January 2001 Major Managem

Challenges and 

Program Risks

A Governmentwide 

Perspective

GAO-01-241

Page 1 GAO-01-241 A Government

Letter 

Major 

Management 

Challenges and 

Program Risks

Appendix I: 

Examples of 

Agencies With 

Human Capital 

Challenges

Appendix II: 

Major 

Management 

Challenges and 

Program Risks 

at 21 Federal 

Agencies

Performance 

and 

Accountability 

Series
Page 2 GAO-01-241 A Government
of th

Page 3 GAO-01-241 A Government

United States General Accounting Office

Washington, D.C. 20548

January 2001

The President of the Senate 

The Speaker of the House of Representati

This report addresses a range of governm

challenges and opportunities to enhance t

performance and accountability of the fed

government and position our country for t

intended to help the new Congress and ad

consider the actions needed to support th

a more results-oriented and accountable f

government. It should also stimulate dialo

number of long-term fiscal and policy cha

the nation. 

This report is part of a special series, first 

January 1999, entitled the Performance an

Accountability Series: Major Management 

and Program Risks. In the 1999 series, GA

Congress that it planned to reassess the m

and criteria used to determine which fede

government programs and functions shou

highlighted and designated as “high risk.” 

completed the assessment, considered co

provided on a publicly available exposure 

published its guidance document, Determ

Performance and Accountability Challeng

Risks (GAO-01-159SP), in November 2000

and methodology described in that docum

as the basis for designating certain progra

functions as high-risk in the series. 

In addition to this governmentwide persp

performance and accountability challenge

Performance and Accountability Series co

separate reports on 21 agencies—coverin
Page 4 GAO-01-241 A Governmentwid

department, most major independent agenci

U.S. Postal Service. As a companion volume 

series, GAO is issuing an update on those ma

government operations and programs that it

identified as “high risk” because of their grea

vulnerabilities to waste, fraud, abuse, and 

mismanagement. 

David M. Walker

Comptroller General 

of the United States
Page 5 GAO-01-241 A Government
Page 6 GAO-01-241 A Government

g

Governmentwide Perspective

As our nation moves into the 21st century

Congress and the new administration face 

challenges and opportunities to enhance t

performance and accountability of the fed

government and position our country for 

Increased globalization, rapid technologic

shifting demographics, changing security 

various quality of life considerations are p

fundamental changes in the environment 

government operates. These trends are pl

premium on increasing strategic planning

integrated approaches, enhancing results-

improving responsiveness, and ensuring a

within the federal government.

At the same time, the current projected tr

surpluses presents both an opportunity an

obligation for the legislative and executiv

government to look at a range of fundame

fiscal issues in advance of the forthcoming 

tidal wave associated with the retirement 

boom” generation. This includes compreh

reassessing what government does and ho

does business in the 21st century. It also i

focusing on the longer term fiscal implica

current programs and policies and a range 

and emerging major management challen

program risks confronting the federal gov

We have many initiatives under way to he

and the executive branch meet the challen

well-being and financial security of the Am

people, address security threats facing ou

deal with the issues raised by global inter

This special performance and accountabil

devoted to framing the actions needed to 

1 GAO Strategic Plan 2000-2005, Serving the Congres
Page 7 GAO-01-241 A Government

transition to a more results-oriented and a

federal government. It also is intended to 

dialogue on seizing the opportunity to rea

government programs and make decision

toward a number of long-term fiscal and p

challenges.

With regard to improving government per

accountability, the main actions needed to 

efficient and effective federal government 

century are as follows:

• First, give high priority to fully implem

legislative reforms essential to modern

performance management, financial ac

and information technology practices.

• Second, address the urgent need to rev

federal government’s entire strategic a

human capital (people) management b

erosion of government’s capacity to pe

dramatically undermines agencies’ abi

efficiently and effectively serve the Am

• Third, continue to attack government 

particular risk of fraud, waste, abuse, a

mismanagement in order to save billio

improve services and programs, and st

public confidence and trust in governm

• Fourth, confront critical challenges fac

departments and agencies in carrying 

missions.

• Fifth, pursue organizational approache

recognize the reality of evolving globa

technological, workforce, and other dy

needs associated with a transition to a 

based economy.

Beyond addressing this fundamental man

foundation, however, lie certain added dim
Page 8 GAO-01-241 A Governmentwid

the challenge of governing in the 21st centur

these are:

• promoting a more sustainable longer term 

and economic outlook to help safeguard t

future generations to afford the commitm

today and make decisions regarding the r

federal government in the future given ou

society; and 

• taking advantage of the window of oppor

presented by the current improvement in 

government’s financial position not only t

fiscal policies, but also to (1) review opti

improving the efficiency and effectivenes

individual federal programs, (2) thorough

what government does and how governm

business, and (3) revisit targeting approa

distribute assistance to beneficiaries by r

the differences between wants, needs, an

affordability. 

Finally, it is important to reach consensus on 

changes and forge executive/legislative partn

promote effective implementation of agreed 

goals—both on the policy front and with reg

certain management reforms that are centra

strengthening the performance and accounta

federal government. For example, progress a

date in improving financial and information 

management and a results-oriented focus ha

attained through the use of a solid legislative 

and concerted, sustained executive and cong

attention. In this regard, congressional overs

essential to further progress. Now is the opp

to review, revise, and reinvigorate the oversi

to help address today’s challenges and prepa

country for tomorrow. 
Page 9 GAO-01-241 A Government

Build on Progress 

Already Made in 

Implementing a 

Management 

Framework 

Over the last decade, Congress and the ex

have worked hard to implement a statutor

to improve the performance and accounta

executive branch and to enhance executiv

congressional decisionmaking.2

 This fram

includes as its core elements

• results-oriented management legislatio

the Government Performance and Res

(GPRA), which is intended to shift the 

government decisionmaking, managem

accountability from activities and proc

results and outcomes achieved by fede

• financial management reforms, includ

Financial Officers (CFO) Act and relat

that have established the foundation fo

generation of timely, accurate, and use

and cost information crucial to inform

decisionmaking, adequate stewardship 

public resources, and basic accountab

• information technology (IT) reform leg

including the Paperwork Reduction an

Cohen Acts, which attempts to ensure 

information technology projects are im

within reasonable cost and time frame

costly investments contribute to tangib

improvements in performance. 

As a result of this framework, the last few 

seen substantial progress in establishing t

infrastructure needed to create high-perfo

organizations. However, much work rema

framework is effectively implemented acr

government. Agencies are still in the early 

2

 Managing for Results: The Statutory Framework fo

Based Management and Accountability (GAO/GGD/A

28, 1998).
Page 10 GAO-01-241 A Governmentwid

transforming their organizational cultures to 

decisionmaking and strengthen performance 

accountability. This transformation is not an 

will require investments of time and resource

sustained commitment and attention from k

within the executive and legislative branche

government. However, the return on these in

is potentially very great. 

These reforms, with their focus on results-or

accountability-based management approach

helping to build a government that is better e

deliver economical, efficient, and effective p

and services to the American people. Strong 

consistent messages of support from the new 

administration and continued active support 

Congress are critical if the government is to b

important progress that it has already made. 

thoughts on how to do this follow.

Results-Oriented 

Management 

In the approximately 3 and a half years since 

agencies began implementing GPRA, new an

information on the plans, goals, and strategie

agencies has been provided. As Congress ex

crafting the legislation, each successive cycl

performance planning has seen improvemen

years’ efforts. Congressional and executive b

decisionmakers are using the information m

more. Additionally, the issuance of agencies’ 

performance reports each March now repres

and potentially more substantive stage in the 

implementation of GPRA— the opportunity 

federal agencies’ actual performance for a sp

year and to consider what steps are needed t

performance and reduce costs in the future.
Page 11 GAO-01-241 A Government

Our assessments of GPRA have identified 

continuing implementation challenges.3

Addressing these challenges requires stron

sustained commitment by top leadership. 

the results of our 1997 and 2000 governme

surveys of federal managers, as shown in 

about one-half of the federal managers pe

great or very great extent, that their agenc

leadership demonstrated a strong commit

achieving results.4

3

 See, for example, Managing for Results: Opportuni

Improvements in Agencies’ Performance Plans

(GAO/GGD/AIMD-99-215, July 20, 1999) and Managi

Agenda to Improve the Usefulness of Agencies’ Ann

Plans (GAO/GGD/AIMD-98-228, Sept. 8, 1998).

4

 For details on our surveys see Managing for Result

Managers Views Show Need for Ensuring Top Leade

(GAO-01-127, Oct. 20, 2000).

• Articulating and reinforcing a results orie

• Coordinating crosscutting programs

• Understanding performance consequenc

budget decisions

• Ensuring daily operations contribute to re

• Building the capacity to gather and use 

performance information
Page 12 GAO-01-241 A Governmentwid

Figure 1: Federal Managers’ Views on Agency Top 

Demonstrated Commitment to Achieving Results

Note: The change between 1997 and 2000 is not statis

significant.

Source: GAO survey data.

