When legislative, administration, and agency actions, including those in response to our recommendations, result in significant progress toward resolving a high-risk problem, we remove the high-risk designation. The five criteria for determining if the high-risk designation can be removed are (1) a demonstrated strong commitment to, and top leadership support for, addressing problems; (2) the capacity to address problems; (3) a corrective action plan; (4) a program to monitor corrective measures; and (5) demonstrated progress in implementing corrective measures. For our 2013 high-risk update, we determined that the following two areas warranted removal from the High Risk List. Interagency contracting—where one agency either places an order using another agency’s contract or obtains contracting support services from another agency—can help streamline the procurement process, take advantage of unique expertise in a particular type of procurement, and achieve savings. While this method of contracting can save the government money and effort when properly managed, it also poses a variety of risks. In 2005, we designated the management of interagency contracting as high risk due in part to unclear lines of accountability between customer and assisting agencies and the potential for improper use, including out- of-scope work and noncompliance with competition requirements. We identified the continuing need for additional management controls and guidance and clearer definitions of roles and responsibilities as keys to addressing these issues. We have also highlighted challenges agencies faced in fully realizing the benefits of interagency contracts, including the lack of data and the risk of potential duplication when new contracting vehicles are created. To address these issues, we identified the need for a policy framework and business case analysis requirements to support the creation of certain new contracts and improved data on existing interagency contracts. As detailed in our 2013 high risk update report, we are removing the management of interagency contracting from the High Risk List based on the following: Continued progress in addressing previously identified deficiencies. In our 2009 and 2011 high-risk updates we noted improvements in procedures used in making purchases on behalf of the Department of Defense (DOD)—the largest user of interagency contracts. The DOD Inspector General has also reported a significant decrease in problems with DOD procurements through other federal agencies in congressionally mandated reviews of interagency acquisitions. More recently, we reported earlier this year that DOD substantially complied with new requirements for interagency contract orders. Strengthened management controls. In response to congressional direction, Federal Acquisition Regulation (FAR) provisions on interagency acquisitions were revised in 2010 to require that agencies make a best procurement approach determination to justify the use of an interagency contract and prepare written interagency agreements outlining the roles and responsibilities of customer and assisting organizations. OMB’s October 2012 analysis of reports from the 24 agencies that account for almost all contract spending governmentwide, found that most had implemented management controls to reinforce the new FAR requirements and strengthen the management of interagency acquisitions. New controls over the creation of new interagency contract vehicles. In response to congressional direction and our prior recommendation, OMB established a policy framework in September 2011 to govern the creation of new interagency contract vehicles. The framework addresses concerns about potential duplication by requiring agencies to develop a thorough business case prior to establishing certain contract vehicles. Improved data on interagency contracts. OMB and the General Services Administration have taken a number of steps to address the need for better data on interagency contract vehicles. These efforts should enhance both governmentwide efforts to manage interagency contracts and agency efforts to conduct market research and negotiate better prices. Importantly, congressional oversight sustained over several years, has been vital in addressing the issues that led this area to be designated high risk. Removing the management of interagency contracting from the High Risk List does not mean that the federal government’s use of these contracts is without challenges. But, we believe there are mechanisms in place that OMB and federal agencies can use to identify and address interagency contracting issues before they put the government at significant risk for waste, fraud, or abuse. We also will continue to monitor developments in this area. The Internal Revenue Service’s (IRS) Business Systems Modernization is a multi-billion dollar, highly-complex effort that involves the development and delivery of a number of modernized tax administration and internal management systems as well as core infrastructure projects that are intended to replace the agency’s aging business and tax processing systems. In 1995, we identified serious management and technical weaknesses in IRS’s modernization program that jeopardized its successful completion. We recommended many actions to fix the problems, and added IRS’s modernization to our High Risk List. In 1995, we also added the agency’s financial management to our High Risk List due to long-standing and pervasive problems which hampered the effective collection of revenues and precluded the preparation of auditable financial statements. We combined the two issues into one high-risk area in 2005 since resolution of the most serious financial management problems depended largely on the