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Testimony: 

Before the Subcommittee on Oversight of Government Management, the 
Federal Workforce, and the District of Columbia, the Committee on 
Homeland Security and Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:30 p.m. EST: 

Wednesday, September 10, 2008: 

The Upcoming Transition: 

GAO's Efforts to Assist the 111th Congress and the Next Administration: 

Statement of Gene L. Dodaro Acting Comptroller General of the United 
States: 

GAO-08-1153T: 

GAO Highlights: 

Highlights of GAO-08-1153T, a testimony before the Subcommittee on 
Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, the Committee on Homeland Security and 
Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

The upcoming 2009 transition will be a unique and critical period for 
the U.S. government. It marks the first wartime presidential transition 
in 40 years. It will also be the first administration change for the 
relatively new Department of Homeland Security operating in the post 
9/11 environment. The next administration will fill thousands of 
positions across government; there will be a number of new faces in 
Congress as well. Making these transitions as seamlessly as possible is 
pivotal to effectively and efficiently help accomplish the federal 
governmentís many essential missions. 

While the Government Accountability Office (GAO), as a legislative 
branch agency, has extensive experience helping each new Congress, the 
Presidential Transition Act points to GAO as a resource to incoming 
administrations as well. The Act specifically identifies GAO as a 
source of briefings and other materials to help presidential appointees 
make the leap from campaigning to governing by informing them of the 
major management issues, risks, and challenges they will face. 

GAO has traditionally played an important role as a resource for new 
Congresses and administrations, providing insight into the issues where 
GAO has done work. This testimony provides an overview of GAOís 
objectives for assisting the 111th Congress and the next administration 
in their all-important transition efforts. 

What GAO Found: 

GAO will highlight issues that the new President, his appointees, and 
the Congress will confront from day one. These include immediate 
challenges ranging from national and homeland security to oversight of 
financial institutions and markets to a range of public health and 
safety issues. GAO will synthesize the hundreds of reports and 
testimonies it issues every year so that new policy makers can quickly 
zero in on critical issues during the first days of the new 
administration and Congress. GAOís analysis, incorporating its 
institutional memory across numerous administrations, will be ready by 
the time the election results are in and transition teams begin to move 
out. 

Objectives for GAOís Transition Efforts: 

* Provide insight into pressing national issues. 

* Highlight the growing need for innovative, integrated approaches to 
solve national and global challenges. 

* Document targeted opportunities to conserve resources that can be 
applied to new initiatives. 

* Underscore critical capacity building needs in individual agencies 
that will affect implementation of whatever new priorities are pursued. 

* Help inform the management improvement agendas of Congress and the 
new administration. 

* Monitor the implementation of the Presidential Transition Act 
provisions and identify potential improvements for future transitions. 

GAO will provide congressional and executive branch policy makers with 
a comprehensive snapshot of how things are working across government 
and emphasize the need to update some federal activities to better 
align them with 21st century realities and bring about government 
transformation. In keeping with its mission, GAO will be providing 
Congress and the executive branch with clear facts and constructive 
options and suggestions that elected officials can use to make policy 
choices in this pivotal transition year. GAO believes the nationís new 
and returning leaders will be able to use such information to help meet 
both the nationís urgent issues and long-term challenges so that our 
nation stays strong and secure now and for the next generation. 

GAOís transition work also will highlight the need to modernize the 
machinery of government through better application of information 
technology, financial management, human capital, and contracting 
practices. GAO also will underscore the need to develop strategies for 
addressing the governmentís serious long-term fiscal sustainability 
challenges, driven on the spending side primarily by escalating health 
care costs and changing demographics. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1153T]. For more 
information, contact J. Christopher Mihm, Managing Director, Strategic 
Issues, at (202) 512-6806 or mihmj@gao.gov. 

[End of section] 

Chairman Akaka, Senator Voinovich, and Members of the Subcommittee: 

I am pleased to be here today to contribute to your hearing on the 
upcoming transition. As agreed with the Subcommittee, I will discuss 
the preparations under way at the Government Accountability Office 
(GAO) to meet our responsibilities under the Presidential Transition 
Act to assist the incoming administration as well as the 111th 
Congress. 

The 2009 presidential transition will be a unique and critical period 
for the United States. Our nation faces a wartime presidential 
transition for the first time in 40 years. In addition, this will be 
the first post-9/11 transition, with a relatively new Department of 
Homeland Security (DHS) grappling with the threats we face here at home 
while experiencing its first change in administration. The White House 
will need to fill thousands of appointments, some of which will be 
subject to Senate confirmation, across the federal government. And on 
Capitol Hill, with 26 House members and 5 Senators deciding not to seek 
reelection, there will also be congressional newcomers. 