To build leadership commitment and help en

managing for results becomes the standard w

business, some agencies are using performan

agreements to define accountability for spec

monitor progress, and evaluate results. Cong

recognized the role that performance agreem

play in holding organizations and executives 

accountable for results. For example, in 1998

chartered the Office of Student Financial Ass

performance-based organization, and require

implement performance agreements. Our wo

0

20

40

60

80

100

1997 2000

Percentage responding that top leadership

demonstrated a strong commitment

to a "great" or "very great" extent

57%

53%
Page 13 GAO-01-241 A Government

identified five common emerging benefits 

of results-oriented performance agreemen

Care must be taken to ensure that GPRA d

become an overly burdensome annual pap

exercise. Performance agreements can be 

vehicles for ensuring that day-to-day activ

targeted squarely on achieving results and 

proper mix of program strategies and bud

capital resources are in place to meet org

goals.

Financial 

Management 

Agencies continue to make progress impl

improvements called for by financial man

reform legislation. These efforts will have 

sustained and built upon to attain the “en

having timely, accurate, and useful financ

5 Managing for Results: Emerging Benefits From Sel

Use of Performance Agreements (GAO-01-115, Oct. 

• Strengthens alignment of results-oriented g

with daily operations

• Fosters collaboration across organizationa

boundaries

• Enhances opportunities to discuss and rou

use performance information to make prog

improvements

• Provides results-oriented basis for individu

accountability

• Maintains continuity of program goals durin

leadership transitions
Page 14 GAO-01-241 A Governmentwid

costs, and other important management info

order to make decisions and monitor govern

performance every day. One important milest

this end game is for each agency to receive a

unqualified or “clean” opinion on its annual f

statements. As shown in figure 2, steady pro

being made in the number of agencies that h

able to do so. 

Figure 2: Number of the 24 CFO Agencies With Un

Opinions on Financial Statements

Source: Agencies’ financial statements audit reports.

Attaining clean audit opinions is essential to 

an annual public scorecard. Producing audit

financial statements is also important in ord

sound financial information available for use 

0

4

8

12

16

20

24

Fiscal years

1996 1997 1998 1999

Unqualified opinions

6

11

12

15
Page 15 GAO-01-241 A Government

Congress in overseeing agency programs, 

managers in maintaining accountability an

operations, and the Department of the Tre

preparing the legislatively required U.S. go

financial statements. 

Although real progress has been made, se

departments are not yet able to produce a

financial statements on a consistent basis

significant in this regard is the Departmen

(DOD), which represents a large percenta

government’s assets, liabilities, and net co

DOD has made progress and is working h

its financial management systems and int

weaknesses, it is not yet able to comply w

accepted accounting principles and pass t

independent financial audit. Our high-risk 

the substantial and long-standing financia

problems at those agencies with the most 

financial management problems—DOD, th

Service, the Federal Aviation Administrati

the Internal Revenue Service (IRS). Becau

deficiencies discussed in our most recent 

U.S. government’s financial statements, w

unable to render an opinion on the reliabi

statements for each of the last 3 years.6

Further, many agencies have only been ab

unqualified audit opinions through heroic 

include using extensive ad hoc procedure

billions of dollars in adjustments to derive 

a single point in time—the end of the fisca

efforts are often completed months after t

fiscal year. The fundamental problem is th

agencies’ financial systems cannot depend

routinely produce annual financial statem

6 Financial Audit: 1999 Report of the United States G

(GAO/AIMD-00-131, Mar. 31, 2000). 
Page 16 GAO-01-241 A Governmentwid

information needed to manage day-to-day op

For fiscal year 1999, agency financial auditor

reported that 21 of 24 major agencies’ financ

do not comply substantially with federal acc

standards or financial systems and other req

To help agencies effectively implement finan

management reforms, in April 2000, we issue

executive guide that describes best practices 

management in leading private sector and st

government organizations.7

It will be especially important for the new 

administration to sustain and expand curren

improvement efforts. Successfully achieving 

management reform will involve modernizin

improving internal control and financial repo

strengthening financial management operati

7 Executive Guide: Creating Value Through World-Class 

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

• Build a foundation of control and accountabilit

• Develop systems that support the partnership 

between finance and operations

• Translate financial data into meaningful inform

• Develop a financial team with the right mix of s

and competencies
Page 17 GAO-01-241 A Government

human capital policies and practices. With 

effort, the federal government can continu

toward meeting the end goal of having rel

and timely financial and other information 

regular basis. Ultimately, providing data in 

user-friendly reports is key to ensuring ad

accountability, managing for results, and h

decisionmakers make timely, well-inform

Information 

Technology 

Management

The rapid pace of technological change an

offers unprecedented opportunities for go

use IT to enhance service to citizens throu

performance and at reduced costs. To the 

billions of dollars in planned IT expenditu

spent more wisely and the management o

technology improved, federal programs w

prepared to meet mission goals and suppo

priorities. 

A recent success that has yielded importa

IT management was the Year 2000 (Y2K) c

challenge. In September 2000,8

 we reporte

although the Year 2000 issue was finite, it 

development of partnerships, initiatives, p

methodologies, and experiences that can 

resolving ongoing management challenge

that the momentum generated by the gove

2000 efforts not be lost and that the lesson

considered in addressing other pressing IT 

8 Year 2000 Computing Challenge: Lessons Learned C

Other Management Challenges (GAO/AIMD-00-290, 
Page 18 GAO-01-241 A Governmentwid

To help address such challenges and improv

management, Congress has enacted legislati

a results orientation in the acquisition and d

of information systems. Federal agencies hav

undertaken a variety of initiatives to enable 

conduct business with the government elect

and therefore more quickly and easily.

Nevertheless, several large modernization ef

are key to delivering critical services continu

risk. As detailed in our high-risk series updat

include projects under way to provide safe a

air travel, modernize tax processing and cus

service operations, and support national def

these projects were designated high-risk in 1

9 High-Risk Series: An Update (GAO-01-263, January 200

• Strengthening agency information security

• Improving the collection, use, and disseminatio

government information

• Pursuing opportunities for electronic governme

• Constructing sound enterprise architectures 

• Fostering mature systems acquisition, 

development, and operational practices

• Ensuring effective agency IT investment practi

• Developing IT human capital strategies
Page 19 GAO-01-241 A Government

have continued to monitor them and reco

to ensure that they are successful in impr

and reducing costs. FAA, IRS, and DOD ar

to implement modernization-management 

address our recommendations, but these 

continue to face challenges that threaten 

cost, schedules, and performance.

We further designated information securit

governmentwide high-risk area in 1997 be

evidence indicated that controls over com

federal operations were not effective and 

risks were escalating. As discussed in det

risk series update, while many actions hav

current activity is not keeping pace with t

threat. Consequently, critical operations, a

sensitive information gathered from the pu

sources continue to be vulnerable to disru

tampering, fraud, and inappropriate disclo

We and various agency inspectors general 

scores of recommendations to agencies re

specific steps needed to make their secur

more effective. Most agencies have heede

recommendations and taken at least some 

actions. However, more needs to be done

the area of security program management

continues to be a widespread and fundam

weakness. Our May 1998 guide, Informati

Management: Learning From Leading Org

provides a road map for managing risks th

ongoing cycle of activities coordinated by 

point; over the last 2 years, its concepts h

widely adopted throughout the federal go

government information security reform p

the FY 2001 Defense Authorization Act re

10 Information Security Management: Learning From 

Organizations (GAO/AIMD-98-68, May 1998).
Page 20 GAO-01-241 A Governmentwid

to adopt these risk management practices al

annual management evaluations and indepen

of agency security programs. Effective imple

of these legislative reforms would significan

agencies’ vulnerability.

In order to improve IT performance governm

and effectively address the remaining challe

sustained and focused central leadership is a

essential. Accordingly, we continue to believ

federal Chief Information Officer (CIO) is ne

a position could provide strong focus and att

the full range of governmentwide informatio

management and technology issues.11

Revamp Federal 

Strategic Human 

Capital 

Management 

After a decade of government downsizing an

investments in the federal government’s hum

it is becoming increasingly clear that today’s 

human capital strategies are not appropriate

constituted to meet the current and emergin

government and the nation’s citizens. This is 

surprising because the federal management 

the 1990s addressed most—but not all—of th

elements of high performing organizations: f

management, information technology manag

results-oriented goal-setting and performanc

measurement. However, human capital refor

to find the broad conceptual acceptance or p

consensus needed for comprehensive reform 

and in this sense effective human capital ma

remains the missing link in the federal mana

framework. 

11 Federal Chief Information Officer: Leadership Needed 

Serious Challenges and Emerging Issues (GAO/T-AIMD-

12, 2000). 
Page 21 GAO-01-241 A Government

The lack of attention to strategic human c

management has created a governmentwi

that is fundamental to the federal governm

effectively serve the American people now 

future. Stated simply, human capital prob

pervasive and lead to programmatic probl

As our performance and accountability se

and High-Risk Series update make clear, h

shortfalls are eroding the ability of many a

threaten the ability of others—to econom

efficiently, and effectively perform their m

Consequently, we have designated strateg

capital management a high-risk area that u

greater attention to ensure maximum gov

performance and accountability for the be

American public in the 21st century.

