

delinquent taxes. 

In this report, I hope to illuminate some of the root

causes of the mismanagement that persist in the

federal government. This report does not attempt

to capture all of the serious management

challenges that the government faces. Rather, we

are focusing on four of the core problems that

agencies face – workforce management, financial

management, information technology management,

and overlap and duplication.

More significant than just wasting money, these

problems mean that the government can’t do

everything it is supposed to do. When the federal

government wastes money, it can’t use that money

for the benefit of the American people. For

instance, as I’ve mentioned, the Medicare program

wasted almost $12 billion last year. That $12

billion could have gone to providing better health

care for more of our elderly citizens. Or, it could

help pay for the prescription drugs needed by most

Medicare recipients.

These problems – workforce management,

financial management, information technology

management, and overlap and duplication – aren’t

new. They weren’t created by the Clinton

Administration. But the Clinton Administration

didn’t give them the attention they deserved, either.

The Congress has passed law after law to address

these problems, but nothing ever seems to improve.

We have the tools to fix these problems. But the

amount of money wasted each year just seems to

grow. And like it or not, these are the problems the

Bush Administration and the new Congress, both

Republicans and Democrats, have inherited. If

these problems are left to fester, they will further
2

erode Americans’ trust in government. More

importantly, Americans will not get the benefits

they deserve from the investments they make with

their taxes. And that money will continue being

wasted. 

The only thing we really need to solve these

problems is leadership. If the President and the

leadership in Congress make a priority out of

solving these problems, they will get solved. If the

White House demands that the Defense

Department get its financial books in order, they

will do it. If Congress joins together to insist that

agencies reduce waste, they will do it. We have to

put our money where our mouth is, of course. It

will require an investment to solve these problems.

But, solving them will reap rewards in the future.

After being Chairman of the Governmental Affairs

Committee now for more than four years, I am

convinced that the best way to secure our nation’s

economic future is to solve many of the

management problems facing our government. If

we don’t solve them now, we will have

surrendered our ability to address other problems in

the future when the retirement of the baby boomers

will place increased demand on our resources.
3

The Bush Administration has inherited

a series of truly daunting problems,

which have developed over many years.

[T]he most pervasive and critical of all

[problems] throughout the federal

government: federal workforce

management, financial management,

information technology management,

and program overlap and duplication.

REPORT OVERVIEW

At the start of a new Administration,

Washington’s attention naturally centers on

policy. Lurking below the surface, however,

are a host of management problems that will

severely test the Administration’s ability to

execute its policy agenda. Management

problems of the nature and magnitude facing the

federal government would attract the highest

priority attention from private sector executives,

who know they couldn’t do business without

first solving them. While the problems are just

as devastating for the federal government, they

tend to fester largely under the radar screen in

Washington.

The purpose of this report is to draw attention to

these problems and highlight the urgent need to

resolve them. The report lays down some

markers on where we are today and what needs

to be done to fix the management mess in

Washington. The Bush Administration has

inherited a series of truly daunting problems,

which have developed over many years. While

not of their making, the new Administration

now faces the consequences of these problems.

They need to take them on and solve

them—something their predecessors failed to

do. Otherwise, much that they try to accomplish

will inevitably fail. 

The work of the government’s objective and

nonpartisan internal auditors—the General

Accounting Office (GAO) and agency

Inspectors General (IGs)—provides irrefutable

evidence that the new Administration begins

with an array of problems of unprecedented

depth and breadth. The federal government’s

core management problems have persisted for

years, and, in fact, have grown worse. GAO and

IGs report on much the same problems —

literally hundreds of them — year after year:

C In 1990, GAO launched its biennial

“high-risk list” of the areas throughout

the federal government that are most

vulnerable to fraud, waste, and abuse. It

started with 14 problem areas. The

current GAO high-risk list, issued just

this year, contains 23 problem areas.

Eight of the original 14 high-risk

problems are still on the list

today—more than a decade later. 

C The IGs report to Congress each year on

the most serious management problems

facing their agencies. For the most part,

they also list the same problems year

after year. (See Appendix.)

Listed below are ten of the worst examples of

waste, fraud, and abuse in the federal

government’s recent history. This report

discusses in greater detail four overarching

problem areas that are the most pervasive and

critical of all throughout the federal
4

The Federal Government’s

Top Ten 

Worst Examples of Mismanagement

1. THE BIG DIG – Boston’s Central Artery –is the most expensive federal infrastructure project in the nation’s

history. Its cost continues to rise and is now estimated at $13.6 billion; an almost 525 percent increase

from the original $2.6 billion.

2. ABUSING THE TRUST OF AMERICAN INDIANS – The Department of the Interior does not know what

happened to more than $3 billion it holds in trust for American Indians. A judge overseeing this case called

it “fiscal and governmental irresponsibility in its purest form.”

3. DEPARTMENT OF DEFENSE FINANCIAL MANAGEMENT - there is widespread agreement that the

Department of Defense finances are a shambles. It wastes billions of dollars each year, and can not

account for much of what it spends. 

4. NASA Mismanagement Causes Mission Failures - In spectacular example after example, NASA lost billions

because of mismanagement of some of its biggest programs. The cause of the Mars Polar Lander failure,

for example, was that one team used English measurements (inches, feet, and pounds) to design and

program the vehicle, while another used metric measurements. 

5. MEDICARE WASTE, FRAUD, AND ABUSE - Medicare wastes almost $12 billion every year on improper

payments. It misspent that $12 billion last year from the fee-for-service part of Medicare alone, which was

about 7 percent of the total fee-for-service budget. The amounts wasted on improper Medicare payments

would go a long way toward funding a prescription drug benefit or other program enhancements.

6. SECURITY VIOLATIONS AT THE DEPARTMENT OF ENERGY - The Department does not adequately

safeguarded America’s nuclear secrets. In just one case, an employee was dead for 11 months before

department officials noticed that he still had four secret documents signed out.

7. IRS FINANCIAL MISMANAGEMENT - The IRS manages its finances worse than most Americans. The

agency does not even know how much it collects in Social Security and Medicare taxes. GAO found

significant delays – sometimes up to 12 years – in recording payments made by taxpayers. 

8. VETERANS AFFAIRS PUTS PATIENT HEALTH AT RISK – The Department of Veterans Affairs IG found that

“[A hospital’s Food Service] shares the loading dock with the Environmental Management Service’s

hazardous waste containers. Dirty Environmental Management Service and red biohazard carts were

located next to the area where food is transported to the kitchen.”

9. BILKING TAXPAYERS OUT OF STUDENT FINANCIAL AID - Federal student aid programs are rife with fraud

and abuse. A cottage industry of criminals advise people on how to cheat to get federal loans and grants.

In one case, scam artists passed off senior citizens taking crafts classes as “college students” who

qualified for federal Pell grants.

10. UNEMPLOYMENT INSURANCE FRAUD - A Las Vegas, Nevada man illegally collected at least $230,500 in

fraudulent Unemployment Insurance benefits from four different states between September, 1996 and

November, 1999. He set up 13 fake companies and submitted bogus claims based on false reported wages

for 36 non-existent claimants using the names and Social Security numbers of dead people, and then

collected the claims by mail from California, Massachusetts, Texas and Nevada.

government: workforce management, financial

management, information technology

management, and overlap and duplication. The

second volume of this report includes

descriptions of these and other critical problems

at a number of individual agencies. 

Workforce management. The federal

government has a major “people” crisis whose

full dimensions are just now emerging. Aging

workforces compounded by the employee

“downsizing” of recent years have left many

agencies dangerously short of employees with

the necessary skills and experience to do their

jobs. Downsizing was conducted as a numbers

game, carried out randomly to reduce employees

to arbitrary predetermined levels. The federal

government reduced staffing without cutting
5

back on anything that it does. 

The situation will get worse since one-third to

one-half of the remaining federal workforce may

retire over the next 5 years. The Hart-Rudman

Commission on National Security has reported

that “the quality of personnel serving in

government is critically important to U.S.

national security in the 21st century.” The

federal government, like the private sector, will

become increasingly reliant on information

technology. But the federal government has

trouble hiring and keeping employees with the

high-tech skills it so badly needs.

On top of these problems, the federal civil

service system—the process the federal

government uses to hire and promote

workers—is broken. One expert says it

“underwhelms at almost every task it

undertakes,” including hiring, training,

rewarding, and dealing with poor performers.

Understandably, few of our young people

express an interest in federal service. Concern

is mounting that problems with the political

appointment process are likewise discouraging

many capable people from accepting top

positions in public service.

Inadequate workforces affect everything that the

government does and make all of its other

management and performance problems that

much worse. It came as no surprise when GAO

recently designated workforce management,

which it refers to as “human capital,” a

government-wide high-risk problem.

Financial management. The federal government

as a whole and some of its largest agencies can’t

pass a basic financial audit. Last year, all major

federal agencies got their financial statements in

on time, and more got unqualified (“clean”)

opinions than ever before. That’s a step in the

right direction. However, it’s only a first step.

All that a clean opinion means is that the agency

could balance its books for one day—September

30 (the last day of the government’s fiscal

year)—and it takes most agencies months after

the end of the fiscal year to figure out what that

balance was. Furthermore, many agencies pass

their financial audits only after massive and

costly accounting efforts that cover up their

underlying problems and divert resources from

fixing them. 

This would be like an ordinary couple taking off

work and spending two solid weeks at home

trying to figure out what their checkbook

balance was six months ago. They may be able

to do it, but it doesn’t help them manage their

finances or avoid bouncing checks today. The

same holds true for the federal government.

Hardly any federal agency can actually use its

financial systems for day-to-day management. 

Financial management is the direct subject of

four GAO high-risk problems and a contributing

factor to many more. The IGs at almost all

major agencies have designated financial

management as a critical problem. Needless to

say, the government can’t operate efficiently

when agencies don’t know how much money

they have, how much they spend, or how much

their programs cost.

 

Information technology management. The

advances in computers and information

technology that revolutionized private sector

business practices have yet to register with the

federal government. Agencies seem unable to

use technology to enhance their efficiency and

effectiveness, and they have consistently

mismanaged major computer projects.

Weaknesses in government computer systems

make them vulnerable to attacks from

international and domestic terrorists, crime
6

A degree of public skepticism toward

our government is a healthy thing. 

Rampant cynicism is not.

rings, and everyday “hackers.” These

weaknesses threaten our national security and

jeopardize the confidentiality of vast amounts of

sensitive information on individuals that the

government holds. 

Information technology management is a critical

problem at all major agencies. GAO has

designated computer security a governmentwide high-risk problem. We should expect the

government to provide the same range and

quality of services as the private sector,

including service over the phone and via the

Internet. But this won’t happen until the

government has the high tech equipment in

place to deliver such services and knows how to

use it. 

Overlap and duplication. The federal

government operates myriad spending

programs, regulatory programs, subsidies, tax

breaks, and other forms of federal intervention.

They have accumulated randomly over the

years, in response to the real or perceived needs

of the moment. Once created, however, it is

virtually impossible to eliminate any of these

programs even if they have long since served

their purpose. The Comptroller General

recently testified before the Governmental

Affairs Committee that, “[i]n program area after

program area, we have found that unfocused and

uncoordinated crosscutting programs waste

scarce resources, confuse and frustrate taxpayers

and program beneficiaries, and limit overall

program effectiveness.” The way the

government is currently organized can only be

described as chaos. 

Why do all these problems matter? Beyond the

obvious waste of taxpayer money, they cause

real hardships for all Americans. Mismanaged

and ineffective programs cheat their intended

beneficiaries. They pose safety and security

risks for our citizens. They also have important

implications for the major policy issues that

Washington decision-makers face. Here are just

a few examples that the report describes in more

detail:

C Staffing problems threaten the Social

Security Administration’s ability to

provide timely and accurate service to

the public. 

• Poor financial and information systems

at the IRS benefit tax cheats and burden

honest taxpayers. 

C Federal air traffic controllers are being

held less accountable for errors that

could affect public safety.

C The Navy is investigating how hackers

broke into one of its computers and stole

the source codes to a missile guidance

program. 

C Because dozens of our embassies

overseas don’t even have e-mail, foreign

governments just bypass them and

communicate directly with Washington.

Finally, these management problems exact a

terrible toll on public trust and confidence in the

federal government. A degree of public

skepticism toward our government is a healthy

thing. Rampant cynicism is not. Its effects can

be seen in the increasing public apathy toward

our political processes and lack of interest in

public service. The combined effect of this

cynicism and indifference creates a vicious

cycle. The more detached the public is from

Washington, the more insular and the less
7

If we can develop the political will to

take on these problems, solutions will

surely follow. If not, we should

probably hang it up.

responsive Washington will become.

Furthermore, our leaders can’t really be

effective if the public feels it can’t trust them.

What can the Bush Administration and

Congress do to turn things around? First, the

tools are in place to fix things. Congress has

enacted an arsenal of management improvement

laws over the last decade. They include the

Chief Financial Officers Act, the Federal

Financial Management Improvement Act, the

Government Performance and Results Act, the

Clinger-Cohen Act, and the Government

Information Security Act, which was enacted

just last year. Second, the Bush Administration

has the benefit of a host of recommendations

that GAO and IGs have already offered to fix

many of the problems. The Governmental

Affairs Committee and its Subcommittee on

Government Management also have issued

recent reports containing recommendations

addressing many of the problems.

However, even though federal agencies have a

wealth of tools and proposed solutions, the same

core problems persist year after year with little

concrete evidence of progress. Why? The

missing ingredient up to now has been

leadership and sustained commitment from the

President and Congress. If we can develop the

political will to take on these problems,

solutions will surely follow. If not, we should

probably hang it up. Therefore, before we can

get serious action on the specific

recommendations already out there, several

other things first have to happen:

C Political leadership: The President and

Congress must make clear in word and

deed that resolving these management

problems is one of their priorities, and

that they will keep after the agencies and

the government’s key management

agency, the Office of Management and

Budget, until the job is done.

C Agency follow up: The Office of

Management and Budget and the

agencies must establish specific

performance goals, measures, strategies,

and timetables to resolve the problems.

They should use as a starting point

potential solutions that have already

been identified.

 

C Investing in improvements: As part of

their improvement strategies, agencies

and the Office of Management and

Budget must identify funding needed to

resolve the problems and Congress must

be willing to provide it. If done right,

relatively modest investments in

improvements will repay themselves

many times over.

 

C Linking funding to results: Both the

President and the Congress need to

insist on reliable performance

information to determine what’s

working and what’s not, and then hold

agencies and programs accountable

where it counts—in their budgets.

Where programs overlap, we should

concentrate our resources on those that

work best or can be made to work best.

Of course, the fact that a program is not

performing well doesn’t automatically

mean it should be defunded. Maybe it
8

We are in a new millennium with a

new economy. We need to get the

federal government into the 21st

Century, even if we have to drag it in

kicking and screaming.

needs a legislative fix or even

more funding. However, letting

non-performing programs

simply continue as is should not

be an option. 

Will we actually move the federal government

into a new era of sound management and

effective performance? That’s very much an

open question at this point. However, there are

some positive signs. Many dedicated career

employees in the executive branch are working

hard to turn things around. Also, there are early

signs that the Bush Administration is taking

management and performance improvement

seriously. 

This year may provide our best chance—and

maybe our last chance—to jump-start real

management reform. We can’t afford to pass it

by. We are in a new millennium with a new

economy. We need to get the federal

government into the 21st Century, even if we

have to drag it in kicking and screaming. Once

we do that—and only after we do that—can we

expect to regain some of the confidence that the

American people once had in their federal

government. Hopefully, this report will help

get things moving.
II. FOUR CORE PROBLEMS: THEIR NATURE, CONSEQUENCES, 

AND POTENTIAL SOLUTIONS

A. FEDERAL WORKFORCE PROBLEMS

Unfortunately, it took until [2000] for the [Clinton] administration to

acknowledge that human resources is a government-wide management priority

. . . What would have been far more useful for the next administration and

Congress when they take office in January is not a list of ideas to solve

problems, but a list of problems that have been solved.

Federal Times Editorial

October 30, 2000

The Bush Administration has inherited a real

mess when it comes to the federal workforce.

The government faces an emerging

workforce—or, as some like to say, “human

capital”—crisis. Many agencies lack the right

employees with the right skills to do their jobs,

or to furnish the public with the services it needs

at the quality levels it deserves. 

During the 1990's, the Clinton Administration

set out to cut, or “downsize,” agency staffs in

order to make the federal government “smaller

and smarter.” They didn’t meet either of these

goals. Their downsizing hardly made a dent in

the true size of government. What it did do was

create a “brain drain” that cost the government

many of its most experienced and valuable

employees, as well as many lower level

employees. Furthermore, they reduced staffing

without cutting back on anything that the federal

government does or improving how it does it.

In short, the federal government wound up

doing the same old things in the same old ways,

but with fewer experienced workers.

The workforce crisis figures to get steadily

worse as many more “baby boomer” federal

employees retire. Over the next 5 years, up to

half of the remaining federal employees may

leave through normal or early retirement. Due

to the hiring freezes and recruiting problems of

recent years, agencies don’t have good

replacements for them. 

