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Testimony: 

Before the Committee on Appropriations, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 10:00 a.m. EST: 

March 10, 2006: 

Fiscal Year 2007 Budget Request: 

Statement of David M. Walker: 
Comptroller General of the United States: 

GAO-06-417T: 

Mr. Chairman and Members of the Committee: 

I am pleased to appear before the Committee today in support of the 
fiscal year 2007 budget request for the U.S. Government Accountability 
Office (GAO). This request will help us continue our support of the 
Congress in meeting its constitutional responsibilities and will help 
improve the performance and ensure the accountability of the federal 
government for the benefit of the American people. 

Budget constraints in the federal government grew tighter in fiscal 
years 2005 and 2006. In developing our fiscal year 2007 budget, we 
considered those constraints consistent with GAO's and the Committee's 
desire to "lead by example." In fiscal year 2007, we are requesting 
budget authority of $509.4 million, a reasonable 5 percent increase 
over our fiscal year 2006 revised funding level. In the event Congress 
acts to hold federal pay increases to 2.2 percent, our requested 
increase will drop to below 5 percent. This request will allow us to 
continue making improvements in productivity, maintain our progress in 
technology and other transformation areas, and support a full-time 
equivalent (FTE) staffing level of 3,267. This represents an increase 
of 50 FTEs over our planned fiscal year 2006 staffing level and will 
allow us to rebuild our workforce to a level that will position us to 
better respond to increasing supply and demand imbalances in areas such 
as disaster assistance, the global war on terrorism, homeland security, 
forensic auditing, and health care. 

I am proud of the work we accomplished this past fiscal year in support 
of the Congress and the American people. We provided our congressional 
clients with timely, objective, and reliable information on how well 
government programs and policies are working and, when needed, 
recommendations for improvement. In the years ahead, our support to the 
Congress will likely prove to be even more critical because of the 
pressures created by our nation's current and projected budget deficit 
and growing long-term fiscal imbalance. Indeed, as it considers those 
fiscal pressures, the Congress will be grappling with tough choices 
about what government does, how it does business, and who should do the 
government's business. GAO is a valuable tool for helping the Congress 
review, reprioritize, and revise existing mandatory and discretionary 
spending programs and tax policies. Additionally, through its 
involvement domestically with the federal, state, and local audit 
community and internationally with its national audit office 
counterparts, GAO has played--and will continue to play--an important 
role in helping to ensure the financial integrity of U.S. funds 
expended at home and abroad. GAO-led efforts to develop and implement 
the first-ever strategic plans for the National Intergovernmental Audit 
Forum and the International Organization of Supreme Audit Institutions 
have helped improve the effectiveness of these audit organizations and 
GAO to work more efficiently and cost-effectively. 

In an effort to identify areas for potential improvement, GAO underwent 
two peer reviews in fiscal year 2005. We obtained a clean opinion on 
our performance audit practice from an international team of 
experienced auditors--the first time that we have sought such an 
opinion. The independent reviewers concluded that we have designed and 
implemented an effective system of quality controls to provide 
reasonable assurance of complying with generally accepted government 
auditing standards, which are designed to ensure that audits of 
government activities are objective, independent, and reliable. This 
opinion validated that the Congress and the American people can rely on 
our work and products. Also during fiscal year 2005, GAO received an 
unqualified report, or clean opinion, on the results of the external 
peer review of its financial audit practice. External peer reviews are 
conducted on a 3-year cycle, and this is the fourth such clean opinion 
that GAO has received from an external peer reviewer since the program 
began in fiscal year 1996. The external peer reviewer, KPMG LLP, found 
that the system of quality control for GAO's financial auditing 
practice met professional standards and that GAO in fact complied with 
the standards. 

In fiscal year 2005, we met or exceeded targets for 10 of our 14 
performance measures, while setting or matching all-time records for 3 
measures. We documented $39.6 billion in financial benefits--a return 
of $83 for every dollar we spent--and over 1,400 nonfinancial benefits-
-a record for us. Our targets for fiscal years 2006 and 2007 will 
continue to challenge the agency in our efforts to support the Congress 
and serve the American people. Beginning with fiscal year 2006, we will 
add 2 internal operations measures to the list. These 2 new performance 
measures will assess how well our mission and people are supported by 
our infrastructure operations staff. 