success of the business systems modernization program. We are removing IRS’s Business Systems Modernization program from the High Risk List because of: Progress in addressing weaknesses. In our 2007, 2009, and 2011 high risk updates, we reported that IRS continued to make progress in addressing our recommendations. In January 2012, the agency delivered the initial phase of its cornerstone tax processing project and began the daily processing and posting of individual taxpayer accounts. This enhanced tax administration and improved service by enabling faster refunds for more taxpayers, allowing more timely account updates, and faster issuance of taxpayer notices. Other improvements made led us to conclude that IRS’s remaining deficiencies in internal controls over information security no longer constitute a material weakness for financial reporting as of September 30, 2012. Commitment to sustaining progress in the future. In July 2011, we reported that IRS had put in place close to 80 percent of the practices needed for an effective investment management process, including all of the processes needed for effective project oversight. We also reported that IRS had embarked on an effort to improve its software development practices using the Carnegie Mellon University Software Engineering Institute’s Capability Maturity Model Integration (CMMI), which calls for disciplined software development and acquisition practices which are considered industry best practices. In September 2012, IRS’s application development organization reached CMMI maturity level 3, a high achievement by industry standards. Throughout the years, Congress conducted oversight of the Business Systems Modernization program by, among other things, requiring that IRS submit annual expenditure plans that needed to meet certain conditions, including a review by GAO. Because of the significant progress made in addressing the high-risk area, starting in fiscal year 2012, Congress did not require the submission of an annual expenditure plan. As with all areas removed from the High Risk List, we will continue to monitor how future events unfold. To determine which federal government programs and functions should be added to the High Risk List, we consider whether the program or function is of national significance or is key to government performance and accountability. Further, we consider qualitative factors, such as whether the risk involves public health or safety, service delivery, national security, national defense, economic growth, or privacy or citizens’ rights, or could result in significant impaired service, program failure, injury or loss of life, or significantly reduced economy, efficiency, or effectiveness. In addition, we also review the exposure to loss in quantitative terms such as the value of major assets being impaired, revenue sources not being realized, or major agency assets being lost, stolen, damaged, or wasted. We also consider corrective measures planned or under way to resolve a material control weakness and the status and effectiveness of these actions. This year, we added two new areas, delineated below, to the High Risk List based on those criteria. Climate change poses risks to many environmental and economic systems—including agriculture, infrastructure, ecosystems, and human health—and presents a significant financial risk to the federal government. The United States Global Change Research Program (USGCRP) has observed that the impacts and costliness of weather disasters will increase in significance as what are considered “rare” events become more common and intense due to climate change. Among other impacts, climate change could threaten coastal areas with rising sea levels, alter agricultural productivity, and increase the intensity and frequency of severe weather events such as floods, drought, and hurricanes. Weather-related events have cost the nation tens of billions of dollars in damages over the past decade. For example, in 2012, the administration requested $60.4 billion for Superstorm Sandy recovery efforts. These impacts pose significant financial risks for the federal government, which owns extensive infrastructure, insures property through federal flood and crop insurance programs, provides technical assistance to state and local governments, and provides emergency aid in response to natural disasters. However, the federal government is not well positioned to address this fiscal exposure, partly because of the complex, cross-cutting nature of the issue. Given these challenges and the nation’s precarious fiscal condition, we have added limiting the federal government’s fiscal exposure to climate change to our 2013 list of high-risk areas. Climate change adaptation—defined as adjustments to natural or human systems in response to actual or expected climate change—is a risk- management strategy to help protect vulnerable sectors and communities that might be affected by changes in the climate. For example, adaptation measures may include raising river or coastal dikes to protect infrastructure from sea level rise, building higher bridges, and increasing the capacity of storm water systems. Policymakers increasingly view climate change adaptation as a risk-management strategy to protect vulnerable sectors and communities that might be affected by changes in the climate, but, as we reported in 2009, the federal government’s emerging adaptation activities were carried out in an ad hoc manner and were not well coordinated across federal agencies, let alone with state and local governments. The federal government has a number of efforts underway to decrease domestic greenhouse gas emissions, but decreasing global emissions depends in large part on cooperative international efforts.