These personnel problems add up to a recipe for

disaster. The government has a host of other

management problems, and sub-par workforces

make all of them worse. The GAO just

designated human capital management a

government-wide “high-risk” problem. In doing

so, Comptroller General David Walker, head of

the GAO, stated: “Widespread inattentiveness to

strategic human capital management has created

a governmentwide risk—one that is

fundamental to the federal government’s ability

to effectively serve the American people, both

now and in the future.”1

This means that workforce problems are one of

the largest contributors to fraud, waste, and

mismanagement in the federal government. The

GAO and the agencies’ own IGs have cited staff

weaknesses as a top management problem at

almost all the major federal agencies. See

Appendix.

1

“Human Capital: Meeting the

Governmentwide High-Risk Challenge,” GAO-01-

357T (February 1, 2001), p.3.
10

The evidence suggests that the nonstrategic way in which downsizing was

accomplished actually detracted from

the capacity of agencies to carry out

essential functions and made them

more vulnerable to fraud, waste, and

mismanagement. 

SHORTSIGHTED STAFF CUTS

The Clinton Administration’s downsizing

treated employee cuts strictly as a numbers

game, designed to get down to arbitrary staff

levels that largely ignored agency workforce

needs. However, even the numbers didn’t add

up. According to one leading expert, Paul

Light, the true federal workforce of today

actually is larger than it was in 1993 when

former President Clinton declared that “the era

of big government is over.” Light points out

that most of the employee reductions of the

1990's were defense-related and were

attributable primarily to the end of the Cold

War. He also notes that a substantial but

unknown number of former federal jobs

migrated to a “shadow” federal workforce made

up of private sector employees as well as state

and local government employees who carry out

federal mandates. This happens when the

government contracts with a private company to

do government work. According to Light, when

this shadow workforce is taken into account, the

“era of big government” is still very much with

us.2 

Likewise, there is no evidence that the 1990's

downsizing made the government more efficient

or effective. Indeed, it clearly had the opposite

effect. The cuts did not take into account the

skills or performance of employees, or the

importance of the jobs they did. The primary

method of downsizing was to offer across-theboard cash “buyouts” in order to pay older

employees to leave. Many were offered early

retirement at age 50. This took away some of

the government’s best talent. The evidence

suggests that the non-strategic way in which

downsizing was accomplished actually detracted

from the capacity of agencies to carry out

essential functions and made them more

vulnerable to fraud, waste, and mismanagement.

The Department of Housing and Urban

Development is a poster child for the effects of

irrational downsizing. It had been clear for

years that the Department’s workforce was

inadequate to carry out its existing programs.

The Clinton Administration’s response was to

further reduce the Department’s staff while

adding even more programs. The Department’s

IG criticized this approach: 

The adequacy of staff resources

in the Department has long been

a concern of the Inspector

General’s Office and a root

cause of many of HUD’s

material weaknesses. Our

audits have consistently found a

mismatch between the number

and complexity of HUD’s

programs and the capability of

HUD staff to administer those

programs. . . . In my mind,

adding more weight to an

already weak foundation makes

HUD a more vulnerable

2

See generally Paul C. Light, “The True Size

of Government” (1999).
11

organization.3

The federal government intended to compensate

for employee staff reductions by making more

efficient use of technology. This approach

worked for many private sector businesses, but

it didn’t work for the federal government. It

failed because the government shot itself in the

foot by getting rid of the very people it needed

to improve its use of technology: 

C Due to staff reductions through

downsizing, agencies now lack the

skilled employees needed to take

advantage of information technology,

and they are at a competitive

disadvantage in hiring such

professionals. They also lack the

necessary in-house expertise to oversee

information technology work that they

have outsourced to contractors.4

TOP-HEAVY BUREAUCRACIES

The 1990's downsizing also made the federal

workforce more top-heavy and less efficient

since most cuts occurred at the lowest staff

levels. In addition to letting more experienced

workers retire, the government also eliminated

jobs that were the easiest to cut, meaning those

with the highest turnover rates and the lowest

political profile. Supposed reductions in middle

management levels often amounted to nothing

more than changing titles. The number of

political appointees, senior career officials, and

middle managers remained steady while layers

of hierarchy actually expanded. This effect can

be seen in the title inflation of recent years: 

C From 1993 to 1998, many new senior

political positions were established with

such titles as “deputy to the deputy

secretary,” “principal assistant deputy

under secretary,” and “associate

principal deputy assistant secretary.”

There are now about 2,800 political

appointee positions, and their elaborate

titles pay by the word. Reducing these

positions by just 600 would save

taxpayers about $700 million over 10

years.5

THE FAILED CIVIL SERVICE SYSTEM

On top of the problems with the composition of

the federal workforce, the civil service

system—the process the federal government

uses to hire and promote workers—is itself

broken. The complex and outmoded federal

civil service system takes too long to hire

people. It fails to hold employees accountable

for their performance. It shields poor

performers and does little to encourage and

reward conscientious and hard-working

employees. Too many good workers don’t get

enough responsibility and support, so they

become demoralized and leave. Too many poor

or marginal workers slide by for 20 or 30-year

careers, and even advance, without any real

accountability. One expert observed that the

civil service system “underwhelms at almost

every task it undertakes. It is slow in the hiring,

almost useless in the firing, overly permissive in

the promoting, [and] out of touch with actual

3

Testimony of Susan Gaffney, Inspector

General of the Department of Housing and Urban

Development, before the Subcommittee on Housing

and Transportation of the Senate Banking Committee

(September 26, 2000.) 

4General Accounting Office, “Human Capital:

Managing Human Capital in the 21st Century,” GAO/TGGD-00-77 (March 9, 2000). 

5Congressional Budget Office, “Budget

Options” (February 2001).
12

performance in the rewarding . . . .”6

The need for performance accountability is not

just an internal government concern. The

actions of federal employees can have an

immediate impact on the public. Unfortunately,

some agencies seem to be going in the wrong

direction when it comes to holding their

employees accountable for their performance: 

C “Operational errors,” or violations of

aircraft in-flight separation

requirements, are a key air travel safety

indicator. Operational errors have

doubled in recent years and are now at a

record high. However, the Federal

Aviation Administration made air traffic

controllers less accountable for these

errors. A controller who had more than

three such errors within a prescribed

period used to be subject to

reassignment, remedial training, or

decertification. Now, the agency has

agreed with its union to reduce

operational errors to “technical

violations” that carry no remedial

consequences. The National

Transportation Safety Board has

objected to this change.7

 

Apart from its day-to-day problems, the basic

federal civil service model—built around a

cradle-to-grave career from entry level to

retirement with virtually guaranteed job

security—is outdated. Today’s workers seek

greater mobility and have different motivations,

needs, and wants than in the past: 

Gone are the days when talented

employees would endure hiring

delays and a mind-numbing

application process to get an

entry-level government job.

Gone, too, are the days when

talented employees would accept

slow but steady advancement

through towering government

bureaucracies in exchange for a

thirty-year commitment. In the

midst of a growing labor

shortage, government is

becoming an employer of last

resort.8

It will be hard to solve many of the challenges

the federal government faces in attracting the

kind of workforce it needs. However, the

government doesn’t even do a good job with

simple things it can easily control. A recent

survey of newly hired federal employees found

serious complaints about the recruiting and

hiring process. Many new hires said they were

not even treated with common courtesy: 

C New hires reported that the time

between submission of an application

and being scheduled for an interview

was unreasonably long. The delay

between the time they were told they

had a job and being able to report for

work also was too long. The new hires

complained of not receiving timely

feedback, or receiving no feedback at

all, on the status of their applications.

Finally, they did not receive quality

6

Paul C. Light, “The New Public Service”

(1999), p. 2.

7

“FAA Policy on Controller Errors

Questioned,” Government Executive Magazine Daily

Briefing, (February 20, 2001). 8

Paul C. Light, “The New Public Service”

(1999), p. 1.
13

service from federal hiring

personnel.9

A recent study demonstrates how far Uncle Sam

lags behind all other types of employers in

attracting and retaining the high-tech workforce

it needs to take advantage of modern technology

to improve its efficiency, service, and

accessibility. It’s no surprise that the federal

government has trouble competing with the

private sector for these workers. However, the

federal government also is less competitive than

private, non-profit organizations, academic

institutions, and state and local governments.

The study rated all of these potential employers

“high,” “medium,” or “low” on five factors for

hiring and keeping high-tech workers. The

federal government came in dead last. See

Table I.10

THE PUBLIC CAN’T AFFORD 

A SUB-PAR FEDERAL WORKFORCE

The government’s personnel problems aren’t

just an “inside the Beltway” issue. They affect

everything the government does and everyone it

touches—in other words, all of us. Here are just

a few examples: 

C The military services are struggling to

meet their recruiting goals. More firsttime enlistees are failing to re-enlist than

ever before. There also are shortages of

junior officers, intelligence analysts,

computer programmers, and pilots.

C Untrained and inexperienced staff at the

Interior Department mismanage billions

of dollars in Indian Trust Funds.

C Energy Department staff lack the

contract management skills needed to

oversee projects to clean up radioactive

and hazardous waste sites.

C Difficulties in replacing experienced

federal fire personnel threaten

9U.S. Merit Systems Protection Board,

“Competing for Federal Jobs: Job Search Experiences

of New Hires” (February 2000).

10National Academy of Public Administration,

“Comparative Study of Information Technology Pay

Systems,” Executive Summary (March 2001), p. 10.

Table I: What Factors Make a Worker Take a Job?

Employer Salary Work life/

benefits

Rewards/

recognition

Advancement/

training

Recruiting

tools

Private High High High High High

Academic Medium High Medium Medium Medium

Non-profit Medium Medium Medium Medium High

State government Low Medium Medium Medium Medium

Local government Low Medium Medium Low Low

Federal

government

Low High Low Low Low
14

firefighting capabilities during

catastrophic events.

C The Veterans Affairs Department faces

a nationwide shortage of nurses at its

facilities that puts veterans at risk.

These examples are just the tip of the iceberg.

Many others can be found at almost all major

federal agencies. See Table II.

Numerous agencies that deal directly with the

public don’t have the staffs to provide our

citizens timely and quality service. Each year,

the Internal Revenue Service gets tens of

millions of telephone calls from taxpayers

seeking help on topics ranging from simple

inquiries about the status of their returns to

complex tax law questions. IRS has trouble

hiring and keeping the staff needed to provide

timely and quality responses to the public—and

the public pays the price through poor customer

service: 

C In random tests this year, IG auditors

were unable to access IRS employees

through the agency’s toll-free number

over one-third of the time. When the

calls did go through, IRS employees

incorrectly answered almost half the test

questions that the auditors posed. (The

questions were taken from IRS’ own list

of frequently asked questions.)11

 

The Social Security Administration is another

agency that provides vital information and

services to large segments of our population. In

the past, the agency prided itself on providing

good service to the public. However, the

agency’s own IG reports that staff downsizing

and hiring restrictions, on the one hand, and the

increasing volume and complexity of caseloads,

on the other, threaten the agency’s ability to

serve the public. These concerns are echoed by

Stanford Ross, Chairman of the Social Security

Advisory Board. He says that the quality of

service has deteriorated in recent years, and the

problems are likely to grow:

Unless there’s fundamental

change, we will soon see

disruptions of service. The

Social Security agency lacks the

ability to handle existing

workloads, and those workloads

are bound to increase over the

next decade. . . . Everybody

knows there’s a long-term deficit

in the financing of Social

Security. But there’s also a

deficit in the agency’s ability to

provide good service, and that

should be equally alarming to

Congress and the public.12

Among the problems at the Social Security

Administration:

C Beneficiaries often can’t get accurate

information over the phone.

C People who visit Social Security offices

find them overcrowded, and often wait

two to four hours for assistance.

C The quality of benefit determinations is

falling, and some claimants must resort

to a slow and overloaded appeals

process.

11David C. Williams, Treasury Inspector

General for Tax Administration, Statement for the

Record before the House Ways and Means Oversight

Subcommittee (April 3, 2001), p. 2.

12“Federal Panel Warns Bush of Social

Security Problems,” New York Times (February 19,

2001).
15

C Two-thirds of initial disability benefit

determinations are reversed on

administrative appeal within the agency.

C Payments are delayed or calculated

incorrectly.

C Bogus Social Security numbers have

become a prime tool of illegal activity,

in part because the agency issues Social

Security numbers without sufficiently

reviewing identity documents submitted

to support the applications.

C Fraud and error are on the increase in all

of the agency’s major programs.13

Unfortunately, the agency doesn’t seem to be

fully acknowledging or coming to grips with its

personnel problems. It even sweeps some of

them under the carpet. For example:

The Social Security

Administration reports that it

meets its goal of answering 95

percent of calls to its 800

number within 5 minutes.

However, this is misleading. In

1999, 20 million of the 79

million callers to the 800

number got a busy signal or

abandoned their calls before they

navigated through the process.

In the end, only 59 million of the

79 million callers, or about 75

percent, actually talked to an

agency employee or finished

using the agency’s automated

system.14

The government’s personnel problems also have

major national security consequences. The HartRudman Commission on National Security

singled out improving the federal workforce as

one of the key things that must be done to

protect our citizens from international terrorism

and other threats to their security:

As it enters the 21st century, the

United States finds itself on the

brink of an unprecedented crisis

of competence in government.

The maintenance of American

power in the world depends on

the quality of U.S. government

personnel, civil and military, at

all levels. We must take

immediate action to ensure that

the United States can meet

future challenges.15

One of several national security concerns

highlighted by the Hart-Rudman Commission

and others is the impact of federal personnel

problems on our intelligence capabilities. For

example, the Commission emphasized the

government’s challenges in recruiting and

retaining individuals with the language skills

and cultural expertise needed to conduct policy

and intelligence analysis for a wider range of

countries, regions, and issues. The Commission

also stressed the need for talented information

13The agency reported the following

overpayment levels for last year: $1.334 billion for Old

Age and Survivors Insurance, $1.281 billion for

Disability Insurance, and $1.644 billion for

Supplemental Security Income. Social Security

Administration, “Performance and Accountability

Report for Fiscal Year 2000,” p. 51. Each of these

overpayment figures is higher than for the previous

year. 

14Testimony of Stanford Ross, Chairman of

the Social Security Advisory Board, before the House

Ways and Means Social Security Subcommittee

(February 10, 2001).

15U.S. Commission on National Security/21st

Century, “Road Map for National Security: Imperative

for Change” (February 2001). 
16

[T]he federal government has virtually

ignored its workforce problems up to

now.

technology professionals to run sophisticated

intelligence platforms.16 

Many agencies have their own security

problems brought on in part by inadequate

security staffs within their agencies. The

following examples illustrate this problem: 

C The Defense Department’s security

clearance process “virtually collapsed”

during the 1990's. The Department has

a backlog of almost a half-million

security clearance investigations for

employees. It takes well over a year to

complete a top secret clearance. This

means that vital positions dealing with

the government’s most sensitive

national security data go unfilled, or the

people in those positions operate with

grossly outdated clearances. These

problems stem, in part, from

productivity problems among

investigators and ill-considered staff

cuts.17

C As of May 2000, the Commerce

Department’s Patent and Trademark

Office had failed to request required

background checks on 113 employees

hired since October 1997, all of whom

had access to sensitive proprietary

business data. For 1,626 employees

hired since 1970, there was no

documentation of security investigations

in the Office’s database.18

C A White House panel formed to

investigate security problems at the

Energy Department found that:

“Organizational disarray, managerial

neglect and a culture of arrogance—both

at Energy Department headquarters and

the labs themselves—conspired to create

an espionage scandal waiting to

happen.” The panel’s public report cited

the example of a Department employee

who was dead for 11 months before

officials noticed that he still had four

secret documents signed out.19

THE NEED FOR LEADERSHIP AND

PRIORITY ATTENTION 

As with many other critical problems,

approaches to workforce management represent

a stark contrast between the private sector and

the federal government. Private sector firms

take a strategic approach to workforce issues.

They analyze which of their functions are

important and systematically identify the

employee skills and characteristics needed to

perform those functions well. Then, they make

16Ibid., p. 98.

17Testimony of Robert Lieberman, Defense

Department Acting IG, before the House Government

Reform Subcommittee on National Security (March 2,

2001).

18Inspector General, Department of

Commerce, “Improved Internal Controls Needed for

Office of Human Resources,” BTD-12830 (September

2000).

19Doyle McManus and Bob Drogin, “Nuclear

Security Panel Assails Energy Department,” Los

Angeles Times (June 15, 1999), p. A1.
17

[W]e need to send the signal that public

service is an honorable and worthwhile

calling.

the investments needed to hire, develop, and

retain employees with these skills and

characteristics. By contrast, the federal

government has virtually ignored its workforce

problems up to now. Only in its last year did

the Clinton Administration start paying attention

to personnel problems—and then only after the

Comptroller General and some Members of

Congress sounded the alarm bell.

WHAT CAN BE DONE?

After years of neglect, the full range of the

federal government’s workforce problems is just

starting to surface. Clearly, the government is

way behind the curve and has much ground to

make up. The problems obviously won’t be

solved overnight, but we can begin with a few

basics.

C Identifying the right number of

employees with the right skills:

Agencies have to figure out how many

employees with what kinds of skills they

need to accomplish their missions.

Then, they have to compare the

workforce they have with the one they

need and pinpoint the gaps. This kind of

workforce planning may seem like

nothing more than common sense. Yet,

it must be a radical concept for the

federal government since it’s never

really been done before in a systematic

way. 

C Getting the right employees hired:

Agencies have to figure out how to get

the people they need on board. 

