Over the past 2 years, the term “Year 2000 Problem” has become increasingly familiar. This problem is rooted in the way in which automated information systems have, for the past several decades, typically represented the year—using two digits rather than four—in order to conserve electronic data storage space and reduce operating costs. Thus 1998 would be represented as simply 98. In this format, however, 2000 is indistinguishable from 1900 because both are represented only as 00. As a result, if not modified, computer systems or applications that use dates or perform date- or time-sensitive calculations may generate incorrect results beyond 1999, reading 00 as 1900 rather than 2000. As we testified before the Congress a year ago, correcting this problem, in government as in the private sector, will be labor-intensive and time-consuming—and must be done while systems continue to operate.Many of the federal government’s computer systems were originally designed and developed 20 to 25 years ago; are poorly documented; and use a wide variety of computer languages—many of which are obsolete. Some applications include thousands, tens of thousands, or even millions of lines of code, each of which must be examined for date-format problems. Other system components—hardware, operating systems, communications interfaces, and database software—may also be affected by the date problem. Many data exchanges and interdependencies also exist among federal, state, and local governments; the private sector; foreign countries; and international organizations. Therefore, systems are also vulnerable to failure caused by incorrectly formatted data provided by other systems, which are noncompliant. Examples of such data exchanges include the following situations. Taxpayers can pay their taxes through data exchanges between the taxpayer, financial institutions, the Federal Reserve System, and the Department of the Treasury’s Financial Management Service and Internal Revenue Service. State disability determination systems provide data on an individual’s medical eligibility for disability benefits to the Social Security Administration which uses this data to support payments to disabled persons. Medical providers obtain payments for their medical services through data exchanges between the provider, Health Care Financing Administration (HCFA) and its contractors, the Social Security Administration, the Department of the Treasury, the Federal Reserve System, and financial institutions. Commercial and military aircraft and ships within the United States and in foreign countries and organizations interface with the Global Positioning System, which consists of satellites, ground systems, and receivers, for navigation purposes as well as for precision targeting and smart bombs. The public faces a high risk that critical services provided by the government and the private sector could be severely disrupted by the Year 2000 computing crisis. Financial transactions could be delayed, flights grounded, power lost, and national defense affected. The many interdependencies that exist among governments and within key economic sectors could cause a single failure to have adverse repercussions. While managers in the government and the private sector are taking many actions to mitigate these risks, a significant amount of work remains, and time frames are unrelenting. The federal government is extremely vulnerable to the Year 2000 issue due to its widespread dependence on computer systems to process financial transactions, deliver vital public services, and carry out its operations. This challenge is made more difficult by the age and poor documentation of some of the government’s existing systems and its lackluster track record in modernizing systems to deliver expected improvements and meet promised deadlines. Unless this issue is successfully addressed, serious consequences could ensue. For example: Unless the Federal Aviation Administration (FAA) takes much more decisive action, there could be grounded or delayed flights, degraded safety, customer inconvenience, and increased airline costs. Payments to veterans with service-connected disabilities could be severely delayed if the system that issues them either halts or produces checks so erroneous that it must be shut down and checks processed manually. The military services could find it extremely difficult to efficiently and effectively equip and sustain their forces around the world. Federal systems used to track student loans could produce erroneous information on loan status, such as indicating that a paid loan was in default. Internal Revenue Service tax systems could be unable to process returns, thereby jeopardizing revenue collection and delaying refunds. The Social Security Administration process to provide benefits to disabled persons could be disrupted if interfaces with state systems fail. In addition, the year 2000 could also cause problems for the many facilities used by the federal government that were built or renovated within the last 20 years and contain embedded computer systems to control, monitor, or assist in operations. Many of these systems could malfunction due to vulnerability to the Year 2000 problem. For example, heating and air conditioning units could stop functioning properly and card-entry security systems could cease to operate. Year 2000-related problems have already been identified. For example, an automated Defense Logistics Agency system erroneously deactivated 90,000 inventoried items as the result of an incorrect date calculation. According to the agency, if the problem