Results-Oriented Government: Shaping the Government to Meet 21st Century Challenges
Published: 2003-09-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO has sought to assist the Congress and the executive branch in considering the actions needed to support the transition to a more high-performing, results-oriented, and accountable federal government. GAO provided perspectives on the federal government's overall structure and the need for reorganization to improve performance.
section_title: What GAO Found
paragraphs: Through normal evolution and inertia over the years, the United States now has a government that is weighed down by organizations with significant performance and management problems as well as duplicative and overlapping missions and functions. This situation is exacerbated by ways of doing business that, in some cases, are better suited for the beginning of the 20th century than the 21st century. Given the changed circumstances and stark fiscal realities, the nation simply cannot afford unnecessary, redundant, or inefficient organizations, programs, or operations. Periodic reexamination and reevaluation of federal agencies' activities have never been more important than they are today. The federal government must address and adapt to major trends in the nation and around the world. At the same time, our nation faces serious, long-term fiscal challenges. Fundamental reexamination of federal agencies' roles, functions, and structure is never easy. Reorganizing government can be an immensely complex and politically charged activity. Those who would reorganize government must make their rationale clear and build a consensus for change if proposed reorganizations are to succeed. All key players must be involved in the process--the Congress, the President, affected executive branch agencies, their employees and unions, and other interested parties, including the public. Regardless of the number and nature of federal entities, the government's goal should be to create high-performing organizations. The federal government needs to look not only at what business it is in, but how it does business. Practices that were good 50 years ago may not make sense today. Old, outdated practices and systems result in inefficiency and waste of resources that the nation cannot afford. Management reform will be vitally important to agencies in transforming their cultures to address the changing role of the government in the 21st century. Strategic human capital management should be a centerpiece of any serious change management initiative or any effort to transform the cultures of government agencies. It is a vital element to the success of any government restructuring efforts, whether within an existing agency or across current agency boundaries. People are an agency's most important organizational asset. An organization's people define its character, affect its capacity to perform, and represent the knowledge base of the organization.

section_title: Letter
paragraphs: I appreciate the opportunity to address this vital topic: how can the federal  government meet the large and emerging challenges it faces and become  more effective?
The federal government is in a period of profound transition and faces an  array of challenges and opportunities to enhance performance, ensure  accountability, and position the nation for the future. A number of  overarching trends, such as diffuse security threats and homeland security  needs, increasing global interdependency, the shift to knowledge-based  economies, and the looming fiscal challenges facing our nation drive the  need to reconsider the role of the federal government in the 21st century,  how the government should do business (including how it should be  structured), and in some instances who should do the government’s  business. The proposed Government Accountability and Streamlining Act  of 2003 (H.R. 2743), introduced by Chairwoman Davis, recognizes the need  to address these critical issues.
The challenges we face are significant and require action by a variety of  parties. Through normal evolution and inertia over the years, we now have  a government that is weighed down by organizations with significant  performance and management problems as well as duplicative and  overlapping missions and functions. This situation is exacerbated by ways  of doing business that, in some cases, are better suited for the beginning of  the 20th century than the 21st century. Given the changed circumstances  and stark fiscal realities, we simply cannot afford unnecessary, redundant,  or inefficient organizations, programs, or operations.
We need to begin by reexamining the base of government programs,  policies, and operations to make government more effective and relevant  to a changing society—a government that is as free as possible of  outmoded commitments and operations. This is true for at least two  reasons. First, as I will discuss briefly, known demographic and health care  cost trends drive a fiscal future that is—absent significant changes—clearly  unsustainable. Second—and this will be the main focus of this testimony— whatever role the American people choose for the federal government, its  activities should be conducted in the most effective manner possible.
We now have both an opportunity and an obligation to take a look at what  the government should be doing and how it should go about doing its work.  Based on GAO’s recent experiences with restructuring, such a fundamental  reexamination of government missions, functions, and activities could  improve government effectiveness and efficiency and enhance  accountability by reducing the number of entities managed, thereby  broadening spans of control, reducing unnecessary overhead, increasing  flexibility, and fully integrating—rather than merely coordinating—related  government activities.
GAO has sought to assist the Congress and the executive branch in  considering the actions needed to support the transition to a more high- performing, results-oriented, and accountable federal government. We  believe that it is crucial for both the Congress and the executive branch to  work together constructively and on a bipartisan basis in addressing a  range of “good government” issues.
My statement today will focus on six points:  the impact of current trends and increasing fiscal challenges,  the need to reexamine how departments and agencies are managing  their programs and organizations,  the need to reassess how federal agencies do business,  the importance of strategic human capital management,  GAO as an example of positive change, and  options for strengthening congressional oversight.
This testimony draws upon our wide-ranging, ongoing, and completed  work on government transformation, organization, management, human  capital, and budget issues. We conducted our work in accordance with  generally accepted government auditing standards.
subsections: section_title: Impact of Emerging Trends and Fiscal Challenges
paragraphs: Periodic reexamination and reevaluation of federal agencies’ activities has  never been more important than it is today. The federal government must  address and adapt to major trends in our country and around the world. At  the same time, our nation faces a serious, long-term fiscal challenge.  Increased pressure also comes from world events: both from the  recognition that we cannot consider ourselves “safe” between two  oceans—which has increased demands for spending on homeland  security—and from the U.S. role in combating terrorism and an  increasingly interdependent world.