In fiscal year 2005, we issued two products that will assist the 
Congress as it addresses future challenges. Recognizing the importance 
and scope of these reports, we provided a copy to every member of 
Congress and each Committee, as well as the White House. Our report 
entitled 21st Century Challenges: Reexamining the Base of the Federal 
Government provides a series of illustrative questions related to 12 
areas of federal activity as well as our perspective on various 
strategies and approaches that should be considered as a possible means 
to address the issues and questions raised in the report. Drawing on 
our institutional knowledge and extensive program evaluation and 
performance assessment work for the Congress, we presented over 200 
specific 21st century questions illustrating the types of hard choices 
our nation needs to face as it reexamines what the federal government 
should do, how it should do it, and how it should be financed. We also 
issued our High-Risk Series: An Update, which identifies federal areas 
and programs at risk of fraud, waste, abuse, and mismanagement and 
those in need of broad-based transformations. The issues affecting many 
of these areas and programs may take years to address, and the report 
will serve as a useful guide for the Congress's future programmatic 
deliberations and oversight activities. The current administration has 
looked to our high-risk program in shaping governmentwide initiatives 
such as the President's Management Agenda, which has at its base many 
of the areas we had previously identified as high risk. The Office of 
Management and Budget (OMB), in consultation with GAO, is currently 
working to ensure that agencies develop detailed action plans to 
address high-risk areas, with the ultimate objective, over time, of 
seeing these items removed from our high-risk list. 

As in past years, during fiscal year 2005, our work covered a number of 
major topics of concern to the nation and, in some cases, the world. 
For example, we reported on the nation's long-term fiscal challenges, 
the financial condition of the airline industry, spending and 
reconstruction activities related to Iraq and Afghanistan, and 
strengthening the visa process as an antiterrorism tool. We also 
examined the Department of Defense's (DOD's) transformation challenges, 
base realignment and closure issues, increasing the strategic focus of 
federal acquisitions, protecting against identity theft, the oversight 
of electricity markets, zero down-payment mortgages, and immigration 
enforcement. We testified many times before the Congress, contributing 
to the public debate on a variety of topics that included Social 
Security reform, pension reform, postal reform, GSE oversight, wildland 
fire management, gasoline prices, the flu vaccine, veterans' health 
care, benefits for members of the Reserves and National Guard, digital 
broadcast television, long-term health care financing, passport fraud 
detection, reducing the tax gap, information security, and a range of 
financial management and accountability issues. In addition, we 
conducted a range of work on a variety of legislative branch agencies 
and projects, including the Capitol Visitor's Center, the Architect of 
the Capitol, and the U.S. Capitol Police. 

This past year we also continued to take steps internally to help us 
achieve our goal of being a model federal agency and a world-class 
professional services organization. These steps helped us to address 
our three major management challenges--human capital, physical 
security, and information security. Through the GAO Human Capital 
Reform Act of 2004, the Congress granted GAO several additional human 
capital flexibilities that will allow us, among other things, to move 
to an even more performance-oriented and market-based compensation 
system. As you have heard me say many times, our most valuable asset is 
our people, and the flexibilities granted in this act will help us to 
continue to modernize our people-related policies and strategies, 
which, in turn, will help ensure that we are well-equipped to serve the 
Congress and the American people in the years to come. As a result, we 
are continuing to take a range of actions designed to modernize our 
human capital policies and practices. In fiscal year 2005, we adopted a 
broad pay band approach and a more performance-oriented pay system for 
our administrative staff. In fiscal year 2006, we implemented a more 
market-based and skills-, knowledge-, and performance-oriented 
classification and pay system for all of our employees. 

My testimony today will focus on our budget request for fiscal year 
2007 to support the Congress and serve the American people and on our 
performance and results with the funding you provided us in fiscal year 
2005. 

GAO's Fiscal Year 2007 Request to Support the Congress: 

Our fiscal year 2007 budget request will provide us the resources 
necessary to achieve our performance goals in support of the Congress 
and the American people. This request will allow GAO to improve 
productivity and maintain progress in technology and other 
transformation areas. We continue to streamline GAO, modernize our 
policies and practices, and leverage technology so that we can achieve 
our mission more effectively and efficiently. These continuing efforts 
allow us to enhance our performance without significant increases in 
funding. Our fiscal year 2007 budget request represents a modest 
increase of about $25 million (or 5 percent) over our fiscal year 2006 
revised funding level--primarily to cover uncontrollable mandatory pay 
and price level increases. This request reflects a reduction of nearly 
$5.4 million in nonrecurring fiscal year 2006 costs used to offset the 
fiscal year 2007 increase. This request also includes about $7 million 
in one-time fiscal year 2007 costs, which will not recur in fiscal year 
2008, to upgrade our business systems and processes. 