High-performing organizations in the priv

sectors have long understood the relation

effective “people management” and organ

success. An organization’s human capital 

critical asset in managing for results. How

federal government has often acted as if p

costs to be cut rather than assets to be va

Today’s nonpostal civilian federal workfor

than it was a decade ago. The federal wor

reduced from approximately 2.3 million fe

employees in fiscal year 1990 to fewer tha

by fiscal year 1999. At the same time, fede

grew from $1.5 trillion in fiscal year 1990 

in fiscal year 1999.12 But what happened—

importantly, did not happen—as this dow

being accomplished was just as significan

downsizing itself. For example, initial rou

downsizing were set in motion without su

12 Outlays provided in constant 1999 dollars.
Page 22 GAO-01-241 A Governmentwid

planning relating to the longer term effects o

performance capacity. At the same time, the 

government reduced permanent new hires fr

in fiscal year 1990 to about 74,000 in fiscal ye

number of individual agencies drastically red

froze their hiring efforts for extended period

helped reduce the size of agencies’ workforc

also reduced the influx of new people with n

new knowledge, new energy, and new ideas—

reservoir of future agency leaders and mana

In confronting challenges such as these, it is 

agencies to engage in effective recruiting and 

planning strategies. This includes attracting 

retaining skilled and knowledgeable individu

performance meets or exceeds expectations

of their age. All decisions with regard to recr

retention must be based on clearly defined, w

documented, consistently applied, and trans

criteria that are nondiscriminatory and merit

shown in this series’ high-risk update, agenci

human capital management challenges invol

areas as strategic human capital planning an

organizational alignment; leadership continu

succession planning; acquiring and developi

whose size, skills, and deployment meet age

and creating results-oriented organizational 

Appendix I of this report provides examples 

federal government’s pervasive human capit

challenges, ranging from military recruitmen

at DOD, staff and skills losses at NASA, to in

workforce planning at EPA. 

The key step for agencies is to focus on huma

a strategic asset. Agencies can begin by asse

well their existing human capital approaches 

their missions, goals, and other organization

useful assessment tool is our human capital 

which identifies a number of human capital 

and underlying values that are common to h
Page 23 GAO-01-241 A Government

performing organizations. This framework 

table 1 and also presented in Human Capi

Assessment Checklist for Agency Leaders

used the framework to guide our recent in

human capital issues across the federal go

at specific agencies, some of which are us

framework in their human capital plannin

Table 1: GAO’s Human Capital Framework 

13Human Capital: A Self-Assessment Checklist for Ag

(GAO/OCG-00-14G, September 2000). 

Strategic Planning Establish the agency’s mission, vision for the 

values, goals and objectives, and strategies.

• Shared vision

• Human capital focus

Organizational Alignment Integrate human capital strategies with the a

business practices.

• Improving workforce planning

• Integrating the human resources function

Leadership Foster a committed leadership team and pro

reasonable continuity through succession pla

• Defining leadership

• Building teamwork and communications

• Ensuring continuity

Talent Recruit, hire, develop, and retain employees 

needed for mission accomplishment.

• Recruiting and hiring

• Training and professional development

• Workforce deployment

• Compensation

• Employee-friendly workplace

Performance Culture Empower and motivate employees while ens

accountability and fairness in the workplace.

• Performance management

• Performance incentives

• Continuous learning and improvement

• Managers and supervisors

• Job processes, tools, and mission support

• Information technology

• Inclusiveness

• Employee and labor relations
Page 24 GAO-01-241 A Governmentwid

Although some improvements in the civil ser

require legislative reforms, federal agencies 

wait to modernize their human capital polici

practices. Agencies can and must take the ini

more competitive in attracting new employe

critical skills; create the kinds of performanc

and training programs that motivate and emp

employees; and build labor-management rela

that are based on common interests and the p

To shape human capital strategies that suppo

specific needs and circumstances, agencies m

strategic human capital management the enh

sustained attention it deserves, modernize th

human capital policies and practices, and ide

flexibilities available to them under current l

The Office of Management and Budget (OMB

Office of Personnel Management (OPM), and 

have all taken recent steps to underscore the 

importance of this issue. For example, the P

fiscal year 2001 budget gave new prominenc

capital management by making “align Federa

resources to support agency goals” a Priority 

Management Objective. OMB’s latest Circula

No. A-11 guidance on preparing annual perfo

plans states that agencies’ fiscal year 2002 an

performance plans should set goals in such a

recruitment, retention, training, appraisals li

program performance, workforce diversity, 

streamlining, and family-friendly programs. I

OPM has begun stressing to agencies the imp

integrating strategic human capital managem

agency planning and has also been focusing 

attention on developing tools to help agencie

new Senior Executive Service performance s

and a workforce planning model with associ

based research tools. In addition, OPM has h

achieve incremental legislative reforms to he

and retain federal employees, such as compe

flexibility for selected specialist positions an
Page 25 GAO-01-241 A Government

benefit enhancements. While OMB’s and O

are encouraging, the scope and magnitude 

government’s human capital challenges w

additional action on a range of issues, as w

sustained and forceful leadership to fulfill 

of these initiatives.

One of the most encouraging developmen

past 2 years has been the visibility given t

capital issue by the Senate Governmental 

Committee and the Subcommittee on Ove

Government Management, Restructuring, 

District of Columbia. In addition, Congres

passed legislation that enables federal age

provide some education-related debt relie

for government service. This is a positive 

additional legislative actions will ultimate

to attract and retain a skilled, knowledgea

and performance-oriented workforce in th

Ultimately, Congress may wish to conside

comprehensive legislative reform in the h

area to address the missing link in the per

management portfolio, giving agencies the 

reasonable flexibilities they need to mana

while providing appropriate safeguards to 

abuse. As part of this effort, Congress ma

consider the extent to which traditional “c

approaches—structures, oversight mecha

and regulations, and direction-setting—m

government that is largely a knowledge-ba

that has adopted and is now implementin

performance management principles.
Page 26 GAO-01-241 A Governmentwid

Overall, the following steps summarize some 

that can be taken.

Continue to Attack 

Activities at Risk of 

Waste, Fraud, 

Abuse, and 

Mismanagement 

Since 1990, we have periodically reported on 

government operations that we have identifi

risk” because of their greater vulnerability to 

fraud, abuse, and mismanagement. Also, the

operations generally result in inefficient, ine

uneconomical practices in programs that inv

substantial government resources and provid

services to the public. 

Since our last high-risk update in January 19

have taken additional steps and Congress ha

several areas we designated as being high ris

Additionally, we have continued to work con

to assess progress and make recommendatio

• Agencies: (1) Focus on human capital as a strategic asset. (2) Apply GAO's hum

 capital self-assessment. (3) Make appropriate use of flexibilities available under cu

 law and, if changes to current requirements are requested, build a sound business 

• OMB and OPM: Provide sustained and forceful leadership to make the promise o

 recent initiatives a reality, including leading benchmarking and best practices effor

 within the executive branch. OMB needs to ensure that agencies view strategic hu

 capital issues as a critically important element in their overall planning, manageme

 and budgeting efforts. 

• Congress: Use the confirmation, oversight and appropriations, and legislative pro

 to ensure that agencies recognize their responsibilities and have the tools and res

 to manage their people.
Page 27 GAO-01-241 A Government

necessary to resolve these risks. We also h

across government to identify emerging h

that need attention.

In the high-risk update that is part of this 

we discuss (1) five areas for which the hig

designation is being removed, (2) one are

human capital management across govern

being added to our list, (3) three program 

which the high-risk focus is being modifie

important progress being made to further 

remaining high-risk areas and challenges 

be addressed in resolving them.

Overall, agencies are taking these problem

and making progress in trying to correct th

also has acted to address several individu

areas through hearings and legislation. Co

perseverance in addressing high-risk area

ultimately yield significant benefits. Lastin

high-risk problems offers the potential to s

dollars, dramatically improve service to th

public, strengthen public confidence and 

performance and accountability of our na

government, and ensure the ability of gov

deliver on its promises.

Over time, as high-risk operations have be

and other risks have emerged, we have re

from the list and added new ones to keep 

current on areas needing attention. Inform

total additions to, and removals from, our 

over the past 11 years is shown in table 2.
Page 28 GAO-01-241 A Governmentwid

Table 2: Overall Changes in GAO’s High-Risk List, 1990 to 2001

a

In 2001, the focus of a previously designated IRS-rela

area was expanded.

b

In 2001, the focus of a previously designated HUD-rel

area was reduced, and another IRS-related area was n

Source: GAO analysis.

For our 2001 high-risk update, we have deter

five high-risk areas warrant removal from th

include the Year 2000 computing challenge a

Census, which were both dependent on time

events that have elapsed. Also, legislative an

actions, including those in response to our 

recommendations, were significant enough t

the high-risk designations for the farm loan p

managed by the Department of Agriculture a

Superfund program, which are programs we 

monitored as high-risk for the past 11 years. 