Our country’s transition into the 21st century is characterized by a number  of key trends, including:  the national and global response to terrorism and other threats to our  personal and national security;  the increasing interdependence of enterprises, economies, markets, civil  societies, and national governments, commonly referred to as  globalization;  the shift to market-oriented, knowledge-based economies;  an aging and more diverse U.S. population;  rapid advances in science and technology and the opportunities and  challenges created by these changes;  challenges and opportunities to maintain and improve the quality of life  for the nation, communities, families, and individuals; and  the changing and increasingly diverse nature of governance structures  and tools.
As the nation and government policymakers grapple with the challenges  presented by these evolving trends, they do so in the context of rapidly  building fiscal pressures. GAO’s long-range budget simulations show that  this nation faces a large and growing structural deficit due primarily to  known demographic trends and rising health care costs. The fiscal  pressures created by the retirement of the baby boom generation and rising  health costs threaten to overwhelm the nation’s fiscal future. As figure 1  shows, by 2040, absent reform or other major tax or spending policy  changes, projected federal revenues will likely be insufficient to pay more  than interest on publicly held debt. Further, our recent shift from surpluses  to deficits means the nation is moving into the future in a weaker fiscal  position.
The United States has had a long-range budget deficit problem for a  number of years, even during recent years in which we had significant  annual budget surpluses. Unfortunately, the days of surpluses are gone, and  our current and projected budget situation has worsened significantly. The  bottom line is that our projected budget deficits are not manageable  without significant changes in “status quo” programs, policies, processes,  and operations.
Doing nothing is simply not an option nor will marginal efforts be enough.  Tough, difficult choices will have to be made. Clearly, the federal  government must start to exercise more fiscal discipline on both the  spending side and the tax side. While many spending increases and tax cuts  may be popular, they may not all be prudent. However, there is not a single  solution to the problems we face, but a number of solutions are needed.  And, it will take the combined efforts of many parties over an extended  period to address these fiscal challenges successfully.
One needed improvement is streamlining and simplifying the federal  government’s organizational structure to make it more economical,  efficient, effective, flexible, responsive, and accountable. This includes  addressing both fragmentation of effort and duplicative, overlapping, and  conflicting government programs, policies, and operations. We need  governmental organizations that embrace modern management practices  of the 21st century, including a strategic human capital management  approach. Streamlining the federal government to eliminate unnecessary  redundancy and inefficient operations will help address our growing fiscal  problems. It will not by itself solve the problem, but it certainly will help.
section_title: Need to Reexamine How Departments and Agencies Are Managing Their Programs and Organizations
paragraphs: It is important to reexamine periodically whether current programs and  activities remain relevant, appropriate, and effective in delivering the  government that Americans want, need, and can afford. This includes  assessing the sustainability of the programs over time as well as the  effectiveness of a range of tools—such as grants, loan guarantees, tax  incentives, regulation, and enforcement—that are used to achieve results.  Many federal programs—their goals, organizations, processes, and  infrastructures—were designed years ago to meet the demands as  determined at that time and within the technological capabilities of earlier  eras. We currently have 15 departments and numerous independent  agencies. The recent report of the Volcker Commission found that “fifty  years have passed since the last comprehensive reorganization of the  government” and that “the relationship of the federal government to the  citizens it services became vastly broader and deeper with each passing  decade.” The commission recommended a fundamental reorganization of  the federal government into a limited number of mission-related executive  departments to improve its capacity to design and implement public policy.  I believe that GAO’s past and present work supports the validity of this  finding. As a result, we should begin to take the steps necessary to make  this recommendation a reality. This hearing is one step toward doing so.
I believe that a number of events over the last few years, combined with a  greater understanding of broad trends, have fostered growing recognition  that fundamental change is necessary. This presents the Congress and the  executive branch with an opportunity to create highly effective,  performance-based organizations that can strengthen the nation’s ability to  meet the challenges of the 21st century and reach beyond our current level  of achievement. Many departments and agencies were created in a  different time and in response to problems and priorities very different  from today’s challenges. Some have achieved their one-time missions, yet  they are still in operation. Many have accumulated responsibilities beyond  their original purposes. Others have not been able to demonstrate how they  are making a difference in real and concrete terms. Still others have  overlapping or conflicting roles and responsibilities. Redundant,  unfocused, and uncoordinated programs waste scarce resources, confuse  and frustrate program customers, and limit overall program effectiveness.
Fundamental reexamination of federal agencies’ roles, functions, and  structure is never easy. Reorganizing government can be an immensely  complex and politically charged activity. Those who would reorganize  government must make their rationale clear and build a consensus for  change if proposed reorganizations are to succeed. All key players must be  involved in the process—the Congress, the President, affected executive  branch agencies, their employees and unions, and other interested parties,  including the public.
In recent years, events have driven us to reassess several major  components of government. In response to the events of September 11,  2001, the Department of Homeland Security was established. Seeing a  pressing need, the government moved expeditiously to form this new  agency and thus consolidate many disparate homeland security functions  under a single agency. However, the formation of the Department of  Homeland Security is still a work in progress. In January of this year, we  designated the implementation and transformation of the Department of  Homeland Security as high risk. The size and complexity of the effort and  the challenges the department inherited will require sustained attention  over time for the department to reach its full potential.
Driven in part by the events of September 11, 2001, the Federal Bureau of  Investigation (FBI) is also undergoing a major transformation, including a  multiphase reorganization, first announced in December 2001. The first  phase is designed to strengthen the FBI’s management structure, enhance  accountability, reduce executive span of control, and establish two new  divisions for Records Management and Security. The second phase is  designed to build, among other things, a national terrorism response  capability that is larger and more mobile, agile, and flexible by shifting  resources from other areas within the FBI. In June of this year, 18 months  into the effort, we reported progress in several areas but noted that major  challenges remain. These challenges included the continued need for a  comprehensive transformation plan, an updated strategic plan, and a  human capital strategic plan.