While as a legislative branch agency GAO has extensive experience 
helping each new Congress, the Presidential Transition Act points to 
GAO as a resource to incoming administrations as well. The Act 
specifically identifies GAO as a source of briefings and other 
materials to help inform presidential appointees of the major 
management issues, risks, and challenges they will face. The Act's 2000 
amendments to clearly bring GAO into the transition picture are 
consistent with the role we traditionally have played as an important 
resource for Congress and new administrations during transitions. For 
example, we update our High-Risk list with the start of each new 
Congress to focus attention on areas in need of broad-based 
transformation or susceptible to waste, fraud, abuse, and 
mismanagement. During the last presidential transition, we identified 
for Congress and the then new administration key program and management 
issues in the major departments and across government. More recently, 
we assisted the 110th Congress by suggesting 36 areas for oversight 
based on our work. We take our role under the Presidential Transition 
Act very seriously; our planning to effectively perform this role is 
well under way. To do this, we will use our institutional knowledge and 
broad-based work on matters across the spectrum of government 
activities. 

My comments today center on the six objectives of our efforts to assist 
the upcoming transition as policy makers take on the serious challenges 
facing our country. 

Objectives for GAOís Transition Efforts: 

* Provide insight into pressing national issues. 

* Highlight the growing need for innovative, integrated approaches to 
solve national and global challenges. 

* Document targeted opportunities to conserve resources that can be 
applied to new initiatives. 

* Underscore critical capacity building needs in individual agencies 
that will affect implementation of whatever new priorities are pursued. 

* Help inform the management improvement agendas of Congress and the 
new administration. 

* Monitor the implementation of the Presidential Transition Act 
provisions and identify potential improvements for future transitions. 

Provide Insight into Pressing National Issues: 

The next Congress and new administration will confront a set of 
pressing issues that will demand urgent attention and continuing 
oversight to ensure the nation's security and well-being. The goal of 
our transition planning is to look across the work we have done and 
across the scope and breadth of the federal government's 
responsibilities to offer insights into areas needing immediate 
attention. A few examples follow: 

* Oversight of financial institutions and markets: As events over the 
past few days have underscored, oversight over the U.S. housing and 
financial markets will certainly be among the priority matters 
commanding the attention of the new administration and the 111th 
Congress. These sectors of our economy have been going through a period 
of significant instability and turmoil. Congress has taken a number of 
steps to address some of the immediate effects of the market turmoil 
including enactment of the Federal Housing Finance Regulatory Reform 
Act of 2008, which, among other things, strengthens regulation of the 
housing government-sponsored enterprises (GSE) and provides authority 
to the Treasury to purchase any amount of Fannie Mae and Freddie Mac 
securities. We are closely monitoring a range of implications of the 
current market turmoil including the financial condition of GSEs and 
the implications of the Treasury exercising this new authority to 
stabilize GSEs. In addition, recent bank failures and growing numbers 
of banks on the "Watchlist" raise questions about the impact on the 
banking system and future federal exposures as well as on the bank 
insurance fund. We have a larger body of work that involves auditing 
the Federal Deposit Insurance Corporation, the newly created Federal 
Housing Finance Agency, and the consolidated financial statements of 
the U.S. government, as well as evaluating ongoing developments in the 
housing and financial markets. We will draw on this work to provide 
observations and advice, as appropriate, on how best to ensure the 
stability of our nation's financial system. 

While these serious disruptions require immediate attention and careful 
monitoring, ongoing turmoil in the housing and financial markets has 
renewed concerns about whether the current system for overseeing and 
regulating financial institutions and markets is best suited to meet 
the nation's evolving needs and 21st century challenges. Later this 
year we plan to issue a report describing the evolution of the current 
regulatory structure and how market developments and changes have 
introduced challenges for the current system. We believe this 
reassessment is needed to ensure that these types of serious 
disruptions can be minimized in the future. As part of this work, we 
are also developing a framework to assist Congress in evaluating 
alternative regulatory reform proposals. 

* U.S. efforts in Iraq and Afghanistan: Policy and implementation 
issues will remain on the horizon for these and other international 
challenges. Hundreds of billions of dollars have been provided to the 
Department of Defense (DOD) for military operations in Iraq and 
Afghanistan as well as U.S. efforts to help address security, 
stabilization and reconstruction, and capacity-building efforts in 
these countries. These efforts include developing security forces, 
rebuilding critical infrastructure, and enhancing the countries' 
capacity to govern. Since 2003, we have issued more than 175 reports on 
military operations and various aspects of U.S. efforts to achieve the 
goals in Iraq and Afghanistan. Our transition work will highlight the 
major implementation issues that need to be addressed to ensure 
accountability and assess progress regardless of what policies are 
pursued. 

* DOD's readiness and capabilities: Extended operations in Iraq, 
Afghanistan, and elsewhere have had significant consequences for 
military readiness, particularly with regard to the Army and Marine 
Corps. Current operations have required the military to operate at a 
persistently high tempo with the added stress of lengthy and repeated 
deployments. In addition, because of the significant wear and tear on 
equipment, refocusing of training on counterinsurgency operations, and 
other factors, rebuilding readiness of U.S. forces is a major challenge 
for DOD. At the same time, DOD faces competing demands for resources 
given broad-based initiatives to grow, modernize, and transform its 
forces. We will offer our perspective on the competing demands DOD 
faces and the need to develop sound plans to guide investment 
decisions, as it reassesses the condition, size, composition, and 
organization of its total force, including contractor support, to 
protect the country from current, emerging, and future conventional and 
unconventional security threats. 