Obviously, the government must

improve its recruiting and hiring

processes. Agencies can start by

streamlining their administrative

processes to eliminate unreasonable

delays in hiring decisions and actions.

More fundamentally, they must find

ways to get good people to want to work

for the federal government. This means

making public service more attractive to

our best and brightest—both those just

getting out of school and those with

more experience. 

We need to send the signal that public service is

an honorable and worthwhile calling. There

was a time when salary limits and other

perceived disadvantages of government service

were at least partially offset by the sense that

those entering public service could help their

fellow citizens and “make a difference.” We

need to restore this way of thinking. For

starters, we need to stop criticizing federal

employees unfairly. Federal employees

themselves are not the problem. The vast

majority of them work hard and serve the

taxpayers as well as they can, given the

conditions under which they operate. 

C Keeping employees motivated and

productive: Once agencies get good

people on board, they must keep them

motivated and productive. They must

have meaningful work and enough

freedom and responsibility to get it

done. We can reduce management

hierarchies and improve methods of

doing business in ways that will

encourage innovation and initiative. Of

course, restructuring management levels

must be done in a thoughtful and

strategic way to ensure that it enhances

the ability of agencies to perform their
20This table is based on examples taken from many GAO and IG reports. It does not attempt to cover all

significant federal workforce problems.

18

missions. Employees must be

held accountable for their

performance, and they must be

evaluated and rewarded in a

meaningful, performance-based

way. Today’s federal

performance appraisal and pay

systems don’t do nearly enough

either to reward good performers

or to deal with poor performers.

Clearly, the new Administration has its work cut

out for it as it starts to tackle the massive

workforce challenges it has inherited. However,

we’re finally recognizing these challenges.

Hopefully, the new Administration will prove

ready to tackle these problems and eventually

solve them. 

TABLE II: AGENCIES WITH REPORTED SERIOUS WORKFORCE PROBLEMS20

Agency Problem(s)

Agriculture

Department

Resistance from the Department’s organizational units and employees impedes efforts

to reorganize and modernize the Department. As a result, little has changed in how the

Department serves its customers. 

The nation’s food safety system suffers from inconsistent oversight, poor coordination,

and inefficient use of staff.

Shortages of experienced fire personnel in the Forest Service threaten firefighting

capabilities during catastrophic events. The impact was felt during the 1999 Big Bar

and Kirk fires in California, according to a recent report released by the Forest Service. 

Forest Service personnel who were certified to manage wild fires did not participate

and/or were not made available by management; in some instances, there were not

enough qualified personnel. 

Employee complaints of discrimination have been a problem at the Department for

years. Due to management turnover and inadequate staff expertise, the Department

doesn’t process complaints within required time lines. 

Commerce

Department

Lack of sufficient experienced staff with the right skills, along with limited funds for

training and travel, limit the ability of Commerce and other trade agencies to monitor

and enforce trade agreements and to obtain favorable resolutions of compliance

problems.

Increasing applications and inexperienced staff at the Patent and Trademark Office

result in undeserving patents slipping through. This, in turn, poses a critical threat to

an economy that runs on intellectual property. 

The Patent and Trademark Office failed to request required background checks on 113

employees hired since October 1997, all of whom had access to sensitive proprietary

business data. For 1,626 employees hired since 1970, there was no documentation of

security investigations in the Office’s database. 
19

Defense

Department

The military services struggle to meet recruiting goals. Attrition among first-time

enlistees is at an all time high. There are shortages among junior officers, and

problems in retaining intelligence analysts, computer programmers, and pilots. 

On the civilian side, the lack of sufficiently skilled and experience staff, following

downsizing, threatens contracting and logistics activities.

The Hart-Rudman Commission on National Security reports that the United States is

“on the brink of an unprecedented crisis of competence in government” that reaches

civilian and military personnel at all levels.

Due to lengthy delays and huge backlogs in completing security clearances, vital

positions dealing with the government’s most sensitive national security data go

unfilled or the people in those positions operate with grossly outdated clearances. The

security clearance problems themselves stem from staffing inadequacies within the

Department. 

Education Department The Department’s staff may lack the knowledge and skills to manage their information

technology operations. 

Energy

Department

Employees lack the contract management skills needed to oversee large projects, such

as the cleanup of radioactive and hazardous waste sites.

Estimates for the National Ignition Facility have expanded from $2.1 billion with

completion in 2002 to $3.5 billion with completion in 2008. Neither the Department’s

headquarters staff nor its field managers have the skills to oversee the managerial and

technical complexities of this large project. The cost overruns and schedule delays

caused in part by this skills gap have the potential to reappear on other large contracts. 

The Stockpile Stewardship Program is faced with a shortage of skilled management

and technical staff. The proportion of offices with vacant or acting managers has

increased from 17 percent in 1996 to almost 65 percent in 2000. In light of the

competitive job market and the attrition of skilled staff, many believe that staffing

shortages will reach crisis proportions by the end of this decade.

Numerous studies have identified pervasive security weaknesses at the Department. A

White House panel condemned the Department as a “dysfunctional bureaucracy that

has proven it is incapable of reforming itself” when it comes to security. The panel

concluded that “organizational disarray, managerial neglect and a culture of arrogance

— both at Energy Department headquarters and the labs themselves — conspired to

create an espionage scandal waiting to happen.” One employee was dead for 11

months before Department officials noticed that he still had four secret documents

signed out.

Health and Human

Services Department

Responsibility for running the Medicare program is fragmented. Frequent leadership

changes hamper long-term Medicare initiatives and consistent management strategies. 

The Department’s Health Care Financing Administration, which operates Medicare,

has had 19 administrators or acting administrators in the 24 years of its existence.
20

Health and Human

Services Department

(continued)

The Department’s workforce doesn’t have the skills needed to meet recent statutory

requirements relating to Medicare. For example, employees lack experience overseeing

preferred provider organizations, private fee-for-service plans, and medical savings

accounts, and monitoring the performance of health maintenance organizations. 

Inadequate staff capacity likewise could leave Medicare unprepared to handle future

population growth and medical technology advances. 

Employees who lack basic accounting skills and training handle enormous transactions.

Inexperienced Department employees made accounting errors in Medicare trust funds

(ultimately discovered and resolved) that totaled $32 billion. 

Housing and Urban

Development

Department

Workload imbalances and insufficient or inexperienced staff pose problems for many

of the Department’s programs.

Despite these workload imbalances, the Department recently invested 10 percent of its

resources in employees called “Community Builders,” who reported that they spent

more than half their time on public relations activities. 

Interior Department Management of the $3 billion in Indian trust funds is left to untrained and

inexperienced staff in the Bureau of Indian Affairs. As a result, trust beneficiaries

have no assurance that their account balances are accurate or that their assets are safe. 

Difficulties replacing experienced fire personnel threaten firefighting capabilities. 

Insufficient fire safety training contributes to fire safety risks at visitor centers, hotels,

and other national park buildings.

The National Park Service can’t monitor the performance of park managers or hold

them accountable for the results of park operations.

The park concessions program suffers because of the inadequate qualifications and

training of the National Park Service’s concession specialists and concessions

contracting staff. 

The Bureau of Land Management has only four rangers to patrol over one million acres

at the Algodones Dunes in California. The result is chaos. According to an internal

agency report, the Dunes have become “unsafe for family recreation activity,” due to

drug and alcohol use and general lawlessness. Near-riots on weekends feature crowds

hurling beer cans and other objects at rangers, and yelling, “Kill the cops.” During

President’s Day weekend, one ranger was hit with a bag of fecal matter, while another

was injured when deliberately run over by a dune buggy.

Justice Department The Immigration and Naturalization Service lacks the staff to perform intelligence

functions. This, in turn, hampers efforts to combat the growing problem of alien

smuggling.

The Immigration and Naturalization Service also has problems hiring and retaining

Border Patrol agents. It missed its Congressionally mandated goal to hire 1,000 new

agents in fiscal year 1999. 

Labor Department The Pension Benefit Guarantee Corporation may not have the right mix of contractor

and federal employees needed to meet future workload challenges. 
21

State Department Quality of life problems at overseas posts, limited career development opportunities,

and personnel management weakness hamper recruitment and retention of Foreign

Service Officers. The Department is short 700 Foreign Service officers, or 15 percent

of its requirements.

Staffing shortfalls hamper counter-narcotics programs and efforts to combat visa fraud. 

The Department processes about 9 million visa applications annually. Attempts to

falsify or alter visas are a constant problem. The Department has inexperienced staff

and insufficient training for consular line officers, and overseas anti-fraud units receive

inadequate supervision. 

The Hart-Rudman Commission on National Security describes the State Department as

“demoralized and dysfunctional.” 

Transportation

Department

Federal Aviation Administration air traffic control modernization is fraught with cost,

schedule, and performance problems due in part to an organizational “culture” and

management structures that impair the acquisition process.

Operational errors by air traffic controllers that violate aircraft in-flight separation

requirements are at a record high. Yet, the Federal Aviation Administration recently

made the controllers less accountable for their operational errors. The National

Transportation Safety Board objected to this action since air separation violations are a

key safety indicator.

Coast Guard personnel routinely perform extra duty and serve on overly long

deployments with too little experience and training. This leads to a host of readiness

problems. For example, 30 percent of Vessel Traffic System radar jobs are not filled. 

The average time in grade for chief aviation mechanics has dropped 50 percent since

1995. More than 80 percent of small boat stations stand 24-hour duty for three days

straight. Lost workdays from shore injuries are up 29 percent. Mishap rates for some

boats have risen. Aircraft ground mishap rates are up almost 50 percent.

Treasury

Department

Customs Service officers annually processes over 20 million import entries, valued at

almost one trillion dollars, and over 450 million persons entering the United States. 

Despite this vast workload, the agency lacks reliable systems and data to assign its

employees where they are most needed.

IRS lacks reliable cost and operational information to measure the effectiveness of its

tax collection and enforcement programs and to judge whether it is appropriately

allocating its staff resources among competing management priorities. 

IRS provides poor service to the public. In random tests this year, IG auditors were

unable to access the IRS toll-free number over one-third of the time. When the calls

did go through, IRS employees incorrectly answered almost half (47 percent) of the test

questions that the auditors posed. (The questions were taken from IRS’ own list of

frequently asked questions.) The IG auditors found similar problems when they visited

47 taxpayer assistance centers in 11 states. IRS employees incorrectly answered 49

percent of their test questions. 
22

Veterans Affairs

Department

A national nursing shortage could adversely affect efforts to improve patient safety at

the Department’s medical facilities and could put veterans at risk. 

The Department missed by wide margins its Fiscal Year 1999 performance goals for

processing veterans’ benefit claims timely and accurately. Training and recruitment

programs are inadequate to ensure a sufficient workforce of competent claims

processors, which undermines efforts to reduce claims processing backlogs and errors.

Agency for

International

Development

Staffing shortfalls in the procurement area have hampered the Agency’s ability to

initiate and monitor contracts, thus delaying reconstruction assistance in the wake of

natural disasters in Central America and the Caribbean. 

Environmental

Protection Agency

The EPA has no systematic means to determine the right size or skills its workforce

needs to carry out the agency’s mission. It faces demands for new skills due to

technological changes, shifts in its environmental responsibilities, and the growing

retirement eligibility of its staff.

The EPA’s employees have suffered from abuses. In August 2000, a senior manager

won a $600,000 verdict in a race and sex discrimination suit against the agency. In

another case, the EPA was found to have retaliated against the director of its Office of

Research and Development laboratory in Athens, GA, after she testified before

Congress about problems in the agency. 

General Services

Administration

As a result of downsizing and restructuring, major program streamlining, and personnel

reductions through attrition and buyouts, many of the agency’s knowledgeable and

experienced staff have been lost. The remaining workforce is aging, and nearly half of

its employees will be eligible to retire in the next 5 years. These staff weaknesses

threaten the agency’s ability to operate efficiently and effectively, and increase

vulnerability to fraud and waste. 

National Aeronautics

and Space

Administration

According to several internal studies, the reduction of NASA’s shuttle workforce by

one-third since 1995 has led to an overworked and fatigued workforce. Staff and skill

losses pose potentially serious problems for the safety and feasibility of the increased

launch rates planned to support the International Space Station. 

In 1999, NASA lost all four of its spacecraft bound for Mars, costing taxpayers $360

million and bringing the entire Mars program to a halt. The problems resulted from

simple negligence, such as forgetting to convert feet to meters, caused in part by

inexperienced staff. 

Nuclear Regulatory

Commission

The Commission’s organizational culture is struggling with the new “risk- informed”

regulatory approach. Further, the Commission’s ability to maintain the skills needed to

achieve its mission and fill the gaps created by growing retirement eligibilities could be

threatened by the decline in university enrollments in nuclear engineering and other

fields related to nuclear safety.

Office of Personnel

Management

With its government-wide responsibilities for personnel management, the Office of

Personnel Management is at the center of the federal workforce crisis. It needs to do

much more than it has in the past to direct, support, and review workforce improvement

efforts throughout the federal government. 
23

Small Business

Administration

Improving personnel management is one of the Small Business Administration’s most

serious challenges. Its workforce has decreased by more than 20 percent over the last

decade, while it has made major changes in the way it delivers goods and services. For

example, the Small Business Administration now uses public-private partnerships to

perform many functions previously done by its own employees. The agency needs to

make sure it has a workforce with the right skills to handle its new ways of doing

business.

Social Security

Administration

Increasing demand for services, the imminent retirement of a large part of its

workforce, changing customer expectations, and mixed success in past technology

investments challenge the Social Security Administration’s ability to meet its service

delivery demands. These demands include faster and more accurate benefit claims

determinations and increased emphasis on returning the disabled to work.

In the coming years, applications for disability insurance will more than double over

1999 levels, applications for retirement benefits will increase by 20 percent over 1999

levels, and the number of non-English speaking customers will continue to rise. This

will place an enormous strain on the agency as one-half of its current employees

become eligible to retire by 2009. 

Customer service problems already are emerging. About 20 million calls to the

agency’s 800-number in 1999 were not completed. Almost 20 percent of answers to

callers with general questions that did not relate to their specific benefits were

inaccurate. Also in 1999, the Social Security Advisory Board reported that people who

visited an agency field office encountered crowded waiting areas and long waiting

times for service. 
24

Officials at the Defense Department

are making more than 57,000

purchases a day! Unfortunately, these

same officials can’t tell us what they

bought or whether they even needed

what they got. 

B. FINANCIAL MANAGEMENT PROBLEMS

The Defense Department, which is talking about needing an additional $50

billion – they want $50 more for every minute since Jesus Christ was born; that

is $50 billion – a year to meet readiness requirements. Yet the Defense

Department does not know with any certainty how much money it currently has

available.

Senator Robert Byrd (WV)

Statement on Department of Defense 

Financial Management 

July 10, 1998

Most Americans balance their checkbooks on a

regular basis. Both small businesses and major

corporations have to make certain that their

books are balanced—that they know how much

money is coming in, how much money is going

out, and where that money is going. This is not

true of the federal government.

Neither the federal government as a whole nor

many major agencies can pass a basic financial

audit. The books don’t add up, major

expenditures are missing, large amounts of

property and equipment can’t be located, and

often, agencies don’t even know how much they

have. These problems are longstanding, but they

have been worsened by the growth of the federal

government. 

Take, for example, the Department of Defense.

In 1999, the Department of Defense made about

14.8 million individual purchases totaling about

$140 billion in goods and services.1 This means

that the officials at the Defense Department are

making more than 57,000 purchases a day!

Unfortunately, these same officials can’t tell us

what they bought or whether they even needed

what they got. 

Senator Robert Byrd (WV) recently took to the

Senate floor to describe the problems facing the

Defense Department. He said:

The Defense Department, which

is talking about needing an

additional $50 billion dollars a

year to meet readiness

requirements, does not know

with any certainty how much

money it currently has available

and cannot pass the test of

receiving a clean audit opinion

on its financial statements. . . . 

Examples of DOD’s financial

1Department of Defense Inspector General,

Semiannual Report to the Congress (April 1, 2000 -

September 30, 2000).
25

management weaknesses abound.

For instance, the GAO found that

the Defense Department could

not reconcile a $7 billion

difference between its available

fund balances and the Treasury’s.

GAO also discovered that the

Department of Defense was

unable to substantiate the $378

billion it had reported as total net

reporting costs in 1999. 2

Senator Charles Grassley (IA) also took to the

Senate floor to rail against the Department of

Defense’s financial mismanagement. He began

with a quote of Senator Byrd’s: “The Pentagon’s

books are in such utter disarray that no one

knows what America's military actually owns or

spends.” Senator Grassley continued:

As Senator Byrd knows, this

quote contains a very powerful

message. This is the message

that I glean from that quote: The

Pentagon does not know how

much it spends. It does not know

if it gets what it orders in goods

and services. And the Pentagon,

additionally, does not have a

handle on its inventory. If the

Pentagon does not know what it

owns and spends, then how does

the Pentagon know if it needs

more money? We, as Senators,

presume already that the

Pentagon needs more

money—because there is kind of

a bipartisan agreement to that,

and President Bush won an

election with that as one of his

key points. We need to know

more, and a sound accounting

system is the basis for that

judgment.3

When you’re talking about such a large

organization and so much money, it’s hard to

grasp the breadth of the problem. But in

example after example, the Defense

Department’s poor financial management has

resulted in spectacular waste. Some of those

examples:

• The GAO reported recently that the

Navy wrote off more than $3 billion in

inventory as “lost in transit.” A lot of

this property was later delivered. But,

because it had no record of the property,

the Navy may have ended up making a

number of unnecessary purchases.4 

• The Navy also wrote off as “lost” almost

$600,000 in generators. Although those

generators were later found, the Navy

had already purchased more than $1

million worth of replacement generators

and had initiated purchase orders for

additional generators valued at about $2

million.5 

• In 1999, the Army took an inventory of

2

 147 Cong. Rec. S1236, (daily ed. February 8,

2001) (statement of Senator Byrd).