The tragedy of Columbia has turned a spotlight on the weaknesses in the  National Aeronautics and Space Administration’s (NASA) organization and  culture. The recent report of the Columbia Accident Investigation Board  made a number of very specific recommendations related to the NASA’s  organization. NASA now must take a hard look at its organizational  structure and culture. While NASA has undertaken numerous programs  that have greatly advanced scientific and technological knowledge, the  agency is at a critical juncture, and major management improvements are  needed. Earlier this year, we outlined several major management  challenges at NASA in human capital, contract, and financial management,  some of which have existed for years.
Improved performance has been a primary goal of several other  restructuring efforts under way. For example, the Internal Revenue Service  (IRS) is in the midst of a long-term modernization. In addition, the  Department of Defense (DOD) is in the process of transforming its  business operations, and the U.S. Postal Service faces the challenge of  transforming its business model for the 21st century.
These are some recent examples of building consensus and undertaking  restructuring to meet new or changed missions and goals. To a great extent,  these changes were driven by catastrophic events. Even with dramatic  events demonstrating the need for change, these reorganizations and  transformations will not be easy. It is likely to be even more difficult to  build consensus for reorganization and change when there is not such an  event driving it. However, current trends, poor performance, and growing  fiscal pressures demand that we make the effort. We simply cannot afford  unnecessary redundancy and inefficiency in the government, especially in  light of impending fiscal challenges and taxpayers deserve better.
GAO’s work has documented the widespread fragmentation and overlap in  both federal missions and individual federal programs. As new needs are  identified, the common response has been to add new responsibilities and  roles within federal departments and agencies, perhaps targeted to a newly  identified clientele or involving a new program delivery approach. In the  worst-case scenario, new programs are layered onto existing programs that  have failed or performed poorly. Though our work also suggests that some  issues, such as security, may warrant the involvement of multiple agencies  or more than one approach, fragmentation and overlap often adversely  affect the economy, efficiency, and effectiveness of the federal government.
Last month, we issued a report, Opportunities for Oversight and Improved  Use of Taxpayer Funds: Examples from Selected GAO Work. In this  report, we highlight opportunities for and specific examples of legislative  and administrative change that might yield budgetary savings. Several  examples clearly illustrate the need to take a hard look at our  organizational structures.
The responsibilities of the four major land management agencies—the  National Park Service, the Bureau of Land Management (BLM), the Fish  and Wildlife Service within the Department of the Interior, and the  Forest Service within the Department of Agriculture (USDA)—have  grown more similar over time. Most notably, the Forest Service and BLM  now provide more noncommodity uses, including recreation and  protection for fish and wildlife, on their lands. In addition, managing  federal lands has become more complex. Managers have to reconcile  differences among a number of laws and regulations, and the authority  for these laws is dispersed among several federal agencies as well as  state and local agencies. These changes have coincided with two other  developments—the federal government’s increased focus on downsizing  and budget constraints and scientists’ increased understanding of the  importance and functioning of natural systems, the boundaries of which  may not be consistent with existing jurisdictional and administrative  boundaries. Together, these changes and developments suggest a basis  for reexamining the processes and structures under which the federal  land management agencies operate.
Two basic strategies have been proposed to improve federal land  management: (1) streamlining the existing structure by coordinating and  integrating functions, systems, activities, programs, and field locations and  (2) reorganizing the structure by combining agencies. The two strategies  are not mutually exclusive. Some small steps have been taken. For  example, the Forest Service and BLM have colocated some offices or  shared space with other federal agencies. However, more needs to be done.
In 1987, the Congress passed the Stewart B. McKinney Act (Pub. L. No.  100-77) to address the multiple needs of homeless people. The act  encompasses both existing and new programs. Over the years, some of  the original McKinney programs have been consolidated or eliminated,  and some new programs have been added. Today, homeless people  receive assistance through these programs as well as other federal  programs that are not authorized under the McKinney Act but are  nevertheless specifically targeted to serve the homeless population. In  February 1999, we reported that seven federal agencies administer 16  programs that serve the homeless population, with the Department of  Housing and Urban Development (HUD) responsible for most of the  funds. Consolidating all of the homeless assistance programs under  HUD could increase administrative and operational efficiencies at the  federal level as well as reduce administrative and coordination burdens  for state and local governments, which also face fiscal challenges.
Each of the three military departments (Army, Navy, and Air Force)  operates its own health care system, providing medical care to active  duty personnel, their dependents, retirees, and survivors of military  personnel. To a large extent, these separate, costly systems perform  many of the same administrative, management, and operational  functions. Since 1949, numerous studies, the most recent completed in  2001, have reviewed whether a central entity should be created within  DOD to manage and administer the three health care systems. Most of  these studies encouraged some form of organizational consolidation. A  DOD health agency would consolidate the three military medical  systems into one centrally managed system, eliminating duplicative  administrative, management, and operational functions.
Similarly, there are potential benefits to be achieved by greater  coordination with the veterans health care system. In an effort to save  federal health care dollars, the Department of Veterans Affairs (VA) and  DOD have sought ways to work together to gain efficiencies. For  example, some local VA and DOD facilities have entered into joint  venture agreements, pooling resources to build a joint facility or  capitalizing on an existing facility. To ensure maximize use of federal  health care dollars, this area needs continued attention.