Additionally, the National Weather Service (N

acted to implement our recommendations to 

manage its information technology moderniz

which we designated high risk in 1995. NWS

modernization is critical to weather forecast

enhance public safety.

Changes 1990−2001 Nu

Original high-risk list in 1990 

High-risk areas added since 1990 

High-risk areas removed since 1990 

Current high-risk list in 2001 

Changes 1999−2001

High-risk list in 1999 

High-risk areas added in 2001a 

High-risk areas removed in 2001b 

Current high-risk list in 2001 
Page 29 GAO-01-241 A Government

Since our high-risk program began in 1990

removed the high-risk designations from 1

are listed in table 3. Six of these areas wer

14 programs and operations we determine

risk at the outset of our efforts to monitor 

programs. These results demonstrate that 

attention and commitment by Congress an

resolve serious, long-standing high-risk pr

paid off, as the root causes of the governm

exposure for almost half of our original hi

have been successfully addressed.

Table 3: High-Risk Designations Removed

a

Originally part of a broader high-risk area designat

the Customs Service.

Source: GAO analysis.

In addition to adding human capital as a h

we are also continuing to monitor 21 othe

previously designated as high risk. For thr

areas, the focus of our high-risk work has 

modified. In the case of the Department o

High-Risk Area Year Added 

Pension Benefit Guaranty Corporation 1990 

State Department Management

of Overseas Real Property 1990 

Federal Transit Administration

Grant Management 1990 

Bank Insurance Fund 1991 

Resolution Trust Corporation 1990 

Customs Service Financial Managementa 1991 

The Year 2000 Computing Challenge 1997 

The 2000 Census 1997 

Superfund Program 1990 

Farm Loan Programs 1990 

National Weather Service Modernization 1995 
Page 30 GAO-01-241 A Governmentwid

Urban Development (HUD), we are reducing 

of HUD program areas deemed to be high ris

progress made by the agency. Also, the focus 

previously designated IRS Tax Filing Fraud h

area is being narrowed to better define the s

concern, which is Earned Income Credit 

noncompliance. For another IRS program, p

designated IRS receivables, we are expandin

to now cover the collection of unpaid taxes. 

redefining this area because some key collec

have declined since 1997, and IRS lacks a me

voluntary compliance to help assess the imp

declines on compliance. 

The 22 areas that comprise our current high-

identified in table 4. These areas cover a ran

government operations and functions includ

governmentwide information security; sever

technology investments; basic financial acco

large departments and agencies; and the man

major benefit, lending, procurement, and oth

important programs across government. The

issues are detailed in our high-risk series upd

included in the accompanying reports on spe

departments and agencies included in this p

and accountability series. These reports high

recommendations we have made to help imp

operations, the steps that agencies are takin

high-risk problems, and additional actions th

be taken.
Page 31 GAO-01-241 A Government

Table 4: GAO’s 2001 High-Risk List

Source: GAO analysis.

2001 High-Risk Areas 

Addressing Governmentwide High-Risk Areas

Strategic Human Capital Management 

Information Security 

Ensuring Major Technology Investments Improve Services

FAA Air Traffic Control Modernization 

IRS Tax Systems Modernization 

DOD Systems Modernization 

Providing Basic Financial Accountability

DOD Financial Management 

Forest Service Financial Management 

FAA Financial Management 

IRS Financial Management 

Reducing Inordinate Program Management Risks

Medicare Program 

Supplemental Security Income 

Earned Income Credit Noncompliance 

Collection of Unpaid Taxes 

DOD Infrastructure Management 

DOD Inventory Management 

HUD Single−Family Mortgage Insurance and Rental Housing Assistance 

Program Areas 

Student Financial Aid Programs 

Asset Forfeiture Programs 

Managing Large Procurement Operations More Efficiently

DOD Weapon Systems Acquisition 

DOD Contract Management 

Department of Energy Contract Management 

NASA Contract Management 
Page 32 GAO-01-241 A Governmentwid

Confront Critical 

Challenges Facing 

Individual 

Departments and 

Agencies in 

Carrying Out Their 

Missions

Many federal departments and agencies easi

size and complexity some of our nation’s lar

corporations, and strong leadership and sou

management are central to the effective impl

of any public policy or program agenda. As l

appendix II to this report, our performance a

accountability and high-risk series identified 

management challenges and program risks c

the individual departments and agencies. Ad

these challenges is central to agencies effect

efficiently, and economically accomplishing 

missions and achieving better results for the 

the American people. 

The challenges and risks presented in this se

intended to assist the new Congress and adm

in shaping their management and oversight a

establishing priorities. Our series is therefor

by agency to better permit Members of Cong

executive branch officials to focus on the ma

management challenges and program risks r

their particular interests. While many of the 

management challenges that agencies face a

each agency also has unique programs and is

outlined in this series.

Pursue 

Organizational 

Approaches That 

Recognize 

Changing Dynamics

Virtually all of the results that the federal gov

strives to achieve require the concerted and c

efforts of two or more agencies. This shared 

responsibility is an outgrowth of several fact

including the piecemeal evolution of federal 

and service delivery efforts. Moreover, the ev

environment in which federal programs are d

and implemented is increasingly demanding 

and multidisciplinary approaches that cut ac

traditional programmatic and functional bou

There are several key trends that form this e
Page 33 GAO-01-241 A Government

and that will increasingly affect the well-b

security of the United States and its peopl

For example, as the evolution to a knowle

economy continues, education, job trainin

immigration, and retirement programs mu

coordinated, not only among federal agen

between the federal and state and local le

government. At the same time, the shift to 

based economy poses human capital chal

federal government in attracting and retai

workforce that is sophisticated in using n

14 Executive Summary: GAO Strategic Plan 2000-200

• Globalization--the increasing interdependence of enterprises, economies, an

 governments and its consequences

• New and Diffuse Security Threats--a growing awareness of vulnerability, wit

 emphasis on new and diffuse threats to the security of the nation, the econom

 and individuals

• Known Demographic Trends--a continuing, fundamental shift in the age and

 composition of the population and the impact of that shift on retirement, health 

 the economy

• Quality of Life Concerns--the expectations and realities of living conditions a

 the world, countries, communities, families, and individuals

• Technology and the Knowledge-Based Economy--the opportunities and th

 posed by rapid changes in technology's capability

• Focusing Performance and Accountability on Results--the growing emph

 responsible stewardship and accountability in the delivery of public services
Page 34 GAO-01-241 A Governmentwid

technologies, flexible, open to continuous le

focused on achieving results. 

Our work has repeatedly shown that mission 

fragmentation and program overlap are wide

the federal government and that crosscutting 

efforts are not well coordinated.15 There are 

program areas across the government, which 

to a dozen federal mission areas, where our 

suggests that mission fragmentation and pro

overlap exist. Crosscutting program areas th

effectively coordinated waste scarce funds, c

frustrate program customers, and undercut t

effectiveness of the federal effort. The follow

examples are presented in more detail in the 

agency volumes of this series. 

• International trade: Several federal agenc

responsibility for overseeing the impleme

over 400 trade agreements the nation has 

into since the mid 1980s, but we found th

ability to monitor and enforce trade agree

limited.16 Agencies lacked sufficient numb

with the right expertise; did not always g

analytical or other types of support from 

agencies; and sometimes had difficulty ob

balanced, comprehensive input from the 

sector. As a result of these problems, U.S

may not have been able to take full advan

benefits secured by trade agreements in a

foreign markets, and the government may 

15 Managing for Results: Barriers to Interagency Coordin

(GAO/GGD-00-106, Mar. 29, 2000), and Managing for Res

Results Act to Address Mission Fragmentation and Prog

(GAO/AIMD-97-146, Aug. 29, 1997).

16 International Trade: Strategy Needed to Better Monito

Trade Agreements (GAO/NSIAD-00-76, Mar. 14, 2000).
Page 35 GAO-01-241 A Government

been realizing the full benefits of incre

exports.17

• Food safety: The current food safety sy

fragmented, with as many as 12 differe

agencies administering over 35 laws re

safety. Until this system is focused und

agency that uses a risk-based inspectio

U.S. food safety system will continue t

inconsistent oversight, poor coordinat

inefficient allocation of resources. We 

out that the government could redirec

to areas with greater potential for incr

safety of our food supply. For example

provided the Department of Agricultur

flexibility in conducting inspections, th

could revise its current policy of inspe

animal carcass, and thus additional res

be available for more critical food safe

• Improving children’s education: State a

program flexibility and limitations in th

of Education’s research and evaluation 

difficult for it to gather information ab

in elementary and secondary educatio

Education must address these challen

the goal of assessing how well all child

challenging academic standards throu

encouraging states to improve perform

information and upgrading federal eva

have recommended that Education co

additional activities to facilitate the ex

information among states and improve 

timeliness, and specificity of state asse

and also that Education implement ad

17 Major Management Challenges and Program Risks

Commerce (GAO-01-243, January 2001).