* Protection at home: DHS must remain prepared and vigilant with 
respect to securing the homeland, particularly during the transition 
period when the nation can be viewed as being particularly vulnerable. 
In doing so, it is important that the new administration address key 
issues that, as we reported, have impacted and will continue to impact 
the nation's security and preparedness, including better securing our 
borders, enforcing immigration laws, and serving those applying for 
immigration benefits; defining key preparedness and response 
capabilities and building and maintaining those capabilities through 
effective governmental and external partnerships; and further 
strengthening the security and resiliency of critical infrastructure to 
acts of terrorism. In achieving its critical mission, we found that DHS 
needs to more fully integrate and strengthen its management functions, 
including acquisition and human capital management; more fully adopt 
risk-based principles in allocating resources to the areas of greatest 
need; and enhance the effectiveness of information sharing among 
federal agencies and with state and local governments and the private 
sector. 

* The decennial census: The results of the 2010 census are central to 
apportionment, redistricting congressional boundaries, and distributing 
hundreds of billions of dollars in federal aid. Soon after taking 
office, the new administration will face decisions that will shape the 
outcome of this central effort. Next spring the first nationwide field 
operation of the 2010 decennial census will begin. During address 
canvassing, the Census Bureau will rely, for the first time, on hand-
held computers to verify address and map information. Earlier this 
year, we designated the decennial census as a high-risk area, in part, 
because of ongoing challenges in managing information technology--
including hand-held computers--and uncertainty over the total cost of 
the decennial census and the Bureau's plans for rehearsing its field 
operations. The Bureau has taken some important steps to get the census 
back on track but did not rehearse its largest and most costly field 
operation--non-response follow-up--and has little time for further 
course correction as it prepares to carry out the national head count. 

While facing pressing issues, the next Congress and new administration 
also inherit the federal government's serious long-term fiscal 
challenge--driven on the spending side by rising health care costs and 
changing demographics. This challenge is complicated by the need to 
timely address developments such as the recent economic pressures and 
troubles in the housing and financial markets. Ultimately, however, the 
new administration and Congress will need to develop a strategy to 
address the federal government's long-term unsustainable fiscal path. 

Highlight the Growing Need for Innovative, Integrated Approaches to 
Solve National and Global Challenges: 

Planning for the transition will necessarily need to address the fact 
that achieving meaningful national results in many policy and program 
areas requires some combination of coordinated efforts among various 
actors across federal agencies, often with other governments (for 
example, internationally and at state and local levels), non-government 
organizations (NGO), for-profit and not for-profit contractors, and the 
private sector. In recognition of this fact, recent years have seen the 
adoption of a range of national plans and strategies to bring together 
decision makers and stakeholders from different locations, types of 
organizations, and levels of government. For example, the National 
Response Plan is intended to be an all-discipline, all-hazards plan 
that establishes a single, comprehensive framework for managing 
domestic incidents where involvement is necessary among many levels of 
government, the private sector, and nonprofit organizations. The 
response and recovery efforts after 9/11 and natural disasters, the 
nation's preparations for a possible pandemic influenza, and the need 
to address global food insecurity are some of the many public issues 
that vividly underscore the critical importance of employing broad 
governance perspectives to meet global and national needs. Our 
transition work will highlight challenges the new Congress and next 
administration face in devising integrated solutions to such multi- 
dimensional problems. Some examples follow: 

* Care for servicemembers: Over the last several years, more than 
30,000 servicemembers have been wounded in action; many with multiple 
serious injuries such as amputations, traumatic brain injury, and post- 
traumatic stress disorder. We have identified substantial weaknesses in 
the health care these wounded warriors are receiving as well as the 
complex and cumbersome DOD and VA disability systems they must 
navigate. While improvement efforts have started, addressing the 
critical continuity of care issues will require sustained attention, 
systematic oversight by DOD and VA, and sufficient resources. 

* Health care in an increasingly global market and environment: The 
spread of severe acute respiratory syndrome (SARS) from China in 2002, 
recent natural disasters, and the persistent threat of an influenza 
pandemic all highlight the need to plan for a coordinated response to 
large-scale public health emergencies. Federal agencies must work with 
one another and with state and local governments, private 
organizations, and international partners to identify and assess the 
magnitude of threat, develop effective countermeasures (such as 
vaccines), and marshal the resources required for an effective public 
health response. Our transition work on these topics--including work 
related to such emergencies as SARS, Hurricane Katrina, pandemic 
influenza, bioterrorism, and TB--will highlight that federal agencies 
still face challenges such as coordinating response efforts and 
developing the capacity for a medical surge in mass casualty events. 

* Food safety: The fragmented nature of the federal food oversight 
system undermines the government's ability to plan more strategically 
to inspect food production processes, identify and react more quickly 
to outbreaks of foodborne illnesses, and focus on promoting the safety 
and integrity of the nation's food supply. Fifteen federal agencies 
collectively administer at least 30 laws related to food safety. We 
have recommended, among other things, that the executive branch 
reconvene the President's Council on Food Safety to facilitate 
interagency coordination on food safety regulation and programs. 

