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Testimony: 

Before Subcommittee on the Legislative Branch, Committee on 
Appropriations, United States House of Representatives: 

United States Government Accountability Office: 

GAO: 

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

Thursday, April 19, 2007: 

Fiscal Year 2008 Budget Request: 

U.S. Government Accountability Office: 

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

GAO-07-543T: 

United States Government Accountability Office: 

Washington, DC 20548: 

Madam Chair and Members of the Subcommittee: 

I am pleased to appear before the subcommittee today in support of the 
fiscal year 2008 budget request for the U.S. Government Accountability 
Office (GAO). The requested funding 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. An overview 
of GAO's strategic plan for serving the Congress and our core values is 
included as appendix I. 

I would also like to thank you and your subcommittee for your past 
support of GAO. I am especially appreciative of your efforts to help us 
avoid a furlough of our staff during fiscal year 2007. Had we not 
received additional funds this year and not taken other cost 
minimization actions, GAO would have likely been forced to furlough 
most staff for up to 5 days without pay. At the same time, due to 
funding shortfalls, we were not able to make pay adjustments 
retroactive to January 7, 2007. 

It is through the efforts of our dedicated and capable staff that we 
were able to provide the Congress with the professional, objective, 
fact-based, nonpartisan, non-ideological, fair, and balanced 
information it needs to meet the full range of its constitutional 
responsibilities. I am extremely pleased and proud to say that we 
helped the federal government achieve a total of $51 billion in 
financial benefits in fiscal year 2006--a record high that represents a 
return on investment of $105 for every dollar the Congress invested in 
us. As a result of our work, we also documented 1,342 nonfinancial 
benefits that helped to improve service to the public, change laws, and 
transform government operations. The funding we received in fiscal year 
2006 allowed us to conduct work that addressed many difficult issues 
confronting the nation, including U.S. border security, Iraq and 
Hurricane Katrina activities, the tax gap and tax reform, and issues 
affecting the health and pay of military service members. Our client- 
focused performance measures indicate that the Congress valued and was 
very pleased with our work overall. 

While fiscal year 2006 was a record year, we will be required to 
constrain vital support to our staff and engagements in fiscal year 
2007 in order to manage within available funds. Although the additional 
funding provided by the subcommittee allows us to avoid a furlough of 
our staff, we must implement a number of actions to cancel, reduce, or 
defer costs in order to manage within fiscal year 2007 funding 
constraints. In fact, our fiscal year 2007 budget for most programs and 
line items retains funding levels at or near fiscal year 2006 funding 
levels--requiring that we absorb inflationary increases, which in turn 
reduce our purchasing power, erode progress toward our strategic goals, 
and ultimately affect our client service and employee support. For 
example, in our travel account--a critical element in our ability to 
conduct firsthand evaluation of federal funding and program activities-
-we expect transportation costs and per diem rates to rise (as they do 
annually). Also, our ability to hire staff to replace departing staff, 
address key succession planning challenges and skill gaps, and maintain 
a skilled workforce will be adversely affected. While we must hold some 
critical employee benefits at last year's funding level, such as 
transit benefits and student loan repayments, our pool of employees 
eligible to retire has increased since last year. Also, some other 
agencies may be offering increased benefits that will be attractive to 
our employees and potential recruits. In addition, we have reduced or 
deferred needed targeted investments and initiatives geared to further 
increasing productivity and effectiveness, achieving cost savings, and 
addressing identified management challenges. 

Unfortunately, we expect that these actions will adversely affect our 
ability to respond to congressional requests, making it even more 
difficult to address supply and demand imbalances in areas such as 
health care, homeland security, the global "war on terrorism," energy 
and natural resources, and forensic auditing. Our diminished capacity 
will likely, in turn, ultimately result in reduced annual financial 
benefits, findings, and recommendations to the Congress and the nation 
and necessitate reductions in our: 

 ability to provide timely and responsive information to support 
congressional deliberations; 

 testimonies on the Congress's legislative and oversight agenda; 

 products containing recommendations for improvements in government 
operations; 

 analyses of executive branch agencies budget justifications to 
support appropriations decisions; 

 support on reauthorization activities for pending programs, such as 
the farm bill, Head Start, the Children's Health Insurance Program, and 
the No Child Left Behind Act; and: 

 oversight of legislative branch programs, including the Capitol 
Visitor Center. 

In an effort to identify areas for potential improvement and help 
ensure accountability, we plan to contract with a public accounting 
firm in fiscal year 2008 to conduct a peer review of our financial 
audit practice and have an international team of auditors conduct an 
external peer review of our performance audit practices. GAO has 
received clean opinions on its previous external peer reviews. 
Consistent with generally accepted governmental auditing standards, 
external peer reviews are conducted on a 3-year cycle and serve to 
validate that the Congress and the American people can rely on our work 
and products. 

In recent years, GAO has worked cooperatively with the appropriation 
committees to submit modest budget requests. During this period, and 
for a variety of reasons, GAO has gone from the largest legislative 
branch agency to the third largest in terms of total budgetary 
resources. Adjusting for inflation, GAO's budget authority has declined 
by 3 percent in constant fiscal year 2006 dollars since fiscal year 
2003, as shown in figure 1. These modest budget results do not 
adequately recognize the return on investment that GAO has been able to 
generate. In fact, these increases have hampered our progress in 
rebuilding from the downsizing (40 percent reduction in staffing 
levels) and mandated funding reductions that occurred in the 1990s. 
Although GAO's fiscal year 2008 budget request represents a 7 percent 
increase in constant dollar terms over our fiscal year 2007 operating 
plan, it is one of the smallest increases requested in the legislative 
branch. 