3

 147 Cong. Rec. S1249 (daily ed. February

13, 2001) (statement of Senator Grassley).

4General Accounting Office, “Defense

Inventory: Continuing Challenges in Managing

Inventories and Avoiding Adverse Operational

Effects,” GAO/T-NSIAD-99-83 (February 25, 1999), 

p. 4, 7-8. 

5General Accounting Office, “Department of

the Navy: Breakdown of In-Transit Inventory Process

Leaves It Vulnerable to Fraud,”

GAO/OSI/NSIAD-00-61 (February 2, 2000).
26

its assets. It found 56 airplanes, 32 tanks,

and 36 Javelin-command launch units for

which it had no centrally located records.

The problems associated with a lack of

accountability over such equipment

should be obvious. But when managers

have no records of classified and

sensitive items, such as aircraft guidedmissile launchers, the consequences

could be disastrous.6

As you can see, the problems of the Defense

Department’s financial management are legion.

But the Department of Defense is not alone.

Many other agencies of the federal government

have similar problems:

• The Internal Revenue Service, the agency

that collects your taxes, does not know

how much it actually collects in Social

Security and Medicare taxes. It allocates

money to those programs based on an

estimate given to it by the Treasury

Department.7 

• The Education Department reported in its

financial statements that it had $7.5

billion in the bank, when it actually owed

that money to the U.S. Treasury. In

addition, because of its poor financial

management, $1.9 million in Department

of Education funds was wired to bank

accounts when fraudulent direct deposit

forms were submitted to the Department

on behalf of two South Dakota school

districts. The perpetrators then used this

money to purchase two luxury cars

valued at nearly $97,000 and a house

worth $135,000. The fraud was

discovered only after a car salesman

contacted the FBI because of apparent

false credit information, not because it

was discovered by the Department of

Education.8

• The Department of Agriculture was

unable to account for more than $5

billion of receipts and expenditures.

That means it could not tell you who

some of that $5 billion was collected

from, where it had gone or to whom

some of it was owed. The Department’s

financial mismanagement has also

resulted in food stamp overpayments,

large errors in accounting records, and

accountability breakdowns.9 

• An estimated $1.3 billion—or 7

percent—of the Agriculture

Department’s fiscal year 1999 food

stamp payments was determined to be

overpayments. That means the federal

government provided food stamp

recipients over $1 billion in food stamps

that they were not entitled to receive.10

6General Accounting Office, “Defense

Inventory: Army Needs to Strengthen and Follow

Procedures to Control Shipped Items,” GAO/NSIAD

-00-109, (June 23, 2000).

7General Accounting Office, “Financial Audit:

IRS’s Fiscal Year 2000 Financial Statements,” GAO-01-

394 (March 1, 2001).

8Department of Education Inspector General,

“Semiannual Report to the Congress” (April 1, 2000 -

September 30, 2000).

9Department of Agriculture Inspector General,

Testimony before the Senate Committee on

Agriculture, Nutrition, and Forestry's Subcommittee on

Research, Nutrition, and General Legislation on the

Status of Financial Management at the Department

of Agriculture (September 27, 2000). 

10Ibid.
27

• Accounting system records at the

Agriculture Department showed

purchases of a motor vehicle valued at

$97 million, 5 other motor vehicles with

a recorded value of over $8 million, and

a microscope with a recorded value of

$11 million.11

• Auditors also identified numerous

instances in which accountable officers

were unable to locate property listed in

the Agriculture Department’s personal

property inventory records.12

Federal agencies have a big problem with

overpayments, which often result when agencies

lack good information about their debts and their

debtors. Some of the more egregious examples

of improper payments include the following:

• Between 1994 and 1999, contractors with

the Department of Defense voluntarily

returned nearly $1.2 billion they were

paid inadvertently. In addition, according

to the GAO, the Defense Department was

seeking to recover $3.6 billion in

problem payments to contractors, at least

$225 million of which was the result of

duplicate payments, overpayments, and

payments for goods not received.13

• According to the IG at the Department of

Education, the Department made

duplicate payments totaling about $151

million during fiscal year 2000. Again,

the Department didn’t discover the

errors. Someone else did.14

• The Department of Housing and Urban

Development’s severe financial

management weaknesses caused it to

make over $900 million in erroneous

payments to subsidize low income

housing. In addition, because it didn’t

keep track of what it was spending, the

Department didn’t spend $151 million

which Congress had specifically

authorized for public housing.15

• The Medicare program makes billions of

dollars in improper payments annually.

Last year, $12 billion in improper

payments were made in the fee-forservice program alone. Some of the

payments made were for medically

unnecessary services, non-covered

services, or were the result of coding

errors. In many cases, Medicare is

billed for services that were never

provided.16

One of the main reasons federal agencies and

departments can’t keep track of their finances is

that they don’t have the right systems in place to

record the transactions they make. The Defense

11Ibid.

12Ibid.

13General Accounting Office, “Financial

Management: Billions in Improper Payments Continue

to Require Attention,” GAO-01-44 (October 2000) page

23.

14Department of Education Inspector General,

Semiannual Report to the Congress (April 1, 2000 -

September 30, 2000). 

15Department of Housing and Urban

Development Inspector General, Testimony before the

House Committee on Government Reform,

Subcommittee on Government Management,

Information, and Technology (March 22, 2000).

16Department of Health and Human Services

Inspector General, "Improper Fiscal Year 2000

Medicare Fee-for-Service Payments," A-17-00-02000

(February 5, 2001).
28

Department, for example, doesn’t have a single

one of its major parts that can pass an audit.

Many agencies have systems and procedures that

are so complicated that one simple mistake can

cost millions of dollars. But because the

agencies aren’t trying hard enough to catch such

errors, they can go undetected for months or

years. Take, for example, an official at the

Department of Health and Human Services. The

GAO recently reported that a clerical error made

month after month by this inexperienced member

of the staff at the Health Care Financing

Administration “resulted in the [Hospital

Insurance] Trust Fund being overinvested by

approximately $14 billion and the

[Supplementary Medical Insurance] Trust Fund

being underinvested by approximately $18

billion.” As a result, GAO reports, “the

[Hospital Insurance] Trust Fund realized excess

interest earnings of about $112 million and the

[Supplementary Medical Insurance] Trust Fund

suffered a loss of about $232 million in interest

earnings.”17 This error occurred because of

weaknesses in fundamental problems like

inadequate training and supervision in the

Medicare program. Luckily, the agency caught

the error and corrected it. But the oversight

raises the question of how many other errors go

undetected. You can bet there are a lot.

According to the GAO, many leading private

organizations it has studied “have already

implemented, or are in the process of

implementing, an enterprisewide system to

integrate financial and operating data to support

both management decision-making and external

reporting requirements. . . . [T]hese systems

provide financial analysts, accountants, and

business unit managers access to the same cost,

performance, and profitability information.”18

The systems currently in place throughout the

federal government certainly do not have this

objective. In fact, it’s often difficult to discern

the reason for the systems, if there’s any reason

at all. When you look at the method the

Department of Defense uses for tracking its

contract payments, as you can see below in

Table III, it’s immediately apparent why the

Department doesn’t know to whom it owes

money, doesn’t know to whom it has paid

money, or why it makes innumerable contract

payment errors.

HOW OFTEN DO YOU BALANCE 

YOUR CHECKBOOK?

Even though their systems don’t produce

reliable information about agency spending on

a regular basis, most agencies check their books

once a year to make sure the numbers add up.

But they only do it only because the law requires

17General Accounting Office, “Medicare

Financial Management: Clerical Errors in the Medicare

Hospital Insurance and Supplementary Medical

Insurance Trust Funds,” Report Number GAO-01-39R

(October 31, 2000).

18General Accounting Office, “Executive

Guide: Creating Value Through World Class Financial

Management,” GAO/AIMD-00-134 (April 2000).

[M]ost agencies check their books once

a year to make sure the numbers add

up. But they only do it only because the

law requires that their financial

statements be audited.

[N]o private sector firm could stay in

business if it had the same financial

problems as the federal government. 
29

that their financial statements be audited. Some

agencies pass financial audits—meaning they’ve

balanced their books—only by undertaking

“heroic” efforts that mask problems with their

financial systems. At the end of each year, they

actually pay large accounting firms to come up

with the amounts listed on their balance sheet.

These are numbers that should be produced

automatically by the agencies’ systems. This

process, in an organization as large as the federal

government, costs the taxpayers millions and

millions each year. It clearly diverts resources

from the problems they were meant to address.

As the GAO wrote in its most recent High-Risk

Series:

Many agencies have been able

to obtain unqualified audit

opinions only through heroic

efforts, which include using

extensive ad hoc procedures and

billions of dollars in adjustments

to derive numbers as of a single

point in time—the end of the

fiscal year. These efforts are

often completed months after the

end of the fiscal year. The

fundamental problem is that

agency financial systems cannot

routinely provide the

information.19

19General Accounting Office, High-Risk

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

SRD1

ADS

IPC

IAPS

CAPS

DJAS

1 Bill

Pay

MOCAS

DPPS

DSDS

SABRS

GAFS

STARS

STANFINS

BCAS

APADE

ITIMP

SAACONS

SPS

CEFT

Debt

Mgt

Prevailidation

Table III: SYSTEM USED BY THE DEPARTMENT OF DEFENSE 

TO TRACK CONTRACT AND VENDOR PAYMENTS

Source: The Department of Defense
30

It is important to put the government’s financial

management in perspective. Private corporations

are required to file financial statements

periodically with the Securities and Exchange

Commission. According to the Securities and

Exchange Commission, “All investors, whether

large institutions or private individuals, should

have access to certain basic facts about an

investment prior to buying it. To achieve this,

the [Commission] requires public companies to

disclose meaningful financial and other

information to the public, which provides a

common pool of knowledge for all investors to

use to judge for themselves if a company’s

securities are a good investment. Only through

the steady flow of timely, comprehensive and

accurate information can people make sound

investment decisions.”20 Although the Securities

and Exchange Commission, a federal

government agency, places these requirements on

private companies, the federal government

cannot produce the same information on a regular

basis. But the fact is, no private sector firm

could stay in business if it had the same financial

problems as the federal government. 

Few federal agencies can actually use their

financial systems for day-to-day management.

Agencies can’t tell you how much programs cost.

Sure, at the end of the year, they can say what

they spent, at least in some cases. But they can’t

tell you what they spent in overhead, staffing

costs, etc. Agriculture Department IG Roger

Viadero testified recently, “[T]he Department, as

a whole, does not know whether it correctly

reported monies to be collected in total, how

much money is collected, the cost of its

operations, or any other meaningful measure of

financial performance.”21 Agencies just don’t

have that information. And the consequences of

the government’s poor financial management

are severe. 

WHY DOES FINANCIAL 

MANAGEMENT MATTER?

If we don’t know how much programs cost or

how much agencies are spending, we can’t tell

whether the American people are getting what

they paid for. Moreover, waste, fraud, and

abuse, exacerbated by poor financial

management, take away scarce resources from

federal activities. According to the Comptroller

General, the consequences of this

mismanagement mean that “federal funds are

diverted from their intended uses or

beneficiaries, revenues owed are not effectively

identified or collected, [and] excessive

inventories and procurement costs drive federal

costs higher than they need to be for some

areas.”22

One of the clearest cases where financial

mismanagement cheats the American citizen is

when agencies or programs distribute federal

funds to those who are not entitled to receive

them. In 1999, the Governmental Affairs

Committee asked the GAO to find out how

much money was given out improperly each

year by federal agencies. Astonishingly, we

discovered that only a few agencies even keep

track of such things. But in the 17 programs for

which improper payments have been recorded,

20Securities and Exchange Commission website

(can be found at www.sec.gov).

21 Testimony before the Senate Agriculture

Committee’s Subcommittee on Research, Nutrition, and

General Legislation (September 27, 2000).

22General Accounting Office, “Congressional

Oversight: Opportunities to Address Risks, Reduce

Costs, and Improve Performance,” GAO/T-AIMD-00-

96 (February 17, 2000). 
31

agencies estimate that an incredible $19.1 billion

was improperly distributed in one year. These

programs included Medicare, Food Stamps, and

Disability Insurance. In 2000, we asked GAO to

look at improper payments again. And with just

21 programs reporting, the amount of money

wasted the next year grew even higher—to $20.7

billion!

• When Medicare makes almost $12 billion

annually in improper payments, it takes

money out of the Medicare Trust Fund

that would otherwise go to provide health

care to the elderly. Twelve billion dollars

is a big piece of what it would cost to

provide prescription drug benefits to the

nation’s senior citizens. 

• The Department of Agriculture pays $1.3

billion in food stamps to those who

shouldn’t receive them. But it also fails

to provide food stamps to eligible

families who may be going hungry.

• When the Department of Housing and

Urban Development pays out money to

house the poor, it often gives cash to

those who don’t deserve it—$935 million

worth. There are millions of Americans

who need a helping hand. When the

Housing Department wastes money on

those who may not need it, it cheats those

who really need housing assistance.

One of the agencies that makes the most

improper payments is the Internal Revenue

Service. The Congress set a policy that

individuals who make a low income, but pay a

high amount of Social Security and Medicare

taxes may be entitled to a tax refund. Those

people—low-income working people—are

entitled to money back from the federal

government. Yet a recent study by the IRS’s IG

cited one study that said only 65 percent of

those entitled to it actually received the tax

refund. That report also cited studies that found

that 25 to 30 percent of Earned Income Tax

Credits were paid improperly.23 That means that

between $5 to 10 billion was paid to those who

23General Accounting Office, “Financial

Management: Billions in Improper Payments Continue

to Require Attention,” GAO-01-44 (October 2000).
32

were not entitled to the payments. The program

that Congress designed was meant to serve the

working poor, but because of the way the

program is mismanaged, those who aren’t

entitled to the benefits are getting federal tax

dollars improperly while those who should be

getting them are going without. 

The federal government also has a hard time

making the right payments to contractors and

grantees. While you shop around for the best

offers, clip coupons, and check your receipts, the

government pays the same bills twice, never

looks for discounts, and regularly pays more than

it owes. Table V lists $18 million in

overpayments made to contractors at the Defense

Supply Center in Philadelphia. (See Table V.)

In addition to wasting scarce resources, financial

mismanagement often interferes substantially

with an agency’s ability to serve the American

people. Take, for instance, the Internal Revenue

Service. Although its financial management has

improved, the agency still suffers major

problems. In a recent audit of the IRS, the GAO

found the following:

• Significant delays—of up to 12

years—in crediting taxpayers with the

payments they made. GAO discovered

many payments that were never credited

to the right account, some dating back as

far as the 1980's.

• The IRS credited the wrong account

Table V: Overpayments Made by the Defense Supply Center, Philadelphia

Type of Overpayment Identified Recovered

Discounts Owed to the Government

The Discount was not offered to the Supply Center but it was offered to

commercial customers. $12,033,919 $1,709,855

The Supply Center was notified of the discounted price on its bill, but paid

full price anyway. 609,373 306,656

A discount was deducted from the price charge to the Supply Center, but at

the wrong rate 104,237 98,858

Vendor charged the Supply Center more than its “most favored” customer,

who paid the lowest price. 1,851,865 925,943

The Supply Center paid the same bill more than once. 597,153 437,549

Unposted credit memorandum (As a result of returned merchandise, vendor

sent a credit memo that remained outstanding.) 1,429,998 1,267,435

Accounting error 440,985 450102

Price protection (Losses to the value of a retailer’s inventory, should a

vendor reduce prices to other retailers.) 519,128 124,329

Allowances (The vendor failed to give financial considerations in exchange

for meeting specific requirements, such as advertising or promotional sales.) 33,797 0

Shortage discrepancy (Vendor sent fewer than the quantity ordered.) 421 421

All other errors 266,000 23,130

Total $17,886,876 $5,344,278

Source: Profit Recovery Group International
33

with a $68 million payment from a

deceased individual’s estate. Even

though that estate was owed a $7 million

refund, the IRS didn’t correct its error

until 2 years had passed.24

• Sometimes, because it didn’t record a

taxpayer’s payment, the IRS didn’t

release liens it held on properties owned

by those taxpayers. In one case, a

taxpayer had paid off his three

outstanding taxes by October 1998.

However, as of December 1999—14

months later—IRS had not released the

lien against the taxpayer’s property.25

Another consequence of poor financial

management and agencies’ failure to accurately

report the costs of the programs they operate is

that Congress and the President end up

distributing federal revenue without knowing

how much an agency actually needs, how much

it will actually spend, or, perhaps most important,

whether the expenditure of those funds will

actually produce the intended result. If the

federal government is to improve its service to

the American people while safeguarding the

taxes it invests, it must improve its financial

management. 