* Surface transportation: The nation's transportation infrastructure-- 
its aviation, highway, transit, and rail systems--is critical to the 
nation's economy and affects the daily lives of most Americans. Despite 
large increases in federal spending on America's vital surface 
transportation system, this investment has not commensurately improved 
the performance of the system. Growing congestion has created by one 
estimate a $78 billion annual drain on the economy, and population 
growth, technological change, and the increased globalization of the 
economy will further strain the system. We have designated 
transportation finance a high-risk area and have called for a 
fundamental reexamination and restructured approach to our surface 
transportation policies, which experts have suggested need to recognize 
emerging national and global imperatives, such as reducing the nation's 
dependence on foreign fuel sources and minimizing the impact of the 
transportation system on the global climate change. 

* Disaster response: Hurricane Katrina demonstrated the critical 
importance of the capability to implement an effective and coordinated 
response to catastrophes that leverages needed resources from across 
the nation, including all levels of government as well as 
nongovernmental entities. While the federal government has made 
progress since Katrina, as shown in the recent response to Hurricane 
Gustav, we have reported that the administration still does not have a 
comprehensive inventory of the nation's response capabilities or a 
systematic, comprehensive process to assess capabilities at the local, 
state, and federal levels based on commonly understood and accepted 
metrics for measuring those capabilities. We have work under way to 
identify the actions that DHS and the Federal Emergency Management 
Agency (FEMA) have taken to implement the provisions of the Post- 
Katrina Emergency Management Reform Act, which charged FEMA with the 
responsibility for leading and supporting the nation in a comprehensive 
risk-based emergency management system--a complex task that requires 
clear strategic vision, leadership, and the development of effective 
partnerships among governmental and nongovernmental entities. 

* Cyber critical infrastructures: Cyber critical infrastructures are 
systems and assets incorporating information technology--such as the 
electric power grid and chemical plants--that are so vital to the 
nation that their incapacitation or destruction would have a 
debilitating impact on national security, our economy, and public 
health and safety. We have made numerous recommendations aimed at 
protecting these essential assets and addressing the many challenges 
that the federal government faces in working with both the private 
sector and state and local governments to do so--such as improving 
threat and vulnerability assessments, enhancing cyber analysis and 
warning capabilities, securing key systems, and developing recovery 
plans. Until these and other areas are effectively addressed, our 
nation's cyber critical infrastructure is at risk of the increasing 
threats posed by terrorists, foreign intelligence services, and others. 

Also, more broadly, the Government Performance and Results Act of 1993 
(GPRA) calls for a governmentwide performance plan to help Congress and 
the executive branch address critical federal performance and 
management issues, including redundancy and other inefficiencies. 
Unfortunately, the promise of this important provision has not been 
realized. The agency-by-agency focus of the budget does not provide for 
the needed strategic, longer range, and integrated perspective of 
government performance. A broader performance plan would provide the 
President with an opportunity to assess and communicate the 
relationship between individual agency goals and outcomes that 
transcend federal agencies. 

Document Targeted Opportunities to Conserve Resources That Can Be 
Applied to New Initiatives: 

Our transition work will identify opportunities to limit costs and 
reduce waste across a broad spectrum of programs and agencies. While 
these opportunities will not eliminate the need to address more 
fundamental long-term fiscal challenges the federal government faces, 
concerted attention by the new administration could conserve resources 
for other priorities and improve the government's image. Examples of 
areas we will highlight and for which we will suggest needed action 
follow: 

* Improper payments: For fiscal year 2007, agencies reported improper 
payment estimates of about $55 billion--including programs such as 
Medicaid, Food Stamps, Unemployment Insurance, and Medicare. The 
governmentwide estimate has steadily increased over the past several 
years; yet even the current estimate does not reflect the full scope of 
improper payments. Further, major management challenges and internal 
control weaknesses continue to plague agency operations and programs 
susceptible to significant improper payments. Addressing these 
challenges and internal control weaknesses will better ensure the 
integrity of payments and minimize the waste of taxpayers' dollars. 

* DOD cost overruns: Total acquisition cost growth on the 95 major 
defense programs in DOD's fiscal year 2007 portfolio is now estimated 
at $295 billion, and of the weapon programs we assessed this year, none 
had proceeded through development meeting the best practice standards 
for mature technologies, stable design, and mature production 
processes--all prerequisites for achieving planned cost and schedule 
outcomes. DOD expects to invest about $900 billion (fiscal year 2008 
dollars) over the next 5 years on development and procurement, with 
more than $335 billion, or 37 percent, going specifically for new major 
weapon systems. Yet, much of this investment will be used to address 
cost overruns rooted in poor planning, execution, and oversight. By 
adopting best practices on individual programs and strengthening 
oversight and accountability for better outcomes, as we have 
consistently recommended, cost and schedule growth could be 
significantly reduced. 