As the Congress addresses the devastation in the Gulf Coast region from 
Hurricane Katrina and several other major 2005 hurricanes, GAO is 
supporting the Congress by assessing whether federal programs assisting 
the people of the Gulf region are efficient and effective and result in 
a strong return on investment. In order to address the demands of this 
work; better respond to the increasing number of demands being placed 
on GAO, including a dramatic increase in health care mandates; and 
address supply and demand imbalances in our ability to respond to 
congressional interest in areas such as disaster assistance, homeland 
security, the global war on terrorism, health care, and forensic 
auditing, we are seeking your support to provide the funding to rebuild 
our staffing level to the levels requested in previous years. We 
believe that 3,267 FTEs is an optimal staffing level for GAO that would 
allow us to more successfully meet the needs of the Congress. 

In preparing this request and taking into account the effects of the 
fiscal year 2006 rescission, we revised our workforce plan to reduce 
fiscal year 2005 hiring and initiated a voluntary early retirement 
opportunity for staff in January 2006. These actions better support 
GAO's strategic plan for serving the Congress, better align GAO's 
workforce to meet mission needs, correct selected skill imbalances, and 
allow us to increase the number of new hires later in fiscal year 2006. 
Our revised hiring plan represents an aggressive hiring level that is 
significantly higher than in recent fiscal years, and it is the maximum 
number of staff we could absorb during fiscal year 2006. These actions 
will also position us to more fully utilize our planned FTE levels of 
3,217 and 3,267 in fiscal years 2006 and 2007, respectively. 

Our fiscal year 2007 budget request includes approximately $502 million 
in direct appropriations and authority to use about $7 million in 
estimated revenue from rental income and reimbursable audit work. Table 
1 summarizes the changes we are requesting in our fiscal year 2007 
budget. 

Table 1: Fiscal Year 2007 Budget Request, Summary of Requested Changes: 

Dollars in thousands. 

FY 2006 enacted budget authority; 
Amount: $489,560; 
FTEs: 3,217; 
Less: rescission; 
Amount: $(4,896); 
FY 2006 revised budget authority; 
Amount: $484,664. 

FY 2007 requested changes: 

Nonrecurring fiscal year 2006 costs; 
Amount: $(5,380); 
Cumulative percentage change: (1%). 

Mandatory pay costs; 
FTEs: 50; 
Amount: $18,469; 
Cumulative percentage change: 3%. 

Price level changes; 
Amount: $4,073; 
Cumulative percentage change: 4%. 

Relatively controllable costs; 
Amount: $7,528. 

Adjustment due to rounding; 
Amount: $1. 

Subtotal - requested changes; 
FTEs: 50; 
Amount: $24,691; 
Cumulative percentage change: 5%. 

Total FY 2007 budget authority required to support GAO operations; 
FTEs: 3,267; 
Amount: $509,355. 

Source: GAO. 

[End of table] 

Our fiscal year 2007 budget request supports three broad program areas: 
Human Capital, Engagement Support, and Infrastructure Operations. 
Consistent with our strategic goal to be a model agency, we have 
undertaken a number of initiatives to implement performance-based, 
market-oriented compensation systems; adopt best practices; benchmark 
service levels and costs; streamline our operations; cross-service and 
outsource activities; and leverage technology to increase efficiency, 
productivity, and results. 

The Human Capital Program provides the resources needed to support a 
diverse, highly educated, knowledge-based workforce comprising 
individuals with a broad array of technical and program skills and 
institutional memory. This workforce represents GAO's human capital-- 
its greatest asset--and is critical to the agency's success in serving 
the Congress and the nation. Human Capital Program costs represent 
nearly 80 percent of our requested budget authority. 

To further ensure our ability to meet congressional needs, we plan to 
allocate approximately $17 million for Engagement Support to: 

* conduct travel, a critical tool to accomplish our mission of 
following the federal dollar cross the country and throughout the 
world, and to ensure the quality of our work; 

* contract for expert advice and assistance when needed to meet 
congressional timeframes for a particular audit or engagement; and: 

* ensure a limited presence in the Middle East to provide more timely, 
responsive information on U.S. activities in the area. 