WHAT CAN BE DONE?

Poor financial management in the federal

government has been a problem for many years.

Like a family that doesn’t balance its

checkbook, the federal government has to try

and figure out where its money was spent. We

should insist that agencies keep track of what

they spend and what they owe on a regular

basis. Clearly, the most important thing the

federal government can do is design and install

the systems that will track the government’s

assets, expenditures, and debts in an efficient

and reliable way. According to the IGs and

other auditors, only 3 of 24 major federal

agencies have systems in place today. We

should expect that every federal agency has

systems in place that provide reliable, useful,

and timely information to manage day-to-day

operations, and that appropriate emphasis be

placed on these systems to ensure that this

occurs sooner rather than later. 

There are many other things the federal

government can do to better track what it owes

and what it spends. In a recent report, the GAO

made a series of recommendations on how to

create “value through world-class financial

management.” GAO analyzed the financial

management practices of high performing

private sector organizations, like Boeing, Pfizer,

and Hewlett-Packard, as well as some in the

public sector, like the states of Massachusetts,

Texas and Virginia.26 The report detailed

several seemingly simple ideas that the federal

government could implement to improve its

financial management. In that report, some of

GAO’s recommendations included the

following:

• Make financial management an entitywide priority: Strong leadership is

24General Accounting Office, “Financial Audit:

IRS' Fiscal Year 2000 Financial Statements”

(GAO-01-394), March 1, 2001.

25General Accounting Office, “Internal

Revenue Service: Recommendations to Improve

Financial and Operational Management” (GAO-01-42),

November 19, 2000.

26General Accounting Office, “Executive

Guide: Creating Value Through World Class Financial

Management,” GAO/AIMD-00-134 (April 2000).
34

needed to ensure that everyone in the

organization understand the importance

of sound financial management. This

includes training employees on good

financial management practices.

• Design financial accounting systems to

provide information that managers and

employees need to assess the quality and

efficiency of what they are doing.

Agency managers and employees will

understand the importance of financial

management only if they can use

financial information to do their job

better. 

From the experience of the federal government

thus far, it is clear that the design and

implementation of financial management systems

is difficult. Time after time, government

agencies have invested millions—sometimes

billions—on systems that don’t work. Once a

sound design has been developed, agency

management must gain the support of Congress

and the President and follow through on the rapid

implementation of the system and processes

necessary to provide accurate financial

information on a regular basis. 

In addition to these recommendations, agencies

should evaluate their progress throughout the

year to ensure that the processes in place are

working, that agency activities are efficient and

effective, and that taxpayers’ dollars are not

being wasted. Accordingly, agencies should do

the following:

• Report the amount wasted each year.

With this annual estimate, agencies can

begin to understand why they waste and

work to reduce the waste in the future.

 

• Communicate and coordinate payments

with other agencies. One of the most

outrageous examples of waste in the

federal government is when one agency

makes a payment that another agency

would have recommended be withheld.

For instance, the IRS often gives tax

refunds to individuals who are 

delinquent in paying their student loans.

Likewise, the Department of Health and

Human Services pays health care costs

for some individuals whom the Social

Security Administration knows are dead.

We must improve the ways in which

agencies share information so these

mistakes don’t continue in the future.

We need to avoid these types of errors

before they occur.

• Recover the money. When we do

identify cases where the government has

overpaid, we should employ every tactic

we can to recover the money. The

government can use a process called

“recovery auditing” to recoup

overpayments, and it should do so. 
35

C. INFORMATION TECHNOLOGY PROBLEMS

The United States is currently confronting what can best be described as another

industrial revolution. The rapid acceleration of computer and telecommunications

technology is a major reason for the appreciable increase in our productivity in

this expansion, and is likely to continue to be a significant force in expanding

standards of living into the twenty-first century.

Alan Greenspan

Chairman

Federal Reserve System

July 10, 1998

During the last decade, people have become

more dependent on computers to do business

with the private and public sectors. For

example, agencies like the IRS allow taxpayers

to file their returns electronically, states provide

residents with the ability to renew their car

registrations online, and more and more federal

departments are posting benefit information on

their Web sites. These technological advances

have offered unprecedented opportunities for the

federal government to use information

technology (IT) to improve agency performance,

reduce costs, and enhance its responsiveness to

the public. Unfortunately, the federal

government still lags behind the private sector

in managing its technology assets for proven

results.

Over the past several years, the United States

has witnessed amazing innovations in the ability

of technology to store, manipulate, display,

exchange, and transmit data. Private companies

have harnessed these new technologies, which

they are using to increase dramatically the speed

of business transactions, the accessibility of

information, and the storage capacity of

Table VI: Recent Innovations in Information Technology

• Since the 1960's, the number of transistors placed on a computer chip have doubled roughly every 18

months.

• The capacity of today’s data storage technologies is doubling every nine months and the average price

per megabyte of storage has declined from $11.54 in 1998 to an estimated $0.02 in 1999.

• Similar improvements have occurred in communications technologies. The carrying capacity of fiber

optics is currently doubling every 12 months. 

• Between 1994 and 1998, the price of telecommunications equipment declined by 2 percent per year. 

• In January 2000, the World Wide Web contained more than one billion unique pages, compared to 100

million in October 1997.

Source: Department of Commerce

Digital Economy 2000
36

complex databases. All types of information are

instantly available through the Internet, and

ordering products online has never been easier.

Meanwhile, the federal government is still at the

entrance ramp to the information superhighway.

Even with $40 billion dollars devoted solely to

information technology, the government is

barely making any progress. 

Many Americans look at the federal government

and wonder, “Where is my money going? Why

hasn’t the government used these incredible

advances to improve the efficiency of its

services?” The Washington Post, for example,

recently highlighted problems that the State

Department was having with its e-mail and

computers:

• Many [employees overseas] do not have

e-mail. Indeed the department depends

on a cable system developed during

World War II for much of its diplomatic

communications.

• The State Department’s computer

system is so outdated that Germany and

some other foreign governments have

been bypassing American embassies

because it is easier to e-mail Washington

directly than American diplomats down

the block.

• The Department runs four separate,

incompatible computer systems that

cannot access the Internet. Some

officials have three computers on their

desks so they can use all the systems.1

Four years ago, Congress passed legislation

requiring agencies to implement new

management procedures aimed at increasing

their ability to make better use of their

information technology assets. The law, known

as the Clinger-Cohen Act, was a result of the

Governmental Affairs Committee’s reviews of

failed computer system acquisitions such as the

IRS’s $7 billion Tax Systems Modernization

project and the National Weather Service’s

more than $500 million Advanced Weather

Interactive Processing System. A recent

investigation into federal agencies’ compliance

with the Clinger-Cohen Act revealed that most

agencies are not using common sense to

determine what computer systems they need, to

manage their systems effectively, or to

determine the costs of their systems. For

example, 17 of 24 agencies do not follow the

best practices used by the private sector to

manage their major information technology

projects, and a quarter of the agencies listed

projects that were significantly over budget and

behind schedule.2

ALIGNING TECHNOLOGY WITH 

THE ROLE OF THE AGENCY

A big part of the problem is that officials don’t

know what type of technology they need to do

their jobs. Information technology raises a

1Alan Sipress, “Trying to Turn Around a

Strapped State Department: Powell Tackles Old

Technology, Personnel Woes,” The Washington Post

(February 23, 2001).

2

Investigative Report of Senator Fred

Thompson on Federal Agency Compliance with the

Clinger-Cohen Act (October 20, 2000).

Many Americans look at the federal

government and wonder, “Where is my

money going? Why hasn’t the

government used these incredible

advances to improve the efficiency of

services?”
37

range of thorny issues, such as how to manage

and integrate complex information management

processes, computer hardware and software,

telecommunications, and networks. Also, most

importantly, agencies don’t properly align

information technology purchases with their

needs. More often than not, agencies don’t

evaluate or review their programs to determine

what type of technologies should be used to help

them achieve their goals. In fact, during the

investigation, it was discovered that agencies

were all too often unable to determine the

impact of information technology on overall

performance. 

CONTINUOUS IMPROVEMENT

The government does not use computer

technology to streamline administrative

processes. Like the private sector, government

could eliminate unnecessary costs by analyzing

the way current computer systems set up

repeatable processes needed to conduct business

on a daily basis.3 With new innovations in

office administration, it is simple to determine

if technologies could streamline current

practices and thereby reduce costs. Agencies

need to find out the value of their business

processes either prior to or as part of major

system purchases or upgrades. For instance,

agencies like the Department of Agriculture

have initiated efforts to overhaul their services

because of their work in reconfiguring their

administrative processes. However, agencies

like the Department of Education and the

Department of Interior have only done the

analysis and have not applied the results of their

efforts to making any agency-wide business

process changes.

OVERCOMING THE 

TIME-TECHNOLOGY DILEMMA

Technology changes at a rapid rate, and yet, the

government adopts these technologies at a much

slower pace. Part of the reason for this is that

the government contracting process is different

and therefore more time consuming.

Determining what an agency needs to buy,

receiving funding approval, and evaluating bids

prior to awarding a contract can be long and

arduous. During this lengthy process,

technology advances. This is especially true

when the government decides to buy large,

complicated systems. Because it seems as

though the federal government is incapable of

completing large, technical projects on schedule

or within budget, or incorporating new

technologies fast enough, the Clinger-Cohen

Act requires agencies to buy systems on a much

smaller scale. This is referred to as modular

contracting and allows agencies to buy in

incremental modules so they can integrate new

technologies into the systems faster.

Below are a number of examples of how

inefficiently the government manages large

scale technical projects. Table VIII, at the end

of this section, describes the case of the

“Railway Killer,” the worst example of what

can happen when technology projects are not

managed appropriately. 

• In 1999, the Bureau of Land

Management pulled the plug on its

much-anticipated electronic system for

instant online access to millions of land

and mineral lease records. The

3Businesses intent on taking full advantage of

innovative technologies often find they have to rethink

the way they operate and reorganize their operations.

This process of reorganization has, in itself, sometimes

produced its own round of innovation. Entire steps in

the production and distribution of goods and services

are being eliminated in favor of, for example, just-intime inventory.
38

Automated Land and Mineral Record

System could not be made to work even

after 15 years of development at a cost

of $67 million. According to reports,

Bureau officials continued to hold out

hope that the system eventually would

work despite repeated warnings of

significant cost overruns and missed

deadlines by government auditors.4

• For the first quarter of Fiscal Year 2000,

the Department of Transportation could

not identify about $16 million worth of

projects in the cost accounting system

due to computer programming and

technical design flaws with the labor

distribution system. According to the

Department’s IG, important internal

controls to offset design problems and

identify reporting errors had not been

put in place when the system was

designed.5

• Faced with rapidly growing traffic

volume and aging equipment, the

Federal Aviation Administration

initiated an ambitious Air Traffic

Control modernization program in 1981.

This project entailed acquiring new

facilities, as well as a vast network of

radar, automated data processing,

navigation, and communications

equipment. Over the past 19 years, the

project “has experienced cost overruns,

schedule delays, and performance

shortfalls of large proportion.”6 In 1986,

it was estimated that the modernization

would be completed at a cost of $12

billion. It is now estimated the

modernization will cost $45 billion

through 2005.7 According to GAO,

some of the causes of the program’s

problems include the way the agency

buys complex software, the lack of an

effective information technology

management structure, and an

organizational culture that has impaired

the acquisition process.

• Major projects within the Air Traffic

Control modernization also continue to

experience cost overruns and schedule

delays. According to the IG, 11

programs “were averaging a 29 percent

cost growth and a 17-month schedule

delay.”

8

 As a matter of illustration,

Table VII9 shows the cost growth and

schedule slippage for one major

component, the Wide Area

Augmentation System (WAAS).10

4

“Federal Agency Scraps Costly Computer

System,” Associated Press State and Local Wire, June

3, 1999.

5Department of Transportation, Office of

Inspector General, “Report on Design of the Cost

Accounting System for Research and Acquisitions,”

Report No. FI-2001-013 (December 18, 2000), p. 3.

6General Accounting Office, “High-Risk

Series: An Update,” GAO-01-263 (January 2001), p.

108.

7A portion of this growth has resulted because

the capacity of the system has increased.

8Department of Transportation, Office of

Inspector General, “Survey of the Federal Aviation

Administration’s Integrated Product Development

System,” AV-2000-110 (August 29, 2000).

9General Accounting Office, “Major

Management Challenges and Program Risks:

Department of Transportation,” GAO-01-253 (January

2001), p. 29.

10The Wide Area Augmentation System

(WAAS) is a ground-and satellite-based navigation

system that is intended to improve the current ground-
39

Table VII: Delay in the Implementation of and Growth in the Cost of 

the Wide Area Augmentation System, a Major Component of the

Modernization of America’s Air Traffic Control System

1994 January 1998 January 1999 September 1999

System Cost Estimate $508 million $1.007 billion $1.007 billion $2.484 billion

Date System was to be

Partially Available

June 1997 July 1999 September 2000 September 2000*

Date System to be 

Fully Available

December 2000 December 2001 To Be Determined December 2006

Note: Since 1996, the Federal Aviation Administration has included life-cycle costs for developing, operating,

and maintaining projects. WAAS development costs have changed essentially because costs for such things as

technical engineering and program support were left out of the earlier estimates and the cost for satellites was not

included as a development cost but was included as a WAAS operating cost. In June 2000, GAO reported that

while FAA estimated that the life-cycle cost for the Wide Area Augmentation System was $3.188 billion, this

cost could grow by at least $200 million.

* The Federal Aviation Administration did not meet this milestone and has not yet determined when it will be

able to do so.

Note: The Federal Aviation Administration recently announced that it would begin providing precision landing

and guidance by September 2003. This capability provides less precision than what the FAA promised to deliver

in the timeframes depicted in the table. Currently, the FAA does not know when it can deliver WAAS’ promised

capability. 

• Over a decade ago, the IRS began

modernizing the inefficient and outdated

systems it used to process tax returns

and respond to taxpayer inquiries. The

goal was to create a virtually paper-free

work environment where taxpayer

account updates are rapid, and taxpayer

information is readily available to IRS

employees to respond to taxpayer

inquiries. In 1996, however, GAO

warned that, “IRS continues to spend

billions more on [the Tax System

Modernization] with little assurance of

successfully delivering effective systems

within established time frames and cost

figures.”11 Spending was suspended in

1996, after it was reported that the IRS

had spent over $3 billion without

receiving comparable value. Congress

now requires the IRS to submit plans to

incrementally modernize its systems.12

based navigation system, which requires pilots to fly

less efficient routes to arrive at their destination. 

11General Accounting Office, “Tax Systems

Modernization: Management and Technical

Weaknesses Must Be Overcome To Achieve Success,”

GAO/T-AIMD-96-75 (March 26, 1996).

12Using this approach, organizations take

large, complex modernization efforts and break them

into projects that are narrow in scope and brief in

duration. This enables organizations to determine

whether a project delivers promised benefits within cost
40

• The Department of Defense spent $41.3

million on a project to create a system to

track the Department’s ammunition.

Unfortunately, according to the IG, after

8 years of work, “the [Department of

Defense] did not produce a working

system or even have one near

completion.”13

• The Department of Defense spent more

than $76 million on the Defense

Security Case Control Management

System, which was meant to track the

myriad security investigations conducted

by the Department and was expected to

reduce processing time for all cases.

According to the Department’s IG,

however, the system “did not meet

performance expectations” and “times

for investigations were not reduced.”14

• The Defense Joint Accounting System

was originally designed to unify the

accounting systems of various entities

within the Department of Defense, but

several Defense organizations, namely

the Navy and the Air Force, were

allowed to opt out of it. Nonetheless,

the Department continued with the more

than $700 million project (originally

estimated at $500 million), despite the

fact that its projected savings decreased

dramatically. According to the Inspector

General, “These cost increases,

combined with a decreasing return on

investment, represent an increased risk

that the system will not be the most costeffective alternative to perform

[Department of Defense] general fund

accounting.”15

• The Defense Environmental Security

Corporate Information Management

Program would have provided better

coordination of the Department of

Defense’s environmental mission.

However, after expenditures of over

$100 million and 9 years of work, the

project could not demonstrate success

and the Department’s IG recommended

scrapping it.16

• In 1997, the State Department provided

posts worldwide with a software

package, the “Resource Allocation

Budget Integration Tool.” In 1998, just

one year later, the State Department

decided that the program had a number

of deficiencies and needed to be

replaced.17

and risk limitations and allows them to correct

problems before significant dollars are expended,

which in turn reduces the risk of program failure.

13Department of Defense, Office of Inspector

General, “Development and Implementation of a Joint

Ammunition System,” D-2001-014 (December 6,

2000).

14Department of Defense, Office of Inspector

General, “Program Management of the Defense

Security Service Case Control Management System,”

D-2001-019 (December 15, 2000).

15Department of Defense, Office of Inspector

General, “Acquisition of the Defense Joint Accounting

System,” D-2000-151 (June 16, 2000).

16Department of Defense, Office of Inspector

General, “Defense Environmental Security Corporate

Information Management Program,” D-2001-015

(December 7, 2000).