* DOD secondary inventory: DOD expends considerable resources to 
provide logistics support for military forces, and the availability of 
spare parts and other critical items provided through DOD's supply 
chains affects military readiness and capabilities. DOD officials have 
estimated that the level of investment in DOD's supply chains is more 
than $150 billion a year, and the value of its supply inventories has 
grown by tens of billions of dollars since fiscal year 2001. However, 
as we have reported over the years, DOD continues to have substantial 
amounts of secondary inventory (spare parts) that are in excess to 
requirements. Most recently, in 2007, we reported that more than half 
of the Air Force's secondary inventory, worth an average of $31.4 
billion, was not needed to support required inventory levels from 
fiscal years 2002 through 2005, although increased demand due to 
ongoing military operations contributed to slight reductions in the 
percentage of inventory on hand and the number of years of supply it 
represents. In ongoing reviews of the Navy's and the Army's secondary 
inventory, we are finding that these services also continue to have 
significant amounts of inventory that exceeds current requirements. To 
reduce its investment in spare parts that are in excess of 
requirements, DOD will need to strengthen the accountability and 
management of its secondary inventory. 

* Oil and gas royalties: In fiscal year 2007, the Department of 
Interior's Minerals Management Service collected over $9 billion in oil 
and gas royalties, but our work on the collection of federal royalties 
has found numerous problems with policies, procedures, and internal 
controls that raise serious doubts about the accuracy of these 
collections. We also found that past implementation of royalty relief 
offered some oil and gas companies during years of low oil and gas 
prices did not include provisions to remove the royalty relief in the 
event that oil and gas prices rose as they have, and this failure to 
include such provisions will likely cost the federal government tens of 
billions of dollars over the working lives of the affected leases. 
Finally, we have found that the federal government ranks lowest among 
the nations in terms of the percentage of total oil and gas revenue 
accruing to the government. We have ongoing reviews of Interior's oil 
and gas leasing and royalty policies and procedures and reports based 
on this work should be publicly released within the next few months. 

* The tax gap: The tax gap--the difference between taxes legally owed 
and taxes paid on time--is a long-standing problem in spite of many 
efforts by Congress and the Internal Revenue Service (IRS) to reduce 
it. Recently, IRS estimated a net tax gap for tax year 2001 of about 
$290 billion. We have identified the need to take multiple approaches 
to reduce the tax gap, and specifically have recommended ways for IRS 
to improve its administration of the tax laws in many areas, including 
payroll taxes, rental real estate income, the tax preparation industry, 
income sent offshore, collecting tax debts, and the usefulness of third-
party information reporting. 

Ultimately, long-term fiscal pressures and other emerging forces will 
test the capacity of the policy process to reexamine and update 
priorities and portfolios of federal entitlement programs, policies, 
programs, commitments, and revenue approaches. In that regard, the 
"base" of government--spending and revenue--also must be reassessed so 
that emerging needs can be addressed while outdated and unsustainable 
efforts can be either reformed or eliminated. Tax expenditures should 
be part of that reassessment. Spending channeled through the tax code 
results in forgone federal revenue that summed to an estimated $844 
billion in 2007 and has approximated the size of total discretionary 
spending in some years. Yet, little is known about the performance of 
credits, deductions, and other tax preferences, statutorily defined as 
tax expenditures, which are often aimed at policy goals similar to 
those of federal spending programs. Because tax expenditures represent 
a significant investment of resources, and in some program areas are 
the main tool used to accomplish federal goals, this is a significant 
gap in the information available to decision makers. 

Underscore Critical Capacity Building Needs in Individual Agencies That 
Will Affect Implementation of Whatever New Priorities Are Pursued: 

While some progress has been made in recent years, agencies still all 
too often lack the basic management capabilities needed to address 
current and emerging demands. As a result, any new administration will 
face challenges in implementing its policy and program agendas because 
of shortcomings in agencies' management capabilities. Accordingly, our 
transition effort will synthesize our wide range of work and identify 
the key management challenges unique to individual departments and 
major agencies. Additionally, our transition work will emphasize five 
key themes common to virtually every government agency. 

* Select a senior leadership team that has the experience needed to run 
large, complex organizations: It is vitally important that leadership 
skills, abilities, and experience be among the key criteria the new 
President uses to select his leadership teams in the agencies. The 
Senate's interest in leveraging its role in confirmation hearings as 
evidenced by Senator Voinovich's request to us to suggest management- 
related confirmation questions and your interest in hearings such as 
this one will send a strong message that nominees should have the 
requisite skills to deal effectively with the broad array of complex 
management challenges they will face. It is also critical that they 
work effectively with career executives and agency staff. 

Given that management improvements and transformations can take years 
to achieve, steps are needed to ensure a continuous focus on those 
efforts. Agencies need to develop executive succession and transition- 
planning strategies that seek to sustain commitment as individual 
leaders depart and new ones arrive. For example, in creating a Chief 
Management Officer (CMO) position for DHS, Congress has required the 
DHS CMO to develop a transition and succession plan to guide the 
transition of management functions with a new administration. More 
broadly speaking, though, the creation of a chief operating officer 
(COO)/CMO position in selected federal agencies can help elevate, 
integrate, and institutionalize responsibility for key management 
functions and transformation efforts and provide continuity of 
leadership over a long term. For example, because of its long-standing 
management weaknesses and high-risk operations, we have long advocated 
the need for a COO/CMO for DOD to advance management integration and 
business transformation in the department. In the fiscal year 2008 
National Defense Authorization Act, Congress designated the Deputy 
Secretary of Defense as the department's CMO. 