A multitude of agencies oversee food safety, with two agencies  accounting for most federal spending on, and regulatory responsibilities  for, food safety. The Food Safety and Inspection Service, under USDA, is  responsible for the safety of meat, poultry, eggs, and some egg products,  while the Food and Drug Administration, under the Department of  Health and Human Services, is responsible for the safety of most other  foods.
The current food safety system emerged from a patchwork of often  archaic laws and grew into a structure that actually hampers efforts to  address existing and emerging food safety risks. Moreover, the current  regulatory framework concentrates on only a segment—primarily food  processing—of the continuum of activities that bring food from farm to  table. The threat of deliberate contamination of the food supply and  scientific and technical advances in the production of food, such as the  development of genetically modified foods, have further complicated  the responsibilities of the existing federal food safety structure. The  food safety system suffers from overlapping and duplicative  inspections, poor coordination, and inefficient allocation of resources.  Consolidation of the federal food safety agencies under a single,  independent agency or under a single department could improve both  the efficiency and effectiveness of the system.
These examples illustrate a few of the opportunities that exist to improve  effectiveness and efficiency by reexamining the government’s  organizational structure. As part of this reexamination, it is important to  ask the fundamental question of whether an existing program, policy, or  activity “fits” the work we face today and will face in the future. It is  important not to accept all existing activities as givens by subjecting new  proposals to greater scrutiny than existing ones undergo. However, such a  fundamental reexamination is not easy. Success will depend on  establishing clear goals, having all the key players actively involved, and  using a process that can help build consensus.
Throughout the 20th century, efforts to structure the federal government to  address the economic and political concerns of the time met with varying  degrees of success. The first Hoover Commission, which lasted from 1947  through 1949, is considered by many to have been the most successful of  government restructuring efforts. The membership of the commission was  bipartisan, including members from the administration and both houses of  the Congress. Half of the members were from outside government. The  commission had a clear vision, making reorganization proposals that  promoted what it referred to as “greater rationality” in the organization and  operation of government agencies, and enhanced the President’s role as the  manager of the government—principles that were understood and  accepted by both the White House and the Congress. Former President  Hoover himself guided the creation of a citizens’ committee to build public  support for the commission’s work. More than 70 percent of the first  Hoover Commission’s recommendations were implemented, including 26  reorganization plans. According to the Congressional Research Service,  “the ease with which most of the reorganization plans became effective  reflected two factors: the existence of a consensus that the President ought  to be given deference and assistance by Congress in meeting his managerial  responsibilities, and the fact that most of the reorganization plans were  pretty straightforward proposals of an organizational character.”
History teaches lessons that are applicable today. Those who would  reorganize government must make their rationale clear and must build a  consensus for change before submitting specific proposals to the Congress  if these efforts are to succeed. To achieve substantive changes, it is  important that all players, particularly the Congress and the President,  agree on restructuring goals and establish processes to achieve their  objectives that provides needed transparency. The processes used may  vary depending on the significance of the changes sought. However, the  risk of failure is high if key players are not involved and no processes for  reaching consensus on specific reorganization proposals submitted to the  Congress for consideration are in place. Both having the right processes  and the right players are critical to success.
Restructuring existing programs is part of the solution to meeting the  challenges faced by our government. However, those decisions are not the  end of the story. Restructuring is not easy and takes time to fully  implement, even once consensus exists on specific proposals. This is why  we have designated the implementation and transformation of the  Department of Homeland Security as high risk. In addition to the  implementation actions taken within the executive branch, congressional  oversight throughout the implementation will be crucial to ultimate  success.
section_title: Need to Reassess How Federal Agencies Do Business
paragraphs: Regardless of the number and nature of federal entities, the government’s  goal should be to create high-performing organizations. We need to look at  not only at what business we are in, but how we do business. Practices that  were good 50 years ago may not make sense today. Old, outdated practices  and systems result in inefficiency and waste of resources that we cannot  afford.
Our work has identified opportunities to change how the government does  business. The following three examples illustrate opportunities to  improve business practices and to make them more efficient and effective.
USDA’s meat and poultry inspection system is hampered by inflexible  legal requirements and relies on outdated inspection methods. Current  law requires mandatory inspections that do not factor in risk. Inspectors  continue to largely rely on their sense of sight, smell, and touch in  making judgments about disease conditions, contamination, and  sanitation. Microbial testing for such things as salmonella, listeria, and  generic E. coli has increased but is still not sufficient. Legislative  revisions could allow USDA to emphasize risk-based inspections. Much  of the funding used to fulfill current, mandatory meat and poultry  inspection activities could be redirected to support more effective food  safety initiatives, such as increasing the frequency of inspections at  high-risk food plants.
Recently, GAO identified at least 21 different grant programs that can be  used by the nation’s first responders to address homeland security  needs. Multiple, fragmented grant programs can create a confusing and  administratively burdensome process for state and local officials  seeking to use federal resources to meet pressing homeland security  needs. In addressing the fragmentation prompted by the current  homeland security grant system, the Congress has taken the initial step  of bringing many of these programs under the Department of Homeland  Security. Additional administrative and legislative steps, such as block  grants, waivers, performance partnerships, and grant waivers, might be  considered. These approaches could provide state and local  governments with increased flexibility while potentially improving  intergovernmental efficiency and homeland security program outcomes.  Better integration, including consolidation, of programs could yield  administrative efficiencies that result in savings or improved  performance. In taking any additional steps, it will be important to  ensure accountability for both performance and funding.