18 Major Management Challenges and Program Risks

Agriculture (GAO-01-242, January 2001).
Page 36 GAO-01-241 A Governmentwid

measures to improve research on the effe

educational services.19

• Federal land management issues: The mis

four major federal land management agen

National Park Service, the Bureau of Lan

Management, the Fish and Wildlife Servic

Forest Service—have become more simil

time. Moreover, issues that these agencie

such as managing forested areas and con

wildfires, transcend their administrative b

and require increased collaboration with 

and other entities, such as states and priv

landowners. For example, since 1995, fed

management agencies have sought to red

threat of catastrophic wildfires in foreste

using prescribed burns to reduce the ove

accumulation of vegetation. However, ma

problems have hindered this effort, and t

fuels reduction was reemphasized after h

wildfires in the western United States bu

million acres, or twice the 10-year averag

The Cerro Grande (Los Alamos) wildfire—

started as a prescribed burn, got out of co

ultimately burned 48,000 acres, destroyin

homes and causing about $1 billion in da

highlights the management problems inh

prescribed burns program and raises con

the readiness of the federal land managem

agencies to support and administer presc

burns.20

19 Major Management Challenges and Program Risks: D

Education (GAO-01-245, January 2001).

20 Major Management Challenges and Program Risks: Th

of the Interior (GAO-01-249, January 2001), and Major M

Challenges and Program Risks: Department of Agricultu

(GAO-01-242, January 2001). 
Page 37 GAO-01-241 A Government

More broadly, GPRA offers a structured a

governmentwide means for rationalizing c

efforts.21 The strategic and annual plannin

under GPRA provide opportunities for age

together to ensure that agency goals for c

programs complement those of other agen

strategies are mutually reinforcing; and as 

common performance measures are used

Interagency councils are another approac

foster communication across the executiv

build commitment to reform efforts, tap t

exist within agencies, and focus attention 

management issues. For example, the Pre

Management Council, which comprises th

operating officers in each of the major ag

(generally the Deputy Secretary or equiva

served as a top-level forum for identifying 

addressing crosscutting management issu

Financial Officers (CFO) Council has had 

in sharing best practices and expertise am

to help improve financial management pra

Similarly, the Chief Information Officers (

provides a forum for senior officials to wo

toward achieving strategic information te

performance goals; improving work proce

integrating information technology archit

strengthening IT knowledge, skills, and ca

We continue to work with the CFO and CI

various other groups to implement manag

that enhance government performance an

accountability. While the councils serve im

they cannot, and should not, be expected 

an absence of OMB leadership. Therefore

OMB assert strong leadership over the ran

21 Managing for Results: Barriers to Interagency Coo

(GAO/GGD-00-106, Mar. 29, 2000).
Page 38 GAO-01-241 A Governmentwid

reforms, as well as over areas that have not r

nearly the attention they deserve, such as str

human capital management. 

Repositioning 

Government for the 

21st Century

As the nation inaugurates the first new Cong

administration of the 21st century, the federa

government has a unique window of opportu

address many long-standing challenges to pr

performance and service delivery. The mana

reform agenda established during the 1990s i

to bear fruit by stimulating the systematic pr

new information on costs and performance o

programs and operations. This management 

can be used by both Congress and the execu

to enhance program services and reduce rela

Building on this management foundation, the

seize the opportunity provided by current an

budget surpluses to more fundamentally rea

government does and how government does 

This can help enhance the capacity of govern

better respond to emerging needs, as well as 

safeguard the capacity of future generations 

the commitments of today and tomorrow in 

society. In short, today’s surpluses create a w

opportunity to position the government and 

for the future. 

Long-Term Fiscal 

Challenges

The current and projected budget surpluses 

opportunity to better position the governme

nation to address both current needs as well 

longer term budget and economy we will han

succeeding generations. The combination of 

sustained economic growth and tough budge

has slain the deficit dragon—at least for the 

Both OMB and CBO project ever-growing su

throughout the next decade. These surpluse

welcome opportunity to meet some pent-up 

held in abeyance during the years of fighting 
Page 39 GAO-01-241 A Government

the same time, longer term fiscal pressure

overwhelm surpluses as the nation strugg

the retirement of the baby boom generatio

Consequently, these surpluses should pro

policymakers to strike a balance between 

opportunities to address today’s unmet ne

stewardship obligation to hand a strong e

sustainable fiscal policies to future genera

In considering how to allocate surpluses, 

involve a continuum of fiscal actions bala

unmet needs with tomorrow’s fiscal challe

Allocating surpluses among debt reductio

spending, and tax cuts is an inherently pol

How these decisions affect our future fisc

one of several factors that must be weighe

process.

Absent further policy changes, projected 

spending on the federal government’s maj

retirement programs--Social Security, Med

Medicaid--will dominate the long-run bud

The expected surge in health and retireme

stems from three dynamic and known fac

large baby boom generation will begin to 

retirement age within the next decade or s

eligible to receive Social Security and Med

Second, people are likely to live longer th

the past and spend more time in retiremen

advances in medical technology will prob

pushing up the cost of providing health ca
Page 40 GAO-01-241 A Governmentwid

Figure 3: Aged Population as a Share of Total U.S. Population Continues to Grow

Note: Projections based on intermediate assumptions 

Annual Report of the Board of Trustees of the Federal 

Survivors Insurance and Disability Insurance Trust Fun

Source: The 2000 Annual Report of the Board of Truste

Federal Old-Age and Survivors Insurance and Disabilit

Trust Funds.

Our long-term simulations illustrate the cons

these dynamics for the federal budget. To mo

future without making changes to federal ret

health programs is to envision a very differen

the federal government. For example, assum

Congress and the President adhere to the oft

goal of saving the entire Social Security surp

spend the entire on-budget surplus through e

cuts and/or spending increases, by 2030 our 

model shows a world in which Social Securit

and Medicaid would require nearly three-qua

total federal revenue. This is the case even a

future benefit enhancements such as, for exa

0

5

10

15

20

25

1950 1975 2000 2025 2050 

Percentage of total population

Population aged 65 and over
Page 41 GAO-01-241 A Government

adding a prescription drug benefit to Med

Budgetary flexibility would be drastically 

and little room would be left for such pro

national defense, educating our nation’s y

modernizing the nation’s physical infrastr

law enforcement. These simulations are a 

benchmark because they demonstrate the 

the fiscal challenges associated with our a

and the significance of the related challen

government will be called upon to addres

22These simulation results use the Medicare Trustees

projections of future program costs. The results do n

long-term cost growth assumption recently recomm

expert panel advising the Medicare Trustees. Use of 

would dramatically add to the program’s projected l

and would yield simulation results showing even les

future federal budgets.
Page 42 GAO-01-241 A Governmentwid

Figure 4: Composition of Spending as a Share of G

Save the Social Security Surpluses Simulation

Note: Revenue as a share of GDP declines from its 200

percent due to unspecified permanent policy actions th

revenue and increase spending to eliminate the non-So

surpluses. 

Source: GAO’s July 2000 analysis.

Moreover, the federal government undertake

range of other activities and responsibilities 

draw on future resources. Some of the costs 

uncertain and difficult to measure, but they n

merit attention. In addition to the need to pla

demographic and technological trends affect

0

10

20

30

40

2000 2030 2050

Percentage of GDP

Social Security

Medicare and Medicaid

Net interest

All other spending

Revenue
Page 43 GAO-01-241 A Government

nation’s Social Security and health care pr

are other looming fiscal pressures. These 

explicit liabilities such as environmental c

from federal installations to implicit expe

future federal spending on emerging need

modernizing physical infrastructure. Expe

improved access to higher education and 

the uninsured are among the many challe

compete for a share of the fiscal pie in the 

competing claims highlight the governmen

stewardship responsibility to provide futu

with sufficient budgetary flexibility and an 

base sufficient to finance current commit

as future needs. 

Of course, a wide range of pent-up deman

today’s economic and social needs are co

share of the current and projected surplus

believe it is realistic to save 100 percent o

surplus for debt reduction and indeed the

legitimate claims for federal actions on bo

the spending side of the federal budget, p

the non-Social Security portion. Since the

proposals in part reflect different prioritie

views about the role of government, the d

them appropriately takes place in the poli

While each individual proposal should be 

its own merits, it is important to also cons

aggregate consequences of our overall fis

choices for the long-term outlook. 

From the longer term perspective, certain 

taken today to help future generations by 

burdens of existing commitments and pro

with greater economic resources and bud

flexibility to address their own priorities a

instance, saving a portion of the surplus f

reduction can enhance fiscal flexibility an

growth. As figure 5 shows, traditionally in 

history, periods of high deficits and debt b
Page 44 GAO-01-241 A Governmentwid

been followed by periods of surplus and red

usually from a combination of fiscal restrain

economic growth. 

Figure 5: Deficit/Surplus as a Share of GNP/GDP over History

Note: Data until 1940 are shown as a percentage of gr

product (GNP); data from 1940 to present are shown as 

of GDP.