* Strengthen the capacity to manage contractors and recognize related 
risks and challenges: Enhancing acquisition and contracting capability 
will be a critical challenge for many agencies in the next 
administration in part because many agencies (for example, DOD, DHS, 
the Department of Energy, and the Centers for Disease Control and 
Prevention) are increasingly reliant on contractors to carry out their 
basic operations. In fiscal year 2007, federal agencies spent $436 
billion on contracts for products and services. At the same time, our 
high-risk list areas include acquisition and contract management issues 
that collectively expose hundreds of billions of taxpayer dollars to 
potential waste and misuse. To improve acquisition outcomes, we have 
stated that agencies need a concentrated effort to address existing 
problems while facilitating a reexamination of the rules and 
regulations that govern the government-contractor relationship in an 
increasingly blended workforce. For example, since agencies have turned 
to contractor support to augment their capabilities, they need to 
ensure that contractors are playing appropriate roles and that the 
agencies have retained sufficient in-house workforce capacity to 
monitor contractor cost, quality, and performance. 

* Better manage information technology (IT) to achieve benefits and 
control costs: A major challenge for the federal government is managing 
its massive investment in IT--currently more than $70 billion annually. 
Our reports have repeatedly shown that agencies and the government as a 
whole face challenges in prudently managing major modernization 
efforts, ensuring that executives are accountable for IT investments, 
instituting key controls to help manage such projects, and ensuring 
that computer systems and information have adequate security and 
privacy protections. 

The Office of Management and Budget (OMB) identifies major projects 
that are poorly planned by placing them on a Management Watch List and 
requires agencies to identify high-risk projects that are performing 
poorly. OMB and federal agencies have identified approximately 413 IT 
projects--totaling at least $25.2 billion in expenditures for fiscal 
year 2008--as being poorly planned, poorly performing, or both. OMB has 
taken steps to improve the identification of the Management Watch List 
and high-risk projects since GAO testified last September, including 
publicly disclosing reasons for placement on the Management Watch List 
and clarifying high-risk project criteria. However, more needs to be 
done by both OMB and the agencies to address recommendations GAO has 
previously made to improve the planning, management, and oversight of 
poorly planned and performing projects so that potentially billions in 
taxpayer dollars are not wasted. 

* Address human capital challenges: Governmentwide, about one-third of 
federal employees on board at the end of fiscal year 2007 will become 
eligible to retire on the new administration's watch. Certain 
occupations--air traffic controllers and customs and border protection 
personnel among them--are projected to have particularly high rates of 
retirement eligibility come 2012. As experienced employees retire, they 
leave behind critical gaps in leadership and institutional knowledge, 
which could adversely affect the government's ability to carry out its 
diverse responsibilities. Agencies must recruit and retain employees 
able to create, sustain, and thrive in organizations that are flatter, 
results-oriented, and externally focused, and who can collaborate with 
other governmental entities as well as with the private and nonprofit 
sectors to achieve desired outcomes. The Office of Personnel Management 
needs to continue to ensure that its own workforce has the skills 
needed to successfully guide agency human capital improvements and 
agencies must make appropriate use of available authorities to acquire, 
develop, motivate, and retain talent. 

* Build on the progress of the statutory management framework: Over the 
last 2 decades, Congress has put in place a legislative framework for 
federal management that includes results-based management, information 
technology, and financial management reforms. As a result of this 
framework and the efforts of Congress and the Bush and Clinton 
administrations, there has been substantial progress in establishing 
the basic infrastructure needed to create high-performing organizations 
across the federal government. However, work still remains and 
sustained attention by Congress and the incoming administration will be 
a critical factor in ensuring the continuing and effective 
implementation of the statutory management reforms. 

Help Inform the Management Improvement Agendas of Congress and the New 
Administration: 

Initiated in 1990, GAO's high-risk program has brought a much greater 
focus to areas in need of broad-based transformations and those 
vulnerable to waste, fraud, abuse, and mismanagement. It also has 
provided the impetus for the creation of several statutory management 
reforms. GAO's current high-risk list covers 28 areas. Our updates to 
the list, issued every 2 years at the start of each new incoming 
Congress, have helped in setting congressional oversight agendas. The 
support of this Subcommittee and others in Congress has been especially 
important to the success of this program. Further, administrations have 
consistently turned to the high-risk list in framing their management 
improvement initiatives. The current administration in particular, 
working with this Subcommittee, has provided a valuable and focused 
effort in requiring agencies to develop meaningful corrective action 
plans for each area that we have designated as high-risk. As a 
consequence of efforts by Congress, the agencies, OMB, and others, much 
progress has been made in many high-risk areas, but key issues need 
continuing attention. Sustained efforts in these areas by the next 
Congress and administration will help improve service to the American 
public, strengthen public confidence in the government's performance 
and accountability, potentially save billions of dollars, and ensure 
the ability of government to deliver on its promises. 