The U.S. overseas presence at more than 260 overseas posts consists of  more than 90,000 people (including dependents of federal workers). The  workforce has been estimated at as many as 60,000 employees,  representing over 30 agencies. The Department of State employs about a  third of the U.S. workforce overseas, and its embassies and consulates  have become bases for the operations of agencies involved in hundreds  of activities. The costs of overseas operations and related security  requirements are directly linked to the size of the overseas workforce.  By reducing the number of employees at posts where U.S. interests are a  lower priority, consolidating functions, establishing regional centers, or  relocating personnel to the United States, the costs of overseas  operations could be significantly reduced. In August 2001, The  President’s Management Agenda noted that the U.S. overseas presence  is costly, increasingly complex, and of growing security concern. It  concluded that the cost and security considerations demand that the  overseas staffing process be improved.
Creating high performing organizations will require a cultural  transformation in government agencies and new ways of doing business.  Hierarchical management approaches will need to yield to partnerial  approaches. Process-oriented ways of doing business will need to yield to  results-oriented ones. “Siloed” organizations will need to become more  horizontal and integrated to make the most of the knowledge, skills, and  abilities of their people. Internally focused agencies will need to focus  externally to meet the needs and expectations of their ultimate clients—the  American people. Major programs and operations need urgent attention  and transformation to ensure that the government functions as  economically, efficiently, and effectively as possible. Management reform  will be vitally important for agencies to transform their cultures to address  the changing role of the government in the 21st century.
The key to effective public management in the 21st century is to ensure that  organizations have the characteristics and capabilities needed to  effectively influence and leverage partners, people, processes, and  technology to achieve results. As part of a continuing series of forums,  GAO will convene a forum in November that will focus specifically on the  implications of the public management environment in the 21st century for  federal agencies as they strive to become high performing organizations.  This forum is intended to help identify key characteristics and capabilities  of high-performing organizations in this environment, challenges facing  federal agencies in transitioning into high-performing organizations, and  ways in which the Congress and the executive branch can foster these  transformation efforts.
section_title: Importance of Strategic Human Capital Management
paragraphs: Strategic human capital management should be a centerpiece of any  serious change management initiative or any effort to transform the  cultures of government agencies. It is a vital element to the success of any  government restructuring efforts, whether within an existing agency or  across current agency boundaries. People are an agency’s most important  organizational asset. An organization’s people define its character, affect its  capacity to perform, and represent the knowledge base of the organization.  Human capital issues have been a focus of this Congress and certainly this  Subcommittee. They will require continuing attention.
Since 2001, we have designated human capital as a governmentwide high  risk. The Congress and the executive branch have taken a number of steps  to address the federal government’s human capital shortfalls. However,  serious human capital challenges continue to erode the ability of many  agencies, and threaten the ability of others, to perform their missions  economically, efficiently, and effectively. A consistent strategic approach to  maximize government performance and ensure its accountability is vital to  the success of any reorganization efforts as well as to transforming existing  agencies.
A high-performing organization should focus on human capital. Human  capital approaches are aligned with accomplishing missions and goals.  Strategies are designed, implemented, and assessed based on their ability  to achieve results and contribute to an organization’s mission. Leaders and  managers stay alert to emerging demands and human capital challenges.  They reevaluate their human capital approaches through the use of valid,  reliable, and current data, including inventories of employee skills and  competencies. Recruiting, hiring, professional development, and retention  strategies focus on ensuring that an agency has the needed talent to meet  organizational goals. Individual performance is clearly linked with  organizational performance. Effective performance management systems  provide a “line of sight” showing how unit, team, and individual  performance can contribute to overall organizational goals.
The first step in meeting the government’s human capital challenges is for  agency leaders to identify and make use of all the appropriate  administrative authorities available to them to manage their people both  effectively and equitably. The second step is for policymakers to purse  incremental legislative reforms. Most recently, the Congress has been  considering legislative proposals for the DOD.
As we have previously testified, agency-specific human capital reforms  should be enacted to the extent that the problems being addressed and the  solutions offered are specific to a particular agency (e.g., military  personnel reforms for DOD). In addition, targeted reforms should be  considered in situations in which additional testing or piloting is needed for  fundamental governmentwide reform.
Moving forward, we believe it would be preferable to employ a  governmentwide approach to address human capital issues and the need  for certain flexibilities that have broad-based application and serious  potential implications for the civil service system, in general, and for the  Office of Personnel Management (OPM), in particular. Some examples, that  have been pursed, include broadbanding, pay for performance,  reemployment, and pension offset waivers. As federal agencies compete  for resources, it is important to maintain a level playing field among  agencies.
However, whether through a governmentwide authority or agency-specific  legislation, in our view, such additional authorities should be put in  operation only when an agency has the institutional infrastructure in place  to use the new authorities effectively. This institutional infrastructure  includes, at a minimum, a human capital planning process that integrates  the agency’s human capital policies, strategies, and programs with its  program goals, mission, and desired outcomes; the capabilities to develop  and implement a new human capital system effectively; and a modern,  effective, and credible performance management system that includes  adequate safeguards, including reasonable transparency and appropriate  accountability mechanisms, to ensure the fair, effective, and  nondiscriminatory implementation of the system.
section_title: GAO as an Example of Positive Change
paragraphs: Transforming an organization is not an easy endeavor. It requires a  comprehensive, strategic approach that takes leadership, time, and  commitment. Because GAO is the agency that reviews others, we strive to  lead by example. To create a model federal agency and world-class  professional services organization, we have undertaken a comprehensive  transformation effort over the past few years. Our strategic plan, which is  developed in consultation with the Congress, is forward-looking and built  on the key trends emerging at the beginning of the 21st century that were  discussed earlier and relate to the United States and its position in the  world community.