Figure 1: Budget Authority in Fiscal Year 2006 Dollars and Full-Time 
Equivalent (FTE) Usage, Fiscal Years 1992-2007: 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Shortly after I was appointed Comptroller General in November 1998, I 
determined that the agency should undertake a major transformation 
effort. As a result, GAO has become more results- oriented, partnerial, 
and client focused. With your support, we have made strategic 
investments; realigned the organization; streamlined our business 
processes; modernized our performance classification, compensation, and 
reward systems; enhanced our ability to attract, retain and reward top 
talent; enhanced the technology and infrastructure supporting our staff 
and systems; and made other key investments. These transformational 
efforts have allowed GAO to model best practices, lead by example, and 
provide significant support to Congressional hearings, while achieving 
record results and very high client satisfaction ratings without 
significant increases in funding. 

We have taken a number of steps to deal with funding shortfalls in the 
past few years; however, we cannot continue to employ the same 
approaches. Our staff has become increasingly stretched and we are 
experiencing backlogs in several areas of critical importance to the 
Congress (e.g., health care, homeland security, energy and natural 
resources). In addition, we have deferred key initiatives and 
technology upgrades (e.g., engagement and administrative process 
upgrades) for several years and it would not be prudent to continue to 
do so. These actions are having an adverse effect on employee morale, 
our ability to produce results, and the return on investment that we 
can generate. 

There is a need for fundamental and dramatic reform to address what the 
government does, how it does business, and who will do the government's 
business. Our support to the Congress will likely prove even more 
critical because of the pressures created by our nation's current and 
projected budget deficit and growing long-term fiscal imbalance. Also, 
as we face current and projected supply and demand imbalance issues and 
a growing workload over the coming years across a wide spectrum of 
issues, GAO will be unable to respond to congressional demands without 
a significant investment in our future. We have exhausted the results 
that we can achieve based on prior investments. Our ability to continue 
to produce record results and assist the Congress in discharging its 
Constitutional responsibilities relating to authorization, 
appropriations, oversight, and other matters will be adversely impacted 
unless we take action now. 

Therefore, our fiscal year 2008 budget request is designed to restore 
GAO's funding to more reasonable operating levels. Specifically, we are 
requesting fiscal year 2008 budget authority of $530 million, an 8.5 
percent increase over our fiscal year 2007 funding level. The 
additional funds provided in fiscal year 2007 have helped reduce our 
requested increase for fiscal year 2008 from 9.4 percent to 8.5 
percent. This funding level also represents a reduction below the 
request we submitted to the Office of Management and Budget (OMB) in 
January as a result of targeted adjustments to our planned fiscal year 
2008 hiring plan. Our fiscal year 2008 budget request will allow us to 
achieve our performance goals to support the Congress as outlined in 
our strategic plan[Footnote 1] and rebuild our workforce capacity to 
allow us to better respond to supply and demand imbalances in 
responding to congressional requests. This funding will also help us 
address our caseload for bid protest filings, which have increased by 
more than 10 percent from fiscal years 2002 through 2006. Our workload 
for the first quarter of fiscal year 2007 suggests a continuation of 
this upward trend in bid protest fillings. 

We will be seeking your commitment and support to provide the funding 
needed to increase GAO's staffing level to a to be determined number 
not to exceed 3,750 over the next 6 years in order to address critical 
needs including supply and demand imbalances, high-risk areas, 21st 
Century Challenges questions, and other areas in need of fundamental 
reform. Also, as we get closer to when GAO may be able to render our 
opinion on the consolidated financial statements of the U. S. 
government and the Department of Defense's financial management and 
related systems, we will need to increase our workforce capacity. We 
will be providing the Congress additional information on the basis for 
and nature of this target later this year. 

In addition, should the Congress decide whether and to what extent to 
create a technology assessment capability within the legislative 
branch, it would be more cost beneficial to establish it within GAO 
than to create a new entity with its own support structure. GAO has 
effectively conducted some technology assessments, at the request of 
the Congress, in part to serve as a beta to determine whether GAO might 
be an appropriate agency to do that work. To establish a basic 
capability to conduct one assessment annually, GAO would require four 
additional full-time staff and funding to obtain contract assistance or 
provide expertise not readily available within GAO. For higher demands, 
additional technology assessment requests would require incremental 
additional resources --depending on economies of scale, timing, and 
scope of work. 

Importantly, as I noted last year, we also plan to request legislation 
that will assist GAO in performing its mission work, and enhance our 
human capital policies, including addressing certain compensation and 
benefits issues of interest to our employees. We plan to submit our 
proposal to our Senate and House authorization and oversight committees 
in the near future. 

My testimony today will focus on key efforts that GAO has undertaken to 
support the Congress, our fiscal year 2006 performance results, our 
budget request for fiscal year 2008 to support the Congress and serve 
the American people, and proposed legislative changes. 