had not been corrected (which took 400 work hours), the impact would have been catastrophic and would have seriously hampered its mission to deliver materiel in a timely manner. In another case, the Department of Defense’s Global Command Control System, which is used to generate a common operating picture of the battlefield for planning, executing, and managing military operations, failed testing when the date was rolled over to the Year 2000. In order to assist federal agencies in addressing their Year 2000 risks, we developed an enterprise readiness guide that offers a structured, step-by-step approach for reviewing the adequacy of agency planning and management of its Year 2000 program. The guide describes five phases of a Year 2000 program: awareness, assessment, renovation, validation, and implementation. Over 30,000 copies of the guide—which was released to the public as an exposure draft in February 1997 and issued in September 1997—have been requested. We have also reviewed the Year 2000 programs of a number of federal agencies and have issued over two dozen reports and testimonies on this issue. (For a complete list of our reports and testimonies on the Year 2000 issue, see the “Related GAO Products” section at the end of this report.) In general, our reviews found that progress has been uneven. As discussed below, some agencies are significantly behind schedule and are at high risk that they will not fix their systems in time. Other agencies have made progress, although risks remain and a great deal more work is needed. Our reports have numerous recommendations which the agencies have almost universally agreed to implement. Federal Aviation Administration (FAA). FAA has been severely behind schedule in completing basic awareness and assessment activities. In our January 1998 report, we concluded that at its current pace, FAA would not make it in time. Moreover, FAA had not (1) analyzed the impact of its systems’ not being Year 2000 compliant, (2) inventoried and assessed all of its systems for date dependencies, or (3) developed contingency plans to ensure continuity of operations. Accordingly, we made several recommendations including that FAA should (1) assess how its business lines and the aviation industry would be affected if the Year 2000 problem were not corrected in time and use this information to help rank the agency’s Year 2000 activities, (2) complete its inventory of all information systems and determine each one’s criticality and decide whether each system should be converted, replaced, or retired, and (3) craft Year 2000 contingency plans for all business lines. FAA has agreed to implement our recommendations. Social Security Administration (SSA). A federal leader in addressing Year 2000 issues, SSA had made significant progress in assessing and renovating mission-critical mainframe software. However, we found that SSA remained at risk in that not all mission-critical systems necessary to prevent the disruption of benefit payments will be corrected before January 1, 2000. At particular risk are the 54 state disability determination systems that had not yet been assessed. In addition, SSA faced the risk that inaccurate data would be introduced into its databases by the hundreds of federal and state agencies and thousands of businesses with which it exchanges data files. Also, SSA had not developed contingency plans. We made several recommendations to the Commissioner of SSA to address these areas. SSA agreed with all of our recommendations and identified specific actions that it would take to ensure an adequate transition to the year 2000. Department of Veterans Affairs (VA). We reported that at VA, the Veterans Benefits Administration is addressing the Year 2000 problem but needed to take additional action to correct its systems in time.Accordingly, we made 10 specific recommendations, such as (1) completing an analysis to determine whether the Veterans Benefits Administration’s internal applications, interfaces, and third-party products were Year 2000 compliant and (2) developing a Year 2000 contingency plan. VA agreed to implement these recommendations. In a later review, we found that VA had initiated a number of these actions but that substantial risks remained. Department of Defense. We recently reported that the Department of Defense, which is responsible for about a third of the federal government’s reported mission critical systems, has taken positive actions to increase awareness, promote sharing of information, and encourage components to make Year 2000 remediation efforts a priority, but that its progress in fixing systems has been slow. However, Defense lacked key management and oversight controls to enforce good management practices, to direct resources, and to establish a complete picture of its progress in fixing systems. Accordingly, we recommended that the Secretary of Defense (1) establish a strong department-level program office, (2) expedite efforts to establish a comprehensive, accurate departmentwide inventory of systems, interfaces, and other equipment needing repair, (3) clearly define criteria and an objective process for prioritizing systems for repair based on their mission-criticality, (4) ensure that system interfaces are adequately addressed, (5) develop an overall, departmentwide testing strategy and a plan for ensuring that adequate resources are available to perform necessary testing, (6) require components to develop contingency plans, and (7) prepare complete and accurate Year 2000 cost estimates. The Department of Defense concurred with our recommendations.