Sources: Budget of the U.S. Government, Fiscal Year 2

Department of Commerce

Reducing publicly held debt helps lift future 

burdens by freeing up budgetary resources e

for interest payments, which currently repre

than 12 cents of every federal dollar spent, a

enhancing the pool of economic resources a

-35

-30

-25

-20

-15

-10

-5

0

5

10

1799 1819 1839 1859 1879 1899 1919 1939 1959 19

Fiscal years

Percentage of GNP/GDP

Surplus

Deficit
Page 45 GAO-01-241 A Government

private investment and long-term econom

is particularly crucial in view of the know

pressures that will begin bearing down on 

budgets in about 10 years as the baby boo

retire. In fact, the emerging consensus to s

Security surpluses, if maintained over the 

entirely eliminate the publicly held debt in 

years.

Our long-term budget simulations suggest

debt reduction or elimination, while impo

sufficient by itself to promote a sustainabl

Even if all public debt is eliminated, as wo

saving the entire Social Security surpluses

budgets will nonetheless be increasingly c

the growth of Medicare, Medicaid, and So

spending, as shown in figure 4. Ultimately

debt would return as the nation struggles 

these increasing costs of an aging society. 

modifying these programs through substa

will be critical to recapturing the fiscal fle

finance a wide range of needs in a changin

the longer term. Early action to change th

would yield the highest fiscal dividends fo

budget and would provide a longer period 

prospective beneficiaries to make adjustm

own planning. The longer we wait, the mo

difficult the choices will become.

Moreover, many argue that some tax cuts 

spending programs may also enhance lon

growth depending in part on how they are 

financed. For instance, funding for well-ch

infrastructure, human capital, and researc

development programs can improve prod

longer term economic growth. Similarly, t

that increase incentives to work and save 

economic efficiency and future economic 
Page 46 GAO-01-241 A Governmentwid

Notwithstanding the choices made in allocat

surplus among debt reduction, tax cuts, and 

increases, the structure and implementation 

choices can serve either to increase or decre

to our long-term fiscal outlook. When we loo

other countries responded to budget surplus

discovered that both spending and tax propo

seen on a continuum by the degree of long-te

risk they present to the budget outlook. For 

contrast to “one-time” actions, permanent ch

the budgetary baseline—on either the spend

revenue side of the budget—carry long-term 

implications. However, there are approaches 

spending changes that may mitigate the risk 

term. These approaches might include “one-

temporary actions; automatic adjustments o

revenue and/or spending sides of the budget 

to actual fiscal results, as some states have d

sunset provisions that offer the potential for 

reconsideration and updating of commitmen

Recognizing the many pent-up demands for n

programs, it is also important to screen new 

commitments by applying stringent perform

cost benefit criteria. Proposed new program

resources, accordingly, should be carefully s

to permit decisionmakers to distinguish the 

variety of “wants” from those investments th

to effectively address more critical “needs.” 

Unfortunately, recent experiences ranging fr

information technology projects to major we

systems illustrate that the benefits achieved 

been disappointing. Poorly conceived projec

incomplete or inaccurate information and pr

have prompted huge cost overruns and limit

performance gains. The following illustrates 

23 Budget Surpluses: Experiences of Other Nations and 

for the United States (GAO/AIMD-00-23, Nov. 2, 1999).
Page 47 GAO-01-241 A Government

questions that should be addressed, as ap

considering any new program or project: 

• Does the proposal promise to contribu

federal mission and is its need support

and systematic needs assessment and 

analysis?

• Is government intervention justified by 

market failure that has led to compelli

or social shortfalls in services or perfo

• Does the proposal warrant a federal—

a state or local—government response

prompt those governments to reduce t

program investments as a consequenc

• Is the proposal integrated with other r

state, local, or private initiatives to red

potential for duplication, overlap, and 

fragmentation?

• Is the proposal the most cost-effective 

achieve the objective when compared 

approaches?

• Are benefits targeted to those recipien

with the greatest need and the least lik

funding the program on their own?

• Are the proposal’s time frames, cost pr

promises realistic in light of past expe

capacity of administrators and other a

implement? Has a systematic risk asse

performed to identify potential proble

different scenarios?

Surpluses challenge our nation to develop 

paradigm to prompt greater attention to t

implications of current program or policy 

Government should strive to make inform

the long-term fiscal exposures associated 

policies more transparent in financial rep

budget processes. We have suggested, for 

budgeting for the fully accrued costs for i

pensions in current budgets to reflect the 
Page 48 GAO-01-241 A Governmentwid

commitments made in current programs.24 Ot

have recognized the value of adopting altern

targets such as debt-to-GDP ratios as a guide 

decisionmaking in a world where budget bal

no longer provides a sufficient fiscal compas

Ultimately, the federal government needs a 

decisionmaking framework that permits it to 

fiscal good fortune and choices against both 

needs and the longer term fiscal future we w

on to future generations. 

Fundamental Review 

of Federal Programs 

and Activities 

In considering competing demands on the su

careful scrutiny is given only to proposed ne

policymakers will miss a golden opportunity 

the government for the 21st century. Our new

budget surpluses provide the opportunity to 

years of preoccupation with annual budget d

undertake a fundamental reexamination of th

existing activities and processes. 

Many federal programs—their goals, organiz

processes—were designed years ago to resp

earlier challenges. As we enter a new centur

been reminded of how much things change. 

perspective, it is useful to recall that student

started college this fall were 11 when the Sov

broke apart and have no memory of the Cold 

lifetimes have always known microcomputer

Yet many of our programs were designed lon

those students were born. It should not be th

any federal program or activity to question it

or “fit” in today’s world and for the future. 

24 Accrual Budgeting: Experiences of Other Nations and 

for the United States (GAO/AIMD-00-57, Feb. 18, 2000), 

Issues: Budgeting for Federal Insurance Programs (GAO

Sept. 30, 1997).
Page 49 GAO-01-241 A Government

The broad-based and rapid changes facing 

today call for a fundamental review of exis

and operations. Several important benefit

expected from such a review. First, policy

create much-needed budget flexibility to a

emerging needs by weeding out programs 

proven to be outdated and no longer relev

changing society. Second, those activities 

relevant could be updated and modernized 

their targeting and efficiency through suc

redesigning allocation and cost sharing fo

consolidating facilities and programs, and 

and reengineering operations and process

This fundamental reexamination entails b

focus for congressional and executive ove

address a range of fundamental questions

• Do the conditions that caused the prog

created still exist?

• Would we design the same program in 

if we were designing it today?

• Are there other government programs 

that are not coordinated with or are w

cross-purposes to this program?

• Is the program operating in the most e

efficient, and effective manner?

• Is the program affordable and sustaina

and over the longer term?

• Is the program targeted appropriately 

beneficiaries most in need of federal a

As Congress and the executive branch un

reassessment, approaches must recognize 

performance goals transcend the boundar

program, agency, or even level of governm

federal mission areas−from low-income h

assistance to food safety to counterterror

addressed by a wide range of mandatory a
Page 50 GAO-01-241 A Governmentwid

discretionary spending programs, tax expen

regulatory approaches that cut across many 

and congressional committees, as illustrated 

charts in figure 6. For instance, as estimated 

year 2000,25 federal health care included abou

or $37 billion, in discretionary budget author

percent, or $323 billion, in entitlement outlay

one-tenth of a percent, or $100 million, in loa

guarantees; and 20 percent, or $89 billion in 

expenditures. Frequently, these elements are 

independently rather than as a part of an ove

approach to health care. Yet the outcomes ac

each of these tools are highly interdependen

debate on governmental performance should 

the full range of policy tools. 

25 As shown in the Budget of the United States Governme

2001.
Page 51 GAO-01-241 A Government

Figure 6: Relative Reliance on Policy Tools in Selected Federal Budget Functions 

Note: Health includes both the health and Medicare 

Source: Budget of the United States Government, F

34%

9%

11%

27%

8%

72%

20%

44%

3%

29%

1%

46%

International Affairs

Commerce and Housing Credit Health

Education, Training, 

Employment and Social Services

Discretionary spending

Mandatory spending

Direct loans

Guaranteed loans

Tax expenditures

19%

53%

24%
Page 52 GAO-01-241 A Governmentwid

Moreover, the federal government has come 

wide range of third parties−state and local go

not-for-profit entities, and for-profit business

workhorses of the federal system. Coordinat

collaboration, therefore, is essential, and the 

and design of federal tools used to engage th

entities−grants, loans, tax expenditures and 

regulations−play a large role in influencing t

performance actually achieved. Over the yea

federal government has sought to manage pr

indirectly. At the same time, federal goals ha

more ambitious and delivery networks more 

As a result, the relationship between program 

actual outcomes has become more complica

can help agencies and Congress better sort o

measure the effects of federal policy tools on 

performance by focusing oversight on outco

achieved through the actions of the many ac

system and improving the quality of informa

program results. 

This is a challenging agenda that will call for 

and more strategic focus for congressional a

executive policymaking and oversight. Addre

issues calls for hard choices and persistent a

There are few examples of “low hanging frui

programs and activities provide important b

their stakeholders. A systematic process tha

the claims of each activity with the help of n

performance and cost information should he

the need for change and the opportunity for 

decisionmakers, stakeholders, and the broad

achieve a more effective, responsive, and rel

government portfolio of programs and servic

future. 