Key Efforts to Support the Congress: 

As is the case with each new Congress, we are beginning to have 
discussions with regard to many new requests for GAO's professional, 
objective, fact-based, nonpartisan, and non-ideological information, 
analysis, and recommendations. On November 17, 2006, I was pleased to 
offer three sets of recommendations for your consideration as part of 
the agenda of the 110th Congress. The first recommendation suggests 
targets for near-term oversight; the second proposes policies and 
programs in need of fundamental reform and re-engineering; the third 
lists governing issues. The proposals represent an effort to synthesize 
GAO's institutional knowledge and special expertise and suggest both 
the breadth and the depth of the issues facing the new Congress. We at 
GAO stand ready to assist the 110th Congress in meeting its 
constitutional responsibilities. To be effective, congressional 
hearings and other activities should offer opportunities to share best 
practices, facilitate governmentwide transformation, and promote 
accountability for delivering positive results. 

On January 9, 2007, we presented GAO's assessment of the key oversight 
issues related to Iraq for consideration in developing the oversight 
agenda of the 110th Congress and in analyzing the President's revised 
strategy for Iraq. This assessment was based on our ongoing work and 
the 67 Iraq-related reports and testimonies we have provided to the 
Congress since May 2003. Our work spans the security, political, 
economic, and reconstruction prongs of the U.S. national strategy in 
Iraq. The broad, crosscutting nature of this work helps minimize the 
possibility of overlap and duplication by any individual inspector 
general. Our work has focused on the U.S. strategy and costs of 
operating in Iraq, training and equipping the Iraqi security forces, 
governance and reconstruction issues, the readiness of U.S. military 
forces, and achieving desired acquisition outcomes. Our current work 
draws on our past work and regular site visits to Iraq and the 
surrounding region, such as Jordan and Kuwait. We plan to establish a 
presence in Iraq beginning later this fiscal year to provide additional 
oversight of issues deemed important to the Congress; subject to 
approval by the U.S. Department of State and adequate funding. We have 
requested supplemental fiscal year 2007 funds of $374,000 to support 
this effort. 

In January of this year, 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. Issued to coincide with the start of each new Congress, our 
high-risk update, first issued 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 1 details our 2007 high-risk 
list. 

Table 1: GAO's 2007 High-Risk List: 

GAO's High-Risk List 2007: 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Strategic Human Capital Management[A]; 
Designated High Risk: 2001. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Managing Federal real Property[A]; 
Designated High Risk: 2003. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Protecting the federal government's Information Systems and the 
Nation's Critical Infrastructures; 
Designated High Risk: 1997. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Implementing an transforming the Department of Homeland Security; 
Designated High Risk: 2003. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Establishing appropriate and effective information-sharing mechanisms 
to improve Homeland Security; 
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A];  
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Business Systems 
Modernization 
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Personnel Security 
Clearance Program; 
Designated High Risk: 2005. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Support Infrastructure 
Management; 
Designated High Risk: 1997. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Financial Management; 
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Supply Chain 
Management; 
Designated High Risk: 1990. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
DOD approach to business transformation[A]: DOD Weapon Systems 
Acquisition; 
Designated High Risk: 1990. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
FAA Air Traffic Control Modernization; 
Designated High Risk: 1995. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Financing the Nation's Transportation System[A] (New); 
Designated High Risk: 2007. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Ensuring the Effective Protection of Technologies Critical to U.S. 
National Security Interests[A] (New); 
Designated High Risk: 2007. 

High Risk Areas: Addressing Challenges in Broad-based Transformations: 
Transforming Federal Oversight of Food Safety[A] (New); 
Designated High Risk: 2007. 

High Risk Areas: Managing Federal Contracting More effectively:  DOD 
Contract Management; 
Designated High Risk: 1992. 

High Risk Areas: Managing Federal Contracting More effectively:  DOE 
Contract Management; 
Designated High Risk: 1990. 

High Risk Areas: Managing Federal Contracting More effectively:  NASA 
Contract Management; 
Designated High Risk: 1990. 

High Risk Areas: Managing Federal Contracting More effectively:  
Management of Interagency Contracting; 
Designated High Risk: 2005. 

High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law 
Administration: Enforcement of Tax Laws[A]; 
Designated High Risk: 1990. 

High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law 
Administration: IRS Business Systems Modernization[C]; 
Designated High Risk: 1995. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Modernizing Federal Disability Program[A]; 
Designated High Risk: 2003.  

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Pension Benefit Guaranty Corporation Single-Employer Pension
Insurance Program; 
Designated High Risk: 2003. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Medicare program[A]; 
Designated High Risk: 1990. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: Medicaid program[A]; 
Designated High Risk:  2003. 

High Risk Areas: Modernizing and Safeguarding Insurance and Benefit 
Programs: National Flood Insurance Program[A]; 
Designated High Risk: 2006. 

Source: GAO. 

[A] Legislation is likely to be necessary, as a supplement to actions 
by the executive branch, in order to effectively address this high-risk 
area. 

[End of table] 

In February of this year, we issued a new publication entitled Fiscal 
Stewardship: A Critical Challenge Facing Our Nation that is designed to 
provide the Congress and the American public, in a relatively brief and 
understandable form, selected budget and financial information 
regarding our nation's current financial condition, long-term fiscal 
outlook, and possible ways forward. In the years ahead, our support to 
the Congress will likely prove 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 the Congress 
considers those fiscal pressures, it will be grappling with tough 
choices about what government does, how it does business, and who will 
do the government's business. GAO is an invaluable tool for helping the 
Congress review, reprioritize, and revise existing mandatory and 
discretionary spending programs and tax policies. 

