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. As you know, 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 personal and national security; the increasing interdependence of enterprises, economies, civil society, and national governments, referred to as globalization; the shift to market-oriented, knowledge-based economies; an aging and more diverse U.S. population; 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 an overwhelming fact: The fiscal pressures created by the retirement of the baby boom generation and rising health care costs threaten to overwhelm the nation’s fiscal future. Our latest long-term budget simulations reinforce the need for change in the major cost drivers—Social Security and health care programs. By midcentury, absent reform of these entitlement programs and/or other major tax or spending policy changes, projected federal revenues may be adequate to pay little beyond interest on the debt and Social Security benefits. Further, our recent shift from surpluses to deficits means that the nation is moving into the future in a weaker fiscal position. In response to the emerging trends and long-term fiscal challenges the government faces in the coming years, we have 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. The federal government cannot accept the status quo as a “given”—we need to reexamine the base of government programs, policies, and operations. We must strive to maintain a government that is effective and relevant to a changing society—a government that is as free as possible of outmoded commitments and operations that can inappropriately encumber the future, reduce our fiscal flexibility, and prevent future generations from being able to make choices regarding what roles they think government should play. 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 and yet they are still in business. 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 funds, confuse and frustrate program customers, and limit overall program effectiveness. Our work has documented the widespread existence of fragmentation and overlap from both the broad perspective of federal missions and from the more specific viewpoint of individual federal programs. As new needs are identified, the common response has been a proliferation of responsibilities and roles to federal departments and agencies, perhaps targeted on a newly identified clientele, or involving a new program delivery approach, or, in the worse case scenario, merely layered onto existing systems in response to programs that have failed or performed poorly. Though our work also suggests that some issues may warrant involvement of multiple agencies or more than one approach, fragmentation and overlap adversely impacts the economy, efficiency and effectiveness and of the federal government. It is obviously important to periodically reexamine 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, as well as the effectiveness of the tools—such as direct spending, loan guarantees, tax incentives, regulation, and enforcement—that these programs embody. Many federal programs—their goals, organizations, processes, and infrastructures—were designed years ago to meet the needs and demands as determined at that time and within the technological capabilities of that earlier era. The recent report of the Volcker Commission similarly observed that “ifty years have passed since the last comprehensive reorganization of the government” and that “he relationship of the federal government to the citizens it services became vastly broader and deeper with each passing decade.” The commission recommended that a fundamental reorganization of the federal government into a limited number of mission-related executive departments was needed to improve its capacity to design and implement public policy. We now have both an opportunity and an obligation to take a comprehensive look at what the government should be doing and how it should go about doing its work. Based on GAO’s own 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, increasing flexibility, and fully integrating rather than merely coordinating related government activities. Given the obvious case for reexamining the government’s structure, the major issue for debate today is the question of whether and how to change the Congress’ normal deliberative process for reviewing and shaping executive branch restructuring proposals. Such authority can serve to better enable presidential leadership to propose government designs that would be more efficient and effective in meeting existing and emerging challenges. Presidential leadership is critical to set goals and propose the means—the organizational design and policy tools—needed to achieve the goals. However, it is important to ensure a consensus on identified problems and needs, and to be sure that the solutions our government legislates and implements can effectively remedy the problems we face in a timely manner. Fixing the wrong problems, or even worse, fixing the right problems poorly, could cause more harm than good. Congressional deliberative processes serve the vital function of both gaining input from a variety of clientele and stakeholders affected by any changes and providing an important constitutional check and counterbalance to the executive branch. The statutory framework for management reform enacted during the 1990s demonstrates the Congress’ capacity to deal with governmentwide management reform needs. The Congress sought to improve the fiscal, program, and management performance of federal agencies, programs, and activities. For example, the Government Performance and Results Act (GPRA) is a central component of the existing statutory management framework, which includes other major elements, such as the Chief Financial Officers (CFO) Act, and information resource management improvements, such as the Clinger- Cohen Act. These laws provide information that is pertinent to a broad range of management-related decisions to help promote a more results- oriented management and decision-making process, regardless of what organizational approach is employed. The normal legislative process, which by design takes time to encourage thorough debate, does help to ensure that any related actions are carefully considered and have broad support. The Congress has played a central role in management improvement efforts throughout the executive branch and has acted to address several high-risk areas through both legislative and oversight activities. Traditionally, congressional and executive branch considerations of policy trade-offs are needed to reach a reasonable degree of consensus on the appropriate federal response to any substantive national need. It is imperative that the Congress and the administration form an effective working relationship on restructuring initiatives. Any systemic changes to federal structures and functions must be approved by the Congress and implemented by the executive branch, so each has a stake in the outcome. Even more importantly, all segments of the public that must regularly deal with their government—individuals, private sector organizations, states, and local governments—must be confident that the changes that are put in place have been thoroughly considered and that the decisions made today will make sense tomorrow. Only the Congress can decide whether it wishes to limit its powers and role in government reorganizations. As part of the legislative branch, we at GAO obviously have some concerns regarding any serious diminution of congressional authority. In certain circumstances, the Congress may deem limitations appropriate; however, care should be taken regarding the nature, timing, and scope of any related changes. Lessons can be learned from prior approaches to granting reorganization authority to the President. Prior successful reorganization initiatives reinforce the importance of maintaining a balance between executive and legislative roles in undertaking significant organizational changes. Safeguards are needed to ensure congressional input and concurrence on the goals as well as overall restructuring proposals. In the final analysis, the Congress must agree with any restructuring proposals submitted for consideration by the President in order for them to become a reality. Periodically, between 1932 and 1984, the Congress provided the President one form or another of expedited reorganization authority. Most of the authority granted during this period shared three characteristics. First, most previous authorities established rules that allowed the President’s plan to go into effect unless either house acted by passing a motion of disapproval within a fixed period. However, in accordance with the 1983 Chadha decision, which held the one-house legislative veto unconstitutional, the most recent expedited reorganization authority, granted to President Reagan in 1984, required passage of a joint affirmative resolution by both houses and signed by the President to approve any presidential reorganization plan. Hence, the need for both houses to positively approve a president’s plan for it to take effect set a higher bar for success and in essence gave the Congress a stronger role than in the past. Second, between 1949 and 1984, the Congress increasingly limited the scope of what the President could propose in a reorganization plan, which also had the effect of enhancing congressional control. For example, whereas in 1949, there were few restrictions on what the President could propose, the Reorganization Act of 1977 prohibited plans that, among other things, established, abolished, transferred, or consolidated departments or independent regulatory agencies. Third, expedited reorganization authority during this period limited the period of time during which a President could propose any reorganization plans. Clearly, the extent to which the Congress was willing to cede its authority to oversee the President’s reorganization plans has been an important variable in designing such provisions.