My testimony today focuses on the major challenges faced by government in improving its performance and strengthening accountability. They are Adopting an effective results orientation. Improving the use of information technology to achieve results. Strengthening financial management for decision-making and accountability. Building, maintaining, and marshaling the human capital needed to achieve results. A central part of this challenge is giving adequate attention to resolving high-risk problems. Since 1990, we have identified government operations that are “high risk” because of their greater vulnerabilities to waste, fraud, abuse, and mismanagement. This effort brought a much needed focus on problems that are costing the government billions of dollars. To help, we have made hundreds of recommendations to improve these high-risk operations. Overall, agencies are making progress in trying to correct these problems and the Congress has acted through hearings and legislation. Sustained attention is needed to make further headway. High-risk problems are highlighted throughout this statement and listed in appendix I. The cornerstone of efforts to implement performance-based management is the adoption of a results orientation. Many agencies continue to struggle to implement basic tenets of performance-based management called for by the Government Performance and Results Act. The uneven pace of progress across government is not surprising; agencies are in the early years of undertaking the changes that performance-based management entails. Too often, the government has failed to manage on the basis of a clear understanding of the results expected to be achieved and how performance will be gauged. These understandings are vital because programs are designed and implemented in dynamic environments; competing program priorities and stakeholders’ needs must continuously be balanced and new needs addressed. The Social Security Administration (SSA) SSA has emphasized improving processes for quickly determining applicants' eligibility for the Supplemental Security Income (SSI) program and moving the eligible claimants onto the disability rolls. However, SSA has not put emphasis on the equally important result of helping individuals return to work and move off the disability rolls. Also, long-standing problems such as increasing overpayments and the inability to recover outstanding debt, contribute to SSI's status as a high-risk area. During fiscal year 1998, for example, current and former recipients owed SSA more than $3.3 billion, including $1.2 billion in newly detected overpayments for the year. SSA plans to improve SSI's overall payment accuracy. (GAO/OCG-99-20) The Internal Revenue Service (IRS) IRS' traditional performance goals and measures, such as amounts collected from taxpayers, had created incentives to maximize enforcement results, but provided insufficient incentives to ensure that taxpayers received fair treatment. IRS plans to emphasize identifying, as promptly as possible, taxpayers who may have compliance problems and then addressing the particular problems of those taxpayers. This customer-oriented approach is intended to help taxpayers and IRS by minimizing the need for subsequent enforcement actions. (GAO/OCG-99-14) Ineffective and outmoded organizational and program structures frequently have undermined agencies’ effectiveness. Challenges agencies confront range from the need for clearer lines of accountability to streamlining organizations in response to changing circumstances. All federal agencies share the ongoing need to ensure that their organizational structures and program approaches efficiently support the accomplishment of mission-related goals. The Department of Energy (DOE) DOE's organizational structure has neither clear lines of authority nor clear definitions of roles and responsibilities. Contractors receive policy guidance from program offices, but are managed by field offices that are not accountable to the program offices. While DOE had nearly $16.2 billion in obligations to contracts in fiscal year 1997, its contract management practices--including noncompetitive awards and lax oversight of costs and activities--continue to be high risk. DOE has a framework in place for contract reform but implementation problems remain. (GAO/OCG-99-6) The Department of Defense (DOD) The end of the cold war provided DOD with the opportunity to reduce the size and cost of its infrastructure and thereby make resources available for other priorities, such as force modernization and military readiness. We have identified areas in which DOD's infrastructure can be eliminated, streamlined, or reengineered. Improved infrastructure planning could help DOD components and programs to develop results-oriented goals and performance measures that link to and support DOD-wide goals. DOD is seeking ways to address mission support inefficiencies such as through consolidations and public-private partnerships. (GAO/OCG-99-4) Virtually all of the results that the government strives to achieve require the concerted and coordinated efforts of two or more agencies. However, mission fragmentation and program overlap are widespread and programs are not always well-coordinated. This wastes scarce funds, frustrates taxpayers, and limits overall program effectiveness. Table 1 illustrates this problem, found in over 30 programs across government and covering nearly a dozen federal missions. Federal agencies are working with their state partners to instill