The public faces a risk that critical services could be severely disrupted by the Year 2000 computing crisis. Financial transactions could be delayed, airline flights grounded, 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 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 its 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 that provides benefits to disabled persons could be disrupted if interfaces with state systems fail. In addition, the year 2000 also could cause problems for the many facilities used by the federal government that were built or renovated within the last 20 years that contain embedded computer systems to control, monitor, or assist in operations. 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 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. Our reviews of federal agency Year 2000 programs have found uneven progress. 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 contained numerous recommendations, which the agencies have almost universally agreed to implement. Among them were the need to complete inventories of systems, document data exchange agreements, and develop contingency plans. Audit offices of some states also have identified significant Year 2000 concerns. Risks include the potential that systems supporting benefits programs, motor vehicle records, and criminal records (i.e., prisoner release or parole eligibility determinations) may be adversely affected. These audit offices have made recommendations including the need for increased oversight, Year 2000 project plans, contingency plans, and personnel recruitment and retention strategies. Data exchanges between the federal government and the states are also critical to ensuring that billions of dollars in benefits payments are made to millions of recipients. Consequently, in October 1997 the Commonwealth of Pennsylvania hosted the first State/Federal Chief Information Officer (CIO) Summit. Participants agreed to (1) use a 4-digit contiguous computer standard for data exchanges, (2) establish a national policy group, and (3) create a joint state/federal technical group. America’s infrastructures are a complex array of public and private enterprises with many interdependencies at all levels. Key economic sectors that could be seriously impacted if their systems are not Year 2000 compliant are information and telecommunications; banking and finance; health, safety, and emergency services; transportation; utilities; and manufacturing and small business. The information and telecommunications infrastructure is especially important because it (1) enables the electronic transfer of funds, (2) is essential to the service economy, manufacturing, and efficient delivery of raw materials and finished goods, and (3) is basic to responsive emergency services. Illustrations of Year 2000 risks follow. According to the Basle Committee on Banking Supervision—an international committee of banking supervisory authorities—failure to address the Year 2000 issue would cause banking institutions to experience operational problems or even bankruptcy. Moreover, the Chair of the Federal Financial Institutions Examination Council, a U.S. interagency council composed of federal bank, credit union, and thrift institution regulators, stated that banking is one of America’s most information-intensive businesses and that any malfunctions caused by the century date change could affect a bank’s ability to meet its obligations. He also stated that of equal concern are problems that customers may experience that could prevent them from meeting their obligations to banks and that these problems, if not addressed, could have repercussions throughout the nation’s economy. According to the International Organization of Securities Commissions, the year 2000 presents a serious challenge to the world’s financial markets. Because they are highly interconnected, a disruption in one segment can spread quickly to others. FAA recently met with representatives of airlines, aircraft manufacturers, airports, fuel suppliers, telecommunications providers, and industry associations to discuss the Year 2000 issue. Participants raised the concern that their own Year 2000 compliance would be irrelevant if FAA were not compliant because of the many system interdependencies. Representatives went on to say that unless FAA were substantially Year 2000 compliant on January 1, 2000, flights would not get off the ground and that extended delays would be an economic disaster. Another risk associated with the transportation sector was described by the Federal Highway Administration, which stated that highway safety could be severely compromised because of potential Year 2000 problems in operational transportation systems. For example, date-dependent signal timing patterns could be incorrectly implemented at highway intersections if traffic signal systems run by state and local governments do not process four-digit years correctly. One risk associated with the utility sector is the potential loss of electrical power. For example, Nuclear Regulatory Commission staff believe that safety-related safe shutdown systems will function but that a worst-case scenario could occur in which Year 2000 failures in several nonsafety-related systems could cause a plant to shut down, resulting in the loss of off-site power and complications in tracking post-shutdown plant status and recovery. With respect to the health, safety, and emergency services sector, according to the Department of Health and Human Services, the Year 2000 issue holds serious implications for the nation’s health care providers and researchers. Medical devices and scientific laboratory equipment may experience problems beginning January 1, 2000, if the computer systems, software applications, or embedded chips used in these devices contain two-digit fields for year representation. In addition, according to the Gartner Group, health care is substantially behind other industries in Year 2000 compliance, and it predicts that at least 10 percent of mission-critical systems in this industry will fail because of noncompliance. One of the largest, and largely unknown, risks relates to the global nature of the problem. With the advent of electronic communication and international commerce, the United States and the rest of the world have become critically dependent on computers. However, there are indications of Year 2000 readiness problems in the international arena. In September 1997, the Gartner Group, a private research firm acknowledged for its expertise in Year 2000 issues, surveyed 2,400 companies in 17 countries and concluded that “hirty percent of all companies have not started dealing with the year 2000 problem.” Based on its survey, the Gartner Group also ranked certain countries and areas of the world. According to the Gartner Group, countries/areas at level I on its scale of compliance—just getting started—include Eastern Europe, many African countries, many South American countries, and several Asian countries, including China. Those at level II—completed the inventory process and have begun the assessment process—include Japan, Brazil, South Africa, Taiwan, and Western Europe. Finally, some companies in the United States, the United Kingdom, Canada, and Australia are at levels II while others are at level III. Level III indicates that a program plan has been completed and dedicated resources are committed and in place. Although there are many national and international risks related to the year 2000, our limited review of these key sectors found a number of private-sector organizations that have raised awareness and provided advice. For example: The Securities Industry Association established a Year 2000 committee in 1995 to promote awareness and since then has established other committees to address key issues, such as testing. The Electric Power Research Institute sponsored a conference in 1997 with utility professionals to explore the Year 2000 issue in embedded systems. Representatives of several oil and gas companies formed a Year 2000 energy industry group, which meets regularly to discuss the problem. The International Air Transport Association organized seminars and briefings for many segments of the airline industry. In addition, information technology industry associations, such as the Information Technology Association of America, have published newsletters, issued guidance, and held seminars to focus information technology users on the Year 2000 problem. As 2000 approaches and the scope of the problems has become clearer, the federal government’s actions have intensified, at the urging of the Congress and others. The amount of attention devoted to this issue has increased in the last year, culminating with the issuance of a February 4, 1998, executive order establishing the President’s Council on Year 2000 Conversion.