We also have restructured our organization to align with our goals,  resulting in significant consolidation—going from 35 to 13 teams,  eliminating an extra organizational layer, and reducing the number of field  offices from 16 to 11. We have become more strategic, results-oriented,  partnerial, integrated, and externally focused. Our scope of activities  includes a range of oversight-, insight-, foresight-related engagements. We  have expanded and revised our product lines to better meet client needs.  We also continue to provide certain legal and adjudicatory services, as  specified in our authorizing legislation. In addition, we have redefined  success in result-oriented terms and linked our institutional and individual  performance measures. We have strengthened our client relations and  employed a “constructive engagement approach” with the entities we  review. The impact on our results has been dramatic. Client feedback  reports show significant improvement, and results for several of our key  performance indicators have almost doubled in only 4 years.
There are four lessons to be learned from our experiences. First, one  should not minimize how challenging it is for an organization to undertake  a comprehensive transformation. Second, transformation is multifaceted  and takes time. Our transformation began in 2000 and continues to be a  work in progress. Third, transformation must be based on the best, most  up-to-date management practices to reach its full potential. Fourth,  transformation requires continual management commitment, monitoring,  and oversight. Because of the 15-year terms for comptrollers general, GAO  has the advantage of stable, long-term leadership that many other agencies  do not have. However, our approach—based on best management  practices—can serve as a guide to others.
We employed a strategic, not an incremental, approach to transforming  GAO. Our approach is based on a regularly updated 6-year strategic plan  for serving the Congress. GAO’s strategic plan, which is currently being  updated, established clear goals and objectives. Three goals aimed at  providing Congress timely, quality service to: (1) address challenges to the  well-being and financial security of the American people, (2) respond to  changing security threats and the challenges of global interdependence,  and (3) transform the federal government’s role and how it does business.  Our fourth goal is to be a model federal agency and a world-class  professional organization. Our strategic plan provides a firm foundation  from which to identify priorities and opportunities for eliminating  redundancies and improving operations. It is the basis for our workforce  planning. It also sets the stage for maximizing our effectiveness and  efficiency. Our strategic planning process provides for updates with each  new Congress, ongoing analysis of emerging conditions and trends,  extensive consultations with congressional clients and outside experts, and  assessments of our internal capabilities and needs.
Our strategic plan formed the basis for a major organizational realignment.  This realignment focused the organization on our goals and resulted in  significant streamlining. The process employed to accomplish the  realignment required time, energy, and commitment from GAO’s senior  leadership. Input was sought from GAO executives and employees at all  levels throughout the process. Extensive communications with GAO staff  and key congressional stakeholders were maintained on an ongoing basis.  The result has been a more agile, effective, responsive, and accountable  organization that has been able to effectively respond to the many new  challenges presented to it.
People are an organization’s most important asset. Modern, effective, and  credible human capital policies are critical to the successful functioning of  any enterprise. This has been the case at GAO. In 2000, we sought and  received certain narrowly tailored human capital authorities, including  early out and buyout authorities. We have used these authorities  responsibly to strategically reshape GAO. In addition, we have  implemented a comprehensive recruiting program, instituted a  competency-based performance management system, made significant  investments in training and staff development, and continued to refine our  staffing process to maximize resource utilization. We continually seek to  refine and improve our human capital practices. Recently, I have sought  additional flexibilities for GAO to ensure quality service to the Congress;  continue leading by example in government transformation; and continue  to attract, retain, motivate, and reward a quality and high-performing  workforce. I appreciated the support from you Chairwoman Davis and the  Subcommittee on this request.
Continual communication with GAO staff is a critical feature of our human  capital strategy. Among other things, we periodically survey staff on a wide  range of human capital and organizational issues. I am pleased to report  that the results of our latest comprehensive survey, completed last month,  continued to demonstrate remarkably positive results.
Finally, we are continually evaluating, reengineering, and refining our work  processes to reflect the best management practices to ensure the most  effective and efficient service delivery. For example, we have employed  two new management strategies within the organization—risk  management and matrix management. GAO’s risk management approach  allows management to identify and involve internal stakeholders with  needed subject matter expertise throughout an engagement to transcend  traditional organizational boundaries, maximize institutional value, and  minimize related risks. GAO’s matrix management approach maximizes our  value to the Congress by leveraging the knowledge, skills, and experience  of all employees to ensure the highest quality products and services and to  help the Congress address the challenging, complex, changing, and  multidimensional problems facing the nation. As part of this effort, we  continually strive to provide GAO’s people with necessary tools,  technology, and training, and a world-class working environment.
GAO’s transformation can provide lessons about what can be  accomplished. To measure ourselves, we use a balanced scorecard,  measuring client service, results, and employees. On all three dimensions,  we are reporting very positive results. To illustrate, in fiscal year 2002,  GAO’s efforts helped the Congress and government leaders achieve   $37.7 billion in financial benefits—an $88 return on every dollar invested in  GAO, up from $19.7 billion and $58 return in fiscal 1998. The return on the  public’s investment in GAO extends beyond dollar savings to improvements  in how the government serves its citizens. The results in 2002 are in part  attributed to work we have done to transform GAO using a strategic,  comprehensive approach.