17Department of State and the Broadcasting

Board of Governors, Office of Inspector General,

“Inquiry Into The Procurement of Contractor Support

For the International Affairs Global Resource

Database,” 01-PP-002 (November 2000).
41

• In 1992, the Health Care Financing

Administration initiated the Medicare

Transaction System, which was intended

to replace Medicare’s multiple

contractor-operated claims-processing

systems with a single system. It was to

be fully implemented before the end of

1998. According to GAO, the system

originally was supposed to cost $151

million. By 1997, the estimated cost of

the project had increased to about $1

billion. Faced with serious technical

and managerial problems and runaway

costs, the agency terminated the contract

in 1997.18

• The Department of Energy duplicated

procurement efforts because it had not

developed software standards or

effectively used Department-wide

software contracts.19 As a result, 45

different offices awarded separate

contracts for the same major database

program. Twenty-four offices awarded

separate contracts for the same Internet

security program. A lack of a consistent

policy also led to significant price

variations for the same program. Two

separate offices purchased the same

word processing software at prices that

differed by 44 percent, $232 versus $335

per user license. One office spent

$200,000 to purchase software to permit

the use of data received from other

Department locations. About 23 percent

of the organizations that provided

information indicated that they used

three or more different electronic mail

and word processing applications.20

• In July 1995, the Department of Energy

implemented a database to contain upto-date and reliable real property

information. Upon investigation,

however, it was determined that the data

in the system was inaccurate and

incomplete. Some data had never been

entered into the system. This occurred

because some field sites maintained

their own site-specific real property

systems and did not use the new system

to manage property. Department of

Energy managers at the Savannah River

Site identified more than 176 pieces of

property that had not been entered in the

system. On the other hand, 416 pieces

of property that had been entered into

the system could not be located.21

• The Department of Agriculture initiated

“Info Share” in 1993 to improve the

delivery of services to its constituents by

coordinating the planning, acquisition,

development, implementation, and

management of information. In 1994,

the program was reevaluated because of

numerous difficulties it was

experiencing. Managers had made

18General Accounting Office, “Medicare

Transaction System: Success Depends Upon Correcting

Critical Managerial and Technical Weaknesses,”

GAO/AIMD-97-78 (May 1997).

19Developing and implementing an effective

software acquisition policy is a well-recognized best

practice. An effective acquisition strategy helps to

guarantee the compatibility of data that is shared

between locations and computer systems and also

enables the purchaser to take advantage of volume

discounts.

20Department of Energy, Office of Inspector

General, “Commercial Off-The-Shelf Software

Acquisition Framework,” DOE/IG-0463 (March 2000).

21Department of Energy, Office of Inspector

General, “Facilities Information Management System,”

DOE/IG-0468 (April 2000).
42

commitments to new technologies

without adequately defining

requirements, performing the necessary

analyses, or conducting sufficient

testing. In 1995, the IG reported that

over $33 million had already been spent

on the project. The Info Share system

was subsequently terminated, although

the concept of consolidating the

Department’s administrative areas

continued. The goal of combining the

Department’s various information

databases, however, has been extended

indefinitely.22

• The U.S. Agency for International

Development initiated the New

Management System to perform eight

accounting and management functions.23

After considering opportunities to use an

off-the-shelf accounting system, the

Agency decided in 1994 to develop its

own system. Because the Agency did

not follow accepted software

development practices, the system they

developed had design deficiencies,

software defects, and could not operate

effectively across the agency’s network.

Despite these problems, the Agency

deployed the system worldwide as the

primary system for conducting its

business in 1996.24 After one year, the

Agency had to suspend operations at

overseas missions and to limit the

processing of financial transactions to

Washington, D.C., offices. By the end

of fiscal year 1998, even though the

Agency had invested about $100 million

to develop the New Management

System,25 officials decided to replace it

with an off-the-shelf system known as

Phoenix.26

• The Department of Commerce began

planning for the acquisition and

development of a new financial system

in 1992 and awarded a contract for

system development in 1994. It was to

be fully implemented by 1998. In 1994,

the Department estimated that it would

cost $41 million for an integrated

system. By 1996, the estimated cost had

increased to $56 million.27 In addition,

the deployment schedules had been

22This figure did not fully take into account

agency costs for employees who worked on Info Share

strategies and the cost of procurements made utilizing

Info Share contracts. When these costs were

considered, the total cost exceeded $115 million.

23However, it was developed and deployed to

perform only four of the functions: accounting,

budgeting, procurement, and operations.

24Such a high-risk approach deviated from

guidance calling for agencies to thoroughly test system

performance and demonstrate that the system could

work effectively in an operational environment.

25More precise estimates are not possible

because the agency lacked a reliable cost methodology

to properly segregate the system and non-system work. 

26During the pre-implementation phase of

Phoenix, the agency employed external assessments to

make sure that it was using best practices as a risk

reduction measure. Phoenix is being implemented in

several phases and continued attention is needed to

ensure success. To attain this goal, the agency is faced

with the challenges to integrate various overseas

subsystems that feed financial information into the

financial system in Washington, D.C. 

27The revised development costs, however, do

not include substantial costs projected for in-house

staff resources and earlier “pre-development” costs.
43

significantly extended. When the

contract was awarded, the Department

believed that the system it was buying

satisfied about 80 percent of its

requirements. The remaining

requirements were to be completed

through contractor-provided software

modifications in six months under a

fixed price contract. However, the

contractor was not able to deliver the

modifications, and some of the existing

capabilities did not perform as expected.

Although the software package was

accepted in 1996, it still did not satisfy

the necessary requirements. In 1998, the

scope of the system was scaled back

when several administrative functions

were dropped. The new system will cost

more, arrive later, and do less than what

was first envisioned. Despite this, the

Department believes the new system

will meet its requirements, but it is not

projected to be fully implemented until

2003. 

• The Customs Service launched a major

initiative in 1994 to reorganize,

streamline, and modernize the

automated system that supports

operations. The “Automated

Commercial Environment” system was

intended to collect, analyze, and

disseminate import-related data in a way

that would facilitate the movement of

goods into the United States. In 1996,

GAO reported that the Customs Service

was not “effectively applying critical

management practices” to the project.

Specifically, the Customs Service

started buying equipment before it

determined where and how the import,

passenger, and export process would

occur, and they did not identify the

information needs of the organization

and consider alternative ways of meeting

them.28 In 1999, GAO stated that the

management approach being undertaken

“failed consistently on other agency

modernization efforts over the past two

decades, [and] has been abandoned by

successful organizations.” Finally,

GAO determined that the Customs

Service “lacks the capability to develop

or acquire [the system’s] software

effectively.”29

• In 1987, the Office of Personnel

Management initiated the “Automated

Processing System” to process

retirement benefits for the Federal

Employee Retirement System. In

September 1995, the agency decided to

temporarily stop the development

process. A review board recommended

that the project be terminated unless

major changes were implemented. Four

months later, the Office of Personnel

Management and the Office of

Management and Budget agreed that the

project should be terminated. According

to the review board’s report, the Office

of Personnel Management had invested

over 8 years and $25 million on the

project.

• The Department of Housing and Urban

Development initiated the “Financial

28General Accounting Office, “Customs

Service Modernization: Strategic Information Must Be

Improved for National Automation Program to

Succeed,” GAO/AIMD-96-57 (May 1996).

29General Accounting Office, “Customs

Service Modernization: Serious Management and

Technical Weaknesses Must Be Corrected,”

GAO/AIMD-99-41 (February 1999).
44

Systems Integration” program in 1991

with a goal of implementing an

integrated financial management system.

While this goal has remained the same,

the strategy for achieving it — along

with the costs and completion

dates—has changed dramatically.30 In

1991, the Department proposed

replacing about 100 financial and

management systems with nine

integrated systems at an estimated cost

of $103 million. In 1993, the

Department abandoned this plan and

developed a new strategy. The new plan

called for the Department to develop a

“core” financial system and various

program offices to develop financial and

management systems to support their

specific requirements. These systems

would then be integrated with the core

system at a cost of about $209 million

and would be fully deployed by

December 1998. In 1997, the plan

changed once more. The schedule

slipped again, and the deployment was

delayed until October 1999. New

systems were also added. According to

GAO, the cost increases and schedule

delays were the result of “inadequate

project management and oversight.”

The IG agreed with this analysis: “These

frequent changes have made it difficult

for the Department to measure

performance and progress, and control

costs.”31

• Similar problems existed with

components of the Department of

Housing and Urban Development’s

Financial Systems Integration program.

The Single Family Acquired Asset

Management System, for example,

which was developed and deployed as

part of the 1993 project, was delivered

late and over budget. Furthermore, the

system did not meet user needs because

it was poorly managed.3 2 The

Department originally estimated that the

system would be developed and

deployed for about $3.2 million in 6

months. But the Department awarded

the contract to develop the system

before adequately defining its

requirements. As a result, the cost of the

system grew to over $32 million, it was

deployed 10 months late, and it failed to

meet the needs of its users. 

• The IG at the Department of Housing

and Urban Development reviewed six

high-profile IT projects that were funded

between 1992 and 1999. The results of

the review found that the “[a]verage

productivity of the projects is 10 times

less than industry average for similar

projects.”33 Also, the projects did not

follow the Department’s system

development guidelines and

documentation requirements or industryaccepted practices for project planning

and risk assessment.

30General Accounting Office, “HUD

Information Systems: Improved Management Practices

Needed to Control Integration Cost and Schedule,”

GAO/AIMD-99-25 (December 18, 1998).

31Department of Housing And Urban

Development, Office of Inspector General, “Attempt to

Audit the Fiscal Year 1999 Financial Statements,” 00-

FO-177-0003 (March 1, 2000), p. 18.

32Op Cit. GAO/AIMD-99-25.

33Department of Housing and Urban

Development, Office of Inspector General, “HUD

Information Technology Investment Practices,” 00-DP166-0001 (October 29, 1999).
45

The federal government’s dependence

on computers makes it susceptible to

devastating disruptions in critical

services, as well as in computer-based

safety and financial controls. Such

disruptions could be caused by

sabotage, natural disasters, or

widespread system faults. 

COMPUTER SECURITY WEAKNESSES

Part of the mismanagement of agency

information technology systems results from the

government’s inability to protect its systems and

data from internal or external attack. Since

1997, the Committee on Governmental Affairs

has heard from security experts, senior

government officials and the GAO about the

persistent security risks associated with the

government’s information holdings. The

security of federal government computer

systems is of great importance to the Committee

and the nation. Advancements in technology

have forced us to look more closely at the

factors that may compromise our government’s

security. Those factors – widely accessible data

and instantaneous communication — increase

the risks that information will be misused,

possibly to commit fraud or other crimes, or that

sensitive information will be inappropriately

disclosed. The federal government’s

dependence on computers makes it susceptible

to devastating disruptions in critical services, as

well as in computer-based safety and financial

controls. Such disruptions could be caused by

sabotage, natural disasters, or widespread

system faults. Hearings of the Committee on

Governmental Affairs have uncovered and

identified failures of information security

affecting our international security and

vulnerability to domestic and international

terrorism. The Committee also directed GAO to

prepare a “best practices” guide on computer

security for federal agencies to use and asked

GAO to study computer security vulnerabilities

at several federal agencies.

The Governmental Affairs Committee’s

hearings highlighted our nation’s vulnerability

to computer attacks—from international and

domestic terrorists to crime rings to everyday

hackers. And while there has been some action

to improve federal information security, more

improvement is needed. Last year, members of

the Committee worked to ensure passage of the

Government Information Security Act, which

builds on the basic framework for managing

information security by better defining roles

among federal agencies to begin to develop a

fully secure government. GAO has issued a

number of reports on the ineffectiveness of

government computer security controls. Below

are a few examples of inadequate government

information security.

 

• “[C]ontinued weaknesses . . . increase

the risk of disruption in services and

make [the Department] of Education’s

loan data vulnerable to unauthorized

access, inadvertent or deliberate misuse,

fraudulent use, improper disclosure, or

destruction, all of which could occur

without detection.”34

• “[P]ervasive computer security

weaknesses at the Department of the

Treasury’s Financial Management

Service placed billions of dollars of

34General Accounting Office, “Major

Management Challenges And Program Risks:

Department of Education,” GAO-01-245 (January

2001), p. 15.
46

payments and collections at significant

risk of loss from fraud, vast amounts of

sensitive data at risk of inappropriate

disclosure, and critical computer-based

operations at risk of serious

disruption.”35

• “[C]omputer systems at the Department

of Energy’s laboratories supporting

civilian research had become a popular

target of the hacking community with

the result that the threat of attacks had

grown dramatically in recent years. . . .

[B]ecause of security breaches, several

laboratories had been forced to

temporarily disconnect their networks

from the Internet, disrupting the

laboratories’ ability to do scientific

research for up to a full week on at least

two occasions.”36

• “[P]ervasive weaknesses in the Corps of

Engineers’ computer controls at its data

processing centers and other Corps’ sites

could allow both hackers and numerous

legitimate users to improperly modify,

inappropriately disclose, and/or destroy

sensitive and financial data, including

Privacy Act data such as social security

numbers and other personal information.

These weaknesses also increase the

vulnerability of other Department of

Defense networks and systems to which

the Corps’ network is linked.”37

• Allegations were made that the Idaho

National Engineering Laboratory sold

surplus computer equipment that

contained sensitive data to an Idaho

businessman. GAO concluded that

some of the computers sold may have

contained sensitive data, but did not

determine how many.38

• A contractor at the Savannah River Site

“failed to comply with Department and

Savannah River Site requirements for

disposal of surplus computers.

Specifically, [the contractor] did not

clear stored information, including

sensitive unclassified information and

Unclassified Controlled Nuclear

Information, from all surplus

computers.”39

• In 1996, GAO reported that unknown

and unauthorized individuals had been

increasingly attacking and gaining

access to highly sensitive unclassified

information at the Department of

Defense. These attacks ranged from

being nuisances to being a serious threat

to national security.40

• To determine the extent to which the

State Department’s systems are

vulnerable to unauthorized attack, GAO

directed and supervised penetration

35General Accounting Office, “High-Risk

Series: An Update,” GAO-01-263 (January 2001), p.

101.

36Ibid., p. 101.

37Ibid., p. 101.

38General Accounting Office, “Department of

Energy Procedures Lacking to Protect Computerized

Data,” GAO/AIMD-95-118 (June 1995).

39Department of Energy, Office of the

Inspector General, “Semiannual Report to the

Congress” (September 30, 2000), p. 17.

40General Accounting Office, “Information

Security: Computer Attacks at Department of Defense

Pose Increasing Risks,” GAO/AIMD-96-84 (May

1996).
47

testing of State Department systems.

GAO’s reviews and testing revealed the

susceptibility of the State Department’s

systems to unauthorized access and that

unauthorized retrieval of sensitive

information from such systems was

possible. Testers were able to

download, delete, and modify data, add

new data, shut down servers, and

monitor network traffic. This activity

went largely undetected, further

underscoring the State Department’s

serious vulnerability to attack.41

• The GAO conducted an evaluation of

the National Aeronautics and Space

Administration’s information

technology security program in 1999.

GAO determined that NASA’s program

did not include key elements of a

comprehensive information technology

security management program because it

did not assess risks, effectively

implement controls, provide training,

monitor policy compliance, or provide

incident response capabilities.42

• A teenage hacker was nabbed by an

Army cybercrimes investigation unit

after he successfully hacked three Army

servers, an Air Force server, and two

private sector computers. The military

servers were domain servers, computers

that function as the “white pages of the

Internet.” According to the Army, when

hackers get access to such servers they

can redirect network traffic anywhere

they wish.43

PRIVACY

Governmentwide management weaknesses not

only lead to lax computer security practices, but

also undermine the ability of the government to

keep the trust of the public. Because weak

computer security management puts personal

information at risk of being viewed, modified or

altered, the government is unable to protect the

very information it collects. And while it is up

to a consumer to choose which company he or

she will do business with based on their privacy

policies, they have no choice but to provide the

government with financial, health, and other

personal information in order to comply with

federal requirements and to be able to receive

certain government program benefits. Below

are a number of examples of how the

government has been unable to protect sensitive

personal data.

• Social Security Administration:

According to a 1997 Price Waterhouse

audit of the Social Security

Administration, the agency has several

deficiencies that could “adversely affect

[its] ability to meet internal objectives,”

such as the failure to properly record and

account for transactions. The auditors

also suggested that the Social Security

Administration work to strengthen its

agency-wide computer security program

to protect against the risk of

unauthorized access to sensitive benefits 41General Accounting Office, “Computer

Security: Pervasive, Serious Weaknesses Jeopardize

State Department Operations,” GAO/AIMD-98-145

(May 1998).

42General Accounting Office, “Information

Security: Many NASA Mission-Critical Systems Face

Serious Risks,” GAO/AIMD-99-47 (May 1999).

43Joshua Dean, “Teen Convicted of Hacking

Military Computers,” GovExec (March 27, 2001).
48

information.44

• Environmental Protection Agency:

The Department’s IG discovered in 1997

that the agency was vulnerable to hacker

attacks. Hackers raided the EPA six

times from October 1992 to November

1997. In its 1998 Federal Managers’

Financial Integrity Act report, EPA

acknowledged that its computer security

plans were “deficient or non-existent,

potentially placing agency organizations

in a state of non-compliance with federal

and agency regulations.”