In addition, we plan to allocate about $91 million--or about 18 percent 
of our total request--for Infrastructure Operations programs and 
initiatives to provide the critical infrastructure to support our work. 
These key activities include information technology, building 
management, knowledge services, human capital operations, and support 
services. 

Performance, Results, and Plans: 

In fiscal year 2005, the Congress focused its attention on a broad 
array of challenging issues affecting the safety, health, and well- 
being of Americans here and abroad, and we were able to provide the 
objective, fact-based information that decision makers needed to 
stimulate debate, change laws, and improve federal programs for the 
betterment of the nation. For example, as the war in Iraq continued, we 
examined how DOD supplied vehicles, body armor, and other materiel to 
the troops in the field; contributed to the debate on military 
compensation; and highlighted the need to improve health, vocational 
rehabilitation, and employment services for seriously injured soldiers 
transitioning from the battlefield to civilian life. We kept pace with 
the Congress's information needs about ways to better protect America 
from terrorism by issuing products and delivering testimonies that 
addressed issues such as security gaps in the nation's passport 
operations that threaten public safety and federal efforts needed to 
improve the security of checked baggage at airports and cargo 
containers coming through U.S. ports. We also explored the financial 
crisis that weakened the airline industry and the impact of this 
situation on the traveling public and airline employees' pensions. We 
performed this work in accordance with our strategic plan for serving 
the Congress, consistent with our professional standards, and guided by 
our core values (see appendix 1). See table 2 for examples of how GAO 
assisted the nation in fiscal year 2005. 

Goal: 1; 
Description: Provide timely, quality service to the Congress and the 
federal government to address current and emerging challenges to the 
well-being and financial security of the American people; 
GAO provided information that helped to: 
* Improve the transition from active duty to civilian status for 
veterans with serious war- related injuries; 
* Address long-term health care financing pressures on state and local 
government budgets; 
* Identify challenges associated with transferring the Medicare appeals 
process from the Social Security Administration and HHS; 
* Improve patient safety at Department of Veterans' Affairs hospitals; 
* Improve the security of Social Security numbers; 
* Address the challenges of pension reform; 
* Strengthen the security screening process for passengers and checked 
baggage at the nation's airports; 
* Improve the oversight of Federal Housing Administration single-family 
and multifamily lenders; 
* Improve the oversight of electricity markets by the Federal Energy 
Regulatory Commission; 
* Identify challenges associated with the Department of Energy's 
(DOE's) nuclear facility designs; 
* Monitor the growth in the digital television market; 
* Analyze issues contributing to the declining financial condition of 
the airline industry. 

Goal: 2; 
Description: Provide timely, quality service to the Congress and the 
federal government to respond to changing security threats and the 
challenges of global interdependence; 
GAO provided information that helped to: 
* Improve the management of funds for the global war on terrorism; 
* Increase the security of cargo containers to prevent terrorist 
activity; 
* Alert the Congress to issues affecting the DOD's major weapon 
systems; 
* Analyze funding options for a new federal foreign assistance program--
the Millennium Challenge Account; 
* Promote government efforts to address threats to the security of the 
nation's information systems; 
* Strengthen the visa process as an antiterrorism tool; 
* Improve management of the U.S. Coast Guard's Deepwater Program; 
* Shape the debate on improving military pay and benefits; 
* Strengthen the U.S. strategic export control system; 
* Identify improvements needed to secure critical IT systems used by 
U.S. financial markets; 
* Report to the Congress on the 2005 base realignment and closures 
(BRAC) defense transformation. 

Goal: 3; 
Description: Help transform the federal government's role and how it 
does business to meet 21st century challenges; 
GAO provided information that helped to: 
* Increase the public's understanding of the federal government's long-
term fiscal challenges; 
* Implement governmentwide civil service reforms; 
* Oversee federal tax policy; 
* Increase debts collected from criminals; 
* Decrease improper payments made by the USDA Food Stamp Program and 
other federal agencies; 
* Manage multibillion dollar IT modernizations and investments at the 
Department of Homeland Security (DHS) and Office of Personnel 
Management; 
* Improve agencies' strategic purchasing practices; 
* Examine changes in key areas of federal activity that could affect 
the federal government's fiscal future; 
* Enhance the knowledge base on comprehensive national indicators; 
* Improve postal operations through reform legislation. 