Monitor the Implementation of the Presidential Transition Act 
Provisions and Identify Potential Improvements for Future Transitions: 

The world has obviously changed a great deal since the Presidential 
Transition Act of 1963. And while there have been periodic amendments 
to the Act, neither the Act nor the transition process itself has been 
subject to a comprehensive or systematic assessment of whether the Act 
is setting transitions up to be as effective as they might be. We will 
be monitoring the transition and reaching out to the new 
administration, Congress, and outside experts to identify lessons 
learned and any needed improvements in the Act's provisions for future 
transitions. 

In summary, our goal will continue to be to provide congressional and 
executive branch policy makers with a comprehensive snapshot of how 
things are working across government and to emphasize the need to 
update some federal activities to better align them with 21st century 
realities and bring about government transformation. In keeping with 
our role, we will be providing Congress and the executive branch with 
clear facts and constructive options and suggestions that our elected 
officials can use to make policy choices in this pivotal transition 
year. The nation's new and returning leaders will be able to use such 
information to help address both the nation's urgent issues and long- 
term challenges so that our nation stays strong and secure now and for 
the next generation. 

Chairman Akaka, Senator Voinovich, and Members of the Subcommittee, 
this concludes my prepared statement. I would be happy to respond to 
any questions you may have. 

[End of section] 

Related GAO Products: 

Oversight of Financial Institutions and Markets: 

Housing Government-Sponsored Enterprises: A Single Regulator Will 
Better Ensure Safety and Soundness and Mission Achievement (GAO-08- 
563T, Mar. 6, 2008). 

Financial Regulation: Industry Trends Continue to Challenge the Federal 
Regulatory Structure (GAO-08-32, Oct. 12, 2007). 

U.S. Efforts in Iraq and Afghanistan: 

Securing, Stabilizing, and Reconstructing Afghanistan: Key Issues for 
Congressional Oversight (GAO-07-801SP, May 24, 2007). 

Securing, Stabilizing and Rebuilding Iraq: Progress Report: Some Gains 
Made, Updated Strategy Needed (GAO-08-837, June 23, 2008). 

DOD's Readiness and Capabilities: 

Military Readiness: Impact of Current Operations and Actions Needed to 
Rebuild Readiness of U.S. Ground Forces (GAO-08-497T, Feb. 14, 2008). 

Force Structure: Restructuring and Rebuilding the Army Will Cost 
Billions of Dollars for Equipment but the Total Cost Is Uncertain (GAO- 
08-669T, Apr. 10, 2008). 

Protecting the Homeland: 

Department of Homeland Security: Progress Report on Implementation of 
Mission and Management Functions (GAO-07-454, Aug. 17, 2007). 

Department of Homeland Security: Progress Made in Implementation of 
Management Functions, but More Work Remains (GAO-08-646T, Apr. 9, 
2008). 

The Decennial Census: 

2010 Census: Census Bureau's Decision to Continue with Handheld 
Computers for Address Canvassing Makes Planning and Testing Critical 
(GAO-08-936, July 31, 2008). 

Information Technology: Significant Problems of Critical Automation 
Program Contribute to Risks Facing 2010 Census (GAO-08-550T, Mar. 5, 
2008). 

Long-Term Fiscal Outlook: 

The Nation's Long-Term Fiscal Outlook: April 2008 Update (GAO-08-783R, 
May 16, 2008). 

Budget Issues: Accrual Budgeting Useful in Certain Areas but Does Not 
Provide Sufficient Information for Reporting on Our Nation's Longer- 
Term Fiscal Challenge (GAO-08-206, Dec. 20, 2007). 

Fiscal Exposures: Improving the Budgetary Focus on Long-Term Costs and 
Uncertainties (GAO-03-213 (Jan. 24, 2003). 

Long-Term Fiscal Outlook: Long-Term Federal Fiscal Challenge Driven 
Primarily by Health Care (GAO-08-912T, June 17, 2008). 

Wounded Servicemembers: 

DOD and VA: Preliminary Observations on Efforts to Improve Care 
Management and Disability Evaluations for Servicemembers (GAO-08-514T, 
Feb. 27, 2008). 

DOD and VA: Preliminary Observations on Efforts to Improve Health Care 
and Disability Evaluations for Returning Servicemembers (GAO-07-1256T, 
Sept. 26, 2007). 

Health Care in an Increasingly Global Market and Environment: 

Emergency Preparedness: States are Planning for Medical Surge, but 
Could Benefit from Shared Guidance for Allocating Scarce Medical 
Resources (GAO-08-668, June 13, 2008). 

Influenza Pandemic: Efforts Under Way to Address Constraints on Using 
Antivirals and Vaccines to Forestall a Pandemic (GAO-08-92, Dec. 21, 
2007). 

Food Safety: 

Federal Oversight of Food Safety: High-Risk Designation Can Bring 
Needed Attention to Fragmented System (GAO-07-449T, Feb. 8, 2007). 