Similar benefits can be achieved in other governmental organizations.  Building on GAO’s experience, a comprehensive approach grounded in a  sound strategic plan and appropriate organizational alignment, and based  on the best management practices, including human capital management,  can yield optimal results in terms of effectiveness and efficiency.  Successful transformation is not easy. It will take strong, committed, and  persistent leadership, and it will take time. We are still working on it, but  we are ahead of schedule and are pleased with our progress.
section_title: Options for Strengthening Congressional Oversight
paragraphs: The challenges facing our nation are many and difficult. Clearly, there is a  need to reexamine how the federal government is organized both in the  executive and legislative branches. We need to reassess how the federal  government does business. Fundamental questions need to be asked about  what the federal government should be doing and who should be doing it,  given past changes and 21st century challenges. Clearly any major  organizational change is both complex and controversial. In considering  government restructuring and changes in business practices, it is important  to focus not just on the present but on the future trends and challenges.  Identifying goals for addressing these trends and challenges can provide a  framework for achieving the needed consensus. In fact, the effects of any  changes will be felt more in the future than they are today. Because the  world is not static and never will be, it is vital to take the long view,  positioning the government to meet challenges throughout the 21st century.
There is no easy answer to the challenges federal departments and  agencies face in transforming themselves. Multiple actions are required.  This is illustrated by the examples I have provided today. As the Congress  moves forward, it will be important to keep three things in focus: goals,  players, and processes. Clear goals are essential. Defining clear goals  forces decision makers to reach a shared understanding of what really  needs to be fixed in government, what the federal role ought to be, how to  balance differing objectives, and what steps need to be taken to create not  just short-term progress but long-term success. All key players must be  engaged if viable solutions are to be achieved—this means the Congress  and the President, as well as other parties with vested interests. Excluding  key players increases the risk of failure. Finally, the process used must be  tailored to the task at hand. Straightforward changes, such as the  consolidation of agency payment operations, may call for agency-centered  processes, requiring minimal involvement by the Congress or others. Other  changes, such as revamping the U.S. food safety system, will require a  process that involves key congressional stakeholders and administration  officials as well as others, ranging from food processors to consumers.  Even more ambitious changes like reorganizing the executive branch or  rationalizing the existing federal infrastructure will likely require  commission approaches similar to the Hoover Commission that I discussed  previously.
On September 24, 2002, GAO convened a forum to identify and discuss  useful practices and lessons learned from major private and public sector  organizational mergers, acquisitions, and transformations that federal  agencies could implement to transform their cultures successfully. While  there is no one right way to manage a successful merger, acquisition, or  transformation, the experiences of both successful and unsuccessful  efforts suggest that there are practices that are key to their success. These  key practices should be considered as federal agencies seek to transform  their cultures in response to governance challenges. These practices  include the following.
Ensure that top leadership drives the transformation.
Establish a coherent mission and integrated strategic goals to guide the  transformation.
Focus on a key set of principles and priorities at the outset of the  transformation.
Set implementation goals and a timeline to build momentum and show  progress from day one.
Dedicate an implementation team to manage the transformation  process.
Use the performance management system to define responsibility and  ensure accountability for change.
Establish a communication strategy to create shared expectations and  report related progress.
Involve employees to obtain their ideas and gain their sense of  ownership of the transformation.
Build a world-class organization.
Eliminating redundancy and improving federal operations are critical to  meeting the challenges we are facing at the beginning of the 21st century.  Chairwoman Davis has introduced the Government Accountability and  Streamlining Act of 2003. This bill is aimed at stopping the creation of any  additional unnecessary redundancy. As it considers this proposal, the  Congress may also want to consider other options, such as reinstituting  some form of budget controls, granting the President executive  reorganization authority, establishing special commissions, and enhancing  oversight. The Congress may want to consider giving federal department  and agencies additional tools to assist in the transformations that they  undertake, including creating chief operating officer positions in selected  departments and agencies and human capital reforms. As I have  emphasized, multiple approaches are needed to address not only future but  also existing redundancy and inefficiency in federal operations. Each of the  following seven tools has merit depending on the situation.
Government Accountability and Streamlining Act of 2003. This  proposal would require GAO to prepare statements for bills and  resolutions reported by congressional committees and subcommittees  on whether the responsibilities of any proposed new federal entities,  programs, or functions are redundant. While I appreciate the respect for  our work shown by this proposal, I also think it is important that we be  practical in designing such a mandate. This kind of evaluation is very  resource intensive, and there are currently no agreed-upon criteria for  determining whether an activity is actually duplicative or redundant.  Each year, there are hundreds of bills proposed by committees alone.  Though not all bills would have potential redundancy implications, the  number might be significant and could affect our other work for the  Congress. An alternative might be to provide the Chair of the House  Committee on Government Reform and its Senate counterpart with the  authority to request such an evaluation for any bill before it goes to the  floor. At a minimum, some way to limit the number of bills analyzed  would be necessary.
Reinstitution of budget controls. The appropriations caps and “pay-go”  requirements—which expired in 2002—limited the expansion and  creation of new government programs and activities. Such controls  could be beneficial given our current and future fiscal challenges. In  addition, the reconciliation process could be used more to force trade- offs as well as a reexamination of existing programs.
Executive reorganization authority. Earlier this year, the House  Committee on Government Reform held hearings on reinstating the  President’s executive reorganization authority. Though a bill has not yet  been introduced, this authority could provide a useful tool in  reexamining the federal government’s organizational structure.  Essentially, it would reinstate the authority of the President to submit  government restructuring plans to the Congress and obtain expedited  review. Such authority can better enable the President to propose  government organization designs that would be more efficient and  effective in meeting existing and emerging challenges. But it is  important to achieve consensus on identified problems, needs, and  solutions. The Congress has a vital role in this process. As I testified at  the April 2003 hearing, some expedited congressional consideration may  be appropriate for specific issues. However, the Congress may want to  consider different tracks for proposals that encompass significant  policy changes versus those that focus more narrowly on specific  government operations.