The reports on each agency in this performa

accountability series provide an inventory of 

performance issues that serve as one basis f

reexamination. We also periodically provide 
Page 53 GAO-01-241 A Government

with budgetary options to address signific

performance problems with existing prog

operations as identified in our ongoing au

evaluation work.26

Improving 

Performance and 

Strengthening 

Accountability 

Through Strategic 

and Constructive 

Oversight 

The beginning of a new Congress and adm

makes this an especially opportune time f

carefully consider how it will take additio

of and leverage the new information and p

coming from the management reforms no

Over the last decade, Congress has been a

champion for improving government perf

accountability by establishing in statute m

basic federal management framework nee

high performing organizations across the 

government. As noted earlier, the current 

the human capital dimension. More recen

has expanded its oversight of agencies’ m

management challenges and program risk

shown a real willingness to consider statu

to help agencies address their human cap

management challenges.

The working partnership that Congress, th

administration, federal agencies, and othe

address the Year 2000 challenge, for exam

successful model. In the case of Congress

bipartisan and bicameral congressional le

demonstrated. Congress held agencies res

demonstrating progress and heightened p

awareness of the problem by holding over 

In particular, the Senate Special Committe

2000 Technology Problem and the House Y

Force—co-chaired by the Subcommittee o

26Budget Issues: Budgetary Implications of Selected 

Fiscal Year 2001 (GAO/OCG-00-8, Mar. 31, 2000).
Page 54 GAO-01-241 A Governmentwid

Government Management, Information and T

of the Committee on Government Reform, a

Subcommittee on Technology of the Commit

Science—played major leadership roles. Con

passed legislation to facilitate the nation’s Ye

work. 

Additionally, congressional and executive br

attention shown to GPRA, financial managem

reform, and information technology manage

underscores the common understanding tha

effective implementation of the statutory fra

although important, is not an end in itself. Ra

implementation of the framework is a means 

end—improved federal performance and acc

through enhanced congressional and execut

decisionmaking. In short, performance impr

within an agency are not occurring just beca

agency published its strategic plan or the res

financial statements audit. Rather, performa

improvements are occurring as congressiona

executive branch decisionmakers use these 

documents—and the management systems a

processes that generate them—to inform the

decisions, stimulate their actions, and thereb

government. 

The progress that has been—and is being—m

suggests that the wealth of information that 

produced under the legislative framework th

has enacted to improve government perform

accountability provides new opportunities to 

congressional oversight and decisionmaking

on GPRA strategic plans and performance pl

reports, financial audit results, our performa

accountability and high-risk series, annual fe

budget reviews, major government reports, m

our recommendations, and the work of inspe

general, affords Congress a broad perspectiv

performance in areas such as: 
Page 55 GAO-01-241 A Government

• the most meaningful challenges faced 

agency or across government in broad 

mission areas; 

• cuts and investments that would contr

government more efficient, effective, a

economical in meeting the wants and n

Americans can afford; and

• the tools, such as regulations, legislati

incentives, loan guarantees, enforceme

direct spending, that appear to be the m

in furthering a given government missi

Congress should also consider the need fo

that allow it to more systematically focus 

on problems with the most serious weakn

risks. For example, the President is requir

prepare and submit to Congress as part of 

budget submission a governmentwide per

that provides a “single cohesive picture of 

performance goals for the fiscal year.” Fir

with the fiscal year 1999 budget, the gove

performance plan includes fiscal, manage

program performance expectations. It pro

to present performance goals for the varie

government and to identify the relative co

a wide range of agencies, programs, and s

address those mission-based performance 

At present, Congress has no direct mecha

respond to and provide a congressional p

upon the President’s governmentwide perf

For example, Congress has no established 

articulate performance goals for the broad

missions of government, to assess alterna

that offer the most promise for achieving 

to define an oversight agenda targeted on 

27 The Results Act: Assessment of the Governmentw

Plan for Fiscal Year 1999 (GAO/AIMD/GGD-98-159, S
Page 56 GAO-01-241 A Governmentwid

pressing crosscutting performance and mana

issues. 

Congress may therefore wish to consider wh

more structured oversight mechanism is nee

permit a coordinated congressional perspect

governmentwide performance matters. One 

approach would involve modifying the curre

resolution. Already organized by budget func

similar to the program performance section 

President’s governmentwide performance pl

resolution could be adapted to permit Congr

respond to, and present a coordinated congr

perspective on, the President’s governmentw

performance plan.

As this report has noted, the current fiscal cl

long-term trends create both an opportunity 

obligation to undertake a reexamination and 

debate about what government does, how go

does business, and who benefits from these a

that regard, continued congressional and exe

branch efforts to effectively implement and u

statutory management framework; develop a

implement a strategic approach to human ca

management appropriate for the federal gov

the 21st Century; continue to attack high-risk 

confront individual agencies’ major managem

challenges; and pursue organizational appro

respond to the new environment must be at t

any serious effort to maximize the performa

ensure the accountability of the federal gove

the benefit of the American people.
Page 57 GAO-01-241 A Government
Page 58 GAO-01-241 A Government

pg

Agency Human Capital Challenges

Agriculture Organizational culture problems, including resistance from affected 

agencies and employees, have hampered departmentwide reorga

modernization efforts. Further, the nation’s food safety system, in w

plays a major role, continues to suffer from inconsistent oversight, 

coordination, and inefficient deployment of resources.

Bureau of Indian 

Affairs

Untrained and inexperienced staff hamper effective management o

Indian trust funds.

Commerce A lack of sufficient numbers of experienced staff with the right exp

ability of Commerce and two other trade agencies to monitor and e

agreements. 

DOD In the past 2 years, the military services have struggled to meet re

Attrition among first-time enlistees has reached an all-time high. T

shortages among junior officers, and problems in retaining intellige

computer programmers, and pilots. On the civilian side, skills and 

imbalances following downsizing are jeopardizing acquisitions and 

capabilities.

Energy Headquarters and field staff have lacked contract management sk

large projects, such as the cleanup of radioactive and hazardous w

EPA EPA has not yet implemented any systematic means of determinin

skills needs, or deployment of its workforce to carry out its mission 

strategic goals and objectives, despite the demand for new skills d

technological changes and the shift in EPA’s regional environmenta

to the states, as well as growing retirement eligibilities in its workfo

FAA Air traffic control modernization is fraught with cost, schedule, and 

problems due in part to an organizational culture that impaired the 

process.

Health Care 

Financing 

Administration 

Medicare’s leadership problems include the lack of any official who

responsibility it is to run the program. Further, frequent leadership 

HCFA have hampered long-term Medicare initiatives and the pursu

management strategy. HCFA’s workforce lacks skills needed to me

legislative requirements. The mismatch between HCFA’s administr

and its mandate could leave Medicare unprepared to handle future 

growth and medical technology advances. 

HUD As HUD’s reorganization moves into its final phases, workload imb

programmatic challenges to several specialty centers and field offi

family mortgage insurance programs administered by HUD’s Fede

Administration have been marked by a number of human capital c

including insufficient staff. Further, insufficient or inexperienced sta

problems in quality assurance reviews for 203(k) home rehabilitatio

oversight of appraisers and mortgage lenders. 

Immigration 

and Naturalization Service

Lack of staff to perform intelligence functions and unclear guidanc

and analyzing information hamper efforts to combat the growing p

smuggling.

Interior and U.S. 

Forest Service

Difficulties replacing experienced fire personnel threaten firefightin

during catastrophic events.
Page 59 GAO-01-241 A Government

Source: Performance and Accountability Series age

Agency Human Capital Challenges

IRS IRS lacks reliable cost and operational information to measure the 

its tax collection and enforcement programs and to judge whether it 

allocating its staff resources among competing management prior

NASA Staff and skills losses following downsizing pose potentially seriou

the safety and planned flight rate of the space shuttle.

National Park 

Service

Historically, the Park Service’s decentralized priority-setting and ac

systems left it without the means to monitor progress toward achie

hold park managers accountable for the results of park operations

concessions program continues to face management problems, in

inadequate qualifications and training of the agency’s concession 

concessions contracting staff. Insufficient fire safety training has co

safety risks at visitor centers, hotels, and other national park buildi

Nuclear

Regulatory

Commission 

NRC’s organizational culture is struggling with the agency’s new “r

regulatory approach. Further, NRC’s ability to maintain the skills ne

its mission and fill the gaps created by growing retirement eligibilit

threatened by the decline in university enrollments in nuclear engin

fields related to nuclear safety.

Pension

Benefit

Guaranty

Corporation

Because the agency did not adequately link its contracting decisio

strategic planning, it may not have the cost-effective mix of contrac

employees needed to meet future workload challenges. Further, P

who monitor contractors lack adequate guidance and policies esse

monitoring contractor performance.

SSA Increasing demand for services, imminent retirement of a large pa

workforce, changing customer expectations, and mixed success in 

investments will challenge SSA’s ability to meet its service delivery 

which include faster and more accurate benefit claims determinati

increased emphasis on returning the disabled to work. 