In addition, I have participated in a series of town hall forums around 
the nation to discuss the federal government's current financial 
condition and deteriorating long-term fiscal outlook, including the 
challenges posed by known long-term demographic trends and rising 
health care costs. These forums, popularly referred to as the "Fiscal 
Wake-up Tour," are led by the Concord Coalition and also include the 
Heritage Foundation, the Brookings Institution, and a range of "good 
government" groups. The Fiscal Wake-up Tour states the facts regarding 
the nation's current financial condition and long-term fiscal outlook 
in order to increase public awareness and accelerate actions by 
appropriate federal, state, and local officials. 

Performance, Results, and Plans: 

We anticipate that the funds requested for fiscal year 2008 will 
support efforts similar to those just completed in fiscal year 2006. 
The following discussions summarize that work. 

In fiscal year 2006, major events like the nation's recovery from 
natural disasters, ongoing military conflicts abroad, terrorist 
threats, and potential pandemics repeatedly focused the public eye on 
the federal government's ability to operate effectively and efficiently 
and provide services to Americans when needed. Our work during the year 
helped the Congress and the public judge how well the federal 
government performed its functions and consider alternative approaches 
for improving operations and laws when performance was less than 
adequate. For example, teams supporting all three of our external 
strategic goals performed work related to every facet of the Hurricane 
Katrina and Rita disasters--preparedness, response, recovery, long- 
term recovery, and mitigation. We developed a coordinated and 
integrated approach to ensure that the Congress's need for factual 
information about disaster preparedness, response, recovery, and 
reconstruction activities along the Gulf Coast was met. We examined how 
federal funds were used during and after the disaster and identified 
the disaster rescue, relief, and rebuilding processes that worked well 
and not so well throughout the effort. To do this, staff drawn from 
across the agency spent time in the hardest hit areas of Louisiana, 
Mississippi, Alabama, and Texas, collecting information from government 
officials at the federal, state, and local levels as well as from 
private organizations assisting with this emergency management effort. 
We briefed congressional staff on our preliminary observations early in 
fiscal year 2006 and subsequently issued over 30 reports and 
testimonies on Hurricanes Katrina and Rita by fiscal year end, focusing 
on, among other issues, minimizing fraud, waste, and abuse in disaster 
assistance and rebuilding the New Orleans hospital care system. 

The following tables provide summary information on GAO's fiscal year 
2006 performance and the results achieved in support of the Congress 
and the American people. Additional information on our performance 
results can be found in Performance and Accountability Highlights 
Fiscal Year 2006 at www.gao.gov. 

Table 2 provides examples of how GAO assisted the nation in fiscal year 
2006. 

Table 2: Examples of How GAO Assisted the Nation in Fiscal Year 2006: 

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: 
* protect Social Security numbers from abuse; 
* ensure the effectiveness of federal investments in science, 
technology, engineering, and mathematics education programs; 
* identify actions needed to improve Federal Emergency Management 
Agency and Red Cross coordination for the 2006 hurricane season; 
* highlight weaknesses in the Department of Health and Human Services' 
communications with beneficiaries about the new Medicare prescription 
drug benefit; 
* identify funding formula and drug pricing disparities in the federal 
AIDS/HIV program; 
* strengthen the oversight of clinical laboratories; 
* identify challenges the Department of Homeland Security faces in 
controlling illegal immigration into the United States; 
* assess the thoroughness of the federal fair housing complaint and 
investigation processes; 
* improve the management of federal oil and natural gas royalty 
revenue; 
* develop a strategy for managing wildfires; 
* focus on the short-and long-term challenges of financing the nation's 
transportation infrastructure; 
* identify outdated mail delivery performance standards used by the 
U.S. Postal Service. 

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: 
* identify current and future funding and cost issues related to DOD 
operations in Iraq and Afghanistan; 
* highlight inefficiencies that could hinder DOD's efforts to reform 
its business operations; 
* improve controls over the issuance of passports and visas and 
increase fraud prevention; 
* improve catastrophic disaster preparedness, response, and recovery; 
* improve the ability of federal agencies to cost effectively acquire 
goods and services; 
* improve the management of payments to U.S. producers injured 
financially by unfairly traded imports; 
* alert the Congress to companies that are marketing costly mutual fund 
products with low returns to military service members; 
* identify steps needed to overhaul investment and management processes 
supporting major DOD acquisitions; 
* improve security at nuclear power plants; 
* improve the Department of Homeland Security's ability to detect 
nuclear smuggling at U.S. ports; 
* promote government efforts to secure sensitive systems and 
information; 
* highlight the cost concerns of small public companies that must 
comply with internal control and auditing provisions of the Sarbanes-
Oxley Act. 

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: 
* improve congressional oversight of the process for reviewing foreign 
direct investment; 
* strengthen DOD's information systems modernization efforts; 
* highlight serious technical and cost challenges affecting the 
purchase of a critical weather satellite; 
* highlight key practices federal agencies should adopt to prevent data 
breaches and better protect the personal information of U.S. citizens; 
* monitor the development of the 2010 decennial census; 
* identify strategies to reduce the gap between the taxes citizens pay 
and the taxes actually owed; 
* focus attention on the revenue consequences of tax expenditures; 
* identify fraud, waste, and abuse in a component of the Federal 
Emergency Management Agency's disaster assistance program; 
* emphasize the importance of reliable cost information for improving 
governmentwide cost efficiency; 
* expose government contractors who used for personal gain federal 
payroll taxes withheld from their employees. 