Special commissions. In the past, there have been special commissions  chartered to examine and make recommendations on difficult structural  issues. The most successful had both executive and bipartisan  legislative branch support. For example, the first Hoover Commission  had more than 70 percent of its recommendations implemented,  including 26 of 35 reorganization plans. More recently, the Base  Realignment and Closure process was used successfully to reduce  unneeded defense assets. Provided there is a clear statement of goals  and the process to be used, such commissions can provide an effective  means of examining issues in depth and formulating recommendations  for the consideration of the Congress.
Enhanced oversight. A management and oversight process that is  narrowly focused or one that considers only incremental changes, while  beneficial, will not allow the government to reach its full performance  potential. The government is composed of organizations, programs, and  functions that are overlapping, fragmented, and interdependent.  Structuring management and oversight only according to preexisting  boundaries, whether they be executive departments or congressional  committee structures, limits the full potential of any review. The  importance of seeing the overall picture cannot be overestimated. It is  important to be asking the right questions.
The traditional oversight that the Congress provides to individual  organizations, programs, and activities has an important role in  eliminating redundancy and inefficiencies. There are important benefits  to be achieved through focused oversight if the right questions are asked  about program design and management. Five key questions for program  oversight are as follows:  Does the program duplicate or even work at cross-purposes with  related programs and tools?
Is the program targeted properly?
Is the program financially sustainable and are there opportunities for  instituting appropriate cost-sharing and recovery mechanisms?
Can the program be made more efficient through reengineering or  streamlining processes or restructuring organizational roles and  responsibilities?
Are there clear goals, measures, and data with which to track  progress built into its planning and reporting systems?
Chief operating officer (COO). Transformation of a large organization  is a difficult undertaking, especially in government. Success depends on  committed, top-level leadership and sustained attention to management  issues. A COO could provide the sustained management attention  essential for addressing key infrastructure and stewardship issues and  could facilitate the transformation process. Establishing a COO in  selected federal agencies could provide a number of benefits. A COO  would be the focal point for elevating attention on management issues  and transformational change, integrating various key management and  transformation efforts, and instituting accountability for addressing  management issues and leading transformational change. A COO would  provide a single organizational position for key management functions,  such as human capital, financial management, information technology,  acquisition management, and performance management as well as for  transformational change initiatives. To be successful, in many cases, a  COO will need to be among an agency’s top leadership (e.g., deputy  secretary or under secretary). However, consistent with the desire to  integrate responsibilities, the creation of a senior management position  needs to be considered with careful regard to existing positions and  responsibilities so that it does not result in unnecessary “layering” at an  agency. Consideration also should be given to providing a term  appointment, such as a 5—7 year term. A term appointment would  provide sustained leadership. No matter how the positions are  structured, it is critical that the people appointed to these positions have  a proven track records in similar positions and be vested with sufficient  authority to achieve results. To further clarify expectations and  responsibilities, the COO should be subject to a clearly defined, results- oriented performance contract with appropriate incentives, rewards,  and accountability mechanisms. For selected agencies, a COO should be  subject to a Senate confirmation. In creating such a position, the  Congress might consider making certain subordinate positions, such as  the chief financial officer, not subject to Senate confirmation.
Governmentwide human capital reforms. There are a number of  reforms that might be considered. As I have previously testified,  Congress should consider providing governmentwide authority to  implement broadbanding, other pay for performance systems, and other  authorities whereby whole agencies are allowed to use additional  authorities after OPM has certified that they have the institutional  infrastructures in place to use them effectively and fairly. In addition to  requiring a human capital strategic plan from each agency, the Congress  should establish statutory principles for standards that an agency must  have in place before OPM can grant additional pay flexibilities.  Additional efforts should be taken to move the Senior Executive Service  to an approach wherein pay and rewards are more closely tied to  performance. Further, the Congress might consider establishing a  governmentwide fund where agencies, based on a sound business case,  could apply to OPM for funds to be used to modernize their  performance management systems and ensure that those systems have  adequate safeguards to prevent abuse. The governmentwide fund would  provide for targeted investments needed to prepare agencies to use their  performance management systems as strategic tools to achieve  organizational results and drive organizational change.
Government leaders are responsible and accountable for making needed  changes to position the federal government to meet current and future  challenges and to take advantage of emerging opportunities. In meeting  this responsibility, leaders must take advantage of every tool that is  available to them. Each of the seven tools that I have discussed has unique  characteristics and benefits that can be highly effective depending on the  goals to be achieved.
section_title: Concluding Remarks
paragraphs: In view of the trends and fiscal challenges facing the nation, there is a need  to consider the proper role of the federal government, how the government  should be structured, how the government should do business, and in some  instances who should do the government’s business. We cannot afford  unnecessary redundancy and inefficient operations, and taxpayers deserve  better. The federal government’s large and growing fiscal gap means that  doing nothing is simply not an option. Tough choices will have to be made  by elected officials. The Congress and the administration will need to use  every tool at their disposal to address these challenges. In addressing these  challenges, it will be important to set clear goals, involve all key players,  and establish viable processes that will lead to positive and sustainable  results. We in GAO take our responsibility to assist the Congress in these  crucial efforts very seriously.
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