State Issues related to the quality of life at overseas posts, career develo

opportunities, and talent management are hampering recruitment 

Foreign Service Officers. Efforts to determine the right size and co

overseas posts have begun; but State faces challenges in aligning 

with new economic, political, security, and technological requireme

staffing shortfalls are hampering counternarcotics programs and e

visa fraud.

USAID Staffing shortfalls in the procurement area have hampered the age

initiate and monitor contracts, thus delaying reconstruction assista

of natural disasters in Central America and the Caribbean.

Veterans Affairs A national nursing shortage could adversely affect VA’s efforts to i

safety in VA facilities and put veterans at risk. Further, VA’s training 

programs may not be adequate to ensure a sufficient workforce of 

claims processors, which would likely undermine efforts to reduce c

of claims processing backlogs and errors.

(Continued From Previous Page)
Page 60 GAO-01-241 A Government

gg

21 Federal Agencies

Agency Challenges

Department of Agriculture • USDA’s farm loan programs rem

loss, but high-risk areas have be

• Delivery of services to farmers ha

challenges remain

• USDA needs to effectively and e

food assistance benefits to eligib

while maintaining program integr

• Fundamental changes are neede

foodborne illnesses

• USDA needs to strengthen Depa

information security

• USDA continues to lack financial 

over billions of dollars in assets

• The Forest Service must provide 

and the public with a clear under

it accomplishes with appropriate

• Problems persist in processing d

complaints

Department of Commerce • Increase the access of U. S. bus

international markets

• Ensure that the United States is 

proliferation of dual-use commod

chemical weapons

• Ensure that weather forecasts an

weather warnings are accurate a

• Improve the economy in distress

• Address other challenges to build

performing organization

Department of Defense • Developing strategic plans that le

mission outcomes

• Hiring, supporting, and retaining 

civilian personnel with the skills t

needs

• Establishing financial manageme

that provide reliable information a

accountability

• Effectively managing information 

investments

• Reforming acquisition processes 

military needs

• Improving processes and contro

contract risk

• Creating an efficient and respons

infrastructure

• Providing logistics support that is 

responsive
Page 61 GAO-01-241 A Government

Department of Education • Ensure access to postsecondary ed

reducing the vulnerability of student 

to fraud, waste, error, and mismanag

• Encourage states to improve perform

information and upgrade federal eva

to assess how well all children reach 

academic standards

• Promote coordination with other fede

and school districts to help build a s

foundation of learning for all children

• Improve financial management to he

high-performing agency

Department of Energy • Address project management, plann

other issues to maintain nuclear wea

capabilities

• Sustain management attention to co

pervasive weaknesses in security co

• Improve priority-setting of nonprolife

programs and coordination among p

the former Soviet Union

• Improve management tools and inte

activities to clean up radioactive and 

wastes

• Resolve problems in contract manag

place it at high risk for fraud, waste, 

mismanagement

• Improve financial management

Department of Health and Human Services • Provide current and future generatio

well-designed and well-administered 

program

• Better safeguard the integrity of the 

program

• Improve oversight of nursing homes 

residents receive quality care 

• Ensure the safety and efficacy of me

products

• Enhance the economic independenc

being of children and families

Department of Housing and Urban Development • Continued improvements needed to 

HUD’s single-family insurance risk

• Continued improvements needed to 

HUD’s rental housing assistance pro

used effectively and efficiently

• Resolution needed for a range of info

financial management systems and 

capital issues

Department of the Interior • Improve management of national pa

• Address persistent management pro

Indian trust programs

• Improve management of ecosystem 

efforts

• Address challenges in managing an 

land base

(Continued From Previous Page)

Agency Challenges
Page 62 GAO-01-241 A Governmentwid

Department of Justice • Improve the enforcement of immi

provision of immigration and natu

services

• Better manage programs design

state and local efforts to reduce 

• Develop measurable performanc

the Drug Enforcement Agency d

progress in reducing the availabi

drugs

• Achieve excellence in financial m

including, but not limited to, a de

unqualified opinion for fiscal year 

beyond

• Improve management and accou

Justice’s asset forfeiture program

Department of Labor • Increasing the employment and e

America’s workforce 

• Protecting the benefits of worker

• Fostering safe and healthy workp

Department of State • Improve the security and mainte

facilities overseas

• Help decrease the level of illegal 

the United States

• Address the threats illegal immig

to pose to Americans at home

• Address additional challenges to 

performing organization

Department of Transportation • Improve the safety and security o

and pipeline transportation

• Enhance the management of avi

Guard acquisitions and obsolete 

maximize investment of public fu

• Increase the accountability for fin

management activities

• Improve the oversight of highway 

projects to provide maximum tran

services for the federal dollars in

• Strengthen the financial conditio

• Enhance competition and consum

aviation and freight rail industries 

reasonable fares, rates, and serv

(Continued From Previous Page)

Agency Challenges
Page 63 GAO-01-241 A Government

Department of the Treasury • Modernize the Internal Revenue Ser

help taxpayers meet their tax respon

to increase overall compliance with t

• Improve the U.S. Customs Service’s 

commercial trade while ensuring tha

against the entry of illegal goods at 

• Achieve sound financial manageme

significant management attention an

• Improve the Bureau of Alcohol, Toba

Firearms’ performance measures to 

determine its progress in reducing c

access to firearms

• Improve the management of Treasu

forfeiture program

Department of Veterans Affairs • Ensure timely and equitable access 

health care

• Maximize VA’s ability to provide heal

available resources

• Process veterans’ disability claims p

accurately

• Develop sound agencywide manage

strategies to build a high-performing 

Agency for International Development • Human capital management issues 

USAID strategic objectives

• Better performance data could help 

assess programs and allocate resou

• Additional challenges to building a h

performing organization

Environmental Protection Agency • Improve environmental and perform

information management to set prio

measure results

• Place greater emphasis on developi

comprehensive human capital appro

• Strengthen working relationships wit

National Aeronautics and Space Administration • Correcting weaknesses in contract m

• Controlling International Space Stat

development and support costs

• Effectively implementing the faster-b

cheaper approach to space explorat

• Integrating a human capital approac

NASA’s workforce management stra

Nuclear Regulatory Commission • Resolve numerous issues to implem

informed regulatory approach for co

nuclear power plants

• Overcome inherent difficulties to app

informed approach to nuclear mater

• Continue efforts to cope with signific

capital challenges, resolve financial 

issues, and effectively develop and i

new information technology

(Continued From Previous Page)

Agency Challenges
Page 64 GAO-01-241 A Governmentwid

Source: Performance and Accountability Series agency 

Small Business Administration • Continue to improve oversight of SB

partners to correct oversight weakne

• Focus the 8(a) program on helping f

contracts to increase procurement o

• Streamline and automate disaster lo

processing to improve timeliness

• Strengthen human capital, informati

technology, budget, and financial ma

practices to help modernize SBA

Social Security Administration • Play an active research, evaluation, 

development role

• Improve SSA’s disability determinati

and return people to work

• Sustain management and oversight 

standing, high-risk Supplemental Se

Income (SSI) issues

• Better position SSA for future servic

challenges

• Further strengthen controls to protec

information

U.S. Postal Service • Remain self-supporting while provid

affordable, high-quality universal ser

• Control costs and improve productiv

• Address long-term human capital iss

• Provide complete and reliable perfor

information

• Address legal and regulatory issues

(Continued From Previous Page)

Agency Challenges
Page 65 GAO-01-241 A Government

Major Management Challenges and Progr

Governmentwide Perspective (GAO-01-24

Major Management Challenges and Progr

Department of Agriculture (GAO-01-242)

Major Management Challenges and Progr

Department of Commerce (GAO-01-243)

Major Management Challenges and Progr

Department of Defense (GAO-01-244)

Major Management Challenges and Progr

Department of Education (GAO-01-245)

Major Management Challenges and Progr

Department of Energy (GAO-01-246)

Major Management Challenges and Progr

Department of Health and Human Service

247)

Major Management Challenges and Progr

Department of Housing and Urban Develo

01-248)

Major Management Challenges and Progr

Department of the Interior (GAO-01-249)

Major Management Challenges and Progr

Department of Justice (GAO-01-250)

Major Management Challenges and Progr

Department of Labor (GAO-01-251)

Major Management Challenges and Progr

Department of State (GAO-01-252)
Page 66 GAO-01-241 A Government

Major Management Challenges and Progr

Department of Transportation (GAO-01-25

Major Management Challenges and Progr

Department of the Treasury (GAO-01-254)

Major Management Challenges and Progr

Department of Veterans Affairs (GAO-01-2

Major Management Challenges and Progr

Agency for International Development (G

Major Management Challenges and Progr

Environmental Protection Agency (GAO-0

Major Management Challenges and Progr

National Aeronautics and Space Administ

(GAO-01-258)

Major Management Challenges and Progr

Nuclear Regulatory Commission (GAO-01

Major Management Challenges and Progr

Small Business Administration (GAO-01-2

Major Management Challenges and Progr

Social Security Administration (GAO-01-2

Major Management Challenges and Progra

Postal Service (GAO-01-262)

High-Risk Series: An Update (GAO-01-263

(450005) Letr
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