Federal Oversight of Food Safety: FDA's Food Protection Plan Proposes 
Positive First Steps, but Capacity to Carry Them Out Is Critical (GAO- 
08-435T, Jan. 29, 2008). 

Surface Transportation: 

Surface Transportation Programs: Proposals Highlight Key Issues and 
Challenges in Restructuring the Programs (GAO-08-843R, July 29, 2008). 

Surface Transportation: Restructured Federal Approach Needed for More 
Focused, Performance-Based, and Sustainable Programs (GAO-08-400, Mar. 
6, 2008). 

Disaster Response: 

Catastrophic Disasters: Enhanced Leadership, Capabilities, and 
Accountability Controls Will Improve the Effectiveness of the Nation's 
Preparedness, Response, and Recovery System (GAO-06-618, Sept. 6, 
2006). 

Emergency Management: Observations on DHS's Preparedness for 
Catastrophic Disasters (GAO-08-868T, June 11, 2008). 

Cyber Critical Infrastructure Protection: 

Critical Infrastructure Protection: Sector-Specific Plans' Coverage of 
Key Cyber Security Elements Varies (GAO-08-113, Oct. 31, 2007). 

Critical Infrastructure Protection: Multiple Efforts to Secure Control 
Systems Are Under Way, but Challenges Remain (GAO-07-1036, Sept. 10, 
2007). 

Improper Payments: 

Improper Payments: Status of Agencies' Efforts to Address Improper 
Payment and Recovery Auditing Requirements (GAO-08-438T, Jan. 31, 
2008). 

Fiscal Year 2007 U.S. Government Financial Statements: Sustained 
Improvement in Financial Management Is Crucial to Improving 
Accountability and Addressing the Long-Term Fiscal Challenges (GAO-08- 
847T, June 5, 2008). 

DOD Cost Overruns: 

Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment (GAO-08-782T, June 3, 2008). 

Defense Acquisitions: Assessments of Selected Weapon Programs. (GAO-08- 
467SP, Mar. 31, 2008). 

DOD Supply Chain Management: 

DOD's High-Risk Areas: Efforts to Improve Supply Chain Can Be Enhanced 
by Linkage to Outcomes, Progress in Transforming Business Operations, 
and Reexamination of Logistics Governance and Strategy (GAO-07-1064T, 
July 10, 2007). 

Defense Inventory: Opportunities Exist to Save Billions by Reducing Air 
Force's Unneeded Spare Parts Inventory (GAO-07-232, Apr. 27, 2007). 

Oil and Gas Royalties: 

Oil and Gas Royalties: A Comparison of the Share of Revenue Received 
from Oil and Gas Production by the Federal Government and Other 
Resource Owners (GAO-07-676R, May 1, 2007). 

Oil and Gas Royalties: Litigation over Royalty Relief Could Cost the 
Federal Government Billions of Dollars (GAO-08-792R, June 5, 2008). 

The Tax Gap: 

Highlights of the Joint Forum on Tax Compliance: Options for 
Improvement and Their Budgetary Potential (GAO-08-703SP, June 2008). 

Tax Compliance: Multiple Approaches Are Needed to Reduce the Tax Gap 
(GAO-07-488T, Feb. 16, 2007). 

Tax Expenditures: 

Government Performance and Accountability: Tax Expenditures Represent a 
Substantial Federal Commitment and Need to Be Reexamined (GAO-05-690, 
Sept. 23, 2005). 

Higher Education: Multiple Higher Education Tax Incentives Create 
Opportunities for Taxpayers to Make Costly Mistakes (GAO-08-717T, May 
1, 2008). 

Senior Leadership Team: 

Organizational Transformation: Implementing Chief Operating Officer/ 
Chief Management Officer Positions in Federal Agencies (GAO-08-34, Nov. 
1, 2007). 

Contract Management: 

Defense Management: DOD Needs to Reexamine Its Extensive Reliance on 
Contractors and Continue to Improve Management and Oversight (GAO-08- 
572T, Mar. 11, 2008). 

Federal Acquisitions and Contracting: Systemic Challenges Need 
Attention (GAO-07-1098T, July 17, 2007). 

Information Technology Management: 

Information Technology: OMB and Agencies Need to Improve Planning, 
Management, and Oversight of Projects Totaling Billions of Dollars (GAO-
08-1051T, July 31, 2008). 

Information Security: Progress Reported, but Weaknesses at Federal 
Agencies Persist (GAO-08-571T, Mar. 12, 2008). 

Human Capital: 

Office of Personnel Management: Opportunities Exist to Build on Recent 
Progress in Internal Human Capital Capacity (GAO-08-11, Oct. 31, 2007). 

Human Capital: Transforming Federal Recruiting and Hiring Efforts (GAO- 
08-762T, May 8, 2008). 

High-Risk Series: 

High-Risk Series: An Update (GAO-07-310, Jan. 31, 2007). 

Oversight Letter: 

Suggested Areas for Oversight for the 110th Congress (GAO-07-235R, Nov. 
17, 2006). 

[End of section] 

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