• State Department: In March 1998,

State Department officials shut down

systems after investigators found data

indicating that an unauthorized person

had used computers at two undisclosed

overseas posts. As a result of an

October 1997 intrusion, the two posts

were limited in their access to the

network, which forced the State

Department to circulate delicate

information on paper via courier.45

• State Department: During extensive

tests at the State Department in 1996

and 1997, GAO investigators, with

assistance from a major accounting

firm, succeeded in breaking into State

Department networks by dialing in from

modems. The investigators also

thwarted building security and walked

into areas where there were unattended

computers and servers. A user

identification and password were taped

to one computer. Once inside the

Department’s networks, GAO reported,

“We were able to access sensitive

information. In addition, we could have

performed system administration actions

that would have allowed us to

download, delete and modify these data,

add new data, shut down servers, and

monitor network traffic.” The systems

that GAO penetrated held performance

appraisals, international financial data,

travel arrangements, e-mail, and

passwords.”46

• Department of Commerce: In August

2000, a Commerce Department security

official in charge of investigating the

private backgrounds of Department

employees, was suspended for

downloading and storing a “monolithic”

stash of porn files on his government

computer and on the Department’s

Intranet, posing a security risk for the

entire system. The official allegedly

maintained files with pictures and

graphics of female employees which he

juxtaposed with pornographic material

of naked women posing in sexual

positions and performing sex acts. In

the past, several female employees had

filed sexual harassment complaints

against him, but the complaints were

allegedly “overlooked” by the director of

the security office.47

44Alison Maxwell, “SSA Audit Sees Fraud

Potential ,” GovExec.com (December 5, 1997).

45“State Dept. Computers Vulnerable,”

GovExec.com, (March 24, 1998).

46General Accounting Office, “Computer

Security: Pervasive, Serious Weaknesses Jeopardize

State Department Operations,” GAO/AIMD-98-145

(May 1998).

47Paul Sperry, “Cyberporn Scandal Hits

Commerce Department,” WorldNetDaily (September

27, 2000).
49

• Department of Agriculture: The

Agriculture IG has found over 600

security vulnerabilities in agency

computer systems. Systems which have

been easily hacked include the

following: the National Agricultural

Statistics Service quantity/price database

which, if altered, could “drastically

impact world commodity markets”; the

Rural Development’s $56 billion loan

portfolio; and the Food Safety and

Inspection Service database that ensures

a safe meat and poultry supply.48

• Internal Revenue Service: During last

year’s tax filing season, the IRS did not

take adequate steps to protect the

security of electronic filing systems and

electronically transmitted taxpayer data.

As a result, unauthorized individuals,

both inside and outside the IRS, could

have gained access to the IRS electronic

filing systems and viewed and modified

taxpayer data.49

WHAT CAN BE DONE?

In order to remedy some of the central problems

underlying the way the government does

business, agencies must fully implement the

Clinger-Cohen Act by investing wisely,

ensuring they are aligning technology with

business needs, continuously improving

processes, and using contracting procedures that

allow them to keep up with the pace of

technology. In short, agency managers need to

understand that technology is changing the way

business is conducted in both the private and the

public sectors. Automating for automating’s

sake neither achieves results nor savings.

Automating in connection with mission goals

and program needs will help agencies produce

results. 

Executive agencies and departments should:

• Emphasize early oversight and planning:

Target oversight of computer

acquisitions on the early phases of

programs to encourage agencies to

reevaluate how they do business before

spending money on automation.

• Avoid reinventing existing technology:

Ensure that developing unique systems

is the exception rather than the rule. It

should be rare for the government to

purchase anything but commercially

available hardware and software.

• Size projects to manageable levels:

Adopt an evolutionary approach to

systems acquisition by splitting

acquisitions in smaller stand-alone

segments. Each subsequent piece

should be required to be compatible

with its predecessors.

• Encourage innovation: As technology

changes, what is appropriate in today’s

environment may be obsolete tomorrow.

The government needs to be flexible in

incorporating new technology.

• Create incentives for contractors to

perform better: Consider past

management performance in meeting

cost, schedule, and performance goals as

48Testimony of Roger C. Viadero, before the

House Appropriations Subcommittee on Agriculture,

Rural Development, Food and Drug Administration,

and Related Agencies (February 17, 2000), p. 21.

49General Accounting Office, “Information

Security: IRS Electronic Filing Systems,” GAO-01-306

(February 2001).
50

one factor in selecting a contractor.

• Communicate lessons learned:

Encourage the foundation of interagency

advisory working groups to share

experience about computer systems

acquisitions.

• Review existing large computer systems

acquisitions: Review existing

acquisitions to determine if current plans

for automation will achieve the best

value for the taxpayer.

With regard to security issues, executive

agencies and departments should: 

• Examine the security risks: Assess the

organization’s security risks and develop

ways to reduce the most critical risks in

a cost-effective manner.

• Implement risk reduction approaches:

As risk factors change, the approaches

should be updated.

• Educate users: Help users understand

the importance of reducing security

risks. This will enable users to think

twice before revealing sensitive data and

more likely to report suspicious activity.

• Monitor the effectiveness of the risk

reduction approaches: Since new

technology is being introduced rapidly,

and related security approaches are often

lagging behind, the organization must

keep abreast of new risks and new ways

to reduce those risks.
50“Computer Chaos: Billions Wasted Buying Federal Computer Systems”, Investigative Report of Senator

William S. Cohen (October 12, 1994).

51Department of Justice, Office of Inspector General, “Follow-up Review: Immigration and Naturalization

Service Management of Automation Programs,” 99-19 (July 1999). 

52Biometrics are individually-unique biological measurements such as fingerprints, hand geometry, facial

recognition, or retinal patterns. The system is an automated identification system that allows Service employees to

identify and track illegal or criminal aliens through the rapid and accurate electronic comparisons of their

fingerprints. Fingerprints are the most commonly used biometrics.

51

Table VIII: The Case of the “Railway Killer”

Sufficient computer capabilities can make the difference in catching a deadly

criminal. . .

 Senator William S. Cohen

 Investigative Report 50

Much of the discussion concerning mismanagement in the federal government deals with wasted

resources and missed opportunities. In some cases, however, mismanagement has real human

costs and involves real human lives. One such example involves the Department of Justice and

six years of mismanagement within the Immigration and Naturalization Service. 

In 1994, the computer systems at the Immigration and Naturalization Service were woefully

inadequate. In fact, information was primarily located in paper files that had to be manually

shipped to immigration offices. The process, which takes months, led to the Service being

unable to identify, apprehend, and deport criminal aliens. 

In 1995, the Immigration and Naturalization Service began work to improve its automated

systems through 12 initiatives. In 1996, the 12 initiatives were reorganized into 8 functional

program areas. According to the IG, these 8 functional program areas were mismanaged from

the start. The IG, for example, reported that the Service “does not adequately manage its

automation programs despite the fact that it has now spent over $800 million on these programs

during [fiscal years] 1995 to 1997.”51 The IG went on to say that, “INS still cannot sufficiently

track the status of its projects to determine whether progress is acceptable. . . . Also, INS staff

were unable to adequately explain how funds were spent.”

One of the 12 initiatives was for biometrics identification systems.52 Supposedly, the Service had

given the deployment of the biometrics identification systems, or IDENT, a high priority,

especially at Border Patrol facilities in the Southwest.

Despite this priority, the systems encountered immediate problems. In 1998, the IG reported that

the Service was “not making consistent and effective use of IDENT as a tool for border
53Department of Justice, Office of Inspector General, “Review of the Immigration and Naturalization

Service’s Automated Biometric Identification System (IDENT),” I-98-10 (March 1998).

54The lookout database contains fingerprints and photographs of approximately 400,000 aliens who have

been previously deported by the INS or who have a significant criminal history.

55Department of Justice, Office of Inspector General, “The Rafael Resendez-Ramirez Case: A Review of

the INS’s Actions and the Operation of Its IDENT Automated Fingerprint Identification System” (March 20, 2000).

56Ibid.

52

enforcement.”53 The IG went on to identify the following specific problems:

• “[T]he Border Patrol must enroll all apprehended aliens in IDENT. Currently, the Border

Patrol is enrolling less than two-thirds of apprehended aliens in IDENT.”

• “[The Service] must enter the fingerprints of all deported aliens and known criminal

aliens into the . . . database. INS is failing in this regard. INS has entered the fingerprints

of only 41 percent of the aliens deported and excluded in Fiscal Year 1996. . . [T]his

results in previously deported aliens (including aggravated felons) being released from

INS custody when subsequently apprehended because INS is unaware of their

immigration or criminal histories.”

• “INS needs to coordinate with the United States Attorney for each district along the

Southwest border to establish a border enforcement and prosecution strategy that takes

advantage of IDENT.”

• “[T]here were virtually no controls in place to ensure the quality of data entered into the

[system’s] lookout database.54 As a result, we found duplicate records and invalid data. . .

Contributing to IDENT data quality problems has been a lack of IDENT training.”

These deficiencies led to tragic human consequences in the case of Rafael Resendez-Ramirez, a

Mexican national who has an extensive criminal record and is accused of committing several

murders in the United States.55 He was implicated in a murder near Houston in 1998. In early

1999, the Houston police contacted INS investigators several times seeking assistance in the

search for Resendez. In June 1999, the Federal Bureau of Investigation formed a multi-agency

task force in Houston to capture Resendez and also placed him on its list of “Ten Most Wanted

Fugitives.”

Unfortunately, if the INS had done its job, these events never would have occurred because:

• Resendez had been apprehended by the Border Patrol “seven times in 1998 while

crossing the border illegally, had been enrolled in IDENT each time, and had been

‘voluntarily returned’ to Mexico each time without formal proceedings.”56

• On June 1, 1999 - at the same time that state and federal warrants for Resendez were

outstanding - Border Patrol agents had “apprehended him crossing the border illegally,

processed him in IDENT, and voluntarily returned him to Mexico the same day. Upon

investigation, the IG found that none of the INS employees who were contracted by other

law enforcement agents seeking Resendez had placed a “lookout” for him in the system. 
57Ibid.

53

When agents apprehended Resendez as he attempted to illegally cross the border, nothing

alerted employees to the fact that he was wanted or had an extensive criminal record. The

IG concluded that the problems found in the Resendez case were indicative of, and partly

caused by, larger problems in the design and implementation of IDENT.57 Specifically,

• “IDENT was not . . . linked with other INS or criminal databases.”

• “Although one of the stated missions of IDENT is to help the INS identify and apprehend

criminal aliens, . . . many INS employees viewed it primarily as a database to help the

Border Patrol track repeat illegal border crossers, not as a useful tool for other INS

components.”

• “IDENT training . . . was ineffective or non-existent. . . . We found a distinct and

widespread lack of knowledge about the lookout policy among the Houston investigators

. . . many of whom acknowledged that they did not know about the lookout policy and did

not use IDENT.”
54

D. OVERLAP AND DUPLICATION

No government ever voluntarily reduces itself in size. Government programs,

once launched, never disappear. Actually, a government bureau is the nearest

thing to eternal life we’ll ever see on this earth!

Ronald Reagan

October 27, 1964

Overlap and duplication abound in the federal

government. In virtually all things that the

government touches, multiple programs

operated by multiple agencies try to solve the

same problems. Table IX provides a number of

examples. Here are just a few:

C Seven different federal agencies

administer 40 different programs aimed

primarily at job training.

C Eight different federal agencies operate

50 different programs to assist the

homeless.

C Nine agencies operate 27 teen pregnancy

programs.

C Seventeen agencies monitor and enforce

over 400 international trade agreements.

C There are about 100 different funded

programs serving at-risk or delinquent

youths.

C Seventy different agencies gather and

analyze statistical data.

C Seventeen departments and agencies

operate 515 research and development

laboratories.

C Over 40 agencies are engaged in

activities to combat terrorism. 

Where did they all come from? Federal

agencies and programs have mushroomed over

time, evolving more-or-less randomly in

response to the real or perceived needs of the

moment. As former President Reagan aptly

noted, agencies and programs hardly ever

die—even after they have clearly outlived their

usefulness. Rather than fixing, replacing, or

eliminating dubious programs, we tend to layer

new programs on top of the existing ones.

Charles Bowsher, the former U.S. Comptroller

General and head of the GAO, stated in

testimony some years ago before the Senate

Governmental Affairs Committee:

The case for reorganizing the

federal government is an easy

one to make. Many departments

and agencies were created in a

different time and in response to

problems very different from

today’s. Many have

accumulated responsibilities

beyond their original purposes.

As new challenges arose or new

needs were identified, new

programs and responsibilities

were added to departments and

agencies with insufficient regard

to their effects on the overall

delivery of services to the

public.1

1General Accounting Office, “Government

Reorganization: Issues and Principles,” GAO/TGGD/AIMD-95-166 (May 17, 1995), pp. 2-3.
55

Nothing has changed since then. Indeed, the

problem has only grown worse.

Redundant federal programs obviously are

wasteful and inefficient. They also do a

disservice to those people who depend on them.

The current Comptroller General, David

Walker, made this point in his recent testimony

before the Governmental Affairs Committee:

[O]ur work has repeatedly

shown that mission

fragmentation and overlap are

widespread. Unfocused and

uncoordinated programs waste

scarce funds, confuse and

frustrate program customers,

and limit overall program

effectiveness.2

More usually doesn’t mean better when it comes

to federal programs. Ironically, multiple and

overlapping programs, each with its own unique

processes and requirements, often work against

the very beneficiaries they are intended to help.

Sometimes the intended beneficiaries just fall

through the cracks. For example, GAO found:

There are over 90 early

childhood programs in 11

federal agencies and 20 offices.

The “system” of multiple early

childhood programs with firm

cutoffs could lead to disruptions

in services from even slight

changes in a child’s family

status. While multiple programs

target disadvantaged preschoolaged children, most such

children do not participate in

any preschool program.

3

Likewise, services aren’t coordinated among the

diffuse 130 programs in 19 agencies that serve

the disabled. As a result, some people with

disabilities may receive duplicate services while

others face service gaps.4 

Overlapping programs often have different, and

even inconsistent, eligibility standards. This

limits the ability of state and local governments,

which often administer these programs, to make

sense out of them. It also confuses and

frustrates potential applicants. For example, of

the 40 different programs with job training as

their main purpose, 33 primarily serve single

target groups. Ten of these programs are

targeted at Native Americans. However, there

are distinctions even within the targeted

populations. One of the Native American

programs serves only disabled people while

another serves only Native Hawaiians.5 Also,

there may be fine distinctions within the same

eligibility factor. For example, “economically

disadvantaged” is defined differently among

some job training programs. A member of a

family of four with an income of $20,040 would

be eligible to participate in one of these

2General Accounting Office, “Managing in the

New Millennium: Shaping a More Efficient and

Effective Government for the 21st Century,” GAO/TOCG-00-9 (March 29, 2000), p. 22. 

3General Accounting Office, “Management

Reform: Continuing Attention Is Needed to Improve

Government Performance,” GAO/-GGD-00-128 (May

4, 2000), p. 13. (Emphasis supplied)

4General Accounting Office, “Managing for

Results: Using the Results Act to Address Mission

Fragmentation and Program Overlap,” GAO/AIMD-97-

146 (August 1997), p. 27. 

5General Accounting Office, “Multiple

Employment and Training Programs: Overlapping

Programs Indicate Need for Closer Examination of

Structure,” GAO-01-71 (October 2000), pp. 5-6.
56

programs, but would be ineligible for another.6

With respect to community development

programs aimed at improving poor or distressed

neighborhoods, GAO reported:

The fragmentation of federal

programs among at least 12

federal departments and

agencies imposes a burden on

distressed urban communities

seeking assistance. Historically,

there has been little

coordination among the

agencies, which have been

protective of their own resources

and separate organizational

missions. . . . [C]ommunity

organizations have to piece

together a complex web of

funding from private and public

sources.7

The fact that multiple agencies and programs

have similar purposes is not necessarily a bad

thing. Some overlap is inevitable given the size

and complexity of the federal government’s

legitimate responsibilities. Indeed, overlap

sometimes provides valuable checks and

balances. However, no rational person could

defend the scattershot, uncoordinated maze of

agencies and programs that make up today’s

federal government. We probably need more

than one program dealing with at-risk youths,

but 131 programs? The sheer numbers of

agencies and programs in area after area defy

reason and common sense. No one could

seriously argue that all these overlapping

agencies and programs are necessary or that they

are equally effective. 

WHAT CAN BE DONE?

Few would dispute that the government in

Washington cannot do effectively all it is now

charged with doing. There’s an obvious need to

bring some order out of this chaos. However,

meaningful reform of the federal government

won’t come from just reshuffling current

organizational boxes and redistributing current

programs. We need to take a fresh look at what

Washington does and how it does it. Our

Founding Fathers designed a government of

defined and limited powers. Imagine their

dismay if they knew the size and scope of the

federal government today. We need to return to

the limited but effective government that the

Founders intended. This means divesting the

federal government of functions it is not well

suited to perform. However, and every bit as

important, it also means ensuring that the

federal government does a better job of

performing its core responsibilities. 

It won’t be easy. For one thing, there are major

political hurdles to clear. Everyone can agree in

the abstract that the federal government has

bitten off more than it can chew, and that it

spends too much on wasteful or ineffective

programs. When it comes to specifics, however,

the going gets tougher. Over time, virtually

every agency and program breeds an entrenched

constituency that feeds off it and defends any

challenges to the status quo. These

constituencies are often very effective. They

may believe quite sincerely in their pet

programs. After all, one person’s wasteful

program is another person’s livelihood. In any

6General Accounting Office, “Managing for

Results: Barriers to Interagency Coordination,”

GAO/GGD-00-106 (March 2000), pp. 12-13.