performance-based approaches to managing intergovernmental programs. Partnership agreements centered on results-oriented goals and measures can be an effective vehicle for achieving results while providing states with needed flexibility. However, in some cases the government could do a better job. The Health Care Financing Administration (HCFA) HCFA, as required by statute, has delegated to states the responsibility to inspect nursing homes and certify that they meet federal standards. We have identified problems in the enforcement of these standards. In analyzing recent inspection and complaint information in California, we found that nearly one in three nursing homes was cited by state inspectors for providing care that created serious or potentially life-threatening problems. Although state inspectors identified serious deficiencies, HCFA's policies did not ensure that these deficiencies were corrected. HCFA is developing plans to improve state inspection practices, revise oversight of state inspections, and strengthen actions against poorly performing homes. (GAO/OCG-99-7) An environment that focuses on results needs different information from that traditionally collected. Obtaining more credible results-oriented performance information is essential for (1) accurately assessing agencies’ progress in achieving goals and (2) in cases where sufficient progress is not being made, for identifying opportunities for improvement. The Environmental Protection Agency (EPA) EPA has found that the wealth of environmental data EPA and states collect are often difficult to compile in a meaningful way. For example, inconsistencies in water quality assessments, due to states using methodologies that differ, make it difficult for EPA to aggregate the data. Using information from these various sources presents a challenge when attempting to conclusively determine whether the quality of rivers, lakes, and streams is getting better or worse over time. Absent this information, it has been difficult for EPA to set priorities, evaluate the success of its programs and activities, and report on its accomplishments in a credible and informed way. (GAO/OCG-99-17) The Health Care Financing Administration HCFA had not developed its own process for estimating the national error rate for its over $181 billion Medicare fee-for-service payment program. For fiscal year 1997, the Department of Health and Human Service's Inspector General, in its CFO financial audit, estimated that about 11 percent of all such payments for claims, about $20 billion, did not comply with Medicare laws and regulations. HCFA has now adopted the reduction of the error rate as a performance goal under the Results Act. (GAO/OCG-99-7) The government is heavily dependent on computer systems and networks to implement vital public services supporting national defense, revenue collection, and social benefits. However, billions of dollars have been wasted for computer systems that failed to deliver expected results. To the extent that billions in planned annual obligations for information technology can be spent more wisely, federal programs will operate more efficiently with less cost. To accomplish this, the government faces a number of critical challenges. Resolving the Year 2000 computing problem is the most pervasive, time-critical risk facing government today. Unless adequate actions are taken, key federal operations—national defense, benefit payments, air traffic management, and more—could be seriously disrupted. Over the past 2 years, preparedness has improved markedly, but significant challenges remain and time is running out. Tier 1: Agencies Demonstrating Insufficient Evidence of Progress Tier 2: Agencies Showing Evidence of Progress But About Which OMB Had Concerns Tier 3: Agencies Making Satisfactory Progress HUD Interior VA EPA FEMA GSA NASA NSF NRC To help agencies mitigate Year 2000 risks, we produced guides on enterprise readiness, business continuity and contingency planning, and testing. We also issued over 70 reports and made over 100 recommendations to improve the readiness of the government as a whole and of a wide range of individual agencies. The scope of this problem extends beyond federal operations—it spans all spectrums of our national economy as well as globally. Accordingly, we recommended that the President’s Council on Year 2000 Conversion develop a comprehensive picture of the nation’s readiness by key economic sector—including risks posed by international links. The Council has adopted a sector-based focus to increase awareness and has begun developing a national assessment. Continuing computer security weaknesses put critical federal operations and assets at great risk. Such problems make it easier for individuals and groups to obtain sensitive information, commit fraud, or disrupt operations. In today’s environment, these threats include a range of military enemies, criminals, and terrorists who have the capability to severely disrupt or damage the systems and infrastructures upon which our nation depends. Much more needs to be done to ensure that systems and data supporting essential federal operations are adequately protected. First, individual agencies need to proactively manage risk and strengthen computer security programs by adopting best practices, such as those we described in a May 1998 executive guide entitled Information Security Management: Learning From Leading Organizations (GAO/AIMD-98-68). Second, stronger governmentwide leadership is essential.