Goal: 4; 
Description: Maximize the value of GAO by being a model federal agency 
and a world-class professional services organization; 
GAO provided information that helped to: 
* Foster among other federal agencies GAO's innovative human capital 
practices, such as broad pay bands; 
* performance-based compensation; 
* and workforce planning and staffing strategies, policies, and 
processes; 
* Share GAO's model business and management processes and other 
transformation-related information with counterpart organizations in 
the United States and abroad. 

Source: GAO. 

[End of table] 

Outcomes of Our Work and the Road Ahead: 

During fiscal year 2005 we monitored our performance using 14 annual 
performance measures that capture the results of our work; the 
assistance we provided to the Congress; and our ability to attract, 
retain, develop, and lead a highly professional workforce (see table 
3). For example, in fiscal year 2005 our work generated $39.6 billion 
in financial benefits, primarily from actions agencies and the Congress 
took in response to our recommendations. Of this amount, about $19 
billion resulted from changes to laws or regulations, $12.8 billion 
resulted from agency actions based on our recommendations to improve 
services to the public, and $7.7 billion resulted from improvements to 
core business processes. See figure 1 for examples of our fiscal year 
2005 financial benefits. 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2005, we recorded a total of 1,409 
other benefits. For instance, we documented 75 instances where 
information we provided to the Congress resulted in statutory or 
regulatory changes, 595 instances where federal agencies improved 
services to the public, and 739 instances where agencies improved core 
business processes or governmentwide reforms were advanced. These 
actions spanned the full spectrum of national issues, from ensuring the 
safety of commercial airline passengers to identifying abusive tax 
shelters. See figure 2 for additional examples of GAO's other benefits 
in fiscal year 2005. 

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2005, 85 percent of the 
recommendations we made in fiscal year 2001 had been implemented, 
primarily by executive branch agencies. Putting these recommendations 
into practice will generate tangible benefits for the nation over many 
years. 

During fiscal year 2005, experts from our staff testified at 179 
congressional hearings covering a wide range of complex issues (see 
table 4). For example, our senior executives testified on improving the 
security of nuclear material, federal oversight of mutual funds, and 
the management and control of DOD's excess property. Over 70 of our 
testimonies were related to high-risk areas and programs (see table 5). 

Table 3: Agencywide Summary of Annual Measures and Targets: 

[See PDF for image] 

[End of table] 

Figure 1: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2005: 

[See PDF for image] 

[End of figure] 

Figure 2: GAO's Selected Other (Nonfinancial) Benefits Reported in 
Fiscal Year 2005: 

[See PDF for image] 

[End of figure] 

Table 4: Selected Testimony Issues, Fiscal Year 2005: 

[See PDF for image] 

[End of table] 

GAOís High-Risk Program: 

Issued to coincide with the start of each new Congress, our high-risk 
update, first used in 1993, has helped Members of the Congress who are 
responsible for oversight and executive branch officials who are 
accountable for performance. Our high-risk program focuses on major 
government programs and operations that need urgent attention or 
transformation to ensure that our government functions in the most 
economical, efficient, and effective manner possible. Overall, our high-
risk program has served to identify and help resolve a range of serious 
weaknesses that involve substantial resources and provide critical 
services to the public. Table 5 details our 2005 high-risk list.

Table 5: GAO's 2005 High-Risk List: 

[See PDF for image] 

[End of table] 

Concluding Remarks: 

We are grateful for the Congressís continued support of our joint 
effort to improve government and for providing the resources that allow 
us to be a world-class professional services organization. We are proud 
of the positive impact we have been able to affect in government over 
the past year and believe an investment in GAO will continue to yield 
substantial returns for the Congress and the American people. Our 
nation will continue to face significant challenges in the years ahead. 
GAOís expertise and involvement in virtually every facet of government 
positions us to provide the Congress with the timely, objective, and 
reliable information it needs to discharge its constitutional 
responsibilities. 

This concludes my statement. I would be pleased to answer any questions 
the Members of the Committee may have. 

Appendix I: Serving the Congress--GAO's Strategic Plan Framework: 

[See PDF for image] 

[End of figure] 

[End of section]