7General Accounting Office, “Managing for

Results: Using the Results Act to Address Mission

Fragmentation and Program Overlap,” GAO/AIMD-97-

146 (August 1997), p. 23. 
57

event, such narrowly focused and intense special

interests can often trump broad-based reform

efforts. Hence, Ronald Reagan’s axiom that the

closest thing to immortality is a government

agency or program. Jonathan Rauch made the

same point in a recent article: 

The government is, of its nature,

inseparable and inalienable

from the million commitments it

has made and the million

interest groups it has spawned. 

Converting the electorate’s

shuddering waves of discontent

into the hundreds or thousands

of alterations to programs

affecting specific groups is like

converting earthquake energy

into steam power: possible in

theory but elusive in practice.8

There are various ways to try to overcome, or

get around, the special interests. Some have

proposed mandatory periodic “sunset” reviews

to force agencies and programs to re-justify

themselves from time to time. Another idea is

a government restructuring commission that

would develop objective reform proposals for

expedited Congressional up-or-down votes. A

third possibility is to give the President broader

authority to reorganize the government. 

Even if we can muster the political will to

seriously rethink what Washington does, the

task will be daunting. Most agencies and

programs can’t explain in a clear and

meaningful what they’re trying to accomplish,

and they can’t measure in a credible way how

well they’re accomplishing it. Right now, we

simply don’t have the information we need to

make rational judgments about which programs

are working and which are not—much less to

compare their relative performance. 

Obviously, questions about the merit and

relative merit of federal programs involve

subjective value judgments. This is the essence

of our political system. However, such

judgments should be the product of honest and

open debate that is informed by objective and

fact-based analysis. We need to muster useful

and reliable information about how programs

are performing in order to engage in such

debates and make such judgments. Getting that

kind of information should be the first step

toward trying to make sense out of what we do

in Washington.

8

Jonathan Rauch, “Government’s End,”

National Journal, January 8, 2000.
9

The examples in this table are compiled from many different GAO reports and other sources. They are by

no means exhaustive. Virtually all federal functions involve multiple agencies and programs.

58

TABLE IX: EXAMPLES OF PROGRAM OVERLAP AND FRAGMENTATION9

PROGRAM AREAS OVERLAP AND FRAGMENTATION

Border control There are long-standing coordination problems between the two

agencies responsible for primary inspections at U.S. land border

points of entry: the Customs Service and the Immigration and

Naturalization Service. These problems complicate efforts to deal

with changing and expanding international business as well as 

increasing international migration flows. 

The FBI, the Customs Service, the Drug Enforcement Agency, the

Coast Guard, and the Immigration and Naturalization Service all

investigate illegal alien smugglers. 

Combating terrorism Over 40 federal agencies are involved in activities to combat

terrorism. Their combined spending on these activities exceeds

$10 billion annually.

Community development The federal government assists urban communities through a

complex web involving at least 12 federal agencies and hundreds

of programs in the areas of housing, economic development, and

social services. For example, the Department of Housing and

Urban Development operates 23 self-sufficiency and economic

opportunity programs that target tenants of public and assisted

housing, or low and moderate income residents in certain

geographic areas.

According to GAO, many of these categorical programs may make

sense when considered individually; taken together, however, they

often work at cross purposes. Historically, there has been little

coordination among the federal agencies, which are protective of

their own resources and separate organizational missions. This

imposes burdens on distressed urban communities seeking

assistance, as they try to piece together and navigate through a

complex web of funding. 
59

Drug control, prevention,

and treatment

Responsibility for federal drug control strategies and their

implementation is fragmented among more than 50 federal

agencies.

There is duplication and overlap in the analysis and reporting of

drug intelligence data by federal agencies. 

Four agencies are responsible for coordinating or developing

narcotics detection technologies. Some of them have differing

views on the need for various detection technologies. 

At least 70 programs in 13 federal departments and agencies could

be used to provide substance abuse prevention services for youths. 

These overlapping programs create difficulties for those seeking

the most appropriate services and funding sources. Insufficient

information exists on the accomplishments of the different federal

programs.

The number of federal agencies involved in substance abuse

treatment and prevention has increased from 12 to 16 in recent

years. 

There are at least 19 federal programs devoted exclusively to

substance abuse prevention. 

Early childhood

development

There are over 90 early childhood programs scattered among 11

federal agencies and 20 offices. The “system” of multiple early

childhood programs with firm cutoffs can lead to disruptions in

service from even slight changes in a child’s family status. While

multiple programs target disadvantaged preschool-aged children,

most such children do not participate in any preschool program.

Nine federal agencies and departments administer 69 programs

supporting education and care for children under age 5. 

The Departments of Education and Health and Human Services 

have 4 different programs addressing low-income child care or

education: the Child Care and Development Fund, Social Services

Block Grant, and Head Start program at HHS, and Education’s

“Title I” program.
60

Economic development There are 342 federal economic development-related programs

administered by a multitude of agencies. A majority of these

programs are in the Departments of Agriculture, Commerce,

Health and Human Services, and Housing and Urban

Development, as well as the Small Business Administration. 

However, 13 of the 14 federal cabinet departments and many more

agencies and administrations operate economic development

programs. 

Consolidation or elimination of similar programs, such as those

managed by the Department of Housing and Urban Development,

the Department of Commerce’s Economic Development

Administration, and the Appalachian Regional Commission would

help eliminate duplication and fragmentation of federal assistance

programs aimed at economic development.
61

Education Seven agencies administer 40 different programs that have job

training as their main purpose. Of the 40 programs, 33 primarily

serve single target groups. For example, 10 serve Native

Americans, 5 serve youths, and 5 serve veterans. Many of the

targeted programs overlap by providing similar services, but not

all members of the target group may participate. For example, one

of the Native American programs serves only disabled people

while another serves only Native Hawaiians. 

Despite decades of efforts to better coordinate job training

programs, conflicting eligibility requirements and differences in

annual operating cycles still hamper the provision of needed

services. For example, nine programs which target the

economically disadvantaged use several different standards for

measuring income level, defining family or household, and

determining what is included in income. Sixteen programs that

target youth have four different operating cycles. 

There are 29 federal programs that provide early education and

care as their primary purpose. While the Education Department

administers most of these programs, the Department of Health and

Human Services administers most of their funding—$8 billion of

the total $9 billion annually. The two Departments are trying to

develop common performance outcome indicators for these

programs (e. g., children will leave kindergarten ready to learn to

read). However, it is too soon to tell if these efforts will be

sufficient to improve services for children.

Migrant education is another area where better coordination is

needed. Different federal eligibility requirements for programs

targeting migrant children create service gaps, impede service

delivery, and complicate transfers between programs. 

At least nine agencies engage in a variety of activities to promote

math and science education, with total expenditures of about $ 2.5

billion annually. However, because these agencies don’t submit

their materials to a central clearinghouse, as required by law,

educators lack a comprehensive list of federally funded materials

and may have trouble learning what materials are available. 

At least 86 teacher training programs in 9 federal agencies fund

similar types of services.
62

Environmental programs The Department of Health and Human Services and the

Environmental Protection Agency need to better coordinate their

efforts to reduce, monitor, and develop methods for measuring

human exposure to toxic chemicals. 

At least five federal agencies have spent nearly $1 billion in

support of 12 international environmental agreements. There were

significant differences in both the amount of their spending and in

the purposes for which the money was spent. 

At least 72 federal programs and other initiatives in 8 departments

and agencies assist states, municipalities, individuals, and others

in their efforts to improve and protect water quality from various

pollution threats. 

Federal land

management

The Interior Department’s National Park Service, Fish and

Wildlife Service, and Bureau of Land Management, and the

Agriculture Department’s Forest Service all deal with federal land

management. Their responsibilities have become increasingly

similar over time. The issues they address, such as managing

forested areas and controlling wildfires, transcend their

administrative boundaries and require increased collaboration with

each other and with other entities, such as states and private

landowners.

All four of the agencies acquire new recreational lands. The

Bureau of Land Management and the Forest Service both operate

land exchange programs, which are poorly managed. 

GAO has suggested that Congress consider reorganizing or

streamlining federal land management programs and agencies.

Federal property

management 

The Departments of Justice and Treasury maintain separate

forfeited asset funds that have inventories totaling about $1.8

billion. According to GAO, the Departments could save the

taxpayers money and improve efficiency by consolidating the

management of their two funds. For example, the two

Departments use separate contractors to handle seized assets, such

as cars, at the same locations. However, the Departments have

consistently rejected a GAO recommendation dating back to 1991

to consolidate management of the two funds. 
63

Financial regulation The Treasury Department, Federal Reserve, Securities and

Exchange Commission, and Commodities Futures Trading

Commission assess risks that cut across regulatory and industry

boundaries.

A number of different federal agencies conduct examinations of

various types of financial institutions. 

Four federal agencies—the Federal Reserve System, the Federal

Trade Commission, and the Departments of Justice and Housing

and Urban Development—all handle fair lending issues. These

agencies need to develop procedures to share information on

consumer complaints. 

Food safety Federal responsibilities for ensuring the safety of the Nation’s

food are highly fragmented, with as many as 12 different federal

agencies spending more than $1 billion annually to administer

over 35 food safety laws. For example, the Agriculture

Department inspects meat pizzas while the Department of Health

and Human Service inspects non-meat pizzas. Until these

responsibilities are consolidated, federal food safety efforts will

continue to suffer from inconsistent oversight, poor coordination,

and inefficient allocation of resources.

Foreign relations Countries formerly part of the Soviet Union have received

assistance through over 200 federal programs operated by 23

different federal departments and agencies.

Sixteen federal agencies fund international educational, cultural,

and training exchange activities through about 75 programs. 

Homelessness There are 50 different federal homeless assistance programs, 

administered by 8 different agencies. About 15 to 17 of these

programs are targeted specifically at the homeless. The programs

are highly fragmented since each program has its own eligibility

criteria, application procedures, and other requirements. 
64

International trade At least 17 federal agencies monitor and enforce over 400 U.S.

trade agreements. As the number of trade agreements and partners

increases, monitoring and enforcing foreign compliance with these

agreements has become more complex. They include far-reaching

World Trade Organization agreements, which cover about $1.4

trillion in annual U.S. trade with 135 countries, as well as

significant bilateral agreements with key trading partners like

Japan and China.

Ten federal agencies offer services that promote U.S. exports,

often in an inefficient and confusing manner. This fragmentation

adversely affects the U.S. business community and taxpayers. 

At least 12 federal agencies have some responsibility for

addressing sanitary measures of other countries that may prohibit

the importation of U.S. agricultural products. However, no single

agency exercises overall direction of federal efforts in this area. 

For example, it was unclear which agency should lead federal

efforts to address a Chinese ban on certain U.S. wheat products.

Law enforcement At least 45 different federal agencies conduct federal criminal

investigations. Collectively, these agencies employ about 50,000

investigators. 

Many federal agencies maintain their own internal “police

departments.” 

Military acquisitions The military services and defense agencies purchase guided

weapons on the basis of their individual requirements. They have

refused to consolidate overlapping and redundant acquisition

programs. Consequently, the Defense Department has a

proliferation of acquisition programs for guided weapons with a

total investment of about $16.6 billion over the next 10 years. 

This will result in doubling the inventory of guided weapons that

may be necessary to meet national objectives.

Military services and defense agencies also have long procured

and operated multiple long-haul telecommunications systems to

meet their individual needs. This has resulted in at least 87

independent telecommunications networks, costing more than $89

million annually, that are fragmented and redundant. 
65

Military health care The Army, Navy, and Air Force provide services through medical

centers and clinics involving about 580 treatment facilities with

annual costs of about $16 billion. There is much redundancy and

waste. For example, the Washington, D.C., area has three large

military health facilities—Walter Reed, Bethesda, and Malcolm

Grow. These facilities provide duplicative services, and in some

cases lack sufficient workloads. Yet, the military services have

resisted any efforts to consolidate their medical departments into a

single health agency. 

The Defense Department and the Department of Veterans Affairs

have failed to cooperate on sharing medical resources for veterans

health care. According to GAO, Congress may need to intervene

to provide direction and guidance to the Departments.

Nuclear health and safety The Environmental Protection Agency and the Nuclear Regulatory

Commission are responsible for setting the standards to regulate

certain radiation levels. However, they can’t agree on the level of

radiation that is safe. 

People with disabilities The federal government operates at least 70 programs to assist

people with disabilities. About 30 of these programs, with

estimated expenditures of $110 billion annually, are aimed

primarily at assisting the disabled. However, because of lack of

coordination among these programs, some people with disabilities 

receive duplicate services while others face service gaps. 

Research and

development

Seventeen federal departments and agencies operate a total of 515

federal research and development laboratories, including those run

by contractors. The Department of Agriculture reported the

largest number of laboratories (185). Laboratories in the

Departments of Defense, Energy, Health and Human Services, and

the National Aeronautics and Space Administration accounted for

88 percent of the funding. 

The Environmental Protection Agency, the National Science

Foundation, and the Departments of Commerce, Energy, and

Transportation all are working to create fuel-efficient automobiles. 

Several agencies are conducting research and development to

counter chemical and biological threats. Most are within the

Defense and Energy Departments. However, the two Departments

are not coordinating sufficiently to ensure that potential overlaps,

gaps, and opportunities for collaboration are addressed.
66

Rural development Using data from the Bureau of the Census and the Catalog of

Federal Domestic Assistance, GAO identified 88 federal rural

development programs. The web of policies, programs, and

regulations accompanying federal funding for rural development

makes service delivery inefficient, according to local and regional

officials. 

At least 28 federal programs administered by 15 federal agencies

provide funds that were either specifically designated for

telecommunications projects in rural areas or could be used for

that purpose. Rural development experts and public officials have

pointed to the need to make these multiple telecommunications

programs easier to identify and use. 

Federal water programs, which are intended to promote the

efficient use of finite water resources for the Nation’s agriculture

and rural water systems, are inconsistent and work at cross

purposes. As many as 8 different federal agencies administer 17

different programs just in the area of rural water and wastewater

systems. Each of these programs has its own set of regulations. 

The complexity and number of programs hamper the ability of

rural areas to use them. 

Satellite control systems Federal defense, intelligence, and civilian agencies operate

separate satellite control systems to ensure that satellites reach

their planned orbits and perform as intended. The agencies need 

to make more efficient use of the several hundred million dollars

spent annually on these efforts. However, the Defense

Department has done little to foster integrated and compatible 

satellite control for all government space activities since it was

directed to do so by the 1996 national space policy. 

Statistical programs At least 70 different federal agencies engage in statistical

activities, at a total annual cost of over $2.75 billion. These

fragmented and decentralized activities cause inefficiency, poor

allocation of taxpayer resources, and barriers to data sharing

among agencies. They also impose burdens on those who provide

statistical data to the federal government, as well those who use

the data. 
67

Teen pregnancy

prevention

The Department of Health and Human Services has 27 different

programs and services to prevent teen pregnancy; eight other

agencies also operate such programs. These programs spend at

least $200 million annually. However, with so many programs

and agencies, coordination is increasingly necessary and complex. 

Telemedicine “Telemedicine” refers to communication technologies that help

deliver medical care by linking medical personnel with patients at

distant or remote locations. Over 35 federal organizations within

nine departments and independent agencies operate or support

telemedicine efforts at an annual cost of at least $646 million. 

Opportunities exist to share the lessons learned and benefits of

these initiatives, but there is no government-wide strategy to do

so. 

Youth programs There are about 130 federal programs on the books to serve at-risk

or delinquent youths. About 100 of these programs are actually

funded, at a total annual cost of more than $4 billion. Most of

these are relatively small programs with budgets of about $10

million that provide multiple services and have multiple target

groups, raising questions about their overall efficiency. 

Eight federal agencies administer at least 46 programs earmarked

for youth development. 
APPENDIX: TOP MANAGEMENT CHALLENGES MOST FREQUENTLY IDENTIFIED 

BY INSPECTORS GENERAL (DECEMBER 2000) 

Agency

Information

Technology

Management

& Security

Results Act

Compliance,

Implementation &

Accountability

Financial

Management &

Annual 

Statements

Procurement

& Grant

Management

Human

Capital

&

Staffing

Service

to the

Public

Public

Health

&

Safety

Physical

Infrastructure

1. USAID X X X X

2. Agriculture X X X X X

3. Commerce X X X X X

4. Defense X X X X X X

5. Education X X X X X

6. Energy X X X X X

7. HHS X X X X X X

8. HUD X X X X X X

9. Interior X X X X X X

10. Justice X X X X X X

11. Labor X X X X X

12. State X X X X X X X

13. Transportation X X X X X X X X

14. Treasury X X X X

15. Veterans Affairs X X X X X

16. EPA X X X X X X

17. FEMA X X X X X X

18. FDIC X X X X

19. GSA X X X X X X X

20. IRS X X X X X

21. NASA X X X X X X

22. NSF X X X X X

23. NRC X X X X X X X

24. OPM X X X X X

25. SBA X X X X X

26. SSA X X X X

27. Postal Service X X X X X

TOTAL 27 23 21 20 18 17 15 7

Source: President’s Council on Integrity & Efficiency