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 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 2006, we used 16 annual performance measures that 
capture the results of our work; the assistance we provided to the 
Congress; our ability to attract, retain, develop, and lead a highly 
professional workforce; and how well our internal administrative 
services help employees get their jobs done and improve their work life 
(see table 3). We generally exceeded the targets we set for all of our 
performance measures, which indicate our ability to produce results for 
the nation and serve the Congress. 

Table 3: Agencywide Summary of Annual Measures and Targets: 

Results. 

Performance measures: Financial benefits (dollars in billions); 
2002 Actual: $37.7; 
2003 Actual: $35.4; 
2004 Actual: $44.0; 
2005 Actual: $39.6; 
2006 Actual: $51.0; 
2007 Target: $40.0; 
2008 Target: $41.5. 

Performance measures: Nonfinancial benefits; 
2002 Actual: 906; 
2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Actual: 1,409; 
2006 Actual: 1,342; 
2007 Target: 1,100; 
2008 Target: 1,150. 

Performance measures: Past recommendations implemented; 
2002 Actual: 79%; 
2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Actual: 85%; 
2006 Actual: 82%; 
2007 Target: 80%; 
2008 Target: 80%. 

Performance measures: New products with recommendations; 
2002 Actual: 53%; 
2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Actual: 63%; 
2006 Actual: 65%; 
2007 Target: 60%; 
2008 Target: 60%. 

Client. 

Performance measures: Testimonies; 
2002 Actual: 216; 
2003 Actual: 189; 
2004 Actual: 217; 
2005 Actual: 179; 
2006 Actual: 240; 
2007 Target: 185; 
2008 Target: 220. 

Performance measures: Timeliness; 
2002 Actual: 96%; 
2003 Actual: 97%; 
2004 Actual: 97%; 
2005 Actual: 97%; 
2006 Actual: 92%; 
2007 Target: 95%; 
2008 Target: 95%. 

People. 

Performance measures: New hire rate; 
2002 Actual: 96%; 
2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 95%; 
2008 Target: 95%. 

Performance measures: Acceptance rate; 
2002 Actual: 81%; 
2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Actual: 71%; 
2006 Actual: 70%; 
2007 Target: 72%; 
2008 Target: 72%. 

Performance measures: Retention rate with retirements; 
2002 Actual: 91%; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Actual: 90%; 
2006 Actual: 90%; 
2007 Target: 90%; 
2008 Target: 90%. 

Performance measures: Retention rate without retirements; 
2002 Actual: 97%; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Actual: 94%; 
2006 Actual: 94%; 
2007 Target: 94%; 
2008 Target: 94%. 

Performance measures: Staff development; 
2002 Actual: 71%; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Actual: 72%; 
2006 Actual: 76%; 
2007 Target: 75%; 
2008 Target: 76%. 

Performance measures: Staff utilization; 
2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Actual: 75%; 
2006 Actual: 75%; 
2007 Target: 78%; 
2008 Target: 78%. 

Performance measures: Leadership; 
2002 Actual: 75%; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Actual: 80%; 
2006 Actual: 79%; 
2007 Target: 80%; 
2008 Target: 80%. 

Performance measures: Organizational climate; 
2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Actual: 76%; 
2006 Actual: 73%; 
2007 Target: 76%; 
2008 Target: 76%. 

Internal operations. 

Performance measures: Help get job done; 
2002 Actual: N/A; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: 4.10; 
2006 Actual: 4.1; 
2007 Target: 4.0; 
2008 Target: 4.0. 

Performance measures: Quality of work life; 
2002 Actual: N/A; 
2003 Actual: 3.86; 
2004 Actual: 3.96; 
2005 Actual: 3.98; 
2006 Actual: 4.0; 
2007 Target: 4.0; 
2008 Target: 4.0. 

Source: GAO. 

Note: N/A indicates the information is not available. 

[End of table] 

In fiscal year 2006, our work generated $51 billion in financial 
benefits, primarily from actions agencies and the Congress took in 
response to our recommendations. Of this amount, about $27 billion 
resulted from changes to laws or regulations, $10 billion resulted from 
agency actions based on our recommendations to improve services to the 
public, and $14 billion resulted from improvements to core business 
processes. See figure 2 for examples of our fiscal year 2006 financial 
benefits. 

Figure 2: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2006: 

[See PDF for image] 

Sources: Art Explosion and PhotoDisc. 

[End of figure] 

Description: Ensured continued monetary benefits from federal spectrum 
auctions; 
Amount: $6.1. 

Description: Encouraged DOD to identify and reduce unobligated funds in 
the military services' operations and maintenance budget; 
Amount: 3.9. 

Description: Recommended payment methods that cut Medicare costs for 
durable medical equipment, orthotics, and prosthetics; 
Amount: 2.9. 

Description: Helped to ensure that certain U.S. Postal Service 
retirement-related benefits would be funded; 
Amount: 2.2. 

Description: Identified recoverable costs for the Tennessee Valley 
Authority; 
Amount: 1.8. 

Description: Helped to increase collections of civil debt; 
Amount: 1.6. 

Description: Encouraged the Department of Housing and Urban Development 
to take actions to reduce improper payments; 
Amount: 1.4. 

Description: Supported the Department of Energy's efforts to reduce its 
carryover funds; 
Amount: 1.2. 

Source: GAO. 

[End of table] 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2006, we recorded a total of 1,342 
nonfinancial benefits. For example, we documented 61 instances where 
information we provided to the Congress resulted in statutory or 
regulatory changes, 667 instances where federal agencies improved 
services to the public, and 614 instances where agencies improved core 
business processes or governmentwide reforms were advanced. These 
actions spanned the full spectrum of national issues, from identifying 
the adverse tax impact of combat pay and certain tax credits on low- 
income military families to improving the Department of State's process 
for developing staffing projections for new embassies. See figure 3 for 
additional examples of GAO's nonfinancial benefits in fiscal year 2006. 

Figure 3: GAO's Selected Nonfinancial Benefits Reported in Fiscal Year 
2006: 

[See PDF for image] 

Source: Art Explosion and PhotoDisc. 

[End of figure] 

Nonfinancial benefits that helped to change laws: Deficit Reduction Act 
of 2005, Pub. L. No. 109-171. Our work is reflected in this law in 
different ways; 
* Strengthened Medicaid program integrity; 
* Improved oversight of the states' performance under the Temporary 
Assistance for Needy Families program; 
* Addressed domestic violence; 
* Improved oversight of schools that are lenders; 
Safe and Timely Interstate Placement of Foster Children Act of 2006, 
Pub. L. No. 109-239. 

Nonfinancial benefits that helped to improve services to the public: 
Strengthened passport and visa issuance processes. 
Identified vulnerabilities in the process to verify personal 
information about new drivers. 
Contributed to the increased visibility of a transportation information 
sharing program for seniors. 
Identified a problem with untimely pay allowances to deployed soldiers. 

Nonfinancial benefits that helped to promote sound agency and 
governmentwide management: 
Improved the quality of federal voluntary voting system standards. 
Highlighted weaknesses in the Federal Aviation Administration's control 
over computers and other assets. 
Strengthened oversight of federal personnel actions. 
Encouraged federal agencies to seek savings on purchase cards. 
Identified improper payments in DOD's travel accounts. 

Source: GAO. 

[End of table] 

During fiscal year 2006, experts from our staff testified at 240 
congressional hearings covering a wide range of complex issues (see 
table 4). For example, our senior executives testified on a variety of 
issues, including freight rail rates, AIDS assistance programs, and 
federal contracting. Over 100 of the hearings at which we testified 
were related to areas and programs we designated as high risk. 

Table 4: GAO's Selected Testimony Issues by Strategic Goal, Fiscal Year 
2006: 

Goal 1: Address Challenges to the Well-Being and Financial Security of 
the American People. 
* Health savings accounts; 
* Guardianships that protect incapacitated seniors; 
* Lake Pontchartrain hurricane protection project; 
* Funds to first responders for 9/11 health problems; 
* Immigration enforcement at work sites; 
* Future air transportation system; 
* Nursing home care for veterans; 
* Passenger rail security issues; 
* Freight railroad rates; 
* AIDS drug assistance programs; 
* Federal Housing Administration reforms; 
* Improving intermodal transportation; 
* Hartford nuclear waste treatment plant; 
* Evaluations of supplemental educational services; 
* Factors affecting gasoline prices; 
* Telecommunication spectrum reform; 
* H-1B visa program; 
* Federal crop insurance program. 

Goal 2: Respond to Changing Security Threats and the Challenges of 
Globalization. 
* A comprehensive strategy to rebuild Iraq; 
* Deploying radiation detection equipment in other countries; 
* Protecting military personnel from unscrupulous financial products; 
* Sensitive information at DOD and the Department of Energy; 
* Hurricane Katrina preparedness, response, and recovery; 
* Alternative mortgage products; 
* Global war on terrorism costs; 
* Transportation Security Administration's Secure Flight program; 
* DOD's business systems modernization; 
* U.S. tactical aircraft; 
* National Capital Region Homeland Security Strategic Plan; 
* Polar- orbiting operational environmental satellites; 
* Worldwide AIDS relief plan; 
* Financial stability and management of the National Flood Insurance 
Program; 
* Information security laws; 
* Procurement controls at the United Nations. 

Goal 3: Help Transform the Federal Government's Role and How It Does 
Business. 
* Contract management challenges in rebuilding Iraq; 
* DOD's financial and business management transformation; 
* Business tax reform; 
* Astronaut exploration vehicle risks; 
* Improving federal financial management governmentwide; 
* Long-term fiscal challenges; 
* Federal contracting during disasters; 
* Improving tax compliance to reduce the tax gap; 
* Protecting the privacy of personal information; 
* DOD acquisition incentives; 
* Decennial Census costs; 
* Information security weaknesses at the Department of Veterans 
Affairs; 
* Improper federal payments for Hurricane Katrina relief; 
* Strengthening the Office of Personnel Management's ability to lead 
human capital reform; 
* Public/private recovery plan for the Internet; 
* Tax system abuses by General Services Administration contractors; 
* Compensation for federal executives and judges. 

Source: GAO. 

[End of table] 

GAO's Fiscal Year 2008 Request to Support the Congress: 

Our fiscal year 2008 budget request seeks the resources necessary to 
allow GAO to rebuild and enhance its workforce, knowledge capacity, 
employee programs, and infrastructure. These items are critical to 
ensure that GAO can continue to provide 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 even more critical because of the pressures created by our 
nation's current and projected budget deficit and growing long-term 
fiscal imbalance. GAO is an invaluable tool for helping the Congress 
review, reprioritize, and revise existing mandatory and discretionary 
spending programs and tax policies. 

Consistent with our strategic goal to be a model agency, we 
continuously assess our operations to ensure that GAO remains an 
effective, high-performing organization, providing timely, critical 
support to the Congress while being fiscally responsive. Our objective 
is to be an employer of choice; maintain skills/knowledge, performance- 
based, and market-oriented compensation systems; adopt best practices; 
benchmark service levels and costs against comparable entities; 
streamline our operations to achieve efficiencies; assess opportunities 
for cross-servicing, outsourcing, or business process re-engineering; 
and leverage technology to increase efficiency, productivity, and 
results. We also continue to partner within and across the legislative 
branch through the legislative branch Chief Administrative Officers, 
financial management, and procurement councils. 

Transformational change and innovation is essential for progress. Our 
fiscal year 2008 budget request includes funds to regain the momentum 
needed to achieve these goals. Our fiscal year 2008 budget request will 
allow GAO to: 

* address supply and demand imbalances in responding to congressional 
requests for studies in areas such as health care, homeland security, 
the global "war on terrorism," energy and natural resources, and 
forensic auditing; 

* address our increasing bid protest workload; 

* be more competitive in the labor markets where GAO competes for 
talent; 

* address critical human capital components, such as knowledge capacity 
building, succession planning, and staff skills and competencies; 

* enhance employee recruitment, retention, and development programs; 

* restore program funding levels and regain our purchasing power; 

* undertake critical initiatives necessary to continuously re-engineer 
processes geared to increasing our productivity and effectiveness and 
addressing identified management challenges; and: 

* pursue critical structural and infrastructure maintenance and 
improvements. 

Our fiscal year 2008 budget request represents an increase of $41.7 
million (or 8.5 percent) over our fiscal year 2007 funding level and 
includes about $523 million in direct appropriations and authority to 
use about $7.5 million in offsetting collections as illustrated in 
table 5. This request reflects a reduction of nearly $5.4 million in 
nonrecurring fiscal year 2007 costs used to offset the fiscal year 2008 
increase. 

Table 5: Fiscal Year 2008 Budget Request, Summary of Requested Changes: 

Dollars in thousands. 

Budget category: FY 2007 enacted budget authority; 
FTEs: 3,159; 
Amount: $488,627; 
Cumulative percentage of change: [Empty]. 

Budget category: FY 2008 requested changes. 

Nonrecurring FY 2007 costs; 
FTEs: [Empty]; 
Amount: ($5,374); 
Cumulative percentage of change: (1.1%). 

Mandatory pay costs; 
FTEs: [Empty]; 
Amount: 19,841; 
Cumulative percentage of change: 3.0%. 

Uncontrollable cost increases; 
FTEs: [Empty]; 
Amount: 5,079; 
Cumulative percentage of change: 4.0%. 

Rebuild our capacity; 
FTEs: 58; 
Amount: 14,826; 
Cumulative percentage of change: 7.0%. 

Critical investments in technology improvements and other 
transformation areas; 
FTEs: [Empty]; 
Amount: 7,314; 
Cumulative percentage of change: 8.5%. 

Budget Category: Net FY 2008 increase; 
FTEs: 58; 
Amount: $41,686; 
Cumulative percentage of change: 8.5%. 

Budget Category: FY 2008 budget authority; 
FTEs: 3,217; 
Amount: $530,313; 
Cumulative percentage of change: [Empty]. 

Source: GAO. 

[End of table] 

Mandatory pay and uncontrollable cost increases. We are requesting 
$24.9 million to cover anticipated mandatory performance-based pay and 
uncontrollable inflationary increases resulting primarily from annual 
across-the-board and performance-based increases, annualization of 
prior fiscal year costs, and an increase in the number of compensable 
days in fiscal year 2008. These costs also include uncontrollable 
inflationary increases imposed by vendors as the cost of doing 
business. 

Rebuilding our capacity. Our fiscal year 2007 budget request sought 
funds to support an increase of 50 FTEs from 3,217 to 3,267. However, 
in order to manage within expected funding levels in fiscal year 2007, 
we will significantly curtail hiring by about 50 percent below the 
previous year, resulting in a projected FTE utilization of 3,159--well 
below our planned level. In fiscal years 2007 and 2008, we anticipate 
attrition of over 600 staff that will result in a significant drain on 
GAO's knowledge capacity or institutional memory. Further, almost 20 
percent of all GAO staff will be eligible for retirement by the end of 
fiscal year 2008, including almost 45 percent of our senior executive 
service. 

Thus, in fiscal year 2008, we are seeking funds to rebuild our staff 
and knowledge capacity. In fiscal year 2008, we plan to hire about 490 
staff--the maximum that we could reasonably absorb--increasing our FTE 
utilization to 3,217. While we are tempering our immediate FTE request, 
increasingly higher demands are being placed on GAO. We are 
experiencing supply and demand imbalances in several areas of critical 
importance to the Congress (e.g., health care, homeland security, and 
energy and natural resources). We have also seen an increase in the 
number of bid protest filings. 

Also, to remain competitive in the labor markets, we need to increase 
employee benefits in areas such as student loan repayments and transit 
subsidies where funding constraints in fiscal year 2007 limit our 
flexibility. For example, effective in January 2007, the IRS increased 
the monthly benefit for transit subsidies for eligible employees who 
commute using public transportation. GAO, however, is unable to extend 
this increased benefit to staff. 

In addition, we need to ensure that staff have the appropriate tools 
and resources to perform effectively, including training and 
development, travel funds, and technology. And when our staff perform 
well, they should be appropriately rewarded. 

Undertake critical investments. We are requesting funds to undertake 
critical investments that would allow us to implement technology 
improvements and streamline and re-engineer work processes to enhance 
the productivity and effectiveness of our staff, conduct essential 
investments that have been deferred as the result of funding 
constraints and cannot continue to be deferred, and implement responses 
to changing federal conditions, such as smart card technology. Also, 
during recent years, we reduced, deferred, and slowed the pace of 
critical upgrades (e.g., engagement and administrative process 
upgrades) and deferred nonessential administrative activities. In 
fiscal year 2008, we would like to have sufficient funding to take 
action to protect our current investments and continue to be a model 
agency and lead by example. 

Legislative authority. We are requesting legislation to establish a 
Board of Contract Appeals at GAO to adjudicate contract claims 
involving contracts awarded by legislative branch agencies. GAO has 
performed this function on an ad hoc basis over the years for appeals 
of claims from decisions of the Architect of the Capitol on contracts 
that it awards. Recently we have agreed to handle claims arising under 
Government Printing Office contracts. The legislative proposal would 
promote efficiency and predictability in the resolution of contractor 
and agency claims by consolidating such work in an established and 
experienced adjudicative component of GAO and would permit GAO to 
recover its costs of providing such adjudicative services from 
legislative branch users of such services. 

We also plan to request legislation that will assist GAO in performing 
its mission work and enhance our human capital policies, including 
addressing certain compensation and benefits issues of interest to our 
employees. While there are a number of important provisions, today I 
will only discuss several of the significant ones. Regarding provisions 
concerned with mission work, we have identified a number of legislative 
mandates that are either no longer meeting the purpose intended or 
should be performed by an entity other than GAO. We are working with 
the cognizant entities and the appropriate authorization and oversight 
committees to discuss the potential impact of legislative relief for 
these issues. 

Another provision would update the existing authority of the 
Comptroller General to administer oaths when appropriate for an audit 
or investigation. The Comptroller General has long had the authority to 
"administer oaths to witnesses when auditing and settling 
accounts".[Footnote 2] Because of the variety of audits and 
investigations GAO now performs, we propose the deletion of "when 
auditing and settling accounts" so that in those limited circumstances 
where appropriate, the Comptroller General may authorize the 
administration of oaths to witnesses. To keep the Congress apprized of 
difficulties we have interviewing agency personnel and obtaining agency 
views on matters related to ongoing mission work, we will suggest new 
reporting requirements. When agencies or other entities ignore a 
request by the Comptroller General to have personnel provide 
information under oath, make personnel available for interviews, or 
provide written answers to questions, the Comptroller General would 
report to the Congress as soon as practicable and also include such 
information in the annual report to the Congress. 

In regard to GAO's human capital flexibilities, among other provisions, 
we are proposing a flexibility that allows us to better approximate 
market rates for professional positions by increasing our maximum pay 
for other than the Senior Executive Service and Senior Level from GS- 
15, step 10, to Executive Level III. Additionally, under our revised 
and contemporary merit pay system, certain portions of an employee's 
merit increase, below applicable market-based pay caps, are not 
permanent. Since this may impact an employee's high three for 
retirement purposes, another key provision of the bill would enable 
these nonpermanent payments to be included in the retirement 
calculation for all GAO employees, except senior executives and senior 
level personnel. 

Concluding Remarks: 

In summary, I believe that you will find our budget request reasonable, 
responsible, and well-justified given the important role that GAO plays 
and the unparalleled return on investment that GAO generates. We are 
grateful for the Congress's continued support of our mutual effort to 
improve government and for providing the resources that allow us to be 
a world-class professional services organization. We are proud of our 
record performance and the positive impact we have been able to effect 
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. GAO's 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. 

Madam Chair and Members of the Subcommittee, this concludes my prepared 
statement. At this time, I would be pleased to answer any questions 
that you or other Members of the Subcommittee may have. 

[End of section] 

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

Serving the Congress and the Nation: GAO's Strategic Plan Framework: 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Themes: 

* Changing Security Threats; 

* Sustainability Concerns; 

* Economic Growth and competitveness; 

* Global interdependency; 

* Societal Change; 

* Quality of Life; 

* Science and Technology; 

Goals and Objectives: 

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 related to... 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

Provide Timely, Quality Service to the Congress and the Federal 
Government to. 

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving... 

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

Help Transform the Federal Government Government's Role and How It Does 
Business to Meet 21st Century Challenges by assessing... 

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government: 

Maximize the Value of GAO by Being a Model Federal Agency and a World- 
Class Professional Services Organization in the areas of... 

* Client and customer satisfaction; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice: 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Fiscal years 2007-2012. 

Source: GAO. 

[End of figure] 

[End of section] 

FOOTNOTES 

[1] In March 2007, we issued our updated strategic plan covering fiscal 
years 2007-2012 to reflect the agenda for the 110th Congress. 

[2] 31 U.S.C. 711(4).

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
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policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
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values of accountability, integrity